10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

or

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For Quarter Ended September 30, 2002

Commission File Number 1-3034

Xcel Energy Inc.

(Exact name of registrant as specified in its charter)

Minnesota (State or other jurisdiction of incorporation or organization)	41-0448030 (I.R.S. Employer Identification No.)
800 Nicollet Mall, Minneapolis, Minn. (Address of principal executive offices)	55402 (Zip Code)

Registrant’s telephone number, including area code (612) 330-5500

Former name, former address and former fiscal year, if changed since last report

     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 þ No o

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at Oct. 31, 2002
Common Stock, $2.50 par value	398,714,039 shares

TABLE OF CONTENTS

PART 1. FINANCIAL INFORMATION
		CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
		CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
		CONSOLIDATED BALANCE SHEETS (UNAUDITED)
		CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY (UNAUDITED)
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
	Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
	Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	Item 4. CONTROLS AND PROCEDURES
Part II. OTHER INFORMATION
	Item 1. LEGAL PROCEEDINGS
	Item 3. DEFAULTS UPON SENIOR SECURITIES
	Item 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
CERTIFICATIONS
EX-4.01 Supplemental Indenture dated Aug. 15, 2002
EX-4.02 Supplemental Indenture dated Sept 15, 2002
EX-4.03 Supplemental Indenture dated Aug. 15, 2002
EX-4.04 Supplemental Indenture dated Sept 15, 2002
EX-4.05 Supplemental Indenture dated June 1, 2002
EX-4.06 Supplemental Indenture dated July 1, 2002
EX-4.10 Form of First Notes
EX-4.11 Form of Second Notes
EX-4.12 Form of First Call Notes
EX-4.13 Form of Second Call Notes
EX-4.14 Form of Third Notes
EX-4.15 Form of Third Call Notes
EX-99.01 Statement pursuant to Private Securities
EX-99.1 Certification Pursuant to 18 USC Sec. 1350

PART 1. FINANCIAL INFORMATION

XCEL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Thousands of Dollars, Except Per Share Data)

				Three Months Ended					Nine Months Ended
				Sept. 30					Sept. 30
				2002			2001		2002			2001
Operating revenues:
	Electric utility			$	1,556,942		$	1,818,812	$	4,117,497		$	5,010,201
	Gas utility				138,268			216,589		937,814			1,577,159
	Electric and gas trading margin				2,127			9,341		4,472			91,333
	Nonregulated and other				810,782			825,876		2,107,849			2,102,118
	Equity earnings from investments in affiliates				27,970			111,021		73,139			198,526
		Total operating revenues			2,536,089			2,981,639		7,240,771			8,979,337
Operating expenses:
	Electric fuel and purchased power — utility				618,442			947,914		1,650,961			2,572,456
	Cost of gas sold and transported — utility				58,115			135,734		559,347			1,199,888
	Cost of sales — nonregulated and other				454,505			379,636		1,137,133			1,132,376
	Other operating and maintenance expenses — utility				352,863			382,299		1,088,337			1,124,971
	Other operating and maintenance expenses — nonregulated				197,369			200,778		571,862			463,389
	Depreciation and amortization				270,899			243,797		792,118			671,818
	Taxes (other than income taxes)				87,538			53,894		255,143			236,395
	Special charges (see Note 2)				2,908,347			—		2,978,828			23,018
	Writedowns and disposal losses from investments (see Notes 2 and 3)				128,967			—		133,135			—
			Total operating expenses		5,077,045			2,344,052		9,166,864			7,424,311
Operating income (loss)					(2,540,956	)		637,587		(1,926,093	)		1,555,026
Interest and other nonoperating income— net of other expenses					5,394			19,926		38,679			46,273
Interest charges and financing costs:
	Interest charges — net of amounts capitalized				236,141			203,653		640,925			555,430
	Distributions on redeemable preferred securities of subsidiary trusts				9,586			9,700		28,758			29,100
			Total interest charges and financing costs		245,727			213,353		669,683			584,530
Income (loss) from continuing operations before income taxes and minority interest					(2,781,289	)		444,160		(2,557,097	)		1,016,769
Income taxes (benefit)					(687,955	)		148,131		(616,934	)		324,573
Minority interest (income) expense					(26,129	)		37,210		(39,184	)		57,108
Income (loss) from continuing operations					(2,067,205	)		258,819		(1,900,979	)		635,088
Income (loss) from discontinued operations, net of tax (see Note 3)					(6,755	)		14,084		17,825			14,982
Net income (loss)					(2,073,960	)		272,903		(1,883,154	)		650,070
Dividend requirements on preferred stock					1,060			1,060		3,180			3,180
Earnings (loss) available for common shareholders				$	(2,075,020	)	$	271,843	$	(1,886,334	)	$	646,890
Weighted average common shares outstanding (in thousands):
	Basic				397,405			343,770		376,565			342,378
	Diluted				397,405			344,385		376,565			343,188
Earnings per share — basic — Income (loss) from continuing operations				$	(5.20	)	$	0.75	$	(5.06	)	$	1.85
Discontinued Operations					(0.02	)		0.04		0.05			0.04
Earnings per share — basic				$	(5.22	)	$	0.79	$	(5.01	)	$	1.89
Earnings per share — diluted — Income (loss) from continuing operations				$	(5.20	)	$	0.75	$	(5.06	)	$	1.84
Discontinued Operations					(0.02	)		0.04		0.05			0.04
Earnings per share — diluted				$	(5.22	)	$	0.79	$	(5.01	)	$	1.88

See Notes to Consolidated Financial Statements

1

XCEL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Thousands of Dollars)

				Nine Months Ended Sept. 30
				2002			2001
Operating activities:
	Net (loss) income			$	(1,883,154	)	$	650,070
	Adjustments to reconcile net income to cash provided by operating activities:
		Depreciation and amortization			800,648			715,493
		Nuclear fuel amortization			37,208			31,843
		Deferred income taxes			(849,327	)		(34,193	)
		Amortization of investment tax credits			(10,285	)		(9,684	)
		Allowance for equity funds used during construction			(5,125	)		(6,373	)
		Undistributed equity in earnings of unconsolidated affiliates			(14,544	)		(170,900	)
		Write-downs and losses from investments and disposal of discontinued operations			150,234			—
		Non-cash special charges — primarily asset impairment write-downs			2,961,454			—
		Gain on sale of property			(6,785	)		—
		Unrealized (gain) loss on derivative financial instruments			15,106			13,942
		Change in accounts receivable			(32,686	)		155,090
		Change in inventories			32,981			(123,826	)
		Change in other current assets			146,473			354,756
		Change in accounts payable			81,847			(495,896	)
		Change in other current liabilities			150,831			258,220
		Change in other assets and liabilities			(75,943	)		(994	)
			Net cash provided by operating activities		1,498,933			1,337,548
Investing activities:
	Nonregulated capital expenditures and asset acquisitions				(1,443,999	)		(3,901,094	)
	Utility capital/construction expenditures				(696,092	)		(753,572	)
	Proceeds from sale of property				40,465			—
	Allowance for equity funds used during construction				5,125			6,373
	Investments in external decommissioning fund				(175,356	)		(46,865	)
	Equity investments, loans, deposits and sales of nonregulated projects				(129,464	)		82,194
	Collection of loans made to nonregulated projects				21,081			3,821
	Other investments — net				76,086			(14,205	)
		Net cash used in investing activities			(2,302,154	)		(4,623,348	)
Financing activities:
	Short-term borrowings — net				(172,047	)		737,880
	Proceeds from issuance of long-term debt				2,318,152			2,854,213
	Repayment of long-term debt, including reacquisition premiums				(510,899	)		(422,936	)
	Proceeds from issuance of common stock				570,242			108,609
	Proceeds from NRG stock offering				—			474,348
	Dividends paid				(420,560	)		(388,491	)
		Net cash provided by financing activities			1,784,888			3,363,623
Effect of exchange rates on cash and cash equivalents					5,979			8,173
Net increase in cash and cash equivalents					987,646			85,996
Cash and cash equivalents at beginning of year					277,356			216,491
Cash and cash equivalents at end of period				$	1,265,002		$	302,487

See Notes to Consolidated Financial Statements

2

XCEL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Thousands of Dollars)

			Sept. 30, 2002			Dec. 31, 2001
ASSETS
Current assets:
	Cash and cash equivalents		$	1,265,002		$	277,356
	Restricted cash			208,277			143,009
	Accounts receivable — net of allowance for bad debts of $48,142 and $46,815, respectively			1,049,330			1,075,686
	Accrued unbilled revenues			359,937			495,994
	Materials and supplies inventories — at average cost			333,719			323,505
	Fuel inventory — at average cost			196,328			250,043
	Gas inventories — replacement cost in excess of (below) LIFO: $(41,165) and $11,331, respectively			140,101			126,563
	Recoverable purchased gas and electric energy costs			65,782			52,583
	Derivative instruments valuation — at market			79,839			59,790
	Prepayments and other			303,838			309,554
	Current assets held for sale			192,135			180,413
		Total current assets		4,194,288			3,294,496
Property, plant and equipment, at cost:
	Electric utility plant			16,375,000			16,099,655
	Nonregulated property and other			8,751,511			7,783,994
	Gas utility plant			2,568,036			2,493,028
	Construction work in progress (utility amounts of $890,841 and $669,895, respectively)			1,533,727			3,682,619
		Total property, plant and equipment		29,228,274			30,059,296
	Less: accumulated depreciation			(10,145,971	)		(9,536,854	)
	Nuclear fuel — net of accumulated amortization of $1,047,063 and $1,009,855, respectively			53,295			96,315
		Net property, plant and equipment		19,135,598			20,618,757
Other assets:
	Investments in unconsolidated affiliates			1,141,107			1,209,017
	Notes receivable, including amounts from affiliates of $201,268 and $202,411, respectively			812,370			779,186
	Nuclear decommissioning fund and other investments			732,363			690,734
	Regulatory assets			569,840			502,442
	Derivative instruments valuation — at market			255,606			179,683
	Prepaid pension asset			509,122			378,825
	Goodwill — net (See Note 1)			40,150			63,925
	Intangible assets — net (See Note 1)			62,027			53,369
	Other			402,417			363,551
	Noncurrent assets held for sale			550,887			584,211
		Total other assets		5,075,889			4,804,943
		Total assets	$	28,405,775		$	28,718,196

3

			Sept. 30, 2002		Dec. 31, 2001
LIABILITIES AND EQUITY
Current liabilities:
	Current portion of long-term debt		$	7,521,934	$	419,335
	Short-term debt			2,004,120		2,224,812
	Accounts payable			1,408,852		1,319,770
	Taxes accrued			377,951		246,152
	Dividends payable			75,982		130,845
	Derivative instruments valuation — at market			48,422		83,122
	Other			716,395		698,315
	Current liabilities held for sale			296,929		310,810
		Total current liabilities		12,450,585		5,433,161
Deferred credits and other liabilities:
	Deferred income taxes			1,407,927		2,270,854
	Deferred investment tax credits			172,816		184,148
	Regulatory liabilities			497,274		483,942
	Derivative instruments valuation — at market			119,303		42,445
	Benefit obligations and other			741,948		703,836
	Noncurrent liabilities held for sale			240,895		279,748
		Total deferred credits and other liabilities		3,180,163		3,964,973
Minority interest in subsidiaries				38,837		636,847
Capitalization:
	Long-term debt			6,889,364		11,889,418
	Mandatorily redeemable preferred securities of subsidiary trusts			494,000		494,000
	Preferred stockholders’ equity — authorized 7,000,000 shares, of $100 par value; outstanding shares: 1,049,800			105,320		105,320
	Common stockholders’ equity — authorized 1,000,000,000 shares of $2.50 par value; outstanding shares: 2002, 398,714,039; 2001, 345,801,028			5,247,506		6,194,477
Commitments and Contingent Liabilities (see Note 9)
		Total Liabilities and Equity	$	28,405,775	$	28,718,196

See Notes to Consolidated Financial Statements

4

CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY (UNAUDITED)

Three Months Ended Sept. 30, 2002 and 2001

(Thousands of Dollars)

												Accumulated
												Other				Total
						Retained			Shares Held			Comprehensive			Stockholders'
		Par Value		Premium		Earnings			by ESOP			Income				Equity
Balance at June 30, 2001		$	860,211	$	2,924,429	$	2,401,727		$	(21,502	)	$	(141,000	)		$	6,023,865
Net income							272,903										272,903
Currency translation adjustments													39,066				39,066
After-tax net unrealized losses related to derivatives accounted for as hedges (see Note 11)													(39,068	)			(39,068	)
After-tax net unrealized losses on derivative transactions reclassified into earnings (see Note 11)													12,358				12,358
Comprehensive income for the period																	285,259
Dividends declared:
	Cumulative preferred stock of Xcel Energy						(1,060	)									(1,060	)
	Common stock						(129,343	)									(129,343	)
Issuances of common stock — net			2,076		22,894												24,970
Other							17										17
Repayment of ESOP loan (a)										1,444							1,444
Balance at Sept. 30, 2001		$	862,287	$	2,947,323	$	2,544,244		$	(20,058	)	$	(128,644	)		$	6,205,152
Balance at June 30, 2002		$	992,186	$	4,019,732	$	2,459,374		$	(16,881	)	$	(82,125	)		$	7,372,286
Net income							(2,073,960	)									(2,073,960	)
Currency translation adjustments													(31,515	)			(31,515	)
After-tax net unrealized gains related to derivatives accounted for as hedges (see Note 11)													54,284				54,284
After-tax net unrealized gains on derivative transactions reclassified into earnings (see Note 11)													(17,707	)			(17,707	)
Unrealized gain-marketable securities													(1	)			(1	)
Comprehensive income for the period																	(2,068,899	)
Dividends declared:
	Cumulative preferred stock of Xcel Energy						(1,060	)									(1,060	)
	Common stock						(74,813	)									(74,813	)
Issuances of common stock — net			4,435		15,274												19,709
Other							90						(8	)			82
Repayment of ESOP loan (a)										201							201
Balance at Sept. 30, 2002		$	996,621	$	4,035,006	$	309,631		$	(16,680	)	$	(77,072	)		$	5,247,506

(a) Did not affect cash flows

See Notes to Consolidated Financial Statements

5

XCEL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY (UNAUDITED)

Nine Months Ended Sept. 30, 2002 and 2001

(Thousands of Dollars)

												Accumulated
												Other			Total
						Retained			Shares Held			Comprehensive			Stockholders'
		Par Value		Premium		Earnings			by ESOP			Income			Equity
Balance at Dec. 31, 2000		$	852,085	$	2,607,025	$	2,284,220		$	(24,617	)	$	(156,929	)	$	5,561,784
Net income							650,070									650,070
Currency translation adjustments													17,604			17,604
Cumulative effect of accounting change -SFAS 133													(28,780	)		(28,780	)
After-tax net unrealized gains related to derivatives accounted for as hedges (see Note 11)													7,230			7,230
After-tax net unrealized losses on derivative transactions reclassified into earnings (see Note 11)													32,231			32,231
Comprehensive income for the period																678,355
Dividends declared:
	Cumulative preferred stock of Xcel Energy						(3,180	)								(3,180	)
	Common stock						(386,840	)								(386,840	)
Issuances of common stock — net			10,202		98,407											108,609
Other							(26	)								(26	)
Gain recognized from NRG stock offering					241,891											241,891
Repayment of ESOP loan (a)										4,559						4,559
Balance at Sept. 30, 2001		$	862,287	$	2,947,323	$	2,544,244		$	(20,058	)	$	(128,644	)	$	6,205,152
Balance at Dec. 31, 2001		$	864,503	$	2,969,589	$	2,558,403		$	(18,564	)	$	(179,454	)	$	6,194,477
Net income							(1,883,154	)								(1,883,154	)
Currency translation adjustments													16,982			16,982
After-tax net unrealized gains related to derivatives accounted for as hedges (see Note 11)													69,186			69,186
After-tax net unrealized gains on derivative transactions reclassified into earnings (see Note 11)													(11,921	)		(11,921	)
Unrealized gain-marketable securities													(29	)		(29	)
Comprehensive income for the period																(1,808,936	)
Dividends declared:
	Cumulative preferred stock of Xcel Energy						(3,180	)								(3,180	)
	Common stock						(362,601	)								(362,601	)
Issuances of common stock — net			67,706		510,195											577,901
Acquisition of NRG minority common shares			64,412		555,222								28,150			647,784
Other							163						14			177
Repayment of ESOP loan (a)										1,884						1,884
Balance at Sept. 30, 2002		$	996,621	$	4,035,006	$	309,631		$	(16,680	)	$	(77,072	)	$	5,247,506

(a) Did not affect cash flows

See Notes to Consolidated Financial Statements

6

XCEL ENERGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

In the opinion of management, the accompanying, unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position of Xcel Energy Inc. and its subsidiaries (collectively, Xcel Energy) as of Sept. 30, 2002, and Dec. 31, 2001, the results of its operations and stockholders’ equity for the three months and nine months ended Sept. 30, 2002 and 2001, and its cash flows for the nine months ended Sept. 30, 2002 and 2001. Due to the seasonality of Xcel Energy’s electric and gas sales and variability of nonregulated operations, quarterly results are not necessarily an appropriate base from which to project annual results.

The accounting policies followed by Xcel Energy are set forth in Note 1 to the consolidated financial statements in Xcel Energy’s Annual Report on Form 10-K for the year ended Dec. 31, 2001 and its Current Report on Form 8-K filed Sept. 16, 2002. The following notes should be read in conjunction with such policies and other disclosures in the Form 10-K and Form 8-K.

Certain items in the 2001 income statement and balance sheet have been reclassified to conform to the 2002 presentation. These reclassifications had no effect on stockholders’ equity, net income or earnings per share as previously reported.

1. Accounting Policies and Changes

Intangible Assets — During the first quarter of 2002, Xcel Energy adopted Statement of Financial Accounting Standard (SFAS) No. 142- “Goodwill and Other Intangible Assets”, which requires new accounting for intangible assets, including goodwill. Intangible assets with finite lives will be amortized over their economic useful lives and periodically reviewed for impairment. Goodwill is no longer being amortized, but will be tested for impairment annually and on an interim basis if an event occurs or a circumstance changes between annual tests that may reduce the fair value of a reporting unit below its carrying value.

Xcel Energy had goodwill of approximately $40 million at Sept. 30, 2002, which will not be amortized, consisting of project-related goodwill at NRG Energy, Inc. (NRG) and Utility Engineering. At June 30, 2002, Xcel Energy had initially recorded $62 million of goodwill related to the acquisition of NRG’s minority shares (see Note 5), which was subsequently reallocated to fixed assets related to projects where the fair value of the fixed assets was higher than the carrying value as of June 2002 and to prepaid pension assets. During the first nine months of 2002, Xcel Energy performed impairment tests of its intangible assets. Tests completed to date have concluded that no write-down of these intangible assets is necessary.

With respect to those intangible assets that will continue to be amortized, aggregate amortization expense recognized in the three and nine months ended Sept. 30, 2002, was $2.0 million and $3.9 million, respectively. The annual aggregate amortization expense for each of the five succeeding years is expected to approximate $3.5 million. Intangible assets consisted of the following:

		Sept. 30, 2002				Dec. 31, 2001
		Gross Carrying		Accumulated		Gross Carrying		Accumulated
Class of Intangible Asset		Amount		Amortization		Amount		Amortization
		(Millions of dollars)
Not Amortized:
	Goodwill	$	47.9	$	7.7	$	74.7	$	10.8
Amortized:
	Service contracts	$	73.2	$	17.1	$	90.9	$	19.8
	Trademarks	$	5.1	$	0.5	$	5.0	$	0.4
	Other (primarily franchises)	$	1.8	$	0.5	$	1.9	$	0.3

7

XCEL ENERGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

The following table summarizes the pro forma impact of implementing SFAS No. 142 at Jan. 1, 2001, on the net income for the periods presented. The pro forma income adjustment to remove goodwill amortization is not material to earnings per share previously reported.

	3 Months Ended					9 Months Ended
	Sept. 30, 2002			Sept. 30, 2001		Sept. 30, 2002			Sept. 30, 2001
	(Millions of dollars)
Reported net income (loss)	$	(2,074.0	)	$	272.9	$	(1,883.2	)	$	650.1
Add back: Goodwill amortization (after tax)		—			0.9		—			2.4
Adjusted net income (loss)	$	(2,074.0	)	$	273.8	$	(1,883.2	)	$	652.5
Diluted earnings (loss) per share	$	(5.22	)	$	0.79	$	(5.01	)	$	1.89

Asset Valuation — On Jan. 1, 2002, Xcel Energy adopted SFAS No. 144 - “Accounting for the Impairment or Disposal of Long-Lived Assets,” which supercedes previous guidance for measurement of asset impairments. Xcel Energy did not recognize any asset impairments as a result of the adoption. The method used in determining fair value was based on a number of valuation techniques, including present value of future cash flows. SFAS No. 144 is being applied to NRG’s sale of assets as they are reclassified to “held for sale” and discontinued operations (see Note 3). In addition, SFAS No. 144 is being applied to test for and measure impairment of NRG’s long-lived assets held for use (primarily energy projects in operation and under construction), as discussed further in Note 2.

Trading Operations — In June 2002, the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB) reached a partial consensus on Issue No. 02-03 “Recognition and Reporting of Gains and Losses on Energy Trading Contracts” under EITF Issue No. 98-10, “Accounting for Contracts Involved in Energy Trading and Risk Management Activities” (EITF No. 02-03). The EITF concluded that all gains and losses related to energy trading activities within the scope of EITF No. 98-10 (whether or not settled physically) must be shown net in the statement of income, effective for periods ending after July 15, 2002. Xcel Energy has reclassified revenue from trading activities for all comparable prior periods reported. Such energy trading activities recorded as a component of Electric and Gas Trading Costs, which have been reclassified to offset Electric and Gas Trading Revenues to present Electric and Gas Trading Margin on a net basis, were $1.0 billion and $679 million for the third quarter of 2002 and 2001, respectively. Such reclassifications for the nine months ended Sept. 30, 2002 and 2001 were $2.8 billion and $2.4 billion, respectively. This reclassification had no impact on trading margins or reported net income.

On Oct. 25, 2002, the EITF rescinded EITF No. 98-10. With the rescission of EITF No. 98-10, energy trading contracts that do not also meet the definition of a derivative under SFAS No. 133 — “Accounting for Derivative Instruments and Hedging Activities” must be accounted for as executory contracts. Contracts previously recorded at fair value under EITF No. 98-10 that are not also derivatives under SFAS No. 133 must be restated to historical cost through a cumulative effect adjustment. Xcel Energy has not yet evaluated the effect of adopting this decision when required in 2003.

Diluted Earnings Per Share — Diluted earnings per share is based on the weighted average common stock and common equivalent shares outstanding each period. However, no common equivalent shares shall be included in the computation of any diluted per-share amounts when a loss from continuing operations exists due to their antidilutive effect. Therefore, common equivalent shares of approximately 5.8 million and 2.0 million were excluded from the diluted earnings per share computations for the three and nine months ended Sept. 30, 2002, respectively.

2. Special Charges and Asset Impairments

Special charges included in Operating Expenses include the following:

		3 Months Ended				9 Months Ended
		Sept. 30, 2002		Sept. 30, 2001		Sept. 30, 2002		Sept. 30, 2001
		(Millions of dollars, except EPS)
NRG Asset Impairments		$	2,891	$	—	$	2,891	$	—
NRG Restructuring Costs			18		—		38		—
NEO Charges (NRG)			—		—		36		—
Regulatory Recovery Adjustment (SPS)			—		—		5		—
Restaffing (Utility and Service Companies)			—		—		9		—
Postemployment Benefits (PSCo)			—		—		—		23
	Total Special Charges	$	2,909	$	—	$	2,979	$	23

8

XCEL ENERGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

NRG Asset Impairments — As discussed further in Note 7, during the third quarter of 2002, NRG experienced credit rating downgrades, defaults under certain credit agreements, increased collateral requirements and reduced liquidity. These events resulted in impairment reviews of a number of NRG assets. NRG completed an analysis as of Sept. 30, 2002 of the recoverability of the asset carrying values of its projects factoring in the probability weighting of different courses of action available to NRG given its financial position and liquidity constraints were significantly affected by NRG’s credit rating downgrade at the end of July 2002. This approach was applied consistently to asset groups with similar uncertainties and cash flow streams. As a result, NRG determined that many of its construction projects and its operational projects became impaired during the third quarter of 2002 and should be written down to fair market value. In applying those provisions NRG management considered cash flow analyses, bids and offers related to those projects. The resulting impairments were recognized as Special Charges in the third quarter of 2002 as follows:

		Status	Pretax Charge		Fair Value Basis
		(Millions of dollars)
Projects In Construction or Development
Nelson		Terminated	$	620	Similar asset prices
Pike		Terminated; in
		bankruptcy		529	Similar asset prices
Bourbonnais		Terminated		270	Similar asset prices
Meriden		Terminated		180	Similar asset prices
Brazos Valley		Foreclosure in process		103	Projected cash flows
Kendall & Batesville
expansion and other		Terminated		147	Similar asset prices
Langage (UK)		Terminated		44	Estimated market price
Turbines & other costs		Equipment being sold		309	Similar asset prices
	Total		$	2,202
Operating Projects
Killingholme (UK)		Foreclosure in process	$	478	Projected cash flows
Audrain		Operating at a loss		66	Projected cash flows
Hsin Yu (Taiwan)*		Funding discontinued;
		operating at a loss		122	Projected cash flows
Other		Operating at a loss		23	Projected cash flows
	Total		$	689
Total NRG Impairment Charges			$	2,891

* Excluding minority interest impact, which would reduce pretax cost by $21 million.

All of these impairment charges relate to assets considered held for use under SFAS 144. For fair values determined by similar asset prices, the fair value represents NRG’s current estimate of recoverability from expected marketing of project assets. For fair values determined by estimated market price, the fair value represents a market bid or appraisal received by NRG that NRG believes is best reflective of fair value. For fair values determined by projected cash flows, the fair value represents a discounted cash flow amount (using rates of 8-10 percent) over the remaining life of each project that reflects project-specific assumptions for long-term power pool prices, escalated future project operating costs and expected plant operation given assumed market conditions.

The Loy Yang project is an equity method investment, not subject to SFAS No. 144 impairment provisions. In the second quarter of 2002, NRG began marketing this investment for sale with the condition that it would only sell the investment if it could recover its current carrying value. Since the Company has not received an offer to recover its carrying amount, NRG will continue to hold its investment as long as it has the capability to do so. However, if the Company had elected to sell this investment as of Sept. 30, 2002, it would be required under generally accepted accounting principles to recognize any foreign currency adjustments recorded as a component of accumulated other comprehensive income into income rather than as a component of equity. As of Sept. 30, 2002, foreign currency adjustments of $89 million were deferred in OCI that would be recognized as a loss if the Company had elected to sell this investment. Based on market appraisals received in the second and third quarters, it was determined in the third quarter of 2002 that there has been a decline in Loy Yang’s fair value that is considered by the Company to be other than temporary. Accordingly, an impairment charge of approximately $54 million has been recognized at Sept. 30, 2002.

9

XCEL ENERGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

Additional asset impairments may be recorded by NRG in periods subsequent to Sept. 30, 2002, given the changing business conditions and the resolution of the pending restructuring plan. Management is unable to determine the possible magnitude of any additional asset impairments.

NRG Severance and Restructuring — In the second quarter of 2002, NRG expensed a pretax charge of $20 million, or 4 cents per share, for expected severance and related benefits. Additional severance accruals of $6 million, or 1 cent per share, were made in the third quarter of 2002. Through Sept. 30, 2002, severance costs have been recognized for all employees who had been terminated as of that date. Similar charges are expected to be expensed in the future, as further actions are taken, but are not determinable at this time. Another $12 million, or 2 cents per share, of other NRG restructuring costs were recorded in the third quarter of 2002, including financial advisors, legal advisors and consultants. See Note 6 for further discussion of NRG restructuring activities and developments.

NRG Charges-NEO Project — During the second quarter of 2002, NRG expensed a pretax charge of $36 million, or 6 cents per share, related to its NEO Corporation landfill gas generation operations. The charge was related largely to asset impairments based on a revised project outlook. It also reflects the accrued impact of a dispute settlement with Fortistar, a partner with NEO in the landfill gas generation operations.

Regulatory Recovery Adjustment — In late 2001, Southwestern Public Service (SPS), a wholly owned subsidiary of Xcel Energy, filed an application requesting recovery of costs incurred to comply with transition to retail competition legislation in Texas and New Mexico. During the first quarter of 2002, SPS entered into a settlement agreement with intervenors regarding the recovery of restructuring costs in Texas, which was approved by the state regulatory commission in May 2002. Based on the settlement agreement, SPS wrote off pretax restructuring costs of approximately $5 million, or approximately 1 cent per share.

2002 Restaffing — During the fourth quarter of 2001, Xcel Energy recorded an estimated liability for expected staff consolidation costs for an estimated 500 employees in several utility operating and corporate support areas of Xcel Energy. In the first quarter of 2002, the identification of affected employees was completed and additional pretax special charges of $9 million, or approximately 1 cent per share, were expensed for the final costs of the utility-related staff consolidations. All 564 of accrued staff terminations have occurred.

The following table summarizes the activity related to accrued special charges for restaffing in the first nine months of 2002.

		Dec. 31, 2001		Accrued					Sept. 30, 2002
		Liability		Special Charges		Payments			Liability
		(Millions of dollars)
Utility and corporate employee severance *		$	37	$	9	$	(31	)	$	15
NRG employee severance **			—		26		(5	)	$	21
	Total accrued special charges	$	37	$	35	$	(36	)	$	36

*	Reported on the balance sheet in other current liabilities.
**	$18.5 million reported on the balance sheet in other current liabilities and $2.5 million reported in benefit obligations and other.

Postemployment Benefits — Earnings for the second quarter of 2001 were reduced by 4 cents per share due to a Colorado Supreme Court decision that resulted in a 2001 pretax write-off of $23 million of regulatory assets related to deferred postemployment benefit costs at Public Service Company of Colorado (PSCo), a wholly owed utility subsidiary of Xcel Energy.

3. Discontinued Operations and Assets Held for Sale

In the second and third quarters of 2002, NRG applied the provisions of SFAS No. 144 — Accounting for the Impairment or Disposal of Long-Lived Assets, to certain of its assets, which were held for sale. SFAS No. 144 requires that assets held for sale be valued on an asset-by-asset basis at the lower of carrying amount or fair value less costs to sell. In applying those provisions, NRG considered cash flow analyses, bids and offers, related to those businesses. As a result, NRG recorded an estimated losses of $86 million on disposal for assets held for sale. A portion of this amount is included as Income (loss) from discontinued operations for consolidated projects and the majority is reported as Estimated loss from disposal of equity investments for equity method projects in the accompanying Consolidated Statements of Income. In accordance with the provisions of SFAS No. 144, the assets classified as assets held for sale will not be depreciated commencing the beginning of the month in which they were classified as such.

10

XCEL ENERGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

Discontinued Operations — NRG

As of Sept. 30, 2002, four projects of NRG (Bulo Bulo, Csepel, Entrade and Crockett Cogeneration Project) that were consolidated on NRG’s financial statements had been classified as held for sale. The operating results and estimated losses on disposal for these projects have been separately classified and reported as discontinued operations in the accompanying financial statements.

Bulo Bulo — In June 2002, NRG began negotiations for the sale of its 60-percent interest in Companie Electrica Central Bulo Bulo S.A. (Bulo Bulo), a Bolivian corporation, to its 40 percent partner, Pan American Energy LLC. During the second quarter of 2002, NRG classified Bulo Bulo as held for sale and recognized an estimated disposal loss of approximately $9.7 million as discontinued operations. The transaction is expected to reach financial close in fourth quarter 2002.

Crockett Cogeneration Project — In September 2002, NRG announced that it had reached an agreement to sell its 57.7-percent interest in Crockett Cogeneration Project, a 240-megawatt, natural gas-fueled cogeneration plant near San Francisco, Calif., to an undisclosed buyer. Upon closing of the sale of Crockett, NRG expects to realize net cash proceeds of approximately $70 million and expects to reduce balance sheet debt and credit obligations by approximately $240 million. Crockett has been classified as held-for-sale and a loss of approximately $7 million has been reported in discontinued operations in the third quarter of 2002.

Hungarian and Czech Assets — In September 2002, NRG announced it had reached agreement to sell its Csepel power generating facilities, its 44.5-percent interest in ECKG power station and its interest in Entrade, an electricity trading business, to Atel, an independent energy group headquartered in Switzerland. NRG expects to realize net cash proceeds of approximately $200 million from the sale with closing anticipated in first quarter 2003. The transaction, which requires approval by competition authorities, is expected to close before year-end and is expected to result in a gain, net of transaction fees. This gain will not be recognized until closing occurs.

Located on Csepel Island in Budapest, Hungary, Csepel I is a 116-megawatt thermal plant, and Csepel II is a 389-megawatt gas turbine power generating station. ECKG, a 343-megawatt coal- and gas-fueled power station and a 173-megawatt thermal plant, is located in Kladno, Czech Republic. Based in Prague, Entrade markets and trades electricity in Central and Eastern Europe.

The following is a summary of the components of discontinued operations:
	3 Months Ended					9 Months Ended
	Sept. 30					Sept. 30
	2002			2001		2002			2001
	(Thousands of dollars)
Operating Revenues	$	121,976		$	103,100	$	373,080		$	280,203
Operating & Other Expenses		121,308			87,247		338,158			263,416
Estimated Loss on Disposal		(7,423	)		—		(17,097	)		—
Income (loss) before taxes		(6,755	)		15,853		17,825			16,787
Income tax expense		—			1,769		—			1,805
Net income (loss) from discontinued operations	$	(6,755	)	$	14,084	$	17,825		$	14,982

Other Assets Held for Sale — NRG

As of Sept. 30, 2002, five significant projects of NRG (Collinsville, ECKG, Energy Development Limited, SRW Cogeneration and Mt. Poso) that were reflected as equity investments on NRG’s financial statements had been classified as held for sale. In the accompanying financial statements, the operating results of these projects are classified in revenue as Equity earnings from investments in affiliates, and the estimated losses on disposal for these projects have been classified and reported as a component of Estimated loss from disposal of equity investments for equity method projects. For the nine months ended Sept. 30, 2002, NRG had recorded charges of $117.9 million to write-down the carrying value of equity investments due to losses expected from sales.

Energy Development Limited — On July 25, 2002, NRG announced it had agreed to the sale of its ownership interests in an Australian energy company, Energy Development Limited (EDL). EDL is engaged in the development and management of an international portfolio of projects with a particular focus on renewable and waste fuels. In October 2002, NRG received proceeds of $78.5 million (AUS), or approximately $43.9 million (USD), from the sale in exchange for its ownership interest in EDL with the closing of the transaction. During the second quarter of 2002, NRG recognized an estimated loss on the sale of approximately $14.3 million in the third quarter of 2002.

Collinsville Power Station — In August 2002, NRG announced it had entered into an agreement for the sale of its 50-percent interest in the 192-megawatt Collinsville Power Station in Australia to an existing partner, a subsidiary of Transfield Services Limited for $8.6 million (AUS), or approximately $4.8 million (USD). NRG recognized an estimated loss on the sale of approximately $4.1 million (USD) during the second quarter of 2002.

11

XCEL ENERGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

Sabine River — In September 2002, NRG agreed to transfer its indirect 50 percent interest in SRW Cogeneration LP (SRW), which owns a cogeneration facility in Orange County, Texas, to Conoco, in consideration for Conoco’s agreement to terminate or assume all of the obligations of NRG in relation to SRW including all of NRG’s obligations under the Tolling Agreement with SRW. The sale closed on Nov. 5, 2002 and resulted in a loss of approximately $49 million which was accrued in the third quarter of 2002.

Mount Poso — In September 2002, NRG agreed to sell its 39.5 percent indirect partnership interest in Mt. Poso Cogeneration Company, a California limited partnership (Mt. Poso), which owns a 49.5 megawatt coal-fired cogeneration power plant and thermally enhanced oil recovery factory in California, to Red Hawk Energy, LLC of $10 million less financial advisors fees of $200,000. This sale is expected to close in November 2002 and is expected to result in a loss to NRG of approximately $400,000, which was accrued in the third quarter of 2002.

Yorkshire Power Group Sale

In August 2002, Xcel Energy announced it had sold its 5.25-percent interest in Yorkshire Power Group Limited for $33 million to CE Electric UK. Xcel Energy and American Electric Power Co. each held a 50-percent interest in Yorkshire, a UK retail electricity and gas supplier and electricity distributor, before selling 94.75 percent of Yorkshire to Innogy Holdings plc in April 2001. The sale of the 5.25-percent interest resulted in an after-tax loss of $8.3 million, or 2 cents per share, in the third quarter of 2002. The loss is included in write-downs and disposal losses from investments on the Statement of Income.

4. Business Developments

NRG Divestitures and Project Terminations

Conectiv — In April 2002, NRG terminated its agreement with a subsidiary of Conectiv, pursuant to which NRG was to acquire 794 megawatts of generating capacity and other assets, including an additional 66 megawatts of the Conemaugh Generating Station and an additional 42 megawatts of the Keystone Generating Station. Canceling the acquisition will result in a $230 million reduction in NRG’s capital spending for 2002. No incremental costs were incurred by NRG related to the termination of this agreement.

FirstEnergy Assets — In 2001, NRG had signed purchase agreements to acquire or lease a portfolio of generating assets from FirstEnergy Corporation. Under the terms of the agreements, NRG had agreed to finance approximately $1.6 billion for four primarily coal-fueled generating stations.

On Aug. 8, 2002, FirstEnergy notified NRG that the agreements related to FirstEnergy generating assets had been cancelled. FirstEnergy cited the reason for canceling the agreements as an alleged anticipatory breach of certain obligations in the agreements by NRG. FirstEnergy also notified NRG that it is reserving the right to pursue legal action against NRG and Xcel Energy for damages, based on the alleged anticipatory breach. At this time, NRG cannot predict the effect on NRG of any legal action that might be brought. NRG continues to evaluate the implications of the cancellation and its potential exposure to FirstEnergy.

LSP Pike Energy, LLC — In August 2002, The Shaw Group (Shaw) and NRG tentatively entered into an agreement to transfer NRG’s interest in the assets in LSP Pike Energy, LLC (Pike) to Shaw. Pike is a 1,200-megawatt, combined-cycle gas turbine plant currently under construction in Mississippi, which is approximately one-third completed. The agreement was subject to approval by the NRG board of directors and lenders. Pike, NRG and the Pike Project lenders have not approved the agreement and are not expected to in the near term.

12

XCEL ENERGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

On Oct. 17, 2002, Shaw filed an involuntary petition for liquidation of Pike in the U.S. District Court for the Southern District of Mississippi under Chapter 7 of the U.S. Bankruptcy Code. Shaw also filed suit against Xcel Energy, NRG, certain NRG subsidiaries, Wayne Brunetti and Richard Kelly. The suit seeks recovery of approximately $130 million, as a result of what Shaw asserts are multiple breaches of contract and under various other liability theories, including that the corporate veils between Xcel Energy, NRG and Pike should be ignored. Defendants expect to challenge the allegations vigorously. The carrying value of NRG’s Pike assets has been reduced substantially as a result of the asset impairments reflected as Special Charges. See discussion in Note 2.

Discontinued Operations and Assets Held for Sale — See Note 3 for discussion of other NRG divestitures that are reported as discontinued operations or assets held for sale as of Sept. 30, 2002.

Other Developments

TRANSLink Transmission Company, LLC (TRANSLink) — In September 2001, Xcel Energy and several other electric utilities applied to the Federal Energy Regulatory Commission (FERC) to integrate operations of their electric transmission systems into a single system through the formation of TRANSLink, a for-profit, independent transmission-only company. The utilities will participate in TRANSLink through a combination of divestiture, leases and operating agreements. The applicants are: Alliant Energy’s Iowa company (Interstate Power and Light Co.), Corn Belt Power Cooperative, MidAmerican Energy Co., Nebraska Public Power District, Omaha Public Power District and Xcel Energy. The participants believe TRANSLink is the most cost-effective option available to manage transmission and to comply with regulations issued by the FERC in 1999, known as Order No. 2000, that require investor-owned electric utilities to transfer operational control of their transmission system to an independent regional transmission organization (RTO).

Under the proposal, TRANSLink will be responsible for planning, managing and operating both local and regional transmission assets. TRANSLink also will construct and own new transmission system additions. TRANSLink will collect revenue for the use of Xcel Energy’s transmission assets through a FERC-approved, regulated cost-of-service tariff and will collect its administrative costs through transmission rate surcharges. Transmission service pricing will continue to be regulated by the FERC, but construction and permitting approvals will continue to rest with regulators in the states served by TRANSLink. The participants also have entered into a memorandum of understanding with the Midwest Independent Transmission Operator, Inc. (MISO) in which they agree that TRANSLink will contract with the MISO for certain other required RTO functions and services. In May 2002, the partners formed TRANSLink Development Company, LLC., which is responsible for pursuing the actions necessary to complete the regulatory approval of TRANSLink Transmission Company, LLC.

In April 2002, the FERC gave conditional approval for the applicants to transfer ownership or operations of their transmission systems to TRANSLink and to form TRANSLink as an independent transmission company operating under the umbrella RTO organization of MISO. The FERC conditioned TRANSLink’s approval on the resubmission of its tariff as a separate rate schedule to be administered by the MISO. TRANSLink Development Company made this rate filing in October 2002. Eleven intervenors had requested that the FERC clarify or reconsider elements of the TRANSLink decision. On Nov. 1, 2002, the FERC issued its order supporting the approval of the formation of TRANSLink. The FERC also clarified several issues covered in its April 2002 order. Several state approvals also would be required to implement the proposal, as well as SEC approval. Subject to receipt of required regulatory approvals, TRANSLink is expected to begin operations in the third quarter of 2003.

Viking Gas Transmission Company — On Nov. 7, 2002, Xcel Energy reached an agreement to sell its wholly owned subsidiary, Viking Gas Transmission Company (Viking) and Viking’s share of Guardian Pipeline to Border Viking Company (Border) whose ultimate parent is Northern Border Partners L.P. Pursuant to the agreement, Border would purchase Viking and a one-third interest in Guardian Pipeline for approximately $152 million, including the assumption of outstanding debt. The purchase is expected to close in the first quarter of 2003, subject to receipt of all necessary approvals.

13

XCEL ENERGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

5. Acquisition of Minority NRG Common Shares

During the second quarter of 2002, Xcel Energy acquired all of the 26 percent of NRG shares not then owned by Xcel Energy through a tender offer and merger involving a tax-free exchange of 0.50 shares of Xcel Energy common stock for each outstanding share of NRG common stock. The transaction was completed on June 3, 2002.

The exchange of NRG common shares for Xcel Energy common shares was accounted for as a purchase. The 25,764,852 shares of Xcel Energy stock issued were valued at $25.14 per share, based on the average market price of Xcel Energy shares for three days before and after April 4, 2002, when the revised terms of the exchange were announced and recommended by the independent members of the NRG Board. Including other costs of acquisition, this resulted in a total purchase price to acquire NRG’s shares of approximately $650 million as of June 30, 2002. Due to the acquisition occurring near quarter-end, additional acquisition costs recorded in the third quarter of 2002 increased the purchase price as of Sept. 30, 2002, to $656 million.

The process to allocate the purchase price to underlying interests in NRG assets, and to determine fair values for the interests in assets acquired was initially completed during the third quarter and resulted in approximately $62 million of amounts preliminarily reported as goodwill which have subsequently been reallocated to fixed assets related to projects where the fair values were in excess of carrying values and to prepaid pension assets. The preliminary purchase price allocation is subject to change as the final purchase price allocation and asset valuation process is completed.

6. NRG Restructuring Plan

Since mid-August, NRG engaged in the preparation of a comprehensive business plan and forecast. The business plan detailed the strategic merits and financial value of NRG’s projects and operations. It also anticipates that NRG will function independent from Xcel Energy and thus all plans and efforts to combine certain functions of the companies were terminated. NRG utilized independent electric revenue forecasts from an outside energy markets consulting firm to develop the forecasted cash flow information included in the business plan. Management concluded that the forecasted free cash flow available to NRG after servicing project-level obligations will be insufficient to service recourse debt obligations. Based on this information in conjunction with Xcel Energy and its financial advisor, NRG prepared and submitted to its, and a number of its subsidiaries’ various lenders, bondholders and other creditor groups (collectively, “NRG’s Creditors”) a restructuring plan on Nov. 4, 2002. The restructuring plan is expected to serve as a basis for negotiations with NRG’s Creditors in a financially-restructured NRG and, among other things, proposes (i) holders of secured (project-level) debt would either (a) have their debt reinstated with agreed modifications or (b) receive the collateral securing such debt and a claim or claims to the extent such debt is under-secured; (ii) holders of unsecured debt, holders of secured recourse claims against NRG, and holders of other general unsecured claims against NRG would receive a pro rata share of (a) an aggregate of $500 million of junior secured debt of reorganized NRG and (b) 95% of the common equity of reorganized NRG; and (iii) holders of project-level general unsecured claims that are non-recourse to NRG would receive a pro rata share of the remaining 5% of the common equity of reorganized NRG.

The restructuring plan also includes a proposal addressing Xcel Energy’s continuing role and degree of ownership in NRG and obligations to NRG. Based on the advice of its financial advisor that NRG is likely insolvent and in return for a release of any and all claims against Xcel Energy, the plan proposes that, upon consummation of the restructuring, Xcel Energy would pay $300 million to NRG. The plan separately proposes that Xcel Energy surrender its equity ownership of NRG. The plan does not contemplate any sharing by Xcel Energy with NRG’s Creditors of any benefits Xcel Energy might receive in connection with the tax matters described below. There can be no assurance that the restructuring plan submitted by NRG will be accepted by NRG’s Creditors or that it will not be significantly revised as a result of ongoing negotiations. Furthermore, there can be no assurance that NRG’s Creditors ultimately will accept any consensual restructuring plan. Xcel Energy is unable to predict whether NRG will be able to implement any such restructuring plan, or whether, in the interim, NRG’s lenders and bondholders will continue to forbear from exercising any or all of the remedies available to them, including acceleration of NRG’s indebtedness, commencement of an involuntary proceeding in bankruptcy and, in the case of certain lenders, realization on the collateral for their indebtedness. On Nov. 6, 2002, lenders to NRG accelerated approximately $1.1. billion of NRG’s debt under a construction revolver financing facility, rendering the debt due and payable. Based on discussions with the lenders, it is NRG’s understanding that the administrative agent issued the acceleration notice to preserve certain rights under the construction revolver financing agreements.

Whether NRG does or does not reach a consensual arrangement with NRG’s Creditors, there is a substantial likelihood that NRG will be the subject of a bankruptcy proceeding. If an agreement were reached with NRG’s Creditors on a restructuring plan, it is expected that NRG would commence a Chapter 11 bankruptcy case and immediately seek approval of a prenegotiated plan of reorganization. Absent an agreement with NRG’s Creditors and the continued forbearance by such creditors, NRG will be subject to substantial doubt as to its ability to continue as a going concern and will likely be the subject of a voluntary or involuntary bankruptcy proceeding, which, due to the lack of a prenegotiated plan of reorganization, would be expected to take an extended period of time to be resolved and may involve claims against Xcel Energy under the equitable doctrine of substantive consolidation. See “Potential NRG Bankruptcy” under Note 9.

Since the acquisition of 100 percent ownership of NRG in June 2002, Xcel Energy has been operating under the following assumptions related to income tax attributes assignable to NRG: (a) NRG is a going concern; (b) Xcel Energy retains a controlling interest in NRG; and (c) NRG will rejoin Xcel Energy’s consolidated group for federal income tax purposes effective June 2002 and will, again, become a party to Xcel Energy’s Tax Allocation Agreement. Under this Tax Allocation Agreement, subsidiaries are paid for taxable losses used by the consolidated group and likewise remit taxable income. To date, no formal election has been made by Xcel Energy to reconsolidate NRG for federal income tax purposes, and NRG has not become a signatory to the Tax Allocation Agreement. Consistent with the foregoing assumptions, Xcel Energy included NRG in its third quarter 2002 estimated income tax payment calculation as if it were included in Xcel Energy’s consolidated federal income tax group for 2002. In addition, Xcel Energy applied the Tax Allocation Agreement as if NRG were included in Xcel Energy’s Consolidated federal income tax group for 2002 and, therefore, made a cash payment of $24 million to NRG in September 2002 for tax benefits expected to be provided by NRG to the Xcel Energy consolidated tax group for the period from and after the acquisition of 100 percent ownership of NRG in June 2002. Based on changed circumstances subsequent to Sept. 30, 2002, it is likely, though not certain, that Xcel Energy will eventually decide not to consolidate NRG for income tax purposes for 2002 when Xcel Energy files its 2002 consolidated income tax returns in

14

XCEL ENERGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

2003.     Xcel Energy’s decision in this regard will depend on a variety of factors, including the outcome of ongoing negotiations with NRG’s Creditors. If Xcel Energy does not consolidate NRG on its 2002 federal income tax return, such action may be contested by NRG’s Creditors.

7. NRG Liquidity & Related Credit Contingencies

NRG Credit Rating — In December 2001, Moody's placed NRG's long-term senior unsecured debt rating on review for downgrade. In response to this threat to NRG's investment grade rating, on Feb. 17, 2002, Xcel Energy announced a financial improvement plan for NRG, which included an initial step of acquiring 100 percent of NRG through a tender offer to exchange all of the outstanding shares of NRG common stock for Xcel Energy common shares. In addition, the plan included financial support to NRG from Xcel Energy; marketing certain NRG generating assets for possible sale; cancelling and deferring capital spending for NRG projects; and combining certain of NRG's functions with Xcel Energy's system and organization. On June 3, 2002, Xcel Energy completed its exchange offer for the 26 percent of NRG's shares that had been previously publicly held. Xcel Energy offered NRG shareholders 0.50 shares of Xcel Energy common stock for each outstanding share of NRG common stock (see Note 5). Throughout this period of time, NRG was in discussions with credit agencies and believed that its actions were sufficient to avoid a downgrade.

However, even with NRG's efforts to avoid a downgrade, unexpectedly on July 26, 2002, Standard & Poors' downgraded NRG's senior unsecured bonds below investment grade, and three days later Moody's Investors' Services also downgraded NRG's senior unsecured debt rating below investment grade. Over the next few months NRG senior unsecured debt, as well as the secured NRG Northeast Generating LLC bonds and the secured NRG South Central Generating LLC bonds, were downgraded multiple times. After NRG failed to make the payment obligations due under certain unsecured bond obligations on Sept. 16, 2002, both Moody's and S&P lowered their ratings on NRG's unsecured bonds once again. Currently, unsecured bond obligations carry a rating of between CCC and D, depending on both the specific debt issue and the rating agency rating system. Credit ratings are not a recommendation to buy, sell or hold securities, and each rating should be evaluated independently of any other rating.

The current credit ratings of NRG have resulted in its inability to access the capital markets.

NRG Liquidity Issues — As a result of the credit rating agencies unexpectedly downgrading NRG’s credit rating below investment grade, NRG is required to post estimated collateral ranging from approximately $1.1 billion to $1.3 billion. NRG previously believed it could meet the collateral requirements that would result from such an occurrence with available cash, operating cash flows, equity contributions from Xcel Energy, proceeds from asset sales and the issuance of bonds into the capital markets or as a private placement.

NRG obtained an agreement with various lenders to extend, until Nov. 15, 2002, the deadline by which it must post this cash collateral. This deadline has passed and NRG has not posted the required collateral. The extension agreement called for NRG to submit a comprehensive restructuring plan to its lenders and bondholders by late October (see Note 6). The extension agreement did not waive other events of default, including failure to make principal and/or interest payments when due or failure to comply with financial covenants. Nor did the extension agreement waive the rights of the bank group or the bondholders to pursue any rights and remedies in respect of such other defaults.

On Nov. 6, 2002, lenders to NRG accelerated approximately $1.1 billion of NRG's debt under a construction revolver financing facility, rendering the debt immediately due and payable. This action terminated the collateral call extension letter (CCEL) in effect between NRG and its major lenders. The extension letter was previously scheduled to expire Nov. 15, 2002. Based on discussions with the construction revolver lenders it is NRG's understanding that the administrative agent, Credit Suisse First Boston, issued the acceleration notice to preserve certain rights under the construction revolver financing agreements. NRG believes that the administrative agent intends to forbear in the immediate exercise of any rights and remedies against NRG.

NRG has missed several scheduled payments of interest and principal on some of its bonds as discussed later and in Part II, Item 3. Consequently, NRG is, and expects to continue to be, in default under various debt instruments. By reason of these various defaults, the lenders are able to seek to enforce their remedies and that would likely lead to a bankruptcy filing by NRG.

In addition, NRG South Central LLC, a wholly owned subsidiary of NRG, has not made approximately $47 million in combined principal and interest payments on 8.962 percent series A-1 senior secured bonds due 2016 and 9.479 percent series B-1 senior secured bonds due 2024. As discussed above, pending agreement on a restructuring plan, NRG does not expect to make any further payments of principal or interest on its debt.

As discussed in Note 6, NRG continues to work with its lenders on a comprehensive restructuring plan that would address the collateral requirements and its debt and other obligations. Absent an agreement on this restructuring plan, NRG will continue to be in default under its debt and other obligations because it does not have sufficient funds

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to meet the requirements and obligations. There can be no assurance that NRG will be able to effect a consensual restructuring or otherwise satisfactorily resolve these issues soon, or at all. It is unlikely that Xcel Energy ultimately will own any equity interest in a restructured NRG.

In addition to the collateral requirements and its debt payment obligations, NRG must continue to meet its ongoing operational and construction funding requirements. Since NRG’s downgrade, its cost of borrowing has increased and it has no access to the capital markets. As a consequence, NRG has developed an updated business plan and, in October 2002 and early November 2002, presented this plan along with a comprehensive restructuring plan to its lenders and bondholders (see Note 6). NRG believes that its current funding requirements under its already reduced construction program may be unsustainable given its inability to raise cash through the capital markets and the uncertainties involved in obtaining additional equity funding from Xcel Energy. NRG and Xcel Energy have retained financial advisors to help work through these issues. NRG is unsure as to the resolution of all issues. NRG’s initial priorities have been obtaining waivers to delay its collateral calls and developing of a restructuring plan.

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As discussed earlier, NRG is not making any payments of principal and interest on its corporate level debt and neither NRG nor any subsidiary is making payment of principal or interest on publicly-held bonds and certain project-level credit facilities. This failure to pay, coupled with past and anticipated proceeds from the sales of projects, has provided NRG with adequate liquidity to meet its day-to-day operating costs. However, there can be no assurance that holders of NRG indebtedness on which interest and principal are not being paid will not seek to enforce their remedies, which would likely lead to NRG seeking relief under bankruptcy laws.

At the present time and based on conversations with various lenders, Xcel Energy management believes that the appropriate course of action is to seek a consensual restructuring of NRG with NRG Creditors. Following an agreement on the restructuring with NRG’s Creditors and as described in Note 6 above, it is expected that NRG would commence a Chapter 11 bankruptcy proceeding and immediately seek approval of a prenegotiated plan of reorganization. If a consensual restructuring cannot be reached, substantial doubt would exist as to NRG's ability to continue as a going concern and, the likelihood of NRG being subject to a protracted voluntary or involuntary bankruptcy proceeding is increased. Although there is a substantial likelihood that NRG will be the subject of a bankruptcy proceeding, if a consensual restructuring of NRG cannot be obtained and NRG remains outside of a bankruptcy proceeding, NRG is expected to continue selling assets to reduce its debt and improve its liquidity.

NRG Debt Covenants and Restrictions

As a consequence of NRG’s credit rating downgrades, defaults under certain agreements, including collateral requirements, reduced liquidity and asset impairments (discussed in Note 2) that occurred during the third quarter of 2002, a portion of NRG’s long term debt obligations have been classified as a current liability on the accompanying balance sheets due to the lenders having the ability to call such debt, including $3.1 billion that is in default. As of Sept. 30, 2002, approximately $6.7 billion of NRG’s long term debt has been reclassified to current from long term.

Short-term Credit Facility Covenants — In May 2001, NRG’s wholly-owned subsidiary, NRG Finance Company I LLC, entered into a $2-billion revolving credit facility. The facility terminates on May 8, 2006, and is non-recourse to NRG other than its obligation to contribute equity at certain times in respect of projects and turbines financed under the facility. As of Sept. 30, 2002, the aggregate amount outstanding under this facility was $1.1 billion, and NRG estimates the obligation to contribute equity to be approximately $819 million. Interest and fees due on Sept. 30, 2002 were not paid and supporting construction and other contracts associated with Pike and Nelson were violated by NRG in September 2002 and October 2002, respectively. Supporting construction and other contracts associated with NRG’s Pike and Nelson projects were violated by NRG in September and October 2002, respectively. Thus this facility is currently in default. See additional discussion regarding this facility and other short-term credit facility defaults in Note 10.

NRG Defaults Upon Senior Securities — On Sept. 16, 2002, NRG failed to make a $14.4-million interest payment due on $350 million of 8.25 percent senior unsecured notes due in 2010 and a $10.9-million interest payment due on a $250 million bond issued by NRG Pass-Thru Trust I trust, which is a wholly owned special financing entity that is effectively a senior unsecured obligation of NRG with an interest rate of 8.70 percent that matures in 2005. The 30-day grace period to make payment ended Oct. 16, 2002, and NRG did not make the required payments. As a result, NRG is in default on these bonds.

On Oct. 1, 2002, NRG failed to make a $13.6-million interest payment due on $350 million of 7.75 percent senior unsecured notes due in 2011 and a $21.6-million interest payment due on $500 million of 8.625 percent senior unsecured notes due in 2031. The 30-day grace period to make payment ended Oct. 31, 2002, and NRG did not make the required payments. As a result, NRG is in default on these bonds.

On Nov. 1, 2002 NRG failed to make a $9.6 million interest payment due on $240 million of 8.00 percent senior unsecured notes due in 2013. The 30-day grace period to make payment ends Dec. 1, 2002 and if NRG does not make the required payments, NRG will be in default on these bonds.

In addition, if certain creditors exercise rights of acceleration against $20 million or $50 million of NRG senior indebtedness, depending on the governing indenture, cross-default provisions place the following NRG senior unsecured debt in default: $300 million of 7.50 percent senior due 2009 (with a $11.3 million interest payment due on Dec. 1, 2002); $250 million of 7.50 percent senior notes due 2007 (with a $9.4 million interest payment due on Dec. 15, 2002); $340 million of 6.75 percent senior notes due 2006 (with a $11.5 million interest payment due on January 15, 2003); $125 million of a 7.625 percent due 2006 (with an interest payment of $4.8 million due Feb. 1, 2003).

On March 13, 2001, NRG completed the sale of 11.5 million equity units (NRZ) for an initial price of $25 per unit. Each equity unit initially consists of a corporate unit comprising a $25 principal amount of NRG’s senior debentures and an obligation to acquire shares of Xcel Energy common stock no later than May 18, 2004. On Oct. 29, 2002, NRG announced it would not make the Nov. 16, 2002 quarterly interest payment on the NRG 6.5 percent senior unsecured debentures due in 2006, which trade with the associated purchase contracts as NRG corporate units (NRZ). The 30-day grace period to make payment ends Dec. 16, 2002, and if NRG does not make payment to the NRZ holders, this issue will be in default. In the event of an NRG bankruptcy, the obligation to purchase shares of Xcel Energy terminates.

Project Debt Service — Substantially all of NRG’s operations are conducted by project subsidiaries and project affiliates. The debt agreements of NRG’s subsidiaries and project affiliates generally restrict their ability to pay dividends, make distributions or otherwise transfer funds to NRG. As of Sept. 30, 2002, seven of NRG’s subsidiaries and project affiliates are restricted from making cash payments to NRG: Loy Yang, Killingholme, Energy Center Kladno, LSP

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Energy (Batesville), NRG South Central and NRG Northeast Generating do not currently meet the minimum debt service coverage ratios required for these projects to make payments to NRG. Additionally, Crockett Cogeneration is limited in its ability to make distributions to NRG and its other partners. Killingholme, NRG South Central, and NRG Northeast Generating are in default on their credit agreements. NRG believes the situations at Energy Center Kladno, Loy Yang, Crockett Cogeneration and Batesville do not create an event of default and will not allow the lenders to accelerate the project financings, thus these financing are not currently in default.

Many of the debt agreements of NRG's subsidiaries and project affiliates require the funding of debt service reserve accounts. Prior to the NRG downgrades, certain debt service reserve accounts funding requirements were satisfied by provision of a guarantee from NRG. Following the downgrade, those guarantees no longer qualified as acceptable credit support and the accounts were required to be funded with cash by NRG. The accounts were not funded with cash from NRG, and, after allowing for applicable cure periods, events of default were triggered under such project financings that allow the lenders to accelerate the project debt. NRG South Central Generating, NRG McClain, NRG MidAtlantic, Flinders, NRG Northeast Generating and Enfield are precluded from making payments to NRG due to unfunded debt service reserve accounts. NRG expects that the Killingholme and Brazos Valley projects will be foreclosed upon by the lenders.

Other Covenants and Compliance — The bankruptcy of Pacific Gas & Electric (PG&E) creates the potential for a covenant default that would result in the acceleration of the debt at Crockett if not resolved with the lenders. Management has engaged in active discussions with the lenders of Crockett since PG&E filed for bankruptcy in April 2001; additionally, Crockett is being paid each month by PG&E since the bankruptcy filing. PG&E and the Bankruptcy Court have affirmed the long-term power purchase agreement and PG&E is paying down the outstanding receivable over a 12-month period ending Dec. 1, 2002. Thus, NRG believes that an acceleration of the Crockett debt is unlikely. However, as of Dec. 31, 2001, NRG has reflected the entire balance of the Crockett debt as a current obligation in the amount of $234.5 million. As of Sept. 30, 2002, the outstanding balance of the Crockett debt has been reclassified as a current liability held for sale due to the pending sale of NRG’s interest in the project. For additional information regarding the pending sale of NRG’s interest in Crockett Cogeneration, see Note 3.

In May 2002, NRG’s indirect wholly owned subsidiary, LSP-Kendall Energy, LLC received a notice of default from Societe Generale, the administrative agent under LSP-Kendall’s Credit and Reimbursement Agreement dated Nov. 12, 1999. The notice asserted that an event of default had occurred under the Credit and Reimbursement Agreement as a result of liens filed against the Kendall project by various subcontractors. In consideration of the borrower’s implementation of a plan to remove the liens, and NRG’s indemnification pursuant to an Indemnity Agreement dated June 28, 2002, of the lenders to the Kendall project from any claims or damages relating to these liens or any dispute or action involving the project’s EPC contractor, the administrative agent, with the consent of the required lenders under the Credit and Reimbursement Agreement, withdrew the notice of default and conditionally waived any default or event of default described therein. Discussions with the administrative agent regarding the liens continue.

In June 2002, NRG Peaker Finance Company LLC (NRG Peaker), an indirect wholly owned subsidiary of NRG Energy, completed the issuance of $325 million of Series A Floating Rate Senior Secured Bonds due 2019. The bonds bear interest at a floating rate based on the 30-day London Interbank Offered Rate. The bonds are secured by a pledge of membership interests in NRG Peaker and a security interest in all of its assets, which initially consisted of notes evidencing loans to the affiliate project owners. The project owners’ jointly and severally guaranteed the entire principal amount of the bonds and interest on such principal amount. The project owner guaranties are secured by a pledge of the membership interest in three of five project owners and a security interest in substantially all of the project owners’ assets related to the peaker projects, including equipment, real property rights, contracts and permits. NRG has entered into a contingent guaranty agreement in favor of the collateral agent for the benefit of the secured parties, under which it agreed to make payments to cover scheduled principal and interest payments on the bonds and regularly scheduled payments under the interest rate swap agreement, to the extent that the net revenues from the peaker projects are insufficient to make such payments, in specified circumstances. This financing contains a cross-default provision related to the failure by NRG to make payment of principal, interest or other amounts due on debt for borrowed money in excess of $50 million of payment defaults by NRG. This covenant was violated in October 2002. In addition, liens were placed against the Bayou Cove facility resulting in an additional default. As a result of these issues, this facility is in default.

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On Sept. 17, 2002, NRG-McClain LLC, an indirect wholly owned subsidiary of NRG, received notice from the agent bank that the project loan was in default as a result of the downgrade of NRG and of defaults on material obligations under the Energy Management Services Agreement.

Brazos Valley Energy, LP, an indirect wholly owned subsidiary of NRG, is party to a credit facility that provides for borrowings of base rate loans and Eurocurrency loans and is secured by mortgages and security agreements in respect of the assets of the projects financed under the facility and pledges of the equity interests in the subsidiaries or affiliates of the borrower that own such projects.

On Sept. 30, 2002, Brazos Valley failed to make approximately $1.2 million in interest payments on the facility. Brazos Valley had five days to make interest payments to the lenders to avoid an event of default on the facility. The five-day grace period to make payment expired and Brazos Valley did not make the required payments. In addition, NRG has suspended equity contributions to the project. As a result, Brazos Valley is in default on this loan.

On Oct. 30, 2002 NRG failed to make $3.1 million in payment under certain Non-Operating Interest Acquisition agreements. As a result, NEO Landfill Gas, Inc., an indirect wholly owned subsidiary of NRG, failed to make approximately $1.4 million in payments under the Amended and Restated Construction, Acquisition and Term Loan Agreement, dated July 6, 1998. Also, the subsidiaries of NEO Landfill Gas, Inc. failed to make approximately $2 million in payments pursuant to various Site Development Operations and Coordination Agreements. NRG received an extension until Nov. 19, 2002 to make payment under such agreements. If NRG does not perform certain requirements during the extension period, NRG will be in default under the Non-Operating Interest Acquisition Agreements, and NEO Landfill Gas, Inc. will be in default under the Amended and Restated Construction, Acquisition and Term Loan Agreement, dated July 6, 1998, and the Site Development and Operations Coordination Agreements.

Electric Wholesale Generator (EWG) Approval — In April 2002, NRG discovered that filings with the FERC to exempt NRG’s Big Cajun Peaking facility in Louisiana from regulation by the SEC under the Public Utility Holding Company Act (PUHCA), and to sell power from the facility at market-based rates, had not been made. NRG has since discussed the situation with the FERC and the SEC and made those filings. EWG status was granted by the FERC, effective April 17, 2002. Although NRG does not expect any material legal or regulatory action to be taken by those agencies, the failure to have made these filings could be viewed as an event of default under certain of NRG’s debt facilities, including the $2 billion construction and acquisition revolving credit facility and the $1 billion unsecured corporate revolving line of credit. Accordingly, NRG sought and has received from its construction and acquisition revolving credit facility lenders a waiver of any event of default occurring as a result of Big Cajun Peaking Power’s failure to file for exemption from regulation under PUCHA, and has sought and received from its corporate revolver lenders an amendment to its corporate revolving line of credit to provide that such failure to obtain or maintain exemption from regulation under PUHCA will not cause an event of default under that facility. While the construction and acquisition revolver waiver and the corporate revolver amendment were being discussed and finalized with its lenders, NRG did not borrow under either of these credit facilities. The waiver under the construction and acquisition facility continues indefinitely unless a default arising out of any possible PUHCA violation relating to Big Cajun’s temporary failure to make these filings occurs. No fines or refunds have been asserted against NRG or any of its subsidiaries or affiliates by the FERC as a result of these missed filings.

Xcel Energy Impacts

Xcel Energy does not believe that the ultimate resolutions of NRG’s going concern uncertainty will affect Xcel Energy’s ability to continue as a going concern. Xcel Energy is not dependent on cash flows from NRG, nor is Xcel Energy contingently liable to creditors of NRG in an amount material to Xcel Energy’s liquidity. Xcel Energy believes that its cash flows from regulated operations and current financing capabilities will be sufficient to fund its non-NRG related operating, investing and financing requirements. Beyond these sources of liquidity, Xcel Energy believes it has access to additional debt and equity financing that is not conditioned upon the outcome of NRG’s financial restructuring plan.

8. Rates and Regulation

Colorado

Merger Agreements — Under the Stipulation and Agreement approved by the Colorado Public Utilities Commission (CPUC) in connection with the Xcel Energy merger, PSCo agreed to 1) file a combined electric, gas and steam rate case in 2002 with new rates effective in January 2003, 2) extend its electric incentive cost adjustment (ICA) mechanism through Dec. 31, 2002 with an increase in the ICA base rate from $12.78 per megawatt hour to a rate based on the 2001 actual costs, 3) continue the Performance Based Regulatory Plan and the Quality of Service Plan through 2006 with an electric department earnings cap of 10.5 percent return on equity for 2002, 4) reduce electric rates annually by $11 million for the period August 2000 to July 2002 and 5) cap merger costs associated with electric operations at $30 million and amortize such costs through 2002.

Incentive Cost Adjustment — In early 2002, PSCo filed to increase rates under the ICA to recover the undercollection of electric supply costs through the period ended Dec. 31, 2001 (approximately $14.5 million, which went into effect on June 1, 2002) and to increase the ICA base rate for the recovery of 2002 costs which are projected to be substantially

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higher than the $12.78 per megawatt hour currently being recovered. PSCo’s actual ICA base costs for 2001 were approximately $19 per megawatt hour. PSCo proposed to increase the ICA base in 2002 to avoid the significant deferral of costs and a large rate increase in 2003, although the Stipulation and Agreement provided for a rate recovery period of April 1, 2003, to March 31, 2004.

On May 10, 2002, the CPUC approved a Settlement Agreement between PSCo and other parties to increase the ICA base rate to $14.88 per megawatt hour, providing for recovery of the deferred 2001 costs and the projected higher 2002 costs over a 34-month period from June 1, 2002, to March 31, 2005. The prudency review and approval of actual costs incurred and recoverable under the ICA for 2001 and 2002 will be conducted in future rate proceedings by the CPUC. PSCo is currently projecting its costs for 2002 to be approximately $50 million to $60 million less than the ICA base allowed using the 2001 test year, resulting in an equal sharing of the difference between retail customers and PSCo. The mechanism for recovering fuel and energy costs for 2003 and later will be addressed in the pending 2002 rate case (discussed below).

General Rate Case — In May 2002, PSCo filed a combined general rate case with the CPUC to address increased costs for providing energy to Colorado customers. The net impact of the filings would increase electric revenue by approximately $220 million annually. This is based on $127 million for fuel and purchased power (including amounts deferred under the ICA) and $93 million for cost of electric service. In addition, PSCo also requested a decrease in natural gas revenue by approximately $13 million to reflect lower wholesale gas costs. PSCo also requested that its authorized rate of return on equity be set at 12 percent for electricity and 12.25 percent for natural gas.

The current schedule for the rate case, as approved by the CPUC, is as follows:

• November 2002 — intervenor testimony;

• January 2003 — company rebuttal testimony;

• February/March 2003 — hearings; and

• April/May 2003 — rates effective.

Gas Cost Prudence Review — In May 2002, the staff of the CPUC filed testimony in PSCo’s gas cost prudence review case, recommending $6.1 million in disallowances of gas costs for the July 2000 through June 2001 gas purchase year. Hearings were held in July 2002. A decision is expected in late 2002.

Texas

Transition to Competition Cost Recovery Application — In December 2001, SPS filed an application with the Public Utility Commission of Texas (PUCT) to recover $20.3 million in costs related to transition to retail competition from the Texas retail customers. These costs were incurred to position SPS for retail competition, which was eventually delayed for SPS. The filing was amended in March 2002 to reduce the request to $13 million to reflect the PUCT approval of SPS using 1999 over-earnings to offset the claims for reimbursement of transition to competition costs. In April 2002, a unanimous settlement agreement was reached. Final approval by the PUCT was received in May 2002. The stipulation provides for the recovery of $5.9 million through an incremental cost recovery rider and the capitalization of $1.9 million for metering equipment. Based on the settlement agreement, SPS wrote off pretax restructuring costs of approximately $5 million in the first quarter of 2002. Recovery of the $5.9 million began in July 2002.

Fuel Clause Adjustment Mechanisms — The PUCT’s regulations require periodic examination of SPS’ fuel and purchased power costs, the efficiency of the use of such fuel and purchase power, fuel acquisition and management policies and purchase power commitments. SPS is required to file an application for the PUCT to retrospectively review, at least every three years, the operations of a utility’s electricity generation and fuel management activities.

In June 2002, SPS filed its fuel reconciliation to review costs recorded for calendar years 2000 and 2001 in the amount of $608 million. A pre-hearing conference was held in October 2002 and discovery in this case is in process. Hearings are scheduled for March 2003.

Minnesota

Metro Emissions Reduction Program — In July 2002, NSP-Minnesota filed for approval by the Minnesota Public Utilities Commission (MPUC) a proposal to invest in existing NSP-Minnesota generation facilities to reduce emissions under the terms of legislation adopted by the 2001 Minnesota Legislature. The proposal includes the installation of state-of-the-art pollution control equipment at the A.S. King plant and conversion from coal to natural gas at the High

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Bridge and Riverside plants. Under the proposal, major construction would start in 2005 and be completed in 2009. Under the terms of the statute, the filing concurrently seeks approval of a rate recovery mechanism for the costs of the proposal, estimated to be a total of $1.1 billion. The rate recovery would be through an annual automatic adjustment mechanism authorized by 2001 legislation, outside a general rate case, and is proposed to be effective at the expiration of the NSP-Minnesota merger rate freeze, which extends through 2005 unless certain exemptions are triggered. The rate recovery proposed by NSP-Minnesota would allow recovery of financing costs of capital expenditures prior to the in-service date of each plant. The proposal is pending comments by interested parties. Other regulatory approvals, such as environmental permitting, are needed before the proposal can be implemented.

Renewable Cost Recovery Tariff — In April 2002, NSP-Minnesota filed for MPUC authorization to recover in retail rates the costs of electric transmission facilities constructed to provide transmission service for renewable energy. The rate recovery would be through an automatic adjustment mechanism authorized by 2001 legislation, outside a general rate case, and is proposed to be effective Jan. 1, 2003. In July 2002, the Minnesota Department of Commerce filed comments supporting approval of the tariff mechanism, subject to certain modifications that are generally acceptable to Xcel Energy.

Minnesota Financial and Service Quality Investigation — On Aug. 8, 2002, the MPUC asked for additional information related to the impact of NRG’s financial circumstances on NSP-Minnesota. Subsequent to that date, several newspaper articles alleged concerns about the reporting of service quality data and NSP-Minnesota’s overall maintenance practices. In an order dated Oct. 22, 2002, the MPUC opened an investigation into the accuracy of NSP-Minnesota’s reliability records and to allow for further review of its maintenance and other service quality measures. In addition, the order requires a number of reporting requirements regarding financial information and work with interested parties on various issues to ensure NSP-Minnesota’s commitments are fulfilled. In addition, the order imposes restrictions on NSP-Minnesota's ability to seek rate increases, encumber utility property, provide intercompany loans and calculate cost of capital. The Minnesota Department of Commerce and Office of Attorney General also have begun their own investigation. There is no scheduled date for completion.

Federal Energy Regulatory Commission

Standard Market Design Rulemaking — In July 2002, the FERC issued a Notice of Proposed Rulemaking on Standard Market Design rulemaking for regulated utilities. If implemented as proposed, the Rulemaking will substantially change how wholesale markets operate throughout the United States. The proposed rulemaking expands the FERC’s intent to unbundle transmission operations from integrated utilities and ensure robust competition in wholesale markets. The rule contemplates that all wholesale and retail customers will be on a single network transmission service tariff. The rule also contemplates the implementation of a bid-based system for buying and selling energy in wholesale markets. RTOs or Independent Transmission Providers will administer the market. RTOs will also be responsible for creating regional plans that identify opportunities to construct new transmission, generation or demand side programs to reduce transmission constraints and meet regional energy requirements. Finally, the Rule envisions the development of Regional Market Monitors responsible for ensuring that individual participants do not exercise unlawful market power. Comments to the rules are due in the fourth quarter of 2002 and first quarter of 2003. The FERC recently extended the comment period but anticipates that the final rules will be in place in 2003 and the contemplated market changes will take place in 2003 and 2004.

Standards of Conduct Rulemaking — In October 2001, the FERC issued a Notice of Proposed Rulemaking proposing to adopt new standards of conduct rules applicable to all jurisdictional electric and natural gas transmission providers. The proposed rules would replace the current rules governing the electric transmission and wholesale electric functions of the Xcel Energy utility subsidiaries and NRG, respectively; and the rules governing the natural gas transportation and wholesale gas supply functions of Viking Gas, e prime and the Xcel Energy utility subsidiaries, respectively. The proposed rules would expand the definition of “affiliate” and further limit communications between transmission functions and supply functions, and could materially increase operating costs of Xcel Energy. In April 2002, the FERC staff issued a reaction paper, generally rejecting the comments of parties opposed to the proposed rules. Though final rules were expected by year-end 2002, they may be delayed while the FERC pursues development of its Standard Market Design Rulemaking.

FERC Investigation — On May 8, 2002, the FERC ordered all sellers of wholesale electricity and/or ancillary services to the California Independent System Operator or Power Exchange, including Xcel Energy and NRG, to respond to data requests, including requests for admissions with respect to certain trading strategies in which the companies may have engaged. The investigation is in response to memoranda prepared by Enron Corporation that detail certain trading strategies engaged in 2000 and 2001, which may have violated market rules. On May 22, 2002, Xcel Energy reported to the FERC that it had not engaged directly in any of the trading strategies identified in the May 8th inquiry. On May 22, 2002, NRG responded that it had not engaged in any trading activities outlined in the FERC request.

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However, Xcel Energy also reported that at times during 2000 and 2001, its regulated operations did sell energy to another energy company that may then have re-sold the electricity for delivery into California as part of an overstated electricity load in schedules submitted to the California Independent System Operator. During that period, the regulated operations of Xcel Energy made sales to the other electricity provider of approximately 8,000 megawatt-hours in the California intra-day market, which resulted in revenues to Xcel Energy of approximately $1.5 million. Xcel Energy cannot determine from its records what part of such sales were associated with overschedules.

To supplement the May 8th request, on May 21, 2002, the FERC ordered all sellers of wholesale electricity and/or ancillary services in the United States portion of the Western Systems Coordinating Council during 2000 and 2001 to report whether they had engaged in activities referred to as “wash,” “round trip” or “sell/buyback” trading. On May 31, 2002, Xcel Energy reported to the FERC that it had not engaged in so-called round trip electricity trading identified in the May 21st inquiry.

On May 13, 2002, Xcel Energy reported that PSCo had engaged in a group of transactions in 1999 and 2000 with the trading arm of Reliant Resources in which PSCo bought a quantity of power from Reliant and simultaneously sold the same quantity back to Reliant. For doing this, PSCo normally received a small profit. PSCo made a total pretax profit of approximately $110,000 on these transactions. Also, PSCo engaged in one trade with Reliant in which PSCo simultaneously bought and sold power at the same price without realizing any profit. The purpose of this nonprofit transaction was in consideration of future for-profit transactions. PSCo engaged in these transactions with Reliant for the proper commercial objective of making a profit. It did not enter into these transactions to inflate volumes or revenues.

In addition, the FERC is assessing whether to set for hearing the justness and reasonableness of rates charged in the Pacific Northwest from Dec. 25, 2000, through June 20, 2001. The FERC directed that an administrative law judge hold a hearing and make a preliminary assessment as to whether it should undertake such an investigation. On Sept. 25, 2001, an administrative law judge concluded that no further proceedings should be held. Various parties have sought rehearing of that order and have requested that the record be reopened in light of the disclosure of the Enron trading strategies. The proceeding is pending before the FERC.

FERC Transmission Inquiry — The FERC has begun a formal, non-public inquiry relating to the treatment by public utility companies of affiliates in generator interconnection and other transmission matters. In connection with the inquiry, the FERC has asked Xcel Energy for certain information and documents. Xcel Energy is complying with the request.

SPS Commitment and Dispatch Agreement — Golden Spread Electric Power Cooperative, Inc. (Golden Spread) and SPS are parties to a commitment and dispatch agreement pursuant to which SPS commits and dispatches the combined resources of both entities to meet their combined load requirements. Under this agreement, SPS purchases a significant amount of energy from Golden Spread at rates designed to share the savings between both parties. Golden Spread has filed a complaint at the FERC contending that SPS has underpaid it for the power it has supplied under the agreement by not providing it with an appropriate share of the savings that SPS has achieved. SPS in turn has filed a complaint at the FERC contending that Golden Spread has improperly inflated various cost components of the rate calculation. FERC has set both complaints for investigation and hearing, but has deferred the hearing pending settlement proceedings. The matter is now before a settlement judge. Even if SPS is required to pay more to Golden Spread for power purchased under this agreement, it believes that the amounts will likely be recoverable from customers under applicable fuel clauses.

22

XCEL ENERGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

Securities and Exchange Commission/Commodity Futures Trading Commission

Temporary Modification of PUHCA Equity Ratio Limit — In accordance with an order from the SEC granting Xcel Energy authority to finance, Xcel Energy cannot currently issue any securities or guarantees if its common equity ratio is below 30 percent.

On Aug. 2, 2002, Xcel Energy filed a proposal with the SEC seeking authorization to engage in financing transactions at a time when Xcel Energy’s ratio of common equity to total capitalization is less than 30 percent. The proposal provided that the common equity of Xcel Energy, as reflected on its most recent Form 10-K, or Form 10-Q and as adjusted to reflect subsequent events that affect capitalization, be at least 24 percent of total capitalization. In addition, Xcel Energy proposed not to engage in any financing transactions after June 30, 2003, unless at such time Xcel Energy has an equity ratio of at least 30 percent. Xcel Energy expects that any reduction of its common equity ratio below 30 percent would be temporary pending resolution of the NRG restructuring.

On Nov. 7, 2002, the SEC issued an order authorizing Xcel Energy to engage in certain financing transactions through Mar. 31, 2003 so long as its common equity ratio, as reported in its most recent Form 10-K, or Form 10-Q and as adjusted for pending subsequent items that affect capitalization, was at least 24 percent of its total capitalization. At Sept. 30, 2002, and as adjusted for pending subsequent items that affect capitalization, Xcel Energy’s common equity ratio was at least 24 percent. Financings of Xcel Energy authorized by the SEC included the issuance of debt (including convertible debt) to refinance or replace Xcel Energy’s $400-million credit facility that expired on Nov. 8, 2002, issuance of $450 million of stock (less any amounts issued as part of the refinancing of the $400-million credit facility) and the renewal of guarantees for various trading obligations of NRG’s power marketing subsidiary. The SEC reserved authorizing additional securities issuances by Xcel Energy through June 30, 2003 while its common equity ratio is below 30 percent. Xcel Energy also has the authority, under PUHCA, to issue approximately $100 million of debt securities with maturities of not more than nine months. In the event NRG were to seek protection under bankruptcy laws and Xcel Energy ceased to have control over NRG, NRG would cease to be a consolidated subsidiary of Xcel Energy for financial reporting purposes and Xcel Energy’s common equity ratio under the SEC’s method of calculation would exceed 30 percent.

SEC and CFTC Subpoenas — Xcel Energy has received a subpoena from the SEC for documents concerning “round trip trades,” as defined in the SEC subpoena, in electricity and natural gas with Reliant Resources, Inc. for the period Jan. 1, 1999, to the present. The SEC subpoena is issued pursuant to a formal order of private investigation that does not name Xcel Energy. Based upon accounts in the public press, management believes that similar subpoenas in the same investigations have been served on other industry participants. Xcel Energy and PSCo are cooperating with the regulators and taking steps to assure satisfactory compliance with the subpoenas.

Xcel Energy and PSCo have also received subpoenas from the Commodity Futures Trading Commission for documents and other information concerning these so-called “round trip trades” and other trading in electricity and natural gas for the period Jan. 1, 1999, to the present involving Xcel Energy or any of its subsidiaries.

9. Commitments and Contingent Liabilities

Lawsuits and claims arise in the normal course of business. Management, after consultation with legal counsel, has recorded an estimate of the probable cost of settlement or other disposition of them.

Xcel Energy and its subsidiaries have been or are currently involved with the cleanup of contamination from certain hazardous substances at several sites. In many situations, Xcel Energy is pursuing or intends to pursue insurance claims and believes it will recover some portion of these costs through such claims. Additionally, where applicable, Xcel Energy is pursuing, or intends to pursue, recovery from other potentially responsible parties and through the rate regulatory process. To the extent any costs are not recovered through the options listed above, Xcel Energy would be required to recognize an expense for such unrecoverable amounts.

Note 7 to the Financial Statements describes the current status of credit contingencies related to NRG and related financial impacts. The circumstances set forth in Notes 15 and 16 to Xcel Energy’s financial statements in Xcel Energy’s Annual Report on Form 10-K for the year ended Dec. 31, 2001, appropriately represent, in all material respects, the current status of other commitments and contingent liabilities, including those regarding public liability for claims resulting from any nuclear incident, and are incorporated herein by reference. The following are unresolved contingencies discussed in the 2001 Annual Report on Form 10-K that are material to Xcel Energy’s financial position as of Sept. 30, 2002:

• California Power Market — Collectibility of NRG receivables;

• Tax Matters — Tax deductibility of corporate-owned life insurance loan interest and

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XCEL ENERGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Commitments

Capital Commitments — Xcel Energy has received and revised its capital expenditure forecast. The utility capital expenditure forecast is detailed in the following table.

	2002		2003		2004
	(Millions of dollars)
Total utility	$	960	$	925	$	1,030

The capital expenditure programs of Xcel Energy are subject to continuing review and modification. Actual utility construction expenditures may vary from the estimates due to changes in electric and natural gas projected load growth, the desired reserve margin and the availability of purchased power, as well as alternative plans for meeting Xcel Energy’s long-term energy needs. In addition, Xcel Energy’s ongoing evaluation of merger, acquisition and divestiture opportunities to support corporate strategies, address restructuring requirements and comply with future requirements to install emission-control equipment may affect actual capital requirements.

Support and Capital Subscription Agreement — In May 2002, Xcel Energy and NRG entered into a Support and Capital Subscription Agreement pursuant to which Xcel Energy agreed under certain circumstances to provide up to $300 million to NRG. Xcel Energy has not to date provided funds to NRG under this agreement. Xcel Energy currently is evaluating the circumstances under which it would make any further investment in NRG.

In September 2002 and in connection with NRG’s collateral extension agreement, Xcel Energy provided NRG with an acknowledgement letter pursuant to which Xcel Energy acknowledged and agreed that demand for a drawing of the $300 million had been made by NRG and its lenders, pursuant to the Support and Capital Subscription Agreement; and funds provided by Xcel Energy will be contributed as equity or as subordinated loans. As a part of the agreement, NRG and its lenders agreed not to enforce the terms of the Support and Capital Subscription Agreement, in exchange for which Xcel Energy agreed not to make any dividends or repurchase shares of its capital stock during the term of the collateral extension agreement, expiring on Nov. 15, 2002, if it would negatively affect its ability to perform under the Support and Capital Subscription Agreement. See further discussion at Note 6.

Environmental Contingencies

PSCo Notice of Violation — On Nov. 3, 1999, the United States Department of Justice filed suit against a number of electric utilities for alleged violations of the Clean Air Act’s New Source Review (NSR) requirements related to alleged modifications of electric generating stations located in the South and Midwest. Subsequently, the United States Environmental Protection Agency (EPA) also issued requests for information pursuant to the Clean Air Act to numerous other electric utilities, including Xcel Energy, seeking to determine whether these utilities engaged in activities that may have been in violation of the NSR requirements. In 2001, Xcel Energy responded to EPA’s initial information requests related to PSCo plants in Colorado.

On July 1, 2002, Xcel Energy received a Notice of Violation (NOV) from the EPA alleging violations of the NSR requirements of the Clean Air Act at the Comanche and Pawnee Stations in Colorado. The NOV specifically alleges that various maintenance, repair and replacement projects undertaken at the plants in the mid- to late-1990s should have required a permit under the NSR process. Xcel Energy believes it acted in full compliance with the Clean Air Act and NSR process. It believes that the projects identified in the NOV fit within the routine maintenance, repair and replacement exemption contained within the NSR regulations or are otherwise not subject to the NSR requirements. Xcel Energy also believes that the projects would be expressly authorized under the EPA’s NSR policy announced by the EPA administrator on June 22, 2002. Xcel Energy disagrees with the assertions contained in the NOV and intends to vigorously defend its position.

If the EPA is successful in any subsequent litigation regarding the issues set forth in the NOV or any matter arising as a result of its information requests, it could require Xcel Energy to install additional emission control equipment at the facilities and pay civil penalties. Civil penalties are limited to not more than $25,000 to $27,500 per day for each violation, commencing from the date the violation began. The ultimate financial impact to Xcel Energy is not determinable at this time.

NSP-Minnesota NSR Information Request — As stated previously, on Nov. 3, 1999, the United States Department of Justice filed suit against a number of electric utilities for alleged violations of the NSR requirements related to alleged modifications of electric generating stations located in the South and Midwest. Subsequently, the EPA also issued requests for information pursuant to the Clean Air Act to numerous other electric utilities, including Xcel Energy, seeking to determine whether these utilities engaged in activities that may have been in violation of the NSR

24

XCEL ENERGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

requirements. In 2001, Xcel Energy responded to EPA’s initial information requests related to NSP-Minnesota plants in Minnesota. On May 22, 2002, EPA issued a follow-up information request to Xcel Energy seeking additional information regarding NSR compliance at its plants in Minnesota. Xcel Energy is in the process of responding to the follow-up request.

NRG Opacity Consent Order — NRG became part of an opacity consent order as a result of acquiring its Huntley, Dunkirk and Oswego plants from Niagara Mohawk. At the time of financial close on these assets, a consent order was being negotiated between Niagara Mohawk and the New York Department of Environmental Conservation (NYDEC). The order required Niagara Mohawk to pay a stipulated penalty for each opacity event at these facilities. On Jan. 14, 2002, the NYDEC issued NRG NOVs for opacity events, which had occurred since the time NRG assumed ownership of Huntley, Dunkirk and Oswego generating stations. The NOVs allege that a total of 7,231 events had occurred where the average opacity during a six-minute block of time had exceeded 20 percent. The NYDEC proposed a penalty associated with the NOVs at $900,000. NRG is in negotiations with the NYDEC to settle the dispute.

Ashland Manufactured Gas Plant Site — NSP-Wisconsin was named as one of three potentially responsible parties (PRP) for creosote and coal tar contamination at a site in Ashland, Wis. The Ashland site includes property owned by NSP-Wisconsin and two other properties: an adjacent city lakeshore park area and a small area of Lake Superior’s Chequemegon Bay adjoining the park.

Estimates of the ultimate cost to remediate the Ashland site vary from $4 million to $93 million, depending on the final remediation option chosen by the EPA and the Wisconsin Department of Natural Resources (WDNR). The EPA and WDNR have not yet selected the final method of remediation to use at the site. In the interim, NSP-Wisconsin has recorded a liability for an estimate of its share of the cost of remediating the portion of the Ashland site that it owns, using information available to date, reasonably effective remedial methods and considering the results of ongoing negotiations with governmental authorities overseeing the remediation.

On Sept. 5, 2002, the Ashland site was placed on the National Priorities List (NPL). The NPL is intended primarily to guide the EPA in determining which sites require further investigation. Resolution of Ashland remediation issues is not expected until 2003 or 2004.

Legal Contingencies

California Litigation — Public Utility District No. 1 of Snohomish County, Washington, has filed a suit against Xcel Energy in United States District Court for the Central District of California contending that various of its trading strategies, as reported to the FERC in response to that agency’s investigation of trading strategies discussed above, violated the California Business and Professions Code. Public Utility District No. 1 of Snohomish County contends that the effect of those strategies was to increase amounts that it paid for wholesale power in the spot market in the Pacific Northwest. Xcel Energy and other defendants requested the case be dismissed in its entirety. A hearing on the motion to dismiss is scheduled for Dec. 19, 2002.

In addition, the California Attorney General’s Office has informed PSCo that it may raise claims against PSCo under the California Business and Professions Code with respect to the rates that PSCo has charged for wholesale sales and PSCo’s reporting of those charges to the FERC. PSCo has had preliminary discussions with the California Attorney General’s Office, and has expressed the view that FERC is the appropriate forum for the concerns that it has raised.

Fortistar Litigation — In July 1999, Fortistar Capital Inc. filed a complaint in District Court in Minnesota against NRG asserting claims for injunctive relief and for damages as a result of NRG’s alleged breach of a confidentiality letter agreement with Fortistar relating to the Oswego facility in New York. NRG disputed Fortistar’s allegations and asserted numerous counterclaims. In October 1999, NRG through a wholly owned subsidiary, closed on the acquisition of the Oswego facility. In April and December 2000, NRG filed summary judgment motions to dispose of the litigation. A hearing on these motions was held in February 2001 and certain of Fortistar’s claims were dismissed. On May 8, 2002 the parties entered into a binding, conditional settlement of the litigation, pending certain approvals and final agreement on the terms of the settlement. Because the conditions for settlement have not been satisfied, the parties have renewed negotiations to explore alternative terms for reaching a settlement.

During the second quarter of 2002, NRG expensed a pre-tax charge of $36 million related to its NEO Corporation landfill gas generation operations, as discussed in Note 2. The charge related largely to asset impairments based on a revised project outlook developed in 2002. It also reflects the accrued impact of the 2002 dispute settlement with Fortistar, a partner with NEO in the Minnesota Methane LLC landfill gas generation operations.

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XCEL ENERGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Shareholder/ERISA Litigation — On July 31, 2002, a lawsuit purporting to be a class action on behalf of purchasers of Xcel Energy common stock between Jan. 31, 2001, and July 26, 2002, was filed in the United States District Court in Minnesota. The complaint named Xcel Energy; Wayne H. Brunetti, chairman, president and chief executive officer; Edward J. McIntyre, former vice president and chief financial officer; and James J. Howard, former chairman, as defendants. Among other things, the complaint alleges violations of Section 10b of the Securities Exchange Act and Rule 10b-5 related to allegedly false and misleading disclosures concerning various issues, including round trip energy trades, the existence of cross-default provisions in Xcel Energy’s and its subsidiary NRG Energy’s credit agreements with lenders, NRG’s liquidity and credit status, the supposed risks to Xcel Energy’s credit rating and the status of Xcel Energy’s internal controls to monitor trading of its power. Since the filing of the lawsuit, 13 additional, similar lawsuits have been filed on behalf of a similar class of common stock purchasers, seeking similar remedies, one of which has subsequently been voluntarily dismissed. The complaint seeks an unspecified amount of damages, interest, attorneys’ fees and other costs. On Sept. 30, 2002, a further lawsuit making essentially identical allegations, identifying the same class period and seeking the same type of relief was filed in the same court on behalf of a purported class of purchasers of two series of NRG Senior Notes.

On Sept. 23, 2002, an action was filed in the United States District Court in Colorado, on behalf of a purported class of employee participants in certain Xcel Energy employee benefit plans, identifying a class period of Sept. 23, 1999, through the date of filing, and naming Xcel Energy and certain present and former directors and officers as defendants. A second similar action, identifying a class period of Oct. 8, 1999, through the date of filing, followed in the same court. Both actions assert violations of the Employee Retirement Income Security Act of 1974 (ERISA), predicated on essentially the same financial circumstances underlying the class actions and the derivative actions, and asserting breach of fiduciary duty and disclosure violations regarding Xcel Energy stock in the benefit plans. The complaints seek a declaration that defendants violated ERISA, unspecified injunctive relief, restitution, disgorgement and other unspecified relief, interest, attorneys’ fees and other costs.

The defendants in all these actions deny any liability and maintain that their disclosures and other conduct have been fully compliant with applicable laws and reporting requirements.

On Aug. 15, 2002, a shareholder derivative action was filed in the same court as the class actions described above purportedly on Xcel Energy’s behalf, against certain present and former directors and officers of Xcel Energy, citing essentially the same circumstances as the class actions and asserting breach of fiduciary duty. Subsequently, two additional derivative actions were filed in the District Court for Hennepin County, Minnesota against essentially the same defendants, focusing on supposed wrongful energy trading activities and asserting breach of fiduciary duty for failure to establish and maintain adequate accounting controls, abuse of control and gross mismanagement. Collectively, the derivative complaints seek judgment in favor of Xcel Energy for an unspecified amount of damages, return of salaries and other compensation, attorney’s fees and other costs. Xcel Energy and its board of directors will consider the proper manner in which to address the derivative actions, which are ostensibly brought for Xcel Energy’s benefit.

Potential NRG Bankruptcy — As discussed in Notes 6 and 7, NRG continues to work with NRG’s Creditors on a comprehensive financial restructuring plan that, among other things, addresses Xcel Energy’s continuing role and degree of ownership in NRG and obligations to NRG in a restructured NRG. Following an agreement on the restructuring with NRG’s Creditors and as described in Note 6 above, it is expected that NRG would commence a Chapter 11 bankruptcy proceeding and immediately seek approval of a prenegotiated plan of reorganization. Absent an agreement with NRG’s Creditors and the continued forbearance by such creditors, NRG will be subject to substantial doubt as to its ability to continue as a going concern and will likely be the subject of a voluntary or involuntary bankruptcy proceeding, which, due to the lack of a prenegotiated plan of reorganization, would be expected to take an extended period of time to be resolved.

While it is an exception rather than the rule, especially where one of the companies involved is not in bankruptcy, the equitable doctrine of substantive consolidation permits a bankruptcy court to disregard the separateness of related entities; to consolidate and pool the entities’ assets and liabilities; and treat them as though held and incurred by one entity where the interrelationship between the entities warrants such consolidation. Xcel Energy believes that any effort to substantively consolidate Xcel Energy with NRG would be without merit. However, it is possible that NRG or its creditors would attempt to advance such claims should an NRG bankruptcy proceeding commence (particularly in the absence of a prenegotiated plan of reorganization), and Xcel Energy cannot be certain how a bankruptcy court would resolve the issue. One of the creditors of an NRG project (Pike, as discussed in Note 4) has already filed involuntary bankruptcy proceedings against that project and has included claims against both NRG and Xcel Energy. If a bankruptcy court were to allow substantive consolidation of Xcel Energy and NRG, it would have a material adverse effect on Xcel Energy.

The accompanying financial statements do not reflect any conditions or matters that would arise if NRG was in bankruptcy.

LSP Pike Energy, LLC — In August 2002, The Shaw Group (Shaw) and NRG tentatively entered into an agreement to transfer NRG’s interest in the assets in LSP Pike Energy, LLC (Pike) to Shaw. Pike is a 1,200-megawatt, combined-cycle gas turbine plant currently under construction in Mississippi, which is approximately one-third completed. The agreement was subject to approval by the NRG board of directors and lenders. To date, Pike, NRG and its lenders have not approved the agreement. See Note 4 for additional discussion regarding Pike.

NYISO Claims — In November 2002, the NYISO notified NRG of claims related to New York City mitigation adjustments, general NYISO billing adjustments and other miscellaneous charges related to sales between November 2000 and October 2002. NRG contests both the validity and calculation of the claims and is currently negotiating with the NYISO over the ultimate disposition. Due to the uncertainty of the final adjustment, an estimate of the final amount has not been recorded in the results for the quarter ended Sept. 30, 2002.

Conectiv Agreement Termination — On Nov. 8, 2002 Conectiv provided NRG with a Notice of Termination of Transaction under the Master Power Purchase and Sale Agreement (Master PPA) dated June 21, 2001. Under the Master PPA, which was assumed by NRG in its acquisition of various assets from Conectiv, NRG had been required to deliver 500 MW of electrical energy around the clock at a specified price through 2005. In connection with the Conectiv acquisition, NRG recorded an out-of-market contract obligation for this agreement. As a result of the cancellation, NRG will lose approximately $402 million in future contracted revenues. Also, in conjunction with the terms of the Master PPA, NRG will receive from Conectiv a termination payment in the amount of $955,000. At Sept. 30, 2002, the balance of the contract obligation was approximately $54 million.

10. Short-Term Borrowings and Financing Instruments

Xcel Energy Short-Term Borrowings — At Sept. 30, 2002, Xcel Energy and its subsidiaries had approximately $2.0 billion of short-term debt outstanding at a weighted average interest rate of approximately 4.383 percent. See Managements Discussion and Analysis — Financing Activities for discussion of debt issuance in 2002.

On Nov. 8, 2002, Xcel Energy entered into a Securities Purchase Agreement (the Purchase Agreement) with Citadel Equity Fund Ltd., Citadel Credit Trading Ltd. and Jackson Investment Fund Ltd. (together, the Purchasers). Pursuant to the Purchase Agreement, Xcel Energy may issue and sell, in one or more private placements, up to $350 million principal amount of 8 percent senior convertible notes (the Notes). In all cases, the notes shall be issued for a gross amount equal to their principal amount. The Notes are convertible into Xcel Energy’s common stock at any time and from time to time after their issuance date by the holder at the conversion prices described below (subject in each instance to adjustment for stock splits, stock dividends, stock combinations and similar transactions as well as certain issuances by Xcel Energy of common stock or common stock derivative securities). Each of the Notes has an initial maturity of 364 days that can be extended by the holder for additional 364-day periods up to a maximum maturity of 5 years.

The following summary highlights certain material terms of the private placement transactions between Xcel Energy and the Purchasers. Because this is a summary, it does not contain all of the information that is included in the transaction documents and, consequently, is qualified in its entirety by the Purchase Agreement, the Registration Rights Agreement, and the form of Notes, which are attached, or incorporated by reference as exhibits to the this Form 10-Q (the forms of Notes are being refiled with this 10-Q to reflect certain technical corrections) (collectively, the Transaction Documents).

On Nov. 8, 2002, Xcel Energy issued $100 million principal amount of Notes (the First Notes). The conversion price for the First Notes will be 110 percent of the arithmetic average of the weighted average price of Xcel Energy’s common stock for the 20 consecutive trading days commencing on the 5th trading day immediately following the date of issuance (the First Notes Pricing Period) provided (i) that the conversion price shall not exceed $11.59 and (ii) until the end of the First Notes Pricing Period the conversion price shall equal 110 percent of the arithmetic average of the weighted average price of Xcel Energy ‘s common stock for the each of the trading days during the First Call Pricing Period through the date of receipt of a Company Call Notice (as hereinafter defined); and provided further that the conversion price shall be equal to 110 percent of the closing bid price of Xcel Energy’s common stock on the 35th business day following the date of issuance date of the First Notes if Xcel Energy has not delivered a Company Call Notice and such price is less than the conversion price then in effect.

Unless the First Notes have previously been redeemed by Xcel Energy, the sale of $50 million principal amount of Notes (the Second Notes) is expected to occur on Nov. 22, 2002, subject to satisfaction of certain conditions precedent. The conversion price for the Second Notes will be 110 percent of the arithmetic average of the weighted average price of Xcel Energy’s common stock for the 10 consecutive trading days following the First Notes Pricing Period (the Second Notes Pricing Period, and together with the First Notes Pricing Period, the Pricing Periods); provided that (i) the conversion price shall not exceed 110 percent of the weighted average price of Xcel Energy’s common stock on the date of issuance of the Second Notes and (ii) during the Second Notes Pricing Period the conversion price shall equal the lesser of (x) 110 percent of the arithmetic average of the weighted average price of Xcel Energy’s common stock for each of the trading days in the Second Notes Pricing Period through the date of receipt of a Company Call Notice and (y) the weighted average price of the common stock on the date of issuance of the Second Notes; and provided further that the conversion price shall be equal to 110 percent of the closing bid price of Xcel Energy’s common stock on the 35th business day following the issuance date of the First Notes if Xcel Energy has not delivered a Company Call Notice and such price is less than the conversion price then if effect.

The First Notes and the Second Notes are redeemable at the option of Xcel Energy during the period of 35 business days following the issuance of the First Notes upon delivery by Xcel Energy of a notice to the holder of such Notes (the Company Call Notice); provided that Xcel Energy cannot deliver a Company Call Notice unless it has first consummated an offering of convertible debt securities in an underwritten offering resulting in gross proceeds to Xcel Energy of not less than $150 million (a Qualified Offering). Xcel Energy is under no obligation to consummate a Qualified Offering nor is there any obligation on Xcel Energy to redeem the Notes in the event of Xcel Energy’s consummation of Qualified Offering. The closing of any redemption effected by Xcel Energy shall be on the date that is five business days after the 35th business day following the issuance of the First Notes (the Redemption Closing Date). Except as provided above, Xcel Energy may not retire, redeem or otherwise accelerate the final maturity of the Notes.

If Xcel Energy has elected to optionally redeem the Notes, Xcel Energy shall pay to the holders of the Notes in cash the greater of (1) 102 percent of the principal amount, plus accrued interest, on such Notes (the Conversion Amount) and (ii) the sum of (x) the product of the Conversion Amount and the quotient determined by dividing the closing bid price of Xcel Energy’s common stock on the date of the Company Call Notice and the applicable Redemption Conversion Price (as hereinafter defined) and (y) 12 percent of the Conversion Amount of the Note. In addition, Xcel Energy shall deliver to the holders of the Note a written agreement granting the holders the right for a one-year period following the redemption of the Notes to purchase securities identical (other than the issuance date) to the securities issued in the Qualified Offering in an aggregate principal amount of up to 25 percent of the aggregate principal amount of securities issued in the Qualified Offering. The Redemption Conversion Price equals, in the case of the First Notes and the Second Notes, 110 percent of the volume weighted average price of the common stock on the respective dates of issuance of such Notes; provided that if the Company Call Notice is delivered after the initiation of a Pricing Period, then the Redemption Conversion Price shall equal 110 percent of the arithmetic average of the volume weighted average price of the common stock during such period if such price is lower. Under certain circumstance described in the Transaction Documents, the holders of Notes may elect to receive all or a portion of the cash amount described above in shares of Xcel Energy’s common stock by providing notice thereof to Xcel Energy prior to the Redemption Closing Day.

In the event that the Company Call Notice is not delivered within the first 35 business days following the issuance date of the First Notes, from and after such 35th day through and including the one year anniversary date of the issuance of the First Notes, the holders of the Notes shall have the right, at any time and from time to time to purchase up to an additional (i) $50 million of Notes identical (other than the issuance date) to the First Notes (the First Call Notes) and (ii) $25 million of Notes identical (other than the issuance date) to the Second Notes (the Second Call Notes). The holders of the Notes are under no obligation to elect to purchase First Call Notes or Second Call Notes.

In the event that the Company Call Notice is not delivered within the first 35 business days following the issuance date of the First Notes, Xcel Energy may elect to issue and sell to the Purchasers, on a date which is 120 calendar days after the issuance date of the First Notes, up to $100 million principal amount of the Notes (the Third Notes). Xcel Energy’s election to effect such issue and sale (the Company Put) must be made within the 90 calendar days following the issuance date of the First Notes. The conversion price of the Third Notes shall be 110 percent of the arithmetic average of the weighted average price of Xcel Energy’s common stock during the 20 day trading period beginning 90 days after the date of issuance of the First Notes, not to exceed the arithmetic average of the weighted average price of Xcel Energy’s common stock during the 20 day trading period ending on the trading day that is immediately prior to the 90th calendar day after the date of issuance of the First Notes. Xcel Energy’s right to elect the Company Put is subject to certain terms and conditions described in the Transaction Documents. Xcel Energy is under no obligation to elect the Company Put.

At any time and from time to time during the period from the date of issuance of the Third Notes until the date which is 365 days after the date of issuance of the Third Notes, the holders may purchase additional Notes identical to the Third Notes (other than the issuance date) in an aggregate principal amount up to 25 percent of the aggregate principal amount of the Third Notes issued (the Third Call Notes). A holder of Third Notes is under no obligation to elect to purchase Third Call Notes.

Upon the occurrence of a Change of Control (as defined in the Notes), the holders of the Notes may elect to require Xcel Energy to redeem all or any portion of the Notes. The redemption price payable by Xcel Energy in such circumstance is a price equal to the Conversion Amount of such Notes multiplied by the greater of 115 percent and a fraction, the numerator of which is equal to the closing sale price immediately following the public announcement of such proposed Change of Control and a denominator equal to the conversion price applicable to such Notes.

The Notes are also subject to acceleration upon the occurrence of an Event of Default (as defined in the Notes). The coupon rate is subject to increase by 2 percent upon the occurrence of an Event of Default and upon the occurrence of other events described in the Transaction Documents.

26

XCEL ENERGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Credit Facilities — As of Sept. 30, 2002, Xcel Energy had the following credit facilities available to meet its liquidity needs:

Company		Total Facility			Drawn		Credit Available		Cash		Total Liquidity		Facility Maturity
	(Millions of dollars)
NSP-Minnesota		$	300		$	100	$	200	$	408	$	609	Aug-2003
NSP-Wisconsin			0			0		0		15		15
PSCo			530			88		442		111		553	June-2003
SPS			250			0		250		78		328	Feb-2003
Xcel Energy -			400	*		400		0					Nov-2002
Holding Company			400			400		0		238		238	Nov-2005
NRG			1,000			1,000		0		347		347	Mar-2003

* This facility matured in November 2002 and was not renewed.

NSP-Minnesota Credit Facility — In August 2002, in connection with its 364-day, $300-million credit agreement renewal, NSP-Minnesota also issued $308 million of first mortgage bonds, due Aug. 15, 2003 to Wells Fargo Bank, N.A. pursuant to the credit agreement. The obligations under the credit agreement will be secured by this series of bonds.

PSCo Credit Facility — In September 2002, PSCo issued and delivered $530 million of first collateral trust bonds to a certain bank to secure its payment obligations under its $530-million, 364-day credit facility.

NRG Short-Term Borrowings — In March 2002, NRG’s $500-million recourse revolving credit facility matured and was replaced with a $1.0-billion, 364-day revolving line of credit, which terminates on March 7, 2003. The facility is unsecured. The credit agreement for this facility was amended in April 2002 to revise the interest coverage ratio covenant. As amended, the covenant requires NRG to maintain a minimum interest coverage ratio that varies throughout the year from 1.75 to 1.00 as determined at the end of each fiscal quarter. The facility contains additional covenants that, among other things, restrict the incurrence of liens and require NRG to maintain a net worth of at least $1.5 billion plus 25 percent of NRG’s consolidated net income from Jan. 1, 2002, through the determination date. In addition, NRG must maintain a debt to capitalization ratio, as defined in the credit agreement, of not more than 0.68 to 1.00. The failure to comply with any of these covenants would be an Event of Default under the terms of the credit agreement At Sept. 30, 2002, NRG had a $1-billion outstanding balance under this credit facility. As of Sept. 30, 2002, the weighted average interest rate of such outstanding advances was 7.7 percent per year. NRG missed the $7.6 million interest payment due on Sept. 30, 2002, and as of Sept. 30, 2002, NRG violated both the minimum net worth covenant and the minimum interest coverage ratio. Accordingly, the facility is in default.

NRG’s $125-million syndicated letter of credit facility contains terms, conditions and covenants that are substantially the same as those in NRG’s $1.0-billion, 364-day revolving line of credit. During the second quarter of 2002, the letter of credit facility agreement was amended to incorporate the same covenant revisions and other amendments that had previously been made to the terms and conditions of NRG’s $1-billion revolving credit facility, including the addition of an interest coverage ratio covenant. As of Sept. 30, 2002, NRG violated both the minimum net worth covenant and the minimum interest coverage ratio. Accordingly, the facility is in default.

As of Dec. 31, 2001, NRG, through its wholly owned subsidiary NRG South Central Generating LLC, had outstanding approximately $40 million under a project level, non-recourse revolving credit agreement. In June 2002, this facility was paid off and was not renewed.

NRG Revolving Credit — In May 2001, NRG’s wholly-owned subsidiary, NRG Finance Company I LLC, entered into a $2-billion revolving credit facility. The facility was to be used to finance the acquisition, development and construction of power generating plants located in the United States and to finance the acquisition of turbines for such facilities. The facility provides for borrowings of base rate loans and Eurocurrency loans and is secured by mortgages and security agreements in respect of the assets of the projects financed under the facility, pledges of the equity interests in the subsidiaries or affiliates of the borrower that own such projects and by guaranties from each such subsidiary or affiliate. Provided that certain conditions are met that assure the lenders that sufficient security remains for the remaining outstanding loans, the borrower may repay loans relating to one project and have the liens relating to that project released. Loans that have been repaid may be re-borrowed, as permitted by the terms of the facility. The facility

27

XCEL ENERGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

terminates on May 8, 2006. The facility is non-recourse to NRG other than its obligation to contribute equity at certain times in respect of projects and turbines financed under the facility. As of Sept. 30, 2002, the aggregate amount outstanding under this facility was $1.1 billion, and NRG estimates the obligation to contribute equity to be approximately $819 million. At Sept. 30, 2002, the weighted average interest rate of such outstanding advances was 7.6 percent. Interest and fees due on Sept. 30, 2002 were not paid, and NRG has suspended equity contributions to the project in order to support construction activities. Thus, NRG is currently in default under this facility. See Note 7 for a discussion of the acceleration of debt under this credit facility and for further discussion of NRG’s credit and liquidity contingencies.

Financing Instruments — As of Sept. 30, 2002, Xcel Energy, excluding NRG, had several interest rate swaps with a notional amount of approximately $101 million. If the swaps were terminated at Sept. 30, 2002, Xcel Energy or its subsidiaries would have had to pay the counterparties approximately $18 million. In addition, as of Sept. 30, 2002, NRG had several interest rate swaps with a notional amount of approximately $2.9 billion. If the NRG swaps were terminated at Sept. 30, 2002, NRG would have had to pay the counterparties approximately $112 million.

Guarantees — Xcel Energy provides various guarantees and bond indemnities supporting certain of its subsidiaries. The guarantees issued by Xcel Energy guarantee payment or performance by its subsidiaries under specified agreements or transactions. As a result, Xcel Energy’s exposure under the guarantees is based upon the net liability of the relevant subsidiary under the specified agreements or transactions. The majority of the guarantees issued by Xcel Energy limit the exposure of Xcel Energy to a maximum amount stated in the guarantees. As of Sept. 30, 2002, Xcel Energy had the following amount of guarantee and exposure under these guarantees:

				Exposure under
Subsidiary		Total Guarantee		Guarantee
		(Millions of dollars)
NRG		$	234	$	104
e prime		$	294	$	78
Viking		$	60	$	60
Other Subsidiaries		$	276	$	81
	Total	$	864	$	323

Xcel Energy guarantees certain obligations for NRG’s power marketing subsidiary, relating to power marketing obligations, fuel purchasing transactions and hedging activities; e prime, relating to trading and hedging activities; and Viking Gas, relating to the Guardian pipeline project. The Viking Gas guarantee terminates no earlier than 90 days after the in-service date of the project. Viking expects the guarantee to terminate in April 2003.

Xcel Energy may be required to provide credit enhancements in the form of cash collateral, letters of credit or other security to satisfy part or potentially all of these exposures, in the event that Standard & Poor’s or Moody’s downgrade Xcel Energy’s credit rating below investment grade. In the event of a downgrade, Xcel Energy would expect to meet its collateral obligations with a combination of cash on hand and, upon receipt of an SEC order permitting such actions, utilization of credit facilities and the issuance of securities in the capital markets.

NRG is directly liable for the obligations of certain of its project affiliates and other subsidiaries pursuant to guarantees relating to certain of their indebtedness, equity and operating obligations. In addition, in connection with the purchase and sale of fuel emission credits and power generation products to and from third parties with respect to the operation of some of NRG’s generation facilities in the United States, NRG may be required to guarantee a portion of the obligations of certain of its subsidiaries. As of Sept. 30, 2002, NRG’s obligations pursuant to its guarantees of the performance, equity and indebtedness obligations of its subsidiaries totaled approximately $687.9 million.

In addition, Xcel Energy provides indemnity protection for bonds issued by subsidiaries. The total amount of bonds with this indemnity outstanding as of Sept. 30, 2002, was approximately $351 million, of which $6.7 million relates to NRG. The total exposure of this indemnification cannot be determined at this time. Xcel Energy believes the exposure to be significantly less than the total indemnification.

11. Derivative Valuation and Financial Impacts

Xcel Energy analyzes derivative financial instruments in accordance with SFAS No. 133. This statement requires that all derivative financial instruments be recorded on the balance sheet at fair value unless exempted. Changes in a derivative instrument’s fair value must be recognized currently in earnings unless the derivative has been designated in a qualifying hedging relationship. The application of hedge accounting allows a derivative instrument’s gains and losses to offset related results of the hedged item in the income statement, to the extent effective. SFAS No. 133 requires that the hedging relationship be highly effective and that a company formally designate a hedging relationship to apply hedge accounting.

28

XCEL ENERGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The components of SFAS No. 133 impacts on Xcel Energy’s Other Comprehensive Income, included in stockholders’ equity, are detailed in the following table:

	9 months ended Sept. 30
	2002			2001
	(Millions of dollars)
Balance at Jan. 1	$	34.2		$	—
Net unrealized transition loss at adoption, Jan. 1, 2001		—			(28.8	)
After-tax net unrealized gains related to derivatives accounted for as hedges		69.2			7.2
After-tax net realized (gains) losses on derivative transactions reclassified into earnings		(11.9	)		32.2
Acquisition of NRG minority interest		27.4			—
Accumulated other comprehensive income related to SFAS No. 133	$	118.9		$	10.6

     The components of the gain for SFAS No. 133 impacts on Xcel Energy’s income statement for the three and nine months ended Sept. 30, 2002 and 2001, excluding gains and losses from trading activities, are detailed in the following table:

		3 months ended						9 Months ended
		Sept. 30						Sept. 30
		2002			2001			2002			2001
		(Millions of dollars, except per share data)
Increase (decrease) in income:
	Nonregulated and other revenues	$	(33.8	)	$	(10.2	)	$	2.5		$	(21.6	)
	Equity earnings from investment in affiliates		1.8			(1.7	)		(0.9	)		(0.9	)
	Electric fuel and purchased power — utility		(0.6	)		(1.2	)		0.4			(1.0	)
	Cost of goods sold — nonregulated and other		(21.3	)		(7.6	)		(21.1	)		(12.8	)
	Other income (deductions)		(2.9	)		(2.2	)		(3.1	)		—
Total decrease before minority interest and income tax		$	(56.8	)	$	(22.9	)	$	(22.2	)	$	(36.3	)
Net-of-tax decrease in net income		$	(33.6	)	$	(11.5	)	$	(15.1	)	$	(13.9	)
Increase (decrease) in EPS-diluted		$	(0.08	)	$	(0.03	)	$	(0.04	)	$	(0.04	)

Xcel Energy records the fair value of its derivative instruments in its Consolidated Balance Sheet as separate line items noted as Derivative Instruments Valuation for assets and liabilities as well as current and noncurrent.

Normal Purchases or Normal Sales — Xcel Energy and its subsidiaries enter into fixed price contracts for the purchase and sale of various commodities for use in their business operations. SFAS No. 133 requires a company to evaluate these contracts to determine whether the contracts are derivatives. Certain contracts that literally meet the definition of a derivative may be exempted from SFAS No. 133 as normal purchases or normal sales. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet the requirements of normal are documented as normal and exempted from the accounting and reporting requirements of SFAS No. 133.

Xcel Energy evaluates all of its contracts within the regulated and nonregulated operations when such contracts are entered into to determine if they are derivatives and, if so, if they qualify and meet the normal designation requirements under SFAS No. 133. None of the contracts entered into within the trading operations are considered normal under the provisions of SFAS No. 133.

Normal purchases and normal sales contracts are accounted for as executory contracts as required under other generally accepted accounting principles.

Cash Flow Hedges — Xcel Energy and its subsidiaries enter into derivative instruments to manage their exposure to changes in commodity prices. These derivative instruments take the form of fixed price, floating price or index sales or purchases and options, such as puts, calls and swaps. These derivative instruments are designated as cash flow hedges for accounting purposes and the changes in the fair value of these instruments are recorded as a component of Other Comprehensive Income. At Sept. 30, 2002, Xcel Energy had various commodity related contracts extending through 2018. Earnings on

29

XCEL ENERGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

these cash flow hedges are recorded as the hedged purchase or sales transaction is completed. This could include the physical sale of electric energy or the usage of natural gas to generate electric energy. Xcel Energy expects to reclassify into earnings through September 2003 net gains from Other Comprehensive Income of approximately $86.4 million.

As required by SFAS No. 133, Xcel Energy recorded losses of $0.6 million and losses of $15.9 million related to ineffectiveness on commodity cash flow hedges during the three months ended Sept. 30, 2002, and 2001, respectively; and gains of $0.4 million and losses of $2.0 million related to ineffectiveness on commodity cash flow hedges during the nine months ended Sept. 30, 2002, and 2001, respectively.

Xcel Energy recorded unrealized losses of $53.1 million and unrealized losses of $1.2 million associated with changes in the fair value of non-hedge, energy-related derivative instruments for the three months ended Sept. 30, 2002 and Sept. 30, 2001, respectively. Xcel Energy recorded unrealized losses of $19.5 million associated with changes in the fair value of non-hedge, energy-related derivative instruments for the nine months ended Sept. 30, 2002. There was no impact for the nine months ended Sept. 30, 2001.

Xcel Energy and its subsidiaries enter into interest rate swap instruments that effectively fix the interest payments on certain floating rate debt obligations. These derivative instruments are designated as cash flow hedges for accounting purposes and the change in the fair value of these instruments is recorded as a component of Other Comprehensive Income. Xcel Energy expects to reclassify into earnings through September 2003 net gains from Other Comprehensive Income of approximately $30.6 million.

As a result of various defaults under certain loan agreements, NRG's counterparties have terminated interest rate swaps with NRG, Brazos Valley LP and NRG Finance Company I LLC. As a result of the interest rate swap agreement terminations, the amounts recorded for them as cash flow hedges in Other Comprehensive Income are expected to be relieved from the Other Comprehensive Income account over the remaining period of the debt. Until NRG successfully restructures outstanding debt and returns to credit quality, the company will not seek to manage interest rate risk through the use of financial derivatives.

Xcel Energy records hedge effectiveness based on the nature of the item being hedged. Hedging transactions for the sales of electric energy are recorded as a component of revenue; hedging transactions for fuel used in energy generation are recorded as a component of fuel costs; and hedging transactions for interest rate swaps are recorded as a component of interest expense.

Fair Value Hedges and Hedges of Foreign Currency Exposure of a Net Investment in Foreign Operations — To preserve the U.S. dollar value of projected foreign currency cash flows, Xcel Energy, through NRG, may hedge, or protect, those cash flows if appropriate foreign hedging instruments are available. Xcel Energy does not expect to reclassify any significant amounts into earnings through September 2003 from Other Comprehensive Income on foreign currency swaps accounted for as hedges.

Xcel Energy recorded unrealized losses of $1.0 million and unrealized losses of $2.1 million associated with changes in the fair value of non-hedge, foreign currency derivative instruments for the three months ended Sept. 30, 2002, and Sept. 30, 2001, respectively. Unrealized losses of $0.8 million and unrealized gains of $3,000 associated with changes in the fair value of non-hedge, foreign currency derivative instruments were recorded for the nine months ended Sept. 30, 2002, and Sept. 30, 2001, respectively.

In addition, Xcel Energy recorded losses of $2.3 million related to the discontinuance of hedge accounting for the three and nine months ended Sept. 30, 2002.

Derivatives Not Qualifying for Hedge Accounting — Xcel Energy and its subsidiaries have various trading operations that enter into derivative instruments. These derivative instruments are accounted for on a mark-to-market basis in our Consolidated Statements of Income. All derivative financial instruments are recorded at the amount of the gain or loss from the transaction within Operating Revenues on the Consolidated Statements of Income.

In order to preserve the U.S. dollar value of projected foreign currency cash flows from European trading operations, Xcel Energy and its subsidiaries enter into various foreign currency exchange contracts that are not designated as accounting hedges but are considered economic hedges. Accordingly, the changes in fair value of these derivatives are reported in Other Nonoperating Income in the Consolidated Statements of Income.

30

XCEL ENERGY INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12. Segment Information

Xcel Energy has the following reportable segments: Electric Utility, Gas Utility and two of its nonregulated energy businesses, NRG and e prime. Trading operations performed by regulated operating companies are not a reportable segment; electric trading results (net of trading costs) are included in the Electric Utility segment and gas trading results are presented as e prime. In 2002, all other includes $676 million of tax benefits as discussed in Note 14.

		Electric		Gas								All		Reconciling			Consolidated
		Utility		Utility			NRG			e prime		Other		Eliminations				Total
		(Thousands of dollars)
3 months ended Sept. 30, 2002
Operating revenues from external customers		$	1,553,800	$	138,961		$	728,653		$	5,113	$	82,129		—			$	2,508,656
Intersegment revenues			281		(93	)		—			—		24,956		(25,681	)			(537	)
Equity in earnings of unconsolidated affiliates			—		—			26,718			559		693		—				27,970
	Total revenues	$	1,554,081	$	138,868		$	755,371		$	5,672	$	107,778	$	(25,681	)		$	2,536,089
Segment net income (loss)		$	175,427	$	3,127		$	(2,925,314	)	$	2,451	$	684,776	$	(14,427	)		$	(2,073,960	)

		Electric		Gas							All			Reconciling			Consolidated
		Utility		Utility			NRG		e prime		Other			Eliminations			Total
		(Thousands of dollars)
3 months ended Sept. 30, 2001
Operating revenues from external customers		$	1,824,458	$	216,030		$	749,448	$	3,442	$	76,428			—		$	2,869,806
Intersegment revenues			253		1,082			165		—		21,271			(21,959	)		812
Equity in earnings of unconsolidated affiliates			—		—			111,132		323		(434	)		—			111,021
	Total revenues	$	1,824,711	$	217,112		$	860,745	$	3,765	$	97,265		$	(21,959	)	$	2,981,639
Segment net income (loss)		$	183,442	$	(5,295	)	$	141,580	$	1,293	$	(40,103	)	$	(8,014	)	$	272,903

		Electric		Gas							All		Reconciling			Consolidated
		Utility		Utility		NRG			e prime		Other		Eliminations			Total
		(Thousands of dollars)
9 months ended Sept. 30, 2002
Operating revenues from external customers		$	4,114,715	$	937,751	$	1,859,123		$	6,597	$	248,726		—		$	7,166,912
Intersegment revenues			782		663		—			—		67,903		(68,628	)		720
Equity in earnings of unconsolidated affiliates			—		—		68,916			1,266		2,957		—			73,139
	Total revenues	$	4,115,497	$	938,414	$	1,928,039		$	7,863	$	319,586	$	(68,628	)	$	7,240,771
Segment net income (loss)		$	384,875	$	51,965	$	(2,993,129	)	$	1,750	$	701,563	$	(30,178	)	$	(1,883,154	)

		Electric		Gas						All			Reconciling			Consolidated
		Utility		Utility		NRG		e prime		Other			Eliminations				Total
		(Thousands of dollars)
9 months ended Sept. 30, 2001
Operating revenues from external customers		$	5,085,433	$	1,576,732	$	1,852,280	$	15,385	$	249,838			—			$	8,779,668
Intersegment revenues			716		3,241		1,859		—		48,711			(53,384	)			1,143
Equity in earnings of unconsolidated affiliates			—		—		193,875		1,022		3,629			—				198,526
	Total revenues	$	5,086,149	$	1,579,973	$	2,048,014	$	16,407	$	302,178		$	(53,384	)		$	8,979,337
Segment net income (loss)		$	449,926	$	48,464	$	225,872	$	7,131	$	(62,637	)	$	(18,686	)		$	650,070

13. Pension Plan Funding and Costs

As disclosed in the 2001 Annual Report on Form 10-K, all of the Xcel Energy pension plans were fully funded and had no cash funding requirements as of Dec. 31, 2001. Investment performance on plan assets during 2002 has resulted in a deterioration of the funded status of the plans compared to 2001. Xcel Energy’s pension plans, in the aggregate, were still fully funded as of Sept. 30, 2002 and, with minimal investment volatility for the rest of 2002, are expected to remain fully funded at year-end. Depending on final 2002 investment performance, some smaller plans within the group may be underfunded at Dec. 31, 2002.

However, no cash funding to any of Xcel Energy’s pension plans was required for 2002 or is expected for 2003 under ERISA regulations. The level of discretionary funding allowed for 2003 and 2004, if made, would not have a material impact on pension costs. Plan investment performance in the past several years has increased Xcel Energy pension costs due to the difference between assumed asset returns reflected in actuarially determined costs, and actual return levels. Xcel Energy's aggregate annual 2002 pension costs recognized will be approximately $6 million more than comparable 2001 levels. Xcel Energy currently expect that costs to be recognized in 2003 may increase by approximately $40 million in relation to 2002 levels due to the impacts of lower-than-expected asset returns over the past few years.

Depending on final 2002 pension plan investment performance, some of the smaller Xcel Energy plans may have to record a minimum pension liability at Dec. 31, 2002. Based on year-to-date 2002 investment performance, Xcel Energy is estimating that a minimum liability may occur (mainly at PSCo) and be in the range of $100 million to $150 million, with a corresponding reduction in shareholders’ equity (other comprehensive income) for the unrealized loss on pension assets. Recording a minimum pension liability, if necessary, would have no impact on PSCo or Xcel Energy earnings.

14.     Income Taxes

As discussed in Note 6, prior to reporting third quarter results for 2002, the likely tax filing status of NRG for 2002 has changed from being included as part of Xcel Energy’s consolidated federal income tax group to filing on a stand-alone basis. On a stand-alone basis, NRG does not have the ability to recognize all tax benefits that may ultimately accrue from losses occurring in 2002. Consequently, current income taxes have been recorded only for refunds actually expected from filing amended returns to carry back 2002 losses to earlier periods, and deferred tax benefits have been recorded only to the extent a tax valuation allowance was not considered necessary.

NRG’s current income tax benefit recognized for the third quarter and nine months ended Sept. 30, 2002 does not include the impact of net pretax operating loss carryforwards of $1.094 billion. In addition, NRG’s deferred tax benefit recognized for the third quarter and nine months ended Sept. 30, 2002 is net of a valuation allowance of $383 million.

The commencement of a loss carryforward position for NRG in the third quarter of 2002 limits the availability of energy tax credits to NRG in 2002, and such credits cannot be carried forward. Accordingly, in third quarter NRG reversed $23 million of 2002 energy tax credits that had previously been recorded through June 30, 2002.

Effective in third quarter 2002, Xcel Energy no longer considers it likely that NRG will be included in Xcel Energy’s consolidated federal income tax group for 2002 tax return purposes. In consideration of the foreseeable effects of the NRG restructuring plan on Xcel Energy’s investment in NRG, Xcel Energy has recognized the expected tax benefits from this investment as of Sept. 30, 2002. This benefit (estimated at $676 million) is reported as deferred income taxes at one of Xcel Energy’s nonregulated intermediate holding companies, and as a reduction of deferred income tax liabilities on the balance sheet. This benefit is based on the difference between the book and tax bases of Xcel Energy’s investment in NRG.

31

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

The following discussion and analysis by management focuses on those factors that had a material effect on Xcel Energy’s financial condition and results of operations during the periods presented, or are expected to have a material impact in the future. It should be read in conjunction with the accompanying unaudited Consolidated Financial Statements and Notes.

Except for the historical statements contained in this report, the matters discussed in the following discussion and analysis are forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements are intended to be identified in this document by the words “anticipate,” “estimate,” “expect,” “objective,” “outlook,” “projected,” “possible,” “potential” and similar expressions. Actual results may vary materially. Factors that could cause actual results to differ materially include, but are not limited to:

• general economic conditions, including the availability of credit, actions of rating agencies and their impact on capital expenditures and the ability of Xcel Energy and its subsidiaries to obtain financing on favorable terms;

• business conditions in the energy industry;

• competitive factors, including the extent and timing of the entry of additional competition in the markets served by Xcel Energy and its subsidiaries;

• unusual weather;

• state, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rate structures and affect the speed and degree to which competition enters the electric and gas markets;

• the higher risk associated with Xcel Energy’s nonregulated businesses compared with its regulated businesses;

• currency translation and transaction adjustments;

• realization of expectations regarding the NRG financial improvement plan;

• NRG’s ability to reach agreements with its lenders and creditors to restructure its debt;

• risks associated with the California power market; and

• the other risk factors listed from time to time by Xcel Energy in reports filed with the Securities and Exchange Commission (SEC), including Exhibit 99.01 to this report on this Form 10-Q.

As discussed more completely under “Liquidity and Capital Resources” and in Notes 2 through 7, NRG’s credit ratings have declined significantly and prices for its power have decreased. As a result, NRG is experiencing severe financial difficulties and has missed several scheduled payments of principal and interest on its bonds. In addition, as a result of being downgraded, NRG is required to post collateral of approximately $1 billion.

NRG had obtained an agreement with various lenders to extend, until Nov. 15, 2002, the deadline by which it must post this cash collateral. As required by the extension agreement, NRG submitted a comprehensive restructuring plan to its lenders and bondholders on Nov. 4, 2002 (see Note 6). The extension agreement did not waive other events of default, including failure to make principal and/or interest payments when due or failure to comply with financial covenants. Nor did the extension agreement waive the rights of the bank group or the bondholders to pursue any rights and remedies in respect of such other defaults.

On Nov. 6, 2002, lenders to NRG accelerated approximately $1.1 billion NRG’s debt under the construction revolver financing facility, rendering the debt immediately due and payable. This action effectively terminated the cash collateral call extension letter in effect between NRG and its major lenders. As mentioned above, the extension letter was previously scheduled to expire Nov. 15, 2002.

Based on discussions with the construction revolver lenders, it is NRG’s understanding that the administrative agent, Credit Suisse First Boston, issued the acceleration notice to preserve certain rights under the construction revolver financing agreements. NRG believes that the administrative agent intends to forbear in the immediate exercise of any rights and remedies against NRG.

NRG has missed several scheduled payments of interest and principal on some of its bonds and does not contemplate making any principal or interest payments on it corporate-level debt pending the restructuring of its obligations. Consequently, NRG is, and expects to continue to be, in default under various debt instruments. By reason of these various defaults, the lenders are able to seek to enforce their remedies, if they so choose, and that would likely lead to a bankruptcy filing by NRG.

As discussed in Note 6, NRG continues to work with its lenders on a comprehensive restructuring plan that would contain waivers and /or material modifications of the collateral requirements and its debt and other obligations. Absent an agreement on this restructuring plan, NRG will be in default under its debt and other obligations because it does not have sufficient funds to meet the requirements and obligations. There can be no assurance that NRG will be able to effect a consensual restructuring or otherwise satisfactorily resolve these issues soon, or at all. It is unlikely that Xcel Energy ultimately will own any equity interest in a restructured NRG.

RESULTS OF OPERATIONS

Earnings per Share Summary

The following table details the earnings per share contribution of Xcel Energy’s regulated and nonregulated businesses.

32

Earning per share (EPS)		3 months ended:					9 months ended:
		Sept. 30, 2002			Sept. 30, 2001		Sept. 30, 2002			Sept. 30, 2001
Regulated EPS		$	0.49		$	0.53	$	1.23		$	1.52
Nonregulated and holding company EPS:
	Continuing operations		(5.69	)		0.22		(6.29	)		0.32
	Discontinued operations		(0.02	)		0.04		0.05			0.04
Total Xcel Energy EPS		$	(5.22	)	$	0.79	$	(5.01	)	$	1.88

Total earnings have been reduced by NRG asset impairment charges recorded as special charges in the third quarter of 2002, which totaled $2.9 billion before tax and $2.8 billion after tax, or $6.95 per share for the quarter. Other unusual items, including NRG restructuring charges and estimated write-downs and disposal losses for certain NRG projects reduced earnings by an additional $136 million before taxes and $135 million after taxes, or 34 cents per share for the quarter. Year-to-date earnings in 2002 have been reduced by $7.28 per share for the impairment charges and an additional 51 cents per share for other unusual items, including second quarter special charges. In addition, third quarter and year-to-date results include tax benefits of $1.70 and $1.80 per share, respectively, related to Xcel Energy investments in NRG (as discussed in Note 14). Excluding these items, Xcel Energy’s earnings from nonregulated continuing operations would have been a loss of 10 cents per share for the third quarter of 2002 and a loss of 30 cents per share for the nine months ended Sept. 30, 2002. See Note 2 for discussion of special charges.

Xcel Energy issued 23 million shares of common stock in a public offering in February 2002, as well as 25.7 million in June 2002. Dilution from these issuances reduced the loss per share for the quarter and nine-month period ended Sept. 30, 2002, by 73 cents per share and 42 cents per share, respectively. The majority of these dilution impacts are affecting NRG’s special charges, as discussed above.

The components of regulated and nonregulated earnings are discussed in the following sections.

Regulated Results

Earning per share (EPS)		3 months ended:				9 months ended:
		Sept. 30, 2002		Sept. 30, 2001		Sept. 30, 2002			Sept. 30, 2001
Regulated results before unusual items		$	0.49	$	0.53	$	1.25		$	1.49
Conservation incentive recovery			0.00		0.00		0.00			0.07
Special charges — See Note 2			0.00		0.00		(0.02	)		(0.04	)
	Total Regulated Earnings		0.49		0.53		1.23			1.52

The 2002 regulated results before unusual items declined 4 cents and 22 cents per share for the quarter and nine months ended Sept. 30, 2002 largely due to dilution from common stock issuances in 2002. Results for the nine month period also include lower short-term wholesale and trading margins, as discussed in the following section. Dilution reduced third quarter 2002 earnings by 7 cents per share, and reduced year-to-date earnings for 2002 by $0.10 per share. See discussion of special charges recorded earlier in 2002 and in 2001 at Note 2.

2001 Conservation Incentive Recovery — Earnings in the second quarter of 2001 were increased by 7 cents per share due to the reversal of a Minnesota Public Utilities Commission (MPUC) decision.

In June 1999, the MPUC denied NSP-Minnesota recovery of 1998 incentives associated with state-mandated programs for electric energy conservation. Xcel Energy recorded a $35-million charge in 1999, which reduced earnings by 7 cents per share, based on this action. After appeal by NSP-Minnesota, on June 28, 2001, the MPUC approved a plan allowing recovery of the 1998 incentives. As a result, the previously recorded liabilities of approximately $41 million (including carrying charges) for potential refunds to customers were no longer required. The plan approved by the MPUC increased revenue by approximately $34 million and increased allowance for funds used during construction by approximately $7 million, increasing earnings by 7 cents per share for the second quarter of 2001.

Based on the new MPUC policy and less uncertainty regarding conservation incentives to be approved, conservation incentives are now being recorded on a current basis.

Weather — The following summarizes the estimated impact on regulated earnings per share of temperature variations from historical averages (excluding the impact on energy trading operations):

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	Earnings per Share Increase (Decrease)
Period Ended Sept. 30:	2002 vs. Normal		2001 vs. Normal		2002 vs. 2001
3 Months Ended	$	0.03	$	0.04	$	(0.01	)
9 Months Ended	$	0.06	$	0.07	$	(0.01	)

Nonregulated and Holding Company Results

The following table summarizes the earnings contributions of Xcel Energy’s nonregulated businesses and holding company results:

Earning per share (EPS)				3 months ended:						9 months ended:
				Sept. 30, 2002			Sept. 30, 2001			Sept. 30, 2002			Sept. 30, 2001
NRG Energy, Inc.:
		Operations before tax credits		$	0.01		$	0.23		$	(0.17	)	$	0.36
		Tax credits			(0.06	)		0.04			0.00			0.10
		Special charges — impairments (Note 2)			(6.95	)		0.00			(7.28	)		0.00
		Special charges — other (Note 2)			(0.04	)		0.00			(0.19	)		0.00
		Write-downs and disposal losses from investments (Notes 2 and 3)			(0.30	)		0.00			(0.32	)		0.00
		Discontinued operations (Note 3)			(0.02	)		0.04			0.05			0.04
			Total NRG Energy, Inc.		(7.36	)		0.31			(7.91	)		0.50
Holding company tax benefit from investment in NRG (Note 14)					1.70			0.00			1.80			0.00
Xcel International, including Yorkshire Power					(0.02	)		(0.02	)		(0.02	)		(0.03	)
Eloigne Company					0.01			0.01			0.02			0.02
Seren Innovations Inc.					(0.01	)		(0.02	)		(0.04	)		(0.06	)
e prime					0.01			0.00			0.00			0.02
Planergy International					0.00			0.00			(0.01	)		(0.02	)
Financing costs and preferred dividends					(0.03	)		(0.03	)		(0.08	)		(0.09	)
Other					(0.01	)		0.01			0.00			0.02
	Total nonregulated and holding company EPS			$	(5.71	)	$	0.26		$	(6.24	)	$	0.36

NRG Operating Results — NRG’s earnings from operations decreased in 2002 due primarily to lower 2002 power prices in the Northeast, Mid-Atlantic and Central regions of the United States and favorable market conditions for West Coast Power in 2001. The decrease for the third quarter was also due to the mark-to-market loss recorded under SFAS No. 133 in the third quarter of 2002 of 13 cents per share, compared with a 3-cent-per-share SFAS No. 133 loss in the comparable 2001 period. NRG’s special charges include estimated losses on sales of certain projects, restructuring costs incurred to date and asset impairment losses, which are discussed in Note 2, and discontinued operations and loss on disposal of equity investments (other assets held for sale), which are discussed in Note 3.

The reversal of previously recorded tax credits in the third quarter of 2002 had an unfavorable impact on NRG’s third quarter 2002 earnings. The reversal of $23 million of tax credits resulted from limitations on credits available to NRG. This reduced NRG’s results by 6 cents per share in the third quarter of 2002 due to changes in NRG’s tax filing status, as discussed in Note 14.

See Note 2 for discussion of NRG special charges in the second and third quarters of 2002. Also, see discussion of NRG tax impacts in Note 14.

Seren — Operation of its broadband communications network in Minnesota and California resulted in losses for the quarter and nine month periods ended Sept. 30, 2002 and 2001 for Seren. As of Sept. 30, 2002, Xcel Energy’s investment in Seren was approximately $251 million. Seren had capitalized $275 million for plant in service and had incurred another $22 million for construction work in progress for these systems at Sept. 30, 2002. Management is continuing to evaluate the strategic fit of Seren in Xcel Energy’s business portfolio.

Planergy International — Planergy is a wholly owned energy management, consulting and demand-side management services subsidiary of Xcel Energy. Planergy’s results for the 9 months ended Sept. 30, 2001 reflect a loss of 2 cents per share recorded in the second quarter of 2001 that was largely due to lower margins on performance contracts, higher project development expenses and final costs related to the consolidation of Planergy and EMI operations.

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Financing Costs and Preferred Dividends — Nonregulated and holding company results consist primarily of interest expense and preferred dividend costs, which are incurred at the Xcel Energy and intermediate holding company levels and are not directly assigned to individual subsidiaries.

Income Statement Analysis — Third Quarter 2002 vs. Third Quarter 2001

Electric Utility and Commodity Trading Margins

Xcel Energy’s commodity trading operations are conducted mainly by PSCo (electric) and e prime (gas), both wholly owned subsidiaries. Electric trading activity, initially recorded at PSCo, is partially redistributed to NSP-Minnesota and SPS pursuant to the Joint Operating Agreement (JOA) approved by the FERC. Trading revenue and costs do not include the revenue and production costs associated with energy produced from Xcel Energy’s generation assets or energy and capacity purchased to serve native load. Trading revenue and costs associated with NRG’s operations are included in nonregulated margins. Margins from these generating assets for utility operations are included in short-term wholesale amounts, discussed later. Wholesale and trading margins reflect the impact of regulatory sharing of certain margins under the ICA in Colorado. The following table details electric utility, short-term wholesale and electric and gas trading revenue and margin.

							Electric			Gas
	Electric			Short-term			Commodity			Commodity			Intercompany			Consolidated
	Utility			Wholesale			Trading			Trading			Eliminations			Total
	(Millions of dollars)
3 months ended 9/30/2002
Electric utility revenue	$	1,507		$	50		$	—		$	—		$	—		$	1,557
Electric fuel and purchased power-utility		(578	)		(40	)		—			—			—			(618	)
Electric and gas trading revenue-gross		—			—			540			491			(20	)		1,011
Electric and gas trading costs		—			—			(543	)		(486	)		20			(1,009	)
Gross margin before operating expenses	$	929		$	10		$	(3	)	$	5		$	—		$	941
Margin as a percentage of revenue		61.6	%		20.0	%		(0.6	)%		1.0	%		—			36.6	%
3 months ended 9/30/2001
Electric utility revenue	$	1,622		$	197		$	—		$	—		$	—		$	1,819
Electric fuel and purchased power-utility		(775	)		(173	)		—			—			—			(948	)
Electric and gas trading revenue-gross		—			—			315			389			(16	)		688
Electric and gas trading costs		—			—			(309	)		(386	)		16			(679	)
Gross margin before operating expenses	$	847		$	24		$	6		$	3		$	—		$	880
Margin as a percentage of revenue		52.2	%		12.2	%		1.9	%		0.8	%		—			35.1	%

Short-term wholesale revenues declined by $147 million, and electric utility revenues decreased approximately $115 million in the third quarter of 2002, compared with the same period in 2001, due largely to lower fuel and purchased power costs passed through rate recovery mechanisms and lower revenues from sales of excess capacity in Texas. Electric utility margins increased approximately $82 million for the third quarter of 2002, compared with 2001. The higher electric margins in the third quarter reflect lower unrecovered costs, due in part to resetting the base-cost recovery at PSCo in January 2002 and sales growth.

Electric and gas commodity trading margins and short-term wholesale margins decreased approximately $21 million for the third quarter of 2002, compared with the third quarter of 2001. The decrease reflects lower power prices and less favorable market conditions in 2002.

Gas Utility Margins

The following table details the changes in gas utility revenue and margin. The cost of gas tends to vary with changing sales requirements and the unit cost of gas purchases. However, due to purchased gas cost recovery mechanisms for retail customers, fluctuations in the cost of gas have little effect on natural gas margin.

	3 months ended
	Sept. 30
	2002			2001
	(Millions of dollars)
Gas revenue	$	138		$	217
Cost of gas purchased and transported		(58	)		(136	)
Gas margin	$	80		$	81

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Gas revenue decreased by approximately $79 million, or 36.4 percent, in the third quarter of 2002, compared with the same period in 2001, primarily due to decreases in the cost of natural gas, which are largely passed on to customers and recovered through various rate adjustment clauses in most of the jurisdictions in which Xcel Energy operates. Gas margin was approximately the same in both periods.

Nonregulated Operating Margins

The following table details the change in nonregulated revenue and margin.

	3 months ended
	Sept. 30
	2002			2001
	(Millions of dollars)
Nonregulated and other revenue	$	811		$	826
Earnings from equity investments		28			111
Nonregulated cost of goods sold		(455	)		(380	)
Nonregulated margin	$	384		$	557

Nonregulated revenue and margin decreased for the third quarter of 2002, largely due to lower power prices in both consolidated and equity investment projects. Lower power prices, mainly in the United States, reduced demand for NRG’s peaking and merchant power facilities.

Non-Fuel Operating Expense and Other Costs

Utility Other Operation and Maintenance Expenses for the third quarter of 2002 decreased by approximately $29 million, or 7.7 percent, compared with the third quarter of 2001. Lower incentive compensation and other employee benefit costs, as well as lower staffing levels in corporate areas, reduced utility operating and maintenance expense by approximately $10 million for the third quarter of 2002, compared with the same period in 2001. The decreased costs were also due to lower accruals for potentially uncollectible accounts in 2002.

Nonregulated Other Operation and Maintenance Expenses decreased by approximately $3 million, or 1.7 percent, for the third quarter of 2002, compared with the third quarter of 2001, primarily due to the restructuring of NRG’s operations during the third quarter of 2002.

Depreciation and amortization increased by approximately $27 million, or 11.1 percent, for the third quarter of 2002, compared with the third quarter of 2001, primarily due to acquisitions of generating facilities by NRG and capital additions to NRG-owned generation facilities and utility plant additions.

Taxes (other than income taxes) increased largely due to a legislative change in Minnesota in the third quarter of 2001, which reduced annual property taxes by approximately $23 million. The majority of this refund will be returned to NSP-Minnesota customers. In addition, Colorado property taxes for the third quarter of 2001 included an $8 million property tax refund for calendar year 2000.

Special charges in 2002 relate to NRG impairment charges and restructuring costs, as discussed in Note 2. Special charges in 2001 relate to a PSCo regulatory adjustment, also discussed in Note 2.

Estimated loss from disposal of investments relate to several projects pending sale, as discussed in Note 3.

Interest income and other nonoperating income — net of other expenses decreased by approximately $15 million, or 72.9 percent, for the third quarter of 2002, compared with the third quarter of 2001, primarily due to lower interest income at NRG.

Interest expense increased by approximately $32 million, or 16.0 percent, for the third quarter of 2002, compared with the third quarter of 2001, primarily due to increased debt levels to fund several asset acquisitions by NRG and higher borrowings rates and fees at the utility subsidiaries, partially offset by increased amounts of capitalized interest related to NRG’s construction projects.

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Income tax expense decreased by approximately $836 million for the third quarter 2002, compared with the third quarter of 2001. Nearly all of this decrease relates to NRG’s 2002 losses and the change in tax filing status for NRG in the third quarter of 2002, as discussed in Note 14. NRG is now in a tax operating loss carryforward and is no longer assumed to be part of Xcel Energy’s consolidated tax group. The effective rate for continuing operations (excluding minority interest) was 24.7 percent for the third quarter of 2002 and 33.8 percent for the third quarter of 2001. The change in the effective rate between years reflects a nominal tax rate at NRG, due to their loss carryforward position. Partially offsetting the NRG tax rate decrease is the impact from a one-time adjustment to recognize tax benefits from Xcel Energy’s investment in NRG, as discussed in Note 14. The effective tax rate for utility and operations other than NRG was comparable for the third quarter 2002, compared with the third quarter 2001.

Discontinued Operations relate to NRG’s assets held for sale as of Sept. 30, 2002, as discussed in Note 3.

Income Statement Analysis — First Nine Months of 2002 vs. First Nine Months of 2001

Electric Utility and Commodity Trading Margins

Xcel Energy’s commodity trading operations are conducted mainly by PSCo (electric) and e prime (gas), both wholly owned subsidiaries. Electric trading activity, initially recorded at PSCo, is partially redistributed to Northern States Power-Minnesota (NSP-Minnesota) and SPS pursuant to the JOA approved by the FERC. Trading revenue and costs do not include the revenue and production costs associated with energy produced from Xcel Energy’s generation assets or energy and capacity purchased to serve native load. Trading revenue and costs associated with NRG’s operations are included in nonregulated margins. Margins from these generating assets for utility operations are included in short-term wholesale amounts, discussed later. Wholesale and trading margins reflect the impact of regulatory sharing of certain trading margins under the ICA in Colorado. The following table details electric utility, short-term wholesale and electric and gas trading revenue and margin.

							Electric			Gas
	Electric			Short-term			Commodity			Commodity			Intercompany			Consolidated
	Utility			Wholesale			Trading			Trading			Eliminations			Total
	(Millions of dollars)
9 months ended 9/30/2002
Electric utility revenue	$	3,985		$	132		$	—		$	—		$	—		$	4,117
Electric fuel and purchased power-utility		(1,544	)		(107	)		—			—			—			(1,651	)
Electric and gas trading revenue-gross		—			—			1,351			1,511			(57	)		2,805
Electric and gas trading costs		—			—			(1,353	)		(1,505	)		57			(2,801	)
Gross margin before operating expenses	$	2,441		$	25		$	(2	)	$	6		$	—		$	2,470
Margin as a percentage of revenue		61.3	%		18.9	%		(0.1	)%		0.4	%		—			35.7	%
9 months ended 9/30/2001
Electric utility revenue	$	4,335		$	675		$	—		$	—		$	—		$	5,010
Electric fuel and purchased power-utility		(2,043	)		(529	)		—			—			—			(2,572	)
Electric and gas trading revenue-gross		—			—			1,075			1,524			(75	)		2,524
Electric and gas trading costs		—			—			(999	)		(1,509	)		75			(2,433	)
Gross margin before operating expenses	$	2,292		$	146		$	76		$	15		$	—		$	2,529
Margin as a percentage of revenue		52.9	%		21.6	%		7.1	%		1.0	%		—			33.6	%

Electric utility revenues decreased approximately $350 million in the first nine months of 2002, compared with the same period in 2001, due largely to lower fuel and power costs passed through rate recovery mechanisms. Electric utility margins increased approximately $149 million for the first nine months of 2002, compared with 2001. The higher electric margins in the first nine months of 2002 reflect lower unrecovered costs, due in part to resetting the base-cost recovery at PSCo in January 2002, sales growth and lower regulatory accruals. Electric utility revenues and margins were both decreased in 2002 due to the 2001 reversal of the disallowed conservation incentive revenues at NSP-Minnesota discussed previously and lower sales of excess capacity in Texas.

Electric and gas commodity trading margins and short-term wholesale margins decreased approximately $208 million, for the first nine months of 2002 compared with the first nine months of 2001. The decrease reflects lower power pool prices and less favorable market conditions in 2002.

Gas Utility Margins

The following table details the changes in gas utility revenue and margin. The cost of gas tends to vary with changing sales requirements and the unit cost of gas purchases. However, due to purchased gas cost recovery mechanisms for retail customers, fluctuations in the cost of gas have little effect on natural gas margin.

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	9 months ended
	Sept. 30
	2002			2001
	(Millions of dollars)
Gas revenue	$	938		$	1,577
Cost of gas purchased and transported		(559	)		(1,200	)
Gas margin	$	379		$	377

Gas revenue decreased by approximately $639 million, or 40.5 percent, in the first nine months of 2002, compared with the same period in 2001, primarily due to decreases in the cost of natural gas, which are largely passed on to customers and recovered through various rate adjustment clauses in most of the jurisdictions in which Xcel Energy operates. Gas margin increased approximately $2 million for the first nine months of 2002, compared with 2001, due largely to the full-period effect of a rate increase effective February 2001 at PSCo.

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Nonregulated Operating Margins

The following table details the change in nonregulated revenue and margin.

	9 months ended
	Sept. 30
	2002			2001
	(Millions of dollars)
Nonregulated and other revenue	$	2,108		$	2,102
Earnings from equity investments		73			199
Nonregulated cost of goods sold		(1,137	)		(1,132	)
Nonregulated margin	$	1,044		$	1,169

Nonregulated margin decreased for the first nine months of 2002, largely due to lower power prices in both consolidated and equity investment projects. Lower power prices, mainly in the United States, reduced demand for NRG’s peaking and merchant power facilities.

Non-Fuel Operating Expense and Other Costs

Utility Other Operation and Maintenance Expenses for the first nine months of 2002 decreased by approximately $37 million, or 3.3 percent, compared with the first nine months of 2001. The decreased costs reflect lower incentive compensation and other employee benefit costs, as well as lower staffing levels in corporate areas, partially offset by higher plant outage and property insurance costs.

Nonregulated Other Operation and Maintenance Expenses increased by approximately $108 million, or 23.4 percent, for the first nine months of 2002, compared with the first nine months of 2001, primarily due to the expansion of NRG’s operations during the last nine months of 2001. These portfolio growth costs were partially offset by savings from the restructuring of NRG’s operations during the third quarter of 2002.

Depreciation and amortization increased by approximately $120 million, or 17.9 percent, for the first nine months of 2002, compared with the first nine months of 2001, primarily due to acquisitions of generating facilities by NRG and capital additions to NRG-owned generation facilities and utility plant additions.

Taxes (other than income taxes) increased largely due to an $8 million Colorado property tax refund in 2001 for calendar year 2000.

Special Charges in 2002 included second quarter NRG items previously discussed and first quarter charges for restaffing and regulatory recovery, as discussed in Note 2. Special Charges in 2001 relate to the second quarter PSCo regulatory adjustment, also discussed in Note 2.

Estimated loss from disposal of investments in 2002 relate to several projects pending sale, as discussed in Note 3.

Interest income and other nonoperating income — net of other expenses decreased by approximately $8 million, or 16.4 percent, for the first nine months of 2002, compared with the first nine months of 2001, primarily due to lower interest income at NRG and lower net gains on the sales of assets.

Interest expense increased by approximately $85 million, or 15.4 percent, for the first nine months of 2002, compared with the first nine months of 2001, primarily due to increased debt levels to fund several asset acquisitions by NRG.

Income tax expense decreased by approximately $942 million for the first nine months of 2002, compared with the first nine months of 2001. Nearly all of this decrease, relates to NRG’s 2002 losses and the change in tax filing status for NRG in the third quarter of 2002, as discussed in Note 14. NRG is now in a tax operating loss carryforward and is no longer assumed to be part of Xcel Energy’s consolidated tax group. The effective rate for continuing operations (excluding minority interest) was 24.1 percent for the first nine months of 2002 and 32.1 percent for the first nine months of 2001. The change in the effective rate between years reflects a nominal tax rate at NRG, due to their loss carryforward position. Partially offsetting the NRG tax rate decrease is the impact from a one-time adjustment to recognize tax benefits from Xcel Energy’s investment in NRG, as discussed in Note 14. The effective tax rate for utility and operations other than NRG was comparable for the third quarter 2002, compared with the third quarter 2001.

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Discontinued Operations relate to NRG’s assets held for sale as of Sept. 30, 2002, as discussed in Note 3.

Pending Accounting Changes

SFAS No. 143 — In 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143 — “Accounting for Asset Retirement Obligations.” This statement will require Xcel Energy to record its future nuclear plant decommissioning obligations as a liability at fair value with a corresponding increase to the carrying value of the related long-lived asset. The liability will be increased to its present value each period, and the capitalized cost will be depreciated over the useful life of the related long-lived asset. If at the end of the asset’s life the recorded liability differs from the actual obligations paid, SFAS No. 143 requires that a gain or loss be recognized at that time. However, rate-regulated entities may recognize a regulatory asset or liability instead, if the criteria for such treatment are met.

Xcel Energy currently follows industry practice by ratably accruing the costs for decommissioning over the approved cost recovery period and including the accruals in accumulated depreciation. At Dec. 31, 2001, Xcel Energy recorded and recovered in rates $623 million of decommissioning obligations and had estimated discounted decommissioning cost obligations to be $878 million as of that date.

In current estimates by Xcel Energy for adoption of the standard on Jan. 1, 2003, the initial value of the liability, including cumulative interest expense through that date, would be approximately $506 million. The decrease in the estimated obligation is due to refinements of assumptions in the SFAS No. 143 calculations, including a higher discount rate and changes in the projected timing and costs for decommissioning (as filed with the MPUC in October 2002). Upon adoption the capitalized asset would be $49 million, before offset by accumulated depreciation of $35 million. The resulting cumulative effect adjustment for unrecognized depreciation and accretion under the new standard would be approximately $8 million. Management expects that the transition amount would be recoverable in rates over time and, therefore, would recognize an additional regulatory asset or liability upon adoption of SFAS No. 143 rather than incur a cumulative effect charge against earnings.

SFAS No. 143 also addresses Xcel Energy’s accrued plant removal costs for a limited number of generation, transmission and distribution facilities for its utility subsidiaries. When identifiable, SFAS No. 143 requires certain removal costs be reclassified from accumulated depreciation to regulatory liabilities when these costs are recoverable in rates. However, these costs are not currently identifiable and the reclassification under SFAS No. 143 may not be practicable.

Xcel Energy expects to adopt SFAS No. 143 as required on Jan. 1, 2003, with updated amounts as appropriate for that date.

SFAS No. 145 — In April 2002, the FASB issued SFAS No. 145 — “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections,” which supercedes previous guidance for the reporting of gains and losses from extinguishment of debt and accounting for leases, among other things. Adoption of SFAS No. 145 may affect the recognition of impacts from NRG’s restructuring plan, if existing debt agreements are ultimately renegotiated. Other impacts of SFAS 145 are not expected to be material to Xcel Energy.

SFAS No. 146 — In July 2002, the FASB issued SFAS No. 146 — “Accounting for Exit or Disposal Activities,” addressing recognition, measurement and reporting of costs associated with exit and disposal activities, including restructuring activities. SFAS 146 may have an impact on the timing of recognition of costs related to the implementation of the NRG restructuring plan; however, such impact is not expected to be material.

EITF Nos. 02-03 and 98-10 — See Note 1 regarding pending changes related to trading operations and the rescission of EITF 98-10 provisions in 2003.

Critical Accounting Policies

Preparation of financial statements and related disclosures in compliance with generally accepted accounting principles (GAAP) requires the application of appropriate technical accounting rules and guidance, as well as the use of estimates. The application of these policies necessarily involves judgments regarding future events, including the likelihood of success of particular projects, legal and regulatory challenges and anticipated recovery of costs. These judgments, in and of themselves, could materially impact the financial statements and disclosures based on varying assumptions, which may be appropriate to use. In addition, the financial and operating environment also may have a significant effect, not only on the operation of the business, but on the results reported through the application of accounting measures used in preparing the financial statements and related disclosures, even if the nature of the accounting policies applied have not changed. Item 7, Management’s Discussion and Analysis, in Xcel Energy’s Annual Report on Form 10-K for the year ended Dec. 31, 2001 includes a list of accounting policies that are most significant to the portrayal of Xcel Energy’s financial condition and

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results, and that require management’s most difficult, subjective or complex judgments. Each of these has a higher likelihood of resulting in materially different reported amounts under different conditions or using different assumptions.

Market Risks

Xcel Energy and its subsidiaries are exposed to market risks, including changes in commodity prices, interest rates and currency exchange rates as disclosed in Management’s Discussion and Analysis in its annual report on Form 10-K for the year ended Dec. 31, 2001. Commodity price risks for Xcel Energy’s regulated subsidiaries are mitigated in most jurisdictions due to cost-based rate regulation.

The energy market continues to evolve and change as market conditions and participants vary. Xcel Energy and its subsidiaries have responded to the change to the energy trading market environment and believe there has been no material change in its market risk exposures that affect the quantitative and qualitative disclosures presented as of Dec. 31, 2001, except as follows:

Interest rates: As a result of various defaults under certain loan agreements, NRG’s counterparties have terminated interest rate swaps with NRG, Brazos Valley LP and NRG Finance Company I LLC. Until NRG successfully restructures outstanding debt and returns to credit quality, the company will not seek to manage interest rate risk through the use of financial derivatives.

Commodity Price: NRG utilizes an undiversified “Value-at-Risk” (VAR) model to estimate a maximum potential loss in the fair value of its commodity portfolio including generation assets, load obligations and bilateral physical and financial transactions. The key assumptions for the NRG Energy VAR model include (1) a lognormal distribution of price returns (2) three day holding period and (3) a 95% confidence interval. The volatility estimate is based on the implied volatility for at the money call options. This model encompasses the following generating regions: Entergy, NEPOOL, NYPP, PJM, WSCC, SPP and Main. The estimated maximum potential three-day loss in fair value of NRG Energy’s commodity portfolio, calculated using the VAR model was $91.6 million and $71.7 million for September 30, 2002 and December 31, 2001, respectively.

LIQUIDITY AND CAPITAL RESOURCES

NRG Financial Issues

Reference is made to Notes 6 and 7 of the Notes to Consolidated Financial Statements for a description of the steps being taken to improve NRG’s financial situation and liquidity issues facing NRG, including the restructuring plan proposed by NRG. As explained in Note 7, Xcel Energy estimates that NRG is required to post collateral ranging from $1.1 billion to $1.3 billion as a result of the lowering of NRG’s credit ratings to below investment grade. NRG previously expected to meet the collateral requirements with available cash, operating cash flows, equity contributions from Xcel Energy, proceeds from asset sales and the issuance of bonds into the capital markets or as a private placement.

NRG had obtained an agreement with various lenders to extend, until Nov. 15, 2002, the deadline by which it must post this cash collateral. As required by the extension agreement, NRG submitted a comprehensive restructuring plan to its lenders and bondholders in late October (see Note 6). The extension agreement did not waive other events of default, including failure to make principal and/or interest payments when due or failure to comply with financial covenants. Nor did the extension agreement waive the rights of the bank group or the bondholders to pursue any rights and remedies in respect of such other defaults.

On Nov. 6, 2002, lenders to NRG accelerated approximately $1.1 billion of NRG's debt under a construction revolver financing facility, rendering the debt immediately due and payable. This action terminated the Second CCEL in effect between NRG and its major lenders. The extension letter was previously scheduled to expire Nov. 15, 2002. Based on discussions with the construction revolver lenders it is NRG's understanding that the administrative agent, Credit Suisse First Boston, issued the acceleration notice to preserve certain rights under the construction revolver financing agreements. NRG believes that the administrative agent intends to forbear in the immediate exercise of any rights and remedies against the Company.

NRG has missed several scheduled payments of interest and principal on some of its bonds and does not contemplate making any principal or interest payments on it corporate-level debt pending the restructuring of its obligations. Consequently, NRG is, and expects to continue to be, in default under various debt instruments. By reason of these various defaults the lenders may, if they so choose, to seek to enforce their remedies and that would likely lead to a bankruptcy filing by NRG.

As explained in Note 6, NRG submitted to its various lenders, bondholders and other creditor groups (collectively, NRG’s Creditors) a restructuring plan on Nov. 4, 2002. The restructuring plan is expected to serve as a basis to financially restructure NRG and, among other things, proposes the conversion of certain outstanding indebtedness and other obligations of NRG into equity of NRG, addresses the status of each of NRG’s projects and provides for the issuance of NRG debt in satisfaction of various NRG obligations. The restructuring plan includes a proposal addressing Xcel Energy’s continuing role and degree of ownership in NRG and obligations to NRG in a restructured NRG. Based on the advice of its financial advisor that NRG is likely insolvent and in return for a release of any and all claims against Xcel Energy, the plan proposes that, upon consummation of the restructuring, Xcel Energy would pay $300 million to NRG. The plan separately proposes that Xcel Energy surrender its equity ownership of NRG. The plan does not contemplate any sharing by Xcel Energy with NRG’s Creditors of any benefits Xcel Energy might receive in connection with the tax matters described in Note 6. There can be no assurance that the restructuring plan submitted by NRG will be accepted by NRG’s Creditors or that it will not be significantly revised as a result of ongoing negotiations. Furthermore, there can be no assurance that any consensual restructuring plan ultimately will be accepted by NRG’s Creditors.

Whether NRG does or does not reach a consensual arrangement with NRG's Creditors, there is a substantial likelihood that NRG will be the subject of a bankruptcy proceeding. If an agreement is reached with NRG’s Creditors on a restructuring plan, it is expected that NRG would commence a Chapter 11 bankruptcy case and immediately seek approval of a prenegotiated plan of reorganization. Absent an agreement with NRG's Creditors and the continued forbearance by such creditors, NRG will be subject to substantial doubt as to its ability to continue as a going concern and will likely be the subject of a voluntary or involuntary bankruptcy proceeding, which, due to the lack of a prenegotiated plan of reorganization, would be expected to take an extended period of time to be resolved and may involve claims against Xcel Energy under the equitable doctrine of substantive consolidation.

In addition to the collateral requirements, NRG must continue to meet its ongoing operational and construction funding requirements. Since NRG’s downgrade, its cost of borrowing has increased and it has not been able to access the capital markets.

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NRG believes that its current funding requirements under its already reduced construction program may be unsustainable given its inability to raise the capital markets and the uncertainties involved in obtaining additional equity funding from Xcel Energy. NRG and Xcel Energy have retained financial advisors to help work through these liquidity issues.

As discussed above, NRG is not making any payments of principal or interest on its corporate level debt and neither NRG nor any subsidiary is making payment of principal or interest on publicly held bonds. This failure to pay, coupled with past and anticipated proceeds from the sales of projects, has provided NRG with adequate liquidity to meet its day-to-day operating costs. However, there can be no assurance that holders of NRG indebtedness, on which interest and principal are not being paid, will not seek to accelerate the payment of their indebtedness, which would likely lead to NRG seeking relief under the bankruptcy laws.

At the present time and based on conversations with various lenders, Xcel Energy management believes that the appropriate course is to seek a consensual restructuring of NRG with NRG Creditors. Following an agreement on the restructuring with NRG's Creditors and as described in Note 6, it is expected that NRG would commence a Chapter 11 bankruptcy proceeding and immediately seek approval of a prenegotiated plan of reorganization. If a consensual restructuring cannot be reached, the likelihood of NRG becoming subject to a protracted voluntary or involuntary bankruptcy proceeding is increased. If a consensual restructuring of NRG cannot be obtained and NRG remains outside of a bankruptcy proceeding, NRG is expected to continue selling assets to reduce its debt and improve its liquidity.

