-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, k+Ax3GpQOtYRiXpa7oVvjKjPyuO9QAUawkvqZySoML3W99w+E17Y8ehRmTHf0P41 5ICZbildFdAN0Ecc3Du2Ag== 0000022767-94-000016.txt : 19940328 0000022767-94-000016.hdr.sgml : 19940328 ACCESSION NUMBER: 0000022767-94-000016 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940325 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEXAS NEW MEXICO POWER CO CENTRAL INDEX KEY: 0000022767 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 750204070 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 002-97230 FILM NUMBER: 94517794 BUSINESS ADDRESS: STREET 1: 4100 INTERNATIONAL PLZ STREET 2: PO BOX 2943 CITY: FORT WORTH STATE: TX ZIP: 76113 BUSINESS PHONE: 8177310099 FORMER COMPANY: FORMER CONFORMED NAME: COMMUNITY PUBLIC SERVICE CO DATE OF NAME CHANGE: 19810617 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1993 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 2-97230 TEXAS-NEW MEXICO POWER COMPANY (Exact name of registrant as specified in its charter) TEXAS 75-0204070 (State of incorporation) (I.R.S. Employer Identification Number) 4100 International Plaza P. O. Box 2943 Fort Worth, Texas 76113 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 817-731-0099 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Registrant is reporting pursuant to Section 15(d) of the Act: Title of Each Class of Securities First Mortgage Bonds: Series M, 8.7% due 2006, Series R, 10.0% due 2017, Series S, 9.625% due 2019, Series T, 11.25% due 1997 and Series U, 9.25% due 2000. Secured Debentures: 12.5% due 1999 Series A, 10.75% due 2003 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of March 11, 1994, all 10,705 shares of the Registrant's outstanding Common Stock ($10 par value) were held, beneficially and of record, by the Registrant's parent, TNP Enterprises, Inc. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES PART 1 Item 1. BUSINESS. General Development of Business Texas - New Mexico Power Company Texas-New Mexico Power Company (Utility) is a public utility engaged in the generation, purchase, transmission, distribution and sale of electricity to customers within the States of Texas and New Mexico. The Utility is qualified to do business as a foreign corporation in the State of Arizona. Business conducted in Arizona is limited to ownership as tenant-in-common with two other electric utility corporations in a 345-KV electric transmission line which transmits electrical energy into New Mexico for sale to customers in New Mexico. The Utility is the principal subsidiary of TNP Enterprises, Inc. (TNPE), a Texas corporation which owns all of the Utility's common stock. TNPE also files a Form 10-K. The Utility and TNPE are holding companies as defined in the Public Utility Holding Company Act but each is exempt from regulation as a "registered holding company" as defined in said act. The Utility is subject to regulation by the Public Utility Commission of Texas (PUCT) and the New Mexico Public Utility Commission (NMPUC). The Utility is subject in some of its activities, including the issuance of securities, to the jurisdiction of the Federal Energy Regulatory Commission (FERC), and its accounting records are maintained in accordance with the FERC Uniform System of Accounts. The Utility has two wholly owned subsidiaries, Texas Generating Company (TGC), organized in 1988, and Texas Generating Company II (TGC II), organized in 1991. All financial information presented herein or incorporated by reference is on a consolidated basis and all intercompany transactions and balances have been eliminated. TNP One Prior to 1990, the Utility purchased virtually all of its electric requirements, primarily from other utilities. In an effort to diversify its energy and fuel sources, the Utility contracted with a consortium consisting of Westinghouse Electric Corporation, Combustion Engineering, Inc. and H. B. Zachry Company to construct TNP One. TNP One is a two- unit lignite-fueled, circulating fluidized bed generating plant in Robertson County, Texas. Unit 1 and Unit 2 of TNP One together provide, on an annualized basis, approximately 30% of the Utility's electric capacity requirements in Texas. The Utility acquired Unit 1 on July 20, 1990, and Unit 2 on July 26, 1991, through TGC and TGC II, respectively. The Utility operates the two units and sells the output of TNP One to its Texas customers. Unit 1 began commercial operation on September 12, 1990, and Unit 2 on October 16, 1991. As of December 31, 1993, the costs of Unit 1 and Unit 2 were approximately $357 million and approximately $282.9 million, respectively. Portions of the costs were funded by the Utility, with the majority of the costs borrowed by TGC and TGC II under separate financing facilities for the two units, which are guaranteed by the Utility. Regulatory Proceedings The Utility has received rate orders from the PUCT placing the majority of the costs of each of the two units of TNP One in rate base. The Utility and other parties to the proceedings have appealed both orders. For a review of the history of the two rate proceedings and the pending judicial proceedings, see Item 3, "Legal Proceedings" and note 5 to the consolidated financial statements. See note 2 to the consolidated financial statements for a discussion of the financings of the two units including, during 1993, substantial reduction of the TNP One construction indebtedness and extension of the payment schedule for the remaining balance of the construction debt. For a discussion of the effects of the construction and financing of TNP One on the Utility's financial condition, including the detrimental regulatory treatment received to date, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Financial Information About Industry Segments 1993 1992 1991 Operating Revenues (thousands of dollars): Residential $193,484 175,885 176,651 Commercial 138,680 128,550 119,745 Industrial 124,474 121,027 128,356 Other 17,604 18,365 16,591 Total $474,242 443,827 441,343 Sales (thousand kilowatt-hours): Residential 2,047,360 1,947,593 2,017,349 Commercial 1,567,083 1,499,927 1,485,211 Industrial 2,567,552 2,508,837 2,798,369 Other 104,882 109,954 115,406 Total 6,286,877 6,066,311 6,416,335 Number of customers (at year-end): Residential 181,298 178,154 174,859 Commercial 30,235 30,359 30,300 Industrial 141 155 160 Other 237 229 230 Total 211,911 208,897 205,549 Kilowatt-hour (KWH) sales in 1993 were assisted by more typical weather experienced in 1993 as compared to 1992. KWH sales declined in 1992 from 1991 due in part to milder than normal temperatures in the Utility's service area in Texas; however, revenues were approximately the same for the two years due primarily to an increase in the Utility's Texas customers' rates in 1992. Also contributing to the sales decline was the failure of new customers and revenues to materialize as expected within the industrial class to ameliorate the loss of KWH sales to certain industrial customers. During 1993, the number of industrial customers decreased by 14, but that decrease included the consolidation of 10 customers into 2 customers for billing purposes and the reclassification of 3 customers to the commercial class of customers. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," for a discussion of the changes in operating revenues, including rate increases. It is not possible to attribute operating profit or loss and identifiable assets to each of the classes of customers listed in the above table. Narrative Description of Business The Utility purchases and generates electricity for sales to its customers wholly within the States of Texas and New Mexico. The Utility's purchases of electricity are primarily from other utilities and cogenerators (see "Sources of Energy" in this section). The Utility's current generation of electricity is from TNP One. The Utility owns and operates electric transmission and distribution facilities in 90 municipalities and adjacent rural areas in Texas and New Mexico. The areas served contain a population of approximately 616,000. The Utility's service is delivered to customers in four operating divisions in Texas and one operating division in New Mexico. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES The Utility's Southeast Division, on the Texas Gulf Coast, is adjacent to the Johnson Space Center and lies between the cities of Houston and Galveston. The economy is supported by the oil and petrochemical industries, agriculture and the general commercial activity of the Houston area. This division produced 49.5% of the total operating revenues in 1993. The Utility's Northern Division is based in Lewisville, just north of the Dallas-Fort Worth International Airport, and extends to include municipalities along the Red River and in the Texas Panhandle. This division serves a variety of commercial, agricultural and petroleum industry customers and produced 19.5% of the Utility's revenues in 1993. The economy of the Utility's New Mexico Division is primarily dependent upon mining and agriculture. Copper mines are the major industrial customers in the New Mexico Division. This division produced 16.8% of the total operating revenues in 1993. The Utility's Central Division includes municipalities and communities located to the south and west of Fort Worth. This area's economy is largely dependent on agriculture and to lesser degrees tourism and oil production. In far west Texas, between Midland and El Paso, the Utility's Western Division serves municipalities whose economies are primarily related to oil and gas production, agriculture and food processing. The Utility serves and intends to continue serving members of the public in all of its present service areas. The Utility will construct facilities as needed to meet increasing demand for its service. The Utility will also extend service beyond its present service territories to the extent permitted by law and the orders of regulatory commissions. For a description of the properties utilized to provide this service, see Item 2, "Properties." Operating Revenues Revenues contributed by the Utility's operating divisions in 1993, 1992 and 1991 and the corresponding percentages of total operating revenues are shown below: 1993 1992 1991 Operating Revenues Revenues Revenues Division (000's) %'s (000's) %'s (000's) %'s Central $39,460 8.3% $35,421 8.0% $34,625 7.8% Northern 92,265 19.5 83,626 18.9 84,227 19.1 Southeast 234,895 49.5 222,460 50.1 220,581 50.0 Western 28,084 5.9 27,193 6.1 27,487 6.2 New Mexico 79,538 16.8 75,127 16.9 74,423 16.9 Total $474,242 100.0% $443,827 100.0% $441,343 100.0% In 1993, 1992 and 1991, no single customer accounted for greater than 10% of operating revenues, although the Utility has two affiliated industrial customers in the New Mexico Division which, together, contributed between 8% and 10% of the Utility's revenues in each of these years. Sources of Energy The Utility obtained its electric energy requirements during the year ended December 31, 1993, from sources shown in the following table. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Sources of Energy
Year of Percent Contract of Energy Fuel Sources* Area Served Expiration Required Source TEXAS Generation TNP One Texas Gulf Coast, - 45.2% Texas Lignite Central & (Western Coal, Northern Texas Petroleum Coke & Natural Gas Capabilities) Purchased Power Clear Lake Cogeneration Texas Gulf Coast 2004 23.5 Natural Gas Limited Partnership (Oil Standby) Texas Utilities Electric Company** Central, Northern 2006 & 22.7 Natural Gas, Lignite (Subsidiary of Texas & West Texas2010 & Nuclear Utilities Company) (Oil Standby) Houston Lighting & Power Texas Gulf Coast 2001 4.0 Natural Gas, Coal, Company (Subsidiary of Lignite, Nuclear Houston Industries, Inc.) & Cogeneration (Oil Standby) West Texas Utilities West Texas 2005 2.5 Natural Gas & Company (Subsidiary Coal of Central and South (Oil Standby) West Corp.) Southwestern Public Texas Panhandle 2005 2.1 Coal & Natural Gas Service Company (Oil Standby) Total 100.0% NEW MEXICO Purchased Power El Paso Electric Southwest 2002 47.9% Coal, Natural Gas, Company New Mexico Oil & Nuclear Southwestern Public South Central 2001 22.2 Coal & Natural Gas Service Company New Mexico (Oil Standby) Public Service South Central & 2006 16.6 Coal, Natural Gas Company of Southwest & Nuclear New Mexico New Mexico (Oil Standby) Other South Central & Various 13.3 Coal, Natural Gas, Southwest Oil & New Mexico Cogeneration Total 100.0%
* The Utility also has a continual contract with Union Carbide to provide energy from natural gas sources for the Texas Gulf Coast. This source did not contribute to the percent of energy required in 1993. ** Except as to one point of delivery, a major source of supply under the contract with an expiration date of 2010, the contract expires in 2006. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES The Utility's future load growth is considered by the Utility and its suppliers in planning their future construction expenditures based on projections or official contract notifications furnished to its suppliers by the Utility. Currently the resources of TNP One and the suppliers' availability of lignite-, coal-, nuclear-, and gas-fired units are adequate to assure projected requirements for power. To the extent the Utility's suppliers experience delays or increases in the costs of construction of new generating facilities, additional costs of complying with regulatory and environmental laws, or increases in the cost of fuel or shortages in fuel supplies, the availability and cost of energy to the Utility will likewise be affected for that portion of supply purchased by the Utility. The Utility does not expect that the factors discussed in this section will result in the inability of its suppliers to provide the portions of power requirements to be purchased by the Utility. Terminations of service by those suppliers regulated by the FERC (El Paso Electric Company, Southwestern Public Service Company, West Texas Utilities Company and Public Service Company of New Mexico) would require authorization by that commission. The Utility anticipates renewing and amending its purchased power contracts with its suppliers as necessary. As a result of the Utility's efforts in contracting for lower costs of purchased power, the Utility's New Mexico customers are expected to benefit from a scheduled decrease of approximately $7.1 million in annualized firm purchased power costs in 1994, the effect of which will be reduced by a $400,000 increase in base rates. In 1990 and 1991, the Utility commenced replacing portions of its Texas purchased power requirements when Unit 1 and Unit 2, respectively, became operational. Beginning in 1992, the full effect of the electric generation of both units was realized. Provisions in the contracts with Texas Utilities Electric Company and Houston Lighting & Power Company allow for reductions in future purchased power commitments. Power generated at TNP One is transmitted over the Utility's own transmission line to other utilities' transmission systems for delivery to the Utility's Texas service area systems. To aid in maintaining a reliable supply of power for its customers and to coordinate interconnected operations, the Utility is a member of the Electric Reliability Council of Texas (ERCOT), the Inland Power Pool and the New Mexico Power Pool. See Item 3, "Legal Proceedings," Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and notes 2 and 5 to the consolidated financial statements for additional information about TNP One. Recovery of Purchased Power and Fuel Costs The Utility expects to refund or collect within two months or less those amounts of total purchased power costs (including supplier fuel costs) billed to the Utility from suppliers that are over- or under- collected in the current month. Purchased power cost recovery adjustment clauses in the Utility's rate schedules have been authorized by the regulatory authorities in Texas and New Mexico. A fixed fuel recovery factor in Texas has also been approved. Both are of substantial benefit to the Utility in efforts to recover timely and adequately these significant elements of operating expenses as described in note 1(g) to the consolidated financial statements. Franchises The Utility holds franchises from each of the 90 municipalities in which it renders electric service. On December 31, 1993, these franchises had expiration dates varying from 1994 to 2039, 86 having stated terms of 25 years or more and two having stated terms of 20 years and two having stated terms of 15 years. The Utility also holds certificates of public convenience and necessity from the PUCT covering all of the territories it serves in Texas. The Utility has been issued certificates for other areas after hearings before the PUCT. These certificates include terms which are customary in the public utility industry. In New Mexico, the Utility operates generally under the grandfather clause of that state's Public Utility Act which authorizes the continuance of existing service following the date of the adoption of such act. Seasonality of Business The Utility's business is seasonal in character. Summer weather causes increased use of air-conditioning equipment which produces higher revenues during the months of June, July, August and September. For the year ended December 31, 1993, approximately 40% of annual revenues were recorded in June, July, August and September, and 60% in the other eight months. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Working Capital The Utility's major demands on working capital are (1) the monthly payments for purchased power costs from the Utility's suppliers, (2) monthly and semi-annual interest payments on long-term debt and (3) semi-monthly payments for the lignite fuel source for TNP One. The purchased power and fuel costs are eventually recovered through the Utility's customers' rates and the purchased power and fuel costs recovery adjustment clauses and fixed fuel factors, more fully described in note 1(g) to the consolidated financial statements. Unlike many other generating utilities, the Utility does not have the requirement of maintaining a large fuel inventory (lignite) due to the proximity of TNP One with the lignite mine site. The Utility sells customer receivables, as do many other utilities. The Utility sells its customer receivables to a nonaffiliated company on a nonrecourse basis. Competitive Conditions As a regulated public utility, the Utility operates with little direct competition throughout most of its service territory. Pursuant to the Texas Public Utility Regulatory Act, the PUCT has issued to all electric utilities in the State certificates of public convenience and necessity authorizing them to render electric service. Rural electric cooperatives, investor-owned electric utilities and municipally owned electric utilities are all defined in such act as public utilities. In 72 of the 81 Texas municipalities served, the Utility has been the only electric utility issued a certificate to serve customers within the municipal limits. The Utility is also the only electric utility authorized to serve customers in some of the rural areas where it has electric facilities. In other rural areas served by the Utility, other electric utilities have also been authorized to serve customers; however, rural electric cooperatives may, under certain circumstances, become exempt from the PUCT's rate regulation. Where other electric utilities have also been certificated to serve customers within the same service area, the Utility may be subject to competition. From time to time, industrial customers of the Utility express interest in cogeneration as a method of reducing or eliminating reliance upon the Utility as a source of electric service, or to lower fuel costs and improve operating efficiency of process steam generation. During 1993, a major industrial customer in the Utility's Southeast Division requested proposals for a cogeneration project for evaluation by the customer. The Utility's operating revenues from this customer during 1993 were approximately $28 million. In January 1994, a potential developer for the proposed project was selected by the customer. The Utility's goal is to retain this customer and to lower overall system operating costs through coordination with the potential developer. Although the Utility cannot predict the ultimate outcome of the process, the current project as proposed by the customer, and as outlined by the potential developer, appears to present a means by which the Utility may retain electric service to this customer, at current levels. The Utility is actively pursuing the development of the necessary agreements with the potential developer to further define the degree to which electric service to this customer is retained and overall system operating costs may be lowered. In New Mexico, a utility subject to the jurisdiction of the NMPUC may not extend into territory served by another utility or into territory not contiguous to its service territory without a certificate of public convenience and necessity from the NMPUC. Investor-owned electric utilities and rural electric cooperatives are subject to the juris- diction of the NMPUC. The Energy Policy Act of 1992, adopted in October 1992, significantly changed the U.S. energy policy, including the governing of the electric utility industry. Among the features of this act is the creation of Exempt Wholesale Generators and the authorization of the FERC to order, on a case-by-case basis, wholesale transmission access. It appears that these particular features will create competition for the generation and supply of electricity. Management continues to evaluate the effects of this act on the Utility. Although the act may not affect the Utility directly, the Utility believes that this increased competition will not have an unfavorable impact on it. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Environmental Requirements Environmental requirements are not expected to materially affect capital outlays or materially affect the Utility directly. As the Utility's electric suppliers may be affected by environmental requirements and resulting costs, the rates charged by them to the Utility may be increased and thus the Utility will be affected indirectly. The Utility's facilities in Texas and New Mexico are regulated by federal and state environmental agencies. These agencies have jurisdiction over air emissions, water quality, wastewater discharges, solid wastes and hazardous substances. The Utility maintains continuous procedures to insure compliance with all applicable environmental laws, rules and regulations. Various Utility activities require permits, licenses, registrations and approvals from such agencies. The Utility has received all necessary authorizations for the construction and continued operation of its generation, transmission and distribution systems. TNP One's circulating fluidized bed technology produces "clean" emissions, without the addition of costly scrubbers. Unit 1 and Unit 2 meet the standards of the Clean Air Act of 1990. Under this act, an entity will be given an allotted number of allowances which permit emissions up to a specified level. The Utility believes the allowances received to be sufficient for the level of emissions to be created by TNP One. The construction costs for TNP One included approximately $89 million for environmental protection facilities. During 1993, 1992 and 1991, as an ongoing operation of air pollution abatement, including ash removal, TNP One incurred expenses of approximately $2.6 million, $2.7 million and $1.9 million, respectively. The Utility anticipates additional capital expenditures of $875,000 by 1995 for air emissions monitoring equipment for TNP One. The operations of the Utility are subject to a number of federal, state and local environmental laws and regulations, which govern the storage of motor fuels, including those regulating underground storage tanks. In September 1988, the Environmental Protection Agency (EPA) issued regulations that required all newly installed underground storage tanks be protected from corrosion, be equipped with devices to prevent spills and overfills, and have a leak detection method that meets certain minimum requirements. The effective commencement date for newly installed tanks was December 22, 1988. Underground storage tanks in place prior to December 22, 1988, must conform to the new standards by December 1998. The Utility currently estimates the cost over the next five years to bring its existing underground storage tanks into compliance with the EPA guidelines will be $100,000. The Utility also has the option of removing any existing underground storage tanks. During 1993, 1992, and 1991, the Utility incurred cleanup and testing costs on both leaking and nonleaking storage tanks of approximately $98,000, $89,000, and $84,000, respectively, in complying with these EPA regulations. A change in the regulations in the State of Texas permitted the Utility to collect in 1992 from the state environmental trust fund $65,000 of expenditures paid in prior years. Both states in which the Utility owns or operates underground storage tanks have state operated funds which reimburse the Utility for certain cleanup costs and liabilities incurred as a result of leaks in underground storage tanks. These funds, which essentially provide insurance coverage for certain environmental liabilities, are funded by taxes on underground storage tanks or on motor fuels purchased within each respective state. The funds require the Utility to pay deductibles of less than $5,000 per occurrence. During 1992, the Texas state environmental trust fund delayed reimbursement payments after September 30, 1992, of certain cleanup costs due to an increase in claims. Because the state and federal government have the right, by law, to levy additional fees on fuel purchases, the Utility believes these cleanup costs will ultimately be reimbursed. Employees The number of employees on December 31, 1993, was 1,051. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Item 2. PROPERTIES. The Utility's electric properties served a total of 211,911 customers at year-end and consisted of the installations described in the following sections. (1) Electric generation, transmission and distribution facilities located in the State of Texas are as follows: (A) Central Division. Electric transmission and distribution systems serving 25 municipalities and 18 unincorporated communities in 17 counties to the south and west of Fort Worth, Texas. The division is based at Clifton, Texas. (B) Northern Division. Electric transmission and distribution systems serving 36 municipalities and 19 unincorporated communities in 14 North Texas counties and 3 counties in the Texas Panhandle. The division is based at Lewisville, Texas. (C) Southeast Division. Electric transmission and distribution systems serving 14 municipalities and 2 unincorporated communities in 3 counties on the Texas Gulf Coast. The division is based at Texas City, Texas. (D) Western Division. Electric transmission and distribution systems serving 6 municipalities and 1 unincorporated community in 5 counties in West Texas. The division is based at Pecos, Texas. (E) Robertson County, Texas. Two 150-megawatt lignite-fueled generating units (Unit 1 and Unit 2, collectively referred to as TNP One) using circulating fluidized bed technology. The Utility also has an 18-mile long transmission line to connect TNP One to a major transmission grid in Texas. (2) Electric generation, transmission and distribution facilities in the State of New Mexico serve 5 municipalities and 5 unincorporated communities in Grant and Hidalgo Counties, and 4 municipalities and 1 unincorporated community in Otero and Lincoln Counties. The New Mexico Division is based at Silver City, New Mexico. (3) The facilities owned by the Utility include those normally used in the electric utility business. The facilities are of sufficient capacity to adequately serve existing customers, and such facilities may be extended and expanded to serve future customer growth of the Utility in existing service areas. The Utility generally constructs its transmission and distribution facilities upon real property held pursuant to easements or public rights of way and not upon real property held in fee simple by the Utility. (4) All real and personal property of the Utility, with certain exceptions such as much of TNP One, is subject to the lien of the Indenture of Mortgage and Deed of Trust (Bond Indenture) under which the Utility's First Mortgage Bonds are issued. Certain exceptions are set forth in the Bond Indenture. The lenders in the Unit 2 financing facility and the holders of all secured debentures hold a second lien on all real and personal Texas property of the Utility. Holders of the Utility's Secured Debentures, due 1999 and Series A, Secured Debentures, due 2003 equally and ratably hold first liens on approximately 59% of Unit 1. The remaining amount of Unit 1 property is subject to a first lien under the Utility's Bond Indenture and a second lien under the secured debentures' indentures. The lenders under the Unit 2 financing facility and the Utility's Secured Debentures, due 1999, equally and ratably hold first liens on approximately 74% of Unit 2. The remaining amount of Unit 2 property is subject to a first lien under the Utility's Bond Indenture and a second lien under the secured debentures' indentures. Under certain conditions, upon repayment of portions of the loans or secured debentures under the financing facilities, the Utility may purchase undivided interests in Unit 1 or Unit 2 from TGC or TGC II, respectively, whereupon such undivided interests become subject to the first lien of the Utility's Bond Indenture. See note 2 to the consolidated financial statements for additional information. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Item 3. LEGAL PROCEEDINGS. Appeals of Regulatory Orders The following summary discusses the Utility's most recent regulatory proceedings before the PUCT and the judicial appeals. While the ultimate outcome of these cases and of other matters discussed below cannot be predicted, the Utility is vigorously pursuing their favorable conclusion. Material adverse resolution of certain of the matters discussed below would have a material adverse impact on earnings in the period of resolution. More detailed discussions of the proceedings and related impacts are included in note 5 to the consolidated financial statements and Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." PUCT Docket No. 9491 On April 11, 1990, the Utility filed a rate application, Docket No. 9491, with the PUCT for inclusion of the costs of Unit 1 in the Utility's rate base and for the setting of rates to recover the costs of that unit. On February 7, 1991, the Utility received a final order which allowed $298.5 million of the costs of Unit 1 in rate base; however, the PUCT disallowed from rate base $39.5 million of the requested investment costs of $338 million for that unit. The PUCT approved an increase in annualized revenues of approximately $36.7 million, or 67% of the Utility's original $54.9 million rate request. The PUCT also found that the Utility failed to prove that its decision to start construction of Unit 2 was prudent. Nevertheless, the PUCT granted rate base treatment for Unit 2 in Docket No. 10200, as discussed below. On appeal by the Utility of the PUCT's order in Docket No. 9491, a State district court in Travis County, Texas, ruled that the PUCT's disallowance of rate base treatment for certain costs of Unit 1 was in error and that the PUCT's "decision to deny $39,508,409 in capital costs for TNP One Unit 1 is not supported by substantial evidence and is arbitrary and capricious." On appeal of the State district court's order by the Utility , the PUCT and certain of the intervenor cities (the Cities), a Third District Court of Appeals in Austin, Texas, rendered a judgment partially reversing the State district court and affirming the PUCT's disallowances for $30.4 million of the total $39.5 million. The Court of Appeals remanded the cause to the district court with instructions that the cause be remanded to the PUCT for proceedings not inconsistent with the appellate opinion. On September 9, 1993, the Utility, the Cities and the PUCT filed motions for rehearing with the Court of Appeals. The Utility's opponents are seeking, among other things, lower rates and greater disallowances, and the Utility is seeking higher rates and no disallowances. The PUCT is not expected to act upon the district court's ordered remand, discussed above, until the appellate process, including appeals to the Texas Supreme Court, has been completed. Based upon the opinions of the Utility's Texas regulatory counsel, Johnson & Gibbs, a Professional Corporation, management believes that it will prevail in obtaining a remand of a significant portion of the disallowances in Docket No. 9491; however, the ultimate disposition and quantification of these items cannot presently be determined. Accordingly, no provision for any loss that may ultimately be required upon resolution of these matters has been made in the consolidated financial statements. If the Utility is not successful in obtaining a final favorable disposition in the appellate proceedings relating to the disallowances in Docket No. 9491, a write-off of some portion of the $39.5 million disallowances would be required, which could result in a significant negative impact on earnings in the period of final resolution. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES PUCT Docket No. 10200 On April 11, 1991, the Utility filed a rate application, Docket No. 10200, with the PUCT for inclusion of $275.2 million of capital costs of Unit 2 in the Utility's rate base and for the setting of rates to recover the costs of that unit. On March 18, 1993, the Utility received a final order which allowed $250.7 million of the Unit 2 costs in rate base; however, the PUCT disallowed from rate base $21.1 million associated with Unit 2 and $0.8 million additional costs requested for Unit 1. The PUCT also determined that $11.1 million of Unit 2 costs would be addressed in a future Texas rate application. The PUCT approved an increase in annualized revenues of approximately $19 million, or 53% of the Utility's original $35.8 million rate request. The order in Docket No. 10200 also reflects application to the Utility of a new method for calculating the amount of Federal income tax expense allowed in cost of service, which significantly reduced the Utility's level of annualized revenue increase from $26 million to $19 million. The Docket No. 10200 rate order has been appealed to a Texas district court by the Utility and other parties. Because of the Court of Appeals judgment relating to the prudence of starting construction of Unit 2 (FF No. 84 in the docket No. 9491), the presiding judge in the Texas district court for the Docket No. 10200 appeal has ordered that the procedural schedule in this appeal be abated until final resolution of the FF No. 84 issue in Docket No. 9491. The Utility will vigorously pursue reversal of the PUCT's new position regarding Federal income tax expenses, in addition to seeking judicial relief from the disallowances and certain other rulings by the PUCT in Docket No. 10200. The opposing parties are seeking a variety of relief to obtain lower rates and greater disallowances, including overturning the basis of the Utility's case as presented to the PUCT and sustaining the PUCT's adverse Federal income tax position without regard to any IRS ruling on the normalization issue. Based upon the opinions of the Utility's Texas regulatory counsel, Johnson & Gibbs, a Professional Corporation, management believes that it will prevail in obtaining a remand of a significant portion of the disallowances in Docket No. 10200; however, the ultimate disposition and quantification of these items cannot presently be determined. Accordingly, no provision for any loss that may ultimately be required upon resolution of these matters has been made in the consolidated financial statements. If the Utility is not successful in obtaining a final favorable disposition in the appellate proceedings relating to the disallowances in Docket No. 10200, a write-off of some portion of the $21.9 million disallowances would be required, which could result in a significant negative impact on earnings in the period of final resolution. Other Legal Matters The Utility is involved in various claims and other legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Utility's consolidated financial position. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no matters submitted to a vote of security holders in the fourth quarter of 1993. PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS. All of the Utility's issued and outstanding common stock, 10,705 shares, is privately held, beneficially and of record, by its parent, TNPE, and is not publicly traded. For the years ended December 31, 1993 and 1992, the Utility paid $17,344,000, and $13,840,200, respectively, in common dividends to its parent, TNPE. Dividends were paid on a quarterly basis. Restrictions on the Utility's ability to pay dividends are discussed in notes 2 and 3 to the consolidated financial statements. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Item 6. SELECTED CONSOLIDATED FINANCIAL DATA. 1993 1992 1991 1990 1989 (Dollars in Thousands) Operating revenues $474,242 443,827 441,343 397,289 378,289 Net operating income $78,240 77,003 62,565 37,069 28,534 Net earnings $11,523 10,845 19,840 15,376 15,315 Earnings available for common stock $10,644 9,877 18,762 14,161 13,964 Total assets (1) $1,095,119 1,156,567 1,111,281 789,651 409,869 CAPITALIZATION: Common stock equity $214,184 205,875 171,393 166,419 136,068 Redeemable cumulative preferred stock 9,560 10,440 11,320 12,600 13,880 Long-term debt, net of amount due within one year (2)(3)(4) 678,994 742,087 525,060 350,301 134,893 Total capitalization $902,738 958,402 707,773 529,320 284,841 CAPITALIZATION RATIOS: Common stock equity 23.7% 21.5 24.2 31.4 47.8 Redeemable cumulative preferred stock 1.1 1.1 1.6 2.4 4.9 Long-term debt, net of amount due within one year (2)(3) 75.2 77.4 74.2 66.2 47.3 Total capitalization 100.0% 100.0 100.0 100.0 100.0 SHORT-TERM DEBT: Long-term debt due within one year (2)(3)(4) $1,070 10,288 201,276 78,570 516 Unsecured notes payable to banks (3) - - 36,000 41,900 13,900 $1,070 10,288 237,276 120,470 14,416 Per common share information omitted; see Item 5. (1) The significant increases in total assets for 1990 and 1991 reflect the assumption of the costs of Unit 1 and Unit 2, respectively. Unit 1 and Unit 2 are two 150-megawatt lignite-fueled generating units using circulating fluidized bed technology. See Items 1, 2, 3 and 7 and notes 2 and 5 to the consolidated financial statements for more information about the units. (2) The significant increases in long-term debt in 1990 and 1991 reflect the assumption of the debt obligations of the financing facilities related to Unit 1 and Unit 2, respectively. See note 2 to the consolidated financial statements for more information about the financing facilities. (3) With proceeds from the issuances of long-term debt securities in January 1992, the Utility repaid and prepaid certain amounts under the Unit 1 and Unit 2 financing facilities and repaid a portion of outstanding unsecured notes payable to banks. (4) With proceeds from the issuances of long-term debt securities in September 1993, the Utility prepaid additional amounts under the Unit 1 and Unit 2 financing facilities. See note 2 to the consolidated financial statements for more information. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and note 5 to the consolidated financial statements for discussion of material uncertainties which might cause the information above not to be indicative of future financial condition or results of operations. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. This discussion presents management's analysis of significant factors in the Utility's financial condition and results of operations and should be read in conjunction with the consolidated financial statements and notes thereto. The Utility currently faces challenges to its financial stability as a result of uncertainties with respect to detrimental regulatory treatment and the servicing of debt incurred for refinancings of both the Unit 1 and the Unit 2 financing facilities. These matters have arisen by reason of the acquisition and operation by the Utility of TNP One, a two-unit, 300-megawatt, lignite-fueled, circulating fluidized bed generating facility located in Robertson County, Texas, and the related rate proceedings in Texas which disallowed recovery in rates of certain costs of TNP One. While the outcome of certain of these matters, and of other matters discussed below, cannot be predicted, the Utility is vigorously pursuing their favorable conclusion. The adverse resolution of certain of the matters discussed below would require a write-off of some portion of the disallowances and could result in a significant negative impact on earnings in the period of final resolution. The following discussion of certain regulatory proceedings related to TNP One is essential to an analysis of the Utility's financial condition and results of operations. Financial Condition TNP One Generating Units and Related Regulatory Matters Unit 1 and Unit 2 of TNP One each supply 150 megawatts and together are providing, on an annualized basis, approximately 30% of the Utility's electric capacity requirements in Texas. The Utility operates the two units and sells the output of TNP One to its Texas customers. Unit 1 began commercial operation on September 12, 1990, and Unit 2 on October 16, 1991. As of December 31, 1993, the costs of Unit 1 and Unit 2 were $357 million and $282.9 million, respectively. The costs of the two units were funded principally by separate financing facilities. PUCT Docket No. 9491 On February 7, 1991, in Docket No. 9491, the Public Utility Commission of Texas (PUCT) approved an increase in annualized revenues of approximately $36.7 million, or 67% of the Utility's original $54.9 million rate request, primarily related to Unit 1. The PUCT's final order allowed $298.5 million of the costs of Unit 1 in rate base; however, the PUCT disallowed from rate base $39.5 million of the requested investment costs of $338 million for that unit. On appeal, a State district court overturned the disallowances and ordered the case remanded to the PUCT for further proceedings consistent with the court's judgment. The Utility, the PUCT and certain intervenor cities (Cities) appealed the State district court's judgment to a Texas Court of Appeals. On August 25, 1993, the Court of Appeals rendered a judgment partially reversing the State district court and affirming the PUCT's disallowances for $30.4 million of the total $39.5 million. The Court of Appeals remanded the cause to the district court with instructions that the cause be remanded to the PUCT for proceedings not inconsistent with the appellate opinion. On September 9, 1993, the Utility, the Cities and the PUCT filed motions for rehearing with the Court of Appeals. The PUCT is not expected to act upon the district court's ordered remand until the appellate process, including appeals to the Texas Supreme Court, has been completed. Based upon the opinions of the Utility's Texas regulatory counsel, Johnson & Gibbs, a Professional Corporation, management believes that it will prevail in obtaining a remand of a significant portion of the disallowances in Docket No. 9491; however, the ultimate disposition and quantification of these items cannot presently be determined. Accordingly, no provision for any loss that may ultimately be required upon resolution of these matters has been made in the consolidated financial statements. If the Utility is not successful in obtaining a final favorable disposition in the appellate proceedings relating to the disallowances in Docket No. 9491, a write-off of some portion of the $39.5 million disallowances would be required, which could result in a significant negative impact on earnings in the period of final resolution. For a further discussion of Docket No. 9491, see note 5 to the consolidated financial statements. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES PUCT Docket No. 10200 On March 18, 1993, in Docket No. 10200, the PUCT approved an increase in annualized revenues of $19 million, or 53% of the Utility's original $35.8 million requested rate increase, primarily related to Unit 2. The PUCT's order determined that the reasonable costs for Unit 2 were $261.8 million. The PUCT allowed in rate base $250.7 million of the $275.2 million requested for Unit 2 costs. The difference between the $261.8 million in costs found to be prudent by the PUCT and the $282.9 million total costs of Unit 2 consisted of disallowances of approximately $21.1 million. The PUCT also determined that $11.1 million of Unit 2 costs would be addressed in a future Texas rate application. The PUCT also disallowed $800,000 of $16.1 million in additional costs requested for Unit 1. The revenue increase approved by the PUCT reflects application to the Utility of a new method for calculating the amount of Federal income tax expense allowed in cost of service, which had the effect of reducing the allowed revenue increase from $26 million to $19 million. The PUCT subsequently approved collection by the Utility of an additional $1.6 million in annualized revenues, subject to refund, on the condition that the Utility seek and receive from the Internal Revenue Service (IRS) a private letter ruling supporting the Utility's position on "normalization" rules with respect to the PUCT order regarding Federal income tax treatment for ratemaking purposes. After receiving PUCT approval on October 19, 1993, the Utility filed, on October 20, 1993, a request with the IRS for a private letter ruling on the issue of a normalization violation. The Utility expects to receive the private letter ruling in 1994. If the private letter ruling supports the Utility's position, the amount of revenues subject to refund ($3.4 million at December 31, 1993) will be recognized in operations upon receipt of the letter. The Docket No. 10200 rate order has been appealed to a Texas district court by the Utility and other parties. Because of the Court of Appeals judgment relating to the prudence of starting construction of Unit 2 (Finding of Fact No. 84 in Docket No. 9491), the presiding judge in the Texas district court for the Docket No. 10200 appeal has ordered that the procedural schedule in this appeal be abated until final resolution of the Finding of Fact No. 84 issue in Docket No. 9491. The Utility will vigorously pursue reversal of the PUCT's new position regarding Federal income tax expenses, in addition to seeking judicial relief from the disallowances and certain other rulings by the PUCT in Docket No. 10200. The opposing parties are seeking a variety of relief to obtain lower rates and greater disallowances, including overturning the basis of the Utility's case as presented to the PUCT and sustaining the PUCT's adverse Federal income tax position without regard to any IRS ruling on the normalization issue. Based upon the opinions of the Utility's Texas regulatory counsel, Johnson & Gibbs, a Professional Corporation, management believes that it will prevail in obtaining a remand of a significant portion of the disallowances in Docket No. 10200; however, the ultimate disposition and quantification of these items cannot presently be determined. Accordingly, no provision for any loss that may ultimately be required upon resolution of these matters has been made in the consolidated financial statements. If the Utility is not successful in obtaining a final favorable disposition in the appellate proceedings relating to the disallowances in Docket No. 10200, a write-off of some portion of the $21.9 million disallowances would be required, which could result in a significant negative impact on earnings in the period of final resolution. For a further discussion of Docket No. 10200, see note 5 to the consolidated financial statements. Other TNP One Matters In November 1987, the Utility entered into a fuel supply agreement with Phillips Coal Company (Phillips), owner of a 300-million-ton lignite reserve in Robertson County in proximity to the TNP One site, to provide a lignite fuel source for the 38-year life of TNP One. Phillips subsequently entered into an agreement with a subsidiary of Peter Kiewit Sons', Inc. for development of the lignite mine by a joint venture partnership, Walnut Creek Mining Company. Unit 1 and Unit 2 are capable of utilizing Western coal, petroleum coke and natural gas as alternative fuel sources. New Mexico Rate Application In August 1993, the Utility filed an application with the New Mexico Public Utility Commission (NMPUC) to increase its base rate revenues in New Mexico by $1.95 million, or 2.87%, and to decrease overall its annualized revenues by $5.13 million. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES On January 28, 1994, a unanimous settlement was executed by all parties involved in the Utility's New Mexico rate application. The settlement, if approved by the NMPUC, would increase the Utility's annual base rate revenues in New Mexico by approximately $400,000, or 0.57%. However, when a scheduled decrease of approximately $7.1 million in firm purchased power costs is considered with the $400,000 increase in base rates, the Utility's customers will receive a net decrease in their overall rates. The overall rate decrease is influenced by the fact that a large part of the total revenue requirements in the Utility's New Mexico operations is related to the cost of purchased power. The settlement provides rates that have two very positive aspects. First, it allows the Utility to recover through the increase in base rates the current operating cost of providing service to its customers in New Mexico including a reasonable return on the Utility's investments. Second, it lowers the overall rates charged to the Utility's New Mexico customers. Subject to the successful completion of the proceedings before the NMPUC on the settlement, the proposed rates would become effective in the spring of 1994. Liquidity and Capital Resources Unit 1 and Unit 2 Financing Facilities The Unit 1 and Unit 2 financing facilities were originally entered into by separate subsidiaries of a construction consortium for the construction of Unit 1 and Unit 2 of TNP One. The Unit 1 financing facility was assumed by Texas Generating Company (TGC) on July 20, 1990. The Unit 2 financing facility was assumed by Texas Generating Company II (TGC II) on July 26, 1991. TGC and TGC II are wholly owned subsidiaries of the Utility. As discussed further below, the balance of the secured notes payable of the Unit 1 financing facility and a substantial amount of loans under the Unit 2 financing facility were purchased or prepaid on September 29, 1993 with proceeds from the issuance of new debt securities. Such purchases and prepayments reduced the amounts remaining to be repaid under the Unit 2 financing facility to $147.75 million. Thereafter, the Utility made additional unscheduled prepayments of approximately $69 million under the Unit 2 financing facility; the Utility used existing cash and a $15 million equity contribution from the Utility's parent, TNP Enterprises, Inc. (TNPE), to make these additional prepayments. At December 31, 1993, the Unit 2 financing facility balance was $78.8 million which represents secured notes payable, consisting of a series of renewable loans from various lenders in a financing syndicate. In contemplation of the prepayments of the Unit 1 and Unit 2 financing facilities, the related credit agreements between the secured lenders and the Utility were amended as of September 21, 1993 to facilitate the issuance of the secured debentures, due 2003, and to extend the maturities of the remaining loans from due dates in 1994 and 1995. The effectiveness of the amendments was contingent upon the application of net proceeds from the sale of the secured debentures, due 2003, and the Series U Bonds. The extension of the maturities of the remaining loans to be outstanding under the Unit 2 financing facility has been approved by the Federal Energy Regulatory Commission and is subject to approval by the NMPUC. The Utility expects to receive the necessary approval prior to June 30, 1994, as required by the amendments. Upon the effective date of the extension, the lenders will receive an extension fee of 1/4 of 1% on their pro-rata share of the $147.75 million commitment. Based upon the December 31, 1993 balance and assuming the approvals of the extensions of the maturities under the Unit 2 financing facility, $1.6 million will be due on December 31, 1995, $3.4 million will be due on December 31, 1996, with the remaining amounts due in two equal installments of approximately $36.9 million on December 31, 1997 and 1998. Under the amendments to the Unit 2 credit agreement, the Utility is permitted to prepay up to $141.5 million of the $147.75 million commitment under the Unit 2 financing facility and reborrow thereunder up to the amount of such prepayments, subject to scheduled reductions of the commitment of approximately $36.9 million each in 1996, 1997 and 1998. Such reborrowings under the Unit 2 financing facility will be subject to compliance with the EBIT test (as described in note 2 to the consolidated financial statements) and maintenance of an equity to total capital ratio of 20% or more as defined in the credit agreement. As of December 31, 1993, the unused commitment available to be borrowed under the Unit 2 financing facility was approximately $69 million. A commitment fee of 1/4 of 1% per annum is payable on the unused portion of the reducing commitment. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES The Utility expects to file, during the first half of 1994, a Texas application requesting an increase in annualized revenues. If the Utility receives satisfactory results from the application, the Utility expects to be able to repay the remaining amount due under the Unit 2 financing facility through receipt of common equity from the Utility's parent, internal cash generation and issuance of debt. See "Capital Resources" below for a discussion of the Utility's external sources for acquiring capital. Issuance of New Debt Securities On September 29, 1993, the Utility issued $100,000,000 of 9.25% First Mortgage Bonds, Series U (New Bonds), due 2000, and $140,000,000 of 10.75% Secured Debentures, Series A, due 2003. Net proceeds from the issuance of the new securities and existing cash were applied as follows: (i) $21.78 million to call the aggregate principal amount, including redemption premiums, of Series H, I, J and K First Mortgage Bonds, (ii) $9.14 million to reimburse the Utility's treasury for funds used to redeem Series G First Mortgage Bonds at maturity on July 1, 1993, (iii) $146 million to prepay or purchase all of the outstanding secured notes payable to lenders under the Unit 1 financing facility and (iv) $75.75 million to prepay secured notes payable under the Unit 2 financing facility. Redemption of Series H, I, J and K First Mortgage Bonds was necessary to permit the issuance of the $100,000,000 in New Bonds because of certain restrictions under the Utility's first mortgage bond indenture (Bond Indenture), as discussed below. Supplemental indentures relating to Series H, I, J and K First Mortgage Bonds contained a requirement that Net Earnings Available for Interest of the Utility for 12 consecutive months out of the preceding 15 months be at least two-and-one-half (2.5) times the aggregate amount of annual Interest Charges on Bonded Indebtedness which gives effect to the interest on the additional Bonds to be issued (the Interest Coverage Ratio). Under the 2.5 times Interest Coverage Ratio required for issuance of additional First Mortgage Bonds, only a minimal amount of additional First Mortgage Bonds could have been issued. Under the supplemental indentures for the series of Bonds outstanding after the deposit of proceeds from the offering of the new securities for the redemption of Series H, I, J and K Bonds, the Interest Coverage Ratio was reduced to two (2) times. Capital Requirements The Utility's 1993 capital requirements consisted of (1) additions to utility plant and (2) bond sinking fund payments and maturities and preferred stock redemptions. The Utility's cash flows from operations for 1993 were reduced by an $18 million rate refund to the appropriate Texas customers. The refund, discussed in note 5 to the consolidated financial statements, was related to the period from October 1991 through April 1993, during which customers were billed at bonded rates which exceeded the finally authorized rates. During 1993, the Utility's capital requirements were funded with cash flows from operations (after payment of cash dividends on common and preferred stock), excluding the rate refund funded from existing cash. Due to the seasonal nature of the Utility's business, cash flows from operations may fluctuate between quarters, but the Utility expects positive cash flows from operations on an annual basis. During the period from January 1, 1994 to December 31, 1999, the Utility currently estimates that its total debt and preferred stock repayments will be $349.4 million. This amount includes the repayments in 1995, 1996, 1997 and 1998 in discharge of the $78.8 million balance outstanding under the Unit 2 financing facility at December 31, 1993. In addition, the Utility expects its utility plant additions to be approximately $180.9 million during the period from January 1, 1994 to December 31, 1999. The Utility expects the requirements for utility plant additions will be funded internally with cash flows from operations. The amounts and types of the foregoing requirements through 1999, after giving effect to the extensions under the Unit 2 financing facility, assuming pending regulatory approval, are estimated as follows: TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Capital Requirements (1)
1994 1995 1996 1997 1998 1999 Total (Dollars in Millions) Preferred stock redemptions $ 0.9 0.9 0.8 0.6 0.6 0.2 4.0 Unit 2 financing facility (2) - 1.6 3.4 36.9 36.9 - 78.8 First Mortgage Bond sinking fund payments and retirements 1.1 1.1 1.1 131.1 1.1 1.1 136.6 Secured Debentures, due 1999 maturity. . . . . - - - - - 130.0 130.0 Total debt and preferred stock repayments. . . . . 2.0 3.6 5.3 168.6 38.6 131.3 349.4 Utility plant additions . . 25.9 28.3 32.7 30.4 31.5 32.1 180.9 Total capital requirements $27.9 31.9 38.0 199.0 70.1 163.4 530.3 (1) See note 2 to the consolidated financial statements for details of the maturities of all outstanding debt. (2) Based upon the balance outstanding at December 31, 1993.
Included in the First Mortgage Bond sinking fund payments and retirements amount for 1997 is $130 million of First Mortgage Bonds, Series T, which mature January 15, 1997. The Utility anticipates that it will refinance these bonds and the Secured Debentures due in 1999 through the issuance of additional First Mortgage Bonds or other debt securities, and/or the receipt of common equity from TNPE. The Utility does not need additional Available Additions (described below under "Capital Resources") in order to issue First Mortgage Bonds for the purpose of refunding outstanding First Mortgage Bonds. As a result of the assumption of the financing facilities for Unit 1 and Unit 2 in 1990 and 1991, respectively, and related refinancings, the Utility's capital structure consisted of 75.2% debt, 23.7% common equity and 1.1% preferred stock at December 31, 1993. Prior to 1990, the Utility's capital structure contained less than 50% debt. The Utility's long-term goal is to strive for a conservative capital structure with a debt ratio of less than 50%. Capital Resources At any time, the Utility's ability to access the capital markets on a reasonable basis or otherwise obtain needed financing for operating and capital requirements is subject to the receipt of adequate and timely regulatory relief and market conditions. The Utility's ability to access the capital markets at reasonable costs will specifically be impacted by the ultimate resolution of (1) the amount of rate relief granted for Unit 1 and Unit 2, (2) the contested disallowances of up to $40.3 million and $21.1 million of the costs of Unit 1 and Unit 2, respectively, and (3) the adverse PUCT ruling concerning the treatment of the Federal income tax component of the Utility's cost of service. In addition to the aforementioned Unit 2 financing facility, the Utility's external sources for acquiring capital are outlined below: First Mortgage Bonds. Assuming an interest rate of 9.25% and satisfactory market conditions, based upon December 31, 1993 financial information, the Utility could have issued approximately $59 million of additional First Mortgage Bonds under the Interest Coverage Ratio requirement. With certain exceptions, the amount of additional First Mortgage Bonds that may be issued is also limited by the Bond Indenture to a certain amount of physical properties which are to be collateralized by the first lien mortgage of the Bond Indenture (Available Additions). Because of the issuance of the New Bonds in September 1993, the Utility has limited ability to issue additional First Mortgage Bonds until more Available Additions are provided upon further repayment of amounts under the financing facilities. Secured Debentures. The indenture, under which the Series A Secured Debentures were issued, permits, generally, the issuance of additional secured debentures to the extent that the proceeds from such issuance are used to purchase an equal amount of loans under the Unit 1 and Unit 2 financing facilities. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Preferred Stock. Due to interest and dividend coverage tests required for issuance of its preferred stock, the Utility cannot presently issue any preferred stock. The Utility does not expect to have the ability to issue preferred stock through 1996. Receipt of Common Equity One source for repayment of the Unit 2 financing facility is anticipated to be the receipt of common equity from TNPE. Receipt of future equity contributions by the Utility from TNPE will be largely dependent upon TNPE's ability to issue common stock. Since most of the assets, liabilities and earnings capability of TNPE are those of the Utility, the ability of TNPE to issue common stock and pay dividends will be largely dependent upon the Utility's operations and the Utility's restrictions regarding payment of cash dividends on its common stock. The Utility may not pay dividends on its common stock unless all past and current dividends on outstanding preferred stock of the Utility have been paid or declared and set apart for payment and all requisite sinking or purchase fund obligations for the preferred stock of the Utility have been fulfilled. Charter provisions relating to the preferred stock and the Bond Indenture under which First Mortgage Bonds are issued contain restrictions regarding the retained earnings of the Utility. At December 31, 1993, pursuant to the terms of the Bond Indenture, approximately $12.8 million of the Utility's $38.9 million of retained earnings was restricted. In addition, the financing facilities place certain restrictions on the Utility's ability to pay dividends on its common stock, unless certain threshold tests are met. The Utility has satisfied the threshold tests since they became effective, and the Utility does not expect that any of the aforementioned contractual restrictions on the payment of dividends will become operative in 1994. However, the Utility can give no assurance that the Utility will satisfy such tests in the future. The Utility's 1993 common stock dividends of $17.3 million exceeded 1993 earnings available for common stock of $10.6 million; however, the Utility's retained earnings were sufficient to allow the dividends to be paid. Contributing to the low-level of earnings in 1993 were the lower rates from the December 1992 adverse ruling of the PUCT regarding the Utility's Federal income tax component in its cost of service and significant interest charges. As discussed in "Net Earnings" under "Results of Operations", management has implemented cost saving measures during 1993 and is seeking equitable regulatory treatment in efforts to improve future results of operations. Cash dividend payments are subject to approval of the Board of Directors and are dependent, especially in the longer term, on the Utility's and TNPE's future financial condition and adequate and timely regulatory relief, including favorable resolution of pending judicial appeals of rate cases. Other Matters Accounting for Postretirement Benefits On January 1, 1993, the Utility implemented Statement of Financial Accounting Standards No. 106 (SFAS 106), "Employers' Accounting for Postretirement Benefits Other Than Pensions," which addresses the accounting for other postretirement employee benefits (OPEBs). For the Utility, OPEBs are comprised primarily of health care and death benefits for retired employees. Prior to 1993, the costs of these OPEBs were expensed on a "pay-as-you-go" basis. Beginning in 1993, SFAS 106 requires a change from the "pay-as-you-go" basis to the accrual basis of recognizing the costs of OPEBs during the periods that employees render service to earn the benefits. The 1993 accrual for OPEBs of $2,952,000, based on adoption of SFAS 106, was $2,276,000 greater than the amount that would have been recorded under the "pay- as-you-go" basis. In March 1993, the PUCT issued its rules for ratemaking treatment of OPEBs. As part of a general rate case, a utility may request OPEBs expense in cost of service for ratemaking purposes on an accrual basis in accordance with generally accepted accounting principles. The PUCT's rule requires that the amounts included in rates shall be placed in an irrevocable external trust fund dedicated to the payment of OPEBs expenses. Based on the PUCT's rule, the Utility intends to seek recovery of OPEBs expense attributable to its Texas jurisdiction in its next Texas rate case. In order to comply with the PUCT's condition for possible recovery of OPEBs expenses, the Utility established in June 1993 a Voluntary Employees' Beneficiary Association (VEBA) trust fund, dedicated to the payment of OPEBs expenses. Monthly cash payments made to the VEBA, which began in June 1993, will fund OPEBs costs for the Utility's Texas and New Mexico operations. See note 1(j) to the consolidated financial statements for information about the funded status of the plan. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES On August 23, 1993, the Utility filed a rate application with the NMPUC which included a request for recovery of the applicable costs of OPEBs. A stipulated agreement among the parties to the proceeding, dated January 28, 1994, subject to approval by the NMPUC, would include such applicable costs in the proposed New Mexico rates, beginning in 1994. For future periods, the costs of OPEBs will be affected by changes in the assumed interest rate and the trends in health care costs; based on actuarial assumptions, national health care costs are expected to increase in the future, resulting in further increases in the Utility's costs. Accounting for Income Taxes On January 1, 1993, the Utility implemented Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." The implementation of SFAS 109 did not result in any significant charge to operations. See note 4 to the consolidated financial statements for details relating to the implementation of SFAS 109. Accounting for Postemployment Benefits The FASB has issued Statement of Financial Accounting Standards No. 112 (SFAS 112), "Employers' Accounting for Postemployment Benefits" which addresses the accounting and reporting for the estimated costs of benefits provided by an employer to former or inactive employees after employment but before retirement. SFAS 112 is effective for fiscal years beginning after December 15, 1993. The Utility estimates such costs to be immaterial. Effects of Inflation The Utility does not believe that the effects of inflation, as measured by the Consumer Price Index over the last three years, have had a material impact on the Utility's consolidated results of operations and financial condition. Tax Law Change The Omnibus Budget Reconciliation Act of 1993 was signed into law on August 10, 1993. Beginning in 1994, the act provides for the disallowance of certain business deductions, the effect of which is not expected to be material for the Utility. The act also provided, effective January 1, 1993, for a corporate income tax rate increase from 34% to 35% to be phased in for taxable income between $10 million and $18 million. Results of Operations The following table sets forth the percentage relationship of items to operating revenues in the consolidated statements of earnings: 1993 1992 1991
Operating revenues 100.0% 100.0% 100.0% Operating expenses: Power purchased for resale 42.2 39.3 49.1 Fuel 9.4 10.1 5.8 Other operating and general expenses 14.6 15.8 14.8 Maintenance 2.4 2.6 2.5 Depreciation of utility plant 7.6 7.9 6.4 Taxes, other than on income 6.4 6.6 5.4 Income taxes 0.9 0.4 1.8 Total operating expenses 83.5 82.7 85.8 Net operating income 16.5 17.3 14.2 Other income, net of taxes 0.2 0.5 0.2 Earnings before interest charges 16.7 17.8 14.4 Total interest charges 14.3 15.4 9.9 Net earnings 2.4% 2.4% 4.5%
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Operating Revenues Operating revenues for 1993 and 1992 reflect increases of $30,415,000 and $2,484,000 over the respective prior years. The following table presents the components of the changes in operating revenues: Increase (Decrease) From Prior Year 1993 1992 (Dollars In Thousands) Base operating revenues . . . . . . $ (1,515) (0.3)% $35,785 8.1% Recovery of purchased power costs 25,926 5.8 (42,561) (9.6) Recovery of fuel costs. . . . . . . (1,230) (0.3) 19,204 4.4 Customer usage. . . . . . . . . . . 8,291 1.9 (11,746) (2.7) Other revenues. . . . . . . . . . . (1,057) (0.2) 1,802 0.4 Total . . . . . . . . . . . . . $30,415 6.9% $ 2,484 0.6%
Base operating revenues are affected primarily by changes in base rates resulting from regulatory commission orders and the effects of variations in sales between customer classifications. The significant increase in base operating revenues for 1992 was primarily attributable to bonded rates for Docket No. 10200 being placed into effect in October 1991. The PUCT's final order approving these rates was received on October 16, 1992 and subsequently was amended by the PUCT in an Order on Rehearing on December 22, 1992. The result of this Order on Rehearing was to lower the previously approved increase in annualized revenues by approximately $7 million, from $26 million to approximately $19 million. The PUCT later increased, subject to refund, the annualized revenues by an additional $1.6 million. Because the increase continued to be subject to a possible refund, no additional revenues were recognized in 1992 or 1993 and such amounts were included in revenues subject to refund in the consolidated balance sheets. For more information regarding Docket No. 10200, see note 5 to the consolidated financial statements. Purchased power costs are recovered through cost recovery factor clauses in both Texas and New Mexico. Fuel costs are recovered through a fixed fuel factor approved by the PUCT. Recoveries of purchased power and fuel costs are discussed further in "Operating Expenses." Customer usage increased in 1993 due to a 3.6% increase in kilowatt- hour (KWH) sales to residential, commercial and industrial customers. The residential usage increase related to an increase in the number of residential customers and warmer temperatures in the Texas service areas; in 1992, milder than normal weather was experienced in the Texas service areas. Commercial usage increased in the Utility's Texas service areas as the result of general retail development in the Northern Division and Southeast Division and the addition of a greyhound race track in the Southeast Division. During 1993, the number of industrial customers decreased by 14, but that decrease included the consolidation of 10 customers into 2 customers for billing purposes and the reclassification of 3 customers to the commercial class of customers. The industrial usage increase in the Utility's New Mexico service area resulted from increased consumption of an existing mining customer and the addition of a new mining customer. The 1992 decrease in customer usage primarily reflected a 5.46% KWH sales decline. Part of the decrease in customer usage was attributable to the milder than normal temperatures experienced in Texas during 1992. Also contributing to the sales decline was the failure of new customers and revenues to materialize as expected within the industrial class to ameliorate the loss of KWH sales to certain industrial customers. From time to time, industrial customers of the Utility express interest in cogeneration as a method of reducing or eliminating reliance upon the Utility as a source of electric service, or to lower fuel costs and improve operating efficiency of process steam generation. During 1993, a major industrial customer in the Utility's Southeast Division requested proposals for a cogeneration project for evaluation by the customer. The Utility's operating revenues from this customer during 1993 were approximately $28 million. In January 1994, a potential developer for the proposed project was selected by the customer. The Utility's goal is to retain this customer and to lower overall system operating costs through coordination with the potential developer. Although the Utility cannot predict the ultimate outcome of the process, the current project as proposed by the customer, and as outlined by the potential developer, appears to present a means by which the Utility may retain electric service to this customer, at current levels. The Utility is actively pursuing the development of the necessary agreements with the potential developer to further define the degree to which electric service to this customer is retained and overall system operating costs may be lowered. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES For information relating to actual KWH sales, number of customers, and revenues, see Item 1, "Financial Information about Industry Segments." Operating Expenses As a regulated entity, the Utility must demonstrate to the regulatory commissions in its rate filings that its requests for recovery of operating expenses to provide service to its customers are reasonable and necessary. In order to provide reliable service to its customers at reasonable rates, management endeavors to control costs through budgeting and monitoring of operating expenses. Commencement of commercial operations of Unit 1 in September 1990 and Unit 2 in October 1991 led to increases in certain expenses and interest charges over prior years; however, the Utility experienced decreases in the potential cost of power purchased for resale as a result of the operations of Unit 1 and Unit 2. The 1993 and 1992 levels of expenses each reflect a full year's operations of both units. Variances in expenses from 1991 to 1992 due to a partial year's operation of Unit 2 in 1991 are noted in the following discussion. Power Purchased for Resale Factors affecting the expense of power purchased for resale are (1) the number of KWH purchased from suppliers, (2) the cost per KWH purchased, (3) the recovery or refund of prior under- or over-collections, respectively, of purchased power costs (deferred purchased power costs), and (4) occasional fuel cost refunds from the Utility's suppliers. The Utility's policy regarding the accounting for deferred purchased power costs is discussed in note 1(g) to the consolidated financial statements. Power purchased for resale increased $25,926,000 in 1993, and a decrease of $42,561,000 was experienced in 1992. The increase in purchased power expense for 1993 was mainly due to an increase in the average cost of KWH purchased from suppliers. Information concerning the Utility's suppliers is disclosed in Item 1 under "Sources of Energy." Also contributing to the increase in 1993 was an increase in the number of KWH purchased as a result of increased customer usage, discussed under "Operating Revenues." The decrease in 1992 resulted from a decline in the number of KWH purchased. This KWH decrease was caused by the replacement of purchased power with a full year's generation of Unit 2 of TNP One and the decrease in customer usage, discussed under "Operating Revenues." Partially offsetting the effect of this reduction in the number of KWH purchased in 1992 was an increase in the recovery of deferred purchased power costs. As in 1992, the 1993 level of KWH purchases reflects a full year's generation of TNP One; therefore, KWH purchases for 1993 and 1992 are comparable in this respect. No significant changes in KWH purchased resulting from TNP One's operations are expected in the future. While costs per KWH from purchased power suppliers are not directly controllable, wholesale rates charged by various suppliers are subject to regulatory authority. The Utility has intervened and will continue to intervene in suppliers' rate cases for the purpose of assuring fair and equitable costs to its customers. Fuel Fuel expense decreased $629,000 in 1993, as compared to an increase of $19,204,000 in 1992. The decrease in recovery of fuel costs for 1993 resulted from a slightly lower fuel cost recovery factor than that utilized in 1992. These differing fuel factors resulted from using a factor related to bonded rates in 1992 which was adjusted downward in 1993 to comply with the final order in Docket No. 10200. The large increase in 1992 was related to a full year's commercial operation of both Unit 1 and Unit 2. Fuel expense primarily represents the recovery of fuel costs through a fixed fuel factor set by the PUCT. The fixed fuel factor is intended to permit the Utility to recover the cost of fuel utilized to generate electricity sold in Texas. The factor may be changed only upon approval of the PUCT and is expected to be adjusted for any cumulative under- or over-recovery of fuel costs. At December 31, 1993, the Utility had under-recovered fuel costs, including interest, of approximately $13.6 million related to both units of TNP One. Any requests to the PUCT for recovery of fuel costs require the Utility's demonstration that the costs were reasonable. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Beginning in 1993, a filing with the PUCT for a reconciliation of fuel costs is required if for any given period of time there is an over- or under-recovery of fuel costs of at least 4% of revenues. Under the PUCT's rules, the months in which utilities may initiate fuel reconciliation proceedings are specified; for the Utility, these months are June and December. In the event of an over- or under-recovery of fuel costs less than the 4% threshold, a filing to adjust the fuel factor may be made at the discretion of management. The Utility expects to file a fuel reconciliation with its next Texas rate application during the first half of 1994. Management will continue to monitor its fuel cost recovery to determine the need to request a change in its fixed fuel factor. For a discussion of the fuel supply agreement for TNP One, see "Other TNP One Matters" under "Financial Condition." Other Operating and General Expenses and Maintenance Other operating and general expenses decreased $597,000 in 1993 after an increase of $4,716,000 in 1992. The 1993 decrease represents primarily decreases in employee pension and thrift benefits and payroll costs which were offset somewhat by an increase in employee postretirement medical costs resulting from implementation of SFAS 106. The decrease in the employee benefits for 1993 was due to an amendment to the pension plan and the curtailment of employer thrift plan contributions on January 1, 1993. Payroll costs declined due to a 3.2% reduction in the number of employees. The increase in other operating and general expenses for 1992 was due primarily to additional wheeling costs which were incurred for a full year's transfer of power generated by Unit 2 and to amortization of previously deferred rate case expenses. Wheeling costs are incurred for the transfer of TNP One power over other utilities' transmission systems for delivery to the Utility's Texas systems. The years 1993 and 1992 reflected wheeling costs for both Unit 1 and Unit 2; therefore, any future changes in this level of expense would be the result of changes in monthly wheeling charges. Regarding deferred rate case expenses, a full year's amortization was reflected in both 1993 and 1992, making them comparable in this respect; in 1994, another year's amortization remains for the deferred rate case expenses. As previously discussed under "Financial Condition," implementation of SFAS 106 may lead to additional costs in the future. Other operating and general expenses will be affected in 1994 because of a 3% cost-of-living payroll adjustment for full-time employees effective January 10, and the restoration of employer thrift plan contributions scheduled to resume beginning July 1. Since the last cost-of-living payroll adjustment granted to the Utility's employees was in 1991, these changes were made to maintain the level of experienced personnel necessary for providing quality service to the Utility's customers. No significant variances have occurred in maintenance expense over the last three years. Maintenance outages are scheduled in the first and fourth quarters of 1994 for Unit 2 and Unit 1, respectively. Since prior years reflect expenses for past scheduled outages of the units, no significant increase in maintenance expense is anticipated in 1994. Depreciation of Utility Plant Depreciation expense increased $917,000 and $7,071,000 in 1993 and 1992, respectively. The 1993 increase was related to normal additions to utility plant while the large increase in 1992 reflects a full year's expense for Unit 2 and Unit 1. Future increases in depreciation would be the result of normal utility plant additions and regulatory approvals of changes in depreciation rates as supported by required periodic independent studies. Taxes, Other Than On Income Taxes, other than on income increased $1,046,000 and $5,462,000 in 1993 and 1992, respectively. The 1993 increase related primarily to an increase in revenue-related taxes which resulted from increased revenues upon which the taxes are based. The increase in 1992 was primarily related to an increase in property-related taxes resulting from (1) a full year's expense related to Unit 2 as compared to only a partial year in 1991 and (2) increases in the property tax rates in Texas. Income Taxes Income taxes increased $2,397,000 in 1993 after a decrease of $5,963,000 in 1992. The increase in 1993 resulted from an increase in earnings over 1992, a decline in the regulatory-ordered amortization of excess deferred taxes, and an increase in Federal income tax rates. Income taxes decreased in 1992 due to the decline in net earnings compared to 1991. For the years 1993, 1992 and 1991, the Utility incurred tax net operating losses due to accelerated tax depreciation deductions and increased interest charges on debt related to TNP One and subsequent refinancings; however, payments of current income taxes were required based on minimum tax (MT) requirements. To the extent that the Utility is subject to MT requirements and limitations on the utilization of available credits, payments of current Federal income taxes are expected to be required in 1994. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES As discussed in "Accounting for Income Taxes" under "Financial Condition," implementation of SFAS 109 did not result in any significant charge to earnings. For more information regarding the Utility's income taxes, see note 4 to the consolidated financial statements. As with all areas of the Utility's cost of service, recovery of income tax expenses is expected in rates charged to customers. However, as discussed in "PUCT Docket No. 10200" under "Financial Condition," uncertainties exist with respect to the Utility's Federal income tax expense component of cost of service. The Utility is pursuing reversal of the PUCT's adverse decisions. Other Income, Net of Taxes Other income, net of taxes increased in 1992 by $1,290,000 primarily because of interest earned on short-term investments, principally repurchase agreements and government money trusts, during the year. Considerable cash was used in 1993 to make optional payments under the Unit 2 financing facility thereby reducing cash available for the aforementioned investments. This contributed to the decrease of $901,000 in 1993. Interest Charges Total interest charges decreased slightly by $342,000 in 1993 after an increase of $24,723,000 in 1992. The slight decrease in interest on long-term debt in 1993 was the net result of several transactions. Decreases in 1993 expense resulted from (1) redemption of Series G First Mortgage Bonds at maturity on July 1, 1993, (2) redemption of Series H, I, J and K First Mortgage Bonds to permit issuance of Series U First Mortgage Bonds and (3) prepayments made under the Unit 1 and Unit 2 financing facilities. Partially offsetting these decreases in interest on long-term debt were the issuances of Series U First Mortgage Bonds and Series A Secured Debentures in September 1993. Interest on long-term debt increased in 1992 due to the issuance in January 1992 of $130 million of 11.25% Series T First Mortgage Bonds and $130 million of 12.50% Secured Debentures, due in 1999. The Utility used $194 million of the proceeds from the issuance to retire a portion of the Unit 1 and Unit 2 financing facilities, as was required for extended payment dates under the amended terms of the financing facilities. The notes payable under the financing facilities had lower interest rates than the new securities. Interest charges also increased in 1992 due to the debt for Unit 2 being outstanding for a full year as compared to a partial year in 1991. In 1994, the full effects of the 1993 redemptions and new issuances are expected to result in a net increase in interest on long-term debt. Any changes in the interest rates or balances related to the Unit 2 financing facility in 1994 will also have an effect on long-term debt interest. Other interest and amortization of debt discount, premium and expense for 1993 reflects a fourth quarter amortization of debt expense associated with the issuances of Series U Bonds and Series A Secured Debentures and further amendments to the Unit 1 and Unit 2 financing facilities; therefore, an increase in this expense can be expected in 1994 due to a full year's amortization. In 1993, other interest included interest on the provision for a refund of bonded revenues billed in excess of the amounts allowed under Docket No. 10200. Other interest and amortization of debt discount, premium and expense increased during 1992 primarily as the result of the issuances of the Series T Bonds and Secured Debentures, due 1999 discussed above, as well as the amortization of expenses related to the amendments of the Unit 1 and Unit 2 financing facilities. Other interest expense increased due to the accrual of interest on the provision for a refund of bonded revenues billed in excess of the amounts allowed in Docket No. 10200. Partially offsetting these increases was a decrease in interest on unsecured notes payable to banks. The Utility utilized a portion of the proceeds from the issuance of the Series T Bonds and Secured Debentures, due 1999 to retire $26 million of unsecured notes payable to banks. The remaining $10 million portion of such notes was retired in August 1992. Allowance for borrowed funds used during construction (AFUDC) decreased in 1992 when compared to 1991 because Unit 2 was placed in commercial operation on October 16, 1991. AFUDC for 1991 reflected primarily the qualified capitalization of interest on the financing facility for Unit 2 from the date of assumption (July 26, 1991) until the date Unit 2 began commercial operation. Receipt of equity contributions and proceeds from future issuances of debt securities are anticipated to help satisfy the scheduled repayments of the Unit 2 financing facility. Interest rates on debt securities are expected to be greater than those interest rates under the financing facility. Interest rates on additional debt may be further increased if the Utility's outstanding regulatory matters are not satisfactorily resolved. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Net Earnings Net earnings increased $678,000 in 1993 after a significant decline of $8,995,000 in 1992. The decline of net earnings in 1992 was due primarily to (1) the decrease in customer usage as discussed in "Operating Revenues," (2) the PUCT's abandonment of its long-standing methodology for determination of the Federal income tax expense component of cost of service in the PUCT's Order on Rehearing in Docket No. 10200 and (3) the increases in interest expense. The slight increase in 1993 resulted from increased KWH sales, the effect of which was reduced by increases in depreciation expense, taxes, other than on income and income taxes and a decrease in other income as previously discussed. The level of 1993 net earnings also reflects the adverse tax ruling by the PUCT, discussed above in "PUCT Docket No. 10200" under "Financial Condition." Early in 1993, the Utility implemented cost saving measures such as (1) suspension of the Utility's matching contributions to the employees' thrift plan, (2) revision to the Utility's pension plan and (3) implementation of a general employee salary and wage freeze and limitations on hiring new employees and replacements. These cost saving measures more than offset the increase in expenses related to the health care and death benefits plans resulting from implementation of SFAS 106. With the exception of the Utility's wage-step progression increases reactivated in April 1993, these measures continued in effect throughout 1993. The Utility reduced its labor force by 3.2% during 1993, trimming $1.1 million from operations and maintenance expenses. Even so, the Utility's return on common equity for 1993 and 1992 was 4.97% and 4.80%, respectively, although the Utility's rate of return granted in Docket No. 10200 authorized a return on common equity of 13.16%. Based on the Utility's earnings for 1993 and 1992 and the expected increases in interest on long-term debt and certain other expenses, equitable rate relief in Texas appears to be necessary for any significant improvement in financial results to occur during 1994. Future regulatory treatment and court decisions regarding Docket Nos. 9491 and 10200, as previously discussed, will have a direct bearing on future earnings. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Item 8. Consolidated Financial Statements and Supplementary Data. Independent Auditors' Report The Board of Directors Texas-New Mexico Power Company: We have audited the consolidated financial statements of Texas-New Mexico Power Company (a wholly owned subsidiary of TNP Enterprises, Inc.) and subsidiaries as listed in the accompanying index at Part IV. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedules as listed in the accompanying index. These consolidated financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Texas-New Mexico Power Company and subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1993, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As discussed in note 5 to the consolidated financial statements, uncertainties exist with respect to the outcome of certain regulatory matters. The ultimate outcome of these matters cannot presently be determined. Accordingly, no provision for any loss that may ultimately be required upon resolution of these matters has been made in the accompanying consolidated financial statements and financial statement schedules. As discussed in note 4 to the consolidated financial statements, the Company changed its method of accounting for income taxes in 1993 to adopt the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. As discussed in note 1(j), the Company also adopted the provisions of the Financial Accounting Standards Board's SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions in 1993. KPMG PEAT MARWICK Fort Worth, Texas January 28, 1994 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprises, Inc.) CONSOLIDATED STATEMENTS OF EARNINGS Three Years Ended December 31, 1993
1993 1992 1991 (In Thousands) Operating revenues (note 5) . . . . . $ 474,242 443,827 441,343 Operating expenses: Power purchased for resale. . . . 200,183 174,257 216,818 . Fuel. . . . . . . . . . . . . . . 44,348 44,977 25,773 Other operating and general . expenses (note 1(j)). . . . . . 69,406 70,003 65,287 Maintenance . . . . . . . . . . . 11,460 11,342 11,225 Depreciation of utility plant 36,015 35,098 28,027 Taxes, other than on income . . . 30,296 29,250 23,788 Income taxes (note 4) . . . . . . 4,294 1,897 7,860 Total operating expenses . . . 396,002 366,824 378,778 Net operating income . . . . . 78,240 77,003 62,565 Other income, net of taxes (note 4) 1,224 2,125 835 Earnings before interest charges 79,464 79,128 63,400 Interest charges: Interest on long-term debt. . . . 63,833 63,893 44,919 Other interest and amortization of . debt discount, premium and expense 4,411 4,539 3,266 Allowance for borrowed funds used during construction . . . (303) (149) (4,625) Total interest charges . . . . 67,941 68,283 43,560 Net earnings . . . . . . . . . 11,523 10,845 19,840 Dividends on preferred stocks . . . . 879 968 1,078 Earnings available for common stock . . . . . . . . . . . . . $ 10,644 9,877 18,762 See accompanying notes to consolidated financial statements.
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprises, Inc.) CONSOLIDATED BALANCE SHEETS December 31, 1993 and 1992
ASSETS 1993 1992 (In Thousands) Utility plant, at original cost (notes 2,5): Electric plant. . . . . . . . . . . . . . . . . 1,203,636 1,184,635 Construction work in progress . . . . . . . . . 5,282 3,922 1,208,918 1,188,557 Less accumulated depreciation . . . . . . . . . 202,923 172,848 Net utility plant . . . . . . . . . . . . . 1,005,995 1,015,709 Nonutility property, at cost. . . . . . . . . . . 541 183 Current assets: Cash and cash equivalents . . . . . . . . . . . 2,078 63,843 Customer receivables. . . . . . . . . . . . . . 764 122 Refundable income taxes . . . . . . . . . . . . - 2,870 Inventories, at the lower of average cost or market: . Fuel. . . . . . . . . . . . . . . . . . . . . 1,422 1,246 . Materials and supplies. . . . . . . . . . . . 7,793 7,185 Deferred purchased power and fuel costs . . . . 15,151 17,735 Accumulated deferred taxes on income (note 4) 4,251 - Other current assets. . . . . . . . . . . . . . 1,091 985 Total current assets . . . . . . . . . . . . 32,550 93,986 Regulatory tax assets (note 4). . . . . . . . . . 16,915 - Deferred charges (note 4) . . . . . . . . . . . . 39,118 46,689 $ 1,095,119 1,156,567 CAPITALIZATION AND LIABILITIES Capitalization: Common stock equity: Common stock, $10 par value per share. Authorized 12,000,000 shares; issued 10,705 shares . . . . . . . . . . . . . . .$ 107 107 Capital in excess of par value. . . . . . . . 175,094 160,085 Retained earnings (note 3). . . . . . . . . . 38,983 45,683 Total common stock equity. . . . . . . . . 214,184 205,875 Redeemable cumulative preferred stocks (note 3) . . . . . . . . . . . . . . . 9,560 10,440 Long-term debt, net of amount due within one year (note 2) . . . . . . . . . . . . . . 678,994 742,087 Total capitalization . . . . . . . . . . . 902,738 958,402 Current liabilities: Long-term debt due within one year. . . . . . . 1,070 10,288 Accounts payable. . . . . . . . . . . . . . . . 22,450 25,809 Accrued interest. . . . . . . . . . . . . . . . 16,115 8,869 Accrued taxes (note 4). . . . . . . . . . . . . 18,006 20,136 Customers' deposits . . . . . . . . . . . . . . 4,464 4,236 Revenues subject to refund (note 5) . . . . . . 3,400 17,515 Other current and accrued liabilities . . . . . 13,404 7,932 Total current liabilities. . . . . . . . . 78,909 94,785 Customers' advances for construction. . . . . . . 169 311 Regulatory tax liabilities (note 4) . . . . . . . 20,412 - Accumulated deferred taxes on income (note 4). . . . . . . . . . . . . . . . . . . . 75,809 84,917 Accumulated deferred investment tax credits (note 4). . . . . . . . . . . . . . . . . . . . 17,082 18,152 Commitments and contingencies (note 5) $ 1,095,119 1,156,567 See accompanying notes to consolidated financial statements.
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprises, Inc.) CONSOLIDATED STATEMENTS OF COMMON STOCK EQUITY AND REDEEMABLE CUMULATIVE PREFERRED STOCKS Three Years Ended December 31, 1993
Common Stock Equity Redeemable Capital in Cumulative Common Stock Excess ofRetained Preferred Shares AmountPar ValueEarnings Total Stocks (In Thousands) Year ended December 31, 1991: Balance, January 1, 1991 10,705 $107 121,588 44,724 166,419 12,600 Net earnings for the year - - - 19,840 19,840 - Dividends on preferred stocks - - - (1,078) (1,078) - Dividends on common stock - - - (13,840) (13,840) - Purchase and retirement of preferred .stocks - 1,200 shares 4.65% Series B, .600 shares 4.75% Series C, 1,200 .shares 11% Series D, 600 shares 11% .Series E, 1,200 shares 11% Series F and .8,000 shares 11.875% Series G - - 52 - 52 (1,280) Balance, December 31, 1991 10,705 107 121,640 49,646 171,393 11,320 Year ended December 31, 1992: Net earnings for the year - - - 10,845 10,845 - Dividends on preferred stocks - - - (968) (968) - Dividends on common stock - - - (13,840) (13,840) - Equity contribution from parent - - 38,405 - 38,405 - Purchase and retirement of preferred .stocks - 1,200 shares 4.65% Series B, .600 shares 4.75% Series C, 1,200 .shares 11% Series D, 600 shares 11% .Series E, 1,200 shares 11% Series F and .4,000 shares 11.875% Series G - - 40 - 40 (880) Balance, December 31, 1992 10,705 107 160,085 45,683 205,875 10,440 Year ended December 31, 1993: Net earnings for the year - - - 11,523 11,523 - Dividends on preferred stocks - - - (879) (879) - Dividends on common stock - - - (17,344) (17,344) - Equity contribution from parent - - 15,000 - 15,000 - Purchase and retirement of preferred .stocks - 1,200 shares 4.65% Series B, .600 shares 4.75% Series C, 1,200 .shares 11% Series D, 600 shares 11% .Series E, 1,200 shares 11% Series F .and 4,000 shares 11.875% Series G - - 9 - 9 (880) Balance, December 31, 1993 10,705 $107 175,094 38,983 214,184 9,560 See accompanying notes to consolidated financial statements.
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprises, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS Three Years Ended December 31, 1993
1993 1992 1991 (In Thousands) CASH FLOWS FROM OPERATIONS: Net earnings. . . . . . . . . . . . . . . . . . . .$ 11,523 10,845 19,840 Items not requiring cash: Depreciation of utility plant. . . . . . . . . . 36,015 35,098 28,027 Amortization of debt expense, discount and premium, and other deferred charges . . . . 4,939 5,667 1,227 Allowance for borrowed funds used during construction . . . . . . . . . . . . . . . . . (303) (149) (4,625) Deferred taxes on income. . . . . . . . . . . . . 5,515 1,347 11,540 Investment tax credit adjustments . . . . . . . . (959) (444) (2,869) Changes in certain current assets and ` liabilities: Customer receivables . . . . . . . . . . . . . . (642) 1,784 (1,070) Refundable income taxes. . . . . . . . . . . . . 2,870 - 2,193 Inventories. . . . . . . . . . . . . . . . . . . (784) (451) 113 Deferred purchased power and fuel costs. . . . . 2,584 (5,493) (8,202) Other current assets . . . . . . . . . . . . . . (106) 5,310 (4,638) Accounts payable . . . . . . . . . . . . . . . . (3,359) (2,007) 3,271 Accrued interest . . . . . . . . . . . . . . . . 7,246 2,256 (1,865) Accrued taxes. . . . . . . . . . . . . . . . . . (947) 3,393 7,897 Customers' deposits. . . . . . . . . . . . . . . 228 284 55 Revenues subject to refund . . . . . . . . . . . (14,115) 15,961 1,554 Other current and accrued liabilities. . . . . . 5,472 (1,642) (2,340) Other - net . . . . . . . . . . . . . . . . . . . . (5,181) (4,048) (9,406) TOTAL. . . . . . . . . . . . . . . . . . . . 49,996 67,711 40,702 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to utility plant, net of capitalized depreciation and interest. . . . . (25,998) (22,098) (29,931) Additions to deferred charges . . . . . . . . . . . (362) (312) (12,605) TOTAL. . . . . . . . . . . . . . . . . . . . (26,360) (22,410) (42,536) CASH FLOWS FROM FINANCING ACTIVITIES: Dividends on preferred and common stocks. . . . . . (18,223) (14,808) (14,918) Issuances: Equity contribution from parent. . . . . . . . . 15,000 38,405 - Long-term debt . . . . . . . . . . . . . . . . . 240,000 271,500 32,000 Deferred expenses associated with financings. . . . . . . . . . . . . . . . . . . (8,940) (9,124) - Redemptions: Preferred stocks . . . . . . . . . . . . . . . . (880) (880) (1,280) Long-term debt . . . . . . . . . . . . . . . . . (312,358) (245,498) (574) Short-term debt. . . . . . . . . . . . . . . . . - (36,000) (5,900) TOTAL. . . . . . . . . . . . . . . . . . . . (85,401) 3,595 9,328 NET CHANGE IN CASH AND CASH EQUIVALENTS . . . . . . . (61,765) 48,896 7,494 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . . . . . 63,843 14,947 7,453 CASH AND CASH EQUIVALENTS AT END OF YEAR. . . . . . .$ 2,078 63,843 14,947 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the years for: Interest (net of amount capitalized) . . . . . .$ 59,028 62,130 41,708 Income taxes . . . . . . . . . . . . . . . . . . 2,388 1,185 958 SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES: On July 26, 1991, the Utility's wholly owned subsidiary, Texas Generating Company II, assumed ownership of TNP One, Unit 2 and assumed the related liabilities totaling approximately $269 million. In addition, approximately $12 million of deferred charges related to TNP One, Unit 2 was reclassified to utility plant. During 1992, the Utility reclassified approximately $12 million of deferred charges to utility plant. On January 1, 1993, the Utility recognized certain assets and liabilities and certain reclassifications as a result of implementation of Statement of Financial Accounting Standards No. 109 (SFAS 109). See note 4 to the consolidated financial statements for further discussion of SFAS 109, including amounts of these transactions. See accompanying notes to consolidated financial statements.
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprise, Inc.) Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 (1) Summary of Significant Accounting Policies (a) Principles of Consolidation The consolidated financial statements include the accounts of Texas-New Mexico Power Company (Utility) and its wholly owned subsidiaries, Texas Generating Company (TGC) and Texas Generating Company II (TGC II). All intercompany transactions and balances have been eliminated in consolidation. The Utility is a wholly owned subsidiary of TNP Enterprises, Inc. (TNPE). The Utility is a public utility engaged in the generation, purchase, transmission, distribution and sale of electricity within the states of Texas and New Mexico. The Utility is subject to regulation by the Public Utility Commission of Texas (PUCT) and the New Mexico Public Utility Commission (NMPUC). The Utility is subject in some of its activities, including the issuance of securities, to the jurisdiction of the Federal Energy Regulatory Commission (FERC), and its accounting records are maintained in accordance with the FERC's Uniform System of Accounts. TGC and TGC II were incorporated in Texas in 1988 and 1991, respectively, as financing entities for the assumption of ownership and liabilities related to two 150-megawatt lignite-fueled generating units, Unit 1 and Unit 2, respectively, collectively referred to as TNP One. The units were constructed by a nonaffiliated consortium in Robertson County, Texas, and are operated by the Utility under the terms of operating agreements between the Utility and its subsidiaries. Notes 2 and 5 provide additional information about the financings and regulatory treatments of Unit 1 and Unit 2. (b) Utility Plant The costs of additions to utility plant and replacement of retired units of property are capitalized. Costs include labor, materials and similar items and indirect charges for such items as engineering, supervision and transportation. Property repairs and replacement of minor items of property are included in maintenance expense. The cost of depreciable units of plant retired or disposed of in the normal course of business is eliminated from utility plant accounts, and such cost plus removal expenses less salvage is charged to accumulated depreciation. When complete operating units are disposed of, appropriate adjustments are made to accumulated depreciation, and the resulting gains or losses, if any, are recognized. (c) Depreciation Depreciation is provided on a straight-line basis over the estimated service lives of the properties. Depreciation of utility plant, other than transportation equipment, is charged to earnings. Depreciation of transportation equipment is charged to earnings and property accounts in accordance with the equipment's use. Depreciation as a percentage of average depreciable cost was 3.00%, 3.10% and 3.17% in 1993, 1992 and 1991, respectively. (d) Unamortized Debt Expense, Discount and Premium on Debt Expenses incurred in connection with the issuance of outstanding long-term debt and discount and premium related to such debt are amortized on a straight-line basis over the lives of the respective issues. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprise, Inc.) Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 (1) Summary of Significant Accounting Policies - continued (e) Revenues and Purchased Power Revenues are recognized on the basis of meter readings which are made on a monthly cycle. The Utility does not accrue revenues for power sold but not billed at the end of an accounting period. Power purchased is recorded on the basis of billings from suppliers; no accrual is made for power delivered to the Utility between the dates of such billings and the end of an accounting period. (f) Customer Receivables The Utility sells customer receivables to a nonaffiliated company on a nonrecourse basis. (g) Deferred Purchased Power and Fuel Costs The deferral method of accounting is used for the portions of purchased power and fuel costs which are recoverable in subsequent periods under purchased power costs recovery adjustment clauses. These clauses provide the ability to refund or collect, in the second succeeding month, those amounts of purchased power costs over- or under-collected in the current month. At December 31, 1993 and 1992, the Utility had under-recovered purchased power costs of approximately $1,520,000 and $6,640,000, respectively. At December 31, 1993 and 1992, the Utility also had under-recovered fuel costs of approximately $13,631,000 and $11,095,000, respectively, related to TNP One. A fixed fuel factor approved by the PUCT is intended to permit the Utility to recover the cost of fuel utilized to generate electricity sold in Texas. The factor may be changed only upon approval of the PUCT and is expected to be adjusted for any cumulative over- or under-recovery of fuel costs. (h) Allowance for Borrowed Funds Used During Construction The applicable regulatory uniform system of accounts defines allowance for funds used during construction as including the net cost during the period of construction of borrowed funds used for construction purposes and a reasonable rate on other funds when so used. In that connection, the Utility used an accrual rate of 7.53% in 1993, 5.8% in 1992 and 8.0% in 1991 for borrowed funds used during construction, excluding capitalized interest related to the financing facilities. Capitalized interest related to the financing facility for Unit 2 (note 2) was approximately $4,234,000 in 1991. Interest was capitalized from the date of assumption of the Unit 2 indebtedness, July 26, 1991, until the date on which Unit 2 began commercial operation, October 16, 1991. (i) Income Taxes The Utility and its subsidiaries account for certain income and expense items differently for financial reporting purposes than for income tax purposes. Provisions for deferred income taxes are made for such differences. As discussed in note 4, the Utility changed its method of accounting for income taxes in 1993 to adopt the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Investment tax credits utilized are deferred and amortized to earnings ratably over the estimated service lives of the related assets. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprise, Inc.) Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 (1) Summary of Significant Accounting Policies - continued (i) Income Taxes - continued The consolidated Federal income tax return filed by TNPE includes the consolidated operations of the Utility and its subsidiaries. The amounts of income taxes and investment tax credits recognized in the accompanying consolidated financial statements were computed as if the Utility and its subsidiaries filed a separate consolidated Federal income tax return, and the amounts could differ from those recognized as a member of TNPE's consolidated group. (j) Employee Benefit Plans The Utility has in effect a trusteed defined benefit retirement plan available to employees who are 21 years of age and over and have at least one year of service with the Utility. The Utility's funding policy is to contribute annually at least the minimum amount required by government funding standards, but not more than that which can be deducted for Federal income tax purposes. The net pension costs for 1993, 1992 and 1991 included the following components:
1993 1992 1991 (In Thousands) Service cost $ 1,472 2,148 1,914 Interest cost on projected benefit obligation 4,191 4,504 4,197 Reduction for actual return on plan assets (6,126) (5,071) (12,276) Other - net 300 258 7,706 $ (163) 1,839 1,541
The following table is a summary of the plan's funded status at December 31, 1993 and 1992: 1993 1992 (In Thousands) Plan assets (principally marketable securities) at estimated fair value $ 69,763 66,643 Projected benefit obligation (including accumulated benefit obligations for 1993 and 1992 of approximately $55,509,000 and $43,894,000, respectively) (60,618) (58,190) 9,145 8,453 Unrecognized net asset (171) (198) Unrecognized prior service cost (2,990) 3,668 Unrecognized net gain (9,554) (15,657) Net pension liability (included in other current and accrued liabilities in the consolidated balance sheets) $ (3,570) (3,734)
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprise, Inc.) Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 (1) Summary of Significant Accounting Policies - continued (j) Employee Benefit Plans - continued The weighted average discount rate and the rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation were 7.15% and 4.15%, respectively, for 1993 and 8.5% and 5.75%, respectively, for 1992. The weighted average expected long-term rate of return on plan assets for 1993 and 1992 was 9.5%. The vested benefit obligations at December 31, 1993 and 1992, were approximately $50,457,000 and $39,757,000, respectively. The defined benefit retirement plan was amended to change, for all participants retiring after December 31, 1992, the determination of average monthly compensation used in calculating the amount of retirement benefits from the average of the three highest consecutive calendar years to the average of the completed calendar years of compensation after 1992. The Utility has a voluntary thrift plan, administered by a trustee, with a provision for the Utility to contribute to the plan amounts equal to certain percentages of amounts contributed by employees. Employees have the option of investing their contributions and contributions of the Utility, if any, in either, or a combination of, certain government securities, TNPE's common stock or, since January 1, 1992, two mutual funds. Effective January 1, 1992, the plan calls for the Utility's contributions to be used to purchase TNPE's common stock which the employees may later convert into investments in one or more of the other investing options. Effective January 1, 1993, the Utility suspended its matching contributions to the thrift plan for an indefinite period; however, the Utility's Board of Directors has approved restoration of the Utility's matching contributions, to be effective for employee contributions made after June 30, 1994. The Utility's contributions to the thrift plan amounted to approximately $1,592,000 and $1,487,000 in 1992 and 1991, respectively. Thrift plan assets included 1,471,213 shares and 1,482,490 shares of TNPE's common stock at December 31, 1993 and 1992, respectively. On November 9, 1993, the Board of Directors of the Utility renewed forms of employment contracts between the Utility and its officers and its other key personnel. The principal purpose of the contracts is to encourage retention of management and other key personnel required for the orderly conduct of the business of the Utility during any threatened or pending acquisition of TNPE or the Utility and during any transition of ownership. The terms of the contracts, from date of execution, are three years as to certain officers and managers of the Utility and two years as to the other key personnel. Upon the expiration date of each contract, the Utility, at its option, may extend the contract for additional three or two year periods, as appropriate. The contracts provide for lump sum compensation payments and other rights to the officers and the other key personnel in the event of termination of employment or other adverse treatment of such persons following a "change in control" of TNPE or the Utility, which event is defined to include, among other things, substantial changes in the corporate structure or ownership of either entity or in the Board of Directors of either entity. Health care and death benefits and an excess benefit plan have been provided at minimal or no cost to retired employees. The excess benefit plan is provided under an insurance policy arrangement and is backed by a letter of credit which will be funded only if a change in control occurs. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprise, Inc.) Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 (1) Summary of Significant Accounting Policies - continued (j) Employee Benefit Plans - continued On January 1, 1993, the Utility implemented Statement of Financial Accounting Standards No. 106 (SFAS 106), "Employers' Accounting for Postretirement Benefits Other Than Pensions," which addresses the accounting for other postretirement employee benefits (OPEBs). For the Utility, OPEBs are comprised primarily of health care and death benefits for retired employees. Prior to 1993, the costs of these OPEBs were expensed on a "pay-as-you-go" basis. For 1992, these costs were approximately $760,000. Beginning in 1993, SFAS 106 requires a change from the "pay-as-you-go" basis to the accrual basis of recognizing the costs of OPEBs during the periods that employees render service to earn the benefits. SFAS 106 also requires employers to recognize the costs of benefits already earned by active employees and retirees at the date of adoption of SFAS 106 (the transition obligation). For the Utility, an annual accrual for OPEBs is comprised of (1) the portion of the expected postretirement benefit obligation attributed to employee service during that period (the service cost), (2) amortization of the transition obligation and (3) the interest costs associated with the total unfunded accumulated obligation for future benefits. For 1993, these costs amounted to approximately $508,000, $934,000 and $1,510,000, respectively. This total cost of $2,952,000 based on adoption of SFAS 106 was $2,276,000 greater than the amount of $676,000 that would have been recorded under the "pay-as-you-go" basis. The assumed health care cost trend rate used to measure the expected cost of benefits was 11.5% for 1993 and is assumed to diminish to 8.4% for 1994, then trend downward slightly each year to a level of 6% for 2003 and thereafter. The Utility's remaining transition obligation of $17,750,000 at December 31, 1993 is to be amortized over a remaining nineteen-year period. A 1% increase in the assumed health care cost trend rate would result in (1) an increase of $3,235,000 in the Utility's accumulated benefit obligation at December 31, 1993 and (2) an increase of $538,000 for 1993 in the aggregate service and interest costs. In March 1993, the PUCT issued its rules for ratemaking treatment of OPEBs. As part of a general rate case, a utility may request OPEBs expense in cost of service for ratemaking purposes on an accrual basis in accordance with generally accepted accounting principles. The PUCT's rule includes recovery of the transition obligation and requires that the amounts included in rates shall be placed in an irrevocable external trust fund dedicated to the payment of OPEBs expenses. Based on the PUCT's rule, the Utility intends to seek recovery of OPEBs expense attributable to its Texas jurisdiction in its next Texas rate case. In order to comply with the PUCT's condition for possible recovery of OPEBs expenses, the Utility established in June 1993 a Voluntary Employees' Beneficiary Association (VEBA) trust fund, dedicated to the payment of OPEBs expenses. Monthly cash payments made to the VEBA, which began in June 1993, will fund the three OPEBs expense components of the Utility's total Texas and New Mexico operations. On August 23, 1993, the Utility filed a rate application with the NMPUC which included a request for recovery of the applicable costs of OPEBs. A stipulated agreement among the parties in the application, dated January 28, 1994, subject to approval by the NMPUC, would include such applicable costs in the proposed New Mexico rates, beginning in 1994. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprise, Inc.) Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 (1) Summary of Significant Accounting Policies - continued (j) Employee Benefit Plans - continued The following table presents the plan's funded status reconciled with amounts recognized in the consolidated balance sheets at December 31, 1993 and 1992: 1993 1992 (In Thousands) Accumulated postretirement benefit obligation: Retirees and dependents $ (15,828) (13,604) Active employees (7,671) (5,080) (23,499) (18,684) Plan assets at fair value 1,297 - Accumulated postretirement benefit obligation in excess of plan assets (22,202) (18,684) Unrecognized net loss 3,533 - Unrecognized transition obligation 17,750 18,684 Accrued postretirement benefit cost included in other current and accrued liabilities $ (919) -
The discount rate used in determining the actuarial present value of the accumulated postretirement benefit obligation was 7.15% and 8.50% for 1993 and 1992, respectively. (k) Fair Values of Financial Instruments The fair value amounts of certain financial instruments included in the accompanying consolidated balance sheets at December 31, 1993 and 1992 were as follows: The fair value of cash and cash equivalents approximates the carrying amount because of the short maturity of those instruments. The total estimated fair value of long-term debt was approximately $723 million and $755 million in 1993 and 1992, respectively. The total estimated fair value of preferred stocks was $7.6 million and $7.7 million in 1993 and 1992, respectively. The estimated fair values of long-term debt and preferred stocks were based on quoted market prices of the same or similar issues. (l) Statements of Cash Flows For purposes of the consolidated statements of cash flows, the Utility considers temporary cash investments with original maturities of three months or less to be cash equivalents. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprise, Inc.) Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 (2) Long-term Debt Long-term debt outstanding was as follows: 1993 1992 (In Thousands) First mortgage bonds: Series G, 4.700% due 1993 $ - 9,138 Series H, 4.950 due 1995 - 3,700 Series I, 6.075 due 1996 - 3,750 Series J, 9.000 due 1999 - 7,800 Series K, 8.500 due 2001 - 6,400 Series L, 10.500 due 2000 9,840 9,960 Series M, 8.700 due 2006 8,400 8,500 Series R, 10.000 due 2017 63,700 64,350 Series S, 9.625 due 2019 20,000 20,000 Series T, 11.250 due 1997 130,000 130,000 Series U, 9.250 due 2000 100,000 - Total 331,940 263,598 Unamortized discount, net of premium (676) (723) First mortgage bonds, net 331,264 262,875 Secured debentures: 12.50% due 1999 130,000 130,000 Series A, 10.75% due 2003 140,000 - 270,000 130,000 Secured notes payable 78,800 359,500 Total long-term debt 680,064 752,375 Less long-term debt due within one year (1,070) (10,288) Total long-term debt, net $ 678,994 742,087
Issuance of Additional First Mortgage Bonds and Secured Debentures On September 29, 1993, the Utility issued $100 million of 9.25% First Mortgage Bonds, Series U, due September 15, 2000 (New Bonds), and $140 million of 10.75% Secured Debentures, Series A, due September 15, 2003 (Debentures, due 2003). After fees and expenses, combined net proceeds available to the Utility from the issuances of the New Bonds and the Debentures, due 2003, and existing cash were utilized as follows: (a) $146 million was used to prepay or purchase all of the outstanding secured notes payable to lenders under the Unit 1 financing facility, as discussed below; (b) $75.75 million was used to prepay secured notes payable under the Unit 2 financing facility, as discussed below; (c) $21.78 million was deposited for the call for redemption of the aggregate principal amount, including redemption premiums, of Series H, I, J and K First Mortgage Bonds; and (d) $9.14 million was used to reimburse the Utility's treasury for funds used to redeem Series G First Mortgage Bonds at maturity on July 1, 1993. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprise, Inc.) Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 (2) Long-term Debt - continued Supplemental indentures relating to Series H, I, J and K First Mortgage Bonds contained a requirement that Net Earnings Available for Interest of the Utility for 12 consecutive months out of the preceding 15 months be at least two-and-one-half (2.5) times the aggregate amount of annual Interest Charges on Bonded Indebtedness which gives effect to the interest on the additional Bonds to be issued (the Interest Coverage Ratio). Under the 2.5 times Interest Coverage Ratio required for issuance of additional First Mortgage Bonds, only a minimal amount of additional First Mortgage Bonds could have been issued. Under the supplemental indentures for the series of Bonds outstanding after the deposit of proceeds from the offering for the redemption of Series H, I, J and K Bonds, the Interest Coverage Ratio was reduced to two (2) times. The maturity of Series G Bonds on July 1, 1993, and the call for redemption of Series H, I, J and K Bonds permitted the issuance of additional Bonds and consummation of the offering of $100 million of New Bonds. Amendments to the Financing Facilities At December 31, 1992, secured notes payable represented loans issued under two financing facilities, which were originally entered into by separate subsidiaries of a construction consortium, for the construction of Unit 1 and Unit 2 of the TNP One generating plant. The Unit 1 financing facility was assumed by TGC on July 20, 1990. The Unit 2 financing facility was assumed by TGC II on July 26, 1991. On September 29, 1993, the balance of the secured notes payable under the Unit 1 financing facility was purchased or prepaid, and $75.75 million of secured notes payable under the Unit 2 financing facility was prepaid, reducing that outstanding commitment to $147.75 million; funds used for these prepayments and purchases were provided from issuance of the New Bonds and the Debentures, due 2003, and from existing cash, as discussed above. Thereafter, the Utility made additional unscheduled prepayments of approximately $69 million under the Unit 2 financing facility. The $78.8 million balance at December 31, 1993 represents secured notes payable under the Unit 2 financing facility, consisting of a series of renewable loans from various lenders in a financing syndicate. In contemplation of the prepayments of the Unit 1 and Unit 2 financing facilities, the related credit agreements between the secured lenders and the Utility were amended as of September 21, 1993 to facilitate the issuance of the Debentures, due 2003, and to extend the maturities of the remaining loans from due dates in 1994 and 1995. The effectiveness of the amendments was contingent upon the application of proceeds from the sale of the Debentures, due 2003, and the New Bonds. The extension of the maturities of the remaining loans to be outstanding under the Unit 2 financing facility is subject to further approvals from the FERC and the NMPUC. The Utility expects to receive the necessary approvals within the period required by the amendments. Upon the effective date of the extension, the lenders will receive an extension fee of 1/4 of 1% on their pro-rata share of the $147.75 million commitment. Based upon the December 31, 1993 balance and assuming the regulatory approvals of the extensions of the maturities under the Unit 2 financing facility, $1.6 million will be due on December 31, 1995, $3.4 million will be due on December 31, 1996, with the remaining amounts due in two equal installments of approximately $36.9 million on December 31, 1997 and 1998. Under the amendments to the Unit 2 credit agreement, the Utility is permitted to prepay up to $141.5 million of the $147.75 million commitment under the Unit 2 financing facility and reborrow thereunder up to the amount of such prepayments, subject to scheduled reductions of the commitment of approximately $36.9 million each in 1996, 1997 and 1998. Such reborrowings under the Unit 2 financing facility will be subject to compliance with the EBIT test (as described below) and maintenance of an equity to total capital ratio of 20% or more as defined in the credit agreement. As of December 31, 1993, the unused commitment available to be borrowed under the Unit 2 financing facility was approximately $69 million. A commitment fee of 1/4 of 1% per annum is payable on the unused portion of the reducing commitment. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprise, Inc.) Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 (2) Long-term Debt - continued The financing facilities contain certain covenants which, under specified conditions, restrict the payment of cash dividends on common stock of the Utility. The most restrictive of such covenants are an interest coverage test and an equity ratio test. Under the interest coverage test, the Utility may not pay cash dividends on its common stock unless its prior twelve months' earnings (exclusive of any writedowns resulting from actions of the PUCT, to the extent included in operating expenses) before interest and income taxes equals or exceeds the sum of all of the interest expense on indebtedness for the same period (said calculation, the EBIT Test). This restriction becomes effective only after the third consecutive calendar quarter during which the Utility does not meet the EBIT Test and continues in effect until after the quarter in which the Utility has met the twelve-month EBIT Test. The Utility has met the EBIT Test at each quarterly date since this test became effective. Under the recently required equity ratio test, the Utility may not pay cash dividends on its common stock if, at the preceding quarterly date, the Utility's ratio of equity capitalization to total capitalization is less than 20%. As of December 31, 1993, this test was met. Under the two financing facilities, interest rates were determined under several alternative methods. During 1993, all rates at the time of each borrowing were no higher than the prime lending rate plus a margin of 1- 3/8%. The effective costs of borrowing under the secured notes payable were 7.23% and 5.61% at December 31, 1993 and 1992, respectively. Under the amended Unit 2 financing facility, the margins will increase by 1/2 of 1% each year in 1994 and 1995 and by 1/4 of 1% each year in 1996, 1997 and 1998. Additional Information Substantially all utility plant owned directly by the Utility is subject to the first lien of the Utility's first mortgage bond indenture, as supplemented (the Bond Indenture). Until repaid, the holders of the secured notes payable and of the secured debentures have a lien junior to the first lien of the Bond Indenture on substantially all utility plant in Texas owned directly by the Utility. The Debentures, due 2003, are secured by a pledge by the Utility to the new debenture trustee of a replacement note (1993 Unit 1 Replacement Note) in an amount equal to the principal amount of the Debentures, due 2003, purchased by the Utility from secured lenders under the Unit 1 financing facility. The 1993 Unit 1 Replacement Note is secured ratably by the original Unit 1 First Lien Mortgage of the Unit 1 financing facility on the assets of TGC, the existing second mortgage lien on the Utility's Bond Indenture trust estate assets in Texas and certain other collateral. The Debentures, due 2003, rank pari passu with the outstanding secured debentures, due 1999, in their Unit 1 mortgage lien on the assets of TGC and other security interests. The secured debentures, due 1999, are secured ratably by a 1992 Unit 1 replacement note and a 1992 Unit 2 replacement note ($65 million each), which are in turn secured by first liens on the assets of TGC and TGC II, respectively, and by the existing second mortgage lien on the Utility's Bond Indenture trust estate assets in Texas and certain other collateral. Under the terms of each financing facility, the secured notes payable and the replacement notes are secured by related first liens on Unit 1 and Unit 2 until undivided interests in Unit 1 and Unit 2 have been purchased from TGC and TGC II, respectively, by the Utility, whereupon such undivided interests become subject to the lien of the Bond Indenture. In connection with the prepayments of the secured notes payable under the Unit 1 and Unit 2 financing facilities in September 1993, the Utility purchased from TGC and TGC II certain undivided direct interests in Unit 1 and Unit 2, respectively; accordingly, these interests were released from the first liens of the financing facilities. These purchases were in addition to interests in Unit 1 acquired by the Utility in 1992 and 1990. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprise, Inc.) Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 (2) Long-term Debt - continued As of December 31, 1993, TGC owns a 205/345 undivided interest in Unit 1 with the remaining fractional interest being owned directly by the Utility. (The denominator of 345 represents the historical maximum balance of $345 million that was originally borrowed under the Unit 1 financing facility; the numerator of 205 represents $205 million of replacement notes secured by the Unit 1 First Lien Mortgage.) TGC's interest in Unit 1 is subject to the lien of the Unit 1 First Lien Mortgage, which secures equally and ratably the 1993 Unit 1 replacement note of $140 million and the 1992 Unit 1 replacement note of $65 million. As of December 31, 1993, TGC II owns a 212.75/288.50 undivided interest in Unit 2 with the remaining fractional interest being owned directly by the Utility. (The denominator of 288.50 represents the historical maximum balance of $288.50 million that was originally borrowed under the Unit 2 financing facility; the numerator of 212.75 represents $212.75 million of debt and available loan commitment that remains secured by the Unit 2 First Lien Mortgage.) TGC II's interest in Unit 2 is subject to the lien of the Unit 2 First Lien Mortgage, which secures all remaining secured notes payable outstanding under the Unit 2 financing facility and the 1992 Unit 2 replacement note of $65 million. During the repayment periods, the Utility will operate and finance Unit 1 and Unit 2. Under the terms of each financing facility, upon or after each repayment of construction debt or replacement notes by TGC or TGC II through financings by the Utility, the Utility may purchase a proportionate undivided direct interest in the respective unit from TGC or TGC II to the extent such purchase is necessary to enable the Utility to issue, from time to time, first mortgage bonds. Upon such purchase, the undivided interest will be released from the lien of such unit's financing facility. In any event, the Utility may not purchase and the respective subsidiary may not transfer any undivided interest which would cause the fraction of the undivided interest remaining subject to the lien of the respective financing facility to be less than a certain fraction. The numerator of such fraction is the sum of (a) the unused commitment provided by lenders and the outstanding principal amounts owed to the lenders under such financing facility and (b) the principal amount of the respective replacement notes held as security for secured debentures. The denominator of such fraction is (i) $345 million under the Unit 1 financing facility and (ii) $288.5 million under the Unit 2 financing facility. The Utility guarantees the obligations of TGC and TGC II under each respective financing facility. The Utility expects, assuming adequate regulatory treatment, to be able to repay the remaining amount due under the Unit 2 financing facility primarily through the receipt of common equity from the Utility's parent, internal cash generation and issuance of debt. Based upon the December 31, 1993 balance and assuming the approvals of the extensions of the maturities of secured notes payable under the Unit 2 financing facility, maturities and sinking fund requirements for the Utility's long-term debt for the five years following 1993 are as follows: First mortgage bonds Secured notes payable (In Thousands) 1994 $ 1,070 - 1995 1,070 1,600 1996 1,070 3,400 1997 131,070 36,900 1998 1,070 36,900 Series Redemption price Shares outstanding Total par value 1993 1992 1993 1992 1993 1992 (In Thousands) (In Thousands) B 4.650% $100.000 100.000 25.2 26.4 $ 2,520 2,640 C 4.750 100.000 100.000 14.4 15.0 1,440 1,500 D 11.000 101.570 102.090 3.2 4.4 320 440 E 11.000 101.570 102.090 1.6 2.2 160 220 F 11.000 101.570 102.090 3.2 4.4 320 440 G 11.875 106.927 107.422 48.0 52.0 4,800 5,200 95.6 104.4 $ 9,560 10,440 On October 1 of each year, the Utility is required to offer to purchase from the holders of shares in Series B and Series C, at a price not exceeding $100 per share plus accrued dividends, a number of shares equal to 2% of the maximum number of shares of each series outstanding at any one time prior to August 15 of such year. In addition, the Utility is required to redeem, at a price of $100 per share plus accrued dividends, 1,200 shares each of Series D and F and 600 shares of Series E on each March 15 through March 1, 1996. The requirement to redeem such shares is cumulative and totals $300,000 on an annual basis. On each June 15 through June 15, 2008, the Utility is required to redeem 4,000 shares of Series G at a price of $100 per share plus accrued dividends; the requirement to redeem such shares is cumulative. The holders of Series G and/or the Utility separately have the noncumulative option for redemption of an additional 4,000 shares on each June 15 at a price of $100 per share plus accrued dividends. Charter provisions relating to the preferred stocks and the Bond Indenture under which the bonds are issued contain restrictions as to the payment of cash dividends on common stock of the Utility. At December 31, 1993, the amount of restricted retained earnings was approximately $12,800,000. As discussed in note 2, terms for additional restrictions as to the payment of common dividends became effective during 1992 and 1993 as a result of the amended terms of the Unit 1 and Unit 2 financing facilities. In the event of voluntary liquidation of the Utility, holders of the preferred stocks have a preference to the extent of amounts payable on redemption, and in the event of involuntary liquidation, to the extent of par plus accrued dividends. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprise, Inc.) Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 (4) Income Taxes Income taxes as set forth in the consolidated statements of earnings consisted of the following components: 1993 1992 1991 (In Thousands) Charged (credited) to operating expenses: Current: Federal $ (356) 655 (2,652) State 94 339 435 (262) 994 (2,217) Deferred Federal income taxes 5,515 1,347 12,946 Investment tax credit adjustments: Investment tax credits made available through net operating loss carrybacks - - (1,911) Investment tax credits utilized 89 607 66 Amortization of accumulated deferred investment tax credits (1,048) (1,051) (1,024) (959) (444) (2,869) Total 4,294 1,897 7,860 Charged to other income: Current - Federal 622 1,095 432 Total income taxes $ 4,916 2,992 8,292
The provisions for deferred income taxes for 1992 and 1991 resulted from the following timing differences: 1992 1991 (In Thousands) Charged (credited) to operating expenses: Tax depreciation in excess of book depreciation $13,615 19,540 Deferred charges and other costs expensed for tax purposes, net 674 1,943 Deferred purchased power and fuel costs expensed for tax purposes 1,765 2,049 Unbilled revenues for tax purposes 519 (1,778) Accrual for revenues subject to refund (5,069) - Minimum tax credit (2,608) (8,085) Amortization of excess deferred taxes (1,153) (810) Change in deferred taxes due to tax net operating loss (6,256) - Other (140) 87 $1,347 12,946 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprise, Inc.) Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 (4) Income Taxes - continued Total income tax expense for 1993, 1992 and 1991 was less than the amount computed by applying the appropriate statutory Federal income tax rate to income before income taxes. The reasons for the differences were as follows:
1993 1992 1991 (In Thousands) Income tax expense at statutory rate $ 5,557 4,589 9,417 Amortization of accumulated deferred investment tax credits (1,048) (1,051) (1,024) Amortization of excess deferred taxes (142) (1,153) (810) State income tax 94 339 435 Effect of tax rate change 234 - - Other - net 221 268 274 $ 4,916 2,992 8,292
The Omnibus Budget Reconciliation Act of 1993 (Act) was signed into law on August 10, 1993. Among other provisions, the Act provided, effective January 1, 1993, for a corporate income tax rate increase from 34% to 35% to be phased in for taxable income between $10 million and $18 million. Adjustments have been made to deferred tax amounts to reflect the future reversal of temporary differences at the higher tax rate. Under transitional rules of the Tax Reform Act of 1986, certain capital expenditures incurred after December 31, 1985 continued to qualify for investment tax credits (ITC). Accordingly, ITC adjustments reflect credits for the utilized portion of ITC generated in 1990 associated with ITC applicable to transitional property. The Utility has ITC carryforwards for Federal income tax purposes of approximately $18,700,000 which are available to reduce future Federal income taxes through 2005. The Utility generated a Federal minimum tax (MT) for the year ended December 31, 1993. The MT resulted in a net current Federal income tax expense of approximately $266,000, after utilization of ITC. At December 31, 1993, the Utility has net operating loss (NOL) carryforwards for Federal income tax purposes of approximately $44,600,000 which are available to offset future Federal taxable income through 2008. In addition, the Utility has minimum tax credit carryforwards of approximately $14,900,000 which are available to reduce future Federal regular income taxes over an indefinite period. In order to fully realize the Federal regular tax NOL carryforwards, the Utility will need to generate future taxable income of approximately $44,600,000 prior to expiration of the Federal regular tax NOL carryforwards which will begin to expire in 2006. Based on the Utility's historical and projected pretax earnings, management believes it is more likely than not that the Utility will realize the benefit of the Federal regular tax NOL carryforwards existing at December 31, 1993 before such carryforwards begin to expire in 2006. In addition, the remaining deferred tax assets, exclusive of the MT credit carryforwards, are considered current and expected to reverse in the next twelve months. TNPE's consolidated Federal income tax returns for the years 1987 through 1989 have been examined by the Internal Revenue Service resulting in a revenue agent report (RAR). The Utility's carryforwards referred to above and the accompanying consolidated financial statements reflect adjustments resulting from the RAR. The RAR had no effect on the Utility's results of operations. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprise, Inc.) Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 (4) Income Taxes - continued On January 1, 1993, the Utility implemented Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." Prior to implementation of SFAS 109, the Utility accounted for income taxes under Accounting Principles Board Opinion No. 11 (APB 11). Implementation of SFAS 109 changed the method of accounting for income taxes from the deferred method required under APB 11 to the asset and liability method. Under the deferred method, annual income tax expense was matched with pretax accounting income by providing deferred taxes at the then current tax rates for timing differences between pretax accounting income and taxable income. The objective of the asset and liability method is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the tax basis of assets and liabilities at enacted tax rates expected to be in effect when such temporary differences are realized or settled. The Utility elected to implement SFAS 109 on a prospective basis. SFAS 109 provides that regulated enterprises are allowed to recognize adjustments resulting from the adoption of SFAS 109 as regulatory tax assets or liabilities if such amounts are probable of being recovered from or returned to customers through future rates. Deferred taxes recorded under APB 11 were attributable primarily to differences associated with book and tax depreciation. Temporary differences under SFAS 109 include all items considered timing differences under APB 11, as well as certain new items including (1) a reduction in the depreciable tax basis due to ITC, (2) ITC accounted for under the deferred method and (3) prior flow-through treatment of tax benefits. Adoption of SFAS 109 has affected the consolidated balance sheet due to deferred Federal income tax effects for temporary differences associated with prior flow-through ratemaking accounting practices, treatment of tax rate changes and unamortized ITC. Unamortized ITC represent amounts being "shared" with customers as future revenue requirements are reduced by the amortization of accumulated deferred ITC. This gives rise to a corresponding regulatory liability to reflect the ratemaking treatment. SFAS 109 requires the recognition of regulatory and deferred tax assets and liabilities for the cumulative unrecognized temporary differences. The result as of January 1, 1993 of implementing SFAS 109 was as follows (in thousands): December 31, January 1, 1992 Reclassifications 1993 Assets: Deferred charges $46,689 (17,529) 29,160 Regulatory tax assets - 17,974 17,974 Accumulated deferred taxes on income - current - 6,006 6,006 46,689 6,451 53,140 Liabilities: Accrued taxes $20,136 (890) 19,246 Accumulated deferred taxes on income - noncurrent 84,917 (15,852) 69,065 Regulatory tax liabilities - 23,193 23,193 $105,053 6,451 111,504 The above reclassifications resulted from the recognition of regulatory and deferred tax assets and liabilities for the cumulative unrecognized temporary differences, recognition of the 1992 Federal regular tax NOL carryforward and reclassification of certain other balances to comply with the provisions of SFAS 109. The implementation of SFAS 109 did not result in any significant charge to operations. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprise, Inc.) Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 (4) Income Taxes - continued The tax effects of temporary differences that gave rise to significant portions of net current accumulated deferred taxes on income and net noncurrent accumulated deferred taxes on income at December 31, 1993 are presented below (in thousands): Current accumulated deferred taxes on income: Deferred tax assets: Unbilled revenues $ 6,914 Revenues subject to refund 1,053 Other 1,435 9,402 Deferred tax liability - Deferred purchased power and fuel costs (5,151) Current accumulated deferred taxes on income, net $ 4,251 Noncurrent accumulated deferred taxes on income: Deferred tax assets: Minimum tax credit carryforwards $ 14,890 Federal regular tax NOL carryforwards 15,679 Other 792 31,361 Deferred tax liabilities: Utility plant, principally due to depreciation and capitalized basis differences (101,839) Deferred rate case expenses (2,553) Deferred loss on reacquired debt (1,823) Deferred accounting treatment (1,617) Other 662 (107,170) Noncurrent accumulated deferred taxes on income, net $ (75,809)
(5) Commitments and Contingencies In October 1991, the second unit of TNP One, the Utility's two-unit, 300- megawatt, circulating fluidized bed generating facility, was completed and successfully placed in operation. At December 31, 1993, the costs of Unit 1 totalled approximately $357 million and the costs of Unit 2 totalled approximately $282.9 million. The Utility has received rate orders (in Docket Nos. 9491 and 10200) from the PUCT placing the majority of the costs of the two units of TNP One in rate base, resulting in rate increases for the Utility's Texas customers. In Docket No. 9491, the PUCT disallowed from rate base approximately $39.5 million of the costs of Unit 1. On appeal, a State district court overturned the disallowances; however, a Texas Court of Appeals rendered a judgment partially reversing the State district court. In its October 16, 1992 rate order in Docket No. 10200, the PUCT disallowed $21.1 million of the costs of Unit 2 . On rehearing of Docket No. 10200, the PUCT unexpectedly reversed consistent precedent to adopt a new methodology for calculating the amount allowed in rates for Federal income taxes. The immediate result was a reduction in the rate increase previously granted on October 16, 1992. Each of the rate orders is the subject of continuing appellate process in the courts. Further detailed information of Docket Nos. 9491 and 10200 is provided below. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprise, Inc.) Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 (5) Commitments and Contingencies - continued In litigating Docket Nos. 9491 and 10200, the Utility's opponents are seeking, among other things, lower rates and greater disallowances, and the Utility is seeking higher rates and no disallowances. While the ultimate outcome of these cases and of other matters discussed below cannot be predicted, the Utility is vigorously pursuing their favorable conclusion. Material adverse resolution of certain of the matters discussed below would have a material adverse impact on earnings in the period of resolution. PUCT Docket No. 9491 On February 7, 1991, in Docket No. 9491, the PUCT approved an increase in annualized revenues of approximately $36.7 million, or 67% of the Utility's original $54.9 million rate request filed in 1990. The approval allowed $298.5 million of the costs of TNP One, Unit 1 in rate base; however, the PUCT disallowed $39.5 million of the requested investment costs of $338 million for that unit. Additional Unit 1 costs, not requested in Docket No. 9491, were included in the Utility's subsequent Texas rate request, Docket No. 10200, filed on April 11, 1991. In Docket No. 9491 in Finding of Fact No. 84 (FF No. 84), the PUCT also found that the Utility failed to prove that its decision to start construction of Unit 2 was prudent. Since the costs incurred for Unit 2 construction were not at issue in the Docket No. 9491 proceeding, the quantification of a disallowance, if any, that might result from this finding was to be determined subsequently in Docket No. 10200. On June 5, 1991, the Utility filed a petition in a Travis County district court which sought to overturn the PUCT's ruling regarding the disallowances and prudence decisions in Docket No. 9491. Certain intervenors also appealed other aspects of the PUCT's decisions in Docket No. 9491. On July 6, 1992, the presiding judge of the district court signed a judgment finding that the PUCT's disallowance of rate base treatment for certain costs of Unit 1 was in error and that the PUCT's "decision to deny $39,508,409 in capital costs for TNP One Unit 1 is not supported by substantial evidence and is arbitrary and capricious." The Utility, the PUCT and certain of the intervenor cities (the Cities) appealed the district court's judgment regarding the appeal of the PUCT's decision in Docket No. 9491 to the Third District Court of Appeals in Austin, Texas. The Utility's appeal related to the district court's decision which upheld the PUCT finding that the Utility failed to prove that its decision to start construction of Unit 2 was prudent and certain other matters. The PUCT and the Cities sought to reinstate the disallowances, and the Cities sought, among other things, to deny rate base treatment and to significantly lower rates granted by the PUCT. On August 25, 1993, the Third District Court of Appeals rendered a judgment partially reversing the district court and affirming the PUCT's disallowances for $30.4 million of the total $39.5 million. The Court of Appeals judgment states that the district court erred in (1) reversing that part of the PUCT's order disallowing "the Compressed Schedule Payment, the Force Majeure Payment, and a portion of the increased costs for the installation of a natural gas pipeline in Change Order No. 9, Item 2;" (2) affirming that part of the PUCT's order dealing with the prudence of the decision to construct Unit 2 (FF No. 84); and (3) affirming that part of the PUCT's order that failed to pass on to ratepayers the federal income tax savings for expenses disallowed by the PUCT. The Court of Appeals remanded the cause to the district court with instructions that the cause be remanded to the PUCT for proceedings not inconsistent with the appellate opinion. On September 9, 1993, the Utility, the Cities and the PUCT filed motions for rehearing with the Court of Appeals. The PUCT is not expected to act upon the district court's ordered remand, discussed above, until the appellate process, including appeals to the Texas Supreme Court, has been completed. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprise, Inc.) Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 (5) Commitments and Contingencies - continued Based upon the opinions of the Utility's Texas regulatory counsel, Johnson & Gibbs, a Professional Corporation, management believes that it will prevail in obtaining a remand of a significant portion of the disallowances in Docket No. 9491; however, the ultimate disposition and quantification of these items cannot presently be determined. Accordingly, no provision for any loss that may ultimately be required upon resolution of these matters has been made in the accompanying consolidated financial statements. If the Utility is not successful in obtaining a final favorable disposition in the appellate proceedings relating to the disallowances in Docket No. 9491, a write-off of some portion of the $39.5 million disallowances would be required, which could result in a significant negative impact on earnings in the period of final resolution. PUCT Docket No. 10200 On April 11, 1991, the Utility filed a rate application, Docket No. 10200, with the PUCT for inclusion of $275.2 million of capital costs of Unit 2 and $16.1 million of additional capital costs of Unit 1 in the Utility's rate base. The Administrative Law Judge (ALJ) in Docket No. 10200 initially required briefs of all parties on the issue of whether the inclusion of Unit 2 in the Utility's rate base would be precluded by the PUCT finding in Docket No. 9491, FF No. 84, that the Utility failed to prove that its decision to start construction of Unit 2 was prudent. In its brief to the ALJ, the Utility argued that FF No. 84 could not have the effect of barring litigation in Docket No. 10200 of all aspects of Unit 2 costs, asserting that evidence as to Unit 2 costs presented in Docket No. 9491 had been presented for the purpose of discussion of facilities which were common to both Unit 1 and Unit 2. The General Counsel of the PUCT argued that the issue of the Utility's prudence as to Unit 2 was barred by FF No. 84 and requested that the Utility's entire prudence testimony in Docket No. 10200 be stricken, along with all associated schedules and exhibits. The ALJ ruled on June 7, 1991 that the PUCT's finding in Docket No. 9491 could not be "relitigated" in Docket No. 10200. However, the ALJ determined that the PUCT did not decide "what specific action by TNP, instead of beginning construction when it did, would have been prudent" and that the PUCT did not "quantify the disallowance resulting from its finding that TNP had failed to prove that beginning construction of Unit 2 was prudent." Therefore, the ALJ concluded that the parties could raise those particular issues in Docket No. 10200. The ALJ further stated that, "The disallowance, if any, will be determined using principles set forth in previous cases regarding prudence." The ALJ determined that, in order for the Utility's request for inclusion of the Unit 2 investment in rate base as plant in service to be considered, the Utility must present a prima facie case in its direct testimony as to how a disallowance resulting from FF No. 84 should be quantified. The Utility appealed the ALJ's ruling to the PUCT, which voted not to hear the appeal. On August 16, 1991, the Utility filed supplemental prudence testimony, under protest, responding to the ALJ's order and supporting the Utility's entitlement to rate base treatment for the costs of Unit 2. In its supplemental testimony, the Utility contended that it prudently could have released Unit 2 for construction in February 1989, rather than September 1988, when the unit was actually released. The Utility argued that this alternative would cost no less than the actual cost of Unit 2, and thus no disallowance should result from any imprudence in releasing Unit 2 for construction in September 1988. Two intervenors in this proceeding objected to the Utility's presentation of a prudent alternative, but the PUCT included such evidence in the record. In a "final" order dated October 16, 1992, the PUCT commissioners approved an increase in annualized revenues of $26 million, or 72% of the Utility's original $35.8 million requested increase. The PUCT's order determined that the reasonable costs for Unit 2 were $261.8 million. The PUCT allowed in rate base $250.7 million of the $275.2 million requested for Unit 2 costs. The difference between the $261.8 million in costs found to be prudent by the PUCT and the $282.9 million total costs of Unit 2 consisted of disallowances of approximately $21.1 million. The PUCT also determined that $11.1 million of Unit 2 costs will be addressed in a future Texas rate application. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprise, Inc.) Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 (5) Commitments and Contingencies - continued The order in Docket No. 10200 also allowed approximately $15.3 million of the requested approximately $16.1 million of Unit 1 costs not sought by the Utility in Docket No. 9491. The approximately $800,000 disallowance was primarily related to debt service on disallowed costs determined in Docket No. 9491. Subsequent to the issuance of the "final" order on October 16, 1992, motions for rehearing of certain issues were filed by parties to the case. On December 22, 1992, the PUCT issued an Order on Rehearing which reduced the $ 26 million increase in annualized revenues that was originally granted by the PUCT in its order on October 16, 1992. The primary issue in the Order on Rehearing was the PUCT's reversal of its original Docket No. 10200 order as to the use of the "return method" for calculating the amount allowed in cost of service for the Utility's Federal income tax expense. The "return method" of computing Federal income tax expense requested by the Utility followed consistent precedent of the PUCT. The concept of the "return method" is to match a utility's taxes with the same revenues and expenses included in rates. The new method adopted by the PUCT in the Order on Rehearing flowed through to ratepayers the tax benefits of expenses disallowed and not included in rates. The net effect of this Order on Rehearing was a decrease of approximately $7 million from the October 16, 1992 order, resulting in a $19 million increase in annualized revenues. On January 26, 1993, the PUCT considered motions for rehearing on the December 22, 1992 Order on Rehearing but did not alter the $19 million increase in annualized revenues or the disallowances. In its Order on Rehearing, dated February 4, 1993, the PUCT ordered the Utility to seek a private letter ruling from the Internal Revenue Service (IRS) to determine if the Order on Rehearing resulted in violations of the "normalization" rules concerning investment tax credits and accelerated tax depreciation on public utility property. The PUCT's February 4, 1993 Order on Rehearing stated that the tax method utilized does not violate the "normalization" rules of the Internal Revenue Code; however, a December 1992 private letter ruling of the IRS to an unrelated utility indicates that regulatory treatment which flows through tax benefits of investment tax credits on disallowed public utility property violates the "normalization" rules. A "normalization" violation ultimately results in a utility's loss of benefits from investment tax credit and/or accelerated depreciation on public utility property. Without the curative action of the PUCT on March 10, 1993, discussed in the following paragraph, an IRS determination that a "normalization" violation had occurred would subject the Utility to paying additional income taxes for the amount of the accumulated deferred investment tax credits as of the time of the violation and taxes on the amount of tax depreciation in excess of book depreciation for all tax years open for IRS review. On March 10, 1993, the PUCT considered motions for rehearing on the February 4, 1993 Order on Rehearing and expressed its position that its earlier actions not create a "normalization" violation for the Utility. As a result, in its Order on Rehearing, dated March 18, 1993, the PUCT ordered that the Utility be granted, subject to refund, an additional $1.6 million in annualized revenues which matches recovery in rates with only the investment tax credits and accelerated tax depreciation related to utility property included in rate base. Accordingly, the benefits of investment tax credits and accelerated tax depreciation related to disallowed public utility property would not be passed through to ratepayers; therefore, the Utility believes that the "normalization" rules with respect to investment tax credits and accelerated tax depreciation would not be violated. Further, the PUCT affirmed its February 4, 1993 Order on Rehearing directing the Utility to seek a private letter ruling from the IRS to determine if the earlier methodology adopted in the December 22, 1992 Order on Rehearing would violate the "normalization" rules concerning investment tax credits and accelerated tax depreciation on public utility property. If the IRS determines that the PUCT's December 22, 1992 order would not constitute a "normalization" violation, then the additional $1.6 million in annualized revenues would be revoked by the PUCT, and the Utility would be required to refund excess amounts collected. The PUCT did not reverse its December 22, 1992 position to pass through to ratepayers the tax benefits of interest charges related to disallowed public utility property. The net resultant effect of Docket No. 10200 (by the PUCT action of March 10, 1993) is an increase in annualized revenues of $20.6 million, of which $1.6 million is subject to refund. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprise, Inc.) Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 (5) Commitments and Contingencies - continued The March 18, 1993 Order on Rehearing was appealed by the Utility and certain intervening parties to a State district court. Because of the Court of Appeals judgment relating to FF No. 84 in the Docket No. 9491 appeals, the presiding judge in the State district court for the Docket No. 10200 appeal has ordered that the procedural schedule in this appeal be abated until final resolution of the FF No. 84 issue in Docket No. 9491. The Utility will vigorously pursue reversal of the PUCT's new position regarding Federal income tax expense in addition to seeking judicial relief from the disallowances and certain other rulings by the PUCT in Docket No. 10200. During the third quarter of 1993, the Utility refunded, to the appropriate Texas customers, amounts collected under bonded rates in excess of the $20.6 million in annualized revenues granted on rehearing in Docket No. 10200. The refund (approximately $18 million, including interest) was related to the period beginning on the effective date for bonded rates (October 16, 1991) through April 1993. After receiving PUCT approval on October 19, 1993, the Utility filed, on October 20, 1993, a request with the IRS for a private letter ruling on the issue of a "normalization" violation resulting from the PUCT's proposed treatment of investment tax credits and accelerated tax depreciation. Revenues related to the conditionally granted $1.6 million annualized increase will not be refunded unless the IRS determines that a "normalization" violation would not result from flowing through benefits of investment tax credits and accelerated tax depreciation related to disallowed public utility property. If the IRS so determines, a refund will be made after that determination. Accordingly, revenues associated with the $1.6 million annualized increase have not been recognized in results of operations as of December 31, 1993, and a provision for revenues subject to refund, including interest, has been made for $3.4 million in the consolidated balance sheet as of December 31, 1993. The Utility expects to receive the private letter ruling in 1994. Based upon the opinions of the Utility's Texas regulatory counsel, Johnson & Gibbs, a Professional Corporation, management believes that it will prevail in obtaining a remand of a significant portion of the disallowances in Docket No. 10200; however, the ultimate disposition and quantification of these items cannot presently be determined. Accordingly, no provision for any loss that may ultimately be required upon resolution of these matters has been made in the accompanying consolidated financial statements. If the Utility is not successful in obtaining a final favorable disposition in the appellate proceedings relating to the disallowances in Docket No. 10200, a write-off of some portion of the $21.9 million disallowances would be required, which could result in a significant negative impact on earnings in the period of final resolution. Other TNP One Matters In Docket No. 9491, the Utility requested deferred accounting treatment (DAT) for Unit 1 which would (1) defer $1.4 million and $2.8 million of operating costs and interest costs, respectively, (2) recover such amounts in rates through amortizations over the life of the unit and (3) include such unamortized amounts in the Utility's rate base, thereby recovering a carrying cost on the unamortized amount. The PUCT granted the Utility's DAT request except the inclusion of interest costs ($2.8 million) in rate base. In the final order meeting for Docket No. 9491, the PUCT commissioners indicated that their decision to exclude interest costs from the Utility's rate base was influenced by a recent appeals court ruling. In that ruling, which involved an appeal of a decision by the PUCT granting DAT to an unrelated electric utility, the appeals court found that the DAT component for interest costs could not be included in rate base. The electric utility has filed an application for writ of error with the Texas Supreme Court regarding the appeals court ruling. The ultimate effect of the appeals court ruling on the order granting DAT for Unit 1 is uncertain at this time. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprise, Inc.) Notes to Consolidated Financial Statements December 31, 1993, 1992, and 1991 (5) Commitments and Contingencies - continued The Utility entered into a fuel supply agreement dated November 18, 1987 with Phillips Coal Company (Phillips), owner of a 300-million-ton lignite reserve in Robertson County in proximity to TNP One. The agreement provides for a lignite fuel source for the 38-year life of TNP One. Phillips subsequently entered into an agreement with a subsidiary of Peter Kiewit Sons', Inc. for development of the lignite mine by a joint venture partnership, Walnut Creek Mining Company. Unit 1 and Unit 2 are capable of utilizing Western coal, petroleum coke and natural gas as alternative fuel sources. Legal Actions The Utility is involved in various claims and other legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Utility's consolidated financial position. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Registrant. Identification of Directors and Directorships Set forth below is certain information concerning the nominees: NOMINEES FOR DIRECTOR Principal occupation Director and business experience of the during past five years; Name/Age Utility since and other directorships R. Denny Alexander, 48 1989 Owner, R. Denny Alexander & Company, since 1978 (investment management) Managing Partner, OPNB Building Joint Venture, since 1978 (real estate investment) Chairman, Overton Bank and Trust, National Association, since May 1984 Director of: Overton Bancshares, Inc., since 1982 Cass O. Edwards, II, 67 1975 Managing Partner, Edwards - Geren Limiated (ranching and farming) Chairman, Overton Bancshares, Inc., since 1982 Chairman and President, Cassco Land Company, Inc. Director of: Overton Bank and Trust, National Association John A. Fanning, 54 1984 Executive Vice President, Snyder Oil Corporation, since March 1990 (oil and gas producer) December 1987 to March 1990 Director of: Snyder Oil Company, Inc., since 1981 Harris L. Kempner, Jr., 54 1980 President, Kempner Capital Management, since 1981 (investment advisor) Trustee, H. Kempner Trust Association Chairman Emeritus and Advisor to the Board of United States National Bank, since 1992 Director of: Balmorhea Ranches; Imperial Holly Corp.; Cullen/Frost Bankers, Inc., since 1982; American Indemnity Company, since 1987; American Indemnity Financial, since 1990 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Dr. Thomas S. Mackey, 63* 1977 President, Key Metals and Minerals Engineering Corporation, since 1970 (consulting engineers) President, Texas Copper Corporation, from 1989 to 1993 (primary copper processing) Thomas S. Mackey, P.C., a law firm, since 1978 President, Airtrust International Corporation, since 1982 (logistic services to oil industry) President, USA Offshore Industries Corporation; USA Logestics Services Corporation since 1982(equipment exports) Chairman, Board of Directors, Neomet Corporation, since 1989 (neodymium eutectic alloy production) President and Director, Neomet Corporation, from 1986 to 1989, and since 1992 President and Director, Cox Creek Refining Company, since 1990 (copper cathode and rod provider) Director of: United States National Bank, since 1970; Reactive Metals and Alloys, Inc., since 1986 (mischmetal and ferro alloy producer); Siltec Corporation and Siltec Epitaxial Corp., since 1986 (silicon wafer manufacturer); Malaysian Titanium Corporation, since 1990 (titanium dioxide pigment for paper and paint industry) D. R. Spurlock, 61 1993 Interim President & Chief Executive Officer of TNPE and the Utility, since November 9, 1993 Sector Vice President - Operations of the Utility, September 1990 through 1992 (Retired) Vice President - Division Manager of the Utility, August 1979 to September 1990 Director of: TNPE, since April 1993; Texas City National Bank, since 1976 R. D. Woofter, 70 1975 Chairman of the Board of TNPE and the Utility, since July 2, 1988 * A member of the Board and Committees, and a nominee until the time of his death on February 25, 1994. Three vacancies currently exist on the Board of Directors of the Utility. One vacancy resulted from the resignation of John Justin as a Director on February 25, 1993 and the unexpected decision of an advisory director not to stand for election to the position previously held by Mr. Justin. The resignation of J. M. Tarpley from the position of President & Chief Executive Officer and from the Board of Directors as of November 9, 1993, resulted in the second vacancy. The third vacancy occurred as the result of the untimely death of Dr. T. S. Mackey on February 25, 1994. It is expected that upon selection of a successful candidate for the position of President & Chief Executive Officer of the Utility, the Board of Directors will appoint that person to the directorship vacated by Mr. Tarpley's resignation. At such time as the Board of Directors has evaluated and selected persons who are qualified to act as directors of the Utility, the Board will make appointments of such persons to fill the two remaining vacant director positions. It is anticipated that appointees will stand for election at the 1995 Annual Meeting of the Shareholders of the Utility. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Identification of Executive Officers Positions & Offices Held Period of with the Utility Such Office Name Age Within the Past 5 Years1 Years Months D. R. Spurlock2 61 Interim President & Chief 0 1 Executive Officer and Director Sector Vice President - 2 4 Operations Vice President - 11 1 Division Manager D. R. Barnard 61 Sector Vice President & 3 8 Chief Financial Officer Vice President & 1 0 Chief Financial Officer Vice President & 17 0 Treasurer J. V. Chambers, Jr. 44 Sector Vice President - 3 8 Revenue Production Vice President - Contracts 3 2 & Regulation M. C. Davie 58 Vice President - Corporate 10 11 Affairs A. B. Davis 56 Vice President - Chief Engineer 1 8 Chief Engineer 1 4 Assistant Chief Engineer 0 1 Manager - Engineering 5 8 L.W. Dillon 39 Vice President - Operations 0 1 Division Manager 3 6 Division Engineering Manager 4 11 R. J. Wright 46 Vice President - 0 6 Corporate Services/Generation Vice President - Manager - Generation 4 8 M. D. Blanchard 43 Corporate Secretary & 6 4 General Counsel Monte W. Smith 40 Treasurer 4 8 Director - Internal Audit 2 11 1 All officers are elected annually by the Utility's Board of Directors for a one-year term until the next annual meeting of the Board of Directors or until their successors shall be elected and qualified. The term of an officer elected at any other time by the Board also will run until the next succeeding annual meeting of the Board of Directors or until a successor shall be elected and qualified. 2 Retired as Sector Vice President effective December 31, 1992; named Interim President & Chief Executive Officer effective November 9, 1993. With the exception of D. R. Spurlock, each of the above-named officers is a full-time employee of the Utility and has been for more than five years prior to the date of the filing of this Form 10-K. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Item 11. Executive Compensation. Compensation Committee Interlocks and Insider Participation The Personnel, Organization & Nominating Committee is responsible for recommending to the Board the appropriate levels of Executive Compensation. The members of the Committee are Messrs. Edwards and Woofter. Prior to his death, Dr. Mackey was a member of this Committee. Mr. Woofter, the Chairman of the Board and formerly the Chief Executive Officer and President of TNPE and the Utility, retired as an officer of both companies in 1988. Mr. Edwards is a director of Overton Bank and Trust, National Association, with which the Utility and TNPE maintain a banking relationship in the ordinary course of business. To the Utility's knowledge, there were no other inter- relationships involving members of the Committee. The following table sets forth information regarding cash compensation paid for services rendered to the Utility and its subsidiaries to the former CEO, the Interim President and CEO, and each of the four most highly compensated executive officers of the Utility whose cash compensation exceeded $100,000, for each of the last three fiscal years. Summary Compensation Table
ANNUAL COMPENSATION FISCAL OTHER ANNUAL ALL OTHER NAME & PRINCIPAL YEAR SALARY COMPENSATION COMPENSATION (1) (2) (3) POSITION (a) (b) (c) J. M. Tarpley (resigned 11-9-93) 1993 $284,419 $ -0- $2,581 $2,581 President and Chief . . . . . . 1992 309,776 7,526 2,514 10,040 Executive Officer of TNPE . . .1991 295,257 7,306 2,295 9,601 and the Utility D. R. Spurlock. . . . . . . . . 1993 77,801 -0- -0- -0- (effective 11-9-93 named. . . .1992 156,649 $24,885 8,728 704 9,432 Interim President and Chief . . 1991 148,089 25,125 8,475 682 9,157 Executive Officer of TNPE and the Utility) (prior to retirement effective 12-31-92 - -Sector Vice President- Operations of the Utility) D. R. Barnard . . . . . . . . . 1993 147,857 -0- 801 801 Vice President and Chief. . . . 1992 155,993 8,728 682 9,410 Financial Officer of TNPE . . . 1991 145,177 8,475 682 9,157 and Sector Vice President and Chief Financial Officer of the Utility J. V. Chambers. . . . . . . . . 1993 148,404 -0- 801 801 Sector Vice President-. . . . . 1992 154,094 8,728 704 9,432 Revenue Production of . . . . . 1991 147,370 8,475 682 9,157 the Utility A. B. Davis . . . . . . . . . . 1993 120,224 -0- 609 609 Vice President - Chief Engineer 1992 116,031 6,730 487 7,217f the Utility. . . . . . . . . 1991 100, R. J. Wright. . . . . . . . . . 1993 127,921 -0- 662 662 Vice President - Corporate. . . 1992 127,058 7,545 582 8,127 Services/Generation of the Utility1991 119,306 7,071 538 7,609 (1) Salaries for the officer group are reviewed annually with any changes in salary generally effective as of the date of the meeting of the directors held in conjunction with the Annual Meeting of the Holders of Common Stock. Because employee salaries are paid bi- weekly, the actual compensation for 1992 included an extra pay period. (2) Housing and transportation allowance. (3) All Other Compensation consists of the following: (a) Amounts contributed by Utility to Thrift Plan (401k Plan). (b) Premiums for Group Life. (c) Total "All Other Compensation." (a) + (b) = (c).
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Utility's Pension Plan The following table sets forth annual benefits payable to employees of the Utility under the Utility's Pension Plan at the normal retirement age of 65. PENSION PLAN TABLE
Remuneration Years of credited service at retirement 15 20 25 30 35 40 $125,000 $ 30,147 $ 40,196 $ 50,245 $ 60,294 $ 70,343 $78,468 *150,000 36,522 48,696 60,870 73,044 85,218 94,968 *175,000 42,897 57,196 71,495 85,794 100,093 111,468 *200,000 49,272 65,696 82,120 98,544 114,968 127,968 *225,000 55,647 74,196 92,745 111,294 129,843 144,468 *250,000 62,022 82,696 103,370 124,044 144,718 160,968 *300,000 74,772 99,696 124,620 149,544 174,468 193,968 *400,000 100,272 133,696 167,120 200,544 233,968 259,968 *450,000 113,022 150,696 188,370 226,044 263,718 292,968 *500,000 125,772 167,696 209,620 251,544 293,468 325,968 _________ * Benefits at these levels are shown without taking into account Internal Revenue Service (IRS) Code Section 415 limits or the $150,000 salary cap in effect following 1993, resulting from the IRS Code Section 401a 717 limits and, therefore, a portion of these benefits would be paid from the unfunded Excess Benefit Plan.
The Utility maintains for the benefit of all eligible employees a non- contributory defined benefit retirement plan (the "Pension Plan") under which contributions are actuarially determined each year. All employees who have one year of service with the Utility and who are 21 years of age are eligible. As a defined benefit plan, the Utility's Pension Plan contributions, which are computed on an actuarial basis, cannot be readily calculated on a per person basis by Plan actuaries. Benefits for each eligible employee are based on the employee's number of years of service computed through the month in which he or she retires multiplied by a specified percentage of the employee's average monthly compensation for each full calendar year completed after 1993. The average monthly compensation for the named executive officers consists only of amounts included beneath the Salary column of the Summary Compensation Table. Pension benefits are not subject to deduction for Social Security benefits. Pension benefits are subject to reduction for retirement prior to age 62. For 1993, the Utility made no contribution to the Pension Plan. The Utility also maintains an unfunded Excess Benefit Plan to compensate certain highly compensated employees. Such highly compensated employees must first have their pensions subject to being reduced below the amount which would have been provided by the Pension Plan because of compliance with Section 415 of the Internal Revenue Code of 1986, as amended, and must be designated as eligible by the Board of Directors for participation in the Excess Benefit Plan. There are three participants currently designated by the Board of Directors. A Letter of Credit is purchased each year which will provide sufficient funds to the Trust to make payments to all persons who are covered by the Excess Benefit Plan if a "change in control" were to occur as that term is defined in certain employment contracts which are discussed hereafter. The Utility owns life insurance policies on the lives of two employees currently eligible to receive payments under such plan upon their retirement and one retiree who is currently receiving benefits under the Excess Benefit Plan. The proceeds of the policies are payable to the Utility to compensate the Utility for its payments to the eligible employees pursuant to the terms of the Excess Benefit Plan. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES As of December 31, 1993, the years of credited service for calculation of the retirement benefits for the named executive officers of the Utility were as follows: NAME YEARS OF CREDITED SERVICE Mr. Tarpley 35 years, 6 months Mr. Spurlock Retired as of 12-31-92 with 33 years, 7 months Mr. Barnard 32 years, 6 months Mr. Chambers 14 years, 11 months Mr. Davis 28 years, 7 months Mr. Wright 14 years, 10 months Except for the Chairman, each member of the Board of Directors who is not also an officer of the Utility receives an annual retainer fee of $4,500 from each of TNPE and the Utility. The Chairman of the Board of Directors receives an annual retainer fee of $36,000 from each of TNPE and the Utility. The Chairman acts as agent for the Board of Directors and is a member of all Committees of the Board. Each director also receives $500 for attending each meeting of the Board of Directors of either TNPE or the Utility or Board committees of either entity of which he is a member. In the event that meetings of Boards of both entities or their Committees are held on the same day, the meeting fee is limited to $500 and is allocated evenly between TNPE and the Utility. Utility's Employment Contracts Employment contracts between the Utility and its officers and its other key personnel have continued since 1988, in form and substance last reviewed and approved by the Board of Directors of the Utility at the November, 1993 Board meeting. The principal purpose of the contracts is to encourage retention of management and other key personnel required for the orderly conduct of the business of the Utility during any threatened or pending acquisition of the Utility or TNPE and during any transition of ownership. The terms of the contracts, from date of execution, are three years as to certain officers and managers of the Utility and two years as to the other key personnel. Upon the expiration of each contract, the Utility, at its option, may extend the contract for additional three or two year periods, as appropriate. The contracts for certain officers and managers, including the named executive officers, provide for lump sum compensation payments equal to three times their current annual salary, and other rights. The contracts for the other key personnel provide for payments equal to their annual salary. The lump sum payments for both the officers and other key personnel only become effective in the event of termination of employment or other adverse treatment of such persons following a "change in control" of the Utility or TNPE, which event is defined to include, among other things, substantial changes in the corporate structure or ownership of either entity or in the Board of Directors of either entity. Pursuant to an agreement between J. M. Tarpley and TNPE and its subsidiaries, including the Utility, Mr. Tarpley resigned his positions as officer and member of the Boards of Directors of all such companies, including his positions as President, Chief Executive Officer and a member of the Boards of TNPE and the Utility. The agreement provides for November 9, 1993, as the effective time of resignation of such officer and director positions and, effective January 1, 1994, a contract of employment between Mr. Tarpley and the Utility. The agreement also sets forth other covenants and arrangements between the parties safeguarding confidential and proprietary information of TNPE and its subsidiaries and prohibiting areas of participation by Mr. Tarpley in opposition to TNPE and the Utility. Upon attaining age 62 (August 23, 1996), Mr. Tarpley will retire as an employee and have all rights of a retired employee of the Utility. As an employee and in consideration of the safeguarding and restricting covenants of Mr. Tarpley, his annual compensation until retirement, or his earlier death, will aggregate $284,000 per year. Mr. Tarpley has the rights as an employee to participate in the benefit plans and programs of the Utility, including such rights as a retired employee after age 62. Effective as of November 9, 1993, the Utility entered into an agreement with D. R. Spurlock to serve as President and Chief Executive Officer on an interim basis. The agreement provides for the Utility to pay Mr. Spurlock $30,000 per month, and to reimburse him for certain expenses incurred during the interim period. Mr. Spurlock does not receive any benefits generally made available to employees, such as pension accrual and enhanced medical benefits. The agreement is terminable by either party upon twenty-four hour written notice. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Item 12. Security Ownership of Certain Beneficial Owners and Management. Director, Nominee and Management Shareholding The following table sets forth information with respect to the beneficial ownership of the common stock of TNPE by its directors, nominees for directors, each executive officer named in the Summary Compensation Table and all directors and officers as a group, as of January 31, 1994. Name of Individual or Group Position with Company Shares Beneficially Owned R. D. Woofter Chairman of the Board 9,893 (1) R. Denny Alexander Director 500 Cass O. Edwards, II Director 6,737 Harris L. Kempner, Jr. Director 200 (2) Thomas S. Mackey * Director 1,386 D. R. Spurlock Director; 1,584 Interim President and CEO since 11-9-93 J. M. Tarpley ** President, Chief 11,347 (3) Executive Officer and Director D. R. Barnard Sector Vice President 18,491 and Chief Financial Officer J. V. Chambers Sector Vice President - 13,964 Revenue Production A. B. Davis Vice President - 4,002 Chief Engineer R. J. Wright Vice President - 10,201 Corporate Services/ Generation Directors and officers as a group (16 persons)(4) 96,370 *** _____________________________________ * A member of the Board and Committees until the time of his death on February 25, 1994. **Resigned effective November 9, 1993 as President and CEO and Director. ***Less than one (1) percent of outstanding shares of Common Stock. (1) Does not include 66 shares owned by the wife of Mr. Woofter as her sole and separate property. Mr. Woofter disclaims any beneficial interest in all such shares. (2) Does not include 200 shares owned by the wife of Mr. Kempner as her sole and separate property. Mr. Kempner disclaims any beneficial interest in all such shares. (3) Subsequent to January 31, 1994, Mr. Tarpley disposed of all shares. (4) Of the nine executive officers of subsidiaries, four are also executive officers of TNPE. All shares held by such officers and directors are shares of TNPE. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Item 13. Certain Relationships and Related Transactions. Mr. R. Denny Alexander is Chairman of the Board and director of Overton Bank and Trust, National Association. Mr. Cass O. Edwards, II is a director of Overton Bank and Trust, National Association. The Utility maintains banking relations with Overton Bank and Trust, National Association. These banking relations are in the ordinary course of business for general banking and short-term investments, and all banking transactions are made on substantially the same terms, including collateral and interest rates, as those prevailing at the time for comparable transactions between such bank and other persons. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) Items Filed as Part of This Report Financial Statements Page Independent Auditors' Report . . . . . . . . . . . . . . . . . . 25 Consolidated Statements of Earnings, Three Years Ended December 31, 1993. . . . . . . . . . . . . . . 26 Consolidated Balance Sheets, December 31, 1993 and 1992 27 Consolidated Statements of Common Stock Equity and Redeemable Cumulative Preferred Stocks, Three Years Ended December 31, 1993. . . . . . . . . . . . . . . 28 Consolidated Statements of Cash Flows, Three Years Ended December 31, 1993. . . . . . . . . . . . . . . 29 Notes to Consolidated Financial Statements . . . . . . . . . . .30-49 Financial Statement Schedules V - Utility Plant, Three Years Ended December 31, 1993. . 58 VI - Accumulated Depreciation of Utility Plant, Three Years Ended December 31, 1993. . . . . . . . . . 59 IX - Short-term Borrowings, Three Years Ended December 31, 1993. . . . . . . . . . 60 X - Supplementary Consolidated Earnings Statement Information Three Years Ended December 31, 1993. . . . . . . . . 61 All other schedules are omitted, as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes. Exhibits See Exhibit Index, Pages 63-72. (b) Reports on Form 8-K None during the last quarter covered by this report. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Utility Plant Schedule V Three Years Ended December 31, 1993 (In Thousands) Other Balance at changes: Balance at beginning Additions add end of Classification of period at cost(1) Retirements(deduct) period Year ended December 31, 1993: Electric plant $1,184,635 17,587 5,436 6,850 1,203,636 Construction work in progress 3,922 8,210 - (6,850) 5,282 $1,188,557 25,797 5,436 - 1,208,918 Year ended December 31, 1992: Electric plant $1,159,511 30,365 (6,683) 1,442 1,184,635 Construction work in progress 2,279 3,085 - (1,442) 3,922 $1,161,790 33,450 (6,683) - 1,188,557 Year ended December 31, 1991: Electric plant $ 850,160 313,259 (6,650) 2,742 1,159,511 Construction work in progress 2,844 2,177 - (2,742) 2,279 $ 853,004 315,436 (6,650) - 1,161,790 Note: See note 1(c) to the consolidated financial statements for disclosure of depreciation method. (1) On July 26, 1991, the Utility's wholly owned subsidiary, TGCII, assumed ownership of TNP One, Unit 2 and assumed the related liabilities totaling approximately $269 million. In addition, approximately $12 million of deferred charges related to TNP One, Unit 2 were reclassified to utility plant. These amounts are included in the 1991 additions above. See note 5 to the consolidated financial statements and Items 1, 2, and 7, for more information about Unit 2. During 1992, the Utility reclassified approximately $12 million of deferred charges to utility plant. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Accumulated Depreciation of Utility Plant Schedule VI
Three Years Ended December 31, 1993 (In Thousands) Other Additions changes: Balance at charged to add Balance at beginning costs and Net (deduct) end of Description of period expenses retirements (See Notes) period Year ended December 31, 1993: Electric plant $172,848 36,015 (6,268) 328 202,923 Year ended December 31, 1992: Electric plant $145,188 35,098 (7,687) 249 172,848 Year ended December 31, 1991: Electric plant $124,015 28,027 (7,444) 590 145,188 Notes: Other additions represent depreciation of transportation equipment charged to property accounts in accordance with the equipment's use. See note 1(c) to the consolidated financial statements for disclosure of depreciation method.
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
Short-term Borrowings (1) Schedule IX Three Years Ended December 31, 1993 (Dollars in Thousands) Weighted Maximum Weighted average amount Average amount average Balance interest outstanding outstanding interest Category of aggregate at end rate at end during during rate during Period short-term borrowings of period of period the period(3) the period(2) the period(2) Year ended Unsecured Notes Payable December 31, 1993 to Banks $ -0 N/A $ -0- -0- N/A Year ended Unsecured Notes Payable December 31, 1992 to Banks $ -0- N/A(2) $36,000 13,004 5.70% Year ended Unsecured Notes Payable December 31, 1991 to Banks $36,000 7.10% $60,000 36,698 7.70% Notes: (1) Unsecured notes payable to banks were issued under revolving lines of credit. Under the terms of the revolving lines of credit, the interest rates were determined under several alternative methods. All rates at the time of issuance were the prime lending rate plus 1/2% or lower. A fee of 1/4 of 1% per annum of the average unused commitments was payable quarterly, with no compensating bank balance requirements. (2) For 1991, computation was based on days outstanding for the year. For 1992, computation was based on the period of January 1, 1992 to August 12, 1992, when all outstanding unsecured notes payable to banks were retired. (3) For 1991, represents the maximum amount outstanding at any month end. For 1992, represents the balance outstanding at January 1, 1992.
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Supplementary Consolidated Earnings Statement Information Schedule X Three Years Ended December 31, 1993 (In Thousands) Charged to costs and expenses Item 1993 1992 1991 Taxes, other than payroll and income taxes: Gross receipts and street rentals $ 11,386 10,064 9,484 Property 14,119 14,272 10,302 Other 2,448 2,431 1,689 $ 27,95 26,767 21,475 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) TEXAS-NEW MEXICO POWER COMPANY By \s\ D. R. Barnard D. R. Barnard, Sector Vice President & Date: March 22, 1994 Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Title Date By \s\ R. D. Woofter Chairman March 22, 1994 R. D. Woofter By \s\ Dwight R. Spurlock Interim President & March 22, 1994 D. R. Spurlock Chief Executive Officer By \s\ D. R. Barnard Sector Vice President & March 22, 1994 D. R. Barnard Chief Financial Officer By \s\ Monte W. Smith Treasurer (Principal March 22, 1994 Monte W. Smith Accounting Officer) By \s\ R. Denny Alexander Director March 22, 1994 R. Denny Alexander By \s\ Cass O. Edwards, II Director March 22, 1994 Cass O. Edwards, II By \s\ John A. Fanning Director March 22, 1994 John A. Fanning By \s\ Harris L. Kempner, Jr. Director March 22, 1994 Harris L. Kempner, Jr. No annual report to security holders of the Registrant covering the Registrant's last fiscal year and no proxy material with respect to solicitations during such fiscal year have been sent to the Registrant's security holders. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES EXHIBIT INDEX Exhibits filed herewith are denoted by "*." The other exhibits have heretofore been filed with the Commission and are incorporated herein by reference. Exhibit No. Description 3(a) - Restated Articles of Incorporation of the Utility (Exhibit 4(a), File No. 2-86282). 3(b) - Amendment to Restated Articles of Incorporation dated October 26, 1983 (Exhibit 3(b) to Form 10-K for the year ended December 31, 1984, File No. 1-2660-2). 3(c) - Amendment to Restated Articles of Incorporation dated April 8, 1984 (Exhibit 3(c) to Form 10-K for the year ended December 31, 1984, File No. 1-2660-2). 3(d) - Amendment to Restated Articles of Incorporation dated October 2, 1984 (Exhibit 3(d) to Form 10-K for the year ended December 31, 1984, File No. 1-2660-2). 3(e) - Articles of Merger dated October 3, 1984 (Exhibit 3(e) to Form 10-K for the year ended December 31, 1984, File No. 1-2660-2). 3(f) - Amendment to Restated Articles of Incorporation dated May 22, 1985 (Exhibit 3(a) to Form 10-K for the year ended December 31, 1985, File No. 2-97230). 3(g) - Amendment to Restated Articles of Incorporation dated August 20, 1985 (Exhibit 3(b) to Form 10-K for the year ended December 31, 1985, File No. 2-97230). 3(h) - Amendment to Restated Articles of Incorporation dated October 7, 1985 (Exhibit 3(c) to Form 10-K for the year ended December 31, 1985, File No. 2-97230). 3(i) - Amendment to Restated Articles of Incorporation dated June 12, 1986 (Exhibit 3(a) to Form 10-K for the year ended December 31, 1986, File No. 2-97230). 3(j) - Amendment to Restated Articles of Incorporation dated October 17, 1986 (Exhibit 3(b) to Form 10-K for the year ended December 31, 1986, File No. 2-97230). 3(k) - Amendment to Restated Articles of Incorporation dated July 14, 1987 (Exhibit 3(k) to Form 10-K for the year ended December 31, 1987, File No. 2-97230). 3(l) - Amendment to Restated Articles of Incorporation dated October 23, 1987 (Exhibit 3(l) to Form 10-K for the year ended December 31, 1987, File No. 2-97230). 3(m) - Amendment to Restated Articles of Incorporation dated May 4, 1988 (Exhibit 3(m) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). 3(n) - Amendment to Restated Articles of Incorporation dated May 5, 1988 (Exhibit 3(n) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). 3(o) - Amendment to Restated Articles of Incorporation dated May 5, 1988 (Exhibit 3(o) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Exhibit No. Description 3(p) - Amendment to Restated Articles of Incorporation dated December 5, 1988 (Exhibit 3(p) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). 3(q) - Amendment to Restated Articles of Incorporation dated April 11, 1989 (Exhibit 3(q) to Form 10-K for the year ended December 31, 1989, File No. 2-97230). 3(r) - Amendment to Restated Articles of Incorporation dated July 27, 1989 (Exhibit 3(r) to Form 10-K for the year ended December 31, 1989, File No. 2-97230). 3(s) - Amendment to Restated Articles of Incorporation dated October 23, 1989 (Exhibit 3(s) to Form 10-K for the year ended December 31, 1989, File No. 2-97230). 3(t) - Amendment to Restated Articles of Incorporation dated May 16, 1990 (Exhibit 3(t) to Form 10-K for the year ended December 31, 1990, File No. 2-97230). 3(u) - Amendment to Restated Articles of Incorporation dated June 26, 1990 (Exhibit 3(u) to Form 10-K for the year ended December 31, 1990, File No. 2-97230). 3(v) - Amendment to Restated Articles of Incorporation dated November 27, 1990 (Exhibit 3(v) to Form 10-K for the year ended December 31, 1990, File No. 2-97230). 3(w) - Amendment to Restated Articles of Incorporation dated May 1, 1991 (Exhibit 3(w) to Form 10-K for the year ended December 31, 1991, File No. 2-97230). 3(x) - Amendment to Restated Articles of Incorporation dated July 18, 1991 (Exhibit 3(x) to Form 10-K for the year ended December 31, 1991, File No. 2-97230). 3(y) - Amendment to Restated Articles of Incorporation dated October 18, 1991 (Exhibit 3(y) to Form 10-K for the year ended December 31, 1991, File No. 2-97230). 3(z) - Amendment to Restated Articles of Incorporation dated April 30, 1992 (Exhibit 3(z) to Form 10-K for the year ended December 31, 1992, File No. 2-97230). 3(aa) - Amendment to Restated Articles of Incorporation dated June 19, 1992 (Exhibit 3(aa) to Form 10-K for the year ended December 31, 1992, File No. 2-97230). 3(bb) - Amendment to Restated Articles of Incorporation dated November 3, 1992 (Exhibit 3(bb) to Form 10-K for the year ended December 31, 1992, File No. 2-97230). *3(cc) - Amendment to Restated Articles of Incorporation dated April 7, 1993. *3(dd) - Amendment to Restated Articles of Incorporation dated July 22, 1993. *3(ee) - Amendment to Restated Articles of Incorporation dated October 21, 1993. 3(ff) - Bylaws of the Utility, as amended February 18, 1992 (Exhibit 3(cc) to Form 10-K for the year ended December 31, 1992, File No. 2-97230). 4(a) - Indenture of Mortgage and Deed of Trust dated as of November 1, 1944 (Exhibit 2(d), File No. 2-61323). 4(b) - Seventh Supplemental Indenture dated as of May 1, 1963 (Exhibit 2(k), File No. 2-61323). TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Exhibit No. Description 4(c) - Eighth Supplemental Indenture dated as of July 1, 1963 (Exhibit 2(1), File No. 2-61323). 4(d) - Ninth Supplemental Indenture dated as of August 1, 1965 (Exhibit 2(m), File No. 2-61323). 4(e) - Tenth Supplemental Indenture dated as of May 1, 1966 (Exhibit 2(n), File No. 2-61323). 4(f) - Eleventh Supplemental Indenture dated as of October 1, 1969 (Exhibit 2(o), File No. 2-61323). 4(g) - Twelfth Supplemental Indenture dated as of May 1, 1971 (Exhibit 2(p), File No. 2-61323). 4(h) - Thirteenth Supplemental Indenture dated as of July 1, 1974 (Exhibit 2(q), File No. 2-61323). 4(i) - Fourteenth Supplemental Indenture dated as of March 1, 1975 (Exhibit 2(r), File No. 2-61323). 4(j) - Fifteenth Supplemental Indenture dated as of September 1, 1976 (Exhibit 2(e), File No. 2-57034). 4(k) - Sixteenth Supplemental Indenture dated as of November 1, 1981 (Exhibit 4(x), File No. 2-74332). 4(l) - Seventeenth Supplemental Indenture dated as of December 1, 1982 (Exhibit 4(cc), File No. 2-80407). 4(m) - Eighteenth Supplemental Indenture dated as of September 1, 1983 (Exhibit (a) to Form 10-Q for the quarter ended September 30, 1983, File No. 1-4756). 4(n) - Nineteenth Supplemental Indenture dated as of May 1, 1985 (Exhibit 4(v), File No. 2-97230). 4(o) - Twentieth Supplemental Indenture dated as of July 1, 1987 (Exhibit 4(o) to Form 10-K for the year ended December 31, 1987, File No. 2-97230). 4(p) - Twenty-First Supplemental Indenture dated as of July 1, 1989 (Exhibit 4(p) to Form 10-Q for the quarter ended June 30, 1989, File No. 2-97230). 4(q) - Twenty-Second Supplemental Indenture dated as of January 15, 1992 (Exhibit 4(q) to Form 10-K for the year ended December 31, 1991, File No. 2-97230). *4(r) - Twenty-Third Supplemental Indenture dated as of September 15, 1993. 4(s) - Indenture and Security Agreement for Secured Debentures dated as of January 15, 1992 (Exhibit 4(r) to Form 10-K for the year ended December 31, 1991, File No. 2-97230). *4(t) - Indenture and Security Agreement for Secured Debentures dated as of September 15, 1993. TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Exhibit No. Description Material Contracts Relating to TNP One 10(a) - Fuel Supply Agreement, dated November 18, 1987, between Phillips Coal Company and the Utility (Exhibit 10(j) to Form 10-K for the year ended December 31, 1987, File No. 2-97230). 10(b) - Unit 1 First Amended and Restated Project Loan and Credit Agreement, dated as of January 8, 1992 (the "Unit 1 Credit Agreement"), among the Utility, Texas Generating Company ("TGC"), the banks named therein as Banks (the "Unit 1 Banks") and The Chase Manhattan Bank (National Association), as Agent for the Unit 1 Banks (the "Unit 1 Agent"), amending and restating the Project Loan and Credit Agreement among such parties dated as of December 1, 1987 (Exhibit 10(c) to Form 10- K for the year ended December 31, 1991, File No. 2-97230). 10(b)1 - Participation Agreement, dated as of January 8, 1992, among the banks named therein as Banks, the parties named therein as Participants and the Unit 1 Agent (Exhibit 10(c)1 to Form 10-K for the year ended December 31, 1991, File No. 2-97230). *10(b)2 - Amendment No. 1, dated as of September 21, 1993, to the Unit 1 Credit Agreement. 10(c) - Assignment and Security Agreement, dated as of January 8, 1992, among TGC and the Unit 1 Agent, for the benefit of the Secured Parties, as defined in the Unit 1 Credit Agreement, amending and restating the Assignment and Security Agreement among such parties dated as of December 1, 1987 (Exhibit 10(d) to Form 10- K for the year ended December 31, 1991, File No. 2-97230). 10(d) - Assignment and Security Agreement, dated December 1, 1987, executed by the Utility in favor of the Unit 1 Agent for the benefit of the Secured Parties, as defined therein (Exhibit 10(u) to Form 10-K for the year ended December 31, 1987, File No. 2-97230). 10(e) - Amended and Restated Subordination Agreement, dated as of October 1, 1988, among the Utility, Continental Illinois National Bank and Trust Company of Chicago and the Unit 1 Agent, amending and restating the Subordination Agreement among such parties dated as of December 1, 1987 (Exhibit 10(uu) to Form 10-K for the year ended December 31, 1988, File No. 2- 97230). 10(f) - Mortgage and Deed of Trust (With Security Agreement and UCC Financing Statement for Fixture Filing), dated to be effective as of December 1, 1987, and executed by Project Funding Corporation ("PFC"), as Mortgagor, to Donald H. Snell, as Mortgage Trustee, for the benefit of the Secured Parties, as defined therein (Exhibit 10(ee) to Form 10-K for the year ended December 31, 1987, File No. 2-97230). 10(f)1 - Supplemental Mortgage and Deed of Trust (With Security Agreement and UCC Financing Statement for Fixture Filing), executed by TGC, as Mortgagor, on January 27, 1992, to be effective as of December 1, 1987, to Donald H. Snell, as Mortgage Trustee, for the benefit of the Secured Parties, as defined therein (Exhibit 10(g)4 to Form 10-K for the year ended December 31, 1991, File No. 2-97230). 10(f)2 - First TGC Modification and Extension Agreement, dated as of January 24, 1992, among the Unit 1 Banks, the Unit 1 Agent, the Utility and TGC (Exhibit 10(g)1 to Form 10-K for the year ended December 31, 1991, File No. 2-97230). TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Exhibit No. Description 10(f)3 - Second TGC Modification and Extension Agreement, dated as of January 27, 1992, among the Unit 1 Banks, the Unit 1 Agent, the Utility and TGC (Exhibit 10(g)2 to Form 10-K for the year ended December 31, 1991, File No. 2-97230). 10(f)4 - Third TGC Modification and Extension Agreement, dated as of January 27, 1992, among the Unit 1 Banks, the Unit 1 Agent, the Utility and TGC (Exhibit 10(g)3 to Form 10-K for the year ended December 31, 1991, File No. 2-97230). *10(f)5 - Fourth TGC Modification and Extension Agreement, dated as of September 29, 1993, among the Unit 1 Banks, the Unit 1 Agent, the Utility and TGC. *10(f)6 - Fifth TGC Modification and Extension Agreement, dated as of September 29, 1993, among the Unit 1 Banks, the Unit 1 Agent, the Utility and TGC. 10(g) - Indemnity Agreement, made as of the 1st day of December, 1987, by Westinghouse, CE and Zachry, as Indemnitors, for the benefit of the Secured Parties, as defined therein (Exhibit 10(ff) to Form 10-K for the year ended December 31, 1987, File No. 2- 97230). 10(h) - Second Lien Mortgage and Deed of Trust (With Security Agreement) executed by the Utility, as Mortgagor, to Donald H. Snell, as Mortgage Trustee, for the benefit of the Secured Parties, as defined therein (Exhibit 10(jj) to Form 10-K for the year ended December 31, 1987, File No. 2-97230). 10(h)1 - Correction Second Lien Mortgage and Deed of Trust (with Security Agreement), dated as of December 1, 1987, executed by the Utility, as Mortgagor, to Donald H. Snell, as Mortgage Trustee, for the benefit of the Secured Parties, as defined therein (Exhibit 10(vv) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). 10(h)2 - Second Lien Mortgage and Deed of Trust (with Security Agreement) Modification, Extension and Amendment Agreement, dated as of January 8, 1992, executed by the Utility to Donald H. Snell, as Mortgage Trustee, for the benefit of the Secured Parties, as defined therein (Exhibit 10(i)2 to Form 10-K for the year ended December 31, 1991, File No. 2-97230). *10(h)3 - TNP Second Lien Mortgage Modification No. 2, dated as of September 21, 1993, executed by the Utility to Donald H. Snell, as Mortgage Trustee, for the benefit of the Secured Parties, as defined therein. 10(i) - Agreement for Conveyance and Partial Release of Liens, made as of the 1st day of December, 1987, by PFC and the Unit 1 Agent for the benefit of the Utility (Exhibit 10(kk) to Form 10-K for the year ended December 31, 1987, File No. 2-97230). 10(j) - Inducement and Consent Agreement, dated as of June 15, 1988, between Phillips Coal Company, Kiewit Texas Mining Company, the Utility, Phillips Petroleum Company and Peter Kiewit Son's, Inc. (Exhibit 10(nn) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). 10(k) - Assumption Agreement, dated as of October 1, 1988, executed by TGC, in favor of the Issuing Bank, as defined therein, the Unit 1 Banks, the Unit 1 Agent and the Depositary, as defined therein (Exhibit 10(ww) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Exhibit No. Description 10(l) - Guaranty, dated as of October 1, 1988, executed by the Utility and given in respect of the TGC obligations under the Unit 1 Credit Agreement (Exhibit 10(xx) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). 10(m) - First Amended and Restated Facility Purchase Agreement, dated as of January 8, 1992, among the Utility, as the Purchaser, and TGC, as the Seller, amending and restating the Facility Purchase Agreement among such parties dated as of October 1, 1988 (Exhibit 10(n) to Form 10-K for the year ended December 31, 1991, File No. 2-97230). 10(n) - Operating Agreement, dated as of October 1, 1988, among the Utility and TGC (Exhibit 10(zz) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). 10(o) - Unit 2 First Amended and Restated Project Loan and Credit Agreement, dated as of January 8, 1992 (the "Unit 2 Credit Agreement"), among the Utility, Texas Generating Company II ("TGCII"), the banks named therein as Banks (the "Unit 2 Banks") and The Chase Manhattan Bank (National Association), as Agent for the Unit 2 Banks (the "Unit 2 Agent"), amending and restating the Project Loan and Credit Agreement among such parties dated as of October 1, 1988 (Exhibit 10(q) to Form 10-K for the year ended December 31, 1991, File No. 2-97230). *10(o)1 - Amendment No. 1, dated as of September 21, 1993, to the Unit 2 Credit Agreement. 10(p) - Assignment and Security Agreement, dated as of January 8, 1992, among TGCII and the Unit 2 Agent, for the benefit of the Secured Parties, as defined in the Unit 2 Credit Agreement, amending and restating the Assignment and Security Agreement among such parties dated as of October 1, 1988 (Exhibit 10(r) to Form 10-K for the year ended December 31, 1991, File No. 2- 97230). 10(q) - Assignment and Security Agreement, dated as of October 1, 1988, executed by the Utility in favor of the Unit 2 Agent for the benefit of the Secured Parties, as defined therein (Exhibit 10(jjj) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). 10(r) - Subordination Agreement, dated as of October 1, 1988, among the Utility, Continental Illinois National Bank and Trust Company of Chicago and the Unit 2 Agent (Exhibit 10(mmm) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). 10(s) - Mortgage and Deed of Trust (With Security Agreement and UCC Financing Statement for Fixture Filing), dated to be effective as of October 1, 1988, and executed by Texas PFC, Inc., as Mortgagor, to Donald H. Snell, as Mortgage Trustee, for the benefit of the Secured Parties, as defined therein (Exhibit 10(uuu) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). 10(s)1 - First TGCII Modification and Extension Agreement, dated as of January 24, 1992, among the Unit 2 Banks, the Unit 2 Agent, the Utility and TGCII (Exhibit 10(u)1 to Form 10-K for the year ended December 31, 1991, File No. 2-97230). 10(s)2 - Second TGCII Modification and Extension Agreement, dated as of January 27, 1992, among the Unit 2 Banks, the Unit 2 Agent, the Utility and TGCII (Exhibit 10(u)2 to Form 10-K for the year ended December 31, 1991, File No. 2-97230). TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Exhibit No. Description 10(s)3 - Third TGCII Modification and Extension Agreement, dated as of January 27, 1992, among the Unit 2 Banks, the Unit 2 Agent, the Utility and TGCII (Exhibit 10(u)3 to Form 10-K for the year ended December 31, 1991, File No. 2-97230). *10(s)4 - Fourth TGCII Modification and Extension Agreement, dated as of September 29, 1993, among the Unit 2 Banks, the Unit 2 Agent, the Utility and TGCII. 10(t) - Release and Waiver of Liens and Indemnity Agreement, made effective as of the 1st day of October, 1988, by a consortium composed of Westinghouse, CE, and Zachry (Exhibit 10(vvv) to Form 10-K for the year ended December 31, 1988, File No. 2- 97230). 10(u) - Second Lien Mortgage and Deed of Trust (With Security Agreement), dated as of October 1, 1988, and executed by the Utility, as Mortgagor, to Donald H. Snell, as Mortgage Trustee, for the benefit of the Secured Parties, as defined therein (Exhibit 10(www) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). 10(u)1 - Second Lien Mortgage and Deed of Trust (with Security Agreement) Modification, Extension and Amendment Agreement, dated as of January 8, 1992, executed by the Utility to Donald H. Snell, as Mortgage Trustee, for the benefit of the Secured Parties, as defined therein (Exhibit 10(w)1 to Form 10-K for the year ended December 31, 1991, File No. 2-97230). *10(u)2 - TNP Second Lien Mortgage Modification No. 2, dated as of September 21, 1993, executed by the Utility to Donald H. Snell, as Mortgage Trustee, for the benefit of the Secured Parties, as defined therein. 10(v) - Intercreditor and Nondisturbance Agreement, dated as of October 1, 1988, among PFC, Texas PFC, Inc., the Utility, the Project Creditors, as defined therein, and the Collateral Agent, as defined therein (Exhibit 10(xxx) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). 10(v)1 - Amendment #1, dated as of January 8, 1992, to the Intercreditor and Nondisturbance Agreement, dated as of October 1, 1988, among TGC, TGCII, the Utility, the Unit 1 Banks, the Unit 2 Banks and The Chase Manhattan Bank (National Association) in its capacity as collateral agent for the Unit 1 Banks and the Unit 2 Banks (Exhibit 10(x)1 to Form 10-K for the year ended December 31, 1991, File No. 2-97230). *10(v)2 - Amendment No. 2, dated as of September 21, 1993, to the Intercreditor and Nondisturbance Agreement, among TGC, TGCII, the Utility, the Unit 1 Banks, the Unit 2 Banks and The Chase Manhattan Bank (National Association) in its capacity as collateral agent for the Unit 1 Banks and the Unit 2 Banks. 10(w) - Grant of Reciprocal Easements and Declaration of Covenants Running with the Land, dated as of the 1st day of October, 1988 between PFC and Texas PFC, Inc. (Exhibit 10(yyy) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). 10(x) - Non-Partition Agreement, dated as of May 30, 1990, among the Utility, TGC and The Chase Manhattan Bank (National Association), as Agent for the Banks which are parties to the Unit 1 Credit Agreement (Exhibit 10(ss) to Form 10-K for the year ended December 31, 1990, File No. 2-97230). TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Exhibit No. Description 10(y) - Assumption Agreement, dated July 26, 1991, to be effective as of May 31, 1991, by TGCII in favor of the Issuing Bank, the Unit 2 Banks, the Unit 2 Agent and the Depositary, as defined therein (Exhibit 10(kkk) to Amendment No. 1 to File No. 33- 41903). 10(z) - Guaranty, dated July 26, 1991, to be effective as of May 31, 1991, by the Utility and given in respect of the TGCII obligations under the Unit 2 Credit Agreement (Exhibit 10(lll) to Amendment No. 1 to File No. 33-41903). 10(aa) - First Amended and Restated Facility Purchase Agreement, dated as of January 8, 1992, among the Utility, as the Purchaser, and TGCII, as the Seller, amending and restating the Facility Purchase Agreement among such parties dated July 26, 1991, to be effective as of May 31, 1991 (Exhibit 10(dd) to Form 10-K for the year ended December 31, 1991, File No. 2-97230). *10(aa)1 - Amendment No. 1 to the Unit 2 First Amended and Restated Facility Purchase Agreement, dated as of September 21, 1993, among the Utility, as the Purchaser, and TGCII, as the Seller. 10(bb) - Operating Agreement, dated July 26, 1991, to be effective as of May 31, 1991, between the Utility and TGCII (Exhibit 10(nnn) to Amendment No. 1 to File No. 33-41903). 10(cc) - Non-Partition Agreement, executed July 26, 1991, to be effective as of May 31, 1991, among the Utility, TGCII and The Chase Manhattan Bank (National Association) (Exhibit 10(ppp) to Amendment No. 1 to File No. 33-41903). Power Supply Contracts 10(dd) - Contract dated May 12, 1976 between the Utility and Houston Lighting & Power Company (Exhibit 5(a), File No. 2-69353). 10(dd)1 - Amendment, dated January 4, 1989, to the Contract dated May 12, 1976 between the Utility and Houston Lighting & Power Company (Exhibit 10(cccc) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). 10(ee) - Contract dated May 1, 1986 between the Utility and Texas Electric Utilities Company, amended September 29, 1986, October 24, 1986 and February 21, 1987 (Exhibit 10(c) of Form 8 applicable to Form 10-K for the year ended December 31, 1986, File No. 2-97230). 10(ff) - Amended and Restated Agreement for Electric Service dated May 14, 1990 between the Utility and Texas Utilities Electric Company (Exhibit 10(vv) to Form 10-K for the year ended December 31, 1990, File No. 2-97230). 10(ff)1 - Amendment, dated April 19, 1993, to Amended and Restated Agreement for Electric Service, dated May 14, 1990, As Amended between the Utility and Texas Utilities Electric Company (Exhibit 10(ii)1 to Form S-2 Registration Statement, filed on July 19, 1993, File No. 33-66232). 10(gg) - Contract dated June 11, 1984 between the Utility and Southwestern Public Service Company (Exhibit 10(d) of Form 8 applicable to Form 10-K for the year ended December 31, 1986, File No. 2-97230). TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Exhibit No. Description 10(hh) - Contract dated April 27, 1977 between the Utility and West Texas Utilities Company amended April 14, 1982, April 19, 1983, May 18, 1984 and October 21, 1985 (Exhibit 10(e) of Form 8 applicable to Form 10-K for the year ended December 31, 1986, File No. 2-97230). 10(ii) - Contract dated April 29, 1987 between the Utility and El Paso Electric Company (Exhibit 10(f) of Form 8 applicable to Form 10-K for the year ended December 31, 1986, File No. 2-97230). 10(jj) - Contract dated February 28, 1974, amended May 13, 1974, November 26, 1975, August 26, 1976 and October 7, 1980 between the Utility and Public Service Company of New Mexico (Exhibit 10(g) of Form 8 applicable to Form 10-K for the year ended December 31, 1986, File No. 2-97230). 10(jj)1 - Amendment, dated February 22, 1982, to the Contract dated February 28, 1974, amended May 13, 1974, November 26, 1975, August 26, 1976, and October 7, 1980 between the Utility and Public Service Company of New Mexico (Exhibit 10(iiii) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). 10(jj)2 - Amendment, dated February 8, 1988, to the Contract dated February 28, 1974, amended May 13, 1974, November 26, 1975, August 26, 1976, and October 7, 1980 between the Utility and Public Service Company of New Mexico (Exhibit 10(jjjj) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). 10(jj)3 - Amended and Restated Contract for Electric Service, dated April 29, 1988, between the Utility and Public Service Company of New Mexico (Exhibit 10(zz)3 to Amendment No. 1 to File No. 33- 41903). 10(kk) - Contract dated December 8, 1981 between the Utility and Southwestern Public Service Company amended December 12, 1984, December 2, 1985 and December 19, 1986 (Exhibit 10(h) of Form 8 applicable to Form 10-K for the year ended December 31, 1986, File No. 2-97230). 10(kk)1 - Amendment, dated December 12, 1988, to the Contract dated December 8, 1981 between the Utility and Southwestern Public Service Company amended December 12, 1984, December 2, 1985 and December 19, 1986 (Exhibit 10(llll) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). 10(kk)2 - Amendment, dated December 12, 1990, to the Contract dated December 8, 1981 between the Utility and Southwestern Public Service Company (Exhibit 19(t) to Form 10-K for the year ended December 31, 1990, File No. 2-97230). 10(ll) - Contract dated August 31, 1983, between the Utility and Capitol Cogeneration Company, Ltd. (including letter agreement dated August 14, 1986) (Exhibit 10(i) of Form 8 applicable to Form 10-K for the year ended December 31, 1986, File No. 2-97230). 10(ll)1 - Agreement Substituting a Party, dated May 3, 1988, among Capitol Cogeneration Company, Ltd., Clear Lake Cogeneration Limited Partnership and the Utility (Exhibit 10(nnnn) to Form 10-K for the year ended December 31, 1988, File No. 2-97230). TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Exhibit No. Description 10(ll)2 - Letter Agreements, dated May 30, 1990 and August 28, 1991, between Clear Lake Cogeneration Limited Partnership and the Utility (Exhibit 10(oo)2 to Form 10-K for the year ended December 31, 1992, File No. 2-97230). 10(ll)3 - Notice of Extension Letter, dated August 31, 1992, between Clear Lake Cogeneration Limited Partnership and the Utility (Exhibit 10(oo)3 to Form 10-K for the year ended December 31, 1992, File No. 2-97230). 10(ll)4 - Scheduling Agreement, dated September 15, 1992, between Clear Lake Cogeneration Limited Partnership and the Utility (Exhibit 10(oo)4 to Form 10-K for the year ended December 31, 1992, File No. 2-97230). 10(mm) - Interconnection Agreement between the Utility and Plains Electric Generation and Transmission Cooperative, Inc. dated July 19, 1984 (Exhibit 10(j) of Form 8 applicable to Form 10-K for the year ended December 31, 1986, File No. 2-97230). 10(nn) - Interchange Agreement between the Utility and El Paso Electric Company dated April 29, 1987 (Exhibit 10(l) of Form 8 applicable to Form 10-K for the year ended December 31, 1986, File No. 2-97230). 10(oo) - DC Terminal Participation Agreement between the Utility and El Paso Electric Company dated December 8, 1981 amended April 29, 1987 (Exhibit 10(m) of Form 8 applicable to Form 10-K for the year ended December 31, 1986, File No. 2-97230). Employment Contracts *10(pp) - Texas-New Mexico Power Company Executive Agreement for Severance Compensation Upon Change in Control, executed November 11, 1993, between Sector Vice President and Chief Financial Officer and the Utility (Pursuant to Instruction 2 of Reg. 229.601(a), accompanying this document is a schedule: (i) identifying documents substantially identical to the document which have been omitted from the Exhibits; and (ii) setting forth the material details in which such omitted documents differ from the document). *10(qq) - Texas-New Mexico Power Company Key Employee Agreement for Severance Compensation Upon Change in Control, executed November 11, 1993, between Assistant Treasurer and the Utility (Pursuant to Instruction 2 of Reg. 229.601(a), accompanying this document is a schedule: (i) identifying documents substantially identical to the document which have been omitted from the Exhibits; and (ii) setting forth the material details in which such omitted documents differ from the document). *10(rr) - Agreement between James M. Tarpley and TNPE and the Utility, effective January 1, 1994. *10(ss) - Agreement between Dwight R. Spurlock and TNPE and the Utility, effective November 9, 1993. *21 - Subsidiaries of the Registrant. EX-21 2 EXHIBIT 21 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES SUBSIDIARIES OF REGISTRANT Exhibit 21 Name State of Incorporation Texas Generating Company Texas Texas Generating Company II Texas EX-3 3 EXHIBIT 3(CC) [FILED In the Office of the Secretary of State of Texas Apr 08 1993 Corporation Section] TEXAS-NEW MEXICO POWER COMPANY STATEMENT OF CANCELLATION BY PURCHASE OF REDEEMABLE SHARES To the Secretary of State of the State of Texas: Pursuant to the provisions of Article 4.10 of the Texas Business Corporation Act, Texas-New Mexico Power Company, the undersigned corporation, submits the following Statement of Cancellation by Purchase of Redeemable Shares of the corporation: 1. The name of the corporation is TEXAS-NEW MEXICO POWER COMPANY. 2. The number of redeemable shares cancelled through purchase is 3,000 itemized as follows:
Number Class Series of Shares 11.00% Cumulative Preferred Stock D 1,200 11.00% Cumulative Preferred Stock E 600 11.00% Cumulative Preferred Stock F 1,200
3. The aggregate number of issued shares of the corporation after giving effect to such cancellation is 112,105 itemized as follows:
Number Class Series of Shares Common Stock 10,705 4.65% Cumulative Preferred Stock B 13,200 (First Closing) 4.65% Cumulative Preferred Stock B 13,200 (Second Closing) 4.75% Cumulative Preferred Stock C 15,000 11.00% Cumulative Preferred Stock D 3,200 11.00% Cumulative Preferred Stock E 1,600 11.00% Cumulative Preferred Stock F 3,200 11.875% Cumulative Preferred Stock G 52,000
4. The amount of stated capital of the corporation after giving effect to such cancellation is $10,247,050. 5. The Restated Articles of Incorporation filed on August 19, 1983 (Statements of Resolution filed on August 16, 1963, October 10, 1963, August 3, 1965, April 29, 1975, and June 10, 1983) provide that if shares of any series of preferred stock are purchased or redeemed pursuant to such Restated Articles of Incorporation, the shares so purchased or redeemed shall be cancelled and shall not be reissued as shares of the same series. The number of shares which the corporation has authority to issue after giving effect to the cancellation is 13,000,000, itemized as follows:
Number Class of Shares Common Stock 12,000,000 Preferred Stock 1,000,000
6. The number of shares of preferred stock which the corporation has authority to issue after giving effect to the cancellation is itemized as to series as follows:
Number Class Series of Shares 4.65% Cumulative Preferred Stock B 13,200 (First Closing) 4.65% Cumulative Preferred Stock B 13,200 (Second Closing) 4.75% Cumulative Preferred Stock C 15,000 11.00% Cumulative Preferred Stock D 3,200 11.00% Cumulative Preferred Stock E 1,600 11.00% Cumulative Preferred Stock F 3,200 11.875% Cumulative Preferred Stock G 52,000 Authorized but unissued preferred stock 898,600 DATED: April 7, 1993 TEXAS-NEW MEXICO POWER COMPANY By \s\ D. R. Barnard Its Sector Vice President By \s\ Michael D. Blanchard Its Secretary THE STATE OF TEXAS COUNTY OF TARRANT I, B. Jan Adkins, a notary public, do hereby certify that on this 7th day of April, 1993, personally appeared before me D. R. BARNARD, who being by me first duly sworn, declared that he is the Sector Vice President of TEXAS-NEW MEXICO POWER COMPANY, that he signed the foregoing document as Sector Vice President of the corporation, and that statements therein contained are true. \s\ B.Jan Adkins Notary Public B. JAN ADKINS My Commission Expires: June 30, 1996
EX-3 4 EXHIBIT 3(DD) TEXAS-NEW MEXICO POWER COMPANY STATEMENT OF CANCELLATION BY PURCHASE OF REDEEMABLE SHARES To the Secretary of State of the State of Texas: Pursuant to the provisions of Article 4.10 of the Texas Business Corporation Act, Texas-New Mexico Power Company, the undersigned corporation, submits the following Statement of Cancellation by Purchase of Redeemable Shares of the corporation: 1. The name of the corporation is TEXAS-NEW MEXICO POWER COMPANY. 2. The number of redeemable shares cancelled through purchase is 4,000 itemized as follows:
Number Class Series of Shares 11.875% Cumulative Preferred Stock G 4,000
3. The aggregate number of issued shares of the corporation after giving effect to such cancellation is 108,105 itemized as follows:
Number Class Series of Shares Common Stock 10,705 4.65% Cumulative Preferred Stock B 13,200 (First Closing) 4.65% Cumulative Preferred Stock B 13,200 (Second Closing) 4.75% Cumulative Preferred Stock C 15,000 11.00% Cumulative Preferred Stock D 3,200 11.00% Cumulative Preferred Stock E 1,600 11.00% Cumulative Preferred Stock F 3,200 11.875% Cumulative Preferred Stock G 48,000