While it is an exception rather than the rule, especially where one of the companies involved is not in bankruptcy, the equitable doctrine of substantive consolidation permits a bankruptcy court to disregard the separateness of related entities; to consolidate and pool the entities’ assets and liabilities; and treat them as though held and incurred by one entity where the interrelationship between the entities warrants such consolidation. Xcel Energy believes that any effort to substantively consolidate Xcel Energy with NRG would be without merit. However, it is possible that NRG or its creditors would attempt to advance such claims should an NRG bankruptcy proceeding commence, (particularly in the absence of a prenegotiated plan of reorganization) and Xcel Energy cannot be certain how a bankruptcy court would resolve the issue. One of the creditors of an NRG project Pike (as discussed in Note 4) has already filed involuntary bankruptcy proceedings against that project and has included claims against both NRG and Xcel Energy. If a bankruptcy court were to allow substantive consolidation of Xcel Energy and NRG, it would have a material adverse effect on Xcel Energy.

NRG has requested that its financial advisor, Zolfo Cooper, LLC (Zolfo), provide advice to management regarding potential opportunities for, and the general benefits and risks associated with: (a) reducing NRG’s cost structure; (b) improving liquidity and cash flow in the short-, medium- and long-term; (c) mitigating the short-term impact on liquidity and cash flow of certain demands and obligations; and (d) liquidating or monetizing certain assets, including contractual relationships that have net present value based on current market prices. One of the specific areas where NRG management has asked for Zolfo’s assistance is in relation to cash collateral requests. In addition to collateral requirements under the loan documents described above, cash collateral requests have been made of NRG by various contract counterparties as a result of the ratings downgrade at NRG. However, not all of the contract counterparties with the contractual right to request cash collateral under the current circumstances have yet made such a request or demand. Zolfo will be working with NRG management to assess the nature and benefit of each such contractual relationship and to identify and evaluate potential strategies for reducing, mitigating or eliminating each cash collateral request. There are no assurances that NRG can be successful in its efforts to mitigate the cash collateral request issue in a manner that preserves sufficient liquidity to operate its businesses effectively.

Other areas where Zolfo has been asked to assist management include, but are not limited to: (a) managing the working capital impact of certain vendors who previously sold product or provided services to NRG on reasonable, market credit terms, but who are now requiring NRG to pay cash in advance for such product or services; and (b) controlling the general disbursement and commitment process so as to ensure that cash is utilized in a manner that maximizes value for stakeholders. Xcel Energy expects that Zolfo’s involvement will help NRG bring structure to its workout process and institute an appropriate emphasis on short-term liquidity and cash flows.

As explained in Note 10, Xcel Energy had guaranteed at Sept. 30, 2002, approximately $234 million of power market contracts, primarily of the power-marketing subsidiary of NRG. Exposure under these guarantees is approximately $104 million.

As discussed in Note 2, developments in the third quarter of 2002 resulted in material NRG asset impairments of nearly $3 billion before taxes.

Additional asset impairments may be recorded by NRG in periods subsequent to Sept. 30, 2002, given the changing business conditions and the resolution of the pending restructuring plan. Management is unable to determine the possible magnitude of any additional asset impairments.

NRG may be subject to additional charges and expenses related to the termination of construction and development projects which have not been recorded as of Sept. 30, 2002. Such amounts will be recorded by NRG as they are known and represent a valid claim against the company. NRG is unable to determine the magnitude of these possible charges at this time.

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Cash Flows

	9 months ended Sept. 30,
	2002	2001
	(Millions of dollars)
Net cash provided by operating activities	$1,499	$1,338

Cash provided by operating activities increased for the first nine months of 2002, compared with the first nine months of 2001. The increase was primarily due to improved working capital, mainly at NRG due to NRG’s recently implemented cash management procedures. Due to NRG's current liquidity concerns, payment of certain items has been temporarily suspended, pending the completion of the comprehensive restructuring plan.

	9 months ended Sept. 30,
	2002	2001
	(Millions of dollars)
Net cash used in investing activities	$(2,302)	$(4,623)

Cash used in investing activities decreased for the first nine months of 2002, compared with the first nine months of 2001. The change is largely due to decreased levels of nonregulated capital expenditures and asset acquisitions, primarily at NRG.

	9 months ended Sept. 30,
	2002	2001
	(Millions of dollars)
Net cash provided by financing activities	$1,785	$3,364

Cash provided by financing activities decreased for the first nine months of 2002, compared with the first nine months of 2001. The change is largely due to limited financing activities at NRG offset by increased financings at Xcel Energy’s utility subsidiaries.

Capital Requirements

Updated Capital Expenditure Forecast

Utility Capital Requirements — Xcel Energy's utility capital expenditure forecast is detailed in Note 9. The capital expenditure programs of Xcel Energy are subject to continuing review and modification. Actual construction expenditures may vary from the estimates due to changes in market conditions.

NRG Prospective Capital Requirements — As of Sept. 30, 2002, NRG has taken definitive steps to scale back and delay certain construction projects so as to enhance its financial position and improve liquidity in 2002. See discussion of NRG's capital and operating expenditure forecast in Note 7.

NRG Energy’s capital expenditure program is subject to continuing review and modification. Actual expenditures may differ significantly depending upon such factors as the success, timing of and level of involvement in projects under construction.

NRG Construction Program Sources — NRG has generally financed the acquisition and development of its projects under financing arrangements to be repaid solely from each of its projects cash flows, which are typically secured by the plant’s physical assets and equity interests in the project company. Financing needs are subject to continuing review and can change depending on market and business conditions and changes, if any, in the capital requirements of NRG and its subsidiaries. During the nine months ended Sept. 30, 2002, NRG has financed its acquisition and construction activities through a combination of both short- and long-term corporate level and project level financings, cash infusions from Xcel Energy and to a limited extent operating cash flows. Additional financing sources include cash proceeds from asset sales, as discussed later.

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Common Stock Dividends

Until third quarter of 2002, dividends since the Xcel Energy merger have been declared each quarter at a rate of $0.375 per share (equivalent to an annual level of $1.50 per share). On Sept. 26, 2002, Xcel Energy’s board of directors declared a quarterly common stock dividend of $0.1875 per share, a reduction of $0.1875 from the previous dividend. Dividends were paid Oct. 20, 2002. Xcel Energy’s goal is to match future dividend growth with long-term earnings growth.

The Articles of Incorporation of Xcel Energy place restrictions on the amount of common stock dividends it can pay when preferred stock is outstanding. Xcel Energy has outstanding preferred stock, however the restrictions do not place any effective limit on the ability of Xcel Energy to pay dividends.

Capital Sources

Short-Term Funding Sources

In 2002, Xcel Energy has been experiencing some volatility in its funding sources due largely to the credit issues being faced by NRG, as described in Note 7.

NRG Cash Flows and Liquidity — NRG’s operating cash flows have been affected by lower operating margins as a result of low power prices since mid-2001. Seasonal variations in demand and market volatility in prices are not unusual in the independent power sector, and NRG does normally experience higher margins in peak summer periods and lower margins in non-peak periods. NRG has also incurred significant amounts of debt to finance its acquisitions in the past several years, and the servicing of interest and principal repayments from such financing is largely dependent on domestic project cash flows.

NRG management has concluded that the forecasted free cash flow available to NRG after servicing project-level obligations will be insufficient to service recourse debt obligations. See Note 6 for further discussion of the financial restructuring plan for NRG.

Under the proposed plan, owned assets with un-funded debt service reserve accounts would be funded at the project level over time with operating cash from the projects as it becomes available. The following lists amounts currently required to fund such accounts:

NRG Northeast Generating LLC
NRG Peaker Finance Co
NRG South Central Generating LLC
Mid-Atlantic Generating
Flinders Power Finance Pty
NRG McClain
Enfield $78.3 million
$78.7 million
$46.6 million
$23.4 million
$20.3 million
$7.4 million*
$3.4 million

*Includes both a debt service reserve and maintenance reserve fund.

NRG estimates that approximately $75 million will be required for general corporate purposes from Oct. 21, through Dec. 31, 2002. This amount includes funds for direct corporate obligations and net requirements for continuing operations. NRG plans to fund these liquidity needs with cash on hand and cash proceeds from asset sales. As of Sept. 30, 2002, NRG had $347 million of cash on hand, which includes $245 million available for general corporate purposes.

Going forward, NRG estimates $125 to $150 million for capital spending in 2003. This amount includes capital improvements, minor refurbishments, and extensions of projects in operation. NRG plans to fund these liquidity needs with cash on hand, operating cash from generating assets, a $300 million infusion from Xcel Energy, and the issuance of project level debt. NRG’s current financial plan estimates cash from operations of approximately $350 million for 2003.

During 2002, Xcel Energy has provided NRG with $500 million of cash infusions. In May 2002, Xcel Energy and NRG entered into a support and capital subscription agreement pursuant to which Xcel Energy agreed, under certain circumstances, to provide an additional $300 million to NRG. Xcel Energy has not, to date, provided funds to NRG under this agreement, however, Xcel Energy is willing to make a contribution of $300 million if the restructuring plan discussed earlier is approved by the creditors.

In the second-quarter 2002, NRG announced it had completed the sale of its ownership interests in an Australian energy company, Energy Development Limited (EDL) and its 50 percent interest in Collinsville Power Station in Australia. NRG received proceeds of approximately $45 million in exchange for its ownership interest in these two assets.

NRG announced the sale of its 60 percent interest in Compania Electrica Central Bulo Bulo S.A. (Bulo Bulo), a Bolivian corporation and TermoRio SA, a Brazilian corporation that owns a thermal generation project under construction in Latin America; transfer of its indirect 50% interest in SRW Cogeneration LP (SRW), which owns a cogeneration facility in Orange County, Texas; and the sales of its 57.7 percent interest in the Crockett Cogeneration Project and sale of its 39.5 percent indirect partnership interest in the Mt. Poso Cogeneration Company, a California limited partnership (Mt. Poso), in California. These transactions are expected to reach financial close in the fourth quarter of 2002 and the company expects to realize net cash proceeds in the amount of approximately $160 million.

As of Sept. 30, 2002, NRG also announced the sales of its Csepel power generating facilities, its 44.5 percent interest in the ECKG power station and its interest in Entrade, an electricity trading business. These transactions are expected to reach financial close in the first quarter of 2003 and the company expects to realize cash proceeds of approximately $200 million. For additional information regarding assets held for sale see Note 3.

Credit Ratings — Short-term borrowings as a source of short-term funding is affected by access to reasonably priced capital markets. This access is dependent in part on credit agency reviews. In the past year, credit ratings for all of Xcel Energy

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have been adversely affected by NRG’s credit contingencies, despite what management believes is a reasonable separation of NRG’s operations and credit risk from Xcel Energy’s utility operations and corporate financing activities. As of Sept. 30, 2002, the following represents the credit ratings assigned to various Xcel Energy companies:

Company	Credit Type	Moody’s*		Standard & Poors		Fitch*
Xcel Energy	Senior Unsecured Debt		Baa3		BBB-		BB+
Xcel Energy	Commercial Paper		NP		A3		WR
NSP-Minnesota	Senior Unsecured Debt		Baa1		BBB-		BBB
NSP-Minnesota	Senior Secured Debt		A3		BBB+		BBB+
NSP-Minnesota	Commercial Paper		P2		A3		F2
NSP-Wisconsin	Senior Unsecured Debt		Baa1		BBB		BBB
NSP-Wisconsin	Senior Secured Debt		A3		BBB+		BBB+
PSCo	Senior Unsecured Debt		Baa2		BBB-		BBB
PSCo	Senior Secured Debt		Baa1		BBB+		BBB+
PSCo	Commercial Paper		P2		A3		F2
SPS	Senior Unsecured Debt		Baa1		BBB		BBB
SPS	Commercial Paper		P2		A3		F2
NRG	Corporate Credit Rating		Caa3		D		N/A

* Negative credit watch/negative outlook

Since December 2001, NRG’s access to short-term capital has been limited due to tightening credit standards for the independent power sector as a whole. The unexpected downgrade of NRG’s credit ratings below investment grade in July 2002 has resulted in cash collateral requirements as discussed above and in Note 7. In addition, lower credit ratings have increased the cost of NRG’s capital financing compared to historical levels.

In June 2002, Xcel Energy’s access to commercial paper markets was reduced due to lowered credit ratings (shown above). Management believes these credit ratings for entities other than NRG are unduly low given the separation of NRG’s operations and credit risk from Xcel Energy’s utility operations and corporate financing activities. However, until the ratings are raised, Xcel Energy and its utility subsidiaries continue to seek sources of financing (both short- and long-term) other than commercial paper.

Credit Facilities — On Aug. 15, 2002, NSP-Minnesota obtained an amended and restated credit facility that replaced its $300-million, 364-day fully drawn credit facility. This credit line is structured as a senior revolving facility and is secured by a new series of bonds issued under its First Mortgage Trust Indenture. The new bonds are secured equally with all other bonds outstanding under the Trust Agreement.

Xcel Energy had a $400-million credit facility that expired Nov. 8, 2002. Xcel Energy paid down the $400 million, 364-day bank line on Nov. 8, 2002. Funds to pay down the line came from cash at the Xcel Energy holding company and funds from a new financing, as discussed in Note 10.

See additional discussion regarding credit facilities at Note 10.

Cross Default Provisions — On Aug. 5, 2002, Xcel Energy signed agreements with its lenders to eliminate cross-default provisions in its bank credit agreements with respect to NRG. At the time, Xcel Energy’s bank agreements consisted of a 364-day credit facility in the amount of $400 million expiring in November 2002 and a five-year credit facility in the amount of $400 million expiring in November 2005. The revised agreements removed key provisions in Xcel Energy’s credit facilities that would have constrained Xcel Energy’s ability to access capital due to difficulties faced by NRG in complying with the terms of NRG’s credit facilities. The agreements reached with Xcel Energy’s lenders removed the linkage between NRG’s agreements and credit facilities and those at Xcel Energy by removing the cross-default provisions.

Financing Activities

Xcel Energy Registration Statements — In September 2000, Xcel Energy filed a $1 billion shelf registration with the SEC to issue debt securities. Xcel Energy has approximately $400 million remaining available under this registration.

In February 2002, Xcel Energy filed a $1-billion shelf registration with the SEC. Xcel Energy may issue debt securities, common stock and rights to purchase common stock under this shelf registration. Xcel Energy has approximately $482.5 million remaining available under this registration.

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Xcel Energy Securities Issuances — In February 2002, Xcel Energy issued 23 million shares of common stock at $22.50 per share. The proceeds were used to fund NRG and to repay short-term debt.

In June 2002, Xcel Energy issued 25.7 million shares of common stock to complete its exchange offer with minority NRG shareholders and acquire 100 percent ownership of NRG (see Note 5).

On Nov. 8, 2002, Xcel Energy entered into a securities purchase agreement with institutional investor pursuant to which the investors purchase, in a private placement, $100 million of Xcel Energy 8 percent senior convertible debt securities. The debt securities are convertible into common stock of Xcel Energy. The proceeds were used to help pay down Xcel Energy's 364-day line of credit which came due on Nov. 8. The securities purchase agreement further provides for possible additional financings up to $250 million. See Note 10.

NSP-MN Debt Issuances — In July 2002, NSP-MN issued $185 million of 8-percent public income notes due in 2042. The proceeds were used to repay short-term indebtedness incurred for general working capital purposes and to meet long-term debt maturity requirements.

In August 2002, NSP-Minnesota issued $450 million of first mortgage bonds. These bonds carry a fixed interest rate of 8 percent and mature in 2012.

In August 2002, in connection with its 364-day, $300-million credit agreement renewal, NSP-Minnesota also issued $308 million of first mortgage bonds, due Aug. 15, 2003, to Wells Fargo Bank, N.A. pursuant to the credit agreement. The obligations under the credit agreement will be secured by this series of bonds.

In August 2002, NSP-Minnesota closed on the conversion of several bonds totaling $196 million from variable rate to a fixed rate of 8.5 percent. The first call date on these bonds is Aug. 27, 2012. As part of the conversion, $69 million of the bonds were collateralized with first mortgage bonds. The remaining bonds were collateralized in 1997.

PSCo Debt Issuances — In September 2002, PSCo issued $600 million of first collateral trust bonds at a fixed interest rate of 7.875 percent and maturing in 2012.

In September 2002, PSCo issued and delivered $530 million of first collateral trust bonds to a certain bank to secure its payment obligations under its $530 million, 364-day credit facility and $48.75 million of first collateral trust bonds to an insurance company to secure insurance obligations related to its 5.1-percent pollution control bonds, series due Jan. 1, 2019.

NRG Peaker Finance Company LLC — During the second quarter of 2002, NRG Peaker Finance Company LLC, an indirect wholly owned subsidiary of NRG, issued $325 million of floating rate senior secured bonds. This issue, rated triple-A by Moody’s Investors Service and Standard & Poor’s Ratings Services and due in 2019, provided net proceeds of $250 million. XL Capital Assurance Inc. (XLCA), rated triple-A by Moody’s Investors Service, Standard & Poor’s Ratings Services and Fitch Ratings, will guarantee scheduled principal and interest payments on the bonds. The XLCA guarantee is secured by five peaker power plants totaling approximately 1,318 megawatts.

NRG Energy Center, Inc. — In July 2002, NRG Energy Center, an indirect wholly owned subsidiary of NRG, entered into an agreement allowing it to issue senior secured promissory notes in the aggregate principal amount of up to $150 million. In July 2002, under this agreement, NRG Energy Center, Inc. issued $75 million of bonds in a private placement. Two series of notes were issued in July 2002: the $55 million Series A-Notes, dated July 3, 2002, matures on Aug. 1, 2017, and bears an interest rate of 7.25 percent per annum; and the $20 million Series B-Notes, dated July 3, 2002, matures on Aug. 1, 2017, and bears an interest rate of 7.12 percent per annum. NRG Thermal Corporation, a wholly owned subsidiary of NRG, which owns 100 percent of NRG Energy Center, pledged its interests primarily in all of its district heating and cooling investments throughout the United States, as collateral. A covenant in this facility requires that Xcel Energy maintain no less than 50 percent indirect ownership interest in NRG Thermal.

See further discussion of NRG credit collateral calls, defaults and debt covenants at Notes 7 and 10.

Financing Plans

Xcel Energy may issue $150 million to $250 million of convertible debt at the Xcel Energy Holding Company in the fourth quarter of 2002, subject to favorable market conditions. The proceeds may be used for general corporate purposes.

Xcel Energy currently does not anticipate issuing additional shares of common stock during 2002. If it were to do so, proceeds would be used for general corporate purposes, to repay short-term debt or to fund Xcel Energy’s subsidiaries, including NRG. Xcel Energy continues to assess its potential financing plans.

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In accordance with an SEC order under PUHCA granting Xcel Energy general financing authority, Xcel Energy must maintain its common stockholders’ equity at a level at least equal to 30 percent of total capitalization in order to issue securities or guarantees. Xcel Energy received approval from the SEC for temporary authorization to allow common equity to be 24 percent of total capitalization, as discussed in Note 8.

Short-term debt and financial instruments are discussed in Note 10 to the Financial Statements.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Item 2, Management’s Discussion and Analysis — Market Risks.

Item 4. CONTROLS AND PROCEDURES

Xcel Energy maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Within the 90-day period prior to the filing of this report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures. Based on that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective.

Subsequent to the date of their evaluation, there have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls.

Part II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

In the normal course of business, various lawsuits and claims have arisen against Xcel Energy. Management, after consultation with legal counsel, has recorded an estimate of the probable cost of settlement or other disposition for such matters. See Notes 4, 7, 8 and 9 of the Financial Statements in this Form 10-Q for further discussion of legal proceedings, including Regulatory Matters and Commitments and Contingent Liabilities, which are hereby incorporated by reference. Reference also is made to Item 3 of Xcel Energy’s 2001 Form 10-K and Item 1 of Part II of Xcel Energy’s Form 10-Q for the quarter ended June 30, 2002 for a description of certain legal proceedings presently pending. There are no new significant cases to report against Xcel Energy or its subsidiaries and there have been no notable changes in the previously reported proceedings, except as set forth below.

Light Rail Transit — In February 2001, NSP-Minnesota filed a lawsuit in the federal district court in Minneapolis seeking reimbursement of costs for relocating electric utility lines to allow for construction of a light rail transit (LRT) line in downtown Minneapolis. In May 2001, the Minnesota Department of Transportation and the Metropolitan Council (Defendants) obtained a preliminary injunction requiring NSP-Minnesota to move certain facilities. NSP-Minnesota has complied with the preliminary injunction and utility line relocation has commenced. NSP-Minnesota is capitalizing its costs incurred as construction work in progress. In September 2002, the court granted Defendants' motions for summary judgment and dismissed NSP-Minnesota's claims. NSP-Minnesota reserves its right to appeal. In collateral matters regarding LRT construction, NSP-Minnesota commenced a mandamus action in state court seeking an order requiring Defendants to commence condemnation proceedings concerning an underground substation, access to which is blocked by LRT. In October 2002, the court dismissed NSP-Minnesota's petition. NSP-Minnesota also has commenced an action in state court alleging that LRT construction violates the Minnesota Environmental Rights Act and a separate action in federal district court alleging that the Federal Transit Administration's failure to evaluate certain environmental effects of LRT violates the National Environmental Policy Act.

French Island — NSP-Wisconsin’s French Island plant generates electricity by burning a mixture of wood waste and refuse derived fuel. The fuel is derived from municipal solid waste furnished under a contract with La Crosse County, Wisconsin. In October 2000, the EPA reversed a prior decision and found that the plant was subject to the federal large combustor regulations. Those regulations became effective on Dec. 19, 2000. NSP-Wisconsin did not have adequate time to install the emission controls necessary to come into compliance with the large combustor regulations by the compliance date. As a result, on March 29, 2001, the EPA issued a finding of violation to the company. Although NSP-Wisconsin disputes the EPA decision, if successful, the EPA could impose fines up to $27,500 per day for each violation. On April 2, 2001, a conservation group sent NSP-Wisconsin a notice of intent to sue under the citizen suit provisions of the Clean Air Act.

On July 27, 2001, the state of Wisconsin filed a lawsuit against NSP-Wisconsin in the Wisconsin Circuit Court for La Crosse County, contending that NSP-Wisconsin exceeded dioxin emission limits on numerous occasions between July 1995 and December 2000 at French Island. On Sept. 3, 2002, the Wisconsin Circuit Court approved a settlement between NSP-Wisconsin and the state of Wisconsin. Under terms of that settlement, NSP-Wisconsin paid a penalty of approximately $168,000 and agreed to contribute $300,000 to an environmental project near the plant. The settlement resolves all claims identified in the state’s complaint against NSP-Wisconsin.

On Aug. 15, 2001, NSP-Wisconsin received a Certificate of Authority to install control equipment necessary to bring the French Island plant into compliance with the large combustor regulations. NSP-Wisconsin began construction of the new air quality equipment on Oct. 1, 2001. NSP-Wisconsin has reached an agreement in principle with La Crosse County through which La Crosse County will pay for the extra emissions equipment required to comply with the EPA regulation.

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Installation of the control equipment has been completed and source tests on one unit confirm that the unit is now in compliance with the state and federal dioxin standards. NSP-Wisconsin will test the remaining unit during the fourth quarter of 2002.

Potential FirstEnergy Litigation — As discussed in Note 4, FirstEnergy terminated the purchase agreements pursuant to which NRG had agreed to purchase four generating stations for approximately $1.6 billion. FirstEnergy’s cited rationale for terminating the agreements was an alleged anticipatory breach by NRG. FirstEnergy notified NRG that it is reserving the right to pursue legal action against NRG and Xcel Energy for damages.

Item 3. DEFAULTS UPON SENIOR SECURITIES

NRG has identified the following material defaults with respect to the indebtedness of NRG and its significant subsidiaries.

$350 million of 8.25 percent Senior Unsecured Notes due 2010 issued by NRG

• Failure to make $14.4 million interest payment

$250 million of 8.7 percent Remarketable or Redeemable Securities due 2005 issued by NRG

• Failure to make $10.9 million interest payment

$240 million of 8 percent Remarketable or Redeemable Securities due 2013 issued by NRG

• Failure to make $9.6 million interest payment

$350 million of 7.75 percent Senior Unsecured Notes due in 2011 issued by NRG

• Failure to make $13.6 million interest payment

$500 million of 8.625 percent Senior Unsecured Notes due in 2031 issued by NRG

• Failure to make $21.6 million interest payment

$1.0 billion 364-Day Revolving Credit Agreement dated March 8, 2002, among NRG ABN Amro Bank NV as Administrative Agent and the other parties

• Failure to make $7.6 million interest payment

• Missed minimum interest coverage ratio of 1.75x

• Violated minimum net tangible worth of $1.5 billion

$125 million Standby Letter of Credit Facility dated November 30, 1999, among NRG, Australia and New Zealand Banking Group Limited Administrative Agent, and other parties thereto

• Missed minimum interest coverage ratio of 1.75x

• Violated minimum net tangible worth of $1.5 billion

• Cross default to $1.0 billion revolving line of credit agreement

$2.0 billion Credit Agreement, dated May 8, 2001 among NRG Finance Company I LLC, Credit Suiss First Boston as Administrative Agents, and other parties thereto

• Failure to make $267,000 interest payment

• Failure to make $2.9 million interest payment

• Failure to make $5.4 million interest and fees payment

• Failure to fund equity obligations for construction

• Failure to post collateral requirements due under equity support agreement

$325 million Series A floating rate Senior Secured Bonds due in 2019 issued by NRG Peaker Finance Company LLC

• Failure to remove liens placed on one of the project company assets

• A cross default resulting from failure by NRG Energy to make payments of principal, interest on other amounts due on debt for borrowed money in excess of $50 million in the aggregate

$500 million of 8.962 percent Series A-1 Senior Secured Notes due in 2016 issued by NRG South Central Generating LLC

• Failure to make $20.2 million interest and $12.75 million principal payment

• Failure to fund debt service reserve account

$300 million of 9.479 percent Series B-1 Senior Secured bonds due 2024 issued by NRG South Central Generating LLC

• Failure to make $14.2 million interest payment

• Failure to fund debt service reserve account

$320 million of 8.065 percent Series A Senior Secured Bonds due 2004 by NRG Northeast Generating LLC

• Failure to fund for debt service reserve account

$130 million of 8.824 percent Series B Senior Secured Bonds due 2015 by NRG Northeast Generating LLC

• Failure to fund debt service reserve account

$300 million of 9.29 percent Series C Senior Secured Bonds due 2024 by NRG Northeast Generating LLC

• Failure to fund service reserve account

$580 million Loan Agreement dated June 25, 2001, as amended, among Mid Atlantic Generating LLC, JP Morgan Chase Bank as Administrative Agent, and the other parties thereto

• Failure to fund the debt service reserve account

$554 million, Credit and Reimbursement Agreement dated Nov. 12, 1999, as amended, LSP Kendall Energy LLC among Societe General, as Administrative Agent and the other parties thereto

• Liens placed against project assets

(Pounds) 325 million Amended and Restated Facility Agreement dated, Sept. 5, 2001, among Sterling Luxembourg (no. 3) S.A.R.L., Killingholme Power Limited, Banc of America Securities Limited, as Administrative Agent, and the other parties thereto

• Failure to fund the debt service account

48

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

The following Exhibits are filed with this report:

4.01	Supplemental Indenture dated Aug. 15, 2002, between PSCo and U.S. Bank Trust National Association, as trustee, creating $48,750,000 principal amount of First Mortgage Bonds Collateral, Series G, due 2019.
4.02	Supplemental Indenture dated as of Sept. 15, 2002, between PSCo and U.S. Bank Trust National Association, as trustee, creating $530,000,000 principal amount of First Mortgage Bonds, Collateral Series I, due 2003.
4.03	Supplemental Indenture dated as of Aug. 15, 2002, between PSCo and U.S. Bank Trust National Association, as trustee, creating $48,750,000 principal amount of First Collateral Trust Bonds, Series No. 7, due 2019.
4.04	Supplemental Indenture dated as of Sept. 15, 2002, between PSCo and U.S. Bank Trust National Association, as trustee, creating $530,000,000 principal amount of First Collateral Trust Bonds, Series No. 9, due 2003.
4.05	Supplemental Indenture dated as of June 1, 2002, between NSP-Minnesota and BNY Midwest Trust Company, as successor trustee, creating $308,000,000 principal amount of First Mortgage Bonds, Series due 2003.
4.06	Supplemental Indenture dated as of July 1, 2002, between NSP-Minnesota and BNY Midwest Trust Company, as successor trustee, creating $69,000,000 principal amount of First Mortgage Bonds, Pollution Control Series S.
4.07	Supplemental Indenture dated Sept. 1, 2002, between PSCo and U.S. Bank Trust National Association, as Trustee, creating $600 million principal amount of 7.875 percent First Collateral Trust Bonds, Series No. 8 due 2012. (Incorporated by reference to PSCo’s Current Report on Form 8-K, dated Sept. 18, 2002.)
4.08	Supplemental Indenture dated Sept. 18, 2002, between PSCo and U.S. Bank Trust National Association, as Trustee, creating $600 million principal amount of 7.875 percent First Mortgage Bonds, Series H due 2012. (Incorporated by reference to PSCo’s Current Report on Form 8-K, dated Sept. 18, 2002.)
4.09	Supplemental Indenture dated Aug. 1, 2002, between NSP-Minnesota and BNY Midwest Trust Company, as Trustee, creating $450 million principal amount of 8 percent First Mortgage Bonds, Series A due Aug. 28, 2012. (Incorporated by reference to NSP-Minnesota’s Current Report on Form 8-K, dated Aug. 22, 2002.)
4.10	Form of First Notes
4.11	Form of Second Notes
4.12	Form of First Call Notes
4.13	Form of Second Call Notes
4.14	Form of Third Notes
4.15	Form of Third Call Notes
4.16	Registration Rights Agreement dated as of Nov. 8, 2002 by and among Xcel Energy Inc. and the Buyers named therein. (Incorporated by reference to Xcel Energy’s Current Report on Form 8-K, dated Nov. 8, 2002)
10.01	Securities Purchase Agreement dated as of Nov. 8, 2002 by and among Xcel Energy Inc. and the investors listed on the Schedule of Buyers attached thereto. (Incorporated by reference to Xcel Energy’s Current Report on Form 8-K/A, dated Nov 8, 2002.)
99.01	Statement pursuant to Private Securities Litigation Reform Act.
99.02	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

The following reports on Form 8-K were filed either during the three months ended Sept. 30, 2002, or between Sept. 30, 2002, and the date of this report:

July 1, 2002, (filed July 8, 2002) Item 5. Other Events. Re: Xcel Energy receipt of Notice of Violation from the Environmental Protection Agency.

July 25, 2002, (filed Aug. 1, 2002) Item 5. Other Events. Re: Rating Agency actions and other events.

July 31, 2002, (filed Aug. 6, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy’s elimination of the cross-default provisions in its bank credit agreements and other events.

Aug. 12, 2002, (filed Aug. 13, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy’s submission of CEO and CFO statements under oath in response to the SEC order.

Aug 20, 2002, (filed Aug. 23, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy’s announcement that Richard C. Kelly named company’s CFO.

Aug. 22, 2002, (filed Aug. 23, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy Offering Memorandum for potential (private placement) purchasers of long-term debt.

Sept. 5, 2002, (filed Sept. 16, 2002) Item 5. Other Events. Re: Xcel Energy’s announcement of completion of re-audit by new auditors, Deloitte & Touche.

49

Sept. 24, 2002, (filed Sept. 27, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy, NRG Energy and The Bank of New York finalize the First Supplement to the Purchase Contract Agreement, dated as of June 6, 2002.

Sept. 26, 2002, (filed Oct. 4, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy’s announcement of common stock dividend for third quarter.

Oct. 1, 2002, (filed Oct. 4, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy’s wholly owned subsidiary’s, NRG Energy, announcement of the end of the fifteen-day grace period for payment of principal and interest payments of secured bonds.

Oct. 3, 2002, (filed Oct. 24, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy’s wholly owned subsidiary’s, NRG Energy, consideration of third quarter 2002 write-downs or abandonments.

Oct. 18, 2002, (filed Oct. 31, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy’s wholly owned subsidiary’s, NRG Energy, announcement of agreement reached with its bank lenders to extend until Nov. 15, the deadline by which it must post cash collateral in connection with certain bank loan agreements.

Nov. 8, 2002, (filed Nov. 14, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy’s securities purchase agreement with institutional lenders.

50

SIGNATURES

     Pursuant to the requirements 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.

XCEL ENERGY INC.

(Registrant)

/s/ DAVID E. RIPKA

David E. Ripka

Vice President and Controller

/s/ RICHARD C. KELLY

Richard C. Kelly

Vice President and Chief Financial Officer

Date: November 18, 2002

51

CERTIFICATIONS

I, Wayne H. Brunetti, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Xcel Energy Inc;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 18, 2002
	/s/ Wayne H. Brunetti
	Wayne H. Brunetti Chairman, President and Chief Executive Officer

52

I, Richard C. Kelly, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Xcel Energy Inc;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 18, 2002
	/s/ Richard C. Kelly
	Richard C. Kelly Vice President and Chief Financial Officer

53 EX-4.01 3 c72574exv4w01.txt EX-4.01 SUPPLEMENTAL INDENTURE DATED AUG. 15, 2002 EXHIBIT 4.01 SUPPLEMENTAL INDENTURE (DATED AS OF AUGUST 15, 2002) -------- PUBLIC SERVICE COMPANY OF COLORADO TO U.S. BANK TRUST NATIONAL ASSOCIATION, AS TRUSTEE -------- CREATING AN ISSUE OF FIRST MORTGAGE BONDS, COLLATERAL SERIES G -------- (SUPPLEMENTAL TO INDENTURE DATED AS OF DECEMBER 1, 1939, AS AMENDED) SUPPLEMENTAL INDENTURE, dated as of August 15, 2002, between PUBLIC SERVICE COMPANY OF COLORADO, a corporation organized and existing under the laws of the State of Colorado (the "Company"), party of the first part, and U.S. BANK TRUST NATIONAL ASSOCIATION (FORMERLY FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION), a national banking association, as successor trustee (the "Trustee") to Morgan Guaranty Trust Company of New York (formerly Guaranty Trust Company of New York), party of the second part. WHEREAS, the Company heretofore executed and delivered to the Trustee its Indenture, dated as of December 1, 1939 (the "Principal Indenture"), to secure its First Mortgage Bonds from time to time issued thereunder; and WHEREAS, the Company has heretofore executed and delivered to the Trustee the Supplemental Indentures referred to in Schedule A hereto for certain purposes, including the creation of series of bonds, the subjection to the lien of the Principal Indenture of property acquired after the execution and delivery thereof, the amendment of certain provisions of the Principal Indenture and the appointment of the successor Trustee; and WHEREAS, the Principal Indenture as supplemented and amended by all Supplemental Indentures heretofore executed by the Company and the Trustee is hereinafter referred to as the "Indenture", and, unless the context requires otherwise, references herein to Articles and Sections of the Indenture shall be to Articles and Sections of the Principal Indenture as so amended; and WHEREAS, the Company proposes to create a new series of First Mortgage Bonds to be designated as First Mortgage Bonds, Collateral Series G (the "Collateral Series G Bonds"), to be issued and delivered to the trustee under the 1993 Mortgage (as hereinafter defined) as the basis for the authentication and delivery under the 1993 Mortgage of a series of securities, all as hereinafter provided, and to vary in certain respects the covenants and provisions contained in Article V of the Indenture, to the extent that such covenants and provisions apply to the Collateral Series G Bonds; and WHEREAS, the Company, pursuant to the provisions of the Indenture, has, by appropriate corporate action, duly resolved and determined to execute this Supplemental Indenture for the purpose of providing for the creation of the Collateral Series G Bonds and of specifying the form, provisions and particulars thereof, as in the Indenture provided or permitted and of giving to the Collateral Series G Bonds the protection and security of the Indenture; and WHEREAS, the Company has acquired the additional property hereinafter described, and the Company desires that such additional property so acquired be specifically subject to the lien of the Indenture; and WHEREAS, the Company represents that all acts and proceedings required by law and by the charter and by-laws of the Company, including all action requisite on the part of its shareholders, directors and officers, necessary to make the Collateral Series G Bonds, when executed by the Company, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal obligations of the Company, and to constitute the Principal Indenture and all indentures supplemental thereto, including this Supplemental Indenture, valid, binding and legal instruments for the security of the bonds of all series, including the Collateral Series G Bonds, in accordance with the terms of such bonds and such instruments, have been done, performed and fulfilled, and the execution and delivery hereof have been in all respects duly authorized; NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: That Public Service Company of Colorado, the Company named in the Indenture, in consideration of the premises and of One Dollar to it duly paid by the Trustee at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in pursuance of the direction and authority of the Board of Directors of the Company given at a meeting thereof duly called and held, and in order to create the Collateral Series G Bonds and to specify the form, terms and provisions thereof, and to make definite and certain the lien of the Indenture upon the premises hereinafter described and to subject said premises directly to the lien of the Indenture, and to secure the payment of the principal of and premium, if any, and interest, if any, on all bonds from time to time outstanding under the Indenture, including the Collateral Series G Bonds, according to the terms of said bonds, and to secure the performance and observance of all of the covenants and conditions contained in the Indenture, has executed and delivered this Supplemental Indenture and has granted, bargained, sold, warranted, aliened, remised, released, conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed, and by these presents does grant, bargain, sell, warrant, alien, remise, release, convey, assign, transfer, mortgage, pledge, set over and confirm unto U.S. Bank Trust National Association, as Trustee, and its successor or successors in the trust and its and their assigns forever, the property described in Schedule B hereto (which is described in such manner as to fall within and under the headings or parts or classifications set forth in the Granting Clauses of the Principal Indenture); TO HAVE AND TO HOLD the same and all and singular the properties, rights, privileges and franchises described in the Principal Indenture and in the several Supplemental Indentures hereinabove referred to and in this Supplemental Indenture and owned by the Company on the date of the execution and delivery hereof (other than property of a character expressly excepted from the lien of the Indenture as therein set forth) unto the Trustee and its successor or successors and assigns forever; SUBJECT, HOWEVER, to permitted encumbrances as defined in the Indenture; IN TRUST, NEVERTHELESS, upon the terms and trusts set forth in the Indenture, for the equal and proportionate benefit and security of all present and future holders of the bonds and coupons issued and to be issued under the Indenture, including the Collateral Series G Bonds, without preference, priority or distinction as to lien (except as any sinking, amortization, improvement or other fund established in accordance with the provisions of the Indenture or any indenture supplemental thereto may afford additional security for the bonds of any particular series) of any of said bonds over any others thereof by reason of series, priority in the time of the issue or negotiation thereof, or otherwise howsoever, except as provided in Section 2 of Article IV of the Indenture. 2 ARTICLE ONE CREATION AND DESCRIPTION OF THE COLLATERAL SERIES G BONDS SECTION 1. A new series of bonds to be issued under and secured by the Indenture is hereby created, the bonds of such new series to be designated First Mortgage Bonds, Collateral Series G. The Collateral Series G Bonds shall be limited to an aggregate principal amount of Forty Eight Million Seven Hundred and Fifty Thousand dollars ($48,750,000), excluding any Collateral Series G Bonds which may be authenticated and exchanged for or in lieu of or in substitution for or on transfer of other Collateral Series G Bonds pursuant to any provisions of the Indenture. The Collateral Series G Bonds shall mature on January 1, 2019. The Collateral Series G Bonds shall not bear interest. The principal of each Collateral Series G Bond shall be payable, upon presentation thereof, at the office or agency of the Company in the city in which the principal corporate trust office of the 1993 Mortgage Trustee (as hereinafter defined) is located, in any coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts. The Collateral Series G Bonds shall be issued and delivered by the Company to U.S. Bank Trust National Association, as successor trustee under the Indenture, dated as of October 1, 1993, as supplemented (the "1993 Mortgage"), of the Company to such successor trustee (the "1993 Mortgage Trustee"), as the basis for the authentication and delivery under the 1993 Mortgage of a series of securities. As provided in the 1993 Mortgage, the Collateral Series G Bonds will be registered in the name of the 1993 Mortgage Trustee or its nominee and will be owned and held by the 1993 Mortgage Trustee, subject to the provisions of the 1993 Mortgage, for the benefit of the holders of all securities from time to time outstanding under the 1993 Mortgage, and the Company shall have no interest therein. Any payment or deemed payment by the Company under the 1993 Mortgage of the principal of the securities which shall have been authenticated and delivered under the 1993 Mortgage on the basis of the issuance and delivery to the 1993 Mortgage Trustee of Collateral Series G Bonds (other than by the application of the proceeds of a payment in respect of such Collateral Series G Bonds) shall, to the extent thereof, be deemed to satisfy and discharge the obligation of the Company, if any, to make a payment of principal of such Collateral Series G Bonds which is then due. The Trustee may conclusively presume that the obligation of the Company to pay the principal of the Collateral Series G Bonds as the same shall become due and payable shall have been fully satisfied and discharged unless and until it shall have received a written notice from the 1993 Mortgage Trustee, signed by an authorized officer thereof, stating that the principal of specified Collateral Series G Bonds has become due and payable and has not been fully paid, and specifying the amount of funds required to make such payment. Each Collateral Series G Bond shall be dated as of the date of its authentication. 3 The Collateral Series G Bonds shall be issued as fully registered bonds only, in denominations of $1,000 and multiples thereof. The Collateral Series G Bonds shall be registerable and exchangeable at the office or agency of the Company in the city in which the principal corporate trust office of the 1993 Mortgage Trustee is located, in the manner and upon the terms set forth in Section 5 of Article II of the Indenture; provided, however, that the Collateral Series G Bonds shall not be transferrable except to a successor trustee under the 1993 Mortgage. No service charge shall be made for any exchange or transfer of any Collateral Series G Bond. SECTION 2. The text of the Collateral Series G Bonds shall be substantially in the form attached hereto as Exhibit A. SECTION 3. The Collateral Series G Bonds may be executed by the Company and delivered to the Trustee and, upon compliance with all applicable provisions and requirements of the Indenture in respect thereof, shall be authenticated by the Trustee and delivered (without awaiting the filing or recording of this Supplemental Indenture) in accordance with the written order or orders of the Company. ARTICLE TWO REDEMPTION OF THE COLLATERAL SERIES G BONDS SECTION 1. Each Collateral Series G Bond shall be redeemable at the option of the Company in whole at any time, or in part from time to time, prior to maturity, at a redemption price equal to 100% of the principal amount thereof to be redeemed. SECTION 2. The provisions of Sections 3, 4, 5, 6 and 7 of Article V of the Indenture shall be applicable to the Collateral Series G Bonds, except that (a) no publication of notice of redemption of the Collateral Series G Bonds shall be required and (b) if less than all the Collateral Series G Bonds are to be redeemed, the Collateral Series G Bonds to be redeemed shall be selected in the principal amounts designated to the Trustee by the Company, and except as such provisions may otherwise be inconsistent with the provisions of this Article Two. SECTION 3. The holder of each and every Collateral Series G Bond hereby agrees to accept payment thereof prior to maturity on the terms and conditions provided for in this Article Two. ARTICLE THREE ACKNOWLEDGMENT OF RIGHT TO VOTE OR CONSENT WITH RESPECT TO CERTAIN AMENDMENTS TO INDENTURE The Company hereby acknowledges the right of the holders of the Collateral Series G Bonds to vote or consent with respect to any or all of the modifications to the Indenture referred to in Article Three of the Supplemental Indenture, dated as of March 1, 1980, irrespective of the fact that the Bonds of the Second 1987 Series are no longer 4 outstanding; provided, however, that such acknowledgment shall not impair (a) the right of the Company to make such modifications without the consent or other action of the holders of the Bonds of the 2020 Series or the bonds of any other series subsequently created under the Indenture with respect to which the Company has expressly reserved such right or (b) the right of the Company to reserve the right to make such modifications without the consent or other action of the holders of bonds of one or more, or any or all, series created subsequent to the creation of the Collateral Series G Bonds. ARTICLE FOUR THE TRUSTEE The Trustee accepts the trusts created by this Supplemental Indenture upon the terms and conditions set forth in the Indenture and this Supplemental Indenture. The recitals in this Supplemental Indenture are made by the Company only and not by the Trustee. Each and every term and condition contained in Article XII of the Indenture shall apply to this Supplemental Indenture with the same force and effect as if the same were herein set forth in full, with such omissions, variations and modifications thereof as may be appropriate to make the same conform to this Supplemental Indenture. ARTICLE FIVE MISCELLANEOUS PROVISIONS SECTION 1. Subject to the variations contained in Article Two of this Supplemental Indenture, the Indenture is in all respects ratified and confirmed and the Principal Indenture, this Supplemental Indenture and all other indentures supplemental to the Principal Indenture shall be read, taken and construed as one and the same instrument. Neither the execution of this Supplemental Indenture nor anything herein contained shall be construed to impair the lien of the Indenture on any of the properties subject thereto, and such lien shall remain in full force and effect as security for all bonds now outstanding or hereafter issued under the Indenture. All covenants and provisions of the Indenture shall continue in full force and effect and this Supplemental Indenture shall form part of the Indenture. SECTION 2. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Supplemental Indenture, shall not be a Business Day (as defined in the 1993 Mortgage), such payment may be made or act performed or right exercised on the next succeeding Business Day with the same force and effect as if done on the nominal date provided in this Supplemental Indenture. SECTION 3. The terms defined in the Indenture shall, for all purposes of this Supplemental Indenture, have the meaning specified in the Indenture except as set forth in Section 4 of this Article or otherwise set forth in this Supplemental Indenture or unless the context clearly indicates some other meaning to be intended. 5 SECTION 4. Any term defined in Section 303 of the Trust Indenture Act of 1939, as amended, and not otherwise defined in the Indenture shall, with respect to this Supplemental Indenture and the Collateral Series G Bonds, have the meaning assigned to such term in Section 303 as in force on the date of the execution of this Supplemental Indenture. SECTION 5. This Supplemental Indenture may be executed in any number of counterparts, and all of said counterparts executed and delivered, each as an original, shall constitute but one and the same instrument. 6 IN WITNESS WHEREOF, Public Service Company of Colorado, party hereto of the first part, has caused its corporate name to be hereunto affixed, and this instrument to be signed by its President, an Executive Vice President, a Senior Vice President or a Vice President, and its corporate seal to be hereunto affixed and attested by its Secretary or an Assistant Secretary for and in its behalf; and U.S. Bank Trust National Association, the party hereto of the second part, in evidence of its acceptance of the trust hereby created, has caused its corporate name to be hereunto affixed, and this instrument to be signed and its corporate seal to be affixed by one of its Vice Presidents and attested by one of its Assistant Secretaries, for and in its behalf, all as of the day and year first above written. PUBLIC SERVICE COMPANY OF COLORADO By:/s/ Paul E. Pender ------------------ Name: Paul E. Pender Title: Vice President and Treasurer ATTEST: /s/ Nancy Haley ---------------- Name: Nancy Haley Title: Assistant Secretary U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee By: /s/ Ignazio Tamburello ---------------------- Name: Ignazio Tamburello Title: Assistant Vice President ATTEST: /s/ Adam Berman ---------------- Name: Adam Berman Title: Trust Officer 7 STATE OF MINNESOTA ) ) ss.: CITY OF MINNEAPOLIS ) On this 9th day of September, 2002, before me, Sharon M. Quellhorst, a duly authorized Notary Public in and for said City and in the State aforesaid, personally appeared Paul E. Pender and Nancy Haley to me known to be a Vice President and Treasurer and the Assistant Secretary, respectively, of PUBLIC SERVICE COMPANY OF COLORADO, a corporation organized and existing under the laws of the State of Colorado, one of the corporations that executed the within and foregoing instrument; and the said Vice President and Treasurer and Assistant Secretary severally acknowledged the said instrument to be the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned, and on oath stated that they were authorized to execute said instrument and that the seal affixed thereto is the corporate seal of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year first above written. /s/ Sharon M. Quelhorst Name: Sharon M. Quellhorst Notary Public, State of Minnesota Commission Expires: January 31, 2005 8 STATE OF NEW YORK ) ) ss.: CITY AND COUNTY OF NEW YORK ) On this 10th day of September, 2002, before me, Rouba Fakih, a duly authorized Notary Public in and for said City and County in the State aforesaid, personally appeared Ignazio Tamburello and Adam Berman to me known to be an Assistant Vice President and a Trust Officer, respectively, of U.S. BANK TRUST NATIONAL ASSOCIATION, a national banking association, one of the corporations that executed the within and foregoing instrument; and the said Assistant Vice President and Assistant Secretary severally acknowledged the said instrument to be the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned, and on oath stated that they were authorized to execute said instrument and that the seal affixed thereto is the corporate seal of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year first above written. /s/ Rouba Fakih --------------- Name: Rouba Fakih Notary Public, State of New York Commission Expires February 20, 2003 9 EXHIBIT A FORM OF COLLATERAL SERIES G BOND THIS BOND IS NOT TRANSFERABLE EXCEPT TO A SUCCESSOR TRUSTEE UNDER THE INDENTURE, DATED AS OF OCTOBER 1, 1993, AS SUPPLEMENTED, BETWEEN PUBLIC SERVICE COMPANY OF COLORADO AND U.S. BANK TRUST NATIONAL ASSOCIATION (FORMERLY FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION), AS SUCCESSOR TRUSTEE THEREUNDER. PUBLIC SERVICE COMPANY OF COLORADO FIRST MORTGAGE BOND, Collateral Series G DUE 2019 REGISTERED REGISTERED No. 1 $48,750,000 FOR VALUE RECEIVED, PUBLIC SERVICE COMPANY OF COLORADO, a corporation organized and existing under the laws of the State of Colorado (hereinafter sometimes called the "Company"), promises to pay to U.S. Bank Trust National Association (formerly known as First Trust of New York, National Association), as successor trustee (the "1993 Mortgage Trustee") under the Indenture, dated as of October 1, 1993 (the "1993 Mortgage"), of the Company, or registered assigns, Forty Eight Million Seven Hundred Fifty Thousand Dollars on January 1, 2019, at the office or agency of the Company in the city in which the principal corporate trust office of the 1993 Mortgage Trustee is located. This bond shall not bear interest. The principal of this bond shall be payable in any coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts. Any payment or deemed payment by the Company under the 1993 Mortgage of the principal of securities which shall have been authenticated and delivered under the 1993 Mortgage on the basis of the issuance and delivery to the 1993 Mortgage Trustee of this bond (the "1993 Mortgage Securities") (other than by the application of the proceeds of a payment in respect of this bond) shall, to the extent thereof, be deemed to satisfy and discharge the obligation of the Company, if any, to make a payment of principal of this bond which is then due. This bond is one of an issue of bonds of the Company, issued and to be issued in one or more series under and equally and ratably secured (except as any sinking, amortization, improvement or other fund, established in accordance with the provisions of the indenture hereinafter mentioned, may afford additional security for the bonds of any particular series) by a certain indenture, dated as of December 1, 1939, made by the Company to U.S. BANK TRUST EXHIBIT A-1 NATIONAL ASSOCIATION (formerly First Trust of New York, National Association), as successor trustee (hereinafter called the "Trustee") to Morgan Guaranty Trust Company of New York (formerly Guaranty Trust Company of New York), as amended and supplemented by several indentures supplemental thereto, including the Supplemental Indenture dated as of August 15, 2002 (said Indenture as amended and supplemented by said indentures supplemental thereto being hereinafter called the "Indenture"), to which Indenture reference is hereby made for a description of the property mortgaged, the nature and extent of the security, the rights and limitations of rights of the Company, the Trustee, and the holders of said bonds, under the Indenture, and the terms and conditions upon which said bonds are secured, to all of the provisions of which Indenture and of all indentures supplemental thereto in respect of such security, including the provisions of the Indenture permitting the issue of bonds of any series for property which, under the restrictions and limitations therein specified, may be subject to liens prior to the lien of the Indenture, the holder, by accepting this bond, assents. To the extent permitted by and as provided in the Indenture, the rights and obligations of the Company and of the holders of said bonds (including those pertaining to any sinking or other fund) may be changed and modified, with the consent of the Company, by the holders of at least 75% in aggregate principal amount of the bonds then outstanding (excluding bonds disqualified from voting by reason of the Company's interest therein as provided in the Indenture); provided, however, that without the consent of the holder hereof no such modification or alteration shall be made which will extend the time of payment of the principal of this bond or reduce the principal amount hereof or effect any other modification of the terms of payment of such principal or will reduce the percentage of bonds required for the aforesaid actions under the Indenture. The Company has reserved the right to amend the Indenture without any consent or other action by holders of any series of bonds created after October 31, 1975 (including this series) so as to change 75% in the foregoing sentence to 60% and to change certain procedures relating to bondholders' meetings. This bond is one of a series of bonds designated as the First Mortgage Bonds, Collateral Series G, of the Company. This bond shall be redeemable at the option of the Company in whole at any time, or in part from time to time, prior to maturity, at a redemption price equal to 100% of the principal amount thereof to be redeemed. The principal of this bond may be declared or may become due before the maturity hereof, on the conditions, in the manner and at the times set forth in the Indenture, upon the happening of an event of default as therein provided. This bond is not transferable except to a successor trustee under the 1993 Mortgage, any such transfer to be made at the office or agency of the Company in the city in which the principal corporate trust office of the 1993 Mortgage Trustee is located, upon surrender and cancellation of this bond, and thereupon a new bond of this series of a like principal amount will be issued to the transferee in exchange therefor, as provided in the Indenture. The Company, the Trustee, any paying agent and any registrar may deem and treat the person in whose name this bond is registered as the absolute owner hereof for the purpose of receiving payment and for all other purposes. This bond, alone or with other bonds of this series, may in like manner be exchanged at such office or agency for one or more new bonds of this series of the same aggregate principal amount, all as provided in the Indenture. No service charge shall be made to any holder of any bond of this series for any exchange or transfer of bonds. EXHIBIT A-2 No recourse under or upon any covenant or obligation of the Indenture, or of any bonds thereby secured, or for any claim based thereon, or otherwise in any manner in respect thereof, shall be had against any incorporator, subscriber to the capital stock, shareholder, officer or director, as such, of the Company, whether former, present or future, either directly, or indirectly through the Company or the Trustee, by the enforcement of any subscription to capital stock, assessment or otherwise, or by any legal or equitable proceeding by virtue of any statute or otherwise (including, without limiting the generality of the foregoing, any proceeding to enforce any claimed liability of shareholders of the Company based upon any theory of disregarding the corporate entity of the Company or upon any theory that the Company was acting as the agent or instrumentality of the shareholders), any and all such liability of incorporators, shareholders, subscribers, officers and directors, as such, being released by the holder hereof, by the acceptance of this bond, and being likewise waived and released by the terms of the Indenture under which this bond is issued. This bond shall not be valid or become obligatory for any purpose until the certificate of authentication endorsed hereon shall have been signed by U.S. Bank Trust National Association, or its successor, as Trustee under the Indenture. IN WITNESS WHEREOF, Public Service Company of Colorado has caused this bond to be signed in its name by a Vice President and its corporate seal to be affixed hereto and attested by its Secretary or an Assistant Secretary. Dated: PUBLIC SERVICE COMPANY OF COLORADO By: ------------------------------ Vice President and Treasurer ATTEST: ------------------------------ Assistant Secretary CERTIFICATE OF AUTHENTICATION This is one of the securities of the series designated therein referred to in the within-mentioned Supplemental Indenture. Dated: U.S. BANK TRUST NATIONAL ASSOCIATION, AS TRUSTEE By: ------------------------------ Authorized Officer EXHIBIT A-3 SCHEDULE A SUPPLEMENTAL INDENTURES

DATE OF SERIES OF BONDS PRINCIPAL PRINCIPAL SUPPLEMENTAL --------------- AMOUNT ISSUED AMOUNT INDENTURE ------------- OUTSTANDING --------- ----------- March 14, 1941 None -- -- May 14, 1941 None -- -- April 28, 1942 None -- -- April 14, 1943 None -- -- April 27, 1944 None -- -- April 18, 1945 None -- -- April 23, 1946 None -- -- April 9, 1947 None -- -- June 1, 1947* 2-7/8% Series due 1977 $ 40,000,000 None April 1, 1948 None -- -- May 20, 1948 None -- -- October 1, 1948 3-1/8% Series due 1978 10,000,000 None April 20, 1949 None -- -- April 24, 1950 None -- -- April 18, 1951 None -- -- October 1, 1951 3-1/4% Series due 1981 15,000,000 None April 21, 1952 None -- -- December 1, 1952 None -- -- April 15, 1953 None -- -- April 19, 1954 None -- -- October 1, 1954* 3-1/8% Series due 1984 20,000,000 None April 18, 1955 None -- -- April 24, 1956 None -- -- May 1, 1957* 4-3/8% Series due 1987 30,000,000 None April 10, 1958 None -- -- May 1, 1959 4-5/8% Series due 1989 20,000,000 None April 18, 1960 None -- -- April 19, 1961 None -- -- October 1, 1961 4-1/2% Series due 1991 30,000,000 None March 1, 1962 4-5/8% Series due 1992 8,800,000 None June 1, 1964 4-1/2% Series due 1994 35,000,000 None May 1, 1966 5-3/8% Series due 1996 35,000,000 None July 1, 1967* 5-7/8% Series due 1997 35,000,000 None July 1, 1968* 6-3/4% Series due 1998 25,000,000 None April 25, 1969 None -- --

SCHEDULE A-1

DATE OF SERIES OF BONDS PRINCIPAL PRINCIPAL SUPPLEMENTAL --------------- AMOUNT ISSUED AMOUNT INDENTURE ------------- OUTSTANDING --------- ----------- None -- -- April 21, 1970 September 1, 1970 8-3/4% Series due 2000 35,000,000 None February 1, 1971 7-1/4% Series due 2001 40,000,000 None August 1, 1972 7-1/2% Series due 2002 50,000,000 None June 1, 1973 7-5/8% Series due 2003 50,000,000 None March 1, 1974 Pollution Control Series A 24,000,000 None December 1, 1974 Pollution Control Series B 50,000,000 None October 1, 1975 9-3/8% Series due 2005 50,000,000 None April 28, 1976 None -- -- April 28, 1977 None -- -- November 1, 1977* 8-1/4% Series due 2007 50,000,000 None April 28, 1978 None -- -- October 1, 1978 9-1/4% Series due 2008 50,000,000 None October 1, 1979* Pollution Control Series C 50,000,000 None March 1, 1980* 15% Series due 1987 50,000,000 None April 28, 1981 None -- -- November 1, 1981* Pollution Control Series D 27,380,000 None December 1, 1981* 16-1/4% Series due 2011 50,000,000 None April 29, 1982 None -- -- May 1, 1983* Pollution Control Series E 42,000,000 None April 30, 1984 None -- -- March 1, 1985* 13% Series due 2015 50,000,000 None November 1, 1986* Pollution Control Series F 27,250,000 None May 1, 1987* 8.95% Series due 1992 75,000,000 None July 1, 1990* 9-7/8% Series due 2020 75,000,000 None December 1, 1990* Secured Medium-Term Notes, Series A 191,500,000** 15,000,000 March 1, 1992* 8-1/8% Series due 2004 and 100,000,000 100,000,000 8-3/4% Series due 2022 150,000,000 146,340,000 April 1, 1993* Pollution Control Series G 79,500,000 79,500,000 June 1, 1993* Pollution Control Series H 50,000,000 50,000,000 November 1, 1993* Collateral Series A 134,500,000 134,500,000 January 1, 1994* Collateral Series B due 2001 and 102,667,000 None Collateral Series B due 2024 110,000,000 110,000,000 September 2, 1994 None -- -- (Appointment of Successor Trustee) May 1, 1996 Collateral Series C 125,000,000 125,000,000

SCHEDULE A-2

DATE OF SERIES OF BONDS PRINCIPAL PRINCIPAL SUPPLEMENTAL --------------- AMOUNT ISSUED AMOUNT INDENTURE ------------- OUTSTANDING --------- ----------- Collateral Series D 250,000,000 None November 1, 1996 February 1, 1997 Collateral Series E 150,000,000 None April 1, 1998 Collateral Series F 250,000,000 250,000,000

- -------------------- * Contains amendatory provisions ** $200,000,000 authorized SCHEDULE A-3 SCHEDULE B DESCRIPTION OF PROPERTY PART FIRST. (PLANTS) The following electric generating plants, gas generating plants, gas holders, steam plant, ice plant, pressure pipe lines, gravity pipe lines, reservoir sites, power sites, gas regulating stations, substations and other properties of the Company, including all dams, power houses, transmission lines, buildings, forebays, reservoirs, races, raceways, pipes, head works, structures and works, and the lands of the Company on which the same are situated, and all the Company's lands, easements, rights, rights-of-way, water rights, rights to the use of water, including all of the Company's right, title and interest in and to any and all decrees therefor, flowage rights, flooding rights, permits, franchises, consents, privileges, licenses, poles, towers, wires, switch racks, insulators, pipes, machinery, engines, boilers, gas benches, condensers and scrubbers, exhausters, blowers and pumps, motors, gas boosters, air condensers, water pumps, governors, purifiers, tar separators, washers, automobiles, trucks, office furniture and fixtures, regulators, meters, tools, appliances, equipment, appurtenances and supplies forming a part of or appertaining to said plants, holders, sites, stations or other properties, or any of them, or used or enjoyed, or capable of being used or enjoyed in conjunction or connection therewith, all situated in the State of Colorado and the counties thereof, more particularly described as follows: ADAMS COUNTY 1. SATRIANO TRACT That part of the NW1/4 NE1/4 of Section 11, Township 3 South, Range 68 West of the 6th P.M., being more particularly described as follows: Beginning at a point which is South 89 degrees 58' East 20 feet and North 395.6 feet from the Southwest corner of the NW1/4 NE1/4 of said Section; thence North 196.92 feet; thence North 88 degrees 36.9' East, 165.65 feet; thence North 0 degrees 17' West, 109.93 feet; thence North 77 degrees 44.6' East 29.52 feet along the center line of the United Irrigation Ditch; thence South 438.11 feet; thence North 89 degrees 58' West 43.9 feet; thence North 115 feet; thence North 89 degrees 58' West 150 feet to the point of beginning, County of Adams, State of Colorado. (for informational purposes only) 6200 North Franklin Street 2. ROSA TRACT Parcels of land more particularly described as follows: Parcel I: SCHEDULE B-1 A portion of the N1/2 of NE1/4 of NE1/4 of Section 11, Township 3 South, Range 68 West of the 6th P.M., described as follows: Beginning at the Northwest Corner of said Tract, thence South 145 feet, thence East 110 feet, thence North 145 feet, thence West 110 feet to the Point of Beginning except the North 20 feet for road purposes. County of Denver, State of Colorado. Parcel II: That portion of the N1/2 of the NE1/4 of the NE1/4 of Section 11, Township 3 South, Range West of the 6th P.M., described as follows: Beginning at a point 110 feet East of the Northwest corner of said tract; thence South 145 feet; thence East 90 feet; thence North 145 feet; thence West 90 feet to the True Point of Beginning, except the North 20 feet for road purposes. County of Adams, State of Colorado. LA PLATA COUNTY 3. COTTONWOOD GULCH GAS QUALITY CONTROL PLANT Tract A of Cottonwood Gulch, Minor Exemption Subdivision, Project No. 99-165, according to the plat thereof filed for record September 27, 1999 as Reception No. 775147. MORGAN COUNTY 4. BADGER CREEK METER STATION A parcel of land lying in the Northeast one-quarter Section 36, Township 3 North, Range 58 West of the Sixth Principal Meridian, County of Morgan, State of Colorado, more particularly described as follows: Basis of bearings: the North line of the Northeast one-quarter of Section 36, Township 3 North, Range 58 West of the Sixth Principal Meridian, being monumented at the North one-quarter corner by a 1-1/2" iron pipe and at the Northeast corner of said Section by a 3-1/2" aluminum cap -- L.S. #23501, being assumed to bear N89 degrees 32'14"E. Commencing at the North one-quarter corner of said Section 36; thence N89 degrees 32'14"E along the North line of said Northeast one quarter, a distance of 520.00 feet to the Point of Beginning; Thence the following four (4) courses: 1. N89 degrees 32'14"E, along said North line, a distance of 100.00 feet to a point on the westerly line of that parcel of land owned by Colorado Interstate Gas Company; SCHEDULE B-2 2. S00 degrees 01'46"W, along said westerly parcel line, a distance of 500.00 feet; 3. S89 degrees 32'14"W, a distance of 100.00 feet. 4. N00 degrees 01'46"E, a distance of 500.00 feet to the Point of Beginning, Less right-of-way for Morgan County Road N, Containing a calculated area of 50,000 square feet or 1.148 acres. SUMMIT COUNTY 5. HIGH TOR METER STATION A portion of the Braddock Placer M.S. 13465, Section 18, Township 6 South, Range 77 West of the Sixth Principal Meridian, located in the Town of Breckenridge, County of Summit, State of Colorado, being more particularly described as follows: Basis of bearings: The westerly line of the Delaware Flats Annexation Plat Phase 3, as recorded under reception number 241384, Summit County records, being monumented at Corner 15 by a 2"x6" stone with no visible markings, and monumented at Corner 16 by a 9"x7" stone with no visible markings and steel pipe 3" diameter 3' high adjacent to said stone, with a line between bearing N07 degrees 18'12"E. Commencing at said Corner 15, thence N77 degrees 51'25"E a distance of 1539.38 feet to a No. 4 rebar with a red plastic cap L.S.. 9939, said point being the Point of Beginning, thence the following four (4) courses: 1) N77 degrees 06'29"W a distance of 49.95 feet to a recovered cross on rock; 2) N12 degrees 42'36"E a distance of 49.89 feet to a No. 4 rebar with a red plastic cap L.S. 9939; 3) S77 degrees 06'29"E a distance of 49.95 feet to a No. 4 rebar with a red plastic cap L.S. 9939; 4) S12 degrees 42'36"W a distance of 49.89 feet to the Point of Beginning, Containing 2492 sq. ft., or 0.057 acres PUEBLO COUNTY 6. SOUTH PUEBLO GAS REGULATOR STATION SCHEDULE B-3 A tract or parcel of land No. 3 Rev XA of the Dept. of Highways' Proj. No. FI 002-3(12), containing 0.076 acres (3,327 sq. ft.), more or less in the SE 1/4 of the SE 1/4 of Sec. 14, T.21 S., R. 65 W., of the Sixth P.M. in Pueblo County, Colorado, said tract or parcel being more particularly described as follows: Commencing at the SE Corner of Sec. 14, T.21 S., R. 65 W.; thence along the South line of said Sec. 14, S. 88 degrees , 36' W., a distance of 272.1 feet to the Point of Beginning: 1. Thence continuing along said South line, S. 88 degrees , 36' W., a distance of 50.0 feet; 2. Thence N. 01 degrees , 24' W., a distance of 50.0 feet; 3. Thence N. 88 degrees , 36' E., a distance of 83.1 feet; 4. Thence S. 32 degrees , 05' W., a distance of 60.0 feet, more or less, to the Point of Beginning. The above described tract contains 0.076 acres (3,327 sq. ft.), more or less. PART SECOND. (SUBSTATIONS) The following electric substations and substation sites of the Company, including all buildings, structures, towers, poles, lines, and all equipment, appliances and devices for transforming, converting and distributing electric energy, and all the right, title and interest of the Company in and to the land on which the same are situated, and all of the Company's lands, easements, rights-of-way, rights, franchises, privileges, machinery, equipment, appliances, devices, appurtenances and supplies forming a part of said substations or any of them, or used or enjoyed, or capable of being used or enjoyed, in conjunction or connection with any thereof, all situated in the State of Colorado and the counties thereof, more particularly described as follows: ADAMS COUNTY 7. TOWER 4 SUBSTATION SITE A portion of a parcel of land described in Book 4550, Page 465, Adams County Clerk and Recorder's Office, located in the Northwest Quarter of Section 27, Township 3 South, Range 66 West of the 6th Principal Meridian, Adams County, Colorado, being more particularly described as follows: COMMENCING at the North Quarter Corner of said Section 27, whence the Northwest Corner of said Section 27 bears S88 degrees 53'04"W a distance of 2638.04 feet; THENCE S00 degrees 08'03"E along the easterly line of the Northwest Quarter of said Section 27 a distance of 60.01 feet; SCHEDULE B-4 THENCE S88 degrees 53'04"W along the southerly right-of-way line of East 38th Avenue as described in Book 2800, Page 680 a distance of 882.04 feet to the POINT OF BEGINNING; THENCE S01 degrees 05'34"E a distance of 440.00 feet; THENCE S88 degrees 53'04"W a distance of 399.02 feet non-tangent with the following described curve; THENCE along the westerly line of said parcel of land described in Book 4550, Page 465, on the arc of a curve to the right, having a central angle of 03 degrees 28'41", a radius of 530.00 feet, a chord bearing N02 degrees 49'55"W a distance of 32.17 feet, and an arc distance of 32.17 feet; THENCE N01 degrees 05'34"W continuing along the westerly line of said parcel, tangent with the last described curve a distance of 407.84 feet; THENCE N88 degrees 53'04"E along the southerly right-of-way line said East 35th Avenue a distance of 400.00 feet to the POINT OF BEGINNING. Containing 4.040 acres (175,989 sq. ft.) more or less. 8. NEW WASHINGTON SUBSTATION A parcel of land decribed in Book Number 5210, Page 0031, Reception Number C0355049, recorded in the Adam County Clerk and Recorder's Office on January 15, 1998, being more particularly described as follows: Lot 1, Block 1, Washington Electric Substation, Filing No. 1, County of Adams, State of Colorado. 9. HOSMER TRUST TRACT A portion of the Southwest Quarter of Section 34, Township 1 South, Range 64 West of the 6th Principal Meridian, Adams County, Colorado, being more particularly described as follows: BEGINNING at the Northwest Corner of said Southwest Quarter of Section 34, whence the Southwest Corner of said Southwest Quarter of Section 34 bears S01 degrees 18'37"E a distance of 2636.70 feet; THENCE S89 degrees 47'30"E along the northerly line of said Southwest Quarter of Section 34 a distance of 1030.01 feet; THENCE S01 degrees 18"37"E a distance of 1631.67 feet; SCHEDULE B-5 THENCE N89 degrees 47'30"W a distance of 1030.01 feet; THENCE N01 degrees 18'37"W along said westerly line of Southwest Quarter of Section 34 a distance of 1631.67 feet to the POINT OF BEGINNING. Containing 38.568 Acres, more or less. ALAMOSA COUNTY 10. MOSCA SUBSTATION: ADDITIONAL LAND A parcel of land more particularly described as follows: That part of the NE1/4 of Section 28, Township 40 North, Range 10 East of the N.M.P.M., described as beginning at a point on the North-South centerline of said Section 28 and a point on the South right-of-way line of County Lane 8 North (as fenced) from which the N1/4 corner bears N00'38'22"E, 25.91 feet; thence N88 degrees 33'59"E, along said right-of-way line 225.00 feet; thence S00 degrees 38'42", 30.90 feet; thence N88 degrees 32'09"E, 25.16 feet; thence S00 degrees 38'22"W, 322.06 feet; thence N89 degrees 53'58"W, 250.00 feet to a point on said North-South centerline; thence N00 degrees 38'22"E, 346.25 feet to the true Point Of Beginning. Alamosa County, State of Colorado DENVER COUNTY 11. BELLEVIEW - QUEBEC SUBSTATION SITE A parcel of land located in a portion of Lot 1, Block 1 of the 165 Subdivision Filing No. 1, recorded in Plat Book 29 at Page 86, and a portion of the Southeast 1/4 of Section 8, Township 5 South, Range 67 West of the 6th P.M., being more particularly described as follows: Basis of bearings: the South line of the Southeast 1/4 of Section 8 is assumed to bear North 90 degrees 00 minutes 00 seconds East; COMMENCING at the South Quarter Corner of Section 8; THENCE North 28 degrees 57 minutes 12 seconds East, a distance of 2099.82 feet to the POINT OF BEGINNING; THENCE North 89 degrees 59 minutes 47 seconds East, a distance of 361.50 feet; THENCE South 00 degrees 00 minutes 00 seconds West, a distance of 136.32 feet to a point on the North line of Lot 1, Block 1 of the 165 Subdivision Filing No. 1; SCHEDULE B-6 THENCE South 00 degrees 00 minutes 00 seconds West, a distance of 48.06 feet; THENCE South 46 degrees 57 minutes 20 seconds West, a distance of 87.86 feet; THENCE North 90 degrees 00 minutes 00 seconds West, a distance of 212.55 feet; THENCE North 34 degrees 59 minutes 47 seconds West, a distance of 131.87 feet to a point on the North line of Lot 1, Block 1, of the 165 Subdivision Filing No. 1; THENCE North 34 degrees 59 minutes 47 seconds West, a distance of 15.89 feet; thence North 00 degrees 00 minutes 00 seconds East, a distance of 123.29 feet to the POINT OF BEGINNING, City and County of Denver, State of Colorado. DOUGLAS COUNTY 12. COLONY (SURREY RIDGE) SUBSTATION Parcels of land more particularly described as follows: Parcel A: A parcel of land in Section 24, Township 6 South, Range 67 West of the sixth principal meridian, Douglas County, Colorado, being more particularly described as follows: COMMENCING at the Northwest corner of said Section 24, whence the West Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11 seconds East a distance of 2667.01 feet; THENCE South 58 degrees 06 minutes 25 seconds East a distance of 54.13 feet to the POINT OF BEGINNING; THENCE North 89 degrees 48 minutes 35 seconds East a distance of 233.36 feet; THENCE South 45 degrees 08 minutes 18 seconds East a distance of 65.90 feet; THENCE South 00 degrees 05 minutes 10 seconds East a distance of 212.74 feet; THENCE South 44 degrees 54 minutes 50 seconds West a distance of 65.94 feet; THENCE South 89 degrees 54 minutes 50 seconds West a distance of 233.37 feet; THENCE North 00 degrees 05 minutes 10 seconds West a distance of 305.50 feet to the POINT OF BEGINNING; SCHEDULE B-7 Parcel D: A parcel of land being sixty (60.00') feet in width, thirty (30.00') feet on each side of the following described centerline, located in the Southeast Quarter of Section 14, Northeast Quarter of Section 23 and the Northwest quarter of Section 24 all in Township 6 South, Range 67 West of the Sixth Principal Meridian, Douglas County, Colorado, being more particularly described as follows: COMMENCING at the Northeast corner of said Southeast Quarter of Section 14, whence the Southeast Corner of said Section 14 bears South 01 degrees 04 minutes 04 seconds East a distance of 2664.06 feet; THENCE South 39 degrees 51 minutes 34 seconds West along a line non-tangent with the following described curve a distance of 652.76 feet to the southerly line of a parcel of land recorded in book 264, page 426 on July 1, 1974 in the Douglas County Clerk and Recorders Office, being the POINT OF BEGINNING; THENCE the following five (5) courses along existing dirt road or trail centerline; 1. Southwesterly along the Arapahoe County of a curve to the right, having a central angle of 12 degrees 16 minutes 59 seconds, a radius of 860.00 feet, a chord bearing of South 28 degrees 24 minutes 25 seconds West, a distance of 184.02 feet, and an arc distance of 184.37 feet; 2. THENCE South 34 degrees 32 minutes 55 seconds West tangent with the last and following described curves a distance of 185.60 feet; 3. THENCE along the arc of a curve to the left, having a central angle of 1 degrees 05 minutes 24 seconds, a radius of 800.00 feet, a chord bearing South 34 degrees 00 minutes 12 seconds West a distance of 15.22 feet, and an arc distance of 15.22 feet; 4. THENCE South 33 degrees 27 minutes 30 seconds West tangent with the last described curve a distance of 230.99 feet; 5. THENCE South 33 degrees 05 minutes 19 seconds West tangent with the following described curve a distance of 63.86 feet; THENCE along the arc of a curve to the left, having a central angle of 17 degrees 08 minutes 04 seconds, a radius of 200.00 feet, a chord bearing South 24 degrees 31 minutes 17 seconds West a distance of 59.59 feet, and an arc distance of 59.81 feet; THENCE South 15 degrees 57 minutes 15 seconds West tangent with the last and following described curves a distance of 108.55 feet; SCHEDULE B-8 THENCE along the arc of a curve to the left, having a central angle of 75 degrees 23 minutes 51 seconds, a radius of 150.00 feet, a chord bearing South 21 degrees 44 minutes 40 seconds East a distance of 183.45 feet, and an arc distance of 197.39 feet; THENCE the following eight (8) courses along said existing dirt road or trail centerline: 1. South 59 degrees 26 minutes 36 seconds East tangent with the last described curve a distance of 35.15 feet; 2. THENCE South 68 degrees 40 minutes 34 seconds East a distance of 43.72 feet; 3. THENCE North 84 degrees 29 minutes 06 seconds East a distance of 73.85 feet; 4. THENCE South 57 degrees 01 minutes 00 seconds East a distance of 68.34 feet; 5. THENCE South 28 degrees 47 minutes 04 seconds East tangent with the following described curve a distance of 31.85 feet; 6. THENCE along the arc of a curve to the right, having a central angle of 30 degrees 53 minutes 10 seconds, a radius of 200.00 feet, a chord bearing South 13 degrees 20 minutes 29 seconds East a distance of 106.51 feet, and an arc distance of 107.81 feet; 7. THENCE along the arc of a curve to the left, tangent with the last described curve, having a central angle of 15 degrees 45 minutes 50 seconds, a radius of 200.00 feet, a chord bearing of South 05 degrees 46 minutes 48 seconds East a distance of 54.85 feet, and an arc distance of 55.03 feet; 8. THENCE South 13 degrees 39 minutes 43 seconds East tangent with the last described curve a distance of 21.80 feet; THENCE South 18 degrees 42 minutes 28 seconds East tangent with the following described curve a distance of 100.70 feet; THENCE along the arc of a curve to the left, having a central angle foot 9 degrees 31 minutes 51 seconds, a radius of 200.00 feet, a chord bearing South 23 degrees 28 minutes 23 seconds East a distance of 33.23 feet, and an arc distance of 33.27 feet; THENCE South 28 degrees 14 minutes 18 seconds East tangent with the last and following described curves a distance of 164.18 feet; THENCE along the arc of a curve to the left, having a central angle of 12 degrees 32 minutes 57 seconds, a radius of 200.00 feet, a chord bearing South 34 degrees 30 minutes 47 seconds East a distance of 43.72 feet, and an arc distance of 43.80 feet; THENCE South 40 degrees 47 minutes 15 seconds East tangent with the last and following described curves a distance of 41.82 feet; SCHEDULE B-9 THENCE along the arc of a curve to the right, having a central angle of 17 degrees 47 minutes 53 seconds, a radius 200.00 feet, a chord bearing South 31 degrees 53 minutes 19 seconds East a distance of 61.88 feet, and an arc distance of 62.13 feet; THENCE South 22 degrees 59 minutes 22 seconds East tangent with the last and following described curves a distance of 713.97 feet; THENCE along the arc of a curve to the left, having a central angle of 67 degrees 06 minutes 49 seconds, a radius of 100.00 feet, a chord bearing of South 56 degrees 32 minutes 47 seconds East a distance of 110.55 feet and an arc distance of 117.14 feet; THENCE North 89 degrees 53 minutes 49 seconds East tangent with the last described curve a distance of 32.70 feet to the point of termination, whence the Southeast corner of said Section 14 bears North 20 degrees 59 minutes 42 seconds West a distance of 128.66 feet; Sidelines are shortened or lengthened to intersect the southerly line of said parcel of land recorded in book 264, page 426, and the westerly line of the Surrey Ridge Substation boundary. Parcel E: A parcel of land located in Sections 24 and 23, Township 6 South, Range 67 West of the Sixth Principal Meridian, Douglas County, Colorado, being more particularly described as follows: COMMENCING at the Northwest corner of said Section 24, whence the West Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11 seconds East, a distance of 2667.01 feet; THENCE South 11 degrees 21 minutes 30 seconds East a distance of 340.73 feet to the southerly line of Surrey Ridge Substation Site, being the POINT OF BEGINNING; THENCE North 89 degrees 54 minutes 50 seconds East along said southerly line of Surrey Ridge Substation site a distance of 185.92 feet; THENCE South 24 degrees 09 minutes 27 seconds West, a distance of 185.11 feet; THENCE South 03 degrees 23 minutes 27 seconds East a distance of 1233.70 feet; THENCE South 17 degrees 16 minutes 47 seconds West a distance of 919.76 feet; THENCE South 38 degrees 14 minutes 15 seconds West a distance of 1281.45 feet; THENCE South 07 degrees 51 minutes 01 seconds West a distance of 1498.69 feet; SCHEDULE B-10 THENCE South 89 degrees 32 minutes 01 seconds West along the northerly line of a parcel of land described in Reception Number 105224, Document Number 1630, recorded in the Douglas County Clerk and Recorders Office on March 23, 1959 a distance of 101.06 feet; THENCE North 07 degrees 51 minutes 01 seconds East a distance of 1540.46 feet; THENCE North 38 degrees 14 minutes 15 seconds East a distance of 1290.11 feet; THENCE North 17 degrees 16 minutes 47 seconds East a distance of 883.02 feet; THENCE North 03 degrees 23 minutes 27 seconds West a distance of 1390.31 feet to the POINT OF BEGINNING. Parcel F: A parcel of land lying in Section 13, Section 14, Section 23 and Section 24 all in Township 6 South, Range 67 West of the Sixth Principal Meridian, Douglas County, Colorado, being more particularly described as follows: COMMENCING at the Northwest Corner of said Section 24, whence the West Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11 seconds East a distance of 2667.01 feet; THENCE South 89 degrees 14 minutes 28 seconds West along the northerly line of the Northeast quarter of said Section 23 a distance of 27.78 feet to the POINT OF BEGINNING; THENCE North 75 degrees 40 minutes 59 seconds East a distance of 184.77 feet; THENCE South 87 degrees 37 minutes 41 seconds East a distance of 152.52 feet; THENCE South 46 degrees 56 minutes 28 seconds East a distance of 121.54 feet; THENCE South 06 degrees 45 minutes 06 seconds East a distance of 281.45 feet; THENCE South 46 degrees 47 minutes 03 seconds West a distance of 166.26 feet; THENCE North 74 degrees 24 minutes 57 seconds West a distance of 329.96 feet; THENCE North 02 degrees 21 minutes 14 seconds West a distance of 348.59 feet to the POINT OF BEGINNING; Excepting therefrom the following described parcel of land: SCHEDULE B-11 COMMENCING at the Northwest Corner of said Section 24, whence the West Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11 seconds East a distance of 2667.01 feet; THENCE South 58 degrees 06 minutes 25 seconds East a distance of 54.13 feet to the POINT OF BEGINNING; THENCE North 89 degrees 48 minutes 35 seconds East a distance of 233.36 feet; WELD COUNTY 13. NEW GILCREST SUBSTATION A parcel of land located in the Southwest one-quarter of Section 10, Township 4 North, Range 66 West of the Sixth Principal Meridian, County of Weld, State of Colorado, being more particularly described as follows: Basis of bearings: The South one-quarter line of Section 10, Township 4 North, Range 66 West of the Sixth Principal Meridian, bearing N89 degrees 26'15"E. Commencing at the Southwest corner of said Section 10; thence N34 degrees 06'30"E a distance of 80.25 feet to the Point Of Beginning; thence N00 degrees 00'00"E parallel with and 45 feet East of the West line of the Southwest one-quarter of said Section 10 a distance of 304.02 feet; thence N89 degrees 26'15"E parallel with the South line of the Southwest one-quarter of said Section 10 a distance of 325.02 feet; thence S00 degrees 00'00"E parallel with the West line of the Southwest one-quarter of said Section 10 a distance of 325.02 feet to a point 45 feet North of the South line of the Southwest one-quarter of said Section 10; thence S89 degrees 26'15"W parallel with the South line of the Southwest one-quarter of said Section 10 a distance of 304.02 feet; thence N45 degrees 16'52"W a distance of 29.55 feet to the Point Of Beginning. Said parcel of land containing 105,409.60 square feet or 2.419 acres more or less. PART THIRD. (MISCELLANEOUS PROPERTY) The following residences, garages, warehouses, buildings, structures, works and sites and the Company's lands on which the same are situated, and all easements, rights, rights of way, permits, franchises, consents, privileges, licenses, machinery, equipment, furniture and fixtures, appurtenances and supplies forming a part of said residences, garages, warehouses, buildings, structures, works and sites, or any of them, or used or enjoyed or capable of being used or enjoyed in connection or conjunction therewith, situated in the State of Colorado and the Counties thereof, more particularly described as follows: JEFFERSON COUNTY SCHEDULE B-12 14. GROUND EQUIPMENT COMPANY TRACT That part of Section 22, Township 2 South, Range 70 West of the 6th Principal Meridian, lying between Colorado State Highway No. 72 and the Denver and Rio Grande Western Railroad, County of Jefferson, State of Colorado, more particularly described as follows: Commencing at the West one-quarter of said Section 22; thence South 0 degrees 25'48" East along the West line of said Section 22, a distance of 721.74 feet to a point on the North right of way of the Denver and Rio Grande Western Railroad; thence along North right of way as follows: South 80 degrees 28'31" East a distance of 2033.16 feet to a point of circular curve; thence along the arc of said curve to the left having a radius of 2764.79 feet and a central angle of 13 degrees 14' a distance of 638.57 feet to the end of said curve, thence North 86 degrees 17'29" East, a distance of 729.07 feet to the true Point of Beginning, being Southeast corner of the parcel to be described, and also the Southeast corner of the exterior boundary as described in Deed recorded in Book 1813 at Page 365; thence departing said railroad right of way line, North 01 degrees 03'14" West, a distance of 1023.73 feet to a point on the southerly right of way of Colorado State Highway No. 72; thence North 83 degrees 39'30" West along said southerly right of way, a distance of 414.42 feet; thence South 01 degrees 03'14" East, a distance of 1096.13 feet to a point on the North right of way of said railroad; thence North 86 degrees 17'29" East along said railroad right of way, a distance of 411.41 feet to the Point of Beginning, except any portion of the above described property conveyed by Deed to the Denver Northwestern and Pacific Railway Company recorded June 25, 1907 in Book 121 at Page 290, of the Jefferson County Records, and, Except portion conveyed to D. L. Billings Co. Inc., trustee, by Deed recorded June 3, 1982 at Reception No. 82037261. Also known as Lots 16, 17, 18, part of Lot 15 and part of Lot 19, Block A, Lot 15, part of Lot 13 and part of Lot 14, Block D, together with that portion of Bronco Lane adjacent to said Lots, all in Northwest Industrial, County of Jefferson, State of Colorado. SCHEDULE B-13 EX-4.02 4 c72574exv4w02.txt EX-4.02 SUPPLEMENTAL INDENTURE DATED SEPT 15, 2002 EXHIBIT 4.02 SUPPLEMENTAL INDENTURE (DATED AS OF SEPTEMBER 15, 2002) -------- PUBLIC SERVICE COMPANY OF COLORADO TO U.S. BANK TRUST NATIONAL ASSOCIATION, AS TRUSTEE -------- CREATING AN ISSUE OF FIRST MORTGAGE BONDS, COLLATERAL SERIES I -------- (SUPPLEMENTAL TO INDENTURE DATED AS OF DECEMBER 1, 1939, AS AMENDED) SUPPLEMENTAL INDENTURE, dated as of September 15, 2002, between PUBLIC SERVICE COMPANY OF COLORADO, a corporation organized and existing under the laws of the State of Colorado (the "Company"), party of the first part, and U.S. BANK TRUST NATIONAL ASSOCIATION (FORMERLY FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION), a national banking association, as successor trustee (the "Trustee") to Morgan Guaranty Trust Company of New York (formerly Guaranty Trust Company of New York), party of the second part. WHEREAS, the Company heretofore executed and delivered to the Trustee its Indenture, dated as of December 1, 1939 (the "Principal Indenture"), to secure its First Mortgage Bonds from time to time issued thereunder; and WHEREAS, the Company has heretofore executed and delivered to the Trustee the Supplemental Indentures referred to in Schedule A hereto for certain purposes, including the creation of series of bonds, the subjection to the lien of the Principal Indenture of property acquired after the execution and delivery thereof, the amendment of certain provisions of the Principal Indenture and the appointment of the successor Trustee; and WHEREAS, the Principal Indenture as supplemented and amended by all Supplemental Indentures heretofore executed by the Company and the Trustee is hereinafter referred to as the "Indenture", and, unless the context requires otherwise, references herein to Articles and Sections of the Indenture shall be to Articles and Sections of the Principal Indenture as so amended; and WHEREAS, the Company proposes to create a new series of First Mortgage Bonds to be designated as First Mortgage Bonds, Collateral Series I (the "Collateral Series I Bonds"), to be issued and delivered to the trustee under the 1993 Mortgage (as hereinafter defined) as the basis for the authentication and delivery under the 1993 Mortgage of a series of securities, all as hereinafter provided, and to vary in certain respects the covenants and provisions contained in Article V of the Indenture, to the extent that such covenants and provisions apply to the Collateral Series I Bonds; and WHEREAS, the Company, pursuant to the provisions of the Indenture, has, by appropriate corporate action, duly resolved and determined to execute this Supplemental Indenture for the purpose of providing for the creation of the Collateral Series I Bonds and of specifying the form, provisions and particulars thereof, as in the Indenture provided or permitted and of giving to the Collateral Series I Bonds the protection and security of the Indenture; and WHEREAS, the Company represents that all acts and proceedings required by law and by the charter and by-laws of the Company, including all action requisite on the part of its shareholders, directors and officers, necessary to make the Collateral Series I Bonds, when executed by the Company, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal obligations of the Company, and to constitute the Principal Indenture and all indentures supplemental thereto, including this Supplemental Indenture, valid, binding and legal instruments for the security of the bonds of all series, including the Collateral Series I Bonds, in accordance with the terms of such bonds and such instruments, have been done, performed and fulfilled, and the execution and delivery hereof have been in all respects duly authorized; NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: That Public Service Company of Colorado, the Company named in the Indenture, in consideration of the premises and of One Dollar to it duly paid by the Trustee at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in pursuance of the direction and authority of the Board of Directors of the Company given at a meeting thereof duly called and held, and in order to create the Collateral Series I Bonds and to specify the form, terms and provisions thereof, and to secure the payment of the principal of and premium, if any, and interest, if any, on all bonds from time to time outstanding under the Indenture, including the Collateral Series I Bonds, according to the terms of said bonds, and to secure the performance and observance of all of the covenants and conditions contained in the Indenture, has executed and delivered this Supplemental Indenture and has granted, bargained, sold, warranted, aliened, remised, released, conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed unto U.S. Bank Trust National Association, as Trustee, and its successor or successors in the trust and its and their assigns forever; TO HAVE AND TO HOLD all and singular the properties, rights, privileges and franchises described in the Principal Indenture and in the several Supplemental Indentures hereinabove referred to and owned by the Company on the date of the execution and delivery hereof (other than property of a character expressly excepted from the lien of the Indenture as therein set forth) unto the Trustee and its successor or successors and assigns forever; SUBJECT, HOWEVER, to permitted encumbrances as defined in the Indenture; IN TRUST, NEVERTHELESS, upon the terms and trusts set forth in the Indenture, for the equal and proportionate benefit and security of all present and future holders of the bonds and coupons issued and to be issued under the Indenture, including the Collateral Series I Bonds, without preference, priority or distinction as to lien (except as any sinking, amortization, improvement or other fund established in accordance with the provisions of the Indenture or any indenture supplemental thereto may afford additional security for the bonds of any particular series) of any of said bonds over any others thereof by reason of series, priority in the time of the issue or negotiation thereof, or otherwise howsoever, except as provided in Section 2 of Article IV of the Indenture. ARTICLE ONE CREATION AND DESCRIPTION OF THE COLLATERAL SERIES I BONDS SECTION 1. A new series of bonds to be issued under and secured by the Indenture is hereby created, the bonds of such new series to be designated First Mortgage Bonds, Collateral Series I. The Collateral Series I Bonds shall be limited to an aggregate principal amount of Five Hundred Thirty Million dollars ($530,000,000), excluding any Collateral Series I 2 Bonds which may be authenticated and exchanged for or in lieu of or in substitution for or on transfer of other Collateral Series I Bonds pursuant to any provisions of the Indenture. The Collateral Series I Bonds shall mature on June 27, 2003. The Collateral Series I Bonds shall not bear interest. The principal of each Collateral Series I Bond shall be payable, upon presentation thereof, at the office or agency of the Company in the city in which the principal corporate trust office of the 1993 Mortgage Trustee (as hereinafter defined) is located, in any coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts. The Collateral Series I Bonds shall be issued and delivered by the Company to U.S. Bank Trust National Association, as successor trustee under the Indenture, dated as of October 1, 1993, as supplemented (the "1993 Mortgage"), of the Company to such successor trustee (the "1993 Mortgage Trustee"), as the basis for the authentication and delivery under the 1993 Mortgage of a series of securities. As provided in the 1993 Mortgage, the Collateral Series I Bonds will be registered in the name of the 1993 Mortgage Trustee or its nominee and will be owned and held by the 1993 Mortgage Trustee, subject to the provisions of the 1993 Mortgage, for the benefit of the holders of all securities from time to time outstanding under the 1993 Mortgage, and the Company shall have no interest therein. Any payment or deemed payment by the Company under the 1993 Mortgage of the principal of the securities which shall have been authenticated and delivered under the 1993 Mortgage on the basis of the issuance and delivery to the 1993 Mortgage Trustee of Collateral Series I Bonds (other than by the application of the proceeds of a payment in respect of such Collateral Series I Bonds) shall, to the extent thereof, be deemed to satisfy and discharge the obligation of the Company, if any, to make a payment of principal of such Collateral Series I Bonds which is then due. The Trustee may conclusively presume that the obligation of the Company to pay the principal of the Collateral Series I Bonds as the same shall become due and payable shall have been fully satisfied and discharged unless and until it shall have received a written notice from the 1993 Mortgage Trustee, signed by an authorized officer thereof, stating that the principal of specified Collateral Series I Bonds has become due and payable and has not been fully paid, and specifying the amount of funds required to make such payment. Each Collateral Series I Bond shall be dated as of the date of its authentication. The Collateral Series I Bonds shall be issued as fully registered bonds only, in denominations of $1,000 and multiples thereof. The Collateral Series I Bonds shall be registerable and exchangeable at the office or agency of the Company in the city in which the principal corporate trust office of the 1993 Mortgage Trustee is located, in the manner and upon the terms set forth in Section 5 of Article II of the Indenture; provided, however, that the Collateral Series I Bonds shall not be transferrable except to a successor trustee under the 1993 Mortgage. No service charge shall be made for any exchange or transfer of any Collateral Series I Bond. 3 SECTION 2. The text of the Collateral Series I Bonds shall be substantially in the form attached hereto as Exhibit A. SECTION 3. The Collateral Series I Bonds may be executed by the Company and delivered to the Trustee and, upon compliance with all applicable provisions and requirements of the Indenture in respect thereof, shall be authenticated by the Trustee and delivered (without awaiting the filing or recording of this Supplemental Indenture) in accordance with the written order or orders of the Company. ARTICLE TWO REDEMPTION OF THE COLLATERAL SERIES I BONDS SECTION 1. Each Collateral Series I Bond shall be redeemable at the option of the Company in whole at any time, or in part from time to time, prior to maturity, at a redemption price equal to 100% of the principal amount thereof to be redeemed. SECTION 2. The provisions of Sections 3, 4, 5, 6 and 7 of Article V of the Indenture shall be applicable to the Collateral Series I Bonds, except that (a) no publication of notice of redemption of the Collateral Series I Bonds shall be required and (b) if less than all the Collateral Series I Bonds are to be redeemed, the Collateral Series I Bonds to be redeemed shall be selected in the principal amounts designated to the Trustee by the Company, and except as such provisions may otherwise be inconsistent with the provisions of this Article Two. SECTION 3. The holder of each and every Collateral Series I Bond hereby agrees to accept payment thereof prior to maturity on the terms and conditions provided for in this Article Two. ARTICLE THREE ACKNOWLEDGMENT OF RIGHT TO VOTE OR CONSENT WITH RESPECT TO CERTAIN AMENDMENTS TO INDENTURE The Company hereby acknowledges the right of the holders of the Collateral Series I Bonds to vote or consent with respect to any or all of the modifications to the Indenture referred to in Article Three of the Supplemental Indenture, dated as of March 1, 1980, irrespective of the fact that the Bonds of the Second 1987 Series are no longer outstanding; provided, however, that such acknowledgment shall not impair (a) the right of the Company to make such modifications without the consent or other action of the holders of the Bonds of the 2020 Series or the bonds of any other series subsequently created under the Indenture with respect to which the Company has expressly reserved such right or (b) the right of the Company to reserve the right to make such modifications without the consent or other action of the holders of bonds of one or more, or any or all, series created subsequent to the creation of the Collateral Series I Bonds. 4 ARTICLE FOUR THE TRUSTEE The Trustee accepts the trusts created by this Supplemental Indenture upon the terms and conditions set forth in the Indenture and this Supplemental Indenture. The recitals in this Supplemental Indenture are made by the Company only and not by the Trustee. Each and every term and condition contained in Article XII of the Indenture shall apply to this Supplemental Indenture with the same force and effect as if the same were herein set forth in full, with such omissions, variations and modifications thereof as may be appropriate to make the same conform to this Supplemental Indenture. ARTICLE FIVE MISCELLANEOUS PROVISIONS SECTION 1. Subject to the variations contained in Article Two of this Supplemental Indenture, the Indenture is in all respects ratified and confirmed and the Principal Indenture, this Supplemental Indenture and all other indentures supplemental to the Principal Indenture shall be read, taken and construed as one and the same instrument. Neither the execution of this Supplemental Indenture nor anything herein contained shall be construed to impair the lien of the Indenture on any of the properties subject thereto, and such lien shall remain in full force and effect as security for all bonds now outstanding or hereafter issued under the Indenture. All covenants and provisions of the Indenture shall continue in full force and effect and this Supplemental Indenture shall form part of the Indenture. SECTION 2. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Supplemental Indenture, shall not be a Business Day (as defined in the 1993 Mortgage), such payment may be made or act performed or right exercised on the next succeeding Business Day with the same force and effect as if done on the nominal date provided in this Supplemental Indenture. SECTION 3. The terms defined in the Indenture shall, for all purposes of this Supplemental Indenture, have the meaning specified in the Indenture except as set forth in Section 4 of this Article or otherwise set forth in this Supplemental Indenture or unless the context clearly indicates some other meaning to be intended. SECTION 4. Any term defined in Section 303 of the Trust Indenture Act of 1939, as amended, and not otherwise defined in the Indenture shall, with respect to this Supplemental Indenture and the Collateral Series I Bonds, have the meaning assigned to such term in Section 303 as in force on the date of the execution of this Supplemental Indenture. SECTION 5. This Supplemental Indenture may be executed in any number of counterparts, and all of said counterparts executed and delivered, each as an original, shall constitute but one and the same instrument. 5 IN WITNESS WHEREOF, Public Service Company of Colorado, party hereto of the first part, has caused its corporate name to be hereunto affixed, and this instrument to be signed by its President, an Executive Vice President, a Senior Vice President or a Vice President, and its corporate seal to be hereunto affixed and attested by its Secretary or an Assistant Secretary for and in its behalf; and U.S. Bank Trust National Association, the party hereto of the second part, in evidence of its acceptance of the trust hereby created, has caused its corporate name to be hereunto affixed, and this instrument to be signed and its corporate seal to be affixed by one of its Assistant Vice Presidents and attested by one of its Trust Officers, for and in its behalf, all as of the day and year first above written. PUBLIC SERVICE COMPANY OF COLORADO By: /s/ Paul E. Pender ------------------- Name: Paul E. Pender Title: Vice President and Treasurer ATTEST: /s/ Anne Ziebell ---------------- Name: Anne Ziebell Title: Assistant Secretary STATE OF MINNESOTA ) ) ss.: CITY OF MINNEAPOLIS ) On this 20th day of September, 2002, before me, Sharon M. Quellhorst, a duly authorized Notary Public in and for said City in the State aforesaid, personally appeared Paul E. Pender and Anne Ziebell to me known to be a Vice President and Treasurer and the Assistant Secretary, respectively, of PUBLIC SERVICE COMPANY OF COLORADO, a corporation organized and existing under the laws of the State of Colorado, one of the corporations that executed the within and foregoing instrument; and the said Vice President and Treasurer and Assistant Secretary severally acknowledged the said instrument to be the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned, and on oath stated that they were authorized to execute said instrument and that the seal affixed thereto is the corporate seal of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year first above written. /s/ Sharon M. Quellhorst ------------------------ Name: Sharon M. Quellhorst Notary Public, State of Colorado Commission Expires: January 31, 2005 6 U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee By: /s/ Ignazio Tamburello ---------------------- Name: Ignazio Tamburello Title: Assistant Vice President ATTEST: /s/ Adam Berman --------------- Name: Adam Berman Title: Trust Officer STATE OF NEW YORK ) ) ss.: CITY AND COUNTY OF NEW YORK ) On this 20th day of September, 2002, before me, Doris Ware, a duly authorized Notary Public in and for said City and County in the State aforesaid, personally appeared Ignazio Tamburello and Adam Berman to me known to be an Assistant Vice President and a Trust Officer, respectively, of U.S. BANK TRUST NATIONAL Association, a national banking association, one of the corporations that executed the within and foregoing instrument; and the said Assistant Vice President and Trust Officer severally acknowledged the said instrument to be the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned, and on oath stated that they were authorized to execute said instrument and that the seal affixed thereto is the corporate seal of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year first above written. /s/ Doris Ware -------------- Name: Doris Ware Notary Public, State of New York Commission Expires: November 9, 2005 7 EXHIBIT A FORM OF COLLATERAL SERIES I BOND THIS BOND IS NOT TRANSFERABLE EXCEPT TO A SUCCESSOR TRUSTEE UNDER THE INDENTURE, DATED AS OF OCTOBER 1, 1993, AS SUPPLEMENTED, BETWEEN PUBLIC SERVICE COMPANY OF COLORADO AND U.S. BANK TRUST NATIONAL ASSOCIATION (FORMERLY FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION), AS SUCCESSOR TRUSTEE THEREUNDER. PUBLIC SERVICE COMPANY OF COLORADO FIRST MORTGAGE BOND, Collateral Series I DUE 2003 REGISTERED REGISTERED No. 1 $530,000,000 FOR VALUE RECEIVED, PUBLIC SERVICE COMPANY OF COLORADO, a corporation organized and existing under the laws of the State of Colorado (hereinafter sometimes called the "Company"), promises to pay to U.S. Bank Trust National Association (formerly known as First Trust of New York, National Association), as successor trustee (the "1993 Mortgage Trustee") under the Indenture, dated as of October 1, 1993 (the "1993 Mortgage"), of the Company, or registered assigns, Five Hundred Thirty Million Dollars on June 27, 2003, at the office or agency of the Company in the city in which the principal corporate trust office of the 1993 Mortgage Trustee is located. This bond shall not bear interest. The principal of this bond shall be payable in any coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts. Any payment or deemed payment by the Company under the 1993 Mortgage of the principal of securities which shall have been authenticated and delivered under the 1993 Mortgage on the basis of the issuance and delivery to the 1993 Mortgage Trustee of this bond (the "1993 Mortgage Securities") (other than by the application of the proceeds of a payment in respect of this bond) shall, to the extent thereof, be deemed to satisfy and discharge the obligation of the Company, if any, to make a payment of principal of this bond which is then due. This bond is one of an issue of bonds of the Company, issued and to be issued in one or more series under and equally and ratably secured (except as any sinking, amortization, improvement or other fund, established in accordance with the provisions of the indenture hereinafter mentioned, may afford additional security for the bonds of any particular series) by a certain indenture, dated as of December 1, 1939, made by the Company to U.S. BANK TRUST EXHIBIT A-1 NATIONAL ASSOCIATION (formerly First Trust of New York, National Association), as successor trustee (hereinafter called the "Trustee") to Morgan Guaranty Trust Company of New York (formerly Guaranty Trust Company of New York), as amended and supplemented by several indentures supplemental thereto, including the Supplemental Indenture dated as of September 15, 2002 (said Indenture as amended and supplemented by said indentures supplemental thereto being hereinafter called the "Indenture"), to which Indenture reference is hereby made for a description of the property mortgaged, the nature and extent of the security, the rights and limitations of rights of the Company, the Trustee, and the holders of said bonds, under the Indenture, and the terms and conditions upon which said bonds are secured, to all of the provisions of which Indenture and of all indentures supplemental thereto in respect of such security, including the provisions of the Indenture permitting the issue of bonds of any series for property which, under the restrictions and limitations therein specified, may be subject to liens prior to the lien of the Indenture, the holder, by accepting this bond, assents. To the extent permitted by and as provided in the Indenture, the rights and obligations of the Company and of the holders of said bonds (including those pertaining to any sinking or other fund) may be changed and modified, with the consent of the Company, by the holders of at least 75% in aggregate principal amount of the bonds then outstanding (excluding bonds disqualified from voting by reason of the Company's interest therein as provided in the Indenture); provided, however, that without the consent of the holder hereof no such modification or alteration shall be made which will extend the time of payment of the principal of this bond or reduce the principal amount hereof or effect any other modification of the terms of payment of such principal or will reduce the percentage of bonds required for the aforesaid actions under the Indenture. The Company has reserved the right to amend the Indenture without any consent or other action by holders of any series of bonds created after October 31, 1975 (including this series) so as to change 75% in the foregoing sentence to 60% and to change certain procedures relating to bondholders' meetings. This bond is one of a series of bonds designated as the First Mortgage Bonds, Collateral Series I, of the Company. This bond shall be redeemable at the option of the Company in whole at any time, or in part from time to time, prior to maturity, at a redemption price equal to 100% of the principal amount thereof to be redeemed. The principal of this bond may be declared or may become due before the maturity hereof, on the conditions, in the manner and at the times set forth in the Indenture, upon the happening of an event of default as therein provided. This bond is not transferable except to a successor trustee under the 1993 Mortgage, any such transfer to be made at the office or agency of the Company in the city in which the principal corporate trust office of the 1993 Mortgage Trustee is located, upon surrender and cancellation of this bond, and thereupon a new bond of this series of a like principal amount will be issued to the transferee in exchange therefor, as provided in the Indenture. The Company, the Trustee, any paying agent and any registrar may deem and treat the person in whose name this bond is registered as the absolute owner hereof for the purpose of receiving payment and for all other purposes. This bond, alone or with other bonds of this series, may in like manner be exchanged at such office or agency for one or more new bonds of this series of the same aggregate principal amount, all as provided in the Indenture. No service charge shall be made to any holder of any bond of this series for any exchange or transfer of bonds. EXHIBIT A-2 No recourse under or upon any covenant or obligation of the Indenture, or of any bonds thereby secured, or for any claim based thereon, or otherwise in any manner in respect thereof, shall be had against any incorporator, subscriber to the capital stock, shareholder, officer or director, as such, of the Company, whether former, present or future, either directly, or indirectly through the Company or the Trustee, by the enforcement of any subscription to capital stock, assessment or otherwise, or by any legal or equitable proceeding by virtue of any statute or otherwise (including, without limiting the generality of the foregoing, any proceeding to enforce any claimed liability of shareholders of the Company based upon any theory of disregarding the corporate entity of the Company or upon any theory that the Company was acting as the agent or instrumentality of the shareholders), any and all such liability of incorporators, shareholders, subscribers, officers and directors, as such, being released by the holder hereof, by the acceptance of this bond, and being likewise waived and released by the terms of the Indenture under which this bond is issued. This bond shall not be valid or become obligatory for any purpose until the certificate of authentication endorsed hereon shall have been signed by U.S. Bank Trust National Association, or its successor, as Trustee under the Indenture. IN WITNESS WHEREOF, Public Service Company of Colorado has caused this bond to be signed in its name by a Vice President and its corporate seal to be affixed hereto and attested by its Secretary or an Assistant Secretary. Dated: PUBLIC SERVICE COMPANY OF COLORADO By: ------------------------------ Vice President and Treasurer ATTEST: ------------------------------ Assistant Secretary CERTIFICATE OF AUTHENTICATION This is one of the securities of the series designated therein referred to in the within-mentioned Supplemental Indenture. Dated: U.S. BANK TRUST NATIONAL ASSOCIATION, AS TRUSTEE By: ------------------------------ Authorized Officer EXHIBIT A-3 SCHEDULE A SUPPLEMENTAL INDENTURES

DATE OF SERIES OF BONDS PRINCIPAL PRINCIPAL SUPPLEMENTAL --------------- AMOUNT ISSUED AMOUNT INDENTURE ------------- OUTSTANDING --------- ----------- March 14, 1941 None -- -- May 14, 1941 None -- -- April 28, 1942 None -- -- April 14, 1943 None -- -- April 27, 1944 None -- -- April 18, 1945 None -- -- April 23, 1946 None -- -- April 9, 1947 None -- -- June 1, 1947* 2-7/8% Series due 1977 $ 40,000,000 None April 1, 1948 None -- -- May 20, 1948 None -- -- October 1, 1948 3-1/8% Series due 1978 10,000,000 None April 20, 1949 None -- -- April 24, 1950 None -- -- April 18, 1951 None -- -- October 1, 1951 3-1/4% Series due 1981 15,000,000 None April 21, 1952 None -- -- December 1, 1952 None -- -- April 15, 1953 None -- -- April 19, 1954 None -- -- October 1, 1954* 3-1/8% Series due 1984 20,000,000 None April 18, 1955 None -- -- April 24, 1956 None -- -- May 1, 1957* 4-3/8% Series due 1987 30,000,000 None April 10, 1958 None -- -- May 1, 1959 4-5/8% Series due 1989 20,000,000 None April 18, 1960 None -- -- April 19, 1961 None -- -- October 1, 1961 4-1/2% Series due 1991 30,000,000 None March 1, 1962 4-5/8% Series due 1992 8,800,000 None June 1, 1964 4-1/2% Series due 1994 35,000,000 None May 1, 1966 5-3/8% Series due 1996 35,000,000 None July 1, 1967* 5-7/8% Series due 1997 35,000,000 None July 1, 1968* 6-3/4% Series due 1998 25,000,000 None April 25, 1969 None -- --

SCHEDULE A-1

DATE OF SERIES OF BONDS PRINCIPAL PRINCIPAL SUPPLEMENTAL --------------- AMOUNT ISSUED AMOUNT INDENTURE ------------- OUTSTANDING --------- ----------- April 21, 1970 None -- -- September 1, 1970 8-3/4% Series due 2000 35,000,000 None February 1, 1971 7-1/4% Series due 2001 40,000,000 None August 1, 1972 7-1/2% Series due 2002 50,000,000 None June 1, 1973 7-5/8% Series due 2003 50,000,000 None March 1, 1974 Pollution Control Series A 24,000,000 None December 1, 1974 Pollution Control Series B 50,000,000 None October 1, 1975 9-3/8% Series due 2005 50,000,000 None April 28, 1976 None -- -- April 28, 1977 None -- -- November 1, 1977* 8-1/4% Series due 2007 50,000,000 None April 28, 1978 None -- -- October 1, 1978 9-1/4% Series due 2008 50,000,000 None October 1, 1979* Pollution Control Series C 50,000,000 None March 1, 1980* 15% Series due 1987 50,000,000 None April 28, 1981 None -- -- November 1, 1981* Pollution Control Series D 27,380,000 None December 1, 1981* 16-1/4% Series due 2011 50,000,000 None April 29, 1982 None -- -- May 1, 1983* Pollution Control Series E 42,000,000 None April 30, 1984 None -- -- March 1, 1985* 13% Series due 2015 50,000,000 None November 1, 1986* Pollution Control Series F 27,250,000 None May 1, 1987* 8.95% Series due 1992 75,000,000 None July 1, 1990* 9-7/8% Series due 2020 75,000,000 None December 1, 1990* Secured Medium-Term Notes, Series A 191,500,000** 15,000,000 March 1, 1992* 8-1/8% Series due 2004 and 100,000,000 100,000,000 8-3/4% Series due 2022 150,000,000 146,340,000 April 1, 1993* Pollution Control Series G 79,500,000 79,500,000 June 1, 1993* Pollution Control Series H 50,000,000 50,000,000 November 1, 1993* Collateral Series A 134,500,000 134,500,000 January 1, 1994* Collateral Series B due 2001 and 102,667,000 None Collateral Series B due 2024 110,000,000 110,000,000 September 2, 1994 None -- -- (Appointment of Successor Trustee) May 1, 1996 Collateral Series C 125,000,000 125,000,000

SCHEDULE A-2

DATE OF SERIES OF BONDS PRINCIPAL PRINCIPAL SUPPLEMENTAL --------------- AMOUNT ISSUED AMOUNT INDENTURE ------------- OUTSTANDING --------- ----------- November 1, 1996 Collateral Series D 250,000,000 175,000,000 February 1, 1997 Collateral Series E 150,000,000 None April 1, 1998 Collateral Series F 250,000,000 250,000,000 August 15, 2002 Collateral Series G 48,750,000 48,750,000 September 1, 2002 Collateral Series H 600,000,000 600,000,000

- ---------------- * Contains amendatory provisions ** $200,000,000 authorized SCHEDULE A-3 EX-4.03 5 c72574exv4w03.txt EX-4.03 SUPPLEMENTAL INDENTURE DATED AUG. 15, 2002 EXHIBIT 4.03 PUBLIC SERVICE COMPANY OF COLORADO TO U.S. BANK TRUST NATIONAL ASSOCIATION, AS TRUSTEE --------------------- SUPPLEMENTAL INDENTURE NO. 8 Dated as of August 15, 2002 Supplemental to the Indenture dated as of October 1, 1993 --------------------- Establishing the Securities of Series No. 7, designated First Collateral Trust Bonds, Series No. 7 (Ambac Collateral Bonds) SUPPLEMENTAL INDENTURE NO. 8, dated as of August 15, 2002, between PUBLIC SERVICE COMPANY OF COLORADO, a corporation duly organized and existing under the laws of the State of Colorado (hereinafter sometimes called the "Company"), and U.S. BANK TRUST NATIONAL ASSOCIATION (FORMERLY FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION), a national banking association, as successor trustee (hereinafter sometimes called the "Trustee") to Morgan Guaranty Trust Company of New York under the Indenture, dated as of October 1, 1993 (hereinafter called the "Original Indenture"), as previously supplemented and as further supplemented by this Supplemental Indenture No. 8. The Original Indenture and any and all indentures and all other instruments supplemental thereto are hereinafter sometimes collectively called the "Indenture". RECITALS OF THE COMPANY The Original Indenture was authorized, executed and delivered by the Company to provide for the issuance from time to time of its Securities (such term and all other capitalized terms used herein without definition having the meanings assigned to them in the Original Indenture), to be issued in one or more series as contemplated therein, and to provide security for the payment of the principal of and premium, if any, and interest, if any, on the Securities. The Company has heretofore executed and delivered to the Trustee the Supplemental Indentures referred to in Schedule A hereto for the purpose of establishing a series of bonds and appointing the successor Trustee. The Company has heretofore entered into two separate Financing Agreements, each dated as of January 1, 1999, with each of Adams County, Colorado and Pueblo County, Colorado (the "Counties") pursuant to which each of the Counties in effect loaned the proceeds of the Pollution Control Refunding Revenue Bonds (collectively, the "Series 1999 Bonds") issued pursuant to separate Indentures of Trust between each County and U.S. Bank National Association, as Trustee, dated as of January 1, 1999 (the "Series 1999 Bond Indentures") to the Company for the purpose of refunding certain outstanding series of pollution control bonds and the Company executed and delivered a note to each of the Counties in the amount of the respective proceeds (the "1999 Series Notes"). The payment of principal of and interest on the 1999 Series Notes are applied solely to the payment of the related Series 1999 Bonds. In connection with the issuance of the Series 1999 Bonds, Ambac Assurance Corporation ("Ambac") issued municipal bond insurance policies (the "Policies") to each of the Counties relating to the Series 1999 Bonds. The Company entered into an Insurance Agreement (the "Insurance Agreement"), dated as of January 21, 1999, with Ambac as part of the consideration for the delivery by Ambac of the Policies, pursuant to which the Company is absolutely and unconditionally obligated, among other matters, to reimburse Ambac for all amounts advanced by Ambac under the Policies. As additional consideration for Ambac issuing the Policies, the Company agreed not to issue any secured debt in an amount above a specified threshold until the Company issues similar secured debt to Ambac (the "Ambac Secured Debt"). The Company now desires to issue the Ambac Secured Debt by establishing a series of Securities to be designated "First Collateral Trust Bonds, Series No. 7 (Ambac Collateral Bonds)", such series of Securities to be hereinafter sometimes called "Series No. 7". The Company has duly authorized the execution and delivery of this Supplemental Indenture No. 8 to establish the Securities of Series No. 7 and has duly authorized the issuance of such Securities; and all acts necessary to make this Supplemental Indenture No. 8 a valid agreement of the Company, and to make the Securities of Series No. 7 valid obligations of the Company, have been performed. GRANTING CLAUSES NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 8 WITNESSETH, that, in consideration of the premises, and in order to secure the payment of the principal of and premium, if any, and interest, if any, on all Securities from time to time Outstanding and the performance of the covenants contained therein and in the Indenture and to declare the terms and conditions on which such Securities are secured, the Company hereby grants, bargains, sells, releases, conveys, assigns, transfers, mortgages, pledges, sets over and confirms to the Trustee, and grants to the Trustee a security interest in, the following: GRANTING CLAUSE FIRST All right, title and interest of the Company, as of the date of the execution and delivery of this Supplemental Indenture No. 8, in and to property (other than Excepted Property), real, personal and mixed and wherever situated, in any case used or to be used in or in connection with the Electric Utility Business (whether or not such use is the sole use of such property), including without limitation (a) all lands and interests in land described or referred to in Schedule B hereto; (b) all other lands, easements, servitudes, licenses, permits, rights of way and other rights and interests in or relating to real property used or to be used in or in connection with the Electric Utility Business or relating to the occupancy or use of such real property, subject however, to the exceptions and exclusions set forth in clause (a) of Granting Clause First of the Original Indenture; (c) all plants, generators, turbines, engines, boilers, fuel handling and transportation facilities, air and water pollution control and sewage and solid waste disposal facilities and other machinery and facilities for the generation of electric energy; (d) all switchyards, lines, towers, substations, transformers and other machinery and facilities for the transmission of electric energy; (e) all lines, poles, conduits, conductors, meters, regulators and other machinery and facilities for the distribution of electric energy; (f) all buildings, offices, warehouses and other structures used or to be used in or in connection with the Electric Utility Business; (g) all pipes, cables, insulators, ducts, tools, computers and other data processing and/or storage equipment and other equipment, apparatus and facilities used or to be used in or in connection with the Electric Utility Business; (h) any or all of the foregoing properties in the process of construction; and (i) all other property, of whatever kind and nature, ancillary to or otherwise used or to be used in conjunction with any or all of the foregoing or otherwise, directly or indirectly, in furtherance of the Electric Utility Business; GRANTING CLAUSE SECOND Subject to the applicable exceptions permitted by Section 810(c), Section 1303 and Section 1305 of the Original Indenture, all property (other than Excepted Property) of the kind and nature described in Granting Clause First which may be hereafter acquired by the Company, it being the intention of the Company that all such property acquired by the Company after the date of the execution and delivery of this Supplemental Indenture No. 8 shall be as fully embraced within and subjected to the Lien hereof as if such property were owned by the Company as of the date of the execution and delivery of this Supplemental Indenture No. 8; 2 GRANTING CLAUSE FOURTH All other property of whatever kind and nature subjected or required to be subjected to the Lien of the Indenture by any of the provisions thereof; EXCEPTED PROPERTY Expressly excepting and excluding, however, from the Lien and operation of the Indenture all Excepted Property of the Company, whether now owned or hereafter acquired; TO HAVE AND TO HOLD all such property, real, personal and mixed, unto the Trustee, its successors in trust and their assigns forever; SUBJECT, HOWEVER, to (a) Liens existing at the date of the execution and delivery of the Original Indenture (including, but not limited to, the Lien of the PSCO 1939 Mortgage), (b) as to property acquired by the Company after the date of the execution and delivery of the Original Indenture, Liens existing or placed thereon at the time of the acquisition thereof (including, but not limited to, the Lien of any Class A Mortgage and purchase money Liens), (c) Retained Interests and (d) any other Permitted Liens, it being understood that, with respect to any property which was at the date of execution and delivery of the Original Indenture or thereafter became or hereafter becomes subject to the Lien of any Class A Mortgage, the Lien of the Indenture shall at all times be junior, subject and subordinate to the Lien of such Class A Mortgage; IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and security of the Holders from time to time of all Outstanding Securities without any priority of any such Security over any other such Security; PROVIDED, HOWEVER, that the right, title and interest of the Trustee in and to the Mortgaged Property shall cease, terminate and become void in accordance with, and subject to the conditions set forth in, Article Nine of the Original Indenture, and if, thereafter, the principal of and premium, if any, and interest, if any, on the Securities shall have been paid to the Holders thereof, or shall have been paid to the Company pursuant to Section 603 of the Original Indenture, then and in that case the Indenture shall terminate, and the Trustee shall execute and deliver to the Company such instruments as the Company shall require to evidence such termination; otherwise the Indenture, and the estate and rights thereby granted shall be and remain in full force and effect; and THE PARTIES HEREBY FURTHER COVENANT AND AGREE as follows: ARTICLE ONE SECURITIES OF SERIES NO. 7 There are hereby established the Securities of Series No. 7. The Securities of Series No. 7 are to be issued to Ambac pursuant to the Insurance Agreement as part of the consideration for the delivery by Ambac of the Policies. The Securities of Series No. 7 shall have the terms and characteristics set forth below (the lettered subdivisions set forth below corresponding to the lettered subdivisions of Section 301 of the Original Indenture): (a) the title of the Securities of such series shall be "First Collateral Trust Bonds, Series No. 7 (Ambac Collateral Bonds)"; provided, however, that, at any time after the 3 PSCO 1939 Mortgage shall have been satisfied and discharged, the Company shall have the right, without any consent or other action by the Holders of such Securities, to change such title in such manner as shall be deemed by the Company to be appropriate to reflect such satisfaction and discharge, such change to be evidenced in an Officer's Certificate; (b) the Securities of Series No. 7 shall be initially authenticated and delivered in the aggregate principal amount of $48,750,000; (c) interest on the Securities of Series No. 7 shall be payable to the Persons in whose names such Securities are registered at the close of business on the Regular Record Date for such interest, except as otherwise expressly provided in the form of such Securities attached as Exhibit A hereto; (d) the principal of the Securities of Series No. 7 shall be payable on January 1, 2019, the Stated Maturity. (e) the Securities of Series No. 7 shall bear interest at a rate of 5.10% per annum; interest shall accrue on the Securities of Series No. 7 from September 10, 2002, or the most recent date to which interest has been paid or duly provided for; the Interest Payment Dates for such Securities shall be January 1 and July 1 in each year, commencing January 1, 2003, and the Regular Record Dates with respect to the Interest Payment Dates for such Securities shall be December 15 and June 15 in each year, respectively (whether or not a Business Day); (f) the Corporate Trust Office of U.S. Bank Trust National Association in New York, New York shall be the place at which (i) the principal of, premium, if any, and interest, if any, on the Securities of Series No. 7 shall be payable, (ii) registration of transfer of such Securities may be effected, (iii) exchanges of such Securities may be effected and (iv) notices and demands to or upon the Company in respect of such Securities and the Indenture may be served; and U.S. Bank Trust National Association shall be the Security Registrar for such Securities; provided, however, that the Company reserves the right to change, by one or more Officer's Certificates, any such place or the Security Registrar; and provided, further, that the Company reserves the right to designate, by one or more Officer's Certificates, its principal office in Denver, Colorado as any such place or itself as the Security Registrar; (g) the Securities of Series No. 7 shall be redeemable as follows: At the time that any Series 1999 Bonds are redeemed pursuant to the Series 1999 Bond Indentures, Securities of Series No. 7 in a principal amount equal to the principal amount of Series 1999 Bonds so redeemed shall be subject to redemption by the Company at a Redemption Price equal to the price at which such Series 1999 Bonds are redeemed; (h) not applicable; (i) not applicable; (j) not applicable; (k) not applicable; (l) not applicable; 4 (m) not applicable; (n) not applicable; (o) not applicable; (p) not applicable; (q) the Securities of Series No. 7 are to be registered in the name of Ambac Assurance Corporation. Such Securities shall not be transferable, nor shall any purported transfer be registered except to a successor to Ambac under the Insurance Agreement upon delivery to the Trustee of a Company Request requesting such transfer. (r) not applicable; (s) no service charge shall be made for the exchange of the Securities of Series No. 7; provided, however, that the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the exchange; (t) not applicable; (u) (i) If the Company shall have caused the Company's indebtedness in respect of any Securities of Series No. 7 to have been satisfied and discharged prior to the Maturity of such Securities, as provided in Section 901 of the Original Indenture, the Company shall, promptly after the date of such satisfaction and discharge, give a notice to each Person who was a Holder of any of such Securities on such date stating (A)(1) the aggregate principal amount of such Securities and (2) the aggregate amount of any money (other than amounts, if any, deposited in respect of accrued interest on such Securities) and the aggregate principal amount of, the rate or rates of interest on, and the aggregate fair market value of, any Eligible Obligations deposited pursuant to Section 901 of the Original Indenture with respect to such Securities and (B) that the Company will provide (and the Company shall promptly so provide) to such Person, or any beneficial owner of such Securities holding through such Person (upon written request to the Company sent to an address specified in such notice), such other information as such Person or beneficial owner, as the case may be, reasonably may request in order to enable it to determine the federal income tax consequences to it resulting from the satisfaction and discharge of the Company's indebtedness in respect of such Securities. Thereafter, the Company shall, within forty-five (45) days after the end of each calendar year, give to each Person who at any time during such calendar year was a Holder of such Securities a notice containing (X) such information as may be necessary to enable such Person to report its income, gain or loss for federal income tax purposes with respect to such Securities or the assets held on deposit in respect thereof during such calendar year or the portion thereof during which such Person was a Holder of such Securities, as the case may be (such information to be set forth for such calendar year as a whole and for each month during such year) and (Y) a statement to the effect that the Company will provide (and the Company shall promptly so provide) to such Person, or any beneficial owner of such Securities holding through such Person (upon written request to the Company sent to an address specified in such notice), such other information as 5 such Person or beneficial owner, as the case may be, reasonably may request in order to enable it to determine its income, gain or loss for federal income tax purposes with respect to such Securities or such assets for such year or portion thereof, as the case may be. The obligation of the Company to provide or cause to be provided information for purposes of income tax reporting by any Person as described in the first two sentences of this paragraph shall be deemed to have been satisfied to the extent that the Company has provided or caused to be provided substantially comparable information pursuant to any requirements of the Internal Revenue Code of 1986, as amended from time to time (the "Code") and United States Treasury regulations thereunder. (ii) Notwithstanding the provisions of subparagraph (i) above, the Company shall not be required to give any notice specified in such subparagraph or to otherwise furnish any of the information contemplated therein if the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Securities will not recognize income, gain or loss for federal income tax purposes as a result of the satisfaction and discharge of the Company's indebtedness in respect of such Securities and such Holders will be subject to federal income taxation on the same amounts and in the same manner and at the same times as if such satisfaction and discharge had not occurred. (iii) Anything in this clause (u) to the contrary notwithstanding, the Company shall not be required to give any notice specified in subparagraph (i) or to otherwise furnish the information contemplated therein or to deliver any Opinion of Counsel contemplated by subparagraph (ii) if the Company shall have caused Securities of Series No. 7 to be deemed to have been paid for purposes of the Indenture, as provided in Section 901 of the Original Indenture, but shall not have effected the satisfaction and discharge of its indebtedness in respect of such Securities pursuant to such Section. (v) Any payment by the Company of principal of, premium, if any, or interest on the Series 1999 Notes or pursuant to the Insurance Agreement with respect to the Series 1999 Bonds shall, to the extent thereof, be deemed to satisfy and discharge the obligation of the Company, if any, to make the payment of principal of, premium, if any, or interest on the Securities of Series No. 7 which is then due; provided, however, if any such payment by the Company on the Series 1999 Notes or pursuant to the Insurance Agreement is determined to be a preferential transfer and is recovered from the registered owner of the Series 1999 Notes or from Ambac pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction as a result, then the obligation of the Company to make such payment of principal of, premium, if any, or interest on the Series 1999 Notes or pursuant to the Insurance Agreement shall no longer be deemed satisfied and discharged for purposes of the Securities of Series No. 7. The Trustee may conclusively presume that the obligation of the Company to pay principal of, premium, if any, and interest on the Securities of Series No. 7 as the same shall have become due and payable shall have been fully satisfied and discharged unless and until it shall have received a written notice from the Holder hereof stating that the principal, premium, if any, or interest of Securities of Series No. 7 has become due and payable and specifying the amount of funds required to make such payment. 6 Notwithstanding anything to the contrary contained herein, the aggregate amount of principal of, premium, if any, and interest on the Securities of Series No. 7 shall not exceed the aggregate amount of the reimbursement obligations of the Company under the Insurance Agreement. (w) The Securities of Series No. 7 shall be substantially in the form attached hereto as Exhibit A and shall have such further terms as are set forth in such form. ARTICLE TWO MISCELLANEOUS PROVISIONS This Supplemental Indenture No. 8 is a supplement to the Original Indenture. As previously supplemented and further supplemented by this Supplemental Indenture No. 8, the Original Indenture is in all respects ratified, approved and confirmed, and the Original Indenture, all previous supplements thereto and this Supplemental Indenture No. 8 shall together constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture No. 8 to be duly executed as of the day and year first above written. PUBLIC SERVICE COMPANY OF COLORADO By: /s/ Paul E. Pender --------------------------------------- Name: Paul E. Pender Title: Vice President and Treasurer U.S. BANK TRUST NATIONAL ASSOCIATION, Trustee By: /s/ Ignazio Tamburello --------------------------------------- Name: Ignazio Tamburello Title: Assistant Vice President 7 STATE OF MINNESOTA ) ) ss.: CITY OF MINNEAPOLIS ) On the 9th day of September, 2002, before me personally came Paul E. Pender to me known, who, being by me duly sworn, did depose and say that he is a Vice President and Treasurer of Public Service Company of Colorado, one of the corporations described in and which executed the foregoing instrument; and that he signed his name thereto by authority of the Board of Directors of said corporation. /s/ Sharon M. Quellhorst ------------------------------------- Name: Sharon M. Quellhorst Notary Public, State of Minnesota Commission Expires: January 31, 2005 8 STATE OF NEW YORK ) ) ss.: CITY AND COUNTY OF NEW YORK ) On the 10th day of September, 2002, before me personally came Ignazio Tamburello, to me known, who, being by me duly sworn, did depose and say that she is an Assistant Vice President of U.S. Bank Trust National Association, the banking association described in and which executed the foregoing instrument; and that she signed her name thereto by authority of the Board of Directors of said banking association. /s/ Rouba Fakih ------------------------------------ Name: Rouba Fakih Notary Public, State of New York Commission Expires February 20, 2003 9 EXHIBIT A FORM OF SECURITY (See legend at the end of this Security for restrictions on transfer and change of form) PUBLIC SERVICE COMPANY OF COLORADO First Collateral Trust Bond, Series No. 7 (Ambac Collateral Bonds) Original Interest Accrual Date September 10, 2002 Interest Rate: 5.10% Stated Maturity: January 1, 2019 Interest Payment Dates: January 1 and July 1 Regular Record Dates: December 15 and June 15 This Security is not a Discount Security within the meaning of the within-mentioned Indenture ----------------------------------------- Principal Amount Registered No. 1 $48,750,000 PUBLIC SERVICE COMPANY OF COLORADO, a corporation duly organized and existing under the laws of the State of Colorado (herein called the "Company," which term includes any successor corporation under the Indenture referred to below), for value received, hereby promises to pay to AMBAC ASSURANCE CORPORATION, or registered assigns, the principal sum of Forty-Eight Million Seven Hundred and Fifty Thousand Dollars on the Stated Maturity specified above, and to pay interest thereon from the Original Interest Accrual Date specified above or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually in arrears on the Interest Payment Dates specified above in each year, commencing with the Interest Payment Date next succeeding the Original Interest Accrual Date specified above, and at Maturity, at the Interest Rate per annum specified above, until the principal hereof is paid or duly provided for. The interest so payable, and paid or duly provided for, on any Interest Payment Date shall, 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 specified above (whether or not a Business Day) next preceding such Interest Payment Date. Notwithstanding the foregoing, interest payable at Maturity shall be paid to the Person to whom principal shall be paid. Except as otherwise provided in said Indenture, any such interest not so paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either 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, notice of which shall be given to Holders of Securities EXHIBIT A-1 of this series not less than 15 days prior to such Special Record Date, or be paid in such other manner as permitted by the Indenture. Payment of the principal of this Security and interest hereon at Maturity shall be made upon presentation of this Security at the Corporate Trust Office of U.S. Bank Trust National Association, in New York, New York or at such other office or agency as may be designated for such purpose by the Company from time to time. Payment of interest on this Security (other than interest at Maturity) shall be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register, except that if such Person shall be a securities depositary, such payment may be made by such other means in lieu of check as shall be agreed upon by the Company, the Trustee and such Person. Payment of the principal of and interest on this Security, as aforesaid, shall be made 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. This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and issuable in one or more series under and equally secured by an Indenture, dated as of October 1, 1993 (such Indenture as originally executed and delivered and as supplemented or amended from time to time thereafter, together with any constituent instruments establishing the terms of particular Securities, being herein called the "Indenture"), between the Company and U.S. Bank Trust National Association (formerly First Trust of New York, National Association) as successor 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 description of the property mortgaged, pledged and held in trust, the nature and extent of the security and the respective rights, limitations of rights, duties and immunities of the Company, the Trustee and the Holders of the Securities thereunder and of the terms and conditions upon which the Securities are, and are to be, authenticated and delivered and secured. The acceptance of this Security shall be deemed to constitute the consent and agreement by the Holder hereof to all of the terms and provisions of the Indenture. This Security is one of the series designated above. This Security has been issued pursuant to the requirements of, and as security for the payment by the Company of its reimbursement obligations under, that certain Insurance Agreement, dated as of January 21, 1999, between the Company and Ambac Assurance Corporation ("Ambac") in connection with the issuance by Ambac of municipal bond insurance policies relating to $27,250,000 in aggregate principal amount of Pollution Control Revenue Refunding Bonds (Public Service Company of Colorado Project) Series 1999 (the "Adams County Bonds"), issued by Adams County, Colorado pursuant to a Trust Indenture, dated as of January 1, 1999, between Adams County, Colorado and the Trustee (the "Adams County Indenture") and $21,500,000 in aggregate principal amount of Pollution Control Revenue Refunding Bonds (Public Service Company of Colorado Project) Series 1999 (the "Pueblo County Bonds"; the Adams County Bonds and the Pueblo County Bonds are referred to herein as the "Series 1999 Bonds"), issued by Pueblo County, Colorado pursuant to a Trust Indenture, dated as of January 1, 1999, between Pueblo County, Colorado and the Trustee (the "Pueblo County Indenture"; the Adams County Indenture and the Pueblo County Indenture are referred to herein as the "Series 1999 Bond Indentures"). In connection with the issuance of the Series 1999 Bonds, the Company entered into separate Financing Agreements, dated as of January 1, 1999, pursuant to which the Company executed and delivered a note to each of the Counties in the amount of the respective proceeds of the Series 1999 Bonds (the "Series 1999 Notes"). The payment of principal of and interest on the 1999 Series Notes are applied solely to the payment of the related Series 1999 Bonds. Any payment by the Company of principal of, premium, if any, or interest on the Series 1999 Notes or pursuant to the Insurance Agreement with respect to the Series 1999 Bonds shall, to the extent thereof, be deemed to satisfy and discharge the obligation of the Company, if any, to make the payment of EXHIBIT A-2 principal of, premium, if any, or interest on the Securities of Series No. 7 which is then due; provided, however, if any such payment by the Company on the Series 1999 Notes or pursuant to the Insurance Agreement is determined to be a preferential transfer and is recovered from the registered owner of the Series 1999 Notes or from Ambac pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction as a result, then the obligation of the Company to make such payment of principal of, premium, if any, or interest on the Series 1999 Notes or pursuant to the Insurance Agreement shall no longer be deemed satisfied and discharged for purposes of the Securities of Series No. 7. The Trustee may conclusively presume that the obligation of the Company to pay principal of, premium, if any, and interest on the Securities of Series No. 7 as the same shall have become due and payable shall have been fully satisfied and discharged unless and until it shall have received a written notice from the Holder hereof stating that the principal, premium, if any, or interest of this Security has become due and payable and specifying the amount of funds required to make such payment. Notwithstanding anything to the contrary contained herein, the aggregate amount of principal of, premium, if any, and interest on the Securities of Series No. 7 shall not exceed the aggregate amount of the reimbursement obligations of the Company under the Insurance Agreement. If any Interest Payment Date or the Stated Maturity shall not be a Business Day (as hereinafter defined), payment of the amounts due on this Security on such date may be made on the next succeeding Business Day; and, if such payment is made or duly provided for on such Business Day, no interest shall accrue on such amounts for the period from and after such Interest Payment Date or Stated Maturity, as the case may be, to such Business Day. This Security is subject to redemption by the Company at the time that any Series 1999 Bonds are redeemed pursuant to the Series 1999 Bond Indentures in a principal amount equal to the principal amount of Series 1999 Bonds so redeemed at a Redemption Price equal to the price at which such Series 1999 Bonds are redeemed. If an Event of Default shall occur and be continuing, the principal of this Security may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the Trustee to enter into one or more supplemental indentures for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, the Indenture with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities of all series then Outstanding under the Indenture, considered as one class; provided, however, that if there shall be Securities of more than one series Outstanding under the Indenture and if a proposed supplemental indenture shall directly affect the rights of the Holders of Securities of one or more, but less than all, of such series, then the consent only of the Holders of a majority in aggregate principal amount of the Outstanding Securities of all series so directly affected, considered as one class, shall be required; and provided, further, that if the Securities of any series shall have been issued in more than one Tranche and if the proposed supplemental indenture shall directly affect the rights of the Holders of Securities of one or more, but less than all, of such Tranches, then the consent only of the Holders of a majority in aggregate principal amount of the Outstanding Securities of all Tranches so directly affected, considered as one class, shall be required; and provided, further, that the Indenture permits the Trustee to enter into one or more supplemental indentures for limited purposes without the consent of any Holders of Securities. The Indenture also contains provisions permitting the Holders of a majority in principal amount of the Securities then Outstanding, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or EXHIBIT A-3 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. As provided in the Indenture and subject to certain limitations therein set forth, this Security or any portion of the principal amount hereof will be deemed to have been paid for all purposes of the Indenture and to be no longer Outstanding thereunder, and, at the election of the Company, the Company's entire indebtedness in respect thereof will be satisfied and discharged, if there has been irrevocably deposited with the Trustee or any Paying Agent (other than the Company), in trust, money in an amount which will be sufficient and/or Eligible Obligations, the principal of and interest on which when due, without regard to any reinvestment thereof, will provide moneys which, together with moneys so deposited, will be sufficient, to pay when due the principal of and interest on this Security when due. This Security is not transferable except to a successor to Ambac Assurance Corporation under the Insurance Agreement upon delivery to the Trustee of a Company Request requesting such transfer. Before any transfer of this Security will be recognized or given effect by the Company or the Trustee, the Holder shall note the amounts of all principal prepayments hereon, and shall notify the Company and the Trustee of the name and address of the transferee and shall afford the Company and the Trustee the opportunity of verifying the notation as to prepayment of principal. By the acceptance hereof the Holder of this Security and each transferee shall be deemed to have agreed to indemnify and hold harmless the Company and the Trustee against all losses, claims, damages or liability arising out of any failure on the part of the Holder or of any such transferee to comply with the requirements of the preceding sentence. Any such transfer is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office of U.S. Bank Trust National Association, in New York, New York or such other office or agency as may be designated by the Company from time to time, 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 attorney duly authorized in writing, and thereupon one or more new Securities of this series of authorized denominations and of like tenor and aggregate principal amount, will be issued to the designated transferee or transferees. Each registered owner hereof by his acceptance hereof waives any right to exchange any unpaid portion of this Bond for another Bond under Section 10.01 of the Indenture. This Bond has not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in contravention of said Act and is not transferable except to a successor to Ambac under the Insurance Agreement. No service charge shall be made for any such registration of transfer, 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 absolute 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. The Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York. EXHIBIT A-4 As used herein "Business Day" means any day, other than a Saturday or Sunday, which is not a day on which banking institutions or trust companies in The City of New York, New York or other city in which is located any office or agency maintained for the payment of principal or interest on this Security, are authorized or required by law, regulation or executive order to remain closed. All other terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. As provided in the Indenture, no recourse shall be had for the payment of the principal of or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof, or of the indebtedness represented thereby, or upon any obligation, covenant or agreement under the Indenture, against, and no personal liability whatsoever shall attach to, or be incurred by, any incorporator, shareholder, officer or director, as such, past, present or future of the Company or of any predecessor or successor corporation (either directly or through the Company or a predecessor or successor corporation), whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that the Indenture and all the Securities are solely corporate obligations and that any such personal liability is hereby expressly waived and released as a condition of, and as part of the consideration for, the execution of the Indenture and the issuance of the Securities. Unless the certificate of authentication hereon has been executed by the Trustee or an Authenticating Agent by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. EXHIBIT A-5 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed and its corporate seal to be hereunto affixed and attested. PUBLIC SERVICE COMPANY OF COLORADO By: ---------------------------------------- Vice President and Treasurer Attest: --------------------------- Assistant Secretary CERTIFICATE OF AUTHENTICATION This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. Dated: ---------------------------- U.S. BANK TRUST OR U.S. BANK TRUST NATIONAL ASSOCIATION, NATIONAL ASSOCIATION, as Trustee as Trustee By: By: ------------------------------- ------------------------------ Authorized Officer AS AUTHENTICATING AGENT By: ------------------------------ Authorized Officer THIS SECURITY MAY NOT BE TRANSFERRED OR EXCHANGED, NOR MAY ANY PURPORTED TRANSFER BE REGISTERED, EXCEPT TO A SUCCESSOR TO AMBAC ASSURANCE CORPORATION UNDER THE INSURANCE AGREEMENT REFERRED TO HEREIN. THE HOLDER OF THIS BOND BY ITS ACCEPTANCE HEREOF AGREES TO RESTRICTIONS ON TRANSFER, TO WAIVERS OF CERTAIN RIGHTS OF EXCHANGE, AND TO INDEMNIFICATION PROVISIONS AS SET FORTH BELOW. IN ADDITION, THE BOND REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND SUCH BOND MAY NOT BE TRANSFERRED WITHOUT COMPLIANCE WITH APPLICABLE SECURITIES LAWS. ------------- EXHIBIT A-6 FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto - -------------------------------------------------------------------------------- [please insert social security or other identifying number of assignee] - -------------------------------------------------------------------------------- [please print or typewrite name and address of assignee] - -------------------------------------------------------------------------------- the within Security of PUBLIC SERVICE COMPANY OF COLORADO and does hereby irrevocably constitute and appoint __________________________________ , Attorney, to transfer said Security on the books of the within-mentioned Company, with full power of substitution in the premises. Dated: --------------------- ------------------------------------------------------ Notice: The signature to this assignment must correspond with the name as written upon the face of the Security in every particular without alteration or enlargement or any change whatsoever. EXHIBIT A-7 SCHEDULE A SUPPLEMENTAL INDENTURES

DATE OF SERIES OF BONDS PRINCIPAL PRINCIPAL SUPPLEMENTAL --------------- AMOUNT ISSUED AMOUNT INDENTURE ------------- OUTSTANDING --------- ------------ November 1, 1993 Series No. 1 $134,500,000 $134,500,000 January 1, 1994 Series No. 2 due 2001 $102,667,000 None and Series No. 2 due 2024 $110,000,000 $110,000,000 September 2, 1994 None None None (Appointment of Successor Trustee) May 1, 1996 Series No. 3 $125,000,000 $125,000,000 November 1, 1996 Series No. 4 $250,000,000 $175,000,000 February 1, 1997 Series No. 5 $150,000,000 None April 1, 1998 Series No. 6 $250,000,000 $250,000,000

SCHEDULE A-1 SCHEDULE B DESCRIPTION OF PROPERTY The following properties are situated in the State of Colorado and the counties thereof: ADAMS COUNTY 1. SATRIANO TRACT That part of the NW1/4 NE1/4 of Section 11, Township 3 South, Range 68 West of the 6th P.M., being more particularly described as follows: Beginning at a point which is South 89 degrees 58' East 20 feet and North 395.6 feet from the Southwest corner of the NW1/4 NE1/4 of said Section; thence North 196.92 feet; thence North 88 degrees 36.9' East, 165.65 feet; thence North 0 degrees 17' West, 109.93 feet; thence North 77 degrees 44.6' East 29.52 feet along the center line of The United Irrigation Ditch; thence South 438.11 feet; thence North 89 degrees 58' West 43.9 feet; thence North 115 feet; thence North 89 degrees 58' West 150 feet to the point of beginning, County of Adams, State of Colorado. (for informational purposes only) 6200 North Franklin Street 2. ROSA TRACT Parcels of land more particularly described as follows: Parcel I: A portion of the N1/2 of NE1/4 of NE1/4 of Section 11, Township 3 South, Range 68 West of the 6th P.M., described as follows: Beginning at the Northwest Corner of said Tract, thence South 145 feet, thence East 110 feet, thence North 145 feet, thence West 110 feet to the Point of Beginning except the North 20 feet for road purposes. County of Denver, State of Colorado. Parcel II: That portion of the N1/2 of the NE1/4 of the NE1/4 of Section 11, Township 3 South, Range West of the 6th P.M., described as follows: SCHEDULE B-1 Beginning at a point 110 feet East of the Northwest corner of said tract; thence South 145 feet; thence East 90 feet; thence North 145 feet; thence West 90 feet to the True Point of Beginning, except the North 20 feet for road purposes. County of Adams, State of Colorado. 3. TOWER 4 SUBSTATION SITE A portion of a parcel of land described in Book 4550, Page 465, Adams County Clerk and Recorder's Office, located in the Northwest Quarter of Section 27, Township 3 South, Range 66 West of the 6th Principal Meridian, Adams County, Colorado, being more particularly described as follows: COMMENCING at the North Quarter Corner of said Section 27, whence the Northwest Corner of said Section 27 bears S88 degrees 53'04"W a distance of 2638.04 feet; THENCE S00 degrees 08'03"E along the easterly line of the Northwest Quarter of said Section 27 a distance of 60.01 feet; THENCE S88 degrees 53'04"W along the southerly right-of-way line of East 38th Avenue as described in Book 2800, Page 680 a distance of 882.04 feet to the POINT OF BEGINNING; THENCE S01 degrees 05'34"E a distance of 440.00 feet; THENCE S88 degrees 53'04"W a distance of 399.02 feet non-tangent with the following described curve; THENCE along the westerly line of said parcel of land described in Book 4550, Page 465, on the arc of a curve to the right, having a central angle of 03 degrees 28'41", a radius of 530.00 feet, a chord bearing N02 degrees 49'55"W a distance of 32.17 feet, and an arc distance of 32.17 feet; THENCE N01 degrees 05'34"W continuing along the westerly line of said parcel, tangent with the last described curve a distance of 407.84 feet; THENCE N88 degrees 53'04"E along the southerly right-of-way line said East 35th Avenue a distance of 400.00 feet to the POINT OF BEGINNING. Containing 4.040 acres (175,989 sq. ft.) more or less. 4. NEW WASHINGTON SUBSTATION A parcel of land decribed in Book Number 5210, Page 0031, Reception Number C0355049, recorded in the Adam County Clerk and Recorder's Office on January 15, 1998, being more particularly described as follows: Lot 1, Block 1, Washington Electric Substation, Filing No. 1, County of Adams, State of Colorado. 5. HOSMER TRUST TRACT SCHEDULE B-2 A portion of the Southwest Quarter of Section 34, Township 1 South, Range 64 West of the 6th Principal Meridian, Adams County, Colorado, being more particularly described as follows: BEGINNING at the Northwest Corner of said Southwest Quarter of Section 34, whence the Southwest Corner of said Southwest Quarter of Section 34 bears S01 degrees 18'37"E a distance of 2636.70 feet; THENCE S89 degrees 47'30"E along the northerly line of said Southwest Quarter of Section 34 a distance of 1030.01 feet; THENCE S01 degrees 18"37"E a distance of 1631.67 feet; THENCE N89 degrees 47'30"W a distance of 1030.01 feet; THENCE N01 degrees 18'37"W along said westerly line of Southwest Quarter of Section 34 a distance of 1631.67 feet to the POINT OF BEGINNING. Containing 38.568 Acres, more or less. ALAMOSA COUNTY 6. MOSCA SUBSTATION: ADDITIONAL LAND A parcel of land more particularly described as follows: That part of the NE1/4 of Section 28, Township 40 North, Range 10 East of the N.M.P.M., described as beginning at a point on the North-South centerline of said Section 28 and a point on the South right-of-way line of County Lane 8 North (as fenced) from which the N1/4 corner bears N00'38'22"E, 25.91 feet; thence N88 degrees 33'59"E, along said right-of-way line 225.00 feet; thence S00 degrees 38'42", 30.90 feet; thence N88 degrees 32'09"E, 25.16 feet; thence S00 degrees 38'22"W, 322.06 feet; thence N89 degrees 53'58"W, 250.00 feet to a point on said North-South centerline; thence N00 degrees 38'22"E, 346.25 feet to the true Point Of Beginning. Alamosa County, State of Colorado DENVER COUNTY 7. BELLEVIEW - QUEBEC SUBSTATION SITE A parcel of land located in a portion of Lot 1, Block 1 of the 165 Subdivision Filing No. 1, recorded in Plat Book 29 at Page 86, and a portion of the Southeast 1/4 of Section 8, Township 5 South, Range 67 West of the 6th P.M., being more particularly described as follows: Basis of bearings: the South line of the Southeast 1/4 of Section 8 is assumed to bear North 90 degrees 00 minutes 00 seconds East; COMMENCING at the South Quarter Corner of Section 8; THENCE North 28 degrees 57 minutes 12 seconds East, a distance of 2099.82 feet to the POINT OF BEGINNING; THENCE North 89 degrees 59 minutes 47 seconds East, a distance of 361.50 feet; SCHEDULE B-3 THENCE South 00 degrees 00 minutes 00 seconds West, a distance of 136.32 feet to a point on the North line of Lot 1, Block 1 of the 165 Subdivision Filing No. 1; THENCE South 00 degrees 00 minutes 00 seconds West, a distance of 48.06 feet; THENCE South 46 degrees 57 minutes 20 seconds West, a distance of 87.86 feet; THENCE North 90 degrees 00 minutes 00 seconds West, a distance of 212.55 feet; THENCE North 34 degrees 59 minutes 47 seconds West, a distance of 131.87 feet to a point on the North line of Lot 1, Block 1, of the 165 Subdivision Filing No. 1; THENCE North 34 degrees 59 minutes 47 seconds West, a distance of 15.89 feet; thence North 00 degrees 00 minutes 00 seconds East, a distance of 123.29 feet to the POINT OF BEGINNING, City and County of Denver, State of Colorado. DOUGLAS COUNTY 8. COLONY (SURREY RIDGE) SUBSTATION Parcels of land more particularly described as follows: Parcel A: A parcel of land in Section 24, Township 6 South, Range 67 West of the sixth principal meridian, Douglas County, Colorado, being more particularly described as follows: COMMENCING at the Northwest corner of said Section 24, whence the West Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11 seconds East a distance of 2667.01 feet; THENCE South 58 degrees 06 minutes 25 seconds East a distance of 54.13 feet to the POINT OF BEGINNING; THENCE North 89 degrees 48 minutes 35 seconds East a distance of 233.36 feet; THENCE South 45 degrees 08 minutes 18 seconds East a distance of 65.90 feet; THENCE South 00 degrees 05 minutes 10 seconds East a distance of 212.74 feet; THENCE South 44 degrees 54 minutes 50 seconds West a distance of 65.94 feet; THENCE South 89 degrees 54 minutes 50 seconds West a distance of 233.37 feet; THENCE North 00 degrees 05 minutes 10 seconds West a distance of 305.50 feet to the POINT OF BEGINNING; Parcel D: SCHEDULE B-4 A parcel of land being sixty (60.00') feet in width, thirty (30.00') feet on each side of the following described centerline, located in the Southeast Quarter of Section 14, Northeast Quarter of Section 23 and the Northwest quarter of Section 24 all in Township 6 South, Range 67 West of the Sixth Principal Meridian, Douglas County, Colorado, being more particularly described as follows: COMMENCING at the Northeast corner of said Southeast Quarter of Section 14, whence the Southeast Corner of said Section 14 bears South 01 degrees 04 minutes 04 seconds East a distance of 2664.06 feet; THENCE South 39 degrees 51 minutes 34 seconds West along a line non-tangent with the following described curve a distance of 652.76 feet to the southerly line of a parcel of land recorded in book 264, page 426 on July 1, 1974 in the Douglas County Clerk and Recorders Office, being the POINT OF BEGINNING; THENCE the following five (5) courses along existing dirt road or trail centerline; 1. Southwesterly along the Arapahoe County of a curve to the right, having a central angle of 12 degrees 16 minutes 59 seconds, a radius of 860.00 feet, a chord bearing of South 28 degrees 24 minutes 25 seconds West, a distance of 184.02 feet, and an arc distance of 184.37 feet; 2. THENCE South 34 degrees 32 minutes 55 seconds West tangent with the last and following described curves a distance of 185.60 feet; 3. THENCE along the arc of a curve to the left, having a central angle of 1 degrees 05 minutes 24 seconds, a radius of 800.00 feet, a chord bearing South 34 degrees 00 minutes 12 seconds West a distance of 15.22 feet, and an arc distance of 15.22 feet; 4. THENCE South 33 degrees 27 minutes 30 seconds West tangent with the last described curve a distance of 230.99 feet; 5. THENCE South 33 degrees 05 minutes 19 seconds West tangent with the following described curve a distance of 63.86 feet; THENCE along the arc of a curve to the left, having a central angle of 17 degrees 08 minutes 04 seconds, a radius of 200.00 feet, a chord bearing South 24 degrees 31 minutes 17 seconds West a distance of 59.59 feet, and an arc distance of 59.81 feet; THENCE South 15 degrees 57 minutes 15 seconds West tangent with the last and following described curves a distance of 108.55 feet; THENCE along the arc of a curve to the left, having a central angle of 75 degrees 23 minutes 51 seconds, a radius of 150.00 feet, a chord bearing South 21 degrees 44 minutes 40 seconds East a distance of 183.45 feet, and an arc distance of 197.39 feet; THENCE the following eight (8) courses along said existing dirt road or trail centerline: 1. South 59 degrees 26 minutes 36 seconds East tangent with the last described curve a distance of 35.15 feet; SCHEDULE B-5 2. THENCE South 68 degrees 40 minutes 34 seconds East a distance of 43.72 feet; 3. THENCE North 84 degrees 29 minutes 06 seconds East a distance of 73.85 feet; 4. THENCE South 57 degrees 01 minutes 00 seconds East a distance of 68.34 feet; 5. THENCE South 28 degrees 47 minutes 04 seconds East tangent with the following described curve a distance of 31.85 feet; 6. THENCE along the arc of a curve to the right, having a central angle of 30 degrees 53 minutes 10 seconds, a radius of 200.00 feet, a chord bearing South 13 degrees 20 minutes 29 seconds East a distance of 106.51 feet, and an arc distance of 107.81 feet; 7. THENCE along the arc of a curve to the left, tangent with the last described curve, having a central angle of 15 degrees 45 minutes 50 seconds, a radius of 200.00 feet, a chord bearing of South 05 degrees 46 minutes 48 seconds East a distance of 54.85 feet, and an arc distance of 55.03 feet; 8. THENCE South 13 degrees 39 minutes 43 seconds East tangent with the last described curve a distance of 21.80 feet; THENCE South 18 degrees 42 minutes 28 seconds East tangent with the following described curve a distance of 100.70 feet; THENCE along the arc of a curve to the left, having a central angle foot 9 degrees 31 minutes 51 seconds, a radius of 200.00 feet, a chord bearing South 23 degrees 28 minutes 23 seconds East a distance of 33.23 feet, and an arc distance of 33.27 feet; THENCE South 28 degrees 14 minutes 18 seconds East tangent with the last and following described curves a distance of 164.18 feet; THENCE along the arc of a curve to the left, having a central angle of 12 degrees 32 minutes 57 seconds, a radius of 200.00 feet, a chord bearing South 34 degrees 30 minutes 47 seconds East a distance of 43.72 feet, and an arc distance of 43.80 feet; THENCE South 40 degrees 47 minutes 15 seconds East tangent with the last and following described curves a distance of 41.82 feet; THENCE along the arc of a curve to the right, having a central angle of 17 degrees 47 minutes 53 seconds, a radius 200.00 feet, a chord bearing South 31 degrees 53 minutes 19 seconds East a distance of 61.88 feet, and an arc distance of 62.13 feet; THENCE South 22 degrees 59 minutes 22 seconds East tangent with the last and following described curves a distance of 713.97 feet; THENCE along the arc of a curve to the left, having a central angle of 67 degrees 06 minutes 49 seconds, a radius of 100.00 feet, a chord bearing of South 56 degrees 32 minutes 47 seconds East a distance of 110.55 feet and an arc distance of 117.14 feet; SCHEDULE B-6 THENCE North 89 degrees 53 minutes 49 seconds East tangent with the last described curve a distance of 32.70 feet to the point of termination, whence the Southeast corner of said Section 14 bears North 20 degrees 59 minutes 42 seconds West a distance of 128.66 feet; Sidelines are shortened or lengthened to intersect the southerly line of said parcel of land recorded in book 264, page 426, and the westerly line of the Surrey Ridge Substation boundary. Parcel E: A parcel of land located in Sections 24 and 23, Township 6 South, Range 67 West of the Sixth Principal Meridian, Douglas County, Colorado, being more particularly described as follows: COMMENCING at the Northwest corner of said Section 24, whence the West Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11 seconds East, a distance of 2667.01 feet; THENCE South 11 degrees 21 minutes 30 seconds East a distance of 340.73 feet to the southerly line of Surrey Ridge Substation Site, being the POINT OF BEGINNING; THENCE North 89 degrees 54 minutes 50 seconds East along said southerly line of Surrey Ridge Substation site a distance of 185.92 feet; THENCE South 24 degrees 09 minutes 27 seconds West, a distance of 185.11 feet; THENCE South 03 degrees 23 minutes 27 seconds East a distance of 1233.70 feet; THENCE South 17 degrees 16 minutes 47 seconds West a distance of 919.76 feet; THENCE South 38 degrees 14 minutes 15 seconds West a distance of 1281.45 feet; THENCE South 07 degrees 51 minutes 01 seconds West a distance of 1498.69 feet; THENCE South 89 degrees 32 minutes 01 seconds West along the northerly line of a parcel of land described in Reception Number 105224, Document Number 1630, recorded in the Douglas County Clerk and Recorders Office on March 23, 1959 a distance of 101.06 feet; THENCE North 07 degrees 51 minutes 01 seconds East a distance of 1540.46 feet; THENCE North 38 degrees 14 minutes 15 seconds East a distance of 1290.11 feet; THENCE North 17 degrees 16 minutes 47 seconds East a distance of 883.02 feet; THENCE North 03 degrees 23 minutes 27 seconds West a distance of 1390.31 feet to the POINT OF BEGINNING. Parcel F: A parcel of land lying in Section 13, Section 14, Section 23 and Section 24 all in Township 6 South, Range 67 West of the Sixth Principal Meridian, Douglas County, Colorado, being more particularly described as follows: SCHEDULE B-7 COMMENCING at the Northwest Corner of said Section 24, whence the West Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11 seconds East a distance of 2667.01 feet; THENCE South 89 degrees 14 minutes 28 seconds West along the northerly line of the Northeast quarter of said Section 23 a distance of 27.78 feet to the POINT OF BEGINNING; THENCE North 75 degrees 40 minutes 59 seconds East a distance of 184.77 feet; THENCE South 87 degrees 37 minutes 41 seconds East a distance of 152.52 feet; THENCE South 46 degrees 56 minutes 28 seconds East a distance of 121.54 feet; THENCE South 06 degrees 45 minutes 06 seconds East a distance of 281.45 feet; THENCE South 46 degrees 47 minutes 03 seconds West a distance of 166.26 feet; THENCE North 74 degrees 24 minutes 57 seconds West a distance of 329.96 feet; THENCE North 02 degrees 21 minutes 14 seconds West a distance of 348.59 feet to the POINT OF BEGINNING; Excepting therefrom the following described parcel of land: COMMENCING at the Northwest Corner of said Section 24, whence the West Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11 seconds East a distance of 2667.01 feet; THENCE South 58 degrees 06 minutes 25 seconds East a distance of 54.13 feet to the POINT OF BEGINNING; THENCE North 89 degrees 48 minutes 35 seconds East a distance of 233.36 feet; WELD COUNTY 9. NEW GILCREST SUBSTATION A parcel of land located in the Southwest one-quarter of Section 10, Township 4 North, Range 66 West of the Sixth Principal Meridian, County of Weld, State of Colorado, being more particularly described as follows: Basis of bearings: The South one-quarter line of Section 10, Township 4 North, Range 66 West of the Sixth Principal Meridian, bearing N89 degrees 26'15"E. Commencing at the Southwest corner of said Section 10; thence N34 degrees 06'30"E a distance of 80.25 feet to the Point Of Beginning; thence N00 degrees 00'00"E parallel with and 45 feet East of the West line of the Southwest one-quarter of said Section 10 a distance of 304.02 feet; thence N89 degrees 26'15"E parallel with the South line of the Southwest one-quarter of said Section 10 a distance of 325.02 feet; thence S00 degrees 00'00"E parallel with the West line of the Southwest one-quarter of said Section 10 a distance of 325.02 feet to a point 45 feet North of the South line of the Southwest one-quarter of said Section 10; thence S89 degrees 26'15"W parallel with the South line of the Southwest one-quarter of said Section 10 a distance of 304.02 feet; thence N45 degrees 16'52"W a distance of 29.55 feet to the Point Of Beginning. SCHEDULE B-8 Said parcel of land containing 105,409.60 square feet or 2.419 acres more or less. SCHEDULE B-9 EX-4.04 6 c72574exv4w04.txt EX-4.04 SUPPLEMENTAL INDENTURE DATED SEPT 15, 2002 EXHIBIT 4.04 PUBLIC SERVICE COMPANY OF COLORADO TO U.S. BANK TRUST NATIONAL ASSOCIATION, AS TRUSTEE --------------------- SUPPLEMENTAL INDENTURE NO. 10 Dated as of September 15, 2002 Supplemental to the Indenture dated as of October 1, 1993 --------------------- Establishing the Securities of Series No. 9, designated First Collateral Trust Bonds, Series No. 9 (Bank of America Collateral Bonds) SUPPLEMENTAL INDENTURE NO. 10, dated as of September 15, 2002, between PUBLIC SERVICE COMPANY OF COLORADO, a corporation duly organized and existing under the laws of the State of Colorado (hereinafter sometimes called the "Company"), and U.S. BANK TRUST NATIONAL ASSOCIATION (FORMERLY FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION), a national banking association, as successor trustee (hereinafter sometimes called the "Trustee") to Morgan Guaranty Trust Company of New York under the Indenture, dated as of October 1, 1993 (hereinafter called the "Original Indenture"), as previously supplemented and as further supplemented by this Supplemental Indenture No. 10. The Original Indenture and any and all indentures and all other instruments supplemental thereto are hereinafter sometimes collectively called the "Indenture". RECITALS OF THE COMPANY The Original Indenture was authorized, executed and delivered by the Company to provide for the issuance from time to time of its Securities (such term and all other capitalized terms used herein without definition having the meanings assigned to them in the Original Indenture), to be issued in one or more series as contemplated therein, and to provide security for the payment of the principal of and premium, if any, and interest, if any, on the Securities. The Company has heretofore executed and delivered to the Trustee the Supplemental Indentures referred to in Schedule A hereto for the purpose of establishing a series of bonds and appointing the successor Trustee. The Company has heretofore entered into a Second Amended and Restated 364-Day Credit Agreement (the "Credit Agreement"), dated as of June 28, 2002, with Bank of America, N.A., as Administrative Agent (the "Administrative Agent") and the several financial institutions and other persons from time to time party thereto (collectively, the "Lenders"), pursuant to which the Lenders have agreed to make advances and grant certain other financial accommodations to the Company up to an aggregate amount of Five Hundred Thirty Million dollars ($530,000,000) (the "Loans"). The Credit Agreement was amended by that certain First Amendment to Second Amended and Restated 364-Day Credit Agreement, dated as of September 6, 2002 (the "First Amendment"), between the Company and the Administrative Agent, pursuant to which certain provisions in the Credit Agreement were modified, including, without limitation, the addition of a covenant requiring the Company to cause the principal amount of the Company's obligations under the Credit Agreement to be ratably secured with all indebtedness of the Company under the Indenture, as a condition to, and as consideration for, the obligation of the Lenders to continue to make the Loans in accordance with the terms of the Credit Agreement. Pursuant to its obligations under the First Amendment, the Company now desires to establish a series of Securities to be designated "First Collateral Trust Bonds, Series No. 9 (Bank of America Collateral Bonds)", such series of Securities to be hereinafter sometimes called "Series No. 9". The Company has duly authorized the execution and delivery of this Supplemental Indenture No. 10 to establish the Securities of Series No. 9 and has duly authorized the issuance of such Securities; and all acts necessary to make this Supplemental Indenture No. 10 a valid agreement of the Company, and to make the Securities of Series No. 9 valid obligations of the Company, have been performed. GRANTING CLAUSES NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 10 WITNESSETH, that, in consideration of the premises, including, without limitation, the consent of the Lenders to continue to make Loans available to the Company in accordance with the terms of the Credit Agreement, and in order to secure the payment of the principal of and premium, if any, and interest, if any, on all Securities from time to time Outstanding and the performance of the covenants contained therein and in the Indenture and to declare the terms and conditions on which such Securities are secured, the Company hereby grants, bargains, sells, releases, conveys, assigns, transfers, mortgages, pledges, sets over and confirms to the Trustee, and grants to the Trustee a security interest in, the following: GRANTING CLAUSE FIRST All right, title and interest of the Company, as of the date of the execution and delivery of this Supplemental Indenture No. 10, in and to property (other than Excepted Property), real, personal and mixed and wherever situated, in any case used or to be used in or in connection with the Electric Utility Business (whether or not such use is the sole use of such property), including without limitation (a) all lands, easements, servitudes, licenses, permits, rights of way and other rights and interests in or relating to real property used or to be used in or in connection with the Electric Utility Business or relating to the occupancy or use of such real property, subject however, to the exceptions and exclusions set forth in clause (a) of Granting Clause First of the Original Indenture; (b) all plants, generators, turbines, engines, boilers, fuel handling and transportation facilities, air and water pollution control and sewage and solid waste disposal facilities and other machinery and facilities for the generation of electric energy; (c) all switchyards, lines, towers, substations, transformers and other machinery and facilities for the transmission of electric energy; (d) all lines, poles, conduits, conductors, meters, regulators and other machinery and facilities for the distribution of electric energy; (e) all buildings, offices, warehouses and other structures used or to be used in or in connection with the Electric Utility Business; (f) all pipes, cables, insulators, ducts, tools, computers and other data processing and/or storage equipment and other equipment, apparatus and facilities used or to be used in or in connection with the Electric Utility Business; (g) any or all of the foregoing properties in the process of construction; and (h) all other property, of whatever kind and nature, ancillary to or otherwise used or to be used in conjunction with any or all of the foregoing or otherwise, directly or indirectly, in furtherance of the Electric Utility Business; GRANTING CLAUSE SECOND Subject to the applicable exceptions permitted by Section 810(c), Section 1303 and Section 1305 of the Original Indenture, all property (other than Excepted Property) of the kind and nature described in Granting Clause First which may be hereafter acquired by the Company, it being the intention of the Company that all such property acquired by the Company after the date of the execution and delivery of this Supplemental Indenture No. 10 shall be as fully embraced within and subjected to the Lien hereof as if such property were owned by the Company as of the date of the execution and delivery of this Supplemental Indenture No. 10; GRANTING CLAUSE FOURTH All other property of whatever kind and nature subjected or required to be subjected to the Lien of the Indenture by any of the provisions thereof; 2 EXCEPTED PROPERTY Expressly excepting and excluding, however, from the Lien and operation of the Indenture all Excepted Property of the Company, whether now owned or hereafter acquired; TO HAVE AND TO HOLD all such property, real, personal and mixed, unto the Trustee, its successors in trust and their assigns forever; SUBJECT, HOWEVER, to (a) Liens existing at the date of the execution and delivery of the Original Indenture (including, but not limited to, the Lien of the PSCO 1939 Mortgage), (b) as to property acquired by the Company after the date of the execution and delivery of the Original Indenture, Liens existing or placed thereon at the time of the acquisition thereof (including, but not limited to, the Lien of any Class A Mortgage and purchase money Liens), (c) Retained Interests and (d) any other Permitted Liens, it being understood that, with respect to any property which was at the date of execution and delivery of the Original Indenture or thereafter became or hereafter becomes subject to the Lien of any Class A Mortgage, the Lien of the Indenture shall at all times be junior, subject and subordinate to the Lien of such Class A Mortgage; IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and security of the Holders from time to time of all Outstanding Securities without any priority of any such Security over any other such Security; PROVIDED, HOWEVER, that the right, title and interest of the Trustee in and to the Mortgaged Property shall cease, terminate and become void in accordance with, and subject to the conditions set forth in, Article Nine of the Original Indenture, and if, thereafter, the principal of and premium, if any, and interest, if any, on the Securities shall have been paid to the Holders thereof, or shall have been paid to the Company pursuant to Section 603 of the Original Indenture, then and in that case the Indenture shall terminate, and the Trustee shall execute and deliver to the Company such instruments as the Company shall require to evidence such termination; otherwise the Indenture, and the estate and rights thereby granted shall be and remain in full force and effect; and THE PARTIES HEREBY FURTHER COVENANT AND AGREE as follows: ARTICLE ONE SECURITIES OF SERIES NO. 9 There are hereby established the Securities of Series No. 9. The Securities of Series No. 9 shall have the terms and characteristics set forth below (the lettered subdivisions set forth below corresponding to the lettered subdivisions of Section 301 of the Original Indenture): (a) the title of the Securities of such series shall be "First Collateral Trust Bonds, Series No. 9 (Bank of America Collateral Bonds)"; provided, however, that, at any time after the PSCO 1939 Mortgage shall have been satisfied and discharged, the Company shall have the right, without any consent or other action by the Holders of such Securities, to change such title in such manner as shall be deemed by the Company to be appropriate to reflect such satisfaction and discharge, such change to be evidenced in an Officer's Certificate; 3 (b) the Securities of Series No. 9 shall be initially authenticated and delivered in the aggregate principal amount of $530,000,000; (c) not applicable; (d) the principal of the Securities of Series No. 9 shall be payable on June 27, 2003, the Stated Maturity. (e) the Securities of Series No. 9 shall not bear interest; (f) the Corporate Trust Office of U.S. Bank Trust National Association in New York, New York shall be the place at which (i) the principal of, premium, if any, and interest, if any, on the Securities of Series No. 9 shall be payable, (ii) registration of transfer of such Securities may be effected, (iii) exchanges of such Securities may be effected and (iv) notices and demands to or upon the Company in respect of such Securities and the Indenture may be served; and U.S. Bank Trust National Association shall be the Security Registrar for such Securities; provided, however, that the Company reserves the right to change, by one or more Officer's Certificates, any such place or the Security Registrar; and provided, further, that the Company reserves the right to designate, by one or more Officer's Certificates, its principal office in Denver, Colorado as any such place or itself as the Security Registrar; (g) the Securities of Series No. 9 shall not be redeemable prior to maturity, other than as set forth in the Indenture; (h) not applicable; (i) not applicable; (j) not applicable; (k) not applicable; (l) not applicable; (m) not applicable; (n) not applicable; (o) not applicable; (p) not applicable; (q) the Securities of Series No. 9 are to be registered in the name of Bank of America, N.A., as Administrative Agent. Such Securities shall not be transferable, nor shall any purported transfer be registered except to a successor to the Administrative Agent under the Credit Agreement upon delivery to the Trustee of a Company Request requesting such transfer. (r) not applicable; 4 (s) no service charge shall be made for the transfer or exchange of the Securities of Series No. 9; provided, however, that the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the transfer or exchange; (t) not applicable; (u) (i) If the Company shall have caused the Company's indebtedness in respect of any Securities of Series No. 9 to have been satisfied and discharged prior to the Maturity of such Securities, as provided in Section 901 of the Original Indenture, the Company shall, promptly after the date of such satisfaction and discharge, give a notice to each Person who was a Holder of any of such Securities on such date stating (A)(1) the aggregate principal amount of such Securities and (2) the aggregate amount of any money (other than amounts, if any, deposited in respect of accrued interest on such Securities) and the aggregate principal amount of, the rate or rates of interest on, and the aggregate fair market value of, any Eligible Obligations deposited pursuant to Section 901 of the Original Indenture with respect to such Securities and (B) that the Company will provide (and the Company shall promptly so provide) to such Person, or any beneficial owner of such Securities holding through such Person (upon written request to the Company sent to an address specified in such notice), such other information as such Person or beneficial owner, as the case may be, reasonably may request in order to enable it to determine the federal income tax consequences to it resulting from the satisfaction and discharge of the Company's indebtedness in respect of such Securities. Thereafter, the Company shall, within forty-five (45) days after the end of each calendar year, give to each Person who at any time during such calendar year was a Holder of such Securities a notice containing (X) such information as may be necessary to enable such Person to report its income, gain or loss for federal income tax purposes with respect to such Securities or the assets held on deposit in respect thereof during such calendar year or the portion thereof during which such Person was a Holder of such Securities, as the case may be (such information to be set forth for such calendar year as a whole and for each month during such year) and (Y) a statement to the effect that the Company will provide (and the Company shall promptly so provide) to such Person, or any beneficial owner of such Securities holding through such Person (upon written request to the Company sent to an address specified in such notice), such other information as such Person or beneficial owner, as the case may be, reasonably may request in order to enable it to determine its income, gain or loss for federal income tax purposes with respect to such Securities or such assets for such year or portion thereof, as the case may be. The obligation of the Company to provide or cause to be provided information for purposes of income tax reporting by any Person as described in the first two sentences of this paragraph shall be deemed to have been satisfied to the extent that the Company has provided or caused to be provided substantially comparable information pursuant to any requirements of the Internal Revenue Code of 1986, as amended from time to time (the "Code") and United States Treasury regulations thereunder. (ii) Notwithstanding the provisions of subparagraph (i) above, the Company shall not be required to give any notice specified in such subparagraph or to 5 otherwise furnish any of the information contemplated therein if the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Securities will not recognize income, gain or loss for federal income tax purposes as a result of the satisfaction and discharge of the Company's indebtedness in respect of such Securities and such Holders will be subject to federal income taxation on the same amounts and in the same manner and at the same times as if such satisfaction and discharge had not occurred. (iii) Anything in this clause (u) to the contrary notwithstanding, the Company shall not be required to give any notice specified in subparagraph (i) or to otherwise furnish the information contemplated therein or to deliver any Opinion of Counsel contemplated by subparagraph (ii) if the Company shall have caused Securities of Series No. 9 to be deemed to have been paid for purposes of the Indenture, as provided in Section 901 of the Original Indenture, but shall not have effected the satisfaction and discharge of its indebtedness in respect of such Securities pursuant to such Section. (v) If the Company terminates or reduces the aggregate amount of unutilized commitments of the Lenders to provide advances under the Credit Agreement pursuant to Section 2.04 thereof, such termination or reduction shall, to the extent thereof, be deemed to satisfy and discharge the obligation of the Company, if any, to make payment of principal on the Securities of Series No. 9. Upon payment of the Company's obligations under the Credit Agreement in full, termination of the Credit Agreement and termination of all commitments and other obligations of the Administrative Agent and the Lenders to the Company, the aggregate amount of principal of the Securities of Series No. 9 shall be deemed satisfied and discharged. On the date which is thirty (30) days after the Maturity of the Securities of Series No. 9, the Trustee may conclusively presume that the obligation of the Company to pay principal on the Securities of Series No. 9 as the same shall have become due and payable shall have been fully satisfied and discharged unless and until the Trustee shall have received a written notice prior to such date from the Holder hereof stating that the principal of Securities of Series No. 9 has become due and payable and specifying the amount of funds required to make such payment. Notwithstanding anything to the contrary contained herein, the aggregate amount of principal actually due on the Securities of Series No. 9 shall not exceed the aggregate amount of the obligations of the Company under the Credit Agreement. (w) The Securities of Series No. 9 shall be subject to certain voting restrictions set forth in the Issuance Agreement to be entered into between the Company and Bank of America, N.A., as Administrative Agent. A copy of the Issuance Agreement will be on file at the office of the Trustee and will be available upon request. (x) The Securities of Series No. 9 shall be substantially in the form attached hereto as Exhibit A and shall have such further terms as are set forth in such form. 6 ARTICLE TWO MISCELLANEOUS PROVISIONS (a) This Supplemental Indenture No. 10 is a supplement to the Original Indenture. As previously supplemented and further supplemented by this Supplemental Indenture No. 10, the Original Indenture is in all respects ratified, approved and confirmed, and the Original Indenture, all previous supplements thereto and this Supplemental Indenture No. 10 shall together constitute one and the same instrument. (b) This Securities of Series No. 9 have been issued by the Company to the Administrative Agent to (i) secure the payment of the Company's obligations to make payments to any person under the Credit Agreement and (ii) provide to such persons the benefits of the security provided for this Security pursuant to the Indenture. 7 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture No. 10 to be duly executed as of the day and year first above written. PUBLIC SERVICE COMPANY OF COLORADO By: /s/ Paul E. Pender --------------------------------------- Name: Paul E. Pender Title: Vice President and Treasurer STATE OF MINNESOTA ) ) ss.: CITY OF MINNEAPOLIS ) On the 20th day of September, 2002, before me personally came Paul E. Pender to me known, who, being by me duly sworn, did depose and say that he is a Vice President and Treasurer of Public Service Company of Colorado, one of the corporations described in and which executed the foregoing instrument; and that he signed his name thereto by authority of the Board of Directors of said corporation. /s/ Sharon M. Quellhorst ----------------------------------------- Name: Sharon M. Quellhorst Notary Public, State of Minnesota Commission Expires: January 31, 2005 8 U.S. BANK TRUST NATIONAL ASSOCIATION, Trustee By: /s/ Ignazio Tamburello --------------------------------- Name: Ignazio Tamburello Title: Assistant Vice President STATE OF NEW YORK ) ) ss.: CITY AND COUNTY OF NEW YORK ) On the 20th day of September, 2002, before me personally came Ignazio Tamburello, to me known, who, being by me duly sworn, did depose and say that he is an Assistant Vice President of U.S. Bank Trust National Association, the banking association described in and which executed the foregoing instrument; and that he signed his name thereto by authority of the Board of Directors of said banking association. /s/ Doris Ware -------------------------------------- Name: Doris Ware Notary Public, State of New York Commission Expires: November 9, 2005 9 EXHIBIT A FORM OF SECURITY (See legend at the end of this Security for restrictions on transfer and change of form) PUBLIC SERVICE COMPANY OF COLORADO First Collateral Trust Bond, Series No. 9 (Bank of America Collateral Bonds) Issue Date: [September __], 2002 Stated Maturity: June 27, 2003 This Security is not a Discount Security within the meaning of the within-mentioned Indenture ----------------------------------------- Principal Amount Registered No. 1 $530,000,000 PUBLIC SERVICE COMPANY OF COLORADO, a corporation duly organized and existing under the laws of the State of Colorado (herein called the "Company," which term includes any successor corporation under the Indenture referred to below), for value received, hereby promises to pay to BANK OF AMERICA, N.A., as Administrative Agent, or registered assigns, the principal sum of Five Hundred Thirty Million Dollars on the Stated Maturity specified above. This Security shall not bear interest. Payment of the principal of this Security at Maturity shall be made upon presentation of this Security at the Corporate Trust Office of U.S. Bank Trust National Association, in New York, New York or at such other office or agency as may be designated for such purpose by the Company from time to time. Payment of the principal of this Security, as aforesaid, shall be made 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. This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and issuable in one or more series under and equally secured by an Indenture, dated as of October 1, 1993 (such Indenture as originally executed and delivered and as supplemented or amended from time to time thereafter, together with any constituent instruments establishing the terms of particular Securities, being herein called the "Indenture"), between the Company and U.S. Bank Trust National Association (formerly First Trust of New York, National Association) as successor trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), to which EXHIBIT A-1 Indenture and all indentures supplemental thereto reference is hereby made for a description of the property mortgaged, pledged and held in trust, the nature and extent of the security and the respective rights, limitations of rights, duties and immunities of the Company, the Trustee and the Holders of the Securities thereunder and of the terms and conditions upon which the Securities are, and are to be, authenticated and delivered and secured. The acceptance of this Security shall be deemed to constitute the consent and agreement by the Holder hereof to all of the terms and provisions of the Indenture. This Security is one of the series designated above. This Security has been issued pursuant to the requirements of, and as a condition to, and as consideration for, the obligations of the Lenders to continue to make the Loans under, and in accordance with the terms of, that certain Second Amended and Restated 364-Day Credit Agreement (the "Credit Agreement"), dated as of June 28, 2002, among the Company, Bank of America, N.A., as Administrative Agent (the "Administrative Agent") and the several financial institutions and other persons from time to time party thereto (collectively, the "Lenders"), as amended by the First Amendment to Second Amended and Restated 364-Day Credit Agreement, dated as of September 6, 2002, between the Company and the Administrative Agent. If the Company terminates or reduces the aggregate amount of unutilized commitments of the Lenders to provide advances under the Credit Agreement pursuant to Section 2.04 thereof, such termination or reduction shall, to the extent thereof, be deemed to satisfy and discharge the obligation of the Company, if any, to make the payment of principal on the Securities of Series No. 9. Upon payment of the Company's obligations under the Credit Agreement in full, termination of the Credit Agreement and termination of all commitments and other obligations of the Administrative Agent and the Lenders to the Company, the aggregate amount of principal of the Securities of Series No. 9 shall be deemed satisfied and discharged. On the date which is thirty (30) days after the Maturity of the Securities of Series No. 9, the Trustee may conclusively presume that the obligation of the Company to pay principal on the Securities of Series No. 9 as the same shall have become due and payable shall have been fully satisfied and discharged unless and until the Trustee shall have received a written notice prior to such date from the Holder hereof stating that the principal of Securities of Series No. 9 has become due and payable and specifying the amount of funds required to make such payment. Notwithstanding anything to the contrary contained herein, the aggregate amount of principal actually due on the Securities of Series No. 9 shall not exceed the aggregate amount of the obligations of the Company under the Credit Agreement. If the Stated Maturity shall not be a Business Day (as hereinafter defined), payment of the amounts due on this Security on such date may be made on the next succeeding Business Day. This Security is not subject to redemption prior to the Stated Maturity thereof, other than as set forth in the Indenture. If an Event of Default shall occur and be continuing, the principal of this Security may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the Trustee to enter into one or more supplemental indentures for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, the Indenture with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities of all series then Outstanding under the Indenture, considered as one class; provided, however, that if there shall be Securities of more than one EXHIBIT A-2 series Outstanding under the Indenture and if a proposed supplemental indenture shall directly affect the rights of the Holders of Securities of one or more, but less than all, of such series, then the consent only of the Holders of a majority in aggregate principal amount of the Outstanding Securities of all series so directly affected, considered as one class, shall be required; and provided, further, that if the Securities of any series shall have been issued in more than one Tranche and if the proposed supplemental indenture shall directly affect the rights of the Holders of Securities of one or more, but less than all, of such Tranches, then the consent only of the Holders of a majority in aggregate principal amount of the Outstanding Securities of all Tranches so directly affected, considered as one class, shall be required; and provided, further, that the Indenture permits the Trustee to enter into one or more supplemental indentures for limited purposes without the consent of any Holders of Securities. The Indenture also contains provisions permitting the Holders of a majority in principal amount of the Securities then Outstanding, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. 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. As provided in the Indenture and subject to certain limitations therein set forth, this Security or any portion of the principal amount hereof will be deemed to have been paid for all purposes of the Indenture and to be no longer Outstanding thereunder, and, at the election of the Company, the Company's entire indebtedness in respect thereof will be satisfied and discharged, if there has been irrevocably deposited with the Trustee or any Paying Agent (other than the Company), in trust, money in an amount which will be sufficient and/or Eligible Obligations, the principal of and interest on which when due, without regard to any reinvestment thereof, will provide moneys which, together with moneys so deposited, will be sufficient, to pay when due the principal of and interest on this Security when due. This Security is not transferable except to a successor to the Administrative Agent under the Credit Agreement upon delivery to the Trustee of a Company Request requesting such transfer. Before any transfer of this Security will be recognized or given effect by the Company or the Trustee, the Holder shall note the amounts of all principal prepayments hereon, and shall notify the Company and the Trustee of the name and address of the transferee and shall afford the Company and the Trustee the opportunity of verifying the notation as to prepayment of principal. By the acceptance hereof the Holder of this Security and each transferee shall be deemed to have agreed to indemnify and hold harmless the Company and the Trustee against all losses, claims, damages or liability arising out of any failure on the part of the Holder or of any such transferee to comply with the requirements of the preceding sentence. Any such transfer is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office of U.S. Bank Trust National Association, in New York, New York or such other office or agency as may be designated by the Company from time to time, 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 attorney duly authorized in writing, and thereupon one or more new Securities of this series of authorized denominations and of like tenor and aggregate principal amount, will be issued to the designated transferee or transferees. This Bond has not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in contravention of said Act and is not transferable except to a successor to the Administrative Agent under the Credit Agreement. EXHIBIT A-3 No service charge shall be made for any such registration of transfer, 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 absolute 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. The Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York. As used herein "Business Day" means any day, other than a Saturday or Sunday, which is not a day on which banking institutions or trust companies in The City of New York, New York or other city in which is located any office or agency maintained for the payment of principal or interest on this Security, are authorized or required by law, regulation or executive order to remain closed. All other terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. As provided in the Indenture, no recourse shall be had for the payment of the principal of or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof, or of the indebtedness represented thereby, or upon any obligation, covenant or agreement under the Indenture, against, and no personal liability whatsoever shall attach to, or be incurred by, any incorporator, shareholder, officer or director, as such, past, present or future of the Company or of any predecessor or successor corporation (either directly or through the Company or a predecessor or successor corporation), whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that the Indenture and all the Securities are solely corporate obligations and that any such personal liability is hereby expressly waived and released as a condition of, and as part of the consideration for, the execution of the Indenture and the issuance of the Securities. Unless the certificate of authentication hereon has been executed by the Trustee or an Authenticating Agent by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. EXHIBIT A-4 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed and its corporate seal to be hereunto affixed and attested. PUBLIC SERVICE COMPANY OF COLORADO By: --------------------------------------- Vice President and Treasurer Attest: ---------------------------- Assistant Secretary CERTIFICATE OF AUTHENTICATION This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. Dated: ----------------------------- U.S. BANK TRUST OR U.S. BANK TRUST NATIONAL ASSOCIATION, NATIONAL ASSOCIATION, as Trustee as Trustee By: By: -------------------------------- --------------------------------- Authorized Officer AS AUTHENTICATING AGENT By: --------------------------------- Authorized Officer THIS SECURITY MAY NOT BE TRANSFERRED OR EXCHANGED, NOR MAY ANY PURPORTED TRANSFER BE REGISTERED, EXCEPT TO A SUCCESSOR TO THE ADMINISTRATIVE AGENT UNDER THE CREDIT AGREEMENT REFERRED TO HEREIN. THE HOLDER OF THIS BOND BY ITS ACCEPTANCE HEREOF AGREES TO RESTRICTIONS ON TRANSFER, RESTRICTIONS ON VOTING, TO WAIVERS OF CERTAIN RIGHTS OF EXCHANGE, AND TO INDEMNIFICATION PROVISIONS AS SET FORTH BELOW. IN ADDITION, THE BOND REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND SUCH BOND MAY NOT BE TRANSFERRED WITHOUT COMPLIANCE WITH APPLICABLE SECURITIES LAWS. THIS SECURITY IS SUBJECT TO CERTAIN VOTING RESTRICTIONS SET FORTH IN THAT ISSUANCE AGREEMENT, DATED AS OF SEPTEMBER 26, 2002, BY AND BETWEEN THE COMPANY AND BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT. A COPY OF THE ISSUANCE AGREEMENT IS ON FILE AT THE OFFICE OF THE TRUSTEE AND IS AVAILABLE UPON REQUEST. ------------------- EXHIBIT A-5 FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto - -------------------------------------------------------------------------------- [please insert social security or other identifying number of assignee] - -------------------------------------------------------------------------------- [please print or typewrite name and address of assignee] - -------------------------------------------------------------------------------- the within Security of PUBLIC SERVICE COMPANY OF COLORADO and does hereby irrevocably constitute and appoint __________________________________ , Attorney, to transfer said Security on the books of the within-mentioned Company, with full power of substitution in the premises. Dated: ---------------------- ------------------------------------------------------ Notice: The signature to this assignment must correspond with the name as written upon the face of the Security in every particular without alteration or enlargement or any change whatsoever. EXHIBIT A-6 SCHEDULE A SUPPLEMENTAL INDENTURES