4. The amount of stated capital of the corporation after giving effect to such cancellation is $9,847,050. 5. The Restated Articles of Incorporation filed on August 19, 1983 (Statements of Resolution filed on August 16, 1963, October 10, 1963, August 3, 1965, April 29, 1975, and June 10, 1983) provide that if shares of any series of preferred stock are purchased or redeemed pursuant to such Restated Articles of Incorporation, the shares so purchased or redeemed shall be cancelled and shall not be reissued as shares of the same series. The number of shares which the corporation has authority to issue after giving effect to the cancellation is 13,000,000, itemized as follows: Number Class of Shares Common Stock 12,000,000 Preferred Stock 1,000,000 6. The number of shares of preferred stock which the corporation has authority to issue after giving effect to the cancellation is itemized as to series as follows:
Number Class Series of Shares 4.65% Cumulative Preferred Stock B 13,200 (First Closing) 4.65% Cumulative Preferred Stock B 13,200 (Second Closing) 4.75% Cumulative Preferred Stock C 15,000 11.00% Cumulative Preferred Stock D 3,200 11.00% Cumulative Preferred Stock E 1,600 11.00% Cumulative Preferred Stock F 3,200 11.875% Cumulative Preferred Stock G 48,000 Authorized but unissued preferred stock 902,600
DATED: July 22, 1993 TEXAS-NEW MEXICO POWER COMPANY By \s\ D. R. Barnard Its Sector Vice President By \s\ Michael D. Blanchard Its Secretary THE STATE OF TEXAS COUNTY OF TARRANT I, B. Jan Adkins, a notary public, do hereby certify that on this 22nd day of July, 1993, personally appeared before me D. R. BARNARD, who being by me first duly sworn, declared that he is the Sector Vice President of TEXAS-NEW MEXICO POWER COMPANY, that he signed the foregoing document as Sector Vice President of the corporation, and that the statements therein contained are true. \s\ B. Jan Adkins Notary Public B. JAN ADKINS My Commission Expires: June 30, 1996 EX-4 5 EXHIBIT 4(R) [CONFORMED COPY] This Instrument Contains After-Acquired Property Provisions. This Instrument Grants a Security Interest by a Utility. Texas-New Mexico Power Company (Formerly COMMUNITY PUBLIC SERVICE COMPANY) TO CONTINENTAL BANK, NATIONAL ASSOCIATION (Formerly CONFIDENTIAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO) Trustee. Twenty-Third Supplemental Indenture Dated as of September 15, 1993 Supplemental to and Modifying Indenture of Mortgage and Deed of Trust Dated as of November 1. 1944 (as supplemented and modified) This Instrument Contains After-Acquired Property Provisions. This Instrument Grants a Security Interest by a Utility. This is a Security Agreement granting a Security Interest in Chattels including Chattels affixed to Realty as well as a Mortgage upon Real Estate and Other Property. THIS TWENTY-THIRD SUPPLEMENTAL INDENTURE, dated as of September 15, 1993, between Texas-New Mexico Power Company (formerly Community Public Service Company), as debtor, a Texas corporation (hereinafter sometimes called the "Company"), whose mailing address and address of its principal place of business is 4100 International Plaza, P.O. Box 2943, Fort Worth, Texas 76113, party of the first part, and Continental Bank, National Association (formerly Continental Illinois National Bank and Trust Company of Chicago), as Trustee and Secured Party, a national banking association having its principal place of business and mailing address at 231 South LaSalle Street, Chicago, Illinois 60697 (hereinafter sometimes called the "Trustee"), party of the second part: WHEREAS, Community Public Service Company, a Delaware corporation (hereinafter sometimes called the "Predecessor Company"), has heretofore executed and delivered to the City National Bank and Trust Company of Chicago (hereinafter sometimes called the "Predecessor Trustee"), an Indenture of Mortgage and Deed of Trust dated as of November 1, 1944 (hereinafter sometimes called the "Original Indenture"), to secure as provided therein, its bonds (in the Original Indenture and herein called the "Bonds") to be designated generally as its "First Mortgage Bonds" and to be issued in one or more series as provided in the Original Indenture; and WHEREAS, the Predecessor Company has heretofore executed and delivered to the Predecessor Trustee six indentures supplemental to the Original Indenture, which supplemental indentures were dated as of March 1, 1947, January 1, 1949, January 1, 1952, March 1, 1954, June 1, 1957 and June 1, 1961, respectively; and 2 WHEREAS, simultaneously with the merger of the Predecessor Company into the Company, the Company has heretofore executed and delivered a Seventh Supplemental Indenture, dated as of May 1, 1963, to Continental Illinois National Bank and Trust Company of Chicago (into which on September 1, 1961, said Predecessor Trustee was merged), as Trustee; and WHEREAS, the Company has heretofore executed and delivered to the Trustee an Eighth Supplemental Indenture dated as of July 1, 1963; a Ninth Supplemental Indenture dated as of August 1, 1965; a Tenth Supplemental Indenture dated as of May 1, 1966; an Eleventh Supplemental Indenture dated as of October 1, 1969; a Twelfth Supplemental Indenture dated as of May 1, 1971; a Thirteenth Supplemental Indenture dated as of July 1, 1974; a Fourteenth Supplemental Indenture dated as of March 1, 1975; a Fifteenth Supplemental Indenture dated as of September 1, 1976; a Sixteenth Supplemental Indenture dated as of November 1, 1981; a Seventeenth Supplemental Indenture dated as of December 1, 1982; an Eighteenth Supplemental Indenture dated as of September 1, 1983; a Nineteenth Supplemental Indenture dated as of May 1, 1985; a Twentieth Supplemental Indenture dated as of July 1, 1987; a Twenty-First Supplemental Indenture dated as of July 1, 1989; and a Twenty-Second Supplemental Indenture dated as of January 15, 1992; and WHEREAS, pursuant to the Original Indenture, as heretofore supplemented and modified, there have been executed, authenticated, delivered and issued and there are now outstanding First Mortgage Bonds of series and in principal amounts as follows: Title Issued Outstanding Series L, 10 1/2% due 2000..... $ 12,000,000 $ 9,840,000 Series M, 8.70% due 2006..... $ 10,000,000 $ 8,400,000 Series R, 10% due 2017....... $ 65,000,000 $ 63,700,000 Series S, 9 5/8% due 2019....... $ 20,000,000 $ 20,000,000 Series T, 11 1/4% due 1997..... $130,000,000 $ 130,000,000 and 3 WHEREAS, it is provided in the Original Indenture, among other things, that the Company and the Trustee may, and when so required by the Original Indenture shall, enter into such indentures supple- mental thereto as may or shall by them be deemed necessary or desirable and which shall thereafter form a part thereof for the purposes, among others, of (a) subjecting to the lien of the Original Indenture additional property acquired by the Company, (b) providing for the creation of any new series of Bonds, designating the series to be created and specifying the form and provisions of the Bonds of such series, (c) providing for a sinking, amortization, improvement or other analogous fund for the benefit of all or any of the Bonds of any one or more series, of such character and of such amount and upon such terms and conditions as shall be contained in such supplemental indenture; and (d) providing for modifications in the Original Indenture, subject to certain conditions; and WHEREAS, the Company desires to create under the Original Indenture a new series of Bonds to be designated First Mortgage Bonds, Series U, 9 1/4% due 2000, to be due September 15, 2000 (hereinafter sometimes called the "Bonds of Series U") to be initially issued in the aggregate principal amount of One Hundred Million Dollars ($100,000,000); and WHEREAS, the Company is required to execute this Twenty-Third Supplemental Indenture and hereby requests the Trustee to join in this Twenty-Third Supplemental Indenture for the purpose, among others, of creating and describing the terms of the Bonds of Series U and subjecting to the lien of the Original Indenture, as supplemented and modified, additional property acquired by the Company since the execution and delivery of the Twenty-Second Supplemental Indenture dated as of January 15, 1992 (the Original Indenture as hereto- fore supplemented and modified and as supplemented and modified by this Twenty-Third Supplemental Indenture being herein some- times called the "Indenture"); and WHEREAS, all acts and proceedings required by law and by the Restated Articles of Incorporation and By-Laws of the Company necessary to make the Bonds of Series U, when executed by the Company, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal obligations of the Company, and 4 to constitute the Indenture a valid and binding mortgage for the security of all of the Bonds in accordance with its and their terms, have been done and taken; and the execution and delivery of this Twenty-Third Supplemental Indenture have been in an respects duly authorized. NOW, THEREFORE, THIS TWENTY-THIRD SUPPLEMENTAL INDENTURE WITNESSETH, that, in order to secure the payment of the principal of, premium, if any, and interest on all Bonds at any time issued and outstanding under the Indenture, according to their tenor, purport and effect, to expressly subject to the lien of the Indenture additional property acquired by the Company since the date of execution and delivery of the Twenty-Second Supplemental Indenture dated as of January 15, 1992, to the Original Indenture, and to secure the performance and observance of all the covenants and conditions contained in said Bonds and in the Indenture, and to declare the terms and conditions upon and subject to which the Bonds of Series U are and are to be issued and secured, and for the purpose of confirming the lien of the Original Indenture, as heretofore supplemented and modified, and for and in consideration of the premises and of the mutual covenants contained in the Indenture and of the purchase and acceptance of the Bonds of Series U by the holders thereof, and of the sum of $1 to the Company paid by the Trustee at or before the ensealing and delivery hereof, and for other valuable considerations, the receipt whereof is hereby acknowledged, the Company has executed and delivered this Twenty-Third Supplemental Indenture, and by these presents does grant, bargain, sell, convey, assign, transfer, mortgage, pledge, hypothecate, set over and confirm unto the Trustee, the following property, rights, privileges and franchises, to wit: CLAUSE I. All the property, real, personal or mixed, tangible or intangible (other than Excepted Property as defined in the Granting Clauses of the Original Indenture) of every kind, character and description which is described in Article Eight hereof. 5 CLAUSE II. Without in any way limiting anything in Article Eight hereof or hereinafter described, all and singular the lands, real estate, chattels real, interests in lands, leaseholds, ways, rights-of-way, easements, servitudes, permits and licenses, lands under water, riparian rights, franchises, privileges, gas or electric generating plants, natural gas plants, gas storage plants and facilities, gas or electric transmission and distribution systems, gas gathering systems and tap lines, and all apparatus and equipment appertaining thereto, offices, buildings, warehouses and other structures, machine shops, tools, materials and supplies and all property of any nature appertaining to any of the plants, systems, business or operations of the Company, whether or not affixed to the realty, used in the operation of any of the premises or plants or systems or otherwise, which are now owned or which may hereafter be owned or acquired by the Company, other than Excepted Property as defined in the Granting Clauses of the Original Indenture. CLAUSE III. All corporate, Federal, State, municipal and other permits, consents, licenses, bridge licenses, bridge rights, river permits, franchises, including those described in Article Eight hereof, grants, privileges and immunities of every kind and description, now belonging to or which may hereafter be owned, held, possessed or enjoyed by the Company (other than Excepted Property as defined in the Granting Clauses of the Original Indenture) and all renewals, extensions, enlargements and modifications of any of them. CLAUSE IV. Also all other property, real, personal or mixed, tangible or intangible (other than Excepted Property as defined in the Granting Clauses of the Original Indenture) of every kind, character and description and wheresoever situated, whether or not useful in the generation, manufacture, production, transportation, distribution or sale of gas or electricity, now owned or which may hereafter be acquired by the Company, it being the intention hereof that all property, rights and franchises acquired by the Company after the 6 date hereof (other than Excepted Property as defined in the Granting Clauses of the Original Indenture) shall be as fully embraced within and subjected to the lien hereof as if such property were now owned by the Company and were specifically described herein and conveyed hereby. CLAUSE V. Together with all and singular the plants, buildings, improvements, additions, tenements, hereditaments, easements, rights, privileges, licenses and franchises and all other, appurtenances whatsoever belonging or in anywise appertaining to any of the property hereby mortgaged or pledged, or intended so to be, or any part thereof, and the reversion and reversions, remainder and remainders, and the rents, revenues, issues, earnings, income, products and profits thereof, and of every part and parcel thereof, and all the estate, right, title, interest, property, claim and demand of every nature whatsoever of the Company at law, in equity or otherwise howsoever, in, of and to such property and every part and parcel thereof. CLAUSE VI. Also any and all property, real, personal, or mixed (including Excepted Property as defined in the Granting Clauses of the Original Indenture), that may, from time to time hereafter, by delivery or by writing of any kind, for the purpose hereof be in anywise subjected to the lien hereof or be expressly conveyed, mortgaged, assigned, transferred, deposited and/or pledged by the Company or by anyone in its behalf or with its consent, to and with the Trustee, which is hereby authorized to receive the same at any and all times as and for additional security and also, when and as in the Indenture provided, as substituted security hereunder, to the extent permitted by law. Such conveyance, mortgage, assignment, transfer, deposit and/or pledge or other creation of lien by the Company or by anyone in its behalf or with its consent of or upon any property as and for additional security may be made subject to any reservations, limitations, conditions and provisions which shall be set forth in an instrument or agreement in writing executed by the Company or the person or corporation conveying, assigning, mortgaging, transfer- 7 ring, depositing and/or pledging the same and/or by the Trustee, respecting the use, management and disposition of the property so conveyed, assigned, mortgaged, transferred, deposited and/or pledged, or the proceeds thereof. EXCEPTED PROPERTY There is, however, expressly excepted and excluded from the lien and operation of the Indenture all property specifically excepted under the heading "Excepted Property" of the Granting Clauses of the Original Indenture, all property released or otherwise disposed of pursuant to the provisions of Article Seven of the Original Indenture and all property excepted in the descriptions contained in Article Eight hereof. The Company may, however, pursuant to the provisions of Granting Clause VI above, subject to the lien and operation of the Indenture, all or any part of the Excepted Property as defined in the Granting Clauses of the Original Indenture. TO HAVE AND TO HOLD the Trust Estate (as defined in Paragraph A of Section 1.06 of the Original Indenture) and all and singular the lands, properties, estates, rights, franchises, privileges and appurtenances hereby mortgaged, conveyed, pledged or assigned, or in- tended so to be, together with all the appurtenances thereto appertaining, unto the Trustee and its successors and assigns, forever: SUBJECT, HOWEVER, to the exceptions, reservations, restrictions, conditions, limitations, covenants and matters recited in Article Eight hereof; to Permitted Encumbrances as defined in Paragraph G of Section 1.07 of the Original Indenture; and, with respect to any property which the Company may hereafter acquire, to all terms, conditions, agreements, covenants, exceptions and reservations ex- pressed or provided in the deeds or other instruments, respectively, under and by virtue of which the Company shall hereafter acquire the same and to any liens thereon existing, and to any liens for unpaid portions of the purchase money placed thereon, at the time of such acquisitions; BUT IN TRUST, NEVERTHELESS, for the equal and proportionate use, benefit, security and protection of those who from time to time shall 8 hold the Bonds and coupons authenticated and delivered under the Indenture and duly issued by the Company, without any discrimination, preference or priority of any one Bond or coupon over any other by reason of priority in the time of issue, sale or negotiation thereof or otherwise, except as provided in Section 10.02 of the Original Indenture, so that, subject to said Section 10.02 of the Original Indenture, each and all of said Bonds and coupons shall have the same right, lien and privilege under the Original Indenture, as heretofore supplemented and as supplemented by this Twenty-Third Supplemental Indenture, and shall be equally secured thereby and hereby and shall have the same proportionate interest and share in the Trust Estate, with the same effect as if all of the Bonds and coupons had been issued, sold and negotiated simultaneously on the date of the delivery hereof; and in trust for enforcing payment of the principal of the Bonds and of the premium, if any, and interest thereon, according to the tenor, purport and effect of the Bonds and coupons and of the Indenture, and for enforcing the terms, provisions, covenants and stipulations in the Indenture and in the Bonds set forth; UPON CONDITION that, until the happening of an Event of Default (as defined in Section 14.01 of the Original Indenture), the Company shall be suffered and permitted to possess, use and enjoy the Trust Estate, except money, securities and other personal property pledged or deposited with or required to be pledged or deposited with the Trustee under the Indenture, and to receive and use the rents, revenues, issues, earnings, income, products and profits therefrom: ARTICLE ONE. BONDS OF SERIES U AND CERTAIN PROVISIONS RELATING THERETO. SECTION 1.01. Terms of Bonds of Series U. There shall be, and hereby is, created a new series of Bonds, known as and entitled "First Mortgage Bonds, Series U, 9 1/4% due 2000" (herein referred to as the "Bonds of Series U"), and the form thereof shall be substantially as hereinafter set forth in Section 1.02 hereof. The principal amount of the Bonds of Series U shall not be limited except as provided in Section 2.01 of the Original Indenture (as amended by Section 1.01 of the Thirteenth Supplemental Indenture dated as of 9 July 1, 1974) and except as may be provided in any indenture supplemental thereto. The definitive Bonds of Series U shall be issued only as registered Bonds without coupons of the denomination of $1,000 or any multiple thereof, and of such respective amounts of each of said denominations as may be executed by the Company and delivered to the Trustee for authentication and delivery. The definitive Bonds of Series U may be issued in the form of Bonds engraved, printed or lithographed on steel engraved borders. September 15, 1993 shall be the date of the commencement of the first interest period for Bonds of Series U. All Bonds of Series U shall mature September 15, 2000, and shall bear interest at the rate of 9 1/4% per annum until the principal thereof shall have become due and payable, such interest to be payable semiannually on March 15 and September 15 in each year commencing March 15, 1994. Both the principal of and the interest on the Bonds of Series U shall be payable, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, at the principal office of the Trustee in the City of Chicago, State of Illinois. Interest on Bonds of Series U shall be payable in each case to the holder of record on the record date as set forth below. The person in whose name any Bond of Series U is registered at the close of business on any record date (as hereinbelow defined) with respect to any interest payment date shall be entitled to receive the interest payable on such interest payment date notwithstanding the cancellation of such Bond of Series U upon any transfer or exchange thereof (including any exchange effected as an incident to a partial redemption thereof) subsequent to the record date and prior to such interest payment date, except that, if and to the extent that the Company shall default in the payment of the interest due on such interest payment date, then the registered holders of Bonds of Series U on such record date shall have no further right to or claim in respect of such defaulted interest as such registered holders on such record date, and the persons entitled to receive payment of any defaulted interest thereafter payable or paid on any Bonds of Series U shall be the registered holders of such Bonds of Series U on the record date for payment of such defaulted interest. The term "record 10 date" as used in this Section 1.01, and in the form of the Bonds of Series U, with respect to any interest payment date applicable to the Bonds of Series U, shall mean the March 1 next preceding a March 15 interest payment date or the September 1 next preceding a September 15 interest payment date, as the case may be (or the preceding business day if a holiday or other day on which the office of the Trustee is closed), or such record date established for defaulted interest as hereinafter provided. In case of failure by the Company, to pay any interest when due the claim for such interest shall be deemed to have been transferred by transfer of any Bond of Series U registered on the books of the Company and the Company, by not less than 10 days' written notice to bondholders, may fix a subsequent record date for determination of holders entitled to payment of such interest. Such provision for establishment of a subsequent record date, however, shall in no way affect the rights of bondholders or of the Trustee consequent on any default. Except as provided in this Section 1.01, every Bond of Series U shall be dated as provided in Section 2.05 of the Original Indenture. However, so long as there is no existing default in the payment of interest on the Bonds of Series U, all Bonds of Series U authenticated by the Trustee between the record date for any interest payment date and such interest payment date shall be dated such interest payment date and shall bear interest from such interest payment date; provided, however, that if the Company shall default in the interest due on such interest payment date, then any such Bond of Series U shall bear interest from the March 15 or September 15, as the case may be, to which interest has been paid, unless such interest payment date is March 15, 1994, in which case from September 15, 1993. Subject to the provisions of Section 2.11 of the Original Indenture, all definitive Bonds of Series U, upon surrender at the principal office of the Trustee, shall be exchangeable for other Bonds of Series U of a different denomination or denominations, as requested by the holder surrendering the same. The Company shall execute, and the Trustee shall authenticate and deliver, Bonds of Series U whenever the same shall be required for any such exchange. 11 Notwithstanding the provisions of Section 2.11 of the Original Indenture no charge shall be made for any exchange of Bonds of Series U for other Bonds of Series U of different authorized denominations or for any transfer of Bonds of Series U, except that the Company at its option may require the payment of a sum sufficient to reimburse it for any stamp tax or other governmental charge incident thereto. The Trustee hereunder shall, by virtue of its office as such Trustee, be a paying agent of the Company for the purpose of the payment of the principal of and premium, if any, and interest on the Bonds of Series U and the registrar and transfer agent of the Company for the purpose of registering and transferring Bonds of Series U. Neither the Company nor the Trustee shall be required to make transfers or exchanges of Bonds of Series U for a period of ten days next preceding the mailing of notice of redemption of Bonds of Series U to be redeemed and neither the Company nor the Trustee shall be required to make transfers or exchanges of any Bonds of Series U designated in whole for redemption or that part of any Bond of Series U designated in part for redemption. SECTION 1.02. Form of Bonds of Series U. The Bonds of Series U shall be in substantially the following form: [FORM OF BOND OF SERIES U] No. U $ TEXAS-NEW MEXICO POWER COMPANY FIRST MORTGAGE BOND, SERIES U, 9 1/4% DUE 2000 DUE SEPTEMBER 15, 2000 TEXAS-NEW MEXICO POWER COMPANY, a Texas corporation (hereinafter sometimes called the "Company"), for value received, hereby promises to pay to or registered assigns, Dollars on September 15, 2000, and to pay interest semiannually on March 15 and September 15 in each year, on the principal hereof from the date hereof until the principal hereof becomes due and payable, at the rate per annum specified in the title of this Bond, and on any overdue principal and (to the extent the payment of such interest is enforceable under applicable law) on any 12 overdue installment of interest at the rate of 6% per annum; provided, however, that if the Company shall default in the interest due on Bonds of this series on any interest payment date then Bonds of this series authenticated by the Trustee between the record date for such interest payment date and such interest payment date shall bear interest from the next preceding date to which interest has been paid on the Bonds of this series, or if no interest has been paid, from September 15, 1993. The interest so payable upon any March 15 or September 15 will, except as provided in the Indenture mentioned on the reverse hereof, be paid to the person in whose name this Bond (or any bond or bonds evidencing the same debt) is registered at the close of business on the March 1 preceding such March 15, or the September 1 preceding such September 15, as the case may be (or the preceding business day if a holiday or other day on which the office of the Trustee is closed). The principal hereof and interest hereon shall be payable, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, at the principal office of the Trustee under the Indenture mentioned on the reverse hereof. This Bond shall not become or be valid or obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Trustee. The provisions of this Bond are continued on the reverse hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. 13 IN WITNESS WHEREOF, TEXAS-NEW MEXICO POWER COMPANY has caused this Bond to be executed in its corporate name by the manual or facsimile signature of its President or one of its Vice Presidents and its corporate seal to be impressed or imprinted hereon, attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries, and this Bond to be dated TEXAS-NEW MEXICO POWER COMPANY, By ................................. President Attest: ......................................... Secretary (SEAL) [FORM OF REVERSE OF BOND OF SERIES U] This Bond is one of an authorized issue of Bonds of the Company known as its "First Mortgage Bonds", limited as provided in the Indenture hereinafter mentioned, issued and to be issued in one or more series under, and all equally and ratably secured (except as any sinking, amortization, improvement, renewal, replacement or other analogous fund established under the Indenture hereinafter mentioned, may afford additional security for the Bonds of any particular series) by an Indenture of Mortgage and Deed of Trust dated as of November 1, 1944, executed to City National Bank and Trust Company of Chicago, as to which Continental Illinois National Bank and Trust Company of Chicago (now Continental Bank, National Association) was successor by merger, as Trustee, as supplemented by twenty-three supplemental indentures thereto, including the Thirteenth, Fourteenth, Fifteenth, Sixteenth, Seventeenth, Eighteenth, Nineteenth, Twentieth, Twenty-First and Twenty-Second Supple- mental Indentures which also modified the Original Indenture and the Twenty-Third Supplemental Indenture dated as of September 15, 1993 (said Indenture of Mortgage and Deed of Trust, as so supplemented and modified, being herein called the "Indenture"), to which 14 Indenture and all indentures supplemental thereto reference is hereby made for a description of the properties mortgaged and pledged, the nature and extent of the security, the rights of the holders of the Bonds and the appurtenant coupons and of the Trustee and of the Company in respect of such security, and the terms and conditions upon which the Bonds are and are to be secured. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than seventy- five per cent in principal amount of the Bonds (exclusive of Bonds disqualified by reason of the Company's interest therein) at the time outstanding, including, if more than one series of Bonds shall be at the time outstanding, not less than sixty per cent in principal amount of each series affected, to execute supplemental indentures amending the Indenture; provided, however, that no such supplemental indenture shall extend the fixed maturity of this Bond or reduce the rate or extend the time of payment of interest hereon or reduce the amount of the principal hereof or reduce any premium payable on the redemption hereof, without the consent of the holder hereof. As provided in the Indenture, the Bonds are issuable in series which may vary as in the Indenture provided or permitted. This Bond is one of a series entitled "First Mortgage Bonds, Series U, 9 1/4% due 2000" (hereinafter called the "Bonds of Series U"). Bonds of this series may, upon surrender thereof at the principal office of the Trustee, be exchanged for several Bonds of the same series for a like aggregate principal amount in authorized denominations; and several Bonds of this series, registered in the same name, may, upon surrender thereof at said principal office of the Trustee, be exchanged for one Bond of the same series for a like aggregate principal amount in an authorized denomination. This Bond may be transferred at said principal office of the Trustee by surrendering this Bond for cancellation, accompanied by a written instrument of transfer, in form approved by the Company, duly executed by the registered owner hereof or by an attorney duly authorized in writing, and thereupon the Company shall execute in the name of the transferee or transferees, and the Trustee shall authenticate and deliver, in exchange therefor a new Bond of the same series for a like aggregate principal amount in authorized denominations. No charge 15 shall be made for any exchange of Bonds of this series for other Bonds of different authorized denominations or for any transfer of this Bond, except that the Company at its option may require the payment of a sum sufficient to reimburse it for any stamp tax or other governmental charge incidental thereto. The Company and the Trustee may deem and treat the person in whose name this Bond shall be registered as the absolute owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Bond shall be overdue; and all such payments shall be valid and effectual to satisfy and discharge the liability upon this Bond to the extent of the sum or sums so paid. If an event of default as defined in the Indenture shall occur, the principal of all the Bonds may become or be declared due and payable upon the conditions and in the manner and with the effect in the Indenture provided. The Bonds of Series U shall not be subject to redemption at the option of the Company prior to maturity. The Twenty-Third Supplemental Indenture provides that in the event of any default in payment of the interest due on any interest payment date, such interest shall not be payable to the holder of the bond on the original record date but shall be paid to the registered holder of such bond on the subsequent record date established for payment of such defaulted interest. No recourse shall be had for the payment of the principal of or the interest on this Bond or for any claim based hereon or otherwise in respect hereof or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, as such, past, present or future, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty, or other- wise, all such liability being by the acceptance hereof and as part of the consideration for the issue hereof expressly waived and released, as provided in the Indenture; provided, however, that nothing herein or in the Indenture contained shall be taken to prevent recourse to and the enforcement of the liability, if any, of any shareholder or 16 any stockholder or subscriber to capital stock upon or in respect of shares of capital stock not fully paid. ARTICLE TWO. REDEMPTION PROVISIONS FOR BONDS OF SERIES U. SECTION 2.01. The Bonds of Series U shall not be subject to redemption at the option of the Company prior to maturity. The Bonds of the Series U shall be subject to redemption, however, at any time prior to maturity, as a whole or from time to time in part, through the application of cash deposited with the Trustee pursuant to Section 7.04 of the Original Indenture, upon the taking, purchase or sale of property in the manner set forth in said Section 7.04. ARTICLE THREE. COVENANTS AS TO IMPROVEMENT FUND, MINIMUM PROVISION FOR DEPRECIATION, RESTRICTIONS ON CAPITAL STOCK DIVIDENDS, CHANGE OF CONTROL AND DURATION OF ARTICLES TWO AND THREE. SECTION 3.01. Improvement Fund. The covenants contained in Article Nine of the Original Indenture shall continue in full force and effect so long as any of the Bonds of Series U shall remain outstanding, except that the Company hereby covenants that no Bonds of Series U shall be redeemable prior to September 15, 2000 through the application of cash deposited in the Improvement Fund. Notwithstanding the provisions of Section 9.03 of the Original Indenture, so long as any of the Bonds of Series L, M, R, S, T or U shall remain outstanding, no Bond delivered or certified to the Trustee to meet the requirements of the Improvement Fund provided for in Section 9.01 of the Original Indenture or redeemed or otherwise retired pursuant to the provisions of said Section 9.01, shall be made the basis of the authentication and delivery of Bonds under Article Six of the Original Indenture unless and until such Bond shall, in the manner provided in said Section 9.01, be reinstated as available as the basis for the authentication and delivery of Bonds. SECTION 3.02. Definition of Term "Minimum Provision for Depreciation". The term "Minimum Provision for Depreciation" shall have the meaning set forth in Paragraph I of Section 1.07 of the 17 Original Indenture so long as any of the Bonds of Series U shall remain outstanding. SECTION 3.03. Restriction on Payment of Dividends on Com- mon Stock. Notwithstanding the provisions of Sections 4.03 and 4.04 of the Fourteenth Supplemental Indenture dated as of March 1, 1975 that the covenants contained in Section 4.03 thereof shall continue only so long as the First Mortgage Bonds, Series L, 10 1/2% due 2000 are outstanding, the Company hereby covenants that the covenants made by the Company in said Section 4.03 shall also continue so long as any Bonds of Series U shall remain outstanding. SECTION 3.04. Tender for the Bonds of Series U upon Change of Control Event. The Company covenants as follows: (a) Within 90 days after the occurrence of a Change of Control Event, as defined below, the Company shall commence a tender offer for all outstanding Bonds of Series U at a purchase price (the "Purchase Price") of 101% of the principal amount thereof plus accrued and unpaid interest to the date of purchase, in accordance with the procedures set forth in Subsections (b) and (c) of this Section. (b) Within 30 days following any Change of Control Event, the Company shall send a notice by first-class mail, postage prepaid, to the Trustee and to each holder of the Bonds of Series U, at his or her address appearing in the registry books of the Company. The notice shall state: (1) that a Change of Control Event has occurred and that the Company is obligated to tender for the Bonds of Series U as provided herein, at the Purchase Price; (2) the circumstances and relevant facts regarding the Change of Control Event (including but not limited to information with respect to pro forma historical income, cash flow and capitalization after giving effect to such Change of Control Event; provided that, to the extent the above-described information is required by Item 7 of Form 8-K, it need be sent only upon the filing with the Securities and Exchange Commission of the Form 8-K); 18 (3) information concerning the business of the Company which the Company in good faith believes will enable the holders of the Bonds of Series U to make an informed decision, which at a minimum will include (i) the most recently filed Annual Report on Form 10-K (including audited consolidated financial statements of the Company), the most recent subsequently filed Quarterly Report on Form 10-Q and any Current Report on Form 8-K of the Company filed subsequent to such Quarterly Report (or in the event the Company is not required to prepare any of the foregoing Forms, the comparable information), and (ii) a description of material developments in the Company's business subsequent to the date of the latest of such Reports; (4) the latest date for tender of the Bonds of Series U, which shall be not more than 30 days after the date of the commencement of the tender offer; (5) the Purchase Price; (6) information concerning acceptance of the tender offer; and (7) that interest accrued to the Purchase Date will be paid as provided in paragraph (a) of this Section and that, unless the Company shall default in payment of the Purchase Price, after the latest date of purchase, interest thereon will cease to accrue with respect to any Bonds of Series U presented and surrendered for purchase. The Trustee shall be under no obligation to ascertain the occurrence of a Change of Control Event or to give notice with respect thereto, other than as provided above, upon receipt of the written notice of Change of Control Event from the Company. The Trustee may conclusively assume, in the absence of written notice to the contrary from the Company, that no Change of Control Event has occurred. (c) Holders tendering Bonds of Series U will be required to do so in accordance with this Section by the close of business on the latest 19 date for tender of the Bonds of Series U. No such Bonds of Series U shall be deemed to have been presented and surrendered until such Bonds of Series U are received by the Company. Holders whose Bonds of Series U are purchased only in part will receive new Bonds of Series U equal in principal amount to the unpurchased portion of the Bonds of the Series U surrendered. (d) As used in this Section, a "Change of Control Event" means an event or the last of a series of events by which (i) any "person" or group of persons (as such term is used in Section 13(d) and 14(d) of the Exchange Act and the rules and regulations of the Securities and Exchange Commission relating to such sections, as amended from time to time), other than TNP Enterprises, Inc. ("TNPE") with respect to the shares of the Company, is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than forty percent (40%) of the total voting power of all outstanding Common Stock of TNPE or of the Company; (ii) the Company consolidates with or merges into another corporation (other than any such transaction between the Company and a wholly owned Subsidiary of the Company) and the Company is not the surviving entity, or the Company conveys, transfers or leases substantially all of its assets; (iii) TNPE or any subsidiary of TNPE, during any period of 12 consecutive months, purchases or otherwise acquires, directly or indirectly, beneficial ownership of 30% or more of the outstanding Common Stock of TNPE; (iv) during any period of 24 consecutive months, whether commencing before or after the date hereof, but ending on or after the date hereof, (a) individuals who at the beginning of such 24-month period constituted the board of directors of TNPE, and 20 (b) any new director(s) who were elected or recommended for election to the board of directors of TNPE by a vote of at least a majority of the directors then still in office who either were directors at the beginning of such 24-month period or whose election was previously so approved or so recommended, cease for any reason to constitute a majority of the board of directors of TNPE; or (v) on any day (a "Calculation Date"), the Company makes any distribution or distributions of cash, property or securities (other than regular quarterly dividends on common or preferred stock) to the common stockholders, or purchases or otherwise acquires outstanding common stock of TNPE, and the sum of the fair market value of such distribution or purchase, plus the fair market value of all other such distributions and purchases which have occurred during the period of 12 consecutive months ending on such Calculation Date, exceeds 30% of the fair market value of the outstanding common stock of TNPE. This percentage is calculated on each Calculation Date by deter- mining the percentage of the fair market value of TNPE's out- standing common stock as of such Calculation Date which is represented by the fair market value of the distributions and purchases which have occurred on such date, and adding to that percentage all of the percentages which have been similarly calculated on the dates of all such distributions and purchases during the period of 12 consecutive months ending on such Calculation Date. SECTION 3.05. Duration of Effectiveness of Certain Provisions. Article Two and Sections 3.02, 3.03 and 3.04 hereof shall be in force and effect only so long as any of the Bonds of Series U shall remain outstanding. Section 3.01 hereof shall be in force and effect only so long as any of the Bonds of Series L, M, R, S, T or U shall remain outstanding. ARTICLE FOUR. SECTION 4.01. Paragraph F of Section 1.05 of the Original In- denture is hereby amended by deleting from subparagraph (3) of Paragraph F the words "two and one-half times" and substituting in 21 place thereof the words "two times" and the acceptance of any Bond of Series U by the holder thereof shall be deemed to constitute a consent to such amendment; provided, however, that such amendment shall not become effective until (a) a further Supplemental Indenture making it effective shall have been executed with the consent of the holders of not less than 75% in principal amount of the Bonds of all Series, including the holders of not less than 60% in principal amount of the Bonds of each Series, at the time outstanding (determined as provided in Section 1.02 of the Original Indenture) other than Bonds of Series M, R, S, T or U and Bonds of any subsequent Series in respect of which the Supplemental Indenture creating the Series provides that the acceptance of any Bond of such Series by the holder thereof shall be deemed to constitute a consent to such amendment, or (b) none of the Bonds of any Series other than Series M, R, S, T or U and any such subsequent Series shall be outstanding. SECTION 4.02. Paragraphs C, D and F of Section 1.05 of the Original Indenture are hereby amended so that the same shall read as follows: "C. The term 'Net Earnings Available for Fixed Charges' of the Company for any period shall mean the net earnings of the Company for such period, determined in the following manner: (a) The gross operating revenues derived from the operation of the Public Utility Property (as defined in Paragraph A of Section 1.07) of the Company shall be computed for such period in accordance with sound accounting practice. (b) From the amount of such gross operating revenues for such period determined as provided in the preceding Clause (a) there shall be deducted an amount equal to the aggregate of all expenses and other proper income charges for such period attributable to the operation of Public Utility Property, determined in accordance with sound accounting practice, exclusive of the following items: (i) losses from the sale, abandonment or other disposition of capital assets; (ii) interest charges; 22 (iii) provision for income and excess profits or other taxes of the Company which are imposed on or measured by its income after deduction of interest charges; and (iv) 33 1/3% of rentals under leases with an initial term of three years or more payable during such period; provided that in any event (without in any respect limiting the generality of the foregoing) there shall be included in such expenses and other income charges the following items: (v) amortization of debt discount and expense and amortization of all other deferred charges provided that there may be deducted from any such amortization of debt discount any amortization of debt premium; (vi) provisions for all taxes other than taxes of the character described in item (iii) of this Clause (b); (vii) provision for all contingency or other reserves, whether general or special; (viii) provision for depreciation, obsolescence, amortization and/or depletion of the Public Utility Property of the Company in amounts in the aggregate not less than those actually deducted on its books, provided that such provision shall be in an aggregate amount not less than the Minimum Provision for Depreciation as defined in Paragraph I of Section 1.07; provided, however, that there may be included in the amount of Net Earnings Available for Fixed Charges an additional amount (not exceeding 18% of the amount of net earnings derived from the operation of Public Utility Property of the Company determined as provided above in this Paragraph C) equal to the net income of the Company for such period derived otherwise than from the operation of the Public Utility Property of the Company, determined in accordance with sound accounting practice, except that in determining such net income the following items shall be excluded: (i) any proceeds of any life insurance policy; 23 (ii) any gain or loss arising from any sale, abandonment or other disposition of capital assets, and any tax adjustment in connection therewith; and (iii) any amount repaid, refunded or credited to the Company, in respect of income or excess profits or other taxes of the Company, paid or accrued for any period, which are imposed on or measured by its income after the deduction of interest charges. "If within or after a particular period for which Net Earnings Available for Fixed Charges of the Company is being determined, the Company shall have acquired properties which within six months prior to such acquisition were used or operated in a business similar to that in which they were used or operated or are to be used or operated by the Company, then, in computing Net Earnings Avail- able for Fixed Charges of the Company, the Net Earnings Available for Fixed Charges of such properties for the whole of such period shall be included; provided, however, that in such event if within or after said period, any substantial portion of the properties of the Company shall have been disposed of by the Company, or shall have been permanently retired from service for any reason, or shall have permanently ceased to be used or useful in the business of the Company, and if the Net Earnings Available for Fixed Charges of such properties is capable of being separately determined in accordance with sound accounting practice, then in computing Net Earnings Available for Fixed Charges of the Company, the Net Earnings Available for Fixed Charges of such properties shall be excluded up to but not exceeding the amount included in the determination of Net Earnings Available for Fixed Charges by reason of properties acquired as provided in this sentence. The Net Earnings Available for Fixed Charges of properties so acquired for the period preceding such acquisition shall be ascertained and determined as provided above in this definition as if such properties had been owned by the Company during the whole of such period. "D. Subject to the foregoing provisions of this Section, all determinations of the amounts of Net Income, Net Earnings Available for Fixed Charges and Prior Lien Indebtedness (as defined in Paragraph E of Section 1.07) pursuant to this Indenture shall be made, and all 24 balance sheets and other financial statements shall be prepared, in accordance with sound accounting practice. "F. The term 'Earnings Certificate' shall mean a Certificate of the Company, dated not more than 30 days prior to the date upon which is made the application for the authentication and delivery of Bonds in connection with which such Certificate is delivered, setting forth in reasonable detail: (1) The amount of the Net Earnings Available for Fixed Charges of the Company, for a period of 12 consecutive calendar months within the 15 calendar months immediately preceding the calendar month in which the application for the authentication and delivery of the Bonds is made. (2) The aggregate amount of the annual 'Interest Charges on Bonded Indebtedness', which term shall be taken to mean and comprise the annual interest charges on (a) all Bonds outstanding hereunder at the date of said Certificate (provided, however, that, in the case of any Bonds which shall at such time be pledged as security for any indebtedness of the Company, the amount of the annual interest charges on such pledged Bonds shall be deemed to be either the amount of the annual interest charges on such indebtedness or the amount of the annual interest charges on such pledged Bonds, whichever shall be greater); (b) all Bonds whose authentication and delivery are applied for in such application or in any other pending application; and (c) all Prior Lien Indebtedness; provided, however, that there shall be excluded from such computation the annual interest charges on any Bond or Prior Lien Indebtedness which is to be paid, redeemed or otherwise retired, or which will become Prepaid Indebtedness, prior to or concurrently with the authentication and delivery of the Bonds then applied for. (3) 33 1/3% of rentals under leases with an initial term of three years or more payable during the period for which Net 25 Earnings Available for Fixed Charges of the Company were computed, as set forth in Clause (1) of this Paragraph. (4) That the amount of Net Earnings Available for Fixed Charges of the Company, set forth as provided by Clause (1) of this Paragraph, is at least equal to two times the sum of (a) the aggregate amount of the annual Interest Charges on Bonded Indebtedness, set forth as provided by Clause (2) of this Paragraph, and (b) the amount of rentals set forth as provided in Clause (3) of this Paragraph. (5) That the amount of such Net Earnings Available for Fixed Charges has been computed and ascertained as provided in Paragraphs C and D of this Section. "The Company covenants and agrees that if the annual Inter- est Charges on Bonded Indebtedness shall be increased after the date of the Earnings Certificate hereinabove in this Paragraph described, and before the authentication and delivery of the Bonds then applied for, the Company will file with the Trustee a new Earnings Certificate showing the amount of said annual Interest Charges on Bonded Indebtedness as so increased-it being the intention hereof that no Bonds shall be authenticated and delivered under the provisions of Article Four, Five or Six, in any case where an Earnings Certificate is required by said Articles, unless the ratio provided for by Clause (4) of this Paragraph shall have been established with respect to the aggregate amount of the annual Interest Charges on Bonded Indebtedness as constituted at the time of the authentication and delivery of the Bonds then applied for; but, subject to the provisions of Sections 17.02 and 17.03, the Trustee shall be entitled to assume, in the absence of such new Earnings Certificate, that the aggregate amount of the annual Interest Charges on Bonded Indebtedness, as constituted at the time of the authentication and delivery of the Bonds then applied for, is as stated in the Earnings Certificate filed with the Trustee as aforesaid. "In any application for the authentication and delivery of Bonds where an Earnings Certificate is required, if the aggregate principal amount of Bonds then applied for plus the aggregate principal amount of Bonds authenticated and delivered since the 26 commencement of the then current calendar year (other than Bonds with respect to which an Earnings Certificate is not required or with respect to which an Earnings Certificate signed by an Independent Public Accountant appointed by a resolution of the Board and approved by the Trustee has been previously furnished) is 10% or more of the aggregate principal amount of the Bonds at the time outstanding hereunder, such Earnings Certificate shall be made and signed by an Independent Public Accountant appointed by a resolution of the Board and approved by the Trustee, in addition to being signed by the officers of the Company as required hereunder, but no such Earnings Certificate need be made or signed by any such Independent Public Accountant as to periods not covered by annual reports required to be filed by the Company." and the acceptance of any Bond of Series U by the holder thereof shall be deemed to constitute a consent to such amendment; provided, however, that such amendment shall not become effective until (a) a further Supplemental Indenture making it effective shall have been executed with the consent of the holders of not less than 75% in principal amount of the Bonds of all Series, including the holders of not less than 60% in principal amount of the Bonds of each Series, at the time outstanding (determined as provided in Section 1.02 of the Original Indenture) other than Bonds of Series L, M, R, S, T or U and Bonds of any subsequent Series in respect of which the Supplemental Indenture creating the Series provides that the acceptance of any Bond of such Series by the holder thereof shall be deemed to constitute a consent to such amendment, or (b) none of the Bonds of any Series other than Series L, M, R, S, T or U and any such subsequent Series shall be outstanding. ARTICLE FIVE. The aggregate principal amount of Bonds of the Company out- standing and presently to be issued and outstanding under the provisions of, and secured by the Indenture, will be $331,940,000 consisting of $9,840,000 principal amount of First Mortgage Bonds, Series L, 10 1/2% due 2000, due March 1, 2000, now outstanding; $8,400,000 principal amount of First Mortgage Bonds, Series M, 27 8.70% due 2006, due September 1, 2006, now outstanding; $63,700,000 principal amount of First Mortgage Bonds, Series R, 10% due 2017, due July 1, 2017, now outstanding; $20,000,000 principal amount of First Mortgage Bonds, Series S, 9 5/8% due 2019, due July 1, 2019, now outstanding; $130,000,000 principal amount of First Mort- gage Bonds, Series T, 11 1/4% due 1997, due January 15, 1997, now outstanding; and $100,000,000 principal amount of First Mortgage Bonds, Series U, 9 1/4% due 2000, due September 15, 2000, to be issued pursuant to Article Four of the Original Indenture upon the execution and delivery of this Twenty-Third Supplemental Indenture. Additional Bonds of Series M, R, S, T and U and of subsequent series created after the execution and delivery of this Twenty-Third Supplemental Indenture, may, from time to time, be authenticated, delivered and issued pursuant to the terms of the Indenture. ARTICLE SIX. The Company covenants and agrees with the Trustee, for the benefit of the Trustee and all the present and future holders of the Bonds and of the coupons, that the Company will pay the principal of, premium, if any, and interest on all Bonds issued or to be issued and secured by the Indenture, as well as all Bonds which may be hereafter issued in exchange or substitution therefor, and will per- form and fulfill all of the terms, covenants and conditions of the Original Indenture, with respect to the additional Bonds to be issued under the Indenture. ARTICLE SEVEN. This instrument is executed and shall be construed as an indenture supplemental to the Original Indenture as heretofore supplemented and shall form a part thereof, and the Original Indenture as heretofore supplemented is hereby confirmed. The recitals in this Twenty-Third Supplemental Indenture are made by the Company only and not by the Trustee; and all of the provisions contained in the Original Indenture in respect of the rights, privileges, immunities, powers and duties of the Trustee shall 28 be applicable in respect hereof as fully and with like effect as if set forth herein in full. Although this Twenty-Third Supplemental Indenture is dated for convenience and for the purpose of reference as of September 15, 1993, the actual date or dates of execution thereof by the Company and the Trustee are as indicated by their respective acknowledgments hereto annexed. In order to facilitate the recording or filing of this Twenty-Third Supplemental Indenture, the same may be simultaneously executed in several counterparts, each of which shall be deemed to be an original, and such counterparts shall together constitute but one and the same instrument. ARTICLE EIGHT. FIRST The following described lots, pieces, or parcels of land acquired by the Company since the execution and delivery of the Twenty- Second Supplemental Indenture dated as of January 15, 1992, are located in the States and in the Counties designated and hereinafter set forth: STATE OF TEXAS 1. Galveston County (a) All that certain property situated in Galveston County, Texas, described as follows, to-wit: Being the surface estate only of a 5.000 acre (217,800 square feet) tract of land out of a 107.486 acre tract in the W. K. WILSON LEAGUE, ABSTRACT 208, Galveston County, Texas; said 107.486 acre tract being that same tract conveyed to Maco Stewart from Galveston Bay Greyhound Racing Association, Ltd., by deed dated September 24, 1991, and recorded under Film Code No. 007-78-1092 in the Official Public Records of Real Property in Galveston County, 29 Texas, said 5.000 acre tract being more particularly described as follows: COMMENCING at the Southwest corner of a 5.677 acre tract of land described in said deed recorded under Film Code No. ###-##-####; said Southwest corner also called to be the South- west corner of said W. K. WILSON LEAGUE, A-208; said Southwest corner bears South 89 Deg. 33 Min. 37 Sec., East, a distance of 14.24 feet from a one-half inch iron rod found in concrete; THENCE North 00 Deg. 48 Min. 41 Sec., East, along the West line of said 5.677 acre tract and along the West line of said W. K. WILSON LEAGUE, A-208, at 1,148.31 feet past the existing Southeasterly right-of-way line of F. M. Highway 1764 (120 feet wide right-of- way), at 1,307.39 feet past a three-eights inch iron rod found on line, at 1,309.44 feet past the existing Northwesterly right-of-way line of said F. M. Highway 1764, and continuing for a total distance of 1,363.14 feet to a copper coated rod with brass cap set at the Southwest corner and POINT OF BEGINNING of the herein described 5.000 acre tract, said POINT OF BEGINNING also being on the proposed Northwesterly right-of-way line of said F. M. Highway 1764; said POINT OF BEGINNING also being the most Southerly corner of said 107.486 acre tract; THENCE North 00 Deg. 48 Min. 41 Sec., East, along the Westerly line of said 107.486 acre tract and along the Westerly line of said W. K. WILSON LEAGUE, A-208, a distance of 860.40 feet to a copper coated rod with brass cap set at the Northwest corner of the herein described tract; THENCE South 89 Deg. 11 Min. 19 Sec., East, a distance of 300.00 feet to a copper coated rod set at the Northeast corner of the herein described tract; THENCE South 00 Deg. 48 Min. 41 Sec., West, a distance of 591.60 feet to a copper coated rod with brass cap set at the Southeasterly corner of the herein described tract on the Southeasterly line of said 107.486 acre tract, also being the proposed Northwesterly right-of- way line of F.M. Highway 1764; 30 THENCE South 48 Deg. 57 Min. 00 Sec., West, along the Southeasterly line of said 107.486 acre tract and the proposed Northwesterly right-of-way line of F. M. Highway 1764 (being 40.00 feet North- westerly of and parallel with the existing Northwesterly right-of- way line of F. M. Highway 1764) a distance of 402.81 feet to the POINT OF BEGINNING and containing 5.000 acres (217,800 square feet). (b) All that certain property situated in Galveston County, Texas, described as follows, to-wit: THE SURFACE ONLY of part of Lot 12 in Motor Subdivision in Galveston County, Texas, according to the map thereof recorded in Volume 254, Page 110, in the office of the County Clerk of Galveston County, Texas, and being more particularly described by metes and bounds as follows: COMMENCING at the most Northerly corner of said Lot 12; THENCE South 50 degrees 52 minutes West, along the Northwesterly line of said Lot 12, a distance of 37.0 feet to a set 1 inch iron pipe for the PLACE OF BEGINNING of this tract, said point being also on the Southwesterly right of way line of State Highway No. 3; THENCE South 39 degrees 08 minutes, East, along said Highway, a distance of 247.94 feet to a found 5/8 inch iron rod with aluminum cap for the intersection with the Northwesterly line of F. M. Highway No. 1764; THENCE South 50 degrees 52 minutes, West, along said Highway No. 1764, a distance of 301.47 feet to a found concrete right of way marker for corner; THENCE continuing along said Highway, South 87 degrees 52 minutes, West, a distance of 181.43 feet to a found concrete right of way marker for corner; THENCE in a Southwesterly direction along a curve concave to the left, said curve having a radius of 284.0 feet, an arc length of 205.7 and a chord bearing of South 67 degrees 07 minutes 03 seconds West, a distance of 201.24 feet to a 1 inch iron pipe set for corner; 31 THENCE South 46 degrees 22 minutes West, continuing along said Highway 1764, a distance of 85.62 feet to a set 1 inch iron pipe for corner; THENCE continuing along said Highway 1764, South 73 degrees 48 minutes 28 seconds, West, a distance of 228.7 feet to a set 1 inch iron pipe for corner on the Northwesterly line of said Lot 12; THENCE North 50 degrees 32 minutes East, along the Northwesterly line of said Lot 12, a distance of 935.53 feet to the PLACE OF BEGINNING and containing 3.1759 acres of land, more or less. This conveyance is made and accepted subject to all restrictions, easements, rights-of-way, oil, gas and mineral leases and royalty and mineral conveyances and reservations of record, if any, in the office of the County Clerk of said county. 2. Robertson County UNIT 1: The following described 65/345ths undivided interest in proper- ties situated in Robertson County as follows: (a) The lands described on Exhibit "A", less and except the lands described on Exhibit "B" attached hereto and made a part hereof (after giving effect to said exception, the "Site"); (b) The electrical generating plant known as TNP One, Unit 1, as described on Exhibit "C" attached hereto and made a part hereof, on the Site; (c) All right, title and interest of Grantor, to the extent attributable to the interests described in (a) and (b) above, in and to all facilities, equipment and personalty of every nature (including, but not limited to, inventory) appurtenant to, used for or in connection with the interests described in (a) and (b) above; and (d) All right, title and interest of Grantor, to the extent attributable to the interests described in (a) and (b) above, in and under all easements, permits, licenses, servitudes, rights of way and surface waivers used for or held with respect to the interests described in (a), (b) and (c) above. 32 UNIT 1 Exhibit "A" PROPERTY DESCRIPTION The following described tracts of land in fee simple: Tract I: Being 2,711.761 acres of land, more or less, lying and being situated in the T. N. Mudd Survey A-229, Joseph Mathers Survey A-261, T. J. Chambers Survey A-2, L. M. Simons Survey A-338, A. B. Hannum Survey A-395, A. B. Hannum Survey A-192 and Conception Charle Survey, Robertson County, Texas. Tract II: Being 2.8175 acres of land, more or less, lying and being situated in the T. J. Chambers Survey A-2, Robertson County, Texas and being the same property as described in Deed from Bernard Wilganowski to Project Funding Corporation dated Au- gust 31, 1987 and recorded in Volume 502, Page 618, Public Records of Robertson County, Texas. Tract III: Being 14.487 acres of land, more or less, lying and being situated in the Joseph Webb Survey A-51, Robertson County, Texas and being the same property as described in Deed from Irvin Conitz to Project Funding Corporation dated August 1, 1988 and recorded in Volume 517, Page 718, Public Records of Robertson County, Texas. Tract IV: Part A: Being 2.00 acres of land, more or less, lying and being situated in the John Trudoe Survey A-346, Robertson County, Texas. Part B: Being 4.998 acres of land, more or less, lying and being situated in the John Trudoe Survey A-346, Robertson County, Texas. And being the same property as described in Deed from C. J. Rutten and wife, Aline M. Rutten and M. A. Bayard to Project Funding Corporation dated July 29, 1988 and recorded in Volume 517, Page 686, Public Records of Robertson County, Texas. Tract V: Being 2.00 acres of land, more or less, lying and being situated in the John Trudoe Survey A-346, Robertson County, Texas and being the same property as described in Deed from Thomas A. Towns to Project Funding Corporation dated September 16, 1988 and 33 recorded in Volume 520, Page 630, Public Records of Robertson County, Texas. Tract VI: Being 13.039 acres of land, more or less, lying and being situated in the Joseph Webb Survey A-51, Robertson County, Texas and being the same property as described in Deed from B. T. Ables and wife, Maurice Ables to Project Funding Corporation dated September 21, 1988 and recorded in Volume 521, Page 15, Public Records of Robertson County, Texas. Tract VII: Being 61.003 acres of land, more or less, out of the H. Davlin Survey A-125, Robertson County, Texas, and being the same property as described in Deed from M. Kathryn Bellis to Project Funding Corporation, dated October 30, 1987, and recorded in Volume 505, Page 489, Public Records of Robertson County, Texas. All of said Tracts I through VII being more particularly described by metes and bounds on the pages attached hereto and made a part hereof for all purposes. TRACT I Field Notes for a 2,711.761 Acre Tract T. N. MUDD SURVEY, A-229 JOSEPH MATHERS SURVEY, A-261 T. J. CHAMBERS SURVEY, A-2 L. M. SIMONS SURVEY, A-338 A. B. HANNUM SURVEY, A-395 CONCEPTION CHARLE CONFLICT A. B. HANNUM SURVEY, A-192 Robertson County, Texas All that certain tract or parcel of land lying and being situated in Robertson County, Texas, out of and a part of the T. N. Mudd Survey, Abstract No. 229, the Joseph Mathers Survey, Abstract No. 261, the T. J. Chambers Survey, Abstract No. 2, the L. M. Simons Survey, Abstract No. 338, the A. B. HANNUM Survey, Abstract No. 395,* and the Conception Charle Conflict, and further being out of and consisting of the following tracts: *the A. B. Hannum Survey 34 1. out of a tract described as 170.54 acres in a Deed to M. Kathryn Bellis recorded in Volume 455, page 383 (found by re-survey to contain 109.677 acres), 2. consisting of a tract called 49 acres described in a Deed to Felix Nobra and wife, Lottie Nobra recorded in Volume 435, page 130, and further consisting of a 20.00 acre tract described in a Contract of Sale from the Veterans Land Board to Felix C. Nobra recorded in Volume 435, page 137 (found by re-survey to contain 69.365 acres), 3. consisting of a 33.3 acre tract described in a Deed to Marl A. Weimer, III and wife, Jill Goodwin Weimer recorded in Volume 432, page 454, and further consisting of two tracts described as 16.7 acres and 2.594 acres in a Contract of Sale from the Veterans Land Board to Marl A. Weimer, III recorded in Volume 432, page 446 (found by re-survey to contain 52.592 acres), 4. consisting of a 17.406 acre tract described in an Option Agreement between Floyd B. Kempenski and wife, Rose T. Kempenski and Marl A. Weimer, III and wife, Jill Goodwin Weimer recorded in Volume 432, page 466 (found by re-survey to contain 17.406 acres), 5. consisting of a 49.1 acre tract described as the FIRST TRACT and all of the remainder of an 82 2/3 acre tract described as the SECOND TRACT both in a Deed to Floyd B. Kempenski and wife, Rose T. Kempenski re- corded in Volume 202, page 54, and further consisting of a 50.3 acre tract described in a Deed to Floyd Kempenski recorded in Volume 135, page 285 (found by re-survey to contain 109.058 acres and 1.980 acres), 6. consisting of a tract called 43 1/2 acres described as TRACT No. 2 in a Deed to Reece Yezak and wife, Josephine Yezak recorded in Volume 500, page 183 (found by re-survey to contain 40.822 acres), 7. out of a 60 acre tract described in a Deed to Stash Calick recorded in Volume 50, page 637 out of a 50 acre tract 35 described in a Deed to Stash Calick recorded in Volume 52, page 111, all of a 45.9 acre tract as occupied by Stash Calick and described in a Deed recorded in Volume 59, page 193, and further consisting of a 101.1 acre tract described in a Deed to Stash Calick recorded in Volume 67, page 470 (found by re-survey to contain 243.125 acres), 8. consisting of a tract called 199.992 acres described in a Deed to Leland Beckendorff recorded in Volume 434, page 683 (found by re-survey to contain 186.197 acres), 9. consisting of a 100 acre tract described in a Deed to Sam Yezak and wife, Janie Yezak recorded in Volume 200, page 204, and further consisting of a 99 2/100 acre tract described in a Deed to Sam Yezak and wife, Janie Yezak recorded in Volume 179, page 226 (found by re-survey to contain 204.247 acres), 10. out of a tract called 232 acres described in a Deed to Ruth Cottingham Sorrels recorded in Volume 140, page 439 (found by re-survey to contain 106.143 acres), 11. out of a tract called 99.8 acres described in the SECOND TRACT in a Deed to Richard L. Hailey recorded in Volume 262, page 677 (found by re-survey to contain 96.654 acres), 12. consisting of a tract called 165.3 acres described in a Deed to Floyd S. Burda recorded in Volume 242, page 180 (found by re-survey to contain 165.977 acres), 13. consisting of a tract called 271.4 acres described in a Deed to Richard Lee Hailey and wife, Imogene Hailey recorded in Volume 197, page 461 (found by re-survey to contain 230.169 and 43.481 acres), 14. consisting of a tract called 149 acres described in a Deed to Martin Kozak recorded in Volume 93, page 435 (found by re-survey to contain 151.420 acres), 15. consisting of a tract called 25 acres described in a Deed to Sandra Handot recorded in Volume 296, page 263 (found by re-survey to contain 25.0265 acres), 36 16. consisting of a tract called 25 acres described in a Deed to William Zeno recorded in Volume 467, page 488 (found by re-survey to contain 25.0265 acres), 17. consisting of a tract called 29 acres described in a Deed to Johnnie Mae Edwards recorded in Volume 204, page 346 (found by re-survey to contain 28.774 acres), 18. consisting of a tract called 272.57 acres described in a Deed to G. H. Ingram, Jr. recorded in Volume 207, page 382 (found by re-survey to contain 273.463 acres), 19. out of a tract called 20 acres described in a Deed to Calvin Joe Boyd and wife Debra Ann Boyd recorded in Volume 394, page 127 (found by re-survey to contain 20.015 acres), 20. consisting of a tract described in a Deed to Modern Homes Construction Company, a Florida Corporation, recorded in Volume 205, page 609 (found by re-survey to contain 1.012 acres), 21. consisting of a tract described as 11.0135 acres in a Deed to Melvin E. Wickham and wife, Carole J. Wickham recorded in Volume 431, page 241, and further consisting of a tract described as 22.027 acres in a Deed to Melvin E. Wickham and wife, Carole J. Wickham re- corded in Volume 431, page 250 (found by re-survey to contain a total of 33.0384 acres), 22. consisting of a tract described as three tracts totalling 55.0675 acres in a Deed to Edward Kuciemba recorded in Volume 463, page 734 (found by re-survey to contain 55.0683 acres), 23. consisting of a tract called 75.65 acres described in a Deed to Henry Hoblinski recorded in Volume 53, page 524 (found by re-survey to contain 74.409 acres), 24. consisting of a 63 acre tract and an 87 acre tract described in a Quit Claim Deed to W. T. Hailey recorded in Volume 155, page 268, and a tract occupied by W. T. Hailey called 68 acres and described in a Deed to Buck 37 Beal recorded in Volume 32, page 34 (found by re- survey to contain 227.147 acres), 25. consisting of a tract called 50.5 acres described in a Deed to Dawson D. Weatherford recorded in Volume 393, page 337 (found by re-survey to contain 50.529 acres), 26. consisting of a tract called 60 acres described as TRACT FIVE in a Deed to Southwest Agricorp Inc. recorded in Volume 498, page 57 (found by re-survey to contain 59.837 acres). 27. consisting of a tract called 11.5 acres described as the SECOND TRACT in a Deed to Fannie Garrett recorded in Volume 128, page 177 (found by re-survey to contain 12.918 acres), and further 28. consisting of a tract called 6/10 of an acre described in a Deed to J. R. Mullins and wife Pearlie Mullins recorded in Volume 499, page 165 (found by re-survey to contain 0.61 of an acre) all of the above Deeds being in the Deed Records of Robertson County, Texas, said tract or parcel of land herein described as follows: BEGINNING at a found 5/8" steel rod at a fence corner in the South line of the Hugh Davlin Survey for the North East corner of the T. N. Mudd Survey, said corner further being the Eastern most North East corner of the above mentioned M. Kathryn Bellis 170.54 acre tract; THENCE along the East line of the T. N. Mudd Survey S 33 degrees 01' 27" E 1576.71 feet to a found 4"x4" petrified rock at a fence corner for the South East corner of the said Bellis 170.54 acre tract, S 33 degrees 20' 50" E 490.28 feet along a fence to a found steel rod, and S 33 degrees 38' 22" E 30.71 feet to a found steel rod at a fence corner for the North East corner of the above mentioned Floyd Kempenski 49.1 acre tract, S 32 degrees 14' 34" E 3863.68 feet to a set steel rod at a fence corner for the South East corner of the above mentioned Floyd Kempenski 50.3 acre tract, and S 32 degrees 12'49" E 2269.45 feet to a x-tie at a fence corner for the South East corner of the above mentioned Sam Yezak 99.02 acre tract; 38 THENCE N 60 degrees 44' 19" E 30.42 feet to a x-tie at a fence corner for a corner of the above mentioned Ruth Cottingham Sorrels 232 acre tract; THENCE S 28 degrees 54' 44" E 666.77 feet along a fence on the East side of an abandoned lane to a set steel rod for an interior corner of the said Sorrels tract and for the South West corner of the Sam Yezak 97 acre tract; THENCE N 57 degrees 21' 26" E 13.09 feet along a fence for the North line of the said Sorrels tract to a set steel rod in the East line of the T. N. Mudd Survey; THENCE S 32 degrees 38' 58" E 1677.06 feet along the East line of the T. N. Mudd Survey to a point for the South East corner of the T. N. Mudd Survey and for the South East corner of the herein described tract, said corner further being N 32 degrees 38' 58" W 8.01 feet from the North West corner of the Tidwell Prairie Cemetery tract; THENCE S 56 degrees 56'17" W 1010.46 feet along the South line of the T. N. Mudd Survey to a point of intersection in a fence line for the occupied North line of the Richard Hailey 2.6 acre tract described in the SECOND TRACT in the above mentioned Deed to Hailey recorded in Volume 262, page 677 of the Deed Records of Robertson County, Texas; THENCE along the said fence for the occupied line between the Hailey 2.6 acre tract and the Sorrels 232 acre tract S 63 degrees 17'46" W 215.77 feet, S 73 degrees 21' 42" W 289.60 feet, S 56 degrees 31' 38" W 193.26 feet, and S 57 degrees 06' 58" W 287.03 feet to a 4" corner post at a fence corner for the South West corner of the Sorrels 232 acre tract and for an angle corner of the herein described tract; THENCE along a fence S 53 degrees 07' 17" W 872.50 feet, and S 54 degrees 36'28" W 764.72 feet to a 30' Post Oak tree at a fence corner in the West line of the Richard Hailey 99.8 acre tract; THENCE S 33 degrees 59' 57" E 16.11 feet along the West line of the said Richard Hailey 99.8 acre tract to a point in the South line of the T. N. Mudd Survey for the South West corner of the said 99.8 acre tract and for a corner of the herein described tract; THENCE S 56 degrees 56' 17" W 2611.34 feet along the South line of the T. N. Mudd Survey to a point in a fence line; 39 THENCE along a fence for the occupied South line of the above mentioned Richard Hailey 271.4 acre tract S 57 degrees 16'59" W 525.79 feet, S 54 degrees 51'52" W 370.06 feet, and S 58 degrees 27'39" W 918.69 feet to a set steel rod at a fence corner in the East line of the Joan Lutz, et. al. 20 acre tract for a corner of the herein described tract, said corner further being in the East line of the Conception Charle Conflict; THENCE N 32 degrees 12'36" W 597.55 feet along a fence to a set steel rod at a fence corner for the North East corner of the said Lutz 20 acre tract and for an interior corner of the herein described tract; THENCE S 58 degrees 15' 54" W 1063.55 feet along a fence to a x-tie at a fence corner for the North West corner of the said Lutz 20 acre tract; THENCE S 57 degrees 41'05" W 413.61 feet along the South line of the above mentioned Fannie Corrett 11.5 acre tract to a set steel rod for the South West corner of the said 11.5 acre tract, said corner further being in the East line of the above mentioned Southwest Agricorp, Inc. 60 acre tract; THENCE S 30 degrees 08'30" E 23.47 feet along the East line of the said Southwest Agricorp, Inc. 60 acre tract to a set steel rod for the South East corner of the same; THENCE along a fence for the occupied South line of the said Southwest Agricorp, Inc. 60 acre tract S 58 degrees 52'44" W 1125.00 feet, S 58 degrees 08'55" W 786.90 feet, and S 56 degrees 46'13" W 271.87 feet to a set steel rod in the East Right of Way line of the Southern Pacific Railroad for the South West corner of the said 60 acre tract and for the South West corner of the herein described tract; THENCE along the East Right of Way line of the Southern Pacific Railroad as follows: 1. N 29 degrees 06'39" W 2860.59 feet to a point for a corner, 2. N 60 degrees 53'21" E 47.50 feet to a point for a corner, 3. N 29 degrees 06'39" W 2773.90 feet to a point at the beginning of a curve, 40 4. along a curve to the right with a radius of 6775.55 feet and a chord bearing N 27 degrees 51' 32" W 296.77 feet to the end of the curve, 5. N 26 degrees 36' 04" W 2996.68 feet to a point at the beginning of a curve, 6. along a curve to the right with a radius of 5598.34 feet and a chord bearing N 20 degrees 50'56" W 1122.20 feet to a set, steel rod at the North West corner of the above mentioned G. H. Ingram, Jr. 272.57 acre tract for the North West corner of the herein described tract; THENCE along the center of a public road N 57 degrees 23' 58" E 4549.06 feet to a point of intersection with another public road from the South for the North East corner of the above mentioned Edward Kuciemba 55.0675 acre tract, said corner further being the North West corner of the above mentioned Leland Beckendorff 199.992 acre tract, and said corner further being in the North line of the T. N. Mudd Survey; THENCE along the North line of the said Beckendorff tract N 57 degrees 08'57" E 1233.50 feet, and N 57 degrees 13'5" E 609.69 feet to a found steel pipe at a fence corner for the Northern most North East corner of the said Beckendorff tract, said corner further being the North West corner of the above mentioned Reece Yezak 43 1/2 acre tract, said corner further being in the North line of the T. N. Mudd Survey; THENCE N 57 degrees 28'49" E 4369.72 feet along the North line of the T. N. Mudd Survey to the place of BEGINNING and containing 2,711.761 acres of land, more or less. Field Notes for a 2.8175 Acre Tract T. J. CHAMBERS SURVEY, A-2 Robertson County, Texas TRACT II: All that certain tract or parcel of land lying and being situated in Robertson County, Texas, out of and a part of the T. J. Chambers Survey, Abstract No. 2, and further being out of a 36.445 acre tract described in a Deed to Bernard Wilganowski and wife, 41 Shirley Wilganowski recorded in Volume 408, page 510 of the Deed Records of Robertson County, Texas, said tract or parcel of land herein described as follows: COMMENCING at a found steel pipe in the East Right of Way line of State Highway 6 for the North West corner of the said Wilganowski 36.445 acre tract; THENCE along the East Right of Way line of State Highway 6 S 08 degrees 11' 44" E 774.41 feet to a concrete Right of Way monument, and S 7 degrees 49'19" E 223.43 feet to a set steel rod for the PLACE OF BEGINNING and for the North West corner of the herein described tract; THENCE along the North line of the herein described tract N 54 degrees 54'53" E 8.20 feet to a set steel rod at the beginning of a curve to the left, along the curve with a radius of 325.00 feet and a long chord bearing N 48 degrees 25' 41" E 73.43 feet to a set steel rod at the end of the curve, N 41 degrees 56'28" E 375.72 feet to a set steel rod at the beginning of a curve to the right, along the curve to the right with a radius of 1220.92 feet and a long chord bearing N 44 degrees 46' 05" E 120.43 feet to a set steel rod in the West Right of Way line of the Southern Pacific Railroad; THENCE S 26 degrees 36'04" E 209.52 feet along the West Right of Way line of the Southern Pacific Railroad to a set steel rod for the South East corner of the herein described tract; THENCE along the South line of the herein described tract along a curve to the left with a radius of 1020.92 feet and a long chord bearing S 43 degrees 09'52" W 43.65 feet to a set steel rod at the end of the curve, S 41 degrees 56'28" W 375.72 feet to a set steel rod at the beginning of a curve to the right, along the curve to the right with a radius of 525 feet and a long chord bearing S 48 degrees 25'41" W 118.62 feet to a set steel rod at the end of the curve, and S 54 degrees 54'53" W 110.92 feet to a set steel rod in the East Right of Way line of State Highway 6 for the South West corner of the herein described tract; THENCE N 07 degrees 54' 01" W 224.84 feet along the East Right of Way line of State Highway 6 to the PLACE OF BEGINNING and containing 2.8175 acres of land, more or less. 42 Field Notes for a 14.487 Acre Tract JOSEPH WEBB SURVEY, A-51 Robertson County, Texas TRACT III: All that certain tract or parcel of land lying and being situated in Robertson County, Texas, out of and a part of the Joseph Webb Survey, Abstract No. 51, and further being the same tract of land described as 14.6 acres in a Deed to Irvin Conitz recorded in Volume 171, page 224 of the Deed Records of Robertson County, Texas, said tract or parcel of land herein described as follows: BEGINNING at a found steel rod in the bend of a public road at a South West interior corner of a 1,162.950 acre tract described in a Deed to C. J. Rutten recorded in Volume 273, page 544 of the Deed Records of Robertson County, Texas for the North East corner of the said Conitz tract, said corner further being the North East corner of the Joseph Webb Survey; THENCE S 33 degrees 24'43" E 1110.97 feet along the center of the said public road to a found steel rod at a fence corner at the outside bend of the said road for a corner for the Southern most South West corner of the said Rutten 1,162.95 acre tract, said corner further being the North West corner of the A. J. Hensley Survey, A-20; THENCE S 32 degrees 33'12" E 632.77 feet generally along a fence for the East line of the Conitz tract to a set steel rod in a gulley for the South East corner of the herein described tract; THENCE S 57 degrees 30' 24" W 367.23 feet partially along a fence on the North side of a gulley to a set steel rod near a fence corner for the South West corner of the herein described tract; THENCE N 32 degrees 33' 12" W 1743.60 feet along the West line of the said Conitz tract as marked by a fence to a point in the above mentioned public road for the North West corner of the herein described tract, from which a found steel pipe at a fence corner bears S 32 degrees 33' 12" E 18.32 feet; 43 THENCE N 57 degrees 30' 24" E 350.58 feet along the said public road to the place of BEGINNING and containing 14.487 acres of land, more or less. Field Notes for a 2.000 Acre Tract JOHN TRUDOE SURVEY, A-346 Robertson County, Texas TRACT IV: PART A: All that certain tract or parcel of land lying and being situated in Robertson County, Texas, out of the John Trudoe Survey, Abstract No. 346, and further being out of the South East corner of a 48.587 acre tract described as TRACT No. 13 in a Deed to M. A. Bayard recorded in Volume 495, page 466 of the Deed Records of Robertson County, Texas, said tract or parcel of land herein described as follows: BEGINNING at a found steel rod at a fence corner in the North line of a public road for the South East corner of the said Bayard 48.587 acre tract for the South East corner of the herein described tract, said corner further being the South West corner of 31.307 acre tract described in a Deed to Joseph A. Smith re- corded in Volume 413, page 289 of the Deed Records of Robert- son County, Texas; THENCE S 56 degrees 02'28" W 295.16 feet along the South line of the said 48.587 acre tract and the North line of the public road to a set steel rod for the South West corner of the herein described tract; THENCE N 33 degrees 55'23" W 295.16 feet to a set steel rod for the North West corner of the herein described tract; THENCE N 56 degrees 02'28" E 295.16 feet to a set steel rod in the East line of the said 48.587 acre tract for the North East corner of the herein described tract; THENCE S 33 degrees 55'23" E 295.16 feet along a fence for a common line between the said Bayard 48.587 acre tract and the Smith 31.307 acre tract to the place of BEGINNING and containing 2.000 acres of land, more or less. 44 Field Notes for a 4.998 Acre Tract JOHN TRUDOE SURVEY, A-346 Robertson County, Texas TRACT IV: PART B: All that certain tract or parcel of land lying and being situated in Robertson County, Texas, out of and a part of the John Trudoe Survey, Abstract No. 346 and further being out of a tract called 10.00 acres described as TRACT 9 in a Deed to M. A. Bayard recorded in Volume 495, page 456 of the Deed Records of Robertson County, Texas, said tract or parcel of land herein described as follows: BEGINNING at a found steel rod in the West line of a 40' road for the North East corner of the said 10.00 acre tract for the North East corner of the herein described tract, said corner further being the South East corner of a 16.312 acre tract described as TRACT 10 in the above mentioned Deed; THENCE S 33 degrees 09'16" E 323.02 feet along the West line of the said 40' road to a found steel rod for the South East corner of the herein described tract, from which a found steel rod at the intersection of the West line of the 40' road with the North line of a public road bears S 33 degrees 09' 16" E 326.42 feet; THENCE S 57 degrees 30'45" W 670.49 feet to a found steel rod in the West line of the said 10.00 acre tract for the South West corner of the herein described tract; THENCE N 34 degrees 27' 00" W 323.12 feet along a fence to a found steel rod for the North West corner of the said 10.00 acre tract and for the North West corner of the herein described tract; THENCE N 57 degrees 30' 24" E 677.80 feet along the common line between the said 10.00 acre tract and the 16.312 acre tract to the place of BEGINNING and containing 4.998 acres of land, more or less. EXCEPTIONS OF RECORD AFFECTING THE PROPERTY CONVEYED BY THE FOREGOING TRACT IV, PART NOS. A AND B: 45 1. Easement from Ben C. Love, et al to Lone Star Gas Company, dated October 24, 1928, recorded in Volume 93, page 581, Deed Records of Robertson County, Texas. 2. Easement from Ben C. Love, et al to Humble Pipe Line Company, dated May 15, 1946, recorded in Vol. 141, Page 489, Deed Records of Robertson County, Texas. 3. Easement from Ben C. Love, et al to Texas Pipe Line Company, dated October 29, 1946, recorded in Vol. 145, Page 531, Deed Records of Robertson County, Texas. 4. Easement from Ben C. Love, et al to Sinclair Pipe Line Company, dated April 21, 1947, recorded in Vol. 149, Page 53, Deed Records of Robertson County, Texas. 5. Easement from Clara C. Love, et al to Humble Pipe Line Company, for Rectifier Unit, dated February 16, 1968, recorded in Vol. 239, Page 251, Public Records of Robertson County, Texas. 6. Easement from Alan C. Love, et al to Humble Pipe Line Company, for Rectifier Unit, dated February 16, 1968, recorded in Vol. 239, Page 341, Public Records of Robertson County, Texas. 7. Subject to unrecorded Navasota Valley Electric Co-op, Inc. power line easements. 8. Right-of-Way Agreement dated October 22, 1969, from Alan C. Love et al to Diamond Shamrock Corporation, recorded in Vol. 253, Page 281, Public Records of Robertson County, Texas; assigned to Diamond Chemicals Company at Vol. 479, Page 580, Public Records of Robertson County, Texas. 9. Right-of-Way Agreement dated October 22, 1969, from Clara C. Love, et al to Diamond Shamrock Corporation, recorded in Vol. 252, Page 632, Public Records of Robertson County, Texas; assigned to Diamond Chemicals Company, at Vol. 479, Page 580, Public Records of Robertson County, Texas. 10. Mineral Deed dated March 28, 1984, from C. J. Rutten et ux, et al to C. Bert Dickens, et al, recorded in Vol. 431, Page 394, Public Records of Robertson County, Texas, conveying 1/2 of the 46 oil, gas and other minerals; Correction Mineral Deed dated Au- gust 9, 1985, from C. J. Rutten et ux and L. M. Lowrey, Trustee to C. Bert Dickens, et al, recorded in Vol. 464, Page 283, Public Records of Robertson County, Texas, conveying 1/2 of oil, gas and other minerals including, coal and lignite; Mineral Deed dated February 17, 1986, from C. Bert Dickens to Mauriene Dickens, recorded in Vol. 480, Page 155, Public Records of Robertson County, Texas. Mineral Deed dated January 21, 1988, from L. M. Lowrey, Trustee to C. J. Rutten, recorded in Vol. 509, Page 640, Public Records of Robertson County, Texas. 11. Coal and Lignite Lease dated April 18, 1977, from C. J. Rutten et al to Phillips Coal Company, for a primary term of 25 years, recorded in Vol. 318, Page 471, Public Records of Robertson County, Texas. 12. Subject to a 20' Utility Easement along an roads. 13. Coal Lease dated December 5, 1977, from Elwood 0. Jahns and Janice Kirkland to Phillips Coal Company, for a primary term of 25 years, recorded in Vol. 332, Page 606, Public Records of Robertson County, Texas. Field Notes for a 2.000 Acre Tract JOHN TRUDOE SURVEY, A-346 Robertson County, Texas TRACT V: All that certain tract or parcel of land lying and being situated in Robertson County, Texas, out of the John Trudoe Survey, Abstract No. 346, and further being out of the South West corner of a 25.00 acre tract of land described in a Deed to Thomas A. Towns recorded in Volume 505, page 455 of the Deed Records of Robertson County, Texas, said tract or parcel of land herein described as follows: BEGINNING at a found steel rod at a fence corner in the North line of a public road for the South West corner of the Towns 25.00 acre tract and for the South West corner of the herein described tract; 47 THENCE N 33 degrees 50' 22" W 417.60 feet along a fence for the West line of the Towns 25.00 acre tract to a set steel rod for the North West corner of the herein described tract; THENCE N 57 degrees 57' 04" E 208.71 feet to a set steel rod for the North East corner of the herein described tract; THENCE S 33 degrees 50' 22" E 417.60 feet to a set steel rod in the North line of the before mentioned public road for the South East corner of the herein described tract; THENCE S 57 degrees 57'04" W 208.71 feet along the North line of the said public road to the place of BEGINNING and containing 2.000 Acres of land, more or less. Field Notes for a 13.039 Acre Tract JOSEPH WEBB SURVEY, A-51 Robertson County, Texas TRACT VI: All that certain tract or parcel of land lying and being situated in Robertson County, Texas, out of and a part of the Joseph Webb Survey, Abstract No. 51 and further being the same tract of land called 14 acres described in a Deed to B. T. Ables recorded in Volume 241, page 310 of the Deed Records of Robertson County, Texas, said tract or parcel of land herein described as follows: BEGINNING at a set steel rod on the South edge of a public road at the intersection of the North line of the Joseph Webb Survey with the East Right of Way line of the Southern Pacific Railroad for the North West corner of the said Ables tract and for the North West corner of the herein described tract; THENCE N 57 degrees 30'24" E 194.44 feet along the North line of the Ables tract to a set steel rod in the South edge of the said public road for the North East corner of the herein described tract; THENCE S 32 degrees 29'36" E 1775.97 feet along a common line between this Ables tract and another B. T. Ables 14 acre tract (241-307) to a set steel rod in a fence line for the South East corner of the herein described tract, said corner being in the North line of the B. T. Ables 20 acre tract; 48 THENCE S 57 degrees 30'59" W 460.38 feet along a fence to a set steel rod in the East Right of Way line of the Southern Pacific Railroad for the South West corner of the herein described tract; THENCE along the East Right of Way line of the Southern Pacific Railroad as follows: 1. along a curve to the left with a radius of 2946.84 feet and a chord bearing N 19 59' 02" W 361.99 feet to a point at the end of the curve, 2. N 23 degrees 30'19" W 433.30 feet to a point for a corner, 3. S 66 degrees 29'41" W 37.00 feet to a point for a corner, and 4. N 23 degrees 30'19" W 1001.03 feet to the place of BEGINNING and containing 13.039 acres of land, more or less. 61.003 Acres HUGH DAVLIN SURVEY, A-125 Robertson County, Texas TRACT VII: All that certain tract or parcel of land lying and being situated in Robertson County, Texas, out of and a part of the Hugh Davlin Survey, Abstract No. 125, and further being out of a tract described as 170.54 acres and consisting of a 2 acre roadway both described in a Deed to M. Kathryn Bellis recorded in Volume 455, page 383 of the Deed Records of Robertson County, Texas, said tract or parcel of land herein described as follows: BEGINNING at a set steel rod in the intersection of the West line of the said Bellis tract as marked by a fence with the South line of the Hugh Davlin Survey for the South West corner of the herein described tract, said corner further being the South East corner of the Reece Yezak 40 acre tract as described in a Deed recorded in Volume 500, page 183 of the Deed Records of Robertson County, Texas; THENCE along a fence for the West line of the said Bellis tract N 32 degrees 55'16" W 191.56 feet, and N 32 degrees 26'03" W 682.17 feet to a set steel rod at a fence corner for the South East corner of the 49 above mentioned 2 acre roadway, and for the North East corner of the Reece Yezak tract; THENCE S 57 degrees 32'43" W 2008.85 feet along a fence to a point in the East line of a public road for a corner; THENCE N 30 degrees 19'43" W 44.56 feet along the East line of the public road to a point for a corner; THENCE N 57 degrees 28'31" E 2005.01 feet along a fence to a found steel rod at a fence corner for the North East corner of the 2 acre roadway, said corner further being in the West line of the Bellis 170.54 acre tract; THENCE N 31 degrees 54' 06" W 809.56 feet along a fence to a x-tie at a fence corner for the North West corner of the Bellis 170.54 acre tract; THENCE N 56 degrees 02' 12" E 320.57 feet generally along a fence to a point in a creek for a corner of the herein described tract; THENCE along the meanders of the creek as follows: S 68 degrees 48' 15" E 101.04 feet, S 78 degrees 18' 12" E 280.96 feet, N 77 degrees 51' 25" E 193.15 feet, N 79 degrees 42' 23" E 156.36 feet, N 78 degrees 48' 41" E 518.91 feet, S 85 degrees 50' 54" E 262.44 feet, and S 72 degrees 33' 28" E 635.17 feet to a point for a corner; THENCE S 32 degrees 10'11" E 502.74 feet to a set steel rod in the South line of the Hugh Davlin Survey for the South East corner of the herein described tract, from which a found steel rod at a fence corner for the North East corner of the T. N. Mudd Survey bears N 57 degrees 28' 49" E 1012.00 feet; THENCE S 57 degrees 28' 49" W 2013.98 feet along the South line of the Hugh Davlin Survey to the place of BEGINNING and containing 61.003 acres of land, more or less. 50 UNIT 1 Exhibit "B" Field Notes for UNIT 2 7.466 Acre Tract T. N. MUDD SURVEY, A-229 JOSEPH MATHERS SURVEY, A-261 Robertson County, Texas All that certain tract or parcel of land lying and being situated in Robertson County, Texas, out of and a part of the T. N. Mudd Survey, Abstract No. 229, and the Joseph Mathers Survey, Abstract No. 261, and further being out of a 2711.761 acre tract described in a Deed of Trust from Project Funding Corporation to Donald H. Snell, Trustee recorded in Volume 507, page 291 of the Deed Records of Robertson County, Texas, said tract or parcel of land herein described as follows: BEGINNING at a point for the Eastern most corner of the herein described tract from which a 5/8" steel rod at the North East corner of the T. N. Mudd Survey bears N 19 degrees 26'31" E 7957.13 feet; THENCE S 43 degrees 04'00" W 175.00 feet to a point for a corner; THENCE N 46 degrees 56'00" W at 470.00 feet pass the 2-W baseline and at a total distance of 1234.83 feet to a point for a corner; THENCE N 43 degrees 04' 00" E 20.00 feet to a point for a corner; THENCE N 46 degrees 56' 00" W 148.03 feet to a point for an angle corner; THENCE S 30 degrees 04' 00" W 177.26 feet to a point for a corner; THENCE N 09 degrees 56' 00" W 393.33 feet to a point for a corner; THENCE N 80 degrees 04' 00" E 130.70 feet to a point for a corner; THENCE S 09 degrees 56' 00" E 73.99 feet to a point for an angle corner; THENCE S 46 degrees 56' 00" E 161.09 feet to a point for a corner; THENCE W 43 degrees 04' 00" E 20.00 feet to a point for a corner; THENCE S 46 degrees 56' 00" E 270.00 feet to a point for a corner; THENCE S 43 degrees 04' 00" W 20.00 feet to a point for a corner; 51 THENCE S 46 degrees 56"00" E 1234.83 feet to the place of beginning and containing 7.466 acres of land, more or less. UNIT 1 Exhibit "C" The electrical generating plant which is located on the Site, having a nominal rating of 150 MW that burns lignite, coal or natural gas as fuel in a circulating fluidized combustion process. Robertson County UNIT 2: The following described 75.75/288.5ths undivided interest in properties situated in Robertson County as follows: (a) The lands described on Exhibit "A" attached hereto and made a part hereof (the "Site"); (b) The electrical generating plant known as TNP One, Unit 2, as described on Exhibit "B" attached hereto and made a part hereof, on the Site; (c) All right, title and interest of Grantor, to the extent attributable to the interests described in (a) and (b) above, in and to all facilities, equipment and personalty of every nature (including, but not limited to, inventory) appurtenant to, used for or in connection with the interests described in (a) and (b) above; and (d) All right, title and interest of Grantor, to the extent attributable to the interests described in (a) and (b) above, in and under all easements, permits, licenses, servitudes, rights of way and surface waivers used for or held with respect to the interests described in (a), (b) and (c) above. 52 UNIT 2 Exhibit "A": Field Notes for UNIT 2 7.466 Acre Tract T. N. MUDD SURVEY, A-229 JOSEPH MATHERS SURVEY, A-261 Robertson County, Texas All that certain tract or parcel of land lying and being situated in Robertson County, Texas, out of and a part of the T. N. Mudd Survey, Abstract No. 229, and the Joseph Mathers Survey, Abstract No. 261, and further being out of a 2711.761 acre tract described in a Deed of Trust from Project Funding Corporation to Donald H. Snell, Trustee recorded in Volume 507, page 291 of the Deed Records of Robertson County, Texas, said tract or parcel of land herein described as follows: BEGINNING at a point for the Eastern most corner of the herein described tract from which a 5/8" steel rod at the North East corner of the T. N. Mudd Survey bears N 19 degrees 26' 31" E 7957.13 feet; THENCE S 43 degrees 04' 00" W 175.00 feet to a point for a corner; THENCE N 46 degrees 56' 00" W at 470.00 feet pass the 2-W baseline and at a total distance of 1234.83 feet to a point for a corner; THENCE N 43 degrees 04' 00" E 20.00 feet to a point for a corner; THENCE N 46 degrees 56' 00" W 148.03 feet to a point for an angle corner; THENCE S 30 degrees 04' 00" W 177.26 feet to a point for a corner; THENCE N 09 degrees 56' 00" W 393.33 feet to a point for a corner; THENCE N 80 degrees 04' 00" E 130.70 feet to a point for a corner; THENCE S 09 degrees 56' 00" E 73.99 feet to a point for an angle corner; THENCE S 46 degrees 56' 00" E 161.09 feet to a point for a corner; THENCE W 43 degrees 04' 00" E 20.00 feet to a point for a corner; THENCE S 46 degrees 56' 00" E 270.00 feet to a point for a corner; THENCE S 43 degrees 04' 00" W 20.00 feet to a point for a corner; 53 THENCE S 46 degrees 56' 00" E 1234.83 feet to the place of beginning and containing 7.466 acres of land, more or less. UNIT 2 Exhibit "B" The electrical generating plant which is located on the Site, having a nominal rating of 150 MW that burns lignite, coal or natural gas as fuel in a circulating fluidized combustion process. SECOND ELECTRIC TRANSMISSION SYSTEM All electric transmission lines acquired by the Company since the execution and delivery of the Twenty-Second Supplemental In- denture, dated as of January 15, 1992, to the Original Indenture, including towers, poles, pole lines, wires, switch racks, switch- boards, insulators and other appliances and equipment and all other property forming a part thereof or pertaining thereto, and all service lines extending therefrom; together with all real property, rights of way, easements, permits, privileges, franchises and rights over or relating to the construction, maintenance or operation thereof, through, over, under, or upon any private property or in the public streets or highways within as well as without the corporate limits of any municipal corporation including without limitation, those situate as follows: A. State of New Mexico 1. Eddy County One-third share of cost of major improvements, feed water control, spare PT, wave trap, and filter resistors at the HVDC Tie. 2. Grant County (a) LCB II relaying for the #3 115 KV transmission line at the Hidalgo Substation. (b) LCB II relaying for the # 3 115 KV transmission line at the Turquoise Substation. 54 B. State of Texas 1. Bosque County Frequency Deviation Recorder at the Olsen Substation. 2. Bosque County, Hamilton County Re-insulate the Olsen-Jonesboro 69 KV line for 138 KV. 3. Brazoria County Purchase material for rebuilding the West Columbia Main- Phillips #3 69 KV line to 138 KV. 4. Clifton Capitalize deferred FIS facilities charges. 5. League City Purchase ROW and material to build the South Shore 138 KV transmission line. 6. Lewisville (a) Obtain CCN for Lakepointe-TI 138 KV line. (b) Frequency Deviation Recorder at Highlands Station. (c) Capitalize deferred FIS facilities charges. 7. Pecos Capitalize deferred FIS facilities charges. 8. Robertson County TNP One Unit Two generating plant. 55 9. Silver City Capitalize deferred FIS facilities charges. 10. Texas City (a) Replace static wires on 69 KV transmission lines. (b) Capitalize deferred FIS facilities charges. (c) Install gang switches and bus work at GAF Station. 11. Ward County Air switch in IH-20 to Wickett 138 KV line. THIRD SUBSTATIONS All the substations and the switching stations acquired by the Company since the execution and delivery of the Twenty-Second Supplemental Indenture, dated as of January 15, 1992, to the Original Indenture for transforming, distributing or otherwise regulating electric current at any of its plants, together with all buildings, transformers, wires, insulators, appliances, equipment and all other property, real or personal, forming a part of or pertaining to or used, occupied or enjoyed in connection with any of such substations and switching stations, including without limitation, those situate as follows: A. State of New Mexico 1. Grant County Regulators on 23 KV distribution circuits. 2. Lincoln County Rebuild Sierra Blanca 12.5-4 KV Substation. B. State of Texas 1. Alvin Replacement of two 15 KV circuit breakers. 2. Fort Stockton (a) Install shielding and arresters in the Downtown Substation. (b) Installation of SEL relay at 16 St. Substation. 56 3. Glen Rose Build #3 69-22 KV Substation. 4. Hamilton Replace transformer and rebuild Hamilton City 4 KV Sub- station to 22 KV. 5. League City (a) One UPS system for the Dispatch Center Building. (b) Purchase material for the construction of the South Shore Substation. (c) Communications equipment, radios, antenna, and towers for the Dispatch Center Building. (d) Install one 12/16/20 MVA, 138-12.5 KV transformer at the Magnolia Substation. 6. Lewisville (a) Purchase two 15 KV breakers for the TI Substation. (b) One 25/33/42/47 MVA, 138-12.5 KV transformer at the West Substation in the West position. (c) Install SCADA equipment and under frequency relaying in all stations. 7. Pecos (a) Frequency Deviation Recorder at the Pecos Main Substation. (b) One 69 KV breaker at the Pecos Main Substation. (e) Install underfrequency relaying in Stafford, Kermit # 2, and the Downtown Substations. 8. Perryton One 9,375 KVA 115-12.5 KV rebuilt transformer at the Perryton #2 Substation. 9. Pilot Point Transformer, regulators, and fuses at the Pilot Point Substation. 10. Texas City (a) Purchase Mainland Substation site. (b) Upgrade East 12.5 KV bus to 2000 ampere capacity at the Heights Substation. 57 (c) Upgrade South 12.5 KV bus to 2000 ampere capacity at the Freeway Park Substation. Purchase and install one 25/33/452/47 MVA, 138-12.5 KV transformer and one 15 KV, 2000 ampere circuit breaker. (d) Install one 25/33/42/47 MVA, 138-12.5 KV trans- former at Freeway Park Substation in the North position. (e) Frequency Deviation Recorder at the Heights Substation. (f) Purchase rebuilt 12/16/20 MVA, 138-12.5 KV trans- former at the Heights Substation. 11. Spearman Addition of 115 KV bus work, air switch, and installation of Circuit-Switcher at the Spearman Substation. 12. Winkler County Two WX reclosers at the Kermit Substation. FOURTH FRANCHISES All and singular, the corporate, federal, state, municipal and other franchises, permits, consents, licenses, grants, immunities, privileges, and rights acquired by the Company since the execution and delivery of the Twenty-Second Supplemental Indenture dated as of January 15, 1992, to the Original Indenture, and now held by the Company for the construction, maintenance, and operation of electric light, heat, and power plants and systems; for the construction, maintenance; as well as all franchises, grants, immunities, privileges, and rights of the Company used or useful in the operation of the Trust Estate, including all and singular the franchises, grants, immunities, privileges, and rights of the Company granted by the governing authorities of the cities and towns enumerated in the schedule below, and by all other municipalities or political subdivisions, and all renewals, extensions, and modifications of said franchises, grants, privileges, and rights, or any of them, including: 58 A. STATE OF NEW MEXICO None B. STATE OF TEXAS Municipality Expiration Date Brazoria.................... March 24, 2022 Dickinson................... April 23, 2018 Pecos....................... May 13, 2023 59 IN WITNESS WHEREOF, Texas-New Mexico Power Company has caused this Twenty-Third Supplemental Indenture to be signed in its corporate name by its President or a Vice President and its corporate seal to be hereunto affixed and attested by its Secretary or an Assistant Secretary, and, in token of its acceptance of the trust created hereby, Continental Bank, National Association, has caused this Twenty-Third Supplemental Indenture to be signed in its corporate name by one of its Vice Presidents and its corporate seal to be hereunto affixed and attested by one of its Trust Officers, all as of the day and year first above written. TEXAS-NEW MEXICO POWER COMPANY, (CORPORATE SEAL) By D. R. BARNARD Sector Vice President and Chief Financial Officer Attest: M. D. BLANCHARD Secretary CONTINENTAL BANK, NATIONAL ASSOCIATION, as Trustee (CORPORATE SEAL) By JOHN W. PORTER Vice President Attest: JOANNE M. MURPHY Trust Officer 60 STATE OF NEW YORK ) COUNTY OF NEW YORK ) ss.: On this 28th day of September, 1993, before me, Mandel Holland, Notary Public in and for the County and State aforesaid, personally appeared D. R. BARNARD, to me personally known, and known to me to be the person whose name is subscribed to the foregoing instrument and known to me to be Sector Vice President and Chief Financial Officer of TEXAS-NEW MEXICO POWER COMPANY, a corporation, who being by me duly sworn, did say that he resides in Fort Worth, Texas, that he is Sector Vice President and Chief Financial Officer of said TEXAS-NEW MEXICO POWER COMPANY and that the seal affixed to said instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors; and said D. R. BARNARD acknowledged said instrument to be the free act and deed of said corporation, and acknowledged to me that he executed said instrument for the purposes and consideration therein expressed and as the act of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and seal of office this 28th day of September, 1993. MANDEL HOLLAND MANDEL HOLLAND (Notarial Seal) NOTARY PUBLIC, State of New York No. 4980339 Qualified in Weschester County Cert. Filed in Bronx County Commission Expires April 16,1995 61 STATE OF ILLINOIS ) COUNTY OF COOK ) ss.: On this 23rd day of September, 1993, before me, Verdine Washington, Notary Public in and for the County and State aforesaid, personally appeared JOHN W. PORTER to me personally known, and known to me to be the person whose name is subscribed to the foregoing instrument and known to me to be a Vice President of CONTINENTAL BANK, NATIONAL ASSOCIATION, a national banking association, who, being by me duly sworn, did say that he resides in Chicago, Illinois; that he is a Vice President of said Continental Bank, National Association, and that the seal affixed to said instrument is the corporate seal of said association, and that said instrument was signed and sealed in behalf of said association by authority of its Board of Directors; and said JOHN W. PORTER, acknowledged said instrument to be the free act and deed of said association, and acknowledged to me that he executed said instrument for the purposes and consideration therein expressed and as the act of said association. IN WITNESS WHEREOF, I have hereunto set my hand and seal of office this 23rd day of September, 1993. "OFFICIAL SEAL" V. WASHINGTON NOTARY PUBLIC, STATE OF ILLINOIS (Notarial Seal) MY COMMISSION EXPIRES 9-20-96 62 STATE OF NEW YORK ) COUNTY OF NEW YORK ) ss.: D. R. BARNARD, being duly sworn, deposes and says: 1. That he is Sector Vice President and Chief Financial Officer of TEXAS-NEW MEXICO POWER COMPANY, a Texas corporation, one of the corporations described in, and which executed the foregoing instrument, and is one of the officers who executed the foregoing instrument in behalf of TEXAS-NEW MEXICO POWER COMPANY. 2. That TEXAS-NEW MEXICO POWER COMPANY, one of the corporations which executed the aforementioned instrument, is a corporation engaged in the States of Texas and New Mexico in the generation, purchase, transmission, distribution and sale of electricity to the public and, consequently, is a utility as described in Section 35.01, Texas Business and Commerce Code, Revised Civil Statutes of Texas. Subscribed and sworn to before me this 28th day of September, 1993. D. R. Barnard (Notarial Seal) Mandel Holland MANDEL HOLLAND NOTARY PUBLIC, State of New York No.4980339 Qualified in Westchester County Cert. Filed in Bronx County Commission Expires April 16, 1995 EX-4 6 EXHIBIT 4(T) This Instrument Grants a Security Interest By A Utility. UTILITY SECURITY INSTRUMENT TEXAS-NEW MEXICO POWER COMPANY and IBJ SCHRODER BANK & TRUST COMPANY, as Trustee ____________________ INDENTURE AND SECURITY AGREEMENT Dated as of September 15, 1993 _____________________ Including issuance of 10-3/4% Secured Debentures, Series A, Due September 15, 2003 Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of September 15, 1993 Trust Indenture Action Section Indenture Section 310(a)(1) . . . . . . . . . . . . . . . . . . 1009 (a)(2) . . . . . . . . . . . . . . . . . . 1009 (a)(3) . . . . . . . . . . . . . . . . . . Not Applicable (a)(4) . . . . . . . . . . . . . . . . . . Not Applicable (a)(5) . . . . . . . . . . . . . . . . . . 1009 (b) . . . . . . . . . . . . . . . . . . 1008, 1010 311(a) . . . . . . . . . . . . . . . . . . 1013 (b) . . . . . . . . . . . . . . . . . . 1013 (b)(2) . . . . . . . . . . . . . . . . . . 1103(a)(2) 1103(b) 312(a) . . . . . . . . . . . . . . . . . . 1101 1102(a) (b) . . . . . . . . . . . . . . . . . . 1102(b) (c) . . . . . . . . . . . . . . . . . . 1102(c) 313(a) . . . . . . . . . . . . . . . . . . 1103(a) (b)(1) . . . . . . . . . . . . . . . . . . 1103(d) (b)(2) . . . . . . . . . . . . . . . . . . 1103(b) (c) . . . . . . . . . . . . . . . . . . 1103(a), 1103(b) (d) . . . . . . . . . . . . . . . . . . 1103(c) 314(a) . . . . . . . . . . . . . . . . . . 1104, 1407 (b) . . . . . . . . . . . . . . . . . . 1616 (c)(1) . . . . . . . . . . . . . . . . . . 102 (c)(2) . . . . . . . . . . . . . . . . . . 102 (c)(3) . . . . . . . . . . . . . . . . . . Not Applicable (d) . . . . . . . . . . . . . . . . . . 601(b) (e) . . . . . . . . . . . . . . . . . . 102 315(a) . . . . . . . . . . . . . . . . . . 1001(a) (b) . . . . . . . . . . . . . . . . . . 1002 1103(a)(6) (c) . . . . . . . . . . . . . . . . . . 1001(b) (d) . . . . . . . . . . . . . . . . . . 1001(c) (d)(1) . . . . . . . . . . . . . . . . . . 1001(a)(1) (d)(2) . . . . . . . . . . . . . . . . . . 1001(c)(2) (d)(3) . . . . . . . . . . . . . . . . . . 1001(c)(3) (e) 914 316(a)(1)(A). . . . . . . . . . . . . . . . . 902 912 (a)(1)(B). . . . . . . . . . . . . . . . . 913 (a)(2) . . . . . . . . . . . . . . . . . . Not Applicable (b) . . . . . . . . . . . . . . . . . . 908 (c) . . . . . . . . . . . . . . . . . . 104(e) 317(a)(1) . . . . . . . . . . . . . . . . . . 903 (a)(2) . . . . . . . . . . . . . . . . . . 904 (b) . . . . . . . . . . . . . . . . . . 1403 318(a) . . . . . . . . . . . . . . . . . . 107 ________________ NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture TABLE OF CONTENTS ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION . . . . . . . . . . . . 2 SECTION 101. Definitions. . . . . . . . . . . . . . . . . . . . . 2 SECTION 102. Compliance Certificates and Opinions.. . . . . . . . 12 SECTION 103. Form of Documents Delivered to Trustee.. . . . . . . 12 SECTION 104. Acts of Holders. . . . . . . . . . . . . . . . . . . 13 SECTION 105. Notices, Etc., to Trustee and Company. . . . . . . . 14 SECTION 106. Notice to Holders; Waiver. . . . . . . . . . . . . . 15 SECTION 107. Conflict with Trust Indenture Act. . . . . . . . . . 15 SECTION 108. Effect of Headings and Table of Contents.. . . . . . 15 SECTION 109. Successors and Assigns.. . . . . . . . . . . . . . . 16 SECTION 110. Separability Clause. . . . . . . . . . . . . . . . . 16 SECTION 111. Benefits of Indenture. . . . . . . . . . . . . . . . 16 SECTION 112. Governing Law. . . . . . . . . . . . . . . . . . . . 16 SECTION 113. Legal Holidays.. . . . . . . . . . . . . . . . . . . 16 ARTICLE TWO SECURITY FORMS . . . . . . . . . . . . . . 17 SECTION 201. Forms Generally. . . . . . . . . . . . . . . . . . . 17 SECTION 202. Form of Face of Security.. . . . . . . . . . . . . . 18 SECTION 203. Form of Reverse of Security. . . . . . . . . . . . . 19 SECTION 204. Form of Trustee's Certificate of Authentication.. . . . . . . . . . . . . . . . . . . 23 ARTICLE THREE THE SECURITIES . . . . . . . . . . . . . . 23 SECTION 301. Limitations on Issuance; Issuable in Series. . . . . 23 SECTION 302. Terms of Particular Series.. . . . . . . . . . . . . 24 SECTION 303. Denominations. . . . . . . . . . . . . . . . . . . . 26 SECTION 304. Execution, Authentication, Delivery and Dating.. . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 305. Temporary Securities.. . . . . . . . . . . . . . . . 28 SECTION 306. Registration, Transfer and Exchange. . . . . . . . . 29 SECTION 307. Mutilated, Destroyed, Lost and Stolen Securities.. . . . . . . . . . . . . . . . . . . . . 30 SECTION 308. Payment of Interest; Interest Rights Preserved. . . . . . . . . . . . . . . . . . . . . . 31 SECTION 309. Persons Deemed Owners. . . . . . . . . . . . . . . . 32 SECTION 310. Cancellation.. . . . . . . . . . . . . . . . . . . . 33 SECTION 311. Computation of Interest. . . . . . . . . . . . . . . 33 ARTICLE FOUR TERMS AND ISSUE OF SERIES A SECURITIES . . . . . . . . 33 SECTION 401. Specific Title, Terms and Forms. . . . . . . . . . . 33 SECTION 402. Redemption.. . . . . . . . . . . . . . . . . . . . . 34 SECTION 403. Authentication and Delivery. . . . . . . . . . . . . 34 ARTICLE FIVE AUTHENTICATION AND DELIVERY OF ADDITIONAL SECURITIES. . . . . 35 SECTION 501. Authentication and Delivery of Additional Securities upon Basis of Available or Additional Collateral. . . . . . . . . . . . . . . . 35 ARTICLE SIX RELEASES. . . . . . . . . . . . . . . . 38 SECTION 601. General Provisions . . . . . . . . . . . . . . . . . 38 SECTION 602. Termination. . . . . . . . . . . . . . . . . . . . . 40 SECTION 603. Terms of Release.. . . . . . . . . . . . . . . . . . 41 ARTICLE SEVEN [Reserved] . . . . . . . . . . . . . . . 41 ARTICLE EIGHT DEFEASANCE . . . . . . . . . . . . . . . 41 SECTION 801. Satisfaction and Discharge of Indenture. . . . . . . 41 SECTION 802. Application of Trust Money.. . . . . . . . . . . . . 43 SECTION 803. Satisfaction, Discharge and Defeasance of Securities of any Series.. . . . . . . . . . . . . . 44 ARTICLE NINE REMEDIES. . . . . . . . . . . . . . . . 46 SECTION 901. Events of Default. . . . . . . . . . . . . . . . . . 46 SECTION 902. Acceleration of Maturity; Rescission andAnnulment.. . . . . . . . . . . . . . . . . . . . 49 SECTION 903. Collection of Indebtedness and Suits for Enforcement by Trustee.. . . . . . . . . . . . . . . 50 SECTION 904. Trustee May File Proofs of Claim.. . . . . . . . . . 51 SECTION 905. Trustee May Enforce Claims Without Possession of Securities. . . . . . . . . . . . . . . . . . . . 52 SECTION 906. Application of Money Collected.. . . . . . . . . . . 52 SECTION 907. Limitation on Suits. . . . . . . . . . . . . . . . . 53 SECTION 908. Unconditional Right of Holders to Receive Principal, Premium and Interest. . . . . . . . . . . 54 SECTION 909. Restoration of Rights and Remedies.. . . . . . . . . 54 SECTION 910. Rights and Remedies Cumulative.. . . . . . . . . . . 54 SECTION 911. Delay or Omission Not Waiver.. . . . . . . . . . . . 55 SECTION 912. Control by Holders.. . . . . . . . . . . . . . . . . 55 SECTION 913. Waiver of Past Defaults. . . . . . . . . . . . . . . 55 SECTION 914. Undertaking for Costs. . . . . . . . . . . . . . . . 56 SECTION 915. Waiver of Stay or Extension Laws.. . . . . . . . . . 56 SECTION 916. Delay in Instituting Bankruptcy Proceedings. . . . . 56 ARTICLE TEN THE TRUSTEE. . . . . . . . . . . . . . . 57 SECTION 1001. Certain Duties and Responsibilities. . . . . . . . . 57 SECTION 1002. Notice of Defaults.. . . . . . . . . . . . . . . . . 59 SECTION 1003. Certain Rights of Trustee. . . . . . . . . . . . . . 60 SECTION 1004. Not Responsible for Recitals or Issuance of Securities.. . . . . . . . . . . . . . . . . . . . . 61 SECTION 1005. May Hold Securities. . . . . . . . . . . . . . . . . 61 SECTION 1006. Money Held in Trust. . . . . . . . . . . . . . . . . 62 SECTION 1007. Compensation and Reimbursement.. . . . . . . . . . . 62 SECTION 1008. Disqualification; Conflicting Interests. . . . . . . 62 SECTION 1009. Corporate Trustee Required; Eligibility. . . . . . . 63 SECTION 1010. Resignation and Removal; Appointment of Successor. . . . . . . . . . . . . . . . . . . . . . 63 SECTION 1011. Acceptance of Appointment by Successor.. . . . . . . 65 SECTION 1012. Merger, Conversion, Consolidation or Succession to Business.. . . . . . . . . . . . . . . 66 SECTION 1013. Preferential Collection of Claims Against Company. . . . . . . . . . . . . . . . . . . . . . . 67 SECTION 1014. Authenticating Agents. . . . . . . . . . . . . . . . 67 ARTICLE ELEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY . . . . . 69 SECTION 1101. Company to Furnish Trustee Names and Addresses of Holders.. . . . . . . . . . . . . . . . 69 SECTION 1102. Preservation of Information; Communications to Holders . . . . . . . . . . . . . . . . . . . . . 69 SECTION 1103. Reports by Trustee.. . . . . . . . . . . . . . . . . 71 SECTION 1104. Reports by Company.. . . . . . . . . . . . . . . . . 72 ARTICLE TWELVE CONSOLIDATION, MERGER, CONVEYANCE, SALE OR LEASE. . . . . . 73 SECTION 1201. Company May Consolidate, Etc., Only on Certain Terms.. . . . . . 73 SECTION 1202. Successor Corporation to be Substituted. . . . . . . 74 ARTICLE THIRTEEN SUPPLEMENTAL INDENTURES AND AMENDMENTS TO CREDIT AGREEMENT AND OTHER DOCUMENTS. . . . . . . . 74 SECTION 1301. Supplemental Indentures without Consent of Holders. . . . . . . . . . . . . . . . . . . . . . . 74 SECTION 1302. Supplemental Indentures with Consent of Holders. . . . . . . . . . . . . . . . . . . . . . . 76 SECTION 1303. Amendments to the Credit Agreements, etc., without Consent of Holders.. . . . . . . . . . . . . 77 SECTION 1304. Amendments to Credit Agreements, etc. with Consent of Holders.. . . . . . . . . . . . . . . . . 79 SECTION 1305. Consideration for Supplements, Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . . 80 SECTION 1306. Execution of Supplemental Indentures.. . . . . . . . 82 SECTION 1307. Effect of Supplemental Indentures. . . . . . . . . . 82 SECTION 1308. Conformity with Trust Indenture Act. . . . . . . . . 82 SECTION 1309. Reference in Securities to Supplemental Indentures.. . . . . . . . . . . . . . . . . . . . . 83 ARTICLE FOURTEEN COVENANTS . . . . . . . . . . . . . . . 83 SECTION 1401. Payment of Principal, Premium and Interest.. . . . . 83 SECTION 1402. Maintenance of Office or Agency. . . . . . . . . . . 83 SECTION 1403. Money for Securities Payments to Be Held in Trust. . . . . . . . . . . . . . . . . . . . . . . . 84 SECTION 1404. Corporate Existence. . . . . . . . . . . . . . . . . 85 SECTION 1405. Maintenance of Properties. . . . . . . . . . . . . . 86 SECTION 1406. Payment of Taxes and Other Claims. . . . . . . . . . 86 SECTION 1407. Statement by Officers as to Default. . . . . . . . . 86 SECTION 1408. Defeasance of Certain Obligations. . . . . . . . . . 87 SECTION 1409. Tender for the Securities upon Change of Control Event. . . . . . . . . . . . . . . . . . . . 88 SECTION 1410. Waiver of Certain Covenants. . . . . . . . . . . . . 90 SECTION 1411. Deposit of Collateral. . . . . . . . . . . . . . . . 90 SECTION 1412. Ownership of Subsidiary Stock. . . . . . . . . . . . 90 SECTION 1413. Project Documents. . . . . . . . . . . . . . . . . . 91 ARTICLE FIFTEEN REDEMPTION OF SECURITIES. . . . . . . . . . . . 91 SECTION 1501. General Applicability of Article.. . . . . . . . . . 91 SECTION 1502. Election to Redeem; Notice to Trustee. . . . . . . . 91 SECTION 1503. Selection by Trustee of Securities to be Redeemed.. . . . . . . . . . . . . . . . . . . . . . 91 SECTION 1504. Notice of Redemption.. . . . . . . . . . . . . . . . 92 SECTION 1505. Deposit of Redemption Price. . . . . . . . . . . . . 93 SECTION 1506. Securities Payable on Redemption Date. . . . . . . . 93 SECTION 1507. Securities Redeemed in Part. . . . . . . . . . . . . 94 ARTICLE SIXTEEN PLEDGE OF SECURITY . . . . . . . . . . . . . 94 SECTION 1601. Pledge of Collateral.. . . . . . . . . . . . . . . . 94 SECTION 1602. Representations in Respect of the Collateral.. . . . . . . . . . . . . . . . . . . . . 95 SECTION 1603. Further Assurances.. . . . . . . . . . . . . . . . . 96 SECTION 1604. Other Financing Statements and Liens.. . . . . . . . 97 SECTION 1605. Preservation of Rights.. . . . . . . . . . . . . . . 97 SECTION 1606. Voting, Consensual and Other Powers. . . . . . . . . 97 SECTION 1607. Payments on the Pledged Notes; Investments; Application and Holding of Collateral. . . . . . . . 97 SECTION 1608. Additional Remedies. . . . . . . . . . . . . . . . .100 SECTION 1609. Removals.. . . . . . . . . . . . . . . . . . . . . .102 SECTION 1610. Private Sale.. . . . . . . . . . . . . . . . . . . .102 SECTION 1611. Deficiency.. . . . . . . . . . . . . . . . . . . . .102 SECTION 1612. Application of Proceeds. . . . . . . . . . . . . . .103 SECTION 1613. Attorney-in-Fact.. . . . . . . . . . . . . . . . . .103 SECTION 1614. Perfection.. . . . . . . . . . . . . . . . . . . . .103 SECTION 1615. Expenses.. . . . . . . . . . . . . . . . . . . . . .103 SECTION 1616. Opinions of Counsel as to Perfection.. . . . . . . .104 SECTION 1617. Additional Deposits of Cash Collateral.. . . . . . .104 TESTIMONIUM SIGNATURES AND SEALS ACKNOWLEDGMENTS ANNEX I Form of Debenture INDENTURE AND SECURITY AGREEMENT, dated as of September 15, 1993, between TEXAS-NEW MEXICO POWER COMPANY, a corporation duly organized and existing under the laws of the State of Texas (herein called the "Company"), having its principal office at 4100 International Plaza, Fort Worth, Texas 76113, and IBJ SCHRODER BANK & TRUST COMPANY, a New York banking corporation, as trustee (herein called the "Trustee"), having its corporate trust office at One State Street Plaza, New York, New York 10004. RECITALS OF THE COMPANY A. The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of up to $417.75 million aggregate principal amount of secured debentures (herein called the "Securities") issuable from time to time in one or more series. B. The Company desires to create a series of Securities in an aggregate principal amount of $140,000,000 to be designated the "10-3/4% Secured Debentures, Series A, Due September 15, 2003" (the "Series A Securities"), and all action on the part of the Company necessary to authorize the issuance of the Series A Securities under this Indenture has been duly taken. C. Prior to the issuance of any Securities, the Credit Agreements (such term and other capitalized terms used herein having the meanings specified in Section 101) will be amended to provide among other things for the issue of the additional Pledged Notes in place of certain notes theretofore issued thereunder. D. The Replacement Notes issued pursuant to the Unit 1 Credit Agreement shall be secured pursuant to the Unit 1 Financing Facility Security Documents. E. The Replacement Notes issued pursuant to the Unit 2 Credit Agreement shall be secured pursuant to the Unit 2 Financing Facility Security Documents. F. In connection with the issuance of the Series A Securities, the Company will deliver a Replacement Note to the Trustee pursuant to Article Sixteen as security for the performance of its obligations hereunder. G. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities or series thereof, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles as applied in the United States of America, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of such computation; and (4) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain terms, used principally in Article Ten, are defined in that Article. "Act," when used with respect to any Holder, has the meaning specified in Section 104. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Application" means an application for the authentication and delivery of Securities, the release of property or the withdrawal of cash under any provision of this Indenture and shall consist of, and shall not be deemed complete until there shall have been delivered to the Trustee, such cash, bonds, securities and documents as are required by such provision to establish the right of the Company to the action applied for. The date of a particular Application shall be deemed to be the date of completion of all such deliveries to the Trustee and not the date on any particular document so delivered. "Authenticating Agent" means any Person authorized to authenticate and deliver Securities on behalf of the Trustee pursuant to Section 1014. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that Board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day," when used with respect to any office or agency maintained by the Company pursuant to Section 1402, means each day which is not a Saturday, a Sunday or a day on which banking institutions in the location of such office or agency are authorized or obligated by law to remain closed. "Change of Control Event" means an event or the last of a series of events by which (i) any "person" or group of persons (as such term is used in Section 13(d) and 14(d) of the Exchange Act and the rules and regulations of the Securities and Exchange Commission relating to such sections, as amended from time to time), other than TNP Enterprises, Inc. ("TNPE") with respect to the shares of the Company, is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 40% of the total voting power of all outstanding Common Stock of TNPE or of the Company; (ii) the Company consolidates with or merges into another corporation (other than any such transaction between the Company and a wholly owned Subsidiary of the Company) and the Company is not the surviving entity, or the Company conveys, transfers or leases substantially all of its assets; (iii) TNPE or any subsidiary of TNPE, during any period of 12 consecutive months, purchases or otherwise acquires, directly or indirectly, beneficial ownership of 30% or more of the outstanding Common Stock of TNPE; (iv) during any period of 24 consecutive months, whether commencing before or after the date hereof, but ending on or after the date hereof, (a) individuals who at the beginning of such 24-month period constituted the board of directors of TNPE, and (b) any new director(s) who were elected or recommended for election to the board of directors of TNPE by a vote of at least a majority of the directors then still in office who either were directors at the beginning of such 24-month period or whose election was previously so approved or so recommended, cease for any reason to constitute a majority of the board of directors of TNPE; or (v) on any day (a "Calculation Date"), the Company makes any distribution or distributions of cash, property or securities (other than regular quarterly dividends on common or preferred stock) to the common stockholders, or purchases or otherwise acquires outstanding common stock of TNPE, and the sum of the fair market value of such distribution or purchase, plus the fair market value of all other such distributions and purchases which have occurred during the period of 12 consecutive months ending on such Calculation Date, exceeds 30% of the fair market value of the outstanding common stock of TNPE. This percentage is calculated on each Calculation Date by determining the percentage of the fair market value of TNPE's outstanding common stock as of such Calculation Date which is represented by the fair market value of the distributions and purchases which have occurred on such date, and adding to that percentage all of the percentages which have been similarly calculated on the dates of all such distributions and purchases during the period of 12 consecutive months ending on such Calculation Date. "Collateral" has the meaning specified in Section 1601. "Commercial Paper" means commercial paper evidenced by certificated securities (within the meaning of Section 8-102(1) (a) of the Uniform Commercial Code) of corporate issuers organized under the laws of the United States of America or any political subdivision thereof maturing no more than 270 days from the date of issuance thereof and having as of any date of determination from any nationally recognized credit rating agency the highest rating obtainable from such agency. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its President or a Vice President, or, if authorized by a power of attorney executed by any of such officers, by such other person as may be authorized in such power of attorney, and delivered to the Trustee. "Corporate Trust Office" means the principal corporate trust office of the Trustee in The Borough of Manhattan, The City of New York, New York, at which at any particular time its corporate trust business shall be administered, which office at the date of execution of this Indenture is located at One State Street Plaza, New York, New York 10004. "Credit Agreements" means, collectively, the Unit 1 Credit Agreement and the Unit 2 Credit Agreement. "Credit Agreement Notes" means, collectively, the "Notes," as defined in the Unit 1 Credit Agreement, and the "Notes," as defined in the Unit 2 Credit Agreement. The term "corporation" includes corporations, associations, companies and business trusts. "Default" means any event which is, or that with the passage of time or the giving of notice or both would become, an Event of Default with respect to Securities of a series. "Defaulted Interest" has the meaning specified in Section 308. "Event of Default" has the meaning specified in Section 901. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. "Holder" means a Person in whose name a Security is registered in the Security Register. "IBJ" means IBJ Schroder Bank & Trust Company, a New York banking corporation, acting in its individual capacity, and any successor Trustee hereunder acting in its individual capacity. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Interest Payment Date," when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security. "Lien" means, as to any Person, a mortgage, pledge, lien, encumbrance, charge or adverse claim affecting title or resulting in an encumbrance against real or personal property, or a security interest of any kind (including any conditional sale or other title retention agreement) any lease in the nature thereof, any option or other agreement to sell and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. "Maturity," when used with respect to any Security, means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Officers' Certificate" means a certificate signed by the President or a Vice President and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company; provided, that in respect of Section 1407(i), Officers' Certificate means a certificate signed by the principal executive officer, principal financial officer or principal accounting officer, of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel, who may be an employee of or counsel for the Company, or may be other counsel satisfactory to the Trustee. "Outstanding," when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Securities which have been paid pursuant to Section 307 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided that, in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned as described in the preceding sentence which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the principal of or interest on any Securities on behalf of the Company. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment," when used with respect to the Securities of any series, means the place or places where the principal of and premium, if any and interest, if any, on the Securities of that series are payable and where such Securities may be registered or transferred as specified in or as contemplated by Section 302(6). "Pledged Note" means, a Replacement Note, pledged or required to be pledged to the Trustee pursuant to Article Sixteen. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 307 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Project Documents" means, collectively, the "Project Documents," as defined in the Unit 1 Credit Agreement, and the "Project Documents," as defined in the Unit 2 Credit Agreement. "Project Note" means, a "Project Note" as defined in the Unit 1 Credit Agreement, and a "Project Note" as defined in the Unit 2 Credit Agreement. "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price," when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture, exclusive of accrued and unpaid interest. "Regular Record Date" for the interest payable on any Interest Payment Date on the Securities means the date specified for that purpose as contemplated by Section 302. "Release Certificate" has the meaning specified in Section 601. "Replacement Note" means, a Replacement Note (i) as defined in, and issued pursuant to, the Unit 1 Credit Agreement, or (ii) as defined in, and issued pursuant to, the Unit 2 Credit Agreement. "Responsible Officer," when used with respect to the Trustee, means the Chairman or Vice Chairman of the Board of Directors, the Chairman or the Vice Chairman of the Executive Committee of the Board of Directors, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above-designated officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Secured Obligations" means, collectively, (i) the principal of, and premium, if any and interest on the Securities and (ii) all obligations of the Company to the Trustee under Sections 1007 and 1615. "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture. "Security Register" and "Security Registrar" have the respective meanings specified in Section 306. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 308. "Stated Maturity," when used with respect to any Security or any installment of interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of interest is due and payable. "Subsidiary" means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed, except as provided in Section 1308. "Uniform Commercial Code" means the Uniform Commercial Code as in effect from time to time in the State of New York. "Unit 1" means the first of two 150-megawatt, circulating fluidized bed units which comprise TNP One, an electrical generating facility located in Robertson County, Texas, and all related property interests included in the term "Mortgage Trust Estate," as defined in the Unit 1 First Lien Mortgage. "Unit 1 Banks" means the banks or other holders of Project Notes or participations therein from time to time parties to the Unit 1 Credit Agreement. "Unit 1 Credit Agreement" means the Unit 1 First Amended and Restated Project Loan and Credit Agreement dated as of January 8, 1992, among Texas-New Mexico Power Company, Texas Generating Company, the Unit 1 Banks and The Chase Manhattan Bank (National Association), as agent (in such capacity, together with its successors in such capacity, the "Agent"), as the same may be amended, corrected, supplemented, extended or restated from time to time. "Unit 1 Facility Purchase Agreement" shall mean the First Amended and Restated Facility Purchase Agreement, between TNP and TGC, dated as of January 8, 1992, as the same may be amended, corrected, supplemented, extended or restated from time to time. "Unit 1 Financing Facility Security Documents" means (i) the Unit 1 First Lien Mortgage, (ii) the Second Lien Mortgage and Deed of Trust dated as of December 1, 1987, executed and delivered by the Company to Donald H. Snell as Mortgage Trustee, (iii) the Assignment and Security Agreement between the Company and the Agent under the Unit 1 Credit Agreement dated as of December 1, 1987 and (iv) the Assignment and Security Agreement between Project Funding Corporation and the Agent under the Unit 1 Credit Agreement dated as of December 1, 1987, as each of the same has been and further may be amended, corrected, supplemented or extended. "Unit 1 First Lien Mortgage" shall mean the Mortgage and Deed of Trust dated to be effective December 1, 1987, between Project Funding Corporation, as mortgagor, and Donald H. Snell, as Mortgage Trustee, creating a first lien on Unit 1. "Unit 2" means the second of two 150-megawatt, circulating fluidized bed units which comprise TNP One, and all related property interests included in the term "Mortgage Trust Estate," as defined in the Unit 2 First Lien Mortgage. "Unit 2 Banks" means the banks or other holders of Project Notes or participations therein from time to time parties to the Unit 2 Credit Agreement. "Unit 2 Credit Agreement" means the Unit 2 First Amended and Restated Project Loan and Credit Agreement dated as of January 8, 1992 among Texas-New Mexico Power Company, Texas Generating Company II, the Unit 2 Banks and The Chase Manhattan Bank (National Association), as Agent, as the same may be amended, corrected, supplemented, extended or restated from time to time. "Unit 2 Facility Purchase Agreement" shall mean the First Amended and Restated Facility Purchase Agreement, between TNP and TGC II, dated as of January 8, 1992, as the same may be amended, corrected, supplemented, extended or restated from time to time. "Unit 2 Financing Facility Security Documents" means (i) the Unit 2 First Lien Mortgage, (ii) the Second Lien Mortgage and Deed of Trust dated as of December 1, 1987, executed and delivered by the Company to Donald H. Snell, as Mortgage Trustee, (iii) the Assignment and Security Agreement between the Company and the Agent under the Unit 2 Credit Agreement, dated as of October 1, 1988, and (iv) the Assignment and Security Agreement between Texas PFC, Inc. and the Agent under the Unit 2 Credit Agreement, dated as of October 1, 1988, as each of the same have been and may further be amended, corrected, supplemented or extended. "Unit 2 First Lien Mortgage" shall mean the Mortgage and Deed of Trust dated to be effective as of October 1, 1988, between Texas PFC, Inc., as mortgagor, and Donald H. Snell, as Mortgage Trustee, creating a first lien on Unit 2. "U.S. Government Obligations" means direct obligations of the United States of America (denominated in such coin or currency of the United States of America as is at the time of payment legal tender for the payment of public and private debts) for the payment of which its full faith and credit is pledged, or obligations of a person controlled or supervised by and acting as an agency or instrumentality of the United States of America and the payment of which is unconditionally guaranteed by the United States of America, and shall also include a depositary receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of a holder of a depositary receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depositary receipt. "Vice President," when used with respect to the Company or the Trustee, means any vice president or assistant vice president, whether or not designated by a number or a word or words added before or after the title "vice president" or "assistant vice president". SECTION 102. Compliance Certificates and Opinions. Except as otherwise expressly provided by this Indenture, upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than the Officers' Certificate delivered pursuant to Section 1407(i)) shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with; and (5) in the case of an Officers' Certificate, a statement that no Event of Default exists under this Indenture. SECTION 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 104. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in Person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 1001) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument, writing or proxy may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument, writing or proxy acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his or her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his or her authority. The fact and date of the execution of any such instrument, writing or proxy, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The ownership of Securities shall be proved by the Security Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. (e) The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to take any action under this Indenture by vote or consent. Such record date shall be the later of 30 days prior to the first solicitation of such consent or vote or the date of the most recent list of Holders furnished to the Trustee pursuant to Section 1101 prior to such solicitation. If a record date is fixed, those Persons who were Holders of Securities at such record date (or their duly designated proxies), and only those Persons, shall be entitled to take such action by vote or consent or to revoke any vote or consent previously given, whether or not such Persons continue to be Holders after such record date; provided, however, that unless such vote or consent is obtained from the Holders (or their duly designated proxies) of the requisite principal amount of Outstanding Securities prior to the date which is the 90th day after such record date, any such vote or consent previously given shall automatically and without further action by any Holder be cancelled and of no further effect. SECTION 105. Notices, Etc., to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration Department, or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this Indenture or at any other address previously furnished in writing to the Trustee by the Company. SECTION 106. Notice to Holders; Waiver. Where this Indenture provides for notice of any event to Holders, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his or her address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 107. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 108. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 109. Successors and Assigns. All covenants and agreements in this Indenture by any party hereto shall bind such parties and its successors and assigns, whether so expressed or not. SECTION 110. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 111. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 112. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the internal laws of the State of New York. SECTION 113. Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day with respect to any office or agency maintained by the Company pursuant to Section 1402, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal and premium, if any, need not be made at such office or agency on such date, but may be made on the next succeeding Business Day at such office or agency with the same force and effect as if made on the Interest Payment Date, Redemption Date or at the Stated Maturity; provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be. ARTICLE TWO SECURITY FORMS SECTION 201. Forms Generally. The Securities of each series shall be in substantially the form set forth in this Article, or in such other form as shall be established by or pursuant to Article Four or in a Board Resolution or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officer or officers executing such Securities, as evidenced by the officer's or officers' execution of the Securities. If the form of Securities of any series is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or Assistant Secretary of the Company, or any other authorized officer of the Company, and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 304 for the authentication and delivery of such Securities. Certificates of authentication relating to the Securities shall be in substantially the form set forth in this Article or in Section 1014. The definitive Securities shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officer or officers executing such Securities, as evidenced by the officer's or officers' execution of such Securities. SECTION 202. Form of Face of Security. The face of the Security shall be in substantially the form set forth below: TEXAS-NEW MEXICO POWER COMPANY % Secured Debentures, Series ___, Due No.__________ $__________ TEXAS-NEW MEXICO POWER COMPANY, a corporation duly organized and existing under the laws of the State of Texas (herein called the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to __________________, or registered assigns, the principal sum of _________ Dollars on _______________, and to pay interest thereon from _______________, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on ________________ and _____________ in each year, commencing _______________, at the rate per annum provided in the title hereof, until the principal hereof is paid or made available for payment, and, subject to the terms of the Indenture, at the rate per annum provided in the title hereof on any overdue principal and premium, if any, and (to the extent that the payment of such interest shall be legally enforceable) on any overdue installment of interest. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the ___________ or ___________ (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either (i) be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, in which event notice whereof shall be given to Holders not less than 10 days prior to such Special Record Date, or (ii) be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Company maintained for that purpose in The Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts; provided that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: [Seal] TEXAS-NEW MEXICO POWER COMPANY By_______________________ [Title] SECTION 203. Form of Reverse of Security. The reverse of the Security shall be in substantially the form set forth below: TEXAS-NEW MEXICO POWER COMPANY ______% Secured Debentures, Series ____, Due _______ This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series limited in aggregate principal amount to $417.75 million under an Indenture and Security Agreement, dated as of September 15, 1993 (herein called the "Indenture"), between the Company and IBJ Schroder Bank & Trust Company, as trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. As provided in the Indenture, the Securities are issuable in series which may vary as in the Indenture provided or permitted. This Security is one of the series designated on the face hereof [, limited in aggregate principal amount to $___________]. [If applicable, insert This security is not subject to redemption prior to maturity.] [If applicable, insert The Securities of this series are subject to redemption upon not less than 30 nor more than 60 days' notice by mail to the Holders of such Securities at their addresses in the Security Register for such series, as a whole or in part, at the election of the Company, at the following Redemption Prices (expressed as percentages of the principal amount): If redeemed [on or before ______________, ____%, and if redeemed] during the 12-month period beginning __________, of the years indicated: Year Redemption Price Year Redemption Price and thereafter at Redemption Price equal to ___% of the principal amount, together in the case of any such redemption with accrued and unpaid interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture. If this Security be called for redemption and payment duly provided therefor as specified in the Indenture, interest shall cease to accrue on the date fixed for redemption.] [In the event of a redemption of this Security in part only, a new Security or Securities of this series and of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon cancellation hereof.] The Indenture contains provisions for defeasance of (a) the entire indebtedness evidenced by this Security and (b) certain restrictive covenants, in either case upon compliance by the Company with certain conditions set forth therein. Pursuant to Article Sixteen of the Indenture, the Company has delivered certain collateral to the Trustee. Such collateral, and certain other collateral that may be received by the Trustee in respect thereof, shall secure the performance of the Company's obligations under the Securities. Under certain circumstances, from time to time property comprising the Collateral may be released. Upon meeting certain requirements, the Company may issue additional Securities which will be secured pari passu by the Collateral. If an Event of Default shall occur and be continuing, the principal of the Securities, and all accrued and unpaid interest thereon, may be declared due and payable in the manner and with the effect provided in the Indenture. With limited exceptions, the Trustee may not file or join in the filing of any bankruptcy or similar petition for a period of six months from the date on which an Event of Default shall have occurred under the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of 66-2/3% in principal amount of the Securities at the time Outstanding (as defined in the Indenture) of all series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, by written consent to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. The Indenture also permits, with certain exceptions as therein provided, the Company and the Trustee to enter into one or more amendments, modifications or waivers or supplements to the Credit Agreements, the Pledged Notes and the Project Documents, as defined in the Indenture, with the consent of the Holders of at least 51% in principal amount of the Securities at the time Outstanding. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company maintained for that purpose, which at the date hereof, shall be the Corporate Trust Office, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his or her attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities of this series are issuable only in registered form without coupons in denominations of $_____ and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. This Security shall be governed by and construed in accordance with the laws of the State of New York. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. SECTION 204. Form of Trustee's Certificate of Authentication. The Trustee's Certificate of Authentication shall be in substantially the form set forth below: This is one of the Securities of the series designated herein and referred to in the within-mentioned Indenture. ___________________________________, as Trustee By___________________________ Authorized Signatory ARTICLE THREE THE SECURITIES SECTION 301. Limitations on Issuance; Issuable in Series. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited in aggregate principal amount to $417.75 million. The Securities may be issued in series as from time to time authorized by the Board of Directors. With respect to the Securities of any particular series, the Company may incorporate in or add to the general title of such Securities any words, letters or figures to distinguish that series. of the series shall be payable and where such Securities may be registered or transferred; (7) if applicable, the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company; (8) the obligation, if any, of the Company to redeem or purchase Securities of the series at the option of a Holder thereof, and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (9) if other than in denominations of $1,000 and any integral multiple thereof, the denominations in which Securities of the series shall be issuable; (10) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 902; (11) if the principal of (and premium, if any) or interest, if any, on the Securities of the series are to be payable, at the election of the Company or a Holder thereof, in a coin or currency other than that in which the Securities are stated to be payable, the period or periods within which, and the terms and conditions upon which, such election may be made; (12) if the amount of payments of principal of (and premium, if any) or interest, if any, on the Securities of the series may be determined with reference to an index based on a coin or currency other than that in which the Securities are stated to be payable, the manner in which such amounts shall be determined; (13) any provisions permitted by this Indenture relating to Events of Default or covenants of the Company with respect to such series of Securities; and (14) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture). The several series of Securities may differ from the Series A Securities and as between series in any respect not in conflict with the provisions of this Indenture. All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to the Board Resolution referred to above and (subject to Section 304) set forth in the Officers' Certificate referred to above or in any such indenture supplemental hereto. All Securities of any one series need not be issued at one time and, unless otherwise provided, a series may be reopened for issuances of additional Securities of such series or to establish additional terms of such series of Securities. Payment of the principal of and interest on the Securities will be made at the office or agency of the Company maintained for that purpose pursuant to Section 1402, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts; provided that, at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. If any of the terms of the series, including the form of Security of such series, is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary or other authorized officer of the Company, and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 304 for the authentication and delivery of such series of Securities. If all of the Securities of any series established by action taken pursuant to a Board Resolution are not to be issued at one time, it shall not be necessary to deliver a record of such action at the time of issuance of each Security of such series, but an appropriate record of such action shall be delivered at or before the time of issuance of the first Security of such series. SECTION 303. Denominations. The Securities of each series shall be issuable in registered form without coupons, except as otherwise expressly provided in a supplemental indenture hereto, in such denominations as shall be specified as contemplated by Section 302. In the absence of any such provisions with respect to the Securities of any series, the Securities of such series shall be issuable in denominations of $1,000 and in integral multiples thereof. SECTION 304. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its President or one of its Vice Presidents, under its corporate seal reproduced thereon, and which need not be attested. The Securities of any series shall be executed by such additional officer, if any, as shall be specified pursuant to a Board Resolution. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signature of any individual who was at any time the proper officer of the Company shall bind the Company, notwithstanding that such individual has ceased to hold such office prior to the authentication and delivery of such Securities or did not hold such office at the date of authentication of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities as in this Indenture provided and not otherwise. If the form or terms of the Securities of the series have been established in or pursuant to one or more Board Resolutions as permitted by Sections 201 and 302, in authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Sections 1001 and 1003) shall be fully protected in relying upon, an Opinion of Counsel stating, (a) if the form of such Securities has been established by or pursuant to Board Resolution as permitted by Section 201, that such form has been established in conformity with the provisions of this Indenture; (b) if the terms of such Securities have been established by or pursuant to Board Resolution as permitted by Section 302, that such terms have been established in conformity with the provisions of this Indenture; and (c) that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting the enforcement of creditors' rights and to general equity principles. If such form or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties, protections or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to Trustee. Notwithstanding the provisions of Sections 302 and 501 and of the preceding paragraph, if all Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver the Officer's Certificate otherwise required pursuant to Section 501 or the Company Order and Opinion of Counsel otherwise required pursuant to such preceding paragraph at or prior to the time of authentication of each Security of such series if such documents are delivered at or prior to the time of authentication upon original issuance of the first Security of such series to be issued. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 310 together with a written statement (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. SECTION 305. Temporary Securities. Pending the preparation of definitive Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officer or officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at any office or agency of the Company maintained pursuant to Section 1402, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of the same series and of like tenor of authorized denominations. Until so exchanged, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series. SECTION 306. Registration, Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency of the Company maintained pursuant to Section 1402 being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. At the option of the Holder, any Security or Securities of any series may be exchanged for other Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. Upon surrender for registration of transfer of any Security of any series at the office or agency of the Company maintained for such purpose pursuant to Section 1402, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series of any authorized denominations and of a like aggregate principal amount and tenor. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his or her attorney duly authorized in writing. No service charge shall be made to the Holder for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Sections 305, 1309 or 1507 not involving any transfer. The Company shall not be required (i) to issue, register the transfer of or exchange Securities of any series during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities of that series selected for redemption under Section 1503 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. SECTION 307. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security, and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 308. Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in paragraph (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities of such series at his or her address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the paragraph (2) below. (2) The Company may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 309. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 308) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. All such payments so made to any such person, or upon such person's order, shall be valid, and, to the extent of the sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Security. SECTION 310. Cancellation. All Securities surrendered for payment, redemption or registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever and may deliver to the Trustee for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be disposed of as directed by a Company Order. SECTION 311. Computation of Interest. Except as otherwise specified as contemplated by Section 302 for Securities of any series, interest, if any, on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months. ARTICLE FOUR TERMS AND ISSUE OF SERIES A SECURITIES SECTION 401. Specific Title, Terms and Forms. Series A Securities shall be the initial series of Securities issued by the Company under this Indenture. The form thereof shall be substantially as set forth in Annex I hereto, the terms of which are herein incorporated by reference, with such insertions, omissions, substitutions and variations as may be determined by the officers executing the same as evidenced by their execution thereof to reflect the applicable terms of the Series A Securities established by this Article. The Stated Maturity of the Series A Securities shall be September 15, 2003. The aggregate principal amount of the Series A Securities which may be authenticated and delivered under this Indenture is limited to $140,000,000, except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 305, 306, 307, 1309 and 1507. The Series A Securities shall bear interest at the rate per annum provided in the title thereof from September 15, 1993 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on March 15 and September 15 in each year, commencing March 15, 1994, until the principal thereof is paid or made available for payment, and, subject to the terms of this Indenture, at the rate per annum provided in the title thereof on any overdue principal, premium (if any) and (to the extent that the payment of such interest shall be legally enforceable) on any overdue installment of interest. The principal of, and premium, if any and interest on the Series A Securities shall be payable at the office or agency of the Company maintained for that purpose, which at the date hereof shall be the Corporate Trust Office; provided, that, at the option of the Company payment of interest may be made by check, mailed to the address of the Person entitled thereto at such address as shall appear in the Security Register. SECTION 402. Redemption. From and after September 15, 2000, the Series A Securities shall be redeemable, in accordance with Article Fifteen, in whole or in part, at the option of the Company from time to time. The Redemption Price shall be 100% of the principal amount of each Series A Security. SECTION 403. Authentication and Delivery. The Series A Securities shall be executed by the Company and delivered to the Trustee for authentication and the same shall be authenticated and delivered by the Trustee up to the aggregate principal amount of $140,000,000 upon receipt of: (a) a Replacement Note issued pursuant to the Unit 1 Credit Agreement in the principal amount of $140,000,000, and pledged to the Trustee pursuant to Article Sixteen; (b) an Officers' Certificate dated the date of the authentication and delivery of such Securities certifying that (i) there has been delivered to the Trustee true and correct copies of the Unit 1 Credit Agreement and the Unit 2 Credit Agreement and all other Project Documents, (ii) no Default exists and (iii) all conditions precedent provided for in this Indenture relating to authentication and delivery of such Securities have been complied with; and (c) an Opinion of Counsel required by Section 501(e) of this Indenture stating, among the other opinions required therein, that Texas Generating Company has title to a 205/345 undivided interest in Unit 1 and the property appurtenant thereto which comprise the "Mortgage Trust Estate" as defined in the Unit 1 First Lien Mortgage. ARTICLE FIVE AUTHENTICATION AND DELIVERY OF ADDITIONAL SECURITIES SECTION 501. Authentication and Delivery of Additional Securities upon Basis of Available or Additional Collateral. In addition to the principal amount of Series A Securities whose authentication and delivery is provided for in Article Four, additional Securities of any one or more series (other than Series A Securities) may from time to time be executed by the Company and delivered to the Trustee for authentication and thereupon the same shall be authenticated and delivered by the Trustee upon compliance with the conditions set forth below and upon receipt by the Trustee of the following: (a) A Company Order requesting the authentication and delivery of a specified principal amount of Securities of a designated series. (b) An Officers' Certificate, dated the date of the authentication and delivery of such Securities, stating that (1) the Securities whose authentication and delivery are then applied for shall be secured without priority or preference among themselves by the pledge or prior pledge of one or more Replacement Notes, which Replacement Note or Notes shall be secured by the "Collateral", as defined in the applicable Unit 1 Credit Agreement or Unit 2 Credit Agreement, pari passu with all other outstanding debt secured thereby; (2) the aggregate principal amount of Pledged Notes securing the Securities whose authentication and delivery are then applied for and all other Outstanding Securities is either (a) not less than the aggregate principal amount of such Securities and all other Outstanding Securities, or (b) if it is less than the aggregate principal amount of such Securities and all other Outstanding Securities, the Officers' Certificate shall specify the amount by which the aggregate principal amount of pledged Replacement Notes is so less (such amount so specified being referred to as the "Required Additional Collateral"); (3) if there is Required Additional Collateral specified in (2) above, that there will be delivered to the Trustee pursuant to Article Sixteen prior to the authentication and delivery of the Securities then being applied for a Replacement Note in aggregate principal amount not less than the amount of Required Additional Collateral; (4) the amount of indebtedness outstanding under the Unit 1 Credit Agreement and the Unit 2 Credit Agreement does not exceed the dollar amount which results from subtracting from $417,750,000 the amounts paid by the Company since the issuance of the Series A Securities which have resulted in further transfers of undivided interests in Unit 1 and Unit 2 to the Company and which have been released from the lien of either the Unit 1 First Lien Mortgage or the Unit 2 First Lien Mortgage (such amount so specified being referred to as the "Maximum Indebtedness Amount"), specifying the amount of such indebtedness; and (5) no Default exists and that all conditions precedent provided for in this Indenture relating to the authentication and delivery of the Securities whose authentication and delivery are then applied for have been complied with. (c) If there is any Required Additional Collateral specified in the Officers' Certificate required by (b) above, a pledge to the Trustee of a Replacement Note accompanied by such Replacement Note in an aggregate principal amount equal to the amount of such Required Additional Collateral. (d) Such instruments of conveyance, transfer, assignment and/or release, as the case may be, necessary to vest in the Trustee as a part of the Collateral all right, Title and interest of the Company in and to the Replacement Notes so described or an Opinion of Counsel that no such instruments are necessary for such purpose. (e) An Opinion of Counsel (which may be based on opinions of other counsel deemed by him reliable), dated the date of authentication and delivery of such Securities, to the effect that: (1) the Company has complied with the requirements, if any, of any tax or recording or filing law, including any cash deposit, applicable to the issuance of the Securities then applied for, or stating that there is no such legal requirement; (2) the Company has received all required authorizations, approvals and consents of or to the issuance by the Company of the Securities whose authentication and delivery are then applied for by any Federal, State or other governmental regulatory agency at the time having jurisdiction in the premises, or stating that no such authorization, approval or consent is required; (3) none of the Collateral is subject to a Lien prior to the Lien of this Indenture; (4) all conditions precedent provided for in this Indenture relating to the authentication and delivery of such Securities have been complied with; (5) such Securities, when executed by the Company and authenticated and delivered by the Trustee and when issued by the Company, will be the legal, valid and binding obligations of the Company enforceable in accordance with their terms and the terms of this Indenture (subject to any applicable bankruptcy, insolvency or other laws affecting creditors' rights generally), and entitled to the benefits of and secured by the Lien of this Indenture equally and ratably with all other Outstanding Securities; (6) Texas Generating Company has, or upon delivery of the instruments of conveyance, transfer or assignment, if any, specified in such Opinion will have, Title to the specified undivided interest in and to Unit 1 and the property appurtenant thereto which comprise the "Mortgage Trust Estate" as defined in the Unit 1 First Lien Mortgage subject only to Permitted Liens under the Unit 1 Credit Agreement; (7) Texas Generating Company II has, or upon delivery of the instruments of conveyance, transfer or assignment, if any, specified in such Opinion will have, Title to the specified undivided interest in and to Unit 2 and the property appurtenant thereto which comprise the "Mortgage Trust Estate" as defined in the Unit 2 First Lien Mortgage subject only to Permitted Liens under the Unit 2 Credit Agreement; (8) the Indenture is a lien upon the Replacement Notes securing the Securities being authenticated and delivered; and (9) the documents which have been or are therewith delivered to the Trustee conform to the requirements of this Indenture for an application for the action applied for and, upon the basis of such Application, the Securities applied for may be lawfully authenticated and delivered and all conditions precedent herein provided for relating to such authentication and delivery have been complied with. (f) The documents and any cash deposit specified in such Opinion of Counsel, which cash deposit, if any, shall be held by the Trustee as part of the Collateral and applied by the Trustee for the purpose specified therein and, to the extent that such cash deposit ultimately proves to be excessive, returned to the Company upon Company Request. (g) "Title," for the purpose of any provision of this Section requiring an Opinion of Counsel that the Company has Title to any property, means such title, which may be in an undivided interest, whether fairly deducible of record or based upon prescriptive rights (or as to personal property, based on such evidence as Counsel shall determine to be sufficient), as in the opinion of Counsel is satisfactory for the use thereof in connection with the operations of the Company, and Counsel in giving such opinion may disregard any irregularity or deficiency in the record evidence of title which, in the opinion of such Counsel, can be cured by proceedings within the power of the Company or does not substantially impair the usefulness of such property for the purpose of the Company and may base such opinion upon his own investigation or upon affidavits, certificates, abstracts of title, statements or investigations made by Persons in whom such Counsel has confidence or upon examination of a certificate or guaranty of title or policy of title insurance in which he has confidence. ARTICLE SIX RELEASES SECTION 601. General Provisions. So long as no Event of Default shall have occurred and be continuing, from time to time, the Company may withdraw Pledged Notes comprising Collateral, to the extent of Collateral Available for Release, as defined herein, and the Trustee shall release such Pledged Notes from the lien of this Indenture upon Company Request, upon compliance with the conditions set forth below and upon receipt in each case by the Trustee of the following: (a) An Officers' Certificate hereafter in this Section referred to as a "Release Certificate," dated the date of the release, stating that: (1) in the opinion of the signers, the release will not impair the security under this Indenture in contravention of the provisions herein and that all conditions precedent herein relating to such release have been complied with, and describing the Pledged Notes to be released; (2) no Event of Default shall have occurred and be continuing; (3) the aggregate principal amount of Pledged Notes securing Outstanding Securities is greater than the aggregate principal amount of Outstanding Securities, specifying the amount by which the aggregate principal amount of Pledged Notes is greater than the amount of Outstanding Securities (such amount so specified being referred to as the "Collateral Available for Release"); (4) if there is Collateral Available for Release specified in (3) above, the identity of the Securities, specifying the amount, series and interest rate thereof, which have been paid down resulting in there being Collateral Available for Release, and the amount, series and interest rate of the Pledged Notes the release or reduction of which is being requested; (5) after such release, (i) the amount of indebtedness outstanding under the Unit 1 Credit Agreement and the Unit 2 Credit Agreement will not exceed the Maximum Indebtedness Amount and (ii) that the maturity and terms of the remaining Pledged Notes will match the maturity and terms of the Outstanding Securities; and (6) no Default exists. (b) Such instruments of release, including but not limited to those instruments required pursuant to the provisions of Section 314(d) of the Trust Indenture Act, necessary to release that part of the Collateral the release of which is being requested or an Opinion of Counsel that no such instruments are necessary for such purpose. (c) An Opinion of Counsel (which may be based on opinions of other counsel deemed by him reliable), dated the date of the release of Collateral to the effect that: (1) the Company has received all required authorizations, approvals and consents of or to the release of Collateral then applied for by any Federal, State or other governmental regulatory agency at the time having jurisdiction in the premises, or stating that no such authorization, approval or consent is required; (2) all conditions precedent provided for in this Indenture relating to the release of Collateral have been complied with; (3) Texas Generating Company has, and after the requested release of Collateral will have, Title to the specified undivided interest in and to Unit 1 and the property appurtenant thereto which comprise the "Mortgage Trust Estate" as defined in the Unit 1 First Lien Mortgage subject only to Permitted Liens under the Unit 1 Credit Agreement; (4) Texas Generating Company II has, and after the requested release of Collateral will have, Title to the specified undivided interest in and to Unit 2 and the property appurtenant thereto which comprise the "Mortgage Trust Estate" as defined in the Unit 2 First Lien Mortgage subject only to Permitted Liens under the Unit 2 Credit Agreement; (5) the Indenture is a lien upon the Pledged Notes securing the Outstanding Securities; and (6) the documents which have been or are therewith delivered to the Trustee conform to the requirements of this Indenture for an application for the action applied for and, upon the basis of such Application, the Collateral applied to be released may be lawfully released and all conditions precedent herein provided for relating to such authentication and delivery have been complied with. (d) In lieu of a release of a Pledged Note in accordance with this Article, upon compliance with this Section 601 the Trustee shall permit the Company to reduce the principal amount of a Pledged Note or the principal amounts of more than one Pledged Note, as specified in the Release Certificate and the aggregate amount of such principal reduction or reductions shall be deemed to be a release of Collateral for all purposes under this Indenture. A reduction in the principal amount of a Pledged Note shall be effected by a notation thereon substantially as follows: "Pursuant to Section 601 of the Indenture and Security Agreement between Texas-New Mexico Power Company and IBJ Schroder Bank & Trust Company, Trustee, dated as of September 15 1993, and an Application dated __________________, the principal amount of this note is reduced to $ _________________________________." Said notation shall be followed by the endorsement of any of the Persons designated to sign the Company Request. SECTION 602. Termination. Notwithstanding any provisions herein to the contrary, upon Company Request, when this Indenture shall have been satisfied and discharged as provided in Article Eight or when no Securities shall be outstanding and the Company shall have paid all obligations of the Company under this Indenture, this Indenture shall terminate, and the Trustee shall forthwith cause to be assigned, transferred and delivered, against receipt but without any recourse, warranty or representation whatsoever, any remaining Collateral and money received in respect thereof, to or on the order of the Company. SECTION 603. Terms of Release. Any release of Collateral or any money held hereunder by the Trustee shall be made to or on the order of the Company by appropriate document of assignment, transfer, and release and by delivery against receipt but without any recourse, warranty or representation whatsoever. ARTICLE SEVEN [Reserved] ARTICLE EIGHT DEFEASANCE SECTION 801. Satisfaction and Discharge of Indenture. This Indenture shall upon Company Request cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, at the expense of the Company, shall (i) execute proper termination statements and instruments acknowledging satisfaction and discharge of this Indenture and (ii) pay, assign, transfer and deliver to the Company or upon Company Order all cash, securities and other personal property then held by it hereunder as a part of the Collateral, when (1) either (A) all Securities theretofore authenticated and delivered (other than (x) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 307 and (y) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1403) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are deemed paid and discharged pursuant to Section 803, and the Company, in the case of clause (1)(B)(i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount of (a) money (denominated in such coin or currency of the United States of America as is at the time of payment legal tender for the payment of public and private debts), or (b) in the case of clause (1)(B)(ii) or (iii) above (I) U.S. Government Obligations (denominated in such coin or currency of the United States of America as is at the time of payment legal tender for the payment of public and private debts) which through the payment of interest and principal (and premium, if any) in respect thereof in accordance with their terms will provide not later than one day before the Stated Maturity or Redemption Date, as the case may be, of the principal of (and premium, if any) and each installment of interest on the Securities, money in an amount, or (II) a combination of money and U.S. Government Obligations in each case as provided above, in any case sufficient, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge the principal of (and premium, if any) and each installment of interest on the Outstanding Securities to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be, of such principal or installment of interest; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 1007, the obligations of the Company to any Authenticating Agent under Section 1014 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section or if money or U.S. Government Obligations shall have been deposited with or received by the Trustee pursuant to Section 803, the obligations of the Trustee under Section 802 and the last paragraph of Section 1403 shall survive. SECTION 802. Application of Trust Money. (a) Subject to the provisions of the last paragraph of Section 1403, all money or U.S. Government Obligations deposited with the Trustee pursuant to Section 801, 803 or 1408 and all money received by the Trustee in respect of U.S. Government Obligations deposited with the Trustee pursuant to Section 801, 803 or 1408, shall be held in trust and such money and the proceeds of such U.S. Government Obligations applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent), to the persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with or received by the Trustee as contemplated by Section 801, 803 or 1408. (b) The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against U.S. Government Obligations deposited pursuant to Section 801, 803 or 1408 or the interest and principal received in respect of such obligations other than any payable by or on behalf of Holders. (c) The Trustee shall deliver or pay to the Company from time to time upon Company Request any U.S. Government Obligations or money held by it as provided in Section 801, 803 or 1408 which, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, are then in excess of the amount thereof which then would have been required to be deposited for the purpose for which such U.S. Government Obligations or money were deposited or received. This provision shall not authorize the sale by the Trustee of any U.S. Government Obligations held under this Indenture. SECTION 803. Satisfaction, Discharge and Defeasance of Securities of any Series. The Company shall be deemed to have paid and discharged the entire indebtedness on all the Outstanding Securities of any series on the 91st day after the date of the deposit referred to in subparagraph (1) below, and the provisions of this Indenture, as they relate to such Outstanding Securities of such series, shall no longer be in effect (and the Trustee, at the expense of the Company, shall at Company Request execute proper instruments acknowledging the same), except as to: (a) the rights of Holders of Securities of such series to receive, from the trust funds described in subparagraph (1) below, if any, payment of the principal of (and premium, if any) and each installment of principal of (and premium, if any) or interest, if any, on the Outstanding Securities of such series on the Stated Maturity of such principal or installment of principal or interest or to and including the Redemption Date irrevocably designated by the Company pursuant to subparagraph (5) below; (b) the Company's obligations with respect to such Securities under Sections 306, 307, 1402 and 1403, if the Company shall have irrevocably designated a Redemption Date pursuant to subparagraph (5) below, Section 1501, 1504 and 1506 as they apply to such Redemption Date; (c) the Company's obligations with respect to the Trustee under Section 1007; and (d) the rights, powers, trust and immunities of the Trustee hereunder and the duties of the Trustee under Section 802 and, if the Company shall have irrevocably designated a Redemption Date pursuant to subparagraph (5) below, Article Fifteen and the duty of the Trustee to authenticate Securities on registration of transfer or exchange; provided that the following conditions shall have been satisfied: (1) the Company has deposited or caused to be irrevocably deposited (except as provided in Section 802(c) and the last paragraph of Section 1403) with the Trustee as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities of such series, (i) money (denominated in such coin or currency of the United States of America as is at the time of payment legal tender for the payment of public and private debts) in an amount, or (ii) (except as provided in a supplemental indenture with respect to such series) if Securities of such series are not subject to repurchase at the option of Holders, either (A) U.S. Government Obligations (denominated in such coin or currency of the United States of America as is at the time of payment legal tender for the payment of public and private debts) which through the payment of interest and principal in respect thereof in accordance with their terms will provide not later than one day before the due date of any payment referred to in clause (a) of this subparagraph (1) money in an amount or (B) a combination of money and U.S. Government obligations, in each case as provided above sufficient, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge the principal of and each installment of interest on the Outstanding Securities on the Stated Maturity of such principal or installment of interest or to and including the Redemption Date irrevocably designated by the Company pursuant to subparagraph (5) below; (2) the Company has delivered to the Trustee an Opinion of Counsel to the effect that such provision would not cause any Outstanding Securities then listed on any national securities exchange to be delisted as a result thereof; (3) no Event of Default or event which with notice or lapse of time would become an Event of Default (including by reason of such deposit) shall have occurred and be continuing on the date of such deposit or during the period ending on the 91st day after such date; (4) the Company has delivered to the Trustee an unqualified opinion, in form and substance satisfactory to the Trustee, of independent counsel selected by the Company and satisfactory to the Trustee to the effect that (i) Holders of the Securities will not recognize income, gain or loss for Federal income tax purposes as a result of the deposit, defeasance and discharge and will be subject to Federal income tax on the same amounts and in the same manner and at the same times as would have been the case if that deposit, defeasance and discharge had not occurred and (ii) the defeasance trust is not, or is registered as, an investment company under the Investment Company Act of 1940; and (5) if the Company has deposited or caused to be deposited money or U.S. Government Obligations to pay or discharge the principal of (and premium, if any) and interest, if any, on the Outstanding Securities of a series to and including a Redemption Date on which all of the Outstanding Securities of such series are to be redeemed, such Redemption Date shall be irrevocably designated by a Board Resolution delivered to Trustee on or prior to the date of deposit of such money or U.S. Government Obligations, and such Board Resolution shall be accompanied by an irrevocable Company Request that the Trustee give notice of such redemption in the name and at the expense of the Company not less than 30 nor more than 60 days prior to such Redemption Date in accordance with Section 1504; and (6) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of the Securities have been complied with. ARTICLE NINE REMEDIES SECTION 901. Events of Default. "Event of Default," wherever used herein, with respect to Securities of any series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be affected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body), unless such event is expressly made inapplicable with respect to such series in or pursuant to a Board Resolution or supplemental indenture under which Securities of such series are issued, as the case may be, as contemplated by Section 302: (1) default in the payment of any interest upon any Security of that series when it becomes due and payable, and continuance of such default for a period of 30 days; or (2) default in the payment of the principal of (or premium, if any, on) any Security of that series at its Maturity; or (3) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with or which has expressly been included in this Indenture solely for the benefit of series of Securities other than that series which is in default), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of that series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (4) a default under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company or by any Subsidiary (including a default with respect to Securities of any series other than that series) or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company (including this Indenture) or by any Subsidiary, whether such indebtedness now exists or shall hereafter be created, which default shall have resulted in such indebtedness in an aggregate principal amount exceeding $5,000,000 becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such acceleration having been rescinded or annulled within a period of 10 days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 10% in principal amount of the Outstanding Securities of that series, a written notice specifying such default and requiring the Company to cause such acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder; or (5) an "Event of Default," as defined in the Unit l Credit Agreement, or an "Event of Default," as defined in the Unit 2 Credit Agreement, or an "Event of Default", as defined in the Company's Indenture and Security Agreement dated as of January 15, 1992, shall have occurred and be continuing; or (6) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under applicable Federal or State law, appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (7) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action; or (8) Article Sixteen shall cease, for any reason, to be in full force and effect or the Company shall so assert in writing; Article Sixteen shall cease to be effective to grant a perfected Lien to the Trustee, for the equal and ratable benefit of the Holders, on the Collateral described therein with the priority purported to be granted thereby; or the Company shall default in the observance or performance of any of the covenants or agreements contained in Article Sixteen; or (9) any other Event of Default provided in the supplemental indenture or provided in or pursuant to the Board Resolution under which such series of Securities is issued or in the form of Security for such series. SECTION 902. Acceleration of Maturity; Rescission and Annulment. If an Event of Default with respect to Securities of any series at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities of that series may declare the principal amount of all of the Securities of that series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount, together with all accrued and unpaid interest thereon, shall become immediately due and payable, except that upon the occurrence of an Event of Default specified in Section 901(5) or 901(6) all principal and interest of all Securities shall become immediately due and payable without any such declaration. At any time after such declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities of that series, by written notice to the Company and the Trustee, may rescind and annul such acceleration and its consequences if (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities of that series, (B) the principal of (and premium, if any, on) any Securities of that series which has become due otherwise than by such acceleration and interest thereon at the rate prescribed therefor in such Securities, (C) to the extent that payment of such interest is lawful, interest upon any overdue interest at the rate prescribed therefor in such Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of and accrued interest on Securities of that series which have become due solely by such acceleration, have been cured or waived as provided in Section 913. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 903. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security at its Maturity; the Company will, upon written demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal (and premium, if any) and on any overdue interest, at the respective rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Securities, wherever situated. If any Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of the Securities of such series, including without limitation those set forth in Article Sixteen, by such appropriate judicial proceedings as the Trustee shall deem most effective to protect and enforce any such rights. SECTION 904. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by acceleration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal, premium or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 1007. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 905. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. SECTION 906. Application of Money Collected. Any money collected by the Trustee pursuant to this Article and/or pursuant to the exercise of any remedies pursuant to Article Sixteen, and any moneys received pursuant to Section 6.03 of either of the Credit Agreements shall be applied in the following order with respect to the Securities of any series, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (and premium, if any) or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: to the payment of all amounts due the Trustee under Sections 1007 and 1615; SECOND: to the payment of any amounts owing or that may become owing under Section 6.03 or 15.05(x) of either of the Credit Agreements or Section 3(b) of the Intercreditor Agreement (as defined in the Credit Agreements); THIRD: in case the principal (and premium, if any) of the Securities of such series in respect of which moneys have been collected shall not have become and be then due and payable, to the payment of interest on the Securities of such series in default in the order of the maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee and to the extent permitted by law at the respective rate or rates prescribed therefor in the Securities) upon the overdue installments of interest at the rate prescribed therefor in the Securities, such payments to be made ratably to the Persons entitled thereto, without discrimination or preference; FOURTH: in case the principal or premium, if any of the Securities of such series in respect of which moneys have been collected shall have become and shall be then due and payable, to the payment of the whole amount then owing and unpaid upon all the Securities of such series for principal (and premium, if any) and interest, with interest upon the overdue principal (and premium, if any), and (to the extent that such interest has been collected by the Trustee and to the extent permitted by law) upon overdue installments of interest, at the rate prescribed therefor in the Securities; and in case such moneys shall be insufficient to pay in full the whole amount so due and unpaid upon the Securities of such series, then to the payment of such principal (and premium, if any) and interest, without preference or priority of principal over interest, or of interest over principal or premium, or of any installment of interest over any other installment of interest, or of any Security of such series over any other Security of such series, ratably to the aggregate of such principal (and premium, if any) and accrued and unpaid interest; and FIFTH: to the payment of the remainder, if any, to the Company or any other Person lawfully entitled thereto. In case any moneys to be applied pursuant to this Section 906 in respect of Securities of more than one series shall be insufficient to pay in full the whole amount due and unpaid upon the Securities of all such series, then any payment shall be made without preference or priority of any Security of any one series over any Security of any other series, ratably among the Securities of all such series. SECTION 907. Limitation on Suits. No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders. SECTION 908. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Section 308) interest on such Security on the Stated Maturity or Maturities expressed in such Security (or in the case of Redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 909. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or under either or both of the Credit Agreements or any of the Unit 1 Financing Facility Security Documents or the Unit 2 Financing Facility Security Documents, and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 910. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 307, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 911. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 912. Control by Holders. The Holders of a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series; provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture, and (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 913. Waiver of Past Defaults. The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series waive any past default hereunder and its consequences with respect to such series, except a default (1) in the payment of the principal of (or premium, if any, on) or interest on any Security of such series, or (2) in respect of a covenant or provision hereof which under Article Thirteen cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 914. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security by his or her acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities of any series, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date). SECTION 915. Waiver of Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 916. Delay in Instituting Bankruptcy Proceedings. Notwithstanding any other provision of this Indenture, so long as any loans are outstanding to any Unit 2 Banks under the Unit 2 Credit Agreement the Trustee shall not, and the Holders shall not have the right to direct the Trustee to, file or join in the filing of any petition under the Federal Bankruptcy Code or any other Federal or State bankruptcy, insolvency, reorganization or similar law seeking (a) to have the Company adjudicated a bankrupt or insolvent, or seeking any reorganization, arrangement, adjustment or composition of or with respect to the Company, (b) the appointment of a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any substantial part of its property, or (c) the winding up or liquidation of the affairs of the Company, in respect of any Event of Default for a period of six months from the date on which such Event of Default shall have occurred, (i) except in connection with the filing of any such petition by the Agent under either Credit Agreement or the Unit 1 Banks or the Unit 2 Banks in respect of an event of default or amounts owing under a Credit Agreement, or (ii) unless, prior to the end of such six-month period, any such petition shall have been filed against the Company by any other Person. If more than one Event of Default shall at any time have occurred and be continuing, such six-month period shall run from the date on which the first such Event of Default shall have occurred. This Section shall not restrict the Trustee's right to take any action, including any action permitted under Section 904, in respect of any proceeding relating to the filing of any such petition by any other Person. ARTICLE TEN THE TRUSTEE SECTION 1001. Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default with respect to the Securities of any series, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (c) Upon payment in full of certain obligations specified in each of the Credit Agreements to the Unit l Banks or the Unit 2 Banks, as the case may be, then automatically and without further action on the part of any Person, the Trustee, in the manner and to the extent provided in the applicable Credit Agreement, shall become the successor to, be subject to and shall perform the duties and obligations of, and be entitled to the rights and benefits of, the Agent, as such term is defined in such Credit Agreement, with respect to the collateral securing the Credit Agreement Notes issued under such Credit Agreement (including the Pledged Notes). The Company shall not, either before or after the occurrence of any such succession, enter into any amendment, modification or supplement to the Credit Agreements or any of the Security Documents relating to such duties, obligations, rights or benefits unless it shall have obtained the prior written consent of the Trustee. (d) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that (1) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Securities of any series, determined in accordance with Section 912, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Securities of such series; and (4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (e) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. (f) Without limiting the other provisions hereof, in the event that the Trustee becomes the Agent under either Credit Agreement, the Trustee shall, in its capacity as such Agent, and subject to the terms and conditions of such Credit Agreement, upon the request of the Company or of Texas Generating Company or Texas Generating Company II, as applicable, execute such documents delivered to it to maintain the effectiveness and priority of the Liens of the Unit 1 Financing Facility Security Documents and the Unit 2 Financing Facility Security Documents and promptly execute releases of liens in accordance with the Facility Purchase Agreement (as defined in such Credit Agreement); provided that any such release shall contain a provision to the effect that such release is made in such Agent's capacity as agent and (if applicable) Collateral Agent (as defined in such Credit Agreement) pursuant to such Facility Purchase Agreement but without warranty by, or recourse to, the Trustee either in its capacity as Trustee or individually. SECTION 1002. Notice of Defaults. Within 90 days after the occurrence of any Default hereunder with respect to the Securities of any series, the Trustee shall transmit by mail to all Holders of Securities of such series, as their names and addresses appear in the Security Register, notice of such Default hereunder known to the Trustee, unless such Default shall have been cured or waived; provided that, except in the case of a Default in the payment of the principal of (or premium, if any) or interest on any Security of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders of Securities of such series; provided, further, that in the case of any Default of the character specified in Section 901(3), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. SECTION 1003. Certain Rights of Trustee. Subject to the provisions of Section 1001: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order or as otherwise expressly provided herein and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to expend or risk its own funds or to exercise, at the request or direction of any of the Holders, any of the rights or powers vested in it by this Indenture pursuant to this Indenture, unless such Holders shall have provided to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) 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, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled upon reasonable request to examine the books, records and premises of the Company, personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (h) the Trustee may enter into any participation agreement pursuant to Section 6.03 of either of the Credit Agreements; and (i) the Trustee may approve the appointment of itself or any other Person as Agent (as such term is defined in each of the Credit Agreements) or as Collateral Agent (as such term is defined in the Credit Agreements). SECTION 1004. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture, the Collateral, any securities or other property received by the Trustee to be held in Trust or of the Securities, or as to the value of any such Collateral, securities or other property, or of the Securities. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of Securities or the proceeds thereof. SECTION 1005. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 1008 and 1013, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. SECTION 1006. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. SECTION 1007. Compensation and Reimbursement. The Company agrees (1) to pay to the Trustee from time to time such compensation as is agreed upon in writing, or, if no such agreement exists, reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. Whenever the Trustee incurs any loss, liability or expense without negligence or bad faith on its part, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, or renders services, after an Event of Default specified in Section 901(6) or 901(7) occurs, any such loss, liability, expense or compensation for services is intended to constitute expenses of administration under any such bankruptcy or similar law. SECTION 1008. Disqualification; Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. SECTION 1009. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be a corporation organized and doing business under the laws of the United States of America or of any State or Territory or of the District of Columbia or a corporation or other person permitted to act as trustee by the Commission, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. The Company may not, nor may any person directly or indirectly controlling, controlled by, or under common control with the Company, serve as Trustee. SECTION 1010. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 1011. (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 1011 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Company. (d) If at any time: (1) the Trustee shall fail to comply with Section 1008 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 1009 and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee with respect to all Securities, or (ii) subject to Section 914 unless the Trustee's duty to resign is stayed as provided in Section 310(b) of the Trust Indenture Act, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees, with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series). If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 1011, become the successor Trustee with respect to the Securities of any series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and shall have accepted appointment in the manner required by Section 1011, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series by mailing written notice of such event by first-class mail, postage prepaid, to all Holders of Securities of such series as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. SECTION 1011. Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder, subject to the extent provided herein to the Lien of this Indenture. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates subject to the extent provided herein to the lien of this Indenture. (c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 1012. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder; provided that such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 1013. Preferential Collection of Claims Against Company. The Trustee shall be subject to the provisions of Section 311 of the Trust Indenture Act. SECTION 1014. Authenticating Agents. From time to time the Trustee, in its sole discretion, may appoint one or more Authenticating Agents with respect to one or more series of Securities with power to act on the Trustee's behalf and subject to its direction in the authentication and delivery of Securities of such series in connection with transfers and exchanges under Sections 305, 306, 307 and 1507 as fully to all intents and purposes as though the Authenticating Agent had been expressly authorized by those Sections of this Indenture to authenticate and deliver the Securities of such series. For all purposes of this Indenture, the authentication and delivery of Securities by an Authenticating Agent pursuant to this Section shall be deemed to be authentication and delivery of such Securities "by the Trustee". Each such Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by Federal, State or District of Columbia authority. If such corporation publishes reports of condition at least annually pursuant to law or the requirements of such authority, then for the purposes of this Section the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which any Authenticating Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation or to which any Authenticating Agent shall be a party, or any corporation succeeding to the corporate trust business of any Authenticating Agent, shall be the successor of the Authenticating Agent hereunder, if such successor corporation is otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the parties hereto or the Authenticating Agent or such successor corporation. An Authenticating Agent may resign at any time by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail notice of such appointment to all Holders of Securities with respect to which such Authenticating Agent will serve, as the names and addresses of such Holders appear on the Security Register. Any successor Authenticating Agent, upon acceptance of its appointment hereunder, shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section. The Trustee shall incur no liability for the appointment of any Authenticating Agent with respect to the Securities of one or more series or for any misconduct or negligence of such Authenticating Agent, including without limitation, its authentication of the Securities upon original issuance or pursuant to Section 306 or 307. If an appointment with respect to one or more series of Securities is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to or in lieu of the Trustee's certificate of authentication, an alternate certificate of authentication in the following form: This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture. By___________________________________ As Trustee By___________________________________ As Authenticating Agent By___________________________________ Authorized Signatory ARTICLE ELEVEN HOLDERS' LISTS AND R EPORTS BY TRUSTEE AND COMPANY SECTION 1101. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee with respect to the Securities of each series (a) semi-annually, not later than 15 days after each Regular Record Date, or, in the case of any series of Securities on which semi-annual interest is not payable, not more than 15 days after such semi-annual dates as may be specified by the Trustee, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date or semi-annual date, as the case may be, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; provided that, so long as the Trustee is the Security Registrar for any series of Securities, no such list shall be required to be furnished with respect to any such series. SECTION 1102. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 1101 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 1101 upon receipt of a new list so furnished. (b) If three or more Holders (herein referred to as "applicants") apply in writing to the Trustee, and furnish to the Trustee reasonable proof that each such applicant has owned a Security for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders with respect to their rights under this Indenture or under the Securities and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall, within five business days after the receipt of such application, at its election, either (i) afford such applicants access to the information preserved at the time by the Trustee in accordance with Section 1102(a), or (ii) inform such applicants as to the approximate number of Holders whose names and addresses appear in the information preserved at the time by the Trustee in accordance with Section 1102(a), and as to the approximate cost of mailing to such Holders the form of proxy or other communication, if any, specified in such application. If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Holder whose name and address appear in the information preserved at the time by the Trustee in accordance with Section 1102(a) a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender the Trustee shall mail to such applicants and file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interest of the Holders or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Holders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 1102(b), regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 1102(b). SECTION 1103. Reports by Trustee. (a) Within 60 days after the first May 15 which occurs not less than 60 days following the first date of issuance of the Securities of any series under this Indenture and within 60 days after May 15 in every year thereafter, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, a brief report dated as of such May 15 with respect to any of the following events which may have occurred in the previous twelve months (but if no such event has occurred within such period no report need be transmitted): (1) any change to eligibility under Section 1009 and its qualifications under Section 1008; (2) the creation of or any material change to a relationship specified in paragraphs (1) through (10) of Subsection (a) of Section 310(b) of the Trust Indenture Act; (3) the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) which remain unpaid on the date of such report, and for the reimbursement of which it claims or may claim a Lien or charge, prior to that of the Securities, on any property or funds held or collected by it as Trustee, except that the Trustee shall not be required (but may elect) to report such advances if such advances so remaining unpaid aggregate not more than 1/2 of 1% of the principal amount of the Securities Outstanding on the date of such report; (4) any change to the amount, interest rate and maturity date of all other indebtedness owing by the Company (or by any other obligor on the Securities) to the Trustee in its individual capacity, on the date of such report, with a brief description of any property held as collateral security therefor, except an indebtedness based upon a creditor relationship arising in any manner described in Section 311(b)(2), (3), (4) or (6) of the Trust Indenture Act; (5) any change to the property and funds, if any, physically in the possession of the Trustee as such on the date of such report; (6) any additional issue of Securities which the Trustee has not previously reported; and (7) any action taken by the Trustee in the performance of its duties hereunder which it has not previously reported and which in its opinion materially affects the Securities, except action in respect of a default, notice of which has been or is to be withheld by the Trustee in accordance with Section 1002. (b) The Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, a brief report with respect to the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) since the date of the last report transmitted pursuant to Subsection (a) of this Section (or if no such report has yet been so transmitted, since the date of execution of this instrument) for the reimbursement of which it claims or may claim a Lien or charge, prior to that of the Securities, on property or funds held or collected by it as Trustee and which it has not previously reported pursuant to this Subsection, except that the Trustee shall not be required (but may elect) to report such advances if such advances remaining unpaid at any time aggregate 10% or less of the principal amount of the Securities Outstanding at such time, such report to be transmitted within 90 days after such time. (c) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when any Securities are listed on any stock exchange. (d) The Trustee shall transmit to the Holders as hereinafter in this Subsection provided, within the times hereinafter in this Subsection provided, a brief report with respect to the release, or release and substitution, of property subject to the Lien of this Indenture and the consideration therefor, if any, unless the fair value of such property, as set forth in the certificate or opinion required by paragraph (1) of Subsection (d) of Section 314 of the Trust Indenture Act, delivered by the Company to the Trustee pursuant to Section 601(b), is less than 10% of the principal amount of the Outstanding Securities at the time of such release, or such release and substitution, such report to be so transmitted within 90 days after such time. SECTION 1104. Reports by Company. The Company shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to Section 314 of the Trust Indenture Act at the times and in the manner provided pursuant thereto; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. ARTICLE TWELVE CONSOLIDATION, MERGER, CONVEYANCE, SALE OR LEASE SECTION 1201. Company May Consolidate, Etc., Only on Certain Terms. The Company shall not consolidate with or merge into any other corporation or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and the Company shall not permit any Person to consolidate with or merge into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless: (1) in case the Company shall consolidate with or merge into another corporation or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia, and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company or a Subsidiary as a result of such transaction as having been incurred by the Company or such Subsidiary at the time of such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; (3) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of the Company would become subject to a Lien which would not be permitted by this Indenture, the Company or such successor corporation or Person, as the case may be, shall take such steps as shall be necessary effectively to secure the Securities equally and ratably with (or prior to) all indebtedness secured thereby; provided that this clause (3) shall not apply if the provisions of Section 1409 apply as a result of the consolidation, merger or conveyance; and (4) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 1202. Successor Corporation to be Substituted. Upon any consolidation by the Company with or merger by the Company into any other corporation or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 1201, the successor corporation formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor corporation had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE THIRTEEN SUPPLEMENTAL INDENTURES AND AMENDMENTS TO CREDIT AGREEMENT AND OTHER DOCUMENTS SECTION 1301. Supplemental Indentures without Consent of Holders. Without the consent of the Holders, the Company and the Trustee may from time to time enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to correct or amplify the description of any property at any time subject to the lien of this Indenture, or better to assure, pledge, grant and confirm unto the Trustee any property subject or required to be subjected to the lien of this Indenture, or subject to the lien of this Indenture additional property, or to release property from the lien of this Indenture; (2) to add to the conditions, limitations and restrictions on the authorized amount, terms or purposes of issue, authentication and delivery of the Securities or of any series of the Securities, as herein set forth, additional conditions, limitations and restrictions thereafter to be observed; (3) to create any series of Securities (other than the Series A Securities) and make such other provisions as provided in Article Three; or (4) to modify or eliminate any of the terms of this Indenture; provided, that (a) such supplemental indenture shall expressly provide that any such modifications or eliminations shall become effective only (i) as to the Securities of any series created by such supplemental indenture and Securities of any series subsequently created to which such change or elimination is made applicable by the subsequent supplemental indenture creating such series; or (ii) when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture; and (b) the Trustee may, in its discretion, decline to enter into any such supplemental indenture which, in the judgment of the Trustee, is to the prejudice of the Trustee when the same becomes operative; (5) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company; (6) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 1011(b); (7) to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; (8) to add any additional Events of Default; (9) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein or to make any other provisions, with respect to matters or questions arising under this Indenture, provided, such action shall not adversely affect the interests of the Holders of the Securities of any series in any material respect; (10) to modify, alter, amend or supplement this Indenture in any other respect which is not materially adverse to Holders, which does not involve a change described in clause (1), (2), (3) or (4) of Section 1302 hereof and which, in the judgment of the Trustee, is not to the prejudice of the Trustee; or (11) to provide for any rights of the Holders of Securities of any series to require the repurchase of Securities of such series by the Company. SECTION 1302. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than 66-2/3% in principal amount of the Outstanding Securities of all series affected by such supplemental indenture (voting as one class), by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by or pursuant to a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) change the Stated Maturity of the principal of, or any installment of interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change any Place of Payment where, or the coin or currency in which, any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date); (2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture or for any amendment, supplement, modification or waiver referred to in Section 1304; (3) modify any of the provisions of this Section, Section 913 or Section 1410, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby, provided, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section, or the deletion of this proviso, in accordance with the requirements of Section 1011(b) and 1301(6); or (4) release any Collateral or change any provision of this Indenture the effect of which is to impair in any respect, directly or indirectly, the Trustee's rights with respect to the Collateral; provided, that no consent of the Holders shall be required for the release of Collateral pursuant to Article Six. A supplemental indenture which changes or eliminates any covenants or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 1303. Amendments to the Credit Agreements, etc., without Consent of Holders. Without the consent of any Holders, the Company and the Trustee, at any time and from time to time, may, and the Company may permit any Subsidiary to, enter into one or more amendments, modifications or waivers of or supplements to the Credit Agreements, the Pledged Notes and the other Project Documents, in accordance with the terms thereof, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another corporation to an obligor on the Pledged Notes and the assumption by any such successor of the covenants of the Company herein and in the Securities; (2) to add to the covenants therein for the benefit of the holders of the Credit Agreement Notes or to surrender any right or power conferred upon the Company in the Credit Agreements or the Project Documents; (3) to add any additional Events of Default (as defined in the Credit Agreements); (4) to provide additional security for the Pledged Notes; (5) to cure any ambiguity, to correct or supplement any provision in the Credit Agreements, the Credit Agreement Notes or the other Project Documents which may be inconsistent with any other provision therein, or to make any other provisions with respect to matters or questions arising thereunder; provided such action shall not adversely affect the interests of the Holders in any material respect; (6) to amend, modify, waive or supplement the Credit Agreements, the Credit Agreement Notes or the Project Documents in any other respect which is not materially adverse to Holders, which does not involve a change described in clause (1), (2) or (3) of Section 1304; or (7) subject to Section 1304(2), provide for the appointment of a successor agent or other Person to act as collateral agent in respect of the collateral security for the Credit Agreement Notes. The Company shall not permit any Subsidiary to enter into any amendment, modification, or waiver of or supplement to the Credit Agreements, the Pledged Notes or the other Project Documents except under circumstances in which the Company could itself enter into such amendment, modification, supplement or waiver. In addition to any amendments, modifications or waivers of, or supplements to, the Credit Agreements, the Credit Agreement Notes and the other Project Documents that the Company may, and may permit its Subsidiaries to, enter into pursuant to other provisions of this Section 1303 or pursuant to Section 1304, the Company may, and may permit its Subsidiaries to, at any time and from time to time, without the consent of the Holders, enter into one or more such amendments, modifications, waivers or supplements for any purpose if (x) under said documents, the consent of the Trustee is not specifically required for such amendments, modifications, waivers or supplements, and (y) the consent of the Holders is not required under clause (1), (2) or (3) of Section 1304 and does not involve an amendment, modification, waiver or supplement in respect of Section 10.01 of either of the Credit Agreements. SECTION 1304. Amendments to Credit Agreements, etc. with Consent of Holders. In addition to any amendments, modifications or waivers of or supplements to the Credit Agreements, the Credit Agreement Notes and the other Project Documents that the Company, its Subsidiaries and the Trustee may enter into without the consent of the Holders pursuant to Section 1303, the Company, when authorized by or pursuant to a Board Resolution, may and the Trustee may, and the Company may permit any Subsidiary to, at any time and from time to time, with the consent of the Holders of not less than 51% in principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, enter into one or more amendments, modifications or waivers of or supplements to the Credit Agreements, the Pledged Notes and the other Project Documents to which the Company or such Subsidiary, as the case may be, is a party; provided that neither the Company nor the Trustee may, nor may the Company permit any Subsidiary to, without the consent of the Holder of each Outstanding Security, enter into any such amendment, modification, supplement or waiver, which shall (1) change the stated maturity of the principal of, or any installment of interest on, any Pledged Notes, or reduce the principal amount thereof or the rate of interest thereon, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof, (2) release any collateral security for the Pledged Notes (other than as contemplated by the Credit Agreements or other Project Documents, as in effect as of the date hereof) or enter into any such amendment, modification, waiver or supplement the effect of which is to impair in any respect, directly or indirectly, the rights of the Trustee (or any agent acting on its behalf) with respect to such collateral security, or (3) change Section 9.09, 9.21, 10.03 or 10.16 of the Unit 1 Credit Agreement or Section 9.09, 9.22, 10.03 or 10.16 of the Unit 2 Credit Agreement in a manner adverse to the Holders; provided that no such consent shall be required for any such amendment, modification, waiver or supplement the effect of which is to permit a Lien (in addition to any Liens now permitted under the Credit Agreements or the Project Documents) to exist in respect of any item of property included in collateral security for the Pledged Notes, but only so long as (a) such Lien does not secure any Debt (as defined in the Credit Agreements, as in effect on the date hereof), and (b) such Lien, individually or together with all other Liens permitted under this proviso, does not materially adversely affect the value or utility of such collateral security for the Pledged Notes. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed amendment, modification or waiver, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 1305. Consideration for Supplements, Amendments, etc. (a) The Company will not, and will not permit any Subsidiary to, request or enter into any supplement, amendment, modification or waiver (whether pursuant to this Article or otherwise) in respect of this Indenture or the Securities unless the Company or such Subsidiary shall have (i) informed each Holder (whether or not affected thereby) of such proposed waiver or amendment, (ii) provided each Holder with (1) a reasonably detailed statement of the reasons why such supplement, amendment, modification or waiver is being sought and the intended effect thereof, and (2) any information with respect to such supplement, amendment, modification or waiver that shall have been delivered to any other Holder, and (iii) allowed each Holder reasonable opportunity to consider such supplement, amendment, modification or waiver prior to the date on which it is to become effective. The Company will not, and will not permit any Subsidiary to, directly or indirectly, pay or cause to be paid any consideration (as supplemental or additional interest, a fee or otherwise) to any Holder in order to induce such Holder to enter into any such supplement, amendment, modification or waiver unless such consideration shall have been offered, on the same terms, ratably to each other Holder and concurrently paid or otherwise delivered to each other Holder consenting to such supplement, amendment, modification or waiver. (b) The Company will not, and will not permit any Subsidiary to, request or enter into any supplement, amendment, modification or waiver (whether pursuant to this Article or otherwise) in respect of this Indenture, the Securities, the Credit Agreements, the Credit Agreement Notes or the Project Documents unless the Company or such Subsidiary shall have (i) informed the Trustee (whether or not affected thereby) of such proposed waiver or amendment, (ii) provided the Trustee with (1) a reasonably detailed statement of the reasons why such supplement, amendment, modification or waiver is being sought and the intended effect thereof, and (2) any information with respect to such supplement, amendment, modification or waiver that shall have been delivered to any other holder of Credit Agreement Notes, and (iii) allowed the Trustee reasonable opportunity to consider such supplement, amendment, modification or waiver prior to the date on which it is to become effective. The Company will deliver to the Trustee executed or true copies of any such supplement, amendment, modification or waiver promptly, and in any event within 10 days, following the date on which it shall have become effective. The Company will not, and will not permit any Subsidiary to, directly or indirectly, pay or cause to be paid any consideration (as supplemental or additional interest, a fee or otherwise) to any holder of Credit Agreement Notes in order to induce such holder to enter into any such supplement, amendment, modification or waiver unless such consideration shall have been offered, on the same terms, ratably to the Trustee and paid or otherwise delivered to the Trustee if it shall have consented to such supplement, amendment, modification or waiver, provided, that this paragraph shall not apply to (x) the payment to the Agent under either Credit Agreement of agency, corporate finance or similar fees not paid as an inducement to amend the Credit Agreement, the Credit Agreement Notes or the Project Document; (y) any increase in the interest rate applicable to the Project Loans or the payment of any fee to the Unit 1 Banks or the Unit 2 Banks, so long as such change shall not result in the yield-to-maturity of the Project Loans outstanding under a Credit Agreement (computed at the time of such increase or payment, as the case may be, and assuming that any additional fees would be treated as additional interest on the Project Loans) exceeding the then current yield-to-maturity of the Securities; and (z) any payment upon an extension of the maturity of Credit Agreement Notes. Any consideration paid to the Trustee shall be deemed to have been paid for the benefit of the Holders and shall be promptly distributed by the Trustee ratably to the Holders that shall have consented to the Trustee's consenting to such supplement, amendment, modification or waiver (or, if no such consent of the Holders shall have been required, to all Holders). SECTION 1306. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article, the modifications thereby of the trusts created by this Indenture, or any amendment, supplement or waiver of or modification to the Credit Agreements, the Credit Agreement Notes or the Project Documents, the Trustee shall be entitled to receive, and (subject to Section 1001) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture, amendment, supplement, waiver or modification is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. The Trustee also may, but shall not be obligated to, enter into any amendment, modification or waiver of or supplement to the Credit Agreements, the Credit Agreement Notes or any of the other Project Documents which could affect the Trustee's own rights, duties or immunities, whether in its capacity as Trustee or in its capacity as Agent or Collateral Agent, as defined under either Credit Agreement, and the Company shall not, and shall not permit any Subsidiary to, enter into any such amendment, modification, supplement or waiver which could affect such rights, duties or immunities, except with the consent of the Trustee. SECTION 1307. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 1308. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as in effect at the time of its execution. SECTION 1309. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. ARTICLE FOURTEEN COVENANTS SECTION 1401. Payment of Principal, Premium and Interest. The Company covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of (and premium, if any) and interest on the Securities of that series in accordance with the terms of the Securities and this Indenture. SECTION 1402. Maintenance of Office or Agency. The Company will maintain in each Place of Payment for any series of Securities, an office or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of that Series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and, in such event, the Trustee shall act as the Company's agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency for Securities of any series for such purposes pursuant to this Section 1402. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 1403. Money for Securities Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date for payment of the principal of (and premium, if any) or interest on any of the Securities of that series, segregate and hold in trust for the benefit of Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Holders or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, prior to 11:00 a.m. (New York City time) on, in case the payment referred to below is made in same-day funds, or, in all other cases, prior to, each due date of the principal of (and premium, if any) or interest on any Securities of that series, deposit with a Paying Agent and/or, pursuant to a Company Order, direct the Trustee to deposit with a Paying Agent from Collateral available for the payment of the Securities under Section 1607(c), a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its failure so to act. No failure by the Trustee to make any deposit with a Paying Agent pursuant to the preceding sentence shall absolve the Company from its responsibility to ensure that such sum is deposited with such Paying Agent. The Company will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities of that series in trust for the benefit of the Holders of such Securities entitled thereto until such sums shall be paid to such Holders or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor upon the Securities of that series) in the making of any payment of principal (and premium, if any) or interest on the Securities of that series; and (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the City, County and State of New York and in the City of Fort Worth, Tarrant County, Texas, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 1404. Corporate Existence. Subject to Article Twelve, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and will use its best efforts to do or cause to be done all things necessary to preserve and keep in full force and effect its rights (charter and statutory) and franchises; provided that the Company shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 1405. Maintenance of Properties. The Company will cause all properties used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted in compliance with all material laws and regulations at all times; provided that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders. SECTION 1406. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a Lien upon the property of the Company or any Subsidiary; provided that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 1407. Statement by Officers as to Default. The Company will deliver to the Trustee, on or before the 120th day after the end of each of its fiscal years, beginning with its fiscal year ending in 1993, (i) an Officers' Certificate as to his or her knowledge of the Company's compliance with all conditions and covenants of this Indenture, such compliance to be determined without regard to any period of grace or requirement of notice provided under this Indenture, and (ii) an Officers' Certificate stating that in the course of the performance by each signer of his or her duties as an officer of the Company he or she would normally have knowledge of any default by the Company in the performance and observance of any of the covenants contained in Sections 1401 to 1406, stating whether or not he or she has knowledge of any such default and, if so, specifying each such default of which such signer has knowledge and the nature thereof. SECTION 1408. Defeasance of Certain Obligations. The Company may omit to comply with any term, provision or condition set forth in Sections 1201, 1404, 1405, 1406 and 1409 with respect to the Securities of any series; provided that the following conditions shall have been satisfied: (1) the Company has deposited or caused to be irrevocably deposited (except as provided in Section 802(c) and the last paragraph of Section 1403) with the Trustee (specifying that each deposit is pursuant to this Section) as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities of such series, (i) money (denominated in such coin or currency of the United States of America as is at the time of payment legal tender for the payment of public and private debts) in an amount, or (ii) U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide not later than one day before the Stated Maturity of the principal of and each installment of interest on the Securities, money in an amount, or (iii) a combination of money and U.S. Government Obligations, in each case as provided above, sufficient, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge the principal of (and premium, if any) and each installment of principal (and premium, if any) and interest on the Outstanding Securities of such series on the Stated Maturity of such principal or installment of principal or interest or to and including the Redemption Date irrevocably designated by the Company pursuant to subparagraph (iv) of this Section and; (2) No Event of Default or event which with notice or lapse of time would become an Event of Default (including by reason of such deposit) with respect to the Securities of such series shall have occurred and be continuing on the date of such deposit; (3) The Company shall have delivered to the Trustee an Opinion of Counsel to the effect that (i) Holders of the Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and defeasance of certain obligations; (ii) such provision would not cause any outstanding Securities of such series then listed on any national securities exchange to be delisted as a result thereof; (iii) the defeasance trust is not, or is registered as, an investment company under the Investment Company Act of 1940; (iv) if the Company has deposited or caused to be deposited money or U.S. Government Obligations to pay or discharge the principal of (and premium, if any) and interest, if any, on the Outstanding Securities of a series to and including a Redemption Date on which all of the Outstanding Securities of such series are to be redeemed, such Redemption Date shall be irrevocably designated by a Board Resolution delivered to the Trustee on or prior to the date of deposit of such money or U.S. Government Obligations, and such Board Resolution shall be accompanied by an irrevocable Company Request that the Trustee give notice of such redemption in the name and at the expense of the Company not less than 30 nor more than 60 days prior to such Redemption Date in accordance with Section 1504; and (v) the Securities will mature within one year. SECTION 1409. Tender for the Securities upon Change of Control Event. The Company covenants as follows: (a) Within 90 days after the occurrence of a Change of Control Event, the Company shall commence a tender offer for all Outstanding Securities, in whole or in any integral multiple of $1,000 of the principal amount of the Securities, at a purchase price (the "Purchase Price") of 101% of the principal amount thereof plus accrued and unpaid interest to the date of purchase, in accordance with the procedures set forth in Subsections (b) and (c) of this Section. (b) Within 30 days following any Change of Control Event, the Company shall send by first-class mail, postage prepaid, to the Trustee and to each Holder of the Securities, at his address appearing in the Security Register, a notice stating: (1) that a Change of Control Event has occurred and that the Company is obligated to tender for the Securities, as provided herein, at the Purchase Price; (2) the circumstances and relevant facts regarding the Change of Control Event (including but not limited to information with respect to pro forma historical income, cash flow and capitalization after giving effect to such Change of Control Event; provided that, to the extent the above-described information is required by Item 7 of Form 8-K, it need be sent only upon the filing with the Securities and Exchange Commission of the Form 8-K); (3) information concerning the business of the Company which the Company in good faith believes will enable the Holders to make an informed decision, which at a minimum will include (i) the most recently filed Annual Report on Form 10-K (including audited consolidated financial statements of the Company, the most recent subsequently filed Quarterly Report on Form 10-Q and any Current Report on Form 8-K of the Company filed subsequent to such Quarterly Report (or in the event the Company is not required to prepare any of the foregoing Forms, the comparable information), and (ii) a description of material developments in the Company's business subsequent to the date of the latest of such Reports; (4) the latest date for tender of the Securities, which shall be not more than 30 days after the date of the commencement of the tender offer; (5) the Purchase Price; (6) information concerning acceptance of the tender offer; and (7) that interest accrued to the Purchase Date will be paid as provided in paragraph (a) of this Section and that, unless the Company shall default in payment of the Purchase Price, after the latest date of purchase, interest thereon will cease to accrue with respect to any Securities presented and surrendered for purchase. (c) Holders tendering Securities will be required to do so in accordance with this Indenture by the close of business on the latest date for tender of the Securities. No such Securities shall be deemed to have been presented and surrendered until such Securities are received by the Company or its designated agent in accordance with the registration and transfer system of this Indenture, as applicable. Holders whose Securities are purchased only in part will receive new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. SECTION 1410. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any term, provision or condition set forth in Section 1404 to 1409 with respect to the Securities of any series if before the time for such compliance the Holders of at least 66 2/3% in principal amount of the Outstanding Securities of such series shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. SECTION 1411. Deposit of Collateral. The Company shall, on the date of the issuance of the Series A Securities, acquire a Replacement Note, which shall have an aggregate principal amount at least equal to the aggregate principal amount of the Series A Securities, and will deliver the same to the Trustee, together with an undated instrument of assignment executed in blank. SECTION 1412. Ownership of Subsidiary Stock. The Company, at all times while any Securities remain Outstanding, will continue to hold, legally and beneficially, free and clear of all liens, all issued and outstanding capital stock of Texas Generating Company and Texas Generating Company II, and of any successor to either thereof, and of any other Subsidiary that shall become or be a party to or otherwise liable upon either Credit Agreement, any Pledged Note or any Project Document. SECTION 1413. Project Documents. Prior to the issuance of the Securities, the Company will deliver to the Trustee a complete and correct copy of each of the Project Documents, including all exhibits and schedules thereto. Promptly following the amendment, modification, supplement or waiver of any of the Project Documents, the Company will deliver a complete and correct copy thereof to the Trustee. ARTICLE FIFTEEN REDEMPTION OF SECURITIES SECTION 1501. General Applicability of Article. Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise provided with respect to the Securities of any particular series by the provisions of this Indenture creating such series) in accordance with this Article. SECTION 1502. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities shall be evidenced by an Officer's Certificate. In case of any redemption at the election of the Company of less than all the Outstanding Securities of any series, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee) notify the Trustee of such Redemption Date and of the principal amount of Securities of such series to be redeemed and of the numbers of any Outstanding Securities of such series then owned by the Company, such notice to be accompanied by a written statement signed by an authorized officer of the Company stating that no defaults in the payment of interest or Events of Default with respect to the Securities of that series have occurred (which have not been waived or cured). SECTION 1503. Selection by Trustee of Securities to be Redeemed. If less than all the Securities of any series are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series not previously called for redemption, by prorating, as nearly as may be, the principal amount of such Securities to be redeemed among the Holders of such Securities in proportion to the aggregate principal amount of such Securities registered in their respective names; provided that, if there shall have been previously filed with the Trustee an Act of all the Holders of such Securities satisfactory to the Trustee specifying the method of selecting the Securities to be redeemed, such selection shall be made by the Trustee in accordance with the terms of such Act. In any proration pursuant to this Section, the Trustee shall make such adjustments, reallocations and eliminations as it shall deem proper to the end that the principal amount of Securities of such series so prorated shall be equal to the greater of $1,000 and the smallest authorized denomination of the Securities of such series, or a multiple thereof, by increasing or decreasing or eliminating the amount which would be allocable to any Holder on the basis of exact proportion by not exceeding such prorated minimum. The Trustee in its discretion may determine the particular Securities (if there is more than one) registered in the name of any Holder which are to be redeemed, in whole or in part. Securities shall be excluded from eligibility for selection for redemption if they are identified by registration and certificate number in an Officers' Certificate (which need not comply with Section 102) delivered to the Security Registrar at least 60 days prior to the Redemption Date as being owned of record and beneficially by, and not pledged or hypothecated by either (a) the Company or (b) an entity specifically identified in such written statement which is an Affiliate of the Company. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed only in part, to the portion of the principal of such Security which has been or is to be redeemed. SECTION 1504. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities of such series to be redeemed, at his or her address appearing in the Security Register. All notices of redemption shall state: (1) the Redemption Date; (2) the Redemption Price and accrued interest, if any; (3) the principal amount of Securities of each series to be redeemed, and, if less than all Outstanding Securities of a series are to be redeemed, the identification of the Securities of such series to be redeemed; (4) that on the Redemption Date the Redemption Price of each of the Securities to be redeemed and accrued interest, if any, will become due and payable and that interest thereon shall cease to accrue from and after said date; (5) the place or places where the Securities of each series to be redeemed are to be surrendered for payment of the Redemption Price and accrued interest, if any, which shall be the office or agency of the Company in each Place of Payment for such series; and (6) if it be the case, that such Securities are to be redeemed by the application of certain specified money held by the Trustee. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. SECTION 1505. Deposit of Redemption Price. On, in the case of same day funds, or, in all other circumstances, at least one Business Day or before any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1403) an amount of money sufficient to pay the Redemption Price of all the Securities which are to be redeemed on that date to the extent that such amounts are not already on deposit at such time in accordance with Sections 801, 803 or 1408. Such money shall be held in trust for the benefit of the Persons entitled to such Redemption Price and shall not be deemed to be part of the Collateral or Trust Moneys. SECTION 1506. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued and unpaid interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued and unpaid interest to the Redemption Date. Installments of interest with a Stated Maturity on or prior to the Redemption Date shall be payable to the Holders of the Securities registered as such on the relevant Record Dates according to the terms of such Securities and the provisions of Section 308. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. SECTION 1507. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Securities, without service charge, a new Security or Securities of the same series of any authorized denomination or denominations as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE SIXTEEN PLEDGE OF SECURITY SECTION 1601. Pledge of Collateral. As collateral security for the prompt payment in full when due (whether at Stated Maturity, by acceleration or otherwise) of the Secured Obligations, the Company hereby pledges and grants to the Trustee, for the benefit of the Holders as hereinafter provided (in the case of the Securities, without priority of any Security of any series over any other Security of that series, and without priority of the Securities of any one Series over the Securities of any other series), a security interest in all of the Company's right, title and interest in the following property, whether now owned by the Company or hereafter acquired and whether now existing or hereafter coming into existence (all such property being collectively referred to herein as "Collateral"): (a) the Pledged Notes; (b) all principal, premium, if any, and interest payable after the date of the delivery of the Pledged Notes to the Trustee (including any of the same payable after such date in respect of periods prior to such date); (c) except as provided in Section 1607(b), all principal, premium, if any, and interest on any investments of cash Collateral pursuant to Section 1607(b); (d) funds deposited with the Trustee pursuant to Section 1617; and (e) all proceeds of and to any of the property of the Company described in clauses (a), (b) and (c) above. As used in this Article, "proceeds" of Collateral shall mean cash, securities and other property realized in respect of, and distributions in kind of, Collateral, including any thereof received under any reorganization, liquidation or adjustment of debt of the Company or any issuer of or obligor on any of the Collateral. SECTION 1602. Representations in Respect of the Collateral. The Company represents and warrants that: (a) At the time of (i) its acquisition of the Pledged Notes and its deposit thereof with the Trustee, and (ii) the deposit of any other Collateral with the Trustee pursuant to this Article Sixteen, it will be, and so long as any Securities remain Outstanding it will continue to be, the sole beneficial owner of such Collateral. (b) No Lien shall exist upon any Collateral at any time while any Securities remain Outstanding, except for the Lien of this Indenture. (c) The Lien of this Indenture, (i) insofar as it applies to the Pledged Notes, upon the delivery thereof by the Company to the Trustee, and (ii) insofar as it applies to any other Collateral, upon the Lien of this Indenture attaching thereto as herein provided, shall constitute a first-priority perfected Lien in and to such Collateral. SECTION 1603. Further Assurances. In furtherance of the grant of the pledge and security interest pursuant to Section 1601, the Company will: (a) if any of the above-described Collateral required to be pledged by the Company under Section 1601 is received by the Company, forthwith either (i) transfer and deliver to the Trustee such Collateral so received by the Company, all of which thereafter shall be held by the Trustee pursuant to the terms of this Indenture as part of the Collateral, or (ii) take such other action as the Trustee shall deem necessary or appropriate duly to record the Lien created hereunder in such shares, securities, monies or property referred to in said Section 1601; (b) give, execute, deliver, file and/or record any financing statement, notice, instrument, document, agreement or other papers that may be necessary or desirable (in the judgment of the Trustee) to create, preserve, perfect or validate the security interest granted pursuant hereto or to enable the Trustee to exercise and enforce its rights hereunder with respect to such pledge and security interest, including, without limitation, causing any or all of the Collateral to be transferred of record into the name of the Trustee or its nominee (and the Trustee agrees that if any Collateral is transferred into its name or the name of its nominee, the Trustee will thereafter promptly give to the Company copies of any notices and communications received by it with respect to the Collateral); and (c) permit representatives of the Trustee, upon reasonable notice, at any time during normal business hours to inspect and make abstracts from its books and records pertaining to the Collateral, and permit representatives of the Trustee to be present at the Company's place of business to receive copies of all communications and remittances relating to the Collateral, and forward copies of any notices or communications received by the Company with respect to the Collateral, all in such manner as the Trustee may require. SECTION 1604. Other Financing Statements and Liens. Without the prior written consent of the Trustee, the Company shall not file or suffer to be on file, or authorize or permit to be filed or to be on file, in any jurisdiction, any financing statement or like instrument with respect to the Collateral in which the Trustee is not named as the sole secured party for the benefit of the Holders. SECTION 1605. Preservation of Rights. The Trustee shall not be required to take steps necessary to preserve any rights against prior parties to any of the Collateral. SECTION 1606. Voting, Consensual and Other Powers. Whether or not an Event of Default or a Default shall have occurred and be continuing, the Trustee, to the exclusion of the Company, shall have the right to exercise all voting, consensual and other powers of ownership pertaining to the Collateral for all purposes. The Company shall execute and deliver to the Trustee or cause to be executed and delivered to the Company all such proxies, powers of attorney and other orders, and all such instruments, without recourse, as the Trustee may reasonably request for the purpose of enabling the Trustee to exercise the rights and powers which it is entitled to exercise pursuant to this Section. In so voting and exercising the powers of an owner with respect to any Pledged Notes, the Trustee shall not be required to attend any meeting, but the Trustee may vote or act by power of attorney or proxy and such power of attorney or proxy may be granted to any person selected by the Trustee, including any officer of the Company. The Trustee may so vote and exercise the powers of an owner with respect to any Pledged Notes for any purpose or purposes which the Trustee, in its discretion, shall deem advisable and in the interest of the Holders, whether or not such action may involve a change in the character of any Pledged Notes or in the corporate identify or business of the issuer thereof or in the proportionate interest or voting power represented by such security. The Trustee shall not be required to exercise any such voting, consensual or other powers except in accordance with the provisions of this Indenture. SECTION 1607. Payments on the Pledged Notes; Investments; Application and Holding of Collateral. (a) Whether or not an Event of Default or a Default has occurred and is continuing, the Trustee shall be entitled to receive and retain any payments of principal of and premium, if any, and interest on the Pledged Notes or any other Collateral, and the same shall constitute a part of the Collateral. All such payments shall be paid directly to the Trustee and retained by it as part of the Collateral, subject to the terms of this Indenture, and, if the Trustee shall so request in writing, the Company agrees to execute and deliver to the Trustee appropriate additional orders and documents to that end. (b) On any date, when so directed by the Company pursuant to a Company Order (which Company Order shall contain a certification to the Trustee that any investments that the Trustee is directed to make therein constitute investments of Collateral that are permitted under this Indenture), if the Trustee shall not have theretofore received notice that an Event of Default or a Default has occurred and is continuing on such date, the Trustee shall invest such Collateral held by it in interest-bearing U.S. Government Obligations and/or Commercial Paper, in either case maturing not later than the day prior to the next-following Interest Payment Date. The Trustee shall not sell any such investments except upon the exercise of remedies pursuant to Section 1608. At any time when an Event of Default or Default has occurred and is continuing, the Trustee may, but shall have no obligation to, invest cash Collateral held by it in U.S. Government Obligations and/or Commercial Paper selected by it. Any determination as to whether an investment constitutes Commercial Paper shall be made as of the date on which such investment is made. Any losses on any investments shall be for the account of the Company. For so long as no Default or Event of Default shall have occurred and be continuing, any amounts received by the Trustee representing interest earned on such investments shall be held by the Trustee for the benefit of the Company, and not as Collateral securing the Secured Obligations, and applied as provided in Subsection (d) below. At any time when a Default or an Event of Default shall have occurred and be continuing, such amounts shall be held as Collateral securing the Secured Obligations. With respect to all investments of Collateral in certificated securities (as defined in Section 8-102(1)(a) of the Uniform Commercial Code), the Trustee will do one of the following: (i) take and thereafter continuously retain (or cause its designee to take and thereafter continuously retain) possession of the certificates evidencing such securities; or (ii) cause (x) such certificated securities to be held in the custody of a clearing corporation (as defined in Section 8-102(3) of the Uniform Commercial Code) or of a custodian bank (as defined in Section 8-102(4) of the Uniform Commercial Code) or a nominee of either subject to the control of the clearing corporation, and to be in bearer form, endorsed in blank, or registered in the name of such clearing corporation, custodian bank or nominee, (y) an appropriate entry to a custodial or similar account of the Trustee in its individual capacity to be made on the books of such clearing corporation, and (z) the Trustee in its individual capacity to send the Trustee confirmation of its interest in such certificated securities and, by book entry or otherwise, to identify the interest of the Trustee in and to such uncertificated securities; or (iii) cause a financial intermediary (as defined in Section 8-313(4) of the Uniform Commercial Code) (including without limitation the Trustee in its individual capacity) to acquire possession of such securities and to cause such securities to be specially endorsed to or issued in the name of the Trustee. With respect to investments of the Collateral in uncertificated securities (as defined in Section 8-102(1)(b) of the Uniform Commercial Code) constituting U.S. Government Obligations in which the Trustee acquires an interest through book entry transfer pursuant to the rules and procedures of the Federal Reserve/Treasury book entry system ("Book Entry Treasury Securities"), the Trustee will do one of the following: (i) if the Trustee in its individual capacity has a custodial account with the Federal Reserve Bank of New York (the "FRBNY"), cause (x) such Book Entry Treasury Securities to be credited to such account, and (y) the Trustee in its individual capacity to send the Trustee confirmation of its interest in such Book Entry Treasury Securities and, by book entry or otherwise, to identify the interest of the Trustee in and to such uncertificated securities, or (ii) if the Trustee in its individual capacity does not have a custodial account with the FRBNY, cause (x) such Book Entry Treasury Securities to be credited to the custodial account of a financial intermediary at the FRBNY, and (y) such financial intermediary to send the Trustee confirmation of its interest in such Book Entry Treasury Securities and, by book entry or otherwise, to identify the interest of the Debenture Trustee in and to such Book Entry Treasury Securities. The Trustee appoints IBJ as its designee for the purpose of holding or being the account party for any Collateral from time to time held by IBJ or for its account pursuant to the preceding two paragraphs, and IBJ accepts such appointment. (c) At the Stated Maturity of the principal of and each installment of interest on the Securities, the Trustee shall apply, first, any cash Collateral then held by it and, second, any amounts representing interest earned on investments of Collateral pursuant to Subsection (b) above, to the payment of principal and interest then due and owing under the Securities or, to the extent required by Section 1403, shall deliver such Collateral and other amounts, to the extent necessary, to a Paying Agent for such application. (d) Promptly, and in any event within three Business Days, after (i) each Interest Payment Date, if the Trustee shall not have received notice that an Event of Default or a Default has occurred and is continuing on such date, or (ii) if on such Interest Payment Date the Trustee shall have received notice that an Event of Default or a Default shall have occurred and be continuing, the date on which the Trustee shall have received an Officers' Certificate certifying that such Event of Default or Default does not exist or has been cured, the Trustee shall pay to the Company or as it may direct, by wire transfer of immediately available funds, all amounts received by it after the Interest Payment Date next preceding such Interest Payment Date and on or before such Interest Payment Date representing interest earned on investments of Collateral pursuant to Subsection (b) above, to the extent not theretofore applied by the Trustee pursuant to Subsection (c) above. (e) All funds delivered to the Trustee as Collateral under this Article shall be deposited in and stand to the credit of deposit accounts in the Trustee's name. SECTION 1608. Additional Remedies. In addition to any other rights and powers otherwise granted to the Trustee pursuant to Article Nine and this Article, during the period during which an Event of Default shall have occurred and be continuing: (a) the Trustee shall have all of the rights and remedies with respect to the Collateral of a secured party under the Uniform Commercial Code (whether or not said Code is in effect in the jurisdiction where the rights and remedies are asserted) and such additional rights and remedies to which a secured party is entitled under the laws in effect in any jurisdiction where any rights and remedies hereunder may be asserted, including, without limitation, the right, to the maximum extent permitted by law, to exercise all voting, consensual and other powers of ownership pertaining to the Collateral as if the Trustee were the sole and absolute owner thereof (and the Company agrees to take all such action as may be appropriate to give effect to such right); (ii) the Trustee in its discretion may, in its name or in the name of the Company or otherwise, demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for any of the Collateral, but shall be under no obligation to do so; and (iii) the Trustee may, upon 10 Business Days' prior written notice to the Company of the time and place, with respect to the Collateral or any part thereof which shall then be or shall thereafter come into the possession, custody or control of the Trustee or any of its agents, sell, assign or otherwise dispose of all or any part of such Collateral, at such place or places as the Trustee deems best, and for cash or on credit or for future delivery (without thereby assuming any credit risk), at public or private sale, without demand of performance or notice of intention to effect any such disposition or of time or place thereof (except such notice as is required above or by applicable statute and cannot be waived) and the Trustee or anyone else may be the purchaser, assignee or recipient of any or all of the Collateral so disposed of at any public sale (or, to the extent permitted by law, at any private sale), and thereafter hold the same absolutely, free from any claim or right of whatsoever kind, including any right or equity of redemption (statutory or otherwise), of the Company, any such demand, notice or right and equity being hereby expressly waived and released. The Trustee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. The Company recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and applicable state securities laws, the Trustee may be compelled, with respect to any sale of all or any part of the Collateral, to limit purchasers to those who will agree, among other things, to acquire the Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Company acknowledges that any such private sales may be at prices and on terms less favorable to the Trustee than those obtainable through a public sale with such restrictions, and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Trustee shall have no obligation to engage in public sales and no obligation to delay the sale of any Collateral for the period of time necessary to permit the issuer thereof to register it for public sale. SECTION 1609. Removals. Without at least 30 days' prior written notice to the Trustee, the Company shall not maintain any of its books and records with respect to the Collateral at any office or maintain its principal place of business at any other place other than at the address specified in the first paragraph of this Indenture. SECTION 1610. Private Sale. The Trustee shall incur no liability as a result of the sale of the Collateral, or any part thereof, at any private sale pursuant to Section 1608 conducted in a commercially reasonable manner. The Company hereby waives any claims against the Trustee arising by reason of the fact that the price at which the Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale or was less than the aggregate amount of the Secured Obligations, even if the Trustee accepts the first offer received and does not offer the Collateral to more than one offeree. SECTION 1611. Deficiency. If the proceeds of sale, collection or other realiza- tion of or upon the Collateral pursuant to Section 1608 hereof are insufficient to cover the costs and expenses of such realiza- tion and the payment in full of the Secured Obligations, the Company shall remain liable for any deficiency. SECTION 1612. Application of Proceeds. The proceeds of any collection, sale or other realiza- tion of all or any part of the Collateral pursuant hereto, and any other cash at the time held by the Trustee under this Arti- cle, shall be applied by the Trustee as provided in Section 906. SECTION 1613. Attorney-in-Fact. Without limiting any rights or powers granted by this Indenture to the Trustee while no Event of Default has occurred and is continuing, the Trustee is hereby appointed the attorney-in-fact of the Company for the purpose of carrying out the provisions of this Article and taking any action and executing any instruments which the Trustee may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, so long as the Trustee shall be entitled under this Article to make collections in respect of the Collateral, the Trustee shall have the right and power to receive, endorse and collect all checks made payable to the order of the Company representing any dividend, payment, or other distribution in respect of the Collateral or any part thereof and to give full discharge for the same. SECTION 1614. Perfection. Substantially concurrently with the authentication and delivery of the Series A Securities, the Company shall deliver to the Trustee the Replacement Note acquired by it pursuant to Section 1411 and shall cause the Trustee to be named therein as the registered owner thereof. SECTION 1615. Expenses. The Company will pay to the Trustee all out-of-pocket expenses (including reasonable expenses for legal services of every kind) of, or incident to, the enforcement of any of the provisions of this Article, or performance by the Trustee of any obligations of the Company in respect of the Collateral which the Company has failed or refused to perform, or any actual or attempted sale, or any exchange, enforcement, collection, compromise or settlement in respect of any of the Collateral, and for the care of the Collateral and defending or asserting rights and claims of the Trustee in respect thereof, by litigation or otherwise and all such expenses shall be Secured Obligations to the Trustee secured under Section 1601. SECTION 1616. Opinions of Counsel as to Perfection. (a) Promptly after the execution and delivery of this Indenture, the Company will deliver to the Trustee an Opinion of Counsel either stating that in the opinion of such counsel this Indenture has been properly recorded and filed so as to make effective the Lien intended to be created hereby, and reciting the details of such action, or stating that in the opinion of such counsel no such action is necessary to make such Lien effective. (b) Not later than the 120th day after the end of each of its fiscal years, beginning with its fiscal year ending in 1993, the Company will deliver to the Trustee an Opinion of Counsel either stating that in the opinion of such counsel such action has been taken with respect to the recording, filing, re-recording and refiling of this Indenture as is necessary to maintain the Lien of this Indenture, and reciting the details of such action, or stating that in the opinion of such counsel no such action is necessary to maintain such Lien. SECTION 1617. Additional Deposits of Cash Collateral. The Company will deposit with the Trustee as additional cash Collateral, prior to 11:00 a.m. (New York City time) on the day in each month that is the counterpart of the day in the calendar month on which interest on the Secured Debentures is next payable, in cash in immediately available funds an amount equal to all interest accrued and unpaid through such date on the Pledged Notes, provided that the Company shall not be required to make such deposit on any date on which an Event of Default shall have occurred and be continuing if TGC and TGC II on such date shall have paid all amounts owing by them under their respective Pledged Notes. Whenever any payment due hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, provided that, if such extension shall cause such payment to be made on a date that is after the next-following date on which interest is required to be paid on the Secured Debentures, such payment shall be made on the next preceding Business Day. In all cases for purposes of determining the amount payable hereunder, interest on the Pledged Notes shall be deemed to have accrued through the date on which an amount would be payable hereunder, without giving effect to the next-preceding sentence and whether or not such day is a Business Day. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. [Seal] TEXAS-NEW MEXICO POWER COMPANY By: /s/ D. R. Barnard D. R. Barnard Its: Sector Vice President and Chief Financial Officer Attest: Michael D. Blanchard Its: Secretary and General Counsel [Seal] , as Trustee By: /s/ Thomas J. Bogert Its: Vice President Attest: /s/ Barbara McCluskey Its: Assistant Secretary STATE OF NEW YORK COUNTY OF NEW YORK On the 27th day of September, 1993, before me personally came D. R. Barnard, to me known, who, being duly sworn, did depose and say that he is a Sector Vice President of Texas-New Mexico Power Company, the corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. Dean A. Tetirick Notary Public, State of New York STATE OF NEW YORK COUNTY OF New York On the 27th day of September, 1993, before me personally came Thomas Bogert, to me known, who, being by me duly sworn, did depose and say that he is an Assistant Vice President of IBJ Schroder Bank & Turst Company, the New York State banking corporation described in and which executed the foregoing instrument; that he knows the seal of said association; that the seal affixed to said instrument is such association seal; that it was so affixed by authority of the Board of Directors of said association, and that he signed his name thereto by like authority. /s/ Elizabeth A. Sullivan Notary Public, State of New York ANNEX I [Form of Face of Debenture] TEXAS-NEW MEXICO POWER COMPANY 10-3/4% Secured Debentures, Series A, Due September 15, 2003 No.__________ $__________ TEXAS-NEW MEXICO POWER COMPANY, a corporation duly organized and existing under the laws of the State of Texas (herein called the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to __________________, or registered assigns, the principal sum of _________ Dollars on September 15, 2003, and to pay interest thereon from September 15, 1993, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on March 15 and September 15 in each year, commencing March 15, 1994, at the rate per annum provided in the title hereof, until the principal hereof is paid or made available for payment, and, subject to the terms of the Indenture, at the rate per annum provided in the title hereof on any overdue principal (and premium, if any) and (to the extent that the payment of such interest shall be legally enforceable) on any overdue installment of interest. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the March 1 or September 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either (i) be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, in which event notice whereof shall be given to Holders not less than 10 days prior to such Special Record Date, or (ii) be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Company maintained for that purpose in The Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts; provided that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: [Seal] TEXAS-NEW MEXICO POWER COMPANY By_______________________ [Title] [Form of Trustee's Certificate of Authentication] The Trustee's Certificate of Authentication shall be in substantially the form set forth below: This is one of the Securities of the series designated herein and referred to in the within- mentioned Indenture. __________________________________, as Trustee By________________________________ Authorized Signatory [Form of Reverse of Debenture] TEXAS-NEW MEXICO POWER COMPANY 10-3/4% Secured Debentures, Series A, Due September 15, 2003 This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series limited in aggregate principal amount to $417.75 million under an Indenture and Security Agreement, dated as of September 15, 1993 (herein called the "Indenture"), between the Company and IBJ Schroder Bank & Trust Company, as trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. As provided in the Indenture, the Securities are issuable in series which may vary as in the Indenture provided or permitted. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $140,000,000. From and after September 15, 2000, the Securities of this series are subject to redemption upon not less than 30 nor more than 60 days' notice by mail to the Holders of such Securities at their addresses in the Security Register for such series, as a whole or in part, at the election of the Company from time to time at a Redemption Price equal to 100% of the principal amount, together in the case of any such redemption with accrued and unpaid interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture. If this Security be called for redemption and payment duly provided therefor as specified in the Indenture, interest shall cease to accrue on the date fixed for redemption. In the event of a redemption of this Security in part only, a new Security or Securities of this series and of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon cancellation hereof. The Indenture contains provisions for defeasance of (a) the entire indebtedness evidenced by this Security and (b) certain restrictive covenants, in either case upon compliance by the Company with certain conditions set forth therein. Pursuant to Article Sixteen of the Indenture, the Company has delivered certain collateral to the Trustee. Such collateral, and certain other collateral that may be received by the Trustee in respect thereof, shall secure the performance of the Company's obligations under the Securities. Under certain circumstances, from time to time property comprising the Collateral may be released. Upon meeting certain requirements, the Company may issue additional Securities which will be secured pari passu by the Collateral. If an Event of Default shall occur and be continuing, the principal of the Securities, and all accrued and unpaid interest thereon, may be declared due and payable in the manner and with the effect provided in the Indenture. With limited exceptions, the Trustee may not file or join in the filing of any bankruptcy or similar petition for a period of six months from the date on which an Event of Default shall have occurred under the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of 66-2/3% in principal amount of the Securities at the time Outstanding (as defined in the Indenture) of all series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, by written consent to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. The Indenture also permits, with certain exceptions as therein provided, the Company and the Trustee to enter into one or more amendments, modifica- tions or waivers or supplements to the Credit Agree- ments, the Pledged Note and the Project Documents, as defined in the Indenture, with the consent of the Holders of at least 51% in principal amount of the Securities at the time Outstanding. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company maintained for that purpose, which at the date hereof, shall be the Corporate Trust Office, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his or her attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. This Security shall be governed by and construed in accordance with the laws of the State of New York. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. EX-10 7 EXHIBIT 10(B)2 EXECUTION COUNTERPART ======================================= AMENDMENT NO. 1 Dated as of September 21, 1993 to the UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Dated as of January 8, 1992 among TEXAS-NEW MEXICO POWER COMPANY and TEXAS GENERATING COMPANY and THE BANKS NAMED HEREIN as Banks and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) as Agent ======================================= AMENDMENT NO. 1 (this "Amendment") dated as of September 21, 1993 to the UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT dated as of January 8, 1992 (the "Credit Agreement"), among TEXAS-NEW MEXICO POWER COMPANY ("TNP"), TEXAS GENERATING COMPANY ("TGC"), each of the lenders that is a signatory hereto identified under the caption "BANKS" on the signature pages hereof or which, pursuant to Section 16.01 hereof, shall become a "Bank" hereunder, the Voting Participants and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as agent for the Banks (in such capacity, the "Agent"). RECITALS 1. The parties hereto have previously entered into the Credit Agreement which became effective on the Effective Date, January 24, 1992, upon the satisfaction of the conditions precedent thereto as set out in Section 8.01 of the Credit Agreement. 2. On January 27, 1992, TNP and TGC satisfied the conditions in Section 8.02 of the Credit Agreement to cause the occurrence of the Extension Date. Among other things, TNP issued its Series T Bonds and its First Secured Debentures, due January 15, 1999, and applied the net proceeds thereof to, among other things, purchase pro rata from the Banks $65,000,000 of the Project Loans outstanding under the Credit Agreement. The Project Loans acquired by TNP were, automatically upon their purchase by TNP, converted into the First Replacement Loan, evidenced by the First Replacement Note that is secured pursuant to the Security Documents pari passu with the other Obligations under the Credit Agreement and the other Project Documents. The First Secured Debentures are secured by TNP's pledge of the First Replacement Note to the First Debenture Trustee under the First Secured Debenture Indenture. As a result of the pledge of the First Replacement Note, the First Secured Debentures indirectly share pari passu in the Banks' Collateral. 3. TNP and TGC have the right to secure additional debt securities with the Collateral, subject to the terms and conditions of Section 9.32 of the Credit Agreement. Other than with respect to the January 27, 1992 transactions described in Recital 2 hereof, however, no specific procedures were AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT established in the Credit Agreement for TNP or TGC to secure additional debt securities with the Collateral. 4. The parties desire to amend the Credit Agreement as provided for in this Amendment to facilitate TNP's or TGC's securing certain additional debt securities and, upon the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest due and payable thereon and all other amounts due and payable by TNP and TGC to the Banks under the Credit Agreement and the other Project Documents, debt with the Collateral from time to time in furtherance of and as necessary for the parties to achieve the purposes and objectives, to perform the obligations and to exercise the rights, all as set forth in or contemplated by the Credit Agreement and as modified by this Amendment. 5. On July 2, 1993, TNP requested certain amendments to the Credit Agreement to provide, among other things, for the purchase by TNP, of $140,000,000 of Project Loans. On July 2, 1993, TNP requested certain amendments to the Unit 2 First Amended and Restated Project Loan and Credit Agreement dated as of January 8, 1992 among TNP, TGC II, the banks and the other parties thereto and Chase, as Agent (as amended, modified and supplemented and in effect from time to time, the "Unit 2 Credit Agreement") and simultaneously with the entering into of this Amendment the parties to the Unit 2 Credit Agreement are entering into Amendment No. 1 to the Unit 2 Credit Agreement in order to effect such amendments to the Unit 2 Credit Agreement. 6. The funds necessary for the payments, prepayments and purchase of Project Loans are expected to be provided by the issuance by TNP of new first mortgage bonds (the "New Bonds") in an aggregate principal amount of up to $100,000,000 under the TNP Bond Indenture and the issuance by TNP of Second Secured Debentures in an aggregate principal amount of up to $140,000,000 under the Second Secured Debenture Indenture. The $140,000,000 of Project Loans acquired by TNP will, automatically upon their purchase by TNP, be converted to the Second Replacement Loan, which Loan will be evidenced by the Second Replacement Note which Note will be secured pursuant to the Security Documents pari passu with the other Obligations under the Credit Agreement, the other Project Documents and the First Replacement Loan. The Second Secured Debentures will be secured by TNP's pledge of the Second Replacement Note to the Second Debenture Trustee under the Second Secured Debenture Indenture. As a result of the pledge of AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT the Second Replacement Note, the Second Secured Debentures will indirectly share pari passu in the Collateral securing the remaining Project Loans and the First Replacement Loan and, indirectly, the First Secured Debentures. 7. Certain provisions of this Amendment will become effective only upon the payment, prepayment and purchase of a portion of the Project Loans and the prepayment of certain of the indebtedness under the Unit 2 Credit Agreement and the satisfaction of certain other conditions. 8. By virtue of the First Debenture Trustee Consent, the Replacement Note Holder has consented to the extent required to the provisions of this Amendment. NOW, THEREFORE, for and in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1. Definitions. Unless otherwise defined herein, the capitalized terms utilized herein (including the Recitals hereinabove set forth) which are defined in the Credit Agreement shall have the meanings ascribed to them in the Credit Agreement. The capitalized terms defined herein, in the context of amending the Credit Agreement, shall, when used herein (including the Recitals hereinabove set forth), have the meanings ascribed to them in such amending language. SECTION 2. Conditions Precedent. (a) The effectiveness of this Amendment shall be subject to the condition precedent that, on or before September 30, 1993, this Amendment shall have been executed and delivered by TNP, TGC, the Banks, the Voting Participants (if any), the Agent and the Collateral Agent, and to the satisfaction of the following additional conditions precedent, in each case for the benefit of the parties hereto and the other Secured Parties: (i) TNP and TGC each shall deliver to the Agent certified copies of the resolutions of their AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT respective boards of directors authorizing the execution, delivery and performance of this Amendment and each of the other First Amendment Documents to which such Person is or is intended to be a party and the transactions contemplated by the issuance by TNP of New Bonds in an aggregate principal amount of up to $100,000,000 under the TNP Bond Indenture and the issuance by TNP of Second Secured Debentures in an aggregate principal amount of up to $140,000,000 under the Second Secured Debenture Indenture and all other documents evidencing other necessary action with respect thereto; (ii) TNP and TGC each shall deliver to the Agent a certificate, in form and substance satisfactory to the Agent, signed by an Authorized Officer of TNP or TGC, as applicable, certifying that, except as disclosed in such certificate, there shall be no injunction, writ, preliminary restraining order or any order of any nature issued by any arbitrator, court or other governmental authority directing that this Amendment not be consummated as herein provided and certifying further that, except as disclosed in such certificate, there shall be no material litigation, investigation or proceeding of or before any arbitrator, court or other governmental authority pending or (to the best of such Authorized Officer's knowledge, threatened) against TNP or TGC or affecting in any material respect any of its respective properties, revenues or assets; (iii) TNP and TGC each shall deliver to the Agent a certificate signed by an Authorized Officer of TNP or TGC, as applicable, certifying that (A) the representations and warranties of each of TNP and TGC, as applicable, contained in Section 2 of the Credit Agreement, as amended by this Amendment and in each of the other Project Documents to which such Person is a party shall be true and correct on and as of such date as if made on and as of such date (or, if stated to have been made solely as of an earlier date, AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT were true and correct as of such earlier date), (B) no Default under the Credit Agreement, as amended by this Amendment, and no default by either TNP or TGC under any of the other Project Documents to which either TNP or TGC is a party, has occurred and is continuing on such date and (C) to the best of such Authorized Officer's knowledge, no default by any other Person to any other Project Document has occurred and is continuing on such date; (iv) TNP and TGC each shall deliver to the Agent a certificate signed by an Authorized Officer of TNP or TGC, as applicable, certifying that (A) it has obtained all Government Approvals necessary under applicable laws and regulations in connection with the due execution, delivery and performance of this Amendment and transactions contemplated hereby and (B) all such Government Approvals have been duly obtained, were validly issued and are held by and in the name of TNP or TGC, as applicable, and are final, in full force and effect and not subject to appeal; (v) TNP and TGC each shall deliver to the Agent legal opinions from counsel to TNP and TGC in form and substance satisfactory to the Agent; (vi) the Intercreditor Amendment No. 2 shall have been duly executed and delivered by the intended parties thereto; (vii) the First Debenture Trustee Consent shall have been duly executed by the First Indenture Trustee and delivered to the Agent; (viii) the Fourth TGC Modification and Extension Agreement shall have been duly executed and delivered by the intended parties thereto and, at the sole cost of TNP and TGC, the Title Company shall have issued to the Agent (A) a T-38 endorsement to Stewart Title Guaranty Mortgage Policy No. M-5802-482888 and a T-38 endorsement to Stewart Title Guaranty Mortgage AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Policy No. M-5832-25812, each with respect to such Fourth TGC Mortgage Modification and Extension Agreement and (B) a title information report in form and substance satisfactory to and approved by the Agent, showing good and indefeasible title to the TGC Mortgage Trust Estate is vested in TGC and that the TGC Mortgage constitutes a valid first mortgage lien on the TGC Mortgage Trust Estate and showing that there are no intervening liens which would adversely affect the priority of the liens securing the Loans, subject only to Permitted Liens; (ix) the TNP Second Lien Mortgage Modification No. 2 shall have been duly executed and delivered by the intended parties thereto; (x) evidence that the First Amendment Documents and all other instruments to be recorded or filed in connection with the effectiveness of this Amendment have been duly recorded and filed in all places wherein such recording and filing are necessary to perfect the interests of the Agent in and to the Collateral covered thereby; (xi) TNP and TGC shall each deliver to the Agent such other certificates, documents or other information with respect to the matters contemplated by this Amendment as the Agent may reasonably determine are necessary to effect the transactions contemplated by this Amendment; and (xii) Amendment No. 1 to the Unit 2 Credit Agreement shall have been duly executed and delivered by TNP, TGC II, the Banks (under and as defined in the Unit 2 Credit Agreement), the Agent (under and as defined in the Unit 2 Credit Agreement) and the Collateral Agent (under and as defined in the Intercreditor Agreement) and each of the conditions precedent described in Sections 2(a)(i) through (xii) of Amendment No. 1 to the Unit 2 Credit Agreement shall have been satisfied. AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (b) The effectiveness of Section 3 of this Amendment shall be subject to the further conditions precedent that, on or before December 21, 1993, each of the following additional conditions precedent, in each case for the benefit of the parties hereto and the other Secured Parties, shall have been fulfilled: (i) TNP and TGC each shall have effected a Section 4.05 Closing (provided that, if such Section 4.05 Closing shall occur on or before November 15, 1993 the parties hereto hereby waive all notices required under Sections 4.05(c) and 4.05(d) of the Credit Agreement (as amended by this First Amendment) and evidence that there is no objection to the terms and conditions of the Second Secured Debentures, due 2003) with respect to Second Secured Debentures in an aggregate principal amount of $140,000,000 and TNP shall have contemporaneously issued New Bonds in the amount of up to $100,000,000 and (A) TNP shall have applied the proceeds from newly issued Second Secured Debentures (which meet the terms and conditions of Section 4.05 of the Credit Agreement as amended by this Amendment) to purchase Project Notes in the amount of $140,000,000 and (B) TNP or TGC shall have prepaid the Project Loans in the amount of $6,000,000 and TNP or TGC II shall have applied the proceeds of the New Bonds plus existing cash to prepay the "Project Loans," under and as defined in the Unit 2 Credit Agreement, as amended by Amendment No. 1 thereto, in the amount of $75,750,000; (ii) The Banks (excluding the New Participants) shall have received payment in full of all accrued interest on the Project Loans purchased, and simultaneously prepaid, at the Section 4.05 Closing referred to in clause (i) of this subsection (b). The New Participants shall have received payment in full of all principal of and accrued interest on the participations in the Project Loans acquired by each such New Participant from the Banks (excluding the New AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Participants) under the New Participation Agreement. (iii) TNP and TGC each shall deliver to the Agent a certificate signed by an Authorized Officer of TNP or TGC, as applicable, certifying that (A) it has obtained all Government Approvals necessary under applicable laws and regulations in connection with the provisions of, and the transactions contemplated by, Section 3 hereof and (B) all such Government Approvals have been duly obtained, were validly issued and are held by and in the name of the proper party (either directly or by transfer from the original applicant therefor) and are final, in full force and effect and not subject to appeal; (iv) TNP and TGC each shall deliver to the Agent a certificate, in form and substance satisfactory to the Agent, signed by an Authorized Officer of TNP or TGC, as applicable, certifying that, except as disclosed in such certificate, there shall be no injunction, writ, preliminary restraining order or any order of any nature issued by any arbitrator, court or other governmental authority directing that this Amendment not be consummated as herein provided and certifying further that, except as disclosed in such certificate, there shall be no material litigation, investigation or proceeding of or before any arbitrator, court or other governmental authority pending or (to the best of such Authorized Officer's knowledge, threatened) against TNP or TGC or affecting in any material respect any of its respective properties, revenues or assets; (v) TNP and TGC each shall deliver to the Agent legal opinions of counsel to TNP and TGC (which may take the form of bring-down letters with respect to legal opinions delivered on the First Amendment Effective Date) in form and substance satisfactory to the Agent; AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (vi) the Fifth TGC Modification and Extension Agreement shall have been duly executed and delivered by the intended parties thereto and, at the sole cost of TNP and TGC, the Title Company shall have issued to the Agent (A) a T-38 endorsement to Stewart Title Guaranty Mortgage Policy No. M-5832-25812, a T-38 endorsement to the Stewart Title Guaranty Mortgage Policy issued pursuant to Section 17.21 of the Credit Agreement, as amended by this Amendment and T-38 endorsement to Stewart Title Guaranty Mortgage Policy No. M-5802-482888, each with respect to such Fifth TGC Mortgage Modification and Extension Agreement and (B) a title information report in form and substance satisfactory to and approved by the Agent, showing good and in defeasible title to the TGC Mortgage Trust Estate is vested in TGC and that the TGC Mortgage constitutes a valid first mortgage lien on the TGC Mortgage Trust Estate and showing that there are no intervening liens which would adversely affect the priority of the liens securing the Loans, subject only to Permitted Liens; (vii) evidence that the First Amendment Documents and all other instruments to be recorded or filed in connection with the effectiveness of Section 3 of this Amendment have been duly recorded and filed in all places wherein such recording and filing are necessary to perfect the interests of the Agent in and to the Collateral covered thereby; and (viii) TNP and TGC shall each deliver to the Agent such other certificates, documents or other information with respect to the matters contemplated by Section 3 of this Amendment as the Agent may reasonably determine are necessary to effect the transactions contemplated by Section 3 of this Amendment. (c) Promptly upon the satisfaction of the conditions precedent to the effectiveness of this Amendment, as described in Section 2(a) of this Amendment, the Agent AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT shall confirm in writing delivered to TNP and TGC that the provisions of this Amendment (except Section 3 hereof) have become effective. Promptly upon the satisfaction of the conditions precedent described in Section 2(b) of this Amendment the Agent shall confirm in writing delivered to TNP and TGC that the provisions of Section 3 of this Amendment have become effective. SECTION 3. SECTION 3.01 Additional Amendments. (a) Section 5.01 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "SECTION 5.01. Outstanding Loans. As of the Section 3 Effective Date, the parties hereto hereby acknowledge the payment, prepayment or purchase in full of the Project Loans, all interest due and payable thereon and all other amounts due and payable by TNP and TGC to the Banks under this Agreement and the other Project Documents. TNP and TGC hereby acknowledge and agree that as of the Section 3 Effective Date there are outstanding $65,000,000 in First Replacement Loans and $140,000,000 in Second Replacement Loans.". (b) Section 5.02(b)(iii) of the Credit Agreement shall be deleted in its entirety and replaced with the following: "(iii) [INTENTIONALLY OMITTED].". SECTION 3.02. Joinder of Guarantor. TNP, as the Guarantor, hereby confirms and consents to each and every of the terms and conditions of Section 3 of this Amendment and the Credit Agreement as amended by Section 3 of this Amendment (including, without limitation Section 17.13 of the Credit Agreement), and agrees that the terms and conditions of the Guaranty are in full force and effect and unaffected by the effectiveness of Section 3 of this Amendment and acknowledges that there are no claims or offsets against, or defenses or counterclaims to, the Guaranty. AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT SECTION 4. Conforming Changes to the Credit Agreement. (a) The introductory paragraph of the Credit Agreement shall be amended by adding an "s" to the end of the term "Replacement Note Holder" in both occurrences of such term. (b) Recital 9 of the Credit Agreement shall be amended by inserting the word "First" before each occurrence of the following terms: "Secured Debentures", "Secured Debenture Indenture", "Replacement Loans", "Replacement Note" and "Debenture Trustee". (c) Recital 10 of the Credit Agreement shall be amended by inserting the word "First" before the term "Secured Debentures". (d) Section 1.01 of the Credit Agreement shall be further amended as follows: (i) Delete the following terms and their definitions in their entirety: "Debenture Trustee", "Replacement Loan", "Replacement Note", "Replacement Note Holder", "Replacement Note Maturity Date", "Scheduled Reduction Dates", "Secured Debenture Indenture", "Secured Debentures", "Security Documents" and "TGC Mortgage Modifications"; (ii) Insert the following new terms and their definitions in the appropriate alphabetical order: ""4.05 Notice" shall have the meaning ascribed to such term in Section 4.05(c) hereof. "Collateral Coverage Maximum Amount" shall mean, as of any date of determination on or after the First Amendment Effective Date, (a) $270,000,000 minus (b) the amount of payments made by TNP resulting in transfers made by TGC (on or after the First Amendment Effective Date) which, in accordance with the terms and conditions of the Facility Purchase Agreement, have resulted in transfers of Interests (as defined in the Facility Purchase Agreement) in Unit 1 from TGC to TNP AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT which Interests (as so defined) have been released from the lien of the TGC Mortgage. On the First Section 4.05 Closing Date (after giving effect to the transactions contemplated to occur on or prior to the First Section 4.05 Closing Date), the Collateral Coverage Maximum Amount shall be $205,000,000 subject to reduction thereafter by virtue of transactions described in clause (b) of the preceding sentence occurring after the First Section 4.05 Closing Date. "Debenture Trustees" shall mean the First Debenture Trustee, the Second Debenture Trustee and any Subsequent Debenture Trustee, and "Debenture Trustee" shall mean any of them. "Fifth TGC Modification and Extension Agreement" shall mean the Fifth TGC Modification and Extension Agreement among the Agent, the Collateral Agent, TNP and TGC, substantially in the form of Exhibit D to the First Amendment. "First Amendment" shall mean the Amendment No. 1 dated as of September 21, 1993 to this Agreement among TNP, TGC, the Banks, the Voting Participants and the Agent. "First Amendment Documents" shall mean the First Amendment, the Second Replacement Note, the Intercreditor Amendment No. 2, the First Debenture Trustee Consent and the First Amendment Security Documents. "First Amendment Effective Date" shall mean the date on which all of the conditions set forth in Section 2(a) of the First Amendment shall have been satisfied. "First Amendment Security Documents" shall mean the First Amendment TGC Mortgage Modifications and the TNP Second Lien Mortgage Modification No. 2. "First Amendment TGC Mortgage Modifications" shall mean the Fourth TGC Mortgage Modification AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT and Extension Agreement and the Fifth TGC Mortgage Modification and Extension Agreement. "First Debenture Trustee" shall mean IBJ, as trustee under, or any successor trustee under, the First Secured Debenture Indenture. "First Debenture Trustee Consent" shall mean a First Debenture Trustee Consent duly executed and delivered by the First Debenture Trustee, substantially in the form of Exhibit I to the First Amendment. "First Replacement Loan" shall have the meaning ascribed to such term in Section 4.05(a) hereof. "First Replacement Note" shall have the meaning ascribed to such term in Section 4.05(a) hereof. "First Replacement Note Maturity Date" shall mean, subject to Section 4.05(g) hereof, the stated maturity date of the First Secured Debentures. "First Section 4.05 Closing Date" shall mean the date on which the first Section 4.05 Closing hereunder with respect to the first series of Second Secured Debentures shall occur. "First Secured Debenture Indenture" shall mean the Indenture and Security Agreement dated as of January 15, 1992 between TNP and IBJ, as trustee, as the same may from time to time be amended, modified or supplemented or its provisions waived. "First Secured Debentures" shall mean the debentures, due January 15, 1999, issued by TNP on January 27, 1992 under the First Secured Debenture Indenture. "Fourth TGC Modification and Extension Agreement" shall mean the Fourth TGC Modification AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT and Extension Agreement among the Agent, the Collateral Agent, TNP and TGC, substantially in the form of Exhibit C to the First Amendment. "IBJ" shall mean IBJ Schroder Bank & Trust Company, a New York banking corporation. "Intercreditor Amendment No. 2" shall mean Amendment No. 2 to the Intercreditor Agreement dated as of September 21, 1993 among TNP, TGC, TGC II, the banks and the other parties thereto and Chase in its several capacities as the Agent, the Collateral Agent and the Agent under the Unit 2 Credit Agreement, substantially in the form of Exhibit B to the First Amendment. "Permitted Collateralized Indebtedness" shall have the meaning ascribed to such term in Section 4.05(b)(i) hereof. "Permitted Demand Date" shall mean, at any time, with respect to any Replacement Loan or any Replacement Note (subject to Section 4.05(g) hereof, other than the First Replacement Loan and the First Replacement Note), the stated maturity date of the Secured Debentures issued on the basis of (and at such time collateralized by) such Replacement Loan and Replacement Note. "Permitted Section 4.05(b)(ii) Collateralized Indebtedness" shall have the meaning ascribed to such term in Section 4.05(b)(ii) hereof. "Register" shall have the meaning ascribed to such term in Section 4.05(f) hereof. "Relevant Instruments" shall have the meaning ascribed to such term in Section 4.05(c) hereof. "Replacement Agent" shall have the meaning ascribed to such term in Section 15.08 hereof. "Replacement Loans" shall mean the First Replacement Loan, the Second Replacement Loan and AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT any Subsequent Replacement Loans, and "Replacement Loan" shall mean any of them. "Replacement Note Holders" shall mean: (a) (i) with respect to the First Replacement Note, on the Extension Date and prior to the pledge of the First Replacement Note by TNP to the First Debenture Trustee pursuant to the First Secured Debenture Indenture, TNP; and (ii) with respect to the Second Replacement Note, any Subsequent Replacement Note or any other Replacement Note (other than a Released Replacement Note) available at such time for pledge in conjunction with a future Section 4.05 Closing, prior to the pledge of such Second Replacement Note, such Subsequent Replacement Note or such other Replacement Note by TNP to a Second Debenture Trustee pursuant to a Second Secured Debenture Indenture or a Subsequent Debenture Trustee pursuant to a Subsequent Secured Debenture Indenture in conjunction with such future Section 4.05 Closing, TNP; (b) immediately upon any such pledge of any such Replacement Note referred to in subclause (i) or (ii) of the preceding subsection (a), but only with respect to such Replacement Note so pledged (a "Pledged Replacement Note"): (i) with respect to any benefits (including, without limitation, rights to vote on amendments or defaults and to attend bank meetings) accruing to, and any obligations pursuant to Sections 6.03, 15.05, 17.16 and 17.18 hereunder of, the holder of such Pledged Replacement Note, the Debenture Trustee to which such Pledged Replacement Note was pledged (whether or not it shall have become the legal and beneficial owner of AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT such Pledged Replacement Note for all purposes); and (ii) with respect to any other obligations of the holder of such Pledged Replacement Note, TNP; (c) following the release of any such pledge of any such Pledged Replacement Note, but only with respect to such Pledged Replacement Note so released (a "Released Replacement Note") and prior to the pledge of such Released Replacement Note in conjunction with a future Section 4.05 Closing, TNP; and (d) following the transfer of any Replacement Note upon the exercise of remedies by a Debenture Trustee under the applicable Secured Debenture Indenture, any transferee of such Replacement Note (other than such Debenture Trustee in its capacity as trustee); provided that each of TNP, each Debenture Trustee and any transferee shall have signed (as a condition to becoming a Replacement Note Holder) an instrument of adoption, substantially in the form of Exhibit G hereto, agreeing to be bound by and (in the case of each Debenture Trustee, subject to the provisions of clause (b) above) comply with terms and conditions of (x) this Agreement applicable to Replacement Note Holders and (y) the Intercreditor Agreement applicable to the "Unit 1 Banks" (as defined in the Intercreditor Agreement); and "Replacement Note Holder" shall mean any of them. Anything in the foregoing to the contrary notwithstanding, TNP, as Replacement Note Holder of any Replacement Note, shall have no voting rights under this Agreement and shall not be considered in the determination of "Majority Banks" for purposes of this Agreement. "Replacement Note Maturity Dates" shall mean the First Replacement Note Maturity Date and with AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT respect to any other Replacement Note, such Replacement Note's Permitted Demand Date or if no demand is made on or within 90 days after such Permitted Demand Date, on January 1, 2050. "Replacement Notes" shall mean the First Replacement Note, the Second Replacement Note and any Subsequent Replacement Notes, and "Replacement Note" shall mean any of them. "Scheduled Reduction Dates" shall mean, the First Scheduled Reduction Date, the Second Scheduled Reduction Date, the Third Scheduled Reduction Date (if applicable), the Final Maturity Date and each Replacement Note Maturity Date. "Second Debenture Trustee" shall mean the trustee under, or any successor trustee under, the Second Secured Debenture Indenture. "Second Replacement Loan" shall have the meaning ascribed to such term in Section 4.05(e) hereof. "Second Replacement Note" shall have the meaning ascribed to such term in Section 4.05(e) hereof. "Second Secured Debenture Indenture" shall mean the Indenture and Security Agreement between TNP and the Second Debenture Trustee, as trustee, as the same may from time to time be amended, modified or supplemented or its provisions waived. "Second Secured Debentures" shall mean the debentures issued by TNP under the Second Secured Debenture Indenture. "Section 3 Effective Date" shall mean the date on which all of the conditions set forth in Section 2(b) of the First Amendment shall have been satisfied. "Section 4.05 Closing" shall have the meaning ascribed to such term in Section 4.05(d) hereof. AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT "Section 4.05 Closing Date" shall have the meaning ascribed to such term in Section 4.05(d) hereof. "Secured Debenture Indentures" shall mean the First Secured Debenture Indenture, the Second Secured Debenture Indenture and any Subsequent Secured Debenture Indentures, and "Secured Debenture Indenture" shall mean any of them. "Secured Debentures" shall mean the First Secured Debentures, the Second Secured Debentures and any Subsequent Secured Debentures (which may include subsequent series of debentures issued under any indenture supplemental to the Second Secured Debenture Indenture or any Subsequent Secured Debenture Indenture), and may refer to the Secured Debentures of any one or more such series, as the context may require. "Security Documents" shall mean, collectively, the TNP Security Agreement, the Subordination Agreement, the TGC Mortgage, the TNP Second Lien Mortgage, the Amendment Security Documents and the First Amendment Security Documents. "Subsequent Debenture Trustee" shall mean, with respect to any Subsequent Secured Debenture Indenture, the trustee, or any successor trustee, under such Subsequent Secured Debenture Indenture or, if there shall be no "trustee," per se, any person serving in a capacity or performing functions, in each case, similar to those of a trustee under an indenture, regardless of the name or legal characterization of said capacity or functions and, in each case, any successor in such capacity or performing such functions under such Subsequent Secured Debenture Indenture. "Subsequent Replacement Loan" shall have the meaning ascribed to such term in Section 4.05(e) hereof. "Subsequent Replacement Note" shall have the meaning ascribed to such term in Section 4.05(e) hereof. AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT "Subsequent Secured Debenture Indentures" shall mean any indenture or agreement, other than the First Secured Debenture Indenture and the Second Secured Debenture Indenture but including any indenture supplemental to the Second Secured Debenture Indenture, which provides for the issuance of and sets out the terms and conditions of any TNP debt which is to be directly or indirectly secured by the Collateral pursuant to and in accordance with Section 4.05 hereof, whether or not said agreement shall be denominated an "indenture" and whether or not said debt shall be denominated "debentures," in each case, as the same may from time to time be amended, modified or supplemented or its provisions waived. "Subsequent Secured Debentures" shall mean any TNP debt, other than the First Secured Debentures and the Second Secured Debentures, which is to be directly or indirectly secured by the Collateral pursuant to and in accordance with Section 4.05 hereof, whether or not said debt shall be denominated "debentures". Said term may refer to Subsequent Secured Debentures of any one or more such series, as the context may require. "Subsequent TGC Modification and Extension Agreement" shall mean a TGC Modification and Extension Agreement among the Agent, the Collateral Agent, TNP and TGC, substantially in the form of Exhibit E to the First Amendment, and otherwise duly completed. "Ten Acre Releases" shall have the meaning ascribed to such term in Section 17.20(c) hereof. "TGC Mortgage Modifications" shall mean (a) the First TGC Modification and Extension Agreement among the Agent, the Collateral Agent, Donald H. Snell as mortgage trustee, TNP and TGC, (b) the Second TGC Modification and Extension AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Agreement among the Agent, the Collateral Agent, TNP and TGC, (c) the Third TGC Modification and Extension Agreement among the Agent, the Collateral Agent, TNP and TGC, (d) the Fourth TGC Modification and Extension Agreement among the Agent, the Collateral Agent, TNP and TGC, substantially in the form of Exhibit C to the First Amendment, (e) the Fifth TGC Modification and Extension Agreement among the Agent, the Collateral Agent, TNP and TGC, substantially in the form of Exhibit D to the First Amendment, (f) each Subsequent TGC Modification and Extension Agreement among the Agent, the Collateral Agent, TNP and TGC, substantially in the form of Exhibit E to the First Amendment and (g) any other modification and extension agreement among the Agent, the Collateral Agent, TNP and TGC, which shall evidence of record that Replacement Loans and the Replacement Notes, issued in accordance with Section 4.05 hereof, are secured by the Collateral. "TNP Second Lien Mortgage Modification No. 2" shall mean the Second Lien Mortgage and Deed of Trust (with Security Agreement) Modification, Extension and Amendment Agreement No. 2 among the Agent and TNP, substantially in the form of Exhibit F to the First Amendment."; (iii) The definition of "Amendment Documents" shall be amended by inserting the word "First" before the term "Replacement Note"; (iv) Delete clause (c) in the definition of "Interest Payment Date" and substitute in its place the following: "(c) as to (i) the First Replacement Loan, each date on which TNP is obligated to make a deposit of cash collateral in respect of interest on the First Secured Debentures pursuant to Section 1119 of the First Secured Debenture Indenture and (ii) the Second Replacement Loan and any Subsequent Replacement Loan, each date on which TNP is obligated to make a deposit of cash AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT collateral in respect of interest on the Second Secured Debentures or any Subsequent Secured Debentures, as applicable, pursuant to provisions of the applicable Second Secured Debenture Indenture or Subsequent Secured Debenture Indenture similar to the provisions referred to in subclause (i) of this clause (c) and providing for the deposit of cash collateral in respect of payment of interest."; (v) The definition of "Loans" shall be amended by adding an "s" to the end of the term "Replacement Loan"; (vi) The definition of "Majority Banks" shall be amended by adding an "s" to the end of the term "Replacement Note Holder"; (vii) The definition of "Net Proceeds" shall be amended by inserting the phrase "when used in Section 8.02(c) hereof," after the term "Net Proceeds"; (viii) The definition of "New Debt Securities" shall be amended by inserting the word "First" before the term "Secured Debentures"; (ix) The definition of "Notes" shall be amended by adding an "s" to the end of term "Replacement Note"; (x) Delete clause (b) in the definition of "Post- Default Rate" and substitute in its place the following: "(b) subject to Section 4.05(g) hereof, in respect of any principal of any Replacement Loan or Replacement Note, a rate per annum, as of any date of determination, equal to the interest rate applicable to (x) the Secured Debentures to which such Replacement Loan relates as of such date of determination as specified in the applicable Secured Debenture Indenture pursuant to which such Secured Debentures were issued or (y) if such Replacement Loan does not as of such date of determination serve as the basis for the issuance AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT of any outstanding Secured Debentures, a rate per annum equal to the Prime Rate."; (xi) The definition of "Principal Office" shall be amended by adding an "s" to the end of the term "Replacement Note Holder"; (xii) The definition of "Project Creditors" shall be amended by (A) deleting the phrase ", after the Extension Date," and (B) adding an "s" to the end of the term "Replacement Note Holder"; (xiii) The definition of "Project Documents" shall be amended by (A) adding an "s" to the end of the term "Replacement Note" and (B) inserting the term "the First Amendment Documents," after the term "this Agreement,"; (xiv) The definition of "Secured Parties" shall be amended by adding an "s" to the end of the term "Replacement Note Holder"; and (xv) The definition of "Voting Participant Notice" shall be amended by (A) substituting the word "a" for "the" before the first occurrence of the term "Replacement Note Holder" and (B) substituting the word "such" for "the" before the second occurrence of such term. (e) Section 1.02 of the Credit Agreement shall be amended by (A) deleting the phrase "the Replacement Note Holder" in the second sentence thereof and inserting in lieu thereof the phrase "any of the Replacement Note Holders" and (B) deleting the phrase "the Secured Debenture Indenture" in the third sentence thereof and inserting in lieu thereof the phrase "any of the Secured Debenture Indentures". (f) Section 2 of the Credit Agreement shall be amended by inserting the phrase "and, with respect to a Section 4.05 Closing (in each case, assuming the due execution and delivery of documents required to be delivered in connection therewith and the performance of the other conditions precedent thereto by the parties (other than TNP or TGC) thereto), the applicable Section 4.05 AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Closing Date" after each occurrence of the term "Extension Date" therein. (g) Section 2.10 of the Credit Agreement shall be amended by inserting after the word "Except" the following: "(i) for the replacement of Project Notes by Replacement Notes, and (ii)". (h) Section 2.22 of the Credit Agreement shall be amended by inserting after the word "Except" the following: "(i) for the replacement of Project Notes by Replacement Notes, and (ii)". (i) Section 4.01 of the Credit Agreement shall be amended by deleting the phrase "none of the Banks and the Replacement Note Holder" in the fourth sentence thereof and inserting in lieu thereof the phrase "neither any of the Banks nor any of the Replacement Note Holders". (j) Section 4.05 of the Credit Agreement shall be amended as follows: (i) Subsection (a) shall be amended by inserting, with or without underscoring as appropriate, the word "First" before each occurrence of the following terms: "Secured Debentures", "Replacement Loan" and "Replacement Note"; (ii) Delete subsection (b) in its entirety; and (iii) Add new subsections (b), (c), (d), (e), (f) and (g) as follows: "(b) (i) Subject to the provisions of Section 4.05(b)(ii) hereof, additional or replacement (A) indebtedness of TNP consisting of Secured Debentures issued on the basis of (and collateralized by) Replacement Notes issued hereunder which are in turn secured by the Collateral and/or (B) indebtedness of TGC consisting of (1) Project Loans and/or (2) Replacement Loans (the indebtedness referred to in the foregoing clauses (A) and (B) hereinafter AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT referred to as "Permitted Collateralized Indebtedness") may be secured, directly or indirectly, by the Collateral, provided that in any such case the liens and security interests on the Collateral directly or indirectly securing Permitted Collateralized Indebtedness are provided on substantially the same terms and conditions as the liens and security interests securing the Loans outstanding on the First Amendment Effective Date and (B) the aggregate principal amount of Loans outstanding hereunder may not at any time be greater than the Collateral Coverage Maximum Amount at such time. (ii) Until the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest due and payable thereon and all other amounts due and payable by TNP and TGC to the Banks under this Agreement and the other Project Documents and so long as any of the First Secured Debentures remain outstanding, only additional or replacement Permitted Collateralized Indebtedness constituting debt securities (and not bank debt) or Loans ("Section 4.05(b)(ii) Permitted Collateralized Indebtedness") may be secured, directly or indirectly, by the Collateral and only if (A) the terms, conditions and limitations of Section 4.05(b)(i) hereof are satisfied and complied with, (B) the proceeds of any such additional Permitted Section 4.05(b)(ii) Permitted Collateralized Indebtedness of TNP are applied to purchase Project Loans outstanding on the First Amendment Effective Date, (C) any such additional or replacement Permitted Section 4.05(b)(ii) Collateralized Indebtedness of TNP (and the related Section 4.05(b)(ii) Collateralized Indebtedness of TGC constituting Replacement Loans) has maturities longer than the Project Notes outstanding on the First Amendment Effective Date and then outstanding and not shorter than the maturity of the First Secured Debentures then outstanding, (D) any such additional or replacement Permitted Section 4.05(b)(ii) Collateralized Indebtedness of TNP (and the AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT related Section 4.05(b)(ii) Collateralized Indebtedness of TGC constituting Replacement Loans) is not subject to prepayment (except on the same terms and conditions of prepayment applicable to the First Secured Debentures) prior to the maturity date of the First Secured Debentures then outstanding and (E) any such additional or replacement Permitted Section 4.05(b)(ii) Collateralized Indebtedness of TNP (and the related Section 4.05(b)(ii) Collateralized Indebtedness of TGC constituting Replacement Loans) is subject to other covenants, terms, conditions and restrictions for the benefit of the Secured Parties substantially the same as those herein with respect to the First Secured Debentures. (c) Upon each occasion that TNP or TGC desires to issue additional or replacement Permitted Collateralized Indebtedness (other than Permitted Collateralized Indebtedness constituting Project Loans): (i) TNP and TGC shall deliver, not less than 30 days prior to the anticipated date of the applicable Section 4.05 Closing, to the Agent (A) an initial notice (a "4.05 Notice") of its intention to issue such Permitted Collateralized Indebtedness containing the proposed terms of such Permitted Collateralized Indebtedness and the terms of the security therefor in sufficient detail to enable the Agent, the Banks (if any Project Loans are outstanding) and the Replacement Note Holders to determine whether such terms comply with the terms and conditions of Section 4.05(b) hereof, (B) substantially final forms of each document, certificate, title information report, Uniform Commercial Code financing statement and other instrument (the "Relevant Instruments") required to be delivered by TNP or TGC to the Agent under this Section 4.05 in connection with the applicable Section 4.05 Closing, (C) a certificate signed by an Authorized Officer of each of TNP and TGC to the effect that such terms comply with the terms and conditions of AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Section 4.05(b) hereof and (D) an opinion of counsel for each of TNP and TGC substantially in the form of Exhibit G to the First Amendment. TNP and TGC shall deliver promptly to the Agent such additional information as the Agent may reasonably request concerning the proposed transaction; (ii) the Agent shall within five days of receipt of a 4.05 Notice forward to each Bank (if any Project Loans are outstanding) and each Replacement Note Holder a copy of such 4.05 Notice and a copy of each of the Relevant Instruments received by the Agent in connection with such 4.05 Notice. Not later than ten days after receipt of such 4.05 Notice from the Agent, the Majority Banks or the Banks (if any Project Loans are outstanding) holding at least 66-2/3% of the outstanding principal amount of the Project Loans, or the Agent acting with the consent of such Banks, may forward to each of TNP and TGC a notice stating that, the terms and conditions of the proposed Section 4.05 Closing do not meet the terms and conditions set forth in Section 4.05 hereof and stating with reasonable specificity why said terms and conditions do not meet the terms and conditions of Section 4.05 hereof; and (iii) TNP or TGC shall (A) revise the terms and conditions of the proposed transaction such that the terms and conditions of Section 4.05 hereof are in fact satisfied by the terms and conditions of the proposed transaction or (B) cancel the proposed transaction. (d) TNP shall designate a date that is a Business Day for the closing of the proposed transactions. The designation shall be made by notice received by the Agent not less than 20 days after the notice under Section 4.05(c)(i) and not less than six days prior to such designated date. The proposed transaction shall be effected at a closing (a "Section 4.05 Closing") on such designated date or such other date (a "Section 4.05 Closing Date") as may be agreed upon AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT by TNP, TGC and the Agent. Prior to or at each Section 4.05 Closing: (i) TNP, TGC, the Agent and, as applicable, the Collateral Agent each shall sign and deliver, in recordable form to the Agent and, as applicable, the Collateral Agent, such financing statements under the Uniform Commercial Code as are necessary to protect, preserve and maintain the priority of the liens contemplated by the Security Documents and TNP and TGC shall provide (A) copies of Uniform Commercial Code search reports with respect to each of TGC and TNP, as "debtor", in each jurisdiction in which such financing statements are to be filed and (B) all other instruments to be recorded or filed or delivered in connection with such Section 4.05 Closing; (ii) TGC shall deliver to the Agent a Subsequent TGC Modification and Extension Agreement and, at the sole cost of TNP and TGC, the Title Company shall have issued to the Agent, a T-38 endorsement (or if a T-38 endorsement is no longer available, such other endorsement as shall have the same scope and purpose as a T-38 endorsement on the First Amendment Effective Date) to the title policy or policies which insure the lien of the TGC Mortgage securing the Loans outstanding hereunder and evidenced by Project Notes or Replacement Notes on such date, each with respect to such TGC Mortgage Modification and Extension Agreement; (iii) At the sole cost of TNP and TGC, the Title Company shall deliver to the Agent a title information report, showing that good and indefeasible title to the TGC Mortgage Trust Estate is vested in TGC and that the TGC Mortgage constitutes a valid first mortgage lien on the TGC Mortgage Trust Estate and showing that there are no intervening liens which would adversely affect the priority of the liens securing Loans, subject only to the Permitted Liens; AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (iv) TNP and TGC each shall deliver to the Agent legal opinions of counsel to TNP and TGC dated the applicable Section 4.05 Closing Date and substantially in the forms of Exhibit H hereto; (v) TNP and TGC each shall deliver to the Agent (A) certified copies of the resolutions of its board of directors authorizing the issuance of such Permitted Collateralized Indebtedness and the collateral therefor furnished pursuant to the terms and conditions of this Section 4.05 and authorizing the execution, delivery and performance of the documentation necessary therefor and (B) certified copies of its charter, bylaws, good standing certificates and franchise tax certificates from the State of Texas and all other places where necessary in light of the business and properties it conducts and owns and intends to conduct and own; (vi) TNP and TGC each shall deliver to the Agent a certificate signed by an Authorized Officer of TNP or TGC, as applicable, and dated the applicable Section 4.05 Closing Date certifying the name, incumbency and signature of each individual authorized to execute any documents or certificates in connection with such Section 4.05 Closing, upon which certificates and documents the Secured Parties may conclusively rely; (vii) TNP and TGC each shall deliver to the Agent a certificate signed by an Authorized Officer of TNP or TGC, as applicable, and dated the applicable Section 4.05 Closing Date certifying that there shall be no injunction, writ, preliminary restraining order or any other order of any nature issued by any arbitrator, court or other governmental authority directing that the transactions conducted, or the transactions contemplated in the documentation executed and/or delivered, at such Section 4.05 Closing not be consummated as herein or therein provided and certifying further, except as disclosed herein, there shall be no material AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT litigation, investigation or proceeding of or before any arbitrator, court or other governmental authority pending or (to the best of such Authorized Officer's knowledge, threatened) against TNP or TGC or affecting any of their respective properties, rights, revenues or assets, or the Project or any of the transactions to be effected at such Section 4.05 Closing; (viii) TNP and TGC each shall deliver to the Agent a certificate signed by an Authorized Officer of TNP or TGC, as applicable, and dated the applicable Section 4.05 Closing Date certifying that (A) the representations and warranties of each of TNP and TGC, as applicable, contained in Section 2 hereof and in each of the other Project Documents to which such Person is a party shall be true and correct on and as of such Section 4.05 Closing Date as if made on and as of such date (or, if stated to have been made solely as of an earlier date, were true and correct as of such earlier date), (B) no Default hereunder, and no default by either TNP or TGC under any of the other Project Documents to which either TNP or TGC is a party, has occurred and is continuing on such date and (C) to the best of such Authorized Officer's knowledge, no default by any other Person to any other Project Document has occurred and is continuing on such date; (ix) TNP and TGC each shall deliver to the Agent a certificate signed by an Authorized Officer of TNP or TGC, as applicable, certifying that (A) it has obtained all Government Approvals necessary under applicable laws and regulations in connection with each of the transactions contemplated by the applicable Section 4.05 Closing and (B) all such Government Approvals have been duly obtained, were validly issued and are held by and in the name of TNP or TGC, as applicable, and are final, in full force and effect and not subject to appeal; and (x) TNP and TGC shall (A) if the transactions then consummated involve a refunding AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT of existing Secured Debentures already secured by the Collateral, pay to the relevant Debenture Trustee in Dollars, in immediately available funds, all amounts due and payable under the applicable Secured Debenture Indenture and (B) if the transactions then consummated involve the purchase by TNP or TGC of Project Loans, pay to the Agent in Dollars, in immediately available funds, the purchase price for the Project Loans then being purchased pro rata from the Banks. After the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest due and payable thereon and all other amounts due and payable by TNP and TGC to the Banks under this Agreement and the other Project Documents, the Agent shall be entitled to rely solely upon the certificates and opinions of counsel delivered hereunder in making any determinations required to be made by the Agent in this Section 4.05. (e) If the transactions then consummated involve the purchase by TNP of Project Loans, then on each such Section 4.05 Closing Date (and, if such Section 4.05 Closing Date is prior to the Section 3 Effective Date, subject to Section 5.02(b)(iii) hereof) TNP shall purchase from each of the Banks (pro rata according to the aggregate outstanding principal amount of each Bank's Project Loans) a portion of such Bank's Project Loans and each Bank shall sell to TNP (without recourse and without any representation or warranty whatsoever other than as to title and absence of liens) such pro rata portion of such Bank's Project Loans such that the aggregate principal amount of Project Loans so purchased is equal to the amount of the proceeds (at the election of TNP, net of any offering or similar transaction costs) from the Second Secured Debentures or Subsequent Secured Debentures, as applicable, issued on such Section 4.05 Closing Date. The purchase price for the Project Loans so purchased by TNP shall be equal to the principal amount thereof. Simultaneously with the sale of AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT each Bank's Project Loans to TNP, TGC shall pay to the Agent, for the account of each Bank, all accrued and unpaid interest on such portion of such Bank's Project Loans to be sold to TNP plus (except with respect to the Project Loans purchased with the proceeds of Second Secured Debentures on the First Section 4.05 Closing Date) the aggregate amount (if any) which would have been payable to each Bank under Section 7.05 hereof had such portion of the Project Loans then been prepaid rather than purchased. TNP shall pay the aggregate amount of such purchase price at such Section 4.05 Closing to the Agent, for the account of each respective Bank, in Dollars in immediately available funds. Effective immediately upon the payment by TNP of such purchase price, the aggregate principal amount of the outstanding Project Loans so purchased by TNP shall be converted into a loan or loans (with respect to such purchase of Project Loans from proceeds of the Second Secured Debentures, whether one or more, the "Second Replacement Loan" and with respect to each such purchase of Project Loans from the proceeds of any Subsequent Secured Debentures, in each case, whether one or more, each a "Subsequent Replacement Loan") of equal principal amount. TGC shall execute and deliver to TNP at such Section 4.05 Closing a promissory note or notes (with respect to the purchase of the Second Replacement Loan, whether one or more, the "Second Replacement Note" and with respect to the purchase of each Subsequent Replacement Loan, in each case, whether one or more, each a "Subsequent Replacement Note") payable to TNP or its registered assigns in an aggregate principal amount equal to the aggregate principal amount of such Second Replacement Loan or such Subsequent Replacement Loan, as applicable, and, in each case, substantially in the form of Exhibit A to the First Amendment and otherwise duly completed. The Second Replacement Note and any such Subsequent Replacement Notes shall be dated, and shall bear interest from, the Section 4.05 Closing Date on which such Second Replacement Note or any such Subsequent Replacement Notes, as applicable, AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT are issued. No Replacement Note Holder shall be entitled to have its Replacement Note subdivided, by exchange for promissory notes of lesser denominations or otherwise, except in connection with a Section 4.05 Closing or in connection with an assignment to TNP of a portion of a Replacement Loan and Replacement Note in conjunction with a release of a Pledged Replacement Note (as defined in the definition of "Replacement Note Holder" in Section 1.01 hereof) expressly contemplated by the related Secured Debenture Indenture. The indebtedness evidenced by the Second Replacement Note and any Subsequent Replacement Notes, together with the indebtedness evidenced by the First Replacement Note and by the Project Notes, shall be secured by the Security Documents. Each Bank shall, prior to any transfer of such Bank's Project Note, place on such Project Note a notation to the effect that a portion of the indebtedness evidenced thereby has been transferred to TNP pursuant to this Section 4.05; provided, that, if TNP purchases the entire outstanding principal amount of a Bank's Project Loans and TNP pays to such Bank all interest due and payable on such Project Loans and all other amounts due and payable by TNP and TGC to such Bank under this Agreement and the other Project Documents, such Bank shall endorse and deliver its Project Note to the Agent so that such Project Note to TNP and, upon endorsement to TNP of all such Project Notes (x) such Project Notes shall automatically, without further action by any Person, become Subsequent Replacement Notes (and the indebtedness evidenced thereby shall automatically, without further action by any Person, become Subsequent Replacement Loans) having an outstanding principal amount equal to the outstanding principal amount of the Project Loans at the time of such purchase and shall automatically, without further action by any Person, have the Replacement Note Maturity Date, the interest rate (including without limitation the Post-Default Rate) and all other terms and conditions contemplated by this Agreement to be applicable to a Subsequent Replacement Loan and a AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Subsequent Replacement Note that do not at such time serve as the basis for the issuance of outstanding Secured Debentures and (y) such Project Notes (and the indebtedness evidenced thereby) as so recharacterized as Subsequent Replacement Notes and Subsequent Replacement Loans shall be available to TNP and TGC for use in conjunction with a future Section 4.05 Closing (and in connection therewith, such Project Note as so recharacterized as a Subsequent Replacement Note may, at the option of TNP and TGC, be replaced by a Replacement Note in the form of Exhibit A to the First Amendment). (f) The Agent will keep at its principal office in New York, New York, or such other office as the Agent may designate in writing to the Replacement Note Holders, a register (the "Register") in which the Agent will provide for the registration of Replacement Loans and Replacement Notes and the registration of transfers of Replacement Loans and Replacement Notes. In the event that any Replacement Loan or any Replacement Note is held by TNP or serves as the basis for the issuance of any outstanding Secured Debentures in accordance with Section 4.05 hereof, the applicable Replacement Note Holder shall notify the Agent for notation in the Register of the Permitted Demand Date, the interest rate and the Post-Default Rate applicable to such Replacement Loan or Replacement Note. The Agent may treat the Person in whose name any Replacement Loan or Replacement Note is registered in such Register as the owner thereof for the purpose of receiving payment of the principal of and the premium, if any, and interest on such Replacement Loan or Replacement Note and for all other purposes under this Agreement. The Agent may rely upon the information set forth in the Register for any determination of the Permitted Demand Date, the interest rate and the Post- Default Rate applicable to any Replacement Loan or Replacement Note required under or in connection with this Agreement. AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (g) If, on or before any date on which TGC is obligated to make any payment of any principal of or interest under a Replacement Note, no Event of Default (as defined in the Secured Debenture Indenture the lien of which attaches to such Replacement Note) shall have occurred and be continuing and TNP shall have delivered (i) if such Replacement Note is the First Replacement Note, to the First Debenture Trustee pursuant to Section 1119 of the First Secured Debenture Indenture and (ii) if such Replacement Note is the Second Replacement Note or a Subsequent Replacement Note, to the applicable Debenture Trustee pursuant to a provision in the applicable Secured Debenture Indenture similar to the provision referred to in subclause (i) of this clause (g), cash to be held as collateral security under the applicable Secured Debenture Indenture that is at least equal in amount to the payment owing on such date by TGC under such Replacement Note, then TGC shall not be required to make such payment under such Replacement Note; provided, that, if at any time and for any reason any such payment by TNP is rescinded or otherwise required to be restored by the applicable Debenture Trustee or any holder of the applicable Secured Debentures, whether as a result of bankruptcy or reorganization proceedings or otherwise, immediately upon such rescission or restoration being imposed or required (A) an amount equal to the amount that has been rescinded or is required to be restored shall become immediately due and payable by TGC under such Replacement Note, and (B) TGC shall pay to such Replacement Note Holder an amount equal to all reasonable costs and expenses (including, without limitation, attorney's fees and any interest payable by the applicable Debenture Trustee in connection with such rescission or restoration). AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT In the event that any Secured Debenture is paid in full by TNP and, by operation of this clause (i) TGC is not obligated to make further payments of principal and interest under or with respect to the related Replacement Loan and Replacement Note, (x) the indebtedness of TGC under this Agreement with respect to such Replacement Loan and Replacement Note shall not be discharged but shall be continued, (y) such Replacement Loan and Replacement Note, shall automatically, without further action by any Person, have the Replacement Note Maturity Date, the interest rate (including without limitation the Post-Default Rate) and all other terms and conditions contemplated by this Agreement to be applicable to a Subsequent Replacement Loan and a Subsequent Replacement Note that do not at such time serve as the basis for the issuance of outstanding Secured Debentures and (z) such Replacement Loan and Replacement Note shall be available to TNP and TGC for use in conjunction with a future Section 4.05 Closing (and in connection therewith, such Replacement Note may, at the option of TNP and TGC, be replaced by a Replacement Note in the form of Exhibit A to the First Amendment). Notwithstanding any other provision in this Section 4.05 to the contrary, until the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest due and payable thereon and all other amounts due and payable by TNP and TGC to the Banks under this Agreement and the other Project Documents, no Section 4.05 Closing shall occur unless TNP and TGC shall each have delivered to the Agent such other certificates, documents or other information in connection with the applicable Section 4.05 Closing as the Agent may reasonably determine are necessary to effect the transactions contemplated by Section 4.05 hereof at such Section 4.05 Closing.". (k) Section 5.02 of the Credit Agreement shall be amended as follows: AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (A) in subsection (a) delete the last sentence in its entirety and substitute in its place the following: "Upon the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest due and payable thereon and any other amounts due and payable by TNP and TGC to the Banks under this Agreement and the other Project Documents, and subject to the terms and conditions of Section 4.05(b) hereof, TNP and TGC may prepay or otherwise reduce or cancel the Replacement Loans in accordance with the terms and conditions of the applicable Secured Debenture Indenture."; (B) in subsection (b)(i) insert, after the words "TGC shall repay", the words "or TNP shall purchase in accordance with the terms and conditions of Section 4.05 hereof,"; (C) delete the word "and" at the end of subsection (b)(i)(D) thereof; (D) in subsection (b)(i)(E), substitute the word "each" for the word "the" before the term "Replacement Note" and substitute the word "maturing" for the word "outstanding"; (E) delete the preface of subsection (b)(iii) in its entirety and substitute in its place the following: "On each date upon which TNP receives the proceeds of any Permanent Financing (other than the proceeds from the issuance of the New Debt Securities which have been applied in accordance with Section 8.02(c) hereof and the proceeds from the issuance of the Second Secured Debentures and the first mortgage bonds issued in connection therewith which have been applied in accordance with Section 2(b)(i) of the First Amendment), TNP or TGC shall prepay or purchase the Project Loans in an amount equal to (a) 100% (except as provided in subparagraph (C) hereof) of the net proceeds of such Permanent Financing less (b) all amounts prepaid or purchased since the date of the AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT previous prepayment or purchase under this Section 5.02(b)(iii), except to the extent such proceeds:"; (F) in subsection (b)(iii)(B)(aa) delete the parenthetical expression "(other than the Secured Debentures)" in its entirety; (G) delete subsection (b)(iii)(D) in its entirety, substitute a "." for the phrase "; or" at the end of subsection (b)(iii)(C) and insert the word "or" after the ";" at the end of subsection (b)(iii)(B); (H) in subsection (g) add an "s" to the end of the term "Replacement Note Holder"; and (I) in subsection (h) substitute the word "a" for "the" before the term "Replacement Loan" and insert after the term "Replacement Note" the phrase "evidencing such Replacement Loan". (l) Section 5.04 of the Credit Agreement shall be amended by (A) substituting the word "any" for "the" before the term "Replacement Loan" in the second sentence thereof; (B) adding an "s" to the end of the term "Replacement Note Holder" in the third sentence thereof and (C) substituting the word "any" for "the" before both occurrences of the term "Replacement Note Holder" in the fourth sentence thereof. (m) Section 5.05 of the Credit Agreement shall be amended as follows: (A) substitute the word "each" for "the" before the term "Replacement Note Holder" in the first sentence of subsection (a) thereof; and (B) delete subsection (a)(iv) in its entirety and substitute in its place the following: "(iv) Replacement Loan and Replacement Note Rate. Subject to Section 4.05(g) hereof, if such Loan is a Replacement Loan, a rate per annum at all times equal to (A) the rate of AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT interest payable on the Secured Debentures the proceeds of which were used to purchase the Project Loans that were converted into such Replacement Loan and as specified in the Secured Debenture Indenture pursuant to which such Secured Debentures were issued, as in effect on (x) with respect to the First Secured Debenture Indenture, the Extension Date and (y) with respect to the Second Secured Debenture Indenture or any Subsequent Secured Debenture Indenture, the applicable Section 4.05 Closing Date, as the case may be, (B) the rate of interest payable on the Secured Debentures, the proceeds of which were used to refund the Secured Debentures to which such Replacement Loan theretofore related and as specified in the Second Secured Debenture Indenture or the Subsequent Secured Debenture Indenture, pursuant to which such refunding Secured Debentures were issued, as in effect on the applicable Section 4.05 Closing Date or (C) if such Replacement Loan does not serve as the basis for the issuance of any outstanding Secured Debentures, a rate per annum equal to the Prime Rate.". (n) Delete Section 5.10 of the Credit Agreement in its entirety and substitute in its place the following: "SECTION 5.10. [INTENTIONALLY OMITTED].". (o) Section 6.02 of the Credit Agreement shall be amended as follows: (A) in the last sentence of subsection (a) add an "s" to the end of the terms "Replacement Note" and "Replacement Note Holder" and insert the word "applicable" before the term "Replacement Note Holders" (as so amended); (B) in the second sentence of subsection (b) add an "s" to the end of the term "Replacement Loan"; and AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (C) in subsection (c) substitute the word "any" for "the" before both occurrences of the term "Replacement Note" and insert the word "related" before the term "Secured Debentures". (p) Delete Section 6.03 of the Credit Agreement in its entirety and substitute in its place the following: "SECTION 6.03. Sharing of Payments, Etc. If any Bank or any Replacement Note Holder shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Loans made or acquired by it (other than pursuant to Section 7 hereof) in excess of its ratable share of payments on account of the Loans obtained by all the Banks and all the Replacement Note Holders, such Bank or such Replacement Note Holder shall forthwith purchase from the other Banks and the other Replacement Note Holders such participations in the Loans held by them as shall be necessary to cause such purchasing Bank or such purchasing Replacement Note Holder to share the excess payment ratably with each of them; provided, that, if all or any portion of such excess payment is thereafter recovered from such purchasing Bank or such purchasing Replacement Note Holder, such purchase from such Bank or such Replacement Note Holder shall be rescinded and such Bank or such Replacement Note Holder shall repay to the purchasing Bank or the purchasing Replacement Note Holder the purchase price to the extent of such recovery together with an amount equal to such Bank's or such Replacement Note Holder's ratable share (according to the proportion of (a) the amount of such Bank's or such Replacement Note Holder's required repayment to (b) the total amount so recovered from the purchasing Bank or the Replacement Note Holder) of any interest or other amount paid or payable by the purchasing Bank or the purchasing Replacement Note Holder in respect of the total amount so recovered. TGC agrees that any Bank or Replacement Note Holder so purchasing a participation from another Bank or Replacement Note Holder pursuant to this Section 6.03 may, to the fullest extent permitted by law, exercise all of its rights of payment (including the right of set-off) with respect to such participation as fully as AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT if such Bank or such Replacement Note Holder were the direct creditor of TGC in the amount of such participation.". (q) Section 9.32(a) of the Credit Agreement shall be amended by deleting the last sentence thereof. (r) Section 10.03 of the Credit Agreement shall be amended by deleting the reference to "Section 9.32(a) and AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT substituting in its place a reference to "Section 4.05(b)". (s) Section 10.06 of the Credit Agreement shall be amended by deleting the "." and substituting in its place the following: "provided, that TGC may advance to TNP funds obtained as proceeds of Project Loans.". (t) Section 10.08(e) of the Credit Agreement shall be amended by deleting the phrase "the last sentence of Section 9.32(a)" and substituting in its place "Section 4.05". (u) Delete Section 10.09 of the Credit Agreement in its entirety and substitute in its place the following: "SECTION 10.09. TGC shall not permit the aggregate principal amount of Loans outstanding hereunder to exceed at any time the Collateral Coverage Maximum Amount at such time.". (v) Delete Section 10.13 of the Credit Agreement in its entirety and substitute in its place the following: "SECTION 10.13. TNP shall not permit the aggregate principal amount of Loans outstanding hereunder to exceed at any time the Collateral Coverage Maximum Amount at such time.". (w) Section 10.16 of the Credit Agreement shall be amended by (A) adding an "s" to the end of the term "Secured Debenture Indenture" in clause (d) thereof and (B) deleting the reference to "Section 9.32(a)" and substituting in its place a reference to "Section 4.05(b)". (x) Delete Section 10.21 (b) of the Credit Agreement in its entirety and substitute in its place the following: "(b) TNP will provide the Banks and the Replacement Note Holders, as soon as available and in any event within 60 Business Days after each Quarterly Date, a certificate of an Authorized Officer of TNP showing, in reasonable detail, the calculation of Interest Coverage, Cumulative Common Dividends, Cumulative Net Income Available for Common, Equity Capital and Total Capitalization, and for the period from January 1, 1993 until the provisions of Section 9.32 hereof have terminated, Available Amount (including the components thereof); in each case, determined as of such Quarterly Date.". (y) Delete Section 10.22 of the Credit Agreement in its entirety and substitute in its place the following: "SECTION 10.22. Equity Capital. TNP will not pay or declare any Common Dividend if the ratio of Equity Capital to Total Capitalization, determined from time to time as of the next preceding Quarterly Date, is less than 20%.". (z) Delete Section 10.23 of the Credit Agreement in its entirety and substitute in its place the following: "SECTION 10.23. Amendment or Modification of Secured Debenture Indentures. Until the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest due and payable thereon and all other amounts due and payable by TNP and TGC to the Banks under this Agreement and the other Project Documents and so long as any of the First Secured Debentures remain outstanding, without the consent of the Majority Banks (excluding for such purpose the Replacement Note Holder with respect to the affected Secured Debenture Indenture, or supplement thereto, referred to below), neither TNP nor any of its Affiliates may enter into any amendment, modification, supplement or waiver of a AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Secured Debenture Indenture which shall (1) shorten the stated maturity of the principal of, or any installment of interest on, any Secured Debenture then outstanding, or increase the principal amount thereof or the rate of interest thereon, (2) grant any additional collateral security for any Secured Debenture or (3) have the effect of impairing in any material respect, directly or indirectly, the rights or interests of the Banks or the Replacement Note Holders in the Collateral or under this Agreement or any other Project Document; provided, that, nothing in this Section 10.23 shall prohibit (i) the pledge of the First Replacement Note under the First Secured Debenture Indenture as in effect on the Extension Date, (ii) the pledge of the Second Replacement Note under the Second Secured Debenture Indenture as in effect on the applicable Section 4.05 Closing Date and (iii) securing Secured Debentures in accordance with Section 4.05 hereof under Subsequent Secured Debenture Indentures (including provisions for substitution of collateral) in each case as in effect on the applicable Section 4.05 Closing Date.". (aa) Section 11 of the Credit Agreement shall be amended by (A) substituting the word "any" for "the" before the term "Secured Debenture Indenture" in subsection (m) thereof and (B) substituting the word "each" for "the" before the term "Replacement Note Holder" in the last sentence of said Section. (bb) Delete Section 11(n) of the Credit Agreement in its entirety and substitute in its place the following: "(n) Except in accordance with the terms and conditions of Section 4.05 hereof, prior to the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest due and payable thereon and all other amounts due and payable by TNP and TGC to the Banks under this Agreement and the other Project Documents and so long as the First Secured Debentures remain outstanding, TNP shall have, or shall have permitted any of its Affiliates to, prepay, repay or make any other payments (except the payment of interest and the reimbursement of costs and expenses of a Secured AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Debenture Trustee or holders of Secured Debentures or payments pursuant to indemnification of a Secured Debenture Trustee) or distributions on account of, or the setting apart of money for a sinking fund or other analogous fund for, the purchase, redemption, refund or other acquisition of, any Secured Debentures, but excluding any payments with respect to interest payable thereon; provided, that, so long as TNP shall be complying with the provisions of Section 9.33 hereof in the same manner and at the same time that TNP is complying with the provisions of Section 1009 of the First Secured Debenture Indenture (as in effect on the Extension Date), similar provisions of the Second Secured Debenture Indenture (as in effect on the applicable Section 4.05 Closing Date) or any Subsequent Secured Debenture Indenture (in each case, as in effect on the applicable Section 4.05 Closing Date), it shall not be a default if TNP purchases or otherwise acquires First Secured Debentures, Second Secured Debentures or Subsequent Secured Debentures, as applicable, after the occurrence of a Change of Control Event pursuant to Section 1009 of the First Secured Debenture Indenture, or such similar provisions of the Second Secured Debenture Indenture or any Subsequent Secured Debenture Indenture pursuant to which such Subsequent Secured Debentures were issued.". (cc) Section 12.01 of the Credit Agreement shall be amended by adding at the beginning of the text thereof, prior to the term "TGC", the following: "Prior to the payment in full of the Project Loans outstanding on the First Amendment Effect Date, all interest payable thereon and all other amounts due and payable by TNP and TGC to the Banks under this Agreement and the other Project Documents,". (dd) Section 12.03 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "SECTION 12.03. Payment of New Participants. Upon payment, prepayment or purchase in full of the Project AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Loans held by each Bank (excluding the New Participants), such Bank shall remit to each of the New Participants, in Dollars in immediately available funds, such New Participant's pro rata share of the participations purchased by such New Participant under the New Participation Agreement.". (ee) Section 15.01 of the Credit Agreement shall be amended as follows: (A) in the first sentence substitute the word "each" for "the" before the term "Replacement Note Holder"; (B) in the second sentence substitute the word "any" for "the" before the term "Replacement Note Holder"; (C) in the third sentence delete clause (b) in its entirety and substitute in its place the following: "(b) in the event that any Debenture Trustee shall at any time become the Agent hereunder, its duties and obligations in its capacity as Agent shall be subject to the same qualifications, conditions and limitations as are set forth in (i) with respect to the First Debenture Trustee, Article Six and Sections 904 and 1106 of the First Secured Debenture Indenture with respect to its duties and obligations as the First Debenture Trustee and (ii) with respect to the Second Debenture Trustee or any Subsequent Debenture Trustee, provisions in the Second Secured Debenture Indenture or any applicable Subsequent Secured Debenture Indenture similar to the provisions referred to in subclause (i) of this clause (b) with respect to such applicable Debenture Trustee's duties and obligations as Debenture Trustee thereunder, and any such Debenture Trustee shall be under no obligation to take any action as Agent except under circumstances in which it would be required to take action in its capacity as First Debenture AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Trustee, Second Debenture Trustee or Subsequent Debenture Trustee, as applicable."; and (D) in the fourth sentence substitute the word "any" for "the" before the first occurrence of the term "Replacement Note Holder" and substitute the words "any other" for "the" before the second occurrence of such term. (ff) Section 15.02 of the Credit Agreement shall be amended as follows: (A) in the second sentence delete the phrase "the Replacement Note Holder" and insert in lieu thereof the phrase "all of the Replacement Note Holders"; and (B) in the third sentence (i) delete the phrase "the Replacement Note Holder shall not" and insert in lieu thereof the phrase "no Replacement Note Holder shall", (ii) substitute the word "such" for "the" before the second and third occurrences of the term "Replacement Note Holder" and (iii) insert the word "applicable" before the term "Secured Debentures". (gg) Section 15.03 of the Credit Agreement shall be amended as follows: (A) substitute the word "a" for "the" before the first occurrence of the term "Replacement Note Holder"; and (B) delete the proviso in the last sentence in its entirety and substitute in its place the following: "provided, that, unless and until the Agent shall have received such direction, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interest of the Secured Parties.". AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (hh) Section 15.04 of the Credit Agreement shall be amended by substituting the word "any" for "the" before the term "Replacement Note Holder". (ii) Section 15.05 of the Credit Agreement shall be amended as follows: (A) substitute the word "each" for "the" before the first occurrence of the term "Replacement Note Holder"; (B) in the first proviso, delete the phrase "no Bank or the Replacement Note Holder" and insert in lieu thereof the phrase "neither any Bank nor any Replacement Note Holder"; (C) delete clauses (x) and (y) of the second proviso in their entirety and substitute in their place the following: "(x) so long as any Debenture Trustee shall be a Replacement Note Holder (whether as the pledgee of a Replacement Note or as the legal and beneficial owner thereof following a foreclosure or other exercise of remedies by such Debenture Trustee with respect thereto), the obligations of such Replacement Note Holder under this Section 15.05 shall be limited to, and solely payable out of, amounts paid by TNP and/or TGC and/or the holders of the applicable Secured Debentures to such Debenture Trustee under this Agreement or any other Project Document that such Debenture Trustee shall not have theretofore applied pursuant to the applicable Secured Debenture Indenture for any purpose other than the payment of amounts owing under this clause (x), and (y) in the case of any Replacement Note Holder (other than a Debenture Trustee in its capacity as trustee) acquiring a Replacement Note upon a foreclosure or other exercise of remedies by a Debenture Trustee with respect thereto, the obligations of such Replacement Note Holder under this Section 15.05 shall be limited to obligations AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT arising from and after the date on which it shall have acquired such Replacement Note."; and (D) in the last sentence, add an "s" to the end of the term "Replacement Note Holder". (jj) Section 15.06 of the Credit Agreement shall be amended by (A) substituting the word "each" for "the" before the first occurrence of the term "Replacement Note Holder" and (B) substituting the word "such" for "the" before the second occurrence of such term. (kk) Section 15.07 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "SECTION 15.07. Non-Reliance on Agent and Other Banks and Other Replacement Note Holders. Each Bank and TNP, as the initial Replacement Note Holder of each Replacement Note, represents that it has, independently and without reliance on the Agent or any other Bank or any other Replacement Note Holder, and based on such documents and information as it has deemed appropriate, made its own appraisal of the financial condition and affairs of TNP and TGC and decision to enter into this Agreement, and agrees that it will, independently and without reliance upon the Agent or any other Bank or any other Replacement Note Holder, and based on such documents and information as it shall deem appropriate at the time, continue to make its own appraisals and decisions in taking or not taking action under this Agreement. Neither the Agent nor any Bank nor any Replacement Note Holder shall be required to keep informed as to the performance or observance by TNP or TGC under this Agreement or any other document referred to or provided for herein or to make inquiry of, or to inspect the properties or books of, TNP or TGC. Except for notices, reports and other documents and information expressly required to be furnished to the Banks and the Replacement Note Holders by the Agent hereunder, neither the Agent nor any Bank nor any Replacement Note Holder shall have any duty or responsibility to provide any Bank or any Replacement Note Holder with any credit or other information concerning TNP and TGC, or any Affiliate of either of them, which may come into the possession of the Agent AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT or such Bank or such Replacement Note Holder or any of its or their affiliates.". (ll) Section 15.08 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "SECTION 15.08. Resignation or Removal of Agent. Subject to the appointment and acceptance of a successor Agent as provided below, the Agent may resign at any time by giving notice thereof to the Banks and the Replacement Note Holders, TNP and TGC, and the Agent may be removed at any time with or without cause by the Majority Banks. Upon any such resignation or removal, the Majority Banks shall have the right to appoint a successor Agent, which Agent shall be reasonably acceptable to TNP and TGC (unless an Event of Default has occurred and is continuing). If no successor Agent shall have been appointed by the Majority Banks and shall have accepted such appointment within 30 days after the retiring Agent's giving of notice of resignation or the Majority Banks' removal of the retiring Agent, then the retiring Agent may, on behalf of the Banks and the Replacement Note Holders, appoint a successor Agent, which shall be either a bank with an office (or an affiliate with an office) in New York, New York, having a combined capital and surplus of not less than U.S. $500,000,000 and which shall be reasonably acceptable to TNP. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Section 15 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. Notwithstanding any other provision in this Agreement to the contrary (i) upon the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest due and payable thereon and all other amounts due and payable by TNP and TGC to the Banks under this Agreement and the other Project Documents, Chase shall AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT resign as Agent hereunder at which time, the Debenture Trustee for the earliest maturing Secured Debentures then outstanding (if any), or its designee, (a "Replacement Agent") automatically shall be appointed as successor Agent effective upon the acceptance of such appointment by such Replacement Agent and (ii) upon the payment in full of the principal of (and premium, if any, on) the Secured Debentures for which a Replacement Agent is Debenture Trustee, all interest thereon and all other amounts due and payable by TNP and TGC pursuant to the applicable Secured Debenture Indenture, such Replacement Agent shall resign as Agent hereunder at which time, the Debenture Trustee for the earliest maturing Secured Debentures then outstanding (if any), or its designee, (also a "Replacement Agent") automatically shall be appointed as successor Agent effective upon the acceptance of such appointment by such Replacement Agent. Until the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest due and payable thereon and all other amounts due and payable by TNP and TGC to the Banks under this Agreement and the other Project Documents, the Replacement Note Holders shall not be considered in the determination of "Majority Banks" for purposes of this Section 15.08. Notwithstanding any provision herein or in any Secured Debenture Indenture to the contrary, in the event a Debenture Trustee becomes Agent hereunder, it shall promptly upon the request of TNP and TGC from time to time execute releases of liens in accordance with the Facility Purchase Agreement; provided, that, any such release shall contain a provision to the effect that such release is made in its capacity as Agent and Collateral Agent, if applicable, pursuant to the Facility Purchase Agreement but without warranty by, or recourse to, such Debenture Trustee either in its capacity as trustee or individually.". (mm) Section 15.09 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "SECTION 15.09. Authorization. The Agent is hereby authorized by the Banks (so long as any Project Loans are outstanding), and the Replacement Note Holders (each by its acceptance of the pledge of the AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT applicable Replacement Note), to execute, deliver and perform, each of the Project Documents to which the Agent is or is intended to be a party and each Bank (so long as any Project Loans are outstanding), and each Replacement Note Holder (each by its acceptance of the pledge of the applicable Replacement Note), agrees to be bound by all of the agreements of the Agent contained in the Project Documents.". (nn) Section 16.01 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "SECTION 16.01. Participation and Assignment. Each Bank and each Replacement Note Holder may sell, assign or transfer all or any portion of its Loans or Notes to any other Person. Each Bank and each Replacement Note Holder shall pay to the Agent (for its own account) a non-refundable assignment fee of $5,000 at the time of each permitted sale, assignment or transfer made by such Bank or such Replacement Note Holder. Nothing herein provided shall prevent any Bank or any Replacement Note Holder from selling at any time a participation in its Loans, any fees payable to it hereunder or any other rights hereunder (the purchaser of any such participation being hereinafter sometimes referred to as a "Participant"); provided, that, (except as provided in Section 16.02 hereof): (a) no such sale or participation shall alter such Bank's or such Replacement Note Holder's obligations hereunder and (b) any agreement pursuant to which any Bank or any Replacement Note Holder may grant any such participation shall provide that such Bank or such Replacement Note Holder shall retain the sole right and responsibility and exercise the rights of such Bank or such Replacement Note Holder, and enforce the obligations of TNP or TGC relating to the Loans, the fees payable hereunder and any other right of such Bank or such Replacement Note Holder, including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement or any other Project Document and the right to take action to have the Loans declared due and payable. Except as provided in Section 16.02 hereof, no Participant shall have any rights under this Agreement or in respect of a Bank's or a Replacement AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Note Holder's Loans, fees payable to it hereunder or any other rights hereunder other than to receive payments in respect of such Participant's participation from such Bank or such Replacement Note Holder. Notwithstanding the foregoing, a Debenture Trustee, in its capacity as pledgee of a Replacement Note, shall have no right to sell, assign or otherwise transfer any participation in, all or any portion of the Replacement Loan evidenced by such Replacement Note or such Replacement Note to any Person except TNP in accordance with the terms of the Secured Debenture Indenture pursuant to which such Debenture Trustee is acting as trustee unless a default shall have occurred and be continuing under such Secured Debenture Indenture. TNP shall have no right to sell, assign or otherwise transfer all or any portion of the Replacement Loans or the Replacement Notes except under a Secured Debenture Indenture, provided, that such prohibition shall not apply to the Debenture Trustee under such Secured Debenture Indenture or any permitted assignee or transferee thereof.". (oo) Section 16.02 of the Credit Agreement shall be amended by substituting the word "a" for "the" before the term "Replacement Note Holder". (pp) Section 17.03 of the Credit Agreement shall be amended by (A) inserting the word "a" before the first occurrence of the term "Replacement Note Holder", (B) inserting the word "applicable" before the phrase "instrument of adoption" and (C) deleting the term ""Replacement Note Holder"" and inserting in lieu thereof the term ""Replacement Note Holders"". (qq) Section 17.04 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "SECTION 17.04. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of TNP, TGC, the Secured Parties and their respective successors and permitted assigns (including each Debenture Trustee, as the prospective pledgee or pledgee of a Replacement Note), except that neither TGC nor TNP (except as contemplated in the Project Documents) may assign or otherwise transfer all or any AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT part of its rights or obligations hereunder (other than its rights in respect of the Replacement Loans and the Replacement Notes as permitted hereunder) without the prior written consent of each Secured Party. The Agent and each of the Banks (so long as any Project Loans are outstanding) consents to the pledge of the Replacement Notes to the applicable Debenture Trustees.". (rr) Section 17.08 of the Credit Agreement shall be amended by (A) adding an "s" to the end of the terms "Replacement Note Maturity Date" and "Replacement Note Holder" in subsection (a) thereof, (B) adding an "s" to the end of the term "Replacement Note Holder" both times it occurs in the last paragraph thereof, (C) in subclause (iii) in the last paragraph thereof, deleting the phrase "provided that such change does not result" and inserting in lieu thereof the phrase "provided, that, if such change would result" and (D) at the end of subclause (iii) in the last paragraph thereof, deleting the term "the Replacement Loans" and substituting in lieu thereof the phrase "any Replacement Loan, then the consent of the Replacement Note Holder in respect of such Replacement Loans shall be required.". (ss) Section 17.12(b) of the Credit Agreement shall be amended by deleting the phrase "OR THE PROPERTY OF TNP OR TNP" and inserting in substitution in its place the phrase "OR THE PROPERTY OF TGC OR TNP.". (tt) Section 17.16 of the Credit Agreement shall be amended by substituting the word "each" for "the" before the term "Replacement Note Holder". (uu) Section 17.18 of the Credit Agreement shall be amended by (A) substituting the word "each" for "the" before the first occurrence of the term "Replacement Note Holder", (B) substituting the word "such" for "the" before the second and third occurrences of the term "Replacement Note Holder", (C) inserting the words "any of" before the fourth occurrence of the term "the Replacement Note Holder" and adding an "s" to the end of such occurrence of such term, (D) substituting the word "any" for "the" before the fifth and seventh occurrences of the term "Replacement Note Holder" and AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (E) adding an "s" to the end of the sixth occurrence of the term "Replacement Note Holder". (vv) Section 17.20 of the Credit Agreement shall be redesignated as "SECTION 17.22", and new Sections 17.20 and 17.21 shall be inserted as follows: "SECTION 17.20. Further Releases and Consents. (a) Notwithstanding any provisions to the contrary in this Agreement or in any other Project Document, each of the Secured Parties hereunder other than the Replacement Note Holder holding the First Replacement Note hereby consents and each of the future Replacement Note Holders (each by acceptance of the pledge of the applicable Replacement Note) is deemed to have consented to the transfer by TNP of up to six ten- acre tracts of real property located in the Site after such time as (i) there has been payment, prepayment or purchase in full of the Project Loans (evidenced by the Project Notes outstanding, all interest due and payable thereon and all other amounts due and payable by TNP and TGC to the Banks under this Agreement and the other Project Documents and (ii) no First Secured Debentures and no Second Secured Debentures remain outstanding. (b) As a condition precedent to each transfer under this Section 17.20, TNP, TGC and TGC II each shall deliver to the Agent a certificate signed by an Authorized Officer of TNP, TGC or TGC II, as applicable, which certificate represents and warrants that (i) such transfer will not materially adversely affect TNP, TGC or TGC II's financial condition or ability to perform their respective obligations under this Agreement or any other Project Document and, except as contemplated by the Ten Acre Releases, has not and will not adversely affect the Collateral and (ii) the ten-acre tract(s) to be conveyed are not necessary to the use or operation of Unit 1 or Unit 2, and TNP's transfers of said ten-acre tract(s) and the resulting loss of access to and across and the loss of the use of said ten-acre tract(s) would neither adversely affect or interfere with the use or operation of Unit 1 or Unit 2 or the value of either thereof nor impair commercial acceptability of the security granted AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT to the Secured Parties pursuant to the Security Documents. (c) In connection with each transfer permitted by Section 17.20 (a) hereof and subject to the terms and conditions of this Section 17.20, each Secured Party hereby consents to the execution and delivery by the Agent, the Collateral Agent and, if required, the Mortgage Trustee, of one or more partial releases of liens (collectively, the "Ten Acre Releases") to effect the releases hereinabove described in this Section 17.20. (d) The consents contained in this Section 17.20 shall be effective only in the specific instances and for the specific purposes for which they are given and shall not be deemed to be a waiver of any past or a consent to any future action, other event or condition in connection with this Agreement. SECTION 17.21. New Title Insurance Policy. On the First Section 4.05 Closing Date, TNP shall pledge to the Second Debenture Trustee a Replacement Note in the form of Exhibit A hereto as contemplated by Section 4.05(e) hereof. On the First Section 4.05 Closing Date, and at the sole cost of TNP and TGC, TNP and TGC shall furnish to the Agent (A) a policy or policies of title insurance, together with evidence of the payment of all premiums due thereon and expenses payable in connection therewith and together with such reinsurance on such forms and in such amounts as the Agent may require, on forms of and issued by the Title Company, in form and substance satisfactory to the Agent, (x) insuring the Agent for the benefit of the Second Replacement Note Holder in the amount of $140,000,000 that good and indefeasible title to the Site is vested in TGC and the TGC Mortgage constitutes a valid first mortgage lien on the TGC Mortgage Trust Estate subject only to Permitted Liens and (y) providing full coverage against all mechanics' and materialmen's liens and (B) a title information report in form and substance satisfactory to and approved by the Agent, showing good and indefeasible title to the TGC Mortgage Trust Estate is vested in TGC and that the TGC Mortgage constitutes AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT a valid first mortgage lien on the TGC Mortgage Trust Estate subject only to Permitted Liens.". SECTION 5. Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Amendment by signing any such counterpart. SECTION 6. Project Documents. Except as expressly amended hereby, the Credit Agreement shall continue in full force and effect in accordance with the terms and conditions thereof. All references in any Project Document to the Credit Agreement and any Schedule or Exhibit thereto shall be deemed to be references to the Credit Agreement and any Schedule or Exhibit thereto as amended. SECTION 7. Joinder of Guarantor. Contemporaneously with the execution and delivery of this Amendment, and as consideration therefor, TNP, as the Guarantor, hereby confirms and consents to each and every of the terms and conditions of this Amendment and the Credit Agreement as amended by this Amendment (including, without limitation Section 17.13 of the Credit Agreement), and agrees that the terms and conditions of the Guaranty are in full force and effect and unaffected by the execution by TGC and TNP of this Amendment and acknowledges that there are no claims or offsets against, or defenses or counterclaims to, the Guaranty. SECTION 8. Headings. The headings of the various sections of this Amendment are for convenience of reference only, do not constitute a part hereof and shall not be interpreted or construed to affect the meanings or construction of any provision hereof. SECTION 9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. TEXAS-NEW MEXICO POWER COMPANY By: \s\ D. R. Barnard Title: D. R. Barnard Vice President and Chief Financial Officer TEXAS GENERATING COMPANY By: \s\ D. R. Barnard Title: D. R. BARNARD PRESIDENT AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT BANKS ABN AMRO BANK N.V., HOUSTON AGENCY By:\s\ Michael Tribolet Title: V. P. By:\s\ C. Lipshutz Title: V. P. AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT BANK OF AMERICA NT & SA By: \s\ Mark F. Milner Title: Vice President AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT THE BANK OF NEW YORK By: \s\ Michael F. Donohue, Jr. Title: Michael F. Donohue, Jr. SENIOR VICE PRESIDENT AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT THE BANK OF NOVA SCOTIA By: \s\ A. S. Norsworthy Title: A. S. Norsworthy Assistant Agent AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT BANKERS TRUST COMPANY By: Title: AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) By: \s\ James T. Beale Jr. Title: Managing Director AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT CREDIT SUISSE By: \s\ Guy R. Cirincione Title: Guy R. Cirincione Member of Senior Management By: \s\ P. P. Leon Title: Associate AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT FLEET BANK OF MASSACHUSETTS, N.A. By: \s\ Fred McManning Title: Senior Vice President AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT NATIONSBANK OF TEXAS, N.A. By: \s\ Vincent Liberio Title: Senior Vice President AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT LEHMAN COMMERCIAL PAPER INC. By: \s\ Lisa Raggi Title: Authorized Signatory AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: \s\ Mary C. Arnold Title: Vice President AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT UNION BANK By: \s\ Peter R. Saggau Title: Peter R. Saggau Vice President AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT WESTPAC BANKING CORPORATION By: \s\ WESTPAC BANKING CORPORATION Title: Vice President AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Agent By \s\ James T. Beale, Jr. Title: Managing Director THE CHASE MANHATTAN BANK, (NATIONAL ASSOCIATION), as Collateral Agent By \s\ James T. Beale, Jr. Title: Managing Director AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT VOTING PARTICIPANT The following Voting Participant consents and agrees to the foregoing Amendment No. 1 to the Unit 1 First Amended and Restated Project Loan and Credit Agreement: THE HONG KONG AND SHANGHAI BANKING CORPORATION LIMITED By \s\ John A. Van Slyke Title: Assistant Vice President AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT VOTING PARTICIPANT The following Voting Participant Consents and agrees to the foregoing Amendment No. 1 to the Unit 1 First Amended and Restated Project Loan and Credit Agreement: Z-LANDERBANK BANK AUSTRIA A.G. By \s\ Kevin McGinn Title: SVP By \s\ Peter Scharf Title: AVP AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EXHIBIT A TO AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT [FORM OF REPLACEMENT NOTE] EXHIBIT A TO AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EXHIBIT B TO AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT [FORM OF INTERCREDITOR AMENDMENT NO. 2] EXHIBIT B TO AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EXHIBIT C TO AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT [FORM OF FOURTH TGC MODIFICATION AND EXTENSION AGREEMENT] EXHIBIT C TO AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EXHIBIT D TO AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT [FORM OF FIFTH TGC MODIFICATION AND EXTENSION AGREEMENT] EXHIBIT D AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EXHIBIT E TO AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT [FORM OF SUBSEQUENT TGC MODIFICATION AND EXTENSION AGREEMENT] EXHIBIT E TO AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EXHIBIT F TO AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT [FORM OF TNP SECOND LIEN MORTGAGE MODIFICATION NO. 2] EXHIBIT F AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EXHIBIT G TO AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT [FORM OF SECTION 4.05 LEGAL OPINION] EXHIBIT G TO AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EXHIBIT H TO AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT [FORM OF SECTION 4.05 CLOSING LEGAL OPINIONS] EXHIBIT H TO AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EXHIBIT I TO AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT [FORM OF FIRST DEBENTURE TRUSTEE CONSENT] EXHIBIT I TO AMENDMENT NO. 1 TO UNIT 1 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EX-10 8 EXHIBIT 10(F)5 EXHIBIT C to Unit 1 First Amendment [FORM OF FOURTH TGC MODIFICATION AND EXTENSION AGREEMENT] FOURTH TGC MODIFICATION AND EXTENSION AGREEMENT ATTENTION ROBERTSON COUNTY, TEXAS RECORDER: RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) c/o DONALD H. SNELL O'Neill, Snell, Banowsky & McClure 200 Crescent Court, Suite 1030 Dallas, Texas 75201 THE STATE OF TEXAS COUNTY OF ROBERTSON FOURTH TGC MODIFICATION AND EXTENSION AGREEMENT THIS FOURTH TGC MODIFICATION AND EXTENSION AGREEMENT (this "Agreement") is made as of September 29, 1993 among the banks (the "Banks") which are parties to that certain Unit 1 First Amended and Restated Project Loan and Credit Agreement dated as of January 8, 1992 (as amended by the First Amendment (as defined below), and as further amended, supplemented or modified and in effect from time to time, the "Credit Agreement"), THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as agent for the Banks and the Replacement Note Holder (in such capacity, together with its successors in such capacity, the "Agent") (the Banks, the Replacement Note Holder and the Agent collectively herein referred to as the "Secured Parties"), TEXAS-NEW MEXICO POWER COMPANY, a Texas corporation ("TNP") and TEXAS GENERATING COMPANY, a Texas corporation ("TGC" or the "Borrower"). Unless otherwise defined herein, the capitalized terms used herein shall have the meanings given to those terms in the Credit Agreement. W I T N E S S E T H: Recitals: A. The Banks, the Agent, Project Funding Corporation, a Delaware corporation ("PFC") and TNP have heretofore entered into the Project Loan and Credit Agreement dated as of December 1, 1987 (the "Project Credit Agreement") pursuant to the terms of which the Banks made Loans, prior to the Alternative Assumption Date, to PFC and, thereafter, to the Borrower in an aggregate FOURTH TGC MODIFICATION AND EXTENSION AGREEMENT principal amount of THREE HUNDRED FORTY-FIVE MILLION DOLLARS ($345,000,000). B. The Alternative Assumption Date occurred as of June 8, 1990. Certain of the obligations of PFC under the terms of the Project Credit Agreement were assumed by the Borrower pursuant to that certain Assumption Agreement recorded in Volume 549 at Page 83 of the Public Records of Robertson County, Texas. The Mortgage Trust Estate was conveyed by PFC to the Borrower pursuant to that certain Conveyance and Bill of Sale dated effective as of June 8, 1990, recorded in Volume 550 at Page 103 of the Public Records of Robertson County, Texas. C. The Obligations under the terms of the Credit Agreement are secured, in part, by the terms, provisions, liens and security interests of that certain Mortgage and Deed of Trust (with Security Agreement and UCC Financing Statement for Fixture Filing), dated as of December 1, 1987 (the "Mortgage") which was filed of record on December 3, 1987, in Volume 507 at Page 291 of the Public Records of Robertson County, Texas, as supplemented by the Supplemental Mortgage and Deed of Trust (with Security Agreement and UCC Financing Statement for Fixture Filing) filed of record on January 27, 1992, in Volume 573 at Page 603 of the Public Records of Robertson County, Texas. The Mortgage covers certain property as more particularly described therein less and except certain lands subsequently released from the Mortgage by the partial release of liens, dated as of October 1, 1988 and recorded in Volume 521 at Page 528 of the Public Records of Robertson County, Texas. D. TGC conveyed a 30/345 undivided interest in the Mortgage Trust Estate to TNP pursuant to that certain Conveyance and Bill of Sale dated as of December 27, 1990, and recorded in Volume 556 at Page 653 of the Public Records of Robertson County, Texas. By the partial release of liens, recorded in Volume 572 at Page 372 of the Public Records of Robertson County, Texas, and filed with the Secretary of State of the State of Texas, the Agent released from the Mortgage the undivided interest which was purchased by TNP. E. TGC conveyed a 45/345 undivided interest in the Mortgage Trust Estate to TNP pursuant to that certain Conveyance and Bill of Sale dated as of January 27, 1992 and recorded in Volume 573 at Page 552 of the Public Records of Robertson County, Texas. By the partial release of liens, recorded in Volume 573 at Page 589 of the Public Records of Robertson County, Texas, and filed with the Secretary of State of the State of Texas, the Agent released from the Mortgage the undivided interest which was purchased by TNP. FOURTH TGC MODIFICATION AND EXTENSION AGREEMENT F. TNP, the Borrower and the Secured Parties entered into the Credit Agreement and executed and delivered the (i) First TGC Modification and Extension Agreement dated as of January 24, 1992 and caused it to be recorded in Volume 573 at Page 477 of the Public Records of Robertson County, Texas, (ii) the Second TGC Modification and Extension Agreement dated as of January 27, 1992 and caused it to be recorded in Volume 573 at Page 504 of the Public Records of Robertson County, Texas and (iii) the Third TGC Modification and Extension Agreement dated as of January 27, 1992 and caused it to be recorded in Volume 573 at Page 518 of the Public Records of Robertson County, Texas, in each case as a memorial of certain modifications of, amendments to or occurrence of events under the Credit Agreement and to confirm the validity and priority of the liens, security interests and assignments of the Mortgage securing the Obligations. G. TNP, the Borrower and the Secured Parties have modified the terms of the Credit Agreement as set forth in the First Amendment (as defined below) and have executed, delivered and caused this Agreement to be filed of record as a memorial of the occurrence of such modifications and to confirm the validity and priority of the liens, security interests and assignments of the Mortgage securing the Obligations. H. The Agent is authorized by Section 15.01 of the Credit Agreement to execute and deliver this Agreement. Agreements NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, TNP, the Borrower and the Agent, on behalf of the Secured Parties, agree as follows: 1. Modification of Terms of the Credit Agreement. The terms and provisions of the Credit Agreement are amended and modified pursuant to that certain Amendment No. 1 dated as of September 21, 1993 to the Unit 1 First Amended and Restated Project Loan and Credit Agreement of even date herewith, executed and delivered by TNP, the Borrower and the Banks and other parties thereto (the "First Amendment"). The First Amendment, among other things, facilitates TNP's or TGC's issuing Permitted Collateralized Indebtedness that, upon the fulfillment of certain terms and conditions of the Credit Agreement, shall be Obligations secured by the liens, security interests and assignments of the Mortgage from time to time. As of the date hereof, the aggregate principal amount of Loans outstanding under the Credit Agreement is $211,000,000, of which $146,000,000 is FOURTH TGC MODIFICATION AND EXTENSION AGREEMENT Project Loans evidenced by Project Notes and $65,000,000 is a Replacement Loan evidenced by the First Replacement Note. 2. Effect of Modification. The Obligations as described in the Credit Agreement are secured by the liens, security interests and assignments of the Mortgage and the other Security Documents. The validity and priority of the liens, security interests and assignments of the Mortgage shall not be extinguished, impaired, reduced, released, or adversely affected by the terms of this Agreement or the First Amendment. 3. Extension of Rights and Liens. The Borrower hereby extends all rights, titles, liens, security interests, assignments, powers and privileges securing the Obligations as described in the Credit Agreement by virtue of the Mortgage until all of such Obligations have been paid in full and agrees that the execution of this Agreement shall in no manner impair the rights, titles, liens, security interests, assignments, powers and privileges existing by virtue of the Mortgage, as they are extended and modified hereby. 4. Joinder of Guarantor. TNP, as guarantor under the TNP Guaranty, hereby (i) consents to the execution, delivery and performance by TGC of this Agreement and any other Amendment Document to which TGC is or is intended to be a party and the consummation of the transactions contemplated hereby and thereby, (ii) agrees that the TNP Guaranty shall remain in full force and effect after giving effect to such transactions and (iii) acknowledges that there are no claims or offsets against, or defenses or counterclaims to, the TNP Guaranty. 5. Successors and Assigns. This Agreement shall be binding upon, and inure to the benefit of, the successors and assigns of TNP, the Borrower and the Agent, for the benefit of the Secured Parties; provided, however, nothing contained in this Section is intended to authorize TNP or the Borrower to assign any of the Obligations or to sell any of the Mortgage Trust Estate except in accordance with the Credit Agreement and the Facility Purchase Agreement. 6. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart. FOURTH TGC MODIFICATION AND EXTENSION AGREEMENT EXECUTED as of the date first hereinabove written. SECURED PARTIES: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Agent By: \s\ Betty Lou Robert Title: Vice President BORROWER: TEXAS GENERATING COMPANY, a Texas corporation By: \s\ D. R. Barnard Title: President The undersigned hereby consents and agrees to the foregoing pursuant to Section 1(c) of the Intercreditor Agreement as defined in the Credit Agreement. THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Collateral Agent By: \s\ Betty Lou Robert Title: Vice President FOURTH TGC MODIFICATION AND EXTENSION AGREEMENT The undersigned is a party to this Agreement for the sole purpose of agreeing to the provisions of Section 4 to this Agreement. TNP: TEXAS-NEW MEXICO POWER COMPANY, a Texas corporation By: \s\ D. R. Barnard Title: Vice President and Chief Financial Officer FOURTH TGC MODIFICATION AND EXTENSION AGREEMENT STATE OF NEW YORK COUNTY OF NEW YORK This instrument was acknowledged before me on the 27th day of September, 1993, by Betty Lou Robert, Vice President of THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Agent. \s\ Elizabeth A. Sullivan NOTARY PUBLIC in and for the State of NEW YORK My Commission Expires: 2/1/95 FOURTH TGC MODIFICATION AND EXTENSION AGREEMENT STATE OF NEW YORK COUNTY OF NEW YORK This instrument was acknowledged before me on the 27th day of September, 1993, by Betty Lou J. Robert, Vice President, of THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Collateral Agent. \s\ Elizabeith A. Sullivan NOTARY PUBLIC in and for the State of NEW YORK My Commission Expires: 2/1/95 FOURTH TGC MODIFICATION AND EXTENSION AGREEMENT STATE OF New York COUNTY OF New York This instrument was acknowledged before me on the 27th day of September, 1993, by D. R. Barnard, Vice President of TEXAS- NEW MEXICO POWER COMPANY, a Texas corporation, on behalf of said corporation. \s\ Aisha Piracha NOTARY PUBLIC in and for the State of New York My Commission Expires: November 16, 1994 FOURTH TGC MODIFICATION AND EXTENSION AGREEMENT STATE OF New York COUNTY OF New York This instrument was acknowledged before me on the 27th day of September, 1993, by D. R. Barnard, President of TEXAS GENERATING COMPANY, a Texas corporation, on behalf of said corporation. \s\ Aisha Piracha NOTARY PUBLIC in and for the State of New York My Commission Expires: 11/16/94 FOURTH TGC MODIFICATION AND EXTENSION AGREEMENT EX-10 9 EXHIBIT 10(F) EXHIBIT D to Unit 1 First Amendment [FORM OF FIFTH TGC MODIFICATION AND EXTENSION AGREEMENT] FIFTH TGC MODIFICATION AND EXTENSION AGREEMENT ATTENTION ROBERTSON COUNTY, TEXAS RECORDER: RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) c/o DONALD H. SNELL O'Neill, Snell, Banowsky & McClure 200 Crescent Court, Suite 1030 Dallas, Texas 75201 THE STATE OF TEXAS COUNTY OF ROBERTSON FIFTH TGC MODIFICATION AND EXTENSION AGREEMENT THIS FIFTH TGC MODIFICATION AND EXTENSION AGREEMENT (this "Agreement") is made as of September 29, 1993 among the banks (the "Banks") which are parties to that certain Unit 1 First Amended and Restated Project Loan and Credit Agreement dated as of January 8, 1992 (as amended by the Amendment No. 1 dated as of September 21, 1993 among the Borrower, TNP and the Banks and other parties thereto (the "First Amendment"), and as further amended, supplemented or modified and in effect from time to time, the "Credit Agreement"), THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as agent for the Banks and the Replacement Note Holders (in such capacity, together with its successors in such capacity, the "Agent") (the Banks, the Replacement Note Holders and the Agent collectively herein called the "Secured Parties"), TEXAS-NEW MEXICO POWER COMPANY, a Texas corporation ("TNP"), and TEXAS GENERATING COMPANY, a Texas corporation ("TGC" or the "Borrower"). Unless otherwise defined herein, the capitalized terms used herein shall have the meanings given to those terms in the Credit Agreement. W I T N E S S E T H: Recitals: A. The Banks, the Agent, Project Funding Corporation, a Delaware corporation ("PFC") and TNP have heretofore entered into the Project Loan and Credit Agreement dated as of December 1, 1987 (the "Project Credit Agreement") pursuant to the terms of FOURTH TGC II MODIFICATION AND EXTENSION AGREEMENT which the Banks made Loans, prior to the Alternative Assumption Date, to PFC and, thereafter, to the Borrower in an aggregate principal amount of THREE HUNDRED FORTY-FIVE MILLION DOLLARS ($345,000,000). B. The Alternative Assumption Date occurred as of June 8, 1990. Certain of the obligations of PFC under the terms of the Project Credit Agreement were assumed by the Borrower pursuant to that certain Assumption Agreement recorded in Volume 549 at Page 83 of the Public Records of Robertson County, Texas. The Mortgage Trust Estate was conveyed by PFC to the Borrower pursuant to that certain Conveyance and Bill of Sale dated effective as of June 8, 1990, recorded in Volume 550 at Page 103 of the Public Records of Robertson County, Texas. C. The Obligations under the terms of the Credit Agreement are secured, in part, by the terms, provisions, liens and security interests of that certain Mortgage and Deed of Trust (with Security Agreement and UCC Financing Statement for Fixture Filing), dated as of December 1, 1987 (the "Mortgage") which was filed of record on December 3, 1987, in Volume 507 at Page 291 of the Public Records of Robertson County, Texas, as supplemented by the Supplemental Mortgage and Deed of Trust (with Security Agreement and UCC Financing Statement for Fixture Filing) filed of record on January 27, 1992, in Volume 573 at Page 603 of the Public Records of Robertson County, Texas. The Mortgage covers certain property as more particularly described therein less and except certain lands subsequently released from the Mortgage by the partial release of liens, dated as of October 1, 1988 and recorded in Volume 521 at Page 528 of the Public Records of Robertson County, Texas. D. TGC conveyed a 30/345 undivided interest in the Mortgage Trust Estate to TNP pursuant to that certain Conveyance and Bill of Sale dated as of December 27, 1990, and recorded in Volume 556 at Page 653 of the Public Records of Robertson County, Texas. By the partial release of liens, recorded in Volume 572 at Page 372 of the Public Records of Robertson County, Texas, and filed with the Secretary of State of the State of Texas, the Agent released from the Mortgage the undivided interest which was purchased by TNP. E. TGC conveyed a 45/345 undivided interest in the Mortgage Trust Estate to TNP pursuant to that certain Conveyance and Bill of Sale dated as of January 27, 1992 and recorded in Volume 573 at Page 552 of the Public Records of Robertson County, Texas. By the partial release of liens, recorded in Volume 573 at Page 589 of the Public Records of Robertson County, Texas, and filed with the Secretary of State of the State of Texas, the FIFTH TGC II MODIFICATION AND EXTENSION AGREEMENT Agent released from the Mortgage the undivided interest which was purchased by TNP. F. TNP, the Borrower and the Secured Parties entered into the Credit Agreement and executed and delivered the (i) First TGC Modification and Extension Agreement dated as of January 24, 1992 and caused it to be recorded in Volume 573 at Page 477 of the Public Records of Robertson County, Texas, (ii) the Second TGC Modification and Extension Agreement dated as of January 27, 1992 and caused it to be recorded in Volume 573 at Page 504 of the Public Records of Robertson County, Texas, (iii) the Third TGC Modification and Extension Agreement dated as of January 27, 1992 and caused it to be recorded in Volume 573 at Page 518 of the Public Records of Robertson County, Texas and (iv) the Fourth TGC Modification and Extension Agreement dated as of September __, 1993 and caused it to be recorded in Volume ___ at Page ___ of the Public Records of Robertson County, Texas, in each case as a memorial of certain modifications of, amendments to or occurrence of events under the Credit Agreement and to confirm the validity and priority of the liens, security interests and assignments of the Mortgage securing the Obligations. G. TNP, the Borrower and the Secured Parties have modified the terms of the Credit Agreement as set forth in Section 3 of the First Amendment (as defined below) and have executed, delivered and caused this Agreement to be filed of record as a memorial of (1) the occurrence of such modifications and to confirm the validity and priority of the liens, security interests and assignments of the Mortgage securing the Obligations and (2) the issuance of the Second Replacement Note (as defined below) and as evidence of the fact that the indebtedness evidenced by the Second Replacement Note shall become a part of the Obligations and shall also be secured by the liens, security interests and assignments of the Mortgage. H. The Agent is authorized by Section 15.01 of the Credit Agreement to execute and deliver this Agreement. Agreements NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, TNP, the Borrower and the Agent, on behalf of the Secured Parties, agree as follows: 1. Issuance of the Second Replacement Note. Under the Project Credit Agreement, the Loans made originally to PFC and assumed by TGC on the Alternative Assumption Date and the Loans made to TGC after the Alternative Assumption Date were evidenced FIFTH TGC II MODIFICATION AND EXTENSION AGREEMENT by Project Notes held by each of the Banks. Under the terms of the Credit Agreement, on the date hereof, TNP purchased an aggregate principal amount of $140,000,000 of the Project Loans together with the rights of such Banks under the terms of the Security Documents relating to such portion of the Project Loans. The purchase was made pro rata from the Banks and the Banks have endorsed and delivered their respective Project Notes to TNP. In connection therewith, TGC issued a substitution and replacement promissory note (the "Second Replacement Note") to TNP to evidence the aggregate principal amount of the Project Loans purchased by TNP and now owed by TGC to TNP which now constitute a part of the Obligations. In addition to TNP's purchase of the Project Loans, TNP made prepayments on the Project Loans in an aggregate principal amount of $6,000,000. As a result of such purchase and such prepayments the Project Loans have been paid in full and the only Loans outstanding under the Credit Agreement are the Replacement Loans. The aggregate of the outstanding principal amounts of all the Loans under the Credit Agreement, as evidenced by the Replacement Notes, has not changed as a result of the issuance of the Second Replacement Note. As of the date hereof, the aggregate principal amount of Loans outstanding under the Credit Agreement is $205,000,000, of which $65,000,000 is a Replacement Loan evidenced by the previously issued First Replacement Note and $140,000,000 is a Replacement Loan evidenced by the Second Replacement Note issued on the date hereof. 2. Effectiveness of Certain Modification of the Credit Agreement. Certain provisions of the First Amendment were to become effective upon the occurrence of certain conditions precedent as set out therein. Said provisions include acknowledgement by the Banks of the prepayment in full of the Project Loans under the Credit Agreement and the acknowledgement by TNP and TGC that there are outstanding $65,000,000 in First Replacement Loans and $140,000,000 in Second Replacement Loans (collectively, the "Subject Provisions"). The conditions precedent have been satisfied and the Subject Provisions are effective. 3. Effect of Modification. The Loans, evidenced by the Replacement Notes, and the other Obligations as described in the Credit Agreement are secured by the liens, security interests and assignments of the Mortgage and the other Security Documents. The validity and priority of the liens, security interests and assignments of the Mortgage shall not be extinguished, impaired, reduced, released, or adversely affected by the terms of this Agreement or the First Amendment. 4. Extension of Rights and Liens. The Borrower hereby extends all rights, titles, liens, security interests, FIFTH TGC II MODIFICATION AND EXTENSION AGREEMENT assignments, powers and privileges securing the Obligations as described in the Credit Agreement by virtue of the Mortgage until all of such Obligations have been paid in full and agrees that the execution of this Agreement shall in no manner impair the rights, titles, liens, security interests, assignments, powers and privileges existing by virtue of the Mortgage, as they are extended and modified hereby. 5. Joinder of Guarantor. TNP, as guarantor under the TNP Guaranty, hereby (i) consents to the execution, delivery and performance by TGC of this Agreement and any other Amendment Document to which TGC is or is intended to be a party and the consummation of the transactions contemplated hereby and thereby, (ii) agrees that the TNP Guaranty shall remain in full force and effect after giving effect to such transactions and (iii) acknowledges that there are no claims or offsets against, or defenses or counterclaims to, the TNP Guaranty. 6. Successors and Assigns. This Agreement shall be binding upon, and inure to the benefit of, the successors and assigns of TNP, the Borrower, and the Agent, for the benefit of the Secured Parties; provided, however, nothing contained in this Section is intended to authorize TNP or the Borrower to assign any of the Obligations or to sell any of the Mortgage Trust Estate except in accordance with the Credit Agreement and the Facility Purchase Agreement. 7. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart. FIFTH TGC II MODIFICATION AND EXTENSION AGREEMENT EXECUTED as of the date first hereinabove written. SECURED PARTIES: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Agent By:/s/ Bettylou J. Robert Title: Vice President BORROWER: TEXAS GENERATING COMPANY, a Texas corporation By:/s/ D. R. Barnard Title: President FIFTH TGC II MODIFICATION AND EXTENSION AGREEMENT The undersigned hereby consents and agrees to the foregoing pursuant to Section 1(c) of the Intercreditor Agreement as defined in the Credit Agreement. THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Collateral Agent By:/s/ Bettylou J. Robert Title: Vice President The undersigned is a party to this Agreement for the sole purpose of agreeing to the provisions of Section 4 to this Agreement. TNP: TEXAS-NEW MEXICO POWER COMPANY, a Texas corporation By:/s/ D. R. Barnard Title: Vice president & Chief Financial Officer FIFTH TGC II MODIFICATION AND EXTENSION AGREEMENT STATE OF NEW YORK COUNTY OF NEW YORK This instrument was acknowledged before me on the 27th day of September, 1993, by Bettylou J. Robert, Vice President of THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Agent. /s/ Elizabeth A. Sullivan NOTARY PUBLIC in and for the State of NEW YORK My Commission Expires: February 1, 1995 FIFTH TGC II MODIFICATION AND EXTENSION AGREEMENT STATE OF NEW YORK COUNTY OF NEW YORK This instrument was acknowledged before me on the 27th day of September, 1993, by Bettylou J. Robert, Vice President of THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Collateral Agent. /s/ Elizabeth A. Sullivan NOTARY PUBLIC in and for the State of NEW YORK My Commission Expires: February 1, 1995 FIFTH TGC II MODIFICATION AND EXTENSION AGREEMENT STATE OF NEW YORK COUNTY OF NEW YORK This instrument was acknowledged before me on the 27th day of September, 1993, by D. R. Barnard, President of TEXAS-NEW MEXICO POWER COMPANY, a Texas corporation, on behalf of said corporation. /s/ Aisha Piracha NOTARY PUBLIC in and for the State of TEXAS My Commission Expires: November 16, 1994 FIFTH TGC II MODIFICATION AND EXTENSION AGREEMENT STATE OF NEW YORK COUNTY OF NEW YORK This instrument was acknowledged before me on the 27th day of September, 1993, by D. R. Barnard, President of TEXAS GENERATING COMPANY, a Texas corporation, on behalf of said corporation. /s/ Aisha Piracha NOTARY PUBLIC in and for the State of TEXAS My Commission Expires: November 16, 1994 FIFTH TGC II MODIFICATION AND EXTENSION AGREEMENT EX-10 10 EXHIBIT 10(U)2 THIS EXHIBIT IS FILED IN THIS DOCUMENT AS EXHIBIT 10(h)3 EX-10 11 EXHIBIT 10(H)3 > EXHIBIT G to Unit 2 First Amendment TNP SECOND LIEN MORTGAGE MODIFICATION NO. 2 THIS INSTRUMENT MODIFIES AND AMENDS AN INSTRUMENT WHICH GRANTED A SECURITY INTEREST BY A UTILITY AND WHICH CONTAINED AFTER-ACQUIRED PROPERTY PROVISIONS PURSUANT TO SUBCHAPTER 35A OF THE TEXAS BUSINESS AND COMMERCE CODE SECOND LIEN MORTGAGE AND DEED OF TRUST (WITH SECURITY AGREEMENT) MODIFICATION, EXTENSION AND AMENDMENT AGREEMENT NO. 2 THIS SECOND LIEN MORTGAGE AND DEED OF TRUST (WITH SECURITY AGREEMENT) MODIFICATION, EXTENSION AND AMENDMENT AGREEMENT NO. 2 ("TNP Second Lien Mortgage Modification No. 2") dated as of September 21, 1993, is executed and delivered by TEXAS-NEW MEXICO POWER COMPANY, a Texas corporation ("Mortgagor"), having an office at 4100 International Plaza, 820 Hulen Towers, Fort Worth, Texas 76109, Attention: D. R. Barnard, to DONALD H. SNELL, having an office at Suite 1030, 200 Crescent Court, Dallas, Texas 75201, as mortgage trustee ("Mortgage Trustee"), for the benefit of the Secured Parties, as described in the Credit Agreement (hereinafter defined). Unless otherwise described or defined herein, all terms used in this TNP Second Lien Mortgage Modification No. 2 shall have the same meanings herein as are assigned to such terms in that certain Unit 2 First Amended and Restated Project Loan and Credit Agreement dated as of January 8, 1992 as amended by the First Amendment (hereinafter defined) (as so amended, and as further amended, "Credit Agreement") among Mortgagor, TEXAS GENERATING COMPANY II ("Borrower"), the banks party thereto ("Banks"), and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) as agent for the Banks and the Replacement Note Holders (the "Agent"). W I T N E S S E T H: Recitals A. As of October 1, 1988, Mortgagor executed and delivered to Mortgage Trustee, for the benefit of the Secured Parties, a certain Second Lien Mortgage and Deed of Trust (with Security Agreement) ("TNP Second Lien Mortgage"), granting to Mortgage Trustee, for the benefit of the Secured Parties, a second lien TNP SECOND LIEN MORTGAGE MODIFICATION NO.2 against property of Mortgagor located in the State of Texas ("Second Lien Mortgage Trust Estate") and more particularly described in the TNP Indenture (as defined in the TNP Second Lien Mortgage), which TNP Second Lien Mortgage was filed with the Secretary of State of Texas on October 4, 1988, as Utility Security Instrument Number 229147. The lien created by the TNP Second Lien Mortgage is subordinate by its own terms to the lien of the TNP Indenture. B. By its terms, the TNP Second Lien Mortgage excluded from the Second Lien Mortgage Trust Estate certain real property located in Robertson County, Texas (the "Property") since no portion thereof was then owned by Mortgagor. C. Pursuant to a certain Warranty Deed dated as of October 1, 1988 and recorded in Volume 521 at Page 532 of the Public Records of Robertson County, Texas, Project Funding Corporation conveyed 7.466 acres of the Property ("Unit 2 Property") to Texas TPFC, Inc. (the Property less and except the Unit 2 Property, hereinafter called the "Robertson County Property"). D. On December 27, 1990, pursuant to the Facility Purchase Agreement, Mortgagor purchased an undivided 30/345 interest in the Robertson County Property (including Unit 1 located thereon) which interest was conveyed to Mortgagor by that certain Conveyance and Bill of Sale recorded in Volume 556 at Page 653 of the Public Records of Robertson County, Texas. E. The Alternative Assumption Date occurred as of May 31, 1991. Effective as of that date, the Unit 2 Property was conveyed to the Borrower pursuant to a certain Conveyance and Bill of Sale dated effective May 31, 1991, recorded on July 26, 1991 in Volume 566 at Page 283 of the Public Records of Robertson County, Texas. Contemporaneously therewith, all of the Obligations under the terms of the Credit Agreement were assumed by the Borrower pursuant to a certain Assumption Agreement recorded on July 26, 1991 in Volume 566 at Page 252 of the Public Records of Robertson County, Texas. Also contemporaneously therewith, the obligations of Mortgagor under that certain Guaranty dated as of May 31, 1991 ("Guaranty") became effective and pursuant thereto, Mortgagor (sometimes hereinafter called "Guarantor") guarantees the Obligations that were assumed by the Borrower. F. On January 8, 1992, Mortgagor and the Agent, on behalf of the Secured Parties, executed that certain Second Lien Mortgage and Deed of Trust (With Security Agreement) Modification, Extension and Amendment Agreement (the "Second Lien Mortgage Modification No. 1"), to among other things, further TNP SECOND LIEN MORTGAGE MODIFICATION NO.2 modify the TNP Second Lien Mortgage to clarify and confirm that any portion of the Trust Estate under the TNP Indenture (as defined in the TNP Second Lien Mortgage) located in Robertson County, Texas then owned or thereafter acquired by the Mortgagor would be included as a part of the Second Lien Trust Estate. G. On January 27, 1992, pursuant to the Facility Purchase Agreement (as defined in the Unit 1 Credit Agreement), Mortgagor purchased an additional undivided 45/345 interest in the Robertson County Property (including Unit 1 located thereon). H. On the date hereof, pursuant to the Facility Purchase Agreement (as defined in the Unit 1 Credit Agreement), Mortgagor has purchased an additional undivided 65/345 interest in the Robertson County Property (including Unit 1 located thereon). I. On the date hereof, pursuant to the Facility Purchase Agreement, Mortgagor purchased an undivided 75.75/288.5 interest in the Unit 2 Property (including Unit 2 located thereon). J. Although all of the undivided interests described in Recitals G, H and I are presently subject to the liens of the TNP Second Lien Mortgage by reason of provision to that effect therein, the parties desire to reflect this fact of record. K. Mortgagor and the Agent, on behalf of the Secured Parties, have modified the TNP Second Lien Mortgage to clarify and confirm that, any portion of the Robertson County Trust Estate Property owned by or acquired by the Mortgagor shall be included as a part of the Second Lien Mortgage Trust Estate. The Mortgagor and the Agent, on behalf of the Secured Parties, have executed and delivered the TNP Second Lien Mortgage Modification dated as of January 8, 1992 and caused it to be filed with the Secretary of State of the State of Texas. L. Borrower, Mortgagor and the Agent, on behalf of the Secured Parties, have agreed, as set forth in the First Amendment (defined below), to modify the terms of the Credit Agreement in order to permit Mortgagor and Borrower to secure Permitted Collateralized Indebtedness with the Collateral, adjust the terms of payment thereunder and to extend the dates for payments required thereby, and to make other modifications all as set forth in and subject to the terms and conditions of the Credit Agreement. M. The Agent is authorized by Section 15.01 of the Credit Agreement to execute and deliver this Agreement. TNP SECOND LIEN MORTGAGE MODIFICATION NO.2 Agreements NOW, THEREFORE, in consideration of the premises and of the sum of Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of all of which are hereby acknowledged, the TNP Second Lien Mortgage, as previously modified by the TNP Second Lien Mortgage Modification, is hereby modified, extended and amended as follows: 1. Amendment to TNP Second Lien Mortgage. The Mortgagor, to further secure the Obligations in the manner and to the extent provided in the TNP Second Lien Mortgage as modified by the Second Lien Mortgage Modification No. 1 and this TNP Second Lien Mortgage Modification No. 2, and the performance and observance by the Mortgagor of all of the covenants, warranties, representations and other obligations contained in the Project Documents which are to be performed by it and to expressly subject to the liens and security interests of the TNP Second Lien Mortgage additional property acquired by Mortgagor since the date of execution and delivery of the TNP Second Lien Mortgage, Mortgagor does hereby BARGAIN, SELL, GRANT, CONVEY, TRANSFER, MORTGAGE, PLEDGE AND ASSIGN to the Mortgage Trustee and his successors and substitutes in trust hereunder for the benefit of the Secured Parties, the following property: (a) that certain 45/345 undivided interest in and to those certain lands, Unit 1 and certain property rights appurtenant to said lands and Unit 1, all as described and conveyed by that certain Conveyance and Bill of Sale from Texas Generating Company to Mortgagor recorded in Volume 573 at Page 552 of the Public Records of Robertson County, Texas; and (b) that certain 65/345 undivided interest in and to those certain lands, Unit 1 and certain property rights appurtenant to said lands and Unit 1, all as described and conveyed by that certain Conveyance and Bill of Sale of even date herewith from Texas Generating Company to Mortgagor recorded on the date hereof in Volume [__] at Page [__] of the Public Records of Robertson County, Texas; and (c) that certain 75.75/288.5 undivided interest in and to those certain lands, Unit 2 and certain property rights appurtenant to said lands and Unit 2, all as described and conveyed by that certain Conveyance and Bill of Sale of even date herewith from Texas Generating Company II to Mortgagor recorded in Volume [__] at Page [__] of the Public Records of Robertson County, Texas (the undivided interests referred to in clauses (a) and TNP SECOND LIEN MORTGAGE MODIFICATION NO.2 (b) above and this clause (c), collectively referred to herein as, the "Additional Trust Estate Property"). TO HAVE AND TO HOLD the said Additional Trust Estate Property unto the Mortgage Trustee, his successors and assigns, forever, and Mortgagor does hereby bind itself, its successors and assigns to warrant and forever defend the title to the Additional Trust Estate Property unto the Mortgage Trustee for the benefit of the Secured Parties, against the claims and demands of all persons whomsoever, except those claiming under Permitted Encumbrances, and second and subordinate in all respects to the lien and security interest of, and other rights and benefits granted to the trustee in the TNP Indenture. 2. Modification of Terms of the Credit Agreement. The terms of the Credit Agreement are amended and modified pursuant to the Amendment No. 1 (the "First Amendment") dated as of September 21, 1993 among the Mortgagor, the Borrower, the Banks and the other parties thereto. The First Amendment, among other things, and subject to certain conditions precedent, provides for (i) rescheduling the amounts and dates of certain repayments, including extension of the Final Maturity Date to December 31, 1998; (ii) increasing interest rates on the Project Loans; (iii) adding certain fees payable to the Agent and the Banks; (iv) providing the Borrower with a revolving credit facility; and (v) providing for the issuance of Subsequent Replacement Notes (hereinafter described). Under the Credit Agreement, the Loans made originally to TPFC and assumed by TGC II on the Alternative Assumption Date and the Loans made to TGC II after the Alternative Assumption Date were evidenced by a Project Note held by each Bank. Under the terms of the Credit Agreement, subject to certain conditions precedent, TNP may purchase a portion of the Loans. Such purchase is to be made pro rata from the Banks which shall make an entry on their respective Project Notes of the amount so purchased and correspondingly reduce the amount of the principal due on said Project Notes. Simultaneously, TGC II shall issue a substitution and replacement promissory note (a "Subsequent Replacement Note") to TNP to evidence the aggregate principal amount of the Loans purchased by TNP which now constitute a part of the Obligations as described in the Credit Agreement. Therefore, the aggregate of the principal amount of all the Loans under the Credit Agreement, as evidenced by the Project Notes and the Replacement Note, shall not be changed as a result of the issuance of any Subsequent Replacement Note. 3. Effect of Modification. The Loans, whether evidenced by Project Notes or the Replacement Notes, and all other Obligations as described in the Credit Agreement are secured by the liens, security interests and assignments of the TNP Second Lien Mortgage and the other Security Documents. The validity and TNP SECOND LIEN MORTGAGE MODIFICATION NO.2 priority of the liens, security interests and assignments of the TNP Second Lien Mortgage shall not be extinguished, impaired, reduced, released or adversely affected by the terms of this TNP Second Lien Mortgage Modification No. 2 or the First Amendment. 4. Extension of Rights and Liens. The Mortgagor hereby extends all rights, titles, liens, security interests, assignments, powers and privileges securing the Obligations as described in the Credit Agreement by virtue of the TNP Second Lien Mortgage until all of such Obligations have been paid in full and agrees that the execution of this TNP Second Lien Mortgage Modification No. 2 shall in no manner impair the rights, titles, liens, security interests, assignments, powers and privileges existing by virtue of the TNP Second Lien Mortgage, as they are extended and modified hereby. 5. Joinder of Guarantor. Contemporaneously with the execution and delivery of this TNP Second Lien Mortgage Modification No. 2, and as consideration therefor, Mortgagor, as the Guarantor, hereby confirms and consents to each and every of the terms and conditions of this TNP Second Lien Mortgage Modification No. 2 and the First Amendment, and agrees that the terms and conditions of the Guaranty are in full force and effect and unaffected by the execution by Borrower and Mortgagor of the First Amendment and this TNP Second Lien Mortgage Modification No. 2, and acknowledges that there are no claims or offsets against, or defenses or counterclaims to, the Guaranty. 6. Successors and Assigns. This TNP Second Lien Mortgage Modification No. 2 shall be binding upon the successors and assigns of Mortgagor, the Secured Parties and the Collateral Agent, and shall inure to the benefit of the successors and assigns of the Secured Parties; provided, however, nothing contained in this Section 6 is intended to authorize TNP or the Borrower to assign any of the Obligations or to sell any of the Second Lien Mortgage Trust Estate except in accordance with the Credit Agreement and the Facility Purchase Agreement. 7. Counterparts. This TNP Second Lien Mortgage Modification No. 2 may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto many execute this TNP Second Lien Mortgage Modification No. 2 by signing any such counterpart. TNP SECOND LIEN MORTGAGE MODIFICATION NO.2 EXECUTED as of the date first hereinabove written. SECURED PARTIES: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Agent By:/s/ Bettylou J. Robert Title: Vice President MORTGAGOR: TEXAS-NEW MEXICO POWER COMPANY, a Texas corporation By:/s/ D. R. Barnard Title: Sector Vice President & Chief Financial Officer The undersigned hereby consents and agrees to the foregoing pursuant to Section 1(c) of the Intercreditor Agreement as defined in the Credit Agreement. THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Collateral Agent By:/s/ Bettylou J. Robert Title: Vice President TNP SECOND LIEN MORTGAGE MODIFICATION NO.2 STATE OF NEW YORK COUNTY OF NEW YORK This instrument was acknowledged before me on the 27th day of September, 1993, by Bettylou J. Robert, Vice President of THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Agent. /s/ Elizabeth A. Sullivan NOTARY PUBLIC in and for the State of NEW YORK My Commission Expires: /s/ Elizabeth A. Sullivan February 1, 1995 Typed or Printed Name of Notary TNP SECOND LIEN MORTGAGE MODIFICATION NO.2 STATE OF NEW YORK COUNTY OF NEW YORK This instrument was acknowledged before me on the 27th day of September, 1993, by Bettylou J. Robert, Vice President of THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Collateral Agent. /s/ Elizabeth A. Sullivan NOTARY PUBLIC in and for the State of NEW YORK My Commission Expires: /s/ Elizabeth A. Sullivan February 1, 1995 Typed or Printed Name of Notary TNP SECOND LIEN MORTGAGE MODIFICATION NO.2 THE STATE OF NEW YORK COUNTY OF NEW YORK This instrument was acknowledged before me on the 27th day of September, 1993, by D. R. Barnard, Sector Vice President & CFO of TEXAS-NEW MEXICO POWER COMPANY, a Texas corporation, on behalf of said corporation. /s/ Aisha Piracha NOTARY PUBLIC in and for the State of TEXAS My Commission Expires: /s/ Aisha Piracha November 16, 1994 Typed or Printed Name of Notary TNP SECOND LIEN MORTGAGE MODIFICATION NO.2 EX-10 12 EXHIBIT 10(O)1 EXECUTION COUNTERPART ======================================= AMENDMENT NO. 1 Dated as of September 21, 1993 to the UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Dated as of January 8, 1992 among TEXAS-NEW MEXICO POWER COMPANY and TEXAS GENERATING COMPANY II and THE BANKS NAMED HEREIN as Banks and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) as Agent ======================================= AMENDMENT NO. 1 (this "Amendment") dated as of September 21, 1993 to the UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT dated as of January 8, 1992 (the "Credit Agreement"), among TEXAS-NEW MEXICO POWER COMPANY ("TNP"), TEXAS GENERATING COMPANY II ("TGC II"), each of the lenders that is a signatory hereto identified under the caption "BANKS" on the signature pages hereto or which, pursuant to Section 4.05(g) or 16.01 hereof, shall become a "Bank" hereunder, the Voting Participants and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as agent for the Banks (in such capacity, the "Agent"). RECITALS 1. The parties hereto have previously entered into the Credit Agreement which became effective on the Effective Date, January 24, 1992, upon the satisfaction of the conditions precedent thereto as set out in Section 8.01 of the Credit Agreement. 2. On January 27, 1992, TNP and TGC II satisfied the conditions in Section 8.02 of the Credit Agreement to cause the occurrence of the Extension Date. Among other things, TNP issued its Series T Bonds and its First Secured Debentures, due January 15, 1999, and applied the net proceeds thereof to, among other things, purchase pro rata from the Banks $65,000,000 of the Existing Loans outstanding under the Credit Agreement. The Existing Loans acquired by TNP were, automatically upon their purchase by TNP, converted into the First Replacement Loan, evidenced by the First Replacement Note that is secured pursuant to the Security Documents pari passu with the other Obligations under the Credit Agreement and the other Project Documents. The First Secured Debentures are secured by TNP's pledge of the First Replacement Note to the First Debenture Trustee under the First Secured Debenture Indenture. As a result of the pledge of the First Replacement Note, the First Secured Debentures indirectly share pari passu in the Banks' Collateral. 3. TNP and TGC II have the right to secure additional debt securities with the Collateral, subject to the terms and conditions of Section 9.33 of the Credit Agreement. Other than with respect to the January 27, 1992 transactions described in Recital 2 hereof, however, no specific procedures were AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT established in the Credit Agreement for TNP or TGC II to secure additional debt securities with the Collateral. 4. The parties desire to amend the Credit Agreement as provided for in this Amendment to facilitate TNP's or TGC II's securing certain additional debt securities and, upon the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest due and payable thereon and all other amounts due and payable by TNP and TGC II to the Banks under the Credit Agreement (including, without limitation, all Supplemental Advances) and the other Project Documents, debt with the Collateral from time to time in furtherance of and as necessary for the parties to achieve the purposes and objectives, to perform the obligations and to exercise the rights, all as set forth in or contemplated by the Credit Agreement and as modified by this Amendment. 5. On July 2, 1993, TNP requested certain amendments to the Credit Agreement to provide, among other things, for the extension of certain scheduled repayment dates and the prepayment by TGC II of $75,750,000 of Existing Project Loans. On July 2, 1993, TNP requested certain amendments to the Unit 1 First Amended and Restated Project Loan and Credit Agreement dated as of January 8, 1992 among TNP, TGC, the banks and the other parties thereto and Chase, as Agent (as amended, modified and supplemented and in effect from time to time, the "Unit 1 Credit Agreement") and simultaneously with the entering into of this Amendment the parties to the Unit 1 Credit Agreement are entering into Amendment No. 1 to the Unit 1 Credit Agreement in order to effect such amendments to the Unit 1 Credit Agreement. 6. The funds necessary for the payments and prepayments of Existing Project Loans are expected to be provided by the issuance by TNP of new first mortgage bonds (the "New Bonds") in an aggregate principal amount of up to $100,000,000 under the TNP Bond Indenture and available cash. 7. Certain provisions of this Amendment will become effective only upon the prepayment of a portion of the Existing Project Loans and the prepayment and purchase of certain of the indebtedness under the Unit 1 Credit Agreement and the satisfaction of certain other conditions. AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT 8. By virtue of the First Debenture Trustee Consent, the Replacement Note Holder has consented to the extent required to the provisions of this Amendment. NOW, THEREFORE, for and in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1. Definitions. Unless otherwise defined herein, the capitalized terms utilized herein (including the Recitals hereinabove set forth) which are defined in the Credit Agreement shall have the meanings ascribed to them in the Credit Agreement. The capitalized terms defined herein, in the context of amending the Credit Agreement, shall, when used herein (including the Recitals hereinabove set forth), have the meanings ascribed to them in such amending language. SECTION 2. Conditions Precedent. (a) The effectiveness of this Amendment shall be subject to the condition precedent that, on or before September 30, 1993, this Amendment shall have been executed and delivered by TNP, TGC II, the Banks, the Voting Participants (if any), the Agent and the Collateral Agent, and to the satisfaction of the following additional conditions precedent, in each case for the benefit of the parties hereto and the other Secured Parties: (i) TNP and TGC II each shall deliver to the Agent certified copies of the resolutions of their respective boards of directors authorizing the execution, delivery and performance of this Amendment and each of the other First Amendment Documents to which such Person is or is intended to be a party and the transactions contemplated by the issuance by TNP of New Bonds in an aggregate principal amount of up to $100,000,000 under the TNP Bond Indenture and all other documents evidencing other necessary action with respect thereto; AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (ii) TNP and TGC II each shall deliver to the Agent a certificate, in form and substance satisfactory to the Agent, signed by an Authorized Officer of TNP or TGC II, as applicable, certifying that, except as disclosed in such certificate, there shall be no injunction, writ, preliminary restraining order or any order of any nature issued by any arbitrator, court or other governmental authority directing that this Amendment not be consummated as herein provided and certifying further that, except as disclosed in such certificate, there shall be no material litigation, investigation or proceeding of or before any arbitrator, court or other governmental authority pending or (to the best of such Authorized Officer's knowledge, threatened) against TNP or TGC II or affecting in any material respect any of its respective properties, revenues or assets; (iii) TNP and TGC II each shall deliver to the Agent a certificate signed by an Authorized Officer of TNP or TGC II, as applicable, certifying that (A) the representations and warranties of each of TNP and TGC II, as applicable, contained in Section 2 of the Credit Agreement, as amended by this Amendment, and in each of the other Project Documents to which such Person is a party shall be true and correct on and as of such date as if made on and as of such date (or, if stated to have been made solely as of an earlier date, were true and correct as of such earlier date), (B) no Default under the Credit Agreement, as amended by this Amendment, and no default by either TNP or TGC II under any of the other Project Documents to which either TNP or TGC II is a party, has occurred and is continuing on such date and (C) to the best of such Authorized Officer's knowledge, no default by any other Person to any other Project Document has occurred and is continuing on such date; (iv) TNP and TGC II each shall deliver to the Agent a certificate signed by an Authorized Officer of TNP or TGC II, as applicable, certifying that AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (A) it has obtained all Government Approvals necessary under applicable laws and regulations in connection with the due execution, delivery and performance of this Amendment and transactions contemplated hereby (except Section 3 hereof) and (B) all such Government Approvals have been duly obtained, were validly issued and are held by and in the name of TNP or TGC II, as applicable, and are final, in full force and effect and not subject to appeal; (v) TNP and TGC II each shall deliver to the Agent legal opinions from counsel to TNP and TGC II in form and substance satisfactory to the Agent; (vi) the Intercreditor Amendment No. 2 shall have been duly executed and delivered by the intended parties thereto; (vii) the First Debenture Trustee Consent shall have been duly executed by the First Indenture Trustee and delivered to the Agent; (viii) the Fourth TGC II Modification and Extension Agreement shall have been duly executed and delivered by the intended parties thereto and, at the sole cost of TNP and TGC II, the Title Company shall have issued to the Agent (A) a T-38 endorsement to Stewart Title Guaranty Mortgage Policy No. M-5802-561740 and a T-38 endorsement to Stewart Title Guaranty Mortgage Policy No. M-5832-25812, each with respect to such Fourth TGC II Mortgage Modification and Extension Agreement and (B) a title information report in form and substance satisfactory to and approved by the Agent, showing good and indefeasible title to the TGC II Mortgage Trust Estate is vested in TGC II and that the TGC II Mortgage constitutes a valid first mortgage lien on the TGC II Mortgage Trust Estate and showing that there are no intervening liens which would adversely affect the priority of the liens securing the Loans, subject only to Permitted Liens; AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (ix) the TNP Second Lien Mortgage Modification No. 2 shall have been duly executed and delivered by the intended parties thereto; (x) the Facility Purchase Agreement Amendment No. 1, in form and substance satisfactory to the Agent, shall have been duly executed and delivered by the intended parties thereto; (xi) evidence that the First Amendment Documents and all other instruments to be recorded or filed in connection with the effectiveness of this Amendment have been duly recorded and filed in all places wherein such recording and filing are necessary to perfect the interests of the Agent in and to the Collateral covered thereby; (xii) TNP and TGC II shall each deliver to the Agent such other certificates, documents or other information with respect to the matters contemplated by this Amendment as the Agent may reasonably determine are necessary to effect the transactions contemplated by this Amendment; and (xiii) Amendment No. 1 to the Unit 1 Credit Agreement shall have been duly executed and delivered by TNP, TGC, the Banks (under and as defined in the Unit 1 Credit Agreement), the Agent (under and as defined in the Unit 1 Credit Agreement) and the Collateral Agent (under and as defined in the Intercreditor Agreement) and each of the conditions precedent described in Sections 2(a)(i) through (xi) of Amendment No. 1 to the Unit 1 Credit Agreement shall have been satisfied. (b) The effectiveness of Section 3 of this Amendment shall be subject to the further conditions precedent that, on or before June 30, 1994, each of the following additional conditions precedent, in each case for the benefit of the parties hereto and the other Secured Parties, shall have been fulfilled: (i) TNP and TGC each shall have effected a Section 4.05 Closing, under and as defined in the Unit 1 AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Credit Agreement, as amended by Amendment No. 1 thereto, with respect to Second Secured Debentures, as defined in, and issued in accordance with the terms and conditions of Section 4.05 of, the Unit 1 Credit Agreement, as amended by Amendment No. 1 thereto (the "Second Secured Debentures"), in an aggregate principal amount of $140,000,000 and TNP shall have contemporaneously issued New Bonds in an aggregate principal amount of up to $100,000,000 and (A) TNP shall have applied the proceeds from the Second Secured Debentures to purchase "Project Notes," under and as defined in the Unit 1 Credit Agreement, as amended by Amendment No. 1 thereto, in the amount of $140,000,000 and (B) TNP and TGC II shall have applied a portion of the proceeds of the New Bonds and available cash to prepay the Existing Project Loans in the amount of $75,750,000 and TNP or TGC shall have prepaid the "Project Loans," under and as defined in the Unit 1 Credit Agreement, as amended by Amendment No. 1 thereto, in the amount of $6,000,000; (ii) TNP and TGC II each shall deliver to the Agent a certificate signed by an Authorized Officer of TNP or TGC II, as applicable, certifying that (A) the representations and warranties of each of TNP and TGC II, as applicable, contained in Section 2 of the Credit Agreement, as amended by this Amendment, and in each of the other Project Documents to which such Person is a party shall be true and correct on and as of such date as if made on and as of such date (or, if stated to have been made solely as of an earlier date, were true and correct as of such earlier date), (B) no Default under the Credit Agreement, as amended by this Amendment, and no default by either TNP or TGC II under any of the other Project Documents to which either TNP or TGC II is a party, has occurred and is continuing on such date and (C) to the best of such Authorized Officer's knowledge, no default by any other Person to any other Project Document has occurred and is continuing on such date; AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (iii) TNP and TGC II each shall deliver to the Agent a certificate signed by an Authorized Officer of TNP or TGC II, as applicable, certifying that (A) it has obtained all Government Approvals necessary under applicable laws and regulations in connection with the provisions of, and the transactions contemplated by, Section 3 hereof (and the transactions contemplated by Section 4 hereof that are contemplated to occur as a consequence of the occurrence of the Section 3 Effective Date) and (B) all such Government Approvals have been duly obtained, were validly issued and are held by and in the name of the proper party (either directly or by transfer from the original applicant therefor) and are final, in full force and effect and not subject to appeal; (iv) TNP and TGC II each shall deliver to the Agent a certificate, in form and substance satisfactory to the Agent, signed by an Authorized Officer of TNP or TGC II, as applicable, certifying that, except as disclosed in such certificate, there shall be no injunction, writ, preliminary restraining order or any order of any nature issued by any arbitrator, court or other governmental authority directing that this Amendment not be consummated as herein provided and certifying further that, except as disclosed in such certificate, there shall be no material litigation, investigation or proceeding of or before any arbitrator, court or other governmental authority pending or (to the best of such Authorized Officer's knowledge, threatened) against TNP or TGC II or affecting in any material respect any of its respective properties, revenues or assets; (v) TNP and TGC II each shall deliver to the Agent legal opinions of counsel to TNP and TGC II (which may take the form of bring-down letters with respect to legal opinions delivered on the First Amendment Effective Date) in form and substance satisfactory to the Agent; AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (vi) the Fifth TGC II Modification and Extension Agreement shall have been duly executed and delivered by the intended parties thereto and, at the sole cost of TNP and TGC II, the Title Company shall have issued to the Agent (A) a T-38 endorsement to the Stewart Title Guaranty Mortgage Policy issued pursuant to Section 17.22 of the Credit Agreement, as amended by this Amendment, and a T-38 endorsement to Stewart Title Guaranty Mortgage Policy No. M-5832-25812, each with respect to such Fifth TGC II Mortgage Modification and Extension Agreement and (B) a title information report in form and substance satisfactory to and approved by the Agent, showing good and indefeasible title to the TGC II Mortgage Trust Estate is vested in TGC II and that the TGC II Mortgage constitutes a valid first mortgage lien on the TGC II Mortgage Trust Estate and showing that there are no intervening liens which would adversely affect the priority of the liens securing the Loans, subject only to Permitted Liens; (vii) evidence that the First Amendment Documents and all other instruments to be recorded or filed in connection with the effectiveness of Section 3 of this Amendment have been duly recorded and filed in all places wherein such recording and filing are necessary to perfect the interests of the Agent in and to the Collateral covered thereby; and (viii) TNP and TGC II shall each deliver to the Agent such other certificates, documents or other information with respect to the matters contemplated by Section 3 of this Amendment as the Agent may reasonably determine are necessary to effect the transactions contemplated by Section 3 of this Amendment. (c) Promptly upon the satisfaction of the conditions precedent to the effectiveness of this Amendment, as described in Section 2(a) of this Amendment, the Agent shall confirm in writing delivered to TNP and TGC II that the provisions of this Amendment (except Section 3 AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT hereof) have become effective. Promptly upon the satisfaction of the conditions precedent described in Section 2(b) of this Amendment (i) TNP or TGC II shall pay to the Agent for the ratable benefit of the Banks a non-refundable extension fee in the amount of 1/4 of 1% of the aggregate principal amount of Existing Project Loans outstanding on the Bond Proceeds Payment Date after giving effect to the prepayments on such date and (ii) the Agent shall confirm in writing delivered to TNP and TGC II that the provisions of Section 3 of this Amendment have become effective. SECTION 3. Extension of Maturities and Changes to "Applicable Margins". SECTION 3.01. Extension of Maturities; Changes to "Applicable Margins". (a) Section 1.01 of the Credit Agreement shall be amended as follows: (i) Delete the following terms and their definitions in their entirety: "Final Maturity Date", "First Scheduled Reduction Date", "Scheduled Reduction Dates" and "Second Scheduled Reduction Date"; (ii) Insert the following new terms and their definitions in the appropriate alphabetical order: ""Final Maturity Date" shall mean December 31, 1998. "First Prospect Purchase Carryforward Amount" shall mean the excess (if any) of (a) Period 1 Prospect Purchases over (b) $1,567,992.42. "First Scheduled Reduction Date" shall mean December 31, 1995. "First Supplemental Advance Bank Purchase Carryforward Amount" shall mean the excess (if any) of (a) Period 1 Supplemental Advance Bank Purchases over (b) the excess (if any) of (i) AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT $35,369,507.58 over (ii) Period 1 Section 5.02(a) Prepayments. "Period 1 Prospect Purchases" shall have the meaning ascribed to such term in Section 5.02(b)(i)(A)(2)(y)(II) hereof. "Period 1 Section 5.02(a) Prepayments" shall have the meaning ascribed to such term in Section 5.02(b)(i)(A)(1)(y)(I) hereof. "Period 1 Supplemental Advance Bank Purchases" shall have the meaning ascribed to such term in Section 5.02(b)(i)(A)(1)(y)(II) hereof. "Period 2 Prospect Purchases" shall have the meaning ascribed to such term in Section 5.02(b)(i)(B)(2)(y)(I)(bb) hereof. "Period 2 Section 5.02(a) Prepayments" shall have the meaning ascribed to such term in Section 5.02(b)(i)(B)(1)(y)(I)(aa) hereof. "Period 2 Supplemental Advance Bank Purchases" shall have the meaning ascribed to such term in Section 5.02(b)(i)(B)(1)(y)(I)(bb) hereof. "Period 3 Section 5.02(a) Prepayments" shall have the meaning ascribed to such term in Section 5.02(b)(i)(C)(1)(y)(I)(aa) hereof. "Period 3 Supplemental Advance Bank Purchases" shall have the meaning ascribed to such term in Section 5.02(b)(i)(C)(1)(y)(I)(bb) hereof. "Scheduled Reduction Dates" shall mean the First Scheduled Reduction Date, the Second Scheduled Reduction Date, the Third Scheduled Reduction Date, the Final Maturity Date and each Replacement Note Maturity Date. "Second Prospect Purchase Carryforward Amount" shall mean the excess (if any) of (a) the sum of (i) the First Prospect Purchase AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Carryforward Amount plus (ii) Period 2 Prospect Purchases over (b) $1,567,992.42. "Second Scheduled Reduction Date" shall mean December 31, 1996. "Second Supplemental Advance Bank Purchase Carryforward Amount" shall mean the excess (if any) of (a) the sum of (i) the First Supplemental Advance Bank Purchase Carryforward Amount plus (ii) Period 2 Supplemental Advance Bank Purchases over (b) the excess (if any) of (i) $35,369,507.58 over (ii) Period 2 Section 5.02(a) Prepayments. "Third Scheduled Reduction Date" shall mean December 31, 1997."; and (iii) Delete the term "Applicable Margin" and the definition thereof and substitute in its place the following: ""Applicable Margins" shall mean: (i) with respect to Prime Rate Loans, (a) for the period from September 23, 1991 through and including December 31, 1992, 1-1/8%, (b) for the period from but excluding December 31, 1992 through and including December 31, 1993, 1-3/8%, (c) for the period from but excluding December 31, 1993 through and including December 31, 1994, 1-7/8%, (d) for the period from but excluding December 31, 1994 through and including December 31, 1995, 2-3/8%, (e) for the period from but excluding December 31, 1995 through and including December 31, 1996, 2-5/8%, AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (f) for the period from but excluding December 31, 1996 through and including December 31, 1997, 2-7/8%, and (g) thereafter, 3-1/8%; (ii) with respect to CD Rate Loans, (a) for the period from September 23, 1991 through and including December 31, 1992, 1-5/8%, (b) for the period from but excluding December 31, 1992 through and including December 31, 1993, 1-7/8%, (c) for the period from but excluding December 31, 1993 through and including December 31, 1994, 2-3/8%, (d) for the period from but excluding December 31, 1994 through and including December 31, 1995, 2-7/8%, (e) for the period from but excluding December 31, 1995 through and including December 31, 1996, 3-1/8%, (f) for the period from but excluding December 31, 1996 through and including December 31, 1997, 3-3/8%, and (g) thereafter, 3-5/8%; and (iii) with respect to Eurodollar Rate Loans, (a) for the period from September 23, 1991 through and including December 31, 1992, 1-1/2%, (b) for the period from but excluding December 31, 1992 through and including December 31, 1993, 1-3/4%, AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (c) for the period from but excluding December 31, 1993 through and including December 31, 1994, 2-1/4%, (d) for the period from but excluding December 31, 1994 through and including December 31, 1995, 2-3/4%, (e) for the period from but excluding December 31, 1995 through and including December 31, 1996, 3%, (f) for the period from but excluding December 31, 1996 through and including December 31, 1997, 3-1/4%, and (g) thereafter, 3-1/2%.". (b) Section 5.02(b)(iii) of the Credit Agreement shall be deleted in its entirety and replaced with the following: "(iii) [INTENTIONALLY OMITTED].". (c) Section 5.02(b)(i) of the Credit Agreement shall be deleted in its entirety and replaced with the following: "(i) TGC II shall prepay, or TNP shall purchase in accordance with the terms and conditions of Section 4.05 hereof, the Project Loans and in the case of clause (E), the applicable Replacement Loans, in the following amounts: (A) On the First Scheduled Reduction Date (1) the Existing Project Loans held by the Supplemental Advance Banks shall be repaid pro rata to the Supplemental Advance Banks in an aggregate principal amount equal to the excess (if any) of (x) $35,369,507.58 over (y) the sum of, in each case for the period after the Bond Proceeds Payment Date and before the First Scheduled Reduction Date (I) the aggregate principal amount of Existing Project Loans prepaid pursuant to AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Section 5.02(a) hereof ("Period 1 Section 5.02(a) Prepayments") plus (II) the aggregate principal amount of Existing Project Loans purchased at Section 4.05 Closings, on TNP Purchase Dates or on the Designee Purchase Date ("Period 1 Supplemental Advance Bank Purchases") and (2) the Existing Project Loans held by Prospect shall be repaid in an aggregate principal amount equal to the excess (if any) of (x) $1,567,992.42 over (y) the sum of, in each case from the period after the Bond Proceeds Payment Date and before the First Scheduled Reduction Date (I) the aggregate principal amount of proceeds received by Prospect in respect of the aggregate principal amount of Existing Project Loans prepaid pursuant to the provisions of this Agreement (except for prepayments made pursuant to Section 5.02(a) hereof) plus (II) the aggregate principal amount of proceeds received by Prospect in respect of the aggregate principal amount of Existing Project Loans purchased at Section 4.05 Closings, on TNP Purchase Dates or on the Designee Purchase Date ("Period 1 Prospect Purchases"); (B) On the Second Scheduled Reduction Date (1) the Existing Project Loans held by the Supplemental Advance Banks shall be repaid pro rata to the Supplemental Advance Banks in an aggregate principal amount equal to the excess (if any) of (x) $35,369,507.58 over (y) the sum of (I) in each case for the period after the First Scheduled Reduction Date and before the Second Scheduled Reduction Date (aa) the aggregate principal amount of Existing Project Loans prepaid pursuant to Section 5.02(a) hereof ("Period 2 Section 5.02(a) Prepayments") plus (bb) the aggregate principal amount of Existing Project Loans purchased at Section 4.05 Closings, on TNP Purchase Dates or on the Designee Purchase Date ("Period 2 Supplemental Advance Bank Purchases") plus (II) the First Supplemental Advance Bank Purchase Carryforward Amount and (2) the Existing Project Loans held by Prospect shall be repaid in an aggregate principal amount equal to the excess (if any) of (x) $1,567,992.42 over (y) the sum of (I) in each case AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT from the period after the First Scheduled Reduction Date and before the Second Scheduled Reduction Date (aa) the aggregate principal amount of proceeds received by Prospect in respect of the aggregate principal amount of Existing Project Loans prepaid pursuant to the provisions of this Agreement (except for prepayments made pursuant to Section 5.02(a) hereof) plus (bb) the aggregate principal amount of proceeds received by Prospect in respect of the aggregate principal amount of Existing Project Loans purchased at Section 4.05 Closings, on TNP Purchase Dates or on the Designee Purchase Date ("Period 2 Prospect Purchases") plus (II) the First Prospect Purchase Carryforward Amount; (C) On the Third Scheduled Reduction Date (1) the Existing Project Loans held by the Supplemental Advance Banks shall be repaid pro rata to the Supplemental Advance Banks in an aggregate principal amount equal to the excess (if any) of (x) $35,369,507.58 over (y) the sum of (I) in each case for the period after the Second Scheduled Reduction Date and before the Third Scheduled Reduction Date (aa) the aggregate principal amount of Existing Project Loans prepaid pursuant to Section 5.02(a) hereof ("Period 3 Section 5.02(a) Prepayments") plus (bb) the aggregate principal amount of Existing Project Loans purchased at Section 4.05 Closings, on TNP Purchase Dates or on the Designee Purchase Date ("Period 3 Supplemental Advance Bank Purchases") plus (II) the Second Supplemental Advance Bank Purchase Carryforward Amount and (2) the Existing Project Loans held by Prospect shall be repaid in an aggregate principal amount equal to the excess (if any) of (x) $1,567,992.42 over (y) the sum of (I) in each case from the period after the Second Scheduled Reduction Date and before the Third Scheduled Reduction Date (aa) the aggregate principal amount of proceeds received by Prospect in respect of the aggregate principal amount of Existing Project Loans prepaid pursuant to the provisions of this Agreement (except for prepayments made pursuant to Section 5.02(a) hereof) plus (bb) the aggregate AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT principal amount of proceeds received by Prospect in respect of the aggregate principal amount of Existing Project Loans purchased at Section 4.05 Closings, on TNP Purchase Dates or on the Designee Purchase Date plus (II) the Second Prospect Purchase Carryforward Amount; (D) on the Final Maturity Date, the Existing Project Loans shall be repaid in an aggregate principal amount equal to 100% of the outstanding Existing Project Loans; and (E) on each Replacement Note Maturity Date and subject to Section 4.05(i) hereof, the aggregate principal amount of Replacement Loans maturing on such date;". SECTION 3.02. Joinder of Guarantor. TNP, as the Guarantor, hereby confirms and consents to each and every of the terms and conditions of Section 3 of this Amendment and the Credit Agreement as amended by Section 3 of this Amendment (including, without limitation Section 17.13 of the Credit Agreement), and agrees that the terms and conditions of the Guaranty are in full force and effect and unaffected by the effectiveness of Section 3 of this Amendment and acknowledges that there are no claims or offsets against, or defenses or counterclaims to, the Guaranty. SECTION 4. Conforming Changes to the Credit Agreement. SECTION 4.01. Future Issuances of Secured Debentures. (a) The introductory paragraph of the Credit Agreement shall be amended by adding an "s" to the end of the term "Replacement Note Holder" in both occurrences of such term. (b) Recital 7 of the Credit Agreement shall be amended by inserting the word "First" before each occurrence of the following terms: "Secured Debentures", "Secured Debenture Indenture", "Replacement Loans", "Replacement Note" and "Debenture Trustee". AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (c) Recital 8 of the Credit Agreement shall be amended by inserting the word "First" before the term "Secured Debentures". (d) Section 1.01 of the Credit Agreement shall be further amended as follows: (i) Delete the following terms and their definitions in their entirety: "Banks", "Debenture Trustee", "Project Loans", "Project Notes", "Replacement Loan", "Replacement Note", "Replacement Note Holder", "Replacement Note Maturity Date", "Secured Debenture Indenture", "Secured Debentures", "Security Documents" and "TGC II Mortgage Modifications"; (ii) Insert the following new terms and their definitions in the appropriate alphabetical order: ""4.05 Notice" shall have the meaning ascribed to such term in Section 4.05(c) hereof. "Aggregate Commitment" shall mean, for each Bank, the amount set forth opposite the name of such Bank on the signature pages of the First Amendment under the caption "Aggregate Commitment". "Bond Proceeds Payment Date" shall mean the date on which (a) TNP or TGC II prepays the Existing Loans in an aggregate principal amount of $75,750,000, (b) TNP purchases $140,000,000 of "Project Loans," under and as defined in the Unit 1 Credit Agreement, as amended by Amendment No. 1 thereto and (c) TNP or TGC prepays $6,000,000 of "Project Loans," under and as defined in the Unit 1 Credit Agreement, as amended by Amendment No. 1 thereto. "Banks" shall mean the Existing Project Banks and the Supplemental Advance Banks. "Class" shall mean, with respect to each Loan, whether such Loan is an Existing Project AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Loan, a Supplemental Advance or a Replacement Loan, each of which constitutes a Class. "Collateral Coverage Maximum Amount" shall mean, as of any date of determination on or after the First Amendment Effective Date, (a) $288,500,000 minus (b) the amount of payments made by TNP resulting in transfers made by TGC II (on or after the First Amendment Effective Date) which, in accordance with the terms and conditions of the Facility Purchase Agreement, have resulted in transfers of Interests (as defined in the Facility Purchase Agreement) in Unit 2 from TGC II to TNP which Interests (as so defined) have been released from the lien of the TGC II Mortgage. On the Bond Proceeds Payment Date (after giving effect to the transactions contemplated to occur on or prior to the Bond Proceeds Payment Date), the Collateral Coverage Maximum Amount shall be $212,750,000 subject to reduction thereafter by virtue of transactions described in clause (b) of the preceding sentence occurring after the Bond Proceeds Payment Date. "Debenture Trustees" shall mean the First Debenture Trustee and any Subsequent Debenture Trustee, and "Debenture Trustee" shall mean any of them. "Designee" shall have the meaning ascribed to such term in Section 4.05(g) hereof. "Designee Purchase Date" shall have the meaning ascribed to such term in Section 4.05(g) hereof. "Designee Purchase Notice" shall have the meaning ascribed to such term in Section 4.05(g) hereof. "Existing Banks" shall have the meaning ascribed to such term in Section 4.01(a) hereof. "Existing Loans" shall have the meaning ascribed to such term in Section 4.01(a) hereof. AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT "Existing Notes" shall have the meaning ascribed to such term in Section 4.01(a) hereof. "Existing Project Banks" shall mean the Existing Banks and the New Advance Banks. "Existing Project Loans" shall mean the Existing Loans and the New Advances. "Facility Purchase Agreement Amendment No. 1" shall mean Amendment No. 1 dated as of September 21, 1993 to the Unit 2 First Amended and Restated Facility Purchase Agreement among TNP, TGC II, the Agent and the Collateral Agent entered into to correct an inaccurate numerical reference therein. "Fifth TGC II Modification and Extension Agreement" shall mean the Fifth TGC II Modification and Extension Agreement among the Agent, the Collateral Agent, TNP and TGC II, substantially in the form of Exhibit E to the First Amendment. "First Amendment" shall mean the Amendment No. 1 dated as of September 21, 1993 to this Agreement among TNP, TGC II, the Banks, the Voting Participants and the Agent. "First Amendment Documents" shall mean the First Amendment, the Intercreditor Amendment No. 2, the First Debenture Trustee Consent and the First Amendment Security Documents. "First Amendment Effective Date" shall mean the date on which all of the conditions set forth in Section 2(a) of the First Amendment shall have been satisfied. "First Amendment Security Documents" shall mean the First Amendment TGC II Mortgage Modifications, the TNP Second Lien Mortgage Modification No. 2 and the Facility Purchase Agreement Amendment No. 1. AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT "First Amendment TGC II Mortgage Modifications" shall mean the Fourth TGC II Mortgage Modification and Extension Agreement and the Fifth TGC II Mortgage Modification and Extension Agreement. "First Debenture Trustee" shall mean IBJ, as trustee under, or any successor trustee under, the First Secured Debenture Indenture. "First Debenture Trustee Consent" shall mean a First Debenture Trustee Consent duly executed and delivered by the First Debenture Trustee, substantially in the form of Exhibit J to the First Amendment. "First Replacement Loan" shall have the meaning ascribed to such term in Section 4.05(a) hereof. "First Replacement Note" shall have the meaning ascribed to such term in Section 4.05(a) hereof. "First Replacement Note Maturity Date" shall mean, subject to Section 4.05(i) hereof, the stated maturity date of the First Secured Debentures. "First Secured Debenture Indenture" shall mean the Indenture and Security Agreement dated as of January 15, 1992 between TNP and IBJ, as trustee, as the same may from time to time be amended, modified or supplemented or its provisions waived. "First Secured Debentures" shall mean the debentures, due January 15, 1999, issued by TNP on January 27, 1992 under the First Secured Debenture Indenture. "Fourth TGC II Modification and Extension Agreement" shall mean the Fourth TGC II Modification and Extension Agreement among the Agent, the Collateral Agent, TNP and TGC II, AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT substantially in the form of Exhibit D to the First Amendment. "IBJ" shall mean IBJ Schroder Bank & Trust Company, a New York banking corporation. "Intercreditor Amendment No. 2" shall mean Amendment No. 2 to the Intercreditor Agreement dated as of September 21, 1993 among TNP, TGC, TGC II, the banks and the other parties party thereto and Chase in its several capacities as the Agent, the Collateral Agent and the Agent under the Unit 1 Credit Agreement, substantially in the form of Exhibit C to the First Amendment. "New Advance Banks" shall mean Chase and NationsBank of Texas, N.A ("NationsBank"). "New Advance Closing Date" shall mean the Bond Proceeds Payment Date. "New Advance Commitment" shall mean (a) for Chase, the obligation of Chase to make New Advances in an aggregate amount up to but not exceeding $10,000,000 and (b) for NationsBank, the obligation of NationsBank to make New Advances in an aggregate amount up to but not exceeding $16,000,000. The original aggregate principal amount of the New Advance Commitments is $26,000,000. "New Advance Commitment Termination Date" shall mean 4:00 p.m. New York time on the Bond Proceeds Payment Date. "New Advances" shall have the meaning ascribed to such term in Section 4.01(b) hereof. "New Project Notes" shall mean the promissory notes provided for by Section 4.06 hereof and all promissory notes delivered to the Banks in substitution or exchange therefor, in each case as the same may be amended, modified and supplemented and in effect from time to time. AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT "Permitted Collateralized Indebtedness" shall have the meaning ascribed to such term in Section 4.05(b)(i) hereof. "Permitted Demand Date" shall mean, at any time, with respect to any Replacement Loan or any Replacement Note (subject to Section 4.05(i) hereof, other than the First Replacement Loan and the First Replacement Note), the stated maturity date of the Secured Debentures issued on the basis of (and at such time collateralized by) such Replacement Loan and Replacement Note. "Permitted Section 4.05(b)(ii) Collateralized Indebtedness" shall have the meaning ascribed to such term in Section 4.05(b)(ii) hereof. "Project Loans" shall mean the Existing Project Loans and the Supplemental Advances. "Project Notes" shall mean the Existing Notes and the New Project Notes. "Register" shall have the meaning ascribed to such term in Section 4.05(h) hereof. "Relevant Instruments" shall have the meaning ascribed to such term in Section 4.05(c) hereof. "Replacement Agent" shall have the meaning ascribed to such term in Section 15.08 hereof. "Replacement Loans" shall mean the First Replacement Loan, any Subsequent Replacement Loans and any Temporary Replacement Loans, and "Replacement Loan" shall mean any of them. "Replacement Note Holders" shall mean: (a) (i) with respect to the First Replacement Note, on the Extension Date and prior to the pledge of the First Replacement Note by TNP to the First Debenture Trustee pursuant to the First Secured Debenture Indenture, TNP; and AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (ii) with respect to any Subsequent Replacement Note or any other Replacement Note (other than a Released Replacement Note) available at such time for pledge in conjunction with a future Section 4.05 Closing, prior to the pledge of such Subsequent Replacement Note or such other Replacement Note by TNP to a Subsequent Debenture Trustee pursuant to a Subsequent Secured Debenture Indenture in conjunction with such future Section 4.05 Closing, TNP; (b) immediately upon any such pledge of any such Replacement Note referred to in subclause (i) or (ii) of the preceding subsection (a), but only with respect to such Replacement Note so pledged (a "Pledged Replacement Note"): (i) with respect to any benefits (including, without limitation, rights to vote on amendments or defaults and to attend bank meetings) accruing to, and any obligations pursuant to Sections 6.03, 15.05, 17.16 and 17.18 hereunder of, the holder of such Pledged Replacement Note, the Debenture Trustee to which such Pledged Replacement Note was pledged (whether or not it shall have become the legal and beneficial owner of such Pledged Replacement Note for all purposes); and (ii) with respect to any other obligations of the holder of such Pledged Replacement Note, TNP; (c) following the release of any such pledge of any such Pledged Replacement Note, but only with respect to such Pledged Replacement Note so released (a "Released Replacement Note") and prior to the pledge of such Released Replacement Note in conjunction with a future Section 4.05 Closing, TNP; and AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (d) following the transfer of any Replacement Note upon the exercise of remedies by a Debenture Trustee under the applicable Secured Debenture Indenture, any transferee of such Replacement Note (other than such Debenture Trustee in its capacity as trustee); provided that each of TNP, each Debenture Trustee and any transferee shall have signed (as a condition to becoming a Replacement Note Holder) an instrument of adoption, substantially in the form of Exhibit G hereto, agreeing to be bound by and (in the case of each Debenture Trustee, subject to the provisions of clause (b) above) comply with terms and conditions of (x) this Agreement applicable to Replacement Note Holders and (y) the Intercreditor Agreement applicable to the "Unit 2 Banks" (as defined in the Intercreditor Agreement); and "Replacement Note Holder" shall mean any of them. Anything in the foregoing to the contrary notwithstanding, TNP, as Replacement Note Holder of any Replacement Note, shall have no voting rights under this Agreement and shall not be considered in the determination of "Majority Banks" for purposes of this Agreement. "Replacement Note Maturity Dates" shall mean the First Replacement Note Maturity Date and with respect to any other Replacement Note, such Replacement Note's Permitted Demand Date or if no demand is made on or within 90 days after such Permitted Demand Date, January 1, 2050. "Replacement Notes" shall mean the First Replacement Note, any Subsequent Replacement Notes and any Temporary Replacement Notes, and "Replacement Note" shall mean any of them. "Section 3 Effective Date" shall mean the date on which all of the conditions set forth in Section 2(b) of the First Amendment shall have been satisfied. AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT "Section 4.05 Closing" shall have the meaning ascribed to such term in Section 4.05(d) hereof. "Section 4.05 Closing Date" shall have the meaning ascribed to such term in Section 4.05(d) hereof. "Secured Debenture Indentures" shall mean the First Secured Debenture Indenture and any Subsequent Secured Debenture Indentures, and "Secured Debenture Indenture" shall mean any of them. "Secured Debentures" shall mean the First Secured Debentures and any Subsequent Secured Debentures (which may include subsequent series of debentures issued under any indenture supplemental to any Subsequent Secured Debenture Indenture), and may refer to the Secured Debentures of any one or more such series, as the context may require. "Security Documents" shall mean, collectively, the TNP Security Agreement, the Subordination Agreement, the TGC II Mortgage, the TNP Second Lien Mortgage, the Amendment Security Documents and the First Amendment Security Documents. "Subject Date" shall have the meaning ascribed to such term in Section 17.21(a) hereof. "Subsequent Debenture Trustee" shall mean, with respect to any Subsequent Secured Debenture Indenture, the trustee, or any successor trustee, under such Subsequent Secured Debenture Indenture or, if there shall be no "trustee," per se, any person serving in a capacity or performing functions, in each case, similar to those of a trustee under an indenture, regardless of the name or legal characterization of said capacity or functions and, in each case, any successor in such capacity or performing such functions under such Subsequent Secured Debenture Indenture. AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT "Subsequent Replacement Loan" shall have the meaning ascribed to such term in Section 4.05(e) hereof. "Subsequent Replacement Note" shall have the meaning ascribed to such term in Section 4.05(e) hereof. "Subsequent Secured Debenture Indentures" shall mean any indenture or agreement, other than the First Secured Debenture Indenture, which provides for the issuance of and sets out the terms and conditions of any TNP debt which is to be directly or indirectly secured by the Collateral pursuant to and in accordance with Section 4.05 hereof, whether or not said agreement shall be denominated an "indenture" and whether or not said debt shall be denominated "debentures," in each case, as the same may from time to time be amended, modified or supplemented or its provisions waived. "Subsequent Secured Debentures" shall mean any TNP debt, other than the First Secured Debentures, which is to be directly or indirectly secured by the Collateral pursuant to and in accordance with Section 4.05 hereof, whether or not said debt shall be denominated "debentures". Said term may refer to Subsequent Secured Debentures of any one or more such series, as the context may require. "Subsequent TGC II Modification and Extension Agreement" shall mean a TGC II Modification and Extension Agreement among the Agent, the Collateral Agent, TNP and TGC II, substantially in the form of Exhibit F to the First Amendment, and otherwise duly completed. "Temporary Replacement Loan" shall have the meaning ascribed to such term in Section 4.05(f) hereof. AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT "Temporary Replacement Note" shall have the meaning ascribed to such term in Section 4.05(f) hereof. "Ten Acre Releases" shall have the meaning ascribed to such term in Section 17.20(c) hereof. "TGC II Mortgage Modifications" shall mean (a) the First TGC II Modification and Extension Agreement among the Agent, the Collateral Agent, Donald H. Snell as mortgage trustee, TNP and TGC II, (b) the Second TGC II Modification and Extension Agreement among the Agent, the Collateral Agent, TNP and TGC II, (c) the Third TGC II Modification and Extension Agreement among the Agent, the Collateral Agent, TNP and TGC II, (d) the Fourth TGC II Modification and Extension Agreement, among the Agent, the Collateral Agent, TNP and TGC II, (e) the Fifth TGC II Modification and Extension Agreement among the Agent, the Collateral Agent, TNP and TGC II, (f) each Subsequent TGC II Modification and Extension Agreement among the Agent, the Collateral Agent, TNP and TGC II and (g) any other modification and extension agreement among the Agent, the Collateral Agent, TNP and TGC II, which shall evidence of record that Replacement Loans and the Replacement Notes, issued in accordance with Section 4.05 hereof, are secured by the Collateral. "TNP Purchase Date" shall have the meaning ascribed to such term in Section 4.05(f) hereof. "TNP Purchase Notice" shall have the meaning ascribed to such term in Section 4.05(f) hereof. "TNP Second Lien Mortgage Modification No. 2" shall mean the Second Lien Mortgage and Deed of Trust (with Security Agreement) Modification, Extension and Amendment Agreement No. 2 among the Agent and TNP, substantially in the form of Exhibit G to the First Amendment."; AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (iii) The definition of "Amendment Documents" shall be amended by inserting the word "First" before the term "Replacement Note"; (iv) Delete clause (c) in the definition of "Interest Payment Date" and substitute in its place the following: "(c) as to (i) the First Replacement Loan, each date on which TNP is obligated to make a deposit of cash collateral in respect of interest on the First Secured Debentures pursuant to Section 1119 of the First Secured Debenture Indenture and (ii) any Subsequent Replacement Loan, each date on which TNP is obligated to make a deposit of cash collateral in respect of interest on any Subsequent Secured Debentures pursuant to provisions of the applicable Subsequent Secured Debenture Indenture similar to the provisions referred to in subclause (i) of this clause (c) and providing for the deposit of cash collateral in respect of payment of interest."; (v) The definition of "Loans" shall be amended by adding an "s" to the end of the term "Replacement Loan"; (vi) The definition of "Majority Banks" shall be amended by adding an "s" to the end of the term "Replacement Note Holder"; (vii) The definition of "Net Proceeds" shall be amended by inserting the phrase "when used in Section 8.02(c) hereof," after the term "Net Proceeds"; (viii) The definition of "New Debt Securities" shall be amended by inserting the word "First" before the term "Secured Debentures"; (ix) The definition of "Notes" shall be amended by adding an "s" to the end of term "Replacement Note"; AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (x) Delete clause (b) in the definition of "Post- Default Rate" and substitute in its place the following: "(b) Subject to Section 4.05(i) hereof, in respect of any principal of any Replacement Loan or Replacement Note, a rate per annum, as of any date of determination, equal to the interest rate applicable to (x) the Secured Debentures to which such Replacement Loan relates as of such date of determination as specified in the applicable Secured Debenture Indenture pursuant to which such Secured Debentures were issued or (y) if such Replacement Loan does not as of such date of determination serve as the basis for the issuance of any outstanding Secured Debentures, a rate per annum, as of any date of determination, equal to the Prime Rate."; (xi) The definition of "Principal Office" shall be amended by adding an "s" to the end of the term "Replacement Note Holder"; (xii) The definition of "Project Creditors" shall be amended by (A) deleting the phrase ", after the Extension Date," and (B) adding an "s" to the end of the term "Replacement Note Holder"; (xiii) The definition of "Project Documents" shall be amended by (A) adding an "s" to the end of the term "Replacement Note" and (B) inserting the term "the First Amendment Documents," after the term "this Agreement,"; (xiv) The definition of "Secured Parties" shall be amended by adding an "s" to the end of the term "Replacement Note Holder"; and (xv) The definition of "Voting Participant Notice" shall be amended by (A) substituting the word "a" for "the" before the first occurrence of the term "Replacement Note Holder" and (B) substituting the word "such" for "the" before the second occurrence of such term. AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (e) Section 1.02 of the Credit Agreement shall be amended by (A) deleting the phrase "the Replacement Note Holder" in the second sentence thereof and inserting in lieu thereof the phrase "any of the Replacement Note Holders" and (B) deleting the phrase "the Secured Debenture Indenture" in the third sentence thereof and inserting in lieu thereof the phrase "any of the Secured Debenture Indentures". (f) Section 2 of the Credit Agreement shall be amended by inserting the phrase "and, with respect to a Section 4.05 Closing, the purchase by TNP of Project Loans on a TNP Purchase Date or the purchase by the Designee of Project Loans on the Designee Purchase Date (in each case, assuming the due execution and delivery of documents required to be delivered in connection therewith and the performance of other conditions precedent thereto by the parties (other than TNP or TGC II) thereto), the applicable Section 4.05 Closing Date, TNP Purchase Date or Designee Purchase Date" after each occurrence of the term "Extension Date" therein. (g) Section 2.10 of the Credit Agreement shall be amended by inserting after the word "Except" the following: "(i) for the replacement of Project Notes by Replacement Notes, and (ii)". (h) Section 2.22 of the Credit Agreement shall be amended by inserting after the word "Except" the following: "(i) for the replacement of Project Notes by Replacement Notes, and (ii)". (i) Section 4.01 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "SECTION 4.01. Existing Loans; New Advance Commitments and New Advances. (a) Existing Loans. The parties hereto acknowledge, confirm and agree that there are outstanding on the First Amendment Effective Date loans (the "Existing Loans") under the Credit Agreement in an aggregate principal amount of $223,500,000, the AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT principal amount of such Existing Loans held by banks (the "Existing Banks") on the First Amendment Effective Date being the amount set forth opposite the name of such Existing Bank's name on the signature pages of the First Amendment under the caption "Existing Loan". Prior to the Bond Proceeds Payment Date, the Existing Loans shall be evidenced by notes (the "Existing Notes") held by the Existing Banks and on and after the Bond Proceeds Payment Date, the Existing Loans shall be evidenced by the New Project Notes held by the Existing Banks. The Existing Loans may be continued or Converted pursuant to Section 4.04 hereof. TGC II hereby agrees to repay the principal of, and to pay interest on, the Existing Loans as set forth in this Agreement. No Existing Bank shall be entitled to have its Existing Note subdivided, by exchange or otherwise, except in connection with a sale, assignment or transfer of all or any portion of such Existing Bank's Loans and Notes pursuant to Section 16.01 hereof. Each Bank hereby waives the aggregate amount (if any) payable to such Bank under Section 7.05 hereof as a result of TGC II's prepayments of Existing Project Loans made on the Bond Proceeds Payment Date. (b) New Advances. (i) New Advances. Each New Advance Bank severally agrees, on the terms and conditions of this Agreement, to make a single loan to TGC II in Dollars on the New Advance Closing Date in an aggregate principal amount up to but not exceeding the amount of the New Advance Commitment of such New Advance Bank (such loans being herein called "New Advances"). Any portion of the New Advance Commitments not used on the New Advance Closing Date shall be automatically terminated on the New Advance Closing Date. The New Advance Commitments once terminated may not be reinstated. The New Advances may be continued or Converted pursuant to Section 4.04 hereof. TGC II hereby agrees to repay the principal of, and to pay interest on, the New Advances as set forth in this Agreement. The New Advances made by each New Advance Bank shall be evidenced by the New Project Note of such New Advance Bank. AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (ii) Borrowings and Notices. (A) If TGC II shall have given the Agent notice of borrowing in accordance with clause (C) of this Subsection 4.01(b)(ii), not later than 1:00 p.m. New York time on the New Advance Closing Date, each New Advance Bank shall make available the amount of the New Advance or New Advances to be made by it on such date to the Agent, at account number NYAO-DI-900-9-000002 maintained by the Agent with Chase at the Principal Office, in immediately available funds, for account of TGC II. (B) TGC II hereby irrevocably instructs the Agent to apply the proceeds of the New Advances to the immediate prepayment of a like principal amount of Existing Loans of the Existing Banks. Notwithstanding anything contained herein to the contrary, such prepayment shall not result in an increase in the Available Supplemental Advance Commitment. (C) A notice by TGC II to the Agent of borrowings of New Advances shall be irrevocable and shall be effective only if received by the Agent not later than 11:00 a.m. New York time one Business Day (with respect to a Prime Rate Loan), two Business Days (with respect to a CD Rate Loan) and three Business Day (with respect to a Eurodollar Rate Loan) prior to the New Advance Closing Date, and the Agent shall give each New Advance Bank prompt notice thereof. Such notice shall specify the amount of New Advances to be borrowed and the Type of New Advances to be borrowed. Such notice shall specify the duration of an Interest Period (if any) and the New Advance to which such Interest Period is to relate. In the event that TGC II fails to select the Type of New Advance, or the duration of any Interest Period for a Eurodollar Rate Loan