DATE OF SERIES OF BONDS PRINCIPAL PRINCIPAL SUPPLEMENTAL --------------- AMOUNT ISSUED AMOUNT INDENTURE ------------- OUTSTANDING --------- ----------- November 1, 1993 Series No. 1 $134,500,000 $134,500,000 January 1, 1994 Series No. 2 due 2001 $102,667,000 None and Series No. 2 due 2024 $110,000,000 $110,000,000 September 2, 1994 None None None (Appointment of Successor Trustee) May 1, 1996 Series No. 3 $125,000,000 $125,000,000 November 1, 1996 Series No. 4 $250,000,000 $175,000,000 February 1, 1997 Series No. 5 $150,000,000 None April 1, 1998 Series No. 6 $250,000,000 $250,000,000 August 15, 2002 Series No. 7 $48,750,000 $48,750,000 September 1, 2002 Series No. 8 $600,000,000 $600,000,000

SCHEDULE A-1 EX-4.05 7 c72574exv4w05.txt EX-4.05 SUPPLEMENTAL INDENTURE DATED JUNE 1, 2002 Exhibit 4.05 - -------------------------------------------------------------------------------- SUPPLEMENTAL TRUST INDENTURE FROM NORTHERN STATES POWER COMPANY TO BNY MIDWEST TRUST COMPANY TRUSTEE DATED AS OF JUNE 1, 2002 SUPPLEMENTAL TO TRUST INDENTURE DATED FEBRUARY 1, 1937 AND SUPPLEMENTAL AND RESTATED TRUST INDENTURE DATED MAY 1, 1988 - -------------------------------------------------------------------------------- TABLE OF CONTENTS

Page ARTICLE I. SPECIFIC SUBJECTION OF ADDITIONAL PROPERTY TO THE LIEN OF THE ORIGINAL INDENTURE.......................8 SECTION 1.01.............................................................................................8 ARTICLE II. FORM AND EXECUTION OF BONDS..........................................................................10 SECTION 2.01............................................................................................10 SECTION 2.02............................................................................................11 SECTION 2.02............................................................................................11 SECTION 2.04............................................................................................11 SECTION 2.05............................................................................................11 SECTION 2.06............................................................................................11 ARTICLE III. APPOINTMENT OF AUTHENTICATING AGENT.................................................................12 SECTION 3.01............................................................................................12 SECTION 3.02............................................................................................12 SECTION 3.03............................................................................................13 SECTION 3.04............................................................................................13 ARTICLE IV. FINANCING STATEMENT TO COMPLY WITH THE UNIFORM COMMERCIAL CODE.......................................13 SECTION 4.02............................................................................................13 SECTION 4.03............................................................................................13 SECTION 4.04............................................................................................14 SECTION 4.05............................................................................................14 SECTION 4.06............................................................................................17 ARTICLE V. AMENDMENTS TO INDENTURE...............................................................................17 SECTION 5.01............................................................................................17 ARTICLE VI. MISCELLANEOUS........................................................................................18 SECTION 6.01............................................................................................18 SECTION 6.02............................................................................................18 SECTION 6.03............................................................................................18 SECTION 6.04............................................................................................18 SECTION 6.05............................................................................................19 SECTION 6.06............................................................................................19 Schedule A......................................................................................................A-1

SUPPLEMENTAL TRUST INDENTURE, made as of the 1ST day of June, 2002, but effective as of August 12, 2002, by and between NORTHERN STATES POWER COMPANY (formerly Northern Power Corporation), a corporation duly organized and existing under and by virtue of the laws of the State of Minnesota, having its principal office in the City of Minneapolis in said State (the "Company"), party of the first part, and BNY MIDWEST TRUST COMPANY, a corporation duly organized and existing under and by virtue of the laws of the State of Illinois, having its principal office in the City of Chicago in said State and the successor to Harris Trust and Savings Bank, as Trustee (the "Trustee"), party of the second part; WITNESSETH: WHEREAS, a predecessor in interest to the Company, Xcel Energy Inc. (formerly Northern States Power Company), a corporation duly organized and existing under and by virtue of the laws of the State of Minnesota (the "Predecessor Company"), heretofore has executed and delivered to the Trustee its Trust Indenture (the "1937 Indenture"), made as of February 1, 1937, whereby the Predecessor Company granted, bargained, sold, warranted, released, conveyed, assigned, transferred, mortgaged, pledged, set over, and confirmed to the Trustee, and to its respective successors in trust, all property, real, personal, and mixed then owned or thereafter acquired or to be acquired by the Predecessor Company (except as therein excepted from the lien thereof) and subject to the rights reserved by the Predecessor Company in and by the provisions of the 1937 Indenture, to be held by said Trustee in trust in accordance with provisions of the 1937 Indenture for the equal pro rata benefit and security of all and every of the bonds issued thereunder in accordance with the provisions thereof; and WHEREAS, the Predecessor Company heretofore has executed and delivered to the Trustee a Supplemental Trust Indenture, made as of June 1, 1942, whereby the Predecessor Company conveyed, assigned, transferred, mortgaged, pledged, set over, and confirmed to the Trustee, and its respective successors in said trust, additional property acquired by it subsequent to the date of the 1937 Indenture; and WHEREAS, the Predecessor Company heretofore has executed and delivered to the Trustee the following additional Supplemental Trust Indentures which, in addition to conveying, assigning, transferring, mortgaging, pledging, setting over, and confirming to the Trustee, and its respective successors in said trust, additional property acquired by it subsequent to the preparation of the next preceding Supplemental Trust Indenture and adding to the covenants, conditions, and agreements of the 1937 Indenture certain additional covenants, conditions, and agreements to be observed by the Predecessor Company, created the following series of First Mortgage Bonds:

DATE OF SUPPLEMENTAL TRUST INDENTURE DESIGNATION OF SERIES - ------------------------------------ ------------------------------------- February 1, 1944 Series due February 1, 1974 (retired) October 1, 1945 Series due October 1, 1975 (retired) July 1, 1948 Series due July 1, 1978 (retired) August 1, 1949 Series due August 1, 1979 (retired) June 1, 1952 Series due June 1, 1982 (retired)

DATE OF SUPPLEMENTAL TRUST INDENTURE DESIGNATION OF SERIES - ------------------------------------ ------------------------------------- October 1, 1954 Series due October 1, 1984 (retired) September 1, 1956 Series due 1986 (retired) August 1, 1957 Series due August 1, 1987 (redeemed) July 1, 1958 Series due July 1, 1988 (retired) December 1, 1960 Series due December 1, 1990 (retired) August 1, 1961 Series due August 1, 1991 (retired) June 1, 1962 Series due June 1, 1992 (retired) September 1, 1963 Series due September 1, 1993 (retired) August 1, 1966 Series due August 1, 1996 (redeemed) June 1, 1967 Series due June 1, 1995 (redeemed) October 1, 1967 Series due October 1, 1997 (redeemed) May 1, 1968 Series due May 1, 1998 (redeemed) October 1, 1969 Series due October 1, 1999 (redeemed) February 1, 1971 Series due March 1, 2001 (redeemed) May 1, 1971 Series due June 1, 2001 (redeemed) February 1, 1972 Series due March 1, 2002 (redeemed) January 1, 1973 Series due February 1, 2003 (redeemed) January 1, 1974 Series due January 1, 2004 (redeemed) September 1, 1974 Pollution Control Series A (redeemed) April 1, 1975 Pollution Control Series B (redeemed) May 1, 1975 Series due May 1, 2005 (redeemed) March 1, 1976 Pollution Control Series C (retired) June 1, 1981 Pollution Control Series D, E and F (redeemed) December 1, 1981 Series due December 1, 2011 (redeemed) May 1, 1983 Series due May 1, 2013 (redeemed) December 1, 1983 Pollution Control Series G (redeemed) September 1, 1984 Pollution Control Series H (redeemed) December 1, 1984 Resource Recovery Series I (redeemed) May 1, 1985 Series due June 1, 2015 (redeemed) September 1, 1985 Pollution Control Series J, K and L July 1, 1989 Series due July 1, 2019 (redeemed) June 1, 1990 Series due June 1, 2020 (redeemed) October 1, 1992 Series due October 1, 1997 (retired) April 1, 1993 Series due April 1, 2003 December 1, 1993 Series due December 1, 2000, and December 1, 2005 February 1, 1994 Series due February 1, 1999 October 1, 1994 Series due October 1, 2001 June 1, 1995 Series due July 1, 2025 April 1, 1997 Pollution Control Series M (redeemed), N, O and P March 1, 1998 Series due March 1, 2023 and March 1, 2028 May 1, 1999 Resource Recovery Series Q June 1, 2000 Resource Recovery Series R; and

2 WHEREAS, on August 18, 2000 New Centuries Energies, Inc. was merged with and into the Predecessor Company and the Predecessor Company changed its corporate name from Northern States Power Company to Xcel Energy Inc.; and WHEREAS, pursuant to an Assignment and Assumption Agreement dated as of August 18, 2000 between the Predecessor Company and the Company, substantially all the assets of the Predecessor Company (other than the stock of the Predecessor Company's subsidiaries) were conveyed to, and substantially all the liabilities of the Predecessor Company, including liabilities created under the Indenture, were assumed by, the Company (the "Assignment"); and WHEREAS, pursuant to the Supplemental Trust Indenture dated as of August 1, 2000 among the Predecessor Company, the Company and Harris Trust and Savings Bank, as Trustee, the requirements and conditions precedent set forth in the Original Indenture and the Restated Indenture (each as hereinafter defined) with respect to the Assignment were satisfied; and WHEREAS, the 1937 Indenture and all of the foregoing Supplemental Trust Indentures are referred to herein collectively as the "Original Indenture;" and WHEREAS, the Predecessor Company heretofore has executed and delivered to the Trustee a Supplemental and Restated Trust Indenture, dated May 1, 1988 (the "Restated Indenture"), which, in addition to conveying, assigning, transferring, mortgaging, pledging, setting over, and confirming to the Trustee, and its respective successors in said trust, additional property acquired by it subsequent to the preparation of the next preceding Supplemental Trust Indenture, amended and restated the Original Indenture; and WHEREAS, the Restated Indenture will not become effective and operative until all bonds of each series issued under the Original Indenture prior to May 1, 1988 shall have been retired through payment or redemption (including those bonds "deemed to be paid" within the meaning of that term as used in Article XVII of the 1937 Indenture) or until, subject to certain exceptions, the holders of the requisite principal amount of such bonds shall have consented to the amendments contained in the Restated Indenture (such date being herein called the "Effective Date"); and WHEREAS, the Original Indenture and the Restated Indenture are referred to herein collectively as the "Indenture"; and WHEREAS, pursuant to the Agreement of Resignation, Appointment and Acceptance dated as of May 1, 2002 among the Company, BNY Midwest Trust Company, as successor trustee, and Harris Trust and Savings Bank, the Trustee accepted the rights, powers, duties and obligations of the trustee under the Indenture effective as of May 9, 2002; and WHEREAS, the Indenture provides that bonds may be issued thereunder in one or more series, each series to have such distinctive designation as the Board of Directors of the Company may select for such series; and WHEREAS, the Company is entering into a Credit Agreement dated as of August 15, 2002 among the Company, Wells Fargo Bank, National Association, as Lead Arranger and Administrative Agent (the "Administrative Agent"), and the other banks party thereto 3 (collectively, the "Banks"), pursuant to which the Company can borrow up to 300,000,000 at any one time outstanding; and WHEREAS, in order to secure the Company's Obligations under and as defined in the Credit Agreement, the Company desires to provide for the issuance under the Indenture to the Administrative Agent, for the benefit of itself, the Co-Agents and the Banks, of a new series of bonds to be designated "First Mortgage Bonds, Series due August 15, 2003 (the "Bonds"); and WHEREAS, the Bonds to be issued as registered bonds without coupons in denominations of a multiple of $1000, and the bonds of said series to be substantially in the form and of the tenor following, to-wit: (Form of Bonds) NORTHERN STATES POWER COMPANY (Incorporated under the laws of the State of Minnesota) First Mortgage Bond Series due August 15, 2003 No. _________ $__________ THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS. PURSUANT TO A SECURITY AGREEMENT (THE "PLEDGE AGREEMENT") DATED AUGUST 15, 2002 BETWEEN THE COMPANY (AS DEFINED BELOW) AND THE ADMINISTRATIVE AGENT (AS DEFINED BELOW), THIS BOND AND ALL PROCEEDS THEREOF HAVE BEEN PLEDGED TO SECURE CERTAIN OBLIGATIONS OF THE COMPANY. THE PLEDGE AGREEMENT SETS FORTH VARIOUS PROVISIONS REGARDING (AMONG OTHER THINGS) THE PAYMENT OF AND VOTING RIGHTS WITH RESPECT TO THIS BOND. THE COMPANY AND (BY THEIR ACCEPTANCE THEREOF) EACH HOLDER OF THIS BOND AGREE THAT THE RIGHTS OF THE PARTIES WITH RESPECT TO THIS BOND SHALL IN ALL RESPECTS BE SUBJECT TO SUCH LIMITATIONS AND OTHER PROVISIONS OF THE PLEDGE AGREEMENT. NORTHERN STATES POWER COMPANY, a corporation organized and existing under the laws of the State of Minnesota (the "Company"), for value received, hereby promises to pay to Wells Fargo Bank, National Association, as Administrative Agent (the "Administrative Agent"), on behalf of itself and the Banks (as defined below), or registered assigns, at the office of the Trustee in Chicago, Illinois, or, at the option of the registered owner, at the agency of the Company in the Borough of Manhattan, City and State of New York, on August 15, 2003 (the "Stated Maturity Date") or upon earlier declaration of acceleration the sum of _________________________ Dollars ($___________). Interest shall be payable on this bond from the date hereof on the Stated Maturity Date or upon earlier declaration of acceleration at the office of the Trustee in Chicago, Illinois, or, at the option of the registered owner, the agency of the Company in the Borough of Manhattan, City and State of New York, at a rate equal to the 4 rate of interest publicly announced from time to time by the Administrative Agent as its "prime" or "base" rate or, if the Administrative Agent ceases to announce a rate so designated, any similar rate designated by the Administrative Agent, plus in either case 200 basis points. This bond shall bear interest from the date hereof. Payment of the principal and interest on this bond shall be made in the lawful money of the United States. This bond is issued to the Administrative Agent by the Company pursuant to the Company's obligations under the Credit Agreement, dated as of August 15, 2002 (as amended, supplemented, restated or otherwise modified from time to time, the "Credit Agreement"), among the Company, the Administrative Agent, and the other banks party thereto from time to time (collectively, the "Banks"). This bond shall be held by the Administrative Agent subject to the terms of the Credit Agreement and the Security Agreement dated as of August 15, 2002 between the Company and the Administrative Agent. It shall be an additional term and condition of the bonds of this series that, in the event (i) an Event of Default under and as defined in the Credit Agreement has occurred under Section 7.1(a) of the Credit Agreement by reason of a failure by the Company to make a payment of principal or interest when the same shall be due and payable pursuant to the Credit Agreement or (ii) the Notes (as defined in the Credit Agreement) are declared due and payable pursuant to Section 7.2 of the Credit Agreement, then the occurrence of either such event shall be deemed to be a completed default, for purposes of Section 1(a) of Article XIII of the Original Indenture prior to the Effective Date (as defined below), and a Completed Default, for purposes of Section 13.01(a) of the Indenture on and after the Effective Date, and the definitions of completed default and Completed Default in the Original Indenture and the Indenture, respectively, are modified accordingly for purposes of the bonds of this series. The Trustee may conclusively presume that the obligation of the Company to pay the principal of and interest on this bond shall have been fully satisfied and discharged unless and until it shall have received a written notice from the Administrative Agent, signed by an authorized officer of the Administrative Agent and attested by the Secretary or an Assistant Secretary of the Administrative Agent, stating that the payment of principal of or interest on this bond has not been fully paid when due and specifying the amount of funds required to make such payment. This bond has been issued by the Company to the Administrative Agent to (i) provide for the payment of the Company's obligations to make payments to any person under the Credit Agreement and (ii) provide to such persons the benefits of the security provided for this bond pursuant to the Indenture. This bond is one of a duly authorized issue of bonds of the Company, of the series and designation indicated on the face hereof, which issue of bonds consists, or may consist, of several series of varying denominations, dates, and tenor, all issued and to be issued under and equally secured (except insofar as a sinking fund, or similar fund, established in accordance with the provisions of the Indenture may afford additional security for the bonds of any specific series) by a Trust Indenture dated February 1, 1937 (the "1937 Indenture"), as supplemented by 49 supplemental trust indentures (collectively, the "Supplemental Indentures" and together with the 1937 Indenture, the "Original Indenture"), a Supplemental and Restated Trust Indenture 5 dated May 1, 1988 (the "Restated Indenture") and a new supplemental trust indenture for the bonds of this series (the "New Supplemental Indenture"), executed by the Company to BNY Midwest Trust Company, as successor to Harris Trust and Savings Bank, as Trustee (the "Trustee"). The 1937 Indenture, as supplemented by the Supplemental Indentures, the Restated Indenture and the New Supplemental Indenture herein are referred to collectively as the "Indenture". Reference hereby is made to the Indenture for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the bonds as to such security, and the terms and conditions upon which the bonds may be issued under the Indenture and are secured. The principal hereof may be declared or may become due on the conditions, in the manner and at the time set forth in the Indenture, upon the happening of a default as in the Indenture, including the New Supplemental Indenture, provided. With the consent of the Company and to the extent permitted by and as provided in the Indenture, the rights and obligations of the Company and of the holders of the bonds, and the terms and provisions of the Indenture and of any instruments supplemental thereto may be modified or altered by affirmative vote of the holders of at least 80% in principal amount of the bonds then outstanding under the Indenture and any instruments supplemental thereto (excluding bonds challenged and disqualified from voting by reason of the Company's interest therein as provided in the Indenture); provided that without the consent of all holders of all bonds affected no such modification or alteration shall permit the extension of the maturity of the principal of any bond or the reduction in the rate of interest thereon or any other modification in the terms of payment of such principal or interest. The foregoing 80% requirement will be reduced to 66 2/3% when all bonds of each series issued under the Indenture prior to May 1, 1985, shall have been retired or all the holders thereof shall have consented to such reduction. The Restated Indenture amends and restates the 1937 Indenture and the Supplemental Indentures. The Restated Indenture will become effective and operative (the "Effective Date") when all bonds of each series issued under the Indenture prior to May 1, 1988 shall have been retired through payment or redemption (including those bonds "deemed to be paid" within the meaning of that term as used in Article XVII of the 1937 Indenture) or until, subject to certain exceptions, the holders of the requisite principal amount of such bonds shall have consented to the amendments contained in the Restated Indenture. Holders of the bonds of this series and of each subsequent series of bonds issued under the Indenture likewise will be bound by the amendments contained in the Restated Indenture when they become effective and operative. Reference is made to the Restated Indenture for a complete description of the amendments contained therein to the 1937 Indenture and to the Supplemental Indentures. The Company and the Trustee may deem and treat the person in whose name this bond is registered as the absolute owner hereof for the purpose of receiving payment and for all other purposes and shall not be affected by any notice to the contrary. Bonds of this series are not redeemable by the Company prior to the Stated Maturity Date for any reason, and are not subject to a sinking fund. This bond is transferable as prescribed in the Indenture by the registered owner hereof in person, or by his duly authorized attorney, at the office of the Trustee in Chicago, Illinois, or at the option of the registered owner at the agency of the Company in the Borough of Manhattan, 6 City and State of New York, or elsewhere if authorized by the Company, upon surrender and cancellation of this bond, and thereupon a new bond or bonds of the same series and of a like aggregate principal amount will be issued to the transferee in exchange therefor as provided in the Indenture, upon payment of taxes or other governmental charges, if any, that may be imposed in relation thereto. Bonds of this series are interchangeable as to denominations in the manner and upon the conditions prescribed in the Indenture. No charge shall be made by the Company for any exchange or transfer of bonds of this series, other than for taxes or other governmental charges, if any, that may be imposed in relation thereto. No recourse shall be had for the payment of the principal of or the interest on this bond, or any part thereof, or of any claim based hereon or in respect hereof or of said Indenture, against any incorporator, or any past, present, or future shareholder, officer or director of the Company or of any predecessor or successor corporation, either directly or through the Company, or through any such predecessor or successor corporation, or through any receiver or a trustee in bankruptcy, whether by virtue of any constitution, statute, or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released, as more fully provided in the Indenture. This bond shall not be valid or become obligatory for any purpose unless and until the certificate of authentication hereon shall have been signed by or on behalf of BNY Midwest Trust Company, as Trustee under the Indenture, or its successor thereunder. IN WITNESS WHEREOF, NORTHERN STATES POWER COMPANY has caused this bond to be executed in its name by its President or a Vice President and its corporate seal, or a facsimile thereof, to be hereto affixed and attested by its Secretary or an Assistant Secretary. Dated as of _________________ NORTHERN STATES POWER COMPANY Attest: By: ------------------------------- --------------------------------- Secretary President 7 (Form of Trustee's Certificate) This bond is one of the bonds of the series designated thereon, described in the within-mentioned Indenture. BNY MIDWEST TRUST COMPANY, As Trustee, By:________________________________ Authorized Officer and WHEREAS, the Company is desirous of conveying, assigning, transferring, mortgaging, pledging, setting over, and confirming to the Trustee and to its respective successors in trust, additional property acquired by it subsequent to the date of the preparation of the Supplemental Trust Indenture dated as of August 1, 2000; and WHEREAS, the Indenture provides in substance that the Company and the Trustee may enter into indentures supplemental thereto for the purposes, among others, of creating and setting forth the particulars of any new series of bonds and of providing the terms and conditions of the issue of the bonds of any series not expressly provided for in the Indenture and of conveying, assigning, transferring, mortgaging, pledging, setting over, and confirming to the Trustee additional property of the Company, and for any other purpose not inconsistent with the terms of the Indenture; and WHEREAS, the execution and delivery of this Supplemental Trust Indenture has been duly authorized by a resolution adopted by the Board of Directors of the Company; and WHEREAS, the Trustee has duly determined to execute this Supplemental Trust Indenture and to be bound, insofar as it may lawfully do so, by the provisions hereof; Now THEREFORE, Northern States Power Company, in consideration of the premises and of one dollar duly paid to it by the Trustee at or before the ensealing and delivery of these presents, the receipt of which is hereby acknowledged, and other good and valuable considerations, does hereby covenant and agree to and with BNY Midwest Trust Company, as Trustee, and its successors in the trust under the Indenture for the benefit of those who hold or shall hold the bonds, or any of them, issued or to be issued thereunder as follows: ARTICLE I. SPECIFIC SUBJECTION OF ADDITIONAL PROPERTY TO THE LIEN OF THE ORIGINAL INDENTURE. SECTION 1.01. The Company in order to better secure the payment, of both the principal and interest, of all bonds of the Company at any time outstanding under the Indenture according to their tenor and effect and the performance of and compliance with the covenants and conditions contained in the Indenture, has granted, bargained, sold, warranted, released, conveyed, assigned, transferred, mortgaged, pledged, set over, and confirmed and by these 8 presents does grant, bargain, sell, warrant, release, convey, assign, transfer, mortgage, pledge, set over, and confirm to the Trustee and to its respective successors in said trust forever, subject to the rights reserved by the Company in and by the provisions of the Indenture, all of the property described and mentioned or enumerated in a schedule annexed hereto and marked Schedule A, reference to said schedule being made hereby with the same force and effect as if the same were incorporated herein at length; together with all and singular the tenements, hereditaments, and appurtenances belonging and in any way appertaining to the aforesaid property or any part thereof with the reversion and reversions, remainder and remainders, tolls, rents and revenues, issues, income, products, and profits thereof; Also, in order to subject the personal property and chattels of the Company to the lien of the Indenture and to conform with the provisions of the Uniform Commercial Code, all fossil, nuclear, hydro, and other electric generating plants, including buildings and other structures, turbines, generators, exciters, boilers, reactors, nuclear fuel, other boiler plant equipment, condensing equipment and all other generating equipment; substations; electric transmission and distribution systems, including structures, poles, towers, fixtures, conduits, insulators, wires, cables, transformers, services and meters; steam heating mains and equipment; gas transmission and distribution systems, including structures, storage facilities, mains, compressor stations, purifier stations, pressure holders, governors, services, and meters; telephone plant and related distribution systems; trucks and trailers; office, shop, and other buildings and structures, furniture and equipment; apparatus and equipment of all other kinds and descriptions; materials and supplies; all municipal and other franchises, leaseholds, licenses, permits, privileges, patents and patent rights; all shares of stock, bonds, evidences of indebtedness, contracts, claims, accounts receivable, choses in action and other intangibles, all books of account and other corporate records; Excluding, however, all merchandise and appliances heretofore or hereafter acquired for the purpose of sale to customers and others; All the estate, right, title, interest, and claim, whatsoever, at law as well as in equity, which the Company now has or hereafter may acquire in and to the aforesaid property and every part and parcel thereof subject, however, to the right of the Company, until the happening of a completed default as defined in Section 1 of Article XIII of the Original Indenture prior to the Effective Date and upon the occurrence and continuation of a Completed Default as defined in the Indenture on and after the Effective Date, to retain in its possession all shares of stock, notes, evidences of indebtedness, other securities and cash not expressly required by the provisions hereof to be deposited with the Trustee, to retain in its possession all contracts, bills and accounts receivable, motor cars, any stock of goods, wares and merchandise, equipment or supplies acquired for the purpose of consumption in the operation, construction, or repair of any of the properties of the Company, and to sell, exchange, pledge, hypothecate, or otherwise dispose of any or all of such property so retained in its possession free from the lien of the Indenture, without permission or hindrance on the part of the Trustee, or any of the bondholders. No person in any dealings with the Company in respect of any such property shall be charged with any notice or knowledge of any such completed default (prior to the Effective Date) or Completed Default (after the Effective Date) under the Indenture while the Company is in possession of such property. Nothing contained herein or in the Indenture shall be deemed or construed to 9 require the deposit with, or delivery to, the Trustee of any of such property, except such as is specifically required to be deposited with the Trustee by some express provision of the Indenture; To have and to hold all said property, real, personal, and mixed, granted, bargained, sold, warranted, released, conveyed, assigned, transferred, mortgaged, pledged, set over, or confirmed by the Company as aforesaid, or intended so to be, to the Trustee and its successors and assigns forever, subject, however, to permitted liens as defined in Section 5 of Article I of the 1937 Indenture prior to the Effective Date and to Permitted Encumbrances on and after the Effective Date and to the further reservations, covenants, conditions, uses, and trusts set forth in the Indenture; in trust nevertheless for the same purposes and upon the same conditions as are set forth in the Indenture. ARTICLE II. FORM AND EXECUTION OF BONDS SECTION 2.01. There hereby is created, for issuance under the Indenture, a series of bonds designated Series due August 15, 2003 in the aggregate principal amount of $308,000,000, which shall bear the descriptive title "First Mortgage Bonds, Series due August 15, 2003" (the "Bonds"), and the form thereof shall contain suitable provisions with respect to the matters hereafter specified in this Section. The Bonds shall be issued as registered bonds without coupons in denominations of a multiple of $1,000 and shall be substantially of the tenor and purport hereinbefore recited. The principal amount of the Bonds shall be payable on August 15, 2003 (the "Stated Maturity Date") or upon earlier declaration of acceleration. Interest shall be payable on the Bonds on the Stated Maturity Date or upon earlier declaration of acceleration at a rate equal to the rate of interest publicly announced from time to time by the Administrative Agent as its "prime" or "base" rate or, if the Administrative Agent ceases to announce a rate so designated, any similar rate designated by the Administrative Agent, plus in either case 200 basis points. The Bonds shall bear interest from August 15, 2002. Principal and interest on the Bonds shall be payable at the office of the Trustee in Chicago, Illinois, or, at the option of the registered owner, at the agency of the Company in the Borough of Manhattan, City and State of New York. Payment of the principal and interest on the Bonds shall be made in the lawful money of the United States. The Bonds are being issued to the Administrative Agent by the Company pursuant to the Company's obligations under the Credit Agreement and shall be held by the Administrative Agent subject to the terms of the Credit Agreement and the Security Agreement dated as of August 15, 2002 between the Company and the Administrative Agent. It shall be an additional term and condition of the Bonds that, in the event (i) an Event of Default under and as defined in the Credit Agreement has occurred under Section 7.1(a) of the Credit Agreement by reason of a failure by the Company to make a payment of principal or interest when the same shall be due and payable pursuant to the Credit Agreement or (ii) the Notes (as defined in the Credit Agreement) are declared due and payable pursuant to Section 7.2 of the Credit Agreement, then the occurrence of either such event shall be deemed to be a completed default, for purposes of Section 1(a) of Article XIII of the Original Indenture prior to the Effective Date, and a Completed Default, for purposes of Section 13.01(a) of the Indenture on and after the Effective Date, and the definitions of completed default and Completed Default 10 in the Original Indenture and the Indenture, respectively, are modified accordingly for purposes of the Bonds. The Bonds have been issued by the Company to the Administrative Agent to (i) provide for the payment of the Company's obligations to make payments to any person under the Credit Agreement and (ii) provide to such persons the benefits of the security provided for the Bonds pursuant to the Indenture. SECTION 2.02. The Bonds are not redeemable by the Company prior to the Stated Maturity Date for any reason and are not subject to a sinking fund. SECTION 2.03. The registered owner of any Bond or Bonds, at his option may surrender the same with other Bonds of such series at the office of the Trustee in Chicago, Illinois, or at the agency of the Company in the Borough of Manhattan, City and State of New York, or elsewhere if authorized by the Company, for cancellation, in exchange for other Bonds of such series of higher or lower authorized denominations, but of the same aggregate principal amount, bearing interest from its date, and upon receipt of any payment required under the provisions of Section 2.04 hereof. Thereupon the Company shall execute and deliver to the Trustee and the Trustee shall authenticate and deliver such other registered bonds to such registered owner at its office or at any other place specified as aforesaid. SECTION 2.04. No charge shall be made by the Company for any exchange or transfer of Bonds, other than for taxes or other governmental charges, if any, that may be imposed in relation thereto. SECTION 2.05. The Bonds, shall be executed on behalf of the Company by the manual signature of its President or one of its Vice Presidents or with the facsimile signature of its President, and its corporate seal shall be thereunto affixed, or printed, lithographed, or engraved thereon, in facsimile, and attested by the manual signature of its Secretary or one of its Assistant Secretaries or with the facsimile signature of its Secretary. In case any of the officers who shall have signed any Bonds or attested the seal thereon or whose facsimile signature shall be borne by the Bonds shall cease to be such officers of the Company before the Bonds so signed and sealed actually shall have been authenticated by the Trustee or delivered by the Company, such Bonds nevertheless may be issued, authenticated, and delivered with the same force and effect as though the person or persons who signed such Bonds and attested the seal thereon or whose facsimile signature is borne by the Bonds had not ceased to be such officer or officers of the Company. Any Bond issuable hereunder may be signed or attested by manual or facsimile signature in behalf of the Company by such person as at the actual date of the execution of such Bond shall be the proper officer of the Company, although at the date of such Bond such person shall not have been an officer of the Company. SECTION 2.06. The registered holder of all of the Bonds shall be the Administrative Agent. 11 ARTICLE III. APPOINTMENT OF AUTHENTICATING AGENT. SECTION 3.01. The Trustee shall, if requested in writing so to do by the Company, promptly appoint an agent or agents of the Trustee who shall have authority to authenticate registered Bonds, in the name and on behalf of the Trustee. Such appointment by the Trustee shall be evidenced by a certificate of a vice-president of the Trustee delivered to the Company prior to the effectiveness of such appointment. SECTION 3.02. (a) Any such authenticating agent shall be acceptable to the Company and at all times shall be a corporation which is organized and doing business under the laws of the United States or of any State, is authorized under such laws to act as authenticating agent, has a combined capital and surplus of at least $10,000,000, and is subject to supervision or examination by Federal or State authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 3.02 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. (b) Any corporation into which any authenticating agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion, or consolidation to which any authenticating agent shall be a party, or any corporation succeeding to the corporate agency business of any authenticating agent, shall continue to be the authenticating agent without the execution or filing of any paper or any further act on the part of the Trustee or the authenticating agent. (c) Any authenticating agent at any time may resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time, and upon written request of the Company to the Trustee shall, 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 in accordance with the provisions of this Section 3.02, the Trustee, unless otherwise requested in writing by the Company, promptly shall appoint a successor authenticating agent, which shall be acceptable to the Company. Any successor authenticating agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers, duties, and responsibilities of its predecessor hereunder, with like effect as if originally named. No successor authenticating agent shall be appointed unless eligible under the provisions of this Section 3.02. (d) The Company agrees to pay to any authenticating agent, appointed in accordance with the provisions of this Section 3.02, reasonable compensation for its services. 12 SECTION 3.03. If an appointment is made pursuant to this Article III, the registered Bonds, shall have endorsed thereon, in addition to the Trustee's Certificate, an alternate Trustee's Certificate in the following form: This bond is one of the bonds of the Series designated thereon, described in the within-mentioned Indenture. BNY MIDWEST TRUST COMPANY, as Trustee, By _________________________________ Authenticating Agent, By _________________________________ Authorized Officer. SECTION 3.04. No provision of this Article III shall require the Trustee to have at any time more than one such authenticating agent for any one State or to appoint any such authenticating agent in the State in which the Trustee has its principal place of business. ARTICLE IV. FINANCING STATEMENT TO COMPLY WITH THE UNIFORM COMMERCIAL CODE. SECTION 4.01. The name and address of the debtor and secured party are set forth below: Debtor: Northern States Power Company 414 Nicollet Mall Minneapolis, Minnesota 55401 Secured Party: BNY Midwest Trust Company, Trustee 2 North LaSalle Street Suite 1020 Chicago, Illinois 60602 NOTE: Northern States Power Company, the debtor above named, is "a transmitting utility" under the Uniform Commercial Code as adopted in Minnesota, North Dakota and South Dakota. SECTION 4.02. Reference to Article I hereof is made for a description of the property of the debtor covered by this Financing Statement with the same force and effect as if incorporated in this Section at length. SECTION 4.03. The maturity dates and respective principal amounts of obligations of the debtor secured and presently to be secured by the Indenture, reference to all of which for the 13 terms and conditions thereof is hereby made with the same force and effect as if incorporated herein at length, are as follows.

FIRST MORTGAGE BONDS PRINCIPAL AMOUNT - ---------------------------------------- ---------------------------- Series due April 1, 2003 $80,000,000 Series due December 1, 2005 $70,000,000 Pollution Control Series J $5,450,000 Pollution Control Series K $3,400,000 Pollution Control Series L $4,850,000 Series due July 1, 2025 $250,000,000 Pollution Control Series N $27,900,000 Pollution Control Series O $50,000,000 Pollution Control Series P $50,000,000 Series due March 1, 2028 $150,000,000 Series due March 1, 2003 $100,000,000 Resource Recovery Series Q $15,170,000 Resource Recovery Series R $19,615,000 Series Due August 15, 2003 $308,000,000

SECTION 4.04. This Financing Statement is hereby adopted for all of the First Mortgage Bonds of the series mentioned above secured by said Indenture. SECTION 4.05. The 1937 Indenture and the prior Supplemental Trust Indentures, as set forth below, have been filed or recorded in each and every office in the States of Minnesota, North Dakota, and South Dakota designated by law for the filing or recording thereof in respect of all property of the Company subject thereto: Original Indenture Dated February 1, 1937 Supplemental Indenture Dated June 1, 1942 Supplemental Indenture Dated February 1, 1944 Supplemental Indenture Dated October 1, 1945 Supplemental Indenture Dated July 1, 1948 Supplemental Indenture Dated August 1, 1949 Supplemental Indenture Dated June 1, 1952 14 Supplemental Indenture Dated October 1, 1954 Supplemental Indenture Dated September 1, 1956 Supplemental Indenture Dated August 1, 1957 Supplemental Indenture Dated July 1, 1958 Supplemental Indenture Dated December 1, 1960 Supplemental Indenture Dated August 1, 1961 Supplemental Indenture Dated June 1, 1962 Supplemental Indenture Dated September 1, 1963 Supplemental Indenture Dated August 1, 1966 Supplemental Indenture Dated June 1, 1967 Supplemental Indenture Dated October 1, 1967 Supplemental Indenture Dated May 1, 1968 Supplemental Indenture Dated October 1, 1969 Supplemental Indenture Dated February 1, 1971 Supplemental Indenture Dated May 1, 1971 Supplemental Indenture Dated February 1, 1972 15 Supplemental Indenture Dated January 1, 1973 Supplemental Indenture Dated January 1, 1974 Supplemental Indenture Dated September 1, 1974 Supplemental Indenture Dated April 1, 1975 Supplemental Indenture Dated May 1, 1975 Supplemental Indenture Dated March 1, 1976 Supplemental Indenture Dated June 1, 1981 Supplemental Indenture Dated December 1, 1981 Supplemental Indenture Dated May 1, 1983 Supplemental Indenture Dated December 1, 1983 Supplemental Indenture Dated September 1, 1984 Supplemental Indenture Dated December 1, 1984 Supplemental Indenture Dated May 1, 1985 Supplemental Indenture Dated September 1, 1985 Supplemental and Restated Indenture Dated May 1, 1988 Supplemental Indenture Dated July 1, 1989 16 Supplemental Indenture Dated June 1, 1990 Supplemental Indenture Dated October 1, 1992 Supplemental Indenture Dated April 1, 1993 Supplemental Indenture Dated December 1, 1993 Supplemental Indenture Dated February 1, 1994 Supplemental Indenture Dated October 1, 1994 Supplemental Indenture Dated June 1, 1995 Supplemental Indenture Dated April 1, 1997 Supplemental Indenture Dated March 1, 1998 Supplemental Indenture Dated May 1, 1999 Supplemental Indenture Dated June 1, 2000 Supplemental Indenture Dated August 1, 2000 SECTION 4.06. The property covered by this Financing Statement also shall secure additional series of First Mortgage Bonds of the debtor which may be issued from time to time in the future in accordance with the provisions of the Indenture. ARTICLE V. AMENDMENTS TO INDENTURE. SECTION 5.01. Each holder or registered owner of a bond of any series originally authenticated by the Trustee and originally issued by the Company subsequent to May 1, 1985 and of any coupon pertaining to any such bond, by the acquisition, holding or ownership of such bond and coupon, thereby consents and agrees to, and shall be bound by, the provisions of Article VI of the Supplemental Indenture dated May 1, 1985. Each holder or registered owner of 17 a bond of any series (including the Bonds) originally authenticated by the Trustee and originally issued by the Company subsequent to May 1, 1988 and of any coupon pertaining to such bond, by the acquisition, holding or ownership of such bond and coupon, thereby consents and agrees to, and shall be bound by, the provisions of the Supplemental and Restated Trust Indenture dated May 1, 1988 upon the Effective Date. ARTICLE VI. MISCELLANEOUS. SECTION 6.01. The recitals of fact herein, except the recital that the Trustee has duly determined to execute this Supplemental Trust Indenture and be bound, insofar as it may lawfully so do, by the provisions hereof and in the bonds shall be taken as statements of the Company and shall not be construed as made by the Trustee. The Trustee makes no representations as to value of any of the property subjected to the lien of the Indenture, or any part thereof, or as to the title of the Company thereto, or as to the security afforded thereby and hereby, or as to the validity of this Supplemental Trust Indenture or of the bonds issued under the Indenture by virtue hereof (except the Trustee's certificate), and the Trustee shall incur no responsibility in respect of such matters. SECTION 6.02. This Supplemental Trust Indenture shall be construed in connection with and as a part of the 1937 Indenture, as supplemented by the Supplemental Trust Indentures dated June 1, 1942, February 1, 1944, October 1, 1945, July 1, 1948, August 1, 1949, June 1, 1952, October 1, 1954, September 1, 1956, August 1, 1957, July 1, 1958, December 1, 1960, August 1, 1961, June 1, 1962, September 1, 1963, August 1, 1966, June 1, 1967, October 1, 1967, May 1, 1968, October 1, 1969, February 1, 1971, May 1, 1971, February 1, 1972, January 1, 1973, January 1, 1974, September 1, 1974, April 1, 1975, May 1, 1975, March 1, 1976, June 1, 1981, December 1, 1981, May 1, 1983, December 1, 1983, September 1, 1984, December 1, 1984, May 1, 1985, September 1, 1985, the Supplemental and Restated Trust Indenture dated May 1, 1988 and the Supplemental Trust Indentures dated July 1, 1989, June 1, 1990, October 1, 1992, April 1, 1993, December 1, 1993, February 1, 1994, October 1, 1994, June 1, 1995, April 1, 1997, March 1, 1997, March 1, 1998, May 1, 1999, June 1, 2000 and August 1, 2000. SECTION 6.03. (a) If any provision of the Indenture or this Supplemental Trust Indenture limits, qualifies, or conflicts with another provision of the Indenture required to be included in indentures qualified under the Trust Indenture Act of 1939 (as enacted prior to the date of this Supplemental Trust Indenture) by any of the provisions of Sections 310 to 317, inclusive, of the said Act, such required provisions shall control. (b) In case any one or more of the provisions contained in this Supplemental Trust Indenture or in the bonds issued hereunder should be invalid, illegal, or unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions contained herein and therein shall not in any way be affected, impaired, prejudiced, or disturbed thereby. SECTION 6.04. Wherever in this Supplemental Trust Indenture the word "Indenture" is used without the prefix, "1937," "Original" or "Supplemental", such word was used intentionally to include in its meaning both the 1937 Indenture and all indentures supplemental thereto. 18 SECTION 6.05. Wherever in this Supplemental Trust Indenture either of the parties hereto is named or referred to, this shall be deemed to include the successors or assigns of such party, and all the covenants and agreements in this Supplemental Trust Indenture contained by or on behalf of the Company or by or on behalf of the Trustee shall bind and inure to the benefit of the respective successors and assigns of such parties, whether so expressed or not. SECTION 6.06. (a) This Supplemental Trust Indenture may be executed simultaneously in several counterparts, and all said counterparts executed and delivered, each as an original, shall constitute but one and the same instrument. (b) The Table of Contents and the descriptive headings of the several Articles of this Supplemental Trust Indenture were formulated, used, and inserted in this Supplemental Trust Indenture for convenience only and shall not be deemed to affect the meaning or construction of any of the provisions hereof. The principal amount of obligations to be issued forthwith under the Indenture is $308,000,000. 19 IN WITNESS WHEREOF, on this ____ day of August, 2002, NORTHERN STATES POWER COMPANY, a Minnesota corporation, party of the first part, has caused its corporate name and seal to be hereunto affixed, and this Supplemental Trust Indenture dated as of June 1, 2002, to be signed by its President or a Vice President, and attested by its Secretary or an Assistant Secretary, for and in its behalf, and BNY MIDWEST TRUST COMPANY, an Illinois corporation, as Trustee, party of the second part, to evidence its acceptance of the trust hereby created, has caused its corporate name and seal to be hereunto affixed, and this Supplemental Trust Indenture dated as of June 1, 2002, to be signed by its President, a Vice President, or an Assistant Vice President, and attested by its Secretary, an Assistant Secretary, or an Assistant Vice President for and in its behalf. NORTHERN STATES POWER COMPANY ------------------------------------- By: Paul E. Pender Its: Vice President and Treasurer Attest: - ------------------------------------ Nancy Haley Assistant Secretary Executed by Northern States Power Company in presence of: - ------------------------------------ (CORPORATE SEAL) Mary Schell, Witness - ------------------------------------ Elizabeth Blohm, Witness 20 BNY MIDWEST TRUST COMPANY, as Trustee ------------------------------------- By: J. Bartolini Its:Vice President Attest: - ------------------------------------ M. Callahan Assistant Vice President Executed by BNY Midwest Trust Company in presence of: - ------------------------------------ K. Gibson, Witness (CORPORATE SEAL) - ------------------------------------ A. Hernandez, Witness 21 STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) On this ____ day of August, A.D. 2002, before me, Sharon Quellhorst, a Notary Public in and for said County in the State aforesaid, personally appeared Paul E. Pender and Nancy Haley, to me personally known, and to me known to be Vice President and Treasurer and Assistant Secretary, respectively, of Northern States Power Company, one of the corporations described in and which executed the within and foregoing instrument, and who, being by me severally duly sworn, each did say that he, the said Paul E. Pender is Vice President and Treasurer, and she, the said Nancy Haley, is Assistant Secretary, of said Northern States Power Company, a corporation; that the seal affixed to the within and foregoing instrument is the corporate seal of said corporation, and that said instrument was executed in behalf of said corporation by authority of its board of directors; and said Paul E. Pender and Nancy Haley each acknowledged said instrument to be the free act and deed of said corporation and that such corporation executed the same. WITNESS my hand and notarial seal this ____ day of August, A.D. 2002. ______________________________________ (NOTARY SEAL) Sharon Quellhorst Notary Public My commission expires January 31, 2005 22 STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) Paul E. Pender and Nancy Haley, being severally duly sworn, each deposes and says that he, the said Paul E. Pender, is Vice President and Treasurer, and she, the said Nancy Haley, is Assistant Secretary, of Northern States Power Company, the corporation described in and which executed the within and foregoing Supplemental Trust Indenture, as mortgagor; and each for himself or herself further says that said Supplemental Trust Indenture was executed in good faith, and not for the purpose of hindering, delaying, or defrauding any creditor of the said mortgagor. - ---------------------------------- ------------------------------------ Paul E. Pender Nancy Haley Subscribed and sworn to before me this ____ day of August, A.D. 2002. ______________________________________ (NOTARY SEAL) Sharon Quellhorst Notary Public My commission expires January 31, 2005 23 STATE OF ILLINOIS ) ) ss. COUNTY OF COOK ) On this ____ day of August, A.D. 2002, before me, L. Garcia, a Notary Public in and for said County in the State aforesaid, personally appeared J. Bartolini and M. Callahan, to me personally known, and to me known to be Vice President and Assistant Vice President, respectively, of BNY Midwest Trust Company, one of the corporations described in and which executed the within and foregoing instrument, and who, being by me severally duly sworn, each, did say that she, the said J. Bartolini is Vice President, and she, the said M. Callahan, is Assistant Vice President, of said BNY Midwest Trust Company, a corporation; that the seal affixed to the within and foregoing instrument is the corporate seal of said corporation, and that said instrument was executed in behalf of said corporation by authority of its board of directors; and said J. Bartolini and M. Callahan each acknowledged said instrument to be the free act and deed of said corporation and that such corporation executed the same. WITNESS my hand and notarial seal this ____ day of August, A.D. 2002. ______________________________________ (NOTARY SEAL) L. Garcia Notary Public My commission expires July 8, 2006 24 STATE OF ILLINOIS ) ) ss. COUNTY OF COOK ) J. Bartolini and M. Callahan, being severally duly sworn, each for herself deposes and says that she, the said J. Bartolini, is Vice President, and she, the said M. Callahan, is Assistant Vice President, of BNY Midwest Trust Company, the corporation described in and which executed the within and foregoing Supplemental Trust Indenture, as mortgagee, and each for herself further says that said Supplemental Trust Indenture was executed in good faith, and not for the purpose of hindering, delaying, or defrauding any creditor of the mortgagor. - --------------------------------- ------------------------------------ J. Bartolini M. Callahan Subscribed and sworn to before me this ____ day of August, A.D. 2002. ______________________________________ (NOTARY SEAL) L. Garcia Notary Public My commission expires July 8, 2006 25 SCHEDULE A The property referred to in Article I of the foregoing Supplemental Trust Indenture from Northern States Power Company to BNY Midwest Trust Company, Trustee, made as of June 1, 2002, includes the following property hereinafter more specifically described. Such description, however, is not intended to limit or impair the scope or intention of the general description contained in the granting clauses or elsewhere in the Original Indenture. PROPERTIES IN THE STATE OF MINNESOTA LYON COUNTY The following described real property, situate, lying and being in the County of Lyon, to wit: Lyon County Substation The South 833 feet of the West 833 feet of the Southwest Quarter (SW1/4) of Section Twenty-eight (28), Township One Hundred Twelve (112), Range Forty (40). This instrument was drafted by Northern States Power Company, 414 Nicollet Mall, Minneapolis, Minnesota 55401. Tax statements for the real property described in this instrument should be sent to Northern States Power Company, 414 Nicollet Mall, Minneapolis, Minnesota 55401. EX-4.06 8 c72574exv4w06.txt EX-4.06 SUPPLEMENTAL INDENTURE DATED JULY 1, 2002 Exhibit 4.06 SUPPLEMENTAL TRUST INDENTURE FROM NORTHERN STATES POWER COMPANY TO BNY MIDWEST TRUST COMPANY TRUSTEE ------------ DATED JULY 1, 2002 ------------ SUPPLEMENTAL TO TRUST INDENTURE DATED FEBRUARY 1, 1937 AND SUPPLEMENTAL AND RESTATED TRUST INDENTURE DATED MAY 1, 1988

PAGE ARTICLE I. SPECIFIC SUBJECTION OF ADDITIONAL PROPERTY TO THE LIEN OF THE ORIGINAL INDENTURE...............9 Section 1.01. ......................................................................................9 ARTICLE II. PROVISIONS OF BONDS OF POLLUTION CONTROL SERIES S.............................................11 Section 2.01. .....................................................................................11 Section 2.02. .....................................................................................11 Section 2.03. .....................................................................................12 Section 2.04. .....................................................................................13 Section 2.05. .....................................................................................13 ARTICLE III. FINANCING STATEMENT TO COMPLY WITH THE UNIFORM COMMERCIAL CODE................................13 Section 3.01. .....................................................................................13 Section 3.02. .....................................................................................13 Section 3.03. .....................................................................................13 Section 3.04. .....................................................................................14 Section 3.05. .....................................................................................14 Section 3.06. .....................................................................................17 ARTICLE IV. AMENDMENTS TO INDENTURE.......................................................................17 Section 4.01. .....................................................................................17 ARTICLE V. MISCELLANEOUS.................................................................................18 Section 5.01. .....................................................................................18 Section 5.02. .....................................................................................18 Section 5.03. .....................................................................................18 Section 5.04. .....................................................................................19 Section 5.05. .....................................................................................19 Section 5.06. .....................................................................................19 Schedule A ....................................................................................A-1

-i- SUPPLEMENTAL TRUST INDENTURE, MADE AS OF THE 1ST DAY OF JULY, 2002, BY AND BETWEEN NORTHERN STATES POWER COMPANY (formerly Northern Power Corporation), a corporation duly organized and existing under and by virtue of the laws of the State of Minnesota, having its principal office in the City of Minneapolis, Minnesota (the "Company"), party of the first part, and BNY MIDWEST TRUST COMPANY, a corporation duly organized and existing under and by virtue of the laws of the State of Illinois, having its principal office in the City of Chicago, Illinois, successor to Harris Trust and Savings Bank, as Trustee (the "Trustee"), party of the second part; WITNESSETH: WHEREAS, a predecessor in interest to the Company, Xcel Energy Inc. (formerly Northern States Power Company), a corporation duly organized and existing under and by virtue of the laws of the State of Minnesota (the "Predecessor Company"), has heretofore executed and delivered to the Trustee its Trust Indenture (the "1937 Indenture"), made as of February 1, 1937, whereby the Predecessor Company granted, bargained, sold, warranted, released, conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed to the Trustee and to its respective successors in trust, all property, real, personal and mixed then owned or thereafter acquired or to be acquired by the Predecessor Company (except as therein excepted from the lien thereof) and subject to the rights reserved by the Predecessor Company in and by the provisions of the 1937 Indenture, to be held by said Trustee in trust in accordance with the provisions of the 1937 Indenture for the equal pro rata benefit and security of all and each of the bonds issued and to be issued thereunder in accordance with the provisions thereof; and WHEREAS, the Predecessor Company heretofore has executed and delivered to the Trustee a Supplemental Trust Indenture, made as of June 1, 1942, whereby the Predecessor Company conveyed, assigned, transferred, mortgaged, pledged, set over, and confirmed to the Trustee, and its respective successors in said trust, additional property acquired by it subsequent to the date of the 1937 Indenture; and WHEREAS, the Predecessor Company heretofore has executed and delivered to the Trustee the following additional Supplemental Trust Indentures which, in addition to conveying, assigning, transferring, mortgaging, pledging, setting over, and confirming to the Trustee, and its respective successors in said trust, additional property acquired by it subsequent to the preparation of the next preceding Supplemental Trust Indenture and adding to the covenants, conditions, and agreements of the 1937 Indenture certain additional covenants, conditions, and agreements to be observed by the Predecessor Company, created the following series of First Mortgage Bonds:

DATE OF SUPPLEMENTAL TRUST INDENTURE DESIGNATION OF SERIES ------------------ --------------------- February 1, 1944 Series due February 1, 1974 (retired) October 1, 1945 Series due October 1, 1975 (retired) July 1, 1948 Series due July 1, 1978 (retired) August 1, 1949 Series due August 1, 1979 (retired)

DATE OF SUPPLEMENTAL TRUST INDENTURE DESIGNATION OF SERIES ------------------ --------------------- June 1, 1952 Series due June 1, 1982 (retired) October 1, 1954 Series due October 1, 1984 (retired) September 1, 1956 Series due 1986 (retired) August 1, 1957 Series due August 1, 1987 (redeemed) July 1, 1958 Series due July 1, 1988 (retired) December 1, 1960 Series due December 1, 1990 (retired) August 1, 1961 Series due August 1, 1991 (retired) June 1, 1962 Series due June 1, 1992 (retired) September 1, 1963 Series due September 1, 1993 (retired) August 1, 1966 Series due August 1, 1996 (redeemed) June 1, 1967 Series due June 1, 1995 (redeemed) October 1, 1967 Series due October 1, 1997 (redeemed) May 1, 1968 Series due May 1, 1998 (redeemed) October 1, 1969 Series due October 1, 1999 (redeemed) February 1, 1971 Series due March 1, 2001 (redeemed) May 1, 1971 Series due June 1, 2001 (redeemed) February 1, 1972 Series due March 1, 2002 (redeemed) January 1, 1973 Series due February 1, 2003 (redeemed) January 1, 1974 Series due January 1, 2004 (redeemed) September 1, 1974 Pollution Control Series A (redeemed) April 1, 1975 Pollution Control Series B (redeemed) May 1, 1975 Series due May 1, 2005 (redeemed) March 1, 1976 Pollution Control Series C (retired) June 1, 1981 Pollution Control Series D, E and F (redeemed) December 1, 1981 Series due December 1, 2011 (redeemed) May 1, 1983 Series due May 1, 2013 (redeemed) December 1, 1983 Pollution Control Series G (redeemed) September 1, 1984 Pollution Control Series H (redeemed) December 1, 1984 Resource Recovery Series I (redeemed) May 1, 1985 Series due June 1, 2015 (redeemed) September 1, 1985 Pollution Control Series J, K and L July 1, 1989 Series due July 1, 2019 (redeemed) June 1, 1990 Series due June 1, 2020 (redeemed) October 1, 1992 Series due October 1, 1997 (retired) April 1, 1993 Series due April 1, 2003 December 1, 1993 Series due December 1, 2000 (retired), and December 1, 2005 February 1, 1994 Series due February 1, 1999 (retired) October 1, 1994 Series due October 1, 2001 (retired) June 1, 1995 Series due July 1, 2025 April 1, 1997 Pollution Control Series M (redeemed), N, O and P March 1, 1998 Series due March 1, 2003, and March 1, 2028 May 1, 1999 Resource Recovery Series Q June 1, 2000 Resource Recovery Series R June 1, 2002 Series due August 15, 2003; and

2 WHEREAS, on August 18, 2000 New Centuries Energies, Inc. was merged with and into the Predecessor Company and the Predecessor Company changed its corporate name from Northern States Power Company to Xcel Energy Inc.; and WHEREAS, pursuant to an Assignment and Assumption Agreement dated as of August 18, 2000 between the Predecessor Company and the Company, substantially all the assets of the Predecessor Company (other than the stock of the Predecessor Company's subsidiaries) were conveyed to, and substantially all the liabilities of the Predecessor Company, including liabilities created under the Indenture, were assumed by, the Company (the "Assignment"); and WHEREAS, pursuant to the Supplemental Trust Indenture dated as of August 1, 2000 among the Predecessor Company, the Company and Harris Trust and Savings Bank, as Trustee, the requirements and conditions precedent set forth in the Original Indenture and the Restated Indenture (each as hereinafter defined) with respect to the Assignment were satisfied; and WHEREAS, the 1937 Indenture and all of the foregoing Supplemental Trust Indentures are referred to herein collectively as the "Original Indenture"; and WHEREAS, the Predecessor Company heretofore has executed and delivered to the Trustee a Supplemental and Restated Trust Indenture, dated May 1, 1988 (the "Restated Indenture"), which, in addition to conveying, assigning, transferring, mortgaging, pledging, setting over, and confirming to the Trustee, and its respective successors in said trust, additional property acquired by it subsequent to the preparation of the next preceding Supplemental Trust Indenture, amended and restated the Original Indenture; and WHEREAS, the Restated Indenture will not become effective and operative until all bonds of each series issued under the Original Indenture prior to May 1, 1988 shall have been retired through payment or redemption (including those bonds "deemed to be paid" within the meaning of that term as used in Article XVII of the 1937 Indenture) or until, subject to certain exceptions, the holders of the requisite principal amount of such bonds shall have consented to the amendments contained in the Restated Indenture (such date being herein called the "Effective Date"); and WHEREAS, the Original Indenture and the Restated Indenture are referred to herein collectively as the "Indenture"; and WHEREAS, pursuant to the Agreement of Resignation, Appointment and Acceptance dated as of May 1, 2002 among the Company, BNY Midwest Trust Company, as successor trustee, and Harris Trust and Savings Bank, the Trustee accepted the rights, powers, duties and obligations of the trustee under the Indenture effective as of May 9, 2002; and 3 WHEREAS, the Indenture provides that bonds may be issued thereunder in one or more series, each series to have such distinctive designation as the Board of Directors of the Company may select for such series; and WHEREAS, the City of Becker, in the County of Sherburne, a municipal corporation existing under the Constitution and laws of the State of Minnesota (the "City") has issued $69,000,000 principal amount of its Pollution Control Revenue Refunding Bonds (Northern States Power Company - Sherburne County Generating Station Units 1 and 2 Project), Series 2000-A (the "Pollution Control Revenue Bonds") pursuant to the provisions of the Indenture of Trust, dated as of March 1, 2000, as supplemented by Supplemental Indenture No. 1, dated as of August 1, 2002, and Supplemental Indenture No. 2, dated as of August 20, 2002 (as supplemented, the "Pollution Control Indenture"), between the City and Wells Fargo Bank Minnesota, National Association, as Trustee (said Trustee or any successor trustee under the Pollution Control Indenture being hereinafter referred to as the "Pollution Control Trustee"); and WHEREAS, the net proceeds of the Pollution Control Revenue Bonds were loaned by the City to the Company pursuant to the provisions of a Loan Agreement dated as of March 1, 2000, between the City and the Company (as amended, the "Agreement"), to provide a portion of the funds to refinance the acquisition, construction and equipping of certain air and water pollution control facilities relating to the first and second electric generating units located in the City at the Company's Sherburne County Generating Station, owned jointly by the Company and Southern Minnesota Municipal Power Agency; and WHEREAS, payments by the Company under and pursuant to the Agreement have been assigned by the City to the Pollution Control Trustee in order to secure the payment of the Pollution Control Revenue Bonds; and WHEREAS, in order to further secure the payment of the Pollution Control Revenue Bonds, the Company desires to provide for the issuance under the Indenture to the Pollution Control Trustee of a new series of bonds designated "First Mortgage Bonds, Pollution Control Series S" (sometimes called "Bonds of Pollution Control Series S"), in a principal amount equal to the principal amount of the Pollution Control Revenue Bonds, and with corresponding terms and maturity, the Bonds of Pollution Control Series S to be issued as registered bonds without coupons in denominations of a multiple of $5,000; and WHEREAS, the Bonds of Pollution Control Series S are to be substantially in the form and tenor following, to-wit: (Form of Bonds of Pollution Control Series S) This Bond has not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in contravention of said Act and is not transferable except to a successor Trustee under the Indenture of Trust dated as of March 1, 2000, as amended, from the City of Becker, Minnesota (the "City"), to Wells Fargo Bank Minnesota, National Association, as Trustee. 4 NORTHERN STATES POWER COMPANY (Incorporated under the laws of the State of Minnesota) First Mortgage Bond Pollution Control Series S No._________ $69,000,000 Northern States Power Company, a corporation organized and existing under and by virtue of the laws of the State of Minnesota (herein called the "Company"), for value received, hereby promises to pay to Wells Fargo Bank Minnesota, National Association, Minneapolis, Minnesota, as Trustee under the Indenture of Trust dated as of March 1, 2000, as supplemented by Supplemental Indenture No. 1, dated as of August 1, 2002, and Supplemental Indenture No. 2, dated as of August 20, 2002 (as supplemented, the "Pollution Control Indenture") from the City of Becker, Minnesota (the "City"), to Wells Fargo Bank Minnesota, National Association, Minneapolis, Minnesota, or any successor trustee under the Pollution Control Indenture (the "Pollution Control Trustee") and at the office of BNY Midwest Trust Company, Chicago, Illinois, successor to Harris Trust and Savings Bank, as trustee (the "Trustee") the sum of Sixty-Nine Million Dollars in lawful money of the United States of America on the Demand Redemption Date, as hereinafter defined, and to pay on the Demand Redemption Date to the Pollution Control Trustee, interest hereon from the Initial Interest Accrual Date, as hereinafter defined, to the Demand Redemption Date at the same rate or rates per annum then and thereafter from time to time borne by the Pollution Control Revenue Refunding Bonds (Northern States Power Company - Sherburne County Generating Station Units 1 and 2 Project), Series 2000-A (the "Pollution Control Revenue Bonds"), in like money, said interest being payable at the office of the Trustee in Chicago, Illinois, subject to the provisions hereinafter set forth in the event of a rescission of a Redemption Demand, as hereinafter defined. This bond is one of a duly authorized issue of bonds of the Company, known as its First Mortgage Bonds, unlimited in aggregate principal amount, which issue of bonds consists, or may consist of several series of varying denominations, dates and tenors, all issued and to be issued under and equally secured (except in so far as a sinking fund, or similar fund, established in accordance with the provisions of the Indenture may afford additional security for the bonds of any specific series) by a Trust Indenture dated February 1, 1937 (the "1937 Indenture"), as supplemented by 50 supplemental trust indentures (the "Supplemental Indentures"), a Supplemental and Restated Trust Indenture dated May 1, 1988 (the "Restated Indenture") and a new supplemental trust indenture for the bonds of this series (the "New Supplemental Indenture"), executed by the Company to the Trustee. The 1937 Indenture, as supplemented by the Supplemental Indentures, the Restated Indenture and the New Supplemental Indenture, is referred to as the "Indenture". Reference is hereby made to the Indenture for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the bonds as to such security, and the terms and conditions upon which the bonds may be issued under the Indenture and are secured. The principal hereof may be declared or may become due on the conditions, in the manner and at the time set forth in the Indenture, upon the happening of a default as in the Indenture provided. 5 With the consent of the Company and to the extent permitted by and as provided in the Indenture, the rights and obligations of the Company and/or the holders of the bonds, and/or the terms and provisions of the Indenture and/or of any instruments supplemental thereto may be modified or altered by affirmative vote of the holders of at least 80% in principal amount of the bonds then outstanding under the Indenture and any instruments supplemental thereto (excluding bonds disqualified from voting by reason of the Company's interest therein as provided in the Indenture); provided that without the consent of all holders of all bonds affected no such modification or alteration shall permit the extension of the maturity of the principal of any bond or the reduction in the rate of interest thereon or any other modification in the terms of payment of such principal or interest. The foregoing 80% requirement will be reduced to 66-2/3% when all bonds of each series issued under the Indenture prior to May 1, 1985, shall have been retired or all the holders thereof shall have consented to such reduction. The Restated Indenture amends and restates the 1937 Indenture and the Supplemental Indentures. The Restated Indenture will become effective and operative (the "Effective Date") when all Bonds of each series issued under the Indenture prior to May 1, 1988 shall have been retired through payment or redemption (including those bonds "deemed to be paid" within the meaning of that term as used in Article XVII of the 1937 Indenture) or until, subject to certain exceptions, the holders of the requisite principal amount of such bonds shall have consented to the amendments contained in the Restated Indenture. Holders of the bonds of this series and of each subsequent series of bonds issued under the Indenture likewise will be bound by the amendments contained in the Restated Indenture when they become effective and operative. Reference is made to the Restated Indenture for a complete description of the amendments contained therein to the 1937 Indenture and to the Supplemental Indentures. This bond is one of a series of bonds of the Company issued under the Indenture and designated as First Mortgage Bonds, Pollution Control Series S. The bonds of this Series have been issued to the Pollution Control Trustee under the Pollution Control Indenture to secure payment of the Pollution Control Revenue Bonds issued by the City under the Pollution Control Indenture, the proceeds of which have been or are to be loaned to the Company pursuant to the provisions of the Loan Agreement dated as of March 1, 2000 (the "Agreement") between the Company and the City. The maturity of the obligation represented by the bonds of this Series is April 1, 2030. The date of maturity of the obligation represented by the bonds of this Series is hereinafter referred to as the Final Maturity Date. The bonds of this Series shall bear interest from the Initial Interest Accrual Date, as hereinafter defined, at the same rate or rates per annum then and thereafter from time to time borne by the Pollution Control Revenue Bonds. Except as provided in the next succeeding paragraph, in the event of a default under Section 8.01 of the Agreement or in the event of a default in the payment of the principal of, premium, if any, or interest (and such default in the payment of interest continues for the full grace period, if any, permitted by the Pollution Control Indenture and the Pollution Control Revenue Bonds) on the Pollution Control Revenue Bonds, whether at maturity, by acceleration, by sinking fund, redemption or otherwise, as and when the same becomes due, the bonds of this Series shall be redeemable in whole upon receipt by the Trustee of a written demand (hereinafter called a "Redemption Demand") from the Pollution Control Trustee stating that there has been such a default, stating that it is acting pursuant to the authorization granted by Section 8.03 of the Pollution Control Indenture, specifying the last date to which interest on the Pollution Control 6 Revenue Bonds has been paid (such date being hereinafter referred to as the "Initial Interest Accrual Date") and demanding redemption of the bonds of this Series. The Trustee shall, within 10 days after receiving such Redemption Demand, mail a copy thereof to the Company marked to indicate the date of its receipt by the Trustee. Promptly upon receipt by the Company of such copy of a Redemption Demand, the Company shall fix a date on which it will redeem the bonds of this Series so demanded to be redeemed (hereinafter called the "Demand Redemption Date"). Notice of the date fixed as and for the Demand Redemption Date shall be mailed by the Company to the trustee at least 30 days prior to such Demand Redemption Date. The date to be fixed by the Company as and for the Demand Redemption Date may be any date up to and including the earlier of (i) the 120th day after receipt by the Trustee of the Redemption Demand or (ii) the Final Maturity Date, provided that if the Trustee shall not have received such notice fixing the Demand Redemption Date within 90 days after receipt by it of the Redemption Demand, the Demand Redemption Date shall be deemed to be the earlier of (i) the 120th day after receipt by the Trustee of the Redemption Demand or (ii) the Final Maturity Date. The Trustee shall mail notice of the Demand Redemption Date (such notice being hereafter called the "Demand Redemption Notice") to the Pollution Control Trustee not more than 10 nor less than five days prior to the Demand Redemption Date. Notwithstanding the foregoing, if a default to which this paragraph is applicable is existing on the Final Maturity Date, such date shall be deemed to be the Demand Redemption Date without further action (including actions specified in this paragraph) by the Pollution Control Trustee, the Trustee or the Company. The bonds of this Series shall be redeemed by the Company on the Demand Redemption Date, upon surrender thereof by the Pollution Control Trustee to the Trustee, at a redemption price equal to the principal amount thereof, plus accrued interest thereon at the rate per annum set forth in the first paragraph of this Bond, from the Initial Interest Accrual Date to the Demand Redemption Date. If a Redemption Demand is rescinded by the Pollution Control Trustee by written notice to the Trustee prior to the Demand Redemption Date, no Demand Redemption Notice shall be given, or, if already given, shall be automatically annulled, and interest on the bonds of this Series shall cease to accrue, all interest accrued thereon shall be automatically rescinded and cancelled and the Company shall not be obligated to make any payments of principal of or interest on the bonds of this Series; but no such rescission shall extend to or affect any subsequent default or impair any right consequent thereon. In the event that all of the bonds outstanding under the Indenture shall have become immediately due and payable, whether by declaration or otherwise, and such acceleration shall not have been annulled, the bonds of this Series shall bear interest at the rate per annum set forth in the first paragraph of this Bond, from the Initial Interest Accrual Date, as specified in a written notice to the Trustee from the Pollution Control Trustee, and the principal of and interest on the bonds of this Series from the Initial Interest Accrual Date shall be payable in accordance with the provisions of the Indenture. Upon payment of the principal of and premium, if any, and interest on the Pollution Control Revenue Bonds, whether at maturity or prior to maturity by redemption or otherwise, and the surrender thereof to and cancellation thereof by the Pollution Control Trustee (other than any Pollution Control Revenue Bond that was cancelled by the Pollution Control Trustee and for which one or more other Pollution Control Revenue Bonds were delivered and authenticated pursuant to the Pollution Control Indenture in lieu of or in exchange or substitution for such cancelled Pollution Control Revenue Bond), or upon provision for the payment thereof having 7 been made in accordance with the Pollution Control Indenture, bonds of this Series in a principal amount equal to the principal amount of the Pollution Control Revenue Bonds so surrendered and cancelled or for the provision for which payment has been made shall be deemed fully paid and the obligations of the Company thereunder shall be terminated, and such bonds of this Series shall be surrendered by the Pollution Control Trustee to the Trustee and shall be cancelled by the Trustee. No recourse shall be had for the payment of, or interest, if any, on this bond, or any part thereof, or of any claim based hereon or in respect hereof or of the Indenture, against any incorporator, or any past, present or future stockholder, officer or director of the Company or of any predecessor or successor corporation, either directly or through the Company, or through any such predecessor or successor corporation, or through any receiver or a trustee in bankruptcy, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released, as more fully provided in the Indenture. The bond shall not be valid or become obligatory for any purpose unless and until the certificate of authentication hereon shall have been signed by or on behalf of BNY Midwest Trust Company, as Trustee under the Indenture, or its successor thereunder. IN WITNESS WHEREOF, NORTHERN STATES POWER COMPANY has caused this instrument to be signed in its name by its President or a Vice President, and its corporate seal, or a facsimile thereof, to be hereto affixed and attested by its Secretary or an Assistant Secretary. Dated: NORTHERN STATES POWER COMPANY ------------------------------ Attest: By: ------------------------------ -------------------------------- Secretary President (Form of Trustee's Certificate) This bond is one of the bonds of the Series designated thereon, described in the within-mentioned Indenture. BNY MIDWEST TRUST COMPANY, As Trustee, By: -------------------------------- Authorized Officer and WHEREAS, the Company is desirous of conveying, assigning, transferring, mortgaging, pledging, setting over, and confirming to the Trustee and to its respective successors in trust, 8 additional property acquired by it subsequent to the date of the preparation of the Supplemental Trust Indenture dated as of August 1, 2000; and WHEREAS, the Indenture provides in substance that the Company and the Trustee may enter into indentures supplemental thereto for the purposes, among others, of creating and setting forth the particulars of any new series of bonds and of providing the terms and conditions of the issue of the bonds of any series not expressly provided for in the Indenture and of conveying, assigning, transferring, mortgaging, pledging, setting over and confirming to the Trustee additional property of the Company, and for any other purpose not inconsistent with the terms of the Indenture; and WHEREAS, the execution and delivery of this Supplemental Trust Indenture have been duly authorized by a resolution adopted by the Board of Directors of the Company; WHEREAS, the Trustee has duly determined to execute this Supplemental Trust Indenture and to be bound, insofar as it may lawfully do so, by the provisions hereof, NOW, THEREFORE, Northern States Power Company, in consideration of the premises and of one dollar duly paid to it by the Trustee at or before the ensealing and delivery of these presents, the receipt of which is hereby acknowledged, and other good and valuable considerations, does hereby covenant and agree to and with BNY Midwest Trust Company, as Trustee, and its successors in the trust under the Indenture for the benefit of those who hold or shall hold the bonds, or any of them, issued or to be issued thereunder, as follows: ARTICLE I. SPECIFIC SUBJECTION OF ADDITIONAL PROPERTY TO THE LIEN OF THE ORIGINAL INDENTURE SECTION 1.01. The Company in order to better secure the payment, of both the principal and interest, of all bonds of the Company at any time outstanding under the Indenture according to their tenor and effect and the performance of and compliance with the covenants and conditions contained in the Indenture, has granted, bargained, sold, warranted, released, conveyed, assigned, transferred, mortgaged, pledged, set over, and confirmed and by these presents does grant, bargain, sell, warrant, release, convey, assign, transfer, mortgage, pledge, set over, and confirm to the Trustee and to its respective successors in said trust forever, subject to the rights reserved by the Company in and by the provisions of the Indenture, all of the property described and mentioned or enumerated in a schedule annexed hereto and marked Schedule A, reference to said schedule being made hereby with the same force and effect as if the same were incorporated herein at length; together with all and singular the tenements, hereditaments, and appurtenances belonging and in any way appertaining to the aforesaid property or any part thereof with the reversion and reversions, remainder and remainders, tolls, rents and revenues, issues, income, products, and profits thereof; Also, in order to subject the personal property and chattels of the Company to the lien of the Indenture and to conform with the provisions of the Uniform Commercial Code, all fossil, nuclear, hydro, and other electric generating plants, including buildings and other structures, turbines, generators, exciters, boilers, reactors, nuclear fuel, other boiler plant equipment, condensing equipment and all other generating equipment; substations; electric transmission and 9 distribution systems, including structures, poles, towers, fixtures, conduits, insulators, wires, cables, transformers, services and meters; steam heating mains and equipment; gas transmission and distribution systems, including structures, storage facilities, mains, compressor stations, purifier stations, pressure holders, governors, services, and meters; telephone plant and related distribution systems; trucks and trailers; office, shop, and other buildings and structures, furniture and equipment; apparatus and equipment of all other kinds and descriptions; materials and supplies; all municipal and other franchises, leaseholds, licenses, permits, privileges, patents and patent rights; all shares of stock, bonds, evidences of indebtedness, contracts, claims, accounts receivable, choses in action and other intangibles, all books of account and other corporate records; Excluding, however, all merchandise and appliances heretofore or hereafter acquired for the purpose of sale to customers and others; All the estate, right, title, interest, and claim, whatsoever, at law as well as in equity, which the Company now has or hereafter may acquire in and to the aforesaid property and every part and parcel thereof subject, however, to the right of the Company, until the happening of a completed default as defined in Section 1 of Article XIII of the Original Indenture prior to the Effective Date and upon the occurrence and continuation of a Completed Default as defined in the Restated Indenture on and after the Effective Date, to retain in its possession all shares of stock, notes, evidences of indebtedness, other securities and cash not expressly required by the provisions hereof to be deposited with the Trustee, to retain in its possession all contracts, bills and accounts receivable, motor cars, any stock of goods, wares and merchandise, equipment or supplies acquired for the purpose of consumption in the operation, construction, or repair of any of the properties of the Company, and to sell, exchange, pledge, hypothecate, or otherwise dispose of any or all of such property so retained in its possession free from the lien of the Indenture, without permission or hindrance on the part of the Trustee, or any of the bondholders. No person in any dealings with the Company in respect of any such property shall be charged with any notice or knowledge of any such completed default (prior to the Effective Date) or Completed Default (after the Effective Date) under the Indenture while the Company is in possession of such property. Nothing contained herein or in the Indenture shall be deemed or construed to require the deposit with, or delivery to, the Trustee of any of such property, except such as is specifically required to be deposited with the Trustee by some express provision of the Indenture; To have and to hold all said property, real, personal, and mixed, granted, bargained; sold, warranted, released, conveyed, assigned, transferred, mortgaged, pledged, set over, or confirmed by the Company as aforesaid, or intended so to be, to the Trustee and its successors and assigns forever, subject, however, to permitted liens as defined in Section 5 of Article I of the 1937 Indenture prior to the Effective Date and to Permitted Encumbrances on and after the Effective Date and to the further reservations, covenants, conditions, uses, and trusts set forth in the Indenture; in trust nevertheless for the same purposes and upon the same conditions as are set forth in the Indenture. 10 ARTICLE II. PROVISIONS OF BONDS OF POLLUTION CONTROL SERIES S SECTION 2.01. There is hereby created, for issuance under the Indenture, a series of bonds designated Pollution Control Series S, each of which shall bear the descriptive title "First Mortgage Bonds, Pollution Control Series S" and the form thereof shall contain suitable provisions with respect to the matters specified in this section. The Bonds of Pollution Control Series S shall be printed, lithographed or typewritten and shall be substantially of the tenor and purport previously recited. The Bonds of Pollution Control Series S shall be issued as registered bonds without coupons in denominations of a multiple of $5,000 and shall be registered in the name of the Pollution Control Trustee. The Bonds of Pollution Control Series S shall be dated as of the date of their authentication. The Bonds of Pollution Control Series S shall be payable, both as to principal and interest, at the office of the Trustee in Chicago, Illinois, in lawful money of the United States of America. The maturity of the obligation represented by the Bonds of Pollution Control Series S is April 1, 2030. The date of maturity of the obligation represented by the Bonds of Pollution Control Series S is hereinafter referred to as the Series S Final Maturity Date. The Bonds of Pollution Control Series S shall bear interest from the Series S Initial Interest Accrual Date, as hereinafter defined, at the same rate or rates then and thereafter from time to time borne by the Pollution Control Revenue Bonds. SECTION 2.02. Except as provided in the next succeeding paragraph of this Section 2.02, in the event of a default under Section 8.01 of the Agreement or in the event of a default in the payment of the principal of, premium, if any, or interest on the Pollution Control Revenue Bonds, whether at maturity, by acceleration, by sinking fund, redemption or otherwise, as and when the same becomes due, the Bonds of Pollution Control Series S shall be redeemable in whole upon receipt by the Trustee of a written demand (hereinafter called a "Series S Redemption Demand") from the Pollution Control Trustee stating that there has been such a default, stating that it is acting pursuant to the authorization granted by Section 8.03 of the Pollution Control Indenture, specifying the last date to which interest on the Pollution Control Revenue Bonds has been paid (such date being hereinafter referred to as the "Series S Initial Interest Accrual Date") and demanding redemption of the Bonds of Pollution Control Series S. The Trustee shall, within 10 days after receiving such Series S Redemption Demand, mail a copy thereof to the Company marked to indicate the date of its receipt by the Trustee. Promptly upon receipt by the Company of such copy of a Series S Redemption Demand, the Company shall fix a date on which it will redeem the Bonds of Pollution Control Series S so demanded to be redeemed (hereinafter called the "Series S Demand Redemption Date"). Notice of the date fixed as the Series S Demand Redemption Date shall be mailed by the Company to the Trustee at least 30 days prior to such Series S Demand Redemption Date. The date to be fixed by the Company as and for the Series S Demand Redemption Date may be any date up to and including the earlier of (i) the 120th day after receipt by the Trustee of the Series S Redemption Demand or (ii) the Series S Final Maturity Date; provided that if the Trustee shall not have received such notice fixing the Series S Demand Redemption Date within 90 days after receipt by it of the Series S Redemption Demand, the Series S Demand Redemption Date shall be deemed to be the earlier of (i) the 120th day after receipt by the Trustee of the Series S Redemption Demand or (ii) the Series S Final Maturity Date. The Trustee shall mail notice of the Series S Demand Redemption Date (such notice being hereinafter called the "Series S Demand Redemption Notice") to the 11 Pollution Control Trustee not more than 10 nor less than five days prior to the Series S Demand Redemption Date. Notwithstanding the foregoing, if a default to which this paragraph is applicable is existing on the Series S Final Maturity Date, such date shall be deemed to be the Demand Redemption Date without further action (including actions specified in this paragraph) by the Pollution Control Trustee, the Trustee or the Company. The Bonds of Pollution Control Series S shall be redeemed by the Company on the Series S Demand Redemption Date, upon surrender thereof by the Pollution Control Trustee to the Trustee, at a redemption price equal to the principal amount thereof, plus accrued interest thereon at the rate per annum set forth in Section 2.01 hereof, from the Series S Initial Interest Accrual Date to the Series S Demand Redemption Date. If a Series S Redemption Demand is rescinded by the Pollution Control Trustee by written notice to the Trustee prior to the Series S Demand Redemption Date, no Series S Demand Redemption Notice shall be given, or, if already given, shall be automatically annulled, and interest on the Bonds of Pollution Control Series S shall cease to accrue, all interest accrued thereon shall be automatically rescinded and cancelled and the Company shall not be obligated to make any payments of principal of or interest on the Bonds of Pollution Control Series S; but no such rescission shall extend to or affect any subsequent default or impair any right consequent thereon. In the event that all of the bonds outstanding under the Indenture shall have become immediately due and payable, whether by declaration or otherwise, and such acceleration shall not have been annulled, the Bonds of Pollution Control Series S shall bear interest at the rate per annum set forth in Section 2.01 hereof; from the Series S Initial Interest Accrual Date, as specified in a written notice to the Trustee from the Pollution Control Trustee, and the principal of and interest on the Bonds of Pollution Control Series S from the Series S Initial Interest Accrual Date shall be payable in accordance with the provisions of the Indenture. Anything herein contained to the contrary notwithstanding, the Trustee is not authorized to take any action pursuant to a Series S Redemption Demand or a rescission thereof or a written notice required by this Section 2.02, and such Series S Redemption Demand, rescission or notice shall be of no force or effect, unless it is executed in the name of the Pollution Control Trustee by one of its Vice Presidents. SECTION 2.03. Upon payment of the principal of and premium, if any, and interest on the Pollution Control Revenue Bonds, whether at maturity or prior to maturity by redemption or otherwise, and the surrender thereof to and cancellation thereof by the Pollution Control Trustee (other than any Pollution Control Revenue Bond that was cancelled by the Pollution Control Trustee and for which one or more other Pollution Control Revenue Bonds were delivered and authenticated pursuant to the Pollution Control Indenture), or upon provision for the payment thereof having been made in accordance with the Pollution Control Indenture, Bonds of Pollution Control Series S in a principal amount equal to the principal amount of the Pollution Control Revenue Bonds so surrendered and cancelled or for the provision for which payment has been made shall be deemed fully paid and the obligations of the Company thereunder shall be terminated, and such Bonds of Pollution Control Series S shall be surrendered by the Pollution Control Trustee to the Trustee and shall be cancelled and disposed of by the Trustee in accordance with its customary procedures, and a certificate of such cancellation and destruction shall be delivered to the Company. 12 SECTION 2.04. The Pollution Control Trustee as the registered holder of the Bonds of Pollution Control Series S, at its option may surrender the same at the office of the Trustee, in Chicago, Illinois, or elsewhere, if authorized by the Company, for cancellation, in exchange for other bonds of the same series of the same aggregate principal amount. Thereupon, and upon receipt of any payment required under the provisions of Section 2.05 hereof, the Company shall execute and deliver to the Trustee and the Trustee shall authenticate and deliver such other registered bonds to such registered holder at its office or at any other place specified as aforesaid. SECTION 2.05. No charge shall be made by the Company for any exchange or transfer of Bonds of Pollution Control Series S other than for taxes or other governmental charges, if any that may be imposed in relation thereto. ARTICLE III. FINANCING STATEMENT TO COMPLY WITH THE UNIFORM COMMERCIAL CODE SECTION 3.01. The name and address of the debtor and secured party are set forth below: Debtor: Northern States Power Company 414 Nicollet Mall Minneapolis, Minnesota 55401 Secured Party: BNY Midwest Trust Company, Trustee 2 North LaSalle Street, Suite 1020 Chicago, Illinois 60602 NOTE: Northern States Power Company, the debtor above named, is "a transmitting utility" under the Uniform Commercial Code as adopted in Minnesota, North Dakota and South Dakota. SECTION 3.02. Reference to Article I hereof is made for a description of the property of the debtor covered by this Financing Statement with the same force and effect as if incorporated in this Section at length. SECTION 3.03. The maturity dates and respective principal amounts of obligations of the debtor secured and presently to be secured by the Indenture, reference to all of which for the terms and conditions thereof is hereby made with the same force and effect as if incorporated herein at length, are as follows:

FIRST MORTGAGE BONDS PRINCIPAL AMOUNT -------------------- ---------------- Series due April 1, 2003................................... $ 80,000,000 Series due December 1, 2005................................ $ 70,000,000 Pollution Control Series J................................. $ 5,450,000 Pollution Control Series K................................. $ 3,400,000 Pollution Control Series L................................. $ 4,850,000 Series due July 1, 2025.................................... $250,000,000