or CD Rate Loan, as provided in this subsection (ii), such New Advance shall be made as a Prime Rate Loan. AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (D) Unless the Agent shall have received notice from a New Advance Bank prior to the date of any borrowing that such New Advance Bank will not make available to the Agent the amount of such New Advance Bank's New Advance Commitment, the Agent may assume that such New Advance Bank has made such portion available to the Agent on the date of such borrowing in accordance with clause (A) of Subsection 4.01(b)(ii) hereof and the Agent may, in reliance upon such assumption, make available to TGC II on such date a corresponding amount. If the amount of such New Advance Bank's New Advance Commitment is made available to the Agent on a date after the date of such borrowing, such New Advance Bank shall pay to the Agent on demand an amount equal to the product of (A) the daily average Federal Funds Rate during such period as quoted by the Agent times (B) the amount of such New Advance Bank's New Advance Commitment times (C) the number of days that elapse from and including the date of such borrowing to the date on which such New Advance Bank's ratable portion of such borrowing shall have been made available to the Agent. A certificate of the Agent submitted to any New Advance Bank with respect to any amounts owing under this Section 4.01 shall be conclusive absent manifest error. If the amount of such New Advance Bank's New Advance Commitment is not in fact made available to the Agent by such New Advance Bank within three Business Days after the date of such borrowing, TGC II agrees to pay to the Agent, on demand, an amount equal to the amount of such New Advance Bank's New Advance Commitment together with interest thereon, for each day from the date such amount was made available to TGC II until the date such amount is repaid to the Agent, at the interest rate applicable at the time to the Loans comprising such borrowing. (iii) Several Obligations; Remedies Independent. The failure of any New Advance Bank to make the New Advance to be made by it on the date specified therefor shall not relieve any other New Advance Bank of its obligation to make its New Advance on such date, but AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT neither any New Advance Bank nor the Agent shall be responsible for the failure of any other New Advance Bank to make a New Advance to be made by such other New Advance Bank, and no New Advance Bank shall have any obligation to the Agent or any other New Advance Bank for the failure by such New Advance Bank to make any New Advance required to be made by such New Advance Bank. The amounts payable by TGC II at any time hereunder and under the New Project Notes to each New Advance Bank shall be a separate and independent debt and each New Advance Bank shall be entitled to protect and enforce its rights arising out of this Agreement and the New Project Notes, and it shall not be necessary for any other Bank or the Agent to consent to, or be joined as an additional party in, any proceedings for such purposes.". (j) Section 4.05 of the Credit Agreement shall be amended as follows: (i) Subsection (a) shall be amended by inserting, with or without underscoring as appropriate, the word "First" before each occurrence of the following terms: "Secured Debentures", "Replacement Loan" and "Replacement Note"; (ii) Delete subsection (b) in its entirety; and (iii) Add new subsections (b), (c), (d), (e), (f), (g), (h) and (i) as follows: "(b) (i) Subject to the provisions of Section 4.05(b)(ii) hereof, additional or replacement (A) indebtedness of TNP consisting of Secured Debentures issued on the basis of (and collateralized by) Replacement Notes issued hereunder which are in turn secured by the Collateral and/or (B) indebtedness of TGC II consisting of (1) Project Loans and/or (2) Replacement Loans (the indebtedness referred to in the foregoing clauses (A) and (B) hereinafter referred to as "Permitted Collateralized Indebtedness") may be secured, directly or indirectly, by the Collateral, provided that in any such case the liens and security interests on AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT the Collateral directly or indirectly securing Permitted Collateralized Indebtedness are provided on substantially the same terms and conditions as the liens and security interests securing the Loans outstanding on the First Amendment Effective Date and (B) the aggregate principal amount of Loans outstanding hereunder may not at any time be greater than the Collateral Coverage Maximum Amount at such time. (ii) Until the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest due and payable thereon and all other amounts due and payable by TNP and TGC II to the Banks under this Agreement (including, without limitation, all Supplemental Advances) and the other Project Documents and so long as any of the First Secured Debentures remain outstanding, only additional or replacement Permitted Collateralized Indebtedness constituting debt securities (and not bank debt) or Loans ("Section 4.05(b)(ii) Permitted Collateralized Indebtedness") may be secured, directly or indirectly, by the Collateral and only if (A) the terms, conditions and limitations of Section 4.05(b)(i) hereof are satisfied and complied with, (B) the proceeds of any such additional Permitted Section 4.05(b)(ii) Permitted Collateralized Indebtedness of TNP are applied to purchase Project Loans outstanding on the First Amendment Effective Date or Supplemental Advances, (C) any such additional or replacement Permitted Section 4.05(b)(ii) Collateralized Indebtedness of TNP (and the related Section 4.05(b)(ii) Collateralized Indebtedness of TGC II constituting Replacement Loans) has maturities longer than the Project Notes outstanding on the First Amendment Effective Date and then outstanding and not shorter than the maturity of the First Secured Debentures then outstanding, (D) any such additional or replacement Permitted Section 4.05(b)(ii) Collateralized Indebtedness of TNP (and the related Section 4.05(b)(ii) Collateralized Indebtedness of TGC II constituting Replacement Loans) is not subject to prepayment AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (except on the same terms and conditions of prepayment applicable to the First Secured Debentures) prior to the maturity date of the First Secured Debentures then outstanding and (E) any such additional or replacement Permitted Section 4.05(b)(ii) Collateralized Indebtedness of TNP (and the related Section 4.05(b)(ii) Collateralized Indebtedness of TGC II constituting Replacement Loans) is subject to other covenants, terms, conditions and restrictions for the benefit of the Secured Parties substantially the same as those herein with respect to the First Secured Debentures. (c) Upon each occasion that TNP or TGC II desires to issue additional or replacement Permitted Collateralized Indebtedness (other than Permitted Collateralized Indebtedness constituting Project Loans): (i) TNP and TGC II shall deliver, not less than 30 days prior to the anticipated date of the applicable Section 4.05 Closing (which shall be a Business Day other than a Scheduled Reduction Date), to the Agent (A) an initial notice (a "4.05 Notice") of its intention to issue such Permitted Collateralized Indebtedness containing the proposed terms of such Permitted Collateralized Indebtedness and the terms of the security therefor in sufficient detail to enable the Agent, the Banks (if any Project Loans are outstanding) and the Replacement Note Holders to determine whether such terms comply with the terms and conditions of Section 4.05(b) hereof, (B) substantially final forms of each document, certificate, title information report, Uniform Commercial Code financing statement and other instrument (the "Relevant Instruments") required to be delivered by TNP or TGC II to the Agent under this Section 4.05 in connection with the applicable Section 4.05 Closing, (C) a certificate signed by an Authorized Officer of each of TNP and TGC II to the effect that such terms comply with the terms and conditions of Section 4.05(b) hereof and (D) an opinion of counsel for each of TNP and AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT TGC II substantially in the form of Exhibit H to the First Amendment. TNP and TGC II shall deliver promptly to the Agent such additional information as the Agent may reasonably request concerning the proposed transaction; (ii) the Agent shall within five days of receipt of a 4.05 Notice forward to each Bank (if any Project Loans are outstanding) and each Replacement Note Holder a copy of such 4.05 Notice and a copy of each of the Relevant Instruments received by the Agent in connection with such 4.05 Notice. Not later than ten days after receipt of such 4.05 Notice from the Agent, the Majority Banks or the Banks (if any Project Loans are outstanding) holding at least 66-2/3% of the outstanding principal amount of the Project Loans, or the Agent acting with the consent of such Banks, may forward to each of TNP and TGC II a notice stating that, the terms and conditions of the proposed Section 4.05 Closing do not meet the terms and conditions set forth in Section 4.05 hereof and stating with reasonable specificity why said terms and conditions do not meet the terms and conditions of Section 4.05 hereof; and (iii) TNP or TGC II shall (A) revise the terms and conditions of the proposed transaction such that the terms and conditions of Section 4.05 hereof are in fact satisfied by the terms and conditions of the proposed transaction or (B) cancel the proposed transaction. (d) TNP shall designate a date that is a Business Day for the closing of the proposed transactions. The designation shall be made by notice received by the Agent not less than 20 days after the notice under Section 4.05(c)(i) and not less than six days prior to such designated date. The proposed transaction shall be effected at a closing (a "Section 4.05 Closing") on such designated date or such other date (a "Section 4.05 Closing Date") as may be agreed upon by TNP, TGC II and the Agent. Prior to or at each Section 4.05 Closing: AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (i) TNP, TGC II, the Agent and, as applicable, the Collateral Agent each shall sign and deliver, in recordable form to the Agent and, as applicable, the Collateral Agent, such financing statements under the Uniform Commercial Code as are necessary to protect, preserve and maintain the priority of the liens contemplated by the Security Documents and TNP and TGC II shall provide (A) copies of Uniform Commercial Code search reports with respect to each of TGC II and TNP, as "debtor", in each jurisdiction in which such financing statements are to be filed and (B) all other instruments to be recorded or filed or delivered in connection with such Section 4.05 Closing; (ii) TGC II shall deliver to the Agent a Subsequent TGC II Modification and Extension Agreement and, at the sole cost of TNP and TGC II, the Title Company shall have issued to the Agent, a T-38 endorsement (or if a T-38 endorsement is no longer available, such other endorsement as shall have the same scope and purpose as a T-38 endorsement on the First Amendment Effective Date) to the title policy or policies which insure the lien of the TGC II Mortgage securing the Loans outstanding hereunder and evidenced by Project Notes or Replacement Notes on such date, each with respect to such Subsequent TGC II Mortgage Modification and Extension Agreement; (iii) At the sole cost of TNP and TGC II, the Title Company shall deliver to the Agent a title information report, showing that good and indefeasible title to the TGC II Mortgage Trust Estate is vested in TGC II and that the TGC II Mortgage constitutes a valid first mortgage lien on the TGC II Mortgage Trust Estate and showing that there are no intervening liens which would adversely affect the priority of the liens securing the Loans, subject only to the Permitted Liens; (iv) TNP and TGC II each shall deliver to the Agent legal opinions of counsel to TNP and AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT TGC II dated the applicable Section 4.05 Closing Date and substantially in the forms of Exhibit I hereto; (v) TNP and TGC II each shall deliver to the Agent (A) certified copies of the resolutions of its board of directors authorizing the issuance of such Permitted Collateralized Indebtedness and the collateral therefor furnished pursuant to the terms and conditions of this Section 4.05 and authorizing the execution, delivery and performance of the documentation necessary therefor and (B) certified copies of its charter, bylaws, good standing certificates and franchise tax certificates from the State of Texas and all other places where necessary in light of the business and properties it conducts and owns and intends to conduct and own; (vi) TNP and TGC II each shall deliver to the Agent a certificate signed by an Authorized Officer of TNP or TGC II, as applicable, and dated the applicable Section 4.05 Closing Date certifying the name, incumbency and signature of each individual authorized to execute any documents or certificates in connection with such Section 4.05 Closing, upon which certificates and documents the Secured Parties may conclusively rely; (vii) TNP and TGC II each shall deliver to the Agent a certificate signed by an Authorized Officer of TNP or TGC II, as applicable, and dated the applicable Section 4.05 Closing Date certifying that there shall be no injunction, writ, preliminary restraining order or any other order of any nature issued by any arbitrator, court or other governmental authority directing that the transactions conducted, or the transactions contemplated in the documentation executed and/or delivered, at such Section 4.05 Closing not be consummated as herein or therein provided and certifying further, except as disclosed herein, there shall be no material litigation, investigation or proceeding of or AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT before any arbitrator, court or other governmental authority pending or (to the best of such Authorized Officer's knowledge, threatened) against TNP or TGC II or affecting any of their respective properties, rights, revenues or assets, or the Project or any of the transactions to be effected at such Section 4.05 Closing; (viii) TNP and TGC II each shall deliver to the Agent a certificate signed by an Authorized Officer of TNP or TGC II, as applicable, and dated the applicable Section 4.05 Closing Date certifying that (A) the representations and warranties of each of TNP and TGC II, as applicable, contained in Section 2 hereof and in each of the other Project Documents to which such Person is a party shall be true and correct on and as of such Section 4.05 Closing Date as if made on and as of such date (or, if stated to have been made solely as of an earlier date, were true and correct as of such earlier date), (B) no Default hereunder, and no default by either TNP or TGC II under any of the other Project Documents to which either TNP or TGC II is a party, has occurred and is continuing on such date and (C) to the best of such Authorized Officer's knowledge, no default by any other Person to any other Project Document has occurred and is continuing on such date; (ix) TNP and TGC II each shall deliver to the Agent a certificate signed by an Authorized Officer of TNP or TGC II, as applicable, certifying that (A) it has obtained all Government Approvals necessary under applicable laws and regulations in connection with each of the transactions contemplated by the applicable Section 4.05 Closing and (B) all such Government Approvals have been duly obtained, were validly issued and are held by and in the name of TNP or TGC II, as applicable, and are final, in full force and effect and not subject to appeal; and (x) TNP and TGC II shall (A) if the transactions then consummated involve a refunding of existing Secured Debentures already secured by AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT the Collateral, pay to the relevant Debenture Trustee in Dollars, in immediately available funds, all amounts due and payable under the applicable Secured Debenture Indenture, (B) if the transactions then consummated involve the purchase by TNP or TGC II of Existing Project Loans, pay to the Agent in Dollars, in immediately available funds, the purchase price for the Existing Project Loans then being purchased pro rata from the Existing Project Banks and (C) if the transactions then consummated involve the purchase by TNP or TGC II of Supplemental Advances, pay to the Agent in Dollars, in immediately available funds, the purchase price for the Supplemental Advances then being purchased pro rata from the Supplemental Advance Banks. After the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest due and payable thereon and all other amounts due and payable by TNP and TGC II to the Banks under this Agreement (including, without limitation, all Supplemental Advances) and the other Project Documents, the Agent shall be entitled to rely solely upon the certificates and opinions of counsel delivered hereunder in making any determinations required to be made by the Agent in this Section 4.05. (e) If the transactions then consummated involve the purchase by TNP of Existing Project Loans or Supplemental Advances, then on each such Section 4.05 Closing Date (and, if such Section 4.05 Closing Date is prior to the Section 3 Effective Date, subject to Section 5.02(b)(iii) hereof) TNP shall purchase from each of the Banks holding Project Loans of the applicable Class (pro rata according to the aggregate outstanding principal amount of each such Bank's Project Loans of such Class held by such Bank) a portion of such Bank's Project Loans of the applicable Class and each Bank shall sell to TNP (without recourse and without any representation or warranty whatsoever other than as to title and absence of liens) such AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT pro rata portion of such Bank's Project Loans of the applicable Class such that the aggregate principal amount of Project Loans of the applicable Class so purchased is equal to the amount of the proceeds (at the election of TNP, net of any offering or similar transaction costs) from any Subsequent Secured Debentures issued on such Section 4.05 Closing Date. The purchase price for the Project Loans of the applicable Class so purchased by TNP shall be equal to the principal amount thereof. Simultaneously with the sale of each Bank's Project Loans of the applicable Class to TNP, TGC II shall pay to the Agent, for the account of each Bank holding Project Loans of applicable Class, all accrued and unpaid interest on such portion of such Bank's Project Loans of the applicable Class to be sold to TNP plus the aggregate amount (if any) which would have been payable to each Bank holding Project Loans of applicable Class under Section 7.05 hereof had such portion of the Project Loans of the applicable Class then been prepaid rather than purchased. TNP shall pay the aggregate amount of such purchase price at such Section 4.05 Closing to the Agent, for the account of each respective Bank holding Project Loans of the applicable Class, in Dollars in immediately available funds. Effective immediately upon the payment by TNP of such purchase price, the aggregate principal amount of the outstanding Project Loans of the applicable Class so purchased by TNP shall be converted into a loan or loans (with respect to such purchase of Project Loans of the applicable Class from the proceeds of any Subsequent Secured Debentures, in each case, whether one or more, each a "Subsequent Replacement Loan") of equal principal amount. TGC II shall execute and deliver to TNP at such Section 4.05 Closing a promissory note or notes (with respect to the purchase of each Subsequent Replacement Loan, in each case, whether one or more, each a "Subsequent Replacement Note") payable to TNP or its registered assigns in an aggregate principal amount equal to the aggregate principal amount of such Subsequent Replacement AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Loan, as applicable, and, in each case, substantially in the form of Exhibit B to the First Amendment and otherwise duly completed. Any such Subsequent Replacement Notes shall be dated, and shall bear interest from, the Section 4.05 Closing Date on which any such Subsequent Replacement Notes, as applicable, are issued. No Replacement Note Holder shall be entitled to have its Replacement Note subdivided, by exchange for promissory notes of lesser denominations or otherwise, except in connection with a Section 4.05 Closing or in connection with an assignment to TNP of a portion of a Replacement Loan and Replacement Note in conjunction with a release of a Pledged Replacement Note (as defined in the definition of "Replacement Note Holder" in Section 1.01 hereof) expressly contemplated by the related Secured Debenture Indenture. The indebtedness evidenced by any Subsequent Replacement Notes, together with the indebtedness evidenced by the First Replacement Note and by the Project Notes, shall be secured by the Security Documents. Each Bank shall, prior to any transfer of such Bank's Project Note, place on such Project Note a notation to the effect that a portion of the indebtedness evidenced thereby has been transferred to TNP pursuant to this Section 4.05; provided, that, if TNP purchases the entire outstanding principal amount of a Bank's Project Loans and TNP pays to such Bank all interest due and payable on such Project Loans and all other amounts due and payable by TNP and TGC II to such Bank under this Agreement and the other Project Documents, such Bank shall endorse and deliver its Project Note to TNP and, upon endorsement to TNP of all such Project Notes (x) such Project Notes shall automatically, without further action by any Person, become Subsequent Replacement Notes (and the indebtedness evidenced thereby shall automatically, without further action by any Person, become Subsequent Replacement Loans) having an outstanding principal amount equal to the outstanding principal amount of the Project Loans at the time of such purchase and shall automatically, without further action by any AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Person, have the Replacement Note Maturity Date, the interest rate (including without limitation the Post-Default Rate) and all other terms and conditions contemplated by this Agreement to be applicable to a Subsequent Replacement Loan and a Subsequent Replacement Note that do not at such time serve as the basis for the issuance of outstanding Secured Debentures and (y) such Project Notes (and the indebtedness evidenced thereby) as so recharacterized as Subsequent Replacement Notes and Subsequent Replacement Loans shall be available to TNP and TGC II for use in conjunction with a future Section 4.05 Closing (and in connection therewith, such Project Note as so recharacterized as a Subsequent Replacement Note may, at the option of TNP and TGC II, be replaced by a replacement Replacement Note in the form of Exhibit B to the First Amendment). (f) (i) Subject to the provisions of this clause (f), TNP shall have the right to purchase Project Loans of any Class from the Banks at any time or from time to time provided that: (A) TNP shall give the Agent notice of each such purchase which notice shall be irrevocable, shall be effective only if received by the Agent not later than 12:00 noon New York time five Business Days prior to the date of the purchase and shall specify the aggregate principal amount and Class of the Project Loans to be purchased and the date of purchase (which shall be a Business Day) (each such notice, a "TNP Purchase Notice" and each such date of purchase, a "TNP Purchase Date"), (B) TNP shall not be entitled to designate a Scheduled Reduction Date as a TNP Purchase Date and (C) TNP shall satisfy the conditions precedent to such purchase set forth in clause (ii) below. The Agent shall promptly notify the Banks and each Replacement Note Holder of the contents of each TNP Purchase Notice. On each TNP Purchase Date, TNP shall purchase from each of the Banks holding Project Loans of the applicable Class (pro rata according to the aggregate outstanding principal amount of each such Bank's Project Loans of such Class held by such Bank) a portion of such Bank's AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Project Loans of the applicable Class and each Bank shall sell to TNP (without recourse and without any representation or warranty whatsoever other than as to title and absence of liens) such pro rata portion of such Bank's Project Loans of the applicable Class such that the aggregate principal amount of Project Loans of the applicable Class so purchased is equal to the amount of Project Loans of the applicable Class specified for purchase in the TNP Purchase Notice related to such TNP Purchase Date. The purchase price for the Project Loans of the applicable Class so purchased by TNP shall be equal to the principal amount thereof. Simultaneously with the sale of each Bank's Project Loans of the applicable Class to TNP, TGC II shall pay to the Agent, for the account of each Bank holding Project Loans of applicable Class, all accrued and unpaid interest on such portion of such Bank's Project Loans of the applicable Class to be sold to TNP plus the aggregate amount (if any) which would have been payable to each Bank holding Project Loans of applicable Class under Section 7.05 hereof had such portion of the Project Loans of the applicable Class then been prepaid rather than purchased. TNP shall pay the aggregate amount of such purchase price on such TNP Purchase Date to the Agent, for the account of each respective Bank holding Project Loans of the applicable Class, in Dollars in immediately available funds. Effective immediately upon the payment by TNP of such purchase price, the aggregate principal amount of the outstanding Project Loans of the applicable Class so purchased by TNP shall be converted into a loan or loans (with respect to each such purchase of Project Loans of the applicable Class, each a "Temporary Replacement Loan") of equal principal amount. TGC II shall execute and deliver to TNP on such TNP Purchase Date a promissory note or notes (with respect to the purchase of each Temporary Replacement Loan, whether one or more, the "Temporary Replacement Note") payable to TNP or its registered assigns in an aggregate principal amount equal to the aggregate principal amount of AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT such Temporary Replacement Loan and, in each case, substantially in the form of Exhibit B hereto and otherwise duly completed. Each Temporary Replacement Note shall be dated, and shall bear interest from, the TNP Purchase Date on which such Temporary Replacement Note is issued. The indebtedness evidenced by any Temporary Replacement Notes, together with the indebtedness evidenced by the other Replacement Notes and by the Project Notes, shall be secured by the Security Documents. Each Bank shall, prior to any transfer of such Bank's Project Note, place on such Project Note a notation to the effect that a portion of the indebtedness evidenced thereby has been transferred to TNP pursuant to this clause (f); provided, that, if TNP purchases the entire outstanding principal amount of a Bank's Project Loans and TNP pays to such Bank all interest due and payable on such Project Loans and all other amounts due and payable by TNP and TGC II to such Bank under this Agreement and the other Project Documents, such Bank shall endorse and deliver its Project Note to TNP and, upon endorsement to TNP of all such Project Notes (x) such Project Notes shall automatically, without further action by any Person, become Subsequent Replacement Notes (and the indebtedness evidenced thereby shall automatically, without further action by any Person, become Subsequent Replacement Loans) having an outstanding principal amount equal to the outstanding principal amount of the Project Loans at the time of such purchase and shall automatically, without further action by any Person, have the Replacement Note Maturity Date, the interest rate (including without limitation the Post-Default Rate) and all other terms and conditions contemplated by this Agreement to be applicable to a Subsequent Replacement Loan and a Subsequent Replacement Note that do not at such time serve as the basis for the issuance of outstanding Secured Debentures and (y) such Project Notes (and the indebtedness evidenced thereby) as so recharacterized as Subsequent Replacement Notes and Subsequent Replacement Loans shall be available to TNP and TGC II for use in AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT conjunction with a future Section 4.05 Closing (and in connection therewith, such Project Note as so recharacterized as a Subsequent Replacement Note may, at the option of TNP and TGC II, be replaced by a replacement Replacement Note in the form of Exhibit B to the First Amendment). Temporary Replacement Loans and Temporary Replacement Notes shall be held by TNP and may not be assigned in whole or in part, and TNP shall not be entitled to have any Temporary Replacement Note subdivided, by exchange for promissory notes of lesser denominations or otherwise, except in conjunction with a future Section 4.05 Closing in which event the portion of such Temporary Replacement Loans and Temporary Replacement Notes assigned to a Replacement Note Holder or Replacement Note Holders shall be and become Subsequent Replacement Loans and Subsequent Replacement Notes for all purposes under this Agreement. (ii) Prior to or on each TNP Purchase Date: (A) TNP, TGC II, the Agent and, as applicable, the Collateral Agent each shall sign and deliver, in recordable form to the Agent and, as applicable, the Collateral Agent, financing statements under the Uniform Commercial Code as are necessary to protect, preserve and maintain the priority of liens contemplated by the Security Documents and TNP and TGC II shall provide (A) copies of Uniform Commercial Code search reports with respect to each of TGC II and TNP, as "debtor", in each jurisdiction in which such financing statements are to be filed and (B) all other instruments to be recorded or filed or delivered in connection with the purchases of Project Loans to be made on such TNP Purchase Date; (B) TGC II shall deliver to the Agent a Subsequent TGC II Modification and Extension Agreement and, at the sole cost of TNP and AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT TGC II, the Title Company shall have issued to the Agent, a T-38 endorsement (or if a T-38 endorsement is no longer available, such other endorsement as shall have the same scope and purpose as a T-38 endorsement on the First Amendment Effective Date) to the title policy or policies which insure the lien of the TGC II Mortgage securing the Loans outstanding hereunder and evidenced by Project Notes or Replacement Notes on such date, each with respect to such Subsequent TGC II Mortgage Modification and Extension Agreement; (C) At the sole cost of TNP and TGC II, the Title Company shall deliver to the Agent a title information report, showing that good and indefeasible title to the TGC II Mortgage Trust Estate is vested in TGC II and that the TGC II Mortgage constitutes a valid first mortgage lien on the TGC II Mortgage Trust Estate and showing that there are no intervening liens which would adversely affect the priority of the liens securing the Loans, subject only to the Permitted Liens; and (D) TNP or TGC II shall deliver to the Agent such other certificates, documents or other information in connection with the purchases of Project Loans to be made on such TNP Purchase Date as the Agent may reasonably determine are necessary to effect the transactions contemplated on such TNP Purchase Date. (g) (i) Subject to the provisions of this clause (g), TNP shall have the right to cause a purchase by one or more banks or other financial institutions (or an agent on behalf of one or more banks or other financial institutions) designated by TNP (such banks or financial institutions or such agent herein being collectively referred to as the "Designee") of all (but not part) of the outstanding Project Loans from the Banks at any AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT time or from time to time provided that: (A) TNP shall give the Agent notice of each such purchase which notice shall be irrevocable, shall be effective only if received by the Agent not later than 12:00 noon New York time five Business Days prior to the date of the purchase (which shall be a Business Day) (each such notice, a "Designee Purchase Notice" and each such date of purchase, a "Designee Purchase Date"), (B) TNP shall not be entitled to designate a Scheduled Reduction Date as a Designee Purchase Date and (C) TNP shall satisfy the conditions precedent to such purchase set forth in clause (ii) below. The Agent shall promptly notify the Banks and each Replacement Note Holder of the contents of each Designee Purchase Notice. On each Designee Purchase Date, the Designee shall purchase from each of the Banks all of such Bank's Project Loans and each Bank shall sell to the Designee (without recourse and without any representation or warranty whatsoever other than as to title and absence of liens) all of such Bank's Project Loans. The purchase price for the Project Loans so purchased by the Designee shall be equal to the principal amount thereof. Simultaneously with the sale of each Bank's Project Loans to the Designee, TGC II shall pay to the Agent, for the account of each Bank all accrued and unpaid interest on such Bank's Project Loans plus the aggregate amount (if any) which would have been payable to each Bank under Section 7.05 hereof had such Project Loans then been prepaid rather than purchased. The Designee shall pay the aggregate amount of such purchase price on such Designee Purchase Date to the Agent, for the account of the Banks, in Dollars in immediately available funds. Each Bank shall, prior to any transfer of such Bank's Project Note, place on such Project Note a notation to the effect that the indebtedness evidenced thereby has been transferred to the Designee pursuant to this clause (g). (ii) Prior to or on each Designee Purchase Date: AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (A) TNP, TGC II, the Agent and, as applicable, the Collateral Agent each shall sign and deliver, in recordable form to the Agent and, as applicable, the Collateral Agent, financing statements under the Uniform Commercial Code as are necessary to protect, preserve and maintain the priority of the liens contemplated by the Security Documents and TNP and TGC II shall provide (A) copies of Uniform Commercial Code search reports with respect to each of TGC II and TNP, as "debtor", in each jurisdiction in which such financing statements are to be filed and (B) all other instruments to be recorded or filed or delivered in connection with the purchases of Project Loans to be made on such Designee Purchase Date; (B) TGC II shall deliver to the Agent a Subsequent TGC II Modification and Extension Agreement and, at the sole cost of TNP and TGC II, the Title Company shall have issued to the Agent, a T-38 endorsement (or if a T-38 endorsement is no longer available, such other endorsement as shall have the same scope and purpose as a T-38 endorsement on the First Amendment Effective Date) to the title policy or policies which insure the lien of the TGC II Mortgage securing the Loans outstanding hereunder and evidenced by Project Notes or Replacement Notes on such date, each with respect to such Subsequent TGC II Mortgage Modification and Extension Agreement; (C) At the sole cost of TNP and TGC II, the Title Company shall deliver to the Agent a title information report, showing that good and indefeasible title to the TGC II Mortgage Trust Estate is vested in TGC II and that the TGC II Mortgage constitutes a valid first mortgage lien on the TGC II Mortgage Trust Estate and showing that there are no intervening liens which would adversely affect the priority of the liens securing the AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Loans, subject only to the Permitted Liens; and (D) TNP or TGC II shall deliver to the Agent such other certificates, documents or other information in connection with the purchases of Project Loans to be made on such Designee Purchase Date as the Agent may reasonably determine are necessary to effect the transactions contemplated on such Designee Purchase Date. (h) The Agent will keep at its principal office in New York, New York, or such other office as the Agent may designate in writing to the Replacement Note Holders, a register (the "Register") in which the Agent will provide for the registration of Replacement Loans and Replacement Notes and the registration of transfers of Replacement Loans and Replacement Notes. In the event that any Replacement Loan or any Replacement Note is held by TNP or serves as the basis for the issuance of any outstanding Secured Debentures in accordance with Section 4.05 hereof, the applicable Replacement Note Holder shall notify the Agent for notation in the Register of the Permitted Demand Date, the interest rate and the Post-Default Rate applicable to such Replacement Loan or Replacement Note. The Agent may treat the Person in whose name any Replacement Loan or Replacement Note is registered in such Register as the owner thereof for the purpose of receiving payment of the principal of and the premium, if any, and interest on such Replacement Loan or Replacement Note and for all other purposes under this Agreement. The Agent may rely upon the information set forth in the Register for any determination of the Permitted Demand Date, the interest rate and the Post- Default Rate applicable to any Replacement Loan or Replacement Note required under or in connection with this Agreement. (i) If, on or before any date on which TGC II is obligated to make any payment of any AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT principal of or interest under a Replacement Note, no Event of Default (as defined in the Secured Debenture Indenture the lien of which attaches to such Replacement Note) shall have occurred and be continuing and TNP shall have delivered (i) if such Replacement Note is the First Replacement Note, to the First Debenture Trustee pursuant to Section 1119 of the First Secured Debenture Indenture and (ii) if such Replacement Note is a Subsequent Replacement Note, to the applicable Debenture Trustee pursuant to a provision in the applicable Secured Debenture Indenture similar to the provision referred to in subclause (i) of this clause (i), cash to be held as collateral security under the applicable Secured Debenture Indenture that is at least equal in amount to the payment owing on such date by TGC II under such Replacement Note, then TGC II shall not be required to make such payment under such Replacement Note; provided, that, if at any time and for any reason any such payment by TNP is rescinded or otherwise required to be restored by the applicable Debenture Trustee or any holder of the applicable Secured Debentures, whether as a result of bankruptcy or reorganization proceedings or otherwise, immediately upon such rescission or restoration being imposed or required (A) an amount equal to the amount that has been rescinded or is required to be restored shall become immediately due and payable by TGC II under such Replacement Note, and (B) TGC II shall pay to such Replacement Note Holder an amount equal to all reasonable costs and expenses (including, without limitation, attorney's fees and any interest payable by the applicable Debenture Trustee in connection with such rescission or restoration). In the event that any Secured Debenture is paid in full by TNP and, by operation of this clause (i), TGC II is not obligated to make further payments of principal and interest under or with respect to AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT the related Replacement Loan and Replacement Note, (x) the indebtedness of TGC II under this Agreement with respect to such Replacement Loan and Replacement Note shall not be discharged but shall be continued, (y) such Replacement Loan and Replacement Note, shall automatically, without further action by any Person, have the Replacement Note Maturity Date, the interest rate (including without limitation the Post-Default Rate) and all other terms and conditions contemplated by this Agreement to be applicable to a Subsequent Replacement Loan and a Subsequent Replacement Note that do not at such time serve as the basis for the issuance of outstanding Secured Debentures and (z) such Replacement Loan and Replacement Note shall be available to TNP and TGC II for use in conjunction with a future Section 4.05 Closing (and in connection therewith, such Replacement Note may, at the option of TNP and TGC II, be replaced by a replacement Replacement Note in the form of Exhibit B to the First Amendment). Notwithstanding any other provision in this Section 4.05 to the contrary, until the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest due and payable thereon and all other amounts due and payable by TNP and TGC II to the Banks under this Agreement (including, without limitation, all Supplemental Advances) and the other Project Documents, no Section 4.05 Closing, closing contemplated by Section 4.50(f) hereof or closing contemplated by Section 4.05(g) hereof shall occur unless TNP and TGC II shall each have delivered to the Agent such other certificates, documents or other information in connection therewith as the Agent may reasonably determine are necessary to effect the transactions contemplated thereby.". (k) Add Section 4.06 of the Credit Agreement as follows: "SECTION 4.06. New Project Notes. AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (i) On and after the Bond Proceeds Payment Date, the Existing Loans, the New Advances and the Supplemental Advances made by each Bank shall be evidenced by a single promissory note of TGC II substantially in the form of Exhibit A to the First Amendment, dated the Bond Proceeds Payment Date, payable to such Bank in a principal amount equal to the amount of its Aggregate Commitment as originally in effect and otherwise duly completed. (ii) The date, amount, Type, interest rate and duration of Interest Period (if applicable) of each Existing Loan, New Advance (if any) or Supplemental Advance (if any) made by each Bank to TGC II, and each payment made on account of the principal thereof, shall be recorded by such Bank on its books and, prior to any transfer of the New Project Note held by it, endorsed by such Bank on the schedule attached to such New Project Note or any continuation thereof; provided that the failure of such Bank to make any such recordation or endorsement shall not affect the obligations of TGC II to make a payment when due of any amount owing hereunder or under such New Project Note in respect of the Existing Loans, the New Advances (if any) or Supplemental Advances (if any). (iii) No Bank shall be entitled to have its New Project Note subdivided, by exchange for promissory notes of lesser denominations or otherwise, except in connection with a sale, assignment or transfer of all or any portion of such Bank's Aggregate Commitment, Project Loans and New Project Note pursuant to Section 16.01 hereof.". (l) Section 5.01 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "SECTION 5.01. [INTENTIONALLY OMITTED].". (m) Section 5.02 of the Credit Agreement shall be amended as follows: (A) in subsection (b)(i) insert, after the words "TGC II shall repay", the words "or TNP shall AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT purchase in accordance with the terms and conditions of Section 4.05 hereof,"; (B) in subsections (b)(i)(C) insert the word "Existing" before each occurrence of the term "Project Loan"; (C) delete the word "and" at the end of subsection (b)(i)(C) thereof; (D) in subsection (b)(i)(D), substitute the word "each" for the word "the" before the term "Replacement Note" and substitute the word "maturing" for the word "outstanding"; (E) delete the preface of subsection (b)(iii) in its entirety and substitute in its place the following: "If all of the Project Loans under, and as defined in, the Unit 1 Credit Agreement have been paid, prepaid or purchased by TGC or TNP, then on each date upon which TNP receives the proceeds of any Permanent Financing (other than the proceeds from the issuance of the New Debt Securities which have been applied in accordance with Section 8.02(c) hereof and the proceeds from the issuance of the Second Secured Debentures, as defined in the Unit 1 Credit Agreement, as amended by Amendment No. 1 thereto, and the first mortgage bonds issued in connection therewith which have been applied in accordance with Section 2(b)(i) of the First Amendment), TNP or TGC II shall prepay or purchase the Existing Project Loans in an amount equal to (a) 100% (except as provided in subparagraph (C) hereof) of the net proceeds of such Permanent Financing less (b) all amounts prepaid since the date of the previous prepayment under this Section 5.02(b)(iii), except to the extent such proceeds:"; (F) in subsection (b)(iii)(B)(aa) delete the parenthetical expression "(other than the Secured Debentures)" in its entirety; AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (G) delete subsection (b)(iii)(D) in its entirety, substitute a "." for the phrase "; or" at the end of subsection (b)(iii)(C) and insert the word "or" after the ";" at the end of subsection (b)(iii)(B); (H) in subsection (g) add an "s" to the end of the term "Replacement Note Holder"; and (I) in subsection (h) substitute the word "a" for "the" before the term "Replacement Loan" and insert after the term "Replacement Note" the phrase "evidencing such Replacement Loan". (n) Delete Section 5.04 of the Credit Agreement in its entirety and substitute in its place the following: "SECTION 5.04. Pro Rata Treatment. Subject to Section 5.02(a) hereof, each payment or prepayment of principal of Existing Project Loans or Supplemental Advances by TNP or TGC II shall be made for account of the relevant Banks pro rata in accordance with the respective unpaid principal amounts of the Project Loans of such Class held by such Banks. In the event that, by reason of the acceleration thereof or otherwise, the principal amount of any Replacement Loan shall become due and payable at a time when the principal amount of the Project Loans shall be due and payable, each payment of principal of Loans shall be made pro rata among the Secured Parties holding Loans according to the respective unpaid principal amounts of the Loans held by the Secured Parties. Each payment of interest on the Loans shall be made pro rata among the Banks and the Replacement Note Holders according to the respective accrued and unpaid amounts of interest then due and owing to such Persons. Any Replacement Note Holder or any Bank receiving a disproportionate share of any such payment shall, on demand by the Agent, return the same to the Agent, which shall pay the same to any Bank or any Replacement Note Holder which had not received its proportionate share of any such payment.". (o) Section 5.05 of the Credit Agreement shall be amended as follows: AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (A) substitute the word "each" for "the" before the term "Replacement Note Holder" in the first sentence of subsection (a) thereof; and (B) delete subsection (a)(iv) in its entirety and substitute in its place the following: "(iv) Replacement Loan and Replacement Note Rate. Subject to Section 4.05(i) hereof, if such Loan is a Replacement Loan, a rate per annum at all times equal to (A) the rate of interest payable on the Secured Debentures the proceeds of which were used to purchase the Project Loans that were converted into such Replacement Loan and as specified in the Secured Debenture Indenture pursuant to which such Secured Debentures were issued, as in effect on (x) with respect to the First Secured Debenture Indenture, the Extension Date and (y) with respect to any Subsequent Secured Debenture Indenture, the applicable Section 4.05 Closing Date, as the case may be, (B) the rate of interest payable on the Secured Debentures, the proceeds of which were used to refund the Secured Debentures to which such Replacement Loan theretofore related and as specified in the Subsequent Secured Debenture Indenture, pursuant to which such refunding Secured Debentures were issued, as in effect on the applicable Section 4.05 Closing Date or (C) if such Replacement Loan does not serve as the basis for the issuance of any outstanding Secured Debentures, a rate per annum equal to the Prime Rate.". (p) Delete Section 5.10 of the Credit Agreement in its entirety and substitute in its place the following: "SECTION 5.10. [INTENTIONALLY OMITTED].". (q) Section 6.02 of the Credit Agreement shall be amended as follows: AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (A) in the last sentence of subsection (a) add an "s" to the end of the terms "Replacement Note" and "Replacement Note Holder" and insert the word "applicable" before the term "Replacement Note Holders" (as so amended); (B) in the second sentence of subsection (b) add an "s" to the end of the term "Replacement Loan"; and (C) in subsection (c) substitute the word "any" for "the" before both occurrences of the term "Replacement Note" and insert the word "related" before the term "Secured Debentures". (r) Delete Section 6.03 of the Credit Agreement in its entirety and substitute in its place the following: "SECTION 6.03. Sharing of Payments, Etc. If any Bank or any Replacement Note Holder shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Loans made or acquired by it (other than pursuant to Section 7 hereof) in excess of its ratable share of payments on account of the Loans of any Class obtained by all the Banks and all the Replacement Note Holders holding Loans of such Class, such Bank or such Replacement Note Holder shall forthwith purchase from the other Banks and the other Replacement Note Holders such participations in the Loans of such Class held by them as shall be necessary to cause such purchasing Bank or such purchasing Replacement Note Holder to share the excess payment ratably with each of them; provided, that, if all or any portion of such excess payment is thereafter recovered from such purchasing Bank or such purchasing Replacement Note Holder, such purchase from such Bank or such Replacement Note Holder shall be rescinded and such Bank or such Replacement Note Holder shall repay to the purchasing Bank or the purchasing Replacement Note Holder the purchase price to the extent of such recovery together with an amount equal to such Bank's or such Replacement Note Holder's ratable share (according to the proportion of (a) the amount of such Bank's or such Replacement Note Holder's required repayment to (b) the total amount so recovered from the purchasing Bank or the Replacement Note AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Holder) of any interest or other amount paid or payable by the purchasing Bank or the purchasing Replacement Note Holder in respect of the total amount so recovered. TGC II agrees that any Bank or Replacement Note Holder so purchasing a participation from another Bank or Replacement Note Holder pursuant to this Section 6.03 may, to the fullest extent permitted by law, exercise all of its rights of payment (including the right of set-off) with respect to such participation as fully as if such Bank or such Replacement Note Holder were the direct creditor of TGC II in the amount of such participation.". (s) Section 9.11 of the Credit Agreement shall be amended as follows: (A) inserting, immediately preceding the first sentence, the phrase "Prior to the First Amendment Effective Date,"; and (B) inserting the following new sentence at the end of such Section: "TGC II shall use the proceeds of Supplemental Advances solely for working capital and other lawful purposes not prohibited by this Agreement.". (t) Section 9.33(a) of the Credit Agreement shall be amended by deleting the last sentence thereof. (u) Section 10.03 of the Credit Agreement shall be amended by deleting the reference to "Section 9.32(a)" and substituting in its place a reference to "Section 4.05(b)". (v) Section 10.06 of the Credit Agreement shall be amended by deleting the "." and substituting in its place the following: "provided, that TGC II may advance to TNP funds obtained as proceeds of Project Loans.". (w) Section 10.08(e) of the Credit Agreement shall be amended by deleting the phrase "the last sentence of AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Section 9.33(a)" and substituting in its place "Section 4.05". (x) Delete Section 10.09 of the Credit Agreement in its entirety and substitute in its place the following: "SECTION 10.09. TGC II shall not permit the aggregate principal amount of Loans outstanding hereunder to exceed at any time the Collateral Coverage Maximum Amount at such time.". (y) Delete Section 10.13 of the Credit Agreement in its entirety and substitute in its place the following: "SECTION 10.13. TNP shall not permit the aggregate principal amount of Loans outstanding hereunder to exceed at any time the Collateral Coverage Maximum Amount at such time.". (z) Section 10.16 of the Credit Agreement shall be amended by (A) adding an "s" to the end of the term "Secured Debenture Indenture" in clause (d) thereof and (B) deleting the reference to "Section 9.33(a)" and substituting in its place a reference to "Section 4.05(b)". (aa) Delete Section 10.21(b) of the Credit Agreement in its entirety and substitute in its place the following: "(b) TNP will provide the Banks and the Replacement Note Holders, as soon as available and in any event within 60 Business Days after each Quarterly Date, a certificate of an Authorized Officer of TNP showing, in reasonable detail, the calculation of Interest Coverage, Cumulative Common Dividends, Cumulative Net Income Available for Common, Equity Capital and Total Capitalization, and for the period from January 1, 1993 until the provisions of Section 9.33 hereof have terminated, Available Amount (including the components thereof); in each case determined as of such Quarterly Date.". (bb) Delete Section 10.22 of the Credit Agreement in its entirety and substitute in its place the following: AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT "SECTION 10.22. Equity Capital. TNP will not pay or declare any Common Dividend if the ratio of Equity Capital to Total Capitalization, determined from time to time as of the next preceding Quarterly Date, is less than 20%.". (cc) Delete Section 10.23 of the Credit Agreement in its entirety and substitute in its place the following: "SECTION 10.23. Amendment or Modification of Secured Debenture Indentures. Until the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest due and payable thereon and all other amounts due and payable by TNP and TGC II to the Banks under this Agreement (including, without limitation, all Supplemental Advances) and the other Project Documents and so long as any of the First Secured Debentures remain outstanding, without the consent of the Majority Banks (excluding for such purpose the Replacement Note Holder with respect to the affected Secured Debenture Indenture, or supplement thereto, referred to below), neither TNP nor any of its Affiliates may enter into any amendment, modification, supplement or waiver of a Secured Debenture Indenture which shall (1) shorten the stated maturity of the principal of, or any installment of interest on, any Secured Debenture then outstanding, or increase the principal amount thereof or the rate of interest thereon, (2) grant any additional collateral security for any Secured Debenture or (3) have the effect of impairing in any material respect, directly or indirectly, the rights or interests of the Banks or the Replacement Note Holders in the Collateral or under this Agreement or any other Project Document; provided, that nothing in this Section 10.23 shall prohibit (i) the pledge of the First Replacement Note under the First Secured Debenture Indenture as in effect on the Extension Date and (ii) securing Secured Debentures in accordance with Section 4.05 hereof under Subsequent Secured Debenture Indentures (including provisions for substitution of collateral) in each case as in effect on the applicable Section 4.05 Closing Date.". (dd) Section 11 of the Credit Agreement shall be amended by (A) substituting the word "any" for "the" before the AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT term "Secured Debenture Indenture" in subsection (m) thereof and (B) substituting the word "each" for "the" before the term "Replacement Note Holder" in the last sentence of said Section. (ee) Delete Section 11(n) of the Credit Agreement in its entirety and substitute in its place the following: "(n) Except in accordance with the terms and conditions of Section 4.05 hereof, prior to the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest due and payable thereon and all other amounts due and payable by TNP and TGC II to the Banks under this Agreement (including, without limitation, all Supplemental Advances) and the other Project Documents and so long as the First Secured Debentures remain outstanding, TNP shall have, or shall have permitted any of its Affiliates to, prepay, repay or make any other payments (except the payment of interest and the reimbursement of costs and expenses of a Secured Debenture Trustee or holders of Secured Debentures or payments pursuant to indemnification of a Secured Debenture Trustee) or distributions on account of, or the setting apart of money for a sinking fund or other analogous fund for, the purchase, redemption, refund or other acquisition of, any Secured Debentures, but excluding any payments with respect to interest payable thereon; provided, that, so long as TNP shall be complying with the provisions of Section 9.34 hereof in the same manner and at the same time that TNP is complying with the provisions of Section 1009 of the First Secured Debenture Indenture (as in effect on the Extension Date) or any Subsequent Secured Debenture Indenture (in each case, as in effect on the applicable Section 4.05 Closing Date), it shall not be a default if TNP purchases or otherwise acquires First Secured Debentures or Subsequent Secured Debentures, as applicable, after the occurrence of a Change of Control Event pursuant to Section 1009 of the First Secured Debenture Indenture, or such similar provisions of any Subsequent Secured Debenture AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Indenture pursuant to which such Subsequent Secured Debentures were issued.". (ff) Section 12.01 of the Credit Agreement shall be amended by adding at the beginning of the text thereof, prior to the term "TGC II", the following: "Prior to the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest payable thereon and all other amounts due and payable by TNP and TGC II to the Banks under this Agreement (including, without limitation, all Supplemental Advances) and the other Project Documents,". (gg) Section 12.04 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "SECTION 12.04. [INTENTIONALLY OMITTED].". (hh) Section 15.01 of the Credit Agreement shall be amended as follows: (A) in the first sentence substitute the word "each" for "the" before the term "Replacement Note Holder"; (B) in the second sentence substitute the word "any" for "the" before the term "Replacement Note Holder"; (C) in the third sentence delete clause (b) in its entirety and substitute in its place the following: "(b) in the event that any Debenture Trustee shall at any time become the Agent hereunder, its duties and obligations in its capacity as Agent shall be subject to the same qualifications, conditions and limitations as are set forth in (i) with respect to the First Debenture Trustee, Article Six and Sections 904 and 1106 of the First Secured Debenture Indenture with respect to its duties and obligations as the First Debenture Trustee and (ii) with respect to any applicable AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Subsequent Debenture Trustee, provisions in any Subsequent Secured Debenture Indenture similar to the provisions referred to in subclause (i) of this clause (b) with respect to such applicable Debenture Trustee's duties and obligations as Debenture Trustee thereunder, and any such Debenture Trustee shall be under no obligation to take any action as Agent except under circumstances in which it would be required to take action in its capacity as First Debenture Trustee or Subsequent Debenture Trustee, as applicable."; and (D) in the fourth sentence substitute the word "any" for "the" before the first occurrence of the term "Replacement Note Holder" and substitute the words "any other" for "the" before the second occurrence of such term. (ii) Section 15.02 of the Credit Agreement shall be amended as follows: (A) in the second sentence delete the phrase "the Replacement Note Holder" and insert in lieu thereof the phrase "all of the Replacement Note Holders"; and (B) in the third sentence (i) delete the phrase "the Replacement Note Holder shall not" and insert in lieu thereof the phrase "no Replacement Note Holder shall", (ii) substitute the word "such" for "the" before the second and third occurrences of the term "Replacement Note Holder" and (iii) insert the word "applicable" before the term "Secured Debentures". (jj) Section 15.03 of the Credit Agreement shall be amended as follows: (A) substitute the word "a" for "the" before the first occurrence of the term "Replacement Note Holder"; and (B) delete the proviso in the last sentence in its entirety and substitute in its place the AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT following: "provided, that, unless and until the Agent shall have received such direction, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interest of the Secured Parties.". (kk) Section 15.04 of the Credit Agreement shall be amended by substituting the word "any" for "the" before the term "Replacement Note Holder". (ll) Section 15.05 of the Credit Agreement shall be amended as follows: (A) substitute the word "each" for "the" before the first occurrence of the term "Replacement Note Holder"; (B) in the first proviso, delete the phrase "no Bank or the Replacement Note Holder" and insert in lieu thereof the phrase "neither any Bank nor any Replacement Note Holder"; (C) delete clauses (x) and (y) of the second proviso in their entirety and substitute in their place the following: "(x) so long as any Debenture Trustee shall be a Replacement Note Holder (whether as the pledgee of a Replacement Note or as the legal and beneficial owner thereof following a foreclosure or other exercise of remedies by such Debenture Trustee with respect thereto), the obligations of such Replacement Note Holder under this Section 15.05 shall be limited to, and solely payable out of, amounts paid by TNP and/or TGC II and/or the holders of the applicable Secured Debentures to such Debenture Trustee under this Agreement or any other Project Document that such Debenture Trustee shall not have theretofore applied pursuant to the applicable Secured Debenture Indenture for any purpose other than the payment of amounts owing under this clause (x), and AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (y) in the case of any Replacement Note Holder (other than a Debenture Trustee in its capacity as trustee) acquiring a Replacement Note upon a foreclosure or other exercise of remedies by a Debenture Trustee with respect thereto, the obligations of such Replacement Note Holder under this Section 15.05 shall be limited to obligations arising from and after the date on which it shall have acquired such Replacement Note."; and (D) in the last sentence, add an "s" to the end of the term "Replacement Note Holder". (mm) Section 15.06 of the Credit Agreement shall be amended by (A) substituting the word "each" for "the" before the first occurrence of the term "Replacement Note Holder" and (B) substituting the word "such" for "the" before the second occurrence of such term. (nn) Section 15.07 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "SECTION 15.07. Non-Reliance on Agent and Other Banks and Other Replacement Note Holders. Each Bank and TNP, as the initial Replacement Note Holder of each Replacement Note, represents that it has, independently and without reliance on the Agent or any other Bank or any other Replacement Note Holder, and based on such documents and information as it has deemed appropriate, made its own appraisal of the financial condition and affairs of TNP and TGC II and decision to enter into this Agreement, and agrees that it will, independently and without reliance upon the Agent or any other Bank or any other Replacement Note Holder, and based on such documents and information as it shall deem appropriate at the time, continue to make its own appraisals and decisions in taking or not taking action under this Agreement. Neither the Agent nor any Bank nor any Replacement Note Holder shall be required to keep informed as to the performance or observance by TNP or TGC II under this Agreement or any other document referred to or provided for herein or to make inquiry of, or to inspect the properties or books of, TNP or TGC II. Except for notices, reports and other documents and information expressly required to be AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT furnished to the Banks and the Replacement Note Holders by the Agent hereunder, neither the Agent nor any Bank nor any Replacement Note Holder shall have any duty or responsibility to provide any Bank or any Replacement Note Holder with any credit or other information concerning TNP and TGC II, or any Affiliate of either of them, which may come into the possession of the Agent or such Bank or such Replacement Note Holder or any of its or their affiliates.". (oo) Section 15.08 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "SECTION 15.08. Resignation or Removal of Agent. Subject to the appointment and acceptance of a successor Agent as provided below, the Agent may resign at any time by giving notice thereof to the Banks and the Replacement Note Holders, TNP and TGC II, and the Agent may be removed at any time with or without cause by the Majority Banks. Upon any such resignation or removal, the Majority Banks shall have the right to appoint a successor Agent, which Agent shall be reasonably acceptable to TNP and TGC II (unless an Event of Default has occurred and is continuing). If no successor Agent shall have been appointed by the Majority Banks and shall have accepted such appointment within 30 days after the retiring Agent's giving of notice of resignation or the Majority Banks' removal of the retiring Agent, then the retiring Agent may, on behalf of the Banks and the Replacement Note Holders, appoint a successor Agent, which shall be either a bank with an office (or an affiliate with an office) in New York, New York, having a combined capital and surplus of not less than U.S. $500,000,000 and which shall be reasonably acceptable to TNP. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Section 15 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Notwithstanding any other provision in this Agreement to the contrary (i) upon the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest due and payable thereon and all other amounts due and payable by TNP and TGC II to the Banks under this Agreement (including, without limitation, all Supplemental Advances) and the other Project Documents, Chase shall resign as Agent hereunder at which time, the Debenture Trustee for the earliest maturing Secured Debentures then outstanding (if any), or its designee, (a "Replacement Agent") automatically shall be appointed as successor Agent effective upon the acceptance of such appointment by such Replacement Agent and (ii) upon the payment in full of the principal of (and premium, if any, on) the Secured Debentures for which a Replacement Agent is Debenture Trustee, all interest thereon and all other amounts due and payable by TNP and TGC II pursuant to the applicable Secured Debenture Indenture, such Replacement Agent shall resign as Agent hereunder at which time, the Debenture Trustee for the earliest maturing Secured Debentures then outstanding (if any), or its designee, (also a "Replacement Agent") automatically shall be appointed as successor Agent effective upon the acceptance of such appointment by such Replacement Agent. Until the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest due and payable thereon and all other amounts due and payable by TNP and TGC II to the Banks under this Agreement (including, without limitation, all Supplemental Advances) and the other Project Documents, the Replacement Note Holders shall not be considered in the determination of "Majority Banks" for purposes of this Section 15.08. Notwithstanding any provision herein or in any Secured Debenture Indenture to the contrary, in the event a Debenture Trustee becomes Agent hereunder, it shall promptly upon the request of TNP and TGC II from time to time execute releases of liens in accordance with the Facility Purchase Agreement; provided, that, any such release shall contain a provision to the effect that such release is made in its capacity as Agent and Collateral Agent, if applicable, pursuant to the Facility Purchase Agreement AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT but without warranty by, or recourse to, such Debenture Trustee either in its capacity as trustee or individually.". (pp) Section 15.09 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "SECTION 15.09. Authorization. The Agent is hereby authorized by the Banks (so long as any Project Loans are outstanding), and the Replacement Note Holders (each by its acceptance of the pledge of the applicable Replacement Note), to execute, deliver and perform, each of the Project Documents to which the Agent is or is intended to be a party and each Bank (so long as any Project Loans are outstanding), and each Replacement Note Holder (each by its acceptance of the pledge of the applicable Replacement Note), agrees to be bound by all of the agreements of the Agent contained in the Project Documents.". (qq) Section 16.01 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "SECTION 16.01. Participation and Assignment. Each Bank and each Replacement Note Holder may sell, assign or transfer all or any portion of its Loans or Notes to any other Person provided that no Bank shall sell, assign or transfer all or any portion of its Loans or Notes to Prospect. Each Bank and each Replacement Note Holder shall pay to the Agent (for its own account) a non-refundable assignment fee of $5,000 at the time of each permitted sale, assignment or transfer made by such Bank or such Replacement Note Holder. If any Supplemental Advance Bank sells, assigns or transfers all or any portion of its Project Loans, the purchaser, assignee or transferee thereof shall assume all of the obligations (including, without limitation, the obligations set forth in Section 17.21 hereof) of such Supplemental Advance Bank. Nothing herein provided shall prevent any Bank or any Replacement Note Holder from selling at any time a participation in its Loans, any fees payable to it hereunder or any other rights hereunder (the purchaser of any such participation being hereinafter sometimes referred to as a "Participant"); provided, that, AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (except as provided in Section 16.02 hereof): (a) no such sale or participation shall alter such Bank's or such Replacement Note Holder's obligations hereunder and (b) any agreement pursuant to which any Bank or any Replacement Note Holder may grant any such participation shall provide that such Bank or such Replacement Note Holder shall retain the sole right and responsibility and exercise the rights of such Bank or such Replacement Note Holder, and enforce the obligations of TNP or TGC II relating to the Loans, the fees payable hereunder and any other right of such Bank or such Replacement Note Holder, including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement or any other Project Document and the right to take action to have the Loans declared due and payable. Except as provided in Section 16.02 hereof, no Participant shall have any rights under this Agreement or in respect of a Bank's or a Replacement Note Holder's Loans, fees payable to it hereunder or any other rights hereunder other than to receive payments in respect of such Participant's participation from such Bank or such Replacement Note Holder. Notwithstanding the foregoing, a Debenture Trustee, in its capacity as pledgee of a Replacement Note, shall have no right to sell, assign or otherwise transfer any participation in, all or any portion of the Replacement Loan evidenced by such Replacement Note or such Replacement Note to any Person except TNP in accordance with the terms of the Secured Debenture Indenture pursuant to which such Debenture Trustee is acting as trustee unless a default shall have occurred and be continuing under such Secured Debenture Indenture. TNP shall have no right to sell, assign or otherwise transfer all or any portion of the Replacement Loans or the Replacement Notes except under a Secured Debenture Indenture, provided, that such prohibition shall not apply to the Debenture Trustee under such Secured Debenture Indenture or any permitted assignee or transferee thereof.". (rr) Section 16.02 of the Credit Agreement shall be amended by substituting the word "a" for "the" before the term "Replacement Note Holder". AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (ss) Section 17.03 of the Credit Agreement shall be amended by (A) inserting the word "a" before the first occurrence of the term "Replacement Note Holder", (B) inserting the word "applicable" before the phrase "instrument of adoption" and (C) deleting the term ""Replacement Note Holder"" and inserting in lieu thereof the term ""Replacement Note Holders"". (tt) Section 17.04 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "SECTION 17.04. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of TNP, TGC II, the Secured Parties and their respective successors and permitted assigns (including each Debenture Trustee, as the prospective pledgee or pledgee of a Replacement Note), except that neither TGC II nor TNP (except as contemplated in the Project Documents) may assign or otherwise transfer all or any part of its rights or obligations hereunder (other than its rights in respect of the Replacement Loans and the Replacement Notes as permitted hereunder) without the prior written consent of each Secured Party. The Agent and each of the Banks (so long as any Project Loans are outstanding) consents to the pledge of the Replacement Notes to the applicable Debenture Trustees.". (uu) Section 17.08 of the Credit Agreement shall be amended as follows: (A) adding an "s" to the end of the terms "Replacement Note Maturity Date" and "Replacement Note Holder" in subsection (a) thereof; and (B) in the last paragraph thereof: (1) inserting "(1)" immediately after the phrase "Notwithstanding the above,"; (2) adding an "s" to the end of both occurrences of the term "Replacement Note Holder"; (3) in subclause (v), deleting the phrase "provided that such change does not result" AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT and inserting in lieu thereof the phrase "provided that, if such change would result"; (4) at the end of subclause (v), deleting the term "the Replacement Loans" and substituting in lieu thereof the phrase "any Replacement Loan, then the consent of the Replacement Note Holder in respect of such Replacement Loans shall be required"; and (5) immediately before the "." inserting the following: "and (2) until the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest payable thereon and all other amounts due and payable by TNP and TGC II to the Banks under this Agreement (including, without limitation, all Supplemental Advances) and the other Project Documents (and notwithstanding whether the Total Supplemental Advance Commitments, the Available Supplemental Advance Commitment or the any portion of either thereof is then available to TGC II hereunder) Banks holding at least 66-2/3% of the outstanding principal amount of the Project Loans, or the Agent acting with the consent of such Banks, shall have consented in writing to any amendment, supplement, modification or waiver of Section 8 of this Agreement, or any provisions of this Agreement or any other instrument, document or agreement, directly or indirectly referred to in or ancillary to, Section 8 of this Agreement, that could have an adverse effect on the interests of the Banks, the value of the security provided to the Agent, as agent for the Banks and the other Secured Parties, under the Security Documents or the ability of TNP or TGC II to perform its obligations under this Agreement or any of the other Project Documents". AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (vv) Section 17.16 of the Credit Agreement shall be amended by substituting the word "each" for "the" before the term "Replacement Note Holder". (ww) Section 17.18 of the Credit Agreement shall be amended by (A) substituting the word "each" for "the" before the first occurrence of the term "Replacement Note Holder", (B) substituting the word "such" for "the" before the second and third occurrences of the term "Replacement Note Holder", (C) inserting the words "any of" before the fourth occurrence of the term "the Replacement Note Holder" and adding an "s" to the end of such occurrence of such term, (D) substituting the word "any" for "the" before the fifth and seventh occurrences of the term "Replacement Note Holder" and (E) adding an "s" to the end of the sixth occurrence of the term "Replacement Note Holder". (xx) Section 17.20 of the Credit Agreement shall be redesignated as "SECTION 17.23", and new Sections 17.20, 17.21 and 17.22 shall be inserted as follows: "SECTION 17.20. Further Releases and Consents. (a) Notwithstanding any provisions to the contrary in this Agreement or in any other Project Document, each of the Secured Parties hereunder other than the Replacement Note Holder holding the First Replacement Note hereby consents and each of the future Replacement Note Holders (each by acceptance of the pledge of the applicable Replacement Note) is deemed to have consented to the transfer by TNP of up to six ten- acre tracts of real property located in the Site after such time as (i) there has been payment, prepayment or purchase in full of the Project Loans evidenced by the New Project Notes outstanding, all interest due and payable thereon and all other amounts due and payable by TNP and TGC II to the Banks under this Agreement and the other Project Documents and (ii) no First Secured Debentures and no Second Secured Debentures, as defined in the Unit 1 Credit Agreement, as amended by Amendment No. 1 thereto, remain outstanding. AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (b) As a condition precedent to each transfer under this Section 17.20, TNP, TGC and TGC II each shall deliver to the Agent a certificate signed by an Authorized Officer of TNP, TGC or TGC II, as applicable, which certificate represents and warrants that (i) such transfer will not materially adversely affect TNP, TGC or TGC II's financial condition or ability to perform their respective obligations under this Agreement or any other Project Document and, except as contemplated by the Ten Acre Releases, has not and will not adversely affect the Collateral and (ii) the ten-acre tract(s) to be conveyed are not necessary to the use or operation of Unit 1 or Unit 2, and TNP's transfers of said ten-acre tract(s) and the resulting loss of access to and across and the loss of the use of said ten-acre tract(s) would neither adversely affect or interfere with the use or operation of Unit 1 or Unit 2 or the value of either thereof nor impair commercial acceptability of the security granted to the Secured Parties pursuant to the Security Documents. (c) In connection with each transfer permitted by Section 17.20 (a) hereof and subject to the terms and conditions of this Section 17.20, each Secured Party hereby consents to the execution and delivery by the Agent, the Collateral Agent and, if required, the Mortgage Trustee, of one or more partial releases of liens (collectively, the "Ten Acre Releases") to effect the releases hereinabove described in this Section 17.20. (d) The consents contained in this Section 17.20 shall be effective only in the specific instances and for the specific purposes for which they are given and shall not be deemed to be a waiver of any past or a consent to any future action, other event or condition in connection with this Agreement. SECTION 17.21. Supplemental Advance Sharing Provisions. (a) If at such time as any of the events set forth in Section 11(e) or Section 11(f) hereof shall occur (a "Subject Date"), any Supplemental Advance AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Bank's percentage of the aggregate principal amount of outstanding Project Loans is less than such Supplemental Advance Bank's percentage of the aggregate principal amount of the Project Loans outstanding on the Bond Proceeds Payment Date after giving effect to the transactions contemplated to be effected on such date by this Agreement (as adjusted by virtue of sales, assignments and transfers of all or any portion of its Project Loans in accordance with Section 16.01 hereof and except for any amount received by such Supplemental Advance Bank in accordance with Section 7.01 hereof), such Supplemental Advance Bank shall promptly purchase from Prospect participations in (or, if and to the extent specified by Prospect, direct interests in) the Project Loans owing to Prospect in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that (except for any amounts received by a Bank in accordance with Section 7.01 hereof) each Bank's percentage of the aggregate principal amount of Project Loans outstanding on such Subject Date shall be equal to such Bank's percentage of the aggregate principal amount of Project Loans outstanding on the Bond Proceeds Payment Date after giving effect to the transactions contemplated on such date (as so adjusted); provided that if any Supplemental Advance Bank sells, assigns or transfers all or any portion of its Project Loans in accordance with Section 16.01 hereof, the purchaser, assignee or transferee of such Project Loans shall (unless otherwise expressed in the relevant instrument of sale, assignment or transfer) be subject to the provisions of this Section 17.21. (b) TGC II and TNP agree that, notwithstanding the provisions of Section 16.01 hereof, any Supplemental Advance Bank so purchasing such a participation (or direct interest) may exercise all rights of set-off, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Supplemental Advance Bank were a direct holder of Project Loans owing to such Supplemental Advance Bank in the amount of such participation. AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (c) If, under any applicable bankruptcy, insolvency or other similar law, any Supplemental Advance Bank receives a secured claim in lieu of a set-off to which this Section 17.21 applies, such Supplemental Advance Bank shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of Prospect to share in the benefits of any recovery on such secured claim. SECTION 17.22. New Title Insurance Policy. On the Bond Proceeds Payment Date, and at the sole cost of TNP and TGC II, TNP and TGC II shall furnish to the Agent (A) a policy or policies of title insurance, together with evidence of the payment of all premiums due thereon and expenses payable in connection therewith and together with such reinsurance on such forms and in such amounts as the Banks may require, on forms of and issued by the Title Company, in form and substance satisfactory to the Banks, (x) insuring the Agent for the benefit of the Banks in the amount of $147,750,000 that good and indefeasible title to the Site is vested in TGC II and the TGC II Mortgage constitutes a valid first mortgage lien on the TGC II Mortgage Trust Estate subject only to Permitted Liens, (y) providing full coverage against all mechanics' and materialmen's liens and (z) providing a T-35 revolving credit endorsement and a T-33 adjustable mortgage loan endorsement and (B) a title information report in form and substance satisfactory to and approved by the Agent, showing good and indefeasible title to the TGC II Mortgage Trust Estate is vested in TGC II and that the TGC II Mortgage constitutes a valid first mortgage lien on the TGC II Mortgage Trust Estate subject only to Permitted Liens.". SECTION 4.02. Supplemental Advance Facility. SECTION 4.02A. Conforming changes to Credit Agreement. (a) Section 1.01 of the Credit Agreement shall be amended as follows: AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT (i) Delete the term "Proportionate Share" and its definition in its entirety; and (ii) Insert the following new terms and their definitions in the appropriate alphabetical order: ""Available Supplemental Advance Commitment" shall mean (a) prior to the date that the Section 3 Effective Date occurs, as of any date of determination after the Bond Proceeds Payment Date and on or before the Final Maturity Date, the sum of (A) the aggregate principal amount of Existing Project Loans prepaid pursuant to Section 5.02(a) hereof after the Bond Proceeds Payment Date minus (B) the aggregate principal amount of Supplemental Advances outstanding on the date of determination and (b) on and after the date that the Section 3 Effective Date occurs (i) as of any date of determination after the First Amendment Effective Date and on or before the First Scheduled Reduction Date, the sum of (A) the aggregate principal amount of Existing Project Loans prepaid pursuant to Section 5.02(a) hereof after the Bond Proceeds Payment Date minus (B) the aggregate principal amount of Supplemental Advances outstanding on such date of determination and (ii) as of any date of determination after the First Scheduled Reduction Date and before the Supplemental Advance Commitment Termination Date, the sum of (A) the aggregate principal amount of Existing Project Loans prepaid pursuant to Section 5.02(a) hereof after the immediately preceding Scheduled Reduction Date plus (B) the excess (if any) of (1) the applicable Carryforward Amount (if any) minus (2) the aggregate principal amount of Supplemental Advances outstanding on such date of determination. Anything in the foregoing to the contrary notwithstanding in the event that the Available Supplemental Advance Commitment as computed in the foregoing sentence would on any date of determination exceed the aggregate amount of the Total Supplemental Advance Commitments, the Available Supplemental Advance Commitment shall be deemed to equal the aggregate amount of the Total AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Supplemental Advance Commitments on such date of determination. "Carryforward Amount" shall mean (i) with respect to the period commencing on the First Scheduled Reduction Date and ending on the Second Scheduled Reduction Date, the excess (if any) of (a) Period 1 Section 5.02(a) Prepayments over (b) the excess (if any) of (1) $35,369,507.58 over (2) Period 1 Supplemental Advance Bank Purchases (the "First Carryforward Amount"); (ii) with respect to the period commencing on the Second Scheduled Reduction Date and ending on the Third Scheduled Reduction Date, the excess (if any) of (a) the sum of (1) the First Carryforward Amount plus (2) Period 2 Section 5.02(a) Prepayments over (b) the excess (if any) of (1) $70,739,015.16 over (2) Period 2 Supplemental Advance Bank Purchases (the "Second Carryforward Amount"); and (iii) with respect to the period commencing on the Third Scheduled Reduction Date and ending on the Final Maturity Date, the excess (if any) of (a) the sum of (1) the Second Carryforward Amount plus (2) Period 3 Section 5.02(a) Prepayments over (b) the excess (if any) of $106,108,522.74 over (3) Period 3 Supplemental Advance Bank Purchases. "Proportionate Share" shall mean, with respect to each Supplemental Advance Bank, the percentage set out under the caption "Proportionate Share" opposite such Supplemental Advance Bank's name on the signature pages of the First Amendment. "Prospect" shall mean Prospect Street Senior Portfolio, L.P. "Supplemental Advance Banks" shall mean (a) on the Bond Proceeds Payment Date, the Banks having Total Supplemental Advance Commitments on the signature pages of the First Amendment and (b) thereafter, the Banks from time to time holding Supplemental Advances and Total Supplemental Advance Commitments after giving effect to any AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT sales, assignments or transfers thereof in accordance with Section 4.05(g) or 16.01 hereof. "Supplemental Advance Commitment Termination Date" shall mean the Business Day preceding the Final Maturity Date. "Supplemental Advances" shall have the meaning ascribed to such term in Section 4.02(a) hereof. "Total Supplemental Advance Commitment" shall mean, for each Supplemental Advance Bank, the obligation of such Supplemental Advance Bank to make Supplemental Advances in an aggregate amount at any one time outstanding up to but not exceeding the amount set opposite the name of such Supplemental Advance Bank on the signature pages of the First Amendment under the caption "Total Supplemental Advance Commitment" (as the same may be reduced from time to time pursuant to Section 4.02(b) hereof). The original aggregate amount of the Total Supplemental Advance Commitments is $141,478,030.31.". (b) Section 5.02(a) of the Credit Agreement shall be deleted in its entirety and replaced with the following: "(a) Prepayments. (i) TGC II may, subject to Section 7.05 hereof and subject to the prior payment in full of all interest on, and principal of (i) the "Project Loans" under and as defined in the Unit 1 Credit Agreement and (ii) the Supplemental Advances then outstanding, prepay the Existing Project Loans held by the Supplemental Advance Banks in whole or in part, without premium (except as provided in Section 9.34 hereof) or penalty, upon at least three Business Days' prior notice by TGC II to the Agent in the case of Eurodollar Rate Loans, at least two Business Days' prior notice to the Agent in the case of CD Rate Loans and at least one Business Day's prior notice to the Agent in the case of Prime Rate Loans (in each case, each such notice to the Agent to be irrevocable), specifying the date and amount of such prepayment and AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT whether the prepayment is of Eurodollar Rate Loans, Prime Rate Loans or CD Rate Loans or a combination thereof. If such notice is given, TGC II shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Partial prepayments shall be in an aggregate principal amount of at least $1,000,000 or an integral multiple of $500,000 in excess thereof. Any prepayments of Existing Project Loans made pursuant to this Section 5.02(a) shall be made pro rata among the Supplemental Advance Banks according to their Proportionate Share. Upon the payment, prepayment or purchase in full of the Project Loans outstanding on the First Amendment Effective Date, all interest due and payable thereon and any other amounts due and payable by TNP and TGC II to the Banks under this Agreement (including, without limitation, all Supplemental Advances) and the other Project Documents, and subject to the terms and conditions of Section 4.05 hereof, TNP and TGC II may prepay or otherwise reduce or cancel the Replacement Loans in accordance with the terms and conditions of the applicable Secured Debenture Indenture.". (c) Section 5.02(b)(i)(B) of the Credit Agreement shall be deleted in its entirety and replaced with the following: "(B) on the Second Scheduled Reduction Date, an amount equal to the sum of (1) the excess of (x) 50% of the sum of (I) the aggregate outstanding principal amount of Project Loans (other than Supplemental Advances) of the Supplemental Advance Banks on such date plus (II) the Supplemental Advance Banks' ratable share (computed on the basis of Existing Project Loans outstanding on the Bond Proceeds Payment Date) of $75,750,000 plus (III) the aggregate principal amount of Project Loans (other than Supplemental Advances) prepaid after the Bond Proceeds Payment Date and before the Second Scheduled Reduction Date over (y) the sum of (I) the Supplemental Advance Banks' ratable share (computed on the basis of Existing Project Loans outstanding on the Bond Proceeds Payment Date) of $75,750,000 plus (II) the aggregate principal amount of Project Loans (other than Supplemental Advances) AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT prepaid after the Bond Proceeds Payment Date and before the Second Scheduled Reduction Date plus (2) the excess of (x) 50% of the sum of (I) the aggregate outstanding principal amount of Project Loans of Prospect on such date plus (II) Prospect's ratable share (computed on the basis of Existing Project Loans outstanding on the Bond Proceeds Payment Date) of $75,750,000 plus (III) the aggregate principal amount of Prospect's Project Loans prepaid after the Bond Proceeds Payment Date and before the Second Scheduled Reduction Date over (y) the sum of (I) Prospect's ratable share (computed on the basis of Existing Project Loans outstanding on the Bond Proceeds Payment Date) of $75,750,000 plus (II) the aggregate principal amount of Prospect's Project Loans prepaid after the Bond Proceeds Payment Date and before the Second Scheduled Reduction Date.". SECTION 4.02B. Supplemental Advances. (a) Section 4.02 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "SECTION 4.02. Total Supplemental Advance Commitments, Available Supplemental Advance Commitment and Supplemental Advances. (a) Supplemental Advances. Each Supplemental Advance Bank severally agrees, on the terms and conditions of this Agreement, to make loans to TGC II in Dollars during the period from and including the Bond Proceeds Payment Date to but not including the Supplemental Advance Commitment Termination Date in an aggregate principal amount at any one time outstanding up to but not exceeding the amount of such Supplemental Advance Bank's Proportionate Share of the Available Supplemental Advance Commitment as in effect from time to time (such loans being herein called "Supplemental Advances"); provided that no additional Supplemental Advances shall be made on, and TGC II hereby agrees not to request any borrowings of Supplemental Advances on, a Scheduled Reduction Date. Subject to the terms and conditions of this Agreement, during such period TGC II may borrow, repay and reborrow up to the amount of the Available Supplemental Advance Commitment by means of AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Prime Rate Loans, CD Rate Loans and Eurodollar Rate Loans and may Convert Supplemental Advances of one Type into Supplemental Advances of another Type (as provided in Section 4.04 hereof) or continue Supplemental Advances of one Type as Supplemental Advances of the same Type (as provided in Section 4.04 hereof); provided that no more than six separate Interest Periods in respect of CD Rate Loans and Eurodollar Rate Loans from each Supplemental Advance Bank may be outstanding at any one time. TGC II shall give the Agent (which shall promptly notify the Supplemental Advance Banks) notice of each borrowing hereunder as provided in Section 6.01 hereof. TGC II hereby agrees to repay the principal of, and to pay interest on, the Supplemental Advances as set forth in this Agreement. TGC II hereby promises to pay to the Agent for account of each Supplemental Advance Bank the entire outstanding principal amount of such Supplemental Advance Bank's Supplemental Advances, and each Supplemental Advance shall mature, on the Final Maturity Date. The Supplemental Advances made by each Supplemental Advance Bank shall be evidenced by the New Project Note of such Supplemental Advance Bank. (b) Changes of Total Supplemental Advance Commitments. (i) The aggregate amount of the Total Supplemental Advance Commitments shall be automatically reduced to zero on the Supplemental Advance Commitment Termination Date. (ii) In the event that the Section 3 Effective Date does not occur, the aggregate amount of the Total Supplemental Advance Commitments shall be automatically reduced on the Second Scheduled Reduction Date by an amount equal to the amount of the prepayment referred to in Section 5.02(b)(i)(B)(1) and shall be automatically reduced to zero on the Final Maturity Date. (iii) The aggregate amount of the Total Supplemental Advance Commitments shall be automatically reduced on each Scheduled Reduction Date set forth in column (A) below to the amount (subject to reduction AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT pursuant to subclause (iii) below) set forth in column (B) below opposite such Scheduled Reduction Date: (A) (B) Total Supplemental Advance Commitments Reduced to the Following Scheduled Reduction Date: Amounts ($): First Scheduled Reduction Date $106,108,522.73 Second Schedule Reduction Date $ 70,739,015.15 Third Scheduled Reduction Date $ 35,369,507.57 Final Maturity Date $ -0- (iv) TGC II shall have the right at any time or from time to time (A) so long as no Supplemental Advances are outstanding, to terminate the Total Supplemental Advance Commitments and (B) to reduce the aggregate unused amount of the Total Supplemental Advance Commitments; provided that TGC II shall give notice of each such termination or reduction as provided in, and comply with the terms and conditions of, Section 6.01 hereof. (v) The Total Supplemental Advance Commitments once terminated or reduced may not be reinstated. (c) Available Supplemental Advance Commitment Fee. TGC II shall pay to the Agent for account of each Supplemental Advance Bank a commitment fee on the daily average unused amount of such Supplemental Advance Bank's Proportionate Share of the Available Supplemental Advance Commitment, for the period from and including the Bond Proceeds Payment Date to but not including the earlier of the date the Total Supplemental Advance Commitments are terminated and the Supplemental Advance Commitment Termination Date, at a rate per annum equal to 1/4 of 1%. Accrued commitment fee shall be payable on each Quarterly Date and on the earlier of the date the Total Supplemental Advance AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Commitments are terminated and the Supplemental Advance Commitment Termination Date. (d) Prepayments of Supplemental Advances. (i) TGC II may, subject to Section 7.05 hereof, prepay the Supplemental Advances in whole or in part, without premium (except as provided in Section 9.34 hereof) or penalty, upon at least three Business Days' prior notice by TGC II to the Agent in the case of Eurodollar Rate Loans, at least two Business Days' prior notice to the Agent in the case of CD Rate Loans and at least one Business Day's prior notice to the Agent in the case of Prime Rate Loans (in each case, each such notice to the Agent to be irrevocable), specifying the date and amount of such prepayment and whether the prepayment is of Eurodollar Rate Loans, Prime Rate Loans or CD Rate Loans or a combination thereof. If such notice is given, TGC II shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Partial prepayments shall be in an aggregate principal amount of at least $1,000,000 or an integral multiple of $500,000 in excess thereof. Until the Supplemental Advance Commitment Termination Date, from time to time TGC II shall prepay, or TNP shall purchase in accordance with the terms and conditions of Section 4.05 hereof, the Supplemental Advances in such principal amounts and on such dates as shall be necessary so that (x) the aggregate amount outstanding principal amount of the Supplemental Advances shall at no time exceed the aggregate amount of the Total Supplemental Advance Commitments and (y) the aggregate principal amount of Loans outstanding hereunder shall not exceed the Collateral Coverage Maximum Amount at such time.". (b) Section 6.01 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "SECTION 6.01. Making the Supplemental Advances. (a) Each termination or reduction of the Total Supplemental Advance Commitments and each borrowing of Supplemental Advances shall be made upon notice to the Agent given by TGC II. Each notice of borrowing of AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Supplemental Advances shall be given not later than 11:00 a.m. (New York City time) one Business Day (with respect to each Prime Rate Loan), two Business Days (with respect to each CD Rate Loan) and three Business Days (with respect to each Eurodollar Rate Loan) prior to the date of the proposed borrowing of Supplemental Advances, and the Agent shall give to each Supplemental Advance Bank prompt notice thereof and of each other notice received from TGC II hereunder. Each notice of termination or reduction of Total Supplemental Advance Commitments shall be given to the Agent not later than five Business Days prior to the proposed termination or reduction and such notice shall specify the amount of Total Supplemental Advance Commitments to be terminated or reduced (which amount shall be $1,000,000 or an integral multiple of $500,000 in excess thereof). Each such notice of a borrowing (a "Notice of Borrowing") shall be in the form of Exhibit O hereto, may be delivered by telex, telecopy or cable, in any case confirmed immediately in writing, shall specify therein (i) the date of such borrowing, (ii) the Type of Supplemental Advances comprising such borrowing, (iii) the aggregate amount of such borrowing (which shall be $1,000,000 or an integral multiple of $500,000 in excess thereof), and (iv) in the case of a borrowing comprised of Eurodollar Rate Loans or CD Rate Loans, the initial Interest Period for each such Loan, and shall be otherwise duly completed. In the case of a proposed borrowing comprised of Eurodollar Rate Loans or CD Rate Loans, the Agent shall promptly notify each Supplemental Advance Bank of the applicable interest rate pursuant to Section 5.05 hereof. Each Supplemental Advance Bank shall, before 11:00 a.m. (New York City time) on the date of such borrowing, make available for the account of its Applicable Lending Office to the Agent at its Principal Office, in same day funds, such Supplemental Advance Bank's Proportionate Share of such borrowing. After the Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Sections 8.03 and 8.04 hereof, the Agent will make such funds available to TGC II, by depositing the proceeds thereof, in immediately available funds, in the TGC II Receipt Account. For purposes of determining whether the applicable conditions set forth in Sections 8.03 AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT and 8.04 hereof have been fulfilled, the Agent may (but is not obligated to) assume the truth of the statements contained in certificates delivered pursuant to said Section. (b) Each Notice of Borrowing shall be irrevocable and binding on TGC II. TGC II shall advise the Agent by telephone of its intention to deliver a Notice of Borrowing prior to the delivery thereof. (c) Unless the Agent shall have received notice from a Supplemental Advance Bank prior to the date of any borrowing pursuant to Section 6.01(a) hereof that such Supplemental Advance Bank will not make available to the Agent such Supplemental Advance Bank's Proportionate Share of such borrowing, the Agent may assume that such Supplemental Advance Bank has made such portion available to the Agent on the date of such borrowing in accordance with Section 6.01(a) hereof and the Agent may, in reliance upon such assumption, make available to TGC II on such date a corresponding amount. If such Supplemental Advance Bank's Proportionate Share of such borrowing is made available to the Agent on a date after the date of such borrowing, such Supplemental Advance Bank shall pay to the Agent on demand an amount equal to the product of (i) the daily average Federal Funds Rate during such period as quoted by the Agent times (ii) the amount of such Supplemental Advance Bank's Proportionate Share of such borrowing times (iii) the number of days that elapse from and including the date of such borrowing to the date on which such Supplemental Advance Bank's ratable portion of such borrowing shall have been made available to the Agent. A certificate of the Agent submitted to any Supplemental Advance Bank with respect to any amounts owing under this Section 6.01(c) shall be conclusive absent manifest error. If such Supplemental Advance Bank's Proportionate Share of such borrowing is not in fact made available to the Agent by such Supplemental Advance Bank within three Business Days after the date of such borrowing, TGC II agrees to pay to the Agent, on demand, an amount equal to such Proportionate Share of such borrowing together with interest thereon, for each day from the date such amount was made available to TGC II until the date such AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT amount is repaid to the Agent, at the interest rate applicable at the time to the Loans comprising such borrowing. (d) The failure of any Supplemental Advance Bank to make the Supplemental Advance to be made by it as part of any borrowing shall not relieve any other Supplemental Advance Bank of its obligation hereunder to make its Supplemental Advance on the date of such borrowing, but no Supplemental Advance Bank shall be responsible for the failure of any other Supplemental Advance Bank to make the Supplemental Advance to be made by such other Supplemental Advance Bank on the date of any borrowing.". (c) Section 8.04 of the Credit Agreement shall be redesignated as "SECTION 8.05" and Section 8.03 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "SECTION 8.03 Supplemental Advances. The obligation of the Supplemental Advance Banks to make any Supplemental Advance to TGC II upon the occasion of each borrowing hereunder (including the initial borrowing) is subject to the conditions precedent that, both immediately prior to the making of such Supplemental Advance and also after giving effect thereto and to the intended use thereof: (a) no Default shall have occurred and be continuing; (b) the representations and warranties made by TGC II and TNP in Section 2 hereof, and in each of the other Project Documents, shall be true and complete on and as of the date of the making of such Supplemental Advance in all material respects with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date); (c) all Government Approvals set forth in Schedule 1 hereto shall be in full force and effect or are reasonably expected to be obtained AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT such that there will not be a material adverse effect on the construction or operation of the Project; (d) the amount of such borrowing shall not cause the aggregate principal amount of the Supplemental Advances outstanding to exceed the aggregate amount of the Available Supplemental Advance Commitment (before giving effect to such borrowing) on such date; (e) no default shall have occurred and be continuing under any Secured Debenture Indenture; and (f) the aggregate principal amount of Loans (including the amount of such borrowing) shall not exceed the Collateral Coverage Maximum Amount at such time. Each notice of borrowing by TGC II hereunder shall constitute a certification by TGC II to the effect set forth in clauses (a) through (f) above (both as of the date of such notice and, unless TGC II otherwise notifies the Agent prior to the date of such borrowing, as of the date of such borrowing). SECTION 8.04 Financial Tests for Supplemental Advances. The obligation of the Supplemental Advance Banks to make any Supplemental Advance to TGC II upon the occasion of each borrowing hereunder (including the initial borrowing) is subject to the further conditions precedent that (a) Interest Coverage, as determined on and as of the Quarterly Date most recently falling prior to the date 60 Business Days prior to the date of borrowing, shall not be less than 1.0 and (b) the ratio of Equity Capital to Total Capitalization, as determined on and as of the Quarterly Date most recently falling prior to the date 60 Business Days prior to the date of borrowing, is greater than or equal to 20%.". SECTION 5. Counterparts. AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Amendment by signing any such counterpart. SECTION 6. Project Documents. Except as expressly amended hereby, the Credit Agreement shall continue in full force and effect in accordance with the terms and conditions thereof. All references in any Project Document to the Credit Agreement and any Schedule or Exhibit thereto shall be deemed to be references to the Credit Agreement and any Schedule or Exhibit thereto as amended. SECTION 7. Joinder of Guarantor. Contemporaneously with the execution and delivery of this Amendment, and as consideration therefor, TNP, as the Guarantor, hereby confirms and consents to each and every of the terms and conditions of this Amendment and the Credit Agreement as amended by this Amendment (including, without limitation Section 17.13 of the Credit Agreement), and agrees that the terms and conditions of the Guaranty are in full force and effect and unaffected by the execution by TGC II and TNP of this Amendment and acknowledges that there are no claims or offsets against, or defenses or counterclaims to, the Guaranty. SECTION 8. Headings. The headings of the various sections of this Amendment are for convenience of reference only, do not constitute a part hereof and shall not be interpreted or construed to affect the meanings or construction of any provision hereof. SECTION 9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. TEXAS-NEW MEXICO POWER COMPANY By: /s/ D. R. Barnard Title: D.R. Barnard Vice President and Chief Financial Officer TEXAS GENERATING COMPANY II By: /s/ D. R. Barnard Title: D. R. Barnard President AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT BANKS Existing Loans: ABN AMRO BANK N.V., $8,127,272.71 HOUSTON AGENCY Aggregate Commitment: $4,427,272.72 Total Supplemental Advance By: /s/Michael A. Tribolet Commitment: Title: Vice President $4,427,272.72 Proportionate Share: By: /s/ C. Lipchutz 3.13% Title: Vice President AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Existing Loans: BANK OF AMERICA NT & SA $20,318,181.84 Aggregate Commitment: $11,068,181.83 By: /s/ Mark F. Milner Title: Vice President Total Supplemental Advance Commitment: $11,068,181.83 Proportionate Share: 7.82% Existing Loans: THE BANK OF NEW YORK $35,218,181.82 Aggregate Commitment: $19,184,848.48 By:/s/ Michael F. Donohue, Jr. Title: Senior Vice President Total Supplemental Advance Commitment: $19,184,848.48 Proportionate Share: 13.56% AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT PAGE 94 Existing Loans: THE BANK OF NOVA SCOTIA $23,704,545.46 Aggregate Commitment: $12,912,878.79 By: /s/ A. S. Norsworthy Title: Assistant Agent Total Supplemental Advance Commitment: $12,912,878.79 Proportionate Share: 9.13% AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT PAGE 95 Existing Loans: THE CHASE MANHATTAN BANK $16,931,819.00 (NATIONAL ASSOCIATION) Aggregate Commitment: $19,223,485.29 By: James T. Beal, Jr. Total Supplemental Advance Title: Managing Director Commitment: $19,223,485.29 Proportionate Share: 13.59% ** Existing Loans: $23,704,545.41 ** Aggregate Commitment: $22,912,878.76 ** Total Supplemental Advance Commitment: $22,912,878.76 ** Proportionate Share: 16.20% * Net of participation of Christiana Bank. ** Without regard to participation of Christiana Bank. These are the amounts or definitions of "Aggregate Commitment", "Proportionate Share" and "Total Supplemental Advance Commitment" and Section Credit Agreement, as amended by the First Amendment. AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Existing Loans: CREDIT SUISSE $13,545,454.54 Aggregate Commitment: $7,378,787.88 By:/s/ Guy R. Cirincione Title: Member of Senior Management Total Supplemental Advance Commitment: $7,378,787.88 Proportionate Share: 5.22% AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT PAGE 97 Existing Loans: FLEET BANK OF MASSACHUSETTS, N.A. $10,159,090.92 Aggregate Commitment: $5,534,090.91 By: /s/ Fred M. Manning Title: Senior Vice President Total Supplemental Advance Commitment: $5,534,090.91 Proportionate Share: 3.91% ** Existing Loans: $20,318,181.84 ** Aggregate Commitment: $11,068,181.82 ** Total Supplemental Advance Commitment: $11,068,181.82 ** Proportionate Share: 7.82% * Net of participation of The Nippon Credit Bank, Ltd. ** Without regard to participation of The Nippon Credit Bank, Ltd. These are the amounts or entries referred to in the definitions of "Aggregate Commitment", "Proportionate Share" and "Total Supplemental Advance Commitment" and Section 4.01 of the Credit Agreement, as amended by the First Amendment. AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Existing Loans: NATIONSBANK OF TEXAS, N.A. $11,513,636.36 Aggregate Commitment: $22,271,969.69 By: /s/ Vincent Liberio Title: Senior Vice President Total Supplemental Advance Commitment: $22,271,969.69 Proportionate Share: 15.74% AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Existing Loans: PROSPECT STREET SENIOR PORTFOLIO, $11,513,636.36 L.P. By: PROSPECT STREET SENIOR LOAN Aggregate Commitment: CORP., as general partner $6,271,969.69 By: /s/ Preston I. Carnes, Jr. Title: Vice President AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Existing Loans: UNION BANK $11,513,636.36 Aggregate Commitment: $6,271,969.69 By: /s/ Peter R. Saggau Title: Vice President Total Supplemental Advance Commitment: $6,271,969.69 Proportionate Share: 4.43% AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Existing Loans: WESTPAC BANKING CORPORATION $23,704,545.46 Aggregate Commitment: $12,912,878.79 By: /s/ Officer of Westpac Title: Vice President Total Supplemental Advance Commitment: $12,912,878.79 Proportionate Share: 9.13% AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT Existing Loans: Z-LANDERBANK BANK AUSTRIA A.G. $20,318,181.84 Aggregate Commitment: $11,068,181.83 By: /s/ Kevin McGinn Title: Senior Vice President Total Supplemental Advance Commitment: $11,068,181.83 By: /s/ Peter Scharf Proportionate Share: Title: Assistant Vice President 7.82% AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Agent By /s/ James T. Beale, Jr. Title: Managing Director Acknowledged and Agreed to: THE CHASE MANHATTAN BANK, (NATIONAL ASSOCIATION), as Collateral Agent By /s/ James T. Beale, Jr. Title: Managing Director AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT VOTING PARTICIPANT Existing Loans: The following Voting Participant $6,772,726.41 consents and agrees to the foregoing Amendment No. 1 to the Unit 2 Aggregate Commitment: First Amended and Restated Project $3,689,393.47 Loan and Credit Agreement: Total Supplemental Advance CHRISTIANA BANK Commitment: $3,689,393.47 By:/s/Jahn O. Roising Peter M. Dodge Proportionate Share: Title: 2.61% First Vice President Vice President AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT VOTING PARTICIPANT Existing Loans: The following Voting Participant $10,159,090.92 consents and agrees to the foregoing Amendment No. 1 to the Unit 2 Aggregate Commitment: First Amended and Restated Project $5,534,090.91 Loan and Credit Agreement: Total Supplemental Advance THE NIPPON CREDIT BANK, LTD. Commitment: $5,534,090.91 By:/s/ Peter Capitelli Proportionate Share: Title: Vice President & Manager 3.91% AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EXHIBIT A TO AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT [FORM OF NEW PROJECT NOTE] AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EXHIBIT B TO AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT [FORM OF REPLACEMENT NOTE] AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EXHIBIT C TO AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT [FORM OF INTERCREDITOR AMENDMENT NO. 2] AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EXHIBIT D TO AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT [FORM OF FOURTH TGC II MODIFICATION AND EXTENSION AGREEMENT] AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EXHIBIT E TO AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT [FORM OF FIFTH TGC II MODIFICATION AND EXTENSION AGREEMENT] AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EXHIBIT F TO AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT [FORM OF SUBSEQUENT TGC II MODIFICATION AND EXTENSION AGREEMENT] AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EXHIBIT G TO AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT [FORM OF TNP SECOND LIEN MORTGAGE MODIFICATION NO. 2] AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EXHIBIT H TO AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT [FORM OF SECTION 4.05 LEGAL OPINION] AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EXHIBIT I TO AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT [FORMS OF SECTION 4.05 CLOSING DATE LEGAL OPINIONS] AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EXHIBIT J TO AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT [FORM OF FIRST DEBENTURE TRUSTEE CONSENT] AMENDMENT NO. 1 TO UNIT 2 FIRST AMENDED AND RESTATED PROJECT LOAN AND CREDIT AGREEMENT EX-10 13 EXHIBIT 10(S)4 FOURTH TGC II MODIFICATION AND EXTENSION AGREEMENT ATTENTION ROBERTSON COUNTY, TEXAS RECORDER: RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) c/o DONALD H. SNELL O'Neill, Snell, Banowsky & McClure 200 Crescent Court, Suite 1030 Dallas, Texas 75201 THE STATE OF TEXAS COUNTY OF ROBERTSON FOURTH TGC II MODIFICATION AND EXTENSION AGREEMENT THIS FOURTH TGC II MODIFICATION AND EXTENSION AGREEMENT (this "Agreement") is made as of September 29, 1993 among the banks (the "Banks") which are parties to that certain Unit 2 First Amended and Restated Project Loan and Credit Agreement dated as of January 8, 1992 (as amended by the First Amendment (as defined below), and as further amended, supplemented or modified and in effect from time to time, the "Credit Agreement"), THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as agent for the Banks and the Replacement Note Holder (in such capacity, together with its successors in such capacity, the "Agent") (the Banks, the Replacement Note Holder and the Agent collectively herein referred to as the "Secured Parties"), TEXAS- NEW MEXICO POWER COMPANY, a Texas corporation ("TNP") and TEXAS GENERATING COMPANY II, a Texas corporation ("TGC II" or the "Borrower"). Unless otherwise defined herein, the capitalized terms used herein shall have the meanings given to those terms in the Credit Agreement. W I T N E S S E T H: Recitals: A. The Banks, the Agent, Texas PFC, Inc., a Delaware corporation ("TPFC") and TNP have heretofore entered into the Project Loan and Credit Agreement dated as of October 1, 1988 (the "Project Credit Agreement") pursuant to the terms of which the Banks made Loans, prior to the Alternative Assumption Date, FOURTH TGC II MODIFICATION AND EXTENSION AGREEMENT to TPFC and, thereafter, to the Borrower in a maximum outstanding aggregate principal amount of TWO HUNDRED EIGHTY EIGHT MILLION FIVE HUNDRED THOUSAND DOLLARS ($288,500,000). B. The Alternative Assumption Date occurred as of May 31, 1991. Certain of the obligations of TPFC under the terms of the Project Credit Agreement were assumed by the Borrower pursuant to that certain Assumption Agreement recorded in Volume 566 at Page 252 of the Public Records of Robertson County, Texas. The Mortgage Trust Estate was conveyed by TPFC to the Borrower pursuant to that certain Conveyance and Bill of Sale dated effective as of May 31, 1991, recorded in Volume 566 at Page 283 of the Public Records of Robertson County, Texas. C. The Obligations under the terms of the Credit Agreement are secured, in part, by the terms, provisions, liens and security interests of that certain Mortgage and Deed of Trust (with Security Agreement and UCC Financing Statement for Fixture Filing), dated as of October 1, 1988 (the "Mortgage") which was filed of record on October 4, 1988 in Volume 521 at Page 601 of the Public Records of Robertson County, Texas. The Mortgage covers certain property as more particularly described therein. D. TNP, the Borrower and the Secured Parties entered into the Credit Agreement and executed and delivered the (i) First TGC II Modification and Extension Agreement dated as of January 24, 1992 and caused it to be recorded in Volume 573 at Page 484 of the Public Records of Robertson County, Texas, (ii) the Second TGC II Modification and Extension Agreement dated as of January 27, 1992 and caused it to be recorded in Volume 573 at Page 511 of the Public Records of Robertson County, Texas and (iii) the Third TGC II Modification and Extension Agreement dated as of January 27, 1992 and caused it to be recorded in Volume 573 at Page 525 of the Public Records of Robertson County, Texas, in each case as a memorial of certain modifications of, amendments to or occurrence of events under the Credit Agreement and to confirm the validity and priority of the liens, security interests and assignments of the Mortgage securing the Obligations. E. TNP, the Borrower and the Secured Parties have modified the terms of the Credit Agreement as set forth in the First Amendment (as defined below) and have executed, delivered and caused this Agreement to be filed of record as a memorial of the occurrence of such modifications and to confirm the validity and priority of the liens, security interests and assignments of the Mortgage securing the Obligations. FOURTH TGC II MODIFICATION AND EXTENSION AGREEMENT F. The Agent is authorized by Section 15.01 of the Credit Agreement to execute and deliver this Agreement. Agreements NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, TNP, the Borrower and the Agent, on behalf of the Secured Parties, agree as follows: 1. Modification of Terms of the Credit Agreement. The terms and provisions of the Credit Agreement are amended and modified pursuant to that certain Amendment No. 1 dated as of September 21, 1993 to the Unit 2 First Amended and Restated Project Loan and Credit Agreement of even date herewith, executed and delivered by TNP, the Borrower and the Banks and other parties thereto (the "First Amendment"). The First Amendment, among other things (A) facilitates TNP's or TGC II's issuing Permitted Collateralized Indebtedness that, upon the fulfillment of certain terms and conditions of the Credit Agreement, shall be Obligations secured by the liens, security interests and assignments of the Mortgage from time to time, (B) provides for the issuance of new promissory notes (referred to as New Project Notes) to evidence the aggregate principal amount of all outstanding indebtedness ("Project Loans") owed to the Banks (including amounts under the revolving loan facility referred to in clause (C) of this Section 1), (C) provides for TGC II to borrow under a revolving loan facility and (D) provides that the current aggregate principal amount of Project Loans outstanding, $147,750,000, is the maximum aggregate principal amount that may be outstanding as Project Loans (of which up to an aggregate principal amount of $141,478,030.31 may be outstanding as revolving loans). In addition, there remains outstanding under the Credit Agreement $65,000,000 of Replacement Loans evidenced by the First Replacement Note. 2. Effect of Modification. The Obligations as described in the Credit Agreement are secured by the liens, security interests and assignments of the Mortgage and the other Security Documents. The validity and priority of the liens, security interests and assignments of the Mortgage shall not be extinguished, impaired, reduced, released, or adversely affected by the terms of this Agreement or the First Amendment. 