13 Pollution Control Series N................................. $ 27,900,000 Pollution Control Series O................................. $ 50,000,000 Pollution Control Series P................................. $ 50,000,000 Resource Recovery Series Q................................. $ 15,170,000 Resource Recovery Series R................................. $ 19,615,000 Series due March 1, 2003................................... $100,000,000 Series due March 1, 2028................................... $150,000,000 Series due August 15, 2003................................. $308,000,000 Pollution Control Series S................................. $ 69,000,000 SECTION 3.04. This Financing Statement is hereby adopted for all of the First Mortgage Bonds of the series mentioned above secured by said Indenture. SECTION 3.05. The 1937 Indenture and the prior Supplemental Trust Indentures, as set forth below, have been filed or recorded in each and every office in the States of Minnesota, North Dakota, and South Dakota designated by law for the filing or recording thereof in respect of all property of the Company subject thereto: Original Indenture Dated February 1, 1937 Supplemental Indenture Dated June 1, 1942 Supplemental Indenture Dated February 1, 1944 Supplemental Indenture Dated October 1, 1945 Supplemental Indenture Dated July 1, 1948 Supplemental Indenture Dated August 1, 1949 Supplemental Indenture Dated June 1, 1952 Supplemental Indenture Dated October 1, 1954 Supplemental Indenture Dated September 1, 1956 14 Supplemental Indenture Dated August 1, 1957 Supplemental Indenture Dated July 1, 1958 Supplemental Indenture Dated December 1, 1960 Supplemental Indenture Dated August 1, 1961 Supplemental Indenture Dated June 1, 1962 Supplemental Indenture Dated September 1, 1963 Supplemental Indenture Dated August 1, 1966 Supplemental Indenture Dated June 1, 1967 Supplemental Indenture Dated October 1, 1967 Supplemental Indenture Dated May 1, 1968 Supplemental Indenture Dated October 1, 1969 Supplemental Indenture Dated February 1, 1971 Supplemental Indenture Dated May 1, 1971 Supplemental Indenture Dated February 1, 1972 Supplemental Indenture Dated January 1, 1973 15 Supplemental Indenture Dated January 1, 1974 Supplemental Indenture Dated September 1, 1974 Supplemental Indenture Dated April 1, 1975 Supplemental Indenture Dated May 1, 1975 Supplemental Indenture Dated March 1, 1976 Supplemental Indenture Dated June 1, 1981 Supplemental Indenture Dated December 1, 1981 Supplemental Indenture Dated May 1, 1983 Supplemental Indenture Dated December 1, 1983 Supplemental Indenture Dated September 1, 1984 Supplemental Indenture Dated December 1, 1984 Supplemental Indenture Dated May 1, 1985 Supplemental Indenture Dated September 1, 1985 Supplemental Indenture Dated May 1, 1988 Supplemental Indenture Dated July 1, 1989 16 Supplemental Indenture Dated June 1, 1990 Supplemental Indenture Dated October 1, 1992 Supplemental Indenture Dated April 1, 1993 Supplemental Indenture Dated December 1, 1993 Supplemental Indenture Dated February 1, 1994 Supplemental Indenture Dated October 1, 1994 Supplemental Indenture Dated June 1, 1995 Supplemental Indenture Dated April 1, 1997 Supplemental Indenture Dated March 1, 1998 Supplemental Indenture Dated May 1, 1999 Supplemental Indenture Dated June 1, 2000 Supplemental Indenture Dated August 1, 2000 Supplemental Indenture Dated June 1, 2002 SECTION 3.06. The property covered by this Financing Statement also shall secure additional series of First Mortgage Bonds of the debtor which may be issued from time to time in the future in accordance with the provisions of the Indenture. ARTICLE IV. AMENDMENTS TO INDENTURE SECTION 4.01. Each holder or registered owner of a bond of any series originally authenticated by the Trustee and originally issued by the Company subsequent to May 1, 1985 17 and of any coupon pertaining to any such bond, by the acquisition, holding or ownership of such bond and coupon, thereby consents and agrees to, and shall be bound by, the provisions of Article VI of the Supplemental Trust Indenture dated May 1, 1985. Each holder or registered owner of a bond of any series (including Bonds of Pollution Control Series S) originally authenticated by the Trustee and originally issued by the Company subsequent to May 1, 1988 and of any coupon pertaining to such bond, by the acquisition, holding or ownership of such bond and coupon, thereby consents and agrees to, and shall be bound by, the provisions of the Supplemental and Restated Trust Indenture dated May 1, 1988 upon the Effective Date. ARTICLE V. MISCELLANEOUS SECTION 5.01. The recitals of fact herein, except the recital that the Trustee has duly determined to execute this Supplemental Trust Indenture and be bound, insofar as it may lawfully so do, by the provisions hereof and in the bonds shall be taken as statements of the Company and shall not be construed as made by the Trustee. The Trustee makes no representations as to the value of any of the property subject to the lien of the Indenture, or any part thereof, or as to the title of the Company thereto, or as to the security afforded thereby and hereby, or as to the validity of this Supplemental Trust Indenture or of the bonds issued under the Indenture by virtue hereof (except the Trustee's certificate) and the Trustee shall incur no responsibility in respect of such matters. SECTION 5.02. This Supplemental Trust Indenture shall be construed in connection with and as a part of the 1937 Indenture, as supplemented by the Supplemental Trust Indentures dated June 1, 1942, February 1, 1944, October 1, 1945, July 1, 1948, August 1, 1949, June 1, 1952, October 1, 1954, September 1, 1956, August 1, 1957, July 1, 1958, December 1, 1960, August 1, 1961, June 1, 1962, September 1, 1963, August 1, 1966, June 1, 1967, October 1, 1967, May 1, 1968, October 1, 1969, February 1, 1971, May 1, 1971, February 1, 1972, January 1, 1973, January 1, 1974, September 1, 1974, April 1, 1975, May 1, 1975, March 1, 1976, June 1, 1981, December 1, 1981, May 1, 1983, December 1, 1983, September 1, 1984, December 1, 1984, May 1, 1985, September 1, 1985, the Supplemental and Restated Trust Indenture dated May 1, 1988 and the Supplemental Trust Indentures dated July 1, 1989, June 1, 1990, October 1, 1992, April 1, 1993, December 1, 1993, February 1, 1994, October 1, 1994, June 1, 1995, April 1, 1997, March 1, 1998, May 1, 1999, June 1, 2000, August 1, 2000 and June 1, 2002. SECTION 5.03. (a) If any provision of this Supplemental Trust Indenture limits, qualifies or conflicts with another provision of the Indenture required to be included in indentures qualified under the Trust Indenture Act of 1939, as amended (as enacted prior to the date of this Supplemental Trust Indenture) by any of the provisions of Sections 310 to 317, inclusive, of the said Act, such required provision shall control. (b) In case any one or more of the provisions contained in this Supplemental Indenture or in the bonds issued hereunder shall be invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected, impaired, prejudiced or disturbed thereby. 18 SECTION 5.04. Wherever in this Supplemental Trust Indenture the word "Indenture" is used without the prefix, "1937", "Original" or "Supplemental", such word was used intentionally to include in its meaning both the 1937 Indenture and all indentures supplemental thereto. SECTION 5.05. Wherever in this Supplemental Trust Indenture either of the parties hereto is named or referred to, this shall be deemed to include the successors or assigns of such party, and all the covenants and agreements in this Supplemental Trust Indenture contained by or on behalf of the Company or by or on behalf of the Trustee shall bind and inure to the benefit of the respective successors and assigns of such parties, whether so expressed or not. SECTION 5.06. (a) This Supplemental Trust Indenture may be simultaneously executed in several counterparts, and all said counterparts executed and delivered, each as an original, shall constitute but one and the same instrument. (b) The Table of Contents and the descriptive headings of the several Articles of this Supplemental Trust Indenture were formulated, used and inserted in this Supplemental Trust Indenture for convenience only and shall not be deemed to affect the meaning or construction of any of the provisions hereof. ---------------------------- The amount of obligations to be issued forthwith under the Indenture is $69,000,000. ---------------------------- 19 IN WITNESS WHEREOF, on this 15th day of August, A.D. 2002, NORTHERN STATES POWER COMPANY, a Minnesota corporation, party of the first part, has caused its corporate name and seal to be hereunto affixed and this Supplemental Trust Indenture dated July 1, 2002, to be signed by its President or a Vice President, and attested by its Secretary or an Assistant Secretary, for and in its behalf, and BNY MIDWEST TRUST COMPANY, an Illinois corporation, as Trustee, party of the second part, to evidence its acceptance of the trust hereby created, has caused its corporate name and seal to be hereunto affixed, and this Supplemental Trust Indenture dated July 1, 2002, to be signed by its President, a Vice President, or an Assistant Vice President, and attested by its Secretary or an Assistant Secretary, for and in its behalf. NORTHERN STATES POWER COMPANY ---------------------------------------- By: Paul E. Pender Its: Vice President and Treasurer Attest: - -------------------------------------- Nancy Haley Assistant Secretary Executed by Northern States Power Company in the presence of: - -------------------------------------- (CORPORATE SEAL) Mary Schell, Witness - -------------------------------------- Elizabeth Blohm, Witness BNY MIDWEST TRUST COMPANY, as Trustee ------------------------------------- By: J. Bartolini Its: Vice President Attest: - ------------------------------------- M. Callahan Assistant Vice President Executed by BNY Midwest Trust Company in the presence of: - ------------------------------------- (CORPORATE SEAL) K. Gibson, Witness - ------------------------------------- A. Hernandez, Witness STATE OF MINNESOTA ) ) ss.: COUNTY OF HENNEPIN ) On this 15th day of August A.D. 2002, before me, Sharon Quellhorst, a Notary Public in and for said County in the State aforesaid, personally appeared Paul E. Pender, and Nancy Haley, to me personally known, and to me known to be the Vice President and Treasurer and Assistant Secretary, respectively, of Northern States Power Company, one of the corporations described in and which executed the within and foregoing instrument, and who, being by me severally duly sworn, each for himself, did say that he, the said Paul E. Pender is a Vice President and Treasurer, and she, the said Nancy Haley is the Assistant Secretary, of said Northern States Power Company, a corporation; that the seal affixed to the within and foregoing instrument is the corporate seal of said corporation, and that said instrument was executed on behalf of said corporation by authority of its stockholders and board of directors; and said Paul E. Pender and Nancy Haley each acknowledged said instrument to be the free act and deed of said corporation and that such corporation executed the same. WITNESS my hand and notarial seal, this 15th day of August, A.D. 2002. (NOTARY SEAL) - ---------------------------------------- Sharon Quellhorst Notary Public My Commission Expires: January 31, 2005 STATE OF MINNESOTA ) ) ss.: COUNTY OF HENNEPIN ) Paul E. Pender and Nancy Haley, being severally duly sworn, each deposes and says that he, the said Paul E. Pender is Vice President and Treasurer, and she, the said Nancy Haley is Assistant Secretary, of Northern States Power Company, the corporation described in and which executed the within and foregoing Supplemental Trust Indenture, as mortgagor; and each for himself further says that said Supplemental Trust Indenture was executed in good faith, and not for the purpose of hindering, delaying, or defrauding any creditor of the said mortgagor. - --------------------------------- --------------------------------------- Paul E. Pender Nancy Haley Subscribed and sworn to before me this 15th day of August, A.D. 2002. (NOTARY SEAL) - --------------------------------- Sharon Quellhorst Notary Public My Commission Expires: January 31, 2005 STATE OF ILLINOIS ) ) ss.: COUNTY OF COOK ) On this _____ day of _______________, A.D. 2002, before me, L. Garcia, a Notary Public in and for said County in the State aforesaid, personally appeared J. Bartolini and M. Callahan to me personally known, and to me known to be the Vice President and Assistant Vice President, respectively, of BNY Midwest Trust Company, one of the corporations described in and which executed the within and foregoing instrument, and who, being by me severally duly sworn, each, did say that she, the said J. Bartolini, is Vice President, and she, the said M. Callahan, is the Assistant Vice President, of said BNY Midwest Trust Company, a corporation; that the seal affixed to the within and foregoing instrument is the corporate seal of said corporation, and that said instrument was executed on behalf of said corporation by authority of its board of directors; and said J. Bartolinli and M. Callahan each acknowledged said instrument to be the free act and deed of said corporation and that such corporation executed the same. WITNESS my hand and notarial seal, this _____ day of _______________, A.D. 2002. (NOTARY SEAL) - ------------------------------------ L. Garcia Notary Public My Commission Expires: July 8, 2006 STATE OF ILLINOIS ) ) ss.: COUNTY OF COOK ) J. Bartolini and M. Callahan, being severally duly sworn, each for himself deposes and says that she, the said J. Bartolini, is Vice President, and she, the said M. Callahan, is Assistant Vice President, of BNY Midwest Trust Company, the corporation described in and which executed the within and foregoing Supplemental Trust Indenture, as mortgagee; and each for himself further says that said Supplemental Trust Indenture was executed in good faith, and not for the purpose of hindering, delaying, or defrauding any creditor of the mortgagor. - ---------------------------------- -------------------------------------- J. Bartolini M. Callahan Subscribed and sworn to before me this __________ day of _______________, A.D. 2002. (NOTARY SEAL) - --------------------------------- L. Garcia Notary Public My Commission Expires: July 8, 2006 SCHEDULE A The property referred to in Article I of the foregoing Supplemental Trust Indenture from Northern States Power Company to BNY Midwest Trust Company, Trustee, made as of July 1, 2002 includes the following property hereinafter more specifically described. Such description, however, is not intended to limit or impair the scope or intention of the general description contained in the granting clauses or elsewhere in the Original Indenture. I. PROPERTIES IN THE STATE OF MINNESOTA The following described real property, situate, lying and being in the County of Hennepin, to-wit: 1. Lot 1, Block 1, Ceridian 2nd Addition, according to the recorded plat thereof, Hennepin County, Minnesota. Together with and subject to the easements filed with the Hennepin County Recorder's Office as Document Nos. 3714541, 6584907 and 6987085 to the extent such easements are appurtenant to the above-referenced real property. II. TRANSMISSION LINES OF THE COMPANY The electric transmission lines of the Company, including towers, poles, pole lines, wire, switch racks, switchboards, insulators, and other appliances and equipment, and all other property forming a part thereof or appertaining thereto, and all service lines extending therefrom; together with all rights for or relating to the construction, maintenance of operation thereof, through, over, under, or upon any private property of public streets or highways within as well as without the corporate limits of any municipal corporation, and particularly the following described lines, to-wit: IN THE STATE OF MINNESOTA Line 0808 0.56 Miles (U.G.) High Bridge-Rogers Lake-Airport-Bloomington-Wilson Hennepin Co., MN., Sec 36, T28N, R23W Line 5531 14.91 Miles Pipestone-Chanerambie Pipestone Co., MN., Sec 12, T106N, R46W Pipestone Co., MN., Sec's 4, 7, 8, 9, T106N, R45W Pipestone Co., MN., Sec's 33, 34, 35, 36, T107N, R45W Pipestone Co., MN., Sec's 31, 32, 33, 34, 35, 36, T107N, R44W Murray Co., MN., Sec 1, T106N, R43W Murray Co., MN., Sec 31, T105N, R43W Line 0832 8.68 Miles Black Dog-Burnsville-Lake Marion Waseca Co., MN., Sec 18, T107N, R22W A-1 Waseca Co., MN., Sec's 1, 12, 13, T107N, R23W Waseca Co., MN., Sec's 1, 12, 13, 24, 25, 36, T108 N, R23W Line 0832 7.28 Miles Black Dog-Burnsville-Lake Marion LeSueur Co., MN., Sec's 35, 36, T109N, R23W Rice Co., MN., Sec's 17, 20, 29, 30, T109N, R22W Line 0703 6.62 Miles Yankee Doodle-Northfield (Tap to Kegan Lake and Air Lake) Dakota Co., MN., Sec's 31, 32, 33, T114N, R20W Dakota Co., MN., Sec 36, T114N, R21W Scott Co., MN., Sec's 1, 12, 13, T113N, R21W ------------------------- This instrument was drafted by Northern States Power Company, 414 Nicollet Mall, Minneapolis, Minnesota 55401. Tax statements for the real property described in this instrument should be sent to Northern States Power Company, 414 Nicollet Mall, Minneapolis, Minnesota 55401. A-2 EX-4.10 9 c72574exv4w10.txt EX-4.10 FORM OF FIRST NOTES EXHIBIT 4.10 SENIOR CONVERTIBLE NOTE THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL IN A REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THIS NOTE. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE. XCEL ENERGY INC. Issuance Date: November 8, 2002 Principal: U.S. $ _________ FOR VALUE RECEIVED, XCEL ENERGY INC., a Minnesota corporation (the "COMPANY"), hereby promises to pay to the order of _____________ or registered assigns ("HOLDER") the amount set out above as the Principal (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the "PRINCIPAL") when due, whether upon the Final Maturity Date (as defined below), acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest ("INTEREST") on any outstanding Principal at the rate of eight percent (8%) per annum, subject to periodic adjustment pursuant to Section 2 (the "INTEREST RATE"), from the date set out above as the Issuance Date (the "ISSUANCE DATE") until the same becomes due and payable, whether upon an Interest Date (as defined below), the Final Maturity Date, acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof). This Convertible Note (including all Convertible Notes issued in exchange, transfer or replacement hereof, this "NOTE") is one of an issue of Convertible Notes (collectively, the "NOTES" and such other Convertible Notes, the "OTHER NOTES") issued on the Issuance Date pursuant to the Securities Purchase Agreement (as defined below). Certain capitalized terms are defined in Section 28 and terms used herein but not defined herein shall have the meanings set forth for such terms in the Securities Purchase Agreement. (1) MATURITY. On the Final Maturity Date, the Holder shall surrender this Note to the Company and the Company shall pay to the Holder an amount in cash representing all outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late Charges (as defined in Section 24(b)), if any. The "MATURITY DATE" shall be the date that is 364 days after the Issuance Date; provided that, if the Holder has given notice in writing to the Company of its desire to extend the Maturity Date on or prior to the date that is 10 Business Days prior to the Maturity Date, the Maturity Date shall be extended (on one or more occasions) for an additional 364 days; provided, further, that the Maturity Date shall not be extended (except as provided in the following proviso) to more than five years after the Issuance Date (such date that is five years after the Issuance Date or such earlier Maturity Date prior to which the Holder has not requested an extension thereof, the "FINAL MATURITY DATE"); and provided, further, that the Final Maturity Date may be extended at the option of the Holder (x) in the event that, and for so long as, an Event of Default (as defined in Section 4(a)) shall have occurred and be continuing or any event shall have occurred and be continuing which with the passage of time and the failure to cure would result in an Event of Default and (y) through the date that is ten days after a Change of Control Termination Date in the event that the Announcement Date giving rise to such Change of Control Termination Date occurred prior to the Final Maturity Date. (2) INTEREST; INTEREST RATE. Interest on this Note shall commence accruing on the Issuance Date and shall be computed on the basis of the actual days elapsed during any period, and a calendar year of 365 or 366 calendar days, as applicable, and shall be payable in cash on each May 1 and each November 1 during the period beginning on the Issuance Date and ending on, and including, the Final Maturity Date (each an "INTEREST DATE"); provided that interest on any Conversion Amount of this Note that is accrued but unpaid as of the Conversion Date of such Conversion Amount shall be paid in shares of Common Stock at the Conversion Rate. From and after the occurrence of an Event of Default (as defined in Section 4(a)) or the failure to deliver timely the Non-Consolidation Opinion (as defined in the Securities Purchase Agreement) pursuant to Section 4(f) of the Securities Purchase Agreement (the "NRG OPINION"), the Interest Rate shall be increased by two percentage points (2%). In the event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided that the Interest as calculated at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of cure of such Event of Default. If the Company shall fail to credit the Holder's balance account with DTC (as defined in Section 3(c)(i)) or, if requested in writing by the Holder, to issue a certificate to the Holder for the number of shares of Common Stock to which the Holder is entitled upon conversion of any Conversion Amount or to issue a new Note (in accordance with Section 18(d)) representing the Principal portion of the Conversion Amount (as defined in Section 3(b)(i)) to which the Holder is entitled, in each case within the time periods set out in Section 3(c)(i) (in each case, a "CONVERSION FAILURE"), then during each period beginning on and including the date of each such Conversion Failure and ending on and including the date such Conversion Failure is cured, the Interest Rate then in effect shall be increased by two percentage points (2%). If (i) the Registration Statement (as defined in the Registration Rights Agreement) covering all the Registrable Securities (as defined in the Registration Rights Agreement) issuable upon conversion of this Note and required to be filed by 2 the Company pursuant to the Registration Rights Agreement is not declared effective by the Securities and Exchange Commission (the "SEC") on or before the applicable Mandatory Effective Date (as defined in the Registration Rights Agreement) or (ii) on any day after such Registration Statement has been declared effective by the SEC that sales of all the Registrable Securities required to be included on such Registration Statement cannot be made (other than during an Allowable Grace Period (as defined in Section 3(t) of the Registration Rights Agreement)) pursuant to such Registration Statement (including, without limitation, because of a failure to keep such Registration Statement effective, to disclose such information as is necessary for sales to be made pursuant to such Registration Statement or to register sufficient shares of Common Stock) (collectively with the event described in the immediately preceding clause (i), each a "REGISTRATION FAILURE"), then, as partial relief for the damages to any holder by reason of any such delay in or reduction of its ability to sell Registrable Securities (which remedy shall not be exclusive of any other remedies available at law or in equity) the Interest Rate then in effect shall be increased by two percentage points (2%) during each period beginning on and including the first date of each such Registration Failure and ending on and including the date such Registration Failure is cured. (3) CONVERSION OF NOTES. This Note shall be convertible into shares of the Common Stock, on the terms and conditions set forth in this Section 3. (a) Conversion Right. Subject to the provisions of Section 3(d), at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount. (b) Conversion Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (as defined below) (the "CONVERSION RATE"). (i) "CONVERSION AMOUNT" means the sum of (A) the portion of the Principal to be converted, redeemed or otherwise surrendered with respect to which this determination is being made, (B) accrued and unpaid Interest with respect to such Principal and (C) accrued and unpaid Late Charges with respect to such Principal and Interest. (ii) "CONVERSION PRICE" means 110% of the arithmetic average of the Weighted Average Price of the Common Stock during the Tranche A Pricing Period; provided that the Conversion Price (i) shall not exceed 110% of the Tranche A Base Price and (ii) shall equal the Company Optional Redemption Conversion Price until such time as the Tranche A Pricing Period has concluded; provided further, that in the event that the Company has not delivered a Company Optional Redemption Notice as of the date that is 3 35 Business Days after the Issuance Date and 110% of the Closing Bid Price of the Common Stock on such date is less than the Conversion Price then in effect, then the Conversion Price shall be reduced to equal such price. (c) Mechanics of Conversion. (i) Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a "CONVERSION DATE"), the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., Central Time on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the "CONVERSION NOTICE") to the Company and (B) if required by Section 3(c)(ii), surrender this Note to a common carrier for delivery to the Company as soon as practicable on or following such date (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction). On or before the first Business Day following the Company's receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Conversion Notice to the Holder and the Transfer Agent (as defined below). On or before the second Business Day following the date of receipt of a Conversion Notice (the "SHARE DELIVERY DATE"), the Company shall (X) (if (Y) below does not apply) issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled, or (Y) provided that the Company's transfer agent (the "TRANSFER AGENT") is participating in The Depository Trust Company ("DTC") Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder's or its designee's balance account with DTC through its Deposit Withdrawal Agent Commission system. If this Note is physically surrendered for conversion as required by Section 3(c)(ii) and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three Business Days after receipt of this Note (the "NOTE DELIVERY DATE") and at its own expense, issue and deliver to the holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal not converted. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date. (ii) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting physical surrender and reissue of this Note. The Holder and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion. 4 (iii) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of the Notes or the Separate Tranche Notes for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes and the Separate Tranche Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from each holder of the Notes and the Separate Tranche Notes electing to have the Notes or Separate Tranche Notes converted on such date a pro rata amount of such holder's portion of its Notes or Separate Tranche Notes submitted for conversion based on the principal amount of the Notes or Separate Tranche Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all the Notes and the Separate Tranche Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 23. (d) Limitations on Conversions. (i) Beneficial Ownership. The Company shall not effect any conversion of this Note, and the Holder of this Note shall not have the right to convert any portion of this Note pursuant to Section 3(a), to the extent that after giving effect to such conversion, the Holder (together with the Holder's affiliates) would beneficially own in excess of 5.0% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any Other Notes, Separate Tranche Notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this Section 3(d)(i), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company's most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its affiliates since the 5 date as of which such number of outstanding shares of Common Stock was reported. (ii) Principal Market Regulation. The Company shall not be obligated to issue any shares of Common Stock pursuant to this Note if the issuance of such shares of Common Stock would exceed that number of shares of Common Stock which the Company may issue pursuant to the Notes and the Separate Tranche Notes without breaching the Company's obligations under the rules or regulations of the Principal Market (the "EXCHANGE CAP"), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its shareholders as required by the applicable rules of the Principal Market for issuances of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the holders of the Notes and the Separate Tranche Notes representing a majority of the principal amounts of the Notes and the Separate Tranche Notes (voting as a single class) then outstanding. Until such approval or written opinion is obtained, no purchaser of the Notes or the Separate Tranche Notes pursuant to the Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon conversion of the Notes or the Separate Tranche Notes, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the principal amount of the Notes and the Separate Tranche Notes issued to such Purchaser pursuant to the Securities Purchase Agreement as of the date of such determination and the denominator of which is the aggregate principal amount of all the Notes and the Separate Tranche Notes issued to the Purchasers pursuant to the Securities Purchase Agreement as of the date of such determination (with respect to each Purchaser, the "EXCHANGE CAP ALLOCATION"). In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser's Notes or Separate Tranche Notes, the transferee shall be allocated a pro rata portion of such Purchaser's Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any holder of the Notes or the Separate Tranche Notes shall convert all of such holder's Notes or Separate Tranche Notes into a number of shares of Common Stock which, in the aggregate, is less than such holder's Exchange Cap Allocation, then the difference between such holder's Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of the Notes and the Separate Tranche Notes on a pro rata basis in proportion to the aggregate principal amount of the Notes and the Separate Tranche Notes then held by each such holder. (4) RIGHTS UPON EVENT OF DEFAULT. (a) Event of Default. Each of the following events shall constitute a "EVENT OF DEFAULT": (i) the failure of the Registration Statement covering all Registrable Securities (as defined in the Registration Rights Agreement) required to be registered pursuant to the Registration Rights Agreement to be declared effective by the SEC on or prior to the date that is 180 days after the Issuance Date, or, while such Registration Statement is required 6 to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of such Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to any holder of the Notes for sale of all of such holder's Registrable Securities in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of five consecutive Business Days or for more than an aggregate of 20 Business Days in any 365-day period; (ii) the suspension from trading on the Principal Market for a period of three consecutive Business Days or for more than an aggregate of three Business Days in any 30-day Trading Day period or the delisting of the Common Stock from the Principal Market; (iii) the Company's (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock or a new Note (in accordance with section 18(d)), as applicable, within 10 days after the receipt by the Company of a Conversion Notice or (B) notice, written or oral, to any holder of the Notes, including by way of public announcement or through any of its agents, at any time, of its intention not to comply with a request for conversion of any Notes into shares of Common Stock that is tendered in accordance with the provisions of the Notes; (iv) the Company's failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as due under this Note, the Securities Purchase Agreement, the Registration Rights Agreement or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby to which the Holder is a party; (v) any default under, redemption of or acceleration prior to maturity of any Indebtedness (as defined in Section 3(r) of the Securities Purchase Agreement) of the Company or any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase Agreement) other than NRG (as defined below) (including, without limitation, the Other Notes) of at least $50,000,000; (vi) the Company or any of its Subsidiaries other than NRG (as defined below), pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal or state law for the relief of debtors (collectively, "BANKRUPTCY LAW"), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a "CUSTODIAN"), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due; (vii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company or any of its Subsidiaries other than NRG (as defined below) in an involuntary case, (B) appoints a Custodian of the Company or any of its Subsidiaries other than NRG (as defined below) or (C) orders the liquidation of the Company or any of its Subsidiaries other than NRG (as defined below); or 7 (viii) the Company breaches any representation, warranty, covenant (other than any covenant to deliver the NRG Opinion) or other term or condition of the Securities Purchase Agreement, the Registration Rights Agreement, this Note or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated thereby and hereby to which the Holder is a party, except, in the case of a breach of a covenant which is curable, only if such breach continues for a period of at least 10 consecutive days. (b) Redemption Right. Promptly after the occurrence of an Event of Default with respect to this Note or the Other Notes, the Company shall deliver written notice thereof via facsimile and overnight courier (a "EVENT OF DEFAULT NOTICE") to the Holder. At any time after the earlier of the Holder's receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (the "EVENT OF DEFAULT REDEMPTION NOTICE") to the Company, which Event of Default Redemption Notice shall indicate the portion of this Note the Holder is electing to redeem. Each portion of this Note subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed by the Company at a price equal to the greater of (i) the product of (x) the Conversion Amount and (y) the quotient determined by dividing (A) the Closing Sale Price of the Common Stock immediately prior to such Event of Default by (B) the Conversion Price and (ii) the product of (x) the Conversion Amount and (y) the Redemption Premium (the "EVENT OF DEFAULT REDEMPTION PRICE"). Redemptions required by this Section 4(b) shall be made in accordance with the provisions of Section 10. (5) RIGHTS UPON CHANGE OF CONTROL. (a) Change of Control. Each of the following events shall constitute a "CHANGE OF CONTROL": (i) the consolidation, merger or other business combination (including, without limitation, a reorganization or recapitalization) of the Company with or into another Person in which holders of the Company's voting power immediately prior to the transaction cease after the transaction to hold, directly or indirectly, a majority of the voting power of the surviving entity or entities or the voting power necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities; (ii) the sale or transfer of all or substantially all of the Company's assets; or (iii) a purchase, tender or exchange offer made to and accepted by the holders of more than the 50% of the outstanding shares of Common Stock. (b) Assumption. Prior to the consummation of any Change of Control, the Company will secure from any Person purchasing the Company's assets or Common Stock or any successor resulting from such Change of Control (in each case, an "ACQUIRING ENTITY") a written agreement (in form and substance satisfactory to the holders of Notes representing a 8 majority of the aggregate principal amount of the Notes then outstanding) to deliver to each holder of Notes in exchange for such Notes, a security of the Acquiring Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including, without limitation, having a principal amount and interest rate equal to the principal amounts and the interest rates of the Notes held by such holder, and satisfactory to the holders of Notes representing a majority of the principal amount of the Notes then outstanding. In the event that an Acquiring Entity is directly or indirectly controlled by a company or entity whose common stock or similar equity interest is listed, designated or quoted on a securities exchange or trading market, the holders of notes representing a majority of the aggregate principal amount of the Notes then outstanding may elect to treat such Person as the Acquiring Entity for purposes of this Section 5(b). (c) Redemption Right. No sooner than 15 days nor later than 10 days prior to the consummation of a Change of Control, but not prior to the public announcement of such Change of Control, the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a "CHANGE OF CONTROL NOTICE"). At any time on or after consummation of such Change of Control, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof ("CHANGE OF CONTROL REDEMPTION NOTICE" and, collectively with an Event of Default Redemption Notice, "REDEMPTION NOTICES" and, individually, each a "REDEMPTION NOTICE") to the Company, which Change of Control Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this Section 5(c) shall be redeemed by the Company at a price equal to the greater of (i) the product of (x) the Conversion Amount and (y) the quotient determined by dividing (A) the Closing Sale Price of the Common Stock immediately following the public announcement of such proposed Change of Control by (B) the Conversion Price and (ii) 115% of the Conversion Amount (the "CHANGE OF CONTROL REDEMPTION PRICE" and, together with the Event of Default Redemption Price, the "REDEMPTION PRICE"). Redemptions required by this Section 5(c) shall be made in accordance with the provisions of Section 10 and shall have priority to payments to other shareholders in connection with a Change of Control. (6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS. (a) Purchase Rights. If at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or restrictions on the convertibility of this Note) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. 9 (b) Other Corporate Events. Prior to the consummation of any recapitalization, reorganization, consolidation, merger or other business combination (other than a Change of Control) pursuant to which holders of Common Stock are entitled to receive securities or other assets with respect to or in exchange for Common Stock (a "CORPORATE EVENT"), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Note, (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the holders of Notes representing a majority of the aggregate principal amount of the Notes then outstanding. (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES. (a) Adjustment of Conversion Price upon Issuance of Common Stock. If and whenever on or after the Issuance Date, the Company issues or sells, or in accordance with this Section 7(a) is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding shares of Common Stock deemed to have been issued or sold by the Company (I) in connection with the Xcel Energy Direct Purchase Plan or any employee benefit plan which has been approved by the Board of Directors of the Company or any of its Subsidiaries, pursuant to which the Company's securities may be issued to any employee, officer or director for services provided to the Company or its Subsidiaries (each, an "APPROVED STOCK PLAN") or (II) upon conversion of the Notes or the Separate Tranche Notes) for a consideration per share less than the higher of the Closing Sale Price of the Common Stock on the date of such issuance or sale or deemed issuance or sale and the Conversion Price in effect immediately prior to such issuance or sale or deemed issuance or sale (such higher price is referred to herein as the "APPLICABLE PRICE"), then immediately after such issue or sale (subject to Section 7(a)(vi)), the Conversion Price then in effect shall be reduced to an amount equal to the product of (x) the Conversion Price in effect immediately prior to such issue or sale or deemed issuance or sale and (y) the quotient determined by dividing (1) the sum of the product of the Applicable Price and the number of shares of Common Stock Deemed Outstanding immediately prior to such issue or sale or deemed issue or sale and the consideration, if any, received by the Company upon such issue or sale, by (2) the product of the Applicable Price multiplied by the number of shares of Common Stock Deemed Outstanding immediately after such issue or sale or deemed issue or sale. For purposes of determining the adjusted Conversion Price under this Section 7(a), the following shall be applicable: (i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the 10 exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 7(a)(i), the "lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of the Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities. If the Company issues or sells any Options which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Securities, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock or Convertible Securities upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the exercise price a price which does not vary with the market price of the Common Stock. (ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon such conversion, exercise or exchange thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance of sale of such Convertible Securities for such price per share. For the purposes of this Section 7(a)(ii), the "price per share for which one share of Common Stock is issuable upon such conversion, exercise or exchange" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the issuance or sale of the Convertible Security and upon the conversion, exercise or exchange of such Convertible Security. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price had been or are to be made pursuant to other provisions of this Section 7(a), no further adjustment of the Conversion Price shall be made by reason of such issue or sale. If the Company issues or sells any Convertible Securities which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Security, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the conversion, exercise or exchange price a price which does not vary 11 with the market price of the Common Stock. (iii) Change in Option Price or Rate of Conversion. If the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Issuance Date are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change. No adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect. (iv) Calculation of Consideration Received. In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for a consideration of $.01. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Company therefor. If any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Closing Sale Price of such securities on the date of receipt. If any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the holders of Notes representing a majority of the principal amounts of the Notes then outstanding. If such parties are unable to reach agreement within ten days after the occurrence of an event requiring valuation (the "VALUATION EVENT"), the fair value of such consideration will be determined within five Business Days after the tenth day following the Valuation Event by an independent, reputable appraiser jointly selected by the Company and the holders of Notes representing a majority of the principal amounts of the Notes then outstanding. The determination of such appraiser shall be deemed binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company. 12 (v) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (vi) Common Stock Deemed Outstanding. "COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii) hereof regardless of whether the Options or Convertible Securities are actually exercisable at such time, but excluding any shares of Common Stock owned or held by or for the account of the Company or issuable upon conversion of the Notes or the Separate Tranche Notes. (vii) Delayed Adjustment. In addition to the foregoing provisions of this Section 7(a), the Weighted Average Price, Closing Sales Price and Closing Bid Price shall be subject to adjustment, in accordance with the foregoing provisions, for any days during any measuring period, including, without limitation, the Tranche A Pricing Period, used herein that occur prior to any of the aforementioned events if such events occur prior to the end of such measuring period. (b) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. If the Company at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. (c) Other Events. If any event occurs of the type contemplated by the provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company's Board of Directors will make an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder under this Note; provided that no such adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 7. (8) NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of, or enter into any agreement which by its terms restricts or otherwise impairs the 13 Company's performance of the terms of, this Note or any of the other Transaction Documents (as defined in the Securities Purchase Agreement), and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note. (9) RESERVATION OF AUTHORIZED SHARES. (a) Reservation. The Company shall initially reserve out of its authorized and unissued Common Stock a number of shares of Common Stock for each of the Notes and the Separate Tranche Notes equal to 115% of the Conversion Rate with respect to the Conversion Amount of each such Note and Separate Tranche Note. Thereafter, the Company shall, so long as any of the Notes or Separate Tranche Notes are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Notes and Separate Tranche Note, at least 100% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Notes and the Separate Tranche Notes then outstanding; provided that at no time shall the number of shares of Common Stock so reserved be less than the number of shares required to be reserved by the previous sentence (without regard to any limitations on conversions) (the "REQUIRED RESERVE AMOUNT"). The initial number of shares of Common Stock reserved for conversions of the Notes and the Separate Tranche Note and each increase in the number of shares so reserved shall be allocated pro rata among the holders of the Notes and Separate Tranche Note based on the principal amount of the Notes and Separate Tranche Notes held by each holder at the time of Issuance Date or increase in the number of reserved shares, as the case may be (the "AUTHORIZED SHARE ALLOCATION"). In the event that a holder shall sell or otherwise transfer any of such holder's Notes, each transferee shall be allocated a pro rata portion of such holder's Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Notes shall be allocated to the remaining holders of Notes, pro rata based on the principal amount of the Notes then held by such holders. (b) Insufficient Authorized Shares. If at any time while any of the Notes or Separate Tranche Note remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes and the Separate Tranche Notes at least a number of shares of Common Stock equal to the Required Reserve Amount (an "AUTHORIZED SHARE FAILURE"), then the Company shall immediately take all action necessary to increase the Company's authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Notes and Separate Tranche Note then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than 60 days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its shareholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each shareholder with a proxy statement and shall use its best efforts to solicit its shareholders' approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the shareholders that they approve such proposal. 14 (10) REDEMPTION. (a) Mechanics. In the event that the Holder has sent a Redemption Notice to the Company pursuant to Section 4(b) or Section 5(c), the Holder shall promptly submit this Note to the Company. The Company shall deliver the applicable Event of Default Redemption Price to the Holder within five Business Days after the Company's receipt of the Holder's Event of Default Redemption Notice and thereafter the Holder shall promptly deliver this Note to the Company. If the Holder has submitted a Change of Control Redemption Notice in accordance with Section 5(c), the Company shall deliver the applicable Change of Control Redemption Price to the Holder concurrently with the consummation of such Change of Control if such notice is received prior to the consummation of such Change of Control and within five Business Days after the Company's receipt of such notice otherwise. In the event of a redemption of less than all of the Conversion Amount of this Note, the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal which has not been redeemed. In the event that the Company does not pay the Redemption Price to the Holder within the time period required above in this Section 10(a) at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder shall have the option to, in lieu of redemption, require the Company to promptly return to the Holder all or any portion of this Note representing the Conversion Amount that was submitted for redemption and for which the applicable Redemption Price (together with any Late Charges thereon) has not been paid. Upon the Company's receipt of such notice, (x) the Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company shall immediately return this Note, or issue a new Note (in accordance with Section 18(d)) to the Holder representing such Conversion Amount and (z) the Conversion Price of this Note or such new Notes shall be adjusted to the lesser of (A) the Conversion Price as in effect on the date on which the Redemption Notice is voided and (B) the lowest Closing Bid Price during the period beginning on and including the date on which the Redemption Notice is delivered to the Company and ending on and including the date on which the Redemption Notice is voided. The Holder's delivery of a notice voiding a Redemption Notice and exercise of its rights following such notice shall not affect the Company's obligations to make any payments of Late Charges which have accrued prior to the date of such notice with respect to the Conversion Amount subject to such notice. (b) Redemption by Other Holders. Upon the Company's receipt of notice from any of the holders of the Other Notes or the Separate Tranche Notes for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 4(b) or Section 5(c) (each an "OTHER REDEMPTION NOTICE"), the Company shall immediately forward to the Holder by facsimile a copy of such notice. If the Company receives a Redemption Notice and one or more Other Redemption Notices during the seven Business Day period beginning on and including the date which is three Business Days prior to the Company's receipt of the Holder's Redemption Notice and ending on and including the date which is three Business Days after the Company's receipt of the Holder's Redemption Notice and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice and such Other Redemption Notices received during such seven Business Day period, then the Company shall redeem a pro rata amount from each holder of the Notes and the Separate Tranche Notes (including the Holder) based on the principal amount of 15 the Notes and the Separate Tranche Notes submitted for redemption pursuant to such Redemption Notice and such Other Redemption Notices received by the Company during such seven Business Day period. (c) Redemption at the Option of the Company. (i) Except as provided in this Section 10(c) or in connection with the satisfaction by the Company of its obligations to redeem the Notes under Sections 4(b) and 5(c) hereof, without the prior written consent of the Holder the Company shall not have the right to prepay, redeem, repurchase, defease or otherwise retire any Note prior to the Maturity Date. (ii) Provided the Company has consummated a Qualified 144A Offering at any time during the Company Optional Redemption Period, the Company may deliver an irrevocable written notice to the Holder and the Transfer Agent (the "COMPANY OPTIONAL REDEMPTION NOTICE") within one (1) Business Day after consummation of the Qualified 144A Offering, indicating that the Company has elected to redeem, and is requiring the Holder to submit for redemption, in whole but not in part, the outstanding Principal of this Note plus accrued Interest thereon for the Company Optional Redemption Consideration (a "COMPANY OPTIONAL REDEMPTION"). The Company Optional Redemption Notice shall be sent by facsimile and overnight courier to the Holder and shall indicate (x) the date fixed for redemption, which shall be five (5) Business Days after the expiration of the Company Optional Redemption Period (the "COMPANY OPTIONAL REDEMPTION DATE") and (y) the place or places where this Note is to be surrendered for payment of the Company Optional Redemption Consideration. If the Company has elected a Company Optional Redemption, the Company shall on the Company Optional Redemption Date (A) deliver the Non-Cash Optional Redemption Consideration to the Holder at the Holder's address and (B) pay to the Holder the Cash Optional Redemption Consideration, by wire transfer of immediately available funds to an account designated in writing by such Holder. (11) RESTRICTION ON REDEMPTION. Until all of the Notes have been converted, redeemed or otherwise satisfied in accordance with their terms, the Company shall not, directly or indirectly, redeem its capital stock without the prior express written consent of the holders of Notes representing at least two-thirds of the aggregate principal amount of the Notes then outstanding. (12) SUBORDINATION; ADDITIONAL INDEBTEDNESS. Payments of Principal and Interest and other payments due under this Note shall rank pari passu in right of payment with all (and shall not be subordinated to any) unsecured, unsubordinated indebtedness of the Company and will be senior in right of payment to all subordinated indebtedness of the Company. (13) COVENANTS. (a) Indebtedness. The Company shall not create, incur, assume, guarantee or suffer to exist, or otherwise become or remain liable with respect to, any Indebtedness other than Permitted Indebtedness and Subordinated Indebtedness. "Subordinated Indebtedness" shall mean Indebtedness that is unsecured and subordinated in right of payment to 16 the Notes and other obligations owing to the Holders in accordance with a subordination agreement in form and substance satisfactory to the Holders. "Permitted Indebtedness" shall mean any Indebtedness that is unsecured and is not senior in right of payment to the Notes and is otherwise on terms that are no more favorable to the holders thereof than the terms of the Indebtedness evidenced by the Notes unless such more favorable terms are offered to the Holders. (b) Liens. The Company shall not create, incur, assume or suffer to exist, or permit any of its Subsidiaries (other than NRG Energy Inc. or its subsidiaries (collectively, "NRG")) to create, incur, assume or suffer to exist, any Lien upon or with respect to any of its properties, whether now owned or hereafter acquired; sign or suffer to exist any security agreement authorizing any secured party thereunder to file a Uniform Commercial Code financing statement (or the equivalent thereof) as notice of a Lien on any property of the Company or its Subsidiaries; sell any of its property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable) with recourse to it or any of its Subsidiaries or assign or otherwise transfer, or permit any of its Subsidiaries (other than the Existing Utility Subsidiaries (as defined in the Bank Facility)) to assign or otherwise transfer, any account or other right to receive income; other than, as to all of the above, Permitted Liens. As used herein, "Permitted Liens" shall have the meaning of that term as defined in the Five-Year Credit Agreement, dated as of November 10, 2000, among the Company and the banks listed therein (as the same maybe amended from time to time, the "BANK FACILITY"). As used herein, "Liens" means any mortgage, deed of trust, pledge, lien (statutory or otherwise), security interest, charge or other encumbrance or security or preferential arrangement of any nature, including, without limitation, any conditional sale or title retention arrangement, any capitalized lease and any assignment, deposit arrangement or financing lease intended as, or having the effect of, security. (c) Transactions With Affiliates. The Company shall not, and shall not permit any Subsidiary to, directly or indirectly, effect any transaction with any Affiliate (as defined in the Bank Facility) that is (a) outside the ordinary course of business or (b) on a basis less favorable than would at the time be obtainable for a comparable transaction in arms-length dealing with an unrelated third party, provided that notwithstanding the foregoing, no loan, payment or other form of contribution shall be made to NRG unless it is in an amount not in excess of (i) $300 Million payable pursuant to the Support Agreement and Capital Subscription Agreement, dated as of May 29, 2002, by and between the Company and NRG Energy Inc. and (ii) $250 Million in respect of guarantee obligations relating to the power marketing business of NRG; provided further that with respect to any payment permitted pursuant to clause (ii) above, the Company shall, in the context of a restructuring of NRG, use its reasonable best efforts to obtain a full release of all obligations and liabilities of the Company relating to NRG. (d) Leverage Ratio. The Company shall not permit the Leverage Ratio set forth in the Bank Facility to be exceeded. (e) Restrictive Agreements. The Company shall not, and shall not permit any Significant Subsidiary (as defined in the Bank Facility) other than NRG to, enter into any agreement after the date of this Note that imposes any restriction on the ability of such Significant Subsidiary to make payments, directly or indirectly, to its shareholders by way of 17 dividends, advances, repayment of loans or intercompany charges, expenses or accruals or other returns on investments that is more restrictive than any such restriction applicable to such Significant Subsidiary on the Issuance Date. (f) Scope of Business. The Company shall, and shall cause each Subsidiary to, engage only in energy-related business, functionally related businesses (as interpreted under PUHCA, as defined in the Securities Purchase Agreement) or such other businesses as maybe permitted pursuant to an order issued by the SEC pursuant to PUHCA. (14) VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law, including but not limited to the Minnesota Business Corporation Act, and as expressly provided in this Note. (15) PARTICIPATION. The Holder, as the holder of this Note, shall be entitled to (i) all extraordinary or special dividends paid and distributions made to the holders of Common Stock to the same extent as if the Holder had converted this Note into Common Stock (without regard to any limitations on conversion herein or elsewhere) and had held such shares of Common Stock on the record date for such dividends and distributions and (ii) regular cash dividends and distributions paid to the holders of the Common Stock only with respect to that portion of such dividends that exceeds $0.1875 per share of Common Stock in any calendar quarter (subject to adjustment for stock splits, stock dividends, stock combinations and other similar transactions after the Issuance Date). Payments under the preceding sentence shall be made concurrently with the dividend or distribution to the holders of Common Stock. (16) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote at a meeting duly called for such purpose or the written consent without a meeting, of the holders of Notes representing not less than two-thirds of the aggregate principal amount of the then outstanding Notes, shall be required for any change or amendment to this Note or the Other Notes. (17) TRANSFER. This Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 2(f) of the Securities Purchase Agreement. (18) REISSUANCE OF THIS NOTE. (a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 18(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Note (in accordance with Section 18(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 3(c)(iii) and this Section 18(a), following conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the 18 Principal stated on the face of this Note. (b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal. (c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 18(d) and in principal amounts of at least $100,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender. (d) Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section 18(a) or Section 18(c), the Principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued Interest and Late Charges on the Principal and Interest of this Note, from the Issuance Date. (19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, the Securities Purchase Agreement and the Registration Rights Agreement, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder's right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. (20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection or enforcement or is 19 collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors' rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including but not limited to attorneys fees and disbursements. (21) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and all the Purchasers and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note. (22) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. (23) DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Redemption Price or the arithmetic calculation of the Conversion Rate or the Redemption Price or any other calculation hereunder, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within one Business Day of receipt of the Conversion Notice or Redemption Notice giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Conversion Rate within one Business Day of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within one Business Day submit via facsimile (a) the disputed determination of the Weighted Average Price, the Closing Bid Price or the Closing Sale Price or any other calculation hereunder to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Rate or the Redemption Price to the Company's independent, outside accountant. The Company, at the Company's expense, shall cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than five Business Days from the time it receives the disputed determinations or calculations. Such investment bank's or accountant's determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error. (24) NOTICES; PAYMENTS. (a) Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such 20 adjustment and (ii) at least twenty days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grants, issues or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to holders of Common Stock or (C) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to such holder. Notwithstanding the foregoing, Section 4(j) of the Securities Purchase Agreement shall apply to all notices given pursuant to this Note. (b) Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Purchasers (as defined in Section 3(d)(ii)), shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder's wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any Interest Date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of Interest due on such date. Any amount of Interest, Principal or other amount due under the Transaction Documents (as defined in the Securities Purchase Agreement) which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of 12% per annum from the date such amount was due until the same is paid in full ("LATE CHARGE"). (25) CANCELLATION. After all Principal, accrued Interest and other amounts at any time owed on this Note has been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued. (26) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement. (27) GOVERNING LAW. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois. 21 (28) CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings: (a) "BUSINESS DAY" means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed. (b) "CASH OPTIONAL REDEMPTION CONSIDERATION" means an amount in cash equal to the greater of (i) 102% of the Conversion Amount of the Note being redeemed in the Company Optional Redemption and (ii) the sum of (A) the product determined by multiplying the Conversion Amount of the Note being redeemed in the Company Optional Redemption by a quotient determined by dividing (X) the Closing Bid Price of the Common Stock on the date of delivery of the Company Optional Redemption Notice by (Y) the Company Optional Redemption Conversion Price and (B) 12% of the Conversion Amount of the Note being redeemed in the Company Optional Redemption; provided, however, that in the event that the Company Optional Redemption Notice is delivered on or after the date that is 10 Business Days after the execution of the Securities Purchase Agreement, the Holder shall have the option, upon delivery of written notice thereof to the Company at any time prior to the Company Optional Redemption Date, to receive in lieu of all or any portion of the Cash Optional Redemption Consideration a number of shares of Common Stock not to exceed the Company Optional Redemption Conversion Shares, in which event the Cash Optional Redemption Consideration shall be reduced by an amount equal to the product determined by multiplying (I) the number of shares of Common Stock the Holder has elected to receive and (II) the Company Optional Redemption Conversion Price. (c) "CHANGE OF CONTROL TERMINATION DATE" shall mean, with respect to any proposed Change of Control for which a public announcement that it proposes or intends to effect a Change of Control of the Company (the date of such announcement, the "ANNOUNCEMENT DATE") has been made, the date upon which the Company or other Person proposing to effect such Change of Control consummates or publicly announces the termination or abandonment of the proposed Change of Control which was the subject of the previous public announcement. (d) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on The New York Stock Exchange, Inc. (the "PRINCIPAL MARKET") as reported by Bloomberg Financial Markets ("BLOOMBERG"), or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m. Eastern Time as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, 22 the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 23. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during any applicable calculation period. (e) "COMMON STOCK" means (i) the Company's common stock, par value $2.50 per share, and (ii) any capital stock resulting from a reclassification of such Common Stock. (f) "COMPANY OPTIONAL REDEMPTION CONVERSION PRICE" shall mean 110% of the arithmetic average of the Weighted Average Price of the Common Stock for each of the Trading Days during the Tranche A Pricing Period through the date the Company delivers to the Holder the Company Optional Redemption Notice, but in no event shall the Company Optional Redemption Conversion Price exceed, and prior to the commencement of the Tranche A Pricing Period it shall equal, the Tranche A Base Price. (g) "COMPANY OPTIONAL REDEMPTION CONVERSION SHARES" shall mean that number of shares of Common Stock determined by dividing (i) the Conversion Amount of the Note being redeemed in the Company Optional Redemption by (ii) the Company Optional Redemption Conversion Price. (h) "COMPANY OPTIONAL REDEMPTION PERIOD" means the period commencing on the Business Day immediately following the Issuance Date and ending on and including the date that is 35 Business Days after the execution of the Securities Purchase Agreement. (i) "COMPANY OPTIONAL REDEMPTION CONSIDERATION" means the Non-Cash Optional Redemption Consideration plus the Cash Optional Redemption Consideration. (j) "NON-CASH OPTIONAL REDEMPTION CONSIDERATION" means a legally binding written agreement executed and delivered by the Company to the Holder, duly authorized by all necessary corporate action on the part of the Company and otherwise in form and substance reasonably satisfactory to the Holder, exercisable by the Holder at any time and from time to time during the one-year period commencing on the Company Optional Redemption Date and ending on the one-year anniversary thereafter, granting the Holder the right to purchase securities that are identical (other than as to the issuance date and other than that the Company shall be required to issue these securities to the Holder in a valid private placement) to the securities issued in the Qualified 144A Offering in an aggregate principal amount that does not exceed such Holder's pro rata portion (based on the Principal amount of this Note on the Issuance Date out of the total aggregate principal amount of all Notes issued by 23 the Company on the Issuance Date) of 25% of the aggregate principal amount of securities issued by the Company in the Qualified 144A Offering. (k) "PERSON" means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof. (l) "QUALIFIED 144A OFFERING" shall mean an underwritten offering by the Company of debt securities of the Company that are convertible into Common Stock, with an effective conversion premium (as defined in Section (d)(3)(i) of Rule 144A of the Securities Act of 1933, as amended ("RULE 144A")) of not less than 10%, with such offering to be conducted either pursuant to Rule 144A or pursuant to a registered offering of such securities, in either case led by Merrill Lynch & Co. and yielding gross unrestricted cash proceeds to the Company of not less than $150 million. (m) "REDEMPTION PREMIUM" means (i) in the case of the Events of Default described in Section 4(a)(i), (ii), (iii), (iv) and (viii), 115% or (ii) in the case of the Events of Default described in Section 4(a)(v) - (vii), 100%. (n) "REGISTRATION RIGHTS AGREEMENT" means that certain registration rights agreement between the Company and the initial holders of the Notes relating to the registration of the resale of the shares of Common Stock issuable upon conversion of the Notes. (o) "SECURITIES PURCHASE AGREEMENT" means that certain securities purchase agreement between the Company and the initial holders of the Notes pursuant to which the Company issued the Notes. (p) "SEPARATE TRANCHE NOTES" means the Second Notes, First Call Notes, Second Call Notes, Third Notes and the Third Call Notes, collectively. (q) "TRADING DAY" means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that "Trading Day" shall not include any day on which the Common Stock is scheduled to trade on such exchange or market or actually trades on such exchange or market for less than 4.5 hours. (r) "TRANCHE A BASE PRICE" means $10.54 (subject to adjustments for stock splits, stock dividends, stock combinations and similar transactions). (s) "TRANCHE A PRICING PERIOD" means the twenty consecutive Trading Days commencing on the fifth Trading Day immediately following the Issuance Date. (t) "VARIABLE SECURITIES" means any stock or securities other than Options directly or indirectly convertible into or exchangeable for Common Stock ("CONVERTIBLE SECURITIES") or any rights, warrants or option to subscribe for or purchase 24 Common Stock or Convertible Securities ("OPTIONS") that are convertible into or exchangeable, directly or indirectly, for Common Stock at a price which varies or may vary with the market price of the Common Stock, including by way of one or more adjustments or resets to a fixed price (a "VARIABLE PRICE"). (u) "WEIGHTED AVERAGE PRICE" means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market during the period beginning at 9:30 a.m., New York Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" functions (ignoring any trade of more than 100,000 shares of such security pursuant to an individual transaction (subject to adjustment for stock splits, stock dividends, stock combinations and other similar transactions involving such security after the Issuance Date)), or, if the Principal Market is not the principal securities exchange or trading market for such security, the dollar volume-weighted average price for such security on the principal securities exchange or trading market where such security is listed or traded during the period beginning at 9:30 a.m., New York Time (or such other time as such principal securities exchange or trading market publicly announces is the official open of trading), and ending at 4:00 p.m., New York Time (or such other time as such principal securities exchange or trading market publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" functions (ignoring any trade of more than 100,000 shares of such security pursuant to an individual transaction (subject to adjustment for stock splits, stock dividends, stock combinations and other similar transactions involving such security after the Issuance Date)), or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30 a.m., New York Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 23. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during applicable calculation period. [SIGNATURE PAGE FOLLOWS] 25 IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Date of Issuance set out above. XCEL ENERGY INC. By: --------------------------------------------- Name: Title: Chief Executive Officer EXHIBIT I XCEL ENERGY INC. CONVERSION NOTICE Reference is made to the Convertible Note (the "NOTE") issued to the undersigned by XCEL ENERGY INC. (the "COMPANY"). In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common Stock, par value $2.50 per share (the "COMMON STOCK"), of the Company as of the date specified below. Date of Conversion: ----------------------------------------------------- Aggregate Conversion Amount to be converted: ---------------------------- Please confirm the following information: Conversion Price: ------------------------------------------------------- Number of shares of Common Stock to be issued: -------------------------- Please issue the Common Stock into which the Note is being converted and, if applicable, any check drawn on an account of the Company in the following name and to the following address: Issue to: --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- Facsimile Number: ------------------------------------------------------- Authorization: ---------------------------------------------------------- By: -------------------------------------------------------------- Title: ------------------------------------- Dated: -------------------------------------------------------------------------- Account Number: --------------------------------------------------------- (if electronic book entry transfer) Transaction Code Number: --------------------------------------------------------- (if electronic book entry transfer) ACKNOWLEDGMENT The Company hereby acknowledges this Conversion Notice and hereby directs [TRANSFER AGENT] to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated November 8, 2002 from the Company and acknowledged and agreed to by [TRANSFER AGENT]. XCEL ENERGY INC. By: --------------------------------------------- Name: Title: EX-4.11 10 c72574exv4w11.txt EX-4.11 FORM OF SECOND NOTES EXHIBIT 4.11 SENIOR CONVERTIBLE NOTE THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL IN A REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THIS NOTE. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE. XCEL ENERGY INC. Issuance Date: _______, 2002 Principal: U.S. $_____ FOR VALUE RECEIVED, XCEL ENERGY INC., a Minnesota corporation (the "COMPANY"), hereby promises to pay to the order of [__________________] or registered assigns ("HOLDER") the amount set out above as the Principal (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the "PRINCIPAL") when due, whether upon the Final Maturity Date (as defined below), acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest ("INTEREST") on any outstanding Principal at the rate of eight percent (8%) per annum, subject to periodic adjustment pursuant to Section 2 (the "INTEREST RATE"), from the date set out above as the Issuance Date (the "ISSUANCE DATE") until the same becomes due and payable, whether upon an Interest Date (as defined below), the Final Maturity Date, acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof). This Convertible Note (including all Convertible Notes issued in exchange, transfer or replacement hereof, this "NOTE") is one of an issue of Convertible Notes (collectively, the "NOTES" and such other Convertible Notes, the "OTHER NOTES") issued on the Issuance Date pursuant to the Securities Purchase Agreement (as defined below). Certain capitalized terms are defined in Section 28 and terms used herein but not defined herein shall have the meanings set forth for such terms in the Securities Purchase Agreement. (1) MATURITY. On the Final Maturity Date, the Holder shall surrender this Note to the Company and the Company shall pay to the Holder an amount in cash representing all outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late Charges (as defined in Section 24(b)), if any. The "MATURITY DATE" shall be the date that is 364 days after the Issuance Date; provided that, if the Holder has given notice in writing to the Company of its desire to extend the Maturity Date on or prior to the date that is 10 Business Days prior to the Maturity Date, the Maturity Date shall be extended (on one or more occasions) for an additional 364 days; provided, further, that the Maturity Date shall not be extended (except as provided in the following proviso) to more than five years after the Issuance Date (such date that is five years after the Issuance Date or such earlier Maturity Date prior to which the Holder has not requested an extension thereof, the "FINAL MATURITY DATE"); and provided, further, that the Final Maturity Date may be extended at the option of the Holder (x) in the event that, and for so long as, an Event of Default (as defined in Section 4(a)) shall have occurred and be continuing or any event shall have occurred and be continuing which with the passage of time and the failure to cure would result in an Event of Default and (y) through the date that is ten days after a Change of Control Termination Date in the event that the Announcement Date giving rise to such Change of Control Termination Date occurred prior to the Final Maturity Date. (2) INTEREST; INTEREST RATE. Interest on this Note shall commence accruing on the Issuance Date and shall be computed on the basis of the actual days elapsed during any period, and a calendar year of 365 or 366 calendar days, as applicable, and shall be payable in cash on each May 1 and each November 1 during the period beginning on the Issuance Date and ending on, and including, the Final Maturity Date (each an "INTEREST DATE"); provided that interest on any Conversion Amount of this Note that is accrued but unpaid as of the Conversion Date of such Conversion Amount shall be paid in shares of Common Stock at the Conversion Rate. From and after the occurrence of an Event of Default (as defined in Section 4(a)) or the failure to deliver timely the Non-Consolidation Opinion (as defined in the Securities Purchase Agreement) pursuant to Section 4(f) of the Securities Purchase Agreement (the "NRG OPINION"), the Interest Rate shall be increased by two percentage points (2%). In the event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided that the Interest as calculated at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of cure of such Event of Default. If the Company shall fail to credit the Holder's balance account with DTC (as defined in Section 3(c)(i)) or, if requested in writing by the Holder, to issue a certificate to the Holder for the number of shares of Common Stock to which the Holder is entitled upon conversion of any Conversion Amount or to issue a new Note (in accordance with Section 18(d)) representing the Principal portion of the Conversion Amount (as defined in Section 3(b)(i)) to which the Holder is entitled, in each case within the time periods set out in Section 3(c)(i) (in each case, a "CONVERSION FAILURE"), then during each period beginning on and including the date of each such Conversion Failure and ending on and including the date such Conversion Failure is cured, the Interest Rate then in effect shall be increased by two percentage points (2%). If (i) the Registration Statement (as defined in the Registration Rights Agreement) covering all the Registrable Securities (as defined in the Registration Rights Agreement) issuable upon conversion of this Note and required to be filed by 2 the Company pursuant to the Registration Rights Agreement is not declared effective by the Securities and Exchange Commission (the "SEC") on or before the applicable Mandatory Effective Date (as defined in the Registration Rights Agreement) or (ii) on any day after such Registration Statement has been declared effective by the SEC that sales of all the Registrable Securities required to be included on such Registration Statement cannot be made (other than during an Allowable Grace Period (as defined in Section 3(t) of the Registration Rights Agreement) pursuant to such Registration Statement (including, without limitation, because of a failure to keep such Registration Statement effective, to disclose such information as is necessary for sales to be made pursuant to such Registration Statement or to register sufficient shares of Common Stock) (collectively with the event described in the immediately preceding clause (i), each a "REGISTRATION FAILURE"), then, as partial relief for the damages to any holder by reason of any such delay in or reduction of its ability to sell Registrable Securities (which remedy shall not be exclusive of any other remedies available at law or in equity) the Interest Rate then in effect shall be increased by two percentage points (2%) during each period beginning on and including the first date of each such Registration Failure and ending on and including the date such Registration Failure is cured. (3) CONVERSION OF NOTES. This Note shall be convertible into shares of the Common Stock, on the terms and conditions set forth in this Section 3. (a) Conversion Right. Subject to the provisions of Section 3(d), at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount. (b) Conversion Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (as defined below) (the "CONVERSION RATE"). (i) "CONVERSION AMOUNT" means the sum of (A) the portion of the Principal to be converted, redeemed or otherwise surrendered with respect to which this determination is being made, (B) accrued and unpaid Interest with respect to such Principal and (C) accrued and unpaid Late Charges with respect to such Principal and Interest. (ii) "CONVERSION PRICE" means 110% of the arithmetic average of the Weighted Average Price of the Common Stock during the Tranche B Pricing Period; provided that the Conversion Price (i) shall not exceed 110% of the Tranche B Base Price and (ii) shall equal the Company Optional Redemption Conversion Price until such time as the Tranche B Pricing Period has concluded; provided further, that in the event that the Company has not delivered a Company Optional Redemption Notice as of the date that is 3 35 Business Days after the date of issuance of the First Notes and 110% of the Closing Bid Price of the Common Stock on such date is less than the Conversion Price then in effect, then the Conversion Price shall be reduced to equal such price. (c) Mechanics of Conversion. (i) Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a "CONVERSION DATE"), the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., Central Time on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the "CONVERSION NOTICE") to the Company and (B) if required by Section 3(c)(ii), surrender this Note to a common carrier for delivery to the Company as soon as practicable on or following such date (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction). On or before the first Business Day following the Company's receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Conversion Notice to the Holder and the Transfer Agent (as defined below). On or before the second Business Day following the date of receipt of a Conversion Notice (the "SHARE DELIVERY DATE"), the Company shall (X) (if (Y) below does not apply) issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled, or (Y) provided that the Company's transfer agent (the "TRANSFER AGENT") is participating in The Depository Trust Company ("DTC") Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder's or its designee's balance account with DTC through its Deposit Withdrawal Agent Commission system. If this Note is physically surrendered for conversion as required by Section 3(c)(ii) and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three Business Days after receipt of this Note (the "NOTE DELIVERY DATE") and at its own expense, issue and deliver to the holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal not converted. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date. (ii) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting physical surrender and reissue of this Note. The Holder and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion. 4 (iii) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of the Notes or the Separate Tranche Notes for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes and the Separate Tranche Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from each holder of the Notes and the Separate Tranche Notes electing to have the Notes or Separate Tranche Notes converted on such date a pro rata amount of such holder's portion of its Notes or Separate Tranche Notes submitted for conversion based on the principal amount of the Notes or Separate Tranche Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all the Notes and the Separate Tranche Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 23. (d) Limitations on Conversions. (i) Beneficial Ownership. The Company shall not effect any conversion of this Note, and the Holder of this Note shall not have the right to convert any portion of this Note pursuant to Section 3(a), to the extent that after giving effect to such conversion, the Holder (together with the Holder's affiliates) would beneficially own in excess of 5.0% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any Other Notes, Separate Tranche Notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this Section 3(d)(i), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company's most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its affiliates since the 5 date as of which such number of outstanding shares of Common Stock was reported. (ii) Principal Market Regulation. The Company shall not be obligated to issue any shares of Common Stock pursuant to this Note if the issuance of such shares of Common Stock would exceed that number of shares of Common Stock which the Company may issue pursuant to the Notes and the Separate Tranche Notes without breaching the Company's obligations under the rules or regulations of the Principal Market (the "EXCHANGE CAP"), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its shareholders as required by the applicable rules of the Principal Market for issuances of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the holders of the Notes and the Separate Tranche Notes representing a majority of the principal amounts of the Notes and the Separate Tranche Notes (voting as a single class) then outstanding. Until such approval or written opinion is obtained, no purchaser of the Notes or the Separate Tranche Notes pursuant to the Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon conversion of the Notes or the Separate Tranche Notes, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the principal amount of the Notes and the Separate Tranche Notes issued to such Purchaser pursuant to the Securities Purchase Agreement as of the date of such determination and the denominator of which is the aggregate principal amount of all the Notes and the Separate Tranche Notes issued to the Purchasers pursuant to the Securities Purchase Agreement as of the date of such determination (with respect to each Purchaser, the "EXCHANGE CAP ALLOCATION"). In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser's Notes or Separate Tranche Notes, the transferee shall be allocated a pro rata portion of such Purchaser's Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any holder of the Notes or the Separate Tranche Notes shall convert all of such holder's Notes or Separate Tranche Notes into a number of shares of Common Stock which, in the aggregate, is less than such holder's Exchange Cap Allocation, then the difference between such holder's Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of the Notes and the Separate Tranche Notes on a pro rata basis in proportion to the aggregate principal amount of the Notes and the Separate Tranche Notes then held by each such holder. (4) RIGHTS UPON EVENT OF DEFAULT. (a) Event of Default. Each of the following events shall constitute a "EVENT OF DEFAULT": (i) the failure of the Registration Statement covering all Registrable Securities (as defined in the Registration Rights Agreement) required to be registered pursuant to the Registration Rights Agreement to be declared effective by the SEC on or prior to the date that is 180 days after the Issuance Date, or, while such Registration Statement is required 6 to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of such Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to any holder of the Notes for sale of all of such holder's Registrable Securities in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of five consecutive Business Days or for more than an aggregate of 20 Business Days in any 365-day period; (ii) the suspension from trading on the Principal Market for a period of three consecutive Business Days or for more than an aggregate of three Business Days in any 30-day Trading Day period or the delisting of the Common Stock from the Principal Market; (iii) the Company's (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock or a new Note (in accordance with section 18(d)), as applicable, within 10 days after the receipt by the Company of a Conversion Notice or (B) notice, written or oral, to any holder of the Notes, including by way of public announcement or through any of its agents, at any time, of its intention not to comply with a request for conversion of any Notes into shares of Common Stock that is tendered in accordance with the provisions of the Notes; (iv) the Company's failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as due under this Note, the Securities Purchase Agreement, the Registration Rights Agreement or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby to which the Holder is a party; (v) any default under, redemption of or acceleration prior to maturity of any Indebtedness (as defined in Section 3(r) of the Securities Purchase Agreement) of the Company or any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase Agreement) other than NRG (as defined below) (including, without limitation, the Other Notes) of at least $50,000,000; (vi) the Company or any of its Subsidiaries other than NRG (as defined below), pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal or state law for the relief of debtors (collectively, "BANKRUPTCY LAW"), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a "CUSTODIAN"), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due; (vii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company or any of its Subsidiaries other than NRG (as defined below) in an involuntary case, (B) appoints a Custodian of the Company or any of its Subsidiaries other than NRG (as defined below) or (C) orders the liquidation of the Company or any of its Subsidiaries other than NRG (as defined below); or 7 (viii) the Company breaches any representation, warranty, covenant (other than any covenant to deliver the NRG Opinion) or other term or condition of the Securities Purchase Agreement, the Registration Rights Agreement, this Note or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated thereby and hereby to which the Holder is a party, except, in the case of a breach of a covenant which is curable, only if such breach continues for a period of at least 10 consecutive days. (b) Redemption Right. Promptly after the occurrence of an Event of Default with respect to this Note or the Other Notes, the Company shall deliver written notice thereof via facsimile and overnight courier (a "EVENT OF DEFAULT NOTICE") to the Holder. At any time after the earlier of the Holder's receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (the "EVENT OF DEFAULT REDEMPTION NOTICE") to the Company, which Event of Default Redemption Notice shall indicate the portion of this Note the Holder is electing to redeem. Each portion of this Note subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed by the Company at a price equal to the greater of (i) the product of (x) the Conversion Amount and (y) the quotient determined by dividing (A) the Closing Sale Price of the Common Stock immediately prior to such Event of Default by (B) the Conversion Price and (ii) the product of (x) the Conversion Amount and (y) the Redemption Premium (the "EVENT OF DEFAULT REDEMPTION PRICE"). Redemptions required by this Section 4(b) shall be made in accordance with the provisions of Section 10. (5) RIGHTS UPON CHANGE OF CONTROL. (a) Change of Control. Each of the following events shall constitute a "CHANGE OF CONTROL": (i) the consolidation, merger or other business combination (including, without limitation, a reorganization or recapitalization) of the Company with or into another Person in which holders of the Company's voting power immediately prior to the transaction cease after the transaction to hold, directly or indirectly, a majority of the voting power of the surviving entity or entities or the voting power necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities; (ii) the sale or transfer of all or substantially all of the Company's assets; or (iii) a purchase, tender or exchange offer made to and accepted by the holders of more than the 50% of the outstanding shares of Common Stock. (b) Assumption. Prior to the consummation of any Change of Control, the Company will secure from any Person purchasing the Company's assets or Common Stock or any successor resulting from such Change of Control (in each case, an "ACQUIRING ENTITY") a written agreement (in form and substance satisfactory to the holders of Notes representing a 8 majority of the aggregate principal amount of the Notes then outstanding) to deliver to each holder of Notes in exchange for such Notes, a security of the Acquiring Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including, without limitation, having a principal amount and interest rate equal to the principal amounts and the interest rates of the Notes held by such holder, and satisfactory to the holders of Notes representing a majority of the principal amount of the Notes then outstanding. In the event that an Acquiring Entity is directly or indirectly controlled by a company or entity whose common stock or similar equity interest is listed, designated or quoted on a securities exchange or trading market, the holders of notes representing a majority of the aggregate principal amount of the Notes then outstanding may elect to treat such Person as the Acquiring Entity for purposes of this Section 5(b). (c) Redemption Right. No sooner than 15 days nor later than 10 days prior to the consummation of a Change of Control, but not prior to the public announcement of such Change of Control, the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a "CHANGE OF CONTROL NOTICE"). At any time on or after consummation of such Change of Control, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof ("CHANGE OF CONTROL REDEMPTION NOTICE" and, collectively with an Event of Default Redemption Notice, "REDEMPTION NOTICES" and, individually, each a "REDEMPTION NOTICE") to the Company, which Change of Control Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this Section 5(c) shall be redeemed by the Company at a price equal to the greater of (i) the product of (x) the Conversion Amount and (y) the quotient determined by dividing (A) the Closing Sale Price of the Common Stock immediately following the public announcement of such proposed Change of Control by (B) the Conversion Price and (ii) 115% of the Conversion Amount (the "CHANGE OF CONTROL REDEMPTION PRICE" and, together with the Event of Default Redemption Price, the "REDEMPTION PRICE"). Redemptions required by this Section 5(c) shall be made in accordance with the provisions of Section 10 and shall have priority to payments to other shareholders in connection with a Change of Control. (6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS. (a) Purchase Rights. If at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or restrictions on the convertibility of this Note) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. 9 (b) Other Corporate Events. Prior to the consummation of any recapitalization, reorganization, consolidation, merger or other business combination (other than a Change of Control) pursuant to which holders of Common Stock are entitled to receive securities or other assets with respect to or in exchange for Common Stock (a "CORPORATE EVENT"), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Note, (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the holders of Notes representing a majority of the aggregate principal amount of the Notes then outstanding. (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES. (a) Adjustment of Conversion Price upon Issuance of Common Stock. If and whenever on or after the Issuance Date, the Company issues or sells, or in accordance with this Section 7(a) is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding shares of Common Stock deemed to have been issued or sold by the Company (I) in connection with the Xcel Energy Direct Purchase Plan or any employee benefit plan which has been approved by the Board of Directors of the Company or any of its Subsidiaries, pursuant to which the Company's securities may be issued to any employee, officer or director for services provided to the Company or its Subsidiaries (each, an "APPROVED STOCK PLAN") or (II) upon conversion of the Notes or the Separate Tranche Notes) for a consideration per share less than the higher of the Closing Sale Price of the Common Stock on the date of such issuance or sale or deemed issuance or sale and the Conversion Price in effect immediately prior to such issuance or sale or deemed issuance or sale (such higher price is referred to herein as the "APPLICABLE PRICE"), then immediately after such issue or sale (subject to Section 7(a)(vi)), the Conversion Price then in effect shall be reduced to an amount equal to the product of (x) the Conversion Price in effect immediately prior to such issue or sale or deemed issuance or sale and (y) the quotient determined by dividing (1) the sum of the product of the Applicable Price and the number of shares of Common Stock Deemed Outstanding immediately prior to such issue or sale or deemed issue or sale and the consideration, if any, received by the Company upon such issue or sale, by (2) the product of the Applicable Price multiplied by the number of shares of Common Stock Deemed Outstanding immediately after such issue or sale or deemed issue or sale. For purposes of determining the adjusted Conversion Price under this Section 7(a), the following shall be applicable: (i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the 10 exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 7(a)(i), the "lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of the Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities. If the Company issues or sells any Options which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Securities, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock or Convertible Securities upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the exercise price a price which does not vary with the market price of the Common Stock. (ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon such conversion, exercise or exchange thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance of sale of such Convertible Securities for such price per share. For the purposes of this Section 7(a)(ii), the "price per share for which one share of Common Stock is issuable upon such conversion, exercise or exchange" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the issuance or sale of the Convertible Security and upon the conversion, exercise or exchange of such Convertible Security. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price had been or are to be made pursuant to other provisions of this Section 7(a), no further adjustment of the Conversion Price shall be made by reason of such issue or sale. If the Company issues or sells any Convertible Securities which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Security, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the conversion, exercise or exchange price a price which does not vary 11 with the market price of the Common Stock. (iii) Change in Option Price or Rate of Conversion. If the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Issuance Date are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change. No adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect. (iv) Calculation of Consideration Received. In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for a consideration of $.01. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Company therefor. If any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Closing Sale Price of such securities on the date of receipt. If any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the holders of Notes representing a majority of the principal amounts of the Notes then outstanding. If such parties are unable to reach agreement within ten days after the occurrence of an event requiring valuation (the "VALUATION EVENT"), the fair value of such consideration will be determined within five Business Days after the tenth day following the Valuation Event by an independent, reputable appraiser jointly selected by the Company and the holders of Notes representing a majority of the principal amounts of the Notes then outstanding. The determination of such appraiser shall be deemed binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company. 12 (v) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (vi) Common Stock Deemed Outstanding. "COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii) hereof regardless of whether the Options or Convertible Securities are actually exercisable at such time, but excluding any shares of Common Stock owned or held by or for the account of the Company or issuable upon conversion of the Notes or the Separate Tranche Notes. (vii) Delayed Adjustment. In addition to the foregoing provisions of this Section 7(a), the Weighted Average Price, Closing Sales Price and Closing Bid Price shall be subject to adjustment, in accordance with the foregoing provisions, for any days during any measuring period, including, without limitation, the Tranche B Pricing Period, used herein that occur prior to any of the aforementioned events if such events occur prior to the end of such measuring period. (b) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. If the Company at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. (c) Other Events. If any event occurs of the type contemplated by the provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company's Board of Directors will make an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder under this Note; provided that no such adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 7. (8) NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of, or enter into any agreement which by its terms restricts or otherwise impairs the 13 Company's performance of the terms of, this Note or any of the other Transaction Documents (as defined in the Securities Purchase Agreement), and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note. (9) RESERVATION OF AUTHORIZED SHARES. (a) Reservation. The Company shall initially reserve out of its authorized and unissued Common Stock a number of shares of Common Stock for each of the Notes and the Separate Tranche Notes equal to 115% of the Conversion Rate with respect to the Conversion Amount of each such Note and Separate Tranche Note. Thereafter, the Company shall, so long as any of the Notes or Separate Tranche Notes are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Notes and Separate Tranche Note, at least 100% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Notes and the Separate Tranche Notes then outstanding; provided that at no time shall the number of shares of Common Stock so reserved be less than the number of shares required to be reserved by the previous sentence (without regard to any limitations on conversions) (the "REQUIRED RESERVE AMOUNT"). The initial number of shares of Common Stock reserved for conversions of the Notes and the Separate Tranche Note and each increase in the number of shares so reserved shall be allocated pro rata among the holders of the Notes and Separate Tranche Note based on the principal amount of the Notes and Separate Tranche Notes held by each holder at the time of Issuance Date or increase in the number of reserved shares, as the case may be (the "AUTHORIZED SHARE ALLOCATION"). In the event that a holder shall sell or otherwise transfer any of such holder's Notes, each transferee shall be allocated a pro rata portion of such holder's Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Notes shall be allocated to the remaining holders of Notes, pro rata based on the principal amount of the Notes then held by such holders. (b) Insufficient Authorized Shares. If at any time while any of the Notes or Separate Tranche Note remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes and the Separate Tranche Notes at least a number of shares of Common Stock equal to the Required Reserve Amount (an "AUTHORIZED SHARE FAILURE"), then the Company shall immediately take all action necessary to increase the Company's authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Notes and Separate Tranche Note then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than 60 days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its shareholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each shareholder with a proxy statement and shall use its best efforts to solicit its shareholders' approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the shareholders that they approve such proposal. 14 (10) REDEMPTION. (a) Mechanics. In the event that the Holder has sent a Redemption Notice to the Company pursuant to Section 4(b) or Section 5(c), the Holder shall promptly submit this Note to the Company. The Company shall deliver the applicable Event of Default Redemption Price to the Holder within five Business Days after the Company's receipt of the Holder's Event of Default Redemption Notice and thereafter the Holder shall promptly deliver this Note to the Company. If the Holder has submitted a Change of Control Redemption Notice in accordance with Section 5(c), the Company shall deliver the applicable Change of Control Redemption Price to the Holder concurrently with the consummation of such Change of Control if such notice is received prior to the consummation of such Change of Control and within five Business Days after the Company's receipt of such notice otherwise. In the event of a redemption of less than all of the Conversion Amount of this Note, the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal which has not been redeemed. In the event that the Company does not pay the Redemption Price to the Holder within the time period required above in this Section 10(a) at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder shall have the option to, in lieu of redemption, require the Company to promptly return to the Holder all or any portion of this Note representing the Conversion Amount that was submitted for redemption and for which the applicable Redemption Price (together with any Late Charges thereon) has not been paid. Upon the Company's receipt of such notice, (x) the Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company shall immediately return this Note, or issue a new Note (in accordance with Section 18(d)) to the Holder representing such Conversion Amount and (z) the Conversion Price of this Note or such new Notes shall be adjusted to the lesser of (A) the Conversion Price as in effect on the date on which the Redemption Notice is voided and (B) the lowest Closing Bid Price during the period beginning on and including the date on which the Redemption Notice is delivered to the Company and ending on and including the date on which the Redemption Notice is voided. The Holder's delivery of a notice voiding a Redemption Notice and exercise of its rights following such notice shall not affect the Company's obligations to make any payments of Late Charges which have accrued prior to the date of such notice with respect to the Conversion Amount subject to such notice. (b) Redemption by Other Holders. Upon the Company's receipt of notice from any of the holders of the Other Notes or the Separate Tranche Notes for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 4(b) or Section 5(c) (each an "OTHER REDEMPTION NOTICE"), the Company shall immediately forward to the Holder by facsimile a copy of such notice. If the Company receives a Redemption Notice and one or more Other Redemption Notices during the seven Business Day period beginning on and including the date which is three Business Days prior to the Company's receipt of the Holder's Redemption Notice and ending on and including the date which is three Business Days after the Company's receipt of the Holder's Redemption Notice and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice and such Other Redemption Notices received during such seven Business Day period, then the Company shall redeem a pro rata amount from each holder of the Notes and the Separate Tranche Notes (including the Holder) based on the principal amount of 15 the Notes and the Separate Tranche Notes submitted for redemption pursuant to such Redemption Notice and such Other Redemption Notices received by the Company during such seven Business Day period. (c) Redemption at the Option of the Company. (i) Except as provided in this Section 10(c) or in connection with the satisfaction by the Company of its obligations to redeem the Notes under Sections 4(b) and 5(c) hereof, without the prior written consent of the Holder the Company shall not have the right to prepay, redeem, repurchase, defease or otherwise retire any Note prior to the Final Maturity Date. (ii) Provided the Company has consummated a Qualified 144A Offering at any time during the Company Optional Redemption Period, the Company may deliver an irrevocable written notice to the Holder and the Transfer Agent (the "COMPANY OPTIONAL REDEMPTION NOTICE") within one (1) Business Day after consummation of the Qualified 144A Offering, indicating that the Company has elected to redeem, and is requiring the Holder to submit for redemption, in whole but not in part, the outstanding Principal of this Note plus accrued Interest thereon for the Company Optional Redemption Consideration (a "COMPANY OPTIONAL REDEMPTION"). The Company Optional Redemption Notice shall be sent by facsimile and overnight courier to the Holder and shall indicate (x) the date fixed for redemption, which shall be five (5) Business Days after the expiration of the Company Optional Redemption Period (the "COMPANY OPTIONAL REDEMPTION DATE") and (y) the place or places where this Note is to be surrendered for payment of the Company Optional Redemption Consideration. If the Company has elected a Company Optional Redemption, the Company shall on the Company Optional Redemption Date pay to the Holder the Cash Optional Redemption Consideration, by wire transfer of immediately available funds to an account designated in writing by such Holder. (11) RESTRICTION ON REDEMPTION. Until all of the Notes have been converted, redeemed or otherwise satisfied in accordance with their terms, the Company shall not, directly or indirectly, redeem its capital stock without the prior express written consent of the holders of Notes representing at least two-thirds of the aggregate principal amount of the Notes then outstanding. (12) SUBORDINATION; ADDITIONAL INDEBTEDNESS. Payments of Principal and Interest and other payments due under this Note shall rank pari passu in right of payment with all (and shall not be subordinated to any) unsecured, unsubordinated indebtedness of the Company and will be senior in right of payment to all subordinated indebtedness of the Company. (13) COVENANTS. (a) Indebtedness. The Company shall not create, incur, assume, guarantee or suffer to exist, or otherwise become or remain liable with respect to, any Indebtedness other than Permitted Indebtedness and Subordinated Indebtedness. "Subordinated Indebtedness" shall mean Indebtedness that is unsecured and subordinated in right of payment to the Notes and other obligations owing to the Holders in accordance with a subordination agreement in form and substance satisfactory to the Holders. "Permitted Indebtedness" shall 16 mean any Indebtedness that is unsecured and is not senior in right of payment to the Notes and is otherwise on terms that are no more favorable to the holders thereof than the terms of the Indebtedness evidenced by the Notes unless such more favorable terms are offered to the Holders. (b) Liens. The Company shall not create, incur, assume or suffer to exist, or permit any of its Subsidiaries (other than NRG Energy Inc. or its subsidiaries (collectively, "NRG")) to create, incur, assume or suffer to exist, any Lien upon or with respect to any of its properties, whether now owned or hereafter acquired; sign or suffer to exist any security agreement authorizing any secured party thereunder to file a Uniform Commercial Code financing statement (or the equivalent thereof) as notice of a Lien on any property of the Company or its Subsidiaries; sell any of its property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable) with recourse to it or any of its Subsidiaries or assign or otherwise transfer, or permit any of its Subsidiaries (other than the Existing Utility Subsidiaries (as defined in the Bank Facility)) to assign or otherwise transfer, any account or other right to receive income; other than, as to all of the above, Permitted Liens. As used herein, "Permitted Liens" shall have the meaning of that term as defined in the Five-Year Credit Agreement, dated as of November 10, 2000, among the Company and the banks listed therein (as the same maybe amended from time to time, the "BANK FACILITY"). As used herein, "Liens" means any mortgage, deed of trust, pledge, lien (statutory or otherwise), security interest, charge or other encumbrance or security or preferential arrangement of any nature, including, without limitation, any conditional sale or title retention arrangement, any capitalized lease and any assignment, deposit arrangement or financing lease intended as, or having the effect of, security. (c) Transactions With Affiliates. The Company shall not, and shall not permit any Subsidiary to, directly or indirectly, effect any transaction with any Affiliate (as defined in the Bank Facility) that is (a) outside the ordinary course of business or (b) on a basis less favorable than would at the time be obtainable for a comparable transaction in arms-length dealing with an unrelated third party, provided that notwithstanding the foregoing, no loan, payment or other form of contribution shall be made to NRG unless it is in an amount not in excess of (i) $300 Million payable pursuant to the Support Agreement and Capital Subscription Agreement, dated as of May 29, 2002, by and between the Company and NRG Energy Inc. and (ii) $250 Million in respect of guarantee obligations relating to the power marketing business of NRG; provided further that with respect to any payment permitted pursuant to clause (ii) above, the Company shall, in the context of a restructuring of NRG, use its reasonable best efforts to obtain a full release of all obligations and liabilities of the Company relating to NRG. (d) Leverage Ratio. The Company shall not permit the Leverage Ratio set forth in the Bank Facility to be exceeded. (e) Restrictive Agreements. The Company shall not, and shall not permit any Significant Subsidiary (as defined in the Bank Facility) other than NRG to, enter into any agreement after the date of this Note that imposes any restriction on the ability of such Significant Subsidiary to make payments, directly or indirectly, to its shareholders by way of dividends, advances, repayment of loans or intercompany charges, expenses or accruals or other 17 returns on investments that is more restrictive than any such restriction applicable to such Significant Subsidiary on the issuance date of the First Notes. (f) Scope of Business. The Company shall, and shall cause each Subsidiary to, engage only in energy-related business, functionally related businesses (as interpreted under PUHCA, as defined in the Securities Purchase Agreement)or such other businesses as maybe permitted pursuant to an order issued by the SEC pursuant to PUHCA. (14) VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law, including but not limited to the Minnesota Business Corporation Act, and as expressly provided in this Note. (15) PARTICIPATION. The Holder, as the holder of this Note, shall be entitled to (i) all extraordinary or special dividends paid and distributions made to the holders of Common Stock to the same extent as if the Holder had converted this Note into Common Stock (without regard to any limitations on conversion herein or elsewhere) and had held such shares of Common Stock on the record date for such dividends and distributions and (ii) regular cash dividends and distributions paid to the holders of the Common Stock only with respect to that portion of such dividends that exceeds $0.1875 per share of Common Stock in any calendar quarter (subject to adjustment for stock splits, stock dividends, stock combinations and other similar transactions after the Issuance Date). Payments under the preceding sentence shall be made concurrently with the dividend or distribution to the holders of Common Stock. (16) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote at a meeting duly called for such purpose or the written consent without a meeting, of the holders of Notes representing not less than two-thirds of the aggregate principal amount of the then outstanding Notes, shall be required for any change or amendment to this Note or the Other Notes. (17) TRANSFER. This Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 2(f) of the Securities Purchase Agreement. (18) REISSUANCE OF THIS NOTE. (a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 18(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Note (in accordance with Section 18(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 3(c)(iii) and this Section 18(a), following conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note. 18 (b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal. (c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 18(d) and in principal amounts of at least $100,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender. (d) Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section 18(a) or Section 18(c), the Principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued Interest and Late Charges on the Principal and Interest of this Note, from the Issuance Date. (19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, the Securities Purchase Agreement and the Registration Rights Agreement, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder's right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. (20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to 19 collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors' rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including but not limited to attorneys fees and disbursements. (21) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and all the Purchasers and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note. (22) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. (23) DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Redemption Price or the arithmetic calculation of the Conversion Rate or the Redemption Price or any other calculation hereunder, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within one Business Day of receipt of the Conversion Notice or Redemption Notice giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Conversion Rate within one Business Day of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within one Business Day submit via facsimile (a) the disputed determination of the Weighted Average Price, the Closing Bid Price or the Closing Sale Price or any other calculation hereunder to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Rate or the Redemption Price to the Company's independent, outside accountant. The Company, at the Company's expense, shall cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than five Business Days from the time it receives the disputed determinations or calculations. Such investment bank's or accountant's determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error. (24) NOTICES; PAYMENTS. (a) Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least twenty days prior to the date on which the Company closes its books 20 or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grants, issues or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to holders of Common Stock or (C) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to such holder. Notwithstanding the foregoing, Section 4(j) of the Securities Purchase Agreement shall apply to all notices given pursuant to this Note. (b) Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Purchasers (as defined in Section 3(d)(ii)), shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder's wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any Interest Date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of Interest due on such date. Any amount of Interest, Principal or other amount due under the Transaction Documents (as defined in the Securities Purchase Agreement) which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of 12% per annum from the date such amount was due until the same is paid in full ("LATE CHARGE"). (25) CANCELLATION. After all Principal, accrued Interest and other amounts at any time owed on this Note has been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued. (26) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement. (27) GOVERNING LAW. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois. (28) CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings: 21 (a) "BUSINESS DAY" means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed. (b) "CASH OPTIONAL REDEMPTION CONSIDERATION" means an amount in cash equal to the greater of (i) 102% of the Conversion Amount of the Note being redeemed in the Company Optional Redemption and (ii) the sum of (A) the product determined by multiplying the Conversion Amount of the Note being redeemed in the Company Optional Redemption by a quotient determined by dividing (X) the Closing Bid Price of the Common Stock on the date of delivery of the Company Optional Redemption Notice by (Y) the Company Optional Redemption Conversion Price and (B) 12% of the Conversion Amount of the Note being redeemed in the Company Optional Redemption; provided, however, that in the event that the Company Optional Redemption Notice is delivered on or after the date that is 10 Business Days after the execution of the Securities Purchase Agreement, the Holder shall have the option, upon delivery of written notice thereof to the Company at any time prior to the Company Optional Redemption Date, to receive in lieu of all or any portion of the Cash Optional Redemption Consideration a number of shares of Common Stock not to exceed the Company Optional Redemption Conversion Shares, in which event the Cash Optional Redemption Consideration shall be reduced by an amount equal to the product determined by multiplying (I) the number of shares of Common Stock the Holder has elected to receive and (II) the Company Optional Redemption Conversion Price. (c) "CHANGE OF CONTROL TERMINATION DATE" shall mean, with respect to any proposed Change of Control for which a public announcement that it proposes or intends to effect a Change of Control of the Company (the date of such announcement, the "ANNOUNCEMENT DATE") has been made, the date upon which the Company or other Person proposing to effect such Change of Control consummates or publicly announces the termination or abandonment of the proposed Change of Control which was the subject of the previous public announcement. (d) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on The New York Stock Exchange, Inc. (the "PRINCIPAL MARKET") as reported by Bloomberg Financial Markets ("BLOOMBERG"), or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m. Eastern Time as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the Closing 22 Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 23. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during any applicable calculation period. (e) "COMMON STOCK" means (i) the Company's common stock, par value $2.50 per share, and (ii) any capital stock resulting from a reclassification of such Common Stock. (f) "COMPANY OPTIONAL REDEMPTION CONVERSION PRICE" shall mean 110% of the arithmetic average of the Weighted Average Price of the Common Stock for each of the Trading Days during the Tranche B Pricing Period through the date the Company delivers to the Holder the Company Optional Redemption Notice, but in no event shall the Company Optional Redemption Conversion Price exceed, and prior to the commencement of the Tranche B Pricing Period it shall equal, 110% of the Tranche B Base Price. (g) "COMPANY OPTIONAL REDEMPTION CONVERSION SHARES" shall mean that number of shares of Common Stock determined by dividing (i) the Conversion Amount of the Note being redeemed in the Company Optional Redemption by (ii) the Company Optional Redemption Conversion Price. (h) "COMPANY OPTIONAL REDEMPTION PERIOD" means the period commencing on the Business Day immediately following the issuance date of the First Notes and ending on and including the date that is 35 Business Days after the execution of the Securities Purchase Agreement. (i) "COMPANY OPTIONAL REDEMPTION CONSIDERATION" means the Cash Optional Redemption Consideration. (j) "PERSON" means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof. (k) "QUALIFIED 144A OFFERING" shall mean an underwritten offering by the Company of debt securities of the Company that are convertible into Common Stock, with an effective conversion premium (as defined in Section (d)(3)(i) of Rule 144A of the Securities Act of 1933, as amended ("Rule 144A")) of not less than 10%, with such offering to be conducted either pursuant to Rule 144A or pursuant to a registered offering of such securities, in either case led by Merrill Lynch & Co. and yielding gross unrestricted cash proceeds to the Company of not less than $150 million. (l) "REDEMPTION PREMIUM" means (i) in the case of the Events of Default described in Section 4(a)(i), (ii), (iii), (iv) and (viii), 115% or (ii) in the case of the 23 Events of Default described in Section 4(a)(v) - (vii), 100%. (m) "REGISTRATION RIGHTS AGREEMENT" means that certain registration rights agreement between the Company and the initial holders of the Notes relating to the registration of the resale of the shares of Common Stock issuable upon conversion of the Notes. (n) "SECURITIES PURCHASE AGREEMENT" means that certain securities purchase agreement between the Company and the initial holders of the Notes pursuant to which the Company issued the Notes. (o) "SEPARATE TRANCHE NOTES" means the First Notes, First Call Notes, Second Call Notes, Third Notes and the Third Call Notes, collectively. (p) "TRADING DAY" means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that "Trading Day" shall not include any day on which the Common Stock is scheduled to trade on such exchange or market or actually trades on such exchange or market for less than 4.5 hours. (q) "TRANCHE B BASE PRICE" means the Weighted Average Price of the Common Stock on the Tranche B Closing Date (subject to adjustments for stock splits, stock dividends, stock combinations and similar transactions). (r) "TRANCHE A PRICING PERIOD" means the twenty consecutive Trading Days commencing on the fifth Trading Day immediately following the issuance date of the First Notes. (s) "TRANCHE B PRICING PERIOD" means the ten consecutive Trading Days commencing on the first Trading Day immediately following the end of the Tranche A Pricing Period. (t) "VARIABLE SECURITIES" means any stock or securities other than Options directly or indirectly convertible into or exchangeable for Common Stock ("CONVERTIBLE SECURITIES") or any rights, warrants or option to subscribe for or purchase Common Stock or Convertible Securities ("OPTIONS") that are convertible into or exchangeable, directly or indirectly, for Common Stock at a price which varies or may vary with the market price of the Common Stock, including by way of one or more adjustments or resets to a fixed price (a "VARIABLE PRICE"). (u) "WEIGHTED AVERAGE PRICE" means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market during the period beginning at 9:30 a.m., New York Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" functions (ignoring any trade of more than 24 100,000 shares of such security pursuant to an individual transaction (subject to adjustment for stock splits, stock dividends, stock combinations and other similar transactions involving such security after the Issuance Date)), or, if the Principal Market is not the principal securities exchange or trading market for such security, the dollar volume-weighted average price for such security on the principal securities exchange or trading market where such security is listed or traded during the period beginning at 9:30 a.m., New York Time (or such other time as such principal securities exchange or trading market publicly announces is the official open of trading), and ending at 4:00 p.m., New York Time (or such other time as such principal securities exchange or trading market publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" functions (ignoring any trade of more than 100,000 shares of such security pursuant to an individual transaction (subject to adjustment for stock splits, stock dividends, stock combinations and other similar transactions involving such security after the Issuance Date)), or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30 a.m., New York Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 23. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during applicable calculation period. [SIGNATURE PAGE FOLLOWS] 25 IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Date of Issuance set out above. XCEL ENERGY INC. By: --------------------------------------------- Name: Title: Chief Executive Officer EXHIBIT I XCEL ENERGY INC. CONVERSION NOTICE Reference is made to the Convertible Note (the "NOTE") issued to the undersigned by XCEL ENERGY INC. (the "COMPANY"). In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common Stock, par value $2.50 per share (the "COMMON STOCK"), of the Company as of the date specified below. Date of Conversion: ----------------------------------------------------- Aggregate Conversion Amount to be converted: ---------------------------- Please confirm the following information: Conversion Price: ------------------------------------------------------- Number of shares of Common Stock to be issued: -------------------------- Please issue the Common Stock into which the Note is being converted and, if applicable, any check drawn on an account of the Company in the following name and to the following address: Issue to: --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- Facsimile Number: ------------------------------------------------------- Authorization: ---------------------------------------------------------- By: -------------------------------------------------------------- Title: ------------------------------------- Dated: -------------------------------------------------------------------------- Account Number: --------------------------------------------------------- (if electronic book entry transfer) Transaction Code Number: ------------------------------------------------ (if electronic book entry transfer) ACKNOWLEDGMENT The Company hereby acknowledges this Conversion Notice and hereby directs [TRANSFER AGENT] to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated November 8, 2002 from the Company and acknowledged and agreed to by [TRANSFER AGENT]. XCEL ENERGY INC. By: --------------------------------------------- Name: Title: EX-4.12 11 c72574exv4w12.txt EX-4.12 FORM OF FIRST CALL NOTES EXHIBIT 4.12 SENIOR CONVERTIBLE NOTE THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL IN A REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THIS NOTE. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE. XCEL ENERGY INC. Issuance Date: _______ __, 200_ Principal: U.S. $_______ FOR VALUE RECEIVED, XCEL ENERGY INC., a Minnesota corporation (the "COMPANY"), hereby promises to pay to the order of __________________ or registered assigns ("HOLDER") the amount set out above as the Principal (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the "PRINCIPAL") when due, whether upon the Final Maturity Date (as defined below), acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest ("INTEREST") on any outstanding Principal at the rate of eight percent (8%) per annum, subject to periodic adjustment pursuant to Section 2 (the "INTEREST RATE"), from the date set out above as the Issuance Date (the "ISSUANCE DATE") until the same becomes due and payable, whether upon an Interest Date (as defined below), the Final Maturity Date, acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof). This Convertible Note (including all Convertible Notes issued in exchange, transfer or replacement hereof, this "NOTE") is one of an issue of Convertible Notes (collectively, the "NOTES" and such other Convertible Notes, the "OTHER NOTES") issued on the Issuance Date pursuant to the Securities Purchase Agreement (as defined below). Certain capitalized terms are defined in Section 28 and terms used herein but not defined herein shall have the meanings set forth for such terms in the Securities Purchase Agreement. (1) MATURITY. On the Final Maturity Date, the Holder shall surrender this Note to the Company and the Company shall pay to the Holder an amount in cash representing all outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late Charges (as defined in Section 24(b)), if any. The "MATURITY DATE" shall be the date that is 364 days after the Issuance Date; provided that, if the Holder has given notice in writing to the Company of its desire to extend the Maturity Date on or prior to the date that is 10 Business Days prior to the Maturity Date, the Maturity Date shall be extended (on one or more occasions) for an additional 364 days; provided, further, that the Maturity Date shall not be extended (except as provided in the following proviso) to more than five years after the Issuance Date (such date that is five years after the Issuance Date or such earlier Maturity Date prior to which the Holder has not requested an extension thereof, the "FINAL MATURITY DATE"); and provided, further, that the Final Maturity Date may be extended at the option of the Holder (x) in the event that, and for so long as, an Event of Default (as defined in Section 4(a)) shall have occurred and be continuing or any event shall have occurred and be continuing which with the passage of time and the failure to cure would result in an Event of Default and (y) through the date that is ten days after a Change of Control Termination Date in the event that the Announcement Date giving rise to such Change of Control Termination Date occurred prior to the Final Maturity Date. (2) INTEREST; INTEREST RATE. Interest on this Note shall commence accruing on the Issuance Date and shall be computed on the basis of the actual days elapsed during any period, and a calendar year of 365 or 366 calendar days, as applicable, and shall be payable in cash on each May 1 and each November 1 during the period beginning on the Issuance Date and ending on, and including, the Final Maturity Date (each an "INTEREST DATE"); provided that interest on any Conversion Amount of this Note that is accrued but unpaid as of the Conversion Date of such Conversion Amount shall be paid in shares of Common Stock at the Conversion Rate. From and after the occurrence of an Event of Default (as defined in Section 4(a)) or the failure to deliver timely the Non-Consolidation Opinion (as defined in the Securities Purchase Agreement) pursuant to Section 4(f) of the Securities Purchase Agreement (the "NRG OPINION"), the Interest Rate shall be increased by two percentage points (2%). In the event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided that the Interest as calculated at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of cure of such Event of Default. If the Company shall fail to credit the Holder's balance account with DTC (as defined in Section 3(c)(i)) or, if requested in writing by the Holder, to issue a certificate to the Holder for the number of shares of Common Stock to which the Holder is entitled upon conversion of any Conversion Amount or to issue a new Note (in accordance with Section 18(d)) representing the Principal portion of the Conversion Amount (as defined in Section 3(b)(i)) to which the Holder is entitled, in each case within the time periods set out in Section 3(c)(i) (in each case, a "CONVERSION FAILURE"), then during each period beginning on and including the date of each such Conversion Failure and ending on and including the date such Conversion Failure is cured, the Interest Rate then in effect shall be increased by two percentage points (2%). If (i) the Registration Statement (as defined in the Registration Rights Agreement) covering all the Registrable Securities (as defined in the Registration Rights Agreement) issuable upon conversion of this Note and required to be filed by 2 the Company pursuant to the Registration Rights Agreement is not declared effective by the Securities and Exchange Commission (the "SEC") on or before the applicable Mandatory Effective Date (as defined in the Registration Rights Agreement) or (ii) on any day after such Registration Statement has been declared effective by the SEC that sales of all the Registrable Securities required to be included on such Registration Statement cannot be made (other than during an Allowable Grace Period (as defined in Section 3(t) of the Registration Rights Agreement) pursuant to such Registration Statement (including, without limitation, because of a failure to keep such Registration Statement effective, to disclose such information as is necessary for sales to be made pursuant to such Registration Statement or to register sufficient shares of Common Stock) (collectively with the event described in the immediately preceding clause (i), each a "REGISTRATION FAILURE"), then, as partial relief for the damages to any holder by reason of any such delay in or reduction of its ability to sell Registrable Securities (which remedy shall not be exclusive of any other remedies available at law or in equity) the Interest Rate then in effect shall be increased by two percentage points (2%) during each period beginning on and including the first date of each such Registration Failure and ending on and including the date such Registration Failure is cured. (3) CONVERSION OF NOTES. This Note shall be convertible into shares of the Common Stock, on the terms and conditions set forth in this Section 3. (a) Conversion Right. Subject to the provisions of Section 3(d), at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount. (b) Conversion Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (as defined below) (the "CONVERSION RATE"). (i) "CONVERSION AMOUNT" means the sum of (A) the portion of the Principal to be converted, redeemed or otherwise surrendered with respect to which this determination is being made, (B) accrued and unpaid Interest with respect to such Principal and (C) accrued and unpaid Late Charges with respect to such Principal and Interest. (ii) "CONVERSION PRICE" means the lesser of (x) 110% of the arithmetic average of the Weighted Average Price of the Common Stock during the Tranche A Pricing Period and (y) 110% of the Closing Bid Price of the Common Stock on the 35th Business Day after the issuance date of the First Notes; provided that the Conversion Price shall not exceed 110% of the Tranche A Base Price. 3 (c) Mechanics of Conversion. (i) Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a "CONVERSION DATE"), the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., Central Time on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the "CONVERSION NOTICE") to the Company and (B) if required by Section 3(c)(ii), surrender this Note to a common carrier for delivery to the Company as soon as practicable on or following such date (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction). On or before the first Business Day following the Company's receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Conversion Notice to the Holder and the Transfer Agent (as defined below). On or before the second Business Day following the date of receipt of a Conversion Notice (the "SHARE DELIVERY DATE"), the Company shall (X) (if (Y) below does not apply) issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled, or (Y) provided that the Company's transfer agent (the "TRANSFER AGENT") is participating in The Depository Trust Company ("DTC") Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder's or its designee's balance account with DTC through its Deposit Withdrawal Agent Commission system. If this Note is physically surrendered for conversion as required by Section 3(c)(ii) and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three Business Days after receipt of this Note (the "NOTE DELIVERY DATE") and at its own expense, issue and deliver to the holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal not converted. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date. (ii) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting physical surrender and reissue of this Note. The Holder and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion. (iii) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of the Notes or the Separate Tranche Notes for the same Conversion Date and the Company can convert some, but not all, of such 4 portions of the Notes and the Separate Tranche Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from each holder of the Notes and the Separate Tranche Notes electing to have the Notes or Separate Tranche Notes converted on such date a pro rata amount of such holder's portion of its Notes or Separate Tranche Notes submitted for conversion based on the principal amount of the Notes or Separate Tranche Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all the Notes and the Separate Tranche Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 23. (d) Limitations on Conversions. (i) Beneficial Ownership. The Company shall not effect any conversion of this Note, and the Holder of this Note shall not have the right to convert any portion of this Note pursuant to Section 3(a), to the extent that after giving effect to such conversion, the Holder (together with the Holder's affiliates) would beneficially own in excess of 5.0% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any Other Notes, Separate Tranche Notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this Section 3(d)(i), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company's most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. (ii) Principal Market Regulation. The Company shall not be obligated to issue any shares of Common Stock pursuant to this Note if the issuance of such shares of Common 5 Stock would exceed that number of shares of Common Stock which the Company may issue pursuant to the Notes and the Separate Tranche Notes without breaching the Company's obligations under the rules or regulations of the Principal Market (the "EXCHANGE CAP"), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its shareholders as required by the applicable rules of the Principal Market for issuances of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the holders of the Notes and the Separate Tranche Notes representing a majority of the principal amounts of the Notes and the Separate Tranche Notes (voting as a single class) then outstanding. Until such approval or written opinion is obtained, no purchaser of the Notes or the Separate Tranche Notes pursuant to the Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon conversion of the Notes or the Separate Tranche Notes, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the principal amount of the Notes and the Separate Tranche Notes issued to such Purchaser pursuant to the Securities Purchase Agreement as of the date of such determination and the denominator of which is the aggregate principal amount of all the Notes and the Separate Tranche Notes issued to the Purchasers pursuant to the Securities Purchase Agreement as of the date of such determination (with respect to each Purchaser, the "EXCHANGE CAP ALLOCATION"). In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser's Notes or Separate Tranche Notes, the transferee shall be allocated a pro rata portion of such Purchaser's Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any holder of the Notes or the Separate Tranche Notes shall convert all of such holder's Notes or Separate Tranche Notes into a number of shares of Common Stock which, in the aggregate, is less than such holder's Exchange Cap Allocation, then the difference between such holder's Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of the Notes and the Separate Tranche Notes on a pro rata basis in proportion to the aggregate principal amount of the Notes and the Separate Tranche Notes then held by each such holder. (4) RIGHTS UPON EVENT OF DEFAULT. (a) Event of Default. Each of the following events shall constitute a "EVENT OF DEFAULT": (i) the failure of the Registration Statement covering all Registrable Securities (as defined in the Registration Rights Agreement) required to be registered pursuant to the Registration Rights Agreement to be declared effective by the SEC on or prior to the date that is 180 days after the Issuance Date, or, while such Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of such Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to any holder of the Notes for sale of all of such holder's Registrable Securities in accordance with the terms of the 6 Registration Rights Agreement, and such lapse or unavailability continues for a period of five consecutive Business Days or for more than an aggregate of 20 Business Days in any 365-day period; (ii) the suspension from trading on the Principal Market for a period of three consecutive Business Days or for more than an aggregate of three Business Days in any 30-day Trading Day period or the delisting of the Common Stock from the Principal Market; (iii) the Company's (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock or a new Note (in accordance with section 18(d)), as applicable, within 10 days after the receipt by the Company of a Conversion Notice or (B) notice, written or oral, to any holder of the Notes, including by way of public announcement or through any of its agents, at any time, of its intention not to comply with a request for conversion of any Notes into shares of Common Stock that is tendered in accordance with the provisions of the Notes; (iv) the Company's failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as due under this Note, the Securities Purchase Agreement, the Registration Rights Agreement or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby to which the Holder is a party; (v) any default under, redemption of or acceleration prior to maturity of any Indebtedness (as defined in Section 3(r) of the Securities Purchase Agreement) of the Company or any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase Agreement) other than NRG (as defined below) (including, without limitation, the Other Notes) of at least $50,000,000; (vi) the Company or any of its Subsidiaries other than NRG (as defined below), pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal or state law for the relief of debtors (collectively, "BANKRUPTCY LAW"), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a "CUSTODIAN"), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due; (vii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company or any of its Subsidiaries other than NRG (as defined below) in an involuntary case, (B) appoints a Custodian of the Company or any of its Subsidiaries other than NRG (as defined below) or (C) orders the liquidation of the Company or any of its Subsidiaries other than NRG (as defined below); or (viii) the Company breaches any representation, warranty, covenant (other than any covenant to deliver the NRG Opinion) or other term or condition of the Securities Purchase Agreement, the Registration Rights Agreement, this Note or any other 7 agreement, document, certificate or other instrument delivered in connection with the transactions contemplated thereby and hereby to which the Holder is a party, except, in the case of a breach of a covenant which is curable, only if such breach continues for a period of at least 10 consecutive days. (b) Redemption Right. Promptly after the occurrence of an Event of Default with respect to this Note or the Other Notes, the Company shall deliver written notice thereof via facsimile and overnight courier (a "EVENT OF DEFAULT NOTICE") to the Holder. At any time after the earlier of the Holder's receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (the "EVENT OF DEFAULT REDEMPTION NOTICE") to the Company, which Event of Default Redemption Notice shall indicate the portion of this Note the Holder is electing to redeem. Each portion of this Note subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed by the Company at a price equal to the greater of (i) the product of (x) the Conversion Amount and (y) the quotient determined by dividing (A) the Closing Sale Price of the Common Stock immediately prior to such Event of Default by (B) the Conversion Price and (ii) the product of (x) the Conversion Amount and (y) the Redemption Premium (the "EVENT OF DEFAULT REDEMPTION PRICE"). Redemptions required by this Section 4(b) shall be made in accordance with the provisions of Section 10. (5) RIGHTS UPON CHANGE OF CONTROL. (a) Change of Control. Each of the following events shall constitute a "CHANGE OF CONTROL": (i) the consolidation, merger or other business combination (including, without limitation, a reorganization or recapitalization) of the Company with or into another Person in which holders of the Company's voting power immediately prior to the transaction cease after the transaction to hold, directly or indirectly, a majority of the voting power of the surviving entity or entities or the voting power necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities; (ii) the sale or transfer of all or substantially all of the Company's assets; or (iii) a purchase, tender or exchange offer made to and accepted by the holders of more than the 50% of the outstanding shares of Common Stock. (b) Assumption. Prior to the consummation of any Change of Control, the Company will secure from any Person purchasing the Company's assets or Common Stock or any successor resulting from such Change of Control (in each case, an "ACQUIRING ENTITY") a written agreement (in form and substance satisfactory to the holders of Notes representing a majority of the aggregate principal amount of the Notes then outstanding) to deliver to each holder of Notes in exchange for such Notes, a security of the Acquiring Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including, without limitation, having a principal amount and interest rate equal to the principal amounts and the 8 interest rates of the Notes held by such holder, and satisfactory to the holders of Notes representing a majority of the principal amount of the Notes then outstanding. In the event that an Acquiring Entity is directly or indirectly controlled by a company or entity whose common stock or similar equity interest is listed, designated or quoted on a securities exchange or trading market, the holders of notes representing a majority of the aggregate principal amount of the Notes then outstanding may elect to treat such Person as the Acquiring Entity for purposes of this Section 5(b). (c) Redemption Right. No sooner than 15 days nor later than 10 days prior to the consummation of a Change of Control, but not prior to the public announcement of such Change of Control, the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a "CHANGE OF CONTROL NOTICE"). At any time on or after consummation of such Change of Control, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof ("CHANGE OF CONTROL REDEMPTION NOTICE" and, collectively with an Event of Default Redemption Notice, "REDEMPTION NOTICES" and, individually, each a "REDEMPTION NOTICE") to the Company, which Change of Control Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this Section 5(c) shall be redeemed by the Company at a price equal to the greater of (i) the product of (x) the Conversion Amount and (y) the quotient determined by dividing (A) the Closing Sale Price of the Common Stock immediately following the public announcement of such proposed Change of Control by (B) the Conversion Price and (ii) 115% of the Conversion Amount (the "CHANGE OF CONTROL REDEMPTION PRICE" and, together with the Event of Default Redemption Price, the "REDEMPTION PRICE"). Redemptions required by this Section 5(c) shall be made in accordance with the provisions of Section 10 and shall have priority to payments to other shareholders in connection with a Change of Control. (6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS. (a) Purchase Rights. If at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or restrictions on the convertibility of this Note) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. (b) Other Corporate Events. Prior to the consummation of any recapitalization, reorganization, consolidation, merger or other business combination (other than a Change of Control) pursuant to which holders of Common Stock are entitled to receive securities or other assets with respect to or in exchange for Common Stock (a "CORPORATE 9 EVENT"), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Note, (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the holders of Notes representing a majority of the aggregate principal amount of the Notes then outstanding. (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES. (a) Adjustment of Conversion Price upon Issuance of Common Stock. If and whenever on or after the issuance date of the First Notes, the Company issues or sells, or in accordance with this Section 7(a) is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding shares of Common Stock deemed to have been issued or sold by the Company (I) in connection with the Xcel Energy Direct Purchase Plan or any employee benefit plan which has been approved by the Board of Directors of the Company or any of its Subsidiaries, pursuant to which the Company's securities may be issued to any employee, officer or director for services provided to the Company or its Subsidiaries (each, an "APPROVED STOCK PLAN") or (II) upon conversion of the Notes or the Separate Tranche Notes) for a consideration per share less than the higher of the Closing Sale Price of the Common Stock on the date of such issuance or sale or deemed issuance or sale and the Conversion Price in effect immediately prior to such issuance or sale or deemed issuance or sale (such higher price is referred to herein as the "APPLICABLE PRICE"), then immediately after such issue or sale (subject to Section 7(a)(vi)), the Conversion Price then in effect shall be reduced to an amount equal to the product of (x) the Conversion Price in effect immediately prior to such issue or sale or deemed issuance or sale and (y) the quotient determined by dividing (1) the sum of the product of the Applicable Price and the number of shares of Common Stock Deemed Outstanding immediately prior to such issue or sale or deemed issue or sale and the consideration, if any, received by the Company upon such issue or sale, by (2) the product of the Applicable Price multiplied by the number of shares of Common Stock Deemed Outstanding immediately after such issue or sale or deemed issue or sale. For purposes of determining the adjusted Conversion Price under this Section 7(a), the following shall be applicable: (i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price 10 per share. For purposes of this Section 7(a)(i), the "lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of the Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities. If the Company issues or sells any Options which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Securities, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock or Convertible Securities upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the exercise price a price which does not vary with the market price of the Common Stock. (ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon such conversion, exercise or exchange thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance of sale of such Convertible Securities for such price per share. For the purposes of this Section 7(a)(ii), the "price per share for which one share of Common Stock is issuable upon such conversion, exercise or exchange" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the issuance or sale of the Convertible Security and upon the conversion, exercise or exchange of such Convertible Security. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price had been or are to be made pursuant to other provisions of this Section 7(a), no further adjustment of the Conversion Price shall be made by reason of such issue or sale. If the Company issues or sells any Convertible Securities which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Security, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the conversion, exercise or exchange price a price which does not vary with the market price of the Common Stock. (iii) Change in Option Price or Rate of Conversion. If the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion or 11 exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Issuance Date are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change. No adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect. (iv) Calculation of Consideration Received. In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for a consideration of $.01. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Company therefor. If any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Closing Sale Price of such securities on the date of receipt. If any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the holders of Notes representing a majority of the principal amounts of the Notes then outstanding. If such parties are unable to reach agreement within ten days after the occurrence of an event requiring valuation (the "VALUATION EVENT"), the fair value of such consideration will be determined within five Business Days after the tenth day following the Valuation Event by an independent, reputable appraiser jointly selected by the Company and the holders of Notes representing a majority of the principal amounts of the Notes then outstanding. The determination of such appraiser shall be deemed binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company. (v) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed 12 to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (vi) Common Stock Deemed Outstanding. "COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii) hereof regardless of whether the Options or Convertible Securities are actually exercisable at such time, but excluding any shares of Common Stock owned or held by or for the account of the Company or issuable upon conversion of the Notes or the Separate Tranche Notes. (vii) Delayed Adjustment. In addition to the foregoing provisions of this Section 7(a), the Weighted Average Price, Closing Sales Price and Closing Bid Price shall be subject to adjustment, in accordance with the foregoing provisions, for any days during any measuring period, including, without limitation, the Tranche A Pricing Period, used herein that occur prior to any of the aforementioned events if such events occur prior to the end of such measuring period. (b) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. If the Company at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. (c) Other Events. If any event occurs of the type contemplated by the provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company's Board of Directors will make an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder under this Note; provided that no such adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 7. (8) NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of, or enter into any agreement which by its terms restricts or otherwise impairs the Company's performance of the terms of, this Note or any of the other Transaction Documents (as defined in the Securities Purchase Agreement), and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note. 13 (9) RESERVATION OF AUTHORIZED SHARES. (a) Reservation. The Company shall initially reserve out of its authorized and unissued Common Stock a number of shares of Common Stock for each of the Notes and the Separate Tranche Notes equal to 115% of the Conversion Rate with respect to the Conversion Amount of each such Note and Separate Tranche Note. Thereafter, the Company shall, so long as any of the Notes or Separate Tranche Notes are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Notes and Separate Tranche Note, at least 100% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Notes and the Separate Tranche Notes then outstanding; provided that at no time shall the number of shares of Common Stock so reserved be less than the number of shares required to be reserved by the previous sentence (without regard to any limitations on conversions) (the "REQUIRED RESERVE AMOUNT"). The initial number of shares of Common Stock reserved for conversions of the Notes and the Separate Tranche Note and each increase in the number of shares so reserved shall be allocated pro rata among the holders of the Notes and Separate Tranche Note based on the principal amount of the Notes and Separate Tranche Notes held by each holder at the time of Issuance Date or increase in the number of reserved shares, as the case may be (the "AUTHORIZED SHARE ALLOCATION"). In the event that a holder shall sell or otherwise transfer any of such holder's Notes, each transferee shall be allocated a pro rata portion of such holder's Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Notes shall be allocated to the remaining holders of Notes, pro rata based on the principal amount of the Notes then held by such holders. (b) Insufficient Authorized Shares. If at any time while any of the Notes or Separate Tranche Note remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes and the Separate Tranche Notes at least a number of shares of Common Stock equal to the Required Reserve Amount (an "AUTHORIZED SHARE FAILURE"), then the Company shall immediately take all action necessary to increase the Company's authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Notes and Separate Tranche Note then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than 60 days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its shareholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each shareholder with a proxy statement and shall use its best efforts to solicit its shareholders' approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the shareholders that they approve such proposal. (10) REDEMPTION. (a) Mechanics. In the event that the Holder has sent a Redemption Notice to the Company pursuant to Section 4(b) or Section 5(c), the Holder shall promptly 14 submit this Note to the Company. The Company shall deliver the applicable Event of Default Redemption Price to the Holder within five Business Days after the Company's receipt of the Holder's Event of Default Redemption Notice and thereafter the Holder shall promptly deliver this Note to the Company. If the Holder has submitted a Change of Control Redemption Notice in accordance with Section 5(c), the Company shall deliver the applicable Change of Control Redemption Price to the Holder concurrently with the consummation of such Change of Control if such notice is received prior to the consummation of such Change of Control and within five Business Days after the Company's receipt of such notice otherwise. In the event of a redemption of less than all of the Conversion Amount of this Note, the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal which has not been redeemed. In the event that the Company does not pay the Redemption Price to the Holder within the time period required above in this Section 10(a) at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder shall have the option to, in lieu of redemption, require the Company to promptly return to the Holder all or any portion of this Note representing the Conversion Amount that was submitted for redemption and for which the applicable Redemption Price (together with any Late Charges thereon) has not been paid. Upon the Company's receipt of such notice, (x) the Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company shall immediately return this Note, or issue a new Note (in accordance with Section 18(d)) to the Holder representing such Conversion Amount and (z) the Conversion Price of this Note or such new Notes shall be adjusted to the lesser of (A) the Conversion Price as in effect on the date on which the Redemption Notice is voided and (B) the lowest Closing Bid Price during the period beginning on and including the date on which the Redemption Notice is delivered to the Company and ending on and including the date on which the Redemption Notice is voided. The Holder's delivery of a notice voiding a Redemption Notice and exercise of its rights following such notice shall not affect the Company's obligations to make any payments of Late Charges which have accrued prior to the date of such notice with respect to the Conversion Amount subject to such notice. (b) Redemption by Other Holders. Upon the Company's receipt of notice from any of the holders of the Other Notes or the Separate Tranche Notes for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 4(b) or Section 5(c) (each an "OTHER REDEMPTION NOTICE"), the Company shall immediately forward to the Holder by facsimile a copy of such notice. If the Company receives a Redemption Notice and one or more Other Redemption Notices during the seven Business Day period beginning on and including the date which is three Business Days prior to the Company's receipt of the Holder's Redemption Notice and ending on and including the date which is three Business Days after the Company's receipt of the Holder's Redemption Notice and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice and such Other Redemption Notices received during such seven Business Day period, then the Company shall redeem a pro rata amount from each holder of the Notes and the Separate Tranche Notes (including the Holder) based on the principal amount of the Notes and the Separate Tranche Notes submitted for redemption pursuant to such Redemption Notice and such Other Redemption Notices received by the Company during such seven Business Day period. 15 (c) Redemption at the Option of the Company. Except in connection with the satisfaction by the Company of its obligations to redeem the Notes under Sections 4(b) and 5(c) hereof, without the prior written consent of the Holder the Company shall not have the right to prepay, redeem, repurchase, defease or otherwise retire any Note prior to the Final Maturity Date. (11) RESTRICTION ON REDEMPTION. Until all of the Notes have been converted, redeemed or otherwise satisfied in accordance with their terms, the Company shall not, directly or indirectly, redeem its capital stock without the prior express written consent of the holders of Notes representing at least two-thirds of the aggregate principal amount of the Notes then outstanding. (12) SUBORDINATION; ADDITIONAL INDEBTEDNESS. Payments of Principal and Interest and other payments due under this Note shall rank pari passu in right of payment with all (and shall not be subordinated to any) unsecured, unsubordinated indebtedness of the Company and will be senior in right of payment to all subordinated indebtedness of the Company. (13) COVENANTS. (a) Indebtedness. The Company shall not create, incur, assume, guarantee or suffer to exist, or otherwise become or remain liable with respect to, any Indebtedness other than Permitted Indebtedness and Subordinated Indebtedness. "Subordinated Indebtedness" shall mean Indebtedness that is unsecured and subordinated in right of payment to the Notes and other obligations owing to the Holders in accordance with a subordination agreement in form and substance satisfactory to the Holders. "Permitted Indebtedness" shall mean any Indebtedness that is unsecured and is not senior in right of payment to the Notes and is otherwise on terms that are no more favorable to the holders thereof than the terms of the Indebtedness evidenced by the Notes unless such more favorable terms are offered to the Holders. (b) Liens. The Company shall not create, incur, assume or suffer to exist, or permit any of its Subsidiaries (other than NRG Energy Inc. or its subsidiaries (collectively, "NRG")) to create, incur, assume or suffer to exist, any Lien upon or with respect to any of its properties, whether now owned or hereafter acquired; sign or suffer to exist any security agreement authorizing any secured party thereunder to file a Uniform Commercial Code financing statement (or the equivalent thereof) as notice of a Lien on any property of the Company or its Subsidiaries; sell any of its property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable) with recourse to it or any of its Subsidiaries or assign or otherwise transfer, or permit any of its Subsidiaries (other than the Existing Utility Subsidiaries (as defined in the Bank Facility)) to assign or otherwise transfer, any account or other right to receive income; other than, as to all of the above, Permitted Liens. As used herein, "Permitted Liens" shall have the meaning of that term as defined in the Five-Year Credit Agreement, dated as of November 10, 2000, among the Company and the banks listed therein (as the same maybe amended from time to time, the "BANK FACILITY"). As used herein, "Liens" means any mortgage, 16 deed of trust, pledge, lien (statutory or otherwise), security interest, charge or other encumbrance or security or preferential arrangement of any nature, including, without limitation, any conditional sale or title retention arrangement, any capitalized lease and any assignment, deposit arrangement or financing lease intended as, or having the effect of, security. (c) Transactions With Affiliates. The Company shall not, and shall not permit any Subsidiary to, directly or indirectly, effect any transaction with any Affiliate (as defined in the Bank Facility) that is (a) outside the ordinary course of business or (b) on a basis less favorable than would at the time be obtainable for a comparable transaction in arms-length dealing with an unrelated third party, provided that notwithstanding the foregoing, no loan, payment or other form of contribution shall be made to NRG unless it is in an amount not in excess of (i) $300 Million payable pursuant to the Support Agreement and Capital Subscription Agreement, dated as of May 29, 2002, by and between the Company and NRG Energy Inc. and (ii) $250 Million in respect of guarantee obligations relating to the power marketing business of NRG; provided further that with respect to any payment permitted pursuant to clause (ii) above, the Company shall in the context of a restructuring of NRG, use its reasonable best efforts to obtain a full release of all obligations and liabilities of the Company relating to NRG. (d) Leverage Ratio. The Company shall not permit the Leverage Ratio set forth in the Bank Facility to be exceeded. (e) Restrictive Agreements. The Company shall not, and shall not permit any Significant Subsidiary (as defined in the Bank Facility) other than NRG to, enter into any agreement after the date of this Note that imposes any restriction on the ability of such Significant Subsidiary to make payments, directly or indirectly, to its shareholders by way of dividends, advances, repayment of loans or intercompany charges, expenses or accruals or other returns on investments that is more restrictive than any such restriction applicable to such Significant Subsidiary on the Issuance Date. (f) Scope of Business. The Company shall, and shall cause each Subsidiary to, engage only in energy-related business, functionally related businesses (as interpreted under PUHCA, as defined in the Securities Purchase Agreement)or such other businesses as maybe permitted pursuant to an order issued by the SEC pursuant to PUHCA. (14) VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law, including but not limited to the Minnesota Business Corporation Act, and as expressly provided in this Note. (15) PARTICIPATION. The Holder, as the holder of this Note, shall be entitled to (i) all extraordinary or special dividends paid and distributions made to the holders of Common Stock to the same extent as if the Holder had converted this Note into Common Stock (without regard to any limitations on conversion herein or elsewhere) and had held such shares of Common Stock on the record date for such dividends and distributions and (ii) regular cash dividends and distributions paid to the holders of the Common Stock only with respect to that portion of such dividends that exceeds $0.1875 per share of Common Stock in any calendar quarter (subject to adjustment for stock splits, stock dividends, stock combinations and other 17 similar transactions after the Issuance Date). Payments under the preceding sentence shall be made concurrently with the dividend or distribution to the holders of Common Stock. (16) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote at a meeting duly called for such purpose or the written consent without a meeting, of the holders of Notes representing not less than two-thirds of the aggregate principal amount of the then outstanding Notes, shall be required for any change or amendment to this Note or the Other Notes. (17) TRANSFER. This Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 2(f) of the Securities Purchase Agreement. (18) REISSUANCE OF THIS NOTE. (a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 18(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Note (in accordance with Section 18(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 3(c)(iii) and this Section 18(a), following conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note. (b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal. (c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 18(d) and in principal amounts of at least $100,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender. (d) Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section 18(a) or Section 18(c), the Principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal 18 remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued Interest and Late Charges on the Principal and Interest of this Note, from the Issuance Date. (19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, the Securities Purchase Agreement and the Registration Rights Agreement, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder's right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. (20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors' rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including but not limited to attorneys fees and disbursements. (21) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and all the Purchasers and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note. (22) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. (23) DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Redemption Price or the arithmetic calculation of the Conversion Rate or the Redemption Price or any other calculation hereunder, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within one Business Day of receipt of the Conversion 19 Notice or Redemption Notice giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Conversion Rate within one Business Day of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within one Business Day submit via facsimile (a) the disputed determination of the Weighted Average Price, the Closing Bid Price or the Closing Sale Price or any other calculation hereunder to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Rate or the Redemption Price to the Company's independent, outside accountant. The Company, at the Company's expense, shall cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than five Business Days from the time it receives the disputed determinations or calculations. Such investment bank's or accountant's determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error. (24) NOTICES; PAYMENTS. (a) Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least twenty days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grants, issues or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to holders of Common Stock or (C) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to such holder. Notwithstanding the foregoing, Section 4(j) of the Securities Purchase Agreement shall apply to all notices given pursuant to this Note. (b) Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Purchasers (as defined in Section 3(d)(ii)), shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder's wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any Interest Date which is not the date on which this Note is paid in full, the extension of the due date thereof shall 20 not be taken into account for purposes of determining the amount of Interest due on such date. Any amount of Interest, Principal or other amount due under the Transaction Documents (as defined in the Securities Purchase Agreement) which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of 12% per annum from the date such amount was due until the same is paid in full ("LATE CHARGE"). (25) CANCELLATION. After all Principal, accrued Interest and other amounts at any time owed on this Note has been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued. (26) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement. (27) GOVERNING LAW. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois. (28) CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings: (a) "BUSINESS DAY" means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed. (b) "CHANGE OF CONTROL TERMINATION DATE" shall mean, with respect to any proposed Change of Control for which a public announcement that it proposes or intends to effect a Change of Control of the Company (the date of such announcement, the "ANNOUNCEMENT DATE") has been made, the date upon which the Company or other Person proposing to effect such Change of Control consummates or publicly announces the termination or abandonment of the proposed Change of Control which was the subject of the previous public announcement. (c) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on The New York Stock Exchange, Inc. (the "PRINCIPAL MARKET") as reported by Bloomberg Financial Markets ("BLOOMBERG"), or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m. Eastern Time as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last 21 trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 23. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during any applicable calculation period. (d) "COMMON STOCK" means (i) the Company's common stock, par value $2.50 per share, and (ii) any capital stock resulting from a reclassification of such Common Stock. (e) "PERSON" means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof. (f) "REDEMPTION PREMIUM" means (i) in the case of the Events of Default described in Section 4(a)(i), (ii), (iii), (iv) and (viii), 115% or (ii) in the case of the Events of Default described in Section 4(a)(v) - (vii), 100%. (g) "REGISTRATION RIGHTS AGREEMENT" means that certain registration rights agreement between the Company and the initial holders of the Notes relating to the registration of the resale of the shares of Common Stock issuable upon conversion of the Notes. (h) "SECURITIES PURCHASE AGREEMENT" means that certain securities purchase agreement between the Company and the initial holders of the Notes pursuant to which the Company issued the Notes. (i) "SEPARATE TRANCHE NOTES" means the First Notes, Second Notes, Second Call Notes, Third Notes and the Third Call Notes, collectively. (j) "TRADING DAY" means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that "Trading Day" shall not include any day on which the Common Stock is scheduled to trade on such exchange or market or actually trades on such exchange or market for less than 4.5 hours. 22 (k) "TRANCHE A BASE PRICE" means $10.54 (subject to adjustment for stock splits, stock dividends, stock combinations and similar events after the issuance date of the First Notes). (l) "TRANCHE A PRICING PERIOD" means the twenty consecutive Trading Days commencing on the fifth Trading Day immediately following the issuance date of the First Notes. (m) "VARIABLE SECURITIES" means any stock or securities other than Options directly or indirectly convertible into or exchangeable for Common Stock ("CONVERTIBLE SECURITIES") or any rights, warrants or option to subscribe for or purchase Common Stock or Convertible Securities ("OPTIONS") that are convertible into or exchangeable, directly or indirectly, for Common Stock at a price which varies or may vary with the market price of the Common Stock, including by way of one or more adjustments or resets to a fixed price (a "VARIABLE PRICE"). (n) "WEIGHTED AVERAGE PRICE" means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market during the period beginning at 9:30 a.m., New York Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" functions (ignoring any trade of more than 100,000 shares of such security pursuant to an individual transaction (subject to adjustment for stock splits, stock dividends, stock combinations and other similar transactions involving such security after the Issuance Date)), or, if the Principal Market is not the principal securities exchange or trading market for such security, the dollar volume-weighted average price for such security on the principal securities exchange or trading market where such security is listed or traded during the period beginning at 9:30 a.m., New York Time (or such other time as such principal securities exchange or trading market publicly announces is the official open of trading), and ending at 4:00 p.m., New York Time (or such other time as such principal securities exchange or trading market publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" functions (ignoring any trade of more than 100,000 shares of such security pursuant to an individual transaction (subject to adjustment for stock splits, stock dividends, stock combinations and other similar transactions involving such security after the Issuance Date)), or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30 a.m., New York Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree 23 upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 23. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during applicable calculation period. [SIGNATURE PAGE FOLLOWS] 24 IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Date of Issuance set out above. XCEL ENERGY INC. By: --------------------------------- Name: Title: Chief Executive Officer EXHIBIT I XCEL ENERGY INC. CONVERSION NOTICE Reference is made to the Convertible Note (the "NOTE") issued to the undersigned by XCEL ENERGY INC. (the "COMPANY"). In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common Stock, par value $2.50 per share (the "COMMON STOCK"), of the Company as of the date specified below. Date of Conversion: ----------------------------------------------------- Aggregate Conversion Amount to be converted: ---------------------------- Please confirm the following information: Conversion Price: ------------------------------------------------------- Number of shares of Common Stock to be issued: -------------------------- Please issue the Common Stock into which the Note is being converted and, if applicable, any check drawn on an account of the Company in the following name and to the following address: Issue to: --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- Facsimile Number: ------------------------------------------------------- Authorization: ---------------------------------------------------------- By: -------------------------------------------------------------- Title: ----------------------- Dated: -------------------------------------------------------------------------- Account Number: ---------------------------------------------------------- (if electronic book entry transfer) Transaction Code Number: ------------------------------------------------ (if electronic book entry transfer) ACKNOWLEDGMENT The Company hereby acknowledges this Conversion Notice and hereby directs [TRANSFER AGENT] to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated November 8, 2002 from the Company and acknowledged and agreed to by [TRANSFER AGENT]. XCEL ENERGY INC. By: --------------------------------- Name: Title: EX-4.13 12 c72574exv4w13.txt EX-4.13 FORM OF SECOND CALL NOTES EXHIBIT 4.13 SENIOR CONVERTIBLE NOTE THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL IN A REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THIS NOTE. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE. XCEL ENERGY INC. Issuance Date: _______ __, 200_ Principal: U.S. $____________ FOR VALUE RECEIVED, XCEL ENERGY INC., a Minnesota corporation (the "COMPANY"), hereby promises to pay to the order of __________________ or registered assigns ("HOLDER") the amount set out above as the Principal (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the "PRINCIPAL") when due, whether upon the Final Maturity Date (as defined below), acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest ("INTEREST") on any outstanding Principal at the rate of eight percent (8%) per annum, subject to periodic adjustment pursuant to Section 2 (the "INTEREST RATE"), from the date set out above as the Issuance Date (the "ISSUANCE DATE") until the same becomes due and payable, whether upon an Interest Date (as defined below), the Final Maturity Date, acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof). This Convertible Note (including all Convertible Notes issued in exchange, transfer or replacement hereof, this "NOTE") is one of an issue of Convertible Notes (collectively, the "NOTES" and such other Convertible Notes, the "OTHER NOTES") issued on the Issuance Date pursuant to the Securities Purchase Agreement (as defined below). Certain capitalized terms are defined in Section 28 and terms used herein but not defined herein shall have the meanings set forth for such terms in the Securities Purchase Agreement. (1) MATURITY. On the Final Maturity Date, the Holder shall surrender this Note to the Company and the Company shall pay to the Holder an amount in cash representing all outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late Charges (as defined in Section 24(b)), if any. The "MATURITY DATE" shall be the date that is 364 days after the Issuance Date; provided that, if the Holder has given notice in writing to the Company of its desire to extend the Maturity Date on or prior to the date that is 10 Business Days prior to the Maturity Date, the Maturity Date shall be extended (on one or more occasions) for an additional 364 days; provided, further, that the Maturity Date shall not be extended (except as provided in the following proviso) to more than five years after the Issuance Date (such date that is five years after the Issuance Date or such earlier Maturity Date prior to which the Holder has not requested an extension thereof, the "FINAL MATURITY DATE"); and provided, further, that the Final Maturity Date may be extended at the option of the Holder (x) in the event that, and for so long as, an Event of Default (as defined in Section 4(a)) shall have occurred and be continuing or any event shall have occurred and be continuing which with the passage of time and the failure to cure would result in an Event of Default and (y) through the date that is ten days after a Change of Control Termination Date in the event that the Announcement Date giving rise to such Change of Control Termination Date occurred prior to the Final Maturity Date. (2) INTEREST; INTEREST RATE. Interest on this Note shall commence accruing on the Issuance Date and shall be computed on the basis of the actual days elapsed during any period, and a calendar year of 365 or 366 calendar days, as applicable, and shall be payable in cash on each May 1 and each November 1 during the period beginning on the Issuance Date and ending on, and including, the Final Maturity Date (each an "INTEREST DATE"); provided that interest on any Conversion Amount of this Note that is accrued but unpaid as of the Conversion Date of such Conversion Amount shall be paid in shares of Common Stock at the Conversion Rate. From and after the occurrence of an Event of Default (as defined in Section 4(a)) or the failure to deliver timely the Non-Consolidation Opinion (as defined in the Securities Purchase Agreement) pursuant to Section 4(f) of the Securities Purchase Agreement (the "NRG OPINION"), the Interest Rate shall be increased by two percentage points (2%). In the event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided that the Interest as calculated at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of cure of such Event of Default. If the Company shall fail to credit the Holder's balance account with DTC (as defined in Section 3(c)(i)) or, if requested in writing by the Holder, to issue a certificate to the Holder for the number of shares of Common Stock to which the Holder is entitled upon conversion of any Conversion Amount or to issue a new Note (in accordance with Section 18(d)) representing the Principal portion of the Conversion Amount (as defined in Section 3(b)(i)) to which the Holder is entitled, in each case within the time periods set out in Section 3(c)(i) (in each case, a "CONVERSION FAILURE"), then during each period beginning on and including the date of each such Conversion Failure and ending on and including the date such Conversion Failure is cured, the Interest Rate then in effect shall be increased by two percentage points (2%). If (i) the Registration Statement (as defined in the Registration Rights Agreement) covering all the Registrable Securities (as defined in the Registration Rights Agreement) issuable upon conversion of this Note and required to be filed by 2 the Company pursuant to the Registration Rights Agreement is not declared effective by the Securities and Exchange Commission (the "SEC") on or before the applicable Mandatory Effective Date (as defined in the Registration Rights Agreement) or (ii) on any day after such Registration Statement has been declared effective by the SEC that sales of all the Registrable Securities required to be included on such Registration Statement cannot be made (other than during an Allowable Grace Period (as defined in Section 3(t) of the Registration Rights Agreement) pursuant to such Registration Statement (including, without limitation, because of a failure to keep such Registration Statement effective, to disclose such information as is necessary for sales to be made pursuant to such Registration Statement or to register sufficient shares of Common Stock) (collectively with the event described in the immediately preceding clause (i), each a "REGISTRATION FAILURE"), then, as partial relief for the damages to any holder by reason of any such delay in or reduction of its ability to sell Registrable Securities (which remedy shall not be exclusive of any other remedies available at law or in equity) the Interest Rate then in effect shall be increased by two percentage points (2%) during each period beginning on and including the first date of each such Registration Failure and ending on and including the date such Registration Failure is cured. (3) CONVERSION OF NOTES. This Note shall be convertible into shares of the Common Stock, on the terms and conditions set forth in this Section 3. (a) Conversion Right. Subject to the provisions of Section 3(d), at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount. (b) Conversion Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (as defined below) (the "CONVERSION RATE"). (i) "CONVERSION AMOUNT" means the sum of (A) the portion of the Principal to be converted, redeemed or otherwise surrendered with respect to which this determination is being made, (B) accrued and unpaid Interest with respect to such Principal and (C) accrued and unpaid Late Charges with respect to such Principal and Interest. (ii) "CONVERSION PRICE" means the lesser of (x) 110% of the arithmetic average of the Weighted Average Price of the Common Stock during the Tranche B Pricing Period and (y) 110% of the Closing Bid Price of the Common Stock on the 35th Business Day after the issuance date of the First Notes; provided that the Conversion Price shall not exceed 110% of the Tranche B Base Price. 3 (c) Mechanics of Conversion. (i) Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a "CONVERSION DATE"), the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., Central Time on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the "CONVERSION NOTICE") to the Company and (B) if required by Section 3(c)(ii), surrender this Note to a common carrier for delivery to the Company as soon as practicable on or following such date (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction). On or before the first Business Day following the Company's receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Conversion Notice to the Holder and the Transfer Agent (as defined below). On or before the second Business Day following the date of receipt of a Conversion Notice (the "SHARE DELIVERY DATE"), the Company shall (X) (if (Y) below does not apply) issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled, or (Y) provided that the Company's transfer agent (the "TRANSFER AGENT") is participating in The Depository Trust Company ("DTC") Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder's or its designee's balance account with DTC through its Deposit Withdrawal Agent Commission system. If this Note is physically surrendered for conversion as required by Section 3(c)(ii) and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three Business Days after receipt of this Note (the "NOTE DELIVERY DATE") and at its own expense, issue and deliver to the holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal not converted. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date. (ii) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting physical surrender and reissue of this Note. The Holder and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion. (iii) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of the Notes or the Separate Tranche Notes for the same Conversion Date and the Company can convert some, but not all, of such 4 portions of the Notes and the Separate Tranche Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from each holder of the Notes and the Separate Tranche Notes electing to have the Notes or Separate Tranche Notes converted on such date a pro rata amount of such holder's portion of its Notes or Separate Tranche Notes submitted for conversion based on the principal amount of the Notes or Separate Tranche Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all the Notes and the Separate Tranche Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 23. (d) Limitations on Conversions. (i) Beneficial Ownership. The Company shall not effect any conversion of this Note, and the Holder of this Note shall not have the right to convert any portion of this Note pursuant to Section 3(a), to the extent that after giving effect to such conversion, the Holder (together with the Holder's affiliates) would beneficially own in excess of 5.0% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any Other Notes, Separate Tranche Notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this Section 3(d)(i), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company's most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. (ii) Principal Market Regulation. The Company shall not be obligated to issue any shares of Common Stock pursuant to this Note if the issuance of such shares of Common 5 Stock would exceed that number of shares of Common Stock which the Company may issue pursuant to the Notes and the Separate Tranche Notes without breaching the Company's obligations under the rules or regulations of the Principal Market (the "EXCHANGE CAP"), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its shareholders as required by the applicable rules of the Principal Market for issuances of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the holders of the Notes and the Separate Tranche Notes representing a majority of the principal amounts of the Notes and the Separate Tranche Notes (voting as a single class) then outstanding. Until such approval or written opinion is obtained, no purchaser of the Notes or the Separate Tranche Notes pursuant to the Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon conversion of the Notes or the Separate Tranche Notes, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the principal amount of the Notes and the Separate Tranche Notes issued to such Purchaser pursuant to the Securities Purchase Agreement as of the date of such determination and the denominator of which is the aggregate principal amount of all the Notes and the Separate Tranche Notes issued to the Purchasers pursuant to the Securities Purchase Agreement as of the date of such determination (with respect to each Purchaser, the "EXCHANGE CAP ALLOCATION"). In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser's Notes or Separate Tranche Notes, the transferee shall be allocated a pro rata portion of such Purchaser's Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any holder of the Notes or the Separate Tranche Notes shall convert all of such holder's Notes or Separate Tranche Notes into a number of shares of Common Stock which, in the aggregate, is less than such holder's Exchange Cap Allocation, then the difference between such holder's Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of the Notes and the Separate Tranche Notes on a pro rata basis in proportion to the aggregate principal amount of the Notes and the Separate Tranche Notes then held by each such holder. (4) RIGHTS UPON EVENT OF DEFAULT. (a) Event of Default. Each of the following events shall constitute a "EVENT OF DEFAULT": (i) the failure of the Registration Statement covering all Registrable Securities (as defined in the Registration Rights Agreement) required to be registered pursuant to the Registration Rights Agreement to be declared effective by the SEC on or prior to the date that is 180 days after the Issuance Date, or, while such Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of such Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to any holder of the Notes for sale of all of such holder's Registrable Securities in accordance with the terms of the 6 Registration Rights Agreement, and such lapse or unavailability continues for a period of five consecutive Business Days or for more than an aggregate of 20 Business Days in any 365-day period; (ii) the suspension from trading on the Principal Market for a period of three consecutive Business Days or for more than an aggregate of three Business Days in any 30-day Trading Day period or the delisting of the Common Stock from the Principal Market; (iii) the Company's (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock or a new Note (in accordance with section 18(d)), as applicable, within 10 days after the receipt by the Company of a Conversion Notice or (B) notice, written or oral, to any holder of the Notes, including by way of public announcement or through any of its agents, at any time, of its intention not to comply with a request for conversion of any Notes into shares of Common Stock that is tendered in accordance with the provisions of the Notes; (iv) the Company's failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as due under this Note, the Securities Purchase Agreement, the Registration Rights Agreement or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby to which the Holder is a party; (v) any default under, redemption of or acceleration prior to maturity of any Indebtedness (as defined in Section 3(r) of the Securities Purchase Agreement) of the Company or any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase Agreement) other than NRG (as defined below) (including, without limitation, the Other Notes) of at least $50,000,000; (vi) the Company or any of its Subsidiaries other than NRG (as defined below), pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal or state law for the relief of debtors (collectively, "BANKRUPTCY LAW"), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a "CUSTODIAN"), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due; (vii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company or any of its Subsidiaries other than NRG (as defined below) in an involuntary case, (B) appoints a Custodian of the Company or any of its Subsidiaries other than NRG (as defined below) or (C) orders the liquidation of the Company or any of its Subsidiaries other than NRG (as defined below); or (viii) the Company breaches any representation, warranty, covenant (other than any covenant to deliver the NRG Opinion) or other term or condition of the Securities Purchase Agreement, the Registration Rights Agreement, this Note or any other 7 agreement, document, certificate or other instrument delivered in connection with the transactions contemplated thereby and hereby to which the Holder is a party, except, in the case of a breach of a covenant which is curable, only if such breach continues for a period of at least 10 consecutive days. (b) Redemption Right. Promptly after the occurrence of an Event of Default with respect to this Note or the Other Notes, the Company shall deliver written notice thereof via facsimile and overnight courier (a "EVENT OF DEFAULT NOTICE") to the Holder. At any time after the earlier of the Holder's receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (the "EVENT OF DEFAULT REDEMPTION NOTICE") to the Company, which Event of Default Redemption Notice shall indicate the portion of this Note the Holder is electing to redeem. Each portion of this Note subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed by the Company at a price equal to the greater of (i) the product of (x) the Conversion Amount and (y) the quotient determined by dividing (A) the Closing Sale Price of the Common Stock immediately prior to such Event of Default by (B) the Conversion Price and (ii) the product of (x) the Conversion Amount and (y) the Redemption Premium (the "EVENT OF DEFAULT REDEMPTION PRICE"). Redemptions required by this Section 4(b) shall be made in accordance with the provisions of Section 10. (5) RIGHTS UPON CHANGE OF CONTROL. (a) Change of Control. Each of the following events shall constitute a "CHANGE OF CONTROL": (i) the consolidation, merger or other business combination (including, without limitation, a reorganization or recapitalization) of the Company with or into another Person in which holders of the Company's voting power immediately prior to the transaction cease after the transaction to hold, directly or indirectly, a majority of the voting power of the surviving entity or entities or the voting power necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities; (ii) the sale or transfer of all or substantially all of the Company's assets; or (iii) a purchase, tender or exchange offer made to and accepted by the holders of more than the 50% of the outstanding shares of Common Stock. (b) Assumption. Prior to the consummation of any Change of Control, the Company will secure from any Person purchasing the Company's assets or Common Stock or any successor resulting from such Change of Control (in each case, an "ACQUIRING ENTITY") a written agreement (in form and substance satisfactory to the holders of Notes representing a majority of the aggregate principal amount of the Notes then outstanding) to deliver to each holder of Notes in exchange for such Notes, a security of the Acquiring Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including, without limitation, having a principal amount and interest rate equal to the principal amounts and the 8 interest rates of the Notes held by such holder, and satisfactory to the holders of Notes representing a majority of the principal amount of the Notes then outstanding. In the event that an Acquiring Entity is directly or indirectly controlled by a company or entity whose common stock or similar equity interest is listed, designated or quoted on a securities exchange or trading market, the holders of notes representing a majority of the aggregate principal amount of the Notes then outstanding may elect to treat such Person as the Acquiring Entity for purposes of this Section 5(b). (c) Redemption Right. No sooner than 15 days nor later than 10 days prior to the consummation of a Change of Control, but not prior to the public announcement of such Change of Control, the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a "CHANGE OF CONTROL NOTICE"). At any time on or after consummation of such Change of Control, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof ("CHANGE OF CONTROL REDEMPTION NOTICE" and, collectively with an Event of Default Redemption Notice, "REDEMPTION NOTICES" and, individually, each a "REDEMPTION NOTICE") to the Company, which Change of Control Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this Section 5(c) shall be redeemed by the Company at a price equal to the greater of (i) the product of (x) the Conversion Amount and (y) the quotient determined by dividing (A) the Closing Sale Price of the Common Stock immediately following the public announcement of such proposed Change of Control by (B) the Conversion Price and (ii) 115% of the Conversion Amount (the "CHANGE OF CONTROL REDEMPTION PRICE" and, together with the Event of Default Redemption Price, the "REDEMPTION PRICE"). Redemptions required by this Section 5(c) shall be made in accordance with the provisions of Section 10 and shall have priority to payments to other shareholders in connection with a Change of Control. (6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS. (a) Purchase Rights. If at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or restrictions on the convertibility of this Note) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. (b) Other Corporate Events. Prior to the consummation of any recapitalization, reorganization, consolidation, merger or other business combination (other than a Change of Control) pursuant to which holders of Common Stock are entitled to receive securities or other assets with respect to or in exchange for Common Stock (a "CORPORATE 9 EVENT"), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Note, (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the holders of Notes representing a majority of the aggregate principal amount of the Notes then outstanding. (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES. (a) Adjustment of Conversion Price upon Issuance of Common Stock. If and whenever on or after the issuance date of the Second Notes, the Company issues or sells, or in accordance with this Section 7(a) is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding shares of Common Stock deemed to have been issued or sold by the Company (I) in connection with the Xcel Energy Direct Purchase Plan or any employee benefit plan which has been approved by the Board of Directors of the Company or any of its Subsidiaries, pursuant to which the Company's securities may be issued to any employee, officer or director for services provided to the Company or its Subsidiaries (each, an "APPROVED STOCK PLAN") or (II) upon conversion of the Notes or the Separate Tranche Notes) for a consideration per share less than the higher of the Closing Sale Price of the Common Stock on the date of such issuance or sale or deemed issuance or sale and the Conversion Price in effect immediately prior to such issuance or sale or deemed issuance or sale (such higher price is referred to herein as the "APPLICABLE PRICE"), then immediately after such issue or sale (subject to Section 7(a)(vi)), the Conversion Price then in effect shall be reduced to an amount equal to the product of (x) the Conversion Price in effect immediately prior to such issue or sale or deemed issuance or sale and (y) the quotient determined by dividing (1) the sum of the product of the Applicable Price and the number of shares of Common Stock Deemed Outstanding immediately prior to such issue or sale or deemed issue or sale and the consideration, if any, received by the Company upon such issue or sale, by (2) the product of the Applicable Price multiplied by the number of shares of Common Stock Deemed Outstanding immediately after such issue or sale or deemed issue or sale. For purposes of determining the adjusted Conversion Price under this Section 7(a), the following shall be applicable: (i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price 10 per share. For purposes of this Section 7(a)(i), the "lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of the Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities. If the Company issues or sells any Options which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Securities, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock or Convertible Securities upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the exercise price a price which does not vary with the market price of the Common Stock. (ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon such conversion, exercise or exchange thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance of sale of such Convertible Securities for such price per share. For the purposes of this Section 7(a)(ii), the "price per share for which one share of Common Stock is issuable upon such conversion, exercise or exchange" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the issuance or sale of the Convertible Security and upon the conversion, exercise or exchange of such Convertible Security. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price had been or are to be made pursuant to other provisions of this Section 7(a), no further adjustment of the Conversion Price shall be made by reason of such issue or sale. If the Company issues or sells any Convertible Securities which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Security, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the conversion, exercise or exchange price a price which does not vary with the market price of the Common Stock. (iii) Change in Option Price or Rate of Conversion. If the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion or 11 exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Issuance Date are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change. No adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect. (iv) Calculation of Consideration Received. In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for a consideration of $.01. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Company therefor. If any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Closing Sale Price of such securities on the date of receipt. If any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the holders of Notes representing a majority of the principal amounts of the Notes then outstanding. If such parties are unable to reach agreement within ten days after the occurrence of an event requiring valuation (the "VALUATION EVENT"), the fair value of such consideration will be determined within five Business Days after the tenth day following the Valuation Event by an independent, reputable appraiser jointly selected by the Company and the holders of Notes representing a majority of the principal amounts of the Notes then outstanding. The determination of such appraiser shall be deemed binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company. (v) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed 12 to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (vi) Common Stock Deemed Outstanding. "COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii) hereof regardless of whether the Options or Convertible Securities are actually exercisable at such time, but excluding any shares of Common Stock owned or held by or for the account of the Company or issuable upon conversion of the Notes or the Separate Tranche Notes. (vii) Delayed Adjustment. In addition to the foregoing provisions of this Section 7(a), the Weighted Average Price, Closing Sales Price and Closing Bid Price shall be subject to adjustment, in accordance with the foregoing provisions, for any days during any measuring period, including, without limitation, the Tranche B Pricing Period, used herein that occur prior to any of the aforementioned events if such events occur prior to the end of such measuring period. (b) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. If the Company at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. (c) Other Events. If any event occurs of the type contemplated by the provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company's Board of Directors will make an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder under this Note; provided that no such adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 7. (8) NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of, or enter into any agreement which by its terms restricts or otherwise impairs the Company's performance of the terms of, this Note or any of the other Transaction Documents (as defined in the Securities Purchase Agreement), and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note. 13 (9) RESERVATION OF AUTHORIZED SHARES. (a) Reservation. The Company shall initially reserve out of its authorized and unissued Common Stock a number of shares of Common Stock for each of the Notes and the Separate Tranche Notes equal to 115% of the Conversion Rate with respect to the Conversion Amount of each such Note and Separate Tranche Note. Thereafter, the Company shall, so long as any of the Notes or Separate Tranche Notes are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Notes and Separate Tranche Note, at least 100% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Notes and the Separate Tranche Notes then outstanding; provided that at no time shall the number of shares of Common Stock so reserved be less than the number of shares required to be reserved by the previous sentence (without regard to any limitations on conversions) (the "REQUIRED RESERVE AMOUNT"). The initial number of shares of Common Stock reserved for conversions of the Notes and the Separate Tranche Note and each increase in the number of shares so reserved shall be allocated pro rata among the holders of the Notes and Separate Tranche Note based on the principal amount of the Notes and Separate Tranche Notes held by each holder at the time of Issuance Date or increase in the number of reserved shares, as the case may be (the "AUTHORIZED SHARE ALLOCATION"). In the event that a holder shall sell or otherwise transfer any of such holder's Notes, each transferee shall be allocated a pro rata portion of such holder's Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Notes shall be allocated to the remaining holders of Notes, pro rata based on the principal amount of the Notes then held by such holders. (b) Insufficient Authorized Shares. If at any time while any of the Notes or Separate Tranche Note remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes and the Separate Tranche Notes at least a number of shares of Common Stock equal to the Required Reserve Amount (an "AUTHORIZED SHARE FAILURE"), then the Company shall immediately take all action necessary to increase the Company's authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Notes and Separate Tranche Note then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than 60 days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its shareholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each shareholder with a proxy statement and shall use its best efforts to solicit its shareholders' approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the shareholders that they approve such proposal. (10) REDEMPTION. (a) Mechanics. In the event that the Holder has sent a Redemption Notice to the Company pursuant to Section 4(b) or Section 5(c), the Holder shall promptly 14 submit this Note to the Company. The Company shall deliver the applicable Event of Default Redemption Price to the Holder within five Business Days after the Company's receipt of the Holder's Event of Default Redemption Notice and thereafter the Holder shall promptly deliver this Note to the Company. If the Holder has submitted a Change of Control Redemption Notice in accordance with Section 5(c), the Company shall deliver the applicable Change of Control Redemption Price to the Holder concurrently with the consummation of such Change of Control if such notice is received prior to the consummation of such Change of Control and within five Business Days after the Company's receipt of such notice otherwise. In the event of a redemption of less than all of the Conversion Amount of this Note, the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal which has not been redeemed. In the event that the Company does not pay the Redemption Price to the Holder within the time period required above in this Section 10(a) at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder shall have the option to, in lieu of redemption, require the Company to promptly return to the Holder all or any portion of this Note representing the Conversion Amount that was submitted for redemption and for which the applicable Redemption Price (together with any Late Charges thereon) has not been paid. Upon the Company's receipt of such notice, (x) the Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company shall immediately return this Note, or issue a new Note (in accordance with Section 18(d)) to the Holder representing such Conversion Amount and (z) the Conversion Price of this Note or such new Notes shall be adjusted to the lesser of (A) the Conversion Price as in effect on the date on which the Redemption Notice is voided and (B) the lowest Closing Bid Price during the period beginning on and including the date on which the Redemption Notice is delivered to the Company and ending on and including the date on which the Redemption Notice is voided. The Holder's delivery of a notice voiding a Redemption Notice and exercise of its rights following such notice shall not affect the Company's obligations to make any payments of Late Charges which have accrued prior to the date of such notice with respect to the Conversion Amount subject to such notice. (b) Redemption by Other Holders. Upon the Company's receipt of notice from any of the holders of the Other Notes or the Separate Tranche Notes for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 4(b) or Section 5(c) (each an "OTHER REDEMPTION NOTICE"), the Company shall immediately forward to the Holder by facsimile a copy of such notice. If the Company receives a Redemption Notice and one or more Other Redemption Notices during the seven Business Day period beginning on and including the date which is three Business Days prior to the Company's receipt of the Holder's Redemption Notice and ending on and including the date which is three Business Days after the Company's receipt of the Holder's Redemption Notice and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice and such Other Redemption Notices received during such seven Business Day period, then the Company shall redeem a pro rata amount from each holder of the Notes and the Separate Tranche Notes (including the Holder) based on the principal amount of the Notes and the Separate Tranche Notes submitted for redemption pursuant to such Redemption Notice and such Other Redemption Notices received by the Company during such seven Business Day period. 15 (c) Redemption at the Option of the Company. Except in connection with the satisfaction by the Company of its obligations to redeem the Notes under Sections 4(b) and 5(c) hereof, without the prior written consent of the Holder the Company shall not have the right to prepay, redeem, repurchase, defease or otherwise retire any Note prior to the Final Maturity Date. (11) RESTRICTION ON REDEMPTION. Until all of the Notes have been converted, redeemed or otherwise satisfied in accordance with their terms, the Company shall not, directly or indirectly, redeem its capital stock without the prior express written consent of the holders of Notes representing at least two-thirds of the aggregate principal amount of the Notes then outstanding. (12) SUBORDINATION; ADDITIONAL INDEBTEDNESS. Payments of Principal and Interest and other payments due under this Note shall rank pari passu in right of payment with all (and shall not be subordinated to any) unsecured, unsubordinated indebtedness of the Company and will be senior in right of payment to all subordinated indebtedness of the Company. (13) COVENANTS. (a) Indebtedness. The Company shall not create, incur, assume, guarantee or suffer to exist, or otherwise become or remain liable with respect to, any Indebtedness other than Permitted Indebtedness and Subordinated Indebtedness. "Subordinated Indebtedness" shall mean Indebtedness that is unsecured and subordinated in right of payment to the Notes and other obligations owing to the Holders in accordance with a subordination agreement in form and substance satisfactory to the Holders. "Permitted Indebtedness" shall mean any Indebtedness that is unsecured and is not senior in right of payment to the Notes and is otherwise on terms that are no more favorable to the holders thereof than the terms of the Indebtedness evidenced by the Notes unless such more favorable terms are offered to the Holders. (b) Liens. The Company shall not create, incur, assume or suffer to exist, or permit any of its Subsidiaries (other than NRG Energy Inc. or its subsidiaries (collectively, "NRG")) to create, incur, assume or suffer to exist, any Lien upon or with respect to any of its properties, whether now owned or hereafter acquired; sign or suffer to exist any security agreement authorizing any secured party thereunder to file a Uniform Commercial Code financing statement (or the equivalent thereof) as notice of a Lien on any property of the Company or its Subsidiaries; sell any of its property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable) with recourse to it or any of its Subsidiaries or assign or otherwise transfer, or permit any of its Subsidiaries (other than the Existing Utility Subsidiaries (as defined in the Bank Facility)) to assign or otherwise transfer, any account or other right to receive income; other than, as to all of the above, Permitted Liens. As used herein, "Permitted Liens" shall have the meaning of that term as defined in the Five-Year Credit Agreement, dated as of November 10, 2000, among the Company and the banks listed therein (as the same maybe amended from time to time, the "BANK FACILITY"). As used herein, "Liens" means any mortgage, 16 deed of trust, pledge, lien (statutory or otherwise), security interest, charge or other encumbrance or security or preferential arrangement of any nature, including, without limitation, any conditional sale or title retention arrangement, any capitalized lease and any assignment, deposit arrangement or financing lease intended as, or having the effect of, security. (c) Transactions With Affiliates. The Company shall not, and shall not permit any Subsidiary to, directly or indirectly, effect any transaction with any Affiliate (as defined in the Bank Facility) that is (a) outside the ordinary course of business or (b) on a basis less favorable than would at the time be obtainable for a comparable transaction in arms-length dealing with an unrelated third party, provided that notwithstanding the foregoing, no loan, payment or other form of contribution shall be made to NRG unless it is in an amount not in excess of (i) $300 Million payable pursuant to the Support Agreement and Capital Subscription Agreement, dated as of May 29, 2002, by and between the Company and NRG Energy Inc. and (ii) $250 Million in respect of guarantee obligations relating to the power marketing business of NRG; ; provided further that with respect to any payment permitted pursuant to clause (ii) above, the Company shall, in the context of a restructuring of NRG, use its reasonable best efforts to obtain a full release of all obligations and liabilities of the Company relating to NRG. (d) Leverage Ratio. The Company shall not permit the Leverage Ratio set forth in the Bank Facility to be exceeded. (e) Restrictive Agreements. The Company shall not, and shall not permit any Significant Subsidiary (as defined in the Bank Facility) other than NRG to, enter into any agreement after the date of this Note that imposes any restriction on the ability of such Significant Subsidiary to make payments, directly or indirectly, to its shareholders by way of dividends, advances, repayment of loans or intercompany charges, expenses or accruals or other returns on investments that is more restrictive than any such restriction applicable to such Significant Subsidiary on the Issuance Date. (f) Scope of Business. The Company shall, and shall cause each Subsidiary to, engage only in energy-related business, functionally related businesses (as interpreted under PUHCA, as defined in the Securities Purchase Agreement)or such other businesses as maybe permitted pursuant to an order issued by the SEC pursuant to PUHCA. (14) VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law, including but not limited to the Minnesota Business Corporation Act, and as expressly provided in this Note. (15) PARTICIPATION. The Holder, as the holder of this Note, shall be entitled to (i) all extraordinary or special dividends paid and distributions made to the holders of Common Stock to the same extent as if the Holder had converted this Note into Common Stock (without regard to any limitations on conversion herein or elsewhere) and had held such shares of Common Stock on the record date for such dividends and distributions and (ii) regular cash dividends and distributions paid to the holders of the Common Stock only with respect to that portion of such dividends that exceeds $0.1875 per share of Common Stock in any calendar quarter (subject to adjustment for stock splits, stock dividends, stock combinations and other 17 similar transactions after the Issuance Date). Payments under the preceding sentence shall be made concurrently with the dividend or distribution to the holders of Common Stock. (16) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote at a meeting duly called for such purpose or the written consent without a meeting, of the holders of Notes representing not less than two-thirds of the aggregate principal amount of the then outstanding Notes, shall be required for any change or amendment to this Note or the Other Notes. (17) TRANSFER. This Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 2(f) of the Securities Purchase Agreement. (18) REISSUANCE OF THIS NOTE. (a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 18(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Note (in accordance with Section 18(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 3(c)(iii) and this Section 18(a), following conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note. (b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal. (c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 18(d) and in principal amounts of at least $100,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender. (d) Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section 18(a) or Section 18(c), the Principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal 18 remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued Interest and Late Charges on the Principal and Interest of this Note, from the Issuance Date. (19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, the Securities Purchase Agreement and the Registration Rights Agreement, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder's right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. (20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors' rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including but not limited to attorneys fees and disbursements. (21) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and all the Purchasers and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note. (22) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. (23) DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Redemption Price or the arithmetic calculation of the Conversion Rate or the Redemption Price or any other calculation hereunder, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within one Business Day of receipt of the Conversion 19 Notice or Redemption Notice giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Conversion Rate within one Business Day of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within one Business Day submit via facsimile (a) the disputed determination of the Weighted Average Price, the Closing Bid Price or the Closing Sale Price or any other calculation hereunder to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Rate or the Redemption Price to the Company's independent, outside accountant. The Company, at the Company's expense, shall cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than five Business Days from the time it receives the disputed determinations or calculations. Such investment bank's or accountant's determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error. (24) NOTICES; PAYMENTS. (a) Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least twenty days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grants, issues or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to holders of Common Stock or (C) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to such holder. Notwithstanding the foregoing, Section 4(j) of the Securities Purchase Agreement shall apply to all notices given pursuant to this Note. (b) Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Purchasers (as defined in Section 3(d)(ii)), shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder's wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any Interest Date which is not the date on which this Note is paid in full, the extension of the due date thereof shall 20 not be taken into account for purposes of determining the amount of Interest due on such date. Any amount of Interest, Principal or other amount due under the Transaction Documents (as defined in the Securities Purchase Agreement) which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of 12% per annum from the date such amount was due until the same is paid in full ("LATE CHARGE"). (25) CANCELLATION. After all Principal, accrued Interest and other amounts at any time owed on this Note has been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued. (26) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement. (27) GOVERNING LAW. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois. (28) CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings: (a) "BUSINESS DAY" means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed. (b) "CHANGE OF CONTROL TERMINATION DATE" shall mean, with respect to any proposed Change of Control for which a public announcement that it proposes or intends to effect a Change of Control of the Company (the date of such announcement, the "ANNOUNCEMENT DATE") has been made, the date upon which the Company or other Person proposing to effect such Change of Control consummates or publicly announces the termination or abandonment of the proposed Change of Control which was the subject of the previous public announcement. (d) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on The New York Stock Exchange, Inc. (the "PRINCIPAL MARKET") as reported by Bloomberg Financial Markets ("BLOOMBERG"), or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m. Eastern Time as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last 21 trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 23. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during any applicable calculation period. (e) "COMMON STOCK" means (i) the Company's common stock, par value $2.50 per share, and (ii) any capital stock resulting from a reclassification of such Common Stock. (f) "PERSON" means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof. (g) "REDEMPTION PREMIUM" means (i) in the case of the Events of Default described in Section 4(a)(i), (ii), (iii), (iv) and (viii), 115% or (ii) in the case of the Events of Default described in Section 4(a)(v) - (vii), 100%. (h) "REGISTRATION RIGHTS AGREEMENT" means that certain registration rights agreement between the Company and the initial holders of the Notes relating to the registration of the resale of the shares of Common Stock issuable upon conversion of the Notes. (i) "SECURITIES PURCHASE AGREEMENT" means that certain securities purchase agreement between the Company and the initial holders of the Notes pursuant to which the Company issued the Notes. (j) "SEPARATE TRANCHE NOTES" means the First Notes, Second Notes, First Call Notes, Third Notes and the Third Call Notes, collectively. (k) "TRADING DAY" means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that "Trading Day" shall not include any day on which the Common Stock is scheduled to trade on such exchange or market or actually trades on such exchange or market for less than 4.5 hours. 22 (l) "TRANCHE B BASE PRICE" means the Weighted Average Price of the Common Stock on the Tranche B Closing Date (subject to adjustment for stock splits, stock dividends, stock combinations and similar events after the issuance date of the Second Notes). (m) "TRANCHE A PRICING PERIOD" means the twenty consecutive Trading Days commencing on the fifth Trading Day immediately following the issuance date of the First Notes. (n) "TRANCHE B PRICING PERIOD" means the ten consecutive Trading Days commencing on the first Trading Day immediately following the end of the Tranche A Pricing Period. (o) "VARIABLE SECURITIES" means any stock or securities other than Options directly or indirectly convertible into or exchangeable for Common Stock ("CONVERTIBLE SECURITIES") or any rights, warrants or option to subscribe for or purchase Common Stock or Convertible Securities ("OPTIONS") that are convertible into or exchangeable, directly or indirectly, for Common Stock at a price which varies or may vary with the market price of the Common Stock, including by way of one or more adjustments or resets to a fixed price (a "VARIABLE PRICE"). (p) "WEIGHTED AVERAGE PRICE" means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market during the period beginning at 9:30 a.m., New York Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" functions (ignoring any trade of more than 100,000 shares of such security pursuant to an individual transaction (subject to adjustment for stock splits, stock dividends, stock combinations and other similar transactions involving such security after the Issuance Date)), or, if the Principal Market is not the principal securities exchange or trading market for such security, the dollar volume-weighted average price for such security on the principal securities exchange or trading market where such security is listed or traded during the period beginning at 9:30 a.m., New York Time (or such other time as such principal securities exchange or trading market publicly announces is the official open of trading), and ending at 4:00 p.m., New York Time (or such other time as such principal securities exchange or trading market publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" functions (ignoring any trade of more than 100,000 shares of such security pursuant to an individual transaction (subject to adjustment for stock splits, stock dividends, stock combinations and other similar transactions involving such security after the Issuance Date)), or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30 a.m., New York Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported 23 in the "pink sheets" by the National Quotation Bureau, Inc. If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 23. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during applicable calculation period. [SIGNATURE PAGE FOLLOWS] 24 IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Date of Issuance set out above. XCEL ENERGY INC. By: --------------------------------- Name: Title: Chief Executive Officer EXHIBIT I XCEL ENERGY INC. CONVERSION NOTICE Reference is made to the Convertible Note (the "NOTE") issued to the undersigned by XCEL ENERGY INC. (the "COMPANY"). In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common Stock, par value $2.50 per share (the "COMMON STOCK"), of the Company as of the date specified below. Date of Conversion: ----------------------------------------------------- Aggregate Conversion Amount to be converted: ---------------------------- Please confirm the following information: Conversion Price: ------------------------------------------------------- Number of shares of Common Stock to be issued: -------------------------- Please issue the Common Stock into which the Note is being converted and, if applicable, any check drawn on an account of the Company in the following name and to the following address: Issue to: --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- Facsimile Number: ------------------------------------------------------- Authorization: ---------------------------------------------------------- By: -------------------------------------------------------------- Title: ----------------------- Dated: -------------------------------------------------------------------------- Account Number: --------------------------------------------------------- (if electronic book entry transfer) Transaction Code Number: ------------------------------------------------ (if electronic book entry transfer) ACKNOWLEDGMENT The Company hereby acknowledges this Conversion Notice and hereby directs [TRANSFER AGENT] to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated November 8, 2002 from the Company and acknowledged and agreed to by [TRANSFER AGENT]. XCEL ENERGY INC. By: --------------------------------- Name: Title: EX-4.14 13 c72574exv4w14.txt EX-4.14 FORM OF THIRD NOTES EXHIBIT 4.14 SENIOR CONVERTIBLE NOTE THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL IN A REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THIS NOTE. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE. XCEL ENERGY INC. Issuance Date: _______ __, ______ Principal: U.S. $____________ FOR VALUE RECEIVED, XCEL ENERGY INC., a Minnesota corporation (the "COMPANY"), hereby promises to pay to the order of __________________ or registered assigns ("HOLDER") the amount set out above as the Principal (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the "PRINCIPAL") when due, whether upon the Final Maturity Date (as defined below), acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest ("INTEREST") on any outstanding Principal at the rate of eight percent (8%) per annum, subject to periodic adjustment pursuant to Section 2 (the "INTEREST RATE"), from the date set out above as the Issuance Date (the "ISSUANCE DATE") until the same becomes due and payable, whether upon an Interest Date (as defined below), the Final Maturity Date, acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof). This Convertible Note (including all Convertible Notes issued in exchange, transfer or replacement hereof, this "NOTE") is one of an issue of Convertible Notes (collectively, the "NOTES" and such other Convertible Notes, the "OTHER NOTES") issued on the Issuance Date pursuant to the Securities Purchase Agreement (as defined below). Certain capitalized terms are defined in Section 28 and terms used herein but not defined herein shall have the meanings set forth for such terms in the Securities Purchase Agreement. (1) MATURITY. On the Final Maturity Date, the Holder shall surrender this Note to the Company and the Company shall pay to the Holder an amount in cash representing all outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late Charges (as defined in Section 24(b)), if any. The "MATURITY DATE" shall be the date that is 364 days after the Issuance Date; provided that, if the Holder has given notice in writing to the Company of its desire to extend the Maturity Date on or prior to the date that is 10 Business Days prior to the Maturity Date, the Maturity Date shall be extended (on one or more occasions) for an additional 364 days; provided, further, that the Maturity Date shall not be extended (except as provided in the following proviso) to more than five years after the Issuance Date (such date that is five years after the Issuance Date or such earlier Maturity Date prior to which the Holder has not requested an extension thereof, the "FINAL MATURITY DATE"); and provided, further, that the Final Maturity Date may be extended at the option of the Holder (x) in the event that, and for so long as, an Event of Default (as defined in Section 4(a)) shall have occurred and be continuing or any event shall have occurred and be continuing which with the passage of time and the failure to cure would result in an Event of Default and (y) through the date that is ten days after a Change of Control Termination Date in the event that the Announcement Date giving rise to such Change of Control Termination Date occurred prior to the Final Maturity Date. (2) INTEREST; INTEREST RATE. Interest on this Note shall commence accruing on the Issuance Date and shall be computed on the basis of the actual days elapsed during any period, and a calendar year of 365 or 366 calendar days, as applicable, and shall be payable in cash on each May 1 and each November 1 during the period beginning on the Issuance Date and ending on, and including, the Final Maturity Date (each an "INTEREST DATE"); provided that interest on any Conversion Amount of this Note that is accrued but unpaid as of the Conversion Date of such Conversion Amount shall be paid in shares of Common Stock at the Conversion Rate. From and after the occurrence of an Event of Default (as defined in Section 4(a)) or the failure to deliver timely the Non-Consolidation Opinion (as defined in the Securities Purchase Agreement) pursuant to Section 4(f) of the Securities Purchase Agreement (the "NRG OPINION"), the Interest Rate shall be increased by two percentage points (2%). In the event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided that the Interest as calculated at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of cure of such Event of Default. If the Company shall fail to credit the Holder's balance account with DTC (as defined in Section 3(c)(i)) or, if requested in writing by the Holder, to issue a certificate to the Holder for the number of shares of Common Stock to which the Holder is entitled upon conversion of any Conversion Amount or to issue a new Note (in accordance with Section 18(d)) representing the Principal portion of the Conversion Amount (as defined in Section 3(b)(i)) to which the Holder is entitled, in each case within the time periods set out in Section 3(c)(i) (in each case, a "CONVERSION FAILURE"), then during each period beginning on and including the date of each such Conversion Failure and ending on and including the date such Conversion Failure is cured, the Interest Rate then in effect shall be increased by two percentage points (2%). If (i) the Registration Statement (as defined in the Registration Rights Agreement) covering all the Registrable Securities (as defined in the Registration Rights Agreement) issuable upon conversion of this Note and required to be filed by 2 the Company pursuant to the Registration Rights Agreement is not declared effective by the Securities and Exchange Commission (the "SEC") on or before the applicable Mandatory Effective Date (as defined in the Registration Rights Agreement) or (ii) on any day after such Registration Statement has been declared effective by the SEC that sales of all the Registrable Securities required to be included on such Registration Statement cannot be made (other than during an Allowable Grace Period (as defined in Section 3(t) of the Registration Rights Agreement) pursuant to such Registration Statement (including, without limitation, because of a failure to keep such Registration Statement effective, to disclose such information as is necessary for sales to be made pursuant to such Registration Statement or to register sufficient shares of Common Stock) (collectively with the event described in the immediately preceding clause (i), each a "REGISTRATION FAILURE"), then, as partial relief for the damages to any holder by reason of any such delay in or reduction of its ability to sell Registrable Securities (which remedy shall not be exclusive of any other remedies available at law or in equity) the Interest Rate then in effect shall be increased by two percentage points (2%) during each period beginning on and including the first date of each such Registration Failure and ending on and including the date such Registration Failure is cured. (3) CONVERSION OF NOTES. This Note shall be convertible into shares of the Common Stock, on the terms and conditions set forth in this Section 3. (a) Conversion Right. Subject to the provisions of Section 3(d), at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount. (b) Conversion Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (as defined below) (the "CONVERSION RATE"). (i) "CONVERSION AMOUNT" means the sum of (A) the portion of the Principal to be converted, redeemed or otherwise surrendered with respect to which this determination is being made, (B) accrued and unpaid Interest with respect to such Principal and (C) accrued and unpaid Late Charges with respect to such Principal and Interest. (ii) "CONVERSION PRICE" means 110% of the arithmetic average of the Weighted Average Price of the Common Stock during the 20 Trading Day period beginning 90 days after the issuance date of the First Notes, not to exceed the arithmetic average of the Weighted Average Price of the Common Stock during the 20 Trading Day period ending on the Trading Day that is immediately prior to the 90th day after the issuance date of the First Notes. 3 (c) Mechanics of Conversion. (i) Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a "CONVERSION DATE"), the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., Central Time on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the "CONVERSION NOTICE") to the Company and (B) if required by Section 3(c)(ii), surrender this Note to a common carrier for delivery to the Company as soon as practicable on or following such date (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction). On or before the first Business Day following the Company's receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Conversion Notice to the Holder and the Transfer Agent (as defined below). On or before the second Business Day following the date of receipt of a Conversion Notice (the "SHARE DELIVERY DATE"), the Company shall (X) (if (Y) below does not apply) issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled, or (Y) provided that the Company's transfer agent (the "TRANSFER AGENT") is participating in The Depository Trust Company ("DTC") Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder's or its designee's balance account with DTC through its Deposit Withdrawal Agent Commission system. If this Note is physically surrendered for conversion as required by Section 3(c)(ii) and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three Business Days after receipt of this Note (the "NOTE DELIVERY DATE") and at its own expense, issue and deliver to the holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal not converted. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date. (ii) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting physical surrender and reissue of this Note. The Holder and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion. (iii) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of the Notes or the Separate Tranche Notes 4 for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes and the Separate Tranche Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from each holder of the Notes and the Separate Tranche Notes electing to have the Notes or Separate Tranche Notes converted on such date a pro rata amount of such holder's portion of its Notes or Separate Tranche Notes submitted for conversion based on the principal amount of the Notes or Separate Tranche Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all the Notes and the Separate Tranche Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 23. (d) Limitations on Conversions. (i) Beneficial Ownership. The Company shall not effect any conversion of this Note, and the Holder of this Note shall not have the right to convert any portion of this Note pursuant to Section 3(a), to the extent that after giving effect to such conversion, the Holder (together with the Holder's affiliates) would beneficially own in excess of 5.0% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any Other Notes, Separate Tranche Notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this Section 3(d)(i), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company's most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. (ii) Principal Market Regulation. The Company shall not be obligated to issue any 5 shares of Common Stock pursuant to this Note if the issuance of such shares of Common Stock would exceed that number of shares of Common Stock which the Company may issue pursuant to the Notes and the Separate Tranche Notes without breaching the Company's obligations under the rules or regulations of the Principal Market (the "EXCHANGE CAP"), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its shareholders as required by the applicable rules of the Principal Market for issuances of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the holders of the Notes and the Separate Tranche Notes representing a majority of the principal amounts of the Notes and the Separate Tranche Notes (voting as a single class) then outstanding. Until such approval or written opinion is obtained, no purchaser of the Notes or the Separate Tranche Notes pursuant to the Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon conversion of the Notes or the Separate Tranche Notes, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the principal amount of the Notes and the Separate Tranche Notes issued to such Purchaser pursuant to the Securities Purchase Agreement as of the date of such determination and the denominator of which is the aggregate principal amount of all the Notes and the Separate Tranche Notes issued to the Purchasers pursuant to the Securities Purchase Agreement as of the date of such determination (with respect to each Purchaser, the "EXCHANGE CAP ALLOCATION"). In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser's Notes or Separate Tranche Notes, the transferee shall be allocated a pro rata portion of such Purchaser's Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any holder of the Notes or the Separate Tranche Notes shall convert all of such holder's Notes or Separate Tranche Notes into a number of shares of Common Stock which, in the aggregate, is less than such holder's Exchange Cap Allocation, then the difference between such holder's Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of the Notes and the Separate Tranche Notes on a pro rata basis in proportion to the aggregate principal amount of the Notes and the Separate Tranche Notes then held by each such holder. (4) RIGHTS UPON EVENT OF DEFAULT. (a) Event of Default. Each of the following events shall constitute a "EVENT OF DEFAULT": (i) the failure of the Registration Statement covering all Registrable Securities (as defined in the Registration Rights Agreement) required to be registered pursuant to the Registration Rights Agreement to be declared effective by the SEC on or prior to the date that is 180 days after the Issuance Date, or, while such Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of such Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to any holder of the Notes for 6 sale of all of such holder's Registrable Securities in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of five consecutive Business Days or for more than an aggregate of 20 Business Days in any 365-day period; (ii) the suspension from trading on the Principal Market for a period of three consecutive Business Days or for more than an aggregate of three Business Days in any 30-day Trading Day period or the delisting of the Common Stock from the Principal Market; (iii) the Company's (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock or a new Note (in accordance with section 17(d)), as applicable, within 10 days after the receipt by the Company of a Conversion Notice or (B) notice, written or oral, to any holder of the Notes, including by way of public announcement or through any of its agents, at any time, of its intention not to comply with a request for conversion of any Notes into shares of Common Stock that is tendered in accordance with the provisions of the Notes; (iv) the Company's failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as due under this Note, the Securities Purchase Agreement, the Registration Rights Agreement or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby to which the Holder is a party; (v) any default under, redemption of or acceleration prior to maturity of any Indebtedness (as defined in Section 3(r) of the Securities Purchase Agreement) of the Company or any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase Agreement) other than NRG (as defined below) (including, without limitation, the Other Notes) of at least $50,000,000; (vi) the Company or any of its Subsidiaries other than NRG (as defined below), pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal or state law for the relief of debtors (collectively, "BANKRUPTCY LAW"), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a "CUSTODIAN"), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due; (vii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company or any of its Subsidiaries other than NRG (as defined below) in an involuntary case, (B) appoints a Custodian of the Company or any of its Subsidiaries other than NRG (as defined below) or (C) orders the liquidation of the Company or any of its Subsidiaries other than NRG (as defined below); or (viii) the Company breaches any representation, warranty, covenant (other than any covenant to deliver the NRG Opinion) or other term or condition of the Securities 7 Purchase Agreement, the Registration Rights Agreement, this Note or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated thereby and hereby to which the Holder is a party, except, in the case of a breach of a covenant which is curable, only if such breach continues for a period of at least 10 consecutive days. (b) Redemption Right. Promptly after the occurrence of an Event of Default with respect to this Note or the Other Notes, the Company shall deliver written notice thereof via facsimile and overnight courier (a "EVENT OF DEFAULT NOTICE") to the Holder. At any time after the earlier of the Holder's receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (the "EVENT OF DEFAULT REDEMPTION NOTICE") to the Company, which Event of Default Redemption Notice shall indicate the portion of this Note the Holder is electing to redeem. Each portion of this Note subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed by the Company at a price equal to the greater of (i) the product of (x) the Conversion Amount and (y) the quotient determined by dividing (A) the Closing Sale Price of the Common Stock immediately prior to such Event of Default by (B) the Conversion Price and (ii) the product of (x) the Conversion Amount and (y) the Redemption Premium (the "EVENT OF DEFAULT REDEMPTION PRICE"). Redemptions required by this Section 4(b) shall be made in accordance with the provisions of Section 10. (5) RIGHTS UPON CHANGE OF CONTROL. (a) Change of Control. Each of the following events shall constitute a "CHANGE OF CONTROL": (i) the consolidation, merger or other business combination (including, without limitation, a reorganization or recapitalization) of the Company with or into another Person in which holders of the Company's voting power immediately prior to the transaction cease after the transaction to hold, directly or indirectly, a majority of the voting power of the surviving entity or entities or the voting power necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities; (ii) the sale or transfer of all or substantially all of the Company's assets; or (iii) a purchase, tender or exchange offer made to and accepted by the holders of more than the 50% of the outstanding shares of Common Stock. (b) Assumption. Prior to the consummation of any Change of Control, the Company will secure from any Person purchasing the Company's assets or Common Stock or any successor resulting from such Change of Control (in each case, an "ACQUIRING ENTITY") a written agreement (in form and substance satisfactory to the holders of Notes representing a majority of the aggregate principal amount of the Notes then outstanding) to deliver to each holder of Notes in exchange for such Notes, a security of the Acquiring Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including, without 8 limitation, having a principal amount and interest rate equal to the principal amounts and the interest rates of the Notes held by such holder, and satisfactory to the holders of Notes representing a majority of the principal amount of the Notes then outstanding. In the event that an Acquiring Entity is directly or indirectly controlled by a company or entity whose common stock or similar equity interest is listed, designated or quoted on a securities exchange or trading market, the holders of notes representing a majority of the aggregate principal amount of the Notes then outstanding may elect to treat such Person as the Acquiring Entity for purposes of this Section 5(b). (c) Redemption Right. No sooner than 15 days nor later than 10 days prior to the consummation of a Change of Control, but not prior to the public announcement of such Change of Control, the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a "CHANGE OF CONTROL NOTICE"). At any time on or after consummation of such Change of Control, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof ("CHANGE OF CONTROL REDEMPTION NOTICE" and, collectively with an Event of Default Redemption Notice, "REDEMPTION NOTICES" and, individually, each a "REDEMPTION NOTICE") to the Company, which Change of Control Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this Section 5(c) shall be redeemed by the Company at a price equal to the greater of (i) the product of (x) the Conversion Amount and (y) the quotient determined by dividing (A) the Closing Sale Price of the Common Stock immediately following the public announcement of such proposed Change of Control by (B) the Conversion Price and (ii) 115% of the Conversion Amount (the "CHANGE OF CONTROL REDEMPTION PRICE" and, together with the Event of Default Redemption Price, the "REDEMPTION PRICE"). Redemptions required by this Section 5(c) shall be made in accordance with the provisions of Section 10 and shall have priority to payments to other shareholders in connection with a Change of Control. (6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS. (a) Purchase Rights. If at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or restrictions on the convertibility of this Note) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. (b) Other Corporate Events. Prior to the consummation of any recapitalization, reorganization, consolidation, merger or other business combination (other than a Change of Control) pursuant to which holders of Common Stock are entitled to receive 9 securities or other assets with respect to or in exchange for Common Stock (a "CORPORATE EVENT"), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Note, (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the holders of Notes representing a majority of the aggregate principal amount of the Notes then outstanding. (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES. (a) Adjustment of Conversion Price upon Issuance of Common Stock. If and whenever on or after the Issuance Date, the Company issues or sells, or in accordance with this Section 7(a) is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding shares of Common Stock deemed to have been issued or sold by the Company (I) in connection with the Xcel Energy Direct Purchase Plan or any employee benefit plan which has been approved by the Board of Directors of the Company or any of its Subsidiaries, pursuant to which the Company's securities may be issued to any employee, officer or director for services provided to the Company or its Subsidiaries (each, an "APPROVED STOCK PLAN") or (II) upon conversion of the Notes or the Separate Tranche Notes) for a consideration per share less than the higher of the Closing Sale Price of the Common Stock on the date of such issuance or sale or deemed issuance or sale and the Conversion Price in effect immediately prior to such issuance or sale or deemed issuance or sale (such higher price is referred to herein as the "APPLICABLE PRICE"), then immediately after such issue or sale (subject to Section 7(a)(vi)), the Conversion Price then in effect shall be reduced to an amount equal to the product of (x) the Conversion Price in effect immediately prior to such issue or sale or deemed issuance or sale and (y) the quotient determined by dividing (1) the sum of the product of the Applicable Price and the number of shares of Common Stock Deemed Outstanding immediately prior to such issue or sale or deemed issue or sale and the consideration, if any, received by the Company upon such issue or sale, by (2) the product of the Applicable Price multiplied by the number of shares of Common Stock Deemed Outstanding immediately after such issue or sale or deemed issue or sale. For purposes of determining the adjusted Conversion Price under this Section 7(a), the following shall be applicable: (i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued 10 and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 7(a)(i), the "lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of the Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities. If the Company issues or sells any Options which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Securities, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock or Convertible Securities upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the exercise price a price which does not vary with the market price of the Common Stock. (ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon such conversion, exercise or exchange thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance of sale of such Convertible Securities for such price per share. For the purposes of this Section 7(a)(ii), the "price per share for which one share of Common Stock is issuable upon such conversion, exercise or exchange" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the issuance or sale of the Convertible Security and upon the conversion, exercise or exchange of such Convertible Security. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price had been or are to be made pursuant to other provisions of this Section 7(a), no further adjustment of the Conversion Price shall be made by reason of such issue or sale. If the Company issues or sells any Convertible Securities which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Security, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the conversion, exercise or exchange price a price which does not vary with the market price of the Common Stock. (iii) Change in Option Price or Rate of Conversion. If the purchase price provided for 11 in any Options, the additional consideration, if any, payable upon the issue, conversion or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Issuance Date are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change. No adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect. (iv) Calculation of Consideration Received. In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for a consideration of $.01. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Company therefor. If any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Closing Sale Price of such securities on the date of receipt. If any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the holders of Notes representing a majority of the principal amounts of the Notes then outstanding. If such parties are unable to reach agreement within ten days after the occurrence of an event requiring valuation (the "VALUATION EVENT"), the fair value of such consideration will be determined within five Business Days after the tenth day following the Valuation Event by an independent, reputable appraiser jointly selected by the Company and the holders of Notes representing a majority of the principal amounts of the Notes then outstanding. The determination of such appraiser shall be deemed binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company. (v) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase 12 Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (vi) Common Stock Deemed Outstanding. "COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii) hereof regardless of whether the Options or Convertible Securities are actually exercisable at such time, but excluding any shares of Common Stock owned or held by or for the account of the Company or issuable upon conversion of the Notes or the Separate Tranche Notes. (vii) Delayed Adjustment. In addition to the foregoing provisions of this Section 7(a), the Weighted Average Price, Closing Sales Price and Closing Bid Price shall be subject to adjustment, in accordance with the foregoing provisions, for any days during any measuring period used herein that occur prior to any of the aforementioned events if such events occur prior to the end of such measuring period. (b) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. If the Company at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. (c) Other Events. If any event occurs of the type contemplated by the provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company's Board of Directors will make an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder under this Note; provided that no such adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 7. (8) NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of, or enter into any agreement which by its terms restricts or otherwise impairs the Company's performance of the terms of, this Note or any of the other Transaction Documents (as defined in the Securities Purchase Agreement), and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note. 13 (9) RESERVATION OF AUTHORIZED SHARES. (a) Reservation. The Company shall initially reserve out of its authorized and unissued Common Stock a number of shares of Common Stock for each of the Notes and the Separate Tranche Notes equal to 115% of the Conversion Rate with respect to the Conversion Amount of each such Note and Separate Tranche Note. Thereafter, the Company shall, so long as any of the Notes or Separate Tranche Notes are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Notes and Separate Tranche Note, at least 100% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Notes and the Separate Tranche Notes then outstanding; provided that at no time shall the number of shares of Common Stock so reserved be less than the number of shares required to be reserved by the previous sentence (without regard to any limitations on conversions) (the "REQUIRED RESERVE AMOUNT"). The initial number of shares of Common Stock reserved for conversions of the Notes and the Separate Tranche Note and each increase in the number of shares so reserved shall be allocated pro rata among the holders of the Notes and Separate Tranche Note based on the principal amount of the Notes and Separate Tranche Notes held by each holder at the time of Issuance Date or increase in the number of reserved shares, as the case may be (the "AUTHORIZED SHARE ALLOCATION"). In the event that a holder shall sell or otherwise transfer any of such holder's Notes, each transferee shall be allocated a pro rata portion of such holder's Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Notes shall be allocated to the remaining holders of Notes, pro rata based on the principal amount of the Notes then held by such holders. (b) Insufficient Authorized Shares. If at any time while any of the Notes or Separate Tranche Note remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes and the Separate Tranche Notes at least a number of shares of Common Stock equal to the Required Reserve Amount (an "AUTHORIZED SHARE FAILURE"), then the Company shall immediately take all action necessary to increase the Company's authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Notes and Separate Tranche Note then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than 60 days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its shareholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each shareholder with a proxy statement and shall use its best efforts to solicit its shareholders' approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the shareholders that they approve such proposal. (10) REDEMPTION. (a) Mechanics. In the event that the Holder has sent a Redemption Notice to the Company pursuant to Section 4(b) or Section 5(c), the Holder shall promptly 14 submit this Note to the Company. The Company shall deliver the applicable Event of Default Redemption Price to the Holder within five Business Days after the Company's receipt of the Holder's Event of Default Redemption Notice and thereafter the Holder shall promptly deliver this Note to the Company. If the Holder has submitted a Change of Control Redemption Notice in accordance with Section 5(c), the Company shall deliver the applicable Change of Control Redemption Price to the Holder concurrently with the consummation of such Change of Control if such notice is received prior to the consummation of such Change of Control and within five Business Days after the Company's receipt of such notice otherwise. In the event of a redemption of less than all of the Conversion Amount of this Note, the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal which has not been redeemed. In the event that the Company does not pay the Redemption Price to the Holder within the time period required above in this Section 10(a) at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder shall have the option to, in lieu of redemption, require the Company to promptly return to the Holder all or any portion of this Note representing the Conversion Amount that was submitted for redemption and for which the applicable Redemption Price (together with any Late Charges thereon) has not been paid. Upon the Company's receipt of such notice, (x) the Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company shall immediately return this Note, or issue a new Note (in accordance with Section 18(d)) to the Holder representing such Conversion Amount and (z) the Conversion Price of this Note or such new Notes shall be adjusted to the lesser of (A) the Conversion Price as in effect on the date on which the Redemption Notice is voided and (B) the lowest Closing Bid Price during the period beginning on and including the date on which the Redemption Notice is delivered to the Company and ending on and including the date on which the Redemption Notice is voided. The Holder's delivery of a notice voiding a Redemption Notice and exercise of its rights following such notice shall not affect the Company's obligations to make any payments of Late Charges which have accrued prior to the date of such notice with respect to the Conversion Amount subject to such notice. (b) Redemption by Other Holders. Upon the Company's receipt of notice from any of the holders of the Other Notes or the Separate Tranche Notes for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 4(b) or Section 5(c) (each an "OTHER REDEMPTION NOTICE"), the Company shall immediately forward to the Holder by facsimile a copy of such notice. If the Company receives a Redemption Notice and one or more Other Redemption Notices during the seven Business Day period beginning on and including the date which is three Business Days prior to the Company's receipt of the Holder's Redemption Notice and ending on and including the date which is three Business Days after the Company's receipt of the Holder's Redemption Notice and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice and such Other Redemption Notices received during such seven Business Day period, then the Company shall redeem a pro rata amount from each holder of the Notes and the Separate Tranche Notes (including the Holder) based on the principal amount of the Notes and the Separate Tranche Notes submitted for redemption pursuant to such Redemption Notice and such Other Redemption Notices received by the Company during such seven Business Day period. 15 (c) Redemption at the Option of the Company. Except in connection with the satisfaction by the Company of its obligations to redeem the Notes under Sections 4(b) and 5(c) hereof, without the prior written consent of the Holder the Company shall not have the right to prepay, redeem, repurchase, defease or otherwise retire any Note prior to the Final Maturity Date. (11) RESTRICTION ON REDEMPTION. Until all of the Notes have been converted, redeemed or otherwise satisfied in accordance with their terms, the Company shall not, directly or indirectly, redeem its capital stock without the prior express written consent of the holders of Notes representing at least two-thirds of the aggregate principal amount of the Notes then outstanding. (12) SUBORDINATION; ADDITIONAL INDEBTEDNESS. Payments of Principal and Interest and other payments due under this Note shall rank pari passu in right of payment with all (and shall not be subordinated to any) unsecured, unsubordinated indebtedness of the Company and will be senior in right of payment to all subordinated indebtedness of the Company. (13) COVENANTS. (a) Indebtedness. The Company shall not create, incur, assume, guarantee or suffer to exist, or otherwise become or remain liable with respect to, any Indebtedness other than Permitted Indebtedness and Subordinated Indebtedness. "Subordinated Indebtedness" shall mean Indebtedness that is unsecured and subordinated in right of payment to the Notes and other obligations owing to the Holders in accordance with a subordination agreement in form and substance satisfactory to the Holders. "Permitted Indebtedness" shall mean any Indebtedness that is unsecured and is not senior in right of payment to the Notes and is otherwise on terms that are no more favorable to the holders thereof than the terms of the Indebtedness evidenced by the Notes unless such more favorable terms are offered to the Holders. (b) Liens. The Company shall not create, incur, assume or suffer to exist, or permit any of its Subsidiaries (other than NRG Energy Inc. or its subsidiaries (collectively, "NRG")) to create, incur, assume or suffer to exist, any Lien upon or with respect to any of its properties, whether now owned or hereafter acquired; sign or suffer to exist any security agreement authorizing any secured party thereunder to file a Uniform Commercial Code financing statement (or the equivalent thereof) as notice of a Lien on any property of the Company or its Subsidiaries; sell any of its property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable) with recourse to it or any of its Subsidiaries or assign or otherwise transfer, or permit any of its Subsidiaries (other than the Existing Utility Subsidiaries (as defined in the Bank Facility)) to assign or otherwise transfer, any account or other right to receive income; other than, as to all of the above, Permitted Liens. As used herein, "Permitted Liens" shall have the meaning of that term as defined in the Five-Year Credit Agreement, dated as of November 10, 2000, among the Company and the banks listed therein (as the same maybe amended from time to time, the "BANK FACILITY"). As used herein, "Liens" means any mortgage, 16 deed of trust, pledge, lien (statutory or otherwise), security interest, charge or other encumbrance or security or preferential arrangement of any nature, including, without limitation, any conditional sale or title retention arrangement, any capitalized lease and any assignment, deposit arrangement or financing lease intended as, or having the effect of, security. (c) Transactions With Affiliates. The Company shall not, and shall not permit any Subsidiary to, directly or indirectly, effect any transaction with any Affiliate (as defined in the Bank Facility) that is (a) outside the ordinary course of business or (b) on a basis less favorable than would at the time be obtainable for a comparable transaction in arms-length dealing with an unrelated third party, provided that notwithstanding the foregoing, no loan, payment or other form of contribution shall be made to NRG unless it is in an amount not in excess of (i) $300 Million payable pursuant to the Support Agreement and Capital Subscription Agreement, dated as of May 29, 2002, by and between the Company and NRG Energy Inc. and (ii) $250 Million in respect of guarantee obligations relating to the power marketing business of NRG; provided further that with respect to any payment permitted pursuant to clause (ii) above, the Company shall, in the context of a restructuring of NRG, use its reasonable best efforts to obtain a full release of all obligations and liabilities of the Company relating to NRG. (d) Leverage Ratio. The Company shall not permit the Leverage Ratio set forth in the Bank Facility to be exceeded. (e) Restrictive Agreements. The Company shall not, and shall not permit any Significant Subsidiary (as defined in the Bank Facility) other than NRG to, enter into any agreement after the date of this Note that imposes any restriction on the ability of such Significant Subsidiary to make payments, directly or indirectly, to its shareholders by way of dividends, advances, repayment of loans or intercompany charges, expenses or accruals or other returns on investments that is more restrictive than any such restriction applicable to such Significant Subsidiary on the Issuance Date. (f) Scope of Business. The Company shall, and shall cause each Subsidiary to, engage only in energy-related business, functionally related businesses (as interpreted under PUHCA, as defined in the Securities Purchase Agreement)or such other businesses as maybe permitted pursuant to an order issued by the SEC pursuant to PUHCA. (14) VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law, including but not limited to the Minnesota Business Corporation Act, and as expressly provided in this Note. (15) PARTICIPATION. The Holder, as the holder of this Note, shall be entitled to (i) all extraordinary or special dividends paid and distributions made to the holders of Common Stock to the same extent as if the Holder had converted this Note into Common Stock (without regard to any limitations on conversion herein or elsewhere) and had held such shares of Common Stock on the record date for such dividends and distributions and (ii) regular cash dividends and distributions paid to the holders of the Common Stock only with respect to that portion of such dividends that exceeds $0.1875 per share of Common Stock in any calendar quarter (subject to adjustment for stock splits, stock dividends, stock combinations and other 17 similar transactions after the Issuance Date). Payments under the preceding sentence shall be made concurrently with the dividend or distribution to the holders of Common Stock. (16) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote at a meeting duly called for such purpose or the written consent without a meeting, of the holders of Notes representing not less than two-thirds of the aggregate principal amount of the then outstanding Notes, shall be required for any change or amendment to this Note or the Other Notes. (17) TRANSFER. This Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 2(f) of the Securities Purchase Agreement. (18) REISSUANCE OF THIS NOTE. (a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 18(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Note (in accordance with Section 18(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 3(c)(iii) and this Section 18(a), following conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note. (b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal. (c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 18(d) and in principal amounts of at least $100,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender. (d) Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section 18(a) or Section 18(c), the Principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal 18 remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued Interest and Late Charges on the Principal and Interest of this Note, from the Issuance Date. (19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, the Securities Purchase Agreement and the Registration Rights Agreement, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder's right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. (20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors' rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including but not limited to attorneys fees and disbursements. (21) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and all the Purchasers and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note. (22) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. (23) DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Redemption Price or the arithmetic calculation of the Conversion Rate or the Redemption Price or any other calculation hereunder, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within one Business Day of receipt of the Conversion 19 Notice or Redemption Notice giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Conversion Rate within one Business Day of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within one Business Day submit via facsimile (a) the disputed determination of the Weighted Average Price, the Closing Bid Price or the Closing Sale Price or any other calculation hereunder to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Rate or the Redemption Price to the Company's independent, outside accountant. The Company, at the Company's expense, shall cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than five Business Days from the time it receives the disputed determinations or calculations. Such investment bank's or accountant's determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error. (24) NOTICES; PAYMENTS. (a) Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least twenty days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grants, issues or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to holders of Common Stock or (C) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to such holder. Notwithstanding the foregoing, Section 4(j) of the Securities Purchase Agreement shall apply to all notices given pursuant to this Note. (b) Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Purchasers (as defined in Section 3(d)(ii)), shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder's wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any Interest Date which is not the date on which this Note is paid in full, the extension of the due date thereof shall 20 not be taken into account for purposes of determining the amount of Interest due on such date. Any amount of Interest, Principal or other amount due under the Transaction Documents (as defined in the Securities Purchase Agreement) which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of 12% per annum from the date such amount was due until the same is paid in full ("LATE CHARGE"). (25) CANCELLATION. After all Principal, accrued Interest and other amounts at any time owed on this Note has been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued. (26) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement. (27) GOVERNING LAW. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois. (28) CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings: (a) "BUSINESS DAY" means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed. (b) "CHANGE OF CONTROL TERMINATION DATE" shall mean, with respect to any proposed Change of Control for which a public announcement that it proposes or intends to effect a Change of Control of the Company (the date of such announcement, the "ANNOUNCEMENT DATE") has been made, the date upon which the Company or other Person proposing to effect such Change of Control consummates or publicly announces the termination or abandonment of the proposed Change of Control which was the subject of the previous public announcement. (c) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on The New York Stock Exchange, Inc. (the "PRINCIPAL Market") as reported by Bloomberg Financial Markets ("BLOOMBERG"), or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m. Eastern Time as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last 21 trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 23. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during any applicable calculation period. (d) "COMMON STOCK" means (i) the Company's common stock, par value $2.50 per share, and (ii) any capital stock resulting from a reclassification of such Common Stock. (e) "PERSON" means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof. (f) "REDEMPTION PREMIUM" means (i) in the case of the Events of Default described in Section 4(a)(i), (ii), (iii), (iv) and (viii), 115% or (ii) in the case of the Events of Default described in Section 4(a)(v) - (vii), 100%. (g) "REGISTRATION RIGHTS AGREEMENT" means that certain registration rights agreement between the Company and the initial holders of the Notes relating to the registration of the resale of the shares of Common Stock issuable upon conversion of the Notes. (h) "SECURITIES PURCHASE AGREEMENT" means that certain securities purchase agreement between the Company and the initial holders of the Notes pursuant to which the Company issued the Notes. (i) "SEPARATE TRANCHE NOTES" means the First Notes, Second Notes, First Call Notes, Second Call Notes and the Third Call Notes, collectively. (j) "TRADING DAY" means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that "Trading Day" shall not include any day on which the Common Stock is scheduled to trade on such exchange or market or actually trades on such exchange or market for less than 4.5 hours. (k) "VARIABLE SECURITIES" means any stock or securities other than 22 Options directly or indirectly convertible into or exchangeable for Common Stock ("CONVERTIBLE SECURITIES") or any rights, warrants or option to subscribe for or purchase Common Stock or Convertible Securities ("OPTIONS") that are convertible into or exchangeable, directly or indirectly, for Common Stock at a price which varies or may vary with the market price of the Common Stock, including by way of one or more adjustments or resets to a fixed price (a "VARIABLE PRICE"). (l) "WEIGHTED AVERAGE PRICE" means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market during the period beginning at 9:30 a.m., New York Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" functions (ignoring any trade of more than 100,000 shares of such security pursuant to an individual transaction (subject to adjustment for stock splits, stock dividends, stock combinations and other similar transactions involving such security after the Issuance Date)), or, if the Principal Market is not the principal securities exchange or trading market for such security, the dollar volume-weighted average price for such security on the principal securities exchange or trading market where such security is listed or traded during the period beginning at 9:30 a.m., New York Time (or such other time as such principal securities exchange or trading market publicly announces is the official open of trading), and ending at 4:00 p.m., New York Time (or such other time as such principal securities exchange or trading market publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" functions (ignoring any trade of more than 100,000 shares of such security pursuant to an individual transaction (subject to adjustment for stock splits, stock dividends, stock combinations and other similar transactions involving such security after the Issuance Date)), or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30 a.m., New York Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 23. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during applicable calculation period. [SIGNATURE PAGE FOLLOWS] 23 IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Date of Issuance set out above. XCEL ENERGY INC. By: --------------------------------- Name: Title: Chief Executive Officer EXHIBIT I XCEL ENERGY INC. CONVERSION NOTICE Reference is made to the Convertible Note (the "NOTE") issued to the undersigned by XCEL ENERGY INC. (the "COMPANY"). In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common Stock, par value $2.50 per share (the "COMMON STOCK"), of the Company as of the date specified below. Date of Conversion: ----------------------------------------------------- Aggregate Conversion Amount to be converted: ---------------------------- Please confirm the following information: Conversion Price: ------------------------------------------------------- Number of shares of Common Stock to be issued: -------------------------- Please issue the Common Stock into which the Note is being converted and, if applicable, any check drawn on an account of the Company in the following name and to the following address: Issue to: --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- Facsimile Number: ------------------------------------------------------- Authorization: ---------------------------------------------------------- By: -------------------------------------------------------------- Title: ----------------------- Dated: -------------------------------------------------------------------------- Account Number: --------------------------------------------------------- (if electronic book entry transfer) Transaction Code Number: ------------------------------------------------ (if electronic book entry transfer) ACKNOWLEDGMENT The Company hereby acknowledges this Conversion Notice and hereby directs [TRANSFER AGENT] to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated November 8, 2002 from the Company and acknowledged and agreed to by [TRANSFER AGENT]. XCEL ENERGY INC. By: --------------------------------- Name: Title: EX-4.15 14 c72574exv4w15.txt EX-4.15 FORM OF THIRD CALL NOTES EXHIBIT 4.15 SENIOR CONVERTIBLE NOTE THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL IN A REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THIS NOTE. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE. XCEL ENERGY INC. Issuance Date: _______ __, ______ Principal: U.S. $____________ FOR VALUE RECEIVED, XCEL ENERGY INC., a Minnesota corporation (the "COMPANY"), hereby promises to pay to the order of __________________ or registered assigns ("HOLDER") the amount set out above as the Principal (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the "PRINCIPAL") when due, whether upon the Final Maturity Date (as defined below), acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest ("INTEREST") on any outstanding Principal at the rate of eight percent (8%) per annum, subject to periodic adjustment pursuant to Section 2 (the "INTEREST RATE"), from the date set out above as the Issuance Date (the "ISSUANCE DATE") until the same becomes due and payable, whether upon an Interest Date (as defined below), the Final Maturity Date, acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof). This Convertible Note (including all Convertible Notes issued in exchange, transfer or replacement hereof, this "NOTE") is one of an issue of Convertible Notes (collectively, the "NOTES" and such other Convertible Notes, the "OTHER NOTES") issued on the Issuance Date pursuant to the Securities Purchase Agreement (as defined below). Certain capitalized terms are defined in Section 28 and terms used herein but not defined herein shall have the meanings set forth for such terms in the Securities Purchase Agreement. (1) MATURITY. On the Final Maturity Date, the Holder shall surrender this Note to the Company and the Company shall pay to the Holder an amount in cash representing all outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late Charges (as defined in Section 24(b)), if any. The "MATURITY DATE" shall be the date that is 364 days after the Issuance Date; provided that, if the Holder has given notice in writing to the Company of its desire to extend the Maturity Date on or prior to the date that is 10 Business Days prior to the Maturity Date, the Maturity Date shall be extended (on one or more occasions) for an additional 364 days; provided, further, that the Maturity Date shall not be extended (except as provided in the following proviso) to more than five years after the Issuance Date (such date that is five years after the Issuance Date or such earlier Maturity Date prior to which the Holder has not requested an extension thereof, the "FINAL MATURITY DATE"); and provided, further, that the Final Maturity Date may be extended at the option of the Holder (x) in the event that, and for so long as, an Event of Default (as defined in Section 4(a)) shall have occurred and be continuing or any event shall have occurred and be continuing which with the passage of time and the failure to cure would result in an Event of Default and (y) through the date that is ten days after a Change of Control Termination Date in the event that the Announcement Date giving rise to such Change of Control Termination Date occurred prior to the Final Maturity Date. (2) INTEREST; INTEREST RATE. Interest on this Note shall commence accruing on the Issuance Date and shall be computed on the basis of the actual days elapsed during any period, and a calendar year of 365 or 366 calendar days, as applicable, and shall be payable in cash on each May 1 and each November 1 during the period beginning on the Issuance Date and ending on, and including, the Final Maturity Date (each an "INTEREST DATE"); provided that interest on any Conversion Amount of this Note that is accrued but unpaid as of the Conversion Date of such Conversion Amount shall be paid in shares of Common Stock at the Conversion Rate. From and after the occurrence of an Event of Default (as defined in Section 4(a)) or the failure to deliver timely the Non-Consolidation Opinion (as defined in the Securities Purchase Agreement) pursuant to Section 4(f) of the Securities Purchase Agreement (the "NRG OPINION"), the Interest Rate shall be increased by two percentage points (2%). In the event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided that the Interest as calculated at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of cure of such Event of Default. If the Company shall fail to credit the Holder's balance account with DTC (as defined in Section 3(c)(i)) or, if requested in writing by the Holder, to issue a certificate to the Holder for the number of shares of Common Stock to which the Holder is entitled upon conversion of any Conversion Amount or to issue a new Note (in accordance with Section 18(d)) representing the Principal portion of the Conversion Amount (as defined in Section 3(b)(i)) to which the Holder is entitled, in each case within the time periods set out in Section 3(c)(i) (in each case, a "CONVERSION FAILURE"), then during each period beginning on and including the date of each such Conversion Failure and ending on and including the date such Conversion Failure is cured, the Interest Rate then in effect shall be increased by two percentage points (2%). If (i) the Registration Statement (as defined in the Registration Rights Agreement) covering all the Registrable Securities (as defined in the Registration Rights Agreement) issuable upon conversion of this Note and required to be filed by 2 the Company pursuant to the Registration Rights Agreement is not declared effective by the Securities and Exchange Commission (the "SEC") on or before the applicable Mandatory Effective Date (as defined in the Registration Rights Agreement) or (ii) on any day after such Registration Statement has been declared effective by the SEC that sales of all the Registrable Securities required to be included on such Registration Statement cannot be made (other than during an Allowable Grace Period (as defined in Section 3(t) of the Registration Rights Agreement) pursuant to such Registration Statement (including, without limitation, because of a failure to keep such Registration Statement effective, to disclose such information as is necessary for sales to be made pursuant to such Registration Statement or to register sufficient shares of Common Stock) (collectively with the event described in the immediately preceding clause (i), each a "REGISTRATION FAILURE"), then, as partial relief for the damages to any holder by reason of any such delay in or reduction of its ability to sell Registrable Securities (which remedy shall not be exclusive of any other remedies available at law or in equity) the Interest Rate then in effect shall be increased by two percentage points (2%) during each period beginning on and including the first date of each such Registration Failure and ending on and including the date such Registration Failure is cured. (3) CONVERSION OF NOTES. This Note shall be convertible into shares of the Common Stock, on the terms and conditions set forth in this Section 3. (a) Conversion Right. Subject to the provisions of Section 3(d), at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount. (b) Conversion Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (as defined below) (the "CONVERSION RATE"). (i) "CONVERSION AMOUNT" means the sum of (A) the portion of the Principal to be converted, redeemed or otherwise surrendered with respect to which this determination is being made, (B) accrued and unpaid Interest with respect to such Principal and (C) accrued and unpaid Late Charges with respect to such Principal and Interest. (ii) "CONVERSION PRICE" means 110% of the arithmetic average of the Weighted Average Price of the Common Stock during the 20 Trading Day period beginning 90 days after the issuance date of the First Notes, not to exceed the arithmetic average of the Weighted Average Price of the Common Stock during the 20 Trading Day period ending on the Trading Day that is immediately prior to the 90th day after the issuance date of the First Notes. 3 (c) Mechanics of Conversion. (i) Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a "CONVERSION DATE"), the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., Central Time on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the "CONVERSION NOTICE") to the Company and (B) if required by Section 3(c)(ii), surrender this Note to a common carrier for delivery to the Company as soon as practicable on or following such date (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction). On or before the first Business Day following the Company's receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Conversion Notice to the Holder and the Transfer Agent (as defined below). On or before the second Business Day following the date of receipt of a Conversion Notice (the "SHARE DELIVERY DATE"), the Company shall (X) (if (Y) below does not apply) issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled, or (Y) provided that the Company's transfer agent (the "TRANSFER AGENT") is participating in The Depository Trust Company ("DTC") Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder's or its designee's balance account with DTC through its Deposit Withdrawal Agent Commission system. If this Note is physically surrendered for conversion as required by Section 3(c)(ii) and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three Business Days after receipt of this Note (the "NOTE DELIVERY DATE") and at its own expense, issue and deliver to the holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal not converted. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date. (ii) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting physical surrender and reissue of this Note. The Holder and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion. (iii) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of the Notes or the Separate Tranche Notes 4 for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes and the Separate Tranche Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from each holder of the Notes and the Separate Tranche Notes electing to have the Notes or Separate Tranche Notes converted on such date a pro rata amount of such holder's portion of its Notes or Separate Tranche Notes submitted for conversion based on the principal amount of the Notes or Separate Tranche Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all the Notes and the Separate Tranche Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 23. (d) Limitations on Conversions. (i) Beneficial Ownership. The Company shall not effect any conversion of this Note, and the Holder of this Note shall not have the right to convert any portion of this Note pursuant to Section 3(a), to the extent that after giving effect to such conversion, the Holder (together with the Holder's affiliates) would beneficially own in excess of 5.0% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any Other Notes, Separate Tranche Notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this Section 3(d)(i), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company's most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. (ii) Principal Market Regulation. The Company shall not be obligated to issue any 5 shares of Common Stock pursuant to this Note if the issuance of such shares of Common Stock would exceed that number of shares of Common Stock which the Company may issue pursuant to the Notes and the Separate Tranche Notes without breaching the Company's obligations under the rules or regulations of the Principal Market (the "EXCHANGE CAP"), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its shareholders as required by the applicable rules of the Principal Market for issuances of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the holders of the Notes and the Separate Tranche Notes representing a majority of the principal amounts of the Notes and the Separate Tranche Notes (voting as a single class) then outstanding. Until such approval or written opinion is obtained, no purchaser of the Notes or the Separate Tranche Notes pursuant to the Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon conversion of the Notes or the Separate Tranche Notes, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the principal amount of the Notes and the Separate Tranche Notes issued to such Purchaser pursuant to the Securities Purchase Agreement as of the date of such determination and the denominator of which is the aggregate principal amount of all the Notes and the Separate Tranche Notes issued to the Purchasers pursuant to the Securities Purchase Agreement as of the date of such determination (with respect to each Purchaser, the "EXCHANGE CAP ALLOCATION"). In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser's Notes or Separate Tranche Notes, the transferee shall be allocated a pro rata portion of such Purchaser's Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any holder of the Notes or the Separate Tranche Notes shall convert all of such holder's Notes or Separate Tranche Notes into a number of shares of Common Stock which, in the aggregate, is less than such holder's Exchange Cap Allocation, then the difference between such holder's Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of the Notes and the Separate Tranche Notes on a pro rata basis in proportion to the aggregate principal amount of the Notes and the Separate Tranche Notes then held by each such holder. (4) RIGHTS UPON EVENT OF DEFAULT. (a) Event of Default. Each of the following events shall constitute a "EVENT OF DEFAULT": (i) the failure of the Registration Statement covering all Registrable Securities (as defined in the Registration Rights Agreement) required to be registered pursuant to the Registration Rights Agreement to be declared effective by the SEC on or prior to the date that is 180 days after the Issuance Date, or, while such Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of such Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to any holder of the Notes for 6 sale of all of such holder's Registrable Securities in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of five consecutive Business Days or for more than an aggregate of 20 Business Days in any 365-day period; (ii) the suspension from trading on the Principal Market for a period of three consecutive Business Days or for more than an aggregate of three Business Days in any 30-day Trading Day period or the delisting of the Common Stock from the Principal Market; (iii) the Company's (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock or a new Note (in accordance with section 18(d)), as applicable, within 10 days after the receipt by the Company of a Conversion Notice or (B) notice, written or oral, to any holder of the Notes, including by way of public announcement or through any of its agents, at any time, of its intention not to comply with a request for conversion of any Notes into shares of Common Stock that is tendered in accordance with the provisions of the Notes; (iv) the Company's failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as due under this Note, the Securities Purchase Agreement, the Registration Rights Agreement or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby to which the Holder is a party; (v) any default under, redemption of or acceleration prior to maturity of any Indebtedness (as defined in Section 3(r) of the Securities Purchase Agreement) of the Company or any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase Agreement) other than NRG (as defined below) (including, without limitation, the Other Notes) of at least $50,000,000; (vi) the Company or any of its Subsidiaries other than NRG (as defined below), pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal or state law for the relief of debtors (collectively, "BANKRUPTCY LAW"), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a "CUSTODIAN"), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due; (vii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company or any of its Subsidiaries other than NRG (as defined below) in an involuntary case, (B) appoints a Custodian of the Company or any of its Subsidiaries other than NRG (as defined below) or (C) orders the liquidation of the Company or any of its Subsidiaries other than NRG (as defined below); or (viii) the Company breaches any representation, warranty, covenant (other than any covenant to deliver the NRG Opinion) or other term or condition of the Securities 7 Purchase Agreement, the Registration Rights Agreement, this Note or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated thereby and hereby to which the Holder is a party, except, in the case of a breach of a covenant which is curable, only if such breach continues for a period of at least 10 consecutive days. (b) Redemption Right. Promptly after the occurrence of an Event of Default with respect to this Note or the Other Notes, the Company shall deliver written notice thereof via facsimile and overnight courier (a "EVENT OF DEFAULT NOTICE") to the Holder. At any time after the earlier of the Holder's receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (the "EVENT OF DEFAULT REDEMPTION NOTICE") to the Company, which Event of Default Redemption Notice shall indicate the portion of this Note the Holder is electing to redeem. Each portion of this Note subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed by the Company at a price equal to the greater of (i) the product of (x) the Conversion Amount and (y) the quotient determined by dividing (A) the Closing Sale Price of the Common Stock immediately prior to such Event of Default by (B) the Conversion Price and (ii) the product of (x) the Conversion Amount and (y) the Redemption Premium (the "EVENT OF DEFAULT REDEMPTION PRICE"). Redemptions required by this Section 4(b) shall be made in accordance with the provisions of Section 10. (5) RIGHTS UPON CHANGE OF CONTROL. (a) Change of Control. Each of the following events shall constitute a "CHANGE OF CONTROL": (i) the consolidation, merger or other business combination (including, without limitation, a reorganization or recapitalization) of the Company with or into another Person in which holders of the Company's voting power immediately prior to the transaction cease after the transaction to hold, directly or indirectly, a majority of the voting power of the surviving entity or entities or the voting power necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities; (ii) the sale or transfer of all or substantially all of the Company's assets; or (iii) a purchase, tender or exchange offer made to and accepted by the holders of more than the 50% of the outstanding shares of Common Stock. (b) Assumption. Prior to the consummation of any Change of Control, the Company will secure from any Person purchasing the Company's assets or Common Stock or any successor resulting from such Change of Control (in each case, an "ACQUIRING ENTITY") a written agreement (in form and substance satisfactory to the holders of Notes representing a majority of the aggregate principal amount of the Notes then outstanding) to deliver to each holder of Notes in exchange for such Notes, a security of the Acquiring Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including, without 8 limitation, having a principal amount and interest rate equal to the principal amounts and the interest rates of the Notes held by such holder, and satisfactory to the holders of Notes representing a majority of the principal amount of the Notes then outstanding. In the event that an Acquiring Entity is directly or indirectly controlled by a company or entity whose common stock or similar equity interest is listed, designated or quoted on a securities exchange or trading market, the holders of notes representing a majority of the aggregate principal amount of the Notes then outstanding may elect to treat such Person as the Acquiring Entity for purposes of this Section 5(b). (c) Redemption Right. No sooner than 15 days nor later than 10 days prior to the consummation of a Change of Control, but not prior to the public announcement of such Change of Control, the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a "CHANGE OF CONTROL NOTICE"). At any time on or after consummation of such Change of Control, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof ("CHANGE OF CONTROL REDEMPTION NOTICE" and, collectively with an Event of Default Redemption Notice, "REDEMPTION NOTICES" and, individually, each a "REDEMPTION NOTICE") to the Company, which Change of Control Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this Section 5(c) shall be redeemed by the Company at a price equal to the greater of (i) the product of (x) the Conversion Amount and (y) the quotient determined by dividing (A) the Closing Sale Price of the Common Stock immediately following the public announcement of such proposed Change of Control by (B) the Conversion Price and (ii) 115% of the Conversion Amount (the "CHANGE OF CONTROL REDEMPTION PRICE" and, together with the Event of Default Redemption Price, the "REDEMPTION PRICE"). Redemptions required by this Section 5(c) shall be made in accordance with the provisions of Section 10 and shall have priority to payments to other shareholders in connection with a Change of Control. (6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS. (a) Purchase Rights. If at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or restrictions on the convertibility of this Note) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. (b) Other Corporate Events. Prior to the consummation of any recapitalization, reorganization, consolidation, merger or other business combination (other than a Change of Control) pursuant to which holders of Common Stock are entitled to receive 9 securities or other assets with respect to or in exchange for Common Stock (a "CORPORATE EVENT"), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Note, (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the holders of Notes representing a majority of the aggregate principal amount of the Notes then outstanding. (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES. (a) Adjustment of Conversion Price upon Issuance of Common Stock. If and whenever on or after the issuance date of the Third Notes, the Company issues or sells, or in accordance with this Section 7(a) is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding shares of Common Stock deemed to have been issued or sold by the Company (I) in connection with the Xcel Energy Direct Purchase Plan or any employee benefit plan which has been approved by the Board of Directors of the Company or any of its Subsidiaries, pursuant to which the Company's securities may be issued to any employee, officer or director for services provided to the Company or its Subsidiaries (each, an "APPROVED STOCK PLAN") or (II) upon conversion of the Notes or the Separate Tranche Notes) for a consideration per share less than the higher of the Closing Sale Price of the Common Stock on the date of such issuance or sale or deemed issuance or sale and the Conversion Price in effect immediately prior to such issuance or sale or deemed issuance or sale (such higher price is referred to herein as the "APPLICABLE PRICE"), then immediately after such issue or sale (subject to Section 7(a)(vi)), the Conversion Price then in effect shall be reduced to an amount equal to the product of (x) the Conversion Price in effect immediately prior to such issue or sale or deemed issuance or sale and (y) the quotient determined by dividing (1) the sum of the product of the Applicable Price and the number of shares of Common Stock Deemed Outstanding immediately prior to such issue or sale or deemed issue or sale and the consideration, if any, received by the Company upon such issue or sale, by (2) the product of the Applicable Price multiplied by the number of shares of Common Stock Deemed Outstanding immediately after such issue or sale or deemed issue or sale. For purposes of determining the adjusted Conversion Price under this Section 7(a), the following shall be applicable: (i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued 10 and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 7(a)(i), the "lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of the Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities. If the Company issues or sells any Options which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Securities, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock or Convertible Securities upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the exercise price a price which does not vary with the market price of the Common Stock. (ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon such conversion, exercise or exchange thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance of sale of such Convertible Securities for such price per share. For the purposes of this Section 7(a)(ii), the "price per share for which one share of Common Stock is issuable upon such conversion, exercise or exchange" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the issuance or sale of the Convertible Security and upon the conversion, exercise or exchange of such Convertible Security. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price had been or are to be made pursuant to other provisions of this Section 7(a), no further adjustment of the Conversion Price shall be made by reason of such issue or sale. If the Company issues or sells any Convertible Securities which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Security, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the conversion, exercise or exchange price a price which does not vary with the market price of the Common Stock. (iii) Change in Option Price or Rate of Conversion. If the purchase price provided for 11 in any Options, the additional consideration, if any, payable upon the issue, conversion or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Issuance Date are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change. No adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect. (iv) Calculation of Consideration Received. In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for a consideration of $.01. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Company therefor. If any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Closing Sale Price of such securities on the date of receipt. If any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the holders of Notes representing a majority of the principal amounts of the Notes then outstanding. If such parties are unable to reach agreement within ten days after the occurrence of an event requiring valuation (the "VALUATION EVENT"), the fair value of such consideration will be determined within five Business Days after the tenth day following the Valuation Event by an independent, reputable appraiser jointly selected by the Company and the holders of Notes representing a majority of the principal amounts of the Notes then outstanding. The determination of such appraiser shall be deemed binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company. (v) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase 12 Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (vi) Common Stock Deemed Outstanding. "COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii) hereof regardless of whether the Options or Convertible Securities are actually exercisable at such time, but excluding any shares of Common Stock owned or held by or for the account of the Company or issuable upon conversion of the Notes or the Separate Tranche Notes. (vii) Delayed Adjustment. In addition to the foregoing provisions of this Section 7(a), the Weighted Average Price, Closing Sales Price and Closing Bid Price shall be subject to adjustment, in accordance with the foregoing provisions, for any days during any measuring period used herein that occur prior to any of the aforementioned events if such events occur prior to the end of such measuring period. (b) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. If the Company at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. (c) Other Events. If any event occurs of the type contemplated by the provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company's Board of Directors will make an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder under this Note; provided that no such adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 7. (8) NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of, or enter into any agreement which by its terms restricts or otherwise impairs the Company's performance of the terms of, this Note or any of the other Transaction Documents (as defined in the Securities Purchase Agreement), and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note. 13 (9) RESERVATION OF AUTHORIZED SHARES. (a) Reservation. The Company shall initially reserve out of its authorized and unissued Common Stock a number of shares of Common Stock for each of the Notes and the Separate Tranche Notes equal to 115% of the Conversion Rate with respect to the Conversion Amount of each such Note and Separate Tranche Note. Thereafter, the Company shall, so long as any of the Notes or Separate Tranche Notes are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Notes and Separate Tranche Note, at least 100% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Notes and the Separate Tranche Notes then outstanding; provided that at no time shall the number of shares of Common Stock so reserved be less than the number of shares required to be reserved by the previous sentence (without regard to any limitations on conversions) (the "REQUIRED RESERVE AMOUNT"). The initial number of shares of Common Stock reserved for conversions of the Notes and the Separate Tranche Note and each increase in the number of shares so reserved shall be allocated pro rata among the holders of the Notes and Separate Tranche Note based on the principal amount of the Notes and Separate Tranche Notes held by each holder at the time of Issuance Date or increase in the number of reserved shares, as the case may be (the "AUTHORIZED SHARE ALLOCATION"). In the event that a holder shall sell or otherwise transfer any of such holder's Notes, each transferee shall be allocated a pro rata portion of such holder's Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Notes shall be allocated to the remaining holders of Notes, pro rata based on the principal amount of the Notes then held by such holders. (b) Insufficient Authorized Shares. If at any time while any of the Notes or Separate Tranche Note remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes and the Separate Tranche Notes at least a number of shares of Common Stock equal to the Required Reserve Amount (an "AUTHORIZED SHARE FAILURE"), then the Company shall immediately take all action necessary to increase the Company's authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Notes and Separate Tranche Note then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than 60 days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its shareholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each shareholder with a proxy statement and shall use its best efforts to solicit its shareholders' approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the shareholders that they approve such proposal. (10) REDEMPTION. (a) Mechanics. In the event that the Holder has sent a Redemption Notice to the Company pursuant to Section 4(b) or Section 5(c), the Holder shall promptly 14 submit this Note to the Company. The Company shall deliver the applicable Event of Default Redemption Price to the Holder within five Business Days after the Company's receipt of the Holder's Event of Default Redemption Notice and thereafter the Holder shall promptly deliver this Note to the Company. If the Holder has submitted a Change of Control Redemption Notice in accordance with Section 5(c), the Company shall deliver the applicable Change of Control Redemption Price to the Holder concurrently with the consummation of such Change of Control if such notice is received prior to the consummation of such Change of Control and within five Business Days after the Company's receipt of such notice otherwise. In the event of a redemption of less than all of the Conversion Amount of this Note, the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal which has not been redeemed. In the event that the Company does not pay the Redemption Price to the Holder within the time period required above in this Section 10(a) at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder shall have the option to, in lieu of redemption, require the Company to promptly return to the Holder all or any portion of this Note representing the Conversion Amount that was submitted for redemption and for which the applicable Redemption Price (together with any Late Charges thereon) has not been paid. Upon the Company's receipt of such notice, (x) the Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company shall immediately return this Note, or issue a new Note (in accordance with Section 18(d)) to the Holder representing such Conversion Amount and (z) the Conversion Price of this Note or such new Notes shall be adjusted to the lesser of (A) the Conversion Price as in effect on the date on which the Redemption Notice is voided and (B) the lowest Closing Bid Price during the period beginning on and including the date on which the Redemption Notice is delivered to the Company and ending on and including the date on which the Redemption Notice is voided. The Holder's delivery of a notice voiding a Redemption Notice and exercise of its rights following such notice shall not affect the Company's obligations to make any payments of Late Charges which have accrued prior to the date of such notice with respect to the Conversion Amount subject to such notice. (b) Redemption by Other Holders. Upon the Company's receipt of notice from any of the holders of the Other Notes or the Separate Tranche Notes for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 4(b) or Section 5(c) (each an "OTHER REDEMPTION NOTICE"), the Company shall immediately forward to the Holder by facsimile a copy of such notice. If the Company receives a Redemption Notice and one or more Other Redemption Notices during the seven Business Day period beginning on and including the date which is three Business Days prior to the Company's receipt of the Holder's Redemption Notice and ending on and including the date which is three Business Days after the Company's receipt of the Holder's Redemption Notice and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice and such Other Redemption Notices received during such seven Business Day period, then the Company shall redeem a pro rata amount from each holder of the Notes and the Separate Tranche Notes (including the Holder) based on the principal amount of the Notes and the Separate Tranche Notes submitted for redemption pursuant to such Redemption Notice and such Other Redemption Notices received by the Company during such seven Business Day period. 15 (c) Redemption at the Option of the Company. Except in connection with the satisfaction by the Company of its obligations to redeem the Notes under Sections 4(b) and 5(c) hereof, without the prior written consent of the Holder the Company shall not have the right to prepay, redeem, repurchase, defease or otherwise retire any Note prior to the Final Maturity Date. (11) RESTRICTION ON REDEMPTION. Until all of the Notes have been converted, redeemed or otherwise satisfied in accordance with their terms, the Company shall not, directly or indirectly, redeem its capital stock without the prior express written consent of the holders of Notes representing at least two-thirds of the aggregate principal amount of the Notes then outstanding. (12) SUBORDINATION; ADDITIONAL INDEBTEDNESS. Payments of Principal and Interest and other payments due under this Note shall rank pari passu in right of payment with all (and shall not be subordinated to any) unsecured, unsubordinated indebtedness of the Company and will be senior in right of payment to all subordinated indebtedness of the Company. (13) COVENANTS. (a) Indebtedness. The Company shall not create, incur, assume, guarantee or suffer to exist, or otherwise become or remain liable with respect to, any Indebtedness other than Permitted Indebtedness and Subordinated Indebtedness. "Subordinated Indebtedness" shall mean Indebtedness that is unsecured and subordinated in right of payment to the Notes and other obligations owing to the Holders in accordance with a subordination agreement in form and substance satisfactory to the Holders. "Permitted Indebtedness" shall mean any Indebtedness that is unsecured and is not senior in right of payment to the Notes and is otherwise on terms that are no more favorable to the holders thereof than the terms of the Indebtedness evidenced by the Notes unless such more favorable terms are offered to the Holders. (b) Liens. The Company shall not create, incur, assume or suffer to exist, or permit any of its Subsidiaries (other than NRG Energy Inc. or its subsidiaries (collectively, "NRG")) to create, incur, assume or suffer to exist, any Lien upon or with respect to any of its properties, whether now owned or hereafter acquired; sign or suffer to exist any security agreement authorizing any secured party thereunder to file a Uniform Commercial Code financing statement (or the equivalent thereof) as notice of a Lien on any property of the Company or its Subsidiaries; sell any of its property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable) with recourse to it or any of its Subsidiaries or assign or otherwise transfer, or permit any of its Subsidiaries (other than the Existing Utility Subsidiaries (as defined in the Bank Facility)) to assign or otherwise transfer, any account or other right to receive income; other than, as to all of the above, Permitted Liens. As used herein, "Permitted Liens" shall have the meaning of that term as defined in the Five-Year Credit Agreement, dated as of November 10, 2000, among the Company and the banks listed therein (as the same maybe amended from time to time, the "BANK FACILITY"). As used herein, "Liens" means any mortgage, 16 deed of trust, pledge, lien (statutory or otherwise), security interest, charge or other encumbrance or security or preferential arrangement of any nature, including, without limitation, any conditional sale or title retention arrangement, any capitalized lease and any assignment, deposit arrangement or financing lease intended as, or having the effect of, security. (c) Transactions With Affiliates. The Company shall not, and shall not permit any Subsidiary to, directly or indirectly, effect any transaction with any Affiliate (as defined in the Bank Facility) that is (a) outside the ordinary course of business or (b) on a basis less favorable than would at the time be obtainable for a comparable transaction in arms-length dealing with an unrelated third party, provided that notwithstanding the foregoing, no loan, payment or other form of contribution shall be made to NRG unless it is in an amount not in excess of (i) $300 Million payable pursuant to the Support Agreement and Capital Subscription Agreement, dated as of May 29, 2002, by and between the Company and NRG Energy Inc. and (ii) $250 Million in respect of guarantee obligations relating to the power marketing business of NRG; provided further that with respect to any payment permitted pursuant to clause (ii) above, the Company shall, in the context of a restructuring of NRG, use its reasonable best efforts to obtain a full release of all obligations and liabilities of the Company relating to NRG. (d) Leverage Ratio. The Company shall not permit the Leverage Ratio set forth in the Bank Facility to be exceeded. (e) Restrictive Agreements. The Company shall not, and shall not permit any Significant Subsidiary (as defined in the Bank Facility) other than NRG to, enter into any agreement after the date of this Note that imposes any restriction on the ability of such Significant Subsidiary to make payments, directly or indirectly, to its shareholders by way of dividends, advances, repayment of loans or intercompany charges, expenses or accruals or other returns on investments that is more restrictive than any such restriction applicable to such Significant Subsidiary on the Issuance Date. (f) Scope of Business. The Company shall, and shall cause each Subsidiary to, engage only in energy-related business, functionally related businesses (as interpreted under PUHCA, as defined in the Securities Purchase Agreement)or such other businesses as maybe permitted pursuant to an order issued by the SEC pursuant to PUHCA. (14) VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law, including but not limited to the Minnesota Business Corporation Act, and as expressly provided in this Note. (15) PARTICIPATION. The Holder, as the holder of this Note, shall be entitled to (i) all extraordinary or special dividends paid and distributions made to the holders of Common Stock to the same extent as if the Holder had converted this Note into Common Stock (without regard to any limitations on conversion herein or elsewhere) and had held such shares of Common Stock on the record date for such dividends and distributions and (ii) regular cash dividends and distributions paid to the holders of the Common Stock only with respect to that portion of such dividends that exceeds $0.1875 per share of Common Stock in any calendar quarter (subject to adjustment for stock splits, stock dividends, stock combinations and other 17 similar transactions after the Issuance Date). Payments under the preceding sentence shall be made concurrently with the dividend or distribution to the holders of Common Stock. (16) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote at a meeting duly called for such purpose or the written consent without a meeting, of the holders of Notes representing not less than two-thirds of the aggregate principal amount of the then outstanding Notes, shall be required for any change or amendment to this Note or the Other Notes. (17) TRANSFER. This Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 2(f) of the Securities Purchase Agreement. (18) REISSUANCE OF THIS NOTE. (a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 18(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Note (in accordance with Section 18(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 3(c)(iii) and this Section 18(a), following conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note. (b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal. (c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 18(d) and in principal amounts of at least $100,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender. (d) Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section 18(a) or Section 18(c), the Principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal 18 remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued Interest and Late Charges on the Principal and Interest of this Note, from the Issuance Date. (19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, the Securities Purchase Agreement and the Registration Rights Agreement, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder's right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. (20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors' rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including but not limited to attorneys fees and disbursements. (21) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and all the Purchasers and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note. (22) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. (23) DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Redemption Price or the arithmetic calculation of the Conversion Rate or the Redemption Price or any other calculation hereunder, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within one Business Day of receipt of the Conversion 19 Notice or Redemption Notice giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Conversion Rate within one Business Day of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within one Business Day submit via facsimile (a) the disputed determination of the Weighted Average Price, the Closing Bid Price or the Closing Sale Price or any other calculation hereunder to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Rate or the Redemption Price to the Company's independent, outside accountant. The Company, at the Company's expense, shall cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than five Business Days from the time it receives the disputed determinations or calculations. Such investment bank's or accountant's determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error. (24) NOTICES; PAYMENTS. (a) Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least twenty days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grants, issues or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to holders of Common Stock or (C) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to such holder. Notwithstanding the foregoing, Section 4(j) of the Securities Purchase Agreement shall apply to all notices given pursuant to this Note. (b) Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Purchasers (as defined in Section 3(d)(ii)), shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder's wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any Interest Date which is not the date on which this Note is paid in full, the extension of the due date thereof shall 20 not be taken into account for purposes of determining the amount of Interest due on such date. Any amount of Interest, Principal or other amount due under the Transaction Documents (as defined in the Securities Purchase Agreement) which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of 12% per annum from the date such amount was due until the same is paid in full ("LATE CHARGE"). (25) CANCELLATION. After all Principal, accrued Interest and other amounts at any time owed on this Note has been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued. (26) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement. (27) GOVERNING LAW. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois. (28) CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings: (a) "BUSINESS DAY" means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed. (b) "CHANGE OF CONTROL TERMINATION DATE" shall mean, with respect to any proposed Change of Control for which a public announcement that it proposes or intends to effect a Change of Control of the Company (the date of such announcement, the "ANNOUNCEMENT DATE") has been made, the date upon which the Company or other Person proposing to effect such Change of Control consummates or publicly announces the termination or abandonment of the proposed Change of Control which was the subject of the previous public announcement. (c) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on The New York Stock Exchange, Inc. (the "PRINCIPAL MARKET") as reported by Bloomberg Financial Markets ("BLOOMBERG"), or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m. Eastern Time as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last 21 trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 23. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during any applicable calculation period. (d) "COMMON STOCK" means (i) the Company's common stock, par value $2.50 per share, and (ii) any capital stock resulting from a reclassification of such Common Stock. (e) "PERSON" means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof. (f) "REDEMPTION PREMIUM" means (i) in the case of the Events of Default described in Section 4(a)(i), (ii), (iii), (iv) and (viii), 115% or (ii) in the case of the Events of Default described in Section 4(a)(v) - (vii), 100%. (g) "REGISTRATION RIGHTS AGREEMENT" means that certain registration rights agreement between the Company and the initial holders of the Notes relating to the registration of the resale of the shares of Common Stock issuable upon conversion of the Notes. (h) "SECURITIES PURCHASE AGREEMENT" means that certain securities purchase agreement between the Company and the initial holders of the Notes pursuant to which the Company issued the Notes. (i) "SEPARATE TRANCHE NOTES" means the First Notes, Second Notes, First Call Notes, Second Call Notes and Third Notes, collectively. (j) "TRADING DAY" means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that "Trading Day" shall not include any day on which the Common Stock is scheduled to trade on such exchange or market or actually trades on such exchange or market for less than 4.5 hours. (k) "VARIABLE SECURITIES" means any stock or securities other than 22 Options directly or indirectly convertible into or exchangeable for Common Stock ("CONVERTIBLE SECURITIES") or any rights, warrants or option to subscribe for or purchase Common Stock or Convertible Securities ("OPTIONS") that are convertible into or exchangeable, directly or indirectly, for Common Stock at a price which varies or may vary with the market price of the Common Stock, including by way of one or more adjustments or resets to a fixed price (a "VARIABLE PRICE"). (l) "WEIGHTED AVERAGE PRICE" means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market during the period beginning at 9:30 a.m., New York Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" functions (ignoring any trade of more than 100,000 shares of such security pursuant to an individual transaction (subject to adjustment for stock splits, stock dividends, stock combinations and other similar transactions involving such security after the Issuance Date)), or, if the Principal Market is not the principal securities exchange or trading market for such security, the dollar volume-weighted average price for such security on the principal securities exchange or trading market where such security is listed or traded during the period beginning at 9:30 a.m., New York Time (or such other time as such principal securities exchange or trading market publicly announces is the official open of trading), and ending at 4:00 p.m., New York Time (or such other time as such principal securities exchange or trading market publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" functions (ignoring any trade of more than 100,000 shares of such security pursuant to an individual transaction (subject to adjustment for stock splits, stock dividends, stock combinations and other similar transactions involving such security after the Issuance Date)), or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30 a.m., New York Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 23. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during applicable calculation period. [SIGNATURE PAGE FOLLOWS] 23 IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Date of Issuance set out above. XCEL ENERGY INC. By: --------------------------------- Name: Title: Chief Executive Officer EXHIBIT I XCEL ENERGY INC. CONVERSION NOTICE Reference is made to the Convertible Note (the "NOTE") issued to the undersigned by XCEL ENERGY INC. (the "COMPANY"). In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common Stock, par value $2.50 per share (the "COMMON STOCK"), of the Company as of the date specified below. Date of Conversion: ----------------------------------------------------- Aggregate Conversion Amount to be converted: ---------------------------- Please confirm the following information: Conversion Price: ------------------------------------------------------- Number of shares of Common Stock to be issued: -------------------------- Please issue the Common Stock into which the Note is being converted and, if applicable, any check drawn on an account of the Company in the following name and to the following address: Issue to: --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- Facsimile Number: ------------------------------------------------------- Authorization: ---------------------------------------------------------- By: -------------------------------------------------------------- Title: ----------------------- Dated: -------------------------------------------------------------------------- Account Number: --------------------------------------------------------- (if electronic book entry transfer) Transaction Code Number: ------------------------------------------------ (if electronic book entry transfer) ACKNOWLEDGMENT The Company hereby acknowledges this Conversion Notice and hereby directs [TRANSFER AGENT] to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated November 8, 2002 from the Company and acknowledged and agreed to by [TRANSFER AGENT]. XCEL ENERGY INC. By: --------------------------------- Name: Title: EX-99.01 15 c72574exv99w01.txt EX-99.01 STATEMENT PURSUANT TO PRIVATE SECURITIES EXHIBIT 99.01 - XCEL ENERGY CAUTIONARY FACTORS The Private Securities Litigation Reform Act provides a "safe harbor" for forward-looking statements to encourage disclosures without the threat of litigation, providing those statements are identified as forward-looking and are accompanied by meaningful, cautionary statements identifying important factors that could cause the actual results to differ materially from those projected in the statement. Forward-looking statements are made in written documents and oral presentations of Xcel Energy. These statements are based on management's beliefs as well as assumptions and information currently available to management. When used in Xcel Energy's documents or oral presentations, the words "anticipate," "estimate," "expect," "projected," objective," "outlook," "forecast," "possible," "potential" and similar expressions are intended to identify forward-looking statements. In addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements, factors that could cause Xcel Energy's actual results to differ materially from those contemplated in any forward-looking statements include, among others, the following: o Economic conditions, including inflation rates, monetary fluctuations and their impact on capital expenditures; o The risk of a significant slowdown in growth or decline in the U.S. economy, the risk of delay in growth recovery in the U.S. economy or the risk of increased cost for insurance premiums, security and other items as a consequence of the Sept. 11, 2001, terrorist attacks; o Trade, monetary, fiscal, taxation and environmental policies of governments, agencies and similar organizations in geographic areas where Xcel Energy has a financial interest; o Customer business conditions, including demand for their products or services and supply of labor and materials used in creating their products and services; o Financial or regulatory accounting principles or policies imposed by the Financial Accounting Standards Board, the SEC, the Federal Energy Regulatory Commission and similar entities with regulatory oversight; o Availability of credit or cost of capital, changes in: interest rates; market perceptions of the utility industry, Xcel Energy or any of its subsidiaries; or security ratings; o Effect of recent credit agency actions; o Factors affecting utility and nonutility operations such as unusual weather conditions; catastrophic weather-related damage; unscheduled generation outages, maintenance or repairs; unanticipated changes to fossil fuel, nuclear fuel or gas supply costs or availability due to higher demand, shortages, transportation problems or other developments; nuclear or environmental incidents; or electric transmission or gas pipeline constraints; o Employee workforce factors, including loss or retirement of key executives, collective bargaining agreements with union employees, or work stoppages; o Increased competition in the utility industry or additional competition in the markets served by Xcel Energy and its subsidiaries; o State, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rate structures and affect the speed and degree to which competition enters the electric and gas markets; industry restructuring initiatives; transmission system operation and/or administration initiatives; recovery of investments made under traditional regulation; nature of competitors entering the industry; retail wheeling; a new pricing structure; and former customers entering the generation market; o Rate-setting policies or procedures of regulatory entities, including environmental externalities, which are values established by regulators assigning environmental costs to each method of electricity generation when evaluating generation resource options; o Nuclear regulatory policies and procedures, including operating regulations and spent nuclear fuel storage; o Social attitudes regarding the utility and power industries; o Risks associated with the California power and other western markets; o Cost and other effects of legal and administrative proceedings, settlements, investigations and claims; o Technological developments that result in competitive disadvantages and the potential for impairment of existing assets; o Factors associated with nonregulated investments, including risks associated with timely completion of projects, including obtaining competitive contracts and construction delays, foreign government actions, foreign economic and currency risks, political instability in foreign countries, partnership actions, competition, operating risks, dependence on certain suppliers and customers, domestic and foreign environmental and energy regulations; o Many of the project investments made by Xcel Energy's subsidiary NRG, Inc. consist of minority interests, and a substantial portion of future investments may take the form of minority interests, which limits NRG's ability to control the development or operation of the project; o The realization of expectations regarding the NRG financial improvement plan; and o Other business or investment considerations that may be disclosed from time to time in Xcel Energy's SEC filings or in other publicly disseminated written documents. Xcel Energy undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors should not be construed as exhaustive. EX-99.02 16 c72574exv99w02.txt EX-99.1 CERTIFICATION PURSUANT TO 18 USC SEC. 1350 EXHIBIT 99.02 - OFFICER CERTIFICATION CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Xcel Energy Inc. (Xcel Energy) on Form 10-Q for the quarter ended Sept. 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (Form 10-Q), each of the undersigned officers of the Xcel Energy certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer's knowledge: (1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Xcel Energy as of the dates and for the periods expressed in the Form 10-Q. Date: November 18, 2002 /s/ Wayne H. Brunetti ----------------------------------------- Wayne H. Brunetti Chairman, President and Chief Executive Officer /s/ Richard C. Kelly ----------------------------------------- Richard C. Kelly Vice President and Chief Financial Officer The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document. 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EX-4.01

                                                                    EXHIBIT 4.01




                             SUPPLEMENTAL INDENTURE


                          (DATED AS OF AUGUST 15, 2002)


                                    --------


                       PUBLIC SERVICE COMPANY OF COLORADO


                                       TO


                      U.S. BANK TRUST NATIONAL ASSOCIATION,
                                   AS TRUSTEE


                                    --------


                   CREATING AN ISSUE OF FIRST MORTGAGE BONDS,
                               COLLATERAL SERIES G

                                    --------

      (SUPPLEMENTAL TO INDENTURE DATED AS OF DECEMBER 1, 1939, AS AMENDED)








         SUPPLEMENTAL INDENTURE, dated as of August 15, 2002, between PUBLIC
         SERVICE COMPANY OF COLORADO, a corporation organized and existing under
         the laws of the State of Colorado (the "Company"), party of the first
         part, and U.S. BANK TRUST NATIONAL ASSOCIATION (FORMERLY FIRST TRUST OF
         NEW YORK, NATIONAL ASSOCIATION), a national banking association, as
         successor trustee (the "Trustee") to Morgan Guaranty Trust Company of
         New York (formerly Guaranty Trust Company of New York), party of the
         second part.

         WHEREAS, the Company heretofore executed and delivered to the Trustee
         its Indenture, dated as of December 1, 1939 (the "Principal
         Indenture"), to secure its First Mortgage Bonds from time to time
         issued thereunder; and

         WHEREAS, the Company has heretofore executed and delivered to the
         Trustee the Supplemental Indentures referred to in Schedule A hereto
         for certain purposes, including the creation of series of bonds, the
         subjection to the lien of the Principal Indenture of property acquired
         after the execution and delivery thereof, the amendment of certain
         provisions of the Principal Indenture and the appointment of the
         successor Trustee; and

         WHEREAS, the Principal Indenture as supplemented and amended by all
         Supplemental Indentures heretofore executed by the Company and the
         Trustee is hereinafter referred to as the "Indenture", and, unless the
         context requires otherwise, references herein to Articles and Sections
         of the Indenture shall be to Articles and Sections of the Principal
         Indenture as so amended; and

         WHEREAS, the Company proposes to create a new series of First Mortgage
         Bonds to be designated as First Mortgage Bonds, Collateral Series G
         (the "Collateral Series G Bonds"), to be issued and delivered to the
         trustee under the 1993 Mortgage (as hereinafter defined) as the basis
         for the authentication and delivery under the 1993 Mortgage of a series
         of securities, all as hereinafter provided, and to vary in certain
         respects the covenants and provisions contained in Article V of the
         Indenture, to the extent that such covenants and provisions apply to
         the Collateral Series G Bonds; and

         WHEREAS, the Company, pursuant to the provisions of the Indenture, has,
         by appropriate corporate action, duly resolved and determined to
         execute this Supplemental Indenture for the purpose of providing for
         the creation of the Collateral Series G Bonds and of specifying the
         form, provisions and particulars thereof, as in the Indenture provided
         or permitted and of giving to the Collateral Series G Bonds the
         protection and security of the Indenture; and

         WHEREAS, the Company has acquired the additional property hereinafter
         described, and the Company desires that such additional property so
         acquired be specifically subject to the lien of the Indenture; and

         WHEREAS, the Company represents that all acts and proceedings required
         by law and by the charter and by-laws of the Company, including all
         action requisite on the part of its shareholders, directors and
         officers, necessary to make the Collateral Series G Bonds, when
         executed by the Company, authenticated and delivered by the Trustee and
         duly issued, the valid, binding and legal obligations of the Company,
         and to constitute the


         Principal Indenture and all indentures supplemental thereto, including
         this Supplemental Indenture, valid, binding and legal instruments for
         the security of the bonds of all series, including the Collateral
         Series G Bonds, in accordance with the terms of such bonds and such
         instruments, have been done, performed and fulfilled, and the execution
         and delivery hereof have been in all respects duly authorized;

         NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:

         That Public Service Company of Colorado, the Company named in the
         Indenture, in consideration of the premises and of One Dollar to it
         duly paid by the Trustee at or before the ensealing and delivery of
         these presents, the receipt whereof is hereby acknowledged, and in
         pursuance of the direction and authority of the Board of Directors of
         the Company given at a meeting thereof duly called and held, and in
         order to create the Collateral Series G Bonds and to specify the form,
         terms and provisions thereof, and to make definite and certain the lien
         of the Indenture upon the premises hereinafter described and to subject
         said premises directly to the lien of the Indenture, and to secure the
         payment of the principal of and premium, if any, and interest, if any,
         on all bonds from time to time outstanding under the Indenture,
         including the Collateral Series G Bonds, according to the terms of said
         bonds, and to secure the performance and observance of all of the
         covenants and conditions contained in the Indenture, has executed and
         delivered this Supplemental Indenture and has granted, bargained, sold,
         warranted, aliened, remised, released, conveyed, assigned, transferred,
         mortgaged, pledged, set over and confirmed, and by these presents does
         grant, bargain, sell, warrant, alien, remise, release, convey, assign,
         transfer, mortgage, pledge, set over and confirm unto U.S. Bank Trust
         National Association, as Trustee, and its successor or successors in
         the trust and its and their assigns forever, the property described in
         Schedule B hereto (which is described in such manner as to fall within
         and under the headings or parts or classifications set forth in the
         Granting Clauses of the Principal Indenture);

         TO HAVE AND TO HOLD the same and all and singular the properties,
         rights, privileges and franchises described in the Principal Indenture
         and in the several Supplemental Indentures hereinabove referred to and
         in this Supplemental Indenture and owned by the Company on the date of
         the execution and delivery hereof (other than property of a character
         expressly excepted from the lien of the Indenture as therein set forth)
         unto the Trustee and its successor or successors and assigns forever;

         SUBJECT, HOWEVER, to permitted encumbrances as defined in the
         Indenture;

         IN TRUST, NEVERTHELESS, upon the terms and trusts set forth in the
         Indenture, for the equal and proportionate benefit and security of all
         present and future holders of the bonds and coupons issued and to be
         issued under the Indenture, including the Collateral Series G Bonds,
         without preference, priority or distinction as to lien (except as any
         sinking, amortization, improvement or other fund established in
         accordance with the provisions of the Indenture or any indenture
         supplemental thereto may afford additional security for the bonds of
         any particular series) of any of said bonds over any others thereof by
         reason of series, priority in the time of the issue or negotiation
         thereof, or otherwise howsoever, except as provided in Section 2 of
         Article IV of the Indenture.


                                       2

                                   ARTICLE ONE

            CREATION AND DESCRIPTION OF THE COLLATERAL SERIES G BONDS

                  SECTION 1. A new series of bonds to be issued under and
secured by the Indenture is hereby created, the bonds of such new series to be
designated First Mortgage Bonds, Collateral Series G. The Collateral Series G
Bonds shall be limited to an aggregate principal amount of Forty Eight Million
Seven Hundred and Fifty Thousand dollars ($48,750,000), excluding any Collateral
Series G Bonds which may be authenticated and exchanged for or in lieu of or in
substitution for or on transfer of other Collateral Series G Bonds pursuant to
any provisions of the Indenture. The Collateral Series G Bonds shall mature on
January 1, 2019. The Collateral Series G Bonds shall not bear interest.

         The principal of each Collateral Series G Bond shall be payable, upon
         presentation thereof, at the office or agency of the Company in the
         city in which the principal corporate trust office of the 1993 Mortgage
         Trustee (as hereinafter defined) is located, in any coin or currency of
         the United States of America which at the time of payment shall be
         legal tender for the payment of public and private debts.

         The Collateral Series G Bonds shall be issued and delivered by the
         Company to U.S. Bank Trust National Association, as successor trustee
         under the Indenture, dated as of October 1, 1993, as supplemented (the
         "1993 Mortgage"), of the Company to such successor trustee (the "1993
         Mortgage Trustee"), as the basis for the authentication and delivery
         under the 1993 Mortgage of a series of securities. As provided in the
         1993 Mortgage, the Collateral Series G Bonds will be registered in the
         name of the 1993 Mortgage Trustee or its nominee and will be owned and
         held by the 1993 Mortgage Trustee, subject to the provisions of the
         1993 Mortgage, for the benefit of the holders of all securities from
         time to time outstanding under the 1993 Mortgage, and the Company shall
         have no interest therein.

         Any payment or deemed payment by the Company under the 1993 Mortgage of
         the principal of the securities which shall have been authenticated and
         delivered under the 1993 Mortgage on the basis of the issuance and
         delivery to the 1993 Mortgage Trustee of Collateral Series G Bonds
         (other than by the application of the proceeds of a payment in respect
         of such Collateral Series G Bonds) shall, to the extent thereof, be
         deemed to satisfy and discharge the obligation of the Company, if any,
         to make a payment of principal of such Collateral Series G Bonds which
         is then due.

         The Trustee may conclusively presume that the obligation of the Company
         to pay the principal of the Collateral Series G Bonds as the same shall
         become due and payable shall have been fully satisfied and discharged
         unless and until it shall have received a written notice from the 1993
         Mortgage Trustee, signed by an authorized officer thereof, stating that
         the principal of specified Collateral Series G Bonds has become due and
         payable and has not been fully paid, and specifying the amount of funds
         required to make such payment.

         Each Collateral Series G Bond shall be dated as of the date of its
         authentication.


                                       3

         The Collateral Series G Bonds shall be issued as fully registered bonds
         only, in denominations of $1,000 and multiples thereof.

         The Collateral Series G Bonds shall be registerable and exchangeable at
         the office or agency of the Company in the city in which the principal
         corporate trust office of the 1993 Mortgage Trustee is located, in the
         manner and upon the terms set forth in Section 5 of Article II of the
         Indenture; provided, however, that the Collateral Series G Bonds shall
         not be transferrable except to a successor trustee under the 1993
         Mortgage. No service charge shall be made for any exchange or transfer
         of any Collateral Series G Bond.

                  SECTION 2. The text of the Collateral Series G Bonds shall be
substantially in the form attached hereto as Exhibit A.

                  SECTION 3. The Collateral Series G Bonds may be executed by
the Company and delivered to the Trustee and, upon compliance with all
applicable provisions and requirements of the Indenture in respect thereof,
shall be authenticated by the Trustee and delivered (without awaiting the filing
or recording of this Supplemental Indenture) in accordance with the written
order or orders of the Company.

                                   ARTICLE TWO

                   REDEMPTION OF THE COLLATERAL SERIES G BONDS

                  SECTION 1. Each Collateral Series G Bond shall be redeemable
at the option of the Company in whole at any time, or in part from time to time,
prior to maturity, at a redemption price equal to 100% of the principal amount
thereof to be redeemed.

                  SECTION 2. The provisions of Sections 3, 4, 5, 6 and 7 of
Article V of the Indenture shall be applicable to the Collateral Series G Bonds,
except that (a) no publication of notice of redemption of the Collateral Series
G Bonds shall be required and (b) if less than all the Collateral Series G Bonds
are to be redeemed, the Collateral Series G Bonds to be redeemed shall be
selected in the principal amounts designated to the Trustee by the Company, and
except as such provisions may otherwise be inconsistent with the provisions of
this Article Two.

                  SECTION 3. The holder of each and every Collateral Series G
Bond hereby agrees to accept payment thereof prior to maturity on the terms and
conditions provided for in this Article Two.

                                  ARTICLE THREE

                         ACKNOWLEDGMENT OF RIGHT TO VOTE
                           OR CONSENT WITH RESPECT TO
                         CERTAIN AMENDMENTS TO INDENTURE

         The Company hereby acknowledges the right of the holders of the
         Collateral Series G Bonds to vote or consent with respect to any or all
         of the modifications to the Indenture referred to in Article Three of
         the Supplemental Indenture, dated as of March 1, 1980, irrespective of
         the fact that the Bonds of the Second 1987 Series are no longer



                                       4


         outstanding; provided, however, that such acknowledgment shall not
         impair (a) the right of the Company to make such modifications without
         the consent or other action of the holders of the Bonds of the 2020
         Series or the bonds of any other series subsequently created under the
         Indenture with respect to which the Company has expressly reserved such
         right or (b) the right of the Company to reserve the right to make such
         modifications without the consent or other action of the holders of
         bonds of one or more, or any or all, series created subsequent to the
         creation of the Collateral Series G Bonds.

                                  ARTICLE FOUR

                                   THE TRUSTEE

         The Trustee accepts the trusts created by this Supplemental Indenture
         upon the terms and conditions set forth in the Indenture and this
         Supplemental Indenture. The recitals in this Supplemental Indenture are
         made by the Company only and not by the Trustee. Each and every term
         and condition contained in Article XII of the Indenture shall apply to
         this Supplemental Indenture with the same force and effect as if the
         same were herein set forth in full, with such omissions, variations and
         modifications thereof as may be appropriate to make the same conform to
         this Supplemental Indenture.

                                  ARTICLE FIVE

                            MISCELLANEOUS PROVISIONS

                  SECTION 1. Subject to the variations contained in Article Two
of this Supplemental Indenture, the Indenture is in all respects ratified and
confirmed and the Principal Indenture, this Supplemental Indenture and all other
indentures supplemental to the Principal Indenture shall be read, taken and
construed as one and the same instrument. Neither the execution of this
Supplemental Indenture nor anything herein contained shall be construed to
impair the lien of the Indenture on any of the properties subject thereto, and
such lien shall remain in full force and effect as security for all bonds now
outstanding or hereafter issued under the Indenture.

         All covenants and provisions of the Indenture shall continue in full
         force and effect and this Supplemental Indenture shall form part of the
         Indenture.

                  SECTION 2. If the date for making any payment or the last date
for performance of any act or the exercising of any right, as provided in this
Supplemental Indenture, shall not be a Business Day (as defined in the 1993
Mortgage), such payment may be made or act performed or right exercised on the
next succeeding Business Day with the same force and effect as if done on the
nominal date provided in this Supplemental Indenture.

                  SECTION 3. The terms defined in the Indenture shall, for all
purposes of this Supplemental Indenture, have the meaning specified in the
Indenture except as set forth in Section 4 of this Article or otherwise set
forth in this Supplemental Indenture or unless the context clearly indicates
some other meaning to be intended.


                                       5


                  SECTION 4. Any term defined in Section 303 of the Trust
Indenture Act of 1939, as amended, and not otherwise defined in the Indenture
shall, with respect to this Supplemental Indenture and the Collateral Series G
Bonds, have the meaning assigned to such term in Section 303 as in force on the
date of the execution of this Supplemental Indenture.

                  SECTION 5. This Supplemental Indenture may be executed in any
number of counterparts, and all of said counterparts executed and delivered,
each as an original, shall constitute but one and the same instrument.













































                                       6

         IN WITNESS WHEREOF, Public Service Company of Colorado, party hereto of
         the first part, has caused its corporate name to be hereunto affixed,
         and this instrument to be signed by its President, an Executive Vice
         President, a Senior Vice President or a Vice President, and its
         corporate seal to be hereunto affixed and attested by its Secretary or
         an Assistant Secretary for and in its behalf; and U.S. Bank Trust
         National Association, the party hereto of the second part, in evidence
         of its acceptance of the trust hereby created, has caused its corporate
         name to be hereunto affixed, and this instrument to be signed and its
         corporate seal to be affixed by one of its Vice Presidents and attested
         by one of its Assistant Secretaries, for and in its behalf, all as of
         the day and year first above written.

                                         PUBLIC SERVICE COMPANY OF
                                          COLORADO



                                         By:/s/ Paul E. Pender
                                            ------------------
                                            Name:   Paul E. Pender
                                            Title:  Vice President and Treasurer


ATTEST: /s/ Nancy Haley
       ----------------
       Name:   Nancy Haley
       Title:  Assistant Secretary
                                         U.S. BANK TRUST
                                          NATIONAL ASSOCIATION,
                                             as Trustee


                                         By: /s/ Ignazio Tamburello
                                             ----------------------
                                             Name:   Ignazio Tamburello
                                             Title:  Assistant Vice President


ATTEST: /s/ Adam Berman
       ----------------
       Name:   Adam Berman
       Title:  Trust Officer






                                       7

STATE OF MINNESOTA         )
                           )  ss.:
CITY OF MINNEAPOLIS        )


         On this 9th day of September, 2002, before me, Sharon M. Quellhorst, a
         duly authorized Notary Public in and for said City and in the State
         aforesaid, personally appeared Paul E. Pender and Nancy Haley to me
         known to be a Vice President and Treasurer and the Assistant Secretary,
         respectively, of PUBLIC SERVICE COMPANY OF COLORADO, a corporation
         organized and existing under the laws of the State of Colorado, one of
         the corporations that executed the within and foregoing instrument; and
         the said Vice President and Treasurer and Assistant Secretary severally
         acknowledged the said instrument to be the free and voluntary act and
         deed of said corporation, for the uses and purposes therein mentioned,
         and on oath stated that they were authorized to execute said instrument
         and that the seal affixed thereto is the corporate seal of said
         corporation.

         IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
         seal the day and year first above written.


                                  /s/ Sharon M. Quelhorst
                                  Name:  Sharon M. Quellhorst
                                  Notary Public, State of Minnesota

                                  Commission Expires:  January 31, 2005






















                                       8

STATE OF NEW YORK                )
                                 )  ss.:
CITY AND COUNTY OF NEW YORK      )


         On this 10th day of September, 2002, before me, Rouba Fakih, a duly
         authorized Notary Public in and for said City and County in the State
         aforesaid, personally appeared Ignazio Tamburello and Adam Berman to me
         known to be an Assistant Vice President and a Trust Officer,
         respectively, of U.S. BANK TRUST NATIONAL ASSOCIATION, a national
         banking association, one of the corporations that executed the within
         and foregoing instrument; and the said Assistant Vice President and
         Assistant Secretary severally acknowledged the said instrument to be
         the free and voluntary act and deed of said corporation, for the uses
         and purposes therein mentioned, and on oath stated that they were
         authorized to execute said instrument and that the seal affixed thereto
         is the corporate seal of said corporation.

         IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
         seal the day and year first above written.


                                    /s/ Rouba Fakih
                                    ---------------
                                    Name:  Rouba Fakih
                                    Notary Public, State of New York

                                    Commission Expires February 20, 2003


























                                        9

                                                                       EXHIBIT A



                        FORM OF COLLATERAL SERIES G BOND

         THIS BOND IS NOT TRANSFERABLE EXCEPT TO A SUCCESSOR TRUSTEE UNDER THE
INDENTURE, DATED AS OF OCTOBER 1, 1993, AS SUPPLEMENTED, BETWEEN PUBLIC SERVICE
COMPANY OF COLORADO AND U.S. BANK TRUST NATIONAL ASSOCIATION (FORMERLY FIRST
TRUST OF NEW YORK, NATIONAL ASSOCIATION), AS SUCCESSOR TRUSTEE THEREUNDER.

                       PUBLIC SERVICE COMPANY OF COLORADO

                              FIRST MORTGAGE BOND,

                               Collateral Series G

                                    DUE 2019

REGISTERED                                                            REGISTERED

No. 1                                                                $48,750,000


         FOR VALUE RECEIVED, PUBLIC SERVICE COMPANY OF COLORADO, a corporation
organized and existing under the laws of the State of Colorado (hereinafter
sometimes called the "Company"), promises to pay to U.S. Bank Trust National
Association (formerly known as First Trust of New York, National Association),
as successor trustee (the "1993 Mortgage Trustee") under the Indenture, dated as
of October 1, 1993 (the "1993 Mortgage"), of the Company, or registered assigns,
Forty Eight Million Seven Hundred Fifty Thousand Dollars on January 1, 2019, at
the office or agency of the Company in the city in which the principal corporate
trust office of the 1993 Mortgage Trustee is located. This bond shall not bear
interest. The principal of this bond shall be payable in any coin or currency of
the United States of America which at the time of payment shall be legal tender
for the payment of public and private debts.

         Any payment or deemed payment by the Company under the 1993 Mortgage of
the principal of securities which shall have been authenticated and delivered
under the 1993 Mortgage on the basis of the issuance and delivery to the 1993
Mortgage Trustee of this bond (the "1993 Mortgage Securities") (other than by
the application of the proceeds of a payment in respect of this bond) shall, to
the extent thereof, be deemed to satisfy and discharge the obligation of the
Company, if any, to make a payment of principal of this bond which is then due.

This bond is one of an issue of bonds of the Company, issued and to be issued in
one or more series under and equally and ratably secured (except as any sinking,
amortization, improvement or other fund, established in accordance with the
provisions of the indenture hereinafter mentioned, may afford additional
security for the bonds of any particular series) by a certain indenture, dated
as of December 1, 1939, made by the Company to U.S. BANK TRUST



                                  EXHIBIT A-1

NATIONAL ASSOCIATION (formerly First Trust of New York, National Association),
as successor trustee (hereinafter called the "Trustee") to Morgan Guaranty Trust
Company of New York (formerly Guaranty Trust Company of New York), as amended
and supplemented by several indentures supplemental thereto, including the
Supplemental Indenture dated as of August 15, 2002 (said Indenture as amended
and supplemented by said indentures supplemental thereto being hereinafter
called the "Indenture"), to which Indenture reference is hereby made for a
description of the property mortgaged, the nature and extent of the security,
the rights and limitations of rights of the Company, the Trustee, and the
holders of said bonds, under the Indenture, and the terms and conditions upon
which said bonds are secured, to all of the provisions of which Indenture and of
all indentures supplemental thereto in respect of such security, including the
provisions of the Indenture permitting the issue of bonds of any series for
property which, under the restrictions and limitations therein specified, may be
subject to liens prior to the lien of the Indenture, the holder, by accepting
this bond, assents. To the extent permitted by and as provided in the Indenture,
the rights and obligations of the Company and of the holders of said bonds
(including those pertaining to any sinking or other fund) may be changed and
modified, with the consent of the Company, by the holders of at least 75% in
aggregate principal amount of the bonds then outstanding (excluding bonds
disqualified from voting by reason of the Company's interest therein as provided
in the Indenture); provided, however, that without the consent of the holder
hereof no such modification or alteration shall be made which will extend the
time of payment of the principal of this bond or reduce the principal amount
hereof or effect any other modification of the terms of payment of such
principal or will reduce the percentage of bonds required for the aforesaid
actions under the Indenture. The Company has reserved the right to amend the
Indenture without any consent or other action by holders of any series of bonds
created after October 31, 1975 (including this series) so as to change 75% in
the foregoing sentence to 60% and to change certain procedures relating to
bondholders' meetings. This bond is one of a series of bonds designated as the
First Mortgage Bonds, Collateral Series G, of the Company.

         This bond shall be redeemable at the option of the Company in whole at
any time, or in part from time to time, prior to maturity, at a redemption price
equal to 100% of the principal amount thereof to be redeemed.

         The principal of this bond may be declared or may become due before the
maturity hereof, on the conditions, in the manner and at the times set forth in
the Indenture, upon the happening of an event of default as therein provided.

         This bond is not transferable except to a successor trustee under the
1993 Mortgage, any such transfer to be made at the office or agency of the
Company in the city in which the principal corporate trust office of the 1993
Mortgage Trustee is located, upon surrender and cancellation of this bond, and
thereupon a new bond of this series of a like principal amount will be issued to
the transferee in exchange therefor, as provided in the Indenture. The Company,
the Trustee, any paying agent and any registrar may deem and treat the person in
whose name this bond is registered as the absolute owner hereof for the purpose
of receiving payment and for all other purposes. This bond, alone or with other
bonds of this series, may in like manner be exchanged at such office or agency
for one or more new bonds of this series of the same aggregate principal amount,
all as provided in the Indenture. No service charge shall be made to any holder
of any bond of this series for any exchange or transfer of bonds.


                                  EXHIBIT A-2

         No recourse under or upon any covenant or obligation of the Indenture,
or of any bonds thereby secured, or for any claim based thereon, or otherwise in
any manner in respect thereof, shall be had against any incorporator, subscriber
to the capital stock, shareholder, officer or director, as such, of the Company,
whether former, present or future, either directly, or indirectly through the
Company or the Trustee, by the enforcement of any subscription to capital stock,
assessment or otherwise, or by any legal or equitable proceeding by virtue of
any statute or otherwise (including, without limiting the generality of the
foregoing, any proceeding to enforce any claimed liability of shareholders of
the Company based upon any theory of disregarding the corporate entity of the
Company or upon any theory that the Company was acting as the agent or
instrumentality of the shareholders), any and all such liability of
incorporators, shareholders, subscribers, officers and directors, as such, being
released by the holder hereof, by the acceptance of this bond, and being
likewise waived and released by the terms of the Indenture under which this bond
is issued.

         This bond shall not be valid or become obligatory for any purpose until
the certificate of authentication endorsed hereon shall have been signed by U.S.
Bank Trust National Association, or its successor, as Trustee under the
Indenture.

         IN WITNESS WHEREOF, Public Service Company of Colorado has caused this
bond to be signed in its name by a Vice President and its corporate seal to be
affixed hereto and attested by its Secretary or an Assistant Secretary.

Dated:                                         PUBLIC SERVICE COMPANY OF
                                               COLORADO



                                               By:
                                                  ------------------------------
                                                   Vice President and Treasurer

ATTEST:
       ------------------------------
       Assistant Secretary


                          CERTIFICATE OF AUTHENTICATION

         This is one of the securities of the series designated therein referred
to in the within-mentioned Supplemental Indenture.

Dated:                                         U.S. BANK TRUST
                                               NATIONAL ASSOCIATION,
                                                     AS TRUSTEE


                                               By:
                                                  ------------------------------
                                                              Authorized Officer




                                   EXHIBIT A-3

                                                                      SCHEDULE A


                             SUPPLEMENTAL INDENTURES



         DATE OF                      SERIES OF BONDS                    PRINCIPAL               PRINCIPAL
      SUPPLEMENTAL                    ---------------                  AMOUNT ISSUED               AMOUNT
        INDENTURE                                                      -------------            OUTSTANDING
        ---------                                                                               -----------
                                                                                       

March 14, 1941                              None                             --                      --
May 14, 1941                                None                             --                      --
April 28, 1942                              None                             --                      --
April 14, 1943                              None                             --                      --
April 27, 1944                              None                             --                      --
April 18, 1945                              None                             --                      --
April 23, 1946                              None                             --                      --
April 9, 1947                               None                             --                      --
June 1, 1947*                      2-7/8% Series due 1977             $ 40,000,000                  None
April 1, 1948                               None                             --                      --
May 20, 1948                                None                             --                      --
October 1, 1948                    3-1/8% Series due 1978               10,000,000                  None
April 20, 1949                              None                             --                      --
April 24, 1950                              None                             --                      --
April 18, 1951                              None                             --                      --
October 1, 1951                    3-1/4% Series due 1981               15,000,000                  None
April 21, 1952                              None                             --                      --
December 1, 1952                            None                             --                      --
April 15, 1953                              None                             --                      --
April 19, 1954                              None                             --                      --
October 1, 1954*                   3-1/8% Series due 1984               20,000,000                  None
April 18, 1955                              None                             --                      --
April 24, 1956                              None                             --                      --
May 1, 1957*                       4-3/8% Series due 1987               30,000,000                  None
April 10, 1958                              None                             --                      --
May 1, 1959                        4-5/8% Series due 1989               20,000,000                  None
April 18, 1960                              None                             --                      --
April 19, 1961                              None                             --                      --
October 1, 1961                    4-1/2% Series due 1991               30,000,000                  None
March 1, 1962                      4-5/8% Series due 1992                8,800,000                  None
June 1, 1964                       4-1/2% Series due 1994               35,000,000                  None
May 1, 1966                        5-3/8% Series due 1996               35,000,000                  None
July 1, 1967*                      5-7/8% Series due 1997               35,000,000                  None
July 1, 1968*                      6-3/4% Series due 1998               25,000,000                  None
April 25, 1969                              None                             --                      --






                                  SCHEDULE A-1



         DATE OF                      SERIES OF BONDS                    PRINCIPAL               PRINCIPAL
      SUPPLEMENTAL                    ---------------                  AMOUNT ISSUED               AMOUNT
        INDENTURE                                                      -------------            OUTSTANDING
        ---------                                                                               -----------
                                                                                       
                                            None                             --                      --
April 21, 1970
September 1, 1970                  8-3/4% Series due 2000               35,000,000                  None
February 1, 1971                   7-1/4% Series due 2001               40,000,000                  None
August 1, 1972                     7-1/2% Series due 2002               50,000,000                  None
June 1, 1973                       7-5/8% Series due 2003               50,000,000                  None
March 1, 1974                    Pollution Control Series A             24,000,000                  None
December 1, 1974                 Pollution Control Series B             50,000,000                  None
October 1, 1975                    9-3/8% Series due 2005               50,000,000                  None
April 28, 1976                              None                             --                      --

April 28, 1977                              None                             --                      --
November 1, 1977*                  8-1/4% Series due 2007               50,000,000                  None
April 28, 1978                              None                             --                      --
October 1, 1978                    9-1/4% Series due 2008               50,000,000                  None
October 1, 1979*                 Pollution Control Series C             50,000,000                  None
March 1, 1980*                      15% Series due 1987                 50,000,000                  None
April 28, 1981                              None                             --                      --
November 1, 1981*                Pollution Control Series D             27,380,000                  None
December 1, 1981*                 16-1/4% Series due 2011               50,000,000                  None
April 29, 1982                              None                             --                      --
May 1, 1983*                     Pollution Control Series E             42,000,000                  None

April 30, 1984                              None                             --                      --
March 1, 1985*                      13% Series due 2015                 50,000,000                  None
November 1, 1986*                Pollution Control Series F             27,250,000                  None
May 1, 1987*                       8.95% Series due 1992                75,000,000                  None
July 1, 1990*                      9-7/8% Series due 2020               75,000,000                  None
December 1, 1990*           Secured Medium-Term Notes, Series A        191,500,000**             15,000,000
March 1, 1992*                   8-1/8% Series due 2004 and            100,000,000              100,000,000
                                   8-3/4% Series due 2022              150,000,000              146,340,000
April 1, 1993*                   Pollution Control Series G             79,500,000               79,500,000
June 1, 1993*                    Pollution Control Series H             50,000,000               50,000,000
November 1, 1993*                   Collateral Series A                134,500,000              134,500,000

January 1, 1994*              Collateral Series B due 2001 and         102,667,000                  None
                                Collateral Series B due 2024           110,000,000              110,000,000
September 2, 1994                           None                             --                      --
(Appointment of
Successor Trustee)
May 1, 1996                         Collateral Series C                125,000,000              125,000,000



                                  SCHEDULE A-2



         DATE OF                      SERIES OF BONDS                    PRINCIPAL               PRINCIPAL
      SUPPLEMENTAL                    ---------------                  AMOUNT ISSUED               AMOUNT
        INDENTURE                                                      -------------            OUTSTANDING
        ---------                                                                               -----------
                                                                                       

                                    Collateral Series D                250,000,000                  None
November 1, 1996
February 1, 1997                    Collateral Series E                150,000,000                  None
April 1, 1998                       Collateral Series F                250,000,000              250,000,000


- --------------------
* Contains amendatory provisions
** $200,000,000 authorized



























                                  SCHEDULE A-3

                                                                      SCHEDULE B

                             DESCRIPTION OF PROPERTY

                                   PART FIRST.

                                    (PLANTS)

         The following electric generating plants, gas generating plants, gas
holders, steam plant, ice plant, pressure pipe lines, gravity pipe lines,
reservoir sites, power sites, gas regulating stations, substations and other
properties of the Company, including all dams, power houses, transmission lines,
buildings, forebays, reservoirs, races, raceways, pipes, head works, structures
and works, and the lands of the Company on which the same are situated, and all
the Company's lands, easements, rights, rights-of-way, water rights, rights to
the use of water, including all of the Company's right, title and interest in
and to any and all decrees therefor, flowage rights, flooding rights, permits,
franchises, consents, privileges, licenses, poles, towers, wires, switch racks,
insulators, pipes, machinery, engines, boilers, gas benches, condensers and
scrubbers, exhausters, blowers and pumps, motors, gas boosters, air condensers,
water pumps, governors, purifiers, tar separators, washers, automobiles, trucks,
office furniture and fixtures, regulators, meters, tools, appliances, equipment,
appurtenances and supplies forming a part of or appertaining to said plants,
holders, sites, stations or other properties, or any of them, or used or
enjoyed, or capable of being used or enjoyed in conjunction or connection
therewith, all situated in the State of Colorado and the counties thereof, more
particularly described as follows:

                                  ADAMS COUNTY

1.       SATRIANO TRACT

         That part of the NW1/4 NE1/4 of Section 11, Township 3 South, Range 68
         West of the 6th P.M., being more particularly described as follows:

         Beginning at a point which is South 89 degrees 58' East 20 feet and
         North 395.6 feet from the Southwest corner of the NW1/4 NE1/4 of said
         Section; thence North 196.92 feet; thence North 88 degrees 36.9' East,
         165.65 feet; thence North 0 degrees 17' West, 109.93 feet; thence North
         77 degrees 44.6' East 29.52 feet along the center line of the United
         Irrigation Ditch; thence South 438.11 feet; thence North 89 degrees 58'
         West 43.9 feet; thence North 115 feet; thence North 89 degrees 58' West
         150 feet to the point of beginning,

         County of Adams,
         State of Colorado.

         (for informational purposes only)  6200 North Franklin Street

2.       ROSA TRACT

         Parcels of land more particularly described as follows:

         Parcel I:


                                  SCHEDULE B-1

         A portion of the N1/2 of NE1/4 of NE1/4 of Section 11, Township 3
         South, Range 68 West of the 6th P.M., described as follows: Beginning
         at the Northwest Corner of said Tract, thence South 145 feet, thence
         East 110 feet, thence North 145 feet, thence West 110 feet to the Point
         of Beginning except the North 20 feet for road purposes.

         County of Denver,
         State of Colorado.

         Parcel II:

         That portion of the N1/2 of the NE1/4 of the NE1/4 of Section 11,
         Township 3 South, Range West of the 6th P.M., described as follows:

         Beginning at a point 110 feet East of the Northwest corner of said
         tract; thence South 145 feet; thence East 90 feet; thence North 145
         feet; thence West 90 feet to the True Point of Beginning, except the
         North 20 feet for road purposes.

         County of Adams, State of Colorado.

                                 LA PLATA COUNTY

3.       COTTONWOOD GULCH GAS QUALITY CONTROL PLANT

         Tract A of Cottonwood Gulch, Minor Exemption Subdivision, Project No.
         99-165, according to the plat thereof filed for record September 27,
         1999 as Reception No. 775147.

                                  MORGAN COUNTY

4.       BADGER CREEK METER STATION

         A parcel of land lying in the Northeast one-quarter Section 36,
         Township 3 North, Range 58 West of the Sixth Principal Meridian, County
         of Morgan, State of Colorado, more particularly described as follows:

         Basis of bearings: the North line of the Northeast one-quarter of
         Section 36, Township 3 North, Range 58 West of the Sixth Principal
         Meridian, being monumented at the North one-quarter corner by a 1-1/2"
         iron pipe and at the Northeast corner of said Section by a 3-1/2"
         aluminum cap -- L.S. #23501, being assumed to bear N89 degrees 32'14"E.

         Commencing at the North one-quarter corner of said Section 36; thence
         N89 degrees 32'14"E along the North line of said Northeast one quarter,
         a distance of 520.00 feet to the Point of Beginning;

         Thence the following four (4) courses:

         1.       N89 degrees 32'14"E, along said North line, a distance of
                  100.00 feet to a point on the westerly line of that parcel of
                  land owned by Colorado Interstate Gas Company;


                                  SCHEDULE B-2

         2.       S00 degrees 01'46"W, along said westerly parcel line, a
                  distance of 500.00 feet;

         3.       S89 degrees 32'14"W, a distance of 100.00 feet.

         4.       N00 degrees 01'46"E, a distance of 500.00 feet to the Point of
                  Beginning,

         Less right-of-way for Morgan County Road N,

         Containing a calculated area of 50,000 square feet or 1.148 acres.

                                  SUMMIT COUNTY

5.       HIGH TOR METER STATION

         A portion of the Braddock Placer M.S. 13465, Section 18, Township 6
         South, Range 77 West of the Sixth Principal Meridian, located in the
         Town of Breckenridge, County of Summit, State of Colorado, being more
         particularly described as follows:

         Basis of bearings:         The westerly line of the Delaware Flats
                                    Annexation Plat Phase 3, as recorded under
                                    reception number 241384, Summit County
                                    records, being monumented at Corner 15 by a
                                    2"x6" stone with no visible markings, and
                                    monumented at Corner 16 by a 9"x7" stone
                                    with no visible markings and steel pipe 3"
                                    diameter 3' high adjacent to said stone,
                                    with a line between bearing N07 degrees
                                    18'12"E.

         Commencing at said Corner 15, thence N77 degrees 51'25"E a distance of
         1539.38 feet to a No. 4 rebar with a red plastic cap L.S.. 9939, said
         point being the Point of Beginning, thence the following four (4)
         courses:

         1)       N77 degrees 06'29"W a distance of 49.95 feet to a recovered
                  cross on rock;

         2)       N12 degrees 42'36"E a distance of 49.89 feet to a No. 4 rebar
                  with a red plastic cap L.S. 9939;

         3)       S77 degrees 06'29"E a distance of 49.95 feet to a No. 4 rebar
                  with a red plastic cap L.S. 9939;

         4)       S12 degrees 42'36"W a distance of 49.89 feet to the Point of
                  Beginning,

         Containing 2492 sq. ft., or 0.057 acres

                                  PUEBLO COUNTY

6.       SOUTH PUEBLO GAS  REGULATOR STATION


                                  SCHEDULE B-3

         A tract or parcel of land No. 3 Rev XA of the Dept. of Highways' Proj.
         No. FI 002-3(12), containing 0.076 acres (3,327 sq. ft.), more or less
         in the SE 1/4 of the SE 1/4 of Sec. 14, T.21 S., R. 65 W., of the Sixth
         P.M. in Pueblo County, Colorado, said tract or parcel being more
         particularly described as follows:

         Commencing at the SE Corner of Sec. 14, T.21 S., R. 65 W.; thence along
         the South line of said Sec. 14, S. 88 degrees , 36' W., a distance of
         272.1 feet to the Point of Beginning:

         1.       Thence continuing along said South line, S. 88 degrees , 36'
                  W., a distance of 50.0 feet;

         2.       Thence N. 01 degrees , 24' W., a distance of 50.0 feet;

         3.       Thence N. 88 degrees , 36' E., a distance of 83.1 feet;

         4.       Thence S. 32 degrees , 05' W., a distance of 60.0 feet, more
                  or less, to the Point of Beginning.

         The above described tract contains 0.076 acres (3,327 sq. ft.), more or
         less.



                                  PART SECOND.

                                  (SUBSTATIONS)

         The following electric substations and substation sites of the Company,
including all buildings, structures, towers, poles, lines, and all equipment,
appliances and devices for transforming, converting and distributing electric
energy, and all the right, title and interest of the Company in and to the land
on which the same are situated, and all of the Company's lands, easements,
rights-of-way, rights, franchises, privileges, machinery, equipment, appliances,
devices, appurtenances and supplies forming a part of said substations or any of
them, or used or enjoyed, or capable of being used or enjoyed, in conjunction or
connection with any thereof, all situated in the State of Colorado and the
counties thereof, more particularly described as follows:

                                  ADAMS COUNTY

7.       TOWER 4 SUBSTATION SITE

         A portion of a parcel of land described in Book 4550, Page 465, Adams
         County Clerk and Recorder's Office, located in the Northwest Quarter of
         Section 27, Township 3 South, Range 66 West of the 6th Principal
         Meridian, Adams County, Colorado, being more particularly described as
         follows:

         COMMENCING at the North Quarter Corner of said Section 27, whence the
         Northwest Corner of said Section 27 bears S88 degrees 53'04"W a
         distance of 2638.04 feet;

         THENCE S00 degrees 08'03"E along the easterly line of the Northwest
         Quarter of said Section 27 a distance of 60.01 feet;



                                  SCHEDULE B-4

         THENCE S88 degrees 53'04"W along the southerly right-of-way line of
         East 38th Avenue as described in Book 2800, Page 680 a distance of
         882.04 feet to the POINT OF BEGINNING;

         THENCE S01 degrees 05'34"E a distance of 440.00 feet;

         THENCE S88 degrees 53'04"W a distance of 399.02 feet non-tangent with
         the following described curve;

         THENCE along the westerly line of said parcel of land described in Book
         4550, Page 465, on the arc of a curve to the right, having a central
         angle of 03 degrees 28'41", a radius of 530.00 feet, a chord bearing
         N02 degrees 49'55"W a distance of 32.17 feet, and an arc distance of
         32.17 feet;

         THENCE N01 degrees 05'34"W continuing along the westerly line of said
         parcel, tangent with the last described curve a distance of 407.84
         feet;


         THENCE N88 degrees 53'04"E along the southerly right-of-way line said
         East 35th Avenue a distance of 400.00 feet to the POINT OF BEGINNING.

         Containing 4.040 acres (175,989 sq. ft.) more or less.

8.       NEW WASHINGTON SUBSTATION

         A parcel of land decribed in Book Number 5210, Page 0031, Reception
         Number C0355049, recorded in the Adam County Clerk and Recorder's
         Office on January 15, 1998, being more particularly described as
         follows:

                    Lot 1, Block 1, Washington Electric Substation, Filing No.
         1, County of Adams, State of Colorado.

9.       HOSMER TRUST TRACT

         A portion of the Southwest Quarter of Section 34, Township 1 South,
         Range 64 West of the 6th Principal Meridian, Adams County, Colorado,
         being more particularly described as follows:

         BEGINNING at the Northwest Corner of said Southwest Quarter of Section
         34, whence the Southwest Corner of said Southwest Quarter of Section 34
         bears S01 degrees 18'37"E a distance of 2636.70 feet;

         THENCE S89 degrees 47'30"E along the northerly line of said Southwest
         Quarter of Section 34 a distance of 1030.01 feet;

         THENCE S01 degrees 18"37"E a distance of 1631.67 feet;


                                  SCHEDULE B-5

         THENCE N89 degrees 47'30"W a distance of 1030.01 feet;

         THENCE N01 degrees 18'37"W along said westerly line of Southwest
         Quarter of Section 34 a distance of 1631.67 feet to the POINT OF
         BEGINNING.

         Containing 38.568 Acres, more or less.

                                 ALAMOSA COUNTY

10.      MOSCA SUBSTATION:  ADDITIONAL LAND

         A parcel of land more particularly described as follows:

         That part of the NE1/4 of Section 28, Township 40 North, Range 10 East
         of the N.M.P.M., described as beginning at a point on the North-South
         centerline of said Section 28 and a point on the South right-of-way
         line of County Lane 8 North (as fenced) from which the N1/4 corner
         bears N00'38'22"E, 25.91 feet; thence N88 degrees 33'59"E, along said
         right-of-way line 225.00 feet; thence S00 degrees 38'42", 30.90 feet;
         thence N88 degrees 32'09"E, 25.16 feet; thence S00 degrees 38'22"W,
         322.06 feet; thence N89 degrees 53'58"W, 250.00 feet to a point on said
         North-South centerline; thence N00 degrees 38'22"E, 346.25 feet to the
         true Point Of Beginning.

         Alamosa County, State of Colorado

                                  DENVER COUNTY

11.      BELLEVIEW - QUEBEC SUBSTATION SITE


         A parcel of land located in a portion of Lot 1, Block 1 of the 165
         Subdivision Filing No. 1, recorded in Plat Book 29 at Page 86, and a
         portion of the Southeast 1/4 of Section 8, Township 5 South, Range 67
         West of the 6th P.M., being more particularly described as follows:

         Basis of bearings: the South line of the Southeast 1/4 of Section 8 is
         assumed to bear North 90 degrees 00 minutes 00 seconds East;

         COMMENCING at the South Quarter Corner of Section 8;

         THENCE North 28 degrees 57 minutes 12 seconds East, a distance of
         2099.82 feet to the POINT OF BEGINNING;

         THENCE North 89 degrees 59 minutes 47 seconds East, a distance of
         361.50 feet;

         THENCE South 00 degrees 00 minutes 00 seconds West, a distance of
         136.32 feet to a point on the North line of Lot 1, Block 1 of the 165
         Subdivision Filing No. 1;



                                  SCHEDULE B-6

         THENCE South 00 degrees 00 minutes 00 seconds West, a distance of 48.06
         feet;

         THENCE South 46 degrees 57 minutes 20 seconds West, a distance of 87.86
         feet;

         THENCE North 90 degrees 00 minutes 00 seconds West, a distance of
         212.55 feet;

         THENCE North 34 degrees 59 minutes 47 seconds West, a distance of
         131.87 feet to a point on the North line of Lot 1, Block 1, of the 165
         Subdivision Filing No. 1;

         THENCE North 34 degrees 59 minutes 47 seconds West, a distance of 15.89
         feet; thence North 00 degrees 00 minutes 00 seconds East, a distance of
         123.29 feet to the POINT OF BEGINNING,

         City and County of Denver,
         State of Colorado.

                                 DOUGLAS COUNTY

12.      COLONY (SURREY RIDGE) SUBSTATION

         Parcels of land more particularly described as follows:

         Parcel A:

         A parcel of land in Section 24, Township 6 South, Range 67 West of the
         sixth principal meridian, Douglas County, Colorado, being more
         particularly described as follows:

         COMMENCING at the Northwest corner of said Section 24, whence the West
         Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11
         seconds East a distance of 2667.01 feet;

         THENCE South 58 degrees 06 minutes 25 seconds East a distance of 54.13
         feet to the POINT OF BEGINNING;

         THENCE North 89 degrees 48 minutes 35 seconds East a distance of 233.36
         feet;

         THENCE South 45 degrees 08 minutes 18 seconds East a distance of 65.90
         feet;

         THENCE South 00 degrees 05 minutes 10 seconds East a distance of 212.74
         feet;

         THENCE South 44 degrees 54 minutes 50 seconds West a distance of 65.94
         feet;

         THENCE South 89 degrees 54 minutes 50 seconds West a distance of 233.37
         feet;

         THENCE North 00 degrees 05 minutes 10 seconds West a distance of 305.50
         feet to the POINT OF BEGINNING;


                                  SCHEDULE B-7

         Parcel D:

         A parcel of land being sixty (60.00') feet in width, thirty (30.00')
         feet on each side of the following described centerline, located in the
         Southeast Quarter of Section 14, Northeast Quarter of Section 23 and
         the Northwest quarter of Section 24 all in Township 6 South, Range 67
         West of the Sixth Principal Meridian, Douglas County, Colorado, being
         more particularly described as follows:

         COMMENCING at the Northeast corner of said Southeast Quarter of Section
         14, whence the Southeast Corner of said Section 14 bears South 01
         degrees 04 minutes 04 seconds East a distance of 2664.06 feet;

         THENCE South 39 degrees 51 minutes 34 seconds West along a line
         non-tangent with the following described curve a distance of 652.76
         feet to the southerly line of a parcel of land recorded in book 264,
         page 426 on July 1, 1974 in the Douglas County Clerk and Recorders
         Office, being the POINT OF BEGINNING;

         THENCE the following five (5) courses along existing dirt road or trail
         centerline;

         1.       Southwesterly along the Arapahoe County of a curve to the
                  right, having a central angle of 12 degrees 16 minutes 59
                  seconds, a radius of 860.00 feet, a chord bearing of South 28
                  degrees 24 minutes 25 seconds West, a distance of 184.02 feet,
                  and an arc distance of 184.37 feet;

         2.       THENCE South 34 degrees 32 minutes 55 seconds West tangent
                  with the last and following described curves a distance of
                  185.60 feet;

         3.       THENCE along the arc of a curve to the left, having a central
                  angle of 1 degrees 05 minutes 24 seconds, a radius of 800.00
                  feet, a chord bearing South 34 degrees 00 minutes 12 seconds
                  West a distance of 15.22 feet, and an arc distance of 15.22
                  feet;

         4.       THENCE South 33 degrees 27 minutes 30 seconds West tangent
                  with the last described curve a distance of 230.99 feet;

         5.       THENCE South 33 degrees 05 minutes 19 seconds West tangent
                  with the following described curve a distance of 63.86 feet;

         THENCE along the arc of a curve to the left, having a central angle of
         17 degrees 08 minutes 04 seconds, a radius of 200.00 feet, a chord
         bearing South 24 degrees 31 minutes 17 seconds West a distance of 59.59
         feet, and an arc distance of 59.81 feet;

         THENCE South 15 degrees 57 minutes 15 seconds West tangent with the
         last and following described curves a distance of 108.55 feet;


                                  SCHEDULE B-8

         THENCE along the arc of a curve to the left, having a central angle of
         75 degrees 23 minutes 51 seconds, a radius of 150.00 feet, a chord
         bearing South 21 degrees 44 minutes 40 seconds East a distance of
         183.45 feet, and an arc distance of 197.39 feet;

         THENCE the following eight (8) courses along said existing dirt road or
         trail centerline:

         1.       South 59 degrees 26 minutes 36 seconds East tangent with the
                  last described curve a distance of 35.15 feet;

         2.       THENCE South 68 degrees 40 minutes 34 seconds East a distance
                  of 43.72 feet;

         3.       THENCE North 84 degrees 29 minutes 06 seconds East a distance
                  of 73.85 feet;

         4.       THENCE South 57 degrees 01 minutes 00 seconds East a distance
                  of 68.34 feet;

         5.       THENCE South 28 degrees 47 minutes 04 seconds East tangent
                  with the following described curve a distance of 31.85 feet;

         6.       THENCE along the arc of a curve to the right, having a central
                  angle of 30 degrees 53 minutes 10 seconds, a radius of 200.00
                  feet, a chord bearing South 13 degrees 20 minutes 29 seconds
                  East a distance of 106.51 feet, and an arc distance of 107.81
                  feet;

         7.       THENCE along the arc of a curve to the left, tangent with the
                  last described curve, having a central angle of 15 degrees 45
                  minutes 50 seconds, a radius of 200.00 feet, a chord bearing
                  of South 05 degrees 46 minutes 48 seconds East a distance of
                  54.85 feet, and an arc distance of 55.03 feet;

         8.       THENCE South 13 degrees 39 minutes 43 seconds East tangent
                  with the last described curve a distance of 21.80 feet;

         THENCE South 18 degrees 42 minutes 28 seconds East tangent with the
         following described curve a distance of 100.70 feet;

         THENCE along the arc of a curve to the left, having a central angle
         foot 9 degrees 31 minutes 51 seconds, a radius of 200.00 feet, a chord
         bearing South 23 degrees 28 minutes 23 seconds East a distance of 33.23
         feet, and an arc distance of 33.27 feet;

         THENCE South 28 degrees 14 minutes 18 seconds East tangent with the
         last and following described curves a distance of 164.18 feet;

         THENCE along the arc of a curve to the left, having a central angle of
         12 degrees 32 minutes 57 seconds, a radius of 200.00 feet, a chord
         bearing South 34 degrees 30 minutes 47 seconds East a distance of 43.72
         feet, and an arc distance of 43.80 feet;

         THENCE South 40 degrees 47 minutes 15 seconds East tangent with the
         last and following described curves a distance of 41.82 feet;


                                  SCHEDULE B-9

         THENCE along the arc of a curve to the right, having a central angle of
         17 degrees 47 minutes 53 seconds, a radius 200.00 feet, a chord bearing
         South 31 degrees 53 minutes 19 seconds East a distance of 61.88 feet,
         and an arc distance of 62.13 feet;

         THENCE South 22 degrees 59 minutes 22 seconds East tangent with the
         last and following described curves a distance of 713.97 feet;

         THENCE along the arc of a curve to the left, having a central angle of
         67 degrees 06 minutes 49 seconds, a radius of 100.00 feet, a chord
         bearing of South 56 degrees 32 minutes 47 seconds East a distance of
         110.55 feet and an arc distance of 117.14 feet;

         THENCE North 89 degrees 53 minutes 49 seconds East tangent with the
         last described curve a distance of 32.70 feet to the point of
         termination, whence the Southeast corner of said Section 14 bears North
         20 degrees 59 minutes 42 seconds West a distance of 128.66 feet;

         Sidelines are shortened or lengthened to intersect the southerly line
         of said parcel of land recorded in book 264, page 426, and the westerly
         line of the Surrey Ridge Substation boundary.

         Parcel E:

         A parcel of land located in Sections 24 and 23, Township 6 South, Range
         67 West of the Sixth Principal Meridian, Douglas County, Colorado,
         being more particularly described as follows:

         COMMENCING at the Northwest corner of said Section 24, whence the West
         Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11
         seconds East, a distance of 2667.01 feet;

         THENCE South 11 degrees 21 minutes 30 seconds East a distance of 340.73
         feet to the southerly line of Surrey Ridge Substation Site, being the
         POINT OF BEGINNING;

         THENCE North 89 degrees 54 minutes 50 seconds East along said southerly
         line of Surrey Ridge Substation site a distance of 185.92 feet;

         THENCE South 24 degrees 09 minutes 27 seconds West, a distance of
         185.11 feet;

         THENCE South 03 degrees 23 minutes 27 seconds East a distance of
         1233.70 feet;

         THENCE South 17 degrees 16 minutes 47 seconds West a distance of 919.76
         feet;

         THENCE South 38 degrees 14 minutes 15 seconds West a distance of
         1281.45 feet;

         THENCE South 07 degrees 51 minutes 01 seconds West a distance of
         1498.69 feet;


                                  SCHEDULE B-10

         THENCE South 89 degrees 32 minutes 01 seconds West along the northerly
         line of a parcel of land described in Reception Number 105224, Document
         Number 1630, recorded in the Douglas County Clerk and Recorders Office
         on March 23, 1959 a distance of 101.06 feet;

         THENCE North 07 degrees 51 minutes 01 seconds East a distance of
         1540.46 feet;

         THENCE North 38 degrees 14 minutes 15 seconds East a distance of
         1290.11 feet;

         THENCE North 17 degrees 16 minutes 47 seconds East a distance of 883.02
         feet;

         THENCE North 03 degrees 23 minutes 27 seconds West a distance of
         1390.31 feet to the POINT OF BEGINNING.

         Parcel F:

         A parcel of land lying in Section 13, Section 14, Section 23 and
         Section 24 all in Township 6 South, Range 67 West of the Sixth
         Principal Meridian, Douglas County, Colorado, being more particularly
         described as follows:

         COMMENCING at the Northwest Corner of said Section 24, whence the West
         Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11
         seconds East a distance of 2667.01 feet;

         THENCE South 89 degrees 14 minutes 28 seconds West along the northerly
         line of the Northeast quarter of said Section 23 a distance of 27.78
         feet to the POINT OF BEGINNING;

         THENCE North 75 degrees 40 minutes 59 seconds East a distance of 184.77
         feet;

         THENCE South 87 degrees 37 minutes 41 seconds East a distance of 152.52
         feet;

         THENCE South 46 degrees 56 minutes 28 seconds East a distance of 121.54
         feet;

         THENCE South 06 degrees 45 minutes 06 seconds East a distance of 281.45
         feet;

         THENCE South 46 degrees 47 minutes 03 seconds West a distance of 166.26
         feet;

         THENCE North 74 degrees 24 minutes 57 seconds West a distance of 329.96
         feet;

         THENCE North 02 degrees 21 minutes 14 seconds West a distance of 348.59
         feet to the POINT OF BEGINNING;

         Excepting therefrom the following described parcel of land:



                                  SCHEDULE B-11

         COMMENCING at the Northwest Corner of said Section 24, whence the West
         Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11
         seconds East a distance of 2667.01 feet;

         THENCE South 58 degrees 06 minutes 25 seconds East a distance of 54.13
         feet to the POINT OF BEGINNING;

         THENCE North 89 degrees 48 minutes 35 seconds East a distance of 233.36
         feet;

                                   WELD COUNTY

13.      NEW GILCREST SUBSTATION

         A parcel of land located in the Southwest one-quarter of Section 10,
         Township 4 North, Range 66 West of the Sixth Principal Meridian, County
         of Weld, State of Colorado, being more particularly described as
         follows:

         Basis of bearings: The South one-quarter line of Section 10, Township 4
         North, Range 66 West of the Sixth Principal Meridian, bearing
         N89 degrees 26'15"E.

         Commencing at the Southwest corner of said Section 10; thence N34
         degrees 06'30"E a distance of 80.25 feet to the Point Of Beginning;
         thence N00 degrees 00'00"E parallel with and 45 feet East of the West
         line of the Southwest one-quarter of said Section 10 a distance of
         304.02 feet; thence N89 degrees 26'15"E parallel with the South line of
         the Southwest one-quarter of said Section 10 a distance of 325.02 feet;
         thence S00 degrees 00'00"E parallel with the West line of the Southwest
         one-quarter of said Section 10 a distance of 325.02 feet to a point 45
         feet North of the South line of the Southwest one-quarter of said
         Section 10; thence S89 degrees 26'15"W parallel with the South line of
         the Southwest one-quarter of said Section 10 a distance of 304.02 feet;
         thence N45 degrees 16'52"W a distance of 29.55 feet to the Point Of
         Beginning.

         Said parcel of land containing 105,409.60 square feet or 2.419 acres
         more or less.



                                   PART THIRD.

                            (MISCELLANEOUS PROPERTY)

         The following residences, garages, warehouses, buildings, structures,
works and sites and the Company's lands on which the same are situated, and all
easements, rights, rights of way, permits, franchises, consents, privileges,
licenses, machinery, equipment, furniture and fixtures, appurtenances and
supplies forming a part of said residences, garages, warehouses, buildings,
structures, works and sites, or any of them, or used or enjoyed or capable of
being used or enjoyed in connection or conjunction therewith, situated in the
State of Colorado and the Counties thereof, more particularly described as
follows:

                                JEFFERSON COUNTY



                                  SCHEDULE B-12

14.      GROUND EQUIPMENT COMPANY TRACT

         That part of Section 22, Township 2 South, Range 70 West of the 6th
         Principal Meridian, lying between Colorado State Highway No. 72 and the
         Denver and Rio Grande Western Railroad, County of Jefferson, State of
         Colorado, more particularly described as follows:

         Commencing at the West one-quarter of said Section 22; thence South 0
         degrees 25'48" East along the West line of said Section 22, a distance
         of 721.74 feet to a point on the North right of way of the Denver and
         Rio Grande Western Railroad; thence along North right of way as
         follows: South 80 degrees 28'31" East a distance of 2033.16 feet to a
         point of circular curve; thence along the arc of said curve to the left
         having a radius of 2764.79 feet and a central angle of 13 degrees 14' a
         distance of 638.57 feet to the end of said curve, thence North 86
         degrees 17'29" East, a distance of 729.07 feet to the true Point of
         Beginning, being Southeast corner of the parcel to be described, and
         also the Southeast corner of the exterior boundary as described in Deed
         recorded in Book 1813 at Page 365; thence departing said railroad right
         of way line, North 01 degrees 03'14" West, a distance of 1023.73 feet
         to a point on the southerly right of way of Colorado State Highway No.
         72; thence North 83 degrees 39'30" West along said southerly right of
         way, a distance of 414.42 feet; thence South 01 degrees 03'14" East, a
         distance of 1096.13 feet to a point on the North right of way of said
         railroad; thence North 86 degrees 17'29" East along said railroad right
         of way, a distance of 411.41 feet to the Point of Beginning, except any
         portion of the above described property conveyed by Deed to the Denver
         Northwestern and Pacific Railway Company recorded June 25, 1907 in Book
         121 at Page 290, of the Jefferson County Records, and,

         Except portion conveyed to D. L. Billings Co. Inc., trustee, by Deed
         recorded June 3, 1982 at Reception No. 82037261.

         Also known as Lots 16, 17, 18, part of Lot 15 and part of Lot 19, Block
         A, Lot 15, part of Lot 13 and part of Lot 14, Block D, together with
         that portion of Bronco Lane adjacent to said Lots, all in Northwest
         Industrial, County of Jefferson, State of Colorado.















                                  SCHEDULE B-13

EX-4.02

                                                                    EXHIBIT 4.02
                             SUPPLEMENTAL INDENTURE


                        (DATED AS OF SEPTEMBER 15, 2002)


                                    --------


                       PUBLIC SERVICE COMPANY OF COLORADO


                                       TO


                      U.S. BANK TRUST NATIONAL ASSOCIATION,
                                                        AS TRUSTEE


                                    --------


                   CREATING AN ISSUE OF FIRST MORTGAGE BONDS,
                               COLLATERAL SERIES I

                                    --------

      (SUPPLEMENTAL TO INDENTURE DATED AS OF DECEMBER 1, 1939, AS AMENDED)

         SUPPLEMENTAL INDENTURE, dated as of September 15, 2002, between PUBLIC
         SERVICE COMPANY OF COLORADO, a corporation organized and existing under
         the laws of the State of Colorado (the "Company"), party of the first
         part, and U.S. BANK TRUST NATIONAL ASSOCIATION (FORMERLY FIRST TRUST OF
         NEW YORK, NATIONAL ASSOCIATION), a national banking association, as
         successor trustee (the "Trustee") to Morgan Guaranty Trust Company of
         New York (formerly Guaranty Trust Company of New York), party of the
         second part.

         WHEREAS, the Company heretofore executed and delivered to the Trustee
         its Indenture, dated as of December 1, 1939 (the "Principal
         Indenture"), to secure its First Mortgage Bonds from time to time
         issued thereunder; and

         WHEREAS, the Company has heretofore executed and delivered to the
         Trustee the Supplemental Indentures referred to in Schedule A hereto
         for certain purposes, including the creation of series of bonds, the
         subjection to the lien of the Principal Indenture of property acquired
         after the execution and delivery thereof, the amendment of certain
         provisions of the Principal Indenture and the appointment of the
         successor Trustee; and

         WHEREAS, the Principal Indenture as supplemented and amended by all
         Supplemental Indentures heretofore executed by the Company and the
         Trustee is hereinafter referred to as the "Indenture", and, unless the
         context requires otherwise, references herein to Articles and Sections
         of the Indenture shall be to Articles and Sections of the Principal
         Indenture as so amended; and

         WHEREAS, the Company proposes to create a new series of First Mortgage
         Bonds to be designated as First Mortgage Bonds, Collateral Series I
         (the "Collateral Series I Bonds"), to be issued and delivered to the
         trustee under the 1993 Mortgage (as hereinafter defined) as the basis
         for the authentication and delivery under the 1993 Mortgage of a series
         of securities, all as hereinafter provided, and to vary in certain
         respects the covenants and provisions contained in Article V of the
         Indenture, to the extent that such covenants and provisions apply to
         the Collateral Series I Bonds; and

         WHEREAS, the Company, pursuant to the provisions of the Indenture, has,
         by appropriate corporate action, duly resolved and determined to
         execute this Supplemental Indenture for the purpose of providing for
         the creation of the Collateral Series I Bonds and of specifying the
         form, provisions and particulars thereof, as in the Indenture provided
         or permitted and of giving to the Collateral Series I Bonds the
         protection and security of the Indenture; and

         WHEREAS, the Company represents that all acts and proceedings required
         by law and by the charter and by-laws of the Company, including all
         action requisite on the part of its shareholders, directors and
         officers, necessary to make the Collateral Series I Bonds, when
         executed by the Company, authenticated and delivered by the Trustee and
         duly issued, the valid, binding and legal obligations of the Company,
         and to constitute the Principal Indenture and all indentures
         supplemental thereto, including this Supplemental Indenture, valid,
         binding and legal instruments for the security of the bonds of all
         series, including the Collateral Series I Bonds, in accordance with the
         terms of such bonds and

         such instruments, have been done, performed and fulfilled, and the
         execution and delivery hereof have been in all respects duly
         authorized;

         NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:

         That Public Service Company of Colorado, the Company named in the
         Indenture, in consideration of the premises and of One Dollar to it
         duly paid by the Trustee at or before the ensealing and delivery of
         these presents, the receipt whereof is hereby acknowledged, and in
         pursuance of the direction and authority of the Board of Directors of
         the Company given at a meeting thereof duly called and held, and in
         order to create the Collateral Series I Bonds and to specify the form,
         terms and provisions thereof, and to secure the payment of the
         principal of and premium, if any, and interest, if any, on all bonds
         from time to time outstanding under the Indenture, including the
         Collateral Series I Bonds, according to the terms of said bonds, and to
         secure the performance and observance of all of the covenants and
         conditions contained in the Indenture, has executed and delivered this
         Supplemental Indenture and has granted, bargained, sold, warranted,
         aliened, remised, released, conveyed, assigned, transferred, mortgaged,
         pledged, set over and confirmed unto U.S. Bank Trust National
         Association, as Trustee, and its successor or successors in the trust
         and its and their assigns forever;

         TO HAVE AND TO HOLD all and singular the properties, rights, privileges
         and franchises described in the Principal Indenture and in the several
         Supplemental Indentures hereinabove referred to and owned by the
         Company on the date of the execution and delivery hereof (other than
         property of a character expressly excepted from the lien of the
         Indenture as therein set forth) unto the Trustee and its successor or
         successors and assigns forever;

         SUBJECT, HOWEVER, to permitted encumbrances as defined in the
         Indenture;

         IN TRUST, NEVERTHELESS, upon the terms and trusts set forth in the
         Indenture, for the equal and proportionate benefit and security of all
         present and future holders of the bonds and coupons issued and to be
         issued under the Indenture, including the Collateral Series I Bonds,
         without preference, priority or distinction as to lien (except as any
         sinking, amortization, improvement or other fund established in
         accordance with the provisions of the Indenture or any indenture
         supplemental thereto may afford additional security for the bonds of
         any particular series) of any of said bonds over any others thereof by
         reason of series, priority in the time of the issue or negotiation
         thereof, or otherwise howsoever, except as provided in Section 2 of
         Article IV of the Indenture.

                                   ARTICLE ONE

            CREATION AND DESCRIPTION OF THE COLLATERAL SERIES I BONDS

                  SECTION 1. A new series of bonds to be issued under and
secured by the Indenture is hereby created, the bonds of such new series to be
designated First Mortgage Bonds, Collateral Series I. The Collateral Series I
Bonds shall be limited to an aggregate principal amount of Five Hundred Thirty
Million dollars ($530,000,000), excluding any Collateral Series I


                                       2

Bonds which may be authenticated and exchanged for or in lieu of or in
substitution for or on transfer of other Collateral Series I Bonds pursuant to
any provisions of the Indenture. The Collateral Series I Bonds shall mature on
June 27, 2003. The Collateral Series I Bonds shall not bear interest.

                  The principal of each Collateral Series I Bond shall be
payable, upon presentation thereof, at the office or agency of the Company in
the city in which the principal corporate trust office of the 1993 Mortgage
Trustee (as hereinafter defined) is located, in any coin or currency of the
United States of America which at the time of payment shall be legal tender for
the payment of public and private debts.

                  The Collateral Series I Bonds shall be issued and delivered by
the Company to U.S. Bank Trust National Association, as successor trustee under
the Indenture, dated as of October 1, 1993, as supplemented (the "1993
Mortgage"), of the Company to such successor trustee (the "1993 Mortgage
Trustee"), as the basis for the authentication and delivery under the 1993
Mortgage of a series of securities. As provided in the 1993 Mortgage, the
Collateral Series I Bonds will be registered in the name of the 1993 Mortgage
Trustee or its nominee and will be owned and held by the 1993 Mortgage Trustee,
subject to the provisions of the 1993 Mortgage, for the benefit of the holders
of all securities from time to time outstanding under the 1993 Mortgage, and the
Company shall have no interest therein.

                  Any payment or deemed payment by the Company under the 1993
Mortgage of the principal of the securities which shall have been authenticated
and delivered under the 1993 Mortgage on the basis of the issuance and delivery
to the 1993 Mortgage Trustee of Collateral Series I Bonds (other than by the
application of the proceeds of a payment in respect of such Collateral Series I
Bonds) shall, to the extent thereof, be deemed to satisfy and discharge the
obligation of the Company, if any, to make a payment of principal of such
Collateral Series I Bonds which is then due.

                  The Trustee may conclusively presume that the obligation of
the Company to pay the principal of the Collateral Series I Bonds as the same
shall become due and payable shall have been fully satisfied and discharged
unless and until it shall have received a written notice from the 1993 Mortgage
Trustee, signed by an authorized officer thereof, stating that the principal of
specified Collateral Series I Bonds has become due and payable and has not been
fully paid, and specifying the amount of funds required to make such payment.

                  Each Collateral Series I Bond shall be dated as of the date of
its authentication.

                  The Collateral Series I Bonds shall be issued as fully
registered bonds only, in denominations of $1,000 and multiples thereof.

                  The Collateral Series I Bonds shall be registerable and
exchangeable at the office or agency of the Company in the city in which the
principal corporate trust office of the 1993 Mortgage Trustee is located, in the
manner and upon the terms set forth in Section 5 of Article II of the Indenture;
provided, however, that the Collateral Series I Bonds shall not be transferrable
except to a successor trustee under the 1993 Mortgage. No service charge shall
be made for any exchange or transfer of any Collateral Series I Bond.




                                       3

                  SECTION 2. The text of the Collateral Series I Bonds shall be
substantially in the form attached hereto as Exhibit A.

                  SECTION 3. The Collateral Series I Bonds may be executed by
the Company and delivered to the Trustee and, upon compliance with all
applicable provisions and requirements of the Indenture in respect thereof,
shall be authenticated by the Trustee and delivered (without awaiting the filing
or recording of this Supplemental Indenture) in accordance with the written
order or orders of the Company.

                                   ARTICLE TWO

                   REDEMPTION OF THE COLLATERAL SERIES I BONDS

                  SECTION 1. Each Collateral Series I Bond shall be redeemable
at the option of the Company in whole at any time, or in part from time to time,
prior to maturity, at a redemption price equal to 100% of the principal amount
thereof to be redeemed.

                  SECTION 2. The provisions of Sections 3, 4, 5, 6 and 7 of
Article V of the Indenture shall be applicable to the Collateral Series I Bonds,
except that (a) no publication of notice of redemption of the Collateral Series
I Bonds shall be required and (b) if less than all the Collateral Series I Bonds
are to be redeemed, the Collateral Series I Bonds to be redeemed shall be
selected in the principal amounts designated to the Trustee by the Company, and
except as such provisions may otherwise be inconsistent with the provisions of
this Article Two.

                  SECTION 3. The holder of each and every Collateral Series I
Bond hereby agrees to accept payment thereof prior to maturity on the terms and
conditions provided for in this Article Two.

                                  ARTICLE THREE

                         ACKNOWLEDGMENT OF RIGHT TO VOTE
                           OR CONSENT WITH RESPECT TO
                         CERTAIN AMENDMENTS TO INDENTURE

                  The Company hereby acknowledges the right of the holders of
the Collateral Series I Bonds to vote or consent with respect to any or all of
the modifications to the Indenture referred to in Article Three of the
Supplemental Indenture, dated as of March 1, 1980, irrespective of the fact that
the Bonds of the Second 1987 Series are no longer outstanding; provided,
however, that such acknowledgment shall not impair (a) the right of the Company
to make such modifications without the consent or other action of the holders of
the Bonds of the 2020 Series or the bonds of any other series subsequently
created under the Indenture with respect to which the Company has expressly
reserved such right or (b) the right of the Company to reserve the right to make
such modifications without the consent or other action of the holders of bonds
of one or more, or any or all, series created subsequent to the creation of the
Collateral Series I Bonds.




                                       4

                                  ARTICLE FOUR

                                   THE TRUSTEE

                  The Trustee accepts the trusts created by this Supplemental
Indenture upon the terms and conditions set forth in the Indenture and this
Supplemental Indenture. The recitals in this Supplemental Indenture are made by
the Company only and not by the Trustee. Each and every term and condition
contained in Article XII of the Indenture shall apply to this Supplemental
Indenture with the same force and effect as if the same were herein set forth in
full, with such omissions, variations and modifications thereof as may be
appropriate to make the same conform to this Supplemental Indenture.

                                  ARTICLE FIVE

                            MISCELLANEOUS PROVISIONS

                  SECTION 1. Subject to the variations contained in Article Two
of this Supplemental Indenture, the Indenture is in all respects ratified and
confirmed and the Principal Indenture, this Supplemental Indenture and all other
indentures supplemental to the Principal Indenture shall be read, taken and
construed as one and the same instrument. Neither the execution of this
Supplemental Indenture nor anything herein contained shall be construed to
impair the lien of the Indenture on any of the properties subject thereto, and
such lien shall remain in full force and effect as security for all bonds now
outstanding or hereafter issued under the Indenture.

                  All covenants and provisions of the Indenture shall continue
in full force and effect and this Supplemental Indenture shall form part of the
Indenture.

                  SECTION 2. If the date for making any payment or the last date
for performance of any act or the exercising of any right, as provided in this
Supplemental Indenture, shall not be a Business Day (as defined in the 1993
Mortgage), such payment may be made or act performed or right exercised on the
next succeeding Business Day with the same force and effect as if done on the
nominal date provided in this Supplemental Indenture.

                  SECTION 3. The terms defined in the Indenture shall, for all
purposes of this Supplemental Indenture, have the meaning specified in the
Indenture except as set forth in Section 4 of this Article or otherwise set
forth in this Supplemental Indenture or unless the context clearly indicates
some other meaning to be intended.

                  SECTION 4. Any term defined in Section 303 of the Trust
Indenture Act of 1939, as amended, and not otherwise defined in the Indenture
shall, with respect to this Supplemental Indenture and the Collateral Series I
Bonds, have the meaning assigned to such term in Section 303 as in force on the
date of the execution of this Supplemental Indenture.

                  SECTION 5. This Supplemental Indenture may be executed in any
number of counterparts, and all of said counterparts executed and delivered,
each as an original, shall constitute but one and the same instrument.



                                       5

                  IN WITNESS WHEREOF, Public Service Company of Colorado, party
hereto of the first part, has caused its corporate name to be hereunto affixed,
and this instrument to be signed by its President, an Executive Vice President,
a Senior Vice President or a Vice President, and its corporate seal to be
hereunto affixed and attested by its Secretary or an Assistant Secretary for and
in its behalf; and U.S. Bank Trust National Association, the party hereto of the
second part, in evidence of its acceptance of the trust hereby created, has
caused its corporate name to be hereunto affixed, and this instrument to be
signed and its corporate seal to be affixed by one of its Assistant Vice
Presidents and attested by one of its Trust Officers, for and in its behalf, all
as of the day and year first above written.

                                     PUBLIC SERVICE COMPANY OF
                                      COLORADO



                                     By: /s/ Paul E. Pender
                                        -------------------
                                         Name:   Paul E. Pender
                                         Title:  Vice President and Treasurer


ATTEST: /s/ Anne Ziebell
        ----------------
        Name:   Anne Ziebell
        Title:  Assistant Secretary

STATE OF MINNESOTA                )
                                  )  ss.:
CITY OF MINNEAPOLIS               )


                  On this 20th day of September, 2002, before me, Sharon M.
Quellhorst, a duly authorized Notary Public in and for said City in the State
aforesaid, personally appeared Paul E. Pender and Anne Ziebell to me known to be
a Vice President and Treasurer and the Assistant Secretary, respectively, of
PUBLIC SERVICE COMPANY OF COLORADO, a corporation organized and existing under
the laws of the State of Colorado, one of the corporations that executed the
within and foregoing instrument; and the said Vice President and Treasurer and
Assistant Secretary severally acknowledged the said instrument to be the free
and voluntary act and deed of said corporation, for the uses and purposes
therein mentioned, and on oath stated that they were authorized to execute said
instrument and that the seal affixed thereto is the corporate seal of said
corporation.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.

                                  /s/ Sharon M. Quellhorst
                                  ------------------------
                                  Name:  Sharon M. Quellhorst
                                  Notary Public, State of Colorado
                                  Commission Expires:  January 31, 2005



                                       6

                                     U.S. BANK TRUST
                                       NATIONAL ASSOCIATION,
                                              as Trustee


                                     By: /s/ Ignazio Tamburello
                                         ----------------------
                                         Name:   Ignazio Tamburello
                                         Title:  Assistant Vice President


ATTEST:  /s/ Adam Berman
         ---------------
         Name:   Adam Berman
         Title:  Trust Officer


STATE OF NEW YORK                    )
                                     )  ss.:
CITY AND COUNTY OF NEW YORK          )


                  On this 20th day of September, 2002, before me, Doris Ware, a
duly authorized Notary Public in and for said City and County in the State
aforesaid, personally appeared Ignazio Tamburello and Adam Berman to me known to
be an Assistant Vice President and a Trust Officer, respectively, of U.S. BANK
TRUST NATIONAL Association, a national banking association, one of the
corporations that executed the within and foregoing instrument; and the said
Assistant Vice President and Trust Officer severally acknowledged the said
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes therein mentioned, and on oath stated that they were
authorized to execute said instrument and that the seal affixed thereto is the
corporate seal of said corporation.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year first above written.


                                     /s/ Doris Ware
                                     --------------
                                     Name:  Doris Ware
                                     Notary Public, State of New York
                                     Commission Expires:  November 9, 2005




                                       7

                                                                       EXHIBIT A



                        FORM OF COLLATERAL SERIES I BOND

         THIS BOND IS NOT TRANSFERABLE EXCEPT TO A SUCCESSOR TRUSTEE UNDER THE
INDENTURE, DATED AS OF OCTOBER 1, 1993, AS SUPPLEMENTED, BETWEEN PUBLIC SERVICE
COMPANY OF COLORADO AND U.S. BANK TRUST NATIONAL ASSOCIATION (FORMERLY FIRST
TRUST OF NEW YORK, NATIONAL ASSOCIATION), AS SUCCESSOR TRUSTEE THEREUNDER.

                       PUBLIC SERVICE COMPANY OF COLORADO

                              FIRST MORTGAGE BOND,

                               Collateral Series I

                                    DUE 2003

REGISTERED                                                            REGISTERED

No. 1                                                               $530,000,000


         FOR VALUE RECEIVED, PUBLIC SERVICE COMPANY OF COLORADO, a corporation
organized and existing under the laws of the State of Colorado (hereinafter
sometimes called the "Company"), promises to pay to U.S. Bank Trust National
Association (formerly known as First Trust of New York, National Association),
as successor trustee (the "1993 Mortgage Trustee") under the Indenture, dated as
of October 1, 1993 (the "1993 Mortgage"), of the Company, or registered assigns,
Five Hundred Thirty Million Dollars on June 27, 2003, at the office or agency of
the Company in the city in which the principal corporate trust office of the
1993 Mortgage Trustee is located. This bond shall not bear interest. The
principal of this bond shall be payable in any coin or currency of the United
States of America which at the time of payment shall be legal tender for the
payment of public and private debts.

         Any payment or deemed payment by the Company under the 1993 Mortgage of
the principal of securities which shall have been authenticated and delivered
under the 1993 Mortgage on the basis of the issuance and delivery to the 1993
Mortgage Trustee of this bond (the "1993 Mortgage Securities") (other than by
the application of the proceeds of a payment in respect of this bond) shall, to
the extent thereof, be deemed to satisfy and discharge the obligation of the
Company, if any, to make a payment of principal of this bond which is then due.

         This bond is one of an issue of bonds of the Company, issued and to be
issued in one or more series under and equally and ratably secured (except as
any sinking, amortization, improvement or other fund, established in accordance
with the provisions of the indenture hereinafter mentioned, may afford
additional security for the bonds of any particular series) by a certain
indenture, dated as of December 1, 1939, made by the Company to U.S. BANK TRUST



                                  EXHIBIT A-1

NATIONAL ASSOCIATION (formerly First Trust of New York, National Association),
as successor trustee (hereinafter called the "Trustee") to Morgan Guaranty Trust
Company of New York (formerly Guaranty Trust Company of New York), as amended
and supplemented by several indentures supplemental thereto, including the
Supplemental Indenture dated as of September 15, 2002 (said Indenture as amended
and supplemented by said indentures supplemental thereto being hereinafter
called the "Indenture"), to which Indenture reference is hereby made for a
description of the property mortgaged, the nature and extent of the security,
the rights and limitations of rights of the Company, the Trustee, and the
holders of said bonds, under the Indenture, and the terms and conditions upon
which said bonds are secured, to all of the provisions of which Indenture and of
all indentures supplemental thereto in respect of such security, including the
provisions of the Indenture permitting the issue of bonds of any series for
property which, under the restrictions and limitations therein specified, may be
subject to liens prior to the lien of the Indenture, the holder, by accepting
this bond, assents. To the extent permitted by and as provided in the Indenture,
the rights and obligations of the Company and of the holders of said bonds
(including those pertaining to any sinking or other fund) may be changed and
modified, with the consent of the Company, by the holders of at least 75% in
aggregate principal amount of the bonds then outstanding (excluding bonds
disqualified from voting by reason of the Company's interest therein as provided
in the Indenture); provided, however, that without the consent of the holder
hereof no such modification or alteration shall be made which will extend the
time of payment of the principal of this bond or reduce the principal amount
hereof or effect any other modification of the terms of payment of such
principal or will reduce the percentage of bonds required for the aforesaid
actions under the Indenture. The Company has reserved the right to amend the
Indenture without any consent or other action by holders of any series of bonds
created after October 31, 1975 (including this series) so as to change 75% in
the foregoing sentence to 60% and to change certain procedures relating to
bondholders' meetings. This bond is one of a series of bonds designated as the
First Mortgage Bonds, Collateral Series I, of the Company.

         This bond shall be redeemable at the option of the Company in whole at
any time, or in part from time to time, prior to maturity, at a redemption price
equal to 100% of the principal amount thereof to be redeemed.

         The principal of this bond may be declared or may become due before the
maturity hereof, on the conditions, in the manner and at the times set forth in
the Indenture, upon the happening of an event of default as therein provided.

         This bond is not transferable except to a successor trustee under the
1993 Mortgage, any such transfer to be made at the office or agency of the
Company in the city in which the principal corporate trust office of the 1993
Mortgage Trustee is located, upon surrender and cancellation of this bond, and
thereupon a new bond of this series of a like principal amount will be issued to
the transferee in exchange therefor, as provided in the Indenture. The Company,
the Trustee, any paying agent and any registrar may deem and treat the person in
whose name this bond is registered as the absolute owner hereof for the purpose
of receiving payment and for all other purposes. This bond, alone or with other
bonds of this series, may in like manner be exchanged at such office or agency
for one or more new bonds of this series of the same aggregate principal amount,
all as provided in the Indenture. No service charge shall be made to any holder
of any bond of this series for any exchange or transfer of bonds.


                                  EXHIBIT A-2

         No recourse under or upon any covenant or obligation of the Indenture,
or of any bonds thereby secured, or for any claim based thereon, or otherwise in
any manner in respect thereof, shall be had against any incorporator, subscriber
to the capital stock, shareholder, officer or director, as such, of the Company,
whether former, present or future, either directly, or indirectly through the
Company or the Trustee, by the enforcement of any subscription to capital stock,
assessment or otherwise, or by any legal or equitable proceeding by virtue of
any statute or otherwise (including, without limiting the generality of the
foregoing, any proceeding to enforce any claimed liability of shareholders of
the Company based upon any theory of disregarding the corporate entity of the
Company or upon any theory that the Company was acting as the agent or
instrumentality of the shareholders), any and all such liability of
incorporators, shareholders, subscribers, officers and directors, as such, being
released by the holder hereof, by the acceptance of this bond, and being
likewise waived and released by the terms of the Indenture under which this bond
is issued.

         This bond shall not be valid or become obligatory for any purpose until
the certificate of authentication endorsed hereon shall have been signed by U.S.
Bank Trust National Association, or its successor, as Trustee under the
Indenture.

         IN WITNESS WHEREOF, Public Service Company of Colorado has caused this
bond to be signed in its name by a Vice President and its corporate seal to be
affixed hereto and attested by its Secretary or an Assistant Secretary.

Dated:                                         PUBLIC SERVICE COMPANY OF
                                               COLORADO



                                               By:
                                                  ------------------------------
                                                   Vice President and Treasurer

ATTEST:
       ------------------------------
           Assistant Secretary


                          CERTIFICATE OF AUTHENTICATION

         This is one of the securities of the series designated therein referred
to in the within-mentioned Supplemental Indenture.

Dated:                                         U.S. BANK TRUST
                                               NATIONAL ASSOCIATION,
                                                     AS TRUSTEE


                                               By:
                                                  ------------------------------
                                                              Authorized Officer



                                  EXHIBIT A-3

                                                                      SCHEDULE A


                             SUPPLEMENTAL INDENTURES



         DATE OF                      SERIES OF BONDS                    PRINCIPAL               PRINCIPAL
      SUPPLEMENTAL                    ---------------                  AMOUNT ISSUED               AMOUNT
        INDENTURE                                                      -------------            OUTSTANDING
        ---------                                                                               -----------
                                                                                    
March 14, 1941                              None                             --                      --
May 14, 1941                                None                             --                      --
April 28, 1942                              None                             --                      --
April 14, 1943                              None                             --                      --
April 27, 1944                              None                             --                      --
April 18, 1945                              None                             --                      --
April 23, 1946                              None                             --                      --
April 9, 1947                               None                             --                      --
June 1, 1947*                      2-7/8% Series due 1977          $    40,000,000                  None
April 1, 1948                               None                             --                      --
May 20, 1948                                None                             --                      --
October 1, 1948                    3-1/8% Series due 1978               10,000,000                  None
April 20, 1949                              None                             --                      --
April 24, 1950                              None                             --                      --
April 18, 1951                              None                             --                      --
October 1, 1951                    3-1/4% Series due 1981               15,000,000                  None
April 21, 1952                              None                             --                      --
December 1, 1952                            None                             --                      --
April 15, 1953                              None                             --                      --
April 19, 1954                              None                             --                      --
October 1, 1954*                   3-1/8% Series due 1984               20,000,000                  None
April 18, 1955                              None                             --                      --
April 24, 1956                              None                             --                      --
May 1, 1957*                       4-3/8% Series due 1987               30,000,000                  None
April 10, 1958                              None                             --                      --
May 1, 1959                        4-5/8% Series due 1989               20,000,000                  None
April 18, 1960                              None                             --                      --
April 19, 1961                              None                             --                      --
October 1, 1961                    4-1/2% Series due 1991               30,000,000                  None
March 1, 1962                      4-5/8% Series due 1992                8,800,000                  None
June 1, 1964                       4-1/2% Series due 1994               35,000,000                  None
May 1, 1966                        5-3/8% Series due 1996               35,000,000                  None
July 1, 1967*                      5-7/8% Series due 1997               35,000,000                  None
July 1, 1968*                      6-3/4% Series due 1998               25,000,000                  None
April 25, 1969                              None                             --                      --




                                  SCHEDULE A-1



         DATE OF                      SERIES OF BONDS                    PRINCIPAL               PRINCIPAL
      SUPPLEMENTAL                    ---------------                  AMOUNT ISSUED               AMOUNT
        INDENTURE                                                      -------------            OUTSTANDING
        ---------                                                                               -----------
                                                                                    
April 21, 1970                              None                             --                      --
September 1, 1970                  8-3/4% Series due 2000               35,000,000                  None
February 1, 1971                   7-1/4% Series due 2001               40,000,000                  None
August 1, 1972                     7-1/2% Series due 2002               50,000,000                  None
June 1, 1973                       7-5/8% Series due 2003               50,000,000                  None
March 1, 1974                    Pollution Control Series A             24,000,000                  None
December 1, 1974                 Pollution Control Series B             50,000,000                  None
October 1, 1975                    9-3/8% Series due 2005               50,000,000                  None
April 28, 1976                              None                             --                      --

April 28, 1977                              None                             --                      --
November 1, 1977*                  8-1/4% Series due 2007               50,000,000                  None
April 28, 1978                              None                             --                      --
October 1, 1978                    9-1/4% Series due 2008               50,000,000                  None
October 1, 1979*                 Pollution Control Series C             50,000,000                  None
March 1, 1980*                      15% Series due 1987                 50,000,000                  None
April 28, 1981                              None                             --                      --
November 1, 1981*                Pollution Control Series D             27,380,000                  None
December 1, 1981*                 16-1/4% Series due 2011               50,000,000                  None
April 29, 1982                              None                             --                      --
May 1, 1983*                     Pollution Control Series E             42,000,000                  None

April 30, 1984                              None                             --                      --
March 1, 1985*                      13% Series due 2015                 50,000,000                  None
November 1, 1986*                Pollution Control Series F             27,250,000                  None
May 1, 1987*                       8.95% Series due 1992                75,000,000                  None
July 1, 1990*                      9-7/8% Series due 2020               75,000,000                  None
December 1, 1990*           Secured Medium-Term Notes, Series A        191,500,000**             15,000,000
March 1, 1992*                   8-1/8% Series due 2004 and            100,000,000              100,000,000
                                   8-3/4% Series due 2022              150,000,000              146,340,000
April 1, 1993*                   Pollution Control Series G             79,500,000               79,500,000
June 1, 1993*                    Pollution Control Series H             50,000,000               50,000,000
November 1, 1993*                   Collateral Series A                134,500,000              134,500,000

January 1, 1994*              Collateral Series B due 2001 and         102,667,000                  None
                                Collateral Series B due 2024           110,000,000              110,000,000
September 2, 1994                           None                             --                      --
(Appointment of
Successor Trustee)
May 1, 1996                         Collateral Series C                125,000,000              125,000,000



                                  SCHEDULE A-2



         DATE OF                      SERIES OF BONDS                    PRINCIPAL               PRINCIPAL
      SUPPLEMENTAL                    ---------------                  AMOUNT ISSUED               AMOUNT
        INDENTURE                                                      -------------            OUTSTANDING
        ---------                                                                               -----------
                                                                                    
November 1, 1996                    Collateral Series D                250,000,000              175,000,000
February 1, 1997                    Collateral Series E                150,000,000                  None
April 1, 1998                       Collateral Series F                250,000,000              250,000,000
August 15, 2002                     Collateral Series G                 48,750,000               48,750,000
September 1, 2002                   Collateral Series H                600,000,000              600,000,000


- ----------------
* Contains amendatory provisions
** $200,000,000 authorized













































                                  SCHEDULE A-3

EX-4.03

                                                                    EXHIBIT 4.03

                             PUBLIC SERVICE COMPANY
                                   OF COLORADO

                                       TO


                      U.S. BANK TRUST NATIONAL ASSOCIATION,

                                                AS TRUSTEE


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


                          SUPPLEMENTAL INDENTURE NO. 8

                           Dated as of August 15, 2002


                          Supplemental to the Indenture
                           dated as of October 1, 1993

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


                  Establishing the Securities of Series No. 7,
 designated First Collateral Trust Bonds, Series No. 7 (Ambac Collateral Bonds)








         SUPPLEMENTAL INDENTURE NO. 8, dated as of August 15, 2002, between
PUBLIC SERVICE COMPANY OF COLORADO, a corporation duly organized and existing
under the laws of the State of Colorado (hereinafter sometimes called the
"Company"), and U.S. BANK TRUST NATIONAL ASSOCIATION (FORMERLY FIRST TRUST OF
NEW YORK, NATIONAL ASSOCIATION), a national banking association, as successor
trustee (hereinafter sometimes called the "Trustee") to Morgan Guaranty Trust
Company of New York under the Indenture, dated as of October 1, 1993
(hereinafter called the "Original Indenture"), as previously supplemented and as
further supplemented by this Supplemental Indenture No. 8. The Original
Indenture and any and all indentures and all other instruments supplemental
thereto are hereinafter sometimes collectively called the "Indenture".

                             RECITALS OF THE COMPANY

         The Original Indenture was authorized, executed and delivered by the
Company to provide for the issuance from time to time of its Securities (such
term and all other capitalized terms used herein without definition having the
meanings assigned to them in the Original Indenture), to be issued in one or
more series as contemplated therein, and to provide security for the payment of
the principal of and premium, if any, and interest, if any, on the Securities.

         The Company has heretofore executed and delivered to the Trustee the
Supplemental Indentures referred to in Schedule A hereto for the purpose of
establishing a series of bonds and appointing the successor Trustee.

         The Company has heretofore entered into two separate Financing
Agreements, each dated as of January 1, 1999, with each of Adams County,
Colorado and Pueblo County, Colorado (the "Counties") pursuant to which each of
the Counties in effect loaned the proceeds of the Pollution Control Refunding
Revenue Bonds (collectively, the "Series 1999 Bonds") issued pursuant to
separate Indentures of Trust between each County and U.S. Bank National
Association, as Trustee, dated as of January 1, 1999 (the "Series 1999 Bond
Indentures") to the Company for the purpose of refunding certain outstanding
series of pollution control bonds and the Company executed and delivered a note
to each of the Counties in the amount of the respective proceeds (the "1999
Series Notes"). The payment of principal of and interest on the 1999 Series
Notes are applied solely to the payment of the related Series 1999 Bonds.

         In connection with the issuance of the Series 1999 Bonds, Ambac
Assurance Corporation ("Ambac") issued municipal bond insurance policies (the
"Policies") to each of the Counties relating to the Series 1999 Bonds. The
Company entered into an Insurance Agreement (the "Insurance Agreement"), dated
as of January 21, 1999, with Ambac as part of the consideration for the delivery
by Ambac of the Policies, pursuant to which the Company is absolutely and
unconditionally obligated, among other matters, to reimburse Ambac for all
amounts advanced by Ambac under the Policies. As additional consideration for
Ambac issuing the Policies, the Company agreed not to issue any secured debt in
an amount above a specified threshold until the Company issues similar secured
debt to Ambac (the "Ambac Secured Debt").

         The Company now desires to issue the Ambac Secured Debt by establishing
a series of Securities to be designated "First Collateral Trust Bonds, Series
No. 7 (Ambac Collateral Bonds)", such series of Securities to be hereinafter
sometimes called "Series No. 7".

         The Company has duly authorized the execution and delivery of this
Supplemental Indenture No. 8 to establish the Securities of Series No. 7 and has
duly authorized the issuance of such Securities; and all acts necessary to make
this Supplemental Indenture No. 8 a valid agreement of the Company, and to make
the Securities of Series No. 7 valid obligations of the Company, have been
performed.







                                GRANTING CLAUSES

         NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 8 WITNESSETH, that, in
consideration of the premises, and in order to secure the payment of the
principal of and premium, if any, and interest, if any, on all Securities from
time to time Outstanding and the performance of the covenants contained therein
and in the Indenture and to declare the terms and conditions on which such
Securities are secured, the Company hereby grants, bargains, sells, releases,
conveys, assigns, transfers, mortgages, pledges, sets over and confirms to the
Trustee, and grants to the Trustee a security interest in, the following:

                              GRANTING CLAUSE FIRST

                  All right, title and interest of the Company, as of the date
         of the execution and delivery of this Supplemental Indenture No. 8, in
         and to property (other than Excepted Property), real, personal and
         mixed and wherever situated, in any case used or to be used in or in
         connection with the Electric Utility Business (whether or not such use
         is the sole use of such property), including without limitation (a) all
         lands and interests in land described or referred to in Schedule B
         hereto; (b) all other lands, easements, servitudes, licenses, permits,
         rights of way and other rights and interests in or relating to real
         property used or to be used in or in connection with the Electric
         Utility Business or relating to the occupancy or use of such real
         property, subject however, to the exceptions and exclusions set forth
         in clause (a) of Granting Clause First of the Original Indenture; (c)
         all plants, generators, turbines, engines, boilers, fuel handling and
         transportation facilities, air and water pollution control and sewage
         and solid waste disposal facilities and other machinery and facilities
         for the generation of electric energy; (d) all switchyards, lines,
         towers, substations, transformers and other machinery and facilities
         for the transmission of electric energy; (e) all lines, poles,
         conduits, conductors, meters, regulators and other machinery and
         facilities for the distribution of electric energy; (f) all buildings,
         offices, warehouses and other structures used or to be used in or in
         connection with the Electric Utility Business; (g) all pipes, cables,
         insulators, ducts, tools, computers and other data processing and/or
         storage equipment and other equipment, apparatus and facilities used or
         to be used in or in connection with the Electric Utility Business; (h)
         any or all of the foregoing properties in the process of construction;
         and (i) all other property, of whatever kind and nature, ancillary to
         or otherwise used or to be used in conjunction with any or all of the
         foregoing or otherwise, directly or indirectly, in furtherance of the
         Electric Utility Business;

                             GRANTING CLAUSE SECOND

                  Subject to the applicable exceptions permitted by Section
         810(c), Section 1303 and Section 1305 of the Original Indenture, all
         property (other than Excepted Property) of the kind and nature
         described in Granting Clause First which may be hereafter acquired by
         the Company, it being the intention of the Company that all such
         property acquired by the Company after the date of the execution and
         delivery of this Supplemental Indenture No. 8 shall be as fully
         embraced within and subjected to the Lien hereof as if such property
         were owned by the Company as of the date of the execution and delivery
         of this Supplemental Indenture No. 8;


                                       2





                             GRANTING CLAUSE FOURTH

                  All other property of whatever kind and nature subjected or
         required to be subjected to the Lien of the Indenture by any of the
         provisions thereof;

                                EXCEPTED PROPERTY

                  Expressly excepting and excluding, however, from the Lien and
         operation of the Indenture all Excepted Property of the Company,
         whether now owned or hereafter acquired;

         TO HAVE AND TO HOLD all such property, real, personal and mixed, unto
the Trustee, its successors in trust and their assigns forever;

         SUBJECT, HOWEVER, to (a) Liens existing at the date of the execution
and delivery of the Original Indenture (including, but not limited to, the Lien
of the PSCO 1939 Mortgage), (b) as to property acquired by the Company after the
date of the execution and delivery of the Original Indenture, Liens existing or
placed thereon at the time of the acquisition thereof (including, but not
limited to, the Lien of any Class A Mortgage and purchase money Liens), (c)
Retained Interests and (d) any other Permitted Liens, it being understood that,
with respect to any property which was at the date of execution and delivery of
the Original Indenture or thereafter became or hereafter becomes subject to the
Lien of any Class A Mortgage, the Lien of the Indenture shall at all times be
junior, subject and subordinate to the Lien of such Class A Mortgage;

         IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and
security of the Holders from time to time of all Outstanding Securities without
any priority of any such Security over any other such Security;

         PROVIDED, HOWEVER, that the right, title and interest of the Trustee in
and to the Mortgaged Property shall cease, terminate and become void in
accordance with, and subject to the conditions set forth in, Article Nine of the
Original Indenture, and if, thereafter, the principal of and premium, if any,
and interest, if any, on the Securities shall have been paid to the Holders
thereof, or shall have been paid to the Company pursuant to Section 603 of the
Original Indenture, then and in that case the Indenture shall terminate, and the
Trustee shall execute and deliver to the Company such instruments as the Company
shall require to evidence such termination; otherwise the Indenture, and the
estate and rights thereby granted shall be and remain in full force and effect;
and

         THE PARTIES HEREBY FURTHER COVENANT AND AGREE as follows:

                                   ARTICLE ONE

                           SECURITIES OF SERIES NO. 7

         There are hereby established the Securities of Series No. 7. The
Securities of Series No. 7 are to be issued to Ambac pursuant to the Insurance
Agreement as part of the consideration for the delivery by Ambac of the
Policies. The Securities of Series No. 7 shall have the terms and
characteristics set forth below (the lettered subdivisions set forth below
corresponding to the lettered subdivisions of Section 301 of the Original
Indenture):

         (a) the title of the Securities of such series shall be "First
         Collateral Trust Bonds, Series No. 7 (Ambac Collateral Bonds)";
         provided, however, that, at any time after the

                                       3





         PSCO 1939 Mortgage shall have been satisfied and discharged, the
         Company shall have the right, without any consent or other action by
         the Holders of such Securities, to change such title in such manner as
         shall be deemed by the Company to be appropriate to reflect such
         satisfaction and discharge, such change to be evidenced in an Officer's
         Certificate;

         (b) the Securities of Series No. 7 shall be initially authenticated and
         delivered in the aggregate principal amount of $48,750,000;

         (c) interest on the Securities of Series No. 7 shall be payable to the
         Persons in whose names such Securities are registered at the close of
         business on the Regular Record Date for such interest, except as
         otherwise expressly provided in the form of such Securities attached as
         Exhibit A hereto;

         (d) the principal of the Securities of Series No. 7 shall be payable on
         January 1, 2019, the Stated Maturity.

         (e) the Securities of Series No. 7 shall bear interest at a rate of
         5.10% per annum; interest shall accrue on the Securities of Series No.
         7 from September 10, 2002, or the most recent date to which interest
         has been paid or duly provided for; the Interest Payment Dates for such
         Securities shall be January 1 and July 1 in each year, commencing
         January 1, 2003, and the Regular Record Dates with respect to the
         Interest Payment Dates for such Securities shall be December 15 and
         June 15 in each year, respectively (whether or not a Business Day);

         (f) the Corporate Trust Office of U.S. Bank Trust National Association
         in New York, New York shall be the place at which (i) the principal of,
         premium, if any, and interest, if any, on the Securities of Series No.
         7 shall be payable, (ii) registration of transfer of such Securities
         may be effected, (iii) exchanges of such Securities may be effected and
         (iv) notices and demands to or upon the Company in respect of such
         Securities and the Indenture may be served; and U.S. Bank Trust
         National Association shall be the Security Registrar for such
         Securities; provided, however, that the Company reserves the right to
         change, by one or more Officer's Certificates, any such place or the
         Security Registrar; and provided, further, that the Company reserves
         the right to designate, by one or more Officer's Certificates, its
         principal office in Denver, Colorado as any such place or itself as the
         Security Registrar;

         (g) the Securities of Series No. 7 shall be redeemable as follows: At
         the time that any Series 1999 Bonds are redeemed pursuant to the Series
         1999 Bond Indentures, Securities of Series No. 7 in a principal amount
         equal to the principal amount of Series 1999 Bonds so redeemed shall be
         subject to redemption by the Company at a Redemption Price equal to the
         price at which such Series 1999 Bonds are redeemed;

         (h) not applicable;

         (i) not applicable;

         (j) not applicable;

         (k) not applicable;

         (l) not applicable;

                                       4






         (m) not applicable;

         (n) not applicable;

         (o) not applicable;

         (p) not applicable;

         (q) the Securities of Series No. 7 are to be registered in the name of
         Ambac Assurance Corporation. Such Securities shall not be transferable,
         nor shall any purported transfer be registered except to a successor to
         Ambac under the Insurance Agreement upon delivery to the Trustee of a
         Company Request requesting such transfer.

         (r) not applicable;

         (s) no service charge shall be made for the exchange of the Securities
         of Series No. 7; provided, however, that the Company may require
         payment of a sum sufficient to cover any tax or other governmental
         charge payable in connection with the exchange;

         (t) not applicable;

         (u)      (i) If the Company shall have caused the Company's
                  indebtedness in respect of any Securities of Series No. 7 to
                  have been satisfied and discharged prior to the Maturity of
                  such Securities, as provided in Section 901 of the Original
                  Indenture, the Company shall, promptly after the date of such
                  satisfaction and discharge, give a notice to each Person who
                  was a Holder of any of such Securities on such date stating
                  (A)(1) the aggregate principal amount of such Securities and
                  (2) the aggregate amount of any money (other than amounts, if
                  any, deposited in respect of accrued interest on such
                  Securities) and the aggregate principal amount of, the rate or
                  rates of interest on, and the aggregate fair market value of,
                  any Eligible Obligations deposited pursuant to Section 901 of
                  the Original Indenture with respect to such Securities and (B)
                  that the Company will provide (and the Company shall promptly
                  so provide) to such Person, or any beneficial owner of such
                  Securities holding through such Person (upon written request
                  to the Company sent to an address specified in such notice),
                  such other information as such Person or beneficial owner, as
                  the case may be, reasonably may request in order to enable it
                  to determine the federal income tax consequences to it
                  resulting from the satisfaction and discharge of the Company's
                  indebtedness in respect of such Securities. Thereafter, the
                  Company shall, within forty-five (45) days after the end of
                  each calendar year, give to each Person who at any time during
                  such calendar year was a Holder of such Securities a notice
                  containing (X) such information as may be necessary to enable
                  such Person to report its income, gain or loss for federal
                  income tax purposes with respect to such Securities or the
                  assets held on deposit in respect thereof during such calendar
                  year or the portion thereof during which such Person was a
                  Holder of such Securities, as the case may be (such
                  information to be set forth for such calendar year as a whole
                  and for each month during such year) and (Y) a statement to
                  the effect that the Company will provide (and the Company
                  shall promptly so provide) to such Person, or any beneficial
                  owner of such Securities holding through such Person (upon
                  written request to the Company sent to an address specified in
                  such notice), such other information as


                                       5





                  such Person or beneficial owner, as the case may be,
                  reasonably may request in order to enable it to determine its
                  income, gain or loss for federal income tax purposes with
                  respect to such Securities or such assets for such year or
                  portion thereof, as the case may be. The obligation of the
                  Company to provide or cause to be provided information for
                  purposes of income tax reporting by any Person as described in
                  the first two sentences of this paragraph shall be deemed to
                  have been satisfied to the extent that the Company has
                  provided or caused to be provided substantially comparable
                  information pursuant to any requirements of the Internal
                  Revenue Code of 1986, as amended from time to time (the
                  "Code") and United States Treasury regulations thereunder.

                  (ii) Notwithstanding the provisions of subparagraph (i) above,
                  the Company shall not be required to give any notice specified
                  in such subparagraph or to otherwise furnish any of the
                  information contemplated therein if the Company shall have
                  delivered to the Trustee an Opinion of Counsel to the effect
                  that the Holders of such Securities will not recognize income,
                  gain or loss for federal income tax purposes as a result of
                  the satisfaction and discharge of the Company's indebtedness
                  in respect of such Securities and such Holders will be subject
                  to federal income taxation on the same amounts and in the same
                  manner and at the same times as if such satisfaction and
                  discharge had not occurred.

                  (iii) Anything in this clause (u) to the contrary
                  notwithstanding, the Company shall not be required to give any
                  notice specified in subparagraph (i) or to otherwise furnish
                  the information contemplated therein or to deliver any Opinion
                  of Counsel contemplated by subparagraph (ii) if the Company
                  shall have caused Securities of Series No. 7 to be deemed to
                  have been paid for purposes of the Indenture, as provided in
                  Section 901 of the Original Indenture, but shall not have
                  effected the satisfaction and discharge of its indebtedness in
                  respect of such Securities pursuant to such Section.

         (v) Any payment by the Company of principal of, premium, if any, or
         interest on the Series 1999 Notes or pursuant to the Insurance
         Agreement with respect to the Series 1999 Bonds shall, to the extent
         thereof, be deemed to satisfy and discharge the obligation of the
         Company, if any, to make the payment of principal of, premium, if any,
         or interest on the Securities of Series No. 7 which is then due;
         provided, however, if any such payment by the Company on the Series
         1999 Notes or pursuant to the Insurance Agreement is determined to be a
         preferential transfer and is recovered from the registered owner of the
         Series 1999 Notes or from Ambac pursuant to the United States
         Bankruptcy Code in accordance with a final, nonappealable order of a
         court of competent jurisdiction as a result, then the obligation of the
         Company to make such payment of principal of, premium, if any, or
         interest on the Series 1999 Notes or pursuant to the Insurance
         Agreement shall no longer be deemed satisfied and discharged for
         purposes of the Securities of Series No. 7.

                  The Trustee may conclusively presume that the obligation of
         the Company to pay principal of, premium, if any, and interest on the
         Securities of Series No. 7 as the same shall have become due and
         payable shall have been fully satisfied and discharged unless and until
         it shall have received a written notice from the Holder hereof stating
         that the principal, premium, if any, or interest of Securities of
         Series No. 7 has become due and payable and specifying the amount of
         funds required to make such payment.


                                       6





                  Notwithstanding anything to the contrary contained herein, the
         aggregate amount of principal of, premium, if any, and interest on the
         Securities of Series No. 7 shall not exceed the aggregate amount of the
         reimbursement obligations of the Company under the Insurance Agreement.

         (w) The Securities of Series No. 7 shall be substantially in the form
         attached hereto as Exhibit A and shall have such further terms as are
         set forth in such form.

                                   ARTICLE TWO

                            MISCELLANEOUS PROVISIONS

         This Supplemental Indenture No. 8 is a supplement to the Original
Indenture. As previously supplemented and further supplemented by this
Supplemental Indenture No. 8, the Original Indenture is in all respects
ratified, approved and confirmed, and the Original Indenture, all previous
supplements thereto and this Supplemental Indenture No. 8 shall together
constitute one and the same instrument.



                  IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture No. 8 to be duly executed as of the day and year first
above written.

                                 PUBLIC SERVICE COMPANY OF COLORADO



                                 By:    /s/ Paul E. Pender
                                        ---------------------------------------
                                        Name:      Paul E. Pender
                                        Title:     Vice President and Treasurer





                                 U.S. BANK TRUST NATIONAL ASSOCIATION,
                                                          Trustee



                                 By:    /s/ Ignazio Tamburello
                                        ---------------------------------------
                                        Name:      Ignazio Tamburello
                                        Title:     Assistant Vice President


                                       7




STATE OF MINNESOTA        )
                          ) ss.:
CITY OF MINNEAPOLIS       )

         On the 9th day of September, 2002, before me personally came Paul E.
Pender to me known, who, being by me duly sworn, did depose and say that he is a
Vice President and Treasurer of Public Service Company of Colorado, one of the
corporations described in and which executed the foregoing instrument; and that
he signed his name thereto by authority of the Board of Directors of said
corporation.

                                          /s/ Sharon M. Quellhorst
                                          -------------------------------------
                                          Name: Sharon M. Quellhorst
                                          Notary Public, State of Minnesota

                                          Commission Expires: January 31, 2005

                                       8






STATE OF NEW YORK              )
                               ) ss.:
CITY AND COUNTY OF NEW YORK    )

         On the 10th day of September, 2002, before me personally came Ignazio
Tamburello, to me known, who, being by me duly sworn, did depose and say that
she is an Assistant Vice President of U.S. Bank Trust National Association, the
banking association described in and which executed the foregoing instrument;
and that she signed her name thereto by authority of the Board of Directors of
said banking association.

                                           /s/ Rouba Fakih
                                           ------------------------------------
                                           Name: Rouba Fakih
                                           Notary Public, State of New York


                                           Commission Expires February 20, 2003




                                       9





                                                                       EXHIBIT A

                                FORM OF SECURITY


                   (See legend at the end of this Security for
                  restrictions on transfer and change of form)


                       PUBLIC SERVICE COMPANY OF COLORADO
       First Collateral Trust Bond, Series No. 7 (Ambac Collateral Bonds)



     Original Interest Accrual Date          September 10, 2002
                     Interest Rate:          5.10%
                   Stated Maturity:          January 1, 2019
            Interest Payment Dates:          January 1 and July 1
              Regular Record Dates:          December 15 and June 15



                    This Security is not a Discount Security
              within the meaning of the within-mentioned Indenture
                    -----------------------------------------


Principal Amount                                          Registered No. 1
$48,750,000


         PUBLIC SERVICE COMPANY OF COLORADO, a corporation duly organized and
existing under the laws of the State of Colorado (herein called the "Company,"
which term includes any successor corporation under the Indenture referred to
below), for value received, hereby promises to pay to AMBAC ASSURANCE
CORPORATION, or registered assigns, the principal sum of Forty-Eight Million
Seven Hundred and Fifty Thousand Dollars on the Stated Maturity specified above,
and to pay interest thereon from the Original Interest Accrual Date specified
above or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, semi-annually in arrears on the Interest Payment
Dates specified above in each year, commencing with the Interest Payment Date
next succeeding the Original Interest Accrual Date specified above, and at
Maturity, at the Interest Rate per annum specified above, until the principal
hereof is paid or duly provided for. The interest so payable, and paid or duly
provided for, on any Interest Payment Date shall, 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
specified above (whether or not a Business Day) next preceding such Interest
Payment Date. Notwithstanding the foregoing, interest payable at Maturity shall
be paid to the Person to whom principal shall be paid. Except as otherwise
provided in said Indenture, any such interest not so paid or duly provided for
shall forthwith cease to be payable to the Holder on such Regular Record Date
and may either 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, notice of which shall be given to Holders of Securities

                                  EXHIBIT A-1


of this series not less than 15 days prior to such Special Record Date, or be
paid in such other manner as permitted by the Indenture.

         Payment of the principal of this Security and interest hereon at
Maturity shall be made upon presentation of this Security at the Corporate Trust
Office of U.S. Bank Trust National Association, in New York, New York or at such
other office or agency as may be designated for such purpose by the Company from
time to time. Payment of interest on this Security (other than interest at
Maturity) shall be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register, except that if
such Person shall be a securities depositary, such payment may be made by such
other means in lieu of check as shall be agreed upon by the Company, the Trustee
and such Person. Payment of the principal of and interest on this Security, as
aforesaid, shall be made 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.

         This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and issuable in one or more
series under and equally secured by an Indenture, dated as of October 1, 1993
(such Indenture as originally executed and delivered and as supplemented or
amended from time to time thereafter, together with any constituent instruments
establishing the terms of particular Securities, being herein called the
"Indenture"), between the Company and U.S. Bank Trust National Association
(formerly First Trust of New York, National Association) as successor 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 description of the property mortgaged, pledged
and held in trust, the nature and extent of the security and the respective
rights, limitations of rights, duties and immunities of the Company, the Trustee
and the Holders of the Securities thereunder and of the terms and conditions
upon which the Securities are, and are to be, authenticated and delivered and
secured. The acceptance of this Security shall be deemed to constitute the
consent and agreement by the Holder hereof to all of the terms and provisions of
the Indenture. This Security is one of the series designated above.

         This Security has been issued pursuant to the requirements of, and as
security for the payment by the Company of its reimbursement obligations under,
that certain Insurance Agreement, dated as of January 21, 1999, between the
Company and Ambac Assurance Corporation ("Ambac") in connection with the
issuance by Ambac of municipal bond insurance policies relating to $27,250,000
in aggregate principal amount of Pollution Control Revenue Refunding Bonds
(Public Service Company of Colorado Project) Series 1999 (the "Adams County
Bonds"), issued by Adams County, Colorado pursuant to a Trust Indenture, dated
as of January 1, 1999, between Adams County, Colorado and the Trustee (the
"Adams County Indenture") and $21,500,000 in aggregate principal amount of
Pollution Control Revenue Refunding Bonds (Public Service Company of Colorado
Project) Series 1999 (the "Pueblo County Bonds"; the Adams County Bonds and the
Pueblo County Bonds are referred to herein as the "Series 1999 Bonds"), issued
by Pueblo County, Colorado pursuant to a Trust Indenture, dated as of January 1,
1999, between Pueblo County, Colorado and the Trustee (the "Pueblo County
Indenture"; the Adams County Indenture and the Pueblo County Indenture are
referred to herein as the "Series 1999 Bond Indentures"). In connection with the
issuance of the Series 1999 Bonds, the Company entered into separate Financing
Agreements, dated as of January 1, 1999, pursuant to which the Company executed
and delivered a note to each of the Counties in the amount of the respective
proceeds of the Series 1999 Bonds (the "Series 1999 Notes"). The payment of
principal of and interest on the 1999 Series Notes are applied solely to the
payment of the related Series 1999 Bonds.

         Any payment by the Company of principal of, premium, if any, or
interest on the Series 1999 Notes or pursuant to the Insurance Agreement with
respect to the Series 1999 Bonds shall, to the extent thereof, be deemed to
satisfy and discharge the obligation of the Company, if any, to make the payment
of

                                  EXHIBIT A-2



principal of, premium, if any, or interest on the Securities of Series No. 7
which is then due; provided, however, if any such payment by the Company on the
Series 1999 Notes or pursuant to the Insurance Agreement is determined to be a
preferential transfer and is recovered from the registered owner of the Series
1999 Notes or from Ambac pursuant to the United States Bankruptcy Code in
accordance with a final, nonappealable order of a court of competent
jurisdiction as a result, then the obligation of the Company to make such
payment of principal of, premium, if any, or interest on the Series 1999 Notes
or pursuant to the Insurance Agreement shall no longer be deemed satisfied and
discharged for purposes of the Securities of Series No. 7.

         The Trustee may conclusively presume that the obligation of the Company
to pay principal of, premium, if any, and interest on the Securities of Series
No. 7 as the same shall have become due and payable shall have been fully
satisfied and discharged unless and until it shall have received a written
notice from the Holder hereof stating that the principal, premium, if any, or
interest of this Security has become due and payable and specifying the amount
of funds required to make such payment.

         Notwithstanding anything to the contrary contained herein, the
aggregate amount of principal of, premium, if any, and interest on the
Securities of Series No. 7 shall not exceed the aggregate amount of the
reimbursement obligations of the Company under the Insurance Agreement.

         If any Interest Payment Date or the Stated Maturity shall not be a
Business Day (as hereinafter defined), payment of the amounts due on this
Security on such date may be made on the next succeeding Business Day; and, if
such payment is made or duly provided for on such Business Day, no interest
shall accrue on such amounts for the period from and after such Interest Payment
Date or Stated Maturity, as the case may be, to such Business Day.

         This Security is subject to redemption by the Company at the time that
any Series 1999 Bonds are redeemed pursuant to the Series 1999 Bond Indentures
in a principal amount equal to the principal amount of Series 1999 Bonds so
redeemed at a Redemption Price equal to the price at which such Series 1999
Bonds are redeemed.

         If an Event of Default shall occur and be continuing, the principal of
this Security may be declared due and payable in the manner and with the effect
provided in the Indenture.

         The Indenture permits, with certain exceptions as therein provided, the
Trustee to enter into one or more supplemental indentures for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, the Indenture with the consent of the Holders of not less than a
majority in aggregate principal amount of the Securities of all series then
Outstanding under the Indenture, considered as one class; provided, however,
that if there shall be Securities of more than one series Outstanding under the
Indenture and if a proposed supplemental indenture shall directly affect the
rights of the Holders of Securities of one or more, but less than all, of such
series, then the consent only of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of all series so directly
affected, considered as one class, shall be required; and provided, further,
that if the Securities of any series shall have been issued in more than one
Tranche and if the proposed supplemental indenture shall directly affect the
rights of the Holders of Securities of one or more, but less than all, of such
Tranches, then the consent only of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of all Tranches so directly
affected, considered as one class, shall be required; and provided, further,
that the Indenture permits the Trustee to enter into one or more supplemental
indentures for limited purposes without the consent of any Holders of
Securities. The Indenture also contains provisions permitting the Holders of a
majority in principal amount of the Securities then Outstanding, on behalf of
the Holders of all Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or


                                  EXHIBIT A-3





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.

         As provided in the Indenture and subject to certain limitations therein
set forth, this Security or any portion of the principal amount hereof will be
deemed to have been paid for all purposes of the Indenture and to be no longer
Outstanding thereunder, and, at the election of the Company, the Company's
entire indebtedness in respect thereof will be satisfied and discharged, if
there has been irrevocably deposited with the Trustee or any Paying Agent (other
than the Company), in trust, money in an amount which will be sufficient and/or
Eligible Obligations, the principal of and interest on which when due, without
regard to any reinvestment thereof, will provide moneys which, together with
moneys so deposited, will be sufficient, to pay when due the principal of and
interest on this Security when due.

         This Security is not transferable except to a successor to Ambac
Assurance Corporation under the Insurance Agreement upon delivery to the Trustee
of a Company Request requesting such transfer. Before any transfer of this
Security will be recognized or given effect by the Company or the Trustee, the
Holder shall note the amounts of all principal prepayments hereon, and shall
notify the Company and the Trustee of the name and address of the transferee and
shall afford the Company and the Trustee the opportunity of verifying the
notation as to prepayment of principal. By the acceptance hereof the Holder of
this Security and each transferee shall be deemed to have agreed to indemnify
and hold harmless the Company and the Trustee against all losses, claims,
damages or liability arising out of any failure on the part of the Holder or of
any such transferee to comply with the requirements of the preceding sentence.
Any such transfer is registrable in the Security Register, upon surrender of
this Security for registration of transfer at the office of U.S. Bank Trust
National Association, in New York, New York or such other office or agency as
may be designated by the Company from time to time, 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
attorney duly authorized in writing, and thereupon one or more new Securities of
this series of authorized denominations and of like tenor and aggregate
principal amount, will be issued to the designated transferee or transferees.

         Each registered owner hereof by his acceptance hereof waives any right
to exchange any unpaid portion of this Bond for another Bond under Section 10.01
of the Indenture.

         This Bond has not been registered under the Securities Act of 1933, as
amended, and may not be offered or sold in contravention of said Act and is not
transferable except to a successor to Ambac under the Insurance Agreement.

         No service charge shall be made for any such registration of transfer,
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 absolute 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.

         The Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York.

                                  EXHIBIT A-4






         As used herein "Business Day" means any day, other than a Saturday or
Sunday, which is not a day on which banking institutions or trust companies in
The City of New York, New York or other city in which is located any office or
agency maintained for the payment of principal or interest on this Security, are
authorized or required by law, regulation or executive order to remain closed.
All other terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.

         As provided in the Indenture, no recourse shall be had for the payment
of the principal of or interest on any Securities, or any part thereof, or for
any claim based thereon or otherwise in respect thereof, or of the indebtedness
represented thereby, or upon any obligation, covenant or agreement under the
Indenture, against, and no personal liability whatsoever shall attach to, or be
incurred by, any incorporator, shareholder, officer or director, as such, past,
present or future of the Company or of any predecessor or successor corporation
(either directly or through the Company or a predecessor or successor
corporation), whether by virtue of any constitutional provision, statute or rule
of law, or by the enforcement of any assessment or penalty or otherwise; it
being expressly agreed and understood that the Indenture and all the Securities
are solely corporate obligations and that any such personal liability is hereby
expressly waived and released as a condition of, and as part of the
consideration for, the execution of the Indenture and the issuance of the
Securities.

         Unless the certificate of authentication hereon has been executed by
the Trustee or an Authenticating Agent by manual signature, this Security shall
not be entitled to any benefit under the Indenture or be valid or obligatory for
any purpose.

                                  EXHIBIT A-5






         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed and its corporate seal to be hereunto affixed and attested.

                                    PUBLIC SERVICE COMPANY OF COLORADO

                                    By:
                                       ----------------------------------------
                                             Vice President and Treasurer




Attest:
       ---------------------------
            Assistant Secretary


                          CERTIFICATE OF AUTHENTICATION

         This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.

Dated:
      ----------------------------


        U.S. BANK TRUST              OR                 U.S. BANK TRUST
      NATIONAL ASSOCIATION,                          NATIONAL ASSOCIATION,
          as Trustee                                      as Trustee



By:                                           By:
   -------------------------------               ------------------------------
         Authorized Officer                       AS AUTHENTICATING AGENT


                                              By:
                                                 ------------------------------
                                                        Authorized Officer





         THIS SECURITY MAY NOT BE TRANSFERRED OR EXCHANGED, NOR MAY ANY
PURPORTED TRANSFER BE REGISTERED, EXCEPT TO A SUCCESSOR TO AMBAC ASSURANCE
CORPORATION UNDER THE INSURANCE AGREEMENT REFERRED TO HEREIN.

         THE HOLDER OF THIS BOND BY ITS ACCEPTANCE HEREOF AGREES TO RESTRICTIONS
ON TRANSFER, TO WAIVERS OF CERTAIN RIGHTS OF EXCHANGE, AND TO INDEMNIFICATION
PROVISIONS AS SET FORTH BELOW. IN ADDITION, THE BOND REPRESENTED BY THIS
CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND SUCH
BOND MAY NOT BE TRANSFERRED WITHOUT COMPLIANCE WITH APPLICABLE SECURITIES LAWS.

                                 -------------
                                  EXHIBIT A-6







   FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto


- --------------------------------------------------------------------------------
     [please insert social security or other identifying number of assignee]


- --------------------------------------------------------------------------------
            [please print or typewrite name and address of assignee]


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

the within Security of PUBLIC SERVICE COMPANY OF COLORADO and does hereby
irrevocably constitute and appoint __________________________________ ,
Attorney, to transfer said Security on the books of the within-mentioned
Company, with full power of substitution in the premises.

Dated:
      ---------------------


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

         Notice: The signature to this assignment must correspond with the name
         as written upon the face of the Security in every particular without
         alteration or enlargement or any change whatsoever.

                                  EXHIBIT A-7







                                                                      SCHEDULE A


                             SUPPLEMENTAL INDENTURES


    DATE OF                   SERIES OF BONDS               PRINCIPAL             PRINCIPAL
 SUPPLEMENTAL                 ---------------             AMOUNT ISSUED             AMOUNT
   INDENTURE                                              -------------          OUTSTANDING
   ---------                                                                     ------------
                                                                        
November 1, 1993                Series No. 1               $134,500,000          $134,500,000
January 1, 1994            Series No. 2 due 2001           $102,667,000              None
                                    and
                           Series No. 2 due 2024           $110,000,000          $110,000,000
September 2, 1994                   None                       None                  None
(Appointment of
Successor Trustee)
May 1, 1996                     Series No. 3               $125,000,000          $125,000,000
November 1, 1996                Series No. 4               $250,000,000          $175,000,000
February 1, 1997                Series No. 5               $150,000,000              None
April 1, 1998                   Series No. 6               $250,000,000          $250,000,000



                                  SCHEDULE A-1




                                                                      SCHEDULE B

                             DESCRIPTION OF PROPERTY

         The following properties are situated in the State of Colorado and the
counties thereof:

                                  ADAMS COUNTY

1.       SATRIANO TRACT

         That part of the NW1/4 NE1/4 of Section 11, Township 3 South, Range 68
         West of the 6th P.M., being more particularly described as follows:

         Beginning at a point which is South 89 degrees 58' East 20 feet and
         North 395.6 feet from the Southwest corner of the NW1/4 NE1/4 of said
         Section; thence North 196.92 feet; thence North 88 degrees 36.9' East,
         165.65 feet; thence North 0 degrees 17' West, 109.93 feet; thence North
         77 degrees 44.6' East 29.52 feet along the center line of The United
         Irrigation Ditch; thence South 438.11 feet; thence North 89 degrees 58'
         West 43.9 feet; thence North 115 feet; thence North 89 degrees 58' West
         150 feet to the point of beginning,

         County of Adams,
         State of Colorado.

         (for informational purposes only)  6200 North Franklin Street

2.       ROSA TRACT

         Parcels of land more particularly described as follows:

         Parcel I:

         A portion of the N1/2 of NE1/4 of NE1/4 of Section 11, Township 3
         South, Range 68 West of the 6th P.M., described as follows: Beginning
         at the Northwest Corner of said Tract, thence South 145 feet, thence
         East 110 feet, thence North 145 feet, thence West 110 feet to the Point
         of Beginning except the North 20 feet for road purposes.

         County of Denver,
         State of Colorado.

         Parcel II:

         That portion of the N1/2 of the NE1/4 of the NE1/4 of Section 11,
         Township 3 South, Range West of the 6th P.M., described as follows:

                                  SCHEDULE B-1






         Beginning at a point 110 feet East of the Northwest corner of said
         tract; thence South 145 feet; thence East 90 feet; thence North 145
         feet; thence West 90 feet to the True Point of Beginning, except the
         North 20 feet for road purposes.

         County of Adams, State of Colorado.

3.       TOWER 4 SUBSTATION SITE

         A portion of a parcel of land described in Book 4550, Page 465, Adams
         County Clerk and Recorder's Office, located in the Northwest Quarter of
         Section 27, Township 3 South, Range 66 West of the 6th Principal
         Meridian, Adams County, Colorado, being more particularly described as
         follows:

         COMMENCING at the North Quarter Corner of said Section 27, whence the
         Northwest Corner of said Section 27 bears S88 degrees 53'04"W a
         distance of 2638.04 feet;

         THENCE S00 degrees 08'03"E along the easterly line of the Northwest
         Quarter of said Section 27 a distance of 60.01 feet;

         THENCE S88 degrees 53'04"W along the southerly right-of-way line of
         East 38th Avenue as described in Book 2800, Page 680 a distance of
         882.04 feet to the POINT OF BEGINNING;

         THENCE S01 degrees 05'34"E a distance of 440.00 feet;

         THENCE S88 degrees 53'04"W a distance of 399.02 feet non-tangent with
         the following described curve;

         THENCE along the westerly line of said parcel of land described in Book
         4550, Page 465, on the arc of a curve to the right, having a central
         angle of 03 degrees 28'41", a radius of 530.00 feet, a chord bearing
         N02 degrees 49'55"W a distance of 32.17 feet, and an arc distance of
         32.17 feet;

         THENCE N01 degrees 05'34"W continuing along the westerly line of said
         parcel, tangent with the last described curve a distance of 407.84
         feet;


         THENCE N88 degrees 53'04"E along the southerly right-of-way line said
         East 35th Avenue a distance of 400.00 feet to the POINT OF BEGINNING.

         Containing 4.040 acres (175,989 sq. ft.) more or less.

4.       NEW WASHINGTON SUBSTATION

         A parcel of land decribed in Book Number 5210, Page 0031, Reception
         Number C0355049, recorded in the Adam County Clerk and Recorder's
         Office on January 15, 1998, being more particularly described as
         follows:

         Lot 1, Block 1, Washington Electric Substation, Filing No. 1, County of
         Adams, State of Colorado.

5.       HOSMER TRUST TRACT

                                  SCHEDULE B-2






         A portion of the Southwest Quarter of Section 34, Township 1 South,
         Range 64 West of the 6th Principal Meridian, Adams County, Colorado,
         being more particularly described as follows:

         BEGINNING at the Northwest Corner of said Southwest Quarter of Section
         34, whence the Southwest Corner of said Southwest Quarter of Section 34
         bears S01 degrees 18'37"E a distance of 2636.70 feet;

         THENCE S89 degrees 47'30"E along the northerly line of said Southwest
         Quarter of Section 34 a distance of 1030.01 feet;

         THENCE S01 degrees 18"37"E a distance of 1631.67 feet;

         THENCE N89 degrees 47'30"W a distance of 1030.01 feet;

         THENCE N01 degrees 18'37"W along said westerly line of Southwest
         Quarter of Section 34 a distance of 1631.67 feet to the POINT OF
         BEGINNING.

         Containing 38.568 Acres, more or less.

                                 ALAMOSA COUNTY

6.       MOSCA SUBSTATION:  ADDITIONAL LAND

         A parcel of land more particularly described as follows:

         That part of the NE1/4 of Section 28, Township 40 North, Range 10 East
         of the N.M.P.M., described as beginning at a point on the North-South
         centerline of said Section 28 and a point on the South right-of-way
         line of County Lane 8 North (as fenced) from which the N1/4 corner
         bears N00'38'22"E, 25.91 feet; thence N88 degrees 33'59"E, along said
         right-of-way line 225.00 feet; thence S00 degrees 38'42", 30.90 feet;
         thence N88 degrees 32'09"E, 25.16 feet; thence S00 degrees 38'22"W,
         322.06 feet; thence N89 degrees 53'58"W, 250.00 feet to a point on said
         North-South centerline; thence N00 degrees 38'22"E, 346.25 feet to the
         true Point Of Beginning. Alamosa County, State of Colorado

                                  DENVER COUNTY

7.       BELLEVIEW - QUEBEC SUBSTATION SITE


         A parcel of land located in a portion of Lot 1, Block 1 of the 165
         Subdivision Filing No. 1, recorded in Plat Book 29 at Page 86, and a
         portion of the Southeast 1/4 of Section 8, Township 5 South, Range 67
         West of the 6th P.M., being more particularly described as follows:

         Basis of bearings: the South line of the Southeast 1/4 of Section 8 is
         assumed to bear North 90 degrees 00 minutes 00 seconds East;

         COMMENCING at the South Quarter Corner of Section 8;

         THENCE North 28 degrees 57 minutes 12 seconds East, a distance of
         2099.82 feet to the POINT OF BEGINNING;

         THENCE North 89 degrees 59 minutes 47 seconds East, a distance of
         361.50 feet;

                                  SCHEDULE B-3



         THENCE South 00 degrees 00 minutes 00 seconds West, a distance of
         136.32 feet to a point on the North line of Lot 1, Block 1 of the 165
         Subdivision Filing No. 1;

         THENCE South 00 degrees 00 minutes 00 seconds West, a distance of 48.06
         feet;

         THENCE South 46 degrees 57 minutes 20 seconds West, a distance of 87.86
         feet;

         THENCE North 90 degrees 00 minutes 00 seconds West, a distance of
         212.55 feet;

         THENCE North 34 degrees 59 minutes 47 seconds West, a distance of
         131.87 feet to a point on the North line of Lot 1, Block 1, of the 165
         Subdivision Filing No. 1;

         THENCE North 34 degrees 59 minutes 47 seconds West, a distance of 15.89
         feet; thence North 00 degrees 00 minutes 00 seconds East, a distance of
         123.29 feet to the POINT OF BEGINNING,

         City and County of Denver,
         State of Colorado.

                                 DOUGLAS COUNTY

8.       COLONY (SURREY RIDGE) SUBSTATION

         Parcels of land more particularly described as follows:

         Parcel A:

         A parcel of land in Section 24, Township 6 South, Range 67 West of the
         sixth principal meridian, Douglas County, Colorado, being more
         particularly described as follows:

         COMMENCING at the Northwest corner of said Section 24, whence the West
         Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11
         seconds East a distance of 2667.01 feet;

         THENCE South 58 degrees 06 minutes 25 seconds East a distance of 54.13
         feet to the POINT OF BEGINNING;

         THENCE North 89 degrees 48 minutes 35 seconds East a distance of 233.36
         feet;

         THENCE South 45 degrees 08 minutes 18 seconds East a distance of 65.90
         feet;

         THENCE South 00 degrees 05 minutes 10 seconds East a distance of 212.74
         feet;

         THENCE South 44 degrees 54 minutes 50 seconds West a distance of 65.94
         feet;

         THENCE South 89 degrees 54 minutes 50 seconds West a distance of 233.37
         feet;

         THENCE North 00 degrees 05 minutes 10 seconds West a distance of 305.50
         feet to the POINT OF BEGINNING;

         Parcel D:

                                  SCHEDULE B-4





         A parcel of land being sixty (60.00') feet in width, thirty (30.00')
         feet on each side of the following described centerline, located in the
         Southeast Quarter of Section 14, Northeast Quarter of Section 23 and
         the Northwest quarter of Section 24 all in Township 6 South, Range 67
         West of the Sixth Principal Meridian, Douglas County, Colorado, being
         more particularly described as follows:

         COMMENCING at the Northeast corner of said Southeast Quarter of Section
         14, whence the Southeast Corner of said Section 14 bears South 01
         degrees 04 minutes 04 seconds East a distance of 2664.06 feet;

         THENCE South 39 degrees 51 minutes 34 seconds West along a line
         non-tangent with the following described curve a distance of 652.76
         feet to the southerly line of a parcel of land recorded in book 264,
         page 426 on July 1, 1974 in the Douglas County Clerk and Recorders
         Office, being the POINT OF BEGINNING;

         THENCE the following five (5) courses along existing dirt road or trail
         centerline;

         1.       Southwesterly along the Arapahoe County of a curve to the
                  right, having a central angle of 12 degrees 16 minutes 59
                  seconds, a radius of 860.00 feet, a chord bearing of South 28
                  degrees 24 minutes 25 seconds West, a distance of 184.02 feet,
                  and an arc distance of 184.37 feet;

         2.       THENCE South 34 degrees 32 minutes 55 seconds West tangent
                  with the last and following described curves a distance of
                  185.60 feet;

         3.       THENCE along the arc of a curve to the left, having a central
                  angle of 1 degrees 05 minutes 24 seconds, a radius of 800.00
                  feet, a chord bearing South 34 degrees 00 minutes 12 seconds
                  West a distance of 15.22 feet, and an arc distance of 15.22
                  feet;

         4.       THENCE South 33 degrees 27 minutes 30 seconds West tangent
                  with the last described curve a distance of 230.99 feet;

         5.       THENCE South 33 degrees 05 minutes 19 seconds West tangent
                  with the following described curve a distance of 63.86 feet;

         THENCE along the arc of a curve to the left, having a central angle of
         17 degrees 08 minutes 04 seconds, a radius of 200.00 feet, a chord
         bearing South 24 degrees 31 minutes 17 seconds West a distance of 59.59
         feet, and an arc distance of 59.81 feet;

         THENCE South 15 degrees 57 minutes 15 seconds West tangent with the
         last and following described curves a distance of 108.55 feet;

         THENCE along the arc of a curve to the left, having a central angle of
         75 degrees 23 minutes 51 seconds, a radius of 150.00 feet, a chord
         bearing South 21 degrees 44 minutes 40 seconds East a distance of
         183.45 feet, and an arc distance of 197.39 feet;

         THENCE the following eight (8) courses along said existing dirt road or
         trail centerline:

         1.       South 59 degrees 26 minutes 36 seconds East tangent with the
                  last described curve a distance of 35.15 feet;

                                  SCHEDULE B-5





         2.       THENCE South 68 degrees 40 minutes 34 seconds East a distance
                  of 43.72 feet;

         3.       THENCE North 84 degrees 29 minutes 06 seconds East a distance
                  of 73.85 feet;

         4.       THENCE South 57 degrees 01 minutes 00 seconds East a distance
                  of 68.34 feet;

         5.       THENCE South 28 degrees 47 minutes 04 seconds East tangent
                  with the following described curve a distance of 31.85 feet;

         6.       THENCE along the arc of a curve to the right, having a central
                  angle of 30 degrees 53 minutes 10 seconds, a radius of 200.00
                  feet, a chord bearing South 13 degrees 20 minutes 29 seconds
                  East a distance of 106.51 feet, and an arc distance of 107.81
                  feet;

         7.       THENCE along the arc of a curve to the left, tangent with the
                  last described curve, having a central angle of 15 degrees 45
                  minutes 50 seconds, a radius of 200.00 feet, a chord bearing
                  of South 05 degrees 46 minutes 48 seconds East a distance of
                  54.85 feet, and an arc distance of 55.03 feet;

         8.       THENCE South 13 degrees 39 minutes 43 seconds East tangent
                  with the last described curve a distance of 21.80 feet;

         THENCE South 18 degrees 42 minutes 28 seconds East tangent with the
         following described curve a distance of 100.70 feet;

         THENCE along the arc of a curve to the left, having a central angle
         foot 9 degrees 31 minutes 51 seconds, a radius of 200.00 feet, a chord
         bearing South 23 degrees 28 minutes 23 seconds East a distance of 33.23
         feet, and an arc distance of 33.27 feet;

         THENCE South 28 degrees 14 minutes 18 seconds East tangent with the
         last and following described curves a distance of 164.18 feet;

         THENCE along the arc of a curve to the left, having a central angle of
         12 degrees 32 minutes 57 seconds, a radius of 200.00 feet, a chord
         bearing South 34 degrees 30 minutes 47 seconds East a distance of 43.72
         feet, and an arc distance of 43.80 feet;

         THENCE South 40 degrees 47 minutes 15 seconds East tangent with the
         last and following described curves a distance of 41.82 feet;

         THENCE along the arc of a curve to the right, having a central angle of
         17 degrees 47 minutes 53 seconds, a radius 200.00 feet, a chord bearing
         South 31 degrees 53 minutes 19 seconds East a distance of 61.88 feet,
         and an arc distance of 62.13 feet;

         THENCE South 22 degrees 59 minutes 22 seconds East tangent with the
         last and following described curves a distance of 713.97 feet;

         THENCE along the arc of a curve to the left, having a central angle of
         67 degrees 06 minutes 49 seconds, a radius of 100.00 feet, a chord
         bearing of South 56 degrees 32 minutes 47 seconds East a distance of
         110.55 feet and an arc distance of 117.14 feet;

                                  SCHEDULE B-6





         THENCE North 89 degrees 53 minutes 49 seconds East tangent with the
         last described curve a distance of 32.70 feet to the point of
         termination, whence the Southeast corner of said Section 14 bears North
         20 degrees 59 minutes 42 seconds West a distance of 128.66 feet;

         Sidelines are shortened or lengthened to intersect the southerly line
         of said parcel of land recorded in book 264, page 426, and the westerly
         line of the Surrey Ridge Substation boundary.

         Parcel E:

         A parcel of land located in Sections 24 and 23, Township 6 South, Range
         67 West of the Sixth Principal Meridian, Douglas County, Colorado,
         being more particularly described as follows:

         COMMENCING at the Northwest corner of said Section 24, whence the West
         Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11
         seconds East, a distance of 2667.01 feet;

         THENCE South 11 degrees 21 minutes 30 seconds East a distance of 340.73
         feet to the southerly line of Surrey Ridge Substation Site, being the
         POINT OF BEGINNING;

         THENCE North 89 degrees 54 minutes 50 seconds East along said southerly
         line of Surrey Ridge Substation site a distance of 185.92 feet;

         THENCE South 24 degrees 09 minutes 27 seconds West, a distance of
         185.11 feet;

         THENCE South 03 degrees 23 minutes 27 seconds East a distance of
         1233.70 feet;

         THENCE South 17 degrees 16 minutes 47 seconds West a distance of 919.76
         feet;

         THENCE South 38 degrees 14 minutes 15 seconds West a distance of
         1281.45 feet;

         THENCE South 07 degrees 51 minutes 01 seconds West a distance of
         1498.69 feet;

         THENCE South 89 degrees 32 minutes 01 seconds West along the northerly
         line of a parcel of land described in Reception Number 105224, Document
         Number 1630, recorded in the Douglas County Clerk and Recorders Office
         on March 23, 1959 a distance of 101.06 feet;

         THENCE North 07 degrees 51 minutes 01 seconds East a distance of
         1540.46 feet;

         THENCE North 38 degrees 14 minutes 15 seconds East a distance of
         1290.11 feet;

         THENCE North 17 degrees 16 minutes 47 seconds East a distance of 883.02
         feet;

         THENCE North 03 degrees 23 minutes 27 seconds West a distance of
         1390.31 feet to the POINT OF BEGINNING.

         Parcel F:

         A parcel of land lying in Section 13, Section 14, Section 23 and
         Section 24 all in Township 6 South, Range 67 West of the Sixth
         Principal Meridian, Douglas County, Colorado, being more particularly
         described as follows:

                                  SCHEDULE B-7





         COMMENCING at the Northwest Corner of said Section 24, whence the West
         Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11
         seconds East a distance of 2667.01 feet;

         THENCE South 89 degrees 14 minutes 28 seconds West along the northerly
         line of the Northeast quarter of said Section 23 a distance of 27.78
         feet to the POINT OF BEGINNING;

         THENCE North 75 degrees 40 minutes 59 seconds East a distance of 184.77
         feet;

         THENCE South 87 degrees 37 minutes 41 seconds East a distance of 152.52
         feet;

         THENCE South 46 degrees 56 minutes 28 seconds East a distance of 121.54
         feet;

         THENCE South 06 degrees 45 minutes 06 seconds East a distance of 281.45
         feet;

         THENCE South 46 degrees 47 minutes 03 seconds West a distance of 166.26
         feet;

         THENCE North 74 degrees 24 minutes 57 seconds West a distance of 329.96
         feet;

         THENCE North 02 degrees 21 minutes 14 seconds West a distance of 348.59
         feet to the POINT OF BEGINNING;

         Excepting therefrom the following described parcel of land:

         COMMENCING at the Northwest Corner of said Section 24, whence the West
         Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11
         seconds East a distance of 2667.01 feet;

         THENCE South 58 degrees 06 minutes 25 seconds East a distance of 54.13
         feet to the POINT OF BEGINNING;

         THENCE North 89 degrees 48 minutes 35 seconds East a distance of 233.36
         feet;

                                   WELD COUNTY

9.       NEW GILCREST SUBSTATION

         A parcel of land located in the Southwest one-quarter of Section 10,
         Township 4 North, Range 66 West of the Sixth Principal Meridian, County
         of Weld, State of Colorado, being more particularly described as
         follows:

         Basis of bearings: The South one-quarter line of Section 10, Township 4
         North, Range 66 West of the Sixth Principal Meridian, bearing
         N89 degrees 26'15"E.

         Commencing at the Southwest corner of said Section 10; thence N34
         degrees 06'30"E a distance of 80.25 feet to the Point Of Beginning;
         thence N00 degrees 00'00"E parallel with and 45 feet East of the West
         line of the Southwest one-quarter of said Section 10 a distance of
         304.02 feet; thence N89 degrees 26'15"E parallel with the South line of
         the Southwest one-quarter of said Section 10 a distance of 325.02 feet;
         thence S00 degrees 00'00"E parallel with the West line of the Southwest
         one-quarter of said Section 10 a distance of 325.02 feet to a point 45
         feet North of the South line of the Southwest one-quarter of said
         Section 10; thence S89 degrees 26'15"W parallel with the South line of
         the Southwest one-quarter of said Section 10 a distance of 304.02 feet;
         thence N45 degrees 16'52"W a distance of 29.55 feet to the Point Of
         Beginning.

                                  SCHEDULE B-8





         Said parcel of land containing 105,409.60 square feet or 2.419 acres
         more or less.


                                  SCHEDULE B-9

EX-4.04

                                                                    EXHIBIT 4.04

                             PUBLIC SERVICE COMPANY
                                   OF COLORADO

                                       TO


                      U.S. BANK TRUST NATIONAL ASSOCIATION,

                                                AS TRUSTEE


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


                          SUPPLEMENTAL INDENTURE NO. 10

                         Dated as of September 15, 2002


                          Supplemental to the Indenture
                           dated as of October 1, 1993

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


                  Establishing the Securities of Series No. 9,
              designated First Collateral Trust Bonds, Series No. 9
                       (Bank of America Collateral Bonds)








         SUPPLEMENTAL INDENTURE NO. 10, dated as of September 15, 2002, between
PUBLIC SERVICE COMPANY OF COLORADO, a corporation duly organized and existing
under the laws of the State of Colorado (hereinafter sometimes called the
"Company"), and U.S. BANK TRUST NATIONAL ASSOCIATION (FORMERLY FIRST TRUST OF
NEW YORK, NATIONAL ASSOCIATION), a national banking association, as successor
trustee (hereinafter sometimes called the "Trustee") to Morgan Guaranty Trust
Company of New York under the Indenture, dated as of October 1, 1993
(hereinafter called the "Original Indenture"), as previously supplemented and as
further supplemented by this Supplemental Indenture No. 10. The Original
Indenture and any and all indentures and all other instruments supplemental
thereto are hereinafter sometimes collectively called the "Indenture".

                             RECITALS OF THE COMPANY

         The Original Indenture was authorized, executed and delivered by the
Company to provide for the issuance from time to time of its Securities (such
term and all other capitalized terms used herein without definition having the
meanings assigned to them in the Original Indenture), to be issued in one or
more series as contemplated therein, and to provide security for the payment of
the principal of and premium, if any, and interest, if any, on the Securities.

         The Company has heretofore executed and delivered to the Trustee the
Supplemental Indentures referred to in Schedule A hereto for the purpose of
establishing a series of bonds and appointing the successor Trustee.

         The Company has heretofore entered into a Second Amended and Restated
364-Day Credit Agreement (the "Credit Agreement"), dated as of June 28, 2002,
with Bank of America, N.A., as Administrative Agent (the "Administrative Agent")
and the several financial institutions and other persons from time to time party
thereto (collectively, the "Lenders"), pursuant to which the Lenders have agreed
to make advances and grant certain other financial accommodations to the Company
up to an aggregate amount of Five Hundred Thirty Million dollars ($530,000,000)
(the "Loans"). The Credit Agreement was amended by that certain First Amendment
to Second Amended and Restated 364-Day Credit Agreement, dated as of September
6, 2002 (the "First Amendment"), between the Company and the Administrative
Agent, pursuant to which certain provisions in the Credit Agreement were
modified, including, without limitation, the addition of a covenant requiring
the Company to cause the principal amount of the Company's obligations under the
Credit Agreement to be ratably secured with all indebtedness of the Company
under the Indenture, as a condition to, and as consideration for, the obligation
of the Lenders to continue to make the Loans in accordance with the terms of the
Credit Agreement.

         Pursuant to its obligations under the First Amendment, the Company now
desires to establish a series of Securities to be designated "First Collateral
Trust Bonds, Series No. 9 (Bank of America Collateral Bonds)", such series of
Securities to be hereinafter sometimes called "Series No. 9".

         The Company has duly authorized the execution and delivery of this
Supplemental Indenture No. 10 to establish the Securities of Series No. 9 and
has duly authorized the issuance of such Securities; and all acts necessary to
make this Supplemental Indenture No. 10 a valid agreement of the Company, and to
make the Securities of Series No. 9 valid obligations of the Company, have been
performed.

                                GRANTING CLAUSES

         NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 10 WITNESSETH, that, in
consideration of the premises, including, without limitation, the consent of the
Lenders to continue to make Loans available to the Company in accordance with
the terms of the Credit Agreement, and in







order to secure the payment of the principal of and premium, if any, and
interest, if any, on all Securities from time to time Outstanding and the
performance of the covenants contained therein and in the Indenture and to
declare the terms and conditions on which such Securities are secured, the
Company hereby grants, bargains, sells, releases, conveys, assigns, transfers,
mortgages, pledges, sets over and confirms to the Trustee, and grants to the
Trustee a security interest in, the following:

                              GRANTING CLAUSE FIRST

                  All right, title and interest of the Company, as of the date
         of the execution and delivery of this Supplemental Indenture No. 10, in
         and to property (other than Excepted Property), real, personal and
         mixed and wherever situated, in any case used or to be used in or in
         connection with the Electric Utility Business (whether or not such use
         is the sole use of such property), including without limitation (a) all
         lands, easements, servitudes, licenses, permits, rights of way and
         other rights and interests in or relating to real property used or to
         be used in or in connection with the Electric Utility Business or
         relating to the occupancy or use of such real property, subject
         however, to the exceptions and exclusions set forth in clause (a) of
         Granting Clause First of the Original Indenture; (b) all plants,
         generators, turbines, engines, boilers, fuel handling and
         transportation facilities, air and water pollution control and sewage
         and solid waste disposal facilities and other machinery and facilities
         for the generation of electric energy; (c) all switchyards, lines,
         towers, substations, transformers and other machinery and facilities
         for the transmission of electric energy; (d) all lines, poles,
         conduits, conductors, meters, regulators and other machinery and
         facilities for the distribution of electric energy; (e) all buildings,
         offices, warehouses and other structures used or to be used in or in
         connection with the Electric Utility Business; (f) all pipes, cables,
         insulators, ducts, tools, computers and other data processing and/or
         storage equipment and other equipment, apparatus and facilities used or
         to be used in or in connection with the Electric Utility Business; (g)
         any or all of the foregoing properties in the process of construction;
         and (h) all other property, of whatever kind and nature, ancillary to
         or otherwise used or to be used in conjunction with any or all of the
         foregoing or otherwise, directly or indirectly, in furtherance of the
         Electric Utility Business;

                             GRANTING CLAUSE SECOND

                  Subject to the applicable exceptions permitted by Section
         810(c), Section 1303 and Section 1305 of the Original Indenture, all
         property (other than Excepted Property) of the kind and nature
         described in Granting Clause First which may be hereafter acquired by
         the Company, it being the intention of the Company that all such
         property acquired by the Company after the date of the execution and
         delivery of this Supplemental Indenture No. 10 shall be as fully
         embraced within and subjected to the Lien hereof as if such property
         were owned by the Company as of the date of the execution and delivery
         of this Supplemental Indenture No. 10;

                             GRANTING CLAUSE FOURTH

                  All other property of whatever kind and nature subjected or
         required to be subjected to the Lien of the Indenture by any of the
         provisions thereof;

                                       2






                                EXCEPTED PROPERTY

                  Expressly excepting and excluding, however, from the Lien and
         operation of the Indenture all Excepted Property of the Company,
         whether now owned or hereafter acquired;

         TO HAVE AND TO HOLD all such property, real, personal and mixed, unto
the Trustee, its successors in trust and their assigns forever;

         SUBJECT, HOWEVER, to (a) Liens existing at the date of the execution
and delivery of the Original Indenture (including, but not limited to, the Lien
of the PSCO 1939 Mortgage), (b) as to property acquired by the Company after the
date of the execution and delivery of the Original Indenture, Liens existing or
placed thereon at the time of the acquisition thereof (including, but not
limited to, the Lien of any Class A Mortgage and purchase money Liens), (c)
Retained Interests and (d) any other Permitted Liens, it being understood that,
with respect to any property which was at the date of execution and delivery of
the Original Indenture or thereafter became or hereafter becomes subject to the
Lien of any Class A Mortgage, the Lien of the Indenture shall at all times be
junior, subject and subordinate to the Lien of such Class A Mortgage;

         IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and
security of the Holders from time to time of all Outstanding Securities without
any priority of any such Security over any other such Security;

         PROVIDED, HOWEVER, that the right, title and interest of the Trustee in
and to the Mortgaged Property shall cease, terminate and become void in
accordance with, and subject to the conditions set forth in, Article Nine of the
Original Indenture, and if, thereafter, the principal of and premium, if any,
and interest, if any, on the Securities shall have been paid to the Holders
thereof, or shall have been paid to the Company pursuant to Section 603 of the
Original Indenture, then and in that case the Indenture shall terminate, and the
Trustee shall execute and deliver to the Company such instruments as the Company
shall require to evidence such termination; otherwise the Indenture, and the
estate and rights thereby granted shall be and remain in full force and effect;
and

         THE PARTIES HEREBY FURTHER COVENANT AND AGREE as follows:

                                   ARTICLE ONE

                           SECURITIES OF SERIES NO. 9

         There are hereby established the Securities of Series No. 9. The
Securities of Series No. 9 shall have the terms and characteristics set forth
below (the lettered subdivisions set forth below corresponding to the lettered
subdivisions of Section 301 of the Original Indenture):

         (a) the title of the Securities of such series shall be "First
         Collateral Trust Bonds, Series No. 9 (Bank of America Collateral
         Bonds)"; provided, however, that, at any time after the PSCO 1939
         Mortgage shall have been satisfied and discharged, the Company shall
         have the right, without any consent or other action by the Holders of
         such Securities, to change such title in such manner as shall be deemed
         by the Company to be appropriate to reflect such satisfaction and
         discharge, such change to be evidenced in an Officer's Certificate;

                                       3






         (b) the Securities of Series No. 9 shall be initially authenticated and
         delivered in the aggregate principal amount of $530,000,000;

         (c) not applicable;

         (d) the principal of the Securities of Series No. 9 shall be payable on
         June 27, 2003, the Stated Maturity.

         (e) the Securities of Series No. 9 shall not bear interest;

         (f) the Corporate Trust Office of U.S. Bank Trust National Association
         in New York, New York shall be the place at which (i) the principal of,
         premium, if any, and interest, if any, on the Securities of Series No.
         9 shall be payable, (ii) registration of transfer of such Securities
         may be effected, (iii) exchanges of such Securities may be effected and
         (iv) notices and demands to or upon the Company in respect of such
         Securities and the Indenture may be served; and U.S. Bank Trust
         National Association shall be the Security Registrar for such
         Securities; provided, however, that the Company reserves the right to
         change, by one or more Officer's Certificates, any such place or the
         Security Registrar; and provided, further, that the Company reserves
         the right to designate, by one or more Officer's Certificates, its
         principal office in Denver, Colorado as any such place or itself as the
         Security Registrar;

         (g) the Securities of Series No. 9 shall not be redeemable prior to
         maturity, other than as set forth in the Indenture;

         (h) not applicable;

         (i) not applicable;

         (j) not applicable;

         (k) not applicable;

         (l) not applicable;

         (m) not applicable;

         (n) not applicable;

         (o) not applicable;

         (p) not applicable;

         (q) the Securities of Series No. 9 are to be registered in the name of
         Bank of America, N.A., as Administrative Agent. Such Securities shall
         not be transferable, nor shall any purported transfer be registered
         except to a successor to the Administrative Agent under the Credit
         Agreement upon delivery to the Trustee of a Company Request requesting
         such transfer.

         (r) not applicable;

                                       4






         (s) no service charge shall be made for the transfer or exchange of the
         Securities of Series No. 9; provided, however, that the Company may
         require payment of a sum sufficient to cover any tax or other
         governmental charge payable in connection with the transfer or
         exchange;

         (t) not applicable;

         (u)      (i) If the Company shall have caused the Company's
                  indebtedness in respect of any Securities of Series No. 9 to
                  have been satisfied and discharged prior to the Maturity of
                  such Securities, as provided in Section 901 of the Original
                  Indenture, the Company shall, promptly after the date of such
                  satisfaction and discharge, give a notice to each Person who
                  was a Holder of any of such Securities on such date stating
                  (A)(1) the aggregate principal amount of such Securities and
                  (2) the aggregate amount of any money (other than amounts, if
                  any, deposited in respect of accrued interest on such
                  Securities) and the aggregate principal amount of, the rate or
                  rates of interest on, and the aggregate fair market value of,
                  any Eligible Obligations deposited pursuant to Section 901 of
                  the Original Indenture with respect to such Securities and (B)
                  that the Company will provide (and the Company shall promptly
                  so provide) to such Person, or any beneficial owner of such
                  Securities holding through such Person (upon written request
                  to the Company sent to an address specified in such notice),
                  such other information as such Person or beneficial owner, as
                  the case may be, reasonably may request in order to enable it
                  to determine the federal income tax consequences to it
                  resulting from the satisfaction and discharge of the Company's
                  indebtedness in respect of such Securities. Thereafter, the
                  Company shall, within forty-five (45) days after the end of
                  each calendar year, give to each Person who at any time during
                  such calendar year was a Holder of such Securities a notice
                  containing (X) such information as may be necessary to enable
                  such Person to report its income, gain or loss for federal
                  income tax purposes with respect to such Securities or the
                  assets held on deposit in respect thereof during such calendar
                  year or the portion thereof during which such Person was a
                  Holder of such Securities, as the case may be (such
                  information to be set forth for such calendar year as a whole
                  and for each month during such year) and (Y) a statement to
                  the effect that the Company will provide (and the Company
                  shall promptly so provide) to such Person, or any beneficial
                  owner of such Securities holding through such Person (upon
                  written request to the Company sent to an address specified in
                  such notice), such other information as such Person or
                  beneficial owner, as the case may be, reasonably may request
                  in order to enable it to determine its income, gain or loss
                  for federal income tax purposes with respect to such
                  Securities or such assets for such year or portion thereof, as
                  the case may be. The obligation of the Company to provide or
                  cause to be provided information for purposes of income tax
                  reporting by any Person as described in the first two
                  sentences of this paragraph shall be deemed to have been
                  satisfied to the extent that the Company has provided or
                  caused to be provided substantially comparable information
                  pursuant to any requirements of the Internal Revenue Code of
                  1986, as amended from time to time (the "Code") and United
                  States Treasury regulations thereunder.

                  (ii) Notwithstanding the provisions of subparagraph (i) above,
                  the Company shall not be required to give any notice specified
                  in such subparagraph or to

                                       5





                  otherwise furnish any of the information contemplated therein
                  if the Company shall have delivered to the Trustee an Opinion
                  of Counsel to the effect that the Holders of such Securities
                  will not recognize income, gain or loss for federal income tax
                  purposes as a result of the satisfaction and discharge of the
                  Company's indebtedness in respect of such Securities and such
                  Holders will be subject to federal income taxation on the same
                  amounts and in the same manner and at the same times as if
                  such satisfaction and discharge had not occurred.

                  (iii) Anything in this clause (u) to the contrary
                  notwithstanding, the Company shall not be required to give any
                  notice specified in subparagraph (i) or to otherwise furnish
                  the information contemplated therein or to deliver any Opinion
                  of Counsel contemplated by subparagraph (ii) if the Company
                  shall have caused Securities of Series No. 9 to be deemed to
                  have been paid for purposes of the Indenture, as provided in
                  Section 901 of the Original Indenture, but shall not have
                  effected the satisfaction and discharge of its indebtedness in
                  respect of such Securities pursuant to such Section.

         (v) If the Company terminates or reduces the aggregate amount of
         unutilized commitments of the Lenders to provide advances under the
         Credit Agreement pursuant to Section 2.04 thereof, such termination or
         reduction shall, to the extent thereof, be deemed to satisfy and
         discharge the obligation of the Company, if any, to make payment of
         principal on the Securities of Series No. 9. Upon payment of the
         Company's obligations under the Credit Agreement in full, termination
         of the Credit Agreement and termination of all commitments and other
         obligations of the Administrative Agent and the Lenders to the Company,
         the aggregate amount of principal of the Securities of Series No. 9
         shall be deemed satisfied and discharged.

                  On the date which is thirty (30) days after the Maturity of
         the Securities of Series No. 9, the Trustee may conclusively presume
         that the obligation of the Company to pay principal on the Securities
         of Series No. 9 as the same shall have become due and payable shall
         have been fully satisfied and discharged unless and until the Trustee
         shall have received a written notice prior to such date from the Holder
         hereof stating that the principal of Securities of Series No. 9 has
         become due and payable and specifying the amount of funds required to
         make such payment.

                  Notwithstanding anything to the contrary contained herein, the
         aggregate amount of principal actually due on the Securities of Series
         No. 9 shall not exceed the aggregate amount of the obligations of the
         Company under the Credit Agreement.

         (w) The Securities of Series No. 9 shall be subject to certain voting
         restrictions set forth in the Issuance Agreement to be entered into
         between the Company and Bank of America, N.A., as Administrative Agent.
         A copy of the Issuance Agreement will be on file at the office of the
         Trustee and will be available upon request.

         (x) The Securities of Series No. 9 shall be substantially in the form
         attached hereto as Exhibit A and shall have such further terms as are
         set forth in such form.

                                       6






                                   ARTICLE TWO

                            MISCELLANEOUS PROVISIONS

         (a) This Supplemental Indenture No. 10 is a supplement to the Original
         Indenture. As previously supplemented and further supplemented by this
         Supplemental Indenture No. 10, the Original Indenture is in all
         respects ratified, approved and confirmed, and the Original Indenture,
         all previous supplements thereto and this Supplemental Indenture No. 10
         shall together constitute one and the same instrument.

         (b) This Securities of Series No. 9 have been issued by the Company to
         the Administrative Agent to (i) secure the payment of the Company's
         obligations to make payments to any person under the Credit Agreement
         and (ii) provide to such persons the benefits of the security provided
         for this Security pursuant to the Indenture.


                                       7







                  IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture No. 10 to be duly executed as of the day and year first
above written.



                                PUBLIC SERVICE COMPANY OF COLORADO



                                  By:    /s/ Paul E. Pender
                                         ---------------------------------------
                                         Name:      Paul E. Pender
                                         Title:     Vice President and Treasurer




STATE OF MINNESOTA       )
                         ) ss.:
CITY OF MINNEAPOLIS      )

         On the 20th day of September, 2002, before me personally came Paul E.
Pender to me known, who, being by me duly sworn, did depose and say that he is a
Vice President and Treasurer of Public Service Company of Colorado, one of the
corporations described in and which executed the foregoing instrument; and that
he signed his name thereto by authority of the Board of Directors of said
corporation.

                                       /s/ Sharon M. Quellhorst
                                       -----------------------------------------
                                       Name: Sharon M. Quellhorst
                                       Notary Public, State of Minnesota

                                       Commission Expires:  January 31, 2005

                                       8





                                        U.S. BANK TRUST NATIONAL ASSOCIATION,
                                                                 Trustee



                                        By:    /s/ Ignazio Tamburello
                                               ---------------------------------
                                               Name:    Ignazio Tamburello
                                               Title:   Assistant Vice President



STATE OF NEW YORK              )
                               ) ss.:
CITY AND COUNTY OF NEW YORK    )

         On the 20th day of September, 2002, before me personally came Ignazio
Tamburello, to me known, who, being by me duly sworn, did depose and say that he
is an Assistant Vice President of U.S. Bank Trust National Association, the
banking association described in and which executed the foregoing instrument;
and that he signed his name thereto by authority of the Board of Directors of
said banking association.

                                         /s/ Doris Ware
                                         --------------------------------------
                                         Name:  Doris Ware
                                         Notary Public, State of New York


                                         Commission Expires: November 9, 2005

                                       9





                                                                       EXHIBIT A

                                FORM OF SECURITY


                   (See legend at the end of this Security for
                  restrictions on transfer and change of form)


                       PUBLIC SERVICE COMPANY OF COLORADO
  First Collateral Trust Bond, Series No. 9 (Bank of America Collateral Bonds)



                        Issue Date:          [September __], 2002
                   Stated Maturity:          June 27, 2003



                    This Security is not a Discount Security
              within the meaning of the within-mentioned Indenture
                    -----------------------------------------


Principal Amount                                           Registered No. 1
$530,000,000


         PUBLIC SERVICE COMPANY OF COLORADO, a corporation duly organized and
existing under the laws of the State of Colorado (herein called the "Company,"
which term includes any successor corporation under the Indenture referred to
below), for value received, hereby promises to pay to BANK OF AMERICA, N.A., as
Administrative Agent, or registered assigns, the principal sum of Five Hundred
Thirty Million Dollars on the Stated Maturity specified above. This Security
shall not bear interest.

         Payment of the principal of this Security at Maturity shall be made
upon presentation of this Security at the Corporate Trust Office of U.S. Bank
Trust National Association, in New York, New York or at such other office or
agency as may be designated for such purpose by the Company from time to time.
Payment of the principal of this Security, as aforesaid, shall be made 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.

         This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and issuable in one or more
series under and equally secured by an Indenture, dated as of October 1, 1993
(such Indenture as originally executed and delivered and as supplemented or
amended from time to time thereafter, together with any constituent instruments
establishing the terms of particular Securities, being herein called the
"Indenture"), between the Company and U.S. Bank Trust National Association
(formerly First Trust of New York, National Association) as successor trustee
(herein called the "Trustee," which term includes any successor trustee under
the Indenture), to which

                                  EXHIBIT A-1




Indenture and all indentures supplemental thereto reference is hereby made for a
description of the property mortgaged, pledged and held in trust, the nature and
extent of the security and the respective rights, limitations of rights, duties
and immunities of the Company, the Trustee and the Holders of the Securities
thereunder and of the terms and conditions upon which the Securities are, and
are to be, authenticated and delivered and secured. The acceptance of this
Security shall be deemed to constitute the consent and agreement by the Holder
hereof to all of the terms and provisions of the Indenture. This Security is one
of the series designated above.

         This Security has been issued pursuant to the requirements of, and as a
condition to, and as consideration for, the obligations of the Lenders to
continue to make the Loans under, and in accordance with the terms of, that
certain Second Amended and Restated 364-Day Credit Agreement (the "Credit
Agreement"), dated as of June 28, 2002, among the Company, Bank of America,
N.A., as Administrative Agent (the "Administrative Agent") and the several
financial institutions and other persons from time to time party thereto
(collectively, the "Lenders"), as amended by the First Amendment to Second
Amended and Restated 364-Day Credit Agreement, dated as of September 6, 2002,
between the Company and the Administrative Agent.

         If the Company terminates or reduces the aggregate amount of unutilized
commitments of the Lenders to provide advances under the Credit Agreement
pursuant to Section 2.04 thereof, such termination or reduction shall, to the
extent thereof, be deemed to satisfy and discharge the obligation of the
Company, if any, to make the payment of principal on the Securities of Series
No. 9. Upon payment of the Company's obligations under the Credit Agreement in
full, termination of the Credit Agreement and termination of all commitments and
other obligations of the Administrative Agent and the Lenders to the Company,
the aggregate amount of principal of the Securities of Series No. 9 shall be
deemed satisfied and discharged.

         On the date which is thirty (30) days after the Maturity of the
Securities of Series No. 9, the Trustee may conclusively presume that the
obligation of the Company to pay principal on the Securities of Series No. 9 as
the same shall have become due and payable shall have been fully satisfied and
discharged unless and until the Trustee shall have received a written notice
prior to such date from the Holder hereof stating that the principal of
Securities of Series No. 9 has become due and payable and specifying the amount
of funds required to make such payment.

         Notwithstanding anything to the contrary contained herein, the
aggregate amount of principal actually due on the Securities of Series No. 9
shall not exceed the aggregate amount of the obligations of the Company under
the Credit Agreement.

         If the Stated Maturity shall not be a Business Day (as hereinafter
defined), payment of the amounts due on this Security on such date may be made
on the next succeeding Business Day.

         This Security is not subject to redemption prior to the Stated Maturity
thereof, other than as set forth in the Indenture.

         If an Event of Default shall occur and be continuing, the principal of
this Security may be declared due and payable in the manner and with the effect
provided in the Indenture.

         The Indenture permits, with certain exceptions as therein provided, the
Trustee to enter into one or more supplemental indentures for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, the Indenture with the consent of the Holders of not less than a
majority in aggregate principal amount of the Securities of all series then
Outstanding under the Indenture, considered as one class; provided, however,
that if there shall be Securities of more than one

                                  EXHIBIT A-2




series Outstanding under the Indenture and if a proposed supplemental indenture
shall directly affect the rights of the Holders of Securities of one or more,
but less than all, of such series, then the consent only of the Holders of a
majority in aggregate principal amount of the Outstanding Securities of all
series so directly affected, considered as one class, shall be required; and
provided, further, that if the Securities of any series shall have been issued
in more than one Tranche and if the proposed supplemental indenture shall
directly affect the rights of the Holders of Securities of one or more, but less
than all, of such Tranches, then the consent only of the Holders of a majority
in aggregate principal amount of the Outstanding Securities of all Tranches so
directly affected, considered as one class, shall be required; and provided,
further, that the Indenture permits the Trustee to enter into one or more
supplemental indentures for limited purposes without the consent of any Holders
of Securities. The Indenture also contains provisions permitting the Holders of
a majority in principal amount of the Securities then Outstanding, on behalf of
the Holders of all Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. 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.

         As provided in the Indenture and subject to certain limitations therein
set forth, this Security or any portion of the principal amount hereof will be
deemed to have been paid for all purposes of the Indenture and to be no longer
Outstanding thereunder, and, at the election of the Company, the Company's
entire indebtedness in respect thereof will be satisfied and discharged, if
there has been irrevocably deposited with the Trustee or any Paying Agent (other
than the Company), in trust, money in an amount which will be sufficient and/or
Eligible Obligations, the principal of and interest on which when due, without
regard to any reinvestment thereof, will provide moneys which, together with
moneys so deposited, will be sufficient, to pay when due the principal of and
interest on this Security when due.

         This Security is not transferable except to a successor to the
Administrative Agent under the Credit Agreement upon delivery to the Trustee of
a Company Request requesting such transfer. Before any transfer of this Security
will be recognized or given effect by the Company or the Trustee, the Holder
shall note the amounts of all principal prepayments hereon, and shall notify the
Company and the Trustee of the name and address of the transferee and shall
afford the Company and the Trustee the opportunity of verifying the notation as
to prepayment of principal. By the acceptance hereof the Holder of this Security
and each transferee shall be deemed to have agreed to indemnify and hold
harmless the Company and the Trustee against all losses, claims, damages or
liability arising out of any failure on the part of the Holder or of any such
transferee to comply with the requirements of the preceding sentence. Any such
transfer is registrable in the Security Register, upon surrender of this
Security for registration of transfer at the office of U.S. Bank Trust National
Association, in New York, New York or such other office or agency as may be
designated by the Company from time to time, 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 attorney duly
authorized in writing, and thereupon one or more new Securities of this series
of authorized denominations and of like tenor and aggregate principal amount,
will be issued to the designated transferee or transferees.

         This Bond has not been registered under the Securities Act of 1933, as
amended, and may not be offered or sold in contravention of said Act and is not
transferable except to a successor to the Administrative Agent under the Credit
Agreement.

                                  EXHIBIT A-3




         No service charge shall be made for any such registration of transfer,
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 absolute 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.

         The Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York.

         As used herein "Business Day" means any day, other than a Saturday or
Sunday, which is not a day on which banking institutions or trust companies in
The City of New York, New York or other city in which is located any office or
agency maintained for the payment of principal or interest on this Security, are
authorized or required by law, regulation or executive order to remain closed.
All other terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.

         As provided in the Indenture, no recourse shall be had for the payment
of the principal of or interest on any Securities, or any part thereof, or for
any claim based thereon or otherwise in respect thereof, or of the indebtedness
represented thereby, or upon any obligation, covenant or agreement under the
Indenture, against, and no personal liability whatsoever shall attach to, or be
incurred by, any incorporator, shareholder, officer or director, as such, past,
present or future of the Company or of any predecessor or successor corporation
(either directly or through the Company or a predecessor or successor
corporation), whether by virtue of any constitutional provision, statute or rule
of law, or by the enforcement of any assessment or penalty or otherwise; it
being expressly agreed and understood that the Indenture and all the Securities
are solely corporate obligations and that any such personal liability is hereby
expressly waived and released as a condition of, and as part of the
consideration for, the execution of the Indenture and the issuance of the
Securities.

         Unless the certificate of authentication hereon has been executed by
the Trustee or an Authenticating Agent by manual signature, this Security shall
not be entitled to any benefit under the Indenture or be valid or obligatory for
any purpose.

                                  EXHIBIT A-4






         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed and its corporate seal to be hereunto affixed and attested.

                                     PUBLIC SERVICE COMPANY OF COLORADO

                                     By:
                                        ---------------------------------------
                                              Vice President and Treasurer




Attest:
       ----------------------------
            Assistant Secretary


                          CERTIFICATE OF AUTHENTICATION

         This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.

Dated:
      -----------------------------


           U.S. BANK TRUST           OR               U.S. BANK TRUST
        NATIONAL ASSOCIATION,                      NATIONAL ASSOCIATION,
             as Trustee                                 as Trustee

By:                                        By:
   --------------------------------           ---------------------------------
         Authorized Officer                    AS AUTHENTICATING AGENT


                                           By:
                                              ---------------------------------
                                                      Authorized Officer





         THIS SECURITY MAY NOT BE TRANSFERRED OR EXCHANGED, NOR MAY ANY
PURPORTED TRANSFER BE REGISTERED, EXCEPT TO A SUCCESSOR TO THE ADMINISTRATIVE
AGENT UNDER THE CREDIT AGREEMENT REFERRED TO HEREIN.

         THE HOLDER OF THIS BOND BY ITS ACCEPTANCE HEREOF AGREES TO RESTRICTIONS
ON TRANSFER, RESTRICTIONS ON VOTING, TO WAIVERS OF CERTAIN RIGHTS OF EXCHANGE,
AND TO INDEMNIFICATION PROVISIONS AS SET FORTH BELOW. IN ADDITION, THE BOND
REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND SUCH BOND MAY NOT BE TRANSFERRED WITHOUT COMPLIANCE WITH APPLICABLE
SECURITIES LAWS.

         THIS SECURITY IS SUBJECT TO CERTAIN VOTING RESTRICTIONS SET FORTH IN
THAT ISSUANCE AGREEMENT, DATED AS OF SEPTEMBER 26, 2002, BY AND BETWEEN THE
COMPANY AND BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT. A COPY OF THE
ISSUANCE AGREEMENT IS ON FILE AT THE OFFICE OF THE TRUSTEE AND IS AVAILABLE UPON
REQUEST.

                               -------------------
                                  EXHIBIT A-5






   FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto


- --------------------------------------------------------------------------------
     [please insert social security or other identifying number of assignee]


- --------------------------------------------------------------------------------
            [please print or typewrite name and address of assignee]


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

the within Security of PUBLIC SERVICE COMPANY OF COLORADO and does hereby
irrevocably constitute and appoint __________________________________ ,
Attorney, to transfer said Security on the books of the within-mentioned
Company, with full power of substitution in the premises.

Dated:
      ----------------------


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

         Notice: The signature to this assignment must correspond with the name
         as written upon the face of the Security in every particular without
         alteration or enlargement or any change whatsoever.

                                  EXHIBIT A-6







                                                                      SCHEDULE A


                             SUPPLEMENTAL INDENTURES



    DATE OF                  SERIES OF BONDS               PRINCIPAL               PRINCIPAL
 SUPPLEMENTAL                ---------------             AMOUNT ISSUED               AMOUNT
   INDENTURE                                             -------------            OUTSTANDING
   ---------                                                                      -----------
                                                                         
November 1, 1993               Series No. 1               $134,500,000            $134,500,000
January 1, 1994           Series No. 2 due 2001           $102,667,000                None
                                   and
                          Series No. 2 due 2024           $110,000,000            $110,000,000
September 2, 1994                  None                       None                    None
(Appointment of
Successor Trustee)
May 1, 1996                    Series No. 3               $125,000,000            $125,000,000
November 1, 1996               Series No. 4               $250,000,000            $175,000,000
February 1, 1997               Series No. 5               $150,000,000                None
April 1, 1998                  Series No. 6               $250,000,000            $250,000,000
August 15, 2002                Series No. 7               $48,750,000             $48,750,000
September 1, 2002              Series No. 8               $600,000,000            $600,000,000




                                  SCHEDULE A-1

EX-4.05

                                                                    Exhibit 4.05



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                          SUPPLEMENTAL TRUST INDENTURE

                                      FROM

                         NORTHERN STATES POWER COMPANY


                                       TO

                           BNY MIDWEST TRUST COMPANY
                                    TRUSTEE

                            DATED AS OF JUNE 1, 2002



                                SUPPLEMENTAL TO

                                TRUST INDENTURE
                             DATED FEBRUARY 1, 1937

                                      AND

                           SUPPLEMENTAL AND RESTATED
                             TRUST INDENTURE DATED
                                  MAY 1, 1988




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                                TABLE OF CONTENTS




                                                                                                               Page
                                                                                                         
ARTICLE I. SPECIFIC SUBJECTION OF ADDITIONAL PROPERTY TO THE LIEN OF THE ORIGINAL INDENTURE.......................8
         SECTION 1.01.............................................................................................8

ARTICLE II. FORM AND EXECUTION OF BONDS..........................................................................10
         SECTION 2.01............................................................................................10
         SECTION 2.02............................................................................................11
         SECTION 2.02............................................................................................11
         SECTION 2.04............................................................................................11
         SECTION 2.05............................................................................................11
         SECTION 2.06............................................................................................11

ARTICLE III. APPOINTMENT OF AUTHENTICATING AGENT.................................................................12
         SECTION 3.01............................................................................................12
         SECTION 3.02............................................................................................12
         SECTION 3.03............................................................................................13
         SECTION 3.04............................................................................................13

ARTICLE IV. FINANCING STATEMENT TO COMPLY WITH THE UNIFORM COMMERCIAL CODE.......................................13
         SECTION 4.02............................................................................................13
         SECTION 4.03............................................................................................13
         SECTION 4.04............................................................................................14
         SECTION 4.05............................................................................................14
         SECTION 4.06............................................................................................17

ARTICLE V. AMENDMENTS TO INDENTURE...............................................................................17
         SECTION 5.01............................................................................................17

ARTICLE VI. MISCELLANEOUS........................................................................................18
         SECTION 6.01............................................................................................18
         SECTION 6.02............................................................................................18
         SECTION 6.03............................................................................................18
         SECTION 6.04............................................................................................18
         SECTION 6.05............................................................................................19
         SECTION 6.06............................................................................................19

Schedule A......................................................................................................A-1














         SUPPLEMENTAL TRUST INDENTURE, made as of the 1ST day of June, 2002, but
effective as of August 12, 2002, by and between NORTHERN STATES POWER COMPANY
(formerly Northern Power Corporation), a corporation duly organized and existing
under and by virtue of the laws of the State of Minnesota, having its principal
office in the City of Minneapolis in said State (the "Company"), party of the
first part, and BNY MIDWEST TRUST COMPANY, a corporation duly organized and
existing under and by virtue of the laws of the State of Illinois, having its
principal office in the City of Chicago in said State and the successor to
Harris Trust and Savings Bank, as Trustee (the "Trustee"), party of the second
part;

                                   WITNESSETH:

         WHEREAS, a predecessor in interest to the Company, Xcel Energy Inc.
(formerly Northern States Power Company), a corporation duly organized and
existing under and by virtue of the laws of the State of Minnesota (the
"Predecessor Company"), heretofore has executed and delivered to the Trustee its
Trust Indenture (the "1937 Indenture"), made as of February 1, 1937, whereby the
Predecessor Company granted, bargained, sold, warranted, released, conveyed,
assigned, transferred, mortgaged, pledged, set over, and confirmed to the
Trustee, and to its respective successors in trust, all property, real,
personal, and mixed then owned or thereafter acquired or to be acquired by the
Predecessor Company (except as therein excepted from the lien thereof) and
subject to the rights reserved by the Predecessor Company in and by the
provisions of the 1937 Indenture, to be held by said Trustee in trust in
accordance with provisions of the 1937 Indenture for the equal pro rata benefit
and security of all and every of the bonds issued thereunder in accordance with
the provisions thereof; and


         WHEREAS, the Predecessor Company heretofore has executed and delivered
to the Trustee a Supplemental Trust Indenture, made as of June 1, 1942, whereby
the Predecessor Company conveyed, assigned, transferred, mortgaged, pledged, set
over, and confirmed to the Trustee, and its respective successors in said trust,
additional property acquired by it subsequent to the date of the 1937 Indenture;
and


         WHEREAS, the Predecessor Company heretofore has executed and delivered
to the Trustee the following additional Supplemental Trust Indentures which, in
addition to conveying, assigning, transferring, mortgaging, pledging, setting
over, and confirming to the Trustee, and its respective successors in said
trust, additional property acquired by it subsequent to the preparation of the
next preceding Supplemental Trust Indenture and adding to the covenants,
conditions, and agreements of the 1937 Indenture certain additional covenants,
conditions, and agreements to be observed by the Predecessor Company, created
the following series of First Mortgage Bonds:




DATE OF SUPPLEMENTAL TRUST INDENTURE                DESIGNATION OF SERIES
- ------------------------------------                -------------------------------------
                                                 
February 1, 1944                                    Series due February 1, 1974 (retired)
October 1, 1945                                     Series due October 1, 1975 (retired)
July 1, 1948                                        Series due July 1, 1978 (retired)
August 1, 1949                                      Series due August 1, 1979 (retired)
June 1, 1952                                        Series due June 1, 1982 (retired)








DATE OF SUPPLEMENTAL TRUST INDENTURE                DESIGNATION OF SERIES
- ------------------------------------                -------------------------------------
                                                 
October 1, 1954                                     Series due October 1, 1984 (retired)
September 1, 1956                                   Series due 1986 (retired)
August 1, 1957                                      Series due August 1, 1987 (redeemed)
July 1, 1958                                        Series due July 1, 1988 (retired)
December 1, 1960                                    Series due December 1, 1990 (retired)
August 1, 1961                                      Series due August 1, 1991 (retired)
June 1, 1962                                        Series due June 1, 1992 (retired)
September 1, 1963                                   Series due September 1, 1993 (retired)
August 1, 1966                                      Series due August 1, 1996 (redeemed)
June 1, 1967                                        Series due June 1, 1995 (redeemed)
October 1, 1967                                     Series due October 1, 1997 (redeemed)
May 1, 1968                                         Series due May 1, 1998 (redeemed)
October 1, 1969                                     Series due October 1, 1999 (redeemed)
February 1, 1971                                    Series due March 1, 2001 (redeemed)
May 1, 1971                                         Series due June 1, 2001 (redeemed)
February 1, 1972                                    Series due March 1, 2002 (redeemed)
January 1, 1973                                     Series due February 1, 2003 (redeemed)
January 1, 1974                                     Series due January 1, 2004 (redeemed)
September 1, 1974                                   Pollution Control Series A (redeemed)
April 1, 1975                                       Pollution Control Series B (redeemed)
May 1, 1975                                         Series due May 1, 2005 (redeemed)
March 1, 1976                                       Pollution Control Series C (retired)
June 1, 1981                                        Pollution Control Series D, E and F (redeemed)
December 1, 1981                                    Series due December 1, 2011 (redeemed)
May 1, 1983                                         Series due May 1, 2013 (redeemed)
December 1, 1983                                    Pollution Control Series G (redeemed)
September 1, 1984                                   Pollution Control Series H (redeemed)
December 1, 1984                                    Resource Recovery Series I (redeemed)
May 1, 1985                                         Series due June 1, 2015 (redeemed)
September 1, 1985                                   Pollution Control Series J, K and L
July 1, 1989                                        Series due July 1, 2019 (redeemed)
June 1, 1990                                        Series due June 1, 2020 (redeemed)
October 1, 1992                                     Series due October 1, 1997 (retired)
April 1, 1993                                       Series due April 1, 2003
December 1, 1993                                    Series due December 1, 2000, and December 1, 2005
February 1, 1994                                    Series due February 1, 1999
October 1, 1994                                     Series due October 1, 2001
June 1, 1995                                        Series due July 1, 2025
April 1, 1997                                       Pollution Control Series M (redeemed), N, O and P
March 1, 1998                                       Series due March 1, 2023 and March 1, 2028
May 1, 1999                                         Resource Recovery Series Q
June 1, 2000                                        Resource Recovery Series R; and



                                       2








         WHEREAS, on August 18, 2000 New Centuries Energies, Inc. was merged
with and into the Predecessor Company and the Predecessor Company changed its
corporate name from Northern States Power Company to Xcel Energy Inc.; and


         WHEREAS, pursuant to an Assignment and Assumption Agreement dated as of
August 18, 2000 between the Predecessor Company and the Company, substantially
all the assets of the Predecessor Company (other than the stock of the
Predecessor Company's subsidiaries) were conveyed to, and substantially all the
liabilities of the Predecessor Company, including liabilities created under the
Indenture, were assumed by, the Company (the "Assignment"); and


         WHEREAS, pursuant to the Supplemental Trust Indenture dated as of
August 1, 2000 among the Predecessor Company, the Company and Harris Trust and
Savings Bank, as Trustee, the requirements and conditions precedent set forth in
the Original Indenture and the Restated Indenture (each as hereinafter defined)
with respect to the Assignment were satisfied; and


         WHEREAS, the 1937 Indenture and all of the foregoing Supplemental Trust
Indentures are referred to herein collectively as the "Original Indenture;" and


         WHEREAS, the Predecessor Company heretofore has executed and delivered
to the Trustee a Supplemental and Restated Trust Indenture, dated May 1, 1988
(the "Restated Indenture"), which, in addition to conveying, assigning,
transferring, mortgaging, pledging, setting over, and confirming to the Trustee,
and its respective successors in said trust, additional property acquired by it
subsequent to the preparation of the next preceding Supplemental Trust
Indenture, amended and restated the Original Indenture; and


         WHEREAS, the Restated Indenture will not become effective and operative
until all bonds of each series issued under the Original Indenture prior to May
1, 1988 shall have been retired through payment or redemption (including those
bonds "deemed to be paid" within the meaning of that term as used in Article
XVII of the 1937 Indenture) or until, subject to certain exceptions, the holders
of the requisite principal amount of such bonds shall have consented to the
amendments contained in the Restated Indenture (such date being herein called
the "Effective Date"); and


         WHEREAS, the Original Indenture and the Restated Indenture are referred
to herein collectively as the "Indenture"; and


         WHEREAS, pursuant to the Agreement of Resignation, Appointment and
Acceptance dated as of May 1, 2002 among the Company, BNY Midwest Trust Company,
as successor trustee, and Harris Trust and Savings Bank, the Trustee accepted
the rights, powers, duties and obligations of the trustee under the Indenture
effective as of May 9, 2002; and


         WHEREAS, the Indenture provides that bonds may be issued thereunder in
one or more series, each series to have such distinctive designation as the
Board of Directors of the Company may select for such series; and


         WHEREAS, the Company is entering into a Credit Agreement dated as of
August 15, 2002 among the Company, Wells Fargo Bank, National Association, as
Lead Arranger and Administrative Agent (the "Administrative Agent"), and the
other banks party thereto


                                       3








(collectively, the "Banks"), pursuant to which the Company can borrow up to
300,000,000 at any one time outstanding; and


         WHEREAS, in order to secure the Company's Obligations under and as
defined in the Credit Agreement, the Company desires to provide for the issuance
under the Indenture to the Administrative Agent, for the benefit of itself, the
Co-Agents and the Banks, of a new series of bonds to be designated "First
Mortgage Bonds, Series due August 15, 2003 (the "Bonds"); and


         WHEREAS, the Bonds to be issued as registered bonds without coupons in
denominations of a multiple of $1000, and the bonds of said series to be
substantially in the form and of the tenor following, to-wit:


                                 (Form of Bonds)
                          NORTHERN STATES POWER COMPANY
             (Incorporated under the laws of the State of Minnesota)
                               First Mortgage Bond
                           Series due August 15, 2003


No. _________                                                        $__________





         THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN
COMPLIANCE WITH APPLICABLE SECURITIES LAWS.


         PURSUANT TO A SECURITY AGREEMENT (THE "PLEDGE AGREEMENT") DATED AUGUST
15, 2002 BETWEEN THE COMPANY (AS DEFINED BELOW) AND THE ADMINISTRATIVE AGENT (AS
DEFINED BELOW), THIS BOND AND ALL PROCEEDS THEREOF HAVE BEEN PLEDGED TO SECURE
CERTAIN OBLIGATIONS OF THE COMPANY. THE PLEDGE AGREEMENT SETS FORTH VARIOUS
PROVISIONS REGARDING (AMONG OTHER THINGS) THE PAYMENT OF AND VOTING RIGHTS WITH
RESPECT TO THIS BOND. THE COMPANY AND (BY THEIR ACCEPTANCE THEREOF) EACH HOLDER
OF THIS BOND AGREE THAT THE RIGHTS OF THE PARTIES WITH RESPECT TO THIS BOND
SHALL IN ALL RESPECTS BE SUBJECT TO SUCH LIMITATIONS AND OTHER PROVISIONS OF THE
PLEDGE AGREEMENT.


         NORTHERN STATES POWER COMPANY, a corporation organized and existing
under the laws of the State of Minnesota (the "Company"), for value received,
hereby promises to pay to Wells Fargo Bank, National Association, as
Administrative Agent (the "Administrative Agent"), on behalf of itself and the
Banks (as defined below), or registered assigns, at the office of the Trustee in
Chicago, Illinois, or, at the option of the registered owner, at the agency of
the Company in the Borough of Manhattan, City and State of New York, on August
15, 2003 (the "Stated Maturity Date") or upon earlier declaration of
acceleration the sum of _________________________ Dollars ($___________).
Interest shall be payable on this bond from the date hereof on the Stated
Maturity Date or upon earlier declaration of acceleration at the office of the
Trustee in Chicago, Illinois, or, at the option of the registered owner, the
agency of the Company in the Borough of Manhattan, City and State of New York,
at a rate equal to the


                                       4








rate of interest publicly announced from time to time by the Administrative
Agent as its "prime" or "base" rate or, if the Administrative Agent ceases to
announce a rate so designated, any similar rate designated by the Administrative
Agent, plus in either case 200 basis points. This bond shall bear interest from
the date hereof. Payment of the principal and interest on this bond shall be
made in the lawful money of the United States.


         This bond is issued to the Administrative Agent by the Company pursuant
to the Company's obligations under the Credit Agreement, dated as of August 15,
2002 (as amended, supplemented, restated or otherwise modified from time to
time, the "Credit Agreement"), among the Company, the Administrative Agent, and
the other banks party thereto from time to time (collectively, the "Banks").
This bond shall be held by the Administrative Agent subject to the terms of the
Credit Agreement and the Security Agreement dated as of August 15, 2002 between
the Company and the Administrative Agent.


         It shall be an additional term and condition of the bonds of this
series that, in the event (i) an Event of Default under and as defined in the
Credit Agreement has occurred under Section 7.1(a) of the Credit Agreement by
reason of a failure by the Company to make a payment of principal or interest
when the same shall be due and payable pursuant to the Credit Agreement or (ii)
the Notes (as defined in the Credit Agreement) are declared due and payable
pursuant to Section 7.2 of the Credit Agreement, then the occurrence of either
such event shall be deemed to be a completed default, for purposes of Section
1(a) of Article XIII of the Original Indenture prior to the Effective Date (as
defined below), and a Completed Default, for purposes of Section 13.01(a) of the
Indenture on and after the Effective Date, and the definitions of completed
default and Completed Default in the Original Indenture and the Indenture,
respectively, are modified accordingly for purposes of the bonds of this series.


         The Trustee may conclusively presume that the obligation of the Company
to pay the principal of and interest on this bond shall have been fully
satisfied and discharged unless and until it shall have received a written
notice from the Administrative Agent, signed by an authorized officer of the
Administrative Agent and attested by the Secretary or an Assistant Secretary of
the Administrative Agent, stating that the payment of principal of or interest
on this bond has not been fully paid when due and specifying the amount of funds
required to make such payment.


         This bond has been issued by the Company to the Administrative Agent to
(i) provide for the payment of the Company's obligations to make payments to any
person under the Credit Agreement and (ii) provide to such persons the benefits
of the security provided for this bond pursuant to the Indenture.


         This bond is one of a duly authorized issue of bonds of the Company, of
the series and designation indicated on the face hereof, which issue of bonds
consists, or may consist, of several series of varying denominations, dates, and
tenor, all issued and to be issued under and equally secured (except insofar as
a sinking fund, or similar fund, established in accordance with the provisions
of the Indenture may afford additional security for the bonds of any specific
series) by a Trust Indenture dated February 1, 1937 (the "1937 Indenture"), as
supplemented by 49 supplemental trust indentures (collectively, the
"Supplemental Indentures" and together with the 1937 Indenture, the "Original
Indenture"), a Supplemental and Restated Trust Indenture



                                       5








dated May 1, 1988 (the "Restated Indenture") and a new supplemental trust
indenture for the bonds of this series (the "New Supplemental Indenture"),
executed by the Company to BNY Midwest Trust Company, as successor to Harris
Trust and Savings Bank, as Trustee (the "Trustee"). The 1937 Indenture, as
supplemented by the Supplemental Indentures, the Restated Indenture and the New
Supplemental Indenture herein are referred to collectively as the "Indenture".
Reference hereby is made to the Indenture for a description of the property
mortgaged and pledged, the nature and extent of the security, the rights of the
holders of the bonds as to such security, and the terms and conditions upon
which the bonds may be issued under the Indenture and are secured. The principal
hereof may be declared or may become due on the conditions, in the manner and at
the time set forth in the Indenture, upon the happening of a default as in the
Indenture, including the New Supplemental Indenture, provided.


         With the consent of the Company and to the extent permitted by and as
provided in the Indenture, the rights and obligations of the Company and of the
holders of the bonds, and the terms and provisions of the Indenture and of any
instruments supplemental thereto may be modified or altered by affirmative vote
of the holders of at least 80% in principal amount of the bonds then outstanding
under the Indenture and any instruments supplemental thereto (excluding bonds
challenged and disqualified from voting by reason of the Company's interest
therein as provided in the Indenture); provided that without the consent of all
holders of all bonds affected no such modification or alteration shall permit
the extension of the maturity of the principal of any bond or the reduction in
the rate of interest thereon or any other modification in the terms of payment
of such principal or interest. The foregoing 80% requirement will be reduced to
66 2/3% when all bonds of each series issued under the Indenture prior to May 1,
1985, shall have been retired or all the holders thereof shall have consented to
such reduction.


         The Restated Indenture amends and restates the 1937 Indenture and the
Supplemental Indentures. The Restated Indenture will become effective and
operative (the "Effective Date") when all bonds of each series issued under the
Indenture prior to May 1, 1988 shall have been retired through payment or
redemption (including those bonds "deemed to be paid" within the meaning of that
term as used in Article XVII of the 1937 Indenture) or until, subject to certain
exceptions, the holders of the requisite principal amount of such bonds shall
have consented to the amendments contained in the Restated Indenture. Holders of
the bonds of this series and of each subsequent series of bonds issued under the
Indenture likewise will be bound by the amendments contained in the Restated
Indenture when they become effective and operative. Reference is made to the
Restated Indenture for a complete description of the amendments contained
therein to the 1937 Indenture and to the Supplemental Indentures.


         The Company and the Trustee may deem and treat the person in whose name
this bond is registered as the absolute owner hereof for the purpose of
receiving payment and for all other purposes and shall not be affected by any
notice to the contrary.


         Bonds of this series are not redeemable by the Company prior to the
Stated Maturity Date for any reason, and are not subject to a sinking fund.


         This bond is transferable as prescribed in the Indenture by the
registered owner hereof in person, or by his duly authorized attorney, at the
office of the Trustee in Chicago, Illinois, or at the option of the registered
owner at the agency of the Company in the Borough of Manhattan,


                                       6








City and State of New York, or elsewhere if authorized by the Company, upon
surrender and cancellation of this bond, and thereupon a new bond or bonds of
the same series and of a like aggregate principal amount will be issued to the
transferee in exchange therefor as provided in the Indenture, upon payment of
taxes or other governmental charges, if any, that may be imposed in relation
thereto.


         Bonds of this series are interchangeable as to denominations in the
manner and upon the conditions prescribed in the Indenture.


         No charge shall be made by the Company for any exchange or transfer of
bonds of this series, other than for taxes or other governmental charges, if
any, that may be imposed in relation thereto.


         No recourse shall be had for the payment of the principal of or the
interest on this bond, or any part thereof, or of any claim based hereon or in
respect hereof or of said Indenture, against any incorporator, or any past,
present, or future shareholder, officer or director of the Company or of any
predecessor or successor corporation, either directly or through the Company, or
through any such predecessor or successor corporation, or through any receiver
or a trustee in bankruptcy, whether by virtue of any constitution, statute, or
rule of law or by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part of the consideration
for the issue hereof, expressly waived and released, as more fully provided in
the Indenture.


         This bond shall not be valid or become obligatory for any purpose
unless and until the certificate of authentication hereon shall have been signed
by or on behalf of BNY Midwest Trust Company, as Trustee under the Indenture, or
its successor thereunder.


         IN WITNESS WHEREOF, NORTHERN STATES POWER COMPANY has caused this bond
to be executed in its name by its President or a Vice President and its
corporate seal, or a facsimile thereof, to be hereto affixed and attested by its
Secretary or an Assistant Secretary.


Dated as of _________________               NORTHERN STATES POWER COMPANY





Attest:                                     By:
       -------------------------------         ---------------------------------
         Secretary                                  President




                                       7









                         (Form of Trustee's Certificate)


         This bond is one of the bonds of the series designated thereon,
described in the within-mentioned Indenture.

                                             BNY MIDWEST TRUST COMPANY,
                                             As Trustee,


                                             By:________________________________
                                                   Authorized Officer

and


         WHEREAS, the Company is desirous of conveying, assigning, transferring,
mortgaging, pledging, setting over, and confirming to the Trustee and to its
respective successors in trust, additional property acquired by it subsequent to
the date of the preparation of the Supplemental Trust Indenture dated as of
August 1, 2000; and


         WHEREAS, the Indenture provides in substance that the Company and the
Trustee may enter into indentures supplemental thereto for the purposes, among
others, of creating and setting forth the particulars of any new series of bonds
and of providing the terms and conditions of the issue of the bonds of any
series not expressly provided for in the Indenture and of conveying, assigning,
transferring, mortgaging, pledging, setting over, and confirming to the Trustee
additional property of the Company, and for any other purpose not inconsistent
with the terms of the Indenture; and


         WHEREAS, the execution and delivery of this Supplemental Trust
Indenture has been duly authorized by a resolution adopted by the Board of
Directors of the Company; and


         WHEREAS, the Trustee has duly determined to execute this Supplemental
Trust Indenture and to be bound, insofar as it may lawfully do so, by the
provisions hereof;


         Now THEREFORE, Northern States Power Company, in consideration of the
premises and of one dollar duly paid to it by the Trustee at or before the
ensealing and delivery of these presents, the receipt of which is hereby
acknowledged, and other good and valuable considerations, does hereby covenant
and agree to and with BNY Midwest Trust Company, as Trustee, and its successors
in the trust under the Indenture for the benefit of those who hold or shall hold
the bonds, or any of them, issued or to be issued thereunder as follows:


                                   ARTICLE I.
                  SPECIFIC SUBJECTION OF ADDITIONAL PROPERTY TO
                       THE LIEN OF THE ORIGINAL INDENTURE.


         SECTION 1.01. The Company in order to better secure the payment, of
both the principal and interest, of all bonds of the Company at any time
outstanding under the Indenture according to their tenor and effect and the
performance of and compliance with the covenants and conditions contained in the
Indenture, has granted, bargained, sold, warranted, released, conveyed,
assigned, transferred, mortgaged, pledged, set over, and confirmed and by these



                                       8








presents does grant, bargain, sell, warrant, release, convey, assign, transfer,
mortgage, pledge, set over, and confirm to the Trustee and to its respective
successors in said trust forever, subject to the rights reserved by the Company
in and by the provisions of the Indenture, all of the property described and
mentioned or enumerated in a schedule annexed hereto and marked Schedule A,
reference to said schedule being made hereby with the same force and effect as
if the same were incorporated herein at length; together with all and singular
the tenements, hereditaments, and appurtenances belonging and in any way
appertaining to the aforesaid property or any part thereof with the reversion
and reversions, remainder and remainders, tolls, rents and revenues, issues,
income, products, and profits thereof;


         Also, in order to subject the personal property and chattels of the
Company to the lien of the Indenture and to conform with the provisions of the
Uniform Commercial Code, all fossil, nuclear, hydro, and other electric
generating plants, including buildings and other structures, turbines,
generators, exciters, boilers, reactors, nuclear fuel, other boiler plant
equipment, condensing equipment and all other generating equipment; substations;
electric transmission and distribution systems, including structures, poles,
towers, fixtures, conduits, insulators, wires, cables, transformers, services
and meters; steam heating mains and equipment; gas transmission and distribution
systems, including structures, storage facilities, mains, compressor stations,
purifier stations, pressure holders, governors, services, and meters; telephone
plant and related distribution systems; trucks and trailers; office, shop, and
other buildings and structures, furniture and equipment; apparatus and equipment
of all other kinds and descriptions; materials and supplies; all municipal and
other franchises, leaseholds, licenses, permits, privileges, patents and patent
rights; all shares of stock, bonds, evidences of indebtedness, contracts,
claims, accounts receivable, choses in action and other intangibles, all books
of account and other corporate records;


         Excluding, however, all merchandise and appliances heretofore or
hereafter acquired for the purpose of sale to customers and others;


         All the estate, right, title, interest, and claim, whatsoever, at law
as well as in equity, which the Company now has or hereafter may acquire in and
to the aforesaid property and every part and parcel thereof subject, however, to
the right of the Company, until the happening of a completed default as defined
in Section 1 of Article XIII of the Original Indenture prior to the Effective
Date and upon the occurrence and continuation of a Completed Default as defined
in the Indenture on and after the Effective Date, to retain in its possession
all shares of stock, notes, evidences of indebtedness, other securities and cash
not expressly required by the provisions hereof to be deposited with the
Trustee, to retain in its possession all contracts, bills and accounts
receivable, motor cars, any stock of goods, wares and merchandise, equipment or
supplies acquired for the purpose of consumption in the operation, construction,
or repair of any of the properties of the Company, and to sell, exchange,
pledge, hypothecate, or otherwise dispose of any or all of such property so
retained in its possession free from the lien of the Indenture, without
permission or hindrance on the part of the Trustee, or any of the bondholders.
No person in any dealings with the Company in respect of any such property shall
be charged with any notice or knowledge of any such completed default (prior to
the Effective Date) or Completed Default (after the Effective Date) under the
Indenture while the Company is in possession of such property. Nothing contained
herein or in the Indenture shall be deemed or construed to



                                       9








require the deposit with, or delivery to, the Trustee of any of such property,
except such as is specifically required to be deposited with the Trustee by some
express provision of the Indenture;


         To have and to hold all said property, real, personal, and mixed,
granted, bargained, sold, warranted, released, conveyed, assigned, transferred,
mortgaged, pledged, set over, or confirmed by the Company as aforesaid, or
intended so to be, to the Trustee and its successors and assigns forever,
subject, however, to permitted liens as defined in Section 5 of Article I of the
1937 Indenture prior to the Effective Date and to Permitted Encumbrances on and
after the Effective Date and to the further reservations, covenants, conditions,
uses, and trusts set forth in the Indenture; in trust nevertheless for the same
purposes and upon the same conditions as are set forth in the Indenture.


                                   ARTICLE II.
                           FORM AND EXECUTION OF BONDS


         SECTION 2.01. There hereby is created, for issuance under the
Indenture, a series of bonds designated Series due August 15, 2003 in the
aggregate principal amount of $308,000,000, which shall bear the descriptive
title "First Mortgage Bonds, Series due August 15, 2003" (the "Bonds"), and the
form thereof shall contain suitable provisions with respect to the matters
hereafter specified in this Section. The Bonds shall be issued as registered
bonds without coupons in denominations of a multiple of $1,000 and shall be
substantially of the tenor and purport hereinbefore recited. The principal
amount of the Bonds shall be payable on August 15, 2003 (the "Stated Maturity
Date") or upon earlier declaration of acceleration. Interest shall be payable on
the Bonds on the Stated Maturity Date or upon earlier declaration of
acceleration at a rate equal to the rate of interest publicly announced from
time to time by the Administrative Agent as its "prime" or "base" rate or, if
the Administrative Agent ceases to announce a rate so designated, any similar
rate designated by the Administrative Agent, plus in either case 200 basis
points. The Bonds shall bear interest from August 15, 2002. Principal and
interest on the Bonds shall be payable at the office of the Trustee in Chicago,
Illinois, or, at the option of the registered owner, at the agency of the
Company in the Borough of Manhattan, City and State of New York. Payment of the
principal and interest on the Bonds shall be made in the lawful money of the
United States.


         The Bonds are being issued to the Administrative Agent by the Company
pursuant to the Company's obligations under the Credit Agreement and shall be
held by the Administrative Agent subject to the terms of the Credit Agreement
and the Security Agreement dated as of August 15, 2002 between the Company and
the Administrative Agent.


         It shall be an additional term and condition of the Bonds that, in the
event (i) an Event of Default under and as defined in the Credit Agreement has
occurred under Section 7.1(a) of the Credit Agreement by reason of a failure by
the Company to make a payment of principal or interest when the same shall be
due and payable pursuant to the Credit Agreement or (ii) the Notes (as defined
in the Credit Agreement) are declared due and payable pursuant to Section 7.2 of
the Credit Agreement, then the occurrence of either such event shall be deemed
to be a completed default, for purposes of Section 1(a) of Article XIII of the
Original Indenture prior to the Effective Date, and a Completed Default, for
purposes of Section 13.01(a) of the Indenture on and after the Effective Date,
and the definitions of completed default and Completed Default



                                       10








in the Original Indenture and the Indenture, respectively, are modified
accordingly for purposes of the Bonds.


         The Bonds have been issued by the Company to the Administrative Agent
to (i) provide for the payment of the Company's obligations to make payments to
any person under the Credit Agreement and (ii) provide to such persons the
benefits of the security provided for the Bonds pursuant to the Indenture.


         SECTION 2.02. The Bonds are not redeemable by the Company prior to the
Stated Maturity Date for any reason and are not subject to a sinking fund.


         SECTION 2.03. The registered owner of any Bond or Bonds, at his option
may surrender the same with other Bonds of such series at the office of the
Trustee in Chicago, Illinois, or at the agency of the Company in the Borough of
Manhattan, City and State of New York, or elsewhere if authorized by the
Company, for cancellation, in exchange for other Bonds of such series of higher
or lower authorized denominations, but of the same aggregate principal amount,
bearing interest from its date, and upon receipt of any payment required under
the provisions of Section 2.04 hereof. Thereupon the Company shall execute and
deliver to the Trustee and the Trustee shall authenticate and deliver such other
registered bonds to such registered owner at its office or at any other place
specified as aforesaid.


         SECTION 2.04. No charge shall be made by the Company for any exchange
or transfer of Bonds, other than for taxes or other governmental charges, if
any, that may be imposed in relation thereto.


         SECTION 2.05. The Bonds, shall be executed on behalf of the Company by
the manual signature of its President or one of its Vice Presidents or with the
facsimile signature of its President, and its corporate seal shall be thereunto
affixed, or printed, lithographed, or engraved thereon, in facsimile, and
attested by the manual signature of its Secretary or one of its Assistant
Secretaries or with the facsimile signature of its Secretary. In case any of the
officers who shall have signed any Bonds or attested the seal thereon or whose
facsimile signature shall be borne by the Bonds shall cease to be such officers
of the Company before the Bonds so signed and sealed actually shall have been
authenticated by the Trustee or delivered by the Company, such Bonds
nevertheless may be issued, authenticated, and delivered with the same force and
effect as though the person or persons who signed such Bonds and attested the
seal thereon or whose facsimile signature is borne by the Bonds had not ceased
to be such officer or officers of the Company. Any Bond issuable hereunder may
be signed or attested by manual or facsimile signature in behalf of the Company
by such person as at the actual date of the execution of such Bond shall be the
proper officer of the Company, although at the date of such Bond such person
shall not have been an officer of the Company.


         SECTION 2.06. The registered holder of all of the Bonds shall be the
Administrative Agent.


                                       11








                                  ARTICLE III.
                      APPOINTMENT OF AUTHENTICATING AGENT.


         SECTION 3.01. The Trustee shall, if requested in writing so to do by
the Company, promptly appoint an agent or agents of the Trustee who shall have
authority to authenticate registered Bonds, in the name and on behalf of the
Trustee. Such appointment by the Trustee shall be evidenced by a certificate of
a vice-president of the Trustee delivered to the Company prior to the
effectiveness of such appointment.


         SECTION 3.02. (a) Any such authenticating agent shall be acceptable to
the Company and at all times shall be a corporation which is organized and doing
business under the laws of the United States or of any State, is authorized
under such laws to act as authenticating agent, has a combined capital and
surplus of at least $10,000,000, and is subject to supervision or examination by
Federal or State authority. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section 3.02
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.


         (b) Any corporation into which any authenticating agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion, or consolidation to which any
authenticating agent shall be a party, or any corporation succeeding to the
corporate agency business of any authenticating agent, shall continue to be the
authenticating agent without the execution or filing of any paper or any further
act on the part of the Trustee or the authenticating agent.


         (c) Any authenticating agent at any time may resign by giving
written notice of resignation to the Trustee and to the Company. The Trustee may
at any time, and upon written request of the Company to the Trustee shall,
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 in accordance with the
provisions of this Section 3.02, the Trustee, unless otherwise requested in
writing by the Company, promptly shall appoint a successor authenticating agent,
which shall be acceptable to the Company. Any successor authenticating agent
upon acceptance of its appointment hereunder shall become vested with all the
rights, powers, duties, and responsibilities of its predecessor hereunder, with
like effect as if originally named. No successor authenticating agent shall be
appointed unless eligible under the provisions of this Section 3.02.


         (d) The Company agrees to pay to any authenticating agent,
appointed in accordance with the provisions of this Section 3.02, reasonable
compensation for its services.


                                       12








         SECTION 3.03. If an appointment is made pursuant to this Article III,
the registered Bonds, shall have endorsed thereon, in addition to the Trustee's
Certificate, an alternate Trustee's Certificate in the following form:


         This bond is one of the bonds of the Series designated thereon,
described in the within-mentioned Indenture.


                                            BNY MIDWEST TRUST COMPANY,
                                            as Trustee,



                                            By _________________________________
                                                     Authenticating Agent,


                                            By _________________________________
                                                      Authorized Officer.


         SECTION 3.04. No provision of this Article III shall require the
Trustee to have at any time more than one such authenticating agent for any one
State or to appoint any such authenticating agent in the State in which the
Trustee has its principal place of business.


                                   ARTICLE IV.
                          FINANCING STATEMENT TO COMPLY
                        WITH THE UNIFORM COMMERCIAL CODE.


         SECTION 4.01. The name and address of the debtor and secured party are
set forth below:


                  Debtor:                   Northern States Power Company
                                            414 Nicollet Mall
                                            Minneapolis, Minnesota 55401


                  Secured Party:            BNY Midwest Trust Company, Trustee
                                            2 North LaSalle Street
                                            Suite 1020
                                            Chicago, Illinois 60602


         NOTE: Northern States Power Company, the debtor above named, is "a
transmitting utility" under the Uniform Commercial Code as adopted in Minnesota,
North Dakota and South Dakota.


         SECTION 4.02. Reference to Article I hereof is made for a description
of the property of the debtor covered by this Financing Statement with the same
force and effect as if incorporated in this Section at length.


         SECTION 4.03. The maturity dates and respective principal amounts of
obligations of the debtor secured and presently to be secured by the Indenture,
reference to all of which for the


                                       13








terms and conditions thereof is hereby made with the same force and effect as if
incorporated herein at length, are as follows.



FIRST MORTGAGE BONDS                                                 PRINCIPAL AMOUNT
- ----------------------------------------                       ----------------------------
                                                            
Series due April 1, 2003                                                   $80,000,000
Series due December 1, 2005                                                $70,000,000
Pollution Control Series J                                                  $5,450,000
Pollution Control Series K                                                  $3,400,000
Pollution Control Series L                                                  $4,850,000
Series due July 1, 2025                                                   $250,000,000
Pollution Control Series N                                                 $27,900,000
Pollution Control Series O                                                 $50,000,000
Pollution Control Series P                                                 $50,000,000
Series due March 1, 2028                                                  $150,000,000
Series due March 1, 2003                                                  $100,000,000
Resource Recovery Series Q                                                 $15,170,000
Resource Recovery Series R                                                 $19,615,000
Series Due August 15, 2003                                                $308,000,000



         SECTION 4.04. This Financing Statement is hereby adopted for all of the
First Mortgage Bonds of the series mentioned above secured by said Indenture.


         SECTION 4.05. The 1937 Indenture and the prior Supplemental Trust
Indentures, as set forth below, have been filed or recorded in each and every
office in the States of Minnesota, North Dakota, and South Dakota designated by
law for the filing or recording thereof in respect of all property of the
Company subject thereto:


         Original Indenture
                  Dated February 1, 1937


         Supplemental Indenture
                  Dated June 1, 1942


         Supplemental Indenture
                  Dated February 1, 1944


         Supplemental Indenture
                  Dated October 1, 1945


         Supplemental Indenture
                  Dated July 1, 1948


         Supplemental Indenture
                  Dated August 1, 1949


         Supplemental Indenture
                  Dated June 1, 1952



                                       14








         Supplemental Indenture
                  Dated October 1, 1954


         Supplemental Indenture
                  Dated September 1, 1956


         Supplemental Indenture
                  Dated August 1, 1957


         Supplemental Indenture
                  Dated July 1, 1958


         Supplemental Indenture
                  Dated December 1, 1960


         Supplemental Indenture
                  Dated August 1, 1961


         Supplemental Indenture
                  Dated June 1, 1962


         Supplemental Indenture
                  Dated September 1, 1963


         Supplemental Indenture
                  Dated August 1, 1966


         Supplemental Indenture
                  Dated June 1, 1967


         Supplemental Indenture
                  Dated October 1, 1967


         Supplemental Indenture
                  Dated May 1, 1968


         Supplemental Indenture
                  Dated October 1, 1969


         Supplemental Indenture
                  Dated February 1, 1971


         Supplemental Indenture
                  Dated May 1, 1971


         Supplemental Indenture
                  Dated February 1, 1972



                                       15







         Supplemental Indenture
                  Dated January 1, 1973


         Supplemental Indenture
                  Dated January 1, 1974


         Supplemental Indenture
                  Dated September 1, 1974


         Supplemental Indenture
                  Dated April 1, 1975


         Supplemental Indenture
                  Dated May 1, 1975


         Supplemental Indenture
                  Dated March 1, 1976


         Supplemental Indenture
                  Dated June 1, 1981


         Supplemental Indenture
                  Dated December 1, 1981


         Supplemental Indenture
                  Dated May 1, 1983


         Supplemental Indenture
                  Dated December 1, 1983


         Supplemental Indenture
                  Dated September 1, 1984


         Supplemental Indenture
                  Dated December 1, 1984


         Supplemental Indenture
                  Dated May 1, 1985


         Supplemental Indenture
                  Dated September 1, 1985


         Supplemental and Restated Indenture
                  Dated May 1, 1988


         Supplemental Indenture
                  Dated July 1, 1989



                                       16







         Supplemental Indenture
                  Dated June 1, 1990


         Supplemental Indenture
                  Dated October 1, 1992


         Supplemental Indenture
                  Dated April 1, 1993


         Supplemental Indenture
                  Dated December 1, 1993


         Supplemental Indenture
                  Dated February 1, 1994


         Supplemental Indenture
                  Dated October 1, 1994


         Supplemental Indenture
                  Dated June 1, 1995


         Supplemental Indenture
                  Dated April 1, 1997


         Supplemental Indenture
                  Dated March 1, 1998


         Supplemental Indenture
                  Dated May 1, 1999


         Supplemental Indenture
                  Dated June 1, 2000


         Supplemental Indenture
                  Dated August 1, 2000


         SECTION 4.06. The property covered by this Financing Statement also
shall secure additional series of First Mortgage Bonds of the debtor which may
be issued from time to time in the future in accordance with the provisions of
the Indenture.


                                   ARTICLE V.
                            AMENDMENTS TO INDENTURE.


         SECTION 5.01. Each holder or registered owner of a bond of any series
originally authenticated by the Trustee and originally issued by the Company
subsequent to May 1, 1985 and of any coupon pertaining to any such bond, by the
acquisition, holding or ownership of such bond and coupon, thereby consents and
agrees to, and shall be bound by, the provisions of Article VI of the
Supplemental Indenture dated May 1, 1985. Each holder or registered owner of


                                       17








a bond of any series (including the Bonds) originally authenticated by the
Trustee and originally issued by the Company subsequent to May 1, 1988 and of
any coupon pertaining to such bond, by the acquisition, holding or ownership of
such bond and coupon, thereby consents and agrees to, and shall be bound by, the
provisions of the Supplemental and Restated Trust Indenture dated May 1, 1988
upon the Effective Date.


                                   ARTICLE VI.
                                 MISCELLANEOUS.


         SECTION 6.01. The recitals of fact herein, except the recital that the
Trustee has duly determined to execute this Supplemental Trust Indenture and be
bound, insofar as it may lawfully so do, by the provisions hereof and in the
bonds shall be taken as statements of the Company and shall not be construed as
made by the Trustee. The Trustee makes no representations as to value of any of
the property subjected to the lien of the Indenture, or any part thereof, or as
to the title of the Company thereto, or as to the security afforded thereby and
hereby, or as to the validity of this Supplemental Trust Indenture or of the
bonds issued under the Indenture by virtue hereof (except the Trustee's
certificate), and the Trustee shall incur no responsibility in respect of such
matters.


         SECTION 6.02. This Supplemental Trust Indenture shall be construed in
connection with and as a part of the 1937 Indenture, as supplemented by the
Supplemental Trust Indentures dated June 1, 1942, February 1, 1944, October 1,
1945, July 1, 1948, August 1, 1949, June 1, 1952, October 1, 1954, September 1,
1956, August 1, 1957, July 1, 1958, December 1, 1960, August 1, 1961, June 1,
1962, September 1, 1963, August 1, 1966, June 1, 1967, October 1, 1967, May 1,
1968, October 1, 1969, February 1, 1971, May 1, 1971, February 1, 1972, January
1, 1973, January 1, 1974, September 1, 1974, April 1, 1975, May 1, 1975, March
1, 1976, June 1, 1981, December 1, 1981, May 1, 1983, December 1, 1983,
September 1, 1984, December 1, 1984, May 1, 1985, September 1, 1985, the
Supplemental and Restated Trust Indenture dated May 1, 1988 and the Supplemental
Trust Indentures dated July 1, 1989, June 1, 1990, October 1, 1992, April 1,
1993, December 1, 1993, February 1, 1994, October 1, 1994, June 1, 1995, April
1, 1997, March 1, 1997, March 1, 1998, May 1, 1999, June 1, 2000 and August 1,
2000.


         SECTION 6.03. (a) If any provision of the Indenture or this
Supplemental Trust Indenture limits, qualifies, or conflicts with another
provision of the Indenture required to be included in indentures qualified under
the Trust Indenture Act of 1939 (as enacted prior to the date of this
Supplemental Trust Indenture) by any of the provisions of Sections 310 to 317,
inclusive, of the said Act, such required provisions shall control.


         (b) In case any one or more of the provisions contained in this
Supplemental Trust Indenture or in the bonds issued hereunder should be invalid,
illegal, or unenforceable in any respect, the validity, legality, and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected, impaired, prejudiced, or disturbed thereby.


         SECTION 6.04. Wherever in this Supplemental Trust Indenture the word
"Indenture" is used without the prefix, "1937," "Original" or "Supplemental",
such word was used intentionally to include in its meaning both the 1937
Indenture and all indentures supplemental thereto.



                                       18







         SECTION 6.05. Wherever in this Supplemental Trust Indenture either of
the parties hereto is named or referred to, this shall be deemed to include the
successors or assigns of such party, and all the covenants and agreements in
this Supplemental Trust Indenture contained by or on behalf of the Company or by
or on behalf of the Trustee shall bind and inure to the benefit of the
respective successors and assigns of such parties, whether so expressed or not.


         SECTION 6.06. (a) This Supplemental Trust Indenture may be executed
simultaneously in several counterparts, and all said counterparts executed and
delivered, each as an original, shall constitute but one and the same
instrument.


         (b) The Table of Contents and the descriptive headings of the
several Articles of this Supplemental Trust Indenture were formulated, used, and
inserted in this Supplemental Trust Indenture for convenience only and shall not
be deemed to affect the meaning or construction of any of the provisions hereof.


         The principal amount of obligations to be issued forthwith under the
Indenture is $308,000,000.



                                       19






         IN WITNESS WHEREOF, on this ____ day of August, 2002, NORTHERN STATES
POWER COMPANY, a Minnesota corporation, party of the first part, has caused its
corporate name and seal to be hereunto affixed, and this Supplemental Trust
Indenture dated as of June 1, 2002, to be signed by its President or a Vice
President, and attested by its Secretary or an Assistant Secretary, for and in
its behalf, and BNY MIDWEST TRUST COMPANY, an Illinois corporation, as Trustee,
party of the second part, to evidence its acceptance of the trust hereby
created, has caused its corporate name and seal to be hereunto affixed, and this
Supplemental Trust Indenture dated as of June 1, 2002, to be signed by its
President, a Vice President, or an Assistant Vice President, and attested by its
Secretary, an Assistant Secretary, or an Assistant Vice President for and in its
behalf.

                                           NORTHERN STATES POWER COMPANY


                                           -------------------------------------
                                           By: Paul E. Pender
                                               Its: Vice President and Treasurer

Attest:


- ------------------------------------
Nancy Haley
Assistant Secretary


Executed by Northern States Power Company
   in presence of:



- ------------------------------------                            (CORPORATE SEAL)
Mary Schell, Witness



- ------------------------------------
Elizabeth Blohm, Witness



                                       20






                                           BNY MIDWEST TRUST COMPANY, as Trustee


                                           -------------------------------------
                                           By: J. Bartolini
                                               Its:Vice President

Attest:


- ------------------------------------
M. Callahan
Assistant Vice President

Executed by BNY Midwest Trust Company in
   presence of:


- ------------------------------------
 K. Gibson, Witness                                             (CORPORATE SEAL)


- ------------------------------------
A. Hernandez, Witness




                                       21






STATE OF MINNESOTA                       )
                                         )     ss.
COUNTY OF HENNEPIN                       )

         On this ____ day of August, A.D. 2002, before me, Sharon Quellhorst, a
Notary Public in and for said County in the State aforesaid, personally appeared
Paul E. Pender and Nancy Haley, to me personally known, and to me known to be
Vice President and Treasurer and Assistant Secretary, respectively, of Northern
States Power Company, one of the corporations described in and which executed
the within and foregoing instrument, and who, being by me severally duly sworn,
each did say that he, the said Paul E. Pender is Vice President and Treasurer,
and she, the said Nancy Haley, is Assistant Secretary, of said Northern States
Power Company, a corporation; that the seal affixed to the within and foregoing
instrument is the corporate seal of said corporation, and that said instrument
was executed in behalf of said corporation by authority of its board of
directors; and said Paul E. Pender and Nancy Haley each acknowledged said
instrument to be the free act and deed of said corporation and that such
corporation executed the same.


         WITNESS my hand and notarial seal this ____ day of August, A.D. 2002.




______________________________________                             (NOTARY SEAL)
Sharon Quellhorst
Notary Public
My commission expires January 31, 2005




                                       22







STATE OF MINNESOTA                       )
                                         )     ss.
COUNTY OF HENNEPIN                       )

         Paul E. Pender and Nancy Haley, being severally duly sworn, each
deposes and says that he, the said Paul E. Pender, is Vice President and
Treasurer, and she, the said Nancy Haley, is Assistant Secretary, of Northern
States Power Company, the corporation described in and which executed the within
and foregoing Supplemental Trust Indenture, as mortgagor; and each for himself
or herself further says that said Supplemental Trust Indenture was executed in
good faith, and not for the purpose of hindering, delaying, or defrauding any
creditor of the said mortgagor.


- ----------------------------------          ------------------------------------
Paul E. Pender                              Nancy Haley


         Subscribed and sworn to before me this ____ day of August, A.D. 2002.




______________________________________                             (NOTARY SEAL)
Sharon Quellhorst
Notary Public
My commission expires January 31, 2005




                                       23






STATE OF ILLINOIS                        )
                                         )     ss.
COUNTY OF COOK                           )

         On this ____ day of August, A.D. 2002, before me, L. Garcia, a Notary
Public in and for said County in the State aforesaid, personally appeared J.
Bartolini and M. Callahan, to me personally known, and to me known to be Vice
President and Assistant Vice President, respectively, of BNY Midwest Trust
Company, one of the corporations described in and which executed the within and
foregoing instrument, and who, being by me severally duly sworn, each, did say
that she, the said J. Bartolini is Vice President, and she, the said M.
Callahan, is Assistant Vice President, of said BNY Midwest Trust Company, a
corporation; that the seal affixed to the within and foregoing instrument is the
corporate seal of said corporation, and that said instrument was executed in
behalf of said corporation by authority of its board of directors; and said J.
Bartolini and M. Callahan each acknowledged said instrument to be the free act
and deed of said corporation and that such corporation executed the same.


         WITNESS my hand and notarial seal this ____ day of August, A.D. 2002.




______________________________________                             (NOTARY SEAL)
L. Garcia
Notary Public
My commission expires July 8, 2006



                                       24







STATE OF ILLINOIS                        )
                                         )     ss.
COUNTY OF COOK                           )

         J. Bartolini and M. Callahan, being severally duly sworn, each for
herself deposes and says that she, the said J. Bartolini, is Vice President, and
she, the said M. Callahan, is Assistant Vice President, of BNY Midwest Trust
Company, the corporation described in and which executed the within and
foregoing Supplemental Trust Indenture, as mortgagee, and each for herself
further says that said Supplemental Trust Indenture was executed in good faith,
and not for the purpose of hindering, delaying, or defrauding any creditor of
the mortgagor.


- ---------------------------------           ------------------------------------
J. Bartolini                                M. Callahan


         Subscribed and sworn to before me this ____ day of August, A.D. 2002.




______________________________________                             (NOTARY SEAL)
L. Garcia
Notary Public
My commission expires July 8, 2006




                                       25









                                   SCHEDULE A


         The property referred to in Article I of the foregoing Supplemental
Trust Indenture from Northern States Power Company to BNY Midwest Trust Company,
Trustee, made as of June 1, 2002, includes the following property hereinafter
more specifically described. Such description, however, is not intended to limit
or impair the scope or intention of the general description contained in the
granting clauses or elsewhere in the Original Indenture.


                      PROPERTIES IN THE STATE OF MINNESOTA


                                   LYON COUNTY


The following described real property, situate, lying and being in the County of
Lyon, to wit:


Lyon County Substation


The South 833 feet of the West 833 feet of the Southwest Quarter (SW1/4) of
Section Twenty-eight (28), Township One Hundred Twelve (112), Range Forty (40).

















         This instrument was drafted by Northern States Power Company, 414
Nicollet Mall, Minneapolis, Minnesota 55401.


         Tax statements for the real property described in this instrument
should be sent to Northern States Power Company, 414 Nicollet Mall, Minneapolis,
Minnesota 55401.

EX-4.06

                                                                    Exhibit 4.06



                          SUPPLEMENTAL TRUST INDENTURE


                                      FROM


                          NORTHERN STATES POWER COMPANY


                                       TO


                            BNY MIDWEST TRUST COMPANY
                                     TRUSTEE


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

                               DATED JULY 1, 2002


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

                         SUPPLEMENTAL TO TRUST INDENTURE
                             DATED FEBRUARY 1, 1937


                                       AND


                            SUPPLEMENTAL AND RESTATED
                                 TRUST INDENTURE
                                DATED MAY 1, 1988








                                                                                                               PAGE

                                                                                                        
ARTICLE I.        SPECIFIC SUBJECTION OF ADDITIONAL PROPERTY TO THE LIEN OF THE ORIGINAL INDENTURE...............9

         Section 1.01.     ......................................................................................9

ARTICLE II.       PROVISIONS OF BONDS OF POLLUTION CONTROL SERIES S.............................................11

         Section 2.01.     .....................................................................................11

         Section 2.02.     .....................................................................................11

         Section 2.03.     .....................................................................................12

         Section 2.04.     .....................................................................................13

         Section 2.05.     .....................................................................................13

ARTICLE III.      FINANCING STATEMENT TO COMPLY WITH THE UNIFORM COMMERCIAL CODE................................13

         Section 3.01.     .....................................................................................13

         Section 3.02.     .....................................................................................13

         Section 3.03.     .....................................................................................13

         Section 3.04.     .....................................................................................14

         Section 3.05.     .....................................................................................14

         Section 3.06.     .....................................................................................17

ARTICLE IV.       AMENDMENTS TO INDENTURE.......................................................................17

         Section 4.01.     .....................................................................................17

ARTICLE V.        MISCELLANEOUS.................................................................................18

         Section 5.01.     .....................................................................................18

         Section 5.02.     .....................................................................................18

         Section 5.03.     .....................................................................................18

         Section 5.04.     .....................................................................................19

         Section 5.05.     .....................................................................................19

         Section 5.06.     .....................................................................................19

         Schedule A        ....................................................................................A-1



                                      -i-






         SUPPLEMENTAL TRUST INDENTURE, MADE AS OF THE 1ST DAY OF JULY, 2002, BY
AND BETWEEN NORTHERN STATES POWER COMPANY (formerly Northern Power Corporation),
a corporation duly organized and existing under and by virtue of the laws of the
State of Minnesota, having its principal office in the City of Minneapolis,
Minnesota (the "Company"), party of the first part, and BNY MIDWEST TRUST
COMPANY, a corporation duly organized and existing under and by virtue of the
laws of the State of Illinois, having its principal office in the City of
Chicago, Illinois, successor to Harris Trust and Savings Bank, as Trustee (the
"Trustee"), party of the second part;

WITNESSETH:

         WHEREAS, a predecessor in interest to the Company, Xcel Energy Inc.
(formerly Northern States Power Company), a corporation duly organized and
existing under and by virtue of the laws of the State of Minnesota (the
"Predecessor Company"), has heretofore executed and delivered to the Trustee its
Trust Indenture (the "1937 Indenture"), made as of February 1, 1937, whereby the
Predecessor Company granted, bargained, sold, warranted, released, conveyed,
assigned, transferred, mortgaged, pledged, set over and confirmed to the Trustee
and to its respective successors in trust, all property, real, personal and
mixed then owned or thereafter acquired or to be acquired by the Predecessor
Company (except as therein excepted from the lien thereof) and subject to the
rights reserved by the Predecessor Company in and by the provisions of the 1937
Indenture, to be held by said Trustee in trust in accordance with the provisions
of the 1937 Indenture for the equal pro rata benefit and security of all and
each of the bonds issued and to be issued thereunder in accordance with the
provisions thereof; and

         WHEREAS, the Predecessor Company heretofore has executed and delivered
to the Trustee a Supplemental Trust Indenture, made as of June 1, 1942, whereby
the Predecessor Company conveyed, assigned, transferred, mortgaged, pledged, set
over, and confirmed to the Trustee, and its respective successors in said trust,
additional property acquired by it subsequent to the date of the 1937 Indenture;
and

         WHEREAS, the Predecessor Company heretofore has executed and delivered
to the Trustee the following additional Supplemental Trust Indentures which, in
addition to conveying, assigning, transferring, mortgaging, pledging, setting
over, and confirming to the Trustee, and its respective successors in said
trust, additional property acquired by it subsequent to the preparation of the
next preceding Supplemental Trust Indenture and adding to the covenants,
conditions, and agreements of the 1937 Indenture certain additional covenants,
conditions, and agreements to be observed by the Predecessor Company, created
the following series of First Mortgage Bonds:




                 DATE OF SUPPLEMENTAL
                   TRUST INDENTURE                   DESIGNATION OF SERIES
                 ------------------                  ---------------------
                                               
                 February 1, 1944                    Series due February 1, 1974 (retired)
                 October 1, 1945                     Series due October 1, 1975 (retired)
                 July 1, 1948                        Series due July 1, 1978 (retired)
                 August 1, 1949                      Series due August 1, 1979 (retired)






                 DATE OF SUPPLEMENTAL
                   TRUST INDENTURE                   DESIGNATION OF SERIES
                 ------------------                  ---------------------
                                               
                 June 1, 1952                        Series due June 1, 1982 (retired)
                 October 1, 1954                     Series due October 1, 1984 (retired)
                 September 1, 1956                   Series due 1986 (retired)
                 August 1, 1957                      Series due August 1, 1987 (redeemed)
                 July 1, 1958                        Series due July 1, 1988 (retired)
                 December 1, 1960                    Series due December 1, 1990 (retired)
                 August 1, 1961                      Series due August 1, 1991 (retired)
                 June 1, 1962                        Series due June 1, 1992 (retired)
                 September 1, 1963                   Series due September 1, 1993 (retired)
                 August 1, 1966                      Series due August 1, 1996 (redeemed)
                 June 1, 1967                        Series due June 1, 1995 (redeemed)
                 October 1, 1967                     Series due October 1, 1997 (redeemed)
                 May 1, 1968                         Series due May 1, 1998 (redeemed)
                 October 1, 1969                     Series due October 1, 1999 (redeemed)
                 February 1, 1971                    Series due March 1, 2001 (redeemed)
                 May 1, 1971                         Series due June 1, 2001 (redeemed)
                 February 1, 1972                    Series due March 1, 2002 (redeemed)
                 January 1, 1973                     Series due February 1, 2003 (redeemed)
                 January 1, 1974                     Series due January 1, 2004 (redeemed)
                 September 1, 1974                   Pollution Control Series A (redeemed)
                 April 1, 1975                       Pollution Control Series B (redeemed)
                 May 1, 1975                         Series due May 1, 2005 (redeemed)
                 March 1, 1976                       Pollution Control Series C (retired)
                 June 1, 1981                        Pollution Control Series D, E and F (redeemed)
                 December 1, 1981                    Series due December 1, 2011 (redeemed)
                 May 1, 1983                         Series due May 1, 2013 (redeemed)
                 December 1, 1983                    Pollution Control Series G (redeemed)
                 September 1, 1984                   Pollution Control Series H (redeemed)
                 December 1, 1984                    Resource Recovery Series I (redeemed)
                 May 1, 1985                         Series due June 1, 2015 (redeemed)
                 September 1, 1985                   Pollution Control Series J, K and L
                 July 1, 1989                        Series due July 1, 2019 (redeemed)
                 June 1, 1990                        Series due June 1, 2020 (redeemed)
                 October 1, 1992                     Series due October 1, 1997 (retired)
                 April 1, 1993                       Series due April 1, 2003
                 December 1, 1993                    Series due December 1, 2000 (retired), and December 1, 2005
                 February 1, 1994                    Series due February 1, 1999 (retired)
                 October 1, 1994                     Series due October 1, 2001 (retired)
                 June 1, 1995                        Series due July 1, 2025
                 April 1, 1997                       Pollution Control Series M (redeemed), N, O and P
                 March 1, 1998                       Series due March 1, 2003, and March 1, 2028
                 May 1, 1999                         Resource Recovery Series Q
                 June 1, 2000                        Resource Recovery Series R
                 June 1, 2002                        Series due August 15, 2003; and



                                       2





         WHEREAS, on August 18, 2000 New Centuries Energies, Inc. was merged
with and into the Predecessor Company and the Predecessor Company changed its
corporate name from Northern States Power Company to Xcel Energy Inc.; and

         WHEREAS, pursuant to an Assignment and Assumption Agreement dated as of
August 18, 2000 between the Predecessor Company and the Company, substantially
all the assets of the Predecessor Company (other than the stock of the
Predecessor Company's subsidiaries) were conveyed to, and substantially all the
liabilities of the Predecessor Company, including liabilities created under the
Indenture, were assumed by, the Company (the "Assignment"); and

         WHEREAS, pursuant to the Supplemental Trust Indenture dated as of
August 1, 2000 among the Predecessor Company, the Company and Harris Trust and
Savings Bank, as Trustee, the requirements and conditions precedent set forth in
the Original Indenture and the Restated Indenture (each as hereinafter defined)
with respect to the Assignment were satisfied; and

         WHEREAS, the 1937 Indenture and all of the foregoing Supplemental Trust
Indentures are referred to herein collectively as the "Original Indenture"; and

         WHEREAS, the Predecessor Company heretofore has executed and delivered
to the Trustee a Supplemental and Restated Trust Indenture, dated May 1, 1988
(the "Restated Indenture"), which, in addition to conveying, assigning,
transferring, mortgaging, pledging, setting over, and confirming to the Trustee,
and its respective successors in said trust, additional property acquired by it
subsequent to the preparation of the next preceding Supplemental Trust
Indenture, amended and restated the Original Indenture; and

         WHEREAS, the Restated Indenture will not become effective and operative
until all bonds of each series issued under the Original Indenture prior to May
1, 1988 shall have been retired through payment or redemption (including those
bonds "deemed to be paid" within the meaning of that term as used in Article
XVII of the 1937 Indenture) or until, subject to certain exceptions, the holders
of the requisite principal amount of such bonds shall have consented to the
amendments contained in the Restated Indenture (such date being herein called
the "Effective Date"); and

         WHEREAS, the Original Indenture and the Restated Indenture are referred
to herein collectively as the "Indenture"; and

         WHEREAS, pursuant to the Agreement of Resignation, Appointment and
Acceptance dated as of May 1, 2002 among the Company, BNY Midwest Trust Company,
as successor trustee, and Harris Trust and Savings Bank, the Trustee accepted
the rights, powers, duties and obligations of the trustee under the Indenture
effective as of May 9, 2002; and


                                       3





         WHEREAS, the Indenture provides that bonds may be issued thereunder in
one or more series, each series to have such distinctive designation as the
Board of Directors of the Company may select for such series; and

         WHEREAS, the City of Becker, in the County of Sherburne, a municipal
corporation existing under the Constitution and laws of the State of Minnesota
(the "City") has issued $69,000,000 principal amount of its Pollution Control
Revenue Refunding Bonds (Northern States Power Company - Sherburne County
Generating Station Units 1 and 2 Project), Series 2000-A (the "Pollution Control
Revenue Bonds") pursuant to the provisions of the Indenture of Trust, dated as
of March 1, 2000, as supplemented by Supplemental Indenture No. 1, dated as of
August 1, 2002, and Supplemental Indenture No. 2, dated as of August 20, 2002
(as supplemented, the "Pollution Control Indenture"), between the City and Wells
Fargo Bank Minnesota, National Association, as Trustee (said Trustee or any
successor trustee under the Pollution Control Indenture being hereinafter
referred to as the "Pollution Control Trustee"); and

         WHEREAS, the net proceeds of the Pollution Control Revenue Bonds were
loaned by the City to the Company pursuant to the provisions of a Loan Agreement
dated as of March 1, 2000, between the City and the Company (as amended, the
"Agreement"), to provide a portion of the funds to refinance the acquisition,
construction and equipping of certain air and water pollution control facilities
relating to the first and second electric generating units located in the City
at the Company's Sherburne County Generating Station, owned jointly by the
Company and Southern Minnesota Municipal Power Agency; and

         WHEREAS, payments by the Company under and pursuant to the Agreement
have been assigned by the City to the Pollution Control Trustee in order to
secure the payment of the Pollution Control Revenue Bonds; and

         WHEREAS, in order to further secure the payment of the Pollution
Control Revenue Bonds, the Company desires to provide for the issuance under the
Indenture to the Pollution Control Trustee of a new series of bonds designated
"First Mortgage Bonds, Pollution Control Series S" (sometimes called "Bonds of
Pollution Control Series S"), in a principal amount equal to the principal
amount of the Pollution Control Revenue Bonds, and with corresponding terms and
maturity, the Bonds of Pollution Control Series S to be issued as registered
bonds without coupons in denominations of a multiple of $5,000; and

         WHEREAS, the Bonds of Pollution Control Series S are to be
substantially in the form and tenor following, to-wit:

                  (Form of Bonds of Pollution Control Series S)

         This Bond has not been registered under the Securities Act of 1933, as
amended, and may not be offered or sold in contravention of said Act and is not
transferable except to a successor Trustee under the Indenture of Trust dated as
of March 1, 2000, as amended, from the City of Becker, Minnesota (the "City"),
to Wells Fargo Bank Minnesota, National Association, as Trustee.



                                       4






                          NORTHERN STATES POWER COMPANY

             (Incorporated under the laws of the State of Minnesota)

                               First Mortgage Bond

                           Pollution Control Series S

No._________                                                         $69,000,000

         Northern States Power Company, a corporation organized and existing
under and by virtue of the laws of the State of Minnesota (herein called the
"Company"), for value received, hereby promises to pay to Wells Fargo Bank
Minnesota, National Association, Minneapolis, Minnesota, as Trustee under the
Indenture of Trust dated as of March 1, 2000, as supplemented by Supplemental
Indenture No. 1, dated as of August 1, 2002, and Supplemental Indenture No. 2,
dated as of August 20, 2002 (as supplemented, the "Pollution Control Indenture")
from the City of Becker, Minnesota (the "City"), to Wells Fargo Bank Minnesota,
National Association, Minneapolis, Minnesota, or any successor trustee under the
Pollution Control Indenture (the "Pollution Control Trustee") and at the office
of BNY Midwest Trust Company, Chicago, Illinois, successor to Harris Trust and
Savings Bank, as trustee (the "Trustee") the sum of Sixty-Nine Million Dollars
in lawful money of the United States of America on the Demand Redemption Date,
as hereinafter defined, and to pay on the Demand Redemption Date to the
Pollution Control Trustee, interest hereon from the Initial Interest Accrual
Date, as hereinafter defined, to the Demand Redemption Date at the same rate or
rates per annum then and thereafter from time to time borne by the Pollution
Control Revenue Refunding Bonds (Northern States Power Company - Sherburne
County Generating Station Units 1 and 2 Project), Series 2000-A (the "Pollution
Control Revenue Bonds"), in like money, said interest being payable at the
office of the Trustee in Chicago, Illinois, subject to the provisions
hereinafter set forth in the event of a rescission of a Redemption Demand, as
hereinafter defined.

         This bond is one of a duly authorized issue of bonds of the Company,
known as its First Mortgage Bonds, unlimited in aggregate principal amount,
which issue of bonds consists, or may consist of several series of varying
denominations, dates and tenors, all issued and to be issued under and equally
secured (except in so far as a sinking fund, or similar fund, established in
accordance with the provisions of the Indenture may afford additional security
for the bonds of any specific series) by a Trust Indenture dated February 1,
1937 (the "1937 Indenture"), as supplemented by 50 supplemental trust indentures
(the "Supplemental Indentures"), a Supplemental and Restated Trust Indenture
dated May 1, 1988 (the "Restated Indenture") and a new supplemental trust
indenture for the bonds of this series (the "New Supplemental Indenture"),
executed by the Company to the Trustee. The 1937 Indenture, as supplemented by
the Supplemental Indentures, the Restated Indenture and the New Supplemental
Indenture, is referred to as the "Indenture". Reference is hereby made to the
Indenture for a description of the property mortgaged and pledged, the nature
and extent of the security, the rights of the holders of the bonds as to such
security, and the terms and conditions upon which the bonds may be issued under
the Indenture and are secured. The principal hereof may be declared or may
become due on the conditions, in the manner and at the time set forth in the
Indenture, upon the happening of a default as in the Indenture provided.


                                       5






         With the consent of the Company and to the extent permitted by and as
provided in the Indenture, the rights and obligations of the Company and/or the
holders of the bonds, and/or the terms and provisions of the Indenture and/or of
any instruments supplemental thereto may be modified or altered by affirmative
vote of the holders of at least 80% in principal amount of the bonds then
outstanding under the Indenture and any instruments supplemental thereto
(excluding bonds disqualified from voting by reason of the Company's interest
therein as provided in the Indenture); provided that without the consent of all
holders of all bonds affected no such modification or alteration shall permit
the extension of the maturity of the principal of any bond or the reduction in
the rate of interest thereon or any other modification in the terms of payment
of such principal or interest. The foregoing 80% requirement will be reduced to
66-2/3% when all bonds of each series issued under the Indenture prior to May 1,
1985, shall have been retired or all the holders thereof shall have consented to
such reduction.

         The Restated Indenture amends and restates the 1937 Indenture and the
Supplemental Indentures. The Restated Indenture will become effective and
operative (the "Effective Date") when all Bonds of each series issued under the
Indenture prior to May 1, 1988 shall have been retired through payment or
redemption (including those bonds "deemed to be paid" within the meaning of that
term as used in Article XVII of the 1937 Indenture) or until, subject to certain
exceptions, the holders of the requisite principal amount of such bonds shall
have consented to the amendments contained in the Restated Indenture. Holders of
the bonds of this series and of each subsequent series of bonds issued under the
Indenture likewise will be bound by the amendments contained in the Restated
Indenture when they become effective and operative. Reference is made to the
Restated Indenture for a complete description of the amendments contained
therein to the 1937 Indenture and to the Supplemental Indentures.

         This bond is one of a series of bonds of the Company issued under the
Indenture and designated as First Mortgage Bonds, Pollution Control Series S.
The bonds of this Series have been issued to the Pollution Control Trustee under
the Pollution Control Indenture to secure payment of the Pollution Control
Revenue Bonds issued by the City under the Pollution Control Indenture, the
proceeds of which have been or are to be loaned to the Company pursuant to the
provisions of the Loan Agreement dated as of March 1, 2000 (the "Agreement")
between the Company and the City. The maturity of the obligation represented by
the bonds of this Series is April 1, 2030. The date of maturity of the
obligation represented by the bonds of this Series is hereinafter referred to as
the Final Maturity Date. The bonds of this Series shall bear interest from the
Initial Interest Accrual Date, as hereinafter defined, at the same rate or rates
per annum then and thereafter from time to time borne by the Pollution Control
Revenue Bonds.

         Except as provided in the next succeeding paragraph, in the event of a
default under Section 8.01 of the Agreement or in the event of a default in the
payment of the principal of, premium, if any, or interest (and such default in
the payment of interest continues for the full grace period, if any, permitted
by the Pollution Control Indenture and the Pollution Control Revenue Bonds) on
the Pollution Control Revenue Bonds, whether at maturity, by acceleration, by
sinking fund, redemption or otherwise, as and when the same becomes due, the
bonds of this Series shall be redeemable in whole upon receipt by the Trustee of
a written demand (hereinafter called a "Redemption Demand") from the Pollution
Control Trustee stating that there has been such a default, stating that it is
acting pursuant to the authorization granted by Section 8.03 of the Pollution
Control Indenture, specifying the last date to which interest on the Pollution
Control


                                       6






Revenue Bonds has been paid (such date being hereinafter referred to as the
"Initial Interest Accrual Date") and demanding redemption of the bonds of this
Series. The Trustee shall, within 10 days after receiving such Redemption
Demand, mail a copy thereof to the Company marked to indicate the date of its
receipt by the Trustee. Promptly upon receipt by the Company of such copy of a
Redemption Demand, the Company shall fix a date on which it will redeem the
bonds of this Series so demanded to be redeemed (hereinafter called the "Demand
Redemption Date"). Notice of the date fixed as and for the Demand Redemption
Date shall be mailed by the Company to the trustee at least 30 days prior to
such Demand Redemption Date. The date to be fixed by the Company as and for the
Demand Redemption Date may be any date up to and including the earlier of (i)
the 120th day after receipt by the Trustee of the Redemption Demand or (ii) the
Final Maturity Date, provided that if the Trustee shall not have received such
notice fixing the Demand Redemption Date within 90 days after receipt by it of
the Redemption Demand, the Demand Redemption Date shall be deemed to be the
earlier of (i) the 120th day after receipt by the Trustee of the Redemption
Demand or (ii) the Final Maturity Date. The Trustee shall mail notice of the
Demand Redemption Date (such notice being hereafter called the "Demand
Redemption Notice") to the Pollution Control Trustee not more than 10 nor less
than five days prior to the Demand Redemption Date. Notwithstanding the
foregoing, if a default to which this paragraph is applicable is existing on the
Final Maturity Date, such date shall be deemed to be the Demand Redemption Date
without further action (including actions specified in this paragraph) by the
Pollution Control Trustee, the Trustee or the Company. The bonds of this Series
shall be redeemed by the Company on the Demand Redemption Date, upon surrender
thereof by the Pollution Control Trustee to the Trustee, at a redemption price
equal to the principal amount thereof, plus accrued interest thereon at the rate
per annum set forth in the first paragraph of this Bond, from the Initial
Interest Accrual Date to the Demand Redemption Date. If a Redemption Demand is
rescinded by the Pollution Control Trustee by written notice to the Trustee
prior to the Demand Redemption Date, no Demand Redemption Notice shall be given,
or, if already given, shall be automatically annulled, and interest on the bonds
of this Series shall cease to accrue, all interest accrued thereon shall be
automatically rescinded and cancelled and the Company shall not be obligated to
make any payments of principal of or interest on the bonds of this Series; but
no such rescission shall extend to or affect any subsequent default or impair
any right consequent thereon.

         In the event that all of the bonds outstanding under the Indenture
shall have become immediately due and payable, whether by declaration or
otherwise, and such acceleration shall not have been annulled, the bonds of this
Series shall bear interest at the rate per annum set forth in the first
paragraph of this Bond, from the Initial Interest Accrual Date, as specified in
a written notice to the Trustee from the Pollution Control Trustee, and the
principal of and interest on the bonds of this Series from the Initial Interest
Accrual Date shall be payable in accordance with the provisions of the
Indenture.

         Upon payment of the principal of and premium, if any, and interest on
the Pollution Control Revenue Bonds, whether at maturity or prior to maturity by
redemption or otherwise, and the surrender thereof to and cancellation thereof
by the Pollution Control Trustee (other than any Pollution Control Revenue Bond
that was cancelled by the Pollution Control Trustee and for which one or more
other Pollution Control Revenue Bonds were delivered and authenticated pursuant
to the Pollution Control Indenture in lieu of or in exchange or substitution for
such cancelled Pollution Control Revenue Bond), or upon provision for the
payment thereof having



                                       7






been made in accordance with the Pollution Control Indenture, bonds of this
Series in a principal amount equal to the principal amount of the Pollution
Control Revenue Bonds so surrendered and cancelled or for the provision for
which payment has been made shall be deemed fully paid and the obligations of
the Company thereunder shall be terminated, and such bonds of this Series shall
be surrendered by the Pollution Control Trustee to the Trustee and shall be
cancelled by the Trustee.

         No recourse shall be had for the payment of, or interest, if any, on
this bond, or any part thereof, or of any claim based hereon or in respect
hereof or of the Indenture, against any incorporator, or any past, present or
future stockholder, officer or director of the Company or of any predecessor or
successor corporation, either directly or through the Company, or through any
such predecessor or successor corporation, or through any receiver or a trustee
in bankruptcy, whether by virtue of any constitution, statute or rule of law or
by the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released, as more fully provided in the Indenture.

         The bond shall not be valid or become obligatory for any purpose unless
and until the certificate of authentication hereon shall have been signed by or
on behalf of BNY Midwest Trust Company, as Trustee under the Indenture, or its
successor thereunder.

         IN WITNESS WHEREOF, NORTHERN STATES POWER COMPANY has caused this
instrument to be signed in its name by its President or a Vice President, and
its corporate seal, or a facsimile thereof, to be hereto affixed and attested by
its Secretary or an Assistant Secretary.

Dated:                                      NORTHERN STATES POWER COMPANY
       ------------------------------
Attest:                                     By:
       ------------------------------           --------------------------------
           Secretary                                President


                         (Form of Trustee's Certificate)

         This bond is one of the bonds of the Series designated thereon,
described in the within-mentioned Indenture.


                                            BNY MIDWEST TRUST COMPANY,
                                                    As Trustee,

                                            By:
                                                --------------------------------
                                                      Authorized Officer
and

WHEREAS, the Company is desirous of conveying, assigning, transferring,
mortgaging, pledging, setting over, and confirming to the Trustee and to its
respective successors in trust,



                                       8





additional property acquired by it subsequent to the date of the preparation of
the Supplemental Trust Indenture dated as of August 1, 2000; and

         WHEREAS, the Indenture provides in substance that the Company and the
Trustee may enter into indentures supplemental thereto for the purposes, among
others, of creating and setting forth the particulars of any new series of bonds
and of providing the terms and conditions of the issue of the bonds of any
series not expressly provided for in the Indenture and of conveying, assigning,
transferring, mortgaging, pledging, setting over and confirming to the Trustee
additional property of the Company, and for any other purpose not inconsistent
with the terms of the Indenture; and

         WHEREAS, the execution and delivery of this Supplemental Trust
Indenture have been duly authorized by a resolution adopted by the Board of
Directors of the Company;

         WHEREAS, the Trustee has duly determined to execute this Supplemental
Trust Indenture and to be bound, insofar as it may lawfully do so, by the
provisions hereof,

         NOW, THEREFORE, Northern States Power Company, in consideration of the
premises and of one dollar duly paid to it by the Trustee at or before the
ensealing and delivery of these presents, the receipt of which is hereby
acknowledged, and other good and valuable considerations, does hereby covenant
and agree to and with BNY Midwest Trust Company, as Trustee, and its successors
in the trust under the Indenture for the benefit of those who hold or shall hold
the bonds, or any of them, issued or to be issued thereunder, as follows:

             ARTICLE I. SPECIFIC SUBJECTION OF ADDITIONAL PROPERTY
                      TO THE LIEN OF THE ORIGINAL INDENTURE

         SECTION 1.01. The Company in order to better secure the payment, of
both the principal and interest, of all bonds of the Company at any time
outstanding under the Indenture according to their tenor and effect and the
performance of and compliance with the covenants and conditions contained in the
Indenture, has granted, bargained, sold, warranted, released, conveyed,
assigned, transferred, mortgaged, pledged, set over, and confirmed and by these
presents does grant, bargain, sell, warrant, release, convey, assign, transfer,
mortgage, pledge, set over, and confirm to the Trustee and to its respective
successors in said trust forever, subject to the rights reserved by the Company
in and by the provisions of the Indenture, all of the property described and
mentioned or enumerated in a schedule annexed hereto and marked Schedule A,
reference to said schedule being made hereby with the same force and effect as
if the same were incorporated herein at length; together with all and singular
the tenements, hereditaments, and appurtenances belonging and in any way
appertaining to the aforesaid property or any part thereof with the reversion
and reversions, remainder and remainders, tolls, rents and revenues, issues,
income, products, and profits thereof;

         Also, in order to subject the personal property and chattels of the
Company to the lien of the Indenture and to conform with the provisions of the
Uniform Commercial Code, all fossil, nuclear, hydro, and other electric
generating plants, including buildings and other structures, turbines,
generators, exciters, boilers, reactors, nuclear fuel, other boiler plant
equipment, condensing equipment and all other generating equipment; substations;
electric transmission and



                                       9






distribution systems, including structures, poles, towers, fixtures, conduits,
insulators, wires, cables, transformers, services and meters; steam heating
mains and equipment; gas transmission and distribution systems, including
structures, storage facilities, mains, compressor stations, purifier stations,
pressure holders, governors, services, and meters; telephone plant and related
distribution systems; trucks and trailers; office, shop, and other buildings and
structures, furniture and equipment; apparatus and equipment of all other kinds
and descriptions; materials and supplies; all municipal and other franchises,
leaseholds, licenses, permits, privileges, patents and patent rights; all shares
of stock, bonds, evidences of indebtedness, contracts, claims, accounts
receivable, choses in action and other intangibles, all books of account and
other corporate records;

         Excluding, however, all merchandise and appliances heretofore or
hereafter acquired for the purpose of sale to customers and others;

         All the estate, right, title, interest, and claim, whatsoever, at law
as well as in equity, which the Company now has or hereafter may acquire in and
to the aforesaid property and every part and parcel thereof subject, however, to
the right of the Company, until the happening of a completed default as defined
in Section 1 of Article XIII of the Original Indenture prior to the Effective
Date and upon the occurrence and continuation of a Completed Default as defined
in the Restated Indenture on and after the Effective Date, to retain in its
possession all shares of stock, notes, evidences of indebtedness, other
securities and cash not expressly required by the provisions hereof to be
deposited with the Trustee, to retain in its possession all contracts, bills and
accounts receivable, motor cars, any stock of goods, wares and merchandise,
equipment or supplies acquired for the purpose of consumption in the operation,
construction, or repair of any of the properties of the Company, and to sell,
exchange, pledge, hypothecate, or otherwise dispose of any or all of such
property so retained in its possession free from the lien of the Indenture,
without permission or hindrance on the part of the Trustee, or any of the
bondholders. No person in any dealings with the Company in respect of any such
property shall be charged with any notice or knowledge of any such completed
default (prior to the Effective Date) or Completed Default (after the Effective
Date) under the Indenture while the Company is in possession of such property.
Nothing contained herein or in the Indenture shall be deemed or construed to
require the deposit with, or delivery to, the Trustee of any of such property,
except such as is specifically required to be deposited with the Trustee by some
express provision of the Indenture;

         To have and to hold all said property, real, personal, and mixed,
granted, bargained; sold, warranted, released, conveyed, assigned, transferred,
mortgaged, pledged, set over, or confirmed by the Company as aforesaid, or
intended so to be, to the Trustee and its successors and assigns forever,
subject, however, to permitted liens as defined in Section 5 of Article I of the
1937 Indenture prior to the Effective Date and to Permitted Encumbrances on and
after the Effective Date and to the further reservations, covenants, conditions,
uses, and trusts set forth in the Indenture; in trust nevertheless for the same
purposes and upon the same conditions as are set forth in the Indenture.



                                       10





         ARTICLE II. PROVISIONS OF BONDS OF POLLUTION CONTROL SERIES S

         SECTION 2.01. There is hereby created, for issuance under the
Indenture, a series of bonds designated Pollution Control Series S, each of
which shall bear the descriptive title "First Mortgage Bonds, Pollution Control
Series S" and the form thereof shall contain suitable provisions with respect to
the matters specified in this section. The Bonds of Pollution Control Series S
shall be printed, lithographed or typewritten and shall be substantially of the
tenor and purport previously recited. The Bonds of Pollution Control Series S
shall be issued as registered bonds without coupons in denominations of a
multiple of $5,000 and shall be registered in the name of the Pollution Control
Trustee. The Bonds of Pollution Control Series S shall be dated as of the date
of their authentication.

         The Bonds of Pollution Control Series S shall be payable, both as to
principal and interest, at the office of the Trustee in Chicago, Illinois, in
lawful money of the United States of America. The maturity of the obligation
represented by the Bonds of Pollution Control Series S is April 1, 2030. The
date of maturity of the obligation represented by the Bonds of Pollution Control
Series S is hereinafter referred to as the Series S Final Maturity Date. The
Bonds of Pollution Control Series S shall bear interest from the Series S
Initial Interest Accrual Date, as hereinafter defined, at the same rate or rates
then and thereafter from time to time borne by the Pollution Control Revenue
Bonds.

         SECTION 2.02. Except as provided in the next succeeding paragraph of
this Section 2.02, in the event of a default under Section 8.01 of the Agreement
or in the event of a default in the payment of the principal of, premium, if
any, or interest on the Pollution Control Revenue Bonds, whether at maturity, by
acceleration, by sinking fund, redemption or otherwise, as and when the same
becomes due, the Bonds of Pollution Control Series S shall be redeemable in
whole upon receipt by the Trustee of a written demand (hereinafter called a
"Series S Redemption Demand") from the Pollution Control Trustee stating that
there has been such a default, stating that it is acting pursuant to the
authorization granted by Section 8.03 of the Pollution Control Indenture,
specifying the last date to which interest on the Pollution Control Revenue
Bonds has been paid (such date being hereinafter referred to as the "Series S
Initial Interest Accrual Date") and demanding redemption of the Bonds of
Pollution Control Series S. The Trustee shall, within 10 days after receiving
such Series S Redemption Demand, mail a copy thereof to the Company marked to
indicate the date of its receipt by the Trustee. Promptly upon receipt by the
Company of such copy of a Series S Redemption Demand, the Company shall fix a
date on which it will redeem the Bonds of Pollution Control Series S so demanded
to be redeemed (hereinafter called the "Series S Demand Redemption Date").
Notice of the date fixed as the Series S Demand Redemption Date shall be mailed
by the Company to the Trustee at least 30 days prior to such Series S Demand
Redemption Date. The date to be fixed by the Company as and for the Series S
Demand Redemption Date may be any date up to and including the earlier of (i)
the 120th day after receipt by the Trustee of the Series S Redemption Demand or
(ii) the Series S Final Maturity Date; provided that if the Trustee shall not
have received such notice fixing the Series S Demand Redemption Date within 90
days after receipt by it of the Series S Redemption Demand, the Series S Demand
Redemption Date shall be deemed to be the earlier of (i) the 120th day after
receipt by the Trustee of the Series S Redemption Demand or (ii) the Series S
Final Maturity Date. The Trustee shall mail notice of the Series S Demand
Redemption Date (such notice being hereinafter called the "Series S Demand
Redemption Notice") to the


                                       11






Pollution Control Trustee not more than 10 nor less than five days prior to
the Series S Demand Redemption Date. Notwithstanding the foregoing, if a default
to which this paragraph is applicable is existing on the Series S Final Maturity
Date, such date shall be deemed to be the Demand Redemption Date without further
action (including actions specified in this paragraph) by the Pollution Control
Trustee, the Trustee or the Company. The Bonds of Pollution Control Series S
shall be redeemed by the Company on the Series S Demand Redemption Date, upon
surrender thereof by the Pollution Control Trustee to the Trustee, at a
redemption price equal to the principal amount thereof, plus accrued interest
thereon at the rate per annum set forth in Section 2.01 hereof, from the Series
S Initial Interest Accrual Date to the Series S Demand Redemption Date. If a
Series S Redemption Demand is rescinded by the Pollution Control Trustee by
written notice to the Trustee prior to the Series S Demand Redemption Date, no
Series S Demand Redemption Notice shall be given, or, if already given, shall be
automatically annulled, and interest on the Bonds of Pollution Control Series S
shall cease to accrue, all interest accrued thereon shall be automatically
rescinded and cancelled and the Company shall not be obligated to make any
payments of principal of or interest on the Bonds of Pollution Control Series S;
but no such rescission shall extend to or affect any subsequent default or
impair any right consequent thereon.

         In the event that all of the bonds outstanding under the Indenture
shall have become immediately due and payable, whether by declaration or
otherwise, and such acceleration shall not have been annulled, the Bonds of
Pollution Control Series S shall bear interest at the rate per annum set forth
in Section 2.01 hereof; from the Series S Initial Interest Accrual Date, as
specified in a written notice to the Trustee from the Pollution Control Trustee,
and the principal of and interest on the Bonds of Pollution Control Series S
from the Series S Initial Interest Accrual Date shall be payable in accordance
with the provisions of the Indenture.

         Anything herein contained to the contrary notwithstanding, the Trustee
is not authorized to take any action pursuant to a Series S Redemption Demand or
a rescission thereof or a written notice required by this Section 2.02, and such
Series S Redemption Demand, rescission or notice shall be of no force or effect,
unless it is executed in the name of the Pollution Control Trustee by one of its
Vice Presidents.

         SECTION 2.03. Upon payment of the principal of and premium, if any, and
interest on the Pollution Control Revenue Bonds, whether at maturity or prior to
maturity by redemption or otherwise, and the surrender thereof to and
cancellation thereof by the Pollution Control Trustee (other than any Pollution
Control Revenue Bond that was cancelled by the Pollution Control Trustee and for
which one or more other Pollution Control Revenue Bonds were delivered and
authenticated pursuant to the Pollution Control Indenture), or upon provision
for the payment thereof having been made in accordance with the Pollution
Control Indenture, Bonds of Pollution Control Series S in a principal amount
equal to the principal amount of the Pollution Control Revenue Bonds so
surrendered and cancelled or for the provision for which payment has been made
shall be deemed fully paid and the obligations of the Company thereunder shall
be terminated, and such Bonds of Pollution Control Series S shall be surrendered
by the Pollution Control Trustee to the Trustee and shall be cancelled and
disposed of by the Trustee in accordance with its customary procedures, and a
certificate of such cancellation and destruction shall be delivered to the
Company.


                                       12






         SECTION 2.04. The Pollution Control Trustee as the registered holder of
the Bonds of Pollution Control Series S, at its option may surrender the same at
the office of the Trustee, in Chicago, Illinois, or elsewhere, if authorized by
the Company, for cancellation, in exchange for other bonds of the same series of
the same aggregate principal amount. Thereupon, and upon receipt of any payment
required under the provisions of Section 2.05 hereof, the Company shall execute
and deliver to the Trustee and the Trustee shall authenticate and deliver such
other registered bonds to such registered holder at its office or at any other
place specified as aforesaid.

         SECTION 2.05. No charge shall be made by the Company for any exchange
or transfer of Bonds of Pollution Control Series S other than for taxes or other
governmental charges, if any that may be imposed in relation thereto.


  ARTICLE III. FINANCING STATEMENT TO COMPLY WITH THE UNIFORM COMMERCIAL CODE

         SECTION 3.01. The name and address of the debtor and secured party are
set forth below:

             Debtor:  Northern States Power Company
                      414 Nicollet Mall
                      Minneapolis, Minnesota 55401

             Secured Party:  BNY Midwest Trust Company, Trustee
                             2 North LaSalle Street, Suite 1020
                             Chicago, Illinois 60602

         NOTE: Northern States Power Company, the debtor above named, is "a
transmitting utility" under the Uniform Commercial Code as adopted in Minnesota,
North Dakota and South Dakota.

         SECTION 3.02. Reference to Article I hereof is made for a description
of the property of the debtor covered by this Financing Statement with the same
force and effect as if incorporated in this Section at length.

         SECTION 3.03. The maturity dates and respective principal amounts of
obligations of the debtor secured and presently to be secured by the Indenture,
reference to all of which for the terms and conditions thereof is hereby made
with the same force and effect as if incorporated herein at length, are as
follows:



                FIRST MORTGAGE BONDS                                         PRINCIPAL AMOUNT
                --------------------                                         ----------------
                                                                       
                Series due April 1, 2003...................................   $ 80,000,000
                Series due December 1, 2005................................   $ 70,000,000
                Pollution Control Series J.................................   $  5,450,000
                Pollution Control Series K.................................   $  3,400,000
                Pollution Control Series L.................................   $  4,850,000
                Series due July 1, 2025....................................   $250,000,000



                                       13




                                                                        
                Pollution Control Series N.................................   $ 27,900,000
                Pollution Control Series O.................................   $ 50,000,000
                Pollution Control Series P.................................   $ 50,000,000
                Resource Recovery Series Q.................................   $ 15,170,000
                Resource Recovery Series R.................................   $ 19,615,000
                Series due March 1, 2003...................................   $100,000,000
                Series due March 1, 2028...................................   $150,000,000
                Series due August 15, 2003.................................   $308,000,000
                Pollution Control Series S.................................   $ 69,000,000



         SECTION 3.04. This Financing Statement is hereby adopted for all of the
First Mortgage Bonds of the series mentioned above secured by said Indenture.

         SECTION 3.05. The 1937 Indenture and the prior Supplemental Trust
Indentures, as set forth below, have been filed or recorded in each and every
office in the States of Minnesota, North Dakota, and South Dakota designated by
law for the filing or recording thereof in respect of all property of the
Company subject thereto:

Original Indenture
     Dated February 1, 1937

Supplemental Indenture
     Dated June 1, 1942

Supplemental Indenture
     Dated February 1, 1944

Supplemental Indenture
     Dated October 1, 1945

Supplemental Indenture
     Dated July 1, 1948

Supplemental Indenture
     Dated August 1, 1949

Supplemental Indenture
     Dated June 1, 1952

Supplemental Indenture
     Dated October 1, 1954

Supplemental Indenture
     Dated September 1, 1956


                                       14





Supplemental Indenture
     Dated August 1, 1957

Supplemental Indenture
     Dated July 1, 1958

Supplemental Indenture
     Dated December 1, 1960

Supplemental Indenture
     Dated August 1, 1961

Supplemental Indenture
     Dated June 1, 1962

Supplemental Indenture
     Dated September 1, 1963

Supplemental Indenture
     Dated August 1, 1966

Supplemental Indenture
     Dated June 1, 1967

Supplemental Indenture
     Dated October  1, 1967

Supplemental Indenture
     Dated May 1, 1968

Supplemental Indenture
     Dated October 1, 1969

Supplemental Indenture
     Dated February 1, 1971

Supplemental Indenture
     Dated May 1, 1971

Supplemental Indenture
     Dated February 1, 1972

Supplemental Indenture
     Dated January 1, 1973



                                       15





Supplemental Indenture
     Dated January 1, 1974

Supplemental Indenture
     Dated September 1, 1974

Supplemental Indenture
     Dated April 1, 1975

Supplemental Indenture
     Dated May 1, 1975

Supplemental Indenture
     Dated March 1, 1976

Supplemental Indenture
     Dated June 1, 1981

Supplemental Indenture
     Dated December 1, 1981

Supplemental Indenture
     Dated May 1, 1983

Supplemental Indenture
     Dated December 1, 1983

Supplemental Indenture
     Dated September 1, 1984

Supplemental Indenture
     Dated December 1, 1984

Supplemental Indenture
     Dated May 1, 1985

Supplemental Indenture
     Dated September 1, 1985

Supplemental Indenture
     Dated May 1, 1988

Supplemental Indenture
     Dated July 1, 1989



                                       16




Supplemental Indenture
     Dated June 1, 1990

Supplemental Indenture
     Dated October 1, 1992

Supplemental Indenture
     Dated April 1, 1993

Supplemental Indenture
     Dated December 1, 1993

Supplemental Indenture
     Dated February 1, 1994

Supplemental Indenture
     Dated October 1, 1994

Supplemental Indenture
     Dated June 1, 1995

Supplemental Indenture
     Dated April 1, 1997

Supplemental Indenture
     Dated March 1, 1998

Supplemental Indenture
     Dated May 1, 1999

Supplemental Indenture
     Dated June 1, 2000

Supplemental Indenture
     Dated August 1, 2000

Supplemental Indenture
     Dated June 1, 2002

         SECTION 3.06. The property covered by this Financing Statement also
shall secure additional series of First Mortgage Bonds of the debtor which may
be issued from time to time in the future in accordance with the provisions of
the Indenture.

                      ARTICLE IV. AMENDMENTS TO INDENTURE

         SECTION 4.01. Each holder or registered owner of a bond of any series
originally authenticated by the Trustee and originally issued by the Company
subsequent to May 1, 1985



                                       17






and of any coupon pertaining to any such bond, by the acquisition, holding or
ownership of such bond and coupon, thereby consents and agrees to, and shall be
bound by, the provisions of Article VI of the Supplemental Trust Indenture dated
May 1, 1985. Each holder or registered owner of a bond of any series (including
Bonds of Pollution Control Series S) originally authenticated by the Trustee and
originally issued by the Company subsequent to May 1, 1988 and of any coupon
pertaining to such bond, by the acquisition, holding or ownership of such bond
and coupon, thereby consents and agrees to, and shall be bound by, the
provisions of the Supplemental and Restated Trust Indenture dated May 1, 1988
upon the Effective Date.

                            ARTICLE V. MISCELLANEOUS

         SECTION 5.01. The recitals of fact herein, except the recital that the
Trustee has duly determined to execute this Supplemental Trust Indenture and be
bound, insofar as it may lawfully so do, by the provisions hereof and in the
bonds shall be taken as statements of the Company and shall not be construed as
made by the Trustee. The Trustee makes no representations as to the value of any
of the property subject to the lien of the Indenture, or any part thereof, or as
to the title of the Company thereto, or as to the security afforded thereby and
hereby, or as to the validity of this Supplemental Trust Indenture or of the
bonds issued under the Indenture by virtue hereof (except the Trustee's
certificate) and the Trustee shall incur no responsibility in respect of such
matters.

         SECTION 5.02. This Supplemental Trust Indenture shall be construed in
connection with and as a part of the 1937 Indenture, as supplemented by the
Supplemental Trust Indentures dated June 1, 1942, February 1, 1944, October 1,
1945, July 1, 1948, August 1, 1949, June 1, 1952, October 1, 1954, September 1,
1956, August 1, 1957, July 1, 1958, December 1, 1960, August 1, 1961, June 1,
1962, September 1, 1963, August 1, 1966, June 1, 1967, October 1, 1967, May 1,
1968, October 1, 1969, February 1, 1971, May 1, 1971, February 1, 1972, January
1, 1973, January 1, 1974, September 1, 1974, April 1, 1975, May 1, 1975, March
1, 1976, June 1, 1981, December 1, 1981, May 1, 1983, December 1, 1983,
September 1, 1984, December 1, 1984, May 1, 1985, September 1, 1985, the
Supplemental and Restated Trust Indenture dated May 1, 1988 and the Supplemental
Trust Indentures dated July 1, 1989, June 1, 1990, October 1, 1992, April 1,
1993, December 1, 1993, February 1, 1994, October 1, 1994, June 1, 1995, April
1, 1997, March 1, 1998, May 1, 1999, June 1, 2000, August 1, 2000 and June 1,
2002.

         SECTION 5.03. (a) If any provision of this Supplemental Trust Indenture
limits, qualifies or conflicts with another provision of the Indenture required
to be included in indentures qualified under the Trust Indenture Act of 1939, as
amended (as enacted prior to the date of this Supplemental Trust Indenture) by
any of the provisions of Sections 310 to 317, inclusive, of the said Act, such
required provision shall control.

         (b) In case any one or more of the provisions contained in this
Supplemental Indenture or in the bonds issued hereunder shall be invalid,
illegal, or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected, impaired, prejudiced or disturbed thereby.


                                       18






         SECTION 5.04. Wherever in this Supplemental Trust Indenture the word
"Indenture" is used without the prefix, "1937", "Original" or "Supplemental",
such word was used intentionally to include in its meaning both the 1937
Indenture and all indentures supplemental thereto.

         SECTION 5.05. Wherever in this Supplemental Trust Indenture either of
the parties hereto is named or referred to, this shall be deemed to include the
successors or assigns of such party, and all the covenants and agreements in
this Supplemental Trust Indenture contained by or on behalf of the Company or by
or on behalf of the Trustee shall bind and inure to the benefit of the
respective successors and assigns of such parties, whether so expressed or not.

         SECTION 5.06. (a) This Supplemental Trust Indenture may be
simultaneously executed in several counterparts, and all said counterparts
executed and delivered, each as an original, shall constitute but one and the
same instrument.

         (b) The Table of Contents and the descriptive headings of the several
Articles of this Supplemental Trust Indenture were formulated, used and inserted
in this Supplemental Trust Indenture for convenience only and shall not be
deemed to affect the meaning or construction of any of the provisions hereof.

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

         The amount of obligations to be issued forthwith under the Indenture is
$69,000,000.

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


                                       19





         IN WITNESS WHEREOF, on this 15th day of August, A.D. 2002, NORTHERN
STATES POWER COMPANY, a Minnesota corporation, party of the first part, has
caused its corporate name and seal to be hereunto affixed and this Supplemental
Trust Indenture dated July 1, 2002, to be signed by its President or a Vice
President, and attested by its Secretary or an Assistant Secretary, for and in
its behalf, and BNY MIDWEST TRUST COMPANY, an Illinois corporation, as Trustee,
party of the second part, to evidence its acceptance of the trust hereby
created, has caused its corporate name and seal to be hereunto affixed, and this
Supplemental Trust Indenture dated July 1, 2002, to be signed by its President,
a Vice President, or an Assistant Vice President, and attested by its Secretary
or an Assistant Secretary, for and in its behalf.


                                        NORTHERN STATES POWER COMPANY


                                        ----------------------------------------
                                        By:  Paul E. Pender
                                             Its:  Vice President and Treasurer
Attest:



- --------------------------------------
Nancy Haley
Assistant Secretary

Executed by Northern States
Power Company in the presence of:


- --------------------------------------                          (CORPORATE SEAL)
Mary Schell, Witness


- --------------------------------------
Elizabeth Blohm, Witness







                                           BNY MIDWEST TRUST COMPANY,
                                           as Trustee


                                           -------------------------------------
                                           By: J. Bartolini
                                               Its: Vice President
Attest:



- -------------------------------------
M. Callahan
Assistant Vice President


Executed by BNY Midwest Trust Company
in the presence of:


- -------------------------------------                           (CORPORATE SEAL)
K. Gibson, Witness


- -------------------------------------
A. Hernandez, Witness







STATE OF MINNESOTA           )
                             )      ss.:
COUNTY OF HENNEPIN           )


         On this 15th day of August A.D. 2002, before me, Sharon Quellhorst, a
Notary Public in and for said County in the State aforesaid, personally appeared
Paul E. Pender, and Nancy Haley, to me personally known, and to me known to be
the Vice President and Treasurer and Assistant Secretary, respectively, of
Northern States Power Company, one of the corporations described in and which
executed the within and foregoing instrument, and who, being by me severally
duly sworn, each for himself, did say that he, the said Paul E. Pender is a Vice
President and Treasurer, and she, the said Nancy Haley is the Assistant
Secretary, of said Northern States Power Company, a corporation; that the seal
affixed to the within and foregoing instrument is the corporate seal of said
corporation, and that said instrument was executed on behalf of said corporation
by authority of its stockholders and board of directors; and said Paul E. Pender
and Nancy Haley each acknowledged said instrument to be the free act and deed of
said corporation and that such corporation executed the same.

         WITNESS my hand and notarial seal, this 15th day of August, A.D. 2002.


                                                                   (NOTARY SEAL)
- ----------------------------------------
Sharon Quellhorst
Notary Public

My Commission Expires:  January 31, 2005








STATE OF MINNESOTA           )
                             )      ss.:
COUNTY OF HENNEPIN           )


         Paul E. Pender and Nancy Haley, being severally duly sworn, each
deposes and says that he, the said Paul E. Pender is Vice President and
Treasurer, and she, the said Nancy Haley is Assistant Secretary, of Northern
States Power Company, the corporation described in and which executed the within
and foregoing Supplemental Trust Indenture, as mortgagor; and each for himself
further says that said Supplemental Trust Indenture was executed in good faith,
and not for the purpose of hindering, delaying, or defrauding any creditor of
the said mortgagor.


- ---------------------------------        ---------------------------------------
Paul E. Pender                            Nancy Haley


         Subscribed and sworn to before me this 15th day of August, A.D. 2002.

                                                                   (NOTARY SEAL)
- ---------------------------------
Sharon Quellhorst
Notary Public

My Commission Expires:  January 31, 2005








STATE OF ILLINOIS          )
                           )   ss.:
COUNTY OF COOK             )


         On this _____ day of _______________, A.D. 2002, before me, L. Garcia,
a Notary Public in and for said County in the State aforesaid, personally
appeared J. Bartolini and M. Callahan to me personally known, and to me known to
be the Vice President and Assistant Vice President, respectively, of BNY Midwest
Trust Company, one of the corporations described in and which executed the
within and foregoing instrument, and who, being by me severally duly sworn,
each, did say that she, the said J. Bartolini, is Vice President, and she, the
said M. Callahan, is the Assistant Vice President, of said BNY Midwest Trust
Company, a corporation; that the seal affixed to the within and foregoing
instrument is the corporate seal of said corporation, and that said instrument
was executed on behalf of said corporation by authority of its board of
directors; and said J. Bartolinli and M. Callahan each acknowledged said
instrument to be the free act and deed of said corporation and that such
corporation executed the same.

         WITNESS my hand and notarial seal, this _____ day of _______________,
A.D. 2002.


                                                                   (NOTARY SEAL)
- ------------------------------------
L. Garcia
Notary Public

My Commission Expires:  July 8, 2006








STATE OF ILLINOIS        )
                         )    ss.:
COUNTY OF COOK           )


         J. Bartolini and M. Callahan, being severally duly sworn, each for
himself deposes and says that she, the said J. Bartolini, is Vice President, and
she, the said M. Callahan, is Assistant Vice President, of BNY Midwest Trust
Company, the corporation described in and which executed the within and
foregoing Supplemental Trust Indenture, as mortgagee; and each for himself
further says that said Supplemental Trust Indenture was executed in good faith,
and not for the purpose of hindering, delaying, or defrauding any creditor of
the mortgagor.

- ----------------------------------        --------------------------------------
J. Bartolini                              M. Callahan


         Subscribed and sworn to before me this __________ day of
_______________, A.D. 2002.


                                                                   (NOTARY SEAL)
- ---------------------------------
L. Garcia
Notary Public

My Commission Expires:  July 8, 2006









                                   SCHEDULE A

         The property referred to in Article I of the foregoing Supplemental
Trust Indenture from Northern States Power Company to BNY Midwest Trust Company,
Trustee, made as of July 1, 2002 includes the following property hereinafter
more specifically described. Such description, however, is not intended to limit
or impair the scope or intention of the general description contained in the
granting clauses or elsewhere in the Original Indenture.

                     I. PROPERTIES IN THE STATE OF MINNESOTA

         The following described real property, situate, lying and being in the
County of Hennepin, to-wit:

         1.   Lot 1, Block 1, Ceridian 2nd Addition, according to the
              recorded plat thereof, Hennepin County, Minnesota.

              Together with and subject to the easements filed with the Hennepin
              County Recorder's Office as Document Nos. 3714541, 6584907 and
              6987085 to the extent such easements are appurtenant to the
              above-referenced real property.

                      II. TRANSMISSION LINES OF THE COMPANY

         The electric transmission lines of the Company, including towers,
poles, pole lines, wire, switch racks, switchboards, insulators, and other
appliances and equipment, and all other property forming a part thereof or
appertaining thereto, and all service lines extending therefrom; together with
all rights for or relating to the construction, maintenance of operation
thereof, through, over, under, or upon any private property of public streets or
highways within as well as without the corporate limits of any municipal
corporation, and particularly the following described lines, to-wit:

                            IN THE STATE OF MINNESOTA

                                    
Line 0808           0.56 Miles (U.G.)     High Bridge-Rogers Lake-Airport-Bloomington-Wilson
                                          Hennepin Co., MN., Sec 36, T28N, R23W

Line 5531           14.91 Miles           Pipestone-Chanerambie
                                          Pipestone Co., MN., Sec 12, T106N, R46W
                                          Pipestone Co., MN., Sec's 4, 7, 8, 9, T106N, R45W
                                          Pipestone Co., MN., Sec's 33, 34, 35, 36, T107N, R45W
                                          Pipestone Co., MN., Sec's 31, 32, 33, 34, 35, 36, T107N, R44W
                                          Murray Co., MN., Sec 1, T106N, R43W
                                          Murray Co., MN., Sec 31, T105N, R43W

Line 0832           8.68 Miles            Black Dog-Burnsville-Lake Marion
                                          Waseca Co., MN., Sec 18, T107N, R22W






                                      A-1




                                    
                                          Waseca Co., MN., Sec's 1, 12, 13, T107N, R23W
                                          Waseca Co., MN., Sec's 1, 12, 13, 24, 25, 36, T108 N, R23W

Line 0832           7.28 Miles            Black Dog-Burnsville-Lake Marion
                                          LeSueur Co., MN., Sec's 35, 36, T109N, R23W
                                          Rice Co., MN., Sec's 17, 20, 29, 30, T109N, R22W

Line 0703           6.62 Miles            Yankee Doodle-Northfield (Tap to Kegan Lake and Air Lake)
                                          Dakota Co., MN., Sec's 31, 32, 33, T114N, R20W
                                          Dakota Co., MN., Sec 36, T114N, R21W
                                          Scott Co., MN., Sec's 1, 12, 13, T113N, R21W




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

         This instrument was drafted by Northern States Power Company, 414
Nicollet Mall, Minneapolis, Minnesota 55401.

         Tax statements for the real property described in this instrument
should be sent to Northern States Power Company, 414 Nicollet Mall, Minneapolis,
Minnesota 55401.



                                      A-2

EX-4.10

                                                                    EXHIBIT 4.10


                            SENIOR CONVERTIBLE NOTE

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A)
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL IN A
REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR
RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THIS NOTE AND THE
SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THIS
NOTE. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS
NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY
BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION
3(c)(iii) OF THIS NOTE.



                                XCEL ENERGY INC.


Issuance Date: November 8, 2002                      Principal: U.S. $ _________

        FOR VALUE RECEIVED, XCEL ENERGY INC., a Minnesota corporation (the
"COMPANY"), hereby promises to pay to the order of _____________ or registered
assigns ("HOLDER") the amount set out above as the Principal (as reduced
pursuant to the terms hereof pursuant to redemption, conversion or otherwise,
the "PRINCIPAL") when due, whether upon the Final Maturity Date (as defined
below), acceleration, conversion, redemption or otherwise (in each case in
accordance with the terms hereof) and to pay interest ("INTEREST") on any
outstanding Principal at the rate of eight percent (8%) per annum, subject to
periodic adjustment pursuant to Section 2 (the "INTEREST RATE"), from the date
set out above as the Issuance Date (the "ISSUANCE DATE") until the same becomes
due and payable, whether upon an Interest Date (as defined below), the Final
Maturity Date, acceleration, conversion, redemption or otherwise (in each case
in accordance with the terms hereof). This Convertible Note (including all
Convertible Notes issued in exchange, transfer or replacement hereof, this
"NOTE") is one of an issue of Convertible Notes (collectively, the "NOTES" and
such other Convertible Notes, the "OTHER NOTES") issued on the Issuance Date
pursuant to the Securities Purchase Agreement (as defined below). Certain
capitalized terms are defined in Section 28 and terms used herein but not
defined herein shall have the meanings set forth for such terms in the
Securities Purchase Agreement.





               (1) MATURITY. On the Final Maturity Date, the Holder shall
surrender this Note to the Company and the Company shall pay to the Holder an
amount in cash representing all outstanding Principal, accrued and unpaid
Interest and accrued and unpaid Late Charges (as defined in Section 24(b)), if
any. The "MATURITY DATE" shall be the date that is 364 days after the Issuance
Date; provided that, if the Holder has given notice in writing to the Company of
its desire to extend the Maturity Date on or prior to the date that is 10
Business Days prior to the Maturity Date, the Maturity Date shall be extended
(on one or more occasions) for an additional 364 days; provided, further, that
the Maturity Date shall not be extended (except as provided in the following
proviso) to more than five years after the Issuance Date (such date that is five
years after the Issuance Date or such earlier Maturity Date prior to which the
Holder has not requested an extension thereof, the "FINAL MATURITY DATE"); and
provided, further, that the Final Maturity Date may be extended at the option of
the Holder (x) in the event that, and for so long as, an Event of Default (as
defined in Section 4(a)) shall have occurred and be continuing or any event
shall have occurred and be continuing which with the passage of time and the
failure to cure would result in an Event of Default and (y) through the date
that is ten days after a Change of Control Termination Date in the event that
the Announcement Date giving rise to such Change of Control Termination Date
occurred prior to the Final Maturity Date.

               (2) INTEREST; INTEREST RATE. Interest on this Note shall commence
accruing on the Issuance Date and shall be computed on the basis of the actual
days elapsed during any period, and a calendar year of 365 or 366 calendar days,
as applicable, and shall be payable in cash on each May 1 and each November 1
during the period beginning on the Issuance Date and ending on, and including,
the Final Maturity Date (each an "INTEREST DATE"); provided that interest on any
Conversion Amount of this Note that is accrued but unpaid as of the Conversion
Date of such Conversion Amount shall be paid in shares of Common Stock at the
Conversion Rate. From and after the occurrence of an Event of Default (as
defined in Section 4(a)) or the failure to deliver timely the Non-Consolidation
Opinion (as defined in the Securities Purchase Agreement) pursuant to Section
4(f) of the Securities Purchase Agreement (the "NRG OPINION"), the Interest Rate
shall be increased by two percentage points (2%). In the event that such Event
of Default is subsequently cured, the adjustment referred to in the preceding
sentence shall cease to be effective as of the date of such cure; provided that
the Interest as calculated at such increased rate during the continuance of such
Event of Default shall continue to apply to the extent relating to the days
after the occurrence of such Event of Default through and including the date of
cure of such Event of Default. If the Company shall fail to credit the Holder's
balance account with DTC (as defined in Section 3(c)(i)) or, if requested in
writing by the Holder, to issue a certificate to the Holder for the number of
shares of Common Stock to which the Holder is entitled upon conversion of any
Conversion Amount or to issue a new Note (in accordance with Section 18(d))
representing the Principal portion of the Conversion Amount (as defined in
Section 3(b)(i)) to which the Holder is entitled, in each case within the time
periods set out in Section 3(c)(i) (in each case, a "CONVERSION FAILURE"), then
during each period beginning on and including the date of each such Conversion
Failure and ending on and including the date such Conversion Failure is cured,
the Interest Rate then in effect shall be increased by two percentage points
(2%). If (i) the Registration Statement (as defined in the Registration Rights
Agreement) covering all the Registrable Securities (as defined in the
Registration Rights Agreement) issuable upon conversion of this Note and
required to be filed by



                                       2


the Company pursuant to the Registration Rights Agreement is not declared
effective by the Securities and Exchange Commission (the "SEC") on or before the
applicable Mandatory Effective Date (as defined in the Registration Rights
Agreement) or (ii) on any day after such Registration Statement has been
declared effective by the SEC that sales of all the Registrable Securities
required to be included on such Registration Statement cannot be made (other
than during an Allowable Grace Period (as defined in Section 3(t) of the
Registration Rights Agreement)) pursuant to such Registration Statement
(including, without limitation, because of a failure to keep such Registration
Statement effective, to disclose such information as is necessary for sales to
be made pursuant to such Registration Statement or to register sufficient shares
of Common Stock) (collectively with the event described in the immediately
preceding clause (i), each a "REGISTRATION FAILURE"), then, as partial relief
for the damages to any holder by reason of any such delay in or reduction of its
ability to sell Registrable Securities (which remedy shall not be exclusive of
any other remedies available at law or in equity) the Interest Rate then in
effect shall be increased by two percentage points (2%) during each period
beginning on and including the first date of each such Registration Failure and
ending on and including the date such Registration Failure is cured.

               (3) CONVERSION OF NOTES. This Note shall be convertible into
shares of the Common Stock, on the terms and conditions set forth in this
Section 3.

                      (a) Conversion Right. Subject to the provisions of Section
3(d), at any time or times on or after the Issuance Date, the Holder shall be
entitled to convert any portion of the outstanding and unpaid Conversion Amount
(as defined below) into fully paid and nonassessable shares of Common Stock in
accordance with Section 3(c), at the Conversion Rate (as defined below). The
Company shall not issue any fraction of a share of Common Stock upon any
conversion. If the issuance would result in the issuance of a fraction of a
share of Common Stock, the Company shall round such fraction of a share of
Common Stock up to the nearest whole share. The Company shall pay any and all
taxes that may be payable with respect to the issuance and delivery of Common
Stock upon conversion of any Conversion Amount.

                      (b) Conversion Rate. The number of shares of Common Stock
issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall
be determined by dividing (x) such Conversion Amount by (y) the Conversion Price
(as defined below) (the "CONVERSION RATE").

        (i) "CONVERSION AMOUNT" means the sum of (A) the portion of the
        Principal to be converted, redeemed or otherwise surrendered with
        respect to which this determination is being made, (B) accrued and
        unpaid Interest with respect to such Principal and (C) accrued and
        unpaid Late Charges with respect to such Principal and Interest.

        (ii) "CONVERSION PRICE" means 110% of the arithmetic average of the
        Weighted Average Price of the Common Stock during the Tranche A Pricing
        Period; provided that the Conversion Price (i) shall not exceed 110% of
        the Tranche A Base Price and (ii) shall equal the Company Optional
        Redemption Conversion Price until such time as the Tranche A Pricing
        Period has concluded; provided further, that in the event that the
        Company has not delivered a Company Optional Redemption Notice as of the
        date that is



                                       3


        35 Business Days after the Issuance Date and 110% of the Closing Bid
        Price of the Common Stock on such date is less than the Conversion Price
        then in effect, then the Conversion Price shall be reduced to equal such
        price.

                      (c) Mechanics of Conversion.

        (i) Optional Conversion. To convert any Conversion Amount into shares of
        Common Stock on any date (a "CONVERSION DATE"), the Holder shall (A)
        transmit by facsimile (or otherwise deliver), for receipt on or prior to
        11:59 p.m., Central Time on such date, a copy of an executed notice of
        conversion in the form attached hereto as Exhibit I (the "CONVERSION
        NOTICE") to the Company and (B) if required by Section 3(c)(ii),
        surrender this Note to a common carrier for delivery to the Company as
        soon as practicable on or following such date (or an indemnification
        undertaking with respect to this Note in the case of its loss, theft or
        destruction). On or before the first Business Day following the
        Company's receipt of a Conversion Notice, the Company shall transmit by
        facsimile a confirmation of receipt of such Conversion Notice to the
        Holder and the Transfer Agent (as defined below). On or before the
        second Business Day following the date of receipt of a Conversion Notice
        (the "SHARE DELIVERY DATE"), the Company shall (X) (if (Y) below does
        not apply) issue and deliver to the address as specified in the
        Conversion Notice, a certificate, registered in the name of the Holder
        or its designee, for the number of shares of Common Stock to which the
        Holder shall be entitled, or (Y) provided that the Company's transfer
        agent (the "TRANSFER AGENT") is participating in The Depository Trust
        Company ("DTC") Fast Automated Securities Transfer Program, upon the
        request of the Holder, credit such aggregate number of shares of Common
        Stock to which the Holder shall be entitled to the Holder's or its
        designee's balance account with DTC through its Deposit Withdrawal Agent
        Commission system. If this Note is physically surrendered for conversion
        as required by Section 3(c)(ii) and the outstanding Principal of this
        Note is greater than the Principal portion of the Conversion Amount
        being converted, then the Company shall as soon as practicable and in no
        event later than three Business Days after receipt of this Note (the
        "NOTE DELIVERY DATE") and at its own expense, issue and deliver to the
        holder a new Note (in accordance with Section 18(d)) representing the
        outstanding Principal not converted. The person or persons entitled to
        receive the shares of Common Stock issuable upon a conversion of this
        Note shall be treated for all purposes as the record holder or holders
        of such shares of Common Stock on the Conversion Date.

        (ii) Book-Entry. Notwithstanding anything to the contrary set forth
        herein, upon conversion of any portion of this Note in accordance with
        the terms hereof, the Holder shall not be required to physically
        surrender this Note to the Company unless (A) the full Conversion Amount
        represented by this Note is being converted or (B) the Holder has
        provided the Company with prior written notice (which notice may be
        included in a Conversion Notice) requesting physical surrender and
        reissue of this Note. The Holder and the Company shall maintain records
        showing the Principal and Interest converted and the dates of such
        conversions or shall use such other method, reasonably satisfactory to
        the Holder and the Company, so as not to require physical surrender of
        this Note upon conversion.



                                       4


        (iii) Pro Rata Conversion; Disputes. In the event that the Company
        receives a Conversion Notice from more than one holder of the Notes or
        the Separate Tranche Notes for the same Conversion Date and the Company
        can convert some, but not all, of such portions of the Notes and the
        Separate Tranche Notes submitted for conversion, the Company, subject to
        Section 3(d), shall convert from each holder of the Notes and the
        Separate Tranche Notes electing to have the Notes or Separate Tranche
        Notes converted on such date a pro rata amount of such holder's portion
        of its Notes or Separate Tranche Notes submitted for conversion based on
        the principal amount of the Notes or Separate Tranche Notes submitted
        for conversion on such date by such holder relative to the aggregate
        principal amount of all the Notes and the Separate Tranche Notes
        submitted for conversion on such date. In the event of a dispute as to
        the number of shares of Common Stock issuable to the Holder in
        connection with a conversion of this Note, the Company shall issue to
        the Holder the number of shares of Common Stock not in dispute and
        resolve such dispute in accordance with Section 23.

                      (d) Limitations on Conversions.

        (i) Beneficial Ownership. The Company shall not effect any conversion of
        this Note, and the Holder of this Note shall not have the right to
        convert any portion of this Note pursuant to Section 3(a), to the extent
        that after giving effect to such conversion, the Holder (together with
        the Holder's affiliates) would beneficially own in excess of 5.0% of the
        number of shares of Common Stock outstanding immediately after giving
        effect to such conversion. For purposes of the foregoing sentence, the
        number of shares of Common Stock beneficially owned by the Holder and
        its affiliates shall include the number of shares of Common Stock
        issuable upon conversion of this Note with respect to which the
        determination of such sentence is being made, but shall exclude the
        number of shares of Common Stock which would be issuable upon (A)
        conversion of the remaining, nonconverted portion of this Note
        beneficially owned by the Holder or any of its affiliates and (B)
        exercise or conversion of the unexercised or nonconverted portion of any
        other securities of the Company (including, without limitation, any
        Other Notes, Separate Tranche Notes or warrants) subject to a limitation
        on conversion or exercise analogous to the limitation contained herein
        beneficially owned by the Holder or any of its affiliates. Except as set
        forth in the preceding sentence, for purposes of this Section 3(d)(i),
        beneficial ownership shall be calculated in accordance with Section
        13(d) of the Securities Exchange Act of 1934, as amended. For purposes
        of this Section 3(d)(i), in determining the number of outstanding shares
        of Common Stock, the Holder may rely on the number of outstanding shares
        of Common Stock as reflected in (x) the Company's most recent Form 10-Q
        or Form 10-K, as the case may be, (y) a more recent public announcement
        by the Company or (z) any other notice by the Company or the Transfer
        Agent setting forth the number of shares of Common Stock outstanding.
        For any reason at any time, upon the written or oral request of the
        Holder, the Company shall within one Business Day confirm orally and in
        writing to the Holder the number of shares of Common Stock then
        outstanding. In any case, the number of outstanding shares of Common
        Stock shall be determined after giving effect to the conversion or
        exercise of securities of the Company, including this Note, by the
        Holder or its affiliates since the



                                       5


        date as of which such number of outstanding shares of Common Stock was
        reported.

        (ii) Principal Market Regulation. The Company shall not be obligated to
        issue any shares of Common Stock pursuant to this Note if the issuance
        of such shares of Common Stock would exceed that number of shares of
        Common Stock which the Company may issue pursuant to the Notes and the
        Separate Tranche Notes without breaching the Company's obligations under
        the rules or regulations of the Principal Market (the "EXCHANGE CAP"),
        except that such limitation shall not apply in the event that the
        Company (A) obtains the approval of its shareholders as required by the
        applicable rules of the Principal Market for issuances of Common Stock
        in excess of such amount or (B) obtains a written opinion from outside
        counsel to the Company that such approval is not required, which opinion
        shall be reasonably satisfactory to the holders of the Notes and the
        Separate Tranche Notes representing a majority of the principal amounts
        of the Notes and the Separate Tranche Notes (voting as a single class)
        then outstanding. Until such approval or written opinion is obtained, no
        purchaser of the Notes or the Separate Tranche Notes pursuant to the
        Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon
        conversion of the Notes or the Separate Tranche Notes, shares of Common
        Stock in an amount greater than the product of the Exchange Cap
        multiplied by a fraction, the numerator of which is the principal amount
        of the Notes and the Separate Tranche Notes issued to such Purchaser
        pursuant to the Securities Purchase Agreement as of the date of such
        determination and the denominator of which is the aggregate principal
        amount of all the Notes and the Separate Tranche Notes issued to the
        Purchasers pursuant to the Securities Purchase Agreement as of the date
        of such determination (with respect to each Purchaser, the "EXCHANGE CAP
        ALLOCATION"). In the event that any Purchaser shall sell or otherwise
        transfer any of such Purchaser's Notes or Separate Tranche Notes, the
        transferee shall be allocated a pro rata portion of such Purchaser's
        Exchange Cap Allocation, and the restrictions of the prior sentence
        shall apply to such transferee with respect to the portion of the
        Exchange Cap Allocation allocated to such transferee. In the event that
        any holder of the Notes or the Separate Tranche Notes shall convert all
        of such holder's Notes or Separate Tranche Notes into a number of shares
        of Common Stock which, in the aggregate, is less than such holder's
        Exchange Cap Allocation, then the difference between such holder's
        Exchange Cap Allocation and the number of shares of Common Stock
        actually issued to such holder shall be allocated to the respective
        Exchange Cap Allocations of the remaining holders of the Notes and the
        Separate Tranche Notes on a pro rata basis in proportion to the
        aggregate principal amount of the Notes and the Separate Tranche Notes
        then held by each such holder.

               (4) RIGHTS UPON EVENT OF DEFAULT.

                      (a) Event of Default. Each of the following events shall
constitute a "EVENT OF DEFAULT":

        (i) the failure of the Registration Statement covering all Registrable
        Securities (as defined in the Registration Rights Agreement) required to
        be registered pursuant to the Registration Rights Agreement to be
        declared effective by the SEC on or prior to the date that is 180 days
        after the Issuance Date, or, while such Registration Statement is
        required



                                       6


        to be maintained effective pursuant to the terms of the Registration
        Rights Agreement, the effectiveness of such Registration Statement
        lapses for any reason (including, without limitation, the issuance of a
        stop order) or is unavailable to any holder of the Notes for sale of all
        of such holder's Registrable Securities in accordance with the terms of
        the Registration Rights Agreement, and such lapse or unavailability
        continues for a period of five consecutive Business Days or for more
        than an aggregate of 20 Business Days in any 365-day period;

        (ii) the suspension from trading on the Principal Market for a period of
        three consecutive Business Days or for more than an aggregate of three
        Business Days in any 30-day Trading Day period or the delisting of the
        Common Stock from the Principal Market;

        (iii) the Company's (A) failure to cure a Conversion Failure by delivery
        of the required number of shares of Common Stock or a new Note (in
        accordance with section 18(d)), as applicable, within 10 days after the
        receipt by the Company of a Conversion Notice or (B) notice, written or
        oral, to any holder of the Notes, including by way of public
        announcement or through any of its agents, at any time, of its intention
        not to comply with a request for conversion of any Notes into shares of
        Common Stock that is tendered in accordance with the provisions of the
        Notes;

        (iv) the Company's failure to pay to the Holder any amount of Principal,
        Interest, Late Charges or other amounts when and as due under this Note,
        the Securities Purchase Agreement, the Registration Rights Agreement or
        any other agreement, document, certificate or other instrument delivered
        in connection with the transactions contemplated hereby and thereby to
        which the Holder is a party;

        (v) any default under, redemption of or acceleration prior to maturity
        of any Indebtedness (as defined in Section 3(r) of the Securities
        Purchase Agreement) of the Company or any of its Subsidiaries (as
        defined in Section 3(a) of the Securities Purchase Agreement) other than
        NRG (as defined below) (including, without limitation, the Other Notes)
        of at least $50,000,000;

        (vi) the Company or any of its Subsidiaries other than NRG (as defined
        below), pursuant to or within the meaning of Title 11, U.S. Code, or any
        similar Federal or state law for the relief of debtors (collectively,
        "BANKRUPTCY LAW"), (A) commences a voluntary case, (B) consents to the
        entry of an order for relief against it in an involuntary case, (C)
        consents to the appointment of a receiver, trustee, assignee, liquidator
        or similar official (a "CUSTODIAN"), (D) makes a general assignment for
        the benefit of its creditors or (E) admits in writing that it is
        generally unable to pay its debts as they become due;

        (vii) a court of competent jurisdiction enters an order or decree under
        any Bankruptcy Law that (A) is for relief against the Company or any of
        its Subsidiaries other than NRG (as defined below) in an involuntary
        case, (B) appoints a Custodian of the Company or any of its Subsidiaries
        other than NRG (as defined below) or (C) orders the liquidation of the
        Company or any of its Subsidiaries other than NRG (as defined below); or



                                       7


        (viii) the Company breaches any representation, warranty, covenant
        (other than any covenant to deliver the NRG Opinion) or other term or
        condition of the Securities Purchase Agreement, the Registration Rights
        Agreement, this Note or any other agreement, document, certificate or
        other instrument delivered in connection with the transactions
        contemplated thereby and hereby to which the Holder is a party, except,
        in the case of a breach of a covenant which is curable, only if such
        breach continues for a period of at least 10 consecutive days.

                      (b) Redemption Right. Promptly after the occurrence of an
Event of Default with respect to this Note or the Other Notes, the Company shall
deliver written notice thereof via facsimile and overnight courier (a "EVENT OF
DEFAULT NOTICE") to the Holder. At any time after the earlier of the Holder's
receipt of an Event of Default Notice and the Holder becoming aware of an Event
of Default, the Holder may require the Company to redeem all or any portion of
this Note by delivering written notice thereof (the "EVENT OF DEFAULT REDEMPTION
NOTICE") to the Company, which Event of Default Redemption Notice shall indicate
the portion of this Note the Holder is electing to redeem. Each portion of this
Note subject to redemption by the Company pursuant to this Section 4(b) shall be
redeemed by the Company at a price equal to the greater of (i) the product of
(x) the Conversion Amount and (y) the quotient determined by dividing (A) the
Closing Sale Price of the Common Stock immediately prior to such Event of
Default by (B) the Conversion Price and (ii) the product of (x) the Conversion
Amount and (y) the Redemption Premium (the "EVENT OF DEFAULT REDEMPTION PRICE").
Redemptions required by this Section 4(b) shall be made in accordance with the
provisions of Section 10.

               (5) RIGHTS UPON CHANGE OF CONTROL.

                      (a) Change of Control. Each of the following events shall
constitute a "CHANGE OF CONTROL":

        (i) the consolidation, merger or other business combination (including,
        without limitation, a reorganization or recapitalization) of the Company
        with or into another Person in which holders of the Company's voting
        power immediately prior to the transaction cease after the transaction
        to hold, directly or indirectly, a majority of the voting power of the
        surviving entity or entities or the voting power necessary to elect a
        majority of the members of the board of directors (or their equivalent
        if other than a corporation) of such entity or entities;

        (ii) the sale or transfer of all or substantially all of the Company's
        assets; or

        (iii) a purchase, tender or exchange offer made to and accepted by the
        holders of more than the 50% of the outstanding shares of Common Stock.

                      (b) Assumption. Prior to the consummation of any Change of
Control, the Company will secure from any Person purchasing the Company's assets
or Common Stock or any successor resulting from such Change of Control (in each
case, an "ACQUIRING ENTITY") a written agreement (in form and substance
satisfactory to the holders of Notes representing a



                                       8


majority of the aggregate principal amount of the Notes then outstanding) to
deliver to each holder of Notes in exchange for such Notes, a security of the
Acquiring Entity evidenced by a written instrument substantially similar in form
and substance to the Notes, including, without limitation, having a principal
amount and interest rate equal to the principal amounts and the interest rates
of the Notes held by such holder, and satisfactory to the holders of Notes
representing a majority of the principal amount of the Notes then outstanding.
In the event that an Acquiring Entity is directly or indirectly controlled by a
company or entity whose common stock or similar equity interest is listed,
designated or quoted on a securities exchange or trading market, the holders of
notes representing a majority of the aggregate principal amount of the Notes
then outstanding may elect to treat such Person as the Acquiring Entity for
purposes of this Section 5(b).

                      (c) Redemption Right. No sooner than 15 days nor later
than 10 days prior to the consummation of a Change of Control, but not prior to
the public announcement of such Change of Control, the Company shall deliver
written notice thereof via facsimile and overnight courier to the Holder (a
"CHANGE OF CONTROL NOTICE"). At any time on or after consummation of such Change
of Control, the Holder may require the Company to redeem all or any portion of
this Note by delivering written notice thereof ("CHANGE OF CONTROL REDEMPTION
NOTICE" and, collectively with an Event of Default Redemption Notice,
"REDEMPTION NOTICES" and, individually, each a "REDEMPTION NOTICE") to the
Company, which Change of Control Redemption Notice shall indicate the Conversion
Amount the Holder is electing to redeem. The portion of this Note subject to
redemption pursuant to this Section 5(c) shall be redeemed by the Company at a
price equal to the greater of (i) the product of (x) the Conversion Amount and
(y) the quotient determined by dividing (A) the Closing Sale Price of the Common
Stock immediately following the public announcement of such proposed Change of
Control by (B) the Conversion Price and (ii) 115% of the Conversion Amount (the
"CHANGE OF CONTROL REDEMPTION PRICE" and, together with the Event of Default
Redemption Price, the "REDEMPTION PRICE"). Redemptions required by this Section
5(c) shall be made in accordance with the provisions of Section 10 and shall
have priority to payments to other shareholders in connection with a Change of
Control.


               (6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE
EVENTS.

                      (a) Purchase Rights. If at any time the Company grants,
issues or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled
to acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete conversion of this
Note (without taking into account any limitations or restrictions on the
convertibility of this Note) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.



                                       9


                      (b) Other Corporate Events. Prior to the consummation of
any recapitalization, reorganization, consolidation, merger or other business
combination (other than a Change of Control) pursuant to which holders of Common
Stock are entitled to receive securities or other assets with respect to or in
exchange for Common Stock (a "CORPORATE EVENT"), the Company shall make
appropriate provision to insure that the Holder will thereafter have the right
to receive upon a conversion of this Note, (i) in addition to the shares of
Common Stock receivable upon such conversion, such securities or other assets to
which the Holder would have been entitled with respect to such shares of Common
Stock had such shares of Common Stock been held by the Holder upon the
consummation of such Corporate Event or (ii) in lieu of the shares of Common
Stock otherwise receivable upon such conversion, such securities or other assets
received by the holders of Common Stock in connection with the consummation of
such Corporate Event in such amounts as the Holder would have been entitled to
receive had this Note initially been issued with conversion rights for the form
of such consideration (as opposed to shares of Common Stock) at a conversion
rate for such consideration commensurate with the Conversion Rate. Provision
made pursuant to the preceding sentence shall be in a form and substance
satisfactory to the holders of Notes representing a majority of the aggregate
principal amount of the Notes then outstanding.

               (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

                      (a) Adjustment of Conversion Price upon Issuance of Common
Stock. If and whenever on or after the Issuance Date, the Company issues or
sells, or in accordance with this Section 7(a) is deemed to have issued or sold,
any shares of Common Stock (including the issuance or sale of shares of Common
Stock owned or held by or for the account of the Company, but excluding shares
of Common Stock deemed to have been issued or sold by the Company (I) in
connection with the Xcel Energy Direct Purchase Plan or any employee benefit
plan which has been approved by the Board of Directors of the Company or any of
its Subsidiaries, pursuant to which the Company's securities may be issued to
any employee, officer or director for services provided to the Company or its
Subsidiaries (each, an "APPROVED STOCK PLAN") or (II) upon conversion of the
Notes or the Separate Tranche Notes) for a consideration per share less than the
higher of the Closing Sale Price of the Common Stock on the date of such
issuance or sale or deemed issuance or sale and the Conversion Price in effect
immediately prior to such issuance or sale or deemed issuance or sale (such
higher price is referred to herein as the "APPLICABLE PRICE"), then immediately
after such issue or sale (subject to Section 7(a)(vi)), the Conversion Price
then in effect shall be reduced to an amount equal to the product of (x) the
Conversion Price in effect immediately prior to such issue or sale or deemed
issuance or sale and (y) the quotient determined by dividing (1) the sum of the
product of the Applicable Price and the number of shares of Common Stock Deemed
Outstanding immediately prior to such issue or sale or deemed issue or sale and
the consideration, if any, received by the Company upon such issue or sale, by
(2) the product of the Applicable Price multiplied by the number of shares of
Common Stock Deemed Outstanding immediately after such issue or sale or deemed
issue or sale. For purposes of determining the adjusted Conversion Price under
this Section 7(a), the following shall be applicable:

        (i) Issuance of Options. If the Company in any manner grants or sells
        any Options and the lowest price per share for which one share of Common
        Stock is issuable upon the



                                       10


        exercise of any such Option or upon conversion, exercise or exchange of
        any Convertible Securities issuable upon exercise of such Option is less
        than the Applicable Price, then such share of Common Stock shall be
        deemed to be outstanding and to have been issued and sold by the Company
        at the time of the granting or sale of such Option for such price per
        share. For purposes of this Section 7(a)(i), the "lowest price per share
        for which one share of Common Stock is issuable upon the exercise of any
        such Option or upon conversion, exercise or exchange of any Convertible
        Securities issuable upon exercise of such Option" shall be equal to the
        sum of the lowest amounts of consideration (if any) received or
        receivable by the Company with respect to any one share of Common Stock
        upon granting or sale of the Option, upon exercise of the Option and
        upon conversion, exercise or exchange of any Convertible Security
        issuable upon exercise of such Option. No further adjustment of the
        Conversion Price shall be made upon the actual issuance of such Common
        Stock or of such Convertible Securities upon the exercise of such
        Options or upon the actual issuance of such Common Stock upon
        conversion, exercise or exchange of such Convertible Securities. If the
        Company issues or sells any Options which are Variable Securities, no
        adjustment of the Conversion Price shall be made pursuant to this
        Section 7(a), and no shares of Common Stock shall be deemed outstanding
        with respect to such Variable Securities, as a result of the issuance of
        such Variable Securities until the actual issuance of Common Stock or
        Convertible Securities upon exercise of such Variable Securities, except
        to the extent such Variable Security also includes as a component of the
        exercise price a price which does not vary with the market price of the
        Common Stock.

        (ii) Issuance of Convertible Securities. If the Company in any manner
        issues or sells any Convertible Securities and the lowest price per
        share for which one share of Common Stock is issuable upon such
        conversion, exercise or exchange thereof is less than the Applicable
        Price, then such share of Common Stock shall be deemed to be outstanding
        and to have been issued and sold by the Company at the time of the
        issuance of sale of such Convertible Securities for such price per
        share. For the purposes of this Section 7(a)(ii), the "price per share
        for which one share of Common Stock is issuable upon such conversion,
        exercise or exchange" shall be equal to the sum of the lowest amounts of
        consideration (if any) received or receivable by the Company with
        respect to any one share of Common Stock upon the issuance or sale of
        the Convertible Security and upon the conversion, exercise or exchange
        of such Convertible Security. No further adjustment of the Conversion
        Price shall be made upon the actual issuance of such Common Stock upon
        conversion, exercise or exchange of such Convertible Securities, and if
        any such issue or sale of such Convertible Securities is made upon
        exercise of any Options for which adjustment of the Conversion Price had
        been or are to be made pursuant to other provisions of this Section
        7(a), no further adjustment of the Conversion Price shall be made by
        reason of such issue or sale. If the Company issues or sells any
        Convertible Securities which are Variable Securities, no adjustment of
        the Conversion Price shall be made pursuant to this Section 7(a), and no
        shares of Common Stock shall be deemed outstanding with respect to such
        Variable Security, as a result of the issuance of such Variable
        Securities until the actual issuance of Common Stock upon exercise of
        such Variable Securities, except to the extent such Variable Security
        also includes as a component of the conversion, exercise or exchange
        price a price which does not vary



                                       11


        with the market price of the Common Stock.