3. Extension of Rights and Liens. The Borrower hereby extends all rights, titles, liens, security interests, assignments, powers and privileges securing the Obligations as described in the Credit Agreement by virtue of the Mortgage until all of such Obligations have been paid in full and agrees that FOURTH TGC II MODIFICATION AND EXTENSION AGREEMENT the execution of this Agreement shall in no manner impair the rights, titles, liens, security interests, assignments, powers and privileges existing by virtue of the Mortgage, as they are extended and modified hereby. 4. Joinder of Guarantor. TNP, as guarantor under the TNP Guaranty, hereby (i) consents to the execution, delivery and performance by TGC II of this Agreement and any other Amendment Document to which TGC II is or is intended to be a party and the consummation of the transactions contemplated hereby and thereby, (ii) agrees that the TNP Guaranty shall remain in full force and effect after giving effect to such transactions and (iii) acknowledges that there are no claims or offsets against, or defenses or counterclaims to, the TNP Guaranty. 5. Successors and Assigns. This Agreement shall be binding upon, and inure to the benefit of, the successors and assigns of TNP, the Borrower and the Agent, for the benefit of the Secured Parties; provided, however, nothing contained in this Section is intended to authorize TNP or the Borrower to assign any of the Obligations or to sell any of the Mortgage Trust Estate except in accordance with the Credit Agreement and the Facility Purchase Agreement. 6. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart. FOURTH TGC II MODIFICATION AND EXTENSION AGREEMENT EXECUTED as of the date first hereinabove written. SECURED PARTIES: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Agent By:/s/Bettylou J. Robert Title: Vice President BORROWER: TEXAS GENERATING COMPANY II, a Texas corporation By:/s/ D. R. Barnard Title: President The undersigned hereby consents and agrees to the foregoing pursuant to Section 1(c) of the Intercreditor Agreement as defined in the Credit Agreement. THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Collateral Agent By:/s/ Bettylou J. Robert Title: Vice President FOURTH TGC II MODIFICATION AND EXTENSION AGREEMENT The undersigned is a party to this Agreement for the sole purpose of agreeing to the provisions of Section 4 to this Agreement. TNP: TEXAS-NEW MEXICO POWER COMPANY, a Texas corporation By:/s/ D. R. Barnard Title: Sector Vice President & Chief Financial Officer FOURTH TGC II MODIFICATION AND EXTENSION AGREEMENT STATE OF NEW YORK COUNTY OF NEW YORK This instrument was acknowledged before me on the 27th day of September, 1993, by Bettylou J. Robert, Vice President of THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Agent. /s/ Elizabeth A. Sullivan NOTARY PUBLIC in and for the State of NEW YORK My Commission Expires: February 1, 1995 FOURTH TGC II MODIFICATION AND EXTENSION AGREEMENT STATE OF NEW YORK COUNTY OF NEW YORK This instrument was acknowledged before me on the 27th day of September, 1993, by Bettylou J. Robert, Vice President of THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Collateral Agent. /s/ Elizabeth A. Sullivan NOTARY PUBLIC in and for the State of NEW YORK My Commission Expires: February 1, 1995 FOURTH TGC II MODIFICATION AND EXTENSION AGREEMENT STATE OF NEW YORK COUNTY OF NEW YORK This instrument was acknowledged before me on the 27th day of September, 1993, by D. R. Barnard, Sector Vice President & CFO of TEXAS-NEW MEXICO POWER COMPANY, a Texas corporation, on behalf of said corporation. /s/ Aisha Piracha NOTARY PUBLIC in and for the State of NEW YORK My Commission Expires: November 16, 1994 FOURTH TGC II MODIFICATION AND EXTENSION AGREEMENT STATE OF NEW YORK COUNTY OF NEW YORK This instrument was acknowledged before me on the 27th day of September, 1993, by D. R. Barnard, President of TEXAS GENERATING COMPANY II, a Texas corporation, on behalf of said corporation. /s/ Aisha Piracha NOTARY PUBLIC in and for the State of TEXAS My Commission Expires: November 16, 1994 FOURTH TGC II MODIFICATION AND EXTENSION AGREEMENT EX-10 14 EXHIBIT 10(V)2 EXECUTION COUNTERPART AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT AMENDMENT NO. 2 (this "Amendment") dated as of September 21, 1993 among TEXAS GENERATING COMPANY, a Texas corporation ("TGC"), TEXAS GENERATING COMPANY II, a Texas corporation ("TGC II"), TEXAS-NEW MEXICO POWER COMPANY, a Texas corporation ("TNP"), the financial institutions listed on the signature pages hereto under the caption "Unit 1 Banks" (the "Unit 1 Banks") and the financial institutions listed on the signature pages hereto under the caption "Unit 2 Banks" (the "Unit 2 Banks") and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) ("Chase"), in its several capacities as agent for the Unit 1 Banks (in such capacity, together with its successors in such capacity, the "Unit 1 Credit Agent"), as agent for the Unit 2 Banks (in such capacity, together with its successors in such capacity, the "Unit 2 Credit Agent") and as collateral agent for the Unit 1 Banks and the Unit 2 Banks (the "Collateral Agent"). Recitals A. Certain of the parties hereto are parties to the Intercreditor and Nondisturbance Agreement dated as of October 1, 1988 (as amended by Amendment No. 1 referred to below, the "Intercreditor Agreement") recorded in Volume 521 at Page 458 of the Public Records of Robertson County, Texas, as amended by Amendment No. 1 to the Intercreditor and Nondistribution Agreement dated as of January 8, 1992 ("Amendment No. 1") recorded in Volume 573 at Page 423 of the Public Records of Robertson County, Texas. B. Unless otherwise defined herein, capitalized terms used herein but not otherwise defined herein shall have the meanings ascribed to such terms in the Intercreditor Agreement. C. TNP, TGC, the Unit 1 Banks and the Unit 1 Credit Agent have entered into Amendment No. 1 dated as of September 21, 1993 (the "Unit 1 First Amendment") to the Unit 1 Credit Agreement (as amended by the Unit 1 First Amendment, the "Unit 1 Credit Agreement"). D. TNP, TGC II, the Unit 2 Banks and the Unit 2 Credit Agent have entered into Amendment No. 1 dated as of September 21, 1993 (the "Unit 2 First Amendment") to the Unit 2 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT Credit Agreement (as amended by the Unit 2 First Amendment, the "Unit 2 Credit Agreement" and, together with the Unit 1 Credit Agreement, the "Credit Agreements" or, individually, a "Credit Agreement"). E. On January 27, 1992, TNP purchased certain loans under the Credit Agreements as then in effect, from the Project Creditors. Upon such purchase, the loans so purchased under each Credit Agreement as then in effect automatically were converted into the Replacement Loans (as defined in each Credit Agreement as then in effect) evidenced by the Replacement Notes (such Replacement Notes as defined in and issued under each Credit Agreement as then in effect; as used herein such Replacement Loans and Replacement Notes are referred to as the "First Replacement Loans" and the "First Replacement Notes", respectively). TNP pledged the First Replacement Notes to IBJ Schroder Bank & Trust Company, as trustee (in such capacity, together with its successors in such capacity, the "First Debenture Trustee") under the Indenture and Security Agreement dated as of January 15, 1992 between the First Debenture Trustee and TNP. In connection with such pledge, the First Debenture Trustee signed the Instrument of Adoption attached as Exhibit G to each of the Credit Agreements as then in effect agreeing, among things, to be bound by the provisions of the Intercreditor Agreement. F. Under the Unit 1 Credit Agreement, TNP will purchase certain loans from the Unit 1 Banks. Upon such purchase, the loans so purchased under the Unit 1 Credit Agreement automatically will be converted into a Second Replacement Loan evidenced by a Second Replacement Note (such Second Replacement Note as defined in and issued under the Unit 1 Credit Agreement, the "Second Replacement Note"). G. TNP will pledge the Second Replacement Note to IBJ Schroder Bank & Trust Company, as trustee (in such capacity, together with its successors in such capacity, the "Second Debenture Trustee") under the Indenture and Security Agreement dated as of September 15, 1993 (the "Second Secured Debenture Indenture") between the Second Debenture Trustee and TNP. In connection with such pledge, the Second Debenture Trustee will sign an Instrument of Adoption, substantially in the form of Exhibit G to the Unit 1 Credit Agreement agreeing, among other things, to be bound by the provisions of the Intercreditor Agreement. AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT H. Under the Unit 1 Credit Agreement TNP may purchase additional loans. Upon such purchase, the loans so purchased will be automatically converted into Subsequent Replacement Loans (as defined in the Unit 1 Credit Agreement) evidenced by Subsequent Replacement Notes (as defined in and as contemplated by the Unit 1 Credit Agreement; as used herein such Subsequent Replacement Notes are referred to as the "Unit 1 Subsequent Replacement Notes"). I. Under the Unit 2 Credit Agreement TNP may purchase additional loans. Upon such purchase, the loans so purchased will be automatically converted into Subsequent Replacement Loans (as defined in the Unit 2 Credit Agreement) evidenced by Subsequent Replacement Notes (as defined in and as contemplated by the Unit 2 Credit Agreement; as used herein such Subsequent Replacement Notes are referred to as the "Unit 2 Subsequent Replacement Notes" (the First Replacement Notes, the Second Replacement Note, the Unit 1 Subsequent Replacement Notes and the Unit 2 Subsequent Replacement Notes are referred to herein as the "Replacement Notes" and each is referred to herein as a "Replacement Note")). J. TNP may pledge Unit 1 Subsequent Replacement Notes or Unit 2 Subsequent Replacement Notes to a Subsequent Debenture Trustee (as defined in each Credit Agreement; as referred to herein, a "Subsequent Debenture Trustee"). In connection with, and as a condition of, such pledge, the Subsequent Debenture Trustee will sign an Instrument of Adoption, substantially in the form of Exhibit G to the Unit 1 Credit Agreement or the Unit 2 Credit Agreement, as applicable. K. The parties hereto desire to amend the Intercreditor Agreement, among other things, in respect of certain rights and obligations of the Second Debenture Trustee, as the pledgee of the Second Replacement Note, thereunder and in respect of certain rights and obligations of any Subsequent Debenture Trustee (as defined in each Credit Agreement and which for purposes of the Unit 1 Credit Agreement or the Unit 2 Credit Agreement could include the Second Debenture Trustee, as the pledgee of Unit 1 Subsequent Replacement Notes or Unit 2 Subsequent Replacement Notes), as the pledgee of any Subsequent Replacement Note (as defined in each Credit Agreement), thereunder. AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT NOW, THEREFORE, the parties hereto agree as follows: 1. Amendments. (a) The word "First" will be added before each occurrence of the phrases "Debenture Trustee" and "Replacement Note Holder" in the definition of the "Unit 1 Banks". (b) The Second Debenture Trustee, as a Replacement Note Holder of the Second Replacement Note (under and as defined in the Unit 1 Credit Agreement), and any Subsequent Debenture Trustee (under and as defined in Unit 1 Credit Agreement), as a Replacement Note Holder of a Subsequent Replacement Note (under and as defined in the Unit 1 Credit Agreement and which for purposes of the Unit 1 Credit Agreement could include the Second Debenture Trustee, as pledgee of the Unit 1 Subsequent Replacement Notes) shall be included in the definition of the "Unit 1 Banks". Any Subsequent Debenture Trustee (under and as defined in the Unit 2 Credit Agreement), as a Replacement Note Holder of a Subsequent Replacement Note (under and as defined in the Unit 2 Credit Agreement and which for purposes of the Unit 2 Credit Agreement could include the Second Debenture Trustee, as pledgee of the Unit 2 Subsequent Replacement Notes) shall be included in the definition of "Unit 2 Banks". (c) Section 1(a) of the Intercreditor Agreement is amended by deleting in its entirety the last sentence thereof and inserting in lieu thereof the following: "This Section 1(a) shall not, however, in any way limit the right of a Debenture Trustee (as defined in either Credit Agreement) who is an 'indenture trustee' as defined in Section 303 of the Trust Indenture Act of 1939, as amended (a "Qualified Trustee") and, following the transfer of a Replacement Note upon the exercise of remedies by such Qualified Trustee, any transferee of such Replacement Note, to file or join in the filing of any petition or commence any proceeding or case seeking reorganization, bankruptcy, receivership, trusteeship, liquidation or insolvency of TNP in respect of any obligation of TNP other than its failure to pay amounts owing or perform other obligations under the Credit Agreements, the Replacement Notes (as defined in either Credit AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT Agreement) or any Project Document (as defined in either Credit Agreement).". (d) Section 2(b) of the Intercreditor Agreement is amended by deleting in its entirety the last sentence thereof and inserting in lieu thereof the following: "Notwithstanding anything to the contrary contained herein, in the event that a Qualified Trustee shall at any time become the Collateral Agent hereunder, its duties and obligations in its capacity as Collateral Agent (except its obligation to consent to the partial release granted by the Unit 1 Credit Agreement or the Unit 2 Credit Agent in accordance with the Facility Purchase Agreements (as defined in each Credit Agreement)) shall be subject to qualifications, conditions and limitations to the same effect as those set forth in Article Six and Sections 904 and 1106 of the First Secured Debenture Indenture with respect to the duties and obligations of the First Debenture Trustee, and any of such Qualified Trustees shall be under no obligation to take any action as Collateral Agent except under circumstances in which it would be required to take action in its capacity as a Qualified Trustee.". (e) Section 2(g) of the Intercreditor Agreement is amended by inserting at the end of the second sentence the following: "; provided, that, in the event that the Collateral Agent shall receive from any transferee or assignee of any such promissory note a certified copy of the instrument of transfer, (in the case of a Replacement Note) evidence of the registry of such Replacement Note in the Register (as defined in each Credit Agreement) and such other evidence of effective transfer of such promissory note in accordance with the terms and conditions of the Credit Agreements as the Collateral Agent shall reasonably request, then such assignee or transferee shall be treated as the owner of such promissory note for all purposes hereunder.". AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT (f) Section 2(h) of the Intercreditor Agreement is amended by deleting such Section in its entirety and inserting in lieu thereof the following: "(h) Rights as Project Creditor. With respect to its Commitments and Loans (as defined in either Credit Agreement) the Collateral Agent shall have the same rights and powers hereunder as any other Project Creditor and may exercise the same as though it were not the Collateral Agent, the Unit 1 Credit Agent, the Unit 2 Credit Agent or Agent under any of the other Collateral Documents, and the terms "Unit 1 Banks," "Unit 2 Banks" and "Project Creditors" shall, unless the context otherwise indicates, include the Collateral Agent in its capacity in which it holds its Commitments and Loans (as so defined), so long as the Collateral Agent holds Commitments or Loans (as so defined).". (g) Section 3(b) of the Intercreditor Agreement is amended by (i) inserting the phrase "(as defined in either Credit Agreement)" after the word "Loans" and (ii) deleting the proviso in the second sentence thereof and inserting in lieu thereof the following: "provided, that, (i) so long as a Qualified Trustee shall be a Replacement Note Holder (as defined in either Credit Agreement), whether as pledgee of a Replacement Note or as the legal and beneficial owner thereof following a foreclosure or other exercise of remedies by such Qualified Trustee with respect thereto, the obligations of such Qualified Trustee as a Project Creditor under this Section 3(b) shall be limited to, and solely payable out of, amounts paid by TNP, TGC and/or TGC II to such Qualified Trustee under the Credit Agreements or any other Project Document (as defined in either Credit Agreement) that such Qualified Trustee shall not have theretofore applied pursuant to the applicable Secured Debenture Indenture (as defined in the Credit Agreements) for any purpose other than the payment of amounts owing under this Section 3(b) and (ii) in the case of any Replacement Note Holder (other than a Qualified Trustee in its capacity as trustee) acquiring a Replacement Note upon a foreclosure or exercise of remedies by a Qualified Trustee with respect thereto, the obligations of such AMENDMENT NO. 2 TO INTERCREDITOR AND NONDISTURBANCE AGREEMENT Replacement Note Holder under this Section 3(b) shall be limited to obligations arising from and after the date on which it shall have acquired such Replacement Note.". (h) Section 4(a)(i) of the Intercreditor Agreement is amended by inserting the word "First" before the term "Debenture Trustee" each time it appears. 2. Title Insurance. Section 5 of the Intercreditor Agreement is amended by adding a new Section 5(m) to read as follows: "The Banks (under and as defined in each Credit Agreement) waive any rights they may have under any Project Document (as defined in either Credit Agreement) to receive any title insurance proceeds from any title insurance policy then in effect for the benefit of any Replacement Note Holder (as defined in either Credit Agreement) and each Replacement Note Holder waives any rights it may have under any Project Document (as defined in either Credit Agreement) to receive any title insurance proceeds from any title insurance policy then in effect for the benefit of the Banks (as so defined).". 3. Pledge of Replacement Notes. Each of the undersigned consents to the pledge of the Second Replacement Note by TNP to the Second Debenture Trustee and acknowledges that, upon such pledge, such Second Debenture Trustee shall be entitled to all of the rights and benefits of a Project Creditor under the Intercreditor Agreement. Each of the undersigned consents to the pledge of each Replacement Note (as defined in each Credit Agreement) by TNP to a Subsequent Debenture Trustee (as defined in each Credit Agreement) and acknowledges that upon such pledge, such Subsequent Debenture Trustee shall be entitled to all of the rights and benefits of a Project Creditor under the Intercreditor Agreement, as amended. 4. Transaction Consent. Each of the undersigned consents to the execution, delivery and performance by the Unit 1 Agent, the Unit 2 Agent and the Collateral Agent of this Agreement, the Unit 1 First Amendment, the Unit 2 First Amendment, the Facility Purchase Agreement Amendment No. 1 (as defined in the Unit 2 Credit Agreement), the TNP Second Lien AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT Mortgage Modification No. 2 (as defined in each Credit Agreement), the First Amendment TGC Mortgage Modifications (as defined in the Unit 1 Credit Agreement), the First Amendment TGC II Mortgage Modifications (as defined in the Unit 2 Credit Agreement) and each other Project Document to which such Person is or is intended to be a party; provided, that, each of the undersigned accepts for all purposes under this Intercreditor Amendment and the Project Documents (as defined in each Credit Agreement), the First Debenture Trustee Consent (as defined in each Credit Agreement) as evidence of the approval of the First Debenture Trustee of the First Amendment (as defined in each Credit Agreement) and, without limiting the foregoing acceptance, agrees that a consent to substantially the same effect, mutatis mutandis, as the First Debenture Trustee Consent (as so defined) or a consent of a Qualified Trustee to substantially the same effect, mutatis mutandis, as the First Debenture Trustee Consent (as so defined) with respect to any amendment, modification or supplement to either Credit Agreement shall be effective for all purposes under this Intercreditor Agreement and the Project Documents (as so defined) to evidence the approval of the First Debenture Trustee or any other Qualified Trustee of such amendment, modification or supplement. 5. Headings. The headings of the various sections of this Amendment for convenience of reference only, do not constitute a part hereof and shall not be interpreted or construed to affect the meanings or construction of any provisions hereof. 6. Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Amendment by signing any such counterpart. 7. Effectiveness. This Amendment shall become effective upon the Section 3 Effective Date (as defined in the Unit 1 Credit Agreement) if signed by each of the parties hereto on or before such date. Except as expressly amended hereby, the Intercreditor Agreement shall continue in full force and effect in accordance with the terms thereof. 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT IN WITNESS WHEREOF, each of the undersigned has caused this Amendment to be duly executed and delivered as of the date first above written. TEXAS GENERATING COMPANY By: \s\ D. R. Barnard Title: President TEXAS GENERATING COMPANY II By: \s\ D. R. Barnard Title: President TEXAS-NEW MEXICO POWER COMPANY By: \s\ D. R. Barnard Title: D. R. Barnard Vice President and Chief Financial Officer THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), in its several capacities as Collateral Agent, the Unit 1 Credit Agent and the Unit 2 Credit Agent By: \s\ Bettylou J. Robert Title: Vice President AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT STATE OF New York ) ) COUNTY OF New York ) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared \s\ D. R. Barnard , President of TEXAS GENERATING COMPANY, a Texas corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 28th day of September , 1993. \s\ Aisha Piracha Notary Public, State of New York (NOTARIAL SEAL) My Commission Expires: 11/16/94 Aisha Piracha Notary Public, State of New York No. 5004499 Qualified in New York county Certificated Filed in New York City Commission Expires November 16, 1994 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT STATE OF New York ) ) COUNTY OF New York ) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared D. R. Barnard , President of TEXAS GENERATING COMPANY II, a Texas corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 28th day of September , 1993. \s\ Aisha Piracha Notary Public, State of New York (NOTARIAL SEAL) My Commission Expires:11/16/94 Aisha Piracha Notary Public, State of New York No. 5004499 Qualified in New York county Certificated Filed in New York City Commission Expires November 16, 1994 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT STATE OF New York ) ) COUNTY OF New York ) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared D. R. Barnard , Sector Vice President of TEXAS-NEW MEXICO POWER COMPANY, a Texas corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 28th day of September , 1993. \s\ Aisha Piracha Notary Public, State of New York (NOTARIAL SEAL) My Commission Expires:11/16/94 Aisha Piracha Notary Public, State of New York No. 5004499 Qualified in New York county Certificated Filed in New York City Commission Expires November 16, 1994 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT STATE OF New York ) ) COUNTY OF New York ) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Bettylou J. Robert , Vice President of THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), a national banking association, as Collateral Agent, as Unit 1 Credit Agent and as Unit 2 Credit Agent, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September , 1993. \s\ Patricia E. Martin Notary Public, State of _________ (NOTARIAL SEAL) My Commission Expires:___________ Patricia E. Martin Notary Public, State of New York No. 52-01MA4995914 Qualified in Suffolk County Commission Expires May 5, 1994 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT UNIT 1 BANKS: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) By:\s\ Bettylou J. Robert Title: BETTYLOU J. ROBERT VICE PRESIDENT STATE OF New York ) ) COUNTY OF New York ) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Bettylou J. Robert , Vice President of THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), a national banking association, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September , 1993. \s\ Patricia E. Martin Notary Public, State of _________ (NOTARIAL SEAL) My Commission Expires:___________ Patricia E. Martin Notary Public, State of New York No. 52-01MA4995914 Qualified in Suffolk County Commission Expires May 5, 1994 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT ABN AMRO BANK N.V., HOUSTON AGENCY By: \s\ Michael A. Tribolet Title: Vice President By:__________________________ Title: STATE OF Texas ) ) COUNTY OF Harris ) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Michael A. Tribolet , V. P. of ABN AMRO BANK N.V., HOUSTON AGENCY, a ______________ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September , 1993. \s\ Deborah B. Hall Notary Public, State of Texas (NOTARIAL SEAL) Deborah B. Hall My Commission Expires January 26, 1996 My Commission Expires:___________ AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT ABN AMRO BANK N.V., HOUSTON AGENCY By: \s\ C. Lipshutz Title: Vice President By:__________________________ Title: STATE OF Texas ) ) COUNTY OF Harris ) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Cheryl Lipshutz , Vice President of ABN AMRO BANK N.V., HOUSTON AGENCY, a ______________ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September , 1993. \s\ Deborah B. Hall Notary Public, State of Texas (NOTARIAL SEAL) My Commission Expires: 1/26/96 Deborah B. Hall My Commission Expires January 26, 1996 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT BANK OF AMERICA NT & SA By: \s\ Mark F. Milner Title: Vice President STATE OF California ) ) COUNTY OF Los Angeles) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Mark F. Milner , Vice President of BANK OF AMERICA NT & SA, a national baking association known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September , 1993. \s\ David Miller Notary Public, State of California (NOTARIAL SEAL) My Commission Expires:Sept. 2, 1995 Davis H. Miller Notory Public California Los Angeles County My Comm Expires Sept. 2, 1995 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT THE BANK OF NEW YORK By:\s\ Michael F. Donohue, Jr. Title: Senior Vice President STATE OF New York ) ) COUNTY OF New York ) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Michael F. Donohue, Jr. , Sr. V.P.________ of THE BANK OF NEW YORK, a New York corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September , 1993. \s\ Diane M. Castoria Notary Public, State of New York (NOTARIAL SEAL) My Commission Expires:6/10/96 Diane M. Castoria Notory Public, State of New York No. 41-4982708 Qualified in Queens County Commission Expires June 10, 1996 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT THE BANK OF NOVA SCOTIA By:\s\ A. S. Norsworthy______ Title : Assistant Agent STATE OF Georgia____) ) COUNTY OF Fulton____) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared A. S. Norsworthy_______________, Assistant Agent__ of THE BANK OF NOVA SCOTIA, a Canadian______ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 30th day of September, 1993. \s\ S. Miolla ___________________ Notary Public, State of Georgia (NOTARIAL SEAL) My Commission Expires:Feb. 15, 1994 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT CREDIT SUISSE By:\s\ Cirincione____________ Title: Guy R. Cirincione Member of Senior Management By:\s\ A. Leon_______________ Title: A. Leon, Associate STATE OF New York ) ) COUNTY OF New York ) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Mr. Guy Cirincione and ________, Mr. Andrew Leon of CREDIT SUISSE, a banking corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September ____, 1993. \s\ Donna A. Singer______________ Notary Public, State of New York_ (NOTARIAL SEAL) My Commission Expires:___________ Donna A. Singer Notary Public, State of New York No. 4898345 Qualified in New York County Commission Expires June 15, 1995 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT CREDIT SUISSE By:\s\ Cirincione Title: Guy R. Cirincione Member of Senior Management By:\s\ PP Leon_______________ Title: A. Leon, Associate STATE OF New York___) ) COUNTY OF New York__) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Mr. Guy Cirincione and ________, Mr. Andrew Leon__ of CREDIT SUISSE, a banking_______ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September ______, 1993. \s\ Donna A Singer_______________ Notary Public, State of New York (NOTARIAL SEAL) My Commission Expires:June 15, 1995 Donna A. Singer Notary Public, State of New York No. 4898345 Qualified in New York County Commission Expires June 15, 1995 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT FLEET BANK OF MASSACHUSETTS, N.A. By:\s\ Christopher Sotir______ Title: Assistant Vice President STATE OF Massachusetts) ) COUNTY OF ____________) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Christopher Sotir______________, Assistant Vice President of FLEET BANK OF MASSACHUSETTS, N.A., a national banking association, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 28th day of September , 1993. \s\ Notary Notary Public, State of Massachusetts (NOTARIAL SEAL) My Commission Expires:Nov. 20, 1998 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT NATIONSBANK OF TEXAS, N.A. By:\s\ Vincent Liberio________ Title: SVP STATE OF Texas______) ) COUNTY OF Tarrant___) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Vincent Liberio________________, SVP______________ of NATIONSBANK OF TEXAS, N.A., a national banking association, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September_______, 1993. \s\ Janet Luedtke________________ Notary Public, State of Texas (NOTARIAL SEAL) My Commission Expires:May 5, 1996 Janet Luedtke Notary Public State of Texas My comm. Exp. 05-05-96 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT LEHMAN COMMERCIAL PAPER INC. By:\s\ Christopher R. Ryan Title: Authorized Signatory STATE OF New York ) ) COUNTY OF New York ) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Christopher R. Ryan __________, Authorized Signatory of LEHMAN COMMERCIAL PAPER INC., a New York__________ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 28th day of September ______, 1993. \s\ Lisa Raggi___________________ Notary Public, State of New York_ (NOTARIAL SEAL) My Commission Expires:12-16-93___ Lisa Raggi Notary Public, State of New York No. 60-4989831 Qualified in Westchester County Commission Expires 12-16-93 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT TEXAS COMMERCE BANK NATIONAL ASSOCIATION By:\s\ Mary C. Arnold_________ Title: Vice President STATE OF Texas_____) ) COUNTY OF Harris____) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Mary C. Arnold_________________, Vice President___ of TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September ______, 1993. \s\ Carole Lott__________________ Notary Public, State of Texas____ (NOTARIAL SEAL) My Commission Expires:11/30/96___ Carole Lott Notary Public, State of Texas My commission Expires 11-30-96 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT UNION BANK By:\s\ Peter R. Saggau________ Title: Vice President STATE OF California_) ) COUNTY OF Los Angeles) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Peter R. Saggau________________, Vice President___ of UNION BANK, a California____ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September_______, 1993. \s\ Bednahrin Badal______________ Notary Public, State of California (NOTARIAL SEAL) My Commission Expires:May 9, 1994 Official Seal Bednahrin Badal Notary Public - California Principal Office in Los Angeles County My Commission Expired May 9, 1994. AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT WESTPAC BANKING CORPORATION By:\s\ Joseph Rubino_______ Title: VP STATE OF New York___) ) COUNTY OF New York__) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Joseph Rubino__________________, Vice President___ of WESTPAC BANKING CORPORATION, a Australia_____ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September ______, 1993. \s\ Patricia A. Steigerwald______ Notary Public, State of New York_ (NOTARIAL SEAL) My Commission Expires:6/30/94____ Patricia A. Steigerwald Notary Public, State of New York No. 30-4714250 Qualified in Nassau County Commission Expires June 30, 1994 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT UNIT 1 VOTING PARTICIPANTS: THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED By:\s\ John A. Van Slyke______ Title: Assistant Vice Pres. STATE OF Texas______) ) COUNTY OF Harris____) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared John A. Van Slyke______________, Asst. Vice President of THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, a Hong Kong_____ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September ______, 1993. \s\ Celeta L. Carr_______________ Notary Public, State of Texas____ (NOTARIAL SEAL) My Commission Expires:9-12-94 Celeta L. Carr Notary Public, State of Texas My commission Expires 9-12-94 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT Z-LANDERBANK BANK AUSTRIA A.G. By:\s\ Kevin McGinn___________ Title: SVP By:\s\ Peter Scharf___________ Title: AVP STATE OF New York___) ) COUNTY OF New York__) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Kevin B. McGinn________________, Senior Vice Pres. of Z-LANDERBANK BANK AUSTRIA A.G., a Austrian____ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September_______, 1993. \s\ Maria F. Cicirelli___________ Notary Public, State of New York_ (NOTARIAL SEAL) My Commission Expires:4/30/95 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT Z-LANDERBANK BANK AUSTRIA A.G. By:\s\ Kevin McGinn Title: SVP By:\s\ Peter Scharf Title: AVP STATE OF New York___) ) COUNTY OF New York__) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Peter Scharf , Asst. Vice Pres. of Z-LANDERBANK BANK AUSTRIA A.G., a Austrian corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September_______, 1993. \s\ Maria F. Cicinelli___________ Notary Public, State of New York_ (NOTARIAL SEAL) My Commission Expires:4/30/95____ AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT UNIT 2 BANKS: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) By:\s\ Bettylou J. Robert Title: Vice President STATE OF New York ) ) COUNTY OF New York) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Bettylou J. Robert_____________, Vice President___ of THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), a national banking association, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September ______, 1993. \s\ Patricia E. Martin___________ Notary Public, State of New York_ (NOTARIAL SEAL) My Commission Expires:_May 5, 1994 Patricia E. Martin Notary Public, State of New York No. 52-01ma4995914 Qualified in Suffolk County Commission Expires May 5, 1994 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT ABN AMRO BANK N.V., HOUSTON AGENCY By:\s\ Michael A. Tribolet____ Title: Vice President By:___________________________ Title: STATE OF Texas______) ) COUNTY OF Harris____) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Michael A. Tribolet____________, Vice President___ of ABN AMRO BANK N.V., HOUSTON AGENCY, a ______________ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September_______, 1993. \s\ Deborah B. Hall______________ Notary Public, State of Texas____ (NOTARIAL SEAL) My Commission Expires:1/26/96____ AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT ABN AMRO BANK N.V., HOUSTON AGENCY By:\s\ C. Lipshutz____________ Title:V P By:___________________________ Title: STATE OF Texas______) ) COUNTY OF Harris____) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Cheryl Lipshutz________________, V.P._____________ of ABN AMRO BANK N.V., HOUSTON AGENCY, a ______________ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September_______, 1993. \s\ Deborah B. Hall______________ Notary Public, State of Texas____ (NOTARIAL SEAL) My Commission Expires:_1/26/96___ AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT BANK OF AMERICA NT & SA By:\s\ Mark F. Milner________ Title: Vice President STATE OF California_) ) COUNTY OF Los Angeles) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Mark F. Milner_________________, a Vice President_ of BANK OF AMERICA NT & SA, a ______________ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September ______, 1993. \s\ David H. Miller______________ Notary Public, State of California (NOTARIAL SEAL) My Commission Expires:Sept. 2, 1995 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT THE BANK OF NEW YORK By:\s\ Michael F. Donohue, Jr. Title: Senior Vice President STATE OF New York___) ) COUNTY OF Queens____) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Michael F. Donohue, Jr.________, Sr. VP___________ of THE BANK OF NEW YORK, a New York______ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September_______, 1993. \s\ Diane M. Castoria____________ Notary Public, State of N.Y._____ (NOTARIAL SEAL) My Commission Expires:6/10/96____ AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT THE BANK OF NOVA SCOTIA By:\s\ A.S. Norsworthy_______ Title: Assistant Agent STATE OF Georgia____) ) COUNTY OF Fulton____) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared A. S. Norsworthy_______________, Assistant Agent__ of THE BANK OF NOVA SCOTIA, a Canadian______ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September ______, 1993. \s\ S. Miolla____________________ Notary Public, State of Georgia__ (NOTARIAL SEAL) My Commission Expires: 02-15-94 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT CREDIT SUISSE By:\s\ Cirincione_________ Title: Guy R. Cirincione Member of Senior Management By:\s\ PP Leon_______________ Title: A. Leon, Associate STATE OF New York___) ) COUNTY OF New York__) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Mr. Guy Cirincione and_________, Mr. Andrew Leon__ of CREDIT SUISSE, a banking_______ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September_______, 1993. \s\ Donna A. Singer______________ Notary Public, State of New York_ (NOTARIAL SEAL) My Commission Expires:June 15, 95 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT CREDIT SUISSE By:\s\ Cirincione____________ Title: Guy R. Cirincione Member of Senior Management By:\s\ PP Leon_______________ Title: A. Leon, Associate STATE OF New York___) ) COUNTY OF New York__) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Mr. Guy Cirincione and_________, Mr. Andrew Leon__ of CREDIT SUISSE, a banking_______ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September_______, 1993. \s\ Donna A. Singer______________ Notary Public, State of New York_ (NOTARIAL SEAL) My Commission Expires:06/15/95___ AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT FLEET BANK OF MASSACHUSETTS, N.A. By:\s\ Christopher Sotir____ Title: Assistant Vice President STATE OF Massachussetts) ) COUNTY OF Saffolk___) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Christopher Sotir______________, Asst. Vice Pres__ of FLEET BANK OF MASSACHUSETTS, N.A., a national banking association, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 28th day of September ______, 1993. \s\ Notary_______________________ Notary Public, State of Masschusetts (NOTARIAL SEAL) My Commission Expires:Nov 20, 1998 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT NATIONSBANK OF TEXAS, N.A. By:\s\ Vincent Liberio______ Title: SVP STATE OF Texas______) ) COUNTY OF Tarrant___) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Vincent Liberio________________, SVP______________ of NATIONSBANK OF TEXAS, N.A., a national banking association, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September_______, 1993. \s\ Janet Luedtke________________ Notary Public, State of Texas____ (NOTARIAL SEAL) My Commission Expires:05-05-96 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT PROSPECT STREET SENIOR PORTFOLIO, L.P. By: PROSPECT STREET SENIOR LOAN CORP., as general partner By:\s\ Dana E. Erikson______ Title: Assistant Vice President STATE OF Massachusetts) ) COUNTY OF Suffolk___) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Mr. Dana E. Erikson____________, Assistant VP_____ of PROSPECT STREET SENIOR LOAN CORP., a MA______ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September ______, 1993. \s\ Laura A. Hawes_______________ Notary Public, State of Massachusetts (NOTARIAL SEAL) My Commission Expires:_07/03/98__ AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT UNION BANK By:\s\ P. Saggau____________ Title: Peter R. Saggau Vice President STATE OF California_) ) COUNTY OF Los Angeles) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Peter R. Saggau________________, Vice President___ of UNION BANK, a California____ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September_______, 1993. \s\ Bednahrin Badal______________ Notary Public, State of California (NOTARIAL SEAL) My Commission Expires:May 9, 1994 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT WESTPAC BANKING CORPORATION By:\s\ Joseph Rubino________ Title: VP STATE OF New York___) ) COUNTY OF New York__) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Joseph Rubino__________________, Vice President___ of WESTPAC BANKING CORPORATION, a New South Wales, Austrlia__ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September ______, 1993. \s\ Patricia A. Steigerwald______ Notary Public, State of New York (NOTARIAL SEAL) My Commission Expires:06/30/94___ AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT Z-LANDERBANK BANK AUSTRIA A.G. By:\s\ Kevin B. McGinn______ Title:Senior Vice President By:\s\ Peter Scharf_________ Title:AVP STATE OF New York___) ) COUNTY OF New York__) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Kevin B. McGinn _______________, Senior Vice Pres_ of Z-LANDERBANK BANK AUSTRIA A.G., an_Austrian_____ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September_______, 1993. \s\ Michael C. Kaiser____________ Notary Public, State of New York_ (NOTARIAL SEAL) My Commission Expires:9-30-93____ AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT Z-LANDERBANK BANK AUSTRIA A.G. By:\s\ Kevin B. McGinn______ Title:SVP By:\s\ Peter Scharf_________ Title:AVP STATE OF New York___) ) COUNTY OF New York__) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Peter Scharf___________________, Ass. Vice Pres___ of Z-LANDERBANK BANK AUSTRIA A.G., an_Austrian_____ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September ______, 1993. \s\ Michael C. Kaiser____________ Notary Public, State of New York_ (NOTARIAL SEAL) My Commission Expires:9-30-93____ AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT UNIT 2 VOTING PARTICIPANTS: CHRISTIANA BANK By:\s\ Jahn O. Roising Title:First Vice President By:\s\ P.M. Dodge Title:Peter M. Dodge Vice Pres. STATE OF New York___) ) COUNTY OF New York__) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Jahn O. Roising & Peter M. Dodge, FVP & VP________ of CHRISTIANA BANK, a New York______ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 28th day of September_______, 1993. \s\ Carole Chapman_____________ Notary Public, State of New York (NOTARIAL SEAL) My Commission Expires:4/30/94____ AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT THE NIPPON CREDIT BANK, LTD. By:\s\ Peter Capitelli________ Title: Vice President&Manager STATE OF New York___) ) COUNTY OF New York__) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Peter Capitelli________________, Vice Pres & Mgr__ of THE NIPPON CREDIT BANK, LTD., a Japanese______ corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 28th day of September_______, 1993. \s\ Yasuko Noguchi_______________ Notary Public, State of New York_ (NOTARIAL SEAL) My Commission Expires:10-11-94___ AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT FIRST DEBENTURE TRUSTEE: IBJ SCHRODER BANK & TRUST COMPANY, as First Debenture Trustee By:\s\ Thomas J. Bogert__________ Title: Assistant Vice President STATE OF New York___) ) COUNTY OF Keregs ) BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Thomas J. Bogert_______________, Assistant Vice President of IBJ SCHRODER BANK & TRUST COMPANY, a Texas corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity or capacities therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this 27th day of September, 1993. \s\ Jane Shaheen_________________ Notary Public, State of New York_ (NOTARIAL SEAL) My Commission Expires:03-30-95 AMENDMENT NO. 2 TO THE INTERCREDITOR AND NONDISTURBANCE AGREEMENT EX-10 15 EXHIBIT 10(AA)1 AMENDMENT NO. 1 TO THE UNIT 2 FIRST AMENDED AND RESTATED FACILITY PURCHASE AGREEMENT Amendment No. 1 (this 'Amendment') dated as of September 21, 1993, to the Unit 2 First Amended and Restated Facility Purchase Agreement is entered into by and between Texas-New Mexico Power Company, a Texas corporation (the "Purchaser') and Texas Generating Company II, a Texas corporation (the "Seller"). Unless otherwise defined herein, capitalized terms used herein in the Credit Agreement referred to below. RECITALS 1. Pursuant to that certain Project Loan and Credit Agreement dated as of October 1, 1988 (as amended, the "Prior Credit Agreement"), among Texas PFC, Inc., a Delaware corporation ("TPFC"), the Purchaser, Algemene Bank Nederland N.V., as issuing bank, the banks named therein (the "Banks") and The Chase Manhattan Bank (National Association), as agent for the Banks (in such capacity, together with its successors in such capacity, the "Agent"), the Banks agreed to make certain extensions of credit to TPFC. 2. By that certain Conveyance and Bill of Sale, dated to be effective as of May 31, 1991 (such date being the "Alternative Assumption Date"), and filed of record in Volume 566 at Page 283 of the Public Records of Robertson County, Texas, TPFC conveyed to the Seller complete ownership of the Project. 3. As of the Alternative Assumption Date, the Seller assumed certain of the rights and obligations of TPFC under the Prior Credit Agreement and all of the rights and obligations of TPFC as the "Assignor" and the "Mortgagor' under the Security Documents. 4. The Seller, the Banks and the Agent have amended and restated the Prior Credit Agreement by executing and delivering the Unit 2 First Amended and Restated Project Loan and Credit Agreement dated as of January 8, 1992 (the "Restated Credit Amendment"). The Seller, the Banks and the Agent have further amended the Restated Credit Agreement by executing and delivering the Amendment No. 1 to the Restated Credit Agreement, dated as of the date hereof (the Restated Credit Agreement as so amended and as further amended, modified and supplemented and in effect from time to time is referred to herein as the "Credit Agreement"). 5. In connection with the Restated Credit Agreement, the Purchaser and Seller entered into the First Amended and Restated Facility Purchase Agreement dated as of January 8, 1992 (the "Facility Purchase Agreement"). 6. It is a condition precedent to the effectiveness of Amendment No. 1 that the Purchaser and Seller wish to enter into this Amendment to correct an inaccurate numerical reference in the Facility Purchase Agreement. THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Purchaser and the Seller hereby amend the Facility Purchase Agreement as follows: 1. Amendments (a) Section 1.02(b) of the Facility Purchase Agreement is amended by deleting the numerical reference "1/345th" appearing in the second line thereof and substituting in its place "1/288.5th". (b) Section 1.03(b) of the Prior Facility Purchase Agreement is amended by deleting the numerical reference "1/345th" appearing in the fourth line thereof and substituting in its place "1/288.5th". 2. Headings. The headings of the various sections of this Amendment are for convenience of reference only, do not constitute a part hereof and shall not be interpreted or construed to affect the meanings or construction of any provisions hereof. 3. Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together constitute one and the same instrument and any of the parties hereto may execute this Amendment by signing any such counterpart. 4. Governing Law. This Amendment shall be governed by and construed and enforced in accordance with the laws of the State of Texas. IN WITNESS WHEREOF, the parties have caused this Amendment to be executed as of the date first written above. PURCHASER TEXAS-NEW MEXICO POWER COMPANY By/s/ D. R. Barnard D. R. Barnard, Sector Vice President and Chief Financial Officer SELLER TEXAS GENERATING COMPANY II By/s/ Monte W. Smith Monte W. Smith Treasurer AGENT For purposes of Sections 1.2(C) and 1.04 (a) (ii) hereof: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Agent BY:/s/ Bettylou J. Robert Title: Vice president For purposes of Section 1.04(a) (ii) hereof: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Collateral Agent BY:/s/ Bettylou J. Robert Title: Vice President EX-10 16 EXHIBIT 10(PP) TEXAS-NEW MEXICO POWER COMPANY EXECUTIVE AGREEMENT FOR SEVERANCE COMPENSATION UPON CHANGE IN CONTROL This Texas-New Mexico Power Company Executive Agreement for Severance Compensation Upon Change in Control ("Agreement") dated November 11, 1993, is by and between Texas-New Mexico Power Company ("Company") and D. R. BARNARD ("Executive"). Witnesseth That: WHEREAS, the Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders; and WHEREAS, the Company has determined that in order to best establish and maintain such sound and vital management it is appropriate to establish certain means for reinforcing and encouraging the continued attention and dedication of the Executive as a part of the management of the Company such that they may continue their assigned duties in a proper and efficient manner without distraction because of the possibility of a Change in Control of the Company; and WHEREAS, the Executive is willing to continue to serve the Company but is concerned about the possible effects any Change in Control might have on his duties and responsibility and status as an Executive: page 1 NOW, THEREFORE, in consideration of the promises and the mutual agreements herein contained, the Company and Executive hereby enter into this Agreement setting forth the severance compensation and extended benefits which the Company agrees it will pay to the Executive if the Executive's employment with the Company terminates under the circumstances described herein: 1) Company's Right to Terminate Prior to a Change in Control of the Company as herein defined, this Agreement shall terminate if Executive shall resign or retire voluntarily, become disabled, or die. Except as provided in paragraph 3)a)(vi) hereof, this Agreement shall also terminate if Executive's employment by the Company shall be terminated, with or without Cause, as herein defined, prior to any Change in Control of the Company by action of either the Board of Directors or Chief Executive Officer of the Company, as applicable. 2) Term a) The term of this Agreement (the "Term") shall commence as of the date of this Agreement and shall expire as of the earliest of (i) the third annual anniversary of the date hereof; provided that the Board of Directors, by resolution duly adopted, may extend the Term of this Agreement from time to time, or (ii) termination of the Executive's employment because of death, Disability, voluntary termination or retirement by the Executive for other than Good Reason, or Cause (as those terms may be herein defined); b) Any obligation which has vested under the terms of the Agreement and remains unpaid as of the date the Agreement expires or is terminated shall survive such expiration or termination and be enforceable under the terms of the Agreement. 3) Change in Control of the Company a) For the purposes of this Agreement, a Change in Control of the Company is defined as the occurrence of any one of the following events: (i) there shall be consummated any consolidation or merger of the Company into or with another corporation or other legal person, and as a result of such consolidation or merger less than a majority of the combined voting power of the then- outstanding securities of such corporation or person immediately after such transactions are held in the aggregate by holders of Voting Stock, as herein defined, of the Company immediately prior to such transactions; or (ii) any sale, lease, exchange or other transfer, whether in one transaction or any series of related transactions, of all or significant portions of the assets of the Company to any other corporation or other legal person, less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale, lease, exchange, or transfer is held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale, lease, exchange, or transfer; or (iii) the shareholders of the Company approve any plan for the liquidation or dissolution of the Company; or (iv) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), becomes, either directly or indirectly, the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities representing 15% or more of the combined voting power of the then- outstanding securities entitled to vote generally in the election of directors of the Company ("Voting Stock"); provided that the Trustee of the Thrift Plan shall not be deemed such a person for the purposes of this Section 3(iv); or (v) if at any time during a fiscal year a majority of the Board of Directors of the Company shall be replaced by persons who were not recommended for those positions by at least two-thirds of the directors of the Company who were directors of the Company at the beginning of the fiscal year; or (vi) the Executive's employment is terminated for other than Cause or the Executive is removed from office or position with the Company in either case following commencement by one or more representatives of the Company of discussions (authorized by the Board of Directors or Chief Executive Officer of the Company) with a third party that ultimately results in the occurrence of an event described in clauses (i), (ii), (iii), (iv), or (v) herein, regardless of whether such third party is a party to such occurrence, in which event, for the purposes of this Agreement, the date of the authorization of such discussions is deemed to be the date of the Change in Control of the Company; b) For all purposes of this paragraph 3), the term Company, as previously defined herein, shall include TNP Enterprises, Inc., the parent of Texas-New Mexico Power Company. 4) Termination Following Change in Control of the Company a) Termination If a Change in Control of the Company shall have occurred while the Executive is still an employee of the Company, the Executive shall be entitled to the compensation provided in paragraph 5 upon the subsequent termination of the Executive's employment with the Company by the Executive or by the Company unless such termination is the result of (i) the Executive's death, (ii) the Executive's Disability, (iii) the Executive's decision voluntarily to terminate his employment or retire, but only if Good Reason does not exist, or (iv) the Executive's termination for Cause. Notwithstanding anything in this Agreement to the contrary, termination of the Executive shall not have been for Cause if termination occurred because of (i) bad judgement or negligence on the part of the Executive unless it is demonstrable from historical events that the Executive's bad judgement or negligence shall have been of such an extensive and ongoing nature that it rendered the Executive unable adequately to perform his duties; or (ii) an act or omission believed by the Executive in good faith to have been in, or at least not opposed to, the Company's best interests. For the purposes of this paragraph a), no act, or failure to act, shall be considered "willful" unless done, or omitted to be done, by the Executive without good faith. Good faith shall be based upon a reasonable belief that the action or omission was in, or at least not opposed to, the best interests of the Company. b) Disability For the purposes of this Agreement, Disability shall mean that the Executive is incapacitated due to physical or mental illness or injury and shall have been unable to perform his duties for the Company on a full time basis for six months and, within 30 days after written Notice of Termination is thereafter given by the Company, the Executive shall not have returned to the full time performance of his duties. c) Cause For the purposes of this Agreement, Cause shall mean (i) the willful and continued failure by the Executive substantially to perform his duties with the Company (excluding any failure resulting from Disability), after a written demand for substantial performance is delivered to the Executive by the Chief Executive Officer of the Company setting forth the manner in which the Executive has not been substantially performing his duties and providing the Executive an opportunity to appear before the Board of Directors of the Company with counsel in order to respond to such notice; (ii) the performance by the Executive of any act or acts constituting a felony involving moral turpitude and which results or is intended to result in damage or harm to the Company, whether monetary or otherwise, or which results in or is intended to result in improper gain or personal enrichment; and (iii) violations of the Company's Personnel Policy Manual, as constituted at any time prior to a Change in Control, concerning personal conduct; provided, that the Company must follow its disciplinary procedures as set forth therein. d) Good Reason The Executive may terminate the Executive's employment with the Company and retain his rights to benefits hereunder if Good Reason exists at any time following a Change in Control of the Company. For the purposes of this Agreement, Good Reason shall mean any of the following, unless the Executive has expressly consented in writing otherwise: (i) within six months after a Change in Control of the Company occurs, the Executive, at his discretion, determines that he will not be able to work in a harmonious and effective manner in the performance of his duties on behalf of the Company; provided that, notwithstanding anything in this Agreement to the contrary, the six month period set forth above does not commence until the satisfaction of all conditions precedent to and the closing of the transactions contemplated in paragraph 3)a) (i), (ii), (iii), (iv), or (v) of this Agreement; (ii) the Executive is assigned by the Company to a position or duties which are inconsistent with or materially different from the Executive's duties or position with the Company immediately prior to the Change in Control of the Company; (iii) the Company removes the Executive from or fails to re-elect the Executive to any positions or offices held by the Executive immediately prior to the Change in Control of the Company, unless such action is for Disability, Cause, the Executive's death or the Executive's voluntary termination or retirement if Good Reason does not exist prior to such termination or retirement; (iv) the Executive's base salary or total compensation in effect immediately prior to the Change in Control of the Company is reduced by the Company; (v) the Company fails to increase the Executive's base salary and total compensation after the Change in Control of the Company by the average percentage increase in base salary and total compensation of other persons holding similar positions and titles within the Company; (vi) any failure by the Company to continue in effect any benefit plan or arrangement, or related trust, in which the Executive is participating or in which he may participate at the time of a Change in Control of the Company. Such plans, arrangements, or related trusts (collectively "Plans"), include, but are not limited to, Texas- New Mexico Power Company's Thrift Plan for Employees and Trust Agreement ("Thrift Plan"), Texas-New Mexico Power Company's Pension Plan ("Pension Plan"), Excess Benefit Plan, group life insurance plan, medical, dental, accident and disability plans and any other plans and related trusts which might exist at the time of a Change in Control of the Company; the Company's obligation hereunder to continue in effect any benefit plan or arrangement includes the obligation to irrevocably fund such Plans to the fullest extent allowed by any applicable rules and regulations, within 90 days of the occurrence of a Change in Control of the Company, and to maintain such funding thereafter; (vii) any action taken by the Company which would adversely affect the Executive's participation in or reduce the Executive's benefits received from any Plan; (viii) any action requiring the Executive to relocate outside the county in which he was officed prior to the Change in Control of the Company, except for travel required in the performance of his duties for the Company to an extent substantially consistent with the Executive's travel obligations immediately prior to a Change in Control of the Company; (ix) any failure by the Company to provide an automobile of similar style, class and size which was provided to the Executive by the Company immediately prior to a Change in Control of the Company; (x) any failure by the Company to provide the Executive with the number of paid vacation days to which the Executive was entitled immediately prior to a Change in Control of the Company; (xi) any material breach by the Company of any provision of this Agreement following a Change in Control of the Company; (xii) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company; (xiii) any purported termination by the Company not in compliance with the Notice of Termination provision in paragraph 4)e) below following a Change in Control of the Company; and (xiv) after a Change in Control of the Company, the Company gives notice to the Executive that the term of this Agreement shall not be extended as provided in paragraph 2)a)(i). e) Notice of Termination Any termination of the Executive by the Company pursuant to paragraphs 4)b) or 4)c) for Disability or Cause shall be communicated by a Notice of Termination in substantial compliance with the provisions of paragraph 8). For the purpose of this Agreement, a Notice of Termination shall mean a written notice which shall indicate the specific provisions in this Agreement relied upon for termination of Executive's employment and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination. For the purposes of this Agreement, no purported termination by the Company shall be effective without such Notice of Termination. f) Effective Date of Termination Any termination of the Executive for Disability or Cause pursuant to paragraphs 4)b) or 4)c) shall be effective 30 calendar days after the Notice of Termination is delivered to the Executive; provided that, in the event the termination is for Disability as set out in paragraph 4)b), the Executive has not returned to full time performance of his duties within the 30-day period. All other terminations subject to the terms of this Agreement, whether by the Company or the Executive, shall be effective immediately upon the giving of the Notice of Termination. 5) Severance Compensation upon Termination of Employment If, during the period commencing upon a Change in Control of the Company and ending two years following the satisfaction of all conditions precedent to and consummation of an event described in clauses (i), (ii), (iii), (iv), or (v) of paragraph 3), the Company shall terminate the Executive's employment for any reason other than as a result of the Executive's death or the reasons set out in paragraphs 4)b) or 4)c) in full compliance of the requirements for notice set out in paragraph 4)e) or if the Executive shall terminate his employment with the Company when Good Reason exists, then the Company shall provide for and pay to the Executive the following compensation: a) severance pay in a lump sum, in cash, no later than the fifth calendar day following the date of termination, an amount equal to three times the annual salary as calculated by reference to the Executive's rate of pay set forth in the Company's payroll records and in effect for the Executive immediately prior to a Change in Control of the Company; b) medical, dental, disability and life insurance and other employee benefits upon the same terms and conditions and at the same cost to the Executive that existed immediately prior to the Change in Control of the Company for the lesser of three years or until substantially similar employee benefits are available through other employment; c) if the Executive is fifty years of age or older and has at least twenty years of service with the Company, the Company, in addition to the foregoing benefits, shall pay to the Executive, as an early retirement incentive, an amount, on a monthly basis for the remainder of his life, that is equal to what the Executive's retirement pay would be, calculated using the formula set forth in the Company's Pension Plan as supplemented by the Excess Benefit Plan based upon the base salary earned by the Executive for the necessary number of years immediately prior to the Change in Control of the Company and the number of service credits that the Executive would accumulate if he continued his employment until age 62; provided that to the extent that the Executive would be entitled to retire on the date of termination or upon his achieving an age upon which the Executive could retire pursuant to the Company's Pension Plan as supplemented by the Excess Benefit Plan, and receive payments pursuant to said Pension Plan and Excess Benefit Plan, the Company's obligation to make monthly payments shall be equal to the difference between the amount actually received by the Executive under the Pension Plan as supplemented by the Excess Benefit Plan and the amount required to be paid by the Company as set forth above; provided further that if the Executive becomes entitled to any of the benefits set forth in paragraph 5)b) as a retiree under the Company's Pension Plan on or after the date of termination, then the benefits provided under said Pension Plan and Excess Benefit Plan shall be substituted for and take the place of the benefits that the Company would otherwise be required to provide; and further provided that to the extent any payment or obligation to pay under this paragraph 5)c) is determined by the Internal Revenue Service to be subject to taxation upon the net present value of the stream of payments for which the Company is obligated to pay, then the Company shall pay to the Executive within 30 days of such determination, a lump sum equal to the amount determined by the Internal Revenue Service to be subject to taxation; d) without limiting the generality or effect of any other provision hereof, employee benefit plan, arrangement, or related trust referred to in paragraph 4)d)(vi), the Company shall fully fund each Plan in which the Executive is a participant or is otherwise entitled to payments or benefits within 5 calendar days of the termination of the Executive's employment; e) any excise tax payable pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), as a result of the payment of the amounts described in subparagraphs a), b), and c); and f) any additional federal, state, or local income tax liability (calculated at the highest effective rate applicable to individuals) and excise tax liability (under Section 4999 of the Code) attributable to payments made pursuant to this paragraph 5) hereof. 6) No Obligation to Mitigate Damages; No Effect on Other Contractual Rights a) The Company hereby acknowledges that it will be difficult, and may be impossible, for the Executive to find reasonably comparable employment following the date of termination. In addition, the Company acknowledges that its severance pay plans applicable in general to its salaried employees do not provide for mitigation, offset, or reduction of any severance payment received thereunder. Accordingly, the parties hereto expressly agree that the payment of the severance compensation by the Company to the Executive in accordance with the terms of this Agreement will be liquidated damages, and that the Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall any profits, income, earnings, or other benefits from any source whatsoever create any mitigation, offset, reduction, or any other obligation on the part of the Executive hereunder or otherwise; b) The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish the Executive's existing rights, or rights which would accrue solely as a result of the passage of time, under any benefit plan, incentive plan or securities plan, employment agreement or other contract, plan or arrangement. 7) Successor to the Company a) The Company will require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. Any failure of the Company to obtain such agreement prior to the effectiveness of any such succession or assignment shall be a material breach of this Agreement and shall entitle the Executive to terminate the Executive's employment for Good Reason. As used in this paragraph 7, Company shall have the same meaning as hereinbefore defined and shall include any successor or assign to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this paragraph 7 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. If at any time during the term of this Agreement, the Executive is employed by any corporation a majority of the voting securities of which is then owned by the Company, the Company as used in paragraphs 3, 4, 5, 12, and 13 hereof shall in addition include such employer. In such event, the Company shall pay or shall cause such employer to pay any amount owed to the Executive pursuant to paragraph 5 hereof; b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts are still payable to him hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or, if there be no such designee, to the Executive's estate; c) This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer, or delegate this Agreement or any rights or obligations hereunder except as expressly provided in paragraph 7)a) above. Without limiting the generality of the foregoing, the Executive's right to receive payments hereunder shall not be assignable, transferable, or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by his or her will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this paragraph 7)c), the Company shall have no liability to pay any amount so attempted to be assigned, transferred, or delegated; d) The Company and the Executive recognize that each party will have no adequate remedy at law for breach by the other of any of the agreements contained herein and, in the event of any such breach, the Company and the Executive hereby agree and consent that the other shall be entitled to a decree of specific performance, mandamus, or other appropriate remedy to enforce performance of this Agreement. 8) Notice For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, as follows: If to the Company: Texas-New Mexico Power Company 4100 International Plaza, Tower II Fort Worth, Texas 76109 If to the Executive: 4361 Westdale Dr. Fortworth, Texas 76109 or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 9) Miscellaneous No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. 10) Validity The invalidity or unenforceability of any provision or any part of a provision of this Agreement shall not affect the validity or enforceability of the remaining provisions of this Agreement, which shall remain in full force and effect. 11) Counterparts This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 12) Legal Fees and Expenses The Company is aware that the Board of Directors or a shareholder of the Company or the Company's parent may then cause or attempt to cause the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Company or the Company's parent to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take other action to deny the Executive the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the Company that the Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder, nor be bound to negotiate any settlement of his rights hereunder under threat of incurring such expenses. Accordingly, if it should appear to the Executive that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or to recover from the Executive the benefits intended to be provided to the Executive hereunder, the Company irrevocably authorizes the Executive from time to time to retain counsel of his choice at the expense of the Company as provided in this paragraph 12, to represent the Executive in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director, officer, shareholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney- client relationship between the Company and such counsel, the Company irrevocably consents to the Executive entering into an attorney-client relationship with such counsel, and in that connection the Company and Executive agree that a confidential relationship shall exist between the Executive and such counsel. The Company shall pay or cause to be paid and shall be solely responsible for any and all attorneys' and related fees and expenses incurred by the Executive as a result of the Company's failure to perform this Agreement or any provision hereof or as a result of the Company or any person contesting the validity or enforceability of this Agreement or any provision hereof. Such fees and expenses shall be paid or reimbursed to the Executive by the Company on a regular, periodic basis, within thirty days following receipt by the Company of statements of such counsel in accordance with such counsel's customary practice. In no event shall the Executive be required to reimburse the Company for attorneys' fees or expenses previously paid on behalf of the Executive or reimbursed to the Executive, or for any attorneys' fees or expenses incurred by the Company in connection with any contest of validity or enforceability of this Agreement or any provisions hereof; provided, however, that any litigation by the Executive, whether as plaintiff or defendant, shall be in good faith. 13) Confidentiality The Executive shall retain in confidence any and all confidential information known to the Executive concerning the Company and its business so long as such information is not otherwise publicly disclosed. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. TEXAS-NEW MEXICO POWER COMPANY By \s\ Dwight Spurlock Name: D. R. Spurlock Title: Interim President & Chief Executive Officer \s\ D. R. Barnard Name: D. R. BARNARD Title: Sector Vice President & Chief Officer ATTEST: B. Jan Adkins Asst.Secretary EXECUTIVE POSITIONS* EXECUTION DATE TERM Sector Vice President & Chief Financial Officer November 11, 1993 3 years Sector Vice President - Revenue Production November 11, 1993 3 years Vice President - Chief Engineer November 11, 1993 3 years Vice President - Corporate Affairs November 11, 1993 3 years Vice President - Corporate Services/Generation November 11, 1993 3 years Corporate Secretary & General Counsel November 11, 1993 3 years Treasurer November 11, 1993 3 years Assistant Vice President/Manager - - Contracts & Regulatory Projects November 11, 1993 3 years Assistant Corporate Secretary November 11, 1993 3 years Division Manager - Central November 11, 1993 3 years Division Manager - New Mexico November 11, 1993 3 years Division Manager - Northern November 11, 1993 3 years Division Manager - Southeast November 11, 1993 3 years Division Manager - Western November 11, 1993 3 years Plant Manager - TNP One November 11, 1993 3 years * Names of the individuals who are parties to the listed Agreements have been omitted. Each Agreement inures to the benefit of the person holding the position indicated above at any point in time. EX-10 17 EXHIBIT 10(QQ) TEXAS-NEW MEXICO POWER COMPANY KEY EMPLOYEE AGREEMENT FOR SEVERANCE COMPENSATION UPON CHANGE IN CONTROL This Texas-New Mexico Power Company Key Employee Agreement for Severance Compensation Upon Change in Control ("Agreement") dated November 11, 1993, is by and between Texas-New Mexico Power Company ("Company") and PATRICK BRIDGES ("Employee"). Witnesseth That: WHEREAS, the Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders; and WHEREAS, the Company has determined that in order to best establish and maintain such sound and vital management it is appropriate to establish certain means for reinforcing and encouraging the continued attention and dedication of the Employee as a part of the management of the Company such that they may continue their assigned duties in a proper and efficient manner without distraction because of the possibility of a Change in Control of the Company; and WHEREAS, the Employee is willing to continue to serve the Company but is concerned about the possible effects any Change in Control might have on his duties and responsibility and status as an Employee: NOW, THEREFORE, in consideration of the promises and the mutual agreements herein contained, the Company and Employee hereby enter into this Agreement setting forth the severance compensation and extended benefits which the Company agrees it will pay to the Employee if the Employee's employment with the Company terminates under the circumstances described herein: 1) Company's Right to Terminate Prior to a Change in Control of the Company as herein defined, this Agreement shall terminate if Employee shall resign voluntarily, retire, become disabled, or die. Except as provided in paragraph 3)a)(vi) hereof, this Agreement shall terminate if Employee's employment by the Company shall be terminated, with or without cause, prior to any Change in Control. 2) Term a) The term of this Agreement (the "Term") shall commence as of the date of this Agreement and shall expire as of the earliest of (i) the second annual anniversary of the date hereof; provided that the Board of Directors by resolution duly adopted may extend the Term of this Agreement from time to time, or (ii) termination of the Employee's employment because of death, Disability, voluntary termination or retirement by the Employee for other than Good Reason, or Cause (as those terms may be herein defined); b) Any obligation which has vested under the terms of the Agreement and remains unpaid as of the date the Agreement expires or is terminated shall survive such expiration or termination and be enforceable under the terms of the Agreement. 3) Change in Control of the Company a) For the purposes of this Agreement, a Change in Control of the Company is defined as the occurrence of any one of the following events: (i) there shall be consummated any consolidation or merger of the Company into or with another corporation or other legal person, and as a result of such consolidation or merger less than a majority of the combined voting power of the then- outstanding securities of such corporation or person immediately after such transactions are held in the aggregate by holders of Voting Stock, as herein defined, of the Company immediately prior to such transactions; or (ii) any sale, lease, exchange or other transfer, whether in one transaction or any series of related transactions, of all or significant portions of the assets of the Company to any other corporation or other legal person, less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale, lease, exchange, or transfer is held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale, lease, exchange, or transfer; or (iii) the shareholders of the Company approve any plan for the liquidation or dissolution of the Company or; (iv) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), becomes, either directly or indirectly, the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities representing 15% or more of the combined voting power of the then- outstanding securities entitled to vote generally in the election of directors of the Company ("Voting Stock"); provided that the Trustee of the Thrift Plan shall not be deemed such a person for the purposes of this Section 3(iv); or (v) if at any time during a fiscal year a majority of the Board of Directors shall be replaced by persons who were not recommended for those positions by at least two-thirds of the directors of the Company who were directors of the Company at the beginning of the fiscal year; or (vi) the Employee's employment is terminated for other than Cause or the Employee is removed from office or position with the Company in either case following commencement by one or more representatives of the Company of discussions (authorized by the Board of Directors or Chief Executive Officer of the Company) with a third party that ultimately results in the occurrence of an event described in clauses (i), (ii), (iii), (iv), or (v) herein, regardless of whether such third party is a party to such occurrence, in which event, for the purposes of this Agreement, the date of the authorization of such discussions is deemed to be the date of the Change in Control of the Company; b) For all purposes of this paragraph 3), the term Company, as previously defined herein, shall include TNP Enterprises, Inc., the parent of Texas-New Mexico Power Company. 4) Termination Following Change in Control of the Company a) Termination If a Change in Control of the Company shall have occurred while the Employee is still an employee of the Company, the Employee shall be entitled to the compensation provided in paragraph 5 upon the subsequent termination of the Employee's employment with the Company by the Employee or by the Company unless such termination is the result of (i) the Employee's death, (ii) the Employee's Disability, (iii) the Employee's decision voluntarily to terminate his employment or retire, but only if Good Reason does not exist; or (iv) the Employee's termination for Cause. Notwithstanding anything in this Agreement to the contrary, termination of the Employee shall not have been for Cause if termination occurred because of (i) bad judgement or negligence on the part of the Employee unless it is demonstrable from historical events that the Employee's bad judgement or negligence shall have been of such an extensive and ongoing nature that it rendered the Employee unable adequately to perform his duties; or (ii) an act or omission believed by the Employee in good faith to have been in, or at least not opposed to, the Company's best interests. For the purposes of this paragraph a), no act, or failure to act, shall be considered "willful" unless done, or omitted to be done, by the Employee without good faith. Good faith shall be based upon a reasonable belief that the action or omission was, or at least not opposed to, in the best interests of the Company. b) Disability For the purposes of this Agreement, Disability shall mean that the Employee is incapacitated due to physical or mental illness or injury and shall have been unable to perform his duties for the Company on a full time basis for six months and, within 30 days after written Notice of Termination is thereafter given by the Company, the Employee shall not have returned to the full time performance of his duties. c) Cause For the purposes of this Agreement, Cause shall mean (i) the willful and continued failure by the Employee substantially to perform his duties with the Company (excluding any failure resulting from Disability), subject to any appeal or grievance procedure set forth in the Company's Personnel Policy Manual; (ii) the performance by the Employee of any act or acts constituting a felony involving moral turpitude and which results or is intended to result in damage or harm to the Company, whether monetary or otherwise, or which results in or is intended to result in improper gain or personal enrichment; and (iii) violations of the Company's Personnel Policy Manual, as constituted at any time prior to a Change in Control, concerning personal conduct; provided, that the Company must follow its disciplinary procedures as set forth therein. d) Good Reason The Employee may terminate the Employee's employment with the Company and retain his rights to benefits hereunder if Good Reason exists at any time following a Change in Control of the Company. For the purposes of this Agreement, Good Reason shall mean any of the following, unless the Employee has expressly consented in writing otherwise: (i) the Employee is assigned by the Company to a position or duties which are inconsistent with or materially different from the Employee's duties, or position with the Company immediately prior to the Change in Control of the Company; (ii) the Employee's base salary or total compensation in effect immediately prior to the Change in Control of the Company is reduced by the Company; (iii) the Company fails to increase the Employee's base salary and total compensation after the Change in Control of the Company by the average percentage increase in base salary and total compensation of other persons holding similar positions and titles within the Company; (iv) any failure by the Company to continue in effect any benefit plan or arrangement, or related trust, in which the Employee is participating or in which he may participate at or after the time of a Change in Control of the Company. Such plans, arrangements, or related trusts (collectively "Plans"), include, but are not limited to, Texas-New Mexico Power Company's Thrift Plan for Employees and Trust Agreement ("Thrift Plan"), Texas-New Mexico Power Company's Pension Plan ("Pension Plan"), group life insurance plan, medical, dental, accident and disability plans and any other plans and related trusts which might exist at the time of a Change in Control of the Company; the Company's obligation hereunder to continue in effect any benefit plan or arrangement includes the obligation to irrevocably fund such Plans, to the fullest extent allowed by any applicable rules and regulations, within 90 days of the occurrence of a Change in Control of the Company, and to maintain such funding thereafter; (v) any action taken by the Company which would adversely affect the Employee's participation in or reduce the Employee's benefits received from any plan set forth in paragraph 4)d) (iv) above; (vi) any action requiring the Employee to relocate outside the county in which he was officed prior to the Change in Control of the Company, except for travel required in the performance of his duties for the Company to an extent substantially consistent with the Employee's travel obligations immediately prior to the Change in Control of the Company; (vii) any failure by the Company to provide an automobile of similar style, class and size which was provided to the Employee by the Company immediately prior to the Change in Control of the Company; (viii) any failure by the Company to provide the Employee with the number of paid vacation days to which the Employee was entitled at the time of a Change in Control of the Company; (ix) any material breach by the Company of any provision of this Agreement following a Change in Control of the Company; (x) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company; (xi) any purported termination by the Company not in compliance with the Notice of Termination provision in paragraph 4)e) below following a Change in Control of the Company; and (xii) after a Change in Control of the Company, the Company gives notice to the Employee that the term of this Agreement shall not be extended as provided in paragraph 2)a)(i). e) Notice of Termination Any termination of the Employee by the Company pursuant to paragraphs 4)b) or 4)c) for Disability or Cause shall be communicated by a Notice of Termination in substantial compliance with the provisions of paragraph 8). For the purpose of this Agreement, a Notice of Termination shall mean a written notice which shall indicate the specific provisions in this Agreement relied upon for termination of Employee's employment and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination. For the purposes of this Agreement, no purported termination by the Company shall be effective without such Notice of Termination. f) Effective Date of Termination Any termination of the Employee for Disability or Cause pursuant to paragraphs 4)b) or 4)c) shall be effective 30 calendar days after the Notice of Termination is delivered to the Employee; provided that, in the event the termination is for Disability as set out in paragraph 4)b), the Employee has not returned to full time performance of his duties within the 30-day period. All other terminations subject to the terms of this Agreement, whether by the Company or the Employee, shall be effective immediately upon the giving of Notice of such Termination. 5) Severance Compensation upon Termination of Employment If, during the period commencing upon a Change in Control of the Company and ending two years following the satisfaction of all conditions precedent to and consummation of an event described in clauses (i), (ii), (iii), (iv), or (v) of paragraph 3), the Company shall terminate the Employee's employment for any reason other than as a result of the Employee's death or the reasons set out in paragraphs 4)b) or 4)c) in full compliance of the requirements for notice set out in paragraph 4)e) or if the Employee shall terminate his employment with the Company when Good Reason exists, then the Company shall provide for and pay to the Employee the following compensation: a) severance pay in a lump sum, in cash, no later than the fifth calendar day following the date of termination, an amount equal to the annual salary in effect for the Employee immediately prior to the Change in Control of the Company; and b) medical, dental, disability and life insurance and other employee benefits upon the same terms and conditions and at the same cost to the Employee that existed immediately prior to the Change in Control of the Company for the lesser of one year or until substantially similar employee benefits are available through other employment. 6) No Obligation to Mitigate Damages; No Effect on Other Contractual Rights a) The Company hereby acknowledges that it will be difficult, and may be impossible, for the Employee to find reasonably comparable employment following the date of termination. In addition, the Company acknowledges that its severance pay plans applicable in general to its salaried employees do not provide for mitigation, offset, or reduction of any severance payment received thereunder. Accordingly, the parties hereto expressly agree that the payment of the severance compensation by the Company to the Employee in accordance with the terms of this Agreement will be liquidated damages, and that the Employee shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall any profits, income, earnings, or other benefits from any source whatsoever create any mitigation, offset, reduction, or any other obligation on the part of the Executive hereunder or otherwise; b) The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish the Employee's existing rights, or rights which would accrue solely as a result of the passage of time, under any benefit plan, incentive plan or securities plan, employment agreement or other contract, plan or arrangement. 7) Successor to the Company a) The Company will require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Employee, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. Any failure of the Company to obtain such agreement prior to the effectiveness of any such succession or assignment shall be a material breach of this Agreement and shall entitle the Employee to terminate the Employee's employment for Good Reason. As used in this paragraph 7, Company shall have the same meaning as hereinbefore defined and shall include any successor or assign to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this paragraph 7 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. If at any time during the term of this Agreement, the Employee is employed by any corporation a majority of the voting securities of which is then owned by the Company, the Company as used in paragraphs 3, 4, 5, 12, and 13 hereof shall in addition include such employer. In such event, the Company agrees that it shall pay or shall cause such employer to pay any amount owed to the Employee pursuant to paragraph 5 hereof; b) This Agreement shall inure to the benefit of and be enforceable by the Employee's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Employee should die while any amounts are still payable to him hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Employee's devisee, legatee, or other designee or, if there be no such designee, to the Employee's estate; c) This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer, or delegate this Agreement or any rights or obligations hereunder except as expressly provided in paragraph 7)a) above. Without limiting the generality of the foregoing, the Employee's right to receive payments hereunder shall not be assignable, transferable, or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by his or her will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this paragraph 7)c), the Company shall have no liability to pay any amount so attempted to be assigned, transferred, or delegated; d) The Company and the Employee recognize that each party will have no adequate remedy at law for breach by the other of any of the agreements contained herein and, in the event of any such breach, the Company and the Employee hereby agree and consent that the other shall be entitled to a decree of specific performance, mandamus, or other appropriate remedy to enforce performance of this Agreement. 8) Notice For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, as follows: If to the Company: Texas-New Mexico Power Company 4100 International Plaza, Tower II Fort Worth, Texas 76109 If to the Employee: 2509 Willing Ave. Fort Worth, Texas 76110 or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 9) Miscellaneous No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Employee and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. 10) Validity The invalidity or unenforceability of any provision or any part of a provision of this Agreement shall not affect the validity or enforceability of the remaining provisions of this Agreement, which shall remain in full force and effect. 11) Counterparts This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 12) Legal Fees and Expenses The Company is aware that the Board of Directors or a shareholder of the Company or the Company's parent may then cause or attempt to cause the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Company or the Company's parent to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take other action to deny the Employee the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the Company that the Employee not be required to incur the expenses associated with the enforcement of his rights under this Agreement by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Employee hereunder, nor be bound to negotiate any settlement of his rights hereunder under threat of incurring such expenses. Accordingly, if it should appear to the Employee that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or to recover from the Employee the benefits intended to be provided to the Employee hereunder, the Company irrevocably authorizes the Employee from time to time to retain counsel of his choice at the expense of the Company as provided in this paragraph 12, to represent the Employee in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director, officer, shareholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to the Employee entering into an attorney-client relationship with such counsel, and in that connection the Company and Employee agree that a confidential relationship shall exist between the Employee and such counsel. The Company shall pay or cause to be paid and shall be solely responsible for any and all attorneys' and related fees and expenses incurred by the Employee as a result of the Company's failure to perform this Agreement or any provision hereof or as a result of the Company or any person contesting the validity or enforceability of this Agreement or any provision hereof. Such fees and expenses shall be paid or reimbursed to the Employee by the Company on a regular, periodic basis, within thirty days following receipt by the Company of statements of such counsel in accordance with such counsel's customary practice. In no event shall the Employee be required to reimburse the Company for attorneys' fees or expenses previously paid on behalf of the Employee or reimbursed to the Employee, or for any attorneys' fees or expenses incurred by the Company in connection with any contest of validity or enforceability of this Agreement or any provisions hereof; provided, however, that any litigation by the Employee, whether as plaintiff or defendant, shall be in good faith. 13) Confidentiality The Employee shall retain in confidence any and all confidential information known to the Employee concerning the Company and its business so long as such information is not otherwise publicly disclosed. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. TEXAS-NEW MEXICO POWER COMPANY By \s\ Dwight Spurlock Name: D. R. Spurlock Title: Interim President & Chief Executive Officer \s\ Patrick L. Bridges Name: PATRICK L. BRIDGES Title: Assistant Treasurer ATTEST: B. Jan Adkins Asst. Secretary KEY EMPLOYEE POSITIONS* EXECUTION DATE TERM Assistant Treasurer November 11, 1993 2 years Assistant Treasurer November 11, 1993 2 years General Manager - Human Resources November 11, 1993 2 years Manager - Internal Audit November 11, 1993 2 years General Manager - Information Services November 11, 1993 2 years Manager - Accounting November 11, 1993 2 years Manager - Customer Accounting November 11, 1993 2 years Manager - Electric Operations November 11, 1993 2 years Manager - Engineering November 11, 1993 2 years Manager - Financial Accounting November 11, 1993 2 years Manager - General Office November 11, 1993 2 years Manager - Generation/Environmental Services November 11, 1993 2 years Manager - Rates November 11, 1993 2 years Manager - Resource Planning November 11, 1993 2 years Manager - Wholesale Rates & Regulatory Affairs November 11, 1993 2 years Administrative Assistant November 11, 1993 2 years * Names of the individuals who are parties to the listed Agreements have been omitted. Each Agreement inures to the benefit of the person holding the position indicated above at any point in time. EX-10 18 EXHIBIT 10(RR) AGREEMENT This Agreement is made by and between Texas-New Mexico Power Company ("TNP"), TNP Enterprises, Inc. ("TNPE"), and the subsidiaries of TNP and TNPE not specifically named as parties hereto, but collectively made parties hereto and referred to as the "Subsidiaries", and James M. Tarpley (hereinafter referred to as the "Executive"), an employee, executive officer and member of the Board of Directors of TNP, TNPE and the Subsidiaries immediately prior to the Effective Time of Resignation (as hereinafter defined). PREAMBLE WHEREAS, it is the stated intent of the Boards of Directors of TNP and TNPE that in consideration of the resignation by the Executive of all officer and director positions with TNP, TNPE and the Subsidiaries and in consideration of certain services and agreements as set forth below, from and after the Effective Time of Resignation the Executive shall continue as an employee until age 62 at the same level of compensation and with all the other rights of remuneration and benefits,, of every nature, as he enjoyed immediately prior to the Effective Time of Resignation and, upon attainment of age 62, the Executive shall retire from the service of TNP, TNPE and the Subsidiaries and shall be entitled to the benefits and other payments due an employee on retirement at such age. NOW, THEREFORE, upon the terms and subject to the conditions set forth herein the parties hereto agree as follow: 1. For and in consideration of the compensation and rights of the Executive set forth in paragraph 2 below, the Executive has resigned, and does hereby confirm resignation of, all positions as an officer and director of TNP, TNPE and the Subsidiaries, in all manner effective as of noon, central standard time, on November 9, 1993 (the "Effective Time of Resignation"). 2. (A) From the Effective Date (as hereinafter defined) until the earlier of the death of the Executive and his attaining age 62, he shall remain an employee of TNP and shall receive the following payments and enjoy the following rights and benefits: (1) Payment by TNP to the Executive of an annual compensation of $184,000, payable bi-weekly and with deductions and withholdings therefrom for FICA-OASDI, Federal M-03, FICA-Hl, Group Medical, Basic Thrift and Additional Thrift. (2) Payment by TNP to the Executive of the sum of $100,000 per year, payable bi-weekly, in consideration for the covenants made by the Executive pursuant to paragraph 3 of this Agreement. (3) (i) The uninterrupted continuation of the Executive as a "Participant" in the Thrift Plan, the Pension Plan and the Excess Benef it Plan of TNP,, including rights of designation and selection of options under such Plans as are available to participants in those Plans (and specifically including any rights and options resulting from the reinstatement of employer contributions to the Thrift Plan after June 30, 1994), subject to limitations imposed by the Department of Labor guidelines or by law applicable to an employee under such Plans, (ii) all rights of the Executive and his vife under the Medical Plan and the Group Life Insurance Plan of TNP, including rights to designate beneficiaries and the full amount of life insurance coverage to which he vould be entitled if he had continued to be an officer and director of TNP, TNPE and the Subsidiaries at the compensation level he enjoyed immediately prior to the Effective Time of Resignation and (iii) continued coverage under officers' and directors I professional liability insurance to be maintained by TNP and TNPE for any claims or causes of action heretofore or hereafter inade against, or affecting the liability of, the Executive as an off icer or director of TNP, TNPE or any of the Subsidiaries. It is understood that the Executive I o benef its under the Excess Benefit Plan shall take into account all cash amounts payable to Executive under paragraph 2 (A) (1) and (2) above. Additionally,, to the extent provided by the Board of Directors of TNP as to any other Participant, the Executive shall continue to receive the "Company Matching Contribution" as current compensation as selected by the Executive and his wife by Election Of Compensation Portions Pursuant to Article III of the Thrift Plan, dated June 15, 1989, until such time as another available election as to such rights is made by the Executive. (B) Upon attaining the age of 62, the Executive shall retire and have all the rights of a retired employee, who retired from the offices from which he resigned as set forth in paragraph 1 above, including (without limitation) all rights of payment and other rights under the Pension Plan, the Thrift Plan, the Medical Plan, the Group Life Insurance Plan and the Excess Benefit Plan of TNP. His rights under the Pension Plan, the Thrift Plan, the Medical Plan, the Group Life Insurance Plan and the Excess Benefit Plan of TNP upon retirement at age 62 shall take into account any amendments to the Plans after the Effective Time of Resignation. It is understood and agreed that in calculating service for determining benefits under the Pension Plan of TNP (and the Excess Benefit Plan of TNP, if applicable) service shall commence with the Executive's hire date of July 1, 1958 and end on his attainment of age 62 or death, whichever first occurs. AGREEMENT (C) Notwithstanding the foregoing, it is understood and agreed that: (i) the Executive shall not be a participant in, or beneficiary under, the Disability Plan of TNP, in respect of the understanding and agreement of the parties hereto that no "disability" suffered by the Executive during his life shall in any manner restrict, limit or reduce the payments and other rights of Executive under paragraph 2 above and (ii) that the special liability insurance coverage and "flight" life insurance coverage carried by TNP in respect of the Executive's private aircraft operation shall not continue in effect after the Effective Time of Resignation (but the parties agree that the basic insurance coverage rights set forth in paragraph 2 (A) (3) above are not affected hereby). (D) It is understood and agreed that: (i) the Executive shall be entitled to payment or reimbursement of travel and other business expenses incurred by him in accordance with applicable employer policy through the Effective Date,, (ii) the Executive shall be entitled, both before and after age 62, subject to TNP's reservations policy, to use of the lake recreation facilities of TNP (so long as the same or similar facilities exist), and (iii) the Executive shall be entitled to retain the use of a Petroleum Club of Fort Worth corporate membership through his attainment of age 62, but the Executive shall be responsible for dues and charges related to his use of such membership. 3. In consideration of the payment set forth in paragraph 2(A)(2) above, the Executive shall maintain confidential and not utilize in any future positions with other entities or otherwise for his own personal gain, or publish, any confidential or proprietary information of TNP, TNPE or the Subsidiaries, nor shall he utilize any such confidential or proprietary information in competition with, or to the detriment of, TNP, TNPE and the Subsidiaries. The Executive also agrees that he will not participate in opposition to TNP or TNPE (i) in any regulatory proceeding, either in his individual behalf or in support of others, (ii) in any acquisition of the common stock or substantially all of the assets of TNP or TNPE which is opposed by TNP or TNPE or (iii) in any action of a utility or other entity to obtain a then existing customer or customers of TNP which is opposed by TNP. The foregoing agreements shall not prohibit the Executive's employment by any entity which may be involved in any such opposition to TNP or TNPE from time to time provided that the Executive complies with the foregoing restrictions on his personal actions. 4. In consideration of the compensation set forth in paragraph 2 (A) (1) above, the Executive shall assist TNP with respect to general administrative and management functions for the operation of TNP. Executive shall make himself available to the officers and Board of Directors of TNP on an as needed basis. TNP and TNPE acknowledge and agree that while Executive is employed hereunder, he may represent; perform services for, or be employed by such third parties as the Executive may elect in his discretion, AGREEMENT and that he may pursue his personal business interests unrestricted by his employment hereunder, in each case subject to paragraph 3 above. The parties hereto mutually agree and conf irm that Ira Butler, Jr. is fully acquainted with the understandings and positions of TNP and TNPE and of the Executive vith respect to such contemplated services of the Executive and should there ever arise any dispute between the parties as to a request for such services or the undertaking or declining to undertake such requested services, a final and binding decision shall be made as to any such matter by Ira Butler, Jr. In the event of the death or failure to perform the service herein contemplated by Ira Butler, Jr., the parties hereto agree that W. Douglas Bailey shall make any such decision, it being understood that W. Douglas Bailey possesses the same understandings as to this provision as does Ira Butler, Jr. Reasonable billings for time and expenses of Messrs. Butler or Bailey serving in the foregoing capacity shall be paid by TNP. 5. (A) The Executive does hereby release and forever discharge TNP, TNPE and the Subsidiaries and their past and present board members, off icers, employees, agents, attorneys and other representatives from all claims, demands and causes of action, including but not limi 'ted to those under the Texas State Constitution, the United States Constitution, the Equal opportunity commission, the Texas commission on Human Rights, the Employee Retirement Income Security Act, the Fair Labor Standards Act, the Workers' Compensation Act of the State of Texas, the Texas Unemployment Compensation Act, all civil rights and anti-discrimination laws, all state and federal laws pertaining to declaratory judgments, claims for defamation, libel, slander, invasion of privacy, negligence, intentional or negligent inf liction of mental anguish, breach of covenant of good faith and fair dealing, breach of implied contract or claims for quantum meruit, all laws concerning wrongful discharge, personal injury or occupational disease or injury and claims for breach of an oral or written contract, including without restricting the foregoing generality, any and all claims f or reinstatement, back pay, front pay, overtime pay, holiday pay, furnishing of a home, unpaid wages, salary continuation benef its, health insurance, vacation pay, or other fringe benefits, and including actual damages, liquidated damages, exemplary damages, consequential damages, damages for mental anguish,, damages f or loss of employment prospects, damages for injury to reputation,, lost compensation, incurred liabilities, attorney's fees of any kind, injunctive or declaratory relief, costs, and any other causes of action now existing, whether known or not known. It is understood and agreed that this release provision extends to any act, cause, matter or thing claimed or alleged or which could have been claimed or alleged by the Executive or based upon or connected therewith, during the entirety of the Executivers employment with TNP, TNPE and the Subsidiaries prior to January 1. 1994, the effective date of this Agreement (the "Effective Date"). The Executive has read this release provision and fully understands it to be a release of all claims arising out of -his prior employment and his resignation therefrom set forth in AGREEMENT paragraph 1 above. The Executive represents and warrants that he is legally competent to &Me this release and enter into this Agreement, and does so of his own free will and accord without reliance on any representation of any kind or character not expressly set forth herein; that he has been advised that he is free to employ an attorney to advise him of the propriety in entering into this Agreement, including the release in this paragraph 5 (A) , and that he has been advised that he may take up to 21 days to consider this Agreement, if he so chooses; and that he has also been advised and that he understands that when he chooses to sign this Agreement that he has 7 days to revoke this Agreement, and that any such revocation must be in writing and delivered in person to TNP, TNPE and the subsidiaries. (B) TNP, TNPE and the Subsidiaries do hereby release and forever discharge the Executive from all claims, demands, causes of action and liabilities, and all damages of every nature therefore, now existing, whether known or not known, based upon any conduct of the Executive during the entirety of the Executive's employment with TNP, TNPE and the Subsidiaries prior to the Effective Date, with the exception of any undisclosed act amounting to willful misconduct or undisclosed criminal conduct in breach and default of the Executive's duties and responsibilities to TNP, TNPE or the Subsidiaries. With respect to any claims, demands or causes of action made by third parties against the Executive for alleged misconduct during the entirety of the Executive's employment with TNP, TNPE and the Subsidiaries prior to the Effective Date, the indemnification and reimbursement provisions of such companies' Articles of Incorporation and Bylaws, in addition to officers' and directors' liability insurance referenced above, shall be available to the Executive for the indemnification and reimbursement set forth therein. 6. TNP and TNPE (including their current and future officers and directors) shall assure that this Agreement and all rights of the Executive hereunder shall be fully assumed by any successor to them, by merger, reorganization, asset purchase or otherwise. This Agreement shall be binding upon and inure to the benefit of any such successors in interest to TNP and TNPE, but shall not otherwise be assignable, transferable or delegable without the prior written consent of the Executive. 7. TNP and TNPE (in their behalf and in behalf of the subsidiaries) represent and warrant that: (i) they have all requisite power and authority to execute and deliver this Agreement and perform their duties and obligations hereunder,, (ii) all necessary corporate proceedings of each of them have been duly taken to authorize the execution, delivery and performance of this Agreement by each of such entities, (iii) this Agreement has been duly executed and delivered by such entities, is a legal, valid and binding obligation of each of them and is enforceable as to each of them in accordance with its terms, and (iv) from the Effective Time of Resignation through December 31, 1993, all rights to compensa AGREEMENT tion (including the continuation of the Executive as a "Partici- pant" as described in paragraph 2 (A) (3) above) have continued uninterrupted as contemplated in the Preamble of this Agreement. 8. The parties hereto agree and confirm that: (i) the Executive has left at the offices of TNP all company records and property heretofore utilized by him or under his control, (ii) the personal property of the Executive located at the offices of TNP prior to the resignation described in paragraph 1 above has either been packed and currently remains on the premises of the offices of TNP with the full rights of removal thereof by the Executive upon reasonable notice or has been removed by the Executive and (iii) the legal and accounting expenses incurred in the preparation of this Agreement and the opinion letters to TNP and the Executive, delivered contemporaneously vith the execution and delivery of this Agreement, shall be borne solely by TNP. 9. It is understood and agreed that the releases and discharges by the Executive set forth in paragraph 5(A) above and by TNP, TNPE and the Subsidiaries set forth in paragraph 5(B) above do not extend to any claims, demands or causes of action arising after the Effective Date as to any duty, right, representation or warranty made to or for the benefit of a releasing and discharging party. 10. This Agreement shall inure to the benefit of, and be enforceable by, the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees and/or legatees, including enforcement rights to obtain all payments, and to enforce all rights, in behalf of the Executive, as may be remaining or continuing hereunder. Without the written consent of TNP, the Executive may not assign, transfer or delegate and of his rights or obligations hereunder, except as contemplated by the terms hereof and the terms of the referenced compensatory plans and programs in which rights are granted to the Executive and his wife (and others following the death of the Executive). 11. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be by: (i) United States of America Certified Mail, Return Receipt Requested, postage prepaid, or (ii) Federal Express, United States of America Express mail or similar overnight delivery or courier services, all expenses prepaid,, or (iii) delivery in person to the offices of TNP to the attention of the President of TNP (in behalf of TNP, TNPE and the Subsidiaries) or to the Executive, or (iv) telecopy, telex or similar telecommunications equipment, as applicable to a party hereto. Set forth below are the mailing, delivery and telecommunications points of delivery (if applicable) of each of the initial parties hereto. Any party hereto may change or supplement points and methods of delivery hereunder, by notice as provided herein. The legally designated representatives of the Estate of the Executive (or his heirs, distributees and/or legatees following his death) shall have the right to set forth pursuant to this provision AGREEMENT the point and method of delivery hereunder. Any notice or communication given by Certified Mail shall be deemed given at the time of certification of delivery thereof; any notice given to a designated point of delivery by other means permitted by this provision shall be deemed given at the time of confirmed delivery thereof to the address or telecommunication or other receptacle therefor and may include electronic confirmation of the date and time of receipt at such designated point of delivery; and deliveries in person to the President of TNP (as contemplated herein in behalf of TNP, TNPE and the Subsidiaries) or to the Executive may be by any means and shall be deemed given when personally delivered. For the purposes hereof, notices and other communications contemplated herein shall be delivered to TNP, TNPE and the Subsidiaries: President, Texas-New Mexico Power Company 4100 International Plaza Fort Worth, Texas 76109 Telecopy: (817) 737-1343, Attention: President For the purposes hereof, notices and other communications contem- plated herein shall be delivered to the Executive: Mr. James M. Tarpley 4424 Riveridge Fort Worth, Texas 76109 12. Any waiver, amendment or modif ication of any provision of this Agreement must be in writing and executed and delivered by the Executive and by TNP (in behalf of itself and TNPE and the Subsidiaries). If any provision of this Agreement or the application of any provision hereof to any person or circumstance is held invalid or unenforceable, to the extent held invalid or unenforceable such provision shall be reformed to the extent necessary to make it enforceable and valid and the other provisions or other application of this Agreement shall not be affected; provided, however, that any such invalidity or unenforceability and such reformation of a provision shall not, overall, materially adversely affect the rights of TNP and TNPE hereunder or of the Executive hereunder. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Texas, without giving effect to conflict of laws. AGREEMENT EX-10 19 EXHIBIT 10(SS) AGREEMENT WHEREAS, the then current President & Chief Executive Officer of Texas-New Mexico Power Company and TNP Enterprises, Inc. (the "Companies") resigned as of November 9, 1993; WHEREAS, the Board of Directors of each of the Companies has determined that an interim President should be elected and named Chief Executive Officer to act on behalf of the Companies until such time as a permanent replacement may be determined and retained; and WHEREAS, the Board of Directors of each of the Companies has determined that Dwight R. Spurlock, a director of the Companies, should be elected as Interim President and act as Chief Executive Officer, to perform the functions of the President & Chief Executive Officer during such interim period: It is, therefore, agreed by Texas-New Mexico Power Company and TNP Enterprises, Inc. and Dwight R. Spurlock that he shall act on behalf of the Board of Directors of each of the Companies as the Interim President & Chief Executive Officer of the Companies, subject to and upon the following terms: Article I Term Dwight R. Spurlock agrees to perform the duties of his offices for and until such time as the Board of Directors of each of the Companies elects a person to serve as President or Chief Executive Officer on a regular and ongoing basis. Article II Compensation As compensation to Dwight R. Spurlock for the performance of his duties as Interim President & Chief Executive Officer, Dwight R. Spurlock shall be paid the sum of $30,000 per month or any part thereof payable at the end of any month in which such duties are performed. Compensation payable for the performance of the duties of Interim President & Chief Executive Officer shall be in addition to any such sums to which Dwight R. Spurlock may be entitled as a director or retiree of the Companies. Article III Duties Dwight R. Spurlock shall perform the duties of the offices to which he has been appointed as such duties are set forth in the Bylaws of the Companies. Dwight R. Spurlock shall devote such time and effort to the performance of his duties as may be necessary to fully and competently achieve such duties. Article IV Benefits It is expressly agreed that benefits generally made available to an employee of either of the Companies shall not be made available to Dwight R. Spurlock, and Dwight R. Spurlock expressly waives any right to participate in such benefits other than as may be expressly set forth herein. Neither this agreement nor the waiver contained herein shall affect the benefits to which Dwight R. Spurlock is entitled as either a director or retiree of the Companies. Article V Expense Reimbursement Dwight R. Spurlock is authorized to incur, and the Companies shall either advance or reimburse, reasonable expenses suitable to and in performance of the duties of his office, including entertainment, travel, and housing expenses during the duration of the performance of his duties. Travel expenses shall include the reasonable cost of commuting between his principal residence in Galveston County, Texas, and the General Office of the Companies in Tarrant County, Texas. Housing expenses shall include the cost of a temporary residence in Tarrant County, Texas, and all related expenses. Article VI Termination Either party to this agreement may terminate such agreement at any time upon twenty-four hour written notice delivered to the other party. TEXAS-NEW MEXICO POWER COMPANY \s\ Dwight Spurlock \s\ R. D. Woofter DWIGHT R. SPURLOCK R. D. WOOFTER, Chairman and Agent of the Board of Directors TNP ENTERPRISES, INC. \s\ R. D. Woofter R. D. WOOFTER, Chairman and Agent of the Board of Directors -----END PRIVACY-ENHANCED MESSAGE-----