        (iii) Change in Option Price or Rate of Conversion. If the purchase
        price provided for in any Options, the additional consideration, if any,
        payable upon the issue, conversion or exchange of any Convertible
        Securities, or the rate at which any Convertible Securities are
        convertible into or exercisable or exchangeable for Common Stock changes
        at any time, the Conversion Price in effect at the time of such change
        shall be adjusted to the Conversion Price which would have been in
        effect at such time had such Options or Convertible Securities provided
        for such changed purchase price, additional consideration or changed
        conversion rate, as the case may be, at the time initially granted,
        issued or sold. For purposes of this Section 7(a)(iii), if the terms of
        any Option or Convertible Security that was outstanding as of the
        Issuance Date are changed in the manner described in the immediately
        preceding sentence, then such Option or Convertible Security and the
        Common Stock deemed issuable upon exercise, conversion or exchange
        thereof shall be deemed to have been issued as of the date of such
        change. No adjustment shall be made if such adjustment would result in
        an increase of the Conversion Price then in effect.

        (iv) Calculation of Consideration Received. In case any Option is issued
        in connection with the issue or sale of other securities of the Company,
        together comprising one integrated transaction in which no specific
        consideration is allocated to such Options by the parties thereto, the
        Options will be deemed to have been issued for a consideration of $.01.
        If any Common Stock, Options or Convertible Securities are issued or
        sold or deemed to have been issued or sold for cash, the consideration
        received therefor will be deemed to be the net amount received by the
        Company therefor. If any Common Stock, Options or Convertible Securities
        are issued or sold for a consideration other than cash, the amount of
        the consideration other than cash received by the Company will be the
        fair value of such consideration, except where such consideration
        consists of securities, in which case the amount of consideration
        received by the Company will be the Closing Sale Price of such
        securities on the date of receipt. If any Common Stock, Options or
        Convertible Securities are issued to the owners of the non-surviving
        entity in connection with any merger in which the Company is the
        surviving entity, the amount of consideration therefor will be deemed to
        be the fair value of such portion of the net assets and business of the
        non-surviving entity as is attributable to such Common Stock, Options or
        Convertible Securities, as the case may be. The fair value of any
        consideration other than cash or securities will be determined jointly
        by the Company and the holders of Notes representing a majority of the
        principal amounts of the Notes then outstanding. If such parties are
        unable to reach agreement within ten days after the occurrence of an
        event requiring valuation (the "VALUATION EVENT"), the fair value of
        such consideration will be determined within five Business Days after
        the tenth day following the Valuation Event by an independent, reputable
        appraiser jointly selected by the Company and the holders of Notes
        representing a majority of the principal amounts of the Notes then
        outstanding. The determination of such appraiser shall be deemed binding
        upon all parties absent manifest error and the fees and expenses of such
        appraiser shall be borne by the Company.



                                       12


        (v) Record Date. If the Company takes a record of the holders of Common
        Stock for the purpose of entitling them (A) to receive a dividend or
        other distribution payable in Common Stock, Options or in Convertible
        Securities or (B) to subscribe for or purchase Common Stock, Options or
        Convertible Securities, then such record date will be deemed to be the
        date of the issue or sale of the shares of Common Stock deemed to have
        been issued or sold upon the declaration of such dividend or the making
        of such other distribution or the date of the granting of such right of
        subscription or purchase, as the case may be.

        (vi) Common Stock Deemed Outstanding. "COMMON STOCK DEEMED OUTSTANDING"
        means, at any given time, the number of shares of Common Stock actually
        outstanding at such time, plus the number of shares of Common Stock
        deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii)
        hereof regardless of whether the Options or Convertible Securities are
        actually exercisable at such time, but excluding any shares of Common
        Stock owned or held by or for the account of the Company or issuable
        upon conversion of the Notes or the Separate Tranche Notes.

        (vii) Delayed Adjustment. In addition to the foregoing provisions of
        this Section 7(a), the Weighted Average Price, Closing Sales Price and
        Closing Bid Price shall be subject to adjustment, in accordance with the
        foregoing provisions, for any days during any measuring period,
        including, without limitation, the Tranche A Pricing Period, used herein
        that occur prior to any of the aforementioned events if such events
        occur prior to the end of such measuring period.

                      (b) Adjustment of Conversion Price upon Subdivision or
Combination of Common Stock. If the Company at any time subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination will be proportionately increased.

                      (c) Other Events. If any event occurs of the type
contemplated by the provisions of this Section 7 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the Holder under this Note;
provided that no such adjustment will increase the Conversion Price as otherwise
determined pursuant to this Section 7.

               (8) NONCIRCUMVENTION. The Company hereby covenants and agrees
that the Company will not, by amendment of its Articles of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of, or enter
into any agreement which by its terms restricts or otherwise impairs the



                                       13


Company's performance of the terms of, this Note or any of the other Transaction
Documents (as defined in the Securities Purchase Agreement), and will at all
times in good faith carry out all of the provisions of this Note and take all
action as may be required to protect the rights of the Holder of this Note.

               (9) RESERVATION OF AUTHORIZED SHARES.

                      (a) Reservation. The Company shall initially reserve out
of its authorized and unissued Common Stock a number of shares of Common Stock
for each of the Notes and the Separate Tranche Notes equal to 115% of the
Conversion Rate with respect to the Conversion Amount of each such Note and
Separate Tranche Note. Thereafter, the Company shall, so long as any of the
Notes or Separate Tranche Notes are outstanding, take all action necessary to
reserve and keep available out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Notes and Separate
Tranche Note, at least 100% of the number of shares of Common Stock as shall
from time to time be necessary to effect the conversion of all of the Notes and
the Separate Tranche Notes then outstanding; provided that at no time shall the
number of shares of Common Stock so reserved be less than the number of shares
required to be reserved by the previous sentence (without regard to any
limitations on conversions) (the "REQUIRED RESERVE AMOUNT"). The initial number
of shares of Common Stock reserved for conversions of the Notes and the Separate
Tranche Note and each increase in the number of shares so reserved shall be
allocated pro rata among the holders of the Notes and Separate Tranche Note
based on the principal amount of the Notes and Separate Tranche Notes held by
each holder at the time of Issuance Date or increase in the number of reserved
shares, as the case may be (the "AUTHORIZED SHARE ALLOCATION"). In the event
that a holder shall sell or otherwise transfer any of such holder's Notes, each
transferee shall be allocated a pro rata portion of such holder's Authorized
Share Allocation. Any shares of Common Stock reserved and allocated to any
Person which ceases to hold any Notes shall be allocated to the remaining
holders of Notes, pro rata based on the principal amount of the Notes then held
by such holders.

                      (b) Insufficient Authorized Shares. If at any time while
any of the Notes or Separate Tranche Note remain outstanding the Company does
not have a sufficient number of authorized and unreserved shares of Common Stock
to satisfy its obligation to reserve for issuance upon conversion of the Notes
and the Separate Tranche Notes at least a number of shares of Common Stock equal
to the Required Reserve Amount (an "AUTHORIZED SHARE FAILURE"), then the Company
shall immediately take all action necessary to increase the Company's authorized
shares of Common Stock to an amount sufficient to allow the Company to reserve
the Required Reserve Amount for the Notes and Separate Tranche Note then
outstanding. Without limiting the generality of the foregoing sentence, as soon
as practicable after the date of the occurrence of an Authorized Share Failure,
but in no event later than 60 days after the occurrence of such Authorized Share
Failure, the Company shall hold a meeting of its shareholders for the approval
of an increase in the number of authorized shares of Common Stock. In connection
with such meeting, the Company shall provide each shareholder with a proxy
statement and shall use its best efforts to solicit its shareholders' approval
of such increase in authorized shares of Common Stock and to cause its board of
directors to recommend to the shareholders that they approve such proposal.



                                       14


               (10) REDEMPTION.

                      (a) Mechanics. In the event that the Holder has sent a
Redemption Notice to the Company pursuant to Section 4(b) or Section 5(c), the
Holder shall promptly submit this Note to the Company. The Company shall deliver
the applicable Event of Default Redemption Price to the Holder within five
Business Days after the Company's receipt of the Holder's Event of Default
Redemption Notice and thereafter the Holder shall promptly deliver this Note to
the Company. If the Holder has submitted a Change of Control Redemption Notice
in accordance with Section 5(c), the Company shall deliver the applicable Change
of Control Redemption Price to the Holder concurrently with the consummation of
such Change of Control if such notice is received prior to the consummation of
such Change of Control and within five Business Days after the Company's receipt
of such notice otherwise. In the event of a redemption of less than all of the
Conversion Amount of this Note, the Company shall promptly cause to be issued
and delivered to the Holder a new Note (in accordance with Section 18(d))
representing the outstanding Principal which has not been redeemed. In the event
that the Company does not pay the Redemption Price to the Holder within the time
period required above in this Section 10(a) at any time thereafter and until the
Company pays such unpaid Redemption Price in full, the Holder shall have the
option to, in lieu of redemption, require the Company to promptly return to the
Holder all or any portion of this Note representing the Conversion Amount that
was submitted for redemption and for which the applicable Redemption Price
(together with any Late Charges thereon) has not been paid. Upon the Company's
receipt of such notice, (x) the Redemption Notice shall be null and void with
respect to such Conversion Amount, (y) the Company shall immediately return this
Note, or issue a new Note (in accordance with Section 18(d)) to the Holder
representing such Conversion Amount and (z) the Conversion Price of this Note or
such new Notes shall be adjusted to the lesser of (A) the Conversion Price as in
effect on the date on which the Redemption Notice is voided and (B) the lowest
Closing Bid Price during the period beginning on and including the date on which
the Redemption Notice is delivered to the Company and ending on and including
the date on which the Redemption Notice is voided. The Holder's delivery of a
notice voiding a Redemption Notice and exercise of its rights following such
notice shall not affect the Company's obligations to make any payments of Late
Charges which have accrued prior to the date of such notice with respect to the
Conversion Amount subject to such notice.

                      (b) Redemption by Other Holders. Upon the Company's
receipt of notice from any of the holders of the Other Notes or the Separate
Tranche Notes for redemption or repayment as a result of an event or occurrence
substantially similar to the events or occurrences described in Section 4(b) or
Section 5(c) (each an "OTHER REDEMPTION NOTICE"), the Company shall immediately
forward to the Holder by facsimile a copy of such notice. If the Company
receives a Redemption Notice and one or more Other Redemption Notices during the
seven Business Day period beginning on and including the date which is three
Business Days prior to the Company's receipt of the Holder's Redemption Notice
and ending on and including the date which is three Business Days after the
Company's receipt of the Holder's Redemption Notice and the Company is unable to
redeem all principal, interest and other amounts designated in such Redemption
Notice and such Other Redemption Notices received during such seven Business Day
period, then the Company shall redeem a pro rata amount from each holder of the
Notes and the Separate Tranche Notes (including the Holder) based on the
principal amount of



                                       15


the Notes and the Separate Tranche Notes submitted for redemption pursuant to
such Redemption Notice and such Other Redemption Notices received by the Company
during such seven Business Day period.

                      (c) Redemption at the Option of the Company. (i) Except as
provided in this Section 10(c) or in connection with the satisfaction by the
Company of its obligations to redeem the Notes under Sections 4(b) and 5(c)
hereof, without the prior written consent of the Holder the Company shall not
have the right to prepay, redeem, repurchase, defease or otherwise retire any
Note prior to the Maturity Date.

                      (ii) Provided the Company has consummated a Qualified 144A
Offering at any time during the Company Optional Redemption Period, the Company
may deliver an irrevocable written notice to the Holder and the Transfer Agent
(the "COMPANY OPTIONAL REDEMPTION NOTICE") within one (1) Business Day after
consummation of the Qualified 144A Offering, indicating that the Company has
elected to redeem, and is requiring the Holder to submit for redemption, in
whole but not in part, the outstanding Principal of this Note plus accrued
Interest thereon for the Company Optional Redemption Consideration (a "COMPANY
OPTIONAL REDEMPTION"). The Company Optional Redemption Notice shall be sent by
facsimile and overnight courier to the Holder and shall indicate (x) the date
fixed for redemption, which shall be five (5) Business Days after the expiration
of the Company Optional Redemption Period (the "COMPANY OPTIONAL REDEMPTION
DATE") and (y) the place or places where this Note is to be surrendered for
payment of the Company Optional Redemption Consideration. If the Company has
elected a Company Optional Redemption, the Company shall on the Company Optional
Redemption Date (A) deliver the Non-Cash Optional Redemption Consideration to
the Holder at the Holder's address and (B) pay to the Holder the Cash Optional
Redemption Consideration, by wire transfer of immediately available funds to an
account designated in writing by such Holder.

                      (11) RESTRICTION ON REDEMPTION. Until all of the Notes
have been converted, redeemed or otherwise satisfied in accordance with their
terms, the Company shall not, directly or indirectly, redeem its capital stock
without the prior express written consent of the holders of Notes representing
at least two-thirds of the aggregate principal amount of the Notes then
outstanding.

                      (12) SUBORDINATION; ADDITIONAL INDEBTEDNESS. Payments of
Principal and Interest and other payments due under this Note shall rank pari
passu in right of payment with all (and shall not be subordinated to any)
unsecured, unsubordinated indebtedness of the Company and will be senior in
right of payment to all subordinated indebtedness of the Company.

                      (13) COVENANTS.

                             (a) Indebtedness. The Company shall not create,
incur, assume, guarantee or suffer to exist, or otherwise become or remain
liable with respect to, any Indebtedness other than Permitted Indebtedness and
Subordinated Indebtedness. "Subordinated Indebtedness" shall mean Indebtedness
that is unsecured and subordinated in right of payment to



                                       16


the Notes and other obligations owing to the Holders in accordance with a
subordination agreement in form and substance satisfactory to the Holders.
"Permitted Indebtedness" shall mean any Indebtedness that is unsecured and is
not senior in right of payment to the Notes and is otherwise on terms that are
no more favorable to the holders thereof than the terms of the Indebtedness
evidenced by the Notes unless such more favorable terms are offered to the
Holders.

                             (b) Liens. The Company shall not create, incur,
assume or suffer to exist, or permit any of its Subsidiaries (other than NRG
Energy Inc. or its subsidiaries (collectively, "NRG")) to create, incur, assume
or suffer to exist, any Lien upon or with respect to any of its properties,
whether now owned or hereafter acquired; sign or suffer to exist any security
agreement authorizing any secured party thereunder to file a Uniform Commercial
Code financing statement (or the equivalent thereof) as notice of a Lien on any
property of the Company or its Subsidiaries; sell any of its property or assets
subject to an understanding or agreement, contingent or otherwise, to repurchase
such property or assets (including sales of accounts receivable) with recourse
to it or any of its Subsidiaries or assign or otherwise transfer, or permit any
of its Subsidiaries (other than the Existing Utility Subsidiaries (as defined in
the Bank Facility)) to assign or otherwise transfer, any account or other right
to receive income; other than, as to all of the above, Permitted Liens. As used
herein, "Permitted Liens" shall have the meaning of that term as defined in the
Five-Year Credit Agreement, dated as of November 10, 2000, among the Company and
the banks listed therein (as the same maybe amended from time to time, the "BANK
FACILITY"). As used herein, "Liens" means any mortgage, deed of trust, pledge,
lien (statutory or otherwise), security interest, charge or other encumbrance or
security or preferential arrangement of any nature, including, without
limitation, any conditional sale or title retention arrangement, any capitalized
lease and any assignment, deposit arrangement or financing lease intended as, or
having the effect of, security.

                      (c) Transactions With Affiliates. The Company shall not,
and shall not permit any Subsidiary to, directly or indirectly, effect any
transaction with any Affiliate (as defined in the Bank Facility) that is (a)
outside the ordinary course of business or (b) on a basis less favorable than
would at the time be obtainable for a comparable transaction in arms-length
dealing with an unrelated third party, provided that notwithstanding the
foregoing, no loan, payment or other form of contribution shall be made to NRG
unless it is in an amount not in excess of (i) $300 Million payable pursuant to
the Support Agreement and Capital Subscription Agreement, dated as of May 29,
2002, by and between the Company and NRG Energy Inc. and (ii) $250 Million in
respect of guarantee obligations relating to the power marketing business of
NRG; provided further that with respect to any payment permitted pursuant to
clause (ii) above, the Company shall, in the context of a restructuring of NRG,
use its reasonable best efforts to obtain a full release of all obligations and
liabilities of the Company relating to NRG.

                      (d) Leverage Ratio. The Company shall not permit the
Leverage Ratio set forth in the Bank Facility to be exceeded.

                      (e) Restrictive Agreements. The Company shall not, and
shall not permit any Significant Subsidiary (as defined in the Bank Facility)
other than NRG to, enter into any agreement after the date of this Note that
imposes any restriction on the ability of such Significant Subsidiary to make
payments, directly or indirectly, to its shareholders by way of



                                       17


dividends, advances, repayment of loans or intercompany charges, expenses or
accruals or other returns on investments that is more restrictive than any such
restriction applicable to such Significant Subsidiary on the Issuance Date.

                      (f) Scope of Business. The Company shall, and shall cause
each Subsidiary to, engage only in energy-related business, functionally related
businesses (as interpreted under PUHCA, as defined in the Securities Purchase
Agreement) or such other businesses as maybe permitted pursuant to an order
issued by the SEC pursuant to PUHCA.


               (14) VOTING RIGHTS. The Holder shall have no voting rights as the
holder of this Note, except as required by law, including but not limited to the
Minnesota Business Corporation Act, and as expressly provided in this Note.

               (15) PARTICIPATION. The Holder, as the holder of this Note, shall
be entitled to (i) all extraordinary or special dividends paid and distributions
made to the holders of Common Stock to the same extent as if the Holder had
converted this Note into Common Stock (without regard to any limitations on
conversion herein or elsewhere) and had held such shares of Common Stock on the
record date for such dividends and distributions and (ii) regular cash dividends
and distributions paid to the holders of the Common Stock only with respect to
that portion of such dividends that exceeds $0.1875 per share of Common Stock in
any calendar quarter (subject to adjustment for stock splits, stock dividends,
stock combinations and other similar transactions after the Issuance Date).
Payments under the preceding sentence shall be made concurrently with the
dividend or distribution to the holders of Common Stock.

               (16) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of Notes representing not less than
two-thirds of the aggregate principal amount of the then outstanding Notes,
shall be required for any change or amendment to this Note or the Other Notes.

               (17) TRANSFER. This Note may be offered, sold, assigned or
transferred by the Holder without the consent of the Company, subject only to
the provisions of Section 2(f) of the Securities Purchase Agreement.

               (18) REISSUANCE OF THIS NOTE.

                      (a) Transfer. If this Note is to be transferred, the
Holder shall surrender this Note to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Note (in
accordance with Section 18(d)), registered as the Holder may request,
representing the outstanding Principal being transferred by the Holder and, if
less then the entire outstanding Principal is being transferred, a new Note (in
accordance with Section 18(d)) to the Holder representing the outstanding
Principal not being transferred. The Holder and any assignee, by acceptance of
this Note, acknowledge and agree that, by reason of the provisions of Section
3(c)(iii) and this Section 18(a), following conversion or redemption of any
portion of this Note, the outstanding Principal represented by this Note may be
less than the



                                       18


Principal stated on the face of this Note.

                      (b) Lost, Stolen or Mutilated Note. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the Company in
customary form and, in the case of mutilation, upon surrender and cancellation
of this Note, the Company shall execute and deliver to the Holder a new Note (in
accordance with Section 18(d)) representing the outstanding Principal.

                      (c) Note Exchangeable for Different Denominations. This
Note is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Note or Notes (in accordance with Section 18(d)
and in principal amounts of at least $100,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.

                      (d) Issuance of New Notes. Whenever the Company is
required to issue a new Note pursuant to the terms of this Note, such new Note
(i) shall be of like tenor with this Note, (ii) shall represent, as indicated on
the face of such new Note, the Principal remaining outstanding (or in the case
of a new Note being issued pursuant to Section 18(a) or Section 18(c), the
Principal designated by the Holder which, when added to the principal
represented by the other new Notes issued in connection with such issuance, does
not exceed the Principal remaining outstanding under this Note immediately prior
to such issuance of new Notes), (iii) shall have an issuance date, as indicated
on the face of such new Note which is the same as the Issuance Date of this
Note, (iv) shall have the same rights and conditions as this Note, and (v) shall
represent accrued Interest and Late Charges on the Principal and Interest of
this Note, from the Issuance Date.

               (19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note, the Securities
Purchase Agreement and the Registration Rights Agreement, at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the Holder's right to pursue actual and consequential
damages for any failure by the Company to comply with the terms of this Note.
Amounts set forth or provided for herein with respect to payments, conversion
and the like (and the computation thereof) shall be the amounts to be received
by the Holder and shall not, except as expressly provided herein, be subject to
any other obligation of the Company (or the performance thereof). The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.

               (20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a)
this Note is placed in the hands of an attorney for collection or enforcement or
is



                                       19


collected or enforced through any legal proceeding or the Holder otherwise takes
action to collect amounts due under this Note or to enforce the provisions of
this Note or (b) there occurs any bankruptcy, reorganization, receivership of
the Company or other proceedings affecting Company creditors' rights and
involving a claim under this Note, then the Company shall pay the costs incurred
by the Holder for such collection, enforcement or action or in connection with
such bankruptcy, reorganization, receivership or other proceeding, including but
not limited to attorneys fees and disbursements.

               (21) CONSTRUCTION; HEADINGS. This Note shall be deemed to be
jointly drafted by the Company and all the Purchasers and shall not be construed
against any person as the drafter hereof. The headings of this Note are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Note.

               (22) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege.

               (23) DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Redemption Price or the arithmetic calculation of the
Conversion Rate or the Redemption Price or any other calculation hereunder, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within one Business Day of receipt of the Conversion Notice or
Redemption Notice giving rise to such dispute, as the case may be, to the
Holder. If the Holder and the Company are unable to agree upon such
determination or calculation of the Conversion Rate within one Business Day of
such disputed determination or arithmetic calculation being submitted to the
Holder, then the Company shall, within one Business Day submit via facsimile (a)
the disputed determination of the Weighted Average Price, the Closing Bid Price
or the Closing Sale Price or any other calculation hereunder to an independent,
reputable investment bank selected by the Company and approved by the Holder or
(b) the disputed arithmetic calculation of the Conversion Rate or the Redemption
Price to the Company's independent, outside accountant. The Company, at the
Company's expense, shall cause the investment bank or the accountant, as the
case may be, to perform the determinations or calculations and notify the
Company and the Holder of the results no later than five Business Days from the
time it receives the disputed determinations or calculations. Such investment
bank's or accountant's determination or calculation, as the case may be, shall
be binding upon all parties absent demonstrable error.

               (24) NOTICES; PAYMENTS.

                      (a) Notices. Whenever notice is required to be given under
this Note, unless otherwise provided herein, such notice shall be given in
accordance with Section 9(f) of the Securities Purchase Agreement. The Company
shall provide the Holder with prompt written notice of all actions taken
pursuant to this Note, including in reasonable detail a description of such
action and the reason therefore. Without limiting the generality of the
foregoing, the Company will give written notice to the Holder (i) immediately
upon any adjustment of the Conversion Price, setting forth in reasonable detail,
and certifying, the calculation of such



                                       20


adjustment and (ii) at least twenty days prior to the date on which the Company
closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any grants, issues or
sales of any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to holders of Common Stock or
(C) for determining rights to vote with respect to any Change of Control,
dissolution or liquidation, provided in each case that such information shall be
made known to the public prior to or in conjunction with such notice being
provided to such holder. Notwithstanding the foregoing, Section 4(j) of the
Securities Purchase Agreement shall apply to all notices given pursuant to this
Note.

                      (b) Payments. Whenever any payment of cash is to be made
by the Company to any Person pursuant to this Note, such payment shall be made
in lawful money of the United States of America by a check drawn on the account
of the Company and sent via overnight courier service to such Person at such
address as previously provided to the Company in writing (which address, in the
case of each of the Purchasers (as defined in Section 3(d)(ii)), shall initially
be as set forth on the Schedule of Buyers attached to the Securities Purchase
Agreement); provided that the Holder may elect to receive a payment of cash via
wire transfer of immediately available funds by providing the Company with prior
written notice setting out such request and the Holder's wire transfer
instructions. Whenever any amount expressed to be due by the terms of this Note
is due on any day which is not a Business Day, the same shall instead be due on
the next succeeding day which is a Business Day and, in the case of any Interest
Date which is not the date on which this Note is paid in full, the extension of
the due date thereof shall not be taken into account for purposes of determining
the amount of Interest due on such date. Any amount of Interest, Principal or
other amount due under the Transaction Documents (as defined in the Securities
Purchase Agreement) which is not paid when due shall result in a late charge
being incurred and payable by the Company in an amount equal to interest on such
amount at the rate of 12% per annum from the date such amount was due until the
same is paid in full ("LATE CHARGE").

               (25) CANCELLATION. After all Principal, accrued Interest and
other amounts at any time owed on this Note has been paid in full, this Note
shall automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.

               (26) WAIVER OF NOTICE. To the extent permitted by law, the
Company hereby waives demand, notice, protest and all other demands and notices
in connection with the delivery, acceptance, performance, default or enforcement
of this Note and the Securities Purchase Agreement.

               (27) GOVERNING LAW. This Note shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal
laws of the State of Illinois, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Illinois or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of Illinois.



                                       21


               (28) CERTAIN DEFINITIONS. For purposes of this Note, the
following terms shall have the following meanings:

                      (a) "BUSINESS DAY" means any day other than Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.

                      (b) "CASH OPTIONAL REDEMPTION CONSIDERATION" means an
amount in cash equal to the greater of (i) 102% of the Conversion Amount of the
Note being redeemed in the Company Optional Redemption and (ii) the sum of (A)
the product determined by multiplying the Conversion Amount of the Note being
redeemed in the Company Optional Redemption by a quotient determined by dividing
(X) the Closing Bid Price of the Common Stock on the date of delivery of the
Company Optional Redemption Notice by (Y) the Company Optional Redemption
Conversion Price and (B) 12% of the Conversion Amount of the Note being redeemed
in the Company Optional Redemption; provided, however, that in the event that
the Company Optional Redemption Notice is delivered on or after the date that is
10 Business Days after the execution of the Securities Purchase Agreement, the
Holder shall have the option, upon delivery of written notice thereof to the
Company at any time prior to the Company Optional Redemption Date, to receive in
lieu of all or any portion of the Cash Optional Redemption Consideration a
number of shares of Common Stock not to exceed the Company Optional Redemption
Conversion Shares, in which event the Cash Optional Redemption Consideration
shall be reduced by an amount equal to the product determined by multiplying (I)
the number of shares of Common Stock the Holder has elected to receive and (II)
the Company Optional Redemption Conversion Price.

                      (c) "CHANGE OF CONTROL TERMINATION DATE" shall mean, with
respect to any proposed Change of Control for which a public announcement that
it proposes or intends to effect a Change of Control of the Company (the date of
such announcement, the "ANNOUNCEMENT DATE") has been made, the date upon which
the Company or other Person proposing to effect such Change of Control
consummates or publicly announces the termination or abandonment of the proposed
Change of Control which was the subject of the previous public announcement.

                      (d) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means,
for any security as of any date, the last closing bid price and last closing
trade price, respectively, for such security on The New York Stock Exchange,
Inc. (the "PRINCIPAL MARKET") as reported by Bloomberg Financial Markets
("BLOOMBERG"), or, if the Principal Market begins to operate on an extended
hours basis and does not designate the closing bid price or the closing trade
price, as the case may be, then the last bid price or last trade price,
respectively, of such security prior to 4:00:00 p.m. Eastern Time as reported by
Bloomberg, or, if the Principal Market is not the principal securities exchange
or trading market for such security, the last closing bid price or last trade
price, respectively, of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg,
or if the foregoing do not apply, the last closing bid price or last trade
price, respectively, of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no
closing bid price or last trade price, respectively, is reported for such
security by Bloomberg,



                                       22


the average of the bid prices, or the ask prices, respectively, of any market
makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Closing Bid Price or the Closing Sale Price cannot
be calculated for a security on a particular date on any of the foregoing bases,
the Closing Bid Price or the Closing Sale Price, as the case may be, of such
security on such date shall be the fair market value as mutually determined by
the Company and the Holder. If the Company and the Holder are unable to agree
upon the fair market value of such security, then such dispute shall be resolved
pursuant to Section 23. All such determinations to be appropriately adjusted for
any stock dividend, stock split, stock combination or other similar transaction
during any applicable calculation period.

                      (e) "COMMON STOCK" means (i) the Company's common stock,
par value $2.50 per share, and (ii) any capital stock resulting from a
reclassification of such Common Stock.

                      (f) "COMPANY OPTIONAL REDEMPTION CONVERSION PRICE" shall
mean 110% of the arithmetic average of the Weighted Average Price of the Common
Stock for each of the Trading Days during the Tranche A Pricing Period through
the date the Company delivers to the Holder the Company Optional Redemption
Notice, but in no event shall the Company Optional Redemption Conversion Price
exceed, and prior to the commencement of the Tranche A Pricing Period it shall
equal, the Tranche A Base Price.

                      (g) "COMPANY OPTIONAL REDEMPTION CONVERSION SHARES" shall
mean that number of shares of Common Stock determined by dividing (i) the
Conversion Amount of the Note being redeemed in the Company Optional Redemption
by (ii) the Company Optional Redemption Conversion Price.

                      (h) "COMPANY OPTIONAL REDEMPTION PERIOD" means the period
commencing on the Business Day immediately following the Issuance Date and
ending on and including the date that is 35 Business Days after the execution of
the Securities Purchase Agreement.

                      (i) "COMPANY OPTIONAL REDEMPTION CONSIDERATION" means the
Non-Cash Optional Redemption Consideration plus the Cash Optional Redemption
Consideration.

                      (j) "NON-CASH OPTIONAL REDEMPTION CONSIDERATION" means a
legally binding written agreement executed and delivered by the Company to the
Holder, duly authorized by all necessary corporate action on the part of the
Company and otherwise in form and substance reasonably satisfactory to the
Holder, exercisable by the Holder at any time and from time to time during the
one-year period commencing on the Company Optional Redemption Date and ending on
the one-year anniversary thereafter, granting the Holder the right to purchase
securities that are identical (other than as to the issuance date and other than
that the Company shall be required to issue these securities to the Holder in a
valid private placement) to the securities issued in the Qualified 144A Offering
in an aggregate principal amount that does not exceed such Holder's pro rata
portion (based on the Principal amount of this Note on the Issuance Date out of
the total aggregate principal amount of all Notes issued by



                                       23


the Company on the Issuance Date) of 25% of the aggregate principal amount of
securities issued by the Company in the Qualified 144A Offering.

                      (k) "PERSON" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, any other entity and a government or any department
or agency thereof.

                      (l) "QUALIFIED 144A OFFERING" shall mean an underwritten
offering by the Company of debt securities of the Company that are convertible
into Common Stock, with an effective conversion premium (as defined in Section
(d)(3)(i) of Rule 144A of the Securities Act of 1933, as amended ("RULE 144A"))
of not less than 10%, with such offering to be conducted either pursuant to Rule
144A or pursuant to a registered offering of such securities, in either case led
by Merrill Lynch & Co. and yielding gross unrestricted cash proceeds to the
Company of not less than $150 million.

                      (m) "REDEMPTION PREMIUM" means (i) in the case of the
Events of Default described in Section 4(a)(i), (ii), (iii), (iv) and (viii),
115% or (ii) in the case of the Events of Default described in Section 4(a)(v) -
(vii), 100%.

                      (n) "REGISTRATION RIGHTS AGREEMENT" means that certain
registration rights agreement between the Company and the initial holders of the
Notes relating to the registration of the resale of the shares of Common Stock
issuable upon conversion of the Notes.

                      (o) "SECURITIES PURCHASE AGREEMENT" means that certain
securities purchase agreement between the Company and the initial holders of the
Notes pursuant to which the Company issued the Notes.

                      (p) "SEPARATE TRANCHE NOTES" means the Second Notes, First
Call Notes, Second Call Notes, Third Notes and the Third Call Notes,
collectively.

                      (q) "TRADING DAY" means any day on which the Common Stock
is traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the principal securities
exchange or securities market on which the Common Stock is then traded; provided
that "Trading Day" shall not include any day on which the Common Stock is
scheduled to trade on such exchange or market or actually trades on such
exchange or market for less than 4.5 hours.

                      (r) "TRANCHE A BASE PRICE" means $10.54 (subject to
adjustments for stock splits, stock dividends, stock combinations and similar
transactions).

                      (s) "TRANCHE A PRICING PERIOD" means the twenty
consecutive Trading Days commencing on the fifth Trading Day immediately
following the Issuance Date.

                      (t) "VARIABLE SECURITIES" means any stock or securities
other than Options directly or indirectly convertible into or exchangeable for
Common Stock ("CONVERTIBLE SECURITIES") or any rights, warrants or option to
subscribe for or purchase



                                       24


Common Stock or Convertible Securities ("OPTIONS") that are convertible into or
exchangeable, directly or indirectly, for Common Stock at a price which varies
or may vary with the market price of the Common Stock, including by way of one
or more adjustments or resets to a fixed price (a "VARIABLE PRICE").

                      (u) "WEIGHTED AVERAGE PRICE" means, for any security as of
any date, the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30 a.m., New York Time (or
such other time as the Principal Market publicly announces is the official open
of trading), and ending at 4:00 p.m., New York Time (or such other time as the
Principal Market publicly announces is the official close of trading), as
reported by Bloomberg through its "Volume at Price" functions (ignoring any
trade of more than 100,000 shares of such security pursuant to an individual
transaction (subject to adjustment for stock splits, stock dividends, stock
combinations and other similar transactions involving such security after the
Issuance Date)), or, if the Principal Market is not the principal securities
exchange or trading market for such security, the dollar volume-weighted average
price for such security on the principal securities exchange or trading market
where such security is listed or traded during the period beginning at 9:30
a.m., New York Time (or such other time as such principal securities exchange or
trading market publicly announces is the official open of trading), and ending
at 4:00 p.m., New York Time (or such other time as such principal securities
exchange or trading market publicly announces is the official close of trading),
as reported by Bloomberg through its "Volume at Price" functions (ignoring any
trade of more than 100,000 shares of such security pursuant to an individual
transaction (subject to adjustment for stock splits, stock dividends, stock
combinations and other similar transactions involving such security after the
Issuance Date)), or, if the foregoing does not apply, the dollar volume-weighted
average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30 a.m., New
York Time (or such other time as the Principal Market publicly announces is the
official open of trading), and ending at 4:00 p.m., New York Time (or such other
time as the Principal Market publicly announces is the official close of
trading), as reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg for such hours, the average of
the highest closing bid price and the lowest closing ask price of any of the
market makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Weighted Average Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the Weighted
Average Price of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to Section 23. All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during applicable calculation period.


                            [SIGNATURE PAGE FOLLOWS]


                                       25


        IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
as of the Date of Issuance set out above.

                                XCEL ENERGY INC.



                                By:
                                   ---------------------------------------------
                                   Name:
                                   Title: Chief Executive Officer











                                    EXHIBIT I

                                XCEL ENERGY INC.
                                CONVERSION NOTICE

Reference is made to the Convertible Note (the "NOTE") issued to the undersigned
by XCEL ENERGY INC. (the "COMPANY"). In accordance with and pursuant to the
Note, the undersigned hereby elects to convert the Conversion Amount (as defined
in the Note) of the Note indicated below into shares of Common Stock, par value
$2.50 per share (the "COMMON STOCK"), of the Company as of the date specified
below.

        Date of Conversion:
                           -----------------------------------------------------

        Aggregate Conversion Amount to be converted:
                                                    ----------------------------

Please confirm the following information:

        Conversion Price:
                         -------------------------------------------------------

        Number of shares of Common Stock to be issued:
                                                      --------------------------

Please issue the Common Stock into which the Note is being converted and, if
applicable, any check drawn on an account of the Company in the following name
and to the following address:

        Issue to:
                 ---------------------------------------------------------------
                 ---------------------------------------------------------------
                 ---------------------------------------------------------------

        Facsimile Number:
                         -------------------------------------------------------

        Authorization:
                      ----------------------------------------------------------
               By:
                  --------------------------------------------------------------
                                     Title:
                                           -------------------------------------
Dated:
      --------------------------------------------------------------------------

        Account Number:
                       ---------------------------------------------------------
         (if electronic book entry transfer)

        Transaction Code Number:
                       ---------------------------------------------------------
         (if electronic book entry transfer)





                                 ACKNOWLEDGMENT


        The Company hereby acknowledges this Conversion Notice and hereby
directs [TRANSFER AGENT] to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated November 8, 2002
from the Company and acknowledged and agreed to by [TRANSFER AGENT].

                                XCEL ENERGY INC.



                                By:
                                   ---------------------------------------------
                                     Name:
                                     Title:

EX-4.11

                                                                    EXHIBIT 4.11

                             SENIOR CONVERTIBLE NOTE

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A)
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL IN A
REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR
RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THIS NOTE AND THE
SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THIS
NOTE. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS
NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY
BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION
3(c)(iii) OF THIS NOTE.



                                XCEL ENERGY INC.


Issuance Date: _______, 2002                              Principal: U.S. $_____

        FOR VALUE RECEIVED, XCEL ENERGY INC., a Minnesota corporation (the
"COMPANY"), hereby promises to pay to the order of [__________________] or
registered assigns ("HOLDER") the amount set out above as the Principal (as
reduced pursuant to the terms hereof pursuant to redemption, conversion or
otherwise, the "PRINCIPAL") when due, whether upon the Final Maturity Date (as
defined below), acceleration, conversion, redemption or otherwise (in each case
in accordance with the terms hereof) and to pay interest ("INTEREST") on any
outstanding Principal at the rate of eight percent (8%) per annum, subject to
periodic adjustment pursuant to Section 2 (the "INTEREST RATE"), from the date
set out above as the Issuance Date (the "ISSUANCE DATE") until the same becomes
due and payable, whether upon an Interest Date (as defined below), the Final
Maturity Date, acceleration, conversion, redemption or otherwise (in each case
in accordance with the terms hereof). This Convertible Note (including all
Convertible Notes issued in exchange, transfer or replacement hereof, this
"NOTE") is one of an issue of Convertible Notes (collectively, the "NOTES" and
such other Convertible Notes, the "OTHER NOTES") issued on the Issuance Date
pursuant to the Securities Purchase Agreement (as defined below). Certain
capitalized terms are defined in Section 28 and terms used herein but not
defined herein shall have the meanings set forth for such terms in the
Securities Purchase Agreement.





               (1) MATURITY. On the Final Maturity Date, the Holder shall
surrender this Note to the Company and the Company shall pay to the Holder an
amount in cash representing all outstanding Principal, accrued and unpaid
Interest and accrued and unpaid Late Charges (as defined in Section 24(b)), if
any. The "MATURITY DATE" shall be the date that is 364 days after the Issuance
Date; provided that, if the Holder has given notice in writing to the Company of
its desire to extend the Maturity Date on or prior to the date that is 10
Business Days prior to the Maturity Date, the Maturity Date shall be extended
(on one or more occasions) for an additional 364 days; provided, further, that
the Maturity Date shall not be extended (except as provided in the following
proviso) to more than five years after the Issuance Date (such date that is five
years after the Issuance Date or such earlier Maturity Date prior to which the
Holder has not requested an extension thereof, the "FINAL MATURITY DATE"); and
provided, further, that the Final Maturity Date may be extended at the option of
the Holder (x) in the event that, and for so long as, an Event of Default (as
defined in Section 4(a)) shall have occurred and be continuing or any event
shall have occurred and be continuing which with the passage of time and the
failure to cure would result in an Event of Default and (y) through the date
that is ten days after a Change of Control Termination Date in the event that
the Announcement Date giving rise to such Change of Control Termination Date
occurred prior to the Final Maturity Date.

               (2) INTEREST; INTEREST RATE. Interest on this Note shall commence
accruing on the Issuance Date and shall be computed on the basis of the actual
days elapsed during any period, and a calendar year of 365 or 366 calendar days,
as applicable, and shall be payable in cash on each May 1 and each November 1
during the period beginning on the Issuance Date and ending on, and including,
the Final Maturity Date (each an "INTEREST DATE"); provided that interest on any
Conversion Amount of this Note that is accrued but unpaid as of the Conversion
Date of such Conversion Amount shall be paid in shares of Common Stock at the
Conversion Rate. From and after the occurrence of an Event of Default (as
defined in Section 4(a)) or the failure to deliver timely the Non-Consolidation
Opinion (as defined in the Securities Purchase Agreement) pursuant to Section
4(f) of the Securities Purchase Agreement (the "NRG OPINION"), the Interest Rate
shall be increased by two percentage points (2%). In the event that such Event
of Default is subsequently cured, the adjustment referred to in the preceding
sentence shall cease to be effective as of the date of such cure; provided that
the Interest as calculated at such increased rate during the continuance of such
Event of Default shall continue to apply to the extent relating to the days
after the occurrence of such Event of Default through and including the date of
cure of such Event of Default. If the Company shall fail to credit the Holder's
balance account with DTC (as defined in Section 3(c)(i)) or, if requested in
writing by the Holder, to issue a certificate to the Holder for the number of
shares of Common Stock to which the Holder is entitled upon conversion of any
Conversion Amount or to issue a new Note (in accordance with Section 18(d))
representing the Principal portion of the Conversion Amount (as defined in
Section 3(b)(i)) to which the Holder is entitled, in each case within the time
periods set out in Section 3(c)(i) (in each case, a "CONVERSION FAILURE"), then
during each period beginning on and including the date of each such Conversion
Failure and ending on and including the date such Conversion Failure is cured,
the Interest Rate then in effect shall be increased by two percentage points
(2%). If (i) the Registration Statement (as defined in the Registration Rights
Agreement) covering all the Registrable Securities (as defined in the
Registration Rights Agreement) issuable upon conversion of this Note and
required to be filed by



                                       2


the Company pursuant to the Registration Rights Agreement is not declared
effective by the Securities and Exchange Commission (the "SEC") on or before the
applicable Mandatory Effective Date (as defined in the Registration Rights
Agreement) or (ii) on any day after such Registration Statement has been
declared effective by the SEC that sales of all the Registrable Securities
required to be included on such Registration Statement cannot be made (other
than during an Allowable Grace Period (as defined in Section 3(t) of the
Registration Rights Agreement) pursuant to such Registration Statement
(including, without limitation, because of a failure to keep such Registration
Statement effective, to disclose such information as is necessary for sales to
be made pursuant to such Registration Statement or to register sufficient shares
of Common Stock) (collectively with the event described in the immediately
preceding clause (i), each a "REGISTRATION FAILURE"), then, as partial relief
for the damages to any holder by reason of any such delay in or reduction of its
ability to sell Registrable Securities (which remedy shall not be exclusive of
any other remedies available at law or in equity) the Interest Rate then in
effect shall be increased by two percentage points (2%) during each period
beginning on and including the first date of each such Registration Failure and
ending on and including the date such Registration Failure is cured.

               (3) CONVERSION OF NOTES. This Note shall be convertible into
shares of the Common Stock, on the terms and conditions set forth in this
Section 3.

                      (a) Conversion Right. Subject to the provisions of Section
3(d), at any time or times on or after the Issuance Date, the Holder shall be
entitled to convert any portion of the outstanding and unpaid Conversion Amount
(as defined below) into fully paid and nonassessable shares of Common Stock in
accordance with Section 3(c), at the Conversion Rate (as defined below). The
Company shall not issue any fraction of a share of Common Stock upon any
conversion. If the issuance would result in the issuance of a fraction of a
share of Common Stock, the Company shall round such fraction of a share of
Common Stock up to the nearest whole share. The Company shall pay any and all
taxes that may be payable with respect to the issuance and delivery of Common
Stock upon conversion of any Conversion Amount.

                      (b) Conversion Rate. The number of shares of Common Stock
issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall
be determined by dividing (x) such Conversion Amount by (y) the Conversion Price
(as defined below) (the "CONVERSION RATE").

        (i) "CONVERSION AMOUNT" means the sum of (A) the portion of the
        Principal to be converted, redeemed or otherwise surrendered with
        respect to which this determination is being made, (B) accrued and
        unpaid Interest with respect to such Principal and (C) accrued and
        unpaid Late Charges with respect to such Principal and Interest.

        (ii) "CONVERSION PRICE" means 110% of the arithmetic average of the
        Weighted Average Price of the Common Stock during the Tranche B Pricing
        Period; provided that the Conversion Price (i) shall not exceed 110% of
        the Tranche B Base Price and (ii) shall equal the Company Optional
        Redemption Conversion Price until such time as the Tranche B Pricing
        Period has concluded; provided further, that in the event that the
        Company has not delivered a Company Optional Redemption Notice as of the
        date that is



                                       3


        35 Business Days after the date of issuance of the First Notes and 110%
        of the Closing Bid Price of the Common Stock on such date is less than
        the Conversion Price then in effect, then the Conversion Price shall be
        reduced to equal such price.

                      (c) Mechanics of Conversion.

        (i) Optional Conversion. To convert any Conversion Amount into shares of
        Common Stock on any date (a "CONVERSION DATE"), the Holder shall (A)
        transmit by facsimile (or otherwise deliver), for receipt on or prior to
        11:59 p.m., Central Time on such date, a copy of an executed notice of
        conversion in the form attached hereto as Exhibit I (the "CONVERSION
        NOTICE") to the Company and (B) if required by Section 3(c)(ii),
        surrender this Note to a common carrier for delivery to the Company as
        soon as practicable on or following such date (or an indemnification
        undertaking with respect to this Note in the case of its loss, theft or
        destruction). On or before the first Business Day following the
        Company's receipt of a Conversion Notice, the Company shall transmit by
        facsimile a confirmation of receipt of such Conversion Notice to the
        Holder and the Transfer Agent (as defined below). On or before the
        second Business Day following the date of receipt of a Conversion Notice
        (the "SHARE DELIVERY DATE"), the Company shall (X) (if (Y) below does
        not apply) issue and deliver to the address as specified in the
        Conversion Notice, a certificate, registered in the name of the Holder
        or its designee, for the number of shares of Common Stock to which the
        Holder shall be entitled, or (Y) provided that the Company's transfer
        agent (the "TRANSFER AGENT") is participating in The Depository Trust
        Company ("DTC") Fast Automated Securities Transfer Program, upon the
        request of the Holder, credit such aggregate number of shares of Common
        Stock to which the Holder shall be entitled to the Holder's or its
        designee's balance account with DTC through its Deposit Withdrawal Agent
        Commission system. If this Note is physically surrendered for conversion
        as required by Section 3(c)(ii) and the outstanding Principal of this
        Note is greater than the Principal portion of the Conversion Amount
        being converted, then the Company shall as soon as practicable and in no
        event later than three Business Days after receipt of this Note (the
        "NOTE DELIVERY DATE") and at its own expense, issue and deliver to the
        holder a new Note (in accordance with Section 18(d)) representing the
        outstanding Principal not converted. The person or persons entitled to
        receive the shares of Common Stock issuable upon a conversion of this
        Note shall be treated for all purposes as the record holder or holders
        of such shares of Common Stock on the Conversion Date.

        (ii) Book-Entry. Notwithstanding anything to the contrary set forth
        herein, upon conversion of any portion of this Note in accordance with
        the terms hereof, the Holder shall not be required to physically
        surrender this Note to the Company unless (A) the full Conversion Amount
        represented by this Note is being converted or (B) the Holder has
        provided the Company with prior written notice (which notice may be
        included in a Conversion Notice) requesting physical surrender and
        reissue of this Note. The Holder and the Company shall maintain records
        showing the Principal and Interest converted and the dates of such
        conversions or shall use such other method, reasonably satisfactory to
        the Holder and the Company, so as not to require physical surrender of
        this Note upon conversion.



                                       4


        (iii) Pro Rata Conversion; Disputes. In the event that the Company
        receives a Conversion Notice from more than one holder of the Notes or
        the Separate Tranche Notes for the same Conversion Date and the Company
        can convert some, but not all, of such portions of the Notes and the
        Separate Tranche Notes submitted for conversion, the Company, subject to
        Section 3(d), shall convert from each holder of the Notes and the
        Separate Tranche Notes electing to have the Notes or Separate Tranche
        Notes converted on such date a pro rata amount of such holder's portion
        of its Notes or Separate Tranche Notes submitted for conversion based on
        the principal amount of the Notes or Separate Tranche Notes submitted
        for conversion on such date by such holder relative to the aggregate
        principal amount of all the Notes and the Separate Tranche Notes
        submitted for conversion on such date. In the event of a dispute as to
        the number of shares of Common Stock issuable to the Holder in
        connection with a conversion of this Note, the Company shall issue to
        the Holder the number of shares of Common Stock not in dispute and
        resolve such dispute in accordance with Section 23.

                      (d) Limitations on Conversions.

        (i) Beneficial Ownership. The Company shall not effect any conversion of
        this Note, and the Holder of this Note shall not have the right to
        convert any portion of this Note pursuant to Section 3(a), to the extent
        that after giving effect to such conversion, the Holder (together with
        the Holder's affiliates) would beneficially own in excess of 5.0% of the
        number of shares of Common Stock outstanding immediately after giving
        effect to such conversion. For purposes of the foregoing sentence, the
        number of shares of Common Stock beneficially owned by the Holder and
        its affiliates shall include the number of shares of Common Stock
        issuable upon conversion of this Note with respect to which the
        determination of such sentence is being made, but shall exclude the
        number of shares of Common Stock which would be issuable upon (A)
        conversion of the remaining, nonconverted portion of this Note
        beneficially owned by the Holder or any of its affiliates and (B)
        exercise or conversion of the unexercised or nonconverted portion of any
        other securities of the Company (including, without limitation, any
        Other Notes, Separate Tranche Notes or warrants) subject to a limitation
        on conversion or exercise analogous to the limitation contained herein
        beneficially owned by the Holder or any of its affiliates. Except as set
        forth in the preceding sentence, for purposes of this Section 3(d)(i),
        beneficial ownership shall be calculated in accordance with Section
        13(d) of the Securities Exchange Act of 1934, as amended. For purposes
        of this Section 3(d)(i), in determining the number of outstanding shares
        of Common Stock, the Holder may rely on the number of outstanding shares
        of Common Stock as reflected in (x) the Company's most recent Form 10-Q
        or Form 10-K, as the case may be, (y) a more recent public announcement
        by the Company or (z) any other notice by the Company or the Transfer
        Agent setting forth the number of shares of Common Stock outstanding.
        For any reason at any time, upon the written or oral request of the
        Holder, the Company shall within one Business Day confirm orally and in
        writing to the Holder the number of shares of Common Stock then
        outstanding. In any case, the number of outstanding shares of Common
        Stock shall be determined after giving effect to the conversion or
        exercise of securities of the Company, including this Note, by the
        Holder or its affiliates since the



                                       5


        date as of which such number of outstanding shares of Common Stock was
        reported.

        (ii) Principal Market Regulation. The Company shall not be obligated to
        issue any shares of Common Stock pursuant to this Note if the issuance
        of such shares of Common Stock would exceed that number of shares of
        Common Stock which the Company may issue pursuant to the Notes and the
        Separate Tranche Notes without breaching the Company's obligations under
        the rules or regulations of the Principal Market (the "EXCHANGE CAP"),
        except that such limitation shall not apply in the event that the
        Company (A) obtains the approval of its shareholders as required by the
        applicable rules of the Principal Market for issuances of Common Stock
        in excess of such amount or (B) obtains a written opinion from outside
        counsel to the Company that such approval is not required, which opinion
        shall be reasonably satisfactory to the holders of the Notes and the
        Separate Tranche Notes representing a majority of the principal amounts
        of the Notes and the Separate Tranche Notes (voting as a single class)
        then outstanding. Until such approval or written opinion is obtained, no
        purchaser of the Notes or the Separate Tranche Notes pursuant to the
        Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon
        conversion of the Notes or the Separate Tranche Notes, shares of Common
        Stock in an amount greater than the product of the Exchange Cap
        multiplied by a fraction, the numerator of which is the principal amount
        of the Notes and the Separate Tranche Notes issued to such Purchaser
        pursuant to the Securities Purchase Agreement as of the date of such
        determination and the denominator of which is the aggregate principal
        amount of all the Notes and the Separate Tranche Notes issued to the
        Purchasers pursuant to the Securities Purchase Agreement as of the date
        of such determination (with respect to each Purchaser, the "EXCHANGE CAP
        ALLOCATION"). In the event that any Purchaser shall sell or otherwise
        transfer any of such Purchaser's Notes or Separate Tranche Notes, the
        transferee shall be allocated a pro rata portion of such Purchaser's
        Exchange Cap Allocation, and the restrictions of the prior sentence
        shall apply to such transferee with respect to the portion of the
        Exchange Cap Allocation allocated to such transferee. In the event that
        any holder of the Notes or the Separate Tranche Notes shall convert all
        of such holder's Notes or Separate Tranche Notes into a number of shares
        of Common Stock which, in the aggregate, is less than such holder's
        Exchange Cap Allocation, then the difference between such holder's
        Exchange Cap Allocation and the number of shares of Common Stock
        actually issued to such holder shall be allocated to the respective
        Exchange Cap Allocations of the remaining holders of the Notes and the
        Separate Tranche Notes on a pro rata basis in proportion to the
        aggregate principal amount of the Notes and the Separate Tranche Notes
        then held by each such holder.

               (4) RIGHTS UPON EVENT OF DEFAULT.

                      (a) Event of Default. Each of the following events shall
constitute a "EVENT OF DEFAULT":

        (i) the failure of the Registration Statement covering all Registrable
        Securities (as defined in the Registration Rights Agreement) required to
        be registered pursuant to the Registration Rights Agreement to be
        declared effective by the SEC on or prior to the date that is 180 days
        after the Issuance Date, or, while such Registration Statement is
        required



                                       6


        to be maintained effective pursuant to the terms of the Registration
        Rights Agreement, the effectiveness of such Registration Statement
        lapses for any reason (including, without limitation, the issuance of a
        stop order) or is unavailable to any holder of the Notes for sale of all
        of such holder's Registrable Securities in accordance with the terms of
        the Registration Rights Agreement, and such lapse or unavailability
        continues for a period of five consecutive Business Days or for more
        than an aggregate of 20 Business Days in any 365-day period;

        (ii) the suspension from trading on the Principal Market for a period of
        three consecutive Business Days or for more than an aggregate of three
        Business Days in any 30-day Trading Day period or the delisting of the
        Common Stock from the Principal Market;

        (iii) the Company's (A) failure to cure a Conversion Failure by delivery
        of the required number of shares of Common Stock or a new Note (in
        accordance with section 18(d)), as applicable, within 10 days after the
        receipt by the Company of a Conversion Notice or (B) notice, written or
        oral, to any holder of the Notes, including by way of public
        announcement or through any of its agents, at any time, of its intention
        not to comply with a request for conversion of any Notes into shares of
        Common Stock that is tendered in accordance with the provisions of the
        Notes;

        (iv) the Company's failure to pay to the Holder any amount of Principal,
        Interest, Late Charges or other amounts when and as due under this Note,
        the Securities Purchase Agreement, the Registration Rights Agreement or
        any other agreement, document, certificate or other instrument delivered
        in connection with the transactions contemplated hereby and thereby to
        which the Holder is a party;

        (v) any default under, redemption of or acceleration prior to maturity
        of any Indebtedness (as defined in Section 3(r) of the Securities
        Purchase Agreement) of the Company or any of its Subsidiaries (as
        defined in Section 3(a) of the Securities Purchase Agreement) other than
        NRG (as defined below) (including, without limitation, the Other Notes)
        of at least $50,000,000;

        (vi) the Company or any of its Subsidiaries other than NRG (as defined
        below), pursuant to or within the meaning of Title 11, U.S. Code, or any
        similar Federal or state law for the relief of debtors (collectively,
        "BANKRUPTCY LAW"), (A) commences a voluntary case, (B) consents to the
        entry of an order for relief against it in an involuntary case, (C)
        consents to the appointment of a receiver, trustee, assignee, liquidator
        or similar official (a "CUSTODIAN"), (D) makes a general assignment for
        the benefit of its creditors or (E) admits in writing that it is
        generally unable to pay its debts as they become due;

        (vii) a court of competent jurisdiction enters an order or decree under
        any Bankruptcy Law that (A) is for relief against the Company or any of
        its Subsidiaries other than NRG (as defined below) in an involuntary
        case, (B) appoints a Custodian of the Company or any of its Subsidiaries
        other than NRG (as defined below) or (C) orders the liquidation of the
        Company or any of its Subsidiaries other than NRG (as defined below); or



                                       7


        (viii) the Company breaches any representation, warranty, covenant
        (other than any covenant to deliver the NRG Opinion) or other term or
        condition of the Securities Purchase Agreement, the Registration Rights
        Agreement, this Note or any other agreement, document, certificate or
        other instrument delivered in connection with the transactions
        contemplated thereby and hereby to which the Holder is a party, except,
        in the case of a breach of a covenant which is curable, only if such
        breach continues for a period of at least 10 consecutive days.

                      (b) Redemption Right. Promptly after the occurrence of an
Event of Default with respect to this Note or the Other Notes, the Company shall
deliver written notice thereof via facsimile and overnight courier (a "EVENT OF
DEFAULT NOTICE") to the Holder. At any time after the earlier of the Holder's
receipt of an Event of Default Notice and the Holder becoming aware of an Event
of Default, the Holder may require the Company to redeem all or any portion of
this Note by delivering written notice thereof (the "EVENT OF DEFAULT REDEMPTION
NOTICE") to the Company, which Event of Default Redemption Notice shall indicate
the portion of this Note the Holder is electing to redeem. Each portion of this
Note subject to redemption by the Company pursuant to this Section 4(b) shall be
redeemed by the Company at a price equal to the greater of (i) the product of
(x) the Conversion Amount and (y) the quotient determined by dividing (A) the
Closing Sale Price of the Common Stock immediately prior to such Event of
Default by (B) the Conversion Price and (ii) the product of (x) the Conversion
Amount and (y) the Redemption Premium (the "EVENT OF DEFAULT REDEMPTION PRICE").
Redemptions required by this Section 4(b) shall be made in accordance with the
provisions of Section 10.

               (5) RIGHTS UPON CHANGE OF CONTROL.

                      (a) Change of Control. Each of the following events shall
constitute a "CHANGE OF CONTROL":

        (i) the consolidation, merger or other business combination (including,
        without limitation, a reorganization or recapitalization) of the Company
        with or into another Person in which holders of the Company's voting
        power immediately prior to the transaction cease after the transaction
        to hold, directly or indirectly, a majority of the voting power of the
        surviving entity or entities or the voting power necessary to elect a
        majority of the members of the board of directors (or their equivalent
        if other than a corporation) of such entity or entities;

        (ii) the sale or transfer of all or substantially all of the Company's
        assets; or

        (iii) a purchase, tender or exchange offer made to and accepted by the
        holders of more than the 50% of the outstanding shares of Common Stock.

                      (b) Assumption. Prior to the consummation of any Change of
Control, the Company will secure from any Person purchasing the Company's assets
or Common Stock or any successor resulting from such Change of Control (in each
case, an "ACQUIRING ENTITY") a written agreement (in form and substance
satisfactory to the holders of Notes representing a



                                       8


majority of the aggregate principal amount of the Notes then outstanding) to
deliver to each holder of Notes in exchange for such Notes, a security of the
Acquiring Entity evidenced by a written instrument substantially similar in form
and substance to the Notes, including, without limitation, having a principal
amount and interest rate equal to the principal amounts and the interest rates
of the Notes held by such holder, and satisfactory to the holders of Notes
representing a majority of the principal amount of the Notes then outstanding.
In the event that an Acquiring Entity is directly or indirectly controlled by a
company or entity whose common stock or similar equity interest is listed,
designated or quoted on a securities exchange or trading market, the holders of
notes representing a majority of the aggregate principal amount of the Notes
then outstanding may elect to treat such Person as the Acquiring Entity for
purposes of this Section 5(b).

                      (c) Redemption Right. No sooner than 15 days nor later
than 10 days prior to the consummation of a Change of Control, but not prior to
the public announcement of such Change of Control, the Company shall deliver
written notice thereof via facsimile and overnight courier to the Holder (a
"CHANGE OF CONTROL NOTICE"). At any time on or after consummation of such Change
of Control, the Holder may require the Company to redeem all or any portion of
this Note by delivering written notice thereof ("CHANGE OF CONTROL REDEMPTION
NOTICE" and, collectively with an Event of Default Redemption Notice,
"REDEMPTION NOTICES" and, individually, each a "REDEMPTION NOTICE") to the
Company, which Change of Control Redemption Notice shall indicate the Conversion
Amount the Holder is electing to redeem. The portion of this Note subject to
redemption pursuant to this Section 5(c) shall be redeemed by the Company at a
price equal to the greater of (i) the product of (x) the Conversion Amount and
(y) the quotient determined by dividing (A) the Closing Sale Price of the Common
Stock immediately following the public announcement of such proposed Change of
Control by (B) the Conversion Price and (ii) 115% of the Conversion Amount (the
"CHANGE OF CONTROL REDEMPTION PRICE" and, together with the Event of Default
Redemption Price, the "REDEMPTION PRICE"). Redemptions required by this Section
5(c) shall be made in accordance with the provisions of Section 10 and shall
have priority to payments to other shareholders in connection with a Change of
Control.


               (6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE
EVENTS.

                      (a) Purchase Rights. If at any time the Company grants,
issues or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled
to acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete conversion of this
Note (without taking into account any limitations or restrictions on the
convertibility of this Note) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.



                                       9


                      (b) Other Corporate Events. Prior to the consummation of
any recapitalization, reorganization, consolidation, merger or other business
combination (other than a Change of Control) pursuant to which holders of Common
Stock are entitled to receive securities or other assets with respect to or in
exchange for Common Stock (a "CORPORATE EVENT"), the Company shall make
appropriate provision to insure that the Holder will thereafter have the right
to receive upon a conversion of this Note, (i) in addition to the shares of
Common Stock receivable upon such conversion, such securities or other assets to
which the Holder would have been entitled with respect to such shares of Common
Stock had such shares of Common Stock been held by the Holder upon the
consummation of such Corporate Event or (ii) in lieu of the shares of Common
Stock otherwise receivable upon such conversion, such securities or other assets
received by the holders of Common Stock in connection with the consummation of
such Corporate Event in such amounts as the Holder would have been entitled to
receive had this Note initially been issued with conversion rights for the form
of such consideration (as opposed to shares of Common Stock) at a conversion
rate for such consideration commensurate with the Conversion Rate. Provision
made pursuant to the preceding sentence shall be in a form and substance
satisfactory to the holders of Notes representing a majority of the aggregate
principal amount of the Notes then outstanding.

               (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

                      (a) Adjustment of Conversion Price upon Issuance of Common
Stock. If and whenever on or after the Issuance Date, the Company issues or
sells, or in accordance with this Section 7(a) is deemed to have issued or sold,
any shares of Common Stock (including the issuance or sale of shares of Common
Stock owned or held by or for the account of the Company, but excluding shares
of Common Stock deemed to have been issued or sold by the Company (I) in
connection with the Xcel Energy Direct Purchase Plan or any employee benefit
plan which has been approved by the Board of Directors of the Company or any of
its Subsidiaries, pursuant to which the Company's securities may be issued to
any employee, officer or director for services provided to the Company or its
Subsidiaries (each, an "APPROVED STOCK PLAN") or (II) upon conversion of the
Notes or the Separate Tranche Notes) for a consideration per share less than the
higher of the Closing Sale Price of the Common Stock on the date of such
issuance or sale or deemed issuance or sale and the Conversion Price in effect
immediately prior to such issuance or sale or deemed issuance or sale (such
higher price is referred to herein as the "APPLICABLE PRICE"), then immediately
after such issue or sale (subject to Section 7(a)(vi)), the Conversion Price
then in effect shall be reduced to an amount equal to the product of (x) the
Conversion Price in effect immediately prior to such issue or sale or deemed
issuance or sale and (y) the quotient determined by dividing (1) the sum of the
product of the Applicable Price and the number of shares of Common Stock Deemed
Outstanding immediately prior to such issue or sale or deemed issue or sale and
the consideration, if any, received by the Company upon such issue or sale, by
(2) the product of the Applicable Price multiplied by the number of shares of
Common Stock Deemed Outstanding immediately after such issue or sale or deemed
issue or sale. For purposes of determining the adjusted Conversion Price under
this Section 7(a), the following shall be applicable:

        (i) Issuance of Options. If the Company in any manner grants or sells
        any Options and the lowest price per share for which one share of Common
        Stock is issuable upon the



                                       10


        exercise of any such Option or upon conversion, exercise or exchange of
        any Convertible Securities issuable upon exercise of such Option is less
        than the Applicable Price, then such share of Common Stock shall be
        deemed to be outstanding and to have been issued and sold by the Company
        at the time of the granting or sale of such Option for such price per
        share. For purposes of this Section 7(a)(i), the "lowest price per share
        for which one share of Common Stock is issuable upon the exercise of any
        such Option or upon conversion, exercise or exchange of any Convertible
        Securities issuable upon exercise of such Option" shall be equal to the
        sum of the lowest amounts of consideration (if any) received or
        receivable by the Company with respect to any one share of Common Stock
        upon granting or sale of the Option, upon exercise of the Option and
        upon conversion, exercise or exchange of any Convertible Security
        issuable upon exercise of such Option. No further adjustment of the
        Conversion Price shall be made upon the actual issuance of such Common
        Stock or of such Convertible Securities upon the exercise of such
        Options or upon the actual issuance of such Common Stock upon
        conversion, exercise or exchange of such Convertible Securities. If the
        Company issues or sells any Options which are Variable Securities, no
        adjustment of the Conversion Price shall be made pursuant to this
        Section 7(a), and no shares of Common Stock shall be deemed outstanding
        with respect to such Variable Securities, as a result of the issuance of
        such Variable Securities until the actual issuance of Common Stock or
        Convertible Securities upon exercise of such Variable Securities, except
        to the extent such Variable Security also includes as a component of the
        exercise price a price which does not vary with the market price of the
        Common Stock.

        (ii) Issuance of Convertible Securities. If the Company in any manner
        issues or sells any Convertible Securities and the lowest price per
        share for which one share of Common Stock is issuable upon such
        conversion, exercise or exchange thereof is less than the Applicable
        Price, then such share of Common Stock shall be deemed to be outstanding
        and to have been issued and sold by the Company at the time of the
        issuance of sale of such Convertible Securities for such price per
        share. For the purposes of this Section 7(a)(ii), the "price per share
        for which one share of Common Stock is issuable upon such conversion,
        exercise or exchange" shall be equal to the sum of the lowest amounts of
        consideration (if any) received or receivable by the Company with
        respect to any one share of Common Stock upon the issuance or sale of
        the Convertible Security and upon the conversion, exercise or exchange
        of such Convertible Security. No further adjustment of the Conversion
        Price shall be made upon the actual issuance of such Common Stock upon
        conversion, exercise or exchange of such Convertible Securities, and if
        any such issue or sale of such Convertible Securities is made upon
        exercise of any Options for which adjustment of the Conversion Price had
        been or are to be made pursuant to other provisions of this Section
        7(a), no further adjustment of the Conversion Price shall be made by
        reason of such issue or sale. If the Company issues or sells any
        Convertible Securities which are Variable Securities, no adjustment of
        the Conversion Price shall be made pursuant to this Section 7(a), and no
        shares of Common Stock shall be deemed outstanding with respect to such
        Variable Security, as a result of the issuance of such Variable
        Securities until the actual issuance of Common Stock upon exercise of
        such Variable Securities, except to the extent such Variable Security
        also includes as a component of the conversion, exercise or exchange
        price a price which does not vary



                                       11


        with the market price of the Common Stock.

        (iii) Change in Option Price or Rate of Conversion. If the purchase
        price provided for in any Options, the additional consideration, if any,
        payable upon the issue, conversion or exchange of any Convertible
        Securities, or the rate at which any Convertible Securities are
        convertible into or exercisable or exchangeable for Common Stock changes
        at any time, the Conversion Price in effect at the time of such change
        shall be adjusted to the Conversion Price which would have been in
        effect at such time had such Options or Convertible Securities provided
        for such changed purchase price, additional consideration or changed
        conversion rate, as the case may be, at the time initially granted,
        issued or sold. For purposes of this Section 7(a)(iii), if the terms of
        any Option or Convertible Security that was outstanding as of the
        Issuance Date are changed in the manner described in the immediately
        preceding sentence, then such Option or Convertible Security and the
        Common Stock deemed issuable upon exercise, conversion or exchange
        thereof shall be deemed to have been issued as of the date of such
        change. No adjustment shall be made if such adjustment would result in
        an increase of the Conversion Price then in effect.

        (iv) Calculation of Consideration Received. In case any Option is issued
        in connection with the issue or sale of other securities of the Company,
        together comprising one integrated transaction in which no specific
        consideration is allocated to such Options by the parties thereto, the
        Options will be deemed to have been issued for a consideration of $.01.
        If any Common Stock, Options or Convertible Securities are issued or
        sold or deemed to have been issued or sold for cash, the consideration
        received therefor will be deemed to be the net amount received by the
        Company therefor. If any Common Stock, Options or Convertible Securities
        are issued or sold for a consideration other than cash, the amount of
        the consideration other than cash received by the Company will be the
        fair value of such consideration, except where such consideration
        consists of securities, in which case the amount of consideration
        received by the Company will be the Closing Sale Price of such
        securities on the date of receipt. If any Common Stock, Options or
        Convertible Securities are issued to the owners of the non-surviving
        entity in connection with any merger in which the Company is the
        surviving entity, the amount of consideration therefor will be deemed to
        be the fair value of such portion of the net assets and business of the
        non-surviving entity as is attributable to such Common Stock, Options or
        Convertible Securities, as the case may be. The fair value of any
        consideration other than cash or securities will be determined jointly
        by the Company and the holders of Notes representing a majority of the
        principal amounts of the Notes then outstanding. If such parties are
        unable to reach agreement within ten days after the occurrence of an
        event requiring valuation (the "VALUATION EVENT"), the fair value of
        such consideration will be determined within five Business Days after
        the tenth day following the Valuation Event by an independent, reputable
        appraiser jointly selected by the Company and the holders of Notes
        representing a majority of the principal amounts of the Notes then
        outstanding. The determination of such appraiser shall be deemed binding
        upon all parties absent manifest error and the fees and expenses of such
        appraiser shall be borne by the Company.



                                       12


        (v) Record Date. If the Company takes a record of the holders of Common
        Stock for the purpose of entitling them (A) to receive a dividend or
        other distribution payable in Common Stock, Options or in Convertible
        Securities or (B) to subscribe for or purchase Common Stock, Options or
        Convertible Securities, then such record date will be deemed to be the
        date of the issue or sale of the shares of Common Stock deemed to have
        been issued or sold upon the declaration of such dividend or the making
        of such other distribution or the date of the granting of such right of
        subscription or purchase, as the case may be.

        (vi) Common Stock Deemed Outstanding. "COMMON STOCK DEEMED OUTSTANDING"
        means, at any given time, the number of shares of Common Stock actually
        outstanding at such time, plus the number of shares of Common Stock
        deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii)
        hereof regardless of whether the Options or Convertible Securities are
        actually exercisable at such time, but excluding any shares of Common
        Stock owned or held by or for the account of the Company or issuable
        upon conversion of the Notes or the Separate Tranche Notes.

        (vii) Delayed Adjustment. In addition to the foregoing provisions of
        this Section 7(a), the Weighted Average Price, Closing Sales Price and
        Closing Bid Price shall be subject to adjustment, in accordance with the
        foregoing provisions, for any days during any measuring period,
        including, without limitation, the Tranche B Pricing Period, used herein
        that occur prior to any of the aforementioned events if such events
        occur prior to the end of such measuring period.

                      (b) Adjustment of Conversion Price upon Subdivision or
Combination of Common Stock. If the Company at any time subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination will be proportionately increased.

                      (c) Other Events. If any event occurs of the type
contemplated by the provisions of this Section 7 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the Holder under this Note;
provided that no such adjustment will increase the Conversion Price as otherwise
determined pursuant to this Section 7.

               (8) NONCIRCUMVENTION. The Company hereby covenants and agrees
that the Company will not, by amendment of its Articles of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of, or enter
into any agreement which by its terms restricts or otherwise impairs the



                                       13


Company's performance of the terms of, this Note or any of the other Transaction
Documents (as defined in the Securities Purchase Agreement), and will at all
times in good faith carry out all of the provisions of this Note and take all
action as may be required to protect the rights of the Holder of this Note.

               (9) RESERVATION OF AUTHORIZED SHARES.

                      (a) Reservation. The Company shall initially reserve out
of its authorized and unissued Common Stock a number of shares of Common Stock
for each of the Notes and the Separate Tranche Notes equal to 115% of the
Conversion Rate with respect to the Conversion Amount of each such Note and
Separate Tranche Note. Thereafter, the Company shall, so long as any of the
Notes or Separate Tranche Notes are outstanding, take all action necessary to
reserve and keep available out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Notes and Separate
Tranche Note, at least 100% of the number of shares of Common Stock as shall
from time to time be necessary to effect the conversion of all of the Notes and
the Separate Tranche Notes then outstanding; provided that at no time shall the
number of shares of Common Stock so reserved be less than the number of shares
required to be reserved by the previous sentence (without regard to any
limitations on conversions) (the "REQUIRED RESERVE AMOUNT"). The initial number
of shares of Common Stock reserved for conversions of the Notes and the Separate
Tranche Note and each increase in the number of shares so reserved shall be
allocated pro rata among the holders of the Notes and Separate Tranche Note
based on the principal amount of the Notes and Separate Tranche Notes held by
each holder at the time of Issuance Date or increase in the number of reserved
shares, as the case may be (the "AUTHORIZED SHARE ALLOCATION"). In the event
that a holder shall sell or otherwise transfer any of such holder's Notes, each
transferee shall be allocated a pro rata portion of such holder's Authorized
Share Allocation. Any shares of Common Stock reserved and allocated to any
Person which ceases to hold any Notes shall be allocated to the remaining
holders of Notes, pro rata based on the principal amount of the Notes then held
by such holders.

                      (b) Insufficient Authorized Shares. If at any time while
any of the Notes or Separate Tranche Note remain outstanding the Company does
not have a sufficient number of authorized and unreserved shares of Common Stock
to satisfy its obligation to reserve for issuance upon conversion of the Notes
and the Separate Tranche Notes at least a number of shares of Common Stock equal
to the Required Reserve Amount (an "AUTHORIZED SHARE FAILURE"), then the Company
shall immediately take all action necessary to increase the Company's authorized
shares of Common Stock to an amount sufficient to allow the Company to reserve
the Required Reserve Amount for the Notes and Separate Tranche Note then
outstanding. Without limiting the generality of the foregoing sentence, as soon
as practicable after the date of the occurrence of an Authorized Share Failure,
but in no event later than 60 days after the occurrence of such Authorized Share
Failure, the Company shall hold a meeting of its shareholders for the approval
of an increase in the number of authorized shares of Common Stock. In connection
with such meeting, the Company shall provide each shareholder with a proxy
statement and shall use its best efforts to solicit its shareholders' approval
of such increase in authorized shares of Common Stock and to cause its board of
directors to recommend to the shareholders that they approve such proposal.



                                       14


               (10) REDEMPTION.

                      (a) Mechanics. In the event that the Holder has sent a
Redemption Notice to the Company pursuant to Section 4(b) or Section 5(c), the
Holder shall promptly submit this Note to the Company. The Company shall deliver
the applicable Event of Default Redemption Price to the Holder within five
Business Days after the Company's receipt of the Holder's Event of Default
Redemption Notice and thereafter the Holder shall promptly deliver this Note to
the Company. If the Holder has submitted a Change of Control Redemption Notice
in accordance with Section 5(c), the Company shall deliver the applicable Change
of Control Redemption Price to the Holder concurrently with the consummation of
such Change of Control if such notice is received prior to the consummation of
such Change of Control and within five Business Days after the Company's receipt
of such notice otherwise. In the event of a redemption of less than all of the
Conversion Amount of this Note, the Company shall promptly cause to be issued
and delivered to the Holder a new Note (in accordance with Section 18(d))
representing the outstanding Principal which has not been redeemed. In the event
that the Company does not pay the Redemption Price to the Holder within the time
period required above in this Section 10(a) at any time thereafter and until the
Company pays such unpaid Redemption Price in full, the Holder shall have the
option to, in lieu of redemption, require the Company to promptly return to the
Holder all or any portion of this Note representing the Conversion Amount that
was submitted for redemption and for which the applicable Redemption Price
(together with any Late Charges thereon) has not been paid. Upon the Company's
receipt of such notice, (x) the Redemption Notice shall be null and void with
respect to such Conversion Amount, (y) the Company shall immediately return this
Note, or issue a new Note (in accordance with Section 18(d)) to the Holder
representing such Conversion Amount and (z) the Conversion Price of this Note or
such new Notes shall be adjusted to the lesser of (A) the Conversion Price as in
effect on the date on which the Redemption Notice is voided and (B) the lowest
Closing Bid Price during the period beginning on and including the date on which
the Redemption Notice is delivered to the Company and ending on and including
the date on which the Redemption Notice is voided. The Holder's delivery of a
notice voiding a Redemption Notice and exercise of its rights following such
notice shall not affect the Company's obligations to make any payments of Late
Charges which have accrued prior to the date of such notice with respect to the
Conversion Amount subject to such notice.

                      (b) Redemption by Other Holders. Upon the Company's
receipt of notice from any of the holders of the Other Notes or the Separate
Tranche Notes for redemption or repayment as a result of an event or occurrence
substantially similar to the events or occurrences described in Section 4(b) or
Section 5(c) (each an "OTHER REDEMPTION NOTICE"), the Company shall immediately
forward to the Holder by facsimile a copy of such notice. If the Company
receives a Redemption Notice and one or more Other Redemption Notices during the
seven Business Day period beginning on and including the date which is three
Business Days prior to the Company's receipt of the Holder's Redemption Notice
and ending on and including the date which is three Business Days after the
Company's receipt of the Holder's Redemption Notice and the Company is unable to
redeem all principal, interest and other amounts designated in such Redemption
Notice and such Other Redemption Notices received during such seven Business Day
period, then the Company shall redeem a pro rata amount from each holder of the
Notes and the Separate Tranche Notes (including the Holder) based on the
principal amount of



                                       15


the Notes and the Separate Tranche Notes submitted for redemption pursuant to
such Redemption Notice and such Other Redemption Notices received by the Company
during such seven Business Day period.

                      (c) Redemption at the Option of the Company. (i) Except as
provided in this Section 10(c) or in connection with the satisfaction by the
Company of its obligations to redeem the Notes under Sections 4(b) and 5(c)
hereof, without the prior written consent of the Holder the Company shall not
have the right to prepay, redeem, repurchase, defease or otherwise retire any
Note prior to the Final Maturity Date.

               (ii) Provided the Company has consummated a Qualified 144A
Offering at any time during the Company Optional Redemption Period, the Company
may deliver an irrevocable written notice to the Holder and the Transfer Agent
(the "COMPANY OPTIONAL REDEMPTION NOTICE") within one (1) Business Day after
consummation of the Qualified 144A Offering, indicating that the Company has
elected to redeem, and is requiring the Holder to submit for redemption, in
whole but not in part, the outstanding Principal of this Note plus accrued
Interest thereon for the Company Optional Redemption Consideration (a "COMPANY
OPTIONAL REDEMPTION"). The Company Optional Redemption Notice shall be sent by
facsimile and overnight courier to the Holder and shall indicate (x) the date
fixed for redemption, which shall be five (5) Business Days after the expiration
of the Company Optional Redemption Period (the "COMPANY OPTIONAL REDEMPTION
DATE") and (y) the place or places where this Note is to be surrendered for
payment of the Company Optional Redemption Consideration. If the Company has
elected a Company Optional Redemption, the Company shall on the Company Optional
Redemption Date pay to the Holder the Cash Optional Redemption Consideration, by
wire transfer of immediately available funds to an account designated in writing
by such Holder.

                      (11) RESTRICTION ON REDEMPTION. Until all of the Notes
have been converted, redeemed or otherwise satisfied in accordance with their
terms, the Company shall not, directly or indirectly, redeem its capital stock
without the prior express written consent of the holders of Notes representing
at least two-thirds of the aggregate principal amount of the Notes then
outstanding.

                      (12) SUBORDINATION; ADDITIONAL INDEBTEDNESS. Payments of
Principal and Interest and other payments due under this Note shall rank pari
passu in right of payment with all (and shall not be subordinated to any)
unsecured, unsubordinated indebtedness of the Company and will be senior in
right of payment to all subordinated indebtedness of the Company.

                      (13) COVENANTS.

                             (a) Indebtedness. The Company shall not create,
incur, assume, guarantee or suffer to exist, or otherwise become or remain
liable with respect to, any Indebtedness other than Permitted Indebtedness and
Subordinated Indebtedness. "Subordinated Indebtedness" shall mean Indebtedness
that is unsecured and subordinated in right of payment to the Notes and other
obligations owing to the Holders in accordance with a subordination agreement in
form and substance satisfactory to the Holders. "Permitted Indebtedness" shall



                                       16


mean any Indebtedness that is unsecured and is not senior in right of payment to
the Notes and is otherwise on terms that are no more favorable to the holders
thereof than the terms of the Indebtedness evidenced by the Notes unless such
more favorable terms are offered to the Holders.

                             (b) Liens. The Company shall not create, incur,
assume or suffer to exist, or permit any of its Subsidiaries (other than NRG
Energy Inc. or its subsidiaries (collectively, "NRG")) to create, incur, assume
or suffer to exist, any Lien upon or with respect to any of its properties,
whether now owned or hereafter acquired; sign or suffer to exist any security
agreement authorizing any secured party thereunder to file a Uniform Commercial
Code financing statement (or the equivalent thereof) as notice of a Lien on any
property of the Company or its Subsidiaries; sell any of its property or assets
subject to an understanding or agreement, contingent or otherwise, to repurchase
such property or assets (including sales of accounts receivable) with recourse
to it or any of its Subsidiaries or assign or otherwise transfer, or permit any
of its Subsidiaries (other than the Existing Utility Subsidiaries (as defined in
the Bank Facility)) to assign or otherwise transfer, any account or other right
to receive income; other than, as to all of the above, Permitted Liens. As used
herein, "Permitted Liens" shall have the meaning of that term as defined in the
Five-Year Credit Agreement, dated as of November 10, 2000, among the Company and
the banks listed therein (as the same maybe amended from time to time, the "BANK
FACILITY"). As used herein, "Liens" means any mortgage, deed of trust, pledge,
lien (statutory or otherwise), security interest, charge or other encumbrance or
security or preferential arrangement of any nature, including, without
limitation, any conditional sale or title retention arrangement, any capitalized
lease and any assignment, deposit arrangement or financing lease intended as, or
having the effect of, security.

                      (c) Transactions With Affiliates. The Company shall not,
and shall not permit any Subsidiary to, directly or indirectly, effect any
transaction with any Affiliate (as defined in the Bank Facility) that is (a)
outside the ordinary course of business or (b) on a basis less favorable than
would at the time be obtainable for a comparable transaction in arms-length
dealing with an unrelated third party, provided that notwithstanding the
foregoing, no loan, payment or other form of contribution shall be made to NRG
unless it is in an amount not in excess of (i) $300 Million payable pursuant to
the Support Agreement and Capital Subscription Agreement, dated as of May 29,
2002, by and between the Company and NRG Energy Inc. and (ii) $250 Million in
respect of guarantee obligations relating to the power marketing business of
NRG; provided further that with respect to any payment permitted pursuant to
clause (ii) above, the Company shall, in the context of a restructuring of NRG,
use its reasonable best efforts to obtain a full release of all obligations and
liabilities of the Company relating to NRG.

                      (d) Leverage Ratio. The Company shall not permit the
Leverage Ratio set forth in the Bank Facility to be exceeded.

                      (e) Restrictive Agreements. The Company shall not, and
shall not permit any Significant Subsidiary (as defined in the Bank Facility)
other than NRG to, enter into any agreement after the date of this Note that
imposes any restriction on the ability of such Significant Subsidiary to make
payments, directly or indirectly, to its shareholders by way of dividends,
advances, repayment of loans or intercompany charges, expenses or accruals or
other



                                       17


returns on investments that is more restrictive than any such restriction
applicable to such Significant Subsidiary on the issuance date of the First
Notes.

                      (f) Scope of Business. The Company shall, and shall cause
each Subsidiary to, engage only in energy-related business, functionally related
businesses (as interpreted under PUHCA, as defined in the Securities Purchase
Agreement)or such other businesses as maybe permitted pursuant to an order
issued by the SEC pursuant to PUHCA.

               (14) VOTING RIGHTS. The Holder shall have no voting rights as the
holder of this Note, except as required by law, including but not limited to the
Minnesota Business Corporation Act, and as expressly provided in this Note.

               (15) PARTICIPATION. The Holder, as the holder of this Note, shall
be entitled to (i) all extraordinary or special dividends paid and distributions
made to the holders of Common Stock to the same extent as if the Holder had
converted this Note into Common Stock (without regard to any limitations on
conversion herein or elsewhere) and had held such shares of Common Stock on the
record date for such dividends and distributions and (ii) regular cash dividends
and distributions paid to the holders of the Common Stock only with respect to
that portion of such dividends that exceeds $0.1875 per share of Common Stock in
any calendar quarter (subject to adjustment for stock splits, stock dividends,
stock combinations and other similar transactions after the Issuance Date).
Payments under the preceding sentence shall be made concurrently with the
dividend or distribution to the holders of Common Stock.

               (16) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of Notes representing not less than
two-thirds of the aggregate principal amount of the then outstanding Notes,
shall be required for any change or amendment to this Note or the Other Notes.

               (17) TRANSFER. This Note may be offered, sold, assigned or
transferred by the Holder without the consent of the Company, subject only to
the provisions of Section 2(f) of the Securities Purchase Agreement.

               (18) REISSUANCE OF THIS NOTE.

                      (a) Transfer. If this Note is to be transferred, the
Holder shall surrender this Note to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Note (in
accordance with Section 18(d)), registered as the Holder may request,
representing the outstanding Principal being transferred by the Holder and, if
less then the entire outstanding Principal is being transferred, a new Note (in
accordance with Section 18(d)) to the Holder representing the outstanding
Principal not being transferred. The Holder and any assignee, by acceptance of
this Note, acknowledge and agree that, by reason of the provisions of Section
3(c)(iii) and this Section 18(a), following conversion or redemption of any
portion of this Note, the outstanding Principal represented by this Note may be
less than the Principal stated on the face of this Note.



                                       18


                      (b) Lost, Stolen or Mutilated Note. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the Company in
customary form and, in the case of mutilation, upon surrender and cancellation
of this Note, the Company shall execute and deliver to the Holder a new Note (in
accordance with Section 18(d)) representing the outstanding Principal.

                      (c) Note Exchangeable for Different Denominations. This
Note is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Note or Notes (in accordance with Section 18(d)
and in principal amounts of at least $100,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.

                      (d) Issuance of New Notes. Whenever the Company is
required to issue a new Note pursuant to the terms of this Note, such new Note
(i) shall be of like tenor with this Note, (ii) shall represent, as indicated on
the face of such new Note, the Principal remaining outstanding (or in the case
of a new Note being issued pursuant to Section 18(a) or Section 18(c), the
Principal designated by the Holder which, when added to the principal
represented by the other new Notes issued in connection with such issuance, does
not exceed the Principal remaining outstanding under this Note immediately prior
to such issuance of new Notes), (iii) shall have an issuance date, as indicated
on the face of such new Note which is the same as the Issuance Date of this
Note, (iv) shall have the same rights and conditions as this Note, and (v) shall
represent accrued Interest and Late Charges on the Principal and Interest of
this Note, from the Issuance Date.

               (19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note, the Securities
Purchase Agreement and the Registration Rights Agreement, at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the Holder's right to pursue actual and consequential
damages for any failure by the Company to comply with the terms of this Note.
Amounts set forth or provided for herein with respect to payments, conversion
and the like (and the computation thereof) shall be the amounts to be received
by the Holder and shall not, except as expressly provided herein, be subject to
any other obligation of the Company (or the performance thereof). The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.

               (20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a)
this Note is placed in the hands of an attorney for collection or enforcement or
is collected or enforced through any legal proceeding or the Holder otherwise
takes action to



                                       19


collect amounts due under this Note or to enforce the provisions of this Note or
(b) there occurs any bankruptcy, reorganization, receivership of the Company or
other proceedings affecting Company creditors' rights and involving a claim
under this Note, then the Company shall pay the costs incurred by the Holder for
such collection, enforcement or action or in connection with such bankruptcy,
reorganization, receivership or other proceeding, including but not limited to
attorneys fees and disbursements.

               (21) CONSTRUCTION; HEADINGS. This Note shall be deemed to be
jointly drafted by the Company and all the Purchasers and shall not be construed
against any person as the drafter hereof. The headings of this Note are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Note.

               (22) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege.

               (23) DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Redemption Price or the arithmetic calculation of the
Conversion Rate or the Redemption Price or any other calculation hereunder, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within one Business Day of receipt of the Conversion Notice or
Redemption Notice giving rise to such dispute, as the case may be, to the
Holder. If the Holder and the Company are unable to agree upon such
determination or calculation of the Conversion Rate within one Business Day of
such disputed determination or arithmetic calculation being submitted to the
Holder, then the Company shall, within one Business Day submit via facsimile (a)
the disputed determination of the Weighted Average Price, the Closing Bid Price
or the Closing Sale Price or any other calculation hereunder to an independent,
reputable investment bank selected by the Company and approved by the Holder or
(b) the disputed arithmetic calculation of the Conversion Rate or the Redemption
Price to the Company's independent, outside accountant. The Company, at the
Company's expense, shall cause the investment bank or the accountant, as the
case may be, to perform the determinations or calculations and notify the
Company and the Holder of the results no later than five Business Days from the
time it receives the disputed determinations or calculations. Such investment
bank's or accountant's determination or calculation, as the case may be, shall
be binding upon all parties absent demonstrable error.

               (24) NOTICES; PAYMENTS.

                      (a) Notices. Whenever notice is required to be given under
this Note, unless otherwise provided herein, such notice shall be given in
accordance with Section 9(f) of the Securities Purchase Agreement. The Company
shall provide the Holder with prompt written notice of all actions taken
pursuant to this Note, including in reasonable detail a description of such
action and the reason therefore. Without limiting the generality of the
foregoing, the Company will give written notice to the Holder (i) immediately
upon any adjustment of the Conversion Price, setting forth in reasonable detail,
and certifying, the calculation of such adjustment and (ii) at least twenty days
prior to the date on which the Company closes its books



                                       20


or takes a record (A) with respect to any dividend or distribution upon the
Common Stock, (B) with respect to any grants, issues or sales of any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to holders of Common Stock or (C) for determining rights
to vote with respect to any Change of Control, dissolution or liquidation,
provided in each case that such information shall be made known to the public
prior to or in conjunction with such notice being provided to such holder.
Notwithstanding the foregoing, Section 4(j) of the Securities Purchase Agreement
shall apply to all notices given pursuant to this Note.

                      (b) Payments. Whenever any payment of cash is to be made
by the Company to any Person pursuant to this Note, such payment shall be made
in lawful money of the United States of America by a check drawn on the account
of the Company and sent via overnight courier service to such Person at such
address as previously provided to the Company in writing (which address, in the
case of each of the Purchasers (as defined in Section 3(d)(ii)), shall initially
be as set forth on the Schedule of Buyers attached to the Securities Purchase
Agreement); provided that the Holder may elect to receive a payment of cash via
wire transfer of immediately available funds by providing the Company with prior
written notice setting out such request and the Holder's wire transfer
instructions. Whenever any amount expressed to be due by the terms of this Note
is due on any day which is not a Business Day, the same shall instead be due on
the next succeeding day which is a Business Day and, in the case of any Interest
Date which is not the date on which this Note is paid in full, the extension of
the due date thereof shall not be taken into account for purposes of determining
the amount of Interest due on such date. Any amount of Interest, Principal or
other amount due under the Transaction Documents (as defined in the Securities
Purchase Agreement) which is not paid when due shall result in a late charge
being incurred and payable by the Company in an amount equal to interest on such
amount at the rate of 12% per annum from the date such amount was due until the
same is paid in full ("LATE CHARGE").

               (25) CANCELLATION. After all Principal, accrued Interest and
other amounts at any time owed on this Note has been paid in full, this Note
shall automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.

               (26) WAIVER OF NOTICE. To the extent permitted by law, the
Company hereby waives demand, notice, protest and all other demands and notices
in connection with the delivery, acceptance, performance, default or enforcement
of this Note and the Securities Purchase Agreement.

               (27) GOVERNING LAW. This Note shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal
laws of the State of Illinois, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Illinois or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of Illinois.

               (28) CERTAIN DEFINITIONS. For purposes of this Note, the
following terms shall have the following meanings:



                                       21


                      (a) "BUSINESS DAY" means any day other than Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.

                      (b) "CASH OPTIONAL REDEMPTION CONSIDERATION" means an
amount in cash equal to the greater of (i) 102% of the Conversion Amount of the
Note being redeemed in the Company Optional Redemption and (ii) the sum of (A)
the product determined by multiplying the Conversion Amount of the Note being
redeemed in the Company Optional Redemption by a quotient determined by dividing
(X) the Closing Bid Price of the Common Stock on the date of delivery of the
Company Optional Redemption Notice by (Y) the Company Optional Redemption
Conversion Price and (B) 12% of the Conversion Amount of the Note being redeemed
in the Company Optional Redemption; provided, however, that in the event that
the Company Optional Redemption Notice is delivered on or after the date that is
10 Business Days after the execution of the Securities Purchase Agreement, the
Holder shall have the option, upon delivery of written notice thereof to the
Company at any time prior to the Company Optional Redemption Date, to receive in
lieu of all or any portion of the Cash Optional Redemption Consideration a
number of shares of Common Stock not to exceed the Company Optional Redemption
Conversion Shares, in which event the Cash Optional Redemption Consideration
shall be reduced by an amount equal to the product determined by multiplying (I)
the number of shares of Common Stock the Holder has elected to receive and (II)
the Company Optional Redemption Conversion Price.

                      (c) "CHANGE OF CONTROL TERMINATION DATE" shall mean, with
respect to any proposed Change of Control for which a public announcement that
it proposes or intends to effect a Change of Control of the Company (the date of
such announcement, the "ANNOUNCEMENT DATE") has been made, the date upon which
the Company or other Person proposing to effect such Change of Control
consummates or publicly announces the termination or abandonment of the proposed
Change of Control which was the subject of the previous public announcement.

                      (d) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means,
for any security as of any date, the last closing bid price and last closing
trade price, respectively, for such security on The New York Stock Exchange,
Inc. (the "PRINCIPAL MARKET") as reported by Bloomberg Financial Markets
("BLOOMBERG"), or, if the Principal Market begins to operate on an extended
hours basis and does not designate the closing bid price or the closing trade
price, as the case may be, then the last bid price or last trade price,
respectively, of such security prior to 4:00:00 p.m. Eastern Time as reported by
Bloomberg, or, if the Principal Market is not the principal securities exchange
or trading market for such security, the last closing bid price or last trade
price, respectively, of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg,
or if the foregoing do not apply, the last closing bid price or last trade
price, respectively, of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no
closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing



                                       22


Bid Price or the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price, as the case may be, of such security on such date shall be
the fair market value as mutually determined by the Company and the Holder. If
the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved pursuant to Section 23. All
such determinations to be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during any applicable
calculation period.

                      (e) "COMMON STOCK" means (i) the Company's common stock,
par value $2.50 per share, and (ii) any capital stock resulting from a
reclassification of such Common Stock.

                      (f) "COMPANY OPTIONAL REDEMPTION CONVERSION PRICE" shall
mean 110% of the arithmetic average of the Weighted Average Price of the Common
Stock for each of the Trading Days during the Tranche B Pricing Period through
the date the Company delivers to the Holder the Company Optional Redemption
Notice, but in no event shall the Company Optional Redemption Conversion Price
exceed, and prior to the commencement of the Tranche B Pricing Period it shall
equal, 110% of the Tranche B Base Price.

                      (g) "COMPANY OPTIONAL REDEMPTION CONVERSION SHARES" shall
mean that number of shares of Common Stock determined by dividing (i) the
Conversion Amount of the Note being redeemed in the Company Optional Redemption
by (ii) the Company Optional Redemption Conversion Price.

                      (h) "COMPANY OPTIONAL REDEMPTION PERIOD" means the period
commencing on the Business Day immediately following the issuance date of the
First Notes and ending on and including the date that is 35 Business Days after
the execution of the Securities Purchase Agreement.

                      (i) "COMPANY OPTIONAL REDEMPTION CONSIDERATION" means the
Cash Optional Redemption Consideration.

                      (j) "PERSON" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, any other entity and a government or any department
or agency thereof.

                      (k) "QUALIFIED 144A OFFERING" shall mean an underwritten
offering by the Company of debt securities of the Company that are convertible
into Common Stock, with an effective conversion premium (as defined in Section
(d)(3)(i) of Rule 144A of the Securities Act of 1933, as amended ("Rule 144A"))
of not less than 10%, with such offering to be conducted either pursuant to Rule
144A or pursuant to a registered offering of such securities, in either case led
by Merrill Lynch & Co. and yielding gross unrestricted cash proceeds to the
Company of not less than $150 million.

                      (l) "REDEMPTION PREMIUM" means (i) in the case of the
Events of Default described in Section 4(a)(i), (ii), (iii), (iv) and (viii),
115% or (ii) in the case of the



                                       23


Events of Default described in Section 4(a)(v) - (vii), 100%.

                      (m) "REGISTRATION RIGHTS AGREEMENT" means that certain
registration rights agreement between the Company and the initial holders of the
Notes relating to the registration of the resale of the shares of Common Stock
issuable upon conversion of the Notes.

                      (n) "SECURITIES PURCHASE AGREEMENT" means that certain
securities purchase agreement between the Company and the initial holders of the
Notes pursuant to which the Company issued the Notes.

                      (o) "SEPARATE TRANCHE NOTES" means the First Notes, First
Call Notes, Second Call Notes, Third Notes and the Third Call Notes,
collectively.

                      (p) "TRADING DAY" means any day on which the Common Stock
is traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the principal securities
exchange or securities market on which the Common Stock is then traded; provided
that "Trading Day" shall not include any day on which the Common Stock is
scheduled to trade on such exchange or market or actually trades on such
exchange or market for less than 4.5 hours.

                      (q) "TRANCHE B BASE PRICE" means the Weighted Average
Price of the Common Stock on the Tranche B Closing Date (subject to adjustments
for stock splits, stock dividends, stock combinations and similar transactions).

                      (r) "TRANCHE A PRICING PERIOD" means the twenty
consecutive Trading Days commencing on the fifth Trading Day immediately
following the issuance date of the First Notes.

                      (s) "TRANCHE B PRICING PERIOD" means the ten consecutive
Trading Days commencing on the first Trading Day immediately following the end
of the Tranche A Pricing Period.

                      (t) "VARIABLE SECURITIES" means any stock or securities
other than Options directly or indirectly convertible into or exchangeable for
Common Stock ("CONVERTIBLE SECURITIES") or any rights, warrants or option to
subscribe for or purchase Common Stock or Convertible Securities ("OPTIONS")
that are convertible into or exchangeable, directly or indirectly, for Common
Stock at a price which varies or may vary with the market price of the Common
Stock, including by way of one or more adjustments or resets to a fixed price (a
"VARIABLE PRICE").

                      (u) "WEIGHTED AVERAGE PRICE" means, for any security as of
any date, the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30 a.m., New York Time (or
such other time as the Principal Market publicly announces is the official open
of trading), and ending at 4:00 p.m., New York Time (or such other time as the
Principal Market publicly announces is the official close of trading), as
reported by Bloomberg through its "Volume at Price" functions (ignoring any
trade of more than



                                       24


100,000 shares of such security pursuant to an individual transaction (subject
to adjustment for stock splits, stock dividends, stock combinations and other
similar transactions involving such security after the Issuance Date)), or, if
the Principal Market is not the principal securities exchange or trading market
for such security, the dollar volume-weighted average price for such security on
the principal securities exchange or trading market where such security is
listed or traded during the period beginning at 9:30 a.m., New York Time (or
such other time as such principal securities exchange or trading market publicly
announces is the official open of trading), and ending at 4:00 p.m., New York
Time (or such other time as such principal securities exchange or trading market
publicly announces is the official close of trading), as reported by Bloomberg
through its "Volume at Price" functions (ignoring any trade of more than 100,000
shares of such security pursuant to an individual transaction (subject to
adjustment for stock splits, stock dividends, stock combinations and other
similar transactions involving such security after the Issuance Date)), or, if
the foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30 a.m., New York Time (or such
other time as the Principal Market publicly announces is the official open of
trading), and ending at 4:00 p.m., New York Time (or such other time as the
Principal Market publicly announces is the official close of trading), as
reported by Bloomberg, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Weighted Average Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the Weighted
Average Price of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to Section 23. All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during applicable calculation period.


                            [SIGNATURE PAGE FOLLOWS]


                                       25


        IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
as of the Date of Issuance set out above.

                                XCEL ENERGY INC.



                                By:
                                   ---------------------------------------------
                                      Name:
                                      Title: Chief Executive Officer







                                    EXHIBIT I

                                XCEL ENERGY INC.
                                CONVERSION NOTICE

Reference is made to the Convertible Note (the "NOTE") issued to the undersigned
by XCEL ENERGY INC. (the "COMPANY"). In accordance with and pursuant to the
Note, the undersigned hereby elects to convert the Conversion Amount (as defined
in the Note) of the Note indicated below into shares of Common Stock, par value
$2.50 per share (the "COMMON STOCK"), of the Company as of the date specified
below.

        Date of Conversion:
                           -----------------------------------------------------

        Aggregate Conversion Amount to be converted:
                                                    ----------------------------


Please confirm the following information:

        Conversion Price:
                         -------------------------------------------------------

        Number of shares of Common Stock to be issued:
                                                      --------------------------

Please issue the Common Stock into which the Note is being converted and, if
applicable, any check drawn on an account of the Company in the following name
and to the following address:

        Issue to:
                 ---------------------------------------------------------------
                 ---------------------------------------------------------------
                 ---------------------------------------------------------------

        Facsimile Number:
                         -------------------------------------------------------

        Authorization:
                      ----------------------------------------------------------
               By:
                  --------------------------------------------------------------
                                     Title:
                                           -------------------------------------
Dated:
      --------------------------------------------------------------------------

        Account Number:
                       ---------------------------------------------------------
          (if electronic book entry transfer)

        Transaction Code Number:
                                ------------------------------------------------
          (if electronic book entry transfer)





                                 ACKNOWLEDGMENT


        The Company hereby acknowledges this Conversion Notice and hereby
directs [TRANSFER AGENT] to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated November 8, 2002
from the Company and acknowledged and agreed to by [TRANSFER AGENT].

                                XCEL ENERGY INC.



                                By:
                                   ---------------------------------------------
                                     Name:
                                     Title:

EX-4.12

                                                                    EXHIBIT 4.12

                            SENIOR CONVERTIBLE NOTE

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A)
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL IN A
REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR
RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THIS NOTE AND THE
SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THIS
NOTE. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS
NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY
BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION
3(c)(iii) OF THIS NOTE.



                                XCEL ENERGY INC.


Issuance Date: _______ __, 200_                         Principal: U.S. $_______

        FOR VALUE RECEIVED, XCEL ENERGY INC., a Minnesota corporation (the
"COMPANY"), hereby promises to pay to the order of __________________ or
registered assigns ("HOLDER") the amount set out above as the Principal (as
reduced pursuant to the terms hereof pursuant to redemption, conversion or
otherwise, the "PRINCIPAL") when due, whether upon the Final Maturity Date (as
defined below), acceleration, conversion, redemption or otherwise (in each case
in accordance with the terms hereof) and to pay interest ("INTEREST") on any
outstanding Principal at the rate of eight percent (8%) per annum, subject to
periodic adjustment pursuant to Section 2 (the "INTEREST RATE"), from the date
set out above as the Issuance Date (the "ISSUANCE DATE") until the same becomes
due and payable, whether upon an Interest Date (as defined below), the Final
Maturity Date, acceleration, conversion, redemption or otherwise (in each case
in accordance with the terms hereof). This Convertible Note (including all
Convertible Notes issued in exchange, transfer or replacement hereof, this
"NOTE") is one of an issue of Convertible Notes (collectively, the "NOTES" and
such other Convertible Notes, the "OTHER NOTES") issued on the Issuance Date
pursuant to the Securities Purchase Agreement (as defined below). Certain
capitalized terms are defined in Section 28 and terms used herein but not
defined herein shall have the meanings set forth for such terms in the
Securities Purchase Agreement.




               (1) MATURITY. On the Final Maturity Date, the Holder shall
surrender this Note to the Company and the Company shall pay to the Holder an
amount in cash representing all outstanding Principal, accrued and unpaid
Interest and accrued and unpaid Late Charges (as defined in Section 24(b)), if
any. The "MATURITY DATE" shall be the date that is 364 days after the Issuance
Date; provided that, if the Holder has given notice in writing to the Company of
its desire to extend the Maturity Date on or prior to the date that is 10
Business Days prior to the Maturity Date, the Maturity Date shall be extended
(on one or more occasions) for an additional 364 days; provided, further, that
the Maturity Date shall not be extended (except as provided in the following
proviso) to more than five years after the Issuance Date (such date that is five
years after the Issuance Date or such earlier Maturity Date prior to which the
Holder has not requested an extension thereof, the "FINAL MATURITY DATE"); and
provided, further, that the Final Maturity Date may be extended at the option of
the Holder (x) in the event that, and for so long as, an Event of Default (as
defined in Section 4(a)) shall have occurred and be continuing or any event
shall have occurred and be continuing which with the passage of time and the
failure to cure would result in an Event of Default and (y) through the date
that is ten days after a Change of Control Termination Date in the event that
the Announcement Date giving rise to such Change of Control Termination Date
occurred prior to the Final Maturity Date.

               (2) INTEREST; INTEREST RATE. Interest on this Note shall commence
accruing on the Issuance Date and shall be computed on the basis of the actual
days elapsed during any period, and a calendar year of 365 or 366 calendar days,
as applicable, and shall be payable in cash on each May 1 and each November 1
during the period beginning on the Issuance Date and ending on, and including,
the Final Maturity Date (each an "INTEREST DATE"); provided that interest on any
Conversion Amount of this Note that is accrued but unpaid as of the Conversion
Date of such Conversion Amount shall be paid in shares of Common Stock at the
Conversion Rate. From and after the occurrence of an Event of Default (as
defined in Section 4(a)) or the failure to deliver timely the Non-Consolidation
Opinion (as defined in the Securities Purchase Agreement) pursuant to Section
4(f) of the Securities Purchase Agreement (the "NRG OPINION"), the Interest Rate
shall be increased by two percentage points (2%). In the event that such Event
of Default is subsequently cured, the adjustment referred to in the preceding
sentence shall cease to be effective as of the date of such cure; provided that
the Interest as calculated at such increased rate during the continuance of such
Event of Default shall continue to apply to the extent relating to the days
after the occurrence of such Event of Default through and including the date of
cure of such Event of Default. If the Company shall fail to credit the Holder's
balance account with DTC (as defined in Section 3(c)(i)) or, if requested in
writing by the Holder, to issue a certificate to the Holder for the number of
shares of Common Stock to which the Holder is entitled upon conversion of any
Conversion Amount or to issue a new Note (in accordance with Section 18(d))
representing the Principal portion of the Conversion Amount (as defined in
Section 3(b)(i)) to which the Holder is entitled, in each case within the time
periods set out in Section 3(c)(i) (in each case, a "CONVERSION FAILURE"), then
during each period beginning on and including the date of each such Conversion
Failure and ending on and including the date such Conversion Failure is cured,
the Interest Rate then in effect shall be increased by two percentage points
(2%). If (i) the Registration Statement (as defined in the Registration Rights
Agreement) covering all the Registrable Securities (as defined in the
Registration Rights Agreement) issuable upon conversion of this Note and
required to be filed by



                                       2


the Company pursuant to the Registration Rights Agreement is not declared
effective by the Securities and Exchange Commission (the "SEC") on or before the
applicable Mandatory Effective Date (as defined in the Registration Rights
Agreement) or (ii) on any day after such Registration Statement has been
declared effective by the SEC that sales of all the Registrable Securities
required to be included on such Registration Statement cannot be made (other
than during an Allowable Grace Period (as defined in Section 3(t) of the
Registration Rights Agreement) pursuant to such Registration Statement
(including, without limitation, because of a failure to keep such Registration
Statement effective, to disclose such information as is necessary for sales to
be made pursuant to such Registration Statement or to register sufficient shares
of Common Stock) (collectively with the event described in the immediately
preceding clause (i), each a "REGISTRATION FAILURE"), then, as partial relief
for the damages to any holder by reason of any such delay in or reduction of its
ability to sell Registrable Securities (which remedy shall not be exclusive of
any other remedies available at law or in equity) the Interest Rate then in
effect shall be increased by two percentage points (2%) during each period
beginning on and including the first date of each such Registration Failure and
ending on and including the date such Registration Failure is cured.

               (3) CONVERSION OF NOTES. This Note shall be convertible into
shares of the Common Stock, on the terms and conditions set forth in this
Section 3.

                      (a) Conversion Right. Subject to the provisions of Section
3(d), at any time or times on or after the Issuance Date, the Holder shall be
entitled to convert any portion of the outstanding and unpaid Conversion Amount
(as defined below) into fully paid and nonassessable shares of Common Stock in
accordance with Section 3(c), at the Conversion Rate (as defined below). The
Company shall not issue any fraction of a share of Common Stock upon any
conversion. If the issuance would result in the issuance of a fraction of a
share of Common Stock, the Company shall round such fraction of a share of
Common Stock up to the nearest whole share. The Company shall pay any and all
taxes that may be payable with respect to the issuance and delivery of Common
Stock upon conversion of any Conversion Amount.

                      (b) Conversion Rate. The number of shares of Common Stock
issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall
be determined by dividing (x) such Conversion Amount by (y) the Conversion Price
(as defined below) (the "CONVERSION RATE").

        (i) "CONVERSION AMOUNT" means the sum of (A) the portion of the
        Principal to be converted, redeemed or otherwise surrendered with
        respect to which this determination is being made, (B) accrued and
        unpaid Interest with respect to such Principal and (C) accrued and
        unpaid Late Charges with respect to such Principal and Interest.

        (ii) "CONVERSION PRICE" means the lesser of (x) 110% of the arithmetic
        average of the Weighted Average Price of the Common Stock during the
        Tranche A Pricing Period and (y) 110% of the Closing Bid Price of the
        Common Stock on the 35th Business Day after the issuance date of the
        First Notes; provided that the Conversion Price shall not exceed 110% of
        the Tranche A Base Price.



                                       3


                      (c) Mechanics of Conversion.

        (i) Optional Conversion. To convert any Conversion Amount into shares of
        Common Stock on any date (a "CONVERSION DATE"), the Holder shall (A)
        transmit by facsimile (or otherwise deliver), for receipt on or prior to
        11:59 p.m., Central Time on such date, a copy of an executed notice of
        conversion in the form attached hereto as Exhibit I (the "CONVERSION
        NOTICE") to the Company and (B) if required by Section 3(c)(ii),
        surrender this Note to a common carrier for delivery to the Company as
        soon as practicable on or following such date (or an indemnification
        undertaking with respect to this Note in the case of its loss, theft or
        destruction). On or before the first Business Day following the
        Company's receipt of a Conversion Notice, the Company shall transmit by
        facsimile a confirmation of receipt of such Conversion Notice to the
        Holder and the Transfer Agent (as defined below). On or before the
        second Business Day following the date of receipt of a Conversion Notice
        (the "SHARE DELIVERY DATE"), the Company shall (X) (if (Y) below does
        not apply) issue and deliver to the address as specified in the
        Conversion Notice, a certificate, registered in the name of the Holder
        or its designee, for the number of shares of Common Stock to which the
        Holder shall be entitled, or (Y) provided that the Company's transfer
        agent (the "TRANSFER AGENT") is participating in The Depository Trust
        Company ("DTC") Fast Automated Securities Transfer Program, upon the
        request of the Holder, credit such aggregate number of shares of Common
        Stock to which the Holder shall be entitled to the Holder's or its
        designee's balance account with DTC through its Deposit Withdrawal Agent
        Commission system. If this Note is physically surrendered for conversion
        as required by Section 3(c)(ii) and the outstanding Principal of this
        Note is greater than the Principal portion of the Conversion Amount
        being converted, then the Company shall as soon as practicable and in no
        event later than three Business Days after receipt of this Note (the
        "NOTE DELIVERY DATE") and at its own expense, issue and deliver to the
        holder a new Note (in accordance with Section 18(d)) representing the
        outstanding Principal not converted. The person or persons entitled to
        receive the shares of Common Stock issuable upon a conversion of this
        Note shall be treated for all purposes as the record holder or holders
        of such shares of Common Stock on the Conversion Date.

        (ii) Book-Entry. Notwithstanding anything to the contrary set forth
        herein, upon conversion of any portion of this Note in accordance with
        the terms hereof, the Holder shall not be required to physically
        surrender this Note to the Company unless (A) the full Conversion Amount
        represented by this Note is being converted or (B) the Holder has
        provided the Company with prior written notice (which notice may be
        included in a Conversion Notice) requesting physical surrender and
        reissue of this Note. The Holder and the Company shall maintain records
        showing the Principal and Interest converted and the dates of such
        conversions or shall use such other method, reasonably satisfactory to
        the Holder and the Company, so as not to require physical surrender of
        this Note upon conversion.

        (iii) Pro Rata Conversion; Disputes. In the event that the Company
        receives a Conversion Notice from more than one holder of the Notes or
        the Separate Tranche Notes for the same Conversion Date and the Company
        can convert some, but not all, of such



                                       4


        portions of the Notes and the Separate Tranche Notes submitted for
        conversion, the Company, subject to Section 3(d), shall convert from
        each holder of the Notes and the Separate Tranche Notes electing to have
        the Notes or Separate Tranche Notes converted on such date a pro rata
        amount of such holder's portion of its Notes or Separate Tranche Notes
        submitted for conversion based on the principal amount of the Notes or
        Separate Tranche Notes submitted for conversion on such date by such
        holder relative to the aggregate principal amount of all the Notes and
        the Separate Tranche Notes submitted for conversion on such date. In the
        event of a dispute as to the number of shares of Common Stock issuable
        to the Holder in connection with a conversion of this Note, the Company
        shall issue to the Holder the number of shares of Common Stock not in
        dispute and resolve such dispute in accordance with Section 23.

                      (d) Limitations on Conversions.

        (i) Beneficial Ownership. The Company shall not effect any conversion of
        this Note, and the Holder of this Note shall not have the right to
        convert any portion of this Note pursuant to Section 3(a), to the extent
        that after giving effect to such conversion, the Holder (together with
        the Holder's affiliates) would beneficially own in excess of 5.0% of the
        number of shares of Common Stock outstanding immediately after giving
        effect to such conversion. For purposes of the foregoing sentence, the
        number of shares of Common Stock beneficially owned by the Holder and
        its affiliates shall include the number of shares of Common Stock
        issuable upon conversion of this Note with respect to which the
        determination of such sentence is being made, but shall exclude the
        number of shares of Common Stock which would be issuable upon (A)
        conversion of the remaining, nonconverted portion of this Note
        beneficially owned by the Holder or any of its affiliates and (B)
        exercise or conversion of the unexercised or nonconverted portion of any
        other securities of the Company (including, without limitation, any
        Other Notes, Separate Tranche Notes or warrants) subject to a limitation
        on conversion or exercise analogous to the limitation contained herein
        beneficially owned by the Holder or any of its affiliates. Except as set
        forth in the preceding sentence, for purposes of this Section 3(d)(i),
        beneficial ownership shall be calculated in accordance with Section
        13(d) of the Securities Exchange Act of 1934, as amended. For purposes
        of this Section 3(d)(i), in determining the number of outstanding shares
        of Common Stock, the Holder may rely on the number of outstanding shares
        of Common Stock as reflected in (x) the Company's most recent Form 10-Q
        or Form 10-K, as the case may be, (y) a more recent public announcement
        by the Company or (z) any other notice by the Company or the Transfer
        Agent setting forth the number of shares of Common Stock outstanding.
        For any reason at any time, upon the written or oral request of the
        Holder, the Company shall within one Business Day confirm orally and in
        writing to the Holder the number of shares of Common Stock then
        outstanding. In any case, the number of outstanding shares of Common
        Stock shall be determined after giving effect to the conversion or
        exercise of securities of the Company, including this Note, by the
        Holder or its affiliates since the date as of which such number of
        outstanding shares of Common Stock was reported.

        (ii) Principal Market Regulation. The Company shall not be obligated to
        issue any shares of Common Stock pursuant to this Note if the issuance
        of such shares of Common



                                       5


        Stock would exceed that number of shares of Common Stock which the
        Company may issue pursuant to the Notes and the Separate Tranche Notes
        without breaching the Company's obligations under the rules or
        regulations of the Principal Market (the "EXCHANGE CAP"), except that
        such limitation shall not apply in the event that the Company (A)
        obtains the approval of its shareholders as required by the applicable
        rules of the Principal Market for issuances of Common Stock in excess of
        such amount or (B) obtains a written opinion from outside counsel to the
        Company that such approval is not required, which opinion shall be
        reasonably satisfactory to the holders of the Notes and the Separate
        Tranche Notes representing a majority of the principal amounts of the
        Notes and the Separate Tranche Notes (voting as a single class) then
        outstanding. Until such approval or written opinion is obtained, no
        purchaser of the Notes or the Separate Tranche Notes pursuant to the
        Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon
        conversion of the Notes or the Separate Tranche Notes, shares of Common
        Stock in an amount greater than the product of the Exchange Cap
        multiplied by a fraction, the numerator of which is the principal amount
        of the Notes and the Separate Tranche Notes issued to such Purchaser
        pursuant to the Securities Purchase Agreement as of the date of such
        determination and the denominator of which is the aggregate principal
        amount of all the Notes and the Separate Tranche Notes issued to the
        Purchasers pursuant to the Securities Purchase Agreement as of the date
        of such determination (with respect to each Purchaser, the "EXCHANGE CAP
        ALLOCATION"). In the event that any Purchaser shall sell or otherwise
        transfer any of such Purchaser's Notes or Separate Tranche Notes, the
        transferee shall be allocated a pro rata portion of such Purchaser's
        Exchange Cap Allocation, and the restrictions of the prior sentence
        shall apply to such transferee with respect to the portion of the
        Exchange Cap Allocation allocated to such transferee. In the event that
        any holder of the Notes or the Separate Tranche Notes shall convert all
        of such holder's Notes or Separate Tranche Notes into a number of shares
        of Common Stock which, in the aggregate, is less than such holder's
        Exchange Cap Allocation, then the difference between such holder's
        Exchange Cap Allocation and the number of shares of Common Stock
        actually issued to such holder shall be allocated to the respective
        Exchange Cap Allocations of the remaining holders of the Notes and the
        Separate Tranche Notes on a pro rata basis in proportion to the
        aggregate principal amount of the Notes and the Separate Tranche Notes
        then held by each such holder.

               (4) RIGHTS UPON EVENT OF DEFAULT.

                      (a) Event of Default. Each of the following events shall
constitute a "EVENT OF DEFAULT":

        (i) the failure of the Registration Statement covering all Registrable
        Securities (as defined in the Registration Rights Agreement) required to
        be registered pursuant to the Registration Rights Agreement to be
        declared effective by the SEC on or prior to the date that is 180 days
        after the Issuance Date, or, while such Registration Statement is
        required to be maintained effective pursuant to the terms of the
        Registration Rights Agreement, the effectiveness of such Registration
        Statement lapses for any reason (including, without limitation, the
        issuance of a stop order) or is unavailable to any holder of the Notes
        for sale of all of such holder's Registrable Securities in accordance
        with the terms of the



                                       6


        Registration Rights Agreement, and such lapse or unavailability
        continues for a period of five consecutive Business Days or for more
        than an aggregate of 20 Business Days in any 365-day period;

        (ii) the suspension from trading on the Principal Market for a period of
        three consecutive Business Days or for more than an aggregate of three
        Business Days in any 30-day Trading Day period or the delisting of the
        Common Stock from the Principal Market;

        (iii) the Company's (A) failure to cure a Conversion Failure by delivery
        of the required number of shares of Common Stock or a new Note (in
        accordance with section 18(d)), as applicable, within 10 days after the
        receipt by the Company of a Conversion Notice or (B) notice, written or
        oral, to any holder of the Notes, including by way of public
        announcement or through any of its agents, at any time, of its intention
        not to comply with a request for conversion of any Notes into shares of
        Common Stock that is tendered in accordance with the provisions of the
        Notes;

        (iv) the Company's failure to pay to the Holder any amount of Principal,
        Interest, Late Charges or other amounts when and as due under this Note,
        the Securities Purchase Agreement, the Registration Rights Agreement or
        any other agreement, document, certificate or other instrument delivered
        in connection with the transactions contemplated hereby and thereby to
        which the Holder is a party;

        (v) any default under, redemption of or acceleration prior to maturity
        of any Indebtedness (as defined in Section 3(r) of the Securities
        Purchase Agreement) of the Company or any of its Subsidiaries (as
        defined in Section 3(a) of the Securities Purchase Agreement) other than
        NRG (as defined below) (including, without limitation, the Other Notes)
        of at least $50,000,000;

        (vi) the Company or any of its Subsidiaries other than NRG (as defined
        below), pursuant to or within the meaning of Title 11, U.S. Code, or any
        similar Federal or state law for the relief of debtors (collectively,
        "BANKRUPTCY LAW"), (A) commences a voluntary case, (B) consents to the
        entry of an order for relief against it in an involuntary case, (C)
        consents to the appointment of a receiver, trustee, assignee, liquidator
        or similar official (a "CUSTODIAN"), (D) makes a general assignment for
        the benefit of its creditors or (E) admits in writing that it is
        generally unable to pay its debts as they become due;

        (vii) a court of competent jurisdiction enters an order or decree under
        any Bankruptcy Law that (A) is for relief against the Company or any of
        its Subsidiaries other than NRG (as defined below) in an involuntary
        case, (B) appoints a Custodian of the Company or any of its Subsidiaries
        other than NRG (as defined below) or (C) orders the liquidation of the
        Company or any of its Subsidiaries other than NRG (as defined below); or

        (viii) the Company breaches any representation, warranty, covenant
        (other than any covenant to deliver the NRG Opinion) or other term or
        condition of the Securities Purchase Agreement, the Registration Rights
        Agreement, this Note or any other



                                       7


        agreement, document, certificate or other instrument delivered in
        connection with the transactions contemplated thereby and hereby to
        which the Holder is a party, except, in the case of a breach of a
        covenant which is curable, only if such breach continues for a period of
        at least 10 consecutive days.

                      (b) Redemption Right. Promptly after the occurrence of an
Event of Default with respect to this Note or the Other Notes, the Company shall
deliver written notice thereof via facsimile and overnight courier (a "EVENT OF
DEFAULT NOTICE") to the Holder. At any time after the earlier of the Holder's
receipt of an Event of Default Notice and the Holder becoming aware of an Event
of Default, the Holder may require the Company to redeem all or any portion of
this Note by delivering written notice thereof (the "EVENT OF DEFAULT REDEMPTION
NOTICE") to the Company, which Event of Default Redemption Notice shall indicate
the portion of this Note the Holder is electing to redeem. Each portion of this
Note subject to redemption by the Company pursuant to this Section 4(b) shall be
redeemed by the Company at a price equal to the greater of (i) the product of
(x) the Conversion Amount and (y) the quotient determined by dividing (A) the
Closing Sale Price of the Common Stock immediately prior to such Event of
Default by (B) the Conversion Price and (ii) the product of (x) the Conversion
Amount and (y) the Redemption Premium (the "EVENT OF DEFAULT REDEMPTION PRICE").
Redemptions required by this Section 4(b) shall be made in accordance with the
provisions of Section 10.

               (5) RIGHTS UPON CHANGE OF CONTROL.

                      (a) Change of Control. Each of the following events shall
constitute a "CHANGE OF CONTROL":

        (i) the consolidation, merger or other business combination (including,
        without limitation, a reorganization or recapitalization) of the Company
        with or into another Person in which holders of the Company's voting
        power immediately prior to the transaction cease after the transaction
        to hold, directly or indirectly, a majority of the voting power of the
        surviving entity or entities or the voting power necessary to elect a
        majority of the members of the board of directors (or their equivalent
        if other than a corporation) of such entity or entities;

        (ii) the sale or transfer of all or substantially all of the Company's
        assets; or

        (iii) a purchase, tender or exchange offer made to and accepted by the
        holders of more than the 50% of the outstanding shares of Common Stock.

                      (b) Assumption. Prior to the consummation of any Change of
Control, the Company will secure from any Person purchasing the Company's assets
or Common Stock or any successor resulting from such Change of Control (in each
case, an "ACQUIRING ENTITY") a written agreement (in form and substance
satisfactory to the holders of Notes representing a majority of the aggregate
principal amount of the Notes then outstanding) to deliver to each holder of
Notes in exchange for such Notes, a security of the Acquiring Entity evidenced
by a written instrument substantially similar in form and substance to the
Notes, including, without limitation, having a principal amount and interest
rate equal to the principal amounts and the



                                       8


interest rates of the Notes held by such holder, and satisfactory to the holders
of Notes representing a majority of the principal amount of the Notes then
outstanding. In the event that an Acquiring Entity is directly or indirectly
controlled by a company or entity whose common stock or similar equity interest
is listed, designated or quoted on a securities exchange or trading market, the
holders of notes representing a majority of the aggregate principal amount of
the Notes then outstanding may elect to treat such Person as the Acquiring
Entity for purposes of this Section 5(b).

                      (c) Redemption Right. No sooner than 15 days nor later
than 10 days prior to the consummation of a Change of Control, but not prior to
the public announcement of such Change of Control, the Company shall deliver
written notice thereof via facsimile and overnight courier to the Holder (a
"CHANGE OF CONTROL NOTICE"). At any time on or after consummation of such Change
of Control, the Holder may require the Company to redeem all or any portion of
this Note by delivering written notice thereof ("CHANGE OF CONTROL REDEMPTION
NOTICE" and, collectively with an Event of Default Redemption Notice,
"REDEMPTION NOTICES" and, individually, each a "REDEMPTION NOTICE") to the
Company, which Change of Control Redemption Notice shall indicate the Conversion
Amount the Holder is electing to redeem. The portion of this Note subject to
redemption pursuant to this Section 5(c) shall be redeemed by the Company at a
price equal to the greater of (i) the product of (x) the Conversion Amount and
(y) the quotient determined by dividing (A) the Closing Sale Price of the Common
Stock immediately following the public announcement of such proposed Change of
Control by (B) the Conversion Price and (ii) 115% of the Conversion Amount (the
"CHANGE OF CONTROL REDEMPTION PRICE" and, together with the Event of Default
Redemption Price, the "REDEMPTION PRICE"). Redemptions required by this Section
5(c) shall be made in accordance with the provisions of Section 10 and shall
have priority to payments to other shareholders in connection with a Change of
Control.


               (6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE
EVENTS.

                      (a) Purchase Rights. If at any time the Company grants,
issues or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled
to acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete conversion of this
Note (without taking into account any limitations or restrictions on the
convertibility of this Note) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.

                      (b) Other Corporate Events. Prior to the consummation of
any recapitalization, reorganization, consolidation, merger or other business
combination (other than a Change of Control) pursuant to which holders of Common
Stock are entitled to receive securities or other assets with respect to or in
exchange for Common Stock (a "CORPORATE



                                       9


EVENT"), the Company shall make appropriate provision to insure that the Holder
will thereafter have the right to receive upon a conversion of this Note, (i) in
addition to the shares of Common Stock receivable upon such conversion, such
securities or other assets to which the Holder would have been entitled with
respect to such shares of Common Stock had such shares of Common Stock been held
by the Holder upon the consummation of such Corporate Event or (ii) in lieu of
the shares of Common Stock otherwise receivable upon such conversion, such
securities or other assets received by the holders of Common Stock in connection
with the consummation of such Corporate Event in such amounts as the Holder
would have been entitled to receive had this Note initially been issued with
conversion rights for the form of such consideration (as opposed to shares of
Common Stock) at a conversion rate for such consideration commensurate with the
Conversion Rate. Provision made pursuant to the preceding sentence shall be in a
form and substance satisfactory to the holders of Notes representing a majority
of the aggregate principal amount of the Notes then outstanding.

               (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

                      (a) Adjustment of Conversion Price upon Issuance of Common
Stock. If and whenever on or after the issuance date of the First Notes, the
Company issues or sells, or in accordance with this Section 7(a) is deemed to
have issued or sold, any shares of Common Stock (including the issuance or sale
of shares of Common Stock owned or held by or for the account of the Company,
but excluding shares of Common Stock deemed to have been issued or sold by the
Company (I) in connection with the Xcel Energy Direct Purchase Plan or any
employee benefit plan which has been approved by the Board of Directors of the
Company or any of its Subsidiaries, pursuant to which the Company's securities
may be issued to any employee, officer or director for services provided to the
Company or its Subsidiaries (each, an "APPROVED STOCK PLAN") or (II) upon
conversion of the Notes or the Separate Tranche Notes) for a consideration per
share less than the higher of the Closing Sale Price of the Common Stock on the
date of such issuance or sale or deemed issuance or sale and the Conversion
Price in effect immediately prior to such issuance or sale or deemed issuance or
sale (such higher price is referred to herein as the "APPLICABLE PRICE"), then
immediately after such issue or sale (subject to Section 7(a)(vi)), the
Conversion Price then in effect shall be reduced to an amount equal to the
product of (x) the Conversion Price in effect immediately prior to such issue or
sale or deemed issuance or sale and (y) the quotient determined by dividing (1)
the sum of the product of the Applicable Price and the number of shares of
Common Stock Deemed Outstanding immediately prior to such issue or sale or
deemed issue or sale and the consideration, if any, received by the Company upon
such issue or sale, by (2) the product of the Applicable Price multiplied by the
number of shares of Common Stock Deemed Outstanding immediately after such issue
or sale or deemed issue or sale. For purposes of determining the adjusted
Conversion Price under this Section 7(a), the following shall be applicable:

        (i) Issuance of Options. If the Company in any manner grants or sells
        any Options and the lowest price per share for which one share of Common
        Stock is issuable upon the exercise of any such Option or upon
        conversion, exercise or exchange of any Convertible Securities issuable
        upon exercise of such Option is less than the Applicable Price, then
        such share of Common Stock shall be deemed to be outstanding and to have
        been issued and sold by the Company at the time of the granting or sale
        of such Option for such price



                                       10


        per share. For purposes of this Section 7(a)(i), the "lowest price per
        share for which one share of Common Stock is issuable upon the exercise
        of any such Option or upon conversion, exercise or exchange of any
        Convertible Securities issuable upon exercise of such Option" shall be
        equal to the sum of the lowest amounts of consideration (if any)
        received or receivable by the Company with respect to any one share of
        Common Stock upon granting or sale of the Option, upon exercise of the
        Option and upon conversion, exercise or exchange of any Convertible
        Security issuable upon exercise of such Option. No further adjustment of
        the Conversion Price shall be made upon the actual issuance of such
        Common Stock or of such Convertible Securities upon the exercise of such
        Options or upon the actual issuance of such Common Stock upon
        conversion, exercise or exchange of such Convertible Securities. If the
        Company issues or sells any Options which are Variable Securities, no
        adjustment of the Conversion Price shall be made pursuant to this
        Section 7(a), and no shares of Common Stock shall be deemed outstanding
        with respect to such Variable Securities, as a result of the issuance of
        such Variable Securities until the actual issuance of Common Stock or
        Convertible Securities upon exercise of such Variable Securities, except
        to the extent such Variable Security also includes as a component of the
        exercise price a price which does not vary with the market price of the
        Common Stock.

        (ii) Issuance of Convertible Securities. If the Company in any manner
        issues or sells any Convertible Securities and the lowest price per
        share for which one share of Common Stock is issuable upon such
        conversion, exercise or exchange thereof is less than the Applicable
        Price, then such share of Common Stock shall be deemed to be outstanding
        and to have been issued and sold by the Company at the time of the
        issuance of sale of such Convertible Securities for such price per
        share. For the purposes of this Section 7(a)(ii), the "price per share
        for which one share of Common Stock is issuable upon such conversion,
        exercise or exchange" shall be equal to the sum of the lowest amounts of
        consideration (if any) received or receivable by the Company with
        respect to any one share of Common Stock upon the issuance or sale of
        the Convertible Security and upon the conversion, exercise or exchange
        of such Convertible Security. No further adjustment of the Conversion
        Price shall be made upon the actual issuance of such Common Stock upon
        conversion, exercise or exchange of such Convertible Securities, and if
        any such issue or sale of such Convertible Securities is made upon
        exercise of any Options for which adjustment of the Conversion Price had
        been or are to be made pursuant to other provisions of this Section
        7(a), no further adjustment of the Conversion Price shall be made by
        reason of such issue or sale. If the Company issues or sells any
        Convertible Securities which are Variable Securities, no adjustment of
        the Conversion Price shall be made pursuant to this Section 7(a), and no
        shares of Common Stock shall be deemed outstanding with respect to such
        Variable Security, as a result of the issuance of such Variable
        Securities until the actual issuance of Common Stock upon exercise of
        such Variable Securities, except to the extent such Variable Security
        also includes as a component of the conversion, exercise or exchange
        price a price which does not vary with the market price of the Common
        Stock.

        (iii) Change in Option Price or Rate of Conversion. If the purchase
        price provided for in any Options, the additional consideration, if any,
        payable upon the issue, conversion or



                                       11


        exchange of any Convertible Securities, or the rate at which any
        Convertible Securities are convertible into or exercisable or
        exchangeable for Common Stock changes at any time, the Conversion Price
        in effect at the time of such change shall be adjusted to the Conversion
        Price which would have been in effect at such time had such Options or
        Convertible Securities provided for such changed purchase price,
        additional consideration or changed conversion rate, as the case may be,
        at the time initially granted, issued or sold. For purposes of this
        Section 7(a)(iii), if the terms of any Option or Convertible Security
        that was outstanding as of the Issuance Date are changed in the manner
        described in the immediately preceding sentence, then such Option or
        Convertible Security and the Common Stock deemed issuable upon exercise,
        conversion or exchange thereof shall be deemed to have been issued as of
        the date of such change. No adjustment shall be made if such adjustment
        would result in an increase of the Conversion Price then in effect.

        (iv) Calculation of Consideration Received. In case any Option is issued
        in connection with the issue or sale of other securities of the Company,
        together comprising one integrated transaction in which no specific
        consideration is allocated to such Options by the parties thereto, the
        Options will be deemed to have been issued for a consideration of $.01.
        If any Common Stock, Options or Convertible Securities are issued or
        sold or deemed to have been issued or sold for cash, the consideration
        received therefor will be deemed to be the net amount received by the
        Company therefor. If any Common Stock, Options or Convertible Securities
        are issued or sold for a consideration other than cash, the amount of
        the consideration other than cash received by the Company will be the
        fair value of such consideration, except where such consideration
        consists of securities, in which case the amount of consideration
        received by the Company will be the Closing Sale Price of such
        securities on the date of receipt. If any Common Stock, Options or
        Convertible Securities are issued to the owners of the non-surviving
        entity in connection with any merger in which the Company is the
        surviving entity, the amount of consideration therefor will be deemed to
        be the fair value of such portion of the net assets and business of the
        non-surviving entity as is attributable to such Common Stock, Options or
        Convertible Securities, as the case may be. The fair value of any
        consideration other than cash or securities will be determined jointly
        by the Company and the holders of Notes representing a majority of the
        principal amounts of the Notes then outstanding. If such parties are
        unable to reach agreement within ten days after the occurrence of an
        event requiring valuation (the "VALUATION EVENT"), the fair value of
        such consideration will be determined within five Business Days after
        the tenth day following the Valuation Event by an independent, reputable
        appraiser jointly selected by the Company and the holders of Notes
        representing a majority of the principal amounts of the Notes then
        outstanding. The determination of such appraiser shall be deemed binding
        upon all parties absent manifest error and the fees and expenses of such
        appraiser shall be borne by the Company.

        (v) Record Date. If the Company takes a record of the holders of Common
        Stock for the purpose of entitling them (A) to receive a dividend or
        other distribution payable in Common Stock, Options or in Convertible
        Securities or (B) to subscribe for or purchase Common Stock, Options or
        Convertible Securities, then such record date will be deemed



                                       12


        to be the date of the issue or sale of the shares of Common Stock deemed
        to have been issued or sold upon the declaration of such dividend or the
        making of such other distribution or the date of the granting of such
        right of subscription or purchase, as the case may be.

        (vi) Common Stock Deemed Outstanding. "COMMON STOCK DEEMED OUTSTANDING"
        means, at any given time, the number of shares of Common Stock actually
        outstanding at such time, plus the number of shares of Common Stock
        deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii)
        hereof regardless of whether the Options or Convertible Securities are
        actually exercisable at such time, but excluding any shares of Common
        Stock owned or held by or for the account of the Company or issuable
        upon conversion of the Notes or the Separate Tranche Notes.

        (vii) Delayed Adjustment. In addition to the foregoing provisions of
        this Section 7(a), the Weighted Average Price, Closing Sales Price and
        Closing Bid Price shall be subject to adjustment, in accordance with the
        foregoing provisions, for any days during any measuring period,
        including, without limitation, the Tranche A Pricing Period, used herein
        that occur prior to any of the aforementioned events if such events
        occur prior to the end of such measuring period.

                      (b) Adjustment of Conversion Price upon Subdivision or
Combination of Common Stock. If the Company at any time subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination will be proportionately increased.

                      (c) Other Events. If any event occurs of the type
contemplated by the provisions of this Section 7 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the Holder under this Note;
provided that no such adjustment will increase the Conversion Price as otherwise
determined pursuant to this Section 7.

               (8) NONCIRCUMVENTION. The Company hereby covenants and agrees
that the Company will not, by amendment of its Articles of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of, or enter
into any agreement which by its terms restricts or otherwise impairs the
Company's performance of the terms of, this Note or any of the other Transaction
Documents (as defined in the Securities Purchase Agreement), and will at all
times in good faith carry out all of the provisions of this Note and take all
action as may be required to protect the rights of the Holder of this Note.



                                       13


               (9) RESERVATION OF AUTHORIZED SHARES.

                      (a) Reservation. The Company shall initially reserve out
of its authorized and unissued Common Stock a number of shares of Common Stock
for each of the Notes and the Separate Tranche Notes equal to 115% of the
Conversion Rate with respect to the Conversion Amount of each such Note and
Separate Tranche Note. Thereafter, the Company shall, so long as any of the
Notes or Separate Tranche Notes are outstanding, take all action necessary to
reserve and keep available out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Notes and Separate
Tranche Note, at least 100% of the number of shares of Common Stock as shall
from time to time be necessary to effect the conversion of all of the Notes and
the Separate Tranche Notes then outstanding; provided that at no time shall the
number of shares of Common Stock so reserved be less than the number of shares
required to be reserved by the previous sentence (without regard to any
limitations on conversions) (the "REQUIRED RESERVE AMOUNT"). The initial number
of shares of Common Stock reserved for conversions of the Notes and the Separate
Tranche Note and each increase in the number of shares so reserved shall be
allocated pro rata among the holders of the Notes and Separate Tranche Note
based on the principal amount of the Notes and Separate Tranche Notes held by
each holder at the time of Issuance Date or increase in the number of reserved
shares, as the case may be (the "AUTHORIZED SHARE ALLOCATION"). In the event
that a holder shall sell or otherwise transfer any of such holder's Notes, each
transferee shall be allocated a pro rata portion of such holder's Authorized
Share Allocation. Any shares of Common Stock reserved and allocated to any
Person which ceases to hold any Notes shall be allocated to the remaining
holders of Notes, pro rata based on the principal amount of the Notes then held
by such holders.

                      (b) Insufficient Authorized Shares. If at any time while
any of the Notes or Separate Tranche Note remain outstanding the Company does
not have a sufficient number of authorized and unreserved shares of Common Stock
to satisfy its obligation to reserve for issuance upon conversion of the Notes
and the Separate Tranche Notes at least a number of shares of Common Stock equal
to the Required Reserve Amount (an "AUTHORIZED SHARE FAILURE"), then the Company
shall immediately take all action necessary to increase the Company's authorized
shares of Common Stock to an amount sufficient to allow the Company to reserve
the Required Reserve Amount for the Notes and Separate Tranche Note then
outstanding. Without limiting the generality of the foregoing sentence, as soon
as practicable after the date of the occurrence of an Authorized Share Failure,
but in no event later than 60 days after the occurrence of such Authorized Share
Failure, the Company shall hold a meeting of its shareholders for the approval
of an increase in the number of authorized shares of Common Stock. In connection
with such meeting, the Company shall provide each shareholder with a proxy
statement and shall use its best efforts to solicit its shareholders' approval
of such increase in authorized shares of Common Stock and to cause its board of
directors to recommend to the shareholders that they approve such proposal.

               (10) REDEMPTION.

                      (a) Mechanics. In the event that the Holder has sent a
Redemption Notice to the Company pursuant to Section 4(b) or Section 5(c), the
Holder shall promptly



                                       14


submit this Note to the Company. The Company shall deliver the applicable Event
of Default Redemption Price to the Holder within five Business Days after the
Company's receipt of the Holder's Event of Default Redemption Notice and
thereafter the Holder shall promptly deliver this Note to the Company. If the
Holder has submitted a Change of Control Redemption Notice in accordance with
Section 5(c), the Company shall deliver the applicable Change of Control
Redemption Price to the Holder concurrently with the consummation of such Change
of Control if such notice is received prior to the consummation of such Change
of Control and within five Business Days after the Company's receipt of such
notice otherwise. In the event of a redemption of less than all of the
Conversion Amount of this Note, the Company shall promptly cause to be issued
and delivered to the Holder a new Note (in accordance with Section 18(d))
representing the outstanding Principal which has not been redeemed. In the event
that the Company does not pay the Redemption Price to the Holder within the time
period required above in this Section 10(a) at any time thereafter and until the
Company pays such unpaid Redemption Price in full, the Holder shall have the
option to, in lieu of redemption, require the Company to promptly return to the
Holder all or any portion of this Note representing the Conversion Amount that
was submitted for redemption and for which the applicable Redemption Price
(together with any Late Charges thereon) has not been paid. Upon the Company's
receipt of such notice, (x) the Redemption Notice shall be null and void with
respect to such Conversion Amount, (y) the Company shall immediately return this
Note, or issue a new Note (in accordance with Section 18(d)) to the Holder
representing such Conversion Amount and (z) the Conversion Price of this Note or
such new Notes shall be adjusted to the lesser of (A) the Conversion Price as in
effect on the date on which the Redemption Notice is voided and (B) the lowest
Closing Bid Price during the period beginning on and including the date on which
the Redemption Notice is delivered to the Company and ending on and including
the date on which the Redemption Notice is voided. The Holder's delivery of a
notice voiding a Redemption Notice and exercise of its rights following such
notice shall not affect the Company's obligations to make any payments of Late
Charges which have accrued prior to the date of such notice with respect to the
Conversion Amount subject to such notice.

                      (b) Redemption by Other Holders. Upon the Company's
receipt of notice from any of the holders of the Other Notes or the Separate
Tranche Notes for redemption or repayment as a result of an event or occurrence
substantially similar to the events or occurrences described in Section 4(b) or
Section 5(c) (each an "OTHER REDEMPTION NOTICE"), the Company shall immediately
forward to the Holder by facsimile a copy of such notice. If the Company
receives a Redemption Notice and one or more Other Redemption Notices during the
seven Business Day period beginning on and including the date which is three
Business Days prior to the Company's receipt of the Holder's Redemption Notice
and ending on and including the date which is three Business Days after the
Company's receipt of the Holder's Redemption Notice and the Company is unable to
redeem all principal, interest and other amounts designated in such Redemption
Notice and such Other Redemption Notices received during such seven Business Day
period, then the Company shall redeem a pro rata amount from each holder of the
Notes and the Separate Tranche Notes (including the Holder) based on the
principal amount of the Notes and the Separate Tranche Notes submitted for
redemption pursuant to such Redemption Notice and such Other Redemption Notices
received by the Company during such seven Business Day period.



                                       15


                      (c) Redemption at the Option of the Company. Except in
connection with the satisfaction by the Company of its obligations to redeem the
Notes under Sections 4(b) and 5(c) hereof, without the prior written consent of
the Holder the Company shall not have the right to prepay, redeem, repurchase,
defease or otherwise retire any Note prior to the Final Maturity Date.

                      (11) RESTRICTION ON REDEMPTION. Until all of the Notes
have been converted, redeemed or otherwise satisfied in accordance with their
terms, the Company shall not, directly or indirectly, redeem its capital stock
without the prior express written consent of the holders of Notes representing
at least two-thirds of the aggregate principal amount of the Notes then
outstanding.

                      (12) SUBORDINATION; ADDITIONAL INDEBTEDNESS. Payments of
Principal and Interest and other payments due under this Note shall rank pari
passu in right of payment with all (and shall not be subordinated to any)
unsecured, unsubordinated indebtedness of the Company and will be senior in
right of payment to all subordinated indebtedness of the Company.

                      (13) COVENANTS.

                             (a) Indebtedness. The Company shall not create,
incur, assume, guarantee or suffer to exist, or otherwise become or remain
liable with respect to, any Indebtedness other than Permitted Indebtedness and
Subordinated Indebtedness. "Subordinated Indebtedness" shall mean Indebtedness
that is unsecured and subordinated in right of payment to the Notes and other
obligations owing to the Holders in accordance with a subordination agreement in
form and substance satisfactory to the Holders. "Permitted Indebtedness" shall
mean any Indebtedness that is unsecured and is not senior in right of payment to
the Notes and is otherwise on terms that are no more favorable to the holders
thereof than the terms of the Indebtedness evidenced by the Notes unless such
more favorable terms are offered to the Holders.

                             (b) Liens. The Company shall not create, incur,
assume or suffer to exist, or permit any of its Subsidiaries (other than NRG
Energy Inc. or its subsidiaries (collectively, "NRG")) to create, incur, assume
or suffer to exist, any Lien upon or with respect to any of its properties,
whether now owned or hereafter acquired; sign or suffer to exist any security
agreement authorizing any secured party thereunder to file a Uniform Commercial
Code financing statement (or the equivalent thereof) as notice of a Lien on any
property of the Company or its Subsidiaries; sell any of its property or assets
subject to an understanding or agreement, contingent or otherwise, to repurchase
such property or assets (including sales of accounts receivable) with recourse
to it or any of its Subsidiaries or assign or otherwise transfer, or permit any
of its Subsidiaries (other than the Existing Utility Subsidiaries (as defined in
the Bank Facility)) to assign or otherwise transfer, any account or other right
to receive income; other than, as to all of the above, Permitted Liens. As used
herein, "Permitted Liens" shall have the meaning of that term as defined in the
Five-Year Credit Agreement, dated as of November 10, 2000, among the Company and
the banks listed therein (as the same maybe amended from time to time, the "BANK
FACILITY"). As used herein, "Liens" means any mortgage,



                                       16


deed of trust, pledge, lien (statutory or otherwise), security interest, charge
or other encumbrance or security or preferential arrangement of any nature,
including, without limitation, any conditional sale or title retention
arrangement, any capitalized lease and any assignment, deposit arrangement or
financing lease intended as, or having the effect of, security.

                      (c) Transactions With Affiliates. The Company shall not,
and shall not permit any Subsidiary to, directly or indirectly, effect any
transaction with any Affiliate (as defined in the Bank Facility) that is (a)
outside the ordinary course of business or (b) on a basis less favorable than
would at the time be obtainable for a comparable transaction in arms-length
dealing with an unrelated third party, provided that notwithstanding the
foregoing, no loan, payment or other form of contribution shall be made to NRG
unless it is in an amount not in excess of (i) $300 Million payable pursuant to
the Support Agreement and Capital Subscription Agreement, dated as of May 29,
2002, by and between the Company and NRG Energy Inc. and (ii) $250 Million in
respect of guarantee obligations relating to the power marketing business of
NRG; provided further that with respect to any payment permitted pursuant to
clause (ii) above, the Company shall in the context of a restructuring of NRG,
use its reasonable best efforts to obtain a full release of all obligations and
liabilities of the Company relating to NRG.

                      (d) Leverage Ratio. The Company shall not permit the
Leverage Ratio set forth in the Bank Facility to be exceeded.

                      (e) Restrictive Agreements. The Company shall not, and
shall not permit any Significant Subsidiary (as defined in the Bank Facility)
other than NRG to, enter into any agreement after the date of this Note that
imposes any restriction on the ability of such Significant Subsidiary to make
payments, directly or indirectly, to its shareholders by way of dividends,
advances, repayment of loans or intercompany charges, expenses or accruals or
other returns on investments that is more restrictive than any such restriction
applicable to such Significant Subsidiary on the Issuance Date.

                      (f) Scope of Business. The Company shall, and shall cause
each Subsidiary to, engage only in energy-related business, functionally related
businesses (as interpreted under PUHCA, as defined in the Securities Purchase
Agreement)or such other businesses as maybe permitted pursuant to an order
issued by the SEC pursuant to PUHCA.

               (14) VOTING RIGHTS. The Holder shall have no voting rights as the
holder of this Note, except as required by law, including but not limited to the
Minnesota Business Corporation Act, and as expressly provided in this Note.

               (15) PARTICIPATION. The Holder, as the holder of this Note, shall
be entitled to (i) all extraordinary or special dividends paid and distributions
made to the holders of Common Stock to the same extent as if the Holder had
converted this Note into Common Stock (without regard to any limitations on
conversion herein or elsewhere) and had held such shares of Common Stock on the
record date for such dividends and distributions and (ii) regular cash dividends
and distributions paid to the holders of the Common Stock only with respect to
that portion of such dividends that exceeds $0.1875 per share of Common Stock in
any calendar quarter (subject to adjustment for stock splits, stock dividends,
stock combinations and other



                                       17


similar transactions after the Issuance Date). Payments under the preceding
sentence shall be made concurrently with the dividend or distribution to the
holders of Common Stock.

               (16) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of Notes representing not less than
two-thirds of the aggregate principal amount of the then outstanding Notes,
shall be required for any change or amendment to this Note or the Other Notes.

               (17) TRANSFER. This Note may be offered, sold, assigned or
transferred by the Holder without the consent of the Company, subject only to
the provisions of Section 2(f) of the Securities Purchase Agreement.

               (18) REISSUANCE OF THIS NOTE.

                      (a) Transfer. If this Note is to be transferred, the
Holder shall surrender this Note to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Note (in
accordance with Section 18(d)), registered as the Holder may request,
representing the outstanding Principal being transferred by the Holder and, if
less then the entire outstanding Principal is being transferred, a new Note (in
accordance with Section 18(d)) to the Holder representing the outstanding
Principal not being transferred. The Holder and any assignee, by acceptance of
this Note, acknowledge and agree that, by reason of the provisions of Section
3(c)(iii) and this Section 18(a), following conversion or redemption of any
portion of this Note, the outstanding Principal represented by this Note may be
less than the Principal stated on the face of this Note.

                      (b) Lost, Stolen or Mutilated Note. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the Company in
customary form and, in the case of mutilation, upon surrender and cancellation
of this Note, the Company shall execute and deliver to the Holder a new Note (in
accordance with Section 18(d)) representing the outstanding Principal.

                      (c) Note Exchangeable for Different Denominations. This
Note is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Note or Notes (in accordance with Section 18(d)
and in principal amounts of at least $100,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.

                      (d) Issuance of New Notes. Whenever the Company is
required to issue a new Note pursuant to the terms of this Note, such new Note
(i) shall be of like tenor with this Note, (ii) shall represent, as indicated on
the face of such new Note, the Principal remaining outstanding (or in the case
of a new Note being issued pursuant to Section 18(a) or Section 18(c), the
Principal designated by the Holder which, when added to the principal
represented by the other new Notes issued in connection with such issuance, does
not exceed the Principal



                                       18


remaining outstanding under this Note immediately prior to such issuance of new
Notes), (iii) shall have an issuance date, as indicated on the face of such new
Note which is the same as the Issuance Date of this Note, (iv) shall have the
same rights and conditions as this Note, and (v) shall represent accrued
Interest and Late Charges on the Principal and Interest of this Note, from the
Issuance Date.

               (19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note, the Securities
Purchase Agreement and the Registration Rights Agreement, at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the Holder's right to pursue actual and consequential
damages for any failure by the Company to comply with the terms of this Note.
Amounts set forth or provided for herein with respect to payments, conversion
and the like (and the computation thereof) shall be the amounts to be received
by the Holder and shall not, except as expressly provided herein, be subject to
any other obligation of the Company (or the performance thereof). The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.

               (20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a)
this Note is placed in the hands of an attorney for collection or enforcement or
is collected or enforced through any legal proceeding or the Holder otherwise
takes action to collect amounts due under this Note or to enforce the provisions
of this Note or (b) there occurs any bankruptcy, reorganization, receivership of
the Company or other proceedings affecting Company creditors' rights and
involving a claim under this Note, then the Company shall pay the costs incurred
by the Holder for such collection, enforcement or action or in connection with
such bankruptcy, reorganization, receivership or other proceeding, including but
not limited to attorneys fees and disbursements.

               (21) CONSTRUCTION; HEADINGS. This Note shall be deemed to be
jointly drafted by the Company and all the Purchasers and shall not be construed
against any person as the drafter hereof. The headings of this Note are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Note.

               (22) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege.

               (23) DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Redemption Price or the arithmetic calculation of the
Conversion Rate or the Redemption Price or any other calculation hereunder, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within one Business Day of receipt of the Conversion



                                       19


Notice or Redemption Notice giving rise to such dispute, as the case may be, to
the Holder. If the Holder and the Company are unable to agree upon such
determination or calculation of the Conversion Rate within one Business Day of
such disputed determination or arithmetic calculation being submitted to the
Holder, then the Company shall, within one Business Day submit via facsimile (a)
the disputed determination of the Weighted Average Price, the Closing Bid Price
or the Closing Sale Price or any other calculation hereunder to an independent,
reputable investment bank selected by the Company and approved by the Holder or
(b) the disputed arithmetic calculation of the Conversion Rate or the Redemption
Price to the Company's independent, outside accountant. The Company, at the
Company's expense, shall cause the investment bank or the accountant, as the
case may be, to perform the determinations or calculations and notify the
Company and the Holder of the results no later than five Business Days from the
time it receives the disputed determinations or calculations. Such investment
bank's or accountant's determination or calculation, as the case may be, shall
be binding upon all parties absent demonstrable error.

               (24) NOTICES; PAYMENTS.

                      (a) Notices. Whenever notice is required to be given under
this Note, unless otherwise provided herein, such notice shall be given in
accordance with Section 9(f) of the Securities Purchase Agreement. The Company
shall provide the Holder with prompt written notice of all actions taken
pursuant to this Note, including in reasonable detail a description of such
action and the reason therefore. Without limiting the generality of the
foregoing, the Company will give written notice to the Holder (i) immediately
upon any adjustment of the Conversion Price, setting forth in reasonable detail,
and certifying, the calculation of such adjustment and (ii) at least twenty days
prior to the date on which the Company closes its books or takes a record (A)
with respect to any dividend or distribution upon the Common Stock, (B) with
respect to any grants, issues or sales of any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property pro rata to
holders of Common Stock or (C) for determining rights to vote with respect to
any Change of Control, dissolution or liquidation, provided in each case that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to such holder. Notwithstanding the foregoing,
Section 4(j) of the Securities Purchase Agreement shall apply to all notices
given pursuant to this Note.

                      (b) Payments. Whenever any payment of cash is to be made
by the Company to any Person pursuant to this Note, such payment shall be made
in lawful money of the United States of America by a check drawn on the account
of the Company and sent via overnight courier service to such Person at such
address as previously provided to the Company in writing (which address, in the
case of each of the Purchasers (as defined in Section 3(d)(ii)), shall initially
be as set forth on the Schedule of Buyers attached to the Securities Purchase
Agreement); provided that the Holder may elect to receive a payment of cash via
wire transfer of immediately available funds by providing the Company with prior
written notice setting out such request and the Holder's wire transfer
instructions. Whenever any amount expressed to be due by the terms of this Note
is due on any day which is not a Business Day, the same shall instead be due on
the next succeeding day which is a Business Day and, in the case of any Interest
Date which is not the date on which this Note is paid in full, the extension of
the due date thereof shall



                                       20


not be taken into account for purposes of determining the amount of Interest due
on such date. Any amount of Interest, Principal or other amount due under the
Transaction Documents (as defined in the Securities Purchase Agreement) which is
not paid when due shall result in a late charge being incurred and payable by
the Company in an amount equal to interest on such amount at the rate of 12% per
annum from the date such amount was due until the same is paid in full ("LATE
CHARGE").

               (25) CANCELLATION. After all Principal, accrued Interest and
other amounts at any time owed on this Note has been paid in full, this Note
shall automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.

               (26) WAIVER OF NOTICE. To the extent permitted by law, the
Company hereby waives demand, notice, protest and all other demands and notices
in connection with the delivery, acceptance, performance, default or enforcement
of this Note and the Securities Purchase Agreement.

               (27) GOVERNING LAW. This Note shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal
laws of the State of Illinois, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Illinois or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of Illinois.

               (28) CERTAIN DEFINITIONS. For purposes of this Note, the
following terms shall have the following meanings:

                      (a) "BUSINESS DAY" means any day other than Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.

                      (b) "CHANGE OF CONTROL TERMINATION DATE" shall mean, with
respect to any proposed Change of Control for which a public announcement that
it proposes or intends to effect a Change of Control of the Company (the date of
such announcement, the "ANNOUNCEMENT DATE") has been made, the date upon which
the Company or other Person proposing to effect such Change of Control
consummates or publicly announces the termination or abandonment of the proposed
Change of Control which was the subject of the previous public announcement.

                      (c) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means,
for any security as of any date, the last closing bid price and last closing
trade price, respectively, for such security on The New York Stock Exchange,
Inc. (the "PRINCIPAL MARKET") as reported by Bloomberg Financial Markets
("BLOOMBERG"), or, if the Principal Market begins to operate on an extended
hours basis and does not designate the closing bid price or the closing trade
price, as the case may be, then the last bid price or last trade price,
respectively, of such security prior to 4:00:00 p.m. Eastern Time as reported by
Bloomberg, or, if the Principal Market is not the principal securities exchange
or trading market for such security, the last closing bid price or last



                                       21


trade price, respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or last
trade price, respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if
no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price or the
Closing Sale Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as
the case may be, of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to Section 23. All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during any applicable calculation period.

                      (d) "COMMON STOCK" means (i) the Company's common stock,
par value $2.50 per share, and (ii) any capital stock resulting from a
reclassification of such Common Stock.

                      (e) "PERSON" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, any other entity and a government or any department
or agency thereof.

                      (f) "REDEMPTION PREMIUM" means (i) in the case of the
Events of Default described in Section 4(a)(i), (ii), (iii), (iv) and (viii),
115% or (ii) in the case of the Events of Default described in Section 4(a)(v) -
(vii), 100%.

                      (g) "REGISTRATION RIGHTS AGREEMENT" means that certain
registration rights agreement between the Company and the initial holders of the
Notes relating to the registration of the resale of the shares of Common Stock
issuable upon conversion of the Notes.

                      (h) "SECURITIES PURCHASE AGREEMENT" means that certain
securities purchase agreement between the Company and the initial holders of the
Notes pursuant to which the Company issued the Notes.

                      (i) "SEPARATE TRANCHE NOTES" means the First Notes, Second
Notes, Second Call Notes, Third Notes and the Third Call Notes, collectively.

                      (j) "TRADING DAY" means any day on which the Common Stock
is traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the principal securities
exchange or securities market on which the Common Stock is then traded; provided
that "Trading Day" shall not include any day on which the Common Stock is
scheduled to trade on such exchange or market or actually trades on such
exchange or market for less than 4.5 hours.



                                       22


                      (k) "TRANCHE A BASE PRICE" means $10.54 (subject to
adjustment for stock splits, stock dividends, stock combinations and similar
events after the issuance date of the First Notes).

                      (l) "TRANCHE A PRICING PERIOD" means the twenty
consecutive Trading Days commencing on the fifth Trading Day immediately
following the issuance date of the First Notes.

                      (m) "VARIABLE SECURITIES" means any stock or securities
other than Options directly or indirectly convertible into or exchangeable for
Common Stock ("CONVERTIBLE SECURITIES") or any rights, warrants or option to
subscribe for or purchase Common Stock or Convertible Securities ("OPTIONS")
that are convertible into or exchangeable, directly or indirectly, for Common
Stock at a price which varies or may vary with the market price of the Common
Stock, including by way of one or more adjustments or resets to a fixed price (a
"VARIABLE PRICE").

                      (n) "WEIGHTED AVERAGE PRICE" means, for any security as of
any date, the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30 a.m., New York Time (or
such other time as the Principal Market publicly announces is the official open
of trading), and ending at 4:00 p.m., New York Time (or such other time as the
Principal Market publicly announces is the official close of trading), as
reported by Bloomberg through its "Volume at Price" functions (ignoring any
trade of more than 100,000 shares of such security pursuant to an individual
transaction (subject to adjustment for stock splits, stock dividends, stock
combinations and other similar transactions involving such security after the
Issuance Date)), or, if the Principal Market is not the principal securities
exchange or trading market for such security, the dollar volume-weighted average
price for such security on the principal securities exchange or trading market
where such security is listed or traded during the period beginning at 9:30
a.m., New York Time (or such other time as such principal securities exchange or
trading market publicly announces is the official open of trading), and ending
at 4:00 p.m., New York Time (or such other time as such principal securities
exchange or trading market publicly announces is the official close of trading),
as reported by Bloomberg through its "Volume at Price" functions (ignoring any
trade of more than 100,000 shares of such security pursuant to an individual
transaction (subject to adjustment for stock splits, stock dividends, stock
combinations and other similar transactions involving such security after the
Issuance Date)), or, if the foregoing does not apply, the dollar volume-weighted
average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30 a.m., New
York Time (or such other time as the Principal Market publicly announces is the
official open of trading), and ending at 4:00 p.m., New York Time (or such other
time as the Principal Market publicly announces is the official close of
trading), as reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg for such hours, the average of
the highest closing bid price and the lowest closing ask price of any of the
market makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Weighted Average Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the Weighted
Average Price of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree



                                       23


upon the fair market value of such security, then such dispute shall be resolved
pursuant to Section 23. All such determinations to be appropriately adjusted for
any stock dividend, stock split, stock combination or other similar transaction
during applicable calculation period.


                            [SIGNATURE PAGE FOLLOWS]










                                       24


        IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
as of the Date of Issuance set out above.

                                            XCEL ENERGY INC.



                                            By:
                                               ---------------------------------
                                               Name:
                                               Title: Chief Executive Officer






                                    EXHIBIT I

                                XCEL ENERGY INC.
                                CONVERSION NOTICE

Reference is made to the Convertible Note (the "NOTE") issued to the undersigned
by XCEL ENERGY INC. (the "COMPANY"). In accordance with and pursuant to the
Note, the undersigned hereby elects to convert the Conversion Amount (as defined
in the Note) of the Note indicated below into shares of Common Stock, par value
$2.50 per share (the "COMMON STOCK"), of the Company as of the date specified
below.

        Date of Conversion:
                           -----------------------------------------------------

        Aggregate Conversion Amount to be converted:
                                                    ----------------------------

Please confirm the following information:

        Conversion Price:
                         -------------------------------------------------------

        Number of shares of Common Stock to be issued:
                                                      --------------------------

Please issue the Common Stock into which the Note is being converted and, if
applicable, any check drawn on an account of the Company in the following name
and to the following address:

        Issue to:
                 ---------------------------------------------------------------
                 ---------------------------------------------------------------
                 ---------------------------------------------------------------

        Facsimile Number:
                         -------------------------------------------------------

        Authorization:
                      ----------------------------------------------------------
               By:
                  --------------------------------------------------------------
                                                   Title:
                                                         -----------------------
Dated:
      --------------------------------------------------------------------------

        Account Number:
                      ----------------------------------------------------------
          (if electronic book entry transfer)

        Transaction Code Number:
                                ------------------------------------------------
          (if electronic book entry transfer)





                                 ACKNOWLEDGMENT


        The Company hereby acknowledges this Conversion Notice and hereby
directs [TRANSFER AGENT] to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated November 8, 2002
from the Company and acknowledged and agreed to by [TRANSFER AGENT].

                                            XCEL ENERGY INC.



                                            By:
                                               ---------------------------------
                                                   Name:
                                                   Title:

EX-4.13

                                                                    EXHIBIT 4.13

                            SENIOR CONVERTIBLE NOTE

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A)
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL IN A
REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR
RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THIS NOTE AND THE
SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THIS
NOTE. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS
NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY
BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION
3(c)(iii) OF THIS NOTE.



                                XCEL ENERGY INC.


Issuance Date: _______ __, 200_                    Principal: U.S. $____________

        FOR VALUE RECEIVED, XCEL ENERGY INC., a Minnesota corporation (the
"COMPANY"), hereby promises to pay to the order of __________________ or
registered assigns ("HOLDER") the amount set out above as the Principal (as
reduced pursuant to the terms hereof pursuant to redemption, conversion or
otherwise, the "PRINCIPAL") when due, whether upon the Final Maturity Date (as
defined below), acceleration, conversion, redemption or otherwise (in each case
in accordance with the terms hereof) and to pay interest ("INTEREST") on any
outstanding Principal at the rate of eight percent (8%) per annum, subject to
periodic adjustment pursuant to Section 2 (the "INTEREST RATE"), from the date
set out above as the Issuance Date (the "ISSUANCE DATE") until the same becomes
due and payable, whether upon an Interest Date (as defined below), the Final
Maturity Date, acceleration, conversion, redemption or otherwise (in each case
in accordance with the terms hereof). This Convertible Note (including all
Convertible Notes issued in exchange, transfer or replacement hereof, this
"NOTE") is one of an issue of Convertible Notes (collectively, the "NOTES" and
such other Convertible Notes, the "OTHER NOTES") issued on the Issuance Date
pursuant to the Securities Purchase Agreement (as defined below). Certain
capitalized terms are defined in Section 28 and terms used herein but not
defined herein shall have the meanings set forth for such terms in the
Securities Purchase Agreement.





               (1) MATURITY. On the Final Maturity Date, the Holder shall
surrender this Note to the Company and the Company shall pay to the Holder an
amount in cash representing all outstanding Principal, accrued and unpaid
Interest and accrued and unpaid Late Charges (as defined in Section 24(b)), if
any. The "MATURITY DATE" shall be the date that is 364 days after the Issuance
Date; provided that, if the Holder has given notice in writing to the Company of
its desire to extend the Maturity Date on or prior to the date that is 10
Business Days prior to the Maturity Date, the Maturity Date shall be extended
(on one or more occasions) for an additional 364 days; provided, further, that
the Maturity Date shall not be extended (except as provided in the following
proviso) to more than five years after the Issuance Date (such date that is five
years after the Issuance Date or such earlier Maturity Date prior to which the
Holder has not requested an extension thereof, the "FINAL MATURITY DATE"); and
provided, further, that the Final Maturity Date may be extended at the option of
the Holder (x) in the event that, and for so long as, an Event of Default (as
defined in Section 4(a)) shall have occurred and be continuing or any event
shall have occurred and be continuing which with the passage of time and the
failure to cure would result in an Event of Default and (y) through the date
that is ten days after a Change of Control Termination Date in the event that
the Announcement Date giving rise to such Change of Control Termination Date
occurred prior to the Final Maturity Date.

               (2) INTEREST; INTEREST RATE. Interest on this Note shall commence
accruing on the Issuance Date and shall be computed on the basis of the actual
days elapsed during any period, and a calendar year of 365 or 366 calendar days,
as applicable, and shall be payable in cash on each May 1 and each November 1
during the period beginning on the Issuance Date and ending on, and including,
the Final Maturity Date (each an "INTEREST DATE"); provided that interest on any
Conversion Amount of this Note that is accrued but unpaid as of the Conversion
Date of such Conversion Amount shall be paid in shares of Common Stock at the
Conversion Rate. From and after the occurrence of an Event of Default (as
defined in Section 4(a)) or the failure to deliver timely the Non-Consolidation
Opinion (as defined in the Securities Purchase Agreement) pursuant to Section
4(f) of the Securities Purchase Agreement (the "NRG OPINION"), the Interest Rate
shall be increased by two percentage points (2%). In the event that such Event
of Default is subsequently cured, the adjustment referred to in the preceding
sentence shall cease to be effective as of the date of such cure; provided that
the Interest as calculated at such increased rate during the continuance of such
Event of Default shall continue to apply to the extent relating to the days
after the occurrence of such Event of Default through and including the date of
cure of such Event of Default. If the Company shall fail to credit the Holder's
balance account with DTC (as defined in Section 3(c)(i)) or, if requested in
writing by the Holder, to issue a certificate to the Holder for the number of
shares of Common Stock to which the Holder is entitled upon conversion of any
Conversion Amount or to issue a new Note (in accordance with Section 18(d))
representing the Principal portion of the Conversion Amount (as defined in
Section 3(b)(i)) to which the Holder is entitled, in each case within the time
periods set out in Section 3(c)(i) (in each case, a "CONVERSION FAILURE"), then
during each period beginning on and including the date of each such Conversion
Failure and ending on and including the date such Conversion Failure is cured,
the Interest Rate then in effect shall be increased by two percentage points
(2%). If (i) the Registration Statement (as defined in the Registration Rights
Agreement) covering all the Registrable Securities (as defined in the
Registration Rights Agreement) issuable upon conversion of this Note and
required to be filed by



                                       2


the Company pursuant to the Registration Rights Agreement is not declared
effective by the Securities and Exchange Commission (the "SEC") on or before the
applicable Mandatory Effective Date (as defined in the Registration Rights
Agreement) or (ii) on any day after such Registration Statement has been
declared effective by the SEC that sales of all the Registrable Securities
required to be included on such Registration Statement cannot be made (other
than during an Allowable Grace Period (as defined in Section 3(t) of the
Registration Rights Agreement) pursuant to such Registration Statement
(including, without limitation, because of a failure to keep such Registration
Statement effective, to disclose such information as is necessary for sales to
be made pursuant to such Registration Statement or to register sufficient shares
of Common Stock) (collectively with the event described in the immediately
preceding clause (i), each a "REGISTRATION FAILURE"), then, as partial relief
for the damages to any holder by reason of any such delay in or reduction of its
ability to sell Registrable Securities (which remedy shall not be exclusive of
any other remedies available at law or in equity) the Interest Rate then in
effect shall be increased by two percentage points (2%) during each period
beginning on and including the first date of each such Registration Failure and
ending on and including the date such Registration Failure is cured.

               (3) CONVERSION OF NOTES. This Note shall be convertible into
shares of the Common Stock, on the terms and conditions set forth in this
Section 3.

                      (a) Conversion Right. Subject to the provisions of Section
3(d), at any time or times on or after the Issuance Date, the Holder shall be
entitled to convert any portion of the outstanding and unpaid Conversion Amount
(as defined below) into fully paid and nonassessable shares of Common Stock in
accordance with Section 3(c), at the Conversion Rate (as defined below). The
Company shall not issue any fraction of a share of Common Stock upon any
conversion. If the issuance would result in the issuance of a fraction of a
share of Common Stock, the Company shall round such fraction of a share of
Common Stock up to the nearest whole share. The Company shall pay any and all
taxes that may be payable with respect to the issuance and delivery of Common
Stock upon conversion of any Conversion Amount.

                      (b) Conversion Rate. The number of shares of Common Stock
issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall
be determined by dividing (x) such Conversion Amount by (y) the Conversion Price
(as defined below) (the "CONVERSION RATE").

        (i) "CONVERSION AMOUNT" means the sum of (A) the portion of the
        Principal to be converted, redeemed or otherwise surrendered with
        respect to which this determination is being made, (B) accrued and
        unpaid Interest with respect to such Principal and (C) accrued and
        unpaid Late Charges with respect to such Principal and Interest.

        (ii) "CONVERSION PRICE" means the lesser of (x) 110% of the arithmetic
        average of the Weighted Average Price of the Common Stock during the
        Tranche B Pricing Period and (y) 110% of the Closing Bid Price of the
        Common Stock on the 35th Business Day after the issuance date of the
        First Notes; provided that the Conversion Price shall not exceed 110% of
        the Tranche B Base Price.



                                       3


                      (c) Mechanics of Conversion.

        (i) Optional Conversion. To convert any Conversion Amount into shares of
        Common Stock on any date (a "CONVERSION DATE"), the Holder shall (A)
        transmit by facsimile (or otherwise deliver), for receipt on or prior to
        11:59 p.m., Central Time on such date, a copy of an executed notice of
        conversion in the form attached hereto as Exhibit I (the "CONVERSION
        NOTICE") to the Company and (B) if required by Section 3(c)(ii),
        surrender this Note to a common carrier for delivery to the Company as
        soon as practicable on or following such date (or an indemnification
        undertaking with respect to this Note in the case of its loss, theft or
        destruction). On or before the first Business Day following the
        Company's receipt of a Conversion Notice, the Company shall transmit by
        facsimile a confirmation of receipt of such Conversion Notice to the
        Holder and the Transfer Agent (as defined below). On or before the
        second Business Day following the date of receipt of a Conversion Notice
        (the "SHARE DELIVERY DATE"), the Company shall (X) (if (Y) below does
        not apply) issue and deliver to the address as specified in the
        Conversion Notice, a certificate, registered in the name of the Holder
        or its designee, for the number of shares of Common Stock to which the
        Holder shall be entitled, or (Y) provided that the Company's transfer
        agent (the "TRANSFER AGENT") is participating in The Depository Trust
        Company ("DTC") Fast Automated Securities Transfer Program, upon the
        request of the Holder, credit such aggregate number of shares of Common
        Stock to which the Holder shall be entitled to the Holder's or its
        designee's balance account with DTC through its Deposit Withdrawal Agent
        Commission system. If this Note is physically surrendered for conversion
        as required by Section 3(c)(ii) and the outstanding Principal of this
        Note is greater than the Principal portion of the Conversion Amount
        being converted, then the Company shall as soon as practicable and in no
        event later than three Business Days after receipt of this Note (the
        "NOTE DELIVERY DATE") and at its own expense, issue and deliver to the
        holder a new Note (in accordance with Section 18(d)) representing the
        outstanding Principal not converted. The person or persons entitled to
        receive the shares of Common Stock issuable upon a conversion of this
        Note shall be treated for all purposes as the record holder or holders
        of such shares of Common Stock on the Conversion Date.

        (ii) Book-Entry. Notwithstanding anything to the contrary set forth
        herein, upon conversion of any portion of this Note in accordance with
        the terms hereof, the Holder shall not be required to physically
        surrender this Note to the Company unless (A) the full Conversion Amount
        represented by this Note is being converted or (B) the Holder has
        provided the Company with prior written notice (which notice may be
        included in a Conversion Notice) requesting physical surrender and
        reissue of this Note. The Holder and the Company shall maintain records
        showing the Principal and Interest converted and the dates of such
        conversions or shall use such other method, reasonably satisfactory to
        the Holder and the Company, so as not to require physical surrender of
        this Note upon conversion.

        (iii) Pro Rata Conversion; Disputes. In the event that the Company
        receives a Conversion Notice from more than one holder of the Notes or
        the Separate Tranche Notes for the same Conversion Date and the Company
        can convert some, but not all, of such



                                       4


        portions of the Notes and the Separate Tranche Notes submitted for
        conversion, the Company, subject to Section 3(d), shall convert from
        each holder of the Notes and the Separate Tranche Notes electing to have
        the Notes or Separate Tranche Notes converted on such date a pro rata
        amount of such holder's portion of its Notes or Separate Tranche Notes
        submitted for conversion based on the principal amount of the Notes or
        Separate Tranche Notes submitted for conversion on such date by such
        holder relative to the aggregate principal amount of all the Notes and
        the Separate Tranche Notes submitted for conversion on such date. In the
        event of a dispute as to the number of shares of Common Stock issuable
        to the Holder in connection with a conversion of this Note, the Company
        shall issue to the Holder the number of shares of Common Stock not in
        dispute and resolve such dispute in accordance with Section 23.

                      (d) Limitations on Conversions.

        (i) Beneficial Ownership. The Company shall not effect any conversion of
        this Note, and the Holder of this Note shall not have the right to
        convert any portion of this Note pursuant to Section 3(a), to the extent
        that after giving effect to such conversion, the Holder (together with
        the Holder's affiliates) would beneficially own in excess of 5.0% of the
        number of shares of Common Stock outstanding immediately after giving
        effect to such conversion. For purposes of the foregoing sentence, the
        number of shares of Common Stock beneficially owned by the Holder and
        its affiliates shall include the number of shares of Common Stock
        issuable upon conversion of this Note with respect to which the
        determination of such sentence is being made, but shall exclude the
        number of shares of Common Stock which would be issuable upon (A)
        conversion of the remaining, nonconverted portion of this Note
        beneficially owned by the Holder or any of its affiliates and (B)
        exercise or conversion of the unexercised or nonconverted portion of any
        other securities of the Company (including, without limitation, any
        Other Notes, Separate Tranche Notes or warrants) subject to a limitation
        on conversion or exercise analogous to the limitation contained herein
        beneficially owned by the Holder or any of its affiliates. Except as set
        forth in the preceding sentence, for purposes of this Section 3(d)(i),
        beneficial ownership shall be calculated in accordance with Section
        13(d) of the Securities Exchange Act of 1934, as amended. For purposes
        of this Section 3(d)(i), in determining the number of outstanding shares
        of Common Stock, the Holder may rely on the number of outstanding shares
        of Common Stock as reflected in (x) the Company's most recent Form 10-Q
        or Form 10-K, as the case may be, (y) a more recent public announcement
        by the Company or (z) any other notice by the Company or the Transfer
        Agent setting forth the number of shares of Common Stock outstanding.
        For any reason at any time, upon the written or oral request of the
        Holder, the Company shall within one Business Day confirm orally and in
        writing to the Holder the number of shares of Common Stock then
        outstanding. In any case, the number of outstanding shares of Common
        Stock shall be determined after giving effect to the conversion or
        exercise of securities of the Company, including this Note, by the
        Holder or its affiliates since the date as of which such number of
        outstanding shares of Common Stock was reported.

        (ii) Principal Market Regulation. The Company shall not be obligated to
        issue any shares of Common Stock pursuant to this Note if the issuance
        of such shares of Common



                                       5


        Stock would exceed that number of shares of Common Stock which the
        Company may issue pursuant to the Notes and the Separate Tranche Notes
        without breaching the Company's obligations under the rules or
        regulations of the Principal Market (the "EXCHANGE CAP"), except that
        such limitation shall not apply in the event that the Company (A)
        obtains the approval of its shareholders as required by the applicable
        rules of the Principal Market for issuances of Common Stock in excess of
        such amount or (B) obtains a written opinion from outside counsel to the
        Company that such approval is not required, which opinion shall be
        reasonably satisfactory to the holders of the Notes and the Separate
        Tranche Notes representing a majority of the principal amounts of the
        Notes and the Separate Tranche Notes (voting as a single class) then
        outstanding. Until such approval or written opinion is obtained, no
        purchaser of the Notes or the Separate Tranche Notes pursuant to the
        Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon
        conversion of the Notes or the Separate Tranche Notes, shares of Common
        Stock in an amount greater than the product of the Exchange Cap
        multiplied by a fraction, the numerator of which is the principal amount
        of the Notes and the Separate Tranche Notes issued to such Purchaser
        pursuant to the Securities Purchase Agreement as of the date of such
        determination and the denominator of which is the aggregate principal
        amount of all the Notes and the Separate Tranche Notes issued to the
        Purchasers pursuant to the Securities Purchase Agreement as of the date
        of such determination (with respect to each Purchaser, the "EXCHANGE CAP
        ALLOCATION"). In the event that any Purchaser shall sell or otherwise
        transfer any of such Purchaser's Notes or Separate Tranche Notes, the
        transferee shall be allocated a pro rata portion of such Purchaser's
        Exchange Cap Allocation, and the restrictions of the prior sentence
        shall apply to such transferee with respect to the portion of the
        Exchange Cap Allocation allocated to such transferee. In the event that
        any holder of the Notes or the Separate Tranche Notes shall convert all
        of such holder's Notes or Separate Tranche Notes into a number of shares
        of Common Stock which, in the aggregate, is less than such holder's
        Exchange Cap Allocation, then the difference between such holder's
        Exchange Cap Allocation and the number of shares of Common Stock
        actually issued to such holder shall be allocated to the respective
        Exchange Cap Allocations of the remaining holders of the Notes and the
        Separate Tranche Notes on a pro rata basis in proportion to the
        aggregate principal amount of the Notes and the Separate Tranche Notes
        then held by each such holder.

               (4) RIGHTS UPON EVENT OF DEFAULT.

                      (a) Event of Default. Each of the following events shall
constitute a "EVENT OF DEFAULT":

        (i) the failure of the Registration Statement covering all Registrable
        Securities (as defined in the Registration Rights Agreement) required to
        be registered pursuant to the Registration Rights Agreement to be
        declared effective by the SEC on or prior to the date that is 180 days
        after the Issuance Date, or, while such Registration Statement is
        required to be maintained effective pursuant to the terms of the
        Registration Rights Agreement, the effectiveness of such Registration
        Statement lapses for any reason (including, without limitation, the
        issuance of a stop order) or is unavailable to any holder of the Notes
        for sale of all of such holder's Registrable Securities in accordance
        with the terms of the



                                       6


        Registration Rights Agreement, and such lapse or unavailability
        continues for a period of five consecutive Business Days or for more
        than an aggregate of 20 Business Days in any 365-day period;

        (ii) the suspension from trading on the Principal Market for a period of
        three consecutive Business Days or for more than an aggregate of three
        Business Days in any 30-day Trading Day period or the delisting of the
        Common Stock from the Principal Market;

        (iii) the Company's (A) failure to cure a Conversion Failure by delivery
        of the required number of shares of Common Stock or a new Note (in
        accordance with section 18(d)), as applicable, within 10 days after the
        receipt by the Company of a Conversion Notice or (B) notice, written or
        oral, to any holder of the Notes, including by way of public
        announcement or through any of its agents, at any time, of its intention
        not to comply with a request for conversion of any Notes into shares of
        Common Stock that is tendered in accordance with the provisions of the
        Notes;

        (iv) the Company's failure to pay to the Holder any amount of Principal,
        Interest, Late Charges or other amounts when and as due under this Note,
        the Securities Purchase Agreement, the Registration Rights Agreement or
        any other agreement, document, certificate or other instrument delivered
        in connection with the transactions contemplated hereby and thereby to
        which the Holder is a party;

        (v) any default under, redemption of or acceleration prior to maturity
        of any Indebtedness (as defined in Section 3(r) of the Securities
        Purchase Agreement) of the Company or any of its Subsidiaries (as
        defined in Section 3(a) of the Securities Purchase Agreement) other than
        NRG (as defined below) (including, without limitation, the Other Notes)
        of at least $50,000,000;

        (vi) the Company or any of its Subsidiaries other than NRG (as defined
        below), pursuant to or within the meaning of Title 11, U.S. Code, or any
        similar Federal or state law for the relief of debtors (collectively,
        "BANKRUPTCY LAW"), (A) commences a voluntary case, (B) consents to the
        entry of an order for relief against it in an involuntary case, (C)
        consents to the appointment of a receiver, trustee, assignee, liquidator
        or similar official (a "CUSTODIAN"), (D) makes a general assignment for
        the benefit of its creditors or (E) admits in writing that it is
        generally unable to pay its debts as they become due;

        (vii) a court of competent jurisdiction enters an order or decree under
        any Bankruptcy Law that (A) is for relief against the Company or any of
        its Subsidiaries other than NRG (as defined below) in an involuntary
        case, (B) appoints a Custodian of the Company or any of its Subsidiaries
        other than NRG (as defined below) or (C) orders the liquidation of the
        Company or any of its Subsidiaries other than NRG (as defined below); or

        (viii) the Company breaches any representation, warranty, covenant
        (other than any covenant to deliver the NRG Opinion) or other term or
        condition of the Securities Purchase Agreement, the Registration Rights
        Agreement, this Note or any other



                                       7


        agreement, document, certificate or other instrument delivered in
        connection with the transactions contemplated thereby and hereby to
        which the Holder is a party, except, in the case of a breach of a
        covenant which is curable, only if such breach continues for a period of
        at least 10 consecutive days.

                      (b) Redemption Right. Promptly after the occurrence of an
Event of Default with respect to this Note or the Other Notes, the Company shall
deliver written notice thereof via facsimile and overnight courier (a "EVENT OF
DEFAULT NOTICE") to the Holder. At any time after the earlier of the Holder's
receipt of an Event of Default Notice and the Holder becoming aware of an Event
of Default, the Holder may require the Company to redeem all or any portion of
this Note by delivering written notice thereof (the "EVENT OF DEFAULT REDEMPTION
NOTICE") to the Company, which Event of Default Redemption Notice shall indicate
the portion of this Note the Holder is electing to redeem. Each portion of this
Note subject to redemption by the Company pursuant to this Section 4(b) shall be
redeemed by the Company at a price equal to the greater of (i) the product of
(x) the Conversion Amount and (y) the quotient determined by dividing (A) the
Closing Sale Price of the Common Stock immediately prior to such Event of
Default by (B) the Conversion Price and (ii) the product of (x) the Conversion
Amount and (y) the Redemption Premium (the "EVENT OF DEFAULT REDEMPTION PRICE").
Redemptions required by this Section 4(b) shall be made in accordance with the
provisions of Section 10.

               (5) RIGHTS UPON CHANGE OF CONTROL.

                      (a) Change of Control. Each of the following events shall
constitute a "CHANGE OF CONTROL":

        (i) the consolidation, merger or other business combination (including,
        without limitation, a reorganization or recapitalization) of the Company
        with or into another Person in which holders of the Company's voting
        power immediately prior to the transaction cease after the transaction
        to hold, directly or indirectly, a majority of the voting power of the
        surviving entity or entities or the voting power necessary to elect a
        majority of the members of the board of directors (or their equivalent
        if other than a corporation) of such entity or entities;

        (ii) the sale or transfer of all or substantially all of the Company's
        assets; or

        (iii) a purchase, tender or exchange offer made to and accepted by the
        holders of more than the 50% of the outstanding shares of Common Stock.

                      (b) Assumption. Prior to the consummation of any Change of
Control, the Company will secure from any Person purchasing the Company's assets
or Common Stock or any successor resulting from such Change of Control (in each
case, an "ACQUIRING ENTITY") a written agreement (in form and substance
satisfactory to the holders of Notes representing a majority of the aggregate
principal amount of the Notes then outstanding) to deliver to each holder of
Notes in exchange for such Notes, a security of the Acquiring Entity evidenced
by a written instrument substantially similar in form and substance to the
Notes, including, without limitation, having a principal amount and interest
rate equal to the principal amounts and the



                                       8


interest rates of the Notes held by such holder, and satisfactory to the holders
of Notes representing a majority of the principal amount of the Notes then
outstanding. In the event that an Acquiring Entity is directly or indirectly
controlled by a company or entity whose common stock or similar equity interest
is listed, designated or quoted on a securities exchange or trading market, the
holders of notes representing a majority of the aggregate principal amount of
the Notes then outstanding may elect to treat such Person as the Acquiring
Entity for purposes of this Section 5(b).

                      (c) Redemption Right. No sooner than 15 days nor later
than 10 days prior to the consummation of a Change of Control, but not prior to
the public announcement of such Change of Control, the Company shall deliver
written notice thereof via facsimile and overnight courier to the Holder (a
"CHANGE OF CONTROL NOTICE"). At any time on or after consummation of such Change
of Control, the Holder may require the Company to redeem all or any portion of
this Note by delivering written notice thereof ("CHANGE OF CONTROL REDEMPTION
NOTICE" and, collectively with an Event of Default Redemption Notice,
"REDEMPTION NOTICES" and, individually, each a "REDEMPTION NOTICE") to the
Company, which Change of Control Redemption Notice shall indicate the Conversion
Amount the Holder is electing to redeem. The portion of this Note subject to
redemption pursuant to this Section 5(c) shall be redeemed by the Company at a
price equal to the greater of (i) the product of (x) the Conversion Amount and
(y) the quotient determined by dividing (A) the Closing Sale Price of the Common
Stock immediately following the public announcement of such proposed Change of
Control by (B) the Conversion Price and (ii) 115% of the Conversion Amount (the
"CHANGE OF CONTROL REDEMPTION PRICE" and, together with the Event of Default
Redemption Price, the "REDEMPTION PRICE"). Redemptions required by this Section
5(c) shall be made in accordance with the provisions of Section 10 and shall
have priority to payments to other shareholders in connection with a Change of
Control.


               (6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE
EVENTS.

                      (a) Purchase Rights. If at any time the Company grants,
issues or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled
to acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete conversion of this
Note (without taking into account any limitations or restrictions on the
convertibility of this Note) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.

                      (b) Other Corporate Events. Prior to the consummation of
any recapitalization, reorganization, consolidation, merger or other business
combination (other than a Change of Control) pursuant to which holders of Common
Stock are entitled to receive securities or other assets with respect to or in
exchange for Common Stock (a "CORPORATE



                                       9


EVENT"), the Company shall make appropriate provision to insure that the Holder
will thereafter have the right to receive upon a conversion of this Note, (i) in
addition to the shares of Common Stock receivable upon such conversion, such
securities or other assets to which the Holder would have been entitled with
respect to such shares of Common Stock had such shares of Common Stock been held
by the Holder upon the consummation of such Corporate Event or (ii) in lieu of
the shares of Common Stock otherwise receivable upon such conversion, such
securities or other assets received by the holders of Common Stock in connection
with the consummation of such Corporate Event in such amounts as the Holder
would have been entitled to receive had this Note initially been issued with
conversion rights for the form of such consideration (as opposed to shares of
Common Stock) at a conversion rate for such consideration commensurate with the
Conversion Rate. Provision made pursuant to the preceding sentence shall be in a
form and substance satisfactory to the holders of Notes representing a majority
of the aggregate principal amount of the Notes then outstanding.

               (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

                      (a) Adjustment of Conversion Price upon Issuance of Common
Stock. If and whenever on or after the issuance date of the Second Notes, the
Company issues or sells, or in accordance with this Section 7(a) is deemed to
have issued or sold, any shares of Common Stock (including the issuance or sale
of shares of Common Stock owned or held by or for the account of the Company,
but excluding shares of Common Stock deemed to have been issued or sold by the
Company (I) in connection with the Xcel Energy Direct Purchase Plan or any
employee benefit plan which has been approved by the Board of Directors of the
Company or any of its Subsidiaries, pursuant to which the Company's securities
may be issued to any employee, officer or director for services provided to the
Company or its Subsidiaries (each, an "APPROVED STOCK PLAN") or (II) upon
conversion of the Notes or the Separate Tranche Notes) for a consideration per
share less than the higher of the Closing Sale Price of the Common Stock on the
date of such issuance or sale or deemed issuance or sale and the Conversion
Price in effect immediately prior to such issuance or sale or deemed issuance or
sale (such higher price is referred to herein as the "APPLICABLE PRICE"), then
immediately after such issue or sale (subject to Section 7(a)(vi)), the
Conversion Price then in effect shall be reduced to an amount equal to the
product of (x) the Conversion Price in effect immediately prior to such issue or
sale or deemed issuance or sale and (y) the quotient determined by dividing (1)
the sum of the product of the Applicable Price and the number of shares of
Common Stock Deemed Outstanding immediately prior to such issue or sale or
deemed issue or sale and the consideration, if any, received by the Company upon
such issue or sale, by (2) the product of the Applicable Price multiplied by the
number of shares of Common Stock Deemed Outstanding immediately after such issue
or sale or deemed issue or sale. For purposes of determining the adjusted
Conversion Price under this Section 7(a), the following shall be applicable:

        (i) Issuance of Options. If the Company in any manner grants or sells
        any Options and the lowest price per share for which one share of Common
        Stock is issuable upon the exercise of any such Option or upon
        conversion, exercise or exchange of any Convertible Securities issuable
        upon exercise of such Option is less than the Applicable Price, then
        such share of Common Stock shall be deemed to be outstanding and to have
        been issued and sold by the Company at the time of the granting or sale
        of such Option for such price



                                       10


        per share. For purposes of this Section 7(a)(i), the "lowest price per
        share for which one share of Common Stock is issuable upon the exercise
        of any such Option or upon conversion, exercise or exchange of any
        Convertible Securities issuable upon exercise of such Option" shall be
        equal to the sum of the lowest amounts of consideration (if any)
        received or receivable by the Company with respect to any one share of
        Common Stock upon granting or sale of the Option, upon exercise of the
        Option and upon conversion, exercise or exchange of any Convertible
        Security issuable upon exercise of such Option. No further adjustment of
        the Conversion Price shall be made upon the actual issuance of such
        Common Stock or of such Convertible Securities upon the exercise of such
        Options or upon the actual issuance of such Common Stock upon
        conversion, exercise or exchange of such Convertible Securities. If the
        Company issues or sells any Options which are Variable Securities, no
        adjustment of the Conversion Price shall be made pursuant to this
        Section 7(a), and no shares of Common Stock shall be deemed outstanding
        with respect to such Variable Securities, as a result of the issuance of
        such Variable Securities until the actual issuance of Common Stock or
        Convertible Securities upon exercise of such Variable Securities, except
        to the extent such Variable Security also includes as a component of the
        exercise price a price which does not vary with the market price of the
        Common Stock.

        (ii) Issuance of Convertible Securities. If the Company in any manner
        issues or sells any Convertible Securities and the lowest price per
        share for which one share of Common Stock is issuable upon such
        conversion, exercise or exchange thereof is less than the Applicable
        Price, then such share of Common Stock shall be deemed to be outstanding
        and to have been issued and sold by the Company at the time of the
        issuance of sale of such Convertible Securities for such price per
        share. For the purposes of this Section 7(a)(ii), the "price per share
        for which one share of Common Stock is issuable upon such conversion,
        exercise or exchange" shall be equal to the sum of the lowest amounts of
        consideration (if any) received or receivable by the Company with
        respect to any one share of Common Stock upon the issuance or sale of
        the Convertible Security and upon the conversion, exercise or exchange
        of such Convertible Security. No further adjustment of the Conversion
        Price shall be made upon the actual issuance of such Common Stock upon
        conversion, exercise or exchange of such Convertible Securities, and if
        any such issue or sale of such Convertible Securities is made upon
        exercise of any Options for which adjustment of the Conversion Price had
        been or are to be made pursuant to other provisions of this Section
        7(a), no further adjustment of the Conversion Price shall be made by
        reason of such issue or sale. If the Company issues or sells any
        Convertible Securities which are Variable Securities, no adjustment of
        the Conversion Price shall be made pursuant to this Section 7(a), and no
        shares of Common Stock shall be deemed outstanding with respect to such
        Variable Security, as a result of the issuance of such Variable
        Securities until the actual issuance of Common Stock upon exercise of
        such Variable Securities, except to the extent such Variable Security
        also includes as a component of the conversion, exercise or exchange
        price a price which does not vary with the market price of the Common
        Stock.

        (iii) Change in Option Price or Rate of Conversion. If the purchase
        price provided for in any Options, the additional consideration, if any,
        payable upon the issue, conversion or



                                       11


        exchange of any Convertible Securities, or the rate at which any
        Convertible Securities are convertible into or exercisable or
        exchangeable for Common Stock changes at any time, the Conversion Price
        in effect at the time of such change shall be adjusted to the Conversion
        Price which would have been in effect at such time had such Options or
        Convertible Securities provided for such changed purchase price,
        additional consideration or changed conversion rate, as the case may be,
        at the time initially granted, issued or sold. For purposes of this
        Section 7(a)(iii), if the terms of any Option or Convertible Security
        that was outstanding as of the Issuance Date are changed in the manner
        described in the immediately preceding sentence, then such Option or
        Convertible Security and the Common Stock deemed issuable upon exercise,
        conversion or exchange thereof shall be deemed to have been issued as of
        the date of such change. No adjustment shall be made if such adjustment
        would result in an increase of the Conversion Price then in effect.

        (iv) Calculation of Consideration Received. In case any Option is issued
        in connection with the issue or sale of other securities of the Company,
        together comprising one integrated transaction in which no specific
        consideration is allocated to such Options by the parties thereto, the
        Options will be deemed to have been issued for a consideration of $.01.
        If any Common Stock, Options or Convertible Securities are issued or
        sold or deemed to have been issued or sold for cash, the consideration
        received therefor will be deemed to be the net amount received by the
        Company therefor. If any Common Stock, Options or Convertible Securities
        are issued or sold for a consideration other than cash, the amount of
        the consideration other than cash received by the Company will be the
        fair value of such consideration, except where such consideration
        consists of securities, in which case the amount of consideration
        received by the Company will be the Closing Sale Price of such
        securities on the date of receipt. If any Common Stock, Options or
        Convertible Securities are issued to the owners of the non-surviving
        entity in connection with any merger in which the Company is the
        surviving entity, the amount of consideration therefor will be deemed to
        be the fair value of such portion of the net assets and business of the
        non-surviving entity as is attributable to such Common Stock, Options or
        Convertible Securities, as the case may be. The fair value of any
        consideration other than cash or securities will be determined jointly
        by the Company and the holders of Notes representing a majority of the
        principal amounts of the Notes then outstanding. If such parties are
        unable to reach agreement within ten days after the occurrence of an
        event requiring valuation (the "VALUATION EVENT"), the fair value of
        such consideration will be determined within five Business Days after
        the tenth day following the Valuation Event by an independent, reputable
        appraiser jointly selected by the Company and the holders of Notes
        representing a majority of the principal amounts of the Notes then
        outstanding. The determination of such appraiser shall be deemed binding
        upon all parties absent manifest error and the fees and expenses of such
        appraiser shall be borne by the Company.

        (v) Record Date. If the Company takes a record of the holders of Common
        Stock for the purpose of entitling them (A) to receive a dividend or
        other distribution payable in Common Stock, Options or in Convertible
        Securities or (B) to subscribe for or purchase Common Stock, Options or
        Convertible Securities, then such record date will be deemed



                                       12


        to be the date of the issue or sale of the shares of Common Stock deemed
        to have been issued or sold upon the declaration of such dividend or the
        making of such other distribution or the date of the granting of such
        right of subscription or purchase, as the case may be.

        (vi) Common Stock Deemed Outstanding. "COMMON STOCK DEEMED OUTSTANDING"
        means, at any given time, the number of shares of Common Stock actually
        outstanding at such time, plus the number of shares of Common Stock
        deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii)
        hereof regardless of whether the Options or Convertible Securities are
        actually exercisable at such time, but excluding any shares of Common
        Stock owned or held by or for the account of the Company or issuable
        upon conversion of the Notes or the Separate Tranche Notes.

        (vii) Delayed Adjustment. In addition to the foregoing provisions of
        this Section 7(a), the Weighted Average Price, Closing Sales Price and
        Closing Bid Price shall be subject to adjustment, in accordance with the
        foregoing provisions, for any days during any measuring period,
        including, without limitation, the Tranche B Pricing Period, used herein
        that occur prior to any of the aforementioned events if such events
        occur prior to the end of such measuring period.

                      (b) Adjustment of Conversion Price upon Subdivision or
Combination of Common Stock. If the Company at any time subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination will be proportionately increased.

                      (c) Other Events. If any event occurs of the type
contemplated by the provisions of this Section 7 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the Holder under this Note;
provided that no such adjustment will increase the Conversion Price as otherwise
determined pursuant to this Section 7.

               (8) NONCIRCUMVENTION. The Company hereby covenants and agrees
that the Company will not, by amendment of its Articles of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of, or enter
into any agreement which by its terms restricts or otherwise impairs the
Company's performance of the terms of, this Note or any of the other Transaction
Documents (as defined in the Securities Purchase Agreement), and will at all
times in good faith carry out all of the provisions of this Note and take all
action as may be required to protect the rights of the Holder of this Note.



                                       13


               (9) RESERVATION OF AUTHORIZED SHARES.

                      (a) Reservation. The Company shall initially reserve out
of its authorized and unissued Common Stock a number of shares of Common Stock
for each of the Notes and the Separate Tranche Notes equal to 115% of the
Conversion Rate with respect to the Conversion Amount of each such Note and
Separate Tranche Note. Thereafter, the Company shall, so long as any of the
Notes or Separate Tranche Notes are outstanding, take all action necessary to
reserve and keep available out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Notes and Separate
Tranche Note, at least 100% of the number of shares of Common Stock as shall
from time to time be necessary to effect the conversion of all of the Notes and
the Separate Tranche Notes then outstanding; provided that at no time shall the
number of shares of Common Stock so reserved be less than the number of shares
required to be reserved by the previous sentence (without regard to any
limitations on conversions) (the "REQUIRED RESERVE AMOUNT"). The initial number
of shares of Common Stock reserved for conversions of the Notes and the Separate
Tranche Note and each increase in the number of shares so reserved shall be
allocated pro rata among the holders of the Notes and Separate Tranche Note
based on the principal amount of the Notes and Separate Tranche Notes held by
each holder at the time of Issuance Date or increase in the number of reserved
shares, as the case may be (the "AUTHORIZED SHARE ALLOCATION"). In the event
that a holder shall sell or otherwise transfer any of such holder's Notes, each
transferee shall be allocated a pro rata portion of such holder's Authorized
Share Allocation. Any shares of Common Stock reserved and allocated to any
Person which ceases to hold any Notes shall be allocated to the remaining
holders of Notes, pro rata based on the principal amount of the Notes then held
by such holders.

                      (b) Insufficient Authorized Shares. If at any time while
any of the Notes or Separate Tranche Note remain outstanding the Company does
not have a sufficient number of authorized and unreserved shares of Common Stock
to satisfy its obligation to reserve for issuance upon conversion of the Notes
and the Separate Tranche Notes at least a number of shares of Common Stock equal
to the Required Reserve Amount (an "AUTHORIZED SHARE FAILURE"), then the Company
shall immediately take all action necessary to increase the Company's authorized
shares of Common Stock to an amount sufficient to allow the Company to reserve
the Required Reserve Amount for the Notes and Separate Tranche Note then
outstanding. Without limiting the generality of the foregoing sentence, as soon
as practicable after the date of the occurrence of an Authorized Share Failure,
but in no event later than 60 days after the occurrence of such Authorized Share
Failure, the Company shall hold a meeting of its shareholders for the approval
of an increase in the number of authorized shares of Common Stock. In connection
with such meeting, the Company shall provide each shareholder with a proxy
statement and shall use its best efforts to solicit its shareholders' approval
of such increase in authorized shares of Common Stock and to cause its board of
directors to recommend to the shareholders that they approve such proposal.

               (10) REDEMPTION.

                      (a) Mechanics. In the event that the Holder has sent a
Redemption Notice to the Company pursuant to Section 4(b) or Section 5(c), the
Holder shall promptly



                                       14


submit this Note to the Company. The Company shall deliver the applicable Event
of Default Redemption Price to the Holder within five Business Days after the
Company's receipt of the Holder's Event of Default Redemption Notice and
thereafter the Holder shall promptly deliver this Note to the Company. If the
Holder has submitted a Change of Control Redemption Notice in accordance with
Section 5(c), the Company shall deliver the applicable Change of Control
Redemption Price to the Holder concurrently with the consummation of such Change
of Control if such notice is received prior to the consummation of such Change
of Control and within five Business Days after the Company's receipt of such
notice otherwise. In the event of a redemption of less than all of the
Conversion Amount of this Note, the Company shall promptly cause to be issued
and delivered to the Holder a new Note (in accordance with Section 18(d))
representing the outstanding Principal which has not been redeemed. In the event
that the Company does not pay the Redemption Price to the Holder within the time
period required above in this Section 10(a) at any time thereafter and until the
Company pays such unpaid Redemption Price in full, the Holder shall have the
option to, in lieu of redemption, require the Company to promptly return to the
Holder all or any portion of this Note representing the Conversion Amount that
was submitted for redemption and for which the applicable Redemption Price
(together with any Late Charges thereon) has not been paid. Upon the Company's
receipt of such notice, (x) the Redemption Notice shall be null and void with
respect to such Conversion Amount, (y) the Company shall immediately return this
Note, or issue a new Note (in accordance with Section 18(d)) to the Holder
representing such Conversion Amount and (z) the Conversion Price of this Note or
such new Notes shall be adjusted to the lesser of (A) the Conversion Price as in
effect on the date on which the Redemption Notice is voided and (B) the lowest
Closing Bid Price during the period beginning on and including the date on which
the Redemption Notice is delivered to the Company and ending on and including
the date on which the Redemption Notice is voided. The Holder's delivery of a
notice voiding a Redemption Notice and exercise of its rights following such
notice shall not affect the Company's obligations to make any payments of Late
Charges which have accrued prior to the date of such notice with respect to the
Conversion Amount subject to such notice.

                      (b) Redemption by Other Holders. Upon the Company's
receipt of notice from any of the holders of the Other Notes or the Separate
Tranche Notes for redemption or repayment as a result of an event or occurrence
substantially similar to the events or occurrences described in Section 4(b) or
Section 5(c) (each an "OTHER REDEMPTION NOTICE"), the Company shall immediately
forward to the Holder by facsimile a copy of such notice. If the Company
receives a Redemption Notice and one or more Other Redemption Notices during the
seven Business Day period beginning on and including the date which is three
Business Days prior to the Company's receipt of the Holder's Redemption Notice
and ending on and including the date which is three Business Days after the
Company's receipt of the Holder's Redemption Notice and the Company is unable to
redeem all principal, interest and other amounts designated in such Redemption
Notice and such Other Redemption Notices received during such seven Business Day
period, then the Company shall redeem a pro rata amount from each holder of the
Notes and the Separate Tranche Notes (including the Holder) based on the
principal amount of the Notes and the Separate Tranche Notes submitted for
redemption pursuant to such Redemption Notice and such Other Redemption Notices
received by the Company during such seven Business Day period.



                                       15


                      (c) Redemption at the Option of the Company. Except in
connection with the satisfaction by the Company of its obligations to redeem the
Notes under Sections 4(b) and 5(c) hereof, without the prior written consent of
the Holder the Company shall not have the right to prepay, redeem, repurchase,
defease or otherwise retire any Note prior to the Final Maturity Date.

                      (11) RESTRICTION ON REDEMPTION. Until all of the Notes
have been converted, redeemed or otherwise satisfied in accordance with their
terms, the Company shall not, directly or indirectly, redeem its capital stock
without the prior express written consent of the holders of Notes representing
at least two-thirds of the aggregate principal amount of the Notes then
outstanding.

                      (12) SUBORDINATION; ADDITIONAL INDEBTEDNESS. Payments of
Principal and Interest and other payments due under this Note shall rank pari
passu in right of payment with all (and shall not be subordinated to any)
unsecured, unsubordinated indebtedness of the Company and will be senior in
right of payment to all subordinated indebtedness of the Company.

                      (13) COVENANTS.

                             (a) Indebtedness. The Company shall not create,
incur, assume, guarantee or suffer to exist, or otherwise become or remain
liable with respect to, any Indebtedness other than Permitted Indebtedness and
Subordinated Indebtedness. "Subordinated Indebtedness" shall mean Indebtedness
that is unsecured and subordinated in right of payment to the Notes and other
obligations owing to the Holders in accordance with a subordination agreement in
form and substance satisfactory to the Holders. "Permitted Indebtedness" shall
mean any Indebtedness that is unsecured and is not senior in right of payment to
the Notes and is otherwise on terms that are no more favorable to the holders
thereof than the terms of the Indebtedness evidenced by the Notes unless such
more favorable terms are offered to the Holders.

                             (b) Liens. The Company shall not create, incur,
assume or suffer to exist, or permit any of its Subsidiaries (other than NRG
Energy Inc. or its subsidiaries (collectively, "NRG")) to create, incur, assume
or suffer to exist, any Lien upon or with respect to any of its properties,
whether now owned or hereafter acquired; sign or suffer to exist any security
agreement authorizing any secured party thereunder to file a Uniform Commercial
Code financing statement (or the equivalent thereof) as notice of a Lien on any
property of the Company or its Subsidiaries; sell any of its property or assets
subject to an understanding or agreement, contingent or otherwise, to repurchase
such property or assets (including sales of accounts receivable) with recourse
to it or any of its Subsidiaries or assign or otherwise transfer, or permit any
of its Subsidiaries (other than the Existing Utility Subsidiaries (as defined in
the Bank Facility)) to assign or otherwise transfer, any account or other right
to receive income; other than, as to all of the above, Permitted Liens. As used
herein, "Permitted Liens" shall have the meaning of that term as defined in the
Five-Year Credit Agreement, dated as of November 10, 2000, among the Company and
the banks listed therein (as the same maybe amended from time to time, the "BANK
FACILITY"). As used herein, "Liens" means any mortgage,



                                       16


deed of trust, pledge, lien (statutory or otherwise), security interest, charge
or other encumbrance or security or preferential arrangement of any nature,
including, without limitation, any conditional sale or title retention
arrangement, any capitalized lease and any assignment, deposit arrangement or
financing lease intended as, or having the effect of, security.

                      (c) Transactions With Affiliates. The Company shall not,
and shall not permit any Subsidiary to, directly or indirectly, effect any
transaction with any Affiliate (as defined in the Bank Facility) that is (a)
outside the ordinary course of business or (b) on a basis less favorable than
would at the time be obtainable for a comparable transaction in arms-length
dealing with an unrelated third party, provided that notwithstanding the
foregoing, no loan, payment or other form of contribution shall be made to NRG
unless it is in an amount not in excess of (i) $300 Million payable pursuant to
the Support Agreement and Capital Subscription Agreement, dated as of May 29,
2002, by and between the Company and NRG Energy Inc. and (ii) $250 Million in
respect of guarantee obligations relating to the power marketing business of
NRG; ; provided further that with respect to any payment permitted pursuant to
clause (ii) above, the Company shall, in the context of a restructuring of NRG,
use its reasonable best efforts to obtain a full release of all obligations and
liabilities of the Company relating to NRG.

                      (d) Leverage Ratio. The Company shall not permit the
Leverage Ratio set forth in the Bank Facility to be exceeded.

                      (e) Restrictive Agreements. The Company shall not, and
shall not permit any Significant Subsidiary (as defined in the Bank Facility)
other than NRG to, enter into any agreement after the date of this Note that
imposes any restriction on the ability of such Significant Subsidiary to make
payments, directly or indirectly, to its shareholders by way of dividends,
advances, repayment of loans or intercompany charges, expenses or accruals or
other returns on investments that is more restrictive than any such restriction
applicable to such Significant Subsidiary on the Issuance Date.

                      (f) Scope of Business. The Company shall, and shall cause
each Subsidiary to, engage only in energy-related business, functionally related
businesses (as interpreted under PUHCA, as defined in the Securities Purchase
Agreement)or such other businesses as maybe permitted pursuant to an order
issued by the SEC pursuant to PUHCA.

               (14) VOTING RIGHTS. The Holder shall have no voting rights as the
holder of this Note, except as required by law, including but not limited to the
Minnesota Business Corporation Act, and as expressly provided in this Note.

               (15) PARTICIPATION. The Holder, as the holder of this Note, shall
be entitled to (i) all extraordinary or special dividends paid and distributions
made to the holders of Common Stock to the same extent as if the Holder had
converted this Note into Common Stock (without regard to any limitations on
conversion herein or elsewhere) and had held such shares of Common Stock on the
record date for such dividends and distributions and (ii) regular cash dividends
and distributions paid to the holders of the Common Stock only with respect to
that portion of such dividends that exceeds $0.1875 per share of Common Stock in
any calendar quarter (subject to adjustment for stock splits, stock dividends,
stock combinations and other



                                       17


similar transactions after the Issuance Date). Payments under the preceding
sentence shall be made concurrently with the dividend or distribution to the
holders of Common Stock.

               (16) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of Notes representing not less than
two-thirds of the aggregate principal amount of the then outstanding Notes,
shall be required for any change or amendment to this Note or the Other Notes.

               (17) TRANSFER. This Note may be offered, sold, assigned or
transferred by the Holder without the consent of the Company, subject only to
the provisions of Section 2(f) of the Securities Purchase Agreement.

               (18) REISSUANCE OF THIS NOTE.

                      (a) Transfer. If this Note is to be transferred, the
Holder shall surrender this Note to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Note (in
accordance with Section 18(d)), registered as the Holder may request,
representing the outstanding Principal being transferred by the Holder and, if
less then the entire outstanding Principal is being transferred, a new Note (in
accordance with Section 18(d)) to the Holder representing the outstanding
Principal not being transferred. The Holder and any assignee, by acceptance of
this Note, acknowledge and agree that, by reason of the provisions of Section
3(c)(iii) and this Section 18(a), following conversion or redemption of any
portion of this Note, the outstanding Principal represented by this Note may be
less than the Principal stated on the face of this Note.

                      (b) Lost, Stolen or Mutilated Note. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the Company in
customary form and, in the case of mutilation, upon surrender and cancellation
of this Note, the Company shall execute and deliver to the Holder a new Note (in
accordance with Section 18(d)) representing the outstanding Principal.

                      (c) Note Exchangeable for Different Denominations. This
Note is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Note or Notes (in accordance with Section 18(d)
and in principal amounts of at least $100,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.

                      (d) Issuance of New Notes. Whenever the Company is
required to issue a new Note pursuant to the terms of this Note, such new Note
(i) shall be of like tenor with this Note, (ii) shall represent, as indicated on
the face of such new Note, the Principal remaining outstanding (or in the case
of a new Note being issued pursuant to Section 18(a) or Section 18(c), the
Principal designated by the Holder which, when added to the principal
represented by the other new Notes issued in connection with such issuance, does
not exceed the Principal



                                       18


remaining outstanding under this Note immediately prior to such issuance of new
Notes), (iii) shall have an issuance date, as indicated on the face of such new
Note which is the same as the Issuance Date of this Note, (iv) shall have the
same rights and conditions as this Note, and (v) shall represent accrued
Interest and Late Charges on the Principal and Interest of this Note, from the
Issuance Date.

               (19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note, the Securities
Purchase Agreement and the Registration Rights Agreement, at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the Holder's right to pursue actual and consequential
damages for any failure by the Company to comply with the terms of this Note.
Amounts set forth or provided for herein with respect to payments, conversion
and the like (and the computation thereof) shall be the amounts to be received
by the Holder and shall not, except as expressly provided herein, be subject to
any other obligation of the Company (or the performance thereof). The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.

               (20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a)
this Note is placed in the hands of an attorney for collection or enforcement or
is collected or enforced through any legal proceeding or the Holder otherwise
takes action to collect amounts due under this Note or to enforce the provisions
of this Note or (b) there occurs any bankruptcy, reorganization, receivership of
the Company or other proceedings affecting Company creditors' rights and
involving a claim under this Note, then the Company shall pay the costs incurred
by the Holder for such collection, enforcement or action or in connection with
such bankruptcy, reorganization, receivership or other proceeding, including but
not limited to attorneys fees and disbursements.

               (21) CONSTRUCTION; HEADINGS. This Note shall be deemed to be
jointly drafted by the Company and all the Purchasers and shall not be construed
against any person as the drafter hereof. The headings of this Note are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Note.

               (22) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege.

               (23) DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Redemption Price or the arithmetic calculation of the
Conversion Rate or the Redemption Price or any other calculation hereunder, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within one Business Day of receipt of the Conversion



                                       19


Notice or Redemption Notice giving rise to such dispute, as the case may be, to
the Holder. If the Holder and the Company are unable to agree upon such
determination or calculation of the Conversion Rate within one Business Day of
such disputed determination or arithmetic calculation being submitted to the
Holder, then the Company shall, within one Business Day submit via facsimile (a)
the disputed determination of the Weighted Average Price, the Closing Bid Price
or the Closing Sale Price or any other calculation hereunder to an independent,
reputable investment bank selected by the Company and approved by the Holder or
(b) the disputed arithmetic calculation of the Conversion Rate or the Redemption
Price to the Company's independent, outside accountant. The Company, at the
Company's expense, shall cause the investment bank or the accountant, as the
case may be, to perform the determinations or calculations and notify the
Company and the Holder of the results no later than five Business Days from the
time it receives the disputed determinations or calculations. Such investment
bank's or accountant's determination or calculation, as the case may be, shall
be binding upon all parties absent demonstrable error.

               (24) NOTICES; PAYMENTS.

                      (a) Notices. Whenever notice is required to be given under
this Note, unless otherwise provided herein, such notice shall be given in
accordance with Section 9(f) of the Securities Purchase Agreement. The Company
shall provide the Holder with prompt written notice of all actions taken
pursuant to this Note, including in reasonable detail a description of such
action and the reason therefore. Without limiting the generality of the
foregoing, the Company will give written notice to the Holder (i) immediately
upon any adjustment of the Conversion Price, setting forth in reasonable detail,
and certifying, the calculation of such adjustment and (ii) at least twenty days
prior to the date on which the Company closes its books or takes a record (A)
with respect to any dividend or distribution upon the Common Stock, (B) with
respect to any grants, issues or sales of any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property pro rata to
holders of Common Stock or (C) for determining rights to vote with respect to
any Change of Control, dissolution or liquidation, provided in each case that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to such holder. Notwithstanding the foregoing,
Section 4(j) of the Securities Purchase Agreement shall apply to all notices
given pursuant to this Note.

                      (b) Payments. Whenever any payment of cash is to be made
by the Company to any Person pursuant to this Note, such payment shall be made
in lawful money of the United States of America by a check drawn on the account
of the Company and sent via overnight courier service to such Person at such
address as previously provided to the Company in writing (which address, in the
case of each of the Purchasers (as defined in Section 3(d)(ii)), shall initially
be as set forth on the Schedule of Buyers attached to the Securities Purchase
Agreement); provided that the Holder may elect to receive a payment of cash via
wire transfer of immediately available funds by providing the Company with prior
written notice setting out such request and the Holder's wire transfer
instructions. Whenever any amount expressed to be due by the terms of this Note
is due on any day which is not a Business Day, the same shall instead be due on
the next succeeding day which is a Business Day and, in the case of any Interest
Date which is not the date on which this Note is paid in full, the extension of
the due date thereof shall



                                       20


not be taken into account for purposes of determining the amount of Interest due
on such date. Any amount of Interest, Principal or other amount due under the
Transaction Documents (as defined in the Securities Purchase Agreement) which is
not paid when due shall result in a late charge being incurred and payable by
the Company in an amount equal to interest on such amount at the rate of 12% per
annum from the date such amount was due until the same is paid in full ("LATE
CHARGE").

               (25) CANCELLATION. After all Principal, accrued Interest and
other amounts at any time owed on this Note has been paid in full, this Note
shall automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.

               (26) WAIVER OF NOTICE. To the extent permitted by law, the
Company hereby waives demand, notice, protest and all other demands and notices
in connection with the delivery, acceptance, performance, default or enforcement
of this Note and the Securities Purchase Agreement.

               (27) GOVERNING LAW. This Note shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal
laws of the State of Illinois, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Illinois or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of Illinois.

               (28) CERTAIN DEFINITIONS. For purposes of this Note, the
following terms shall have the following meanings:

                      (a) "BUSINESS DAY" means any day other than Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.

                      (b) "CHANGE OF CONTROL TERMINATION DATE" shall mean, with
respect to any proposed Change of Control for which a public announcement that
it proposes or intends to effect a Change of Control of the Company (the date of
such announcement, the "ANNOUNCEMENT DATE") has been made, the date upon which
the Company or other Person proposing to effect such Change of Control
consummates or publicly announces the termination or abandonment of the proposed
Change of Control which was the subject of the previous public announcement.

                      (d) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means,
for any security as of any date, the last closing bid price and last closing
trade price, respectively, for such security on The New York Stock Exchange,
Inc. (the "PRINCIPAL MARKET") as reported by Bloomberg Financial Markets
("BLOOMBERG"), or, if the Principal Market begins to operate on an extended
hours basis and does not designate the closing bid price or the closing trade
price, as the case may be, then the last bid price or last trade price,
respectively, of such security prior to 4:00:00 p.m. Eastern Time as reported by
Bloomberg, or, if the Principal Market is not the principal securities exchange
or trading market for such security, the last closing bid price or last



                                       21


trade price, respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or last
trade price, respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if
no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price or the
Closing Sale Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as
the case may be, of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to Section 23. All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during any applicable calculation period.

                      (e) "COMMON STOCK" means (i) the Company's common stock,
par value $2.50 per share, and (ii) any capital stock resulting from a
reclassification of such Common Stock.

                      (f) "PERSON" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, any other entity and a government or any department
or agency thereof.

                      (g) "REDEMPTION PREMIUM" means (i) in the case of the
Events of Default described in Section 4(a)(i), (ii), (iii), (iv) and (viii),
115% or (ii) in the case of the Events of Default described in Section 4(a)(v) -
(vii), 100%.

                      (h) "REGISTRATION RIGHTS AGREEMENT" means that certain
registration rights agreement between the Company and the initial holders of the
Notes relating to the registration of the resale of the shares of Common Stock
issuable upon conversion of the Notes.

                      (i) "SECURITIES PURCHASE AGREEMENT" means that certain
securities purchase agreement between the Company and the initial holders of the
Notes pursuant to which the Company issued the Notes.

                      (j) "SEPARATE TRANCHE NOTES" means the First Notes, Second
Notes, First Call Notes, Third Notes and the Third Call Notes, collectively.

                      (k) "TRADING DAY" means any day on which the Common Stock
is traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the principal securities
exchange or securities market on which the Common Stock is then traded; provided
that "Trading Day" shall not include any day on which the Common Stock is
scheduled to trade on such exchange or market or actually trades on such
exchange or market for less than 4.5 hours.



                                       22


                      (l) "TRANCHE B BASE PRICE" means the Weighted Average
Price of the Common Stock on the Tranche B Closing Date (subject to adjustment
for stock splits, stock dividends, stock combinations and similar events after
the issuance date of the Second Notes).

                      (m) "TRANCHE A PRICING PERIOD" means the twenty
consecutive Trading Days commencing on the fifth Trading Day immediately
following the issuance date of the First Notes.

                      (n) "TRANCHE B PRICING PERIOD" means the ten consecutive
Trading Days commencing on the first Trading Day immediately following the end
of the Tranche A Pricing Period.

                      (o) "VARIABLE SECURITIES" means any stock or securities
other than Options directly or indirectly convertible into or exchangeable for
Common Stock ("CONVERTIBLE SECURITIES") or any rights, warrants or option to
subscribe for or purchase Common Stock or Convertible Securities ("OPTIONS")
that are convertible into or exchangeable, directly or indirectly, for Common
Stock at a price which varies or may vary with the market price of the Common
Stock, including by way of one or more adjustments or resets to a fixed price (a
"VARIABLE PRICE").

                      (p) "WEIGHTED AVERAGE PRICE" means, for any security as of
any date, the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30 a.m., New York Time (or
such other time as the Principal Market publicly announces is the official open
of trading), and ending at 4:00 p.m., New York Time (or such other time as the
Principal Market publicly announces is the official close of trading), as
reported by Bloomberg through its "Volume at Price" functions (ignoring any
trade of more than 100,000 shares of such security pursuant to an individual
transaction (subject to adjustment for stock splits, stock dividends, stock
combinations and other similar transactions involving such security after the
Issuance Date)), or, if the Principal Market is not the principal securities
exchange or trading market for such security, the dollar volume-weighted average
price for such security on the principal securities exchange or trading market
where such security is listed or traded during the period beginning at 9:30
a.m., New York Time (or such other time as such principal securities exchange or
trading market publicly announces is the official open of trading), and ending
at 4:00 p.m., New York Time (or such other time as such principal securities
exchange or trading market publicly announces is the official close of trading),
as reported by Bloomberg through its "Volume at Price" functions (ignoring any
trade of more than 100,000 shares of such security pursuant to an individual
transaction (subject to adjustment for stock splits, stock dividends, stock
combinations and other similar transactions involving such security after the
Issuance Date)), or, if the foregoing does not apply, the dollar volume-weighted
average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30 a.m., New
York Time (or such other time as the Principal Market publicly announces is the
official open of trading), and ending at 4:00 p.m., New York Time (or such other
time as the Principal Market publicly announces is the official close of
trading), as reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg for such hours, the average of
the highest closing bid price and the lowest closing ask price of any of the
market makers for such security as reported



                                       23


in the "pink sheets" by the National Quotation Bureau, Inc. If the Weighted
Average Price cannot be calculated for a security on a particular date on any of
the foregoing bases, the Weighted Average Price of such security on such date
shall be the fair market value as mutually determined by the Company and the
Holder. If the Company and the Holder are unable to agree upon the fair market
value of such security, then such dispute shall be resolved pursuant to Section
23. All such determinations to be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during applicable
calculation period.




                            [SIGNATURE PAGE FOLLOWS]



                                       24


        IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
as of the Date of Issuance set out above.

                                            XCEL ENERGY INC.



                                            By:
                                               ---------------------------------
                                               Name:
                                               Title: Chief Executive Officer






                                    EXHIBIT I

                                XCEL ENERGY INC.
                                CONVERSION NOTICE

Reference is made to the Convertible Note (the "NOTE") issued to the undersigned
by XCEL ENERGY INC. (the "COMPANY"). In accordance with and pursuant to the
Note, the undersigned hereby elects to convert the Conversion Amount (as defined
in the Note) of the Note indicated below into shares of Common Stock, par value
$2.50 per share (the "COMMON STOCK"), of the Company as of the date specified
below.

        Date of Conversion:
                           -----------------------------------------------------

        Aggregate Conversion Amount to be converted:
                                                    ----------------------------

Please confirm the following information:

        Conversion Price:
                         -------------------------------------------------------

        Number of shares of Common Stock to be issued:
                                                      --------------------------

Please issue the Common Stock into which the Note is being converted and, if
applicable, any check drawn on an account of the Company in the following name
and to the following address:

        Issue to:
                 ---------------------------------------------------------------
                 ---------------------------------------------------------------
                 ---------------------------------------------------------------

        Facsimile Number:
                         -------------------------------------------------------

        Authorization:
                      ----------------------------------------------------------
               By:
                  --------------------------------------------------------------
                                                   Title:
                                                         -----------------------
Dated:
      --------------------------------------------------------------------------

        Account Number:
                       ---------------------------------------------------------
          (if electronic book entry transfer)

        Transaction Code Number:
                                ------------------------------------------------
          (if electronic book entry transfer)





                                 ACKNOWLEDGMENT


        The Company hereby acknowledges this Conversion Notice and hereby
directs [TRANSFER AGENT] to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated November 8, 2002
from the Company and acknowledged and agreed to by [TRANSFER AGENT].

                                            XCEL ENERGY INC.



                                            By:
                                               ---------------------------------
                                                   Name:
                                                   Title:

EX-4.14

                                                                    EXHIBIT 4.14

                            SENIOR CONVERTIBLE NOTE

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A)
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL IN A
REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR
RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THIS NOTE AND THE
SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THIS
NOTE. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS
NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY
BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION
3(c)(iii) OF THIS NOTE.



                                XCEL ENERGY INC.


Issuance Date: _______ __, ______                  Principal: U.S. $____________

        FOR VALUE RECEIVED, XCEL ENERGY INC., a Minnesota corporation (the
"COMPANY"), hereby promises to pay to the order of __________________ or
registered assigns ("HOLDER") the amount set out above as the Principal (as
reduced pursuant to the terms hereof pursuant to redemption, conversion or
otherwise, the "PRINCIPAL") when due, whether upon the Final Maturity Date (as
defined below), acceleration, conversion, redemption or otherwise (in each case
in accordance with the terms hereof) and to pay interest ("INTEREST") on any
outstanding Principal at the rate of eight percent (8%) per annum, subject to
periodic adjustment pursuant to Section 2 (the "INTEREST RATE"), from the date
set out above as the Issuance Date (the "ISSUANCE DATE") until the same becomes
due and payable, whether upon an Interest Date (as defined below), the Final
Maturity Date, acceleration, conversion, redemption or otherwise (in each case
in accordance with the terms hereof). This Convertible Note (including all
Convertible Notes issued in exchange, transfer or replacement hereof, this
"NOTE") is one of an issue of Convertible Notes (collectively, the "NOTES" and
such other Convertible Notes, the "OTHER NOTES") issued on the Issuance Date
pursuant to the Securities Purchase Agreement (as defined below). Certain
capitalized terms are defined in Section 28 and terms used herein but not
defined herein shall have the meanings set forth for such terms in the
Securities Purchase Agreement.





               (1) MATURITY. On the Final Maturity Date, the Holder shall
surrender this Note to the Company and the Company shall pay to the Holder an
amount in cash representing all outstanding Principal, accrued and unpaid
Interest and accrued and unpaid Late Charges (as defined in Section 24(b)), if
any. The "MATURITY DATE" shall be the date that is 364 days after the Issuance
Date; provided that, if the Holder has given notice in writing to the Company of
its desire to extend the Maturity Date on or prior to the date that is 10
Business Days prior to the Maturity Date, the Maturity Date shall be extended
(on one or more occasions) for an additional 364 days; provided, further, that
the Maturity Date shall not be extended (except as provided in the following
proviso) to more than five years after the Issuance Date (such date that is five
years after the Issuance Date or such earlier Maturity Date prior to which the
Holder has not requested an extension thereof, the "FINAL MATURITY DATE"); and
provided, further, that the Final Maturity Date may be extended at the option of
the Holder (x) in the event that, and for so long as, an Event of Default (as
defined in Section 4(a)) shall have occurred and be continuing or any event
shall have occurred and be continuing which with the passage of time and the
failure to cure would result in an Event of Default and (y) through the date
that is ten days after a Change of Control Termination Date in the event that
the Announcement Date giving rise to such Change of Control Termination Date
occurred prior to the Final Maturity Date.

               (2) INTEREST; INTEREST RATE. Interest on this Note shall commence
accruing on the Issuance Date and shall be computed on the basis of the actual
days elapsed during any period, and a calendar year of 365 or 366 calendar days,
as applicable, and shall be payable in cash on each May 1 and each November 1
during the period beginning on the Issuance Date and ending on, and including,
the Final Maturity Date (each an "INTEREST DATE"); provided that interest on any
Conversion Amount of this Note that is accrued but unpaid as of the Conversion
Date of such Conversion Amount shall be paid in shares of Common Stock at the
Conversion Rate. From and after the occurrence of an Event of Default (as
defined in Section 4(a)) or the failure to deliver timely the Non-Consolidation
Opinion (as defined in the Securities Purchase Agreement) pursuant to Section
4(f) of the Securities Purchase Agreement (the "NRG OPINION"), the Interest Rate
shall be increased by two percentage points (2%). In the event that such Event
of Default is subsequently cured, the adjustment referred to in the preceding
sentence shall cease to be effective as of the date of such cure; provided that
the Interest as calculated at such increased rate during the continuance of such
Event of Default shall continue to apply to the extent relating to the days
after the occurrence of such Event of Default through and including the date of
cure of such Event of Default. If the Company shall fail to credit the Holder's
balance account with DTC (as defined in Section 3(c)(i)) or, if requested in
writing by the Holder, to issue a certificate to the Holder for the number of
shares of Common Stock to which the Holder is entitled upon conversion of any
Conversion Amount or to issue a new Note (in accordance with Section 18(d))
representing the Principal portion of the Conversion Amount (as defined in
Section 3(b)(i)) to which the Holder is entitled, in each case within the time
periods set out in Section 3(c)(i) (in each case, a "CONVERSION FAILURE"), then
during each period beginning on and including the date of each such Conversion
Failure and ending on and including the date such Conversion Failure is cured,
the Interest Rate then in effect shall be increased by two percentage points
(2%). If (i) the Registration Statement (as defined in the Registration Rights
Agreement) covering all the Registrable Securities (as defined in the
Registration Rights Agreement) issuable upon conversion of this Note and
required to be filed by



                                       2


the Company pursuant to the Registration Rights Agreement is not declared
effective by the Securities and Exchange Commission (the "SEC") on or before the
applicable Mandatory Effective Date (as defined in the Registration Rights
Agreement) or (ii) on any day after such Registration Statement has been
declared effective by the SEC that sales of all the Registrable Securities
required to be included on such Registration Statement cannot be made (other
than during an Allowable Grace Period (as defined in Section 3(t) of the
Registration Rights Agreement) pursuant to such Registration Statement
(including, without limitation, because of a failure to keep such Registration
Statement effective, to disclose such information as is necessary for sales to
be made pursuant to such Registration Statement or to register sufficient shares
of Common Stock) (collectively with the event described in the immediately
preceding clause (i), each a "REGISTRATION FAILURE"), then, as partial relief
for the damages to any holder by reason of any such delay in or reduction of its
ability to sell Registrable Securities (which remedy shall not be exclusive of
any other remedies available at law or in equity) the Interest Rate then in
effect shall be increased by two percentage points (2%) during each period
beginning on and including the first date of each such Registration Failure and
ending on and including the date such Registration Failure is cured.

               (3) CONVERSION OF NOTES. This Note shall be convertible into
shares of the Common Stock, on the terms and conditions set forth in this
Section 3.

                      (a) Conversion Right. Subject to the provisions of Section
3(d), at any time or times on or after the Issuance Date, the Holder shall be
entitled to convert any portion of the outstanding and unpaid Conversion Amount
(as defined below) into fully paid and nonassessable shares of Common Stock in
accordance with Section 3(c), at the Conversion Rate (as defined below). The
Company shall not issue any fraction of a share of Common Stock upon any
conversion. If the issuance would result in the issuance of a fraction of a
share of Common Stock, the Company shall round such fraction of a share of
Common Stock up to the nearest whole share. The Company shall pay any and all
taxes that may be payable with respect to the issuance and delivery of Common
Stock upon conversion of any Conversion Amount.

                      (b) Conversion Rate. The number of shares of Common Stock
issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall
be determined by dividing (x) such Conversion Amount by (y) the Conversion Price
(as defined below) (the "CONVERSION RATE").

        (i) "CONVERSION AMOUNT" means the sum of (A) the portion of the
        Principal to be converted, redeemed or otherwise surrendered with
        respect to which this determination is being made, (B) accrued and
        unpaid Interest with respect to such Principal and (C) accrued and
        unpaid Late Charges with respect to such Principal and Interest.

        (ii) "CONVERSION PRICE" means 110% of the arithmetic average of the
        Weighted Average Price of the Common Stock during the 20 Trading Day
        period beginning 90 days after the issuance date of the First Notes, not
        to exceed the arithmetic average of the Weighted Average Price of the
        Common Stock during the 20 Trading Day period ending on the Trading Day
        that is immediately prior to the 90th day after the issuance date of the
        First Notes.



                                       3


                      (c) Mechanics of Conversion.

        (i) Optional Conversion. To convert any Conversion Amount into shares of
        Common Stock on any date (a "CONVERSION DATE"), the Holder shall (A)
        transmit by facsimile (or otherwise deliver), for receipt on or prior to
        11:59 p.m., Central Time on such date, a copy of an executed notice of
        conversion in the form attached hereto as Exhibit I (the "CONVERSION
        NOTICE") to the Company and (B) if required by Section 3(c)(ii),
        surrender this Note to a common carrier for delivery to the Company as
        soon as practicable on or following such date (or an indemnification
        undertaking with respect to this Note in the case of its loss, theft or
        destruction). On or before the first Business Day following the
        Company's receipt of a Conversion Notice, the Company shall transmit by
        facsimile a confirmation of receipt of such Conversion Notice to the
        Holder and the Transfer Agent (as defined below). On or before the
        second Business Day following the date of receipt of a Conversion Notice
        (the "SHARE DELIVERY DATE"), the Company shall (X) (if (Y) below does
        not apply) issue and deliver to the address as specified in the
        Conversion Notice, a certificate, registered in the name of the Holder
        or its designee, for the number of shares of Common Stock to which the
        Holder shall be entitled, or (Y) provided that the Company's transfer
        agent (the "TRANSFER AGENT") is participating in The Depository Trust
        Company ("DTC") Fast Automated Securities Transfer Program, upon the
        request of the Holder, credit such aggregate number of shares of Common
        Stock to which the Holder shall be entitled to the Holder's or its
        designee's balance account with DTC through its Deposit Withdrawal Agent
        Commission system. If this Note is physically surrendered for conversion
        as required by Section 3(c)(ii) and the outstanding Principal of this
        Note is greater than the Principal portion of the Conversion Amount
        being converted, then the Company shall as soon as practicable and in no
        event later than three Business Days after receipt of this Note (the
        "NOTE DELIVERY DATE") and at its own expense, issue and deliver to the
        holder a new Note (in accordance with Section 18(d)) representing the
        outstanding Principal not converted. The person or persons entitled to
        receive the shares of Common Stock issuable upon a conversion of this
        Note shall be treated for all purposes as the record holder or holders
        of such shares of Common Stock on the Conversion Date.

        (ii) Book-Entry. Notwithstanding anything to the contrary set forth
        herein, upon conversion of any portion of this Note in accordance with
        the terms hereof, the Holder shall not be required to physically
        surrender this Note to the Company unless (A) the full Conversion Amount
        represented by this Note is being converted or (B) the Holder has
        provided the Company with prior written notice (which notice may be
        included in a Conversion Notice) requesting physical surrender and
        reissue of this Note. The Holder and the Company shall maintain records
        showing the Principal and Interest converted and the dates of such
        conversions or shall use such other method, reasonably satisfactory to
        the Holder and the Company, so as not to require physical surrender of
        this Note upon conversion.

        (iii) Pro Rata Conversion; Disputes. In the event that the Company
        receives a Conversion Notice from more than one holder of the Notes or
        the Separate Tranche Notes



                                       4


        for the same Conversion Date and the Company can convert some, but not
        all, of such portions of the Notes and the Separate Tranche Notes
        submitted for conversion, the Company, subject to Section 3(d), shall
        convert from each holder of the Notes and the Separate Tranche Notes
        electing to have the Notes or Separate Tranche Notes converted on such
        date a pro rata amount of such holder's portion of its Notes or Separate
        Tranche Notes submitted for conversion based on the principal amount of
        the Notes or Separate Tranche Notes submitted for conversion on such
        date by such holder relative to the aggregate principal amount of all
        the Notes and the Separate Tranche Notes submitted for conversion on
        such date. In the event of a dispute as to the number of shares of
        Common Stock issuable to the Holder in connection with a conversion of
        this Note, the Company shall issue to the Holder the number of shares of
        Common Stock not in dispute and resolve such dispute in accordance with
        Section 23.

                      (d) Limitations on Conversions.

        (i) Beneficial Ownership. The Company shall not effect any conversion of
        this Note, and the Holder of this Note shall not have the right to
        convert any portion of this Note pursuant to Section 3(a), to the extent
        that after giving effect to such conversion, the Holder (together with
        the Holder's affiliates) would beneficially own in excess of 5.0% of the
        number of shares of Common Stock outstanding immediately after giving
        effect to such conversion. For purposes of the foregoing sentence, the
        number of shares of Common Stock beneficially owned by the Holder and
        its affiliates shall include the number of shares of Common Stock
        issuable upon conversion of this Note with respect to which the
        determination of such sentence is being made, but shall exclude the
        number of shares of Common Stock which would be issuable upon (A)
        conversion of the remaining, nonconverted portion of this Note
        beneficially owned by the Holder or any of its affiliates and (B)
        exercise or conversion of the unexercised or nonconverted portion of any
        other securities of the Company (including, without limitation, any
        Other Notes, Separate Tranche Notes or warrants) subject to a limitation
        on conversion or exercise analogous to the limitation contained herein
        beneficially owned by the Holder or any of its affiliates. Except as set
        forth in the preceding sentence, for purposes of this Section 3(d)(i),
        beneficial ownership shall be calculated in accordance with Section
        13(d) of the Securities Exchange Act of 1934, as amended. For purposes
        of this Section 3(d)(i), in determining the number of outstanding shares
        of Common Stock, the Holder may rely on the number of outstanding shares
        of Common Stock as reflected in (x) the Company's most recent Form 10-Q
        or Form 10-K, as the case may be, (y) a more recent public announcement
        by the Company or (z) any other notice by the Company or the Transfer
        Agent setting forth the number of shares of Common Stock outstanding.
        For any reason at any time, upon the written or oral request of the
        Holder, the Company shall within one Business Day confirm orally and in
        writing to the Holder the number of shares of Common Stock then
        outstanding. In any case, the number of outstanding shares of Common
        Stock shall be determined after giving effect to the conversion or
        exercise of securities of the Company, including this Note, by the
        Holder or its affiliates since the date as of which such number of
        outstanding shares of Common Stock was reported.

        (ii) Principal Market Regulation. The Company shall not be obligated to
        issue any



                                       5


        shares of Common Stock pursuant to this Note if the issuance of such
        shares of Common Stock would exceed that number of shares of Common
        Stock which the Company may issue pursuant to the Notes and the Separate
        Tranche Notes without breaching the Company's obligations under the
        rules or regulations of the Principal Market (the "EXCHANGE CAP"),
        except that such limitation shall not apply in the event that the
        Company (A) obtains the approval of its shareholders as required by the
        applicable rules of the Principal Market for issuances of Common Stock
        in excess of such amount or (B) obtains a written opinion from outside
        counsel to the Company that such approval is not required, which opinion
        shall be reasonably satisfactory to the holders of the Notes and the
        Separate Tranche Notes representing a majority of the principal amounts
        of the Notes and the Separate Tranche Notes (voting as a single class)
        then outstanding. Until such approval or written opinion is obtained, no
        purchaser of the Notes or the Separate Tranche Notes pursuant to the
        Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon
        conversion of the Notes or the Separate Tranche Notes, shares of Common
        Stock in an amount greater than the product of the Exchange Cap
        multiplied by a fraction, the numerator of which is the principal amount
        of the Notes and the Separate Tranche Notes issued to such Purchaser
        pursuant to the Securities Purchase Agreement as of the date of such
        determination and the denominator of which is the aggregate principal
        amount of all the Notes and the Separate Tranche Notes issued to the
        Purchasers pursuant to the Securities Purchase Agreement as of the date
        of such determination (with respect to each Purchaser, the "EXCHANGE CAP
        ALLOCATION"). In the event that any Purchaser shall sell or otherwise
        transfer any of such Purchaser's Notes or Separate Tranche Notes, the
        transferee shall be allocated a pro rata portion of such Purchaser's
        Exchange Cap Allocation, and the restrictions of the prior sentence
        shall apply to such transferee with respect to the portion of the
        Exchange Cap Allocation allocated to such transferee. In the event that
        any holder of the Notes or the Separate Tranche Notes shall convert all
        of such holder's Notes or Separate Tranche Notes into a number of shares
        of Common Stock which, in the aggregate, is less than such holder's
        Exchange Cap Allocation, then the difference between such holder's
        Exchange Cap Allocation and the number of shares of Common Stock
        actually issued to such holder shall be allocated to the respective
        Exchange Cap Allocations of the remaining holders of the Notes and the
        Separate Tranche Notes on a pro rata basis in proportion to the
        aggregate principal amount of the Notes and the Separate Tranche Notes
        then held by each such holder.

               (4) RIGHTS UPON EVENT OF DEFAULT.

                      (a) Event of Default. Each of the following events shall
constitute a "EVENT OF DEFAULT":

        (i) the failure of the Registration Statement covering all Registrable
        Securities (as defined in the Registration Rights Agreement) required to
        be registered pursuant to the Registration Rights Agreement to be
        declared effective by the SEC on or prior to the date that is 180 days
        after the Issuance Date, or, while such Registration Statement is
        required to be maintained effective pursuant to the terms of the
        Registration Rights Agreement, the effectiveness of such Registration
        Statement lapses for any reason (including, without limitation, the
        issuance of a stop order) or is unavailable to any holder of the Notes
        for



                                       6


        sale of all of such holder's Registrable Securities in accordance with
        the terms of the Registration Rights Agreement, and such lapse or
        unavailability continues for a period of five consecutive Business Days
        or for more than an aggregate of 20 Business Days in any 365-day period;

        (ii) the suspension from trading on the Principal Market for a period of
        three consecutive Business Days or for more than an aggregate of three
        Business Days in any 30-day Trading Day period or the delisting of the
        Common Stock from the Principal Market;

        (iii) the Company's (A) failure to cure a Conversion Failure by delivery
        of the required number of shares of Common Stock or a new Note (in
        accordance with section 17(d)), as applicable, within 10 days after the
        receipt by the Company of a Conversion Notice or (B) notice, written or
        oral, to any holder of the Notes, including by way of public
        announcement or through any of its agents, at any time, of its intention
        not to comply with a request for conversion of any Notes into shares of
        Common Stock that is tendered in accordance with the provisions of the
        Notes;

        (iv) the Company's failure to pay to the Holder any amount of Principal,
        Interest, Late Charges or other amounts when and as due under this Note,
        the Securities Purchase Agreement, the Registration Rights Agreement or
        any other agreement, document, certificate or other instrument delivered
        in connection with the transactions contemplated hereby and thereby to
        which the Holder is a party;

        (v) any default under, redemption of or acceleration prior to maturity
        of any Indebtedness (as defined in Section 3(r) of the Securities
        Purchase Agreement) of the Company or any of its Subsidiaries (as
        defined in Section 3(a) of the Securities Purchase Agreement) other than
        NRG (as defined below) (including, without limitation, the Other Notes)
        of at least $50,000,000;

        (vi) the Company or any of its Subsidiaries other than NRG (as defined
        below), pursuant to or within the meaning of Title 11, U.S. Code, or any
        similar Federal or state law for the relief of debtors (collectively,
        "BANKRUPTCY LAW"), (A) commences a voluntary case, (B) consents to the
        entry of an order for relief against it in an involuntary case, (C)
        consents to the appointment of a receiver, trustee, assignee, liquidator
        or similar official (a "CUSTODIAN"), (D) makes a general assignment for
        the benefit of its creditors or (E) admits in writing that it is
        generally unable to pay its debts as they become due;

        (vii) a court of competent jurisdiction enters an order or decree under
        any Bankruptcy Law that (A) is for relief against the Company or any of
        its Subsidiaries other than NRG (as defined below) in an involuntary
        case, (B) appoints a Custodian of the Company or any of its Subsidiaries
        other than NRG (as defined below) or (C) orders the liquidation of the
        Company or any of its Subsidiaries other than NRG (as defined below); or

        (viii) the Company breaches any representation, warranty, covenant
        (other than any covenant to deliver the NRG Opinion) or other term or
        condition of the Securities



                                       7


        Purchase Agreement, the Registration Rights Agreement, this Note or any
        other agreement, document, certificate or other instrument delivered in
        connection with the transactions contemplated thereby and hereby to
        which the Holder is a party, except, in the case of a breach of a
        covenant which is curable, only if such breach continues for a period of
        at least 10 consecutive days.

                      (b) Redemption Right. Promptly after the occurrence of an
Event of Default with respect to this Note or the Other Notes, the Company shall
deliver written notice thereof via facsimile and overnight courier (a "EVENT OF
DEFAULT NOTICE") to the Holder. At any time after the earlier of the Holder's
receipt of an Event of Default Notice and the Holder becoming aware of an Event
of Default, the Holder may require the Company to redeem all or any portion of
this Note by delivering written notice thereof (the "EVENT OF DEFAULT REDEMPTION
NOTICE") to the Company, which Event of Default Redemption Notice shall indicate
the portion of this Note the Holder is electing to redeem. Each portion of this
Note subject to redemption by the Company pursuant to this Section 4(b) shall be
redeemed by the Company at a price equal to the greater of (i) the product of
(x) the Conversion Amount and (y) the quotient determined by dividing (A) the
Closing Sale Price of the Common Stock immediately prior to such Event of
Default by (B) the Conversion Price and (ii) the product of (x) the Conversion
Amount and (y) the Redemption Premium (the "EVENT OF DEFAULT REDEMPTION PRICE").
Redemptions required by this Section 4(b) shall be made in accordance with the
provisions of Section 10.

               (5) RIGHTS UPON CHANGE OF CONTROL.

                      (a) Change of Control. Each of the following events shall
constitute a "CHANGE OF CONTROL":

        (i) the consolidation, merger or other business combination (including,
        without limitation, a reorganization or recapitalization) of the Company
        with or into another Person in which holders of the Company's voting
        power immediately prior to the transaction cease after the transaction
        to hold, directly or indirectly, a majority of the voting power of the
        surviving entity or entities or the voting power necessary to elect a
        majority of the members of the board of directors (or their equivalent
        if other than a corporation) of such entity or entities;

        (ii) the sale or transfer of all or substantially all of the Company's
        assets; or

        (iii) a purchase, tender or exchange offer made to and accepted by the
        holders of more than the 50% of the outstanding shares of Common Stock.

                      (b) Assumption. Prior to the consummation of any Change of
Control, the Company will secure from any Person purchasing the Company's assets
or Common Stock or any successor resulting from such Change of Control (in each
case, an "ACQUIRING ENTITY") a written agreement (in form and substance
satisfactory to the holders of Notes representing a majority of the aggregate
principal amount of the Notes then outstanding) to deliver to each holder of
Notes in exchange for such Notes, a security of the Acquiring Entity evidenced
by a written instrument substantially similar in form and substance to the
Notes, including, without



                                       8


limitation, having a principal amount and interest rate equal to the principal
amounts and the interest rates of the Notes held by such holder, and
satisfactory to the holders of Notes representing a majority of the principal
amount of the Notes then outstanding. In the event that an Acquiring Entity is
directly or indirectly controlled by a company or entity whose common stock or
similar equity interest is listed, designated or quoted on a securities exchange
or trading market, the holders of notes representing a majority of the aggregate
principal amount of the Notes then outstanding may elect to treat such Person as
the Acquiring Entity for purposes of this Section 5(b).

                      (c) Redemption Right. No sooner than 15 days nor later
than 10 days prior to the consummation of a Change of Control, but not prior to
the public announcement of such Change of Control, the Company shall deliver
written notice thereof via facsimile and overnight courier to the Holder (a
"CHANGE OF CONTROL NOTICE"). At any time on or after consummation of such Change
of Control, the Holder may require the Company to redeem all or any portion of
this Note by delivering written notice thereof ("CHANGE OF CONTROL REDEMPTION
NOTICE" and, collectively with an Event of Default Redemption Notice,
"REDEMPTION NOTICES" and, individually, each a "REDEMPTION NOTICE") to the
Company, which Change of Control Redemption Notice shall indicate the Conversion
Amount the Holder is electing to redeem. The portion of this Note subject to
redemption pursuant to this Section 5(c) shall be redeemed by the Company at a
price equal to the greater of (i) the product of (x) the Conversion Amount and
(y) the quotient determined by dividing (A) the Closing Sale Price of the Common
Stock immediately following the public announcement of such proposed Change of
Control by (B) the Conversion Price and (ii) 115% of the Conversion Amount (the
"CHANGE OF CONTROL REDEMPTION PRICE" and, together with the Event of Default
Redemption Price, the "REDEMPTION PRICE"). Redemptions required by this Section
5(c) shall be made in accordance with the provisions of Section 10 and shall
have priority to payments to other shareholders in connection with a Change of
Control.


               (6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE
EVENTS.

                      (a) Purchase Rights. If at any time the Company grants,
issues or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled
to acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete conversion of this
Note (without taking into account any limitations or restrictions on the
convertibility of this Note) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.

                      (b) Other Corporate Events. Prior to the consummation of
any recapitalization, reorganization, consolidation, merger or other business
combination (other than a Change of Control) pursuant to which holders of Common
Stock are entitled to receive



                                       9


securities or other assets with respect to or in exchange for Common Stock (a
"CORPORATE EVENT"), the Company shall make appropriate provision to insure that
the Holder will thereafter have the right to receive upon a conversion of this
Note, (i) in addition to the shares of Common Stock receivable upon such
conversion, such securities or other assets to which the Holder would have been
entitled with respect to such shares of Common Stock had such shares of Common
Stock been held by the Holder upon the consummation of such Corporate Event or
(ii) in lieu of the shares of Common Stock otherwise receivable upon such
conversion, such securities or other assets received by the holders of Common
Stock in connection with the consummation of such Corporate Event in such
amounts as the Holder would have been entitled to receive had this Note
initially been issued with conversion rights for the form of such consideration
(as opposed to shares of Common Stock) at a conversion rate for such
consideration commensurate with the Conversion Rate. Provision made pursuant to
the preceding sentence shall be in a form and substance satisfactory to the
holders of Notes representing a majority of the aggregate principal amount of
the Notes then outstanding.

               (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

                      (a) Adjustment of Conversion Price upon Issuance of Common
Stock. If and whenever on or after the Issuance Date, the Company issues or
sells, or in accordance with this Section 7(a) is deemed to have issued or sold,
any shares of Common Stock (including the issuance or sale of shares of Common
Stock owned or held by or for the account of the Company, but excluding shares
of Common Stock deemed to have been issued or sold by the Company (I) in
connection with the Xcel Energy Direct Purchase Plan or any employee benefit
plan which has been approved by the Board of Directors of the Company or any of
its Subsidiaries, pursuant to which the Company's securities may be issued to
any employee, officer or director for services provided to the Company or its
Subsidiaries (each, an "APPROVED STOCK PLAN") or (II) upon conversion of the
Notes or the Separate Tranche Notes) for a consideration per share less than the
higher of the Closing Sale Price of the Common Stock on the date of such
issuance or sale or deemed issuance or sale and the Conversion Price in effect
immediately prior to such issuance or sale or deemed issuance or sale (such
higher price is referred to herein as the "APPLICABLE PRICE"), then immediately
after such issue or sale (subject to Section 7(a)(vi)), the Conversion Price
then in effect shall be reduced to an amount equal to the product of (x) the
Conversion Price in effect immediately prior to such issue or sale or deemed
issuance or sale and (y) the quotient determined by dividing (1) the sum of the
product of the Applicable Price and the number of shares of Common Stock Deemed
Outstanding immediately prior to such issue or sale or deemed issue or sale and
the consideration, if any, received by the Company upon such issue or sale, by
(2) the product of the Applicable Price multiplied by the number of shares of
Common Stock Deemed Outstanding immediately after such issue or sale or deemed
issue or sale. For purposes of determining the adjusted Conversion Price under
this Section 7(a), the following shall be applicable:

        (i) Issuance of Options. If the Company in any manner grants or sells
        any Options and the lowest price per share for which one share of Common
        Stock is issuable upon the exercise of any such Option or upon
        conversion, exercise or exchange of any Convertible Securities issuable
        upon exercise of such Option is less than the Applicable Price, then
        such share of Common Stock shall be deemed to be outstanding and to have
        been issued



                                       10


        and sold by the Company at the time of the granting or sale of such
        Option for such price per share. For purposes of this Section 7(a)(i),
        the "lowest price per share for which one share of Common Stock is
        issuable upon the exercise of any such Option or upon conversion,
        exercise or exchange of any Convertible Securities issuable upon
        exercise of such Option" shall be equal to the sum of the lowest amounts
        of consideration (if any) received or receivable by the Company with
        respect to any one share of Common Stock upon granting or sale of the
        Option, upon exercise of the Option and upon conversion, exercise or
        exchange of any Convertible Security issuable upon exercise of such
        Option. No further adjustment of the Conversion Price shall be made upon
        the actual issuance of such Common Stock or of such Convertible
        Securities upon the exercise of such Options or upon the actual issuance
        of such Common Stock upon conversion, exercise or exchange of such
        Convertible Securities. If the Company issues or sells any Options which
        are Variable Securities, no adjustment of the Conversion Price shall be
        made pursuant to this Section 7(a), and no shares of Common Stock shall
        be deemed outstanding with respect to such Variable Securities, as a
        result of the issuance of such Variable Securities until the actual
        issuance of Common Stock or Convertible Securities upon exercise of such
        Variable Securities, except to the extent such Variable Security also
        includes as a component of the exercise price a price which does not
        vary with the market price of the Common Stock.

        (ii) Issuance of Convertible Securities. If the Company in any manner
        issues or sells any Convertible Securities and the lowest price per
        share for which one share of Common Stock is issuable upon such
        conversion, exercise or exchange thereof is less than the Applicable
        Price, then such share of Common Stock shall be deemed to be outstanding
        and to have been issued and sold by the Company at the time of the
        issuance of sale of such Convertible Securities for such price per
        share. For the purposes of this Section 7(a)(ii), the "price per share
        for which one share of Common Stock is issuable upon such conversion,
        exercise or exchange" shall be equal to the sum of the lowest amounts of
        consideration (if any) received or receivable by the Company with
        respect to any one share of Common Stock upon the issuance or sale of
        the Convertible Security and upon the conversion, exercise or exchange
        of such Convertible Security. No further adjustment of the Conversion
        Price shall be made upon the actual issuance of such Common Stock upon
        conversion, exercise or exchange of such Convertible Securities, and if
        any such issue or sale of such Convertible Securities is made upon
        exercise of any Options for which adjustment of the Conversion Price had
        been or are to be made pursuant to other provisions of this Section
        7(a), no further adjustment of the Conversion Price shall be made by
        reason of such issue or sale. If the Company issues or sells any
        Convertible Securities which are Variable Securities, no adjustment of
        the Conversion Price shall be made pursuant to this Section 7(a), and no
        shares of Common Stock shall be deemed outstanding with respect to such
        Variable Security, as a result of the issuance of such Variable
        Securities until the actual issuance of Common Stock upon exercise of
        such Variable Securities, except to the extent such Variable Security
        also includes as a component of the conversion, exercise or exchange
        price a price which does not vary with the market price of the Common
        Stock.

        (iii) Change in Option Price or Rate of Conversion. If the purchase
        price provided for



                                       11


        in any Options, the additional consideration, if any, payable upon the
        issue, conversion or exchange of any Convertible Securities, or the rate
        at which any Convertible Securities are convertible into or exercisable
        or exchangeable for Common Stock changes at any time, the Conversion
        Price in effect at the time of such change shall be adjusted to the
        Conversion Price which would have been in effect at such time had such
        Options or Convertible Securities provided for such changed purchase
        price, additional consideration or changed conversion rate, as the case
        may be, at the time initially granted, issued or sold. For purposes of
        this Section 7(a)(iii), if the terms of any Option or Convertible
        Security that was outstanding as of the Issuance Date are changed in the
        manner described in the immediately preceding sentence, then such Option
        or Convertible Security and the Common Stock deemed issuable upon
        exercise, conversion or exchange thereof shall be deemed to have been
        issued as of the date of such change. No adjustment shall be made if
        such adjustment would result in an increase of the Conversion Price then
        in effect.

        (iv) Calculation of Consideration Received. In case any Option is issued
        in connection with the issue or sale of other securities of the Company,
        together comprising one integrated transaction in which no specific
        consideration is allocated to such Options by the parties thereto, the
        Options will be deemed to have been issued for a consideration of $.01.
        If any Common Stock, Options or Convertible Securities are issued or
        sold or deemed to have been issued or sold for cash, the consideration
        received therefor will be deemed to be the net amount received by the
        Company therefor. If any Common Stock, Options or Convertible Securities
        are issued or sold for a consideration other than cash, the amount of
        the consideration other than cash received by the Company will be the
        fair value of such consideration, except where such consideration
        consists of securities, in which case the amount of consideration
        received by the Company will be the Closing Sale Price of such
        securities on the date of receipt. If any Common Stock, Options or
        Convertible Securities are issued to the owners of the non-surviving
        entity in connection with any merger in which the Company is the
        surviving entity, the amount of consideration therefor will be deemed to
        be the fair value of such portion of the net assets and business of the
        non-surviving entity as is attributable to such Common Stock, Options or
        Convertible Securities, as the case may be. The fair value of any
        consideration other than cash or securities will be determined jointly
        by the Company and the holders of Notes representing a majority of the
        principal amounts of the Notes then outstanding. If such parties are
        unable to reach agreement within ten days after the occurrence of an
        event requiring valuation (the "VALUATION EVENT"), the fair value of
        such consideration will be determined within five Business Days after
        the tenth day following the Valuation Event by an independent, reputable
        appraiser jointly selected by the Company and the holders of Notes
        representing a majority of the principal amounts of the Notes then
        outstanding. The determination of such appraiser shall be deemed binding
        upon all parties absent manifest error and the fees and expenses of such
        appraiser shall be borne by the Company.

        (v) Record Date. If the Company takes a record of the holders of Common
        Stock for the purpose of entitling them (A) to receive a dividend or
        other distribution payable in Common Stock, Options or in Convertible
        Securities or (B) to subscribe for or purchase



                                       12


        Common Stock, Options or Convertible Securities, then such record date
        will be deemed to be the date of the issue or sale of the shares of
        Common Stock deemed to have been issued or sold upon the declaration of
        such dividend or the making of such other distribution or the date of
        the granting of such right of subscription or purchase, as the case may
        be.

        (vi) Common Stock Deemed Outstanding. "COMMON STOCK DEEMED OUTSTANDING"
        means, at any given time, the number of shares of Common Stock actually
        outstanding at such time, plus the number of shares of Common Stock
        deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii)
        hereof regardless of whether the Options or Convertible Securities are
        actually exercisable at such time, but excluding any shares of Common
        Stock owned or held by or for the account of the Company or issuable
        upon conversion of the Notes or the Separate Tranche Notes.

        (vii) Delayed Adjustment. In addition to the foregoing provisions of
        this Section 7(a), the Weighted Average Price, Closing Sales Price and
        Closing Bid Price shall be subject to adjustment, in accordance with the
        foregoing provisions, for any days during any measuring period used
        herein that occur prior to any of the aforementioned events if such
        events occur prior to the end of such measuring period.

                      (b) Adjustment of Conversion Price upon Subdivision or
Combination of Common Stock. If the Company at any time subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination will be proportionately increased.

                      (c) Other Events. If any event occurs of the type
contemplated by the provisions of this Section 7 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the Holder under this Note;
provided that no such adjustment will increase the Conversion Price as otherwise
determined pursuant to this Section 7.

               (8) NONCIRCUMVENTION. The Company hereby covenants and agrees
that the Company will not, by amendment of its Articles of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of, or enter
into any agreement which by its terms restricts or otherwise impairs the
Company's performance of the terms of, this Note or any of the other Transaction
Documents (as defined in the Securities Purchase Agreement), and will at all
times in good faith carry out all of the provisions of this Note and take all
action as may be required to protect the rights of the Holder of this Note.



                                       13


               (9) RESERVATION OF AUTHORIZED SHARES.

                      (a) Reservation. The Company shall initially reserve out
of its authorized and unissued Common Stock a number of shares of Common Stock
for each of the Notes and the Separate Tranche Notes equal to 115% of the
Conversion Rate with respect to the Conversion Amount of each such Note and
Separate Tranche Note. Thereafter, the Company shall, so long as any of the
Notes or Separate Tranche Notes are outstanding, take all action necessary to
reserve and keep available out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Notes and Separate
Tranche Note, at least 100% of the number of shares of Common Stock as shall
from time to time be necessary to effect the conversion of all of the Notes and
the Separate Tranche Notes then outstanding; provided that at no time shall the
number of shares of Common Stock so reserved be less than the number of shares
required to be reserved by the previous sentence (without regard to any
limitations on conversions) (the "REQUIRED RESERVE AMOUNT"). The initial number
of shares of Common Stock reserved for conversions of the Notes and the Separate
Tranche Note and each increase in the number of shares so reserved shall be
allocated pro rata among the holders of the Notes and Separate Tranche Note
based on the principal amount of the Notes and Separate Tranche Notes held by
each holder at the time of Issuance Date or increase in the number of reserved
shares, as the case may be (the "AUTHORIZED SHARE ALLOCATION"). In the event
that a holder shall sell or otherwise transfer any of such holder's Notes, each
transferee shall be allocated a pro rata portion of such holder's Authorized
Share Allocation. Any shares of Common Stock reserved and allocated to any
Person which ceases to hold any Notes shall be allocated to the remaining
holders of Notes, pro rata based on the principal amount of the Notes then held
by such holders.

                      (b) Insufficient Authorized Shares. If at any time while
any of the Notes or Separate Tranche Note remain outstanding the Company does
not have a sufficient number of authorized and unreserved shares of Common Stock
to satisfy its obligation to reserve for issuance upon conversion of the Notes
and the Separate Tranche Notes at least a number of shares of Common Stock equal
to the Required Reserve Amount (an "AUTHORIZED SHARE FAILURE"), then the Company
shall immediately take all action necessary to increase the Company's authorized
shares of Common Stock to an amount sufficient to allow the Company to reserve
the Required Reserve Amount for the Notes and Separate Tranche Note then
outstanding. Without limiting the generality of the foregoing sentence, as soon
as practicable after the date of the occurrence of an Authorized Share Failure,
but in no event later than 60 days after the occurrence of such Authorized Share
Failure, the Company shall hold a meeting of its shareholders for the approval
of an increase in the number of authorized shares of Common Stock. In connection
with such meeting, the Company shall provide each shareholder with a proxy
statement and shall use its best efforts to solicit its shareholders' approval
of such increase in authorized shares of Common Stock and to cause its board of
directors to recommend to the shareholders that they approve such proposal.

               (10) REDEMPTION.

                      (a) Mechanics. In the event that the Holder has sent a
Redemption Notice to the Company pursuant to Section 4(b) or Section 5(c), the
Holder shall promptly



                                       14


submit this Note to the Company. The Company shall deliver the applicable Event
of Default Redemption Price to the Holder within five Business Days after the
Company's receipt of the Holder's Event of Default Redemption Notice and
thereafter the Holder shall promptly deliver this Note to the Company. If the
Holder has submitted a Change of Control Redemption Notice in accordance with
Section 5(c), the Company shall deliver the applicable Change of Control
Redemption Price to the Holder concurrently with the consummation of such Change
of Control if such notice is received prior to the consummation of such Change
of Control and within five Business Days after the Company's receipt of such
notice otherwise. In the event of a redemption of less than all of the
Conversion Amount of this Note, the Company shall promptly cause to be issued
and delivered to the Holder a new Note (in accordance with Section 18(d))
representing the outstanding Principal which has not been redeemed. In the event
that the Company does not pay the Redemption Price to the Holder within the time
period required above in this Section 10(a) at any time thereafter and until the
Company pays such unpaid Redemption Price in full, the Holder shall have the
option to, in lieu of redemption, require the Company to promptly return to the
Holder all or any portion of this Note representing the Conversion Amount that
was submitted for redemption and for which the applicable Redemption Price
(together with any Late Charges thereon) has not been paid. Upon the Company's
receipt of such notice, (x) the Redemption Notice shall be null and void with
respect to such Conversion Amount, (y) the Company shall immediately return this
Note, or issue a new Note (in accordance with Section 18(d)) to the Holder
representing such Conversion Amount and (z) the Conversion Price of this Note or
such new Notes shall be adjusted to the lesser of (A) the Conversion Price as in
effect on the date on which the Redemption Notice is voided and (B) the lowest
Closing Bid Price during the period beginning on and including the date on which
the Redemption Notice is delivered to the Company and ending on and including
the date on which the Redemption Notice is voided. The Holder's delivery of a
notice voiding a Redemption Notice and exercise of its rights following such
notice shall not affect the Company's obligations to make any payments of Late
Charges which have accrued prior to the date of such notice with respect to the
Conversion Amount subject to such notice.

                      (b) Redemption by Other Holders. Upon the Company's
receipt of notice from any of the holders of the Other Notes or the Separate
Tranche Notes for redemption or repayment as a result of an event or occurrence
substantially similar to the events or occurrences described in Section 4(b) or
Section 5(c) (each an "OTHER REDEMPTION NOTICE"), the Company shall immediately
forward to the Holder by facsimile a copy of such notice. If the Company
receives a Redemption Notice and one or more Other Redemption Notices during the
seven Business Day period beginning on and including the date which is three
Business Days prior to the Company's receipt of the Holder's Redemption Notice
and ending on and including the date which is three Business Days after the
Company's receipt of the Holder's Redemption Notice and the Company is unable to
redeem all principal, interest and other amounts designated in such Redemption
Notice and such Other Redemption Notices received during such seven Business Day
period, then the Company shall redeem a pro rata amount from each holder of the
Notes and the Separate Tranche Notes (including the Holder) based on the
principal amount of the Notes and the Separate Tranche Notes submitted for
redemption pursuant to such Redemption Notice and such Other Redemption Notices
received by the Company during such seven Business Day period.




                                       15


                      (c) Redemption at the Option of the Company. Except in
connection with the satisfaction by the Company of its obligations to redeem the
Notes under Sections 4(b) and 5(c) hereof, without the prior written consent of
the Holder the Company shall not have the right to prepay, redeem, repurchase,
defease or otherwise retire any Note prior to the Final Maturity Date.

                      (11) RESTRICTION ON REDEMPTION. Until all of the Notes
have been converted, redeemed or otherwise satisfied in accordance with their
terms, the Company shall not, directly or indirectly, redeem its capital stock
without the prior express written consent of the holders of Notes representing
at least two-thirds of the aggregate principal amount of the Notes then
outstanding.

                      (12) SUBORDINATION; ADDITIONAL INDEBTEDNESS. Payments of
Principal and Interest and other payments due under this Note shall rank pari
passu in right of payment with all (and shall not be subordinated to any)
unsecured, unsubordinated indebtedness of the Company and will be senior in
right of payment to all subordinated indebtedness of the Company.

                      (13) COVENANTS.

                             (a) Indebtedness. The Company shall not create,
incur, assume, guarantee or suffer to exist, or otherwise become or remain
liable with respect to, any Indebtedness other than Permitted Indebtedness and
Subordinated Indebtedness. "Subordinated Indebtedness" shall mean Indebtedness
that is unsecured and subordinated in right of payment to the Notes and other
obligations owing to the Holders in accordance with a subordination agreement in
form and substance satisfactory to the Holders. "Permitted Indebtedness" shall
mean any Indebtedness that is unsecured and is not senior in right of payment to
the Notes and is otherwise on terms that are no more favorable to the holders
thereof than the terms of the Indebtedness evidenced by the Notes unless such
more favorable terms are offered to the Holders.

                             (b) Liens. The Company shall not create, incur,
assume or suffer to exist, or permit any of its Subsidiaries (other than NRG
Energy Inc. or its subsidiaries (collectively, "NRG")) to create, incur, assume
or suffer to exist, any Lien upon or with respect to any of its properties,
whether now owned or hereafter acquired; sign or suffer to exist any security
agreement authorizing any secured party thereunder to file a Uniform Commercial
Code financing statement (or the equivalent thereof) as notice of a Lien on any
property of the Company or its Subsidiaries; sell any of its property or assets
subject to an understanding or agreement, contingent or otherwise, to repurchase
such property or assets (including sales of accounts receivable) with recourse
to it or any of its Subsidiaries or assign or otherwise transfer, or permit any
of its Subsidiaries (other than the Existing Utility Subsidiaries (as defined in
the Bank Facility)) to assign or otherwise transfer, any account or other right
to receive income; other than, as to all of the above, Permitted Liens. As used
herein, "Permitted Liens" shall have the meaning of that term as defined in the
Five-Year Credit Agreement, dated as of November 10, 2000, among the Company and
the banks listed therein (as the same maybe amended from time to time, the "BANK
FACILITY"). As used herein, "Liens" means any mortgage,



                                       16


deed of trust, pledge, lien (statutory or otherwise), security interest, charge
or other encumbrance or security or preferential arrangement of any nature,
including, without limitation, any conditional sale or title retention
arrangement, any capitalized lease and any assignment, deposit arrangement or
financing lease intended as, or having the effect of, security.

                      (c) Transactions With Affiliates. The Company shall not,
and shall not permit any Subsidiary to, directly or indirectly, effect any
transaction with any Affiliate (as defined in the Bank Facility) that is (a)
outside the ordinary course of business or (b) on a basis less favorable than
would at the time be obtainable for a comparable transaction in arms-length
dealing with an unrelated third party, provided that notwithstanding the
foregoing, no loan, payment or other form of contribution shall be made to NRG
unless it is in an amount not in excess of (i) $300 Million payable pursuant to
the Support Agreement and Capital Subscription Agreement, dated as of May 29,
2002, by and between the Company and NRG Energy Inc. and (ii) $250 Million in
respect of guarantee obligations relating to the power marketing business of
NRG; provided further that with respect to any payment permitted pursuant to
clause (ii) above, the Company shall, in the context of a restructuring of NRG,
use its reasonable best efforts to obtain a full release of all obligations and
liabilities of the Company relating to NRG.

                      (d) Leverage Ratio. The Company shall not permit the
Leverage Ratio set forth in the Bank Facility to be exceeded.

                      (e) Restrictive Agreements. The Company shall not, and
shall not permit any Significant Subsidiary (as defined in the Bank Facility)
other than NRG to, enter into any agreement after the date of this Note that
imposes any restriction on the ability of such Significant Subsidiary to make
payments, directly or indirectly, to its shareholders by way of dividends,
advances, repayment of loans or intercompany charges, expenses or accruals or
other returns on investments that is more restrictive than any such restriction
applicable to such Significant Subsidiary on the Issuance Date.

                      (f) Scope of Business. The Company shall, and shall cause
each Subsidiary to, engage only in energy-related business, functionally related
businesses (as interpreted under PUHCA, as defined in the Securities Purchase
Agreement)or such other businesses as maybe permitted pursuant to an order
issued by the SEC pursuant to PUHCA.


               (14) VOTING RIGHTS. The Holder shall have no voting rights as the
holder of this Note, except as required by law, including but not limited to the
Minnesota Business Corporation Act, and as expressly provided in this Note.

               (15) PARTICIPATION. The Holder, as the holder of this Note, shall
be entitled to (i) all extraordinary or special dividends paid and distributions
made to the holders of Common Stock to the same extent as if the Holder had
converted this Note into Common Stock (without regard to any limitations on
conversion herein or elsewhere) and had held such shares of Common Stock on the
record date for such dividends and distributions and (ii) regular cash dividends
and distributions paid to the holders of the Common Stock only with respect to
that portion of such dividends that exceeds $0.1875 per share of Common Stock in
any calendar quarter (subject to adjustment for stock splits, stock dividends,
stock combinations and other



                                       17


similar transactions after the Issuance Date). Payments under the preceding
sentence shall be made concurrently with the dividend or distribution to the
holders of Common Stock.

               (16) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of Notes representing not less than
two-thirds of the aggregate principal amount of the then outstanding Notes,
shall be required for any change or amendment to this Note or the Other Notes.

               (17) TRANSFER. This Note may be offered, sold, assigned or
transferred by the Holder without the consent of the Company, subject only to
the provisions of Section 2(f) of the Securities Purchase Agreement.

               (18) REISSUANCE OF THIS NOTE.

                      (a) Transfer. If this Note is to be transferred, the
Holder shall surrender this Note to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Note (in
accordance with Section 18(d)), registered as the Holder may request,
representing the outstanding Principal being transferred by the Holder and, if
less then the entire outstanding Principal is being transferred, a new Note (in
accordance with Section 18(d)) to the Holder representing the outstanding
Principal not being transferred. The Holder and any assignee, by acceptance of
this Note, acknowledge and agree that, by reason of the provisions of Section
3(c)(iii) and this Section 18(a), following conversion or redemption of any
portion of this Note, the outstanding Principal represented by this Note may be
less than the Principal stated on the face of this Note.

                      (b) Lost, Stolen or Mutilated Note. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the Company in
customary form and, in the case of mutilation, upon surrender and cancellation
of this Note, the Company shall execute and deliver to the Holder a new Note (in
accordance with Section 18(d)) representing the outstanding Principal.

                      (c) Note Exchangeable for Different Denominations. This
Note is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Note or Notes (in accordance with Section 18(d)
and in principal amounts of at least $100,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.

                      (d) Issuance of New Notes. Whenever the Company is
required to issue a new Note pursuant to the terms of this Note, such new Note
(i) shall be of like tenor with this Note, (ii) shall represent, as indicated on
the face of such new Note, the Principal remaining outstanding (or in the case
of a new Note being issued pursuant to Section 18(a) or Section 18(c), the
Principal designated by the Holder which, when added to the principal
represented by the other new Notes issued in connection with such issuance, does
not exceed the Principal



                                       18


remaining outstanding under this Note immediately prior to such issuance of new
Notes), (iii) shall have an issuance date, as indicated on the face of such new
Note which is the same as the Issuance Date of this Note, (iv) shall have the
same rights and conditions as this Note, and (v) shall represent accrued
Interest and Late Charges on the Principal and Interest of this Note, from the
Issuance Date.

               (19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note, the Securities
Purchase Agreement and the Registration Rights Agreement, at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the Holder's right to pursue actual and consequential
damages for any failure by the Company to comply with the terms of this Note.
Amounts set forth or provided for herein with respect to payments, conversion
and the like (and the computation thereof) shall be the amounts to be received
by the Holder and shall not, except as expressly provided herein, be subject to
any other obligation of the Company (or the performance thereof). The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.

               (20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a)
this Note is placed in the hands of an attorney for collection or enforcement or
is collected or enforced through any legal proceeding or the Holder otherwise
takes action to collect amounts due under this Note or to enforce the provisions
of this Note or (b) there occurs any bankruptcy, reorganization, receivership of
the Company or other proceedings affecting Company creditors' rights and
involving a claim under this Note, then the Company shall pay the costs incurred
by the Holder for such collection, enforcement or action or in connection with
such bankruptcy, reorganization, receivership or other proceeding, including but
not limited to attorneys fees and disbursements.

               (21) CONSTRUCTION; HEADINGS. This Note shall be deemed to be
jointly drafted by the Company and all the Purchasers and shall not be construed
against any person as the drafter hereof. The headings of this Note are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Note.

               (22) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege.

               (23) DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Redemption Price or the arithmetic calculation of the
Conversion Rate or the Redemption Price or any other calculation hereunder, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within one Business Day of receipt of the Conversion



                                       19


Notice or Redemption Notice giving rise to such dispute, as the case may be, to
the Holder. If the Holder and the Company are unable to agree upon such
determination or calculation of the Conversion Rate within one Business Day of
such disputed determination or arithmetic calculation being submitted to the
Holder, then the Company shall, within one Business Day submit via facsimile (a)
the disputed determination of the Weighted Average Price, the Closing Bid Price
or the Closing Sale Price or any other calculation hereunder to an independent,
reputable investment bank selected by the Company and approved by the Holder or
(b) the disputed arithmetic calculation of the Conversion Rate or the Redemption
Price to the Company's independent, outside accountant. The Company, at the
Company's expense, shall cause the investment bank or the accountant, as the
case may be, to perform the determinations or calculations and notify the
Company and the Holder of the results no later than five Business Days from the
time it receives the disputed determinations or calculations. Such investment
bank's or accountant's determination or calculation, as the case may be, shall
be binding upon all parties absent demonstrable error.

               (24) NOTICES; PAYMENTS.

                      (a) Notices. Whenever notice is required to be given under
this Note, unless otherwise provided herein, such notice shall be given in
accordance with Section 9(f) of the Securities Purchase Agreement. The Company
shall provide the Holder with prompt written notice of all actions taken
pursuant to this Note, including in reasonable detail a description of such
action and the reason therefore. Without limiting the generality of the
foregoing, the Company will give written notice to the Holder (i) immediately
upon any adjustment of the Conversion Price, setting forth in reasonable detail,
and certifying, the calculation of such adjustment and (ii) at least twenty days
prior to the date on which the Company closes its books or takes a record (A)
with respect to any dividend or distribution upon the Common Stock, (B) with
respect to any grants, issues or sales of any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property pro rata to
holders of Common Stock or (C) for determining rights to vote with respect to
any Change of Control, dissolution or liquidation, provided in each case that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to such holder. Notwithstanding the foregoing,
Section 4(j) of the Securities Purchase Agreement shall apply to all notices
given pursuant to this Note.

                      (b) Payments. Whenever any payment of cash is to be made
by the Company to any Person pursuant to this Note, such payment shall be made
in lawful money of the United States of America by a check drawn on the account
of the Company and sent via overnight courier service to such Person at such
address as previously provided to the Company in writing (which address, in the
case of each of the Purchasers (as defined in Section 3(d)(ii)), shall initially
be as set forth on the Schedule of Buyers attached to the Securities Purchase
Agreement); provided that the Holder may elect to receive a payment of cash via
wire transfer of immediately available funds by providing the Company with prior
written notice setting out such request and the Holder's wire transfer
instructions. Whenever any amount expressed to be due by the terms of this Note
is due on any day which is not a Business Day, the same shall instead be due on
the next succeeding day which is a Business Day and, in the case of any Interest
Date which is not the date on which this Note is paid in full, the extension of
the due date thereof shall



                                       20


not be taken into account for purposes of determining the amount of Interest due
on such date. Any amount of Interest, Principal or other amount due under the
Transaction Documents (as defined in the Securities Purchase Agreement) which is
not paid when due shall result in a late charge being incurred and payable by
the Company in an amount equal to interest on such amount at the rate of 12% per
annum from the date such amount was due until the same is paid in full ("LATE
CHARGE").

               (25) CANCELLATION. After all Principal, accrued Interest and
other amounts at any time owed on this Note has been paid in full, this Note
shall automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.

               (26) WAIVER OF NOTICE. To the extent permitted by law, the
Company hereby waives demand, notice, protest and all other demands and notices
in connection with the delivery, acceptance, performance, default or enforcement
of this Note and the Securities Purchase Agreement.

               (27) GOVERNING LAW. This Note shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal
laws of the State of Illinois, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Illinois or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of Illinois.

               (28) CERTAIN DEFINITIONS. For purposes of this Note, the
following terms shall have the following meanings:

                      (a) "BUSINESS DAY" means any day other than Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.

                      (b) "CHANGE OF CONTROL TERMINATION DATE" shall mean, with
respect to any proposed Change of Control for which a public announcement that
it proposes or intends to effect a Change of Control of the Company (the date of
such announcement, the "ANNOUNCEMENT DATE") has been made, the date upon which
the Company or other Person proposing to effect such Change of Control
consummates or publicly announces the termination or abandonment of the proposed
Change of Control which was the subject of the previous public announcement.

                      (c) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means,
for any security as of any date, the last closing bid price and last closing
trade price, respectively, for such security on The New York Stock Exchange,
Inc. (the "PRINCIPAL Market") as reported by Bloomberg Financial Markets
("BLOOMBERG"), or, if the Principal Market begins to operate on an extended
hours basis and does not designate the closing bid price or the closing trade
price, as the case may be, then the last bid price or last trade price,
respectively, of such security prior to 4:00:00 p.m. Eastern Time as reported by
Bloomberg, or, if the Principal Market is not the principal securities exchange
or trading market for such security, the last closing bid price or last



                                       21


trade price, respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or last
trade price, respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if
no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price or the
Closing Sale Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as
the case may be, of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to Section 23. All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during any applicable calculation period.

                      (d) "COMMON STOCK" means (i) the Company's common stock,
par value $2.50 per share, and (ii) any capital stock resulting from a
reclassification of such Common Stock.

                      (e) "PERSON" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, any other entity and a government or any department
or agency thereof.

                      (f) "REDEMPTION PREMIUM" means (i) in the case of the
Events of Default described in Section 4(a)(i), (ii), (iii), (iv) and (viii),
115% or (ii) in the case of the Events of Default described in Section 4(a)(v) -
(vii), 100%.

                      (g) "REGISTRATION RIGHTS AGREEMENT" means that certain
registration rights agreement between the Company and the initial holders of the
Notes relating to the registration of the resale of the shares of Common Stock
issuable upon conversion of the Notes.

                      (h) "SECURITIES PURCHASE AGREEMENT" means that certain
securities purchase agreement between the Company and the initial holders of the
Notes pursuant to which the Company issued the Notes.

                      (i) "SEPARATE TRANCHE NOTES" means the First Notes, Second
Notes, First Call Notes, Second Call Notes and the Third Call Notes,
collectively.

                      (j) "TRADING DAY" means any day on which the Common Stock
is traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the principal securities
exchange or securities market on which the Common Stock is then traded; provided
that "Trading Day" shall not include any day on which the Common Stock is
scheduled to trade on such exchange or market or actually trades on such
exchange or market for less than 4.5 hours.

                      (k) "VARIABLE SECURITIES" means any stock or securities
other than



                                       22


Options directly or indirectly convertible into or exchangeable for Common Stock
("CONVERTIBLE SECURITIES") or any rights, warrants or option to subscribe for or
purchase Common Stock or Convertible Securities ("OPTIONS") that are convertible
into or exchangeable, directly or indirectly, for Common Stock at a price which
varies or may vary with the market price of the Common Stock, including by way
of one or more adjustments or resets to a fixed price (a "VARIABLE PRICE").

                      (l) "WEIGHTED AVERAGE PRICE" means, for any security as of
any date, the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30 a.m., New York Time (or
such other time as the Principal Market publicly announces is the official open
of trading), and ending at 4:00 p.m., New York Time (or such other time as the
Principal Market publicly announces is the official close of trading), as
reported by Bloomberg through its "Volume at Price" functions (ignoring any
trade of more than 100,000 shares of such security pursuant to an individual
transaction (subject to adjustment for stock splits, stock dividends, stock
combinations and other similar transactions involving such security after the
Issuance Date)), or, if the Principal Market is not the principal securities
exchange or trading market for such security, the dollar volume-weighted average
price for such security on the principal securities exchange or trading market
where such security is listed or traded during the period beginning at 9:30
a.m., New York Time (or such other time as such principal securities exchange or
trading market publicly announces is the official open of trading), and ending
at 4:00 p.m., New York Time (or such other time as such principal securities
exchange or trading market publicly announces is the official close of trading),
as reported by Bloomberg through its "Volume at Price" functions (ignoring any
trade of more than 100,000 shares of such security pursuant to an individual
transaction (subject to adjustment for stock splits, stock dividends, stock
combinations and other similar transactions involving such security after the
Issuance Date)), or, if the foregoing does not apply, the dollar volume-weighted
average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30 a.m., New
York Time (or such other time as the Principal Market publicly announces is the
official open of trading), and ending at 4:00 p.m., New York Time (or such other
time as the Principal Market publicly announces is the official close of
trading), as reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg for such hours, the average of
the highest closing bid price and the lowest closing ask price of any of the
market makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Weighted Average Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the Weighted
Average Price of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to Section 23. All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during applicable calculation period.


                            [SIGNATURE PAGE FOLLOWS]



                                       23


        IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
as of the Date of Issuance set out above.

                                            XCEL ENERGY INC.



                                            By:
                                               ---------------------------------
                                                  Name:
                                                  Title: Chief Executive Officer






                                    EXHIBIT I

                                XCEL ENERGY INC.
                                CONVERSION NOTICE

Reference is made to the Convertible Note (the "NOTE") issued to the undersigned
by XCEL ENERGY INC. (the "COMPANY"). In accordance with and pursuant to the
Note, the undersigned hereby elects to convert the Conversion Amount (as defined
in the Note) of the Note indicated below into shares of Common Stock, par value
$2.50 per share (the "COMMON STOCK"), of the Company as of the date specified
below.

        Date of Conversion:
                           -----------------------------------------------------

        Aggregate Conversion Amount to be converted:
                                                    ----------------------------

Please confirm the following information:

        Conversion Price:
                         -------------------------------------------------------

        Number of shares of Common Stock to be issued:
                                                      --------------------------

Please issue the Common Stock into which the Note is being converted and, if
applicable, any check drawn on an account of the Company in the following name
and to the following address:

        Issue to:
                 ---------------------------------------------------------------
                 ---------------------------------------------------------------
                 ---------------------------------------------------------------


        Facsimile Number:
                         -------------------------------------------------------

        Authorization:
                      ----------------------------------------------------------
               By:
                  --------------------------------------------------------------
                                                   Title:
                                                         -----------------------
Dated:
      --------------------------------------------------------------------------

        Account Number:
                       ---------------------------------------------------------
          (if electronic book entry transfer)

        Transaction Code Number:
                                ------------------------------------------------
          (if electronic book entry transfer)





                                 ACKNOWLEDGMENT


        The Company hereby acknowledges this Conversion Notice and hereby
directs [TRANSFER AGENT] to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated November 8, 2002
from the Company and acknowledged and agreed to by [TRANSFER AGENT].

                                            XCEL ENERGY INC.



                                            By:
                                               ---------------------------------
                                                   Name:
                                                   Title:

EX-4.15

                                                                    EXHIBIT 4.15


                            SENIOR CONVERTIBLE NOTE

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A)
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL IN A
REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR
RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THIS NOTE AND THE
SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THIS
NOTE. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS
NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY
BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION
3(c)(iii) OF THIS NOTE.



                                XCEL ENERGY INC.


Issuance Date: _______ __, ______                  Principal: U.S. $____________

        FOR VALUE RECEIVED, XCEL ENERGY INC., a Minnesota corporation (the
"COMPANY"), hereby promises to pay to the order of __________________ or
registered assigns ("HOLDER") the amount set out above as the Principal (as
reduced pursuant to the terms hereof pursuant to redemption, conversion or
otherwise, the "PRINCIPAL") when due, whether upon the Final Maturity Date (as
defined below), acceleration, conversion, redemption or otherwise (in each case
in accordance with the terms hereof) and to pay interest ("INTEREST") on any
outstanding Principal at the rate of eight percent (8%) per annum, subject to
periodic adjustment pursuant to Section 2 (the "INTEREST RATE"), from the date
set out above as the Issuance Date (the "ISSUANCE DATE") until the same becomes
due and payable, whether upon an Interest Date (as defined below), the Final
Maturity Date, acceleration, conversion, redemption or otherwise (in each case
in accordance with the terms hereof). This Convertible Note (including all
Convertible Notes issued in exchange, transfer or replacement hereof, this
"NOTE") is one of an issue of Convertible Notes (collectively, the "NOTES" and
such other Convertible Notes, the "OTHER NOTES") issued on the Issuance Date
pursuant to the Securities Purchase Agreement (as defined below). Certain
capitalized terms are defined in Section 28 and terms used herein but not
defined herein shall have the meanings set forth for such terms in the
Securities Purchase Agreement.





               (1) MATURITY. On the Final Maturity Date, the Holder shall
surrender this Note to the Company and the Company shall pay to the Holder an
amount in cash representing all outstanding Principal, accrued and unpaid
Interest and accrued and unpaid Late Charges (as defined in Section 24(b)), if
any. The "MATURITY DATE" shall be the date that is 364 days after the Issuance
Date; provided that, if the Holder has given notice in writing to the Company of
its desire to extend the Maturity Date on or prior to the date that is 10
Business Days prior to the Maturity Date, the Maturity Date shall be extended
(on one or more occasions) for an additional 364 days; provided, further, that
the Maturity Date shall not be extended (except as provided in the following
proviso) to more than five years after the Issuance Date (such date that is five
years after the Issuance Date or such earlier Maturity Date prior to which the
Holder has not requested an extension thereof, the "FINAL MATURITY DATE"); and
provided, further, that the Final Maturity Date may be extended at the option of
the Holder (x) in the event that, and for so long as, an Event of Default (as
defined in Section 4(a)) shall have occurred and be continuing or any event
shall have occurred and be continuing which with the passage of time and the
failure to cure would result in an Event of Default and (y) through the date
that is ten days after a Change of Control Termination Date in the event that
the Announcement Date giving rise to such Change of Control Termination Date
occurred prior to the Final Maturity Date.

               (2) INTEREST; INTEREST RATE. Interest on this Note shall commence
accruing on the Issuance Date and shall be computed on the basis of the actual
days elapsed during any period, and a calendar year of 365 or 366 calendar days,
as applicable, and shall be payable in cash on each May 1 and each November 1
during the period beginning on the Issuance Date and ending on, and including,
the Final Maturity Date (each an "INTEREST DATE"); provided that interest on any
Conversion Amount of this Note that is accrued but unpaid as of the Conversion
Date of such Conversion Amount shall be paid in shares of Common Stock at the
Conversion Rate. From and after the occurrence of an Event of Default (as
defined in Section 4(a)) or the failure to deliver timely the Non-Consolidation
Opinion (as defined in the Securities Purchase Agreement) pursuant to Section
4(f) of the Securities Purchase Agreement (the "NRG OPINION"), the Interest Rate
shall be increased by two percentage points (2%). In the event that such Event
of Default is subsequently cured, the adjustment referred to in the preceding
sentence shall cease to be effective as of the date of such cure; provided that
the Interest as calculated at such increased rate during the continuance of such
Event of Default shall continue to apply to the extent relating to the days
after the occurrence of such Event of Default through and including the date of
cure of such Event of Default. If the Company shall fail to credit the Holder's
balance account with DTC (as defined in Section 3(c)(i)) or, if requested in
writing by the Holder, to issue a certificate to the Holder for the number of
shares of Common Stock to which the Holder is entitled upon conversion of any
Conversion Amount or to issue a new Note (in accordance with Section 18(d))
representing the Principal portion of the Conversion Amount (as defined in
Section 3(b)(i)) to which the Holder is entitled, in each case within the time
periods set out in Section 3(c)(i) (in each case, a "CONVERSION FAILURE"), then
during each period beginning on and including the date of each such Conversion
Failure and ending on and including the date such Conversion Failure is cured,
the Interest Rate then in effect shall be increased by two percentage points
(2%). If (i) the Registration Statement (as defined in the Registration Rights
Agreement) covering all the Registrable Securities (as defined in the
Registration Rights Agreement) issuable upon conversion of this Note and
required to be filed by



                                       2


the Company pursuant to the Registration Rights Agreement is not declared
effective by the Securities and Exchange Commission (the "SEC") on or before the
applicable Mandatory Effective Date (as defined in the Registration Rights
Agreement) or (ii) on any day after such Registration Statement has been
declared effective by the SEC that sales of all the Registrable Securities
required to be included on such Registration Statement cannot be made (other
than during an Allowable Grace Period (as defined in Section 3(t) of the
Registration Rights Agreement) pursuant to such Registration Statement
(including, without limitation, because of a failure to keep such Registration
Statement effective, to disclose such information as is necessary for sales to
be made pursuant to such Registration Statement or to register sufficient shares
of Common Stock) (collectively with the event described in the immediately
preceding clause (i), each a "REGISTRATION FAILURE"), then, as partial relief
for the damages to any holder by reason of any such delay in or reduction of its
ability to sell Registrable Securities (which remedy shall not be exclusive of
any other remedies available at law or in equity) the Interest Rate then in
effect shall be increased by two percentage points (2%) during each period
beginning on and including the first date of each such Registration Failure and
ending on and including the date such Registration Failure is cured.

               (3) CONVERSION OF NOTES. This Note shall be convertible into
shares of the Common Stock, on the terms and conditions set forth in this
Section 3.

                      (a) Conversion Right. Subject to the provisions of Section
3(d), at any time or times on or after the Issuance Date, the Holder shall be
entitled to convert any portion of the outstanding and unpaid Conversion Amount
(as defined below) into fully paid and nonassessable shares of Common Stock in
accordance with Section 3(c), at the Conversion Rate (as defined below). The
Company shall not issue any fraction of a share of Common Stock upon any
conversion. If the issuance would result in the issuance of a fraction of a
share of Common Stock, the Company shall round such fraction of a share of
Common Stock up to the nearest whole share. The Company shall pay any and all
taxes that may be payable with respect to the issuance and delivery of Common
Stock upon conversion of any Conversion Amount.

                      (b) Conversion Rate. The number of shares of Common Stock
issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall
be determined by dividing (x) such Conversion Amount by (y) the Conversion Price
(as defined below) (the "CONVERSION RATE").

        (i) "CONVERSION AMOUNT" means the sum of (A) the portion of the
        Principal to be converted, redeemed or otherwise surrendered with
        respect to which this determination is being made, (B) accrued and
        unpaid Interest with respect to such Principal and (C) accrued and
        unpaid Late Charges with respect to such Principal and Interest.

        (ii) "CONVERSION PRICE" means 110% of the arithmetic average of the
        Weighted Average Price of the Common Stock during the 20 Trading Day
        period beginning 90 days after the issuance date of the First Notes, not
        to exceed the arithmetic average of the Weighted Average Price of the
        Common Stock during the 20 Trading Day period ending on the Trading Day
        that is immediately prior to the 90th day after the issuance date of the
        First Notes.



                                       3


                      (c) Mechanics of Conversion.

        (i) Optional Conversion. To convert any Conversion Amount into shares of
        Common Stock on any date (a "CONVERSION DATE"), the Holder shall (A)
        transmit by facsimile (or otherwise deliver), for receipt on or prior to
        11:59 p.m., Central Time on such date, a copy of an executed notice of
        conversion in the form attached hereto as Exhibit I (the "CONVERSION
        NOTICE") to the Company and (B) if required by Section 3(c)(ii),
        surrender this Note to a common carrier for delivery to the Company as
        soon as practicable on or following such date (or an indemnification
        undertaking with respect to this Note in the case of its loss, theft or
        destruction). On or before the first Business Day following the
        Company's receipt of a Conversion Notice, the Company shall transmit by
        facsimile a confirmation of receipt of such Conversion Notice to the
        Holder and the Transfer Agent (as defined below). On or before the
        second Business Day following the date of receipt of a Conversion Notice
        (the "SHARE DELIVERY DATE"), the Company shall (X) (if (Y) below does
        not apply) issue and deliver to the address as specified in the
        Conversion Notice, a certificate, registered in the name of the Holder
        or its designee, for the number of shares of Common Stock to which the
        Holder shall be entitled, or (Y) provided that the Company's transfer
        agent (the "TRANSFER AGENT") is participating in The Depository Trust
        Company ("DTC") Fast Automated Securities Transfer Program, upon the
        request of the Holder, credit such aggregate number of shares of Common
        Stock to which the Holder shall be entitled to the Holder's or its
        designee's balance account with DTC through its Deposit Withdrawal Agent
        Commission system. If this Note is physically surrendered for conversion
        as required by Section 3(c)(ii) and the outstanding Principal of this
        Note is greater than the Principal portion of the Conversion Amount
        being converted, then the Company shall as soon as practicable and in no
        event later than three Business Days after receipt of this Note (the
        "NOTE DELIVERY DATE") and at its own expense, issue and deliver to the
        holder a new Note (in accordance with Section 18(d)) representing the
        outstanding Principal not converted. The person or persons entitled to
        receive the shares of Common Stock issuable upon a conversion of this
        Note shall be treated for all purposes as the record holder or holders
        of such shares of Common Stock on the Conversion Date.

        (ii) Book-Entry. Notwithstanding anything to the contrary set forth
        herein, upon conversion of any portion of this Note in accordance with
        the terms hereof, the Holder shall not be required to physically
        surrender this Note to the Company unless (A) the full Conversion Amount
        represented by this Note is being converted or (B) the Holder has
        provided the Company with prior written notice (which notice may be
        included in a Conversion Notice) requesting physical surrender and
        reissue of this Note. The Holder and the Company shall maintain records
        showing the Principal and Interest converted and the dates of such
        conversions or shall use such other method, reasonably satisfactory to
        the Holder and the Company, so as not to require physical surrender of
        this Note upon conversion.

        (iii) Pro Rata Conversion; Disputes. In the event that the Company
        receives a Conversion Notice from more than one holder of the Notes or
        the Separate Tranche Notes



                                       4


        for the same Conversion Date and the Company can convert some, but not
        all, of such portions of the Notes and the Separate Tranche Notes
        submitted for conversion, the Company, subject to Section 3(d), shall
        convert from each holder of the Notes and the Separate Tranche Notes
        electing to have the Notes or Separate Tranche Notes converted on such
        date a pro rata amount of such holder's portion of its Notes or Separate
        Tranche Notes submitted for conversion based on the principal amount of
        the Notes or Separate Tranche Notes submitted for conversion on such
        date by such holder relative to the aggregate principal amount of all
        the Notes and the Separate Tranche Notes submitted for conversion on
        such date. In the event of a dispute as to the number of shares of
        Common Stock issuable to the Holder in connection with a conversion of
        this Note, the Company shall issue to the Holder the number of shares of
        Common Stock not in dispute and resolve such dispute in accordance with
        Section 23.

                      (d) Limitations on Conversions.

        (i) Beneficial Ownership. The Company shall not effect any conversion of
        this Note, and the Holder of this Note shall not have the right to
        convert any portion of this Note pursuant to Section 3(a), to the extent
        that after giving effect to such conversion, the Holder (together with
        the Holder's affiliates) would beneficially own in excess of 5.0% of the
        number of shares of Common Stock outstanding immediately after giving
        effect to such conversion. For purposes of the foregoing sentence, the
        number of shares of Common Stock beneficially owned by the Holder and
        its affiliates shall include the number of shares of Common Stock
        issuable upon conversion of this Note with respect to which the
        determination of such sentence is being made, but shall exclude the
        number of shares of Common Stock which would be issuable upon (A)
        conversion of the remaining, nonconverted portion of this Note
        beneficially owned by the Holder or any of its affiliates and (B)
        exercise or conversion of the unexercised or nonconverted portion of any
        other securities of the Company (including, without limitation, any
        Other Notes, Separate Tranche Notes or warrants) subject to a limitation
        on conversion or exercise analogous to the limitation contained herein
        beneficially owned by the Holder or any of its affiliates. Except as set
        forth in the preceding sentence, for purposes of this Section 3(d)(i),
        beneficial ownership shall be calculated in accordance with Section
        13(d) of the Securities Exchange Act of 1934, as amended. For purposes
        of this Section 3(d)(i), in determining the number of outstanding shares
        of Common Stock, the Holder may rely on the number of outstanding shares
        of Common Stock as reflected in (x) the Company's most recent Form 10-Q
        or Form 10-K, as the case may be, (y) a more recent public announcement
        by the Company or (z) any other notice by the Company or the Transfer
        Agent setting forth the number of shares of Common Stock outstanding.
        For any reason at any time, upon the written or oral request of the
        Holder, the Company shall within one Business Day confirm orally and in
        writing to the Holder the number of shares of Common Stock then
        outstanding. In any case, the number of outstanding shares of Common
        Stock shall be determined after giving effect to the conversion or
        exercise of securities of the Company, including this Note, by the
        Holder or its affiliates since the date as of which such number of
        outstanding shares of Common Stock was reported.

        (ii) Principal Market Regulation. The Company shall not be obligated to
        issue any



                                       5


        shares of Common Stock pursuant to this Note if the issuance of such
        shares of Common Stock would exceed that number of shares of Common
        Stock which the Company may issue pursuant to the Notes and the Separate
        Tranche Notes without breaching the Company's obligations under the
        rules or regulations of the Principal Market (the "EXCHANGE CAP"),
        except that such limitation shall not apply in the event that the
        Company (A) obtains the approval of its shareholders as required by the
        applicable rules of the Principal Market for issuances of Common Stock
        in excess of such amount or (B) obtains a written opinion from outside
        counsel to the Company that such approval is not required, which opinion
        shall be reasonably satisfactory to the holders of the Notes and the
        Separate Tranche Notes representing a majority of the principal amounts
        of the Notes and the Separate Tranche Notes (voting as a single class)
        then outstanding. Until such approval or written opinion is obtained, no
        purchaser of the Notes or the Separate Tranche Notes pursuant to the
        Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon
        conversion of the Notes or the Separate Tranche Notes, shares of Common
        Stock in an amount greater than the product of the Exchange Cap
        multiplied by a fraction, the numerator of which is the principal amount
        of the Notes and the Separate Tranche Notes issued to such Purchaser
        pursuant to the Securities Purchase Agreement as of the date of such
        determination and the denominator of which is the aggregate principal
        amount of all the Notes and the Separate Tranche Notes issued to the
        Purchasers pursuant to the Securities Purchase Agreement as of the date
        of such determination (with respect to each Purchaser, the "EXCHANGE CAP
        ALLOCATION"). In the event that any Purchaser shall sell or otherwise
        transfer any of such Purchaser's Notes or Separate Tranche Notes, the
        transferee shall be allocated a pro rata portion of such Purchaser's
        Exchange Cap Allocation, and the restrictions of the prior sentence
        shall apply to such transferee with respect to the portion of the
        Exchange Cap Allocation allocated to such transferee. In the event that
        any holder of the Notes or the Separate Tranche Notes shall convert all
        of such holder's Notes or Separate Tranche Notes into a number of shares
        of Common Stock which, in the aggregate, is less than such holder's
        Exchange Cap Allocation, then the difference between such holder's
        Exchange Cap Allocation and the number of shares of Common Stock
        actually issued to such holder shall be allocated to the respective
        Exchange Cap Allocations of the remaining holders of the Notes and the
        Separate Tranche Notes on a pro rata basis in proportion to the
        aggregate principal amount of the Notes and the Separate Tranche Notes
        then held by each such holder.

               (4) RIGHTS UPON EVENT OF DEFAULT.

                      (a) Event of Default. Each of the following events shall
constitute a "EVENT OF DEFAULT":

        (i) the failure of the Registration Statement covering all Registrable
        Securities (as defined in the Registration Rights Agreement) required to
        be registered pursuant to the Registration Rights Agreement to be
        declared effective by the SEC on or prior to the date that is 180 days
        after the Issuance Date, or, while such Registration Statement is
        required to be maintained effective pursuant to the terms of the
        Registration Rights Agreement, the effectiveness of such Registration
        Statement lapses for any reason (including, without limitation, the
        issuance of a stop order) or is unavailable to any holder of the Notes
        for



                                       6


        sale of all of such holder's Registrable Securities in accordance with
        the terms of the Registration Rights Agreement, and such lapse or
        unavailability continues for a period of five consecutive Business Days
        or for more than an aggregate of 20 Business Days in any 365-day period;

        (ii) the suspension from trading on the Principal Market for a period of
        three consecutive Business Days or for more than an aggregate of three
        Business Days in any 30-day Trading Day period or the delisting of the
        Common Stock from the Principal Market;

        (iii) the Company's (A) failure to cure a Conversion Failure by delivery
        of the required number of shares of Common Stock or a new Note (in
        accordance with section 18(d)), as applicable, within 10 days after the
        receipt by the Company of a Conversion Notice or (B) notice, written or
        oral, to any holder of the Notes, including by way of public
        announcement or through any of its agents, at any time, of its intention
        not to comply with a request for conversion of any Notes into shares of
        Common Stock that is tendered in accordance with the provisions of the
        Notes;

        (iv) the Company's failure to pay to the Holder any amount of Principal,
        Interest, Late Charges or other amounts when and as due under this Note,
        the Securities Purchase Agreement, the Registration Rights Agreement or
        any other agreement, document, certificate or other instrument delivered
        in connection with the transactions contemplated hereby and thereby to
        which the Holder is a party;

        (v) any default under, redemption of or acceleration prior to maturity
        of any Indebtedness (as defined in Section 3(r) of the Securities
        Purchase Agreement) of the Company or any of its Subsidiaries (as
        defined in Section 3(a) of the Securities Purchase Agreement) other than
        NRG (as defined below) (including, without limitation, the Other Notes)
        of at least $50,000,000;

        (vi) the Company or any of its Subsidiaries other than NRG (as defined
        below), pursuant to or within the meaning of Title 11, U.S. Code, or any
        similar Federal or state law for the relief of debtors (collectively,
        "BANKRUPTCY LAW"), (A) commences a voluntary case, (B) consents to the
        entry of an order for relief against it in an involuntary case, (C)
        consents to the appointment of a receiver, trustee, assignee, liquidator
        or similar official (a "CUSTODIAN"), (D) makes a general assignment for
        the benefit of its creditors or (E) admits in writing that it is
        generally unable to pay its debts as they become due;

        (vii) a court of competent jurisdiction enters an order or decree under
        any Bankruptcy Law that (A) is for relief against the Company or any of
        its Subsidiaries other than NRG (as defined below) in an involuntary
        case, (B) appoints a Custodian of the Company or any of its Subsidiaries
        other than NRG (as defined below) or (C) orders the liquidation of the
        Company or any of its Subsidiaries other than NRG (as defined below); or

        (viii) the Company breaches any representation, warranty, covenant
        (other than any covenant to deliver the NRG Opinion) or other term or
        condition of the Securities



                                       7


        Purchase Agreement, the Registration Rights Agreement, this Note or any
        other agreement, document, certificate or other instrument delivered in
        connection with the transactions contemplated thereby and hereby to
        which the Holder is a party, except, in the case of a breach of a
        covenant which is curable, only if such breach continues for a period of
        at least 10 consecutive days.

                      (b) Redemption Right. Promptly after the occurrence of an
Event of Default with respect to this Note or the Other Notes, the Company shall
deliver written notice thereof via facsimile and overnight courier (a "EVENT OF
DEFAULT NOTICE") to the Holder. At any time after the earlier of the Holder's
receipt of an Event of Default Notice and the Holder becoming aware of an Event
of Default, the Holder may require the Company to redeem all or any portion of
this Note by delivering written notice thereof (the "EVENT OF DEFAULT REDEMPTION
NOTICE") to the Company, which Event of Default Redemption Notice shall indicate
the portion of this Note the Holder is electing to redeem. Each portion of this
Note subject to redemption by the Company pursuant to this Section 4(b) shall be
redeemed by the Company at a price equal to the greater of (i) the product of
(x) the Conversion Amount and (y) the quotient determined by dividing (A) the
Closing Sale Price of the Common Stock immediately prior to such Event of
Default by (B) the Conversion Price and (ii) the product of (x) the Conversion
Amount and (y) the Redemption Premium (the "EVENT OF DEFAULT REDEMPTION PRICE").
Redemptions required by this Section 4(b) shall be made in accordance with the
provisions of Section 10.

               (5) RIGHTS UPON CHANGE OF CONTROL.

                      (a) Change of Control. Each of the following events shall
constitute a "CHANGE OF CONTROL":

        (i) the consolidation, merger or other business combination (including,
        without limitation, a reorganization or recapitalization) of the Company
        with or into another Person in which holders of the Company's voting
        power immediately prior to the transaction cease after the transaction
        to hold, directly or indirectly, a majority of the voting power of the
        surviving entity or entities or the voting power necessary to elect a
        majority of the members of the board of directors (or their equivalent
        if other than a corporation) of such entity or entities;

        (ii) the sale or transfer of all or substantially all of the Company's
        assets; or

        (iii) a purchase, tender or exchange offer made to and accepted by the
        holders of more than the 50% of the outstanding shares of Common Stock.

                      (b) Assumption. Prior to the consummation of any Change of
Control, the Company will secure from any Person purchasing the Company's assets
or Common Stock or any successor resulting from such Change of Control (in each
case, an "ACQUIRING ENTITY") a written agreement (in form and substance
satisfactory to the holders of Notes representing a majority of the aggregate
principal amount of the Notes then outstanding) to deliver to each holder of
Notes in exchange for such Notes, a security of the Acquiring Entity evidenced
by a written instrument substantially similar in form and substance to the
Notes, including, without



                                       8


limitation, having a principal amount and interest rate equal to the principal
amounts and the interest rates of the Notes held by such holder, and
satisfactory to the holders of Notes representing a majority of the principal
amount of the Notes then outstanding. In the event that an Acquiring Entity is
directly or indirectly controlled by a company or entity whose common stock or
similar equity interest is listed, designated or quoted on a securities exchange
or trading market, the holders of notes representing a majority of the aggregate
principal amount of the Notes then outstanding may elect to treat such Person as
the Acquiring Entity for purposes of this Section 5(b).

                      (c) Redemption Right. No sooner than 15 days nor later
than 10 days prior to the consummation of a Change of Control, but not prior to
the public announcement of such Change of Control, the Company shall deliver
written notice thereof via facsimile and overnight courier to the Holder (a
"CHANGE OF CONTROL NOTICE"). At any time on or after consummation of such Change
of Control, the Holder may require the Company to redeem all or any portion of
this Note by delivering written notice thereof ("CHANGE OF CONTROL REDEMPTION
NOTICE" and, collectively with an Event of Default Redemption Notice,
"REDEMPTION NOTICES" and, individually, each a "REDEMPTION NOTICE") to the
Company, which Change of Control Redemption Notice shall indicate the Conversion
Amount the Holder is electing to redeem. The portion of this Note subject to
redemption pursuant to this Section 5(c) shall be redeemed by the Company at a
price equal to the greater of (i) the product of (x) the Conversion Amount and
(y) the quotient determined by dividing (A) the Closing Sale Price of the Common
Stock immediately following the public announcement of such proposed Change of
Control by (B) the Conversion Price and (ii) 115% of the Conversion Amount (the
"CHANGE OF CONTROL REDEMPTION PRICE" and, together with the Event of Default
Redemption Price, the "REDEMPTION PRICE"). Redemptions required by this Section
5(c) shall be made in accordance with the provisions of Section 10 and shall
have priority to payments to other shareholders in connection with a Change of
Control.


               (6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE
EVENTS.

                      (a) Purchase Rights. If at any time the Company grants,
issues or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled
to acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete conversion of this
Note (without taking into account any limitations or restrictions on the
convertibility of this Note) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.

                      (b) Other Corporate Events. Prior to the consummation of
any recapitalization, reorganization, consolidation, merger or other business
combination (other than a Change of Control) pursuant to which holders of Common
Stock are entitled to receive



                                       9


securities or other assets with respect to or in exchange for Common Stock (a
"CORPORATE EVENT"), the Company shall make appropriate provision to insure that
the Holder will thereafter have the right to receive upon a conversion of this
Note, (i) in addition to the shares of Common Stock receivable upon such
conversion, such securities or other assets to which the Holder would have been
entitled with respect to such shares of Common Stock had such shares of Common
Stock been held by the Holder upon the consummation of such Corporate Event or
(ii) in lieu of the shares of Common Stock otherwise receivable upon such
conversion, such securities or other assets received by the holders of Common
Stock in connection with the consummation of such Corporate Event in such
amounts as the Holder would have been entitled to receive had this Note
initially been issued with conversion rights for the form of such consideration
(as opposed to shares of Common Stock) at a conversion rate for such
consideration commensurate with the Conversion Rate. Provision made pursuant to
the preceding sentence shall be in a form and substance satisfactory to the
holders of Notes representing a majority of the aggregate principal amount of
the Notes then outstanding.

               (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

                      (a) Adjustment of Conversion Price upon Issuance of Common
Stock. If and whenever on or after the issuance date of the Third Notes, the
Company issues or sells, or in accordance with this Section 7(a) is deemed to
have issued or sold, any shares of Common Stock (including the issuance or sale
of shares of Common Stock owned or held by or for the account of the Company,
but excluding shares of Common Stock deemed to have been issued or sold by the
Company (I) in connection with the Xcel Energy Direct Purchase Plan or any
employee benefit plan which has been approved by the Board of Directors of the
Company or any of its Subsidiaries, pursuant to which the Company's securities
may be issued to any employee, officer or director for services provided to the
Company or its Subsidiaries (each, an "APPROVED STOCK PLAN") or (II) upon
conversion of the Notes or the Separate Tranche Notes) for a consideration per
share less than the higher of the Closing Sale Price of the Common Stock on the
date of such issuance or sale or deemed issuance or sale and the Conversion
Price in effect immediately prior to such issuance or sale or deemed issuance or
sale (such higher price is referred to herein as the "APPLICABLE PRICE"), then
immediately after such issue or sale (subject to Section 7(a)(vi)), the
Conversion Price then in effect shall be reduced to an amount equal to the
product of (x) the Conversion Price in effect immediately prior to such issue or
sale or deemed issuance or sale and (y) the quotient determined by dividing (1)
the sum of the product of the Applicable Price and the number of shares of
Common Stock Deemed Outstanding immediately prior to such issue or sale or
deemed issue or sale and the consideration, if any, received by the Company upon
such issue or sale, by (2) the product of the Applicable Price multiplied by the
number of shares of Common Stock Deemed Outstanding immediately after such issue
or sale or deemed issue or sale. For purposes of determining the adjusted
Conversion Price under this Section 7(a), the following shall be applicable:

        (i) Issuance of Options. If the Company in any manner grants or sells
        any Options and the lowest price per share for which one share of Common
        Stock is issuable upon the exercise of any such Option or upon
        conversion, exercise or exchange of any Convertible Securities issuable
        upon exercise of such Option is less than the Applicable Price, then
        such share of Common Stock shall be deemed to be outstanding and to have
        been issued



                                       10


        and sold by the Company at the time of the granting or sale of such
        Option for such price per share. For purposes of this Section 7(a)(i),
        the "lowest price per share for which one share of Common Stock is
        issuable upon the exercise of any such Option or upon conversion,
        exercise or exchange of any Convertible Securities issuable upon
        exercise of such Option" shall be equal to the sum of the lowest amounts
        of consideration (if any) received or receivable by the Company with
        respect to any one share of Common Stock upon granting or sale of the
        Option, upon exercise of the Option and upon conversion, exercise or
        exchange of any Convertible Security issuable upon exercise of such
        Option. No further adjustment of the Conversion Price shall be made upon
        the actual issuance of such Common Stock or of such Convertible
        Securities upon the exercise of such Options or upon the actual issuance
        of such Common Stock upon conversion, exercise or exchange of such
        Convertible Securities. If the Company issues or sells any Options which
        are Variable Securities, no adjustment of the Conversion Price shall be
        made pursuant to this Section 7(a), and no shares of Common Stock shall
        be deemed outstanding with respect to such Variable Securities, as a
        result of the issuance of such Variable Securities until the actual
        issuance of Common Stock or Convertible Securities upon exercise of such
        Variable Securities, except to the extent such Variable Security also
        includes as a component of the exercise price a price which does not
        vary with the market price of the Common Stock.

        (ii) Issuance of Convertible Securities. If the Company in any manner
        issues or sells any Convertible Securities and the lowest price per
        share for which one share of Common Stock is issuable upon such
        conversion, exercise or exchange thereof is less than the Applicable
        Price, then such share of Common Stock shall be deemed to be outstanding
        and to have been issued and sold by the Company at the time of the
        issuance of sale of such Convertible Securities for such price per
        share. For the purposes of this Section 7(a)(ii), the "price per share
        for which one share of Common Stock is issuable upon such conversion,
        exercise or exchange" shall be equal to the sum of the lowest amounts of
        consideration (if any) received or receivable by the Company with
        respect to any one share of Common Stock upon the issuance or sale of
        the Convertible Security and upon the conversion, exercise or exchange
        of such Convertible Security. No further adjustment of the Conversion
        Price shall be made upon the actual issuance of such Common Stock upon
        conversion, exercise or exchange of such Convertible Securities, and if
        any such issue or sale of such Convertible Securities is made upon
        exercise of any Options for which adjustment of the Conversion Price had
        been or are to be made pursuant to other provisions of this Section
        7(a), no further adjustment of the Conversion Price shall be made by
        reason of such issue or sale. If the Company issues or sells any
        Convertible Securities which are Variable Securities, no adjustment of
        the Conversion Price shall be made pursuant to this Section 7(a), and no
        shares of Common Stock shall be deemed outstanding with respect to such
        Variable Security, as a result of the issuance of such Variable
        Securities until the actual issuance of Common Stock upon exercise of
        such Variable Securities, except to the extent such Variable Security
        also includes as a component of the conversion, exercise or exchange
        price a price which does not vary with the market price of the Common
        Stock.

        (iii) Change in Option Price or Rate of Conversion. If the purchase
        price provided for



                                       11


        in any Options, the additional consideration, if any, payable upon the
        issue, conversion or exchange of any Convertible Securities, or the rate
        at which any Convertible Securities are convertible into or exercisable
        or exchangeable for Common Stock changes at any time, the Conversion
        Price in effect at the time of such change shall be adjusted to the
        Conversion Price which would have been in effect at such time had such
        Options or Convertible Securities provided for such changed purchase
        price, additional consideration or changed conversion rate, as the case
        may be, at the time initially granted, issued or sold. For purposes of
        this Section 7(a)(iii), if the terms of any Option or Convertible
        Security that was outstanding as of the Issuance Date are changed in the
        manner described in the immediately preceding sentence, then such Option
        or Convertible Security and the Common Stock deemed issuable upon
        exercise, conversion or exchange thereof shall be deemed to have been
        issued as of the date of such change. No adjustment shall be made if
        such adjustment would result in an increase of the Conversion Price then
        in effect.

        (iv) Calculation of Consideration Received. In case any Option is issued
        in connection with the issue or sale of other securities of the Company,
        together comprising one integrated transaction in which no specific
        consideration is allocated to such Options by the parties thereto, the
        Options will be deemed to have been issued for a consideration of $.01.
        If any Common Stock, Options or Convertible Securities are issued or
        sold or deemed to have been issued or sold for cash, the consideration
        received therefor will be deemed to be the net amount received by the
        Company therefor. If any Common Stock, Options or Convertible Securities
        are issued or sold for a consideration other than cash, the amount of
        the consideration other than cash received by the Company will be the
        fair value of such consideration, except where such consideration
        consists of securities, in which case the amount of consideration
        received by the Company will be the Closing Sale Price of such
        securities on the date of receipt. If any Common Stock, Options or
        Convertible Securities are issued to the owners of the non-surviving
        entity in connection with any merger in which the Company is the
        surviving entity, the amount of consideration therefor will be deemed to
        be the fair value of such portion of the net assets and business of the
        non-surviving entity as is attributable to such Common Stock, Options or
        Convertible Securities, as the case may be. The fair value of any
        consideration other than cash or securities will be determined jointly
        by the Company and the holders of Notes representing a majority of the
        principal amounts of the Notes then outstanding. If such parties are
        unable to reach agreement within ten days after the occurrence of an
        event requiring valuation (the "VALUATION EVENT"), the fair value of
        such consideration will be determined within five Business Days after
        the tenth day following the Valuation Event by an independent, reputable
        appraiser jointly selected by the Company and the holders of Notes
        representing a majority of the principal amounts of the Notes then
        outstanding. The determination of such appraiser shall be deemed binding
        upon all parties absent manifest error and the fees and expenses of such
        appraiser shall be borne by the Company.

        (v) Record Date. If the Company takes a record of the holders of Common
        Stock for the purpose of entitling them (A) to receive a dividend or
        other distribution payable in Common Stock, Options or in Convertible
        Securities or (B) to subscribe for or purchase



                                       12


        Common Stock, Options or Convertible Securities, then such record date
        will be deemed to be the date of the issue or sale of the shares of
        Common Stock deemed to have been issued or sold upon the declaration of
        such dividend or the making of such other distribution or the date of
        the granting of such right of subscription or purchase, as the case may
        be.

        (vi) Common Stock Deemed Outstanding. "COMMON STOCK DEEMED OUTSTANDING"
        means, at any given time, the number of shares of Common Stock actually
        outstanding at such time, plus the number of shares of Common Stock
        deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii)
        hereof regardless of whether the Options or Convertible Securities are
        actually exercisable at such time, but excluding any shares of Common
        Stock owned or held by or for the account of the Company or issuable
        upon conversion of the Notes or the Separate Tranche Notes.

        (vii) Delayed Adjustment. In addition to the foregoing provisions of
        this Section 7(a), the Weighted Average Price, Closing Sales Price and
        Closing Bid Price shall be subject to adjustment, in accordance with the
        foregoing provisions, for any days during any measuring period used
        herein that occur prior to any of the aforementioned events if such
        events occur prior to the end of such measuring period.

                      (b) Adjustment of Conversion Price upon Subdivision or
Combination of Common Stock. If the Company at any time subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination will be proportionately increased.

                      (c) Other Events. If any event occurs of the type
contemplated by the provisions of this Section 7 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the Holder under this Note;
provided that no such adjustment will increase the Conversion Price as otherwise
determined pursuant to this Section 7.

               (8) NONCIRCUMVENTION. The Company hereby covenants and agrees
that the Company will not, by amendment of its Articles of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of, or enter
into any agreement which by its terms restricts or otherwise impairs the
Company's performance of the terms of, this Note or any of the other Transaction
Documents (as defined in the Securities Purchase Agreement), and will at all
times in good faith carry out all of the provisions of this Note and take all
action as may be required to protect the rights of the Holder of this Note.



                                       13


               (9) RESERVATION OF AUTHORIZED SHARES.

                      (a) Reservation. The Company shall initially reserve out
of its authorized and unissued Common Stock a number of shares of Common Stock
for each of the Notes and the Separate Tranche Notes equal to 115% of the
Conversion Rate with respect to the Conversion Amount of each such Note and
Separate Tranche Note. Thereafter, the Company shall, so long as any of the
Notes or Separate Tranche Notes are outstanding, take all action necessary to
reserve and keep available out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Notes and Separate
Tranche Note, at least 100% of the number of shares of Common Stock as shall
from time to time be necessary to effect the conversion of all of the Notes and
the Separate Tranche Notes then outstanding; provided that at no time shall the
number of shares of Common Stock so reserved be less than the number of shares
required to be reserved by the previous sentence (without regard to any
limitations on conversions) (the "REQUIRED RESERVE AMOUNT"). The initial number
of shares of Common Stock reserved for conversions of the Notes and the Separate
Tranche Note and each increase in the number of shares so reserved shall be
allocated pro rata among the holders of the Notes and Separate Tranche Note
based on the principal amount of the Notes and Separate Tranche Notes held by
each holder at the time of Issuance Date or increase in the number of reserved
shares, as the case may be (the "AUTHORIZED SHARE ALLOCATION"). In the event
that a holder shall sell or otherwise transfer any of such holder's Notes, each
transferee shall be allocated a pro rata portion of such holder's Authorized
Share Allocation. Any shares of Common Stock reserved and allocated to any
Person which ceases to hold any Notes shall be allocated to the remaining
holders of Notes, pro rata based on the principal amount of the Notes then held
by such holders.

                      (b) Insufficient Authorized Shares. If at any time while
any of the Notes or Separate Tranche Note remain outstanding the Company does
not have a sufficient number of authorized and unreserved shares of Common Stock
to satisfy its obligation to reserve for issuance upon conversion of the Notes
and the Separate Tranche Notes at least a number of shares of Common Stock equal
to the Required Reserve Amount (an "AUTHORIZED SHARE FAILURE"), then the Company
shall immediately take all action necessary to increase the Company's authorized
shares of Common Stock to an amount sufficient to allow the Company to reserve
the Required Reserve Amount for the Notes and Separate Tranche Note then
outstanding. Without limiting the generality of the foregoing sentence, as soon
as practicable after the date of the occurrence of an Authorized Share Failure,
but in no event later than 60 days after the occurrence of such Authorized Share
Failure, the Company shall hold a meeting of its shareholders for the approval
of an increase in the number of authorized shares of Common Stock. In connection
with such meeting, the Company shall provide each shareholder with a proxy
statement and shall use its best efforts to solicit its shareholders' approval
of such increase in authorized shares of Common Stock and to cause its board of
directors to recommend to the shareholders that they approve such proposal.

               (10) REDEMPTION.

                      (a) Mechanics. In the event that the Holder has sent a
Redemption Notice to the Company pursuant to Section 4(b) or Section 5(c), the
Holder shall promptly



                                       14


submit this Note to the Company. The Company shall deliver the applicable Event
of Default Redemption Price to the Holder within five Business Days after the
Company's receipt of the Holder's Event of Default Redemption Notice and
thereafter the Holder shall promptly deliver this Note to the Company. If the
Holder has submitted a Change of Control Redemption Notice in accordance with
Section 5(c), the Company shall deliver the applicable Change of Control
Redemption Price to the Holder concurrently with the consummation of such Change
of Control if such notice is received prior to the consummation of such Change
of Control and within five Business Days after the Company's receipt of such
notice otherwise. In the event of a redemption of less than all of the
Conversion Amount of this Note, the Company shall promptly cause to be issued
and delivered to the Holder a new Note (in accordance with Section 18(d))
representing the outstanding Principal which has not been redeemed. In the event
that the Company does not pay the Redemption Price to the Holder within the time
period required above in this Section 10(a) at any time thereafter and until the
Company pays such unpaid Redemption Price in full, the Holder shall have the
option to, in lieu of redemption, require the Company to promptly return to the
Holder all or any portion of this Note representing the Conversion Amount that
was submitted for redemption and for which the applicable Redemption Price
(together with any Late Charges thereon) has not been paid. Upon the Company's
receipt of such notice, (x) the Redemption Notice shall be null and void with
respect to such Conversion Amount, (y) the Company shall immediately return this
Note, or issue a new Note (in accordance with Section 18(d)) to the Holder
representing such Conversion Amount and (z) the Conversion Price of this Note or
such new Notes shall be adjusted to the lesser of (A) the Conversion Price as in
effect on the date on which the Redemption Notice is voided and (B) the lowest
Closing Bid Price during the period beginning on and including the date on which
the Redemption Notice is delivered to the Company and ending on and including
the date on which the Redemption Notice is voided. The Holder's delivery of a
notice voiding a Redemption Notice and exercise of its rights following such
notice shall not affect the Company's obligations to make any payments of Late
Charges which have accrued prior to the date of such notice with respect to the
Conversion Amount subject to such notice.

                      (b) Redemption by Other Holders. Upon the Company's
receipt of notice from any of the holders of the Other Notes or the Separate
Tranche Notes for redemption or repayment as a result of an event or occurrence
substantially similar to the events or occurrences described in Section 4(b) or
Section 5(c) (each an "OTHER REDEMPTION NOTICE"), the Company shall immediately
forward to the Holder by facsimile a copy of such notice. If the Company
receives a Redemption Notice and one or more Other Redemption Notices during the
seven Business Day period beginning on and including the date which is three
Business Days prior to the Company's receipt of the Holder's Redemption Notice
and ending on and including the date which is three Business Days after the
Company's receipt of the Holder's Redemption Notice and the Company is unable to
redeem all principal, interest and other amounts designated in such Redemption
Notice and such Other Redemption Notices received during such seven Business Day
period, then the Company shall redeem a pro rata amount from each holder of the
Notes and the Separate Tranche Notes (including the Holder) based on the
principal amount of the Notes and the Separate Tranche Notes submitted for
redemption pursuant to such Redemption Notice and such Other Redemption Notices
received by the Company during such seven Business Day period.



                                       15


                      (c) Redemption at the Option of the Company. Except in
connection with the satisfaction by the Company of its obligations to redeem the
Notes under Sections 4(b) and 5(c) hereof, without the prior written consent of
the Holder the Company shall not have the right to prepay, redeem, repurchase,
defease or otherwise retire any Note prior to the Final Maturity Date.

                      (11) RESTRICTION ON REDEMPTION. Until all of the Notes
have been converted, redeemed or otherwise satisfied in accordance with their
terms, the Company shall not, directly or indirectly, redeem its capital stock
without the prior express written consent of the holders of Notes representing
at least two-thirds of the aggregate principal amount of the Notes then
outstanding.

                      (12) SUBORDINATION; ADDITIONAL INDEBTEDNESS. Payments of
Principal and Interest and other payments due under this Note shall rank pari
passu in right of payment with all (and shall not be subordinated to any)
unsecured, unsubordinated indebtedness of the Company and will be senior in
right of payment to all subordinated indebtedness of the Company.

                      (13) COVENANTS.

                             (a) Indebtedness. The Company shall not create,
incur, assume, guarantee or suffer to exist, or otherwise become or remain
liable with respect to, any Indebtedness other than Permitted Indebtedness and
Subordinated Indebtedness. "Subordinated Indebtedness" shall mean Indebtedness
that is unsecured and subordinated in right of payment to the Notes and other
obligations owing to the Holders in accordance with a subordination agreement in
form and substance satisfactory to the Holders. "Permitted Indebtedness" shall
mean any Indebtedness that is unsecured and is not senior in right of payment to
the Notes and is otherwise on terms that are no more favorable to the holders
thereof than the terms of the Indebtedness evidenced by the Notes unless such
more favorable terms are offered to the Holders.

                             (b) Liens. The Company shall not create, incur,
assume or suffer to exist, or permit any of its Subsidiaries (other than NRG
Energy Inc. or its subsidiaries (collectively, "NRG")) to create, incur, assume
or suffer to exist, any Lien upon or with respect to any of its properties,
whether now owned or hereafter acquired; sign or suffer to exist any security
agreement authorizing any secured party thereunder to file a Uniform Commercial
Code financing statement (or the equivalent thereof) as notice of a Lien on any
property of the Company or its Subsidiaries; sell any of its property or assets
subject to an understanding or agreement, contingent or otherwise, to repurchase
such property or assets (including sales of accounts receivable) with recourse
to it or any of its Subsidiaries or assign or otherwise transfer, or permit any
of its Subsidiaries (other than the Existing Utility Subsidiaries (as defined in
the Bank Facility)) to assign or otherwise transfer, any account or other right
to receive income; other than, as to all of the above, Permitted Liens. As used
herein, "Permitted Liens" shall have the meaning of that term as defined in the
Five-Year Credit Agreement, dated as of November 10, 2000, among the Company and
the banks listed therein (as the same maybe amended from time to time, the "BANK
FACILITY"). As used herein, "Liens" means any mortgage,



                                       16


deed of trust, pledge, lien (statutory or otherwise), security interest, charge
or other encumbrance or security or preferential arrangement of any nature,
including, without limitation, any conditional sale or title retention
arrangement, any capitalized lease and any assignment, deposit arrangement or
financing lease intended as, or having the effect of, security.

                      (c) Transactions With Affiliates. The Company shall not,
and shall not permit any Subsidiary to, directly or indirectly, effect any
transaction with any Affiliate (as defined in the Bank Facility) that is (a)
outside the ordinary course of business or (b) on a basis less favorable than
would at the time be obtainable for a comparable transaction in arms-length
dealing with an unrelated third party, provided that notwithstanding the
foregoing, no loan, payment or other form of contribution shall be made to NRG
unless it is in an amount not in excess of (i) $300 Million payable pursuant to
the Support Agreement and Capital Subscription Agreement, dated as of May 29,
2002, by and between the Company and NRG Energy Inc. and (ii) $250 Million in
respect of guarantee obligations relating to the power marketing business of
NRG; provided further that with respect to any payment permitted pursuant to
clause (ii) above, the Company shall, in the context of a restructuring of NRG,
use its reasonable best efforts to obtain a full release of all obligations and
liabilities of the Company relating to NRG.

                      (d) Leverage Ratio. The Company shall not permit the
Leverage Ratio set forth in the Bank Facility to be exceeded.

                      (e) Restrictive Agreements. The Company shall not, and
shall not permit any Significant Subsidiary (as defined in the Bank Facility)
other than NRG to, enter into any agreement after the date of this Note that
imposes any restriction on the ability of such Significant Subsidiary to make
payments, directly or indirectly, to its shareholders by way of dividends,
advances, repayment of loans or intercompany charges, expenses or accruals or
other returns on investments that is more restrictive than any such restriction
applicable to such Significant Subsidiary on the Issuance Date.

                      (f) Scope of Business. The Company shall, and shall cause
each Subsidiary to, engage only in energy-related business, functionally related
businesses (as interpreted under PUHCA, as defined in the Securities Purchase
Agreement)or such other businesses as maybe permitted pursuant to an order
issued by the SEC pursuant to PUHCA.


               (14) VOTING RIGHTS. The Holder shall have no voting rights as the
holder of this Note, except as required by law, including but not limited to the
Minnesota Business Corporation Act, and as expressly provided in this Note.

               (15) PARTICIPATION. The Holder, as the holder of this Note, shall
be entitled to (i) all extraordinary or special dividends paid and distributions
made to the holders of Common Stock to the same extent as if the Holder had
converted this Note into Common Stock (without regard to any limitations on
conversion herein or elsewhere) and had held such shares of Common Stock on the
record date for such dividends and distributions and (ii) regular cash dividends
and distributions paid to the holders of the Common Stock only with respect to
that portion of such dividends that exceeds $0.1875 per share of Common Stock in
any calendar quarter (subject to adjustment for stock splits, stock dividends,
stock combinations and other



                                       17


similar transactions after the Issuance Date). Payments under the preceding
sentence shall be made concurrently with the dividend or distribution to the
holders of Common Stock.

               (16) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of Notes representing not less than
two-thirds of the aggregate principal amount of the then outstanding Notes,
shall be required for any change or amendment to this Note or the Other Notes.

               (17) TRANSFER. This Note may be offered, sold, assigned or
transferred by the Holder without the consent of the Company, subject only to
the provisions of Section 2(f) of the Securities Purchase Agreement.

               (18) REISSUANCE OF THIS NOTE.

                      (a) Transfer. If this Note is to be transferred, the
Holder shall surrender this Note to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Note (in
accordance with Section 18(d)), registered as the Holder may request,
representing the outstanding Principal being transferred by the Holder and, if
less then the entire outstanding Principal is being transferred, a new Note (in
accordance with Section 18(d)) to the Holder representing the outstanding
Principal not being transferred. The Holder and any assignee, by acceptance of
this Note, acknowledge and agree that, by reason of the provisions of Section
3(c)(iii) and this Section 18(a), following conversion or redemption of any
portion of this Note, the outstanding Principal represented by this Note may be
less than the Principal stated on the face of this Note.

                      (b) Lost, Stolen or Mutilated Note. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the Company in
customary form and, in the case of mutilation, upon surrender and cancellation
of this Note, the Company shall execute and deliver to the Holder a new Note (in
accordance with Section 18(d)) representing the outstanding Principal.

                      (c) Note Exchangeable for Different Denominations. This
Note is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Note or Notes (in accordance with Section 18(d)
and in principal amounts of at least $100,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.

                      (d) Issuance of New Notes. Whenever the Company is
required to issue a new Note pursuant to the terms of this Note, such new Note
(i) shall be of like tenor with this Note, (ii) shall represent, as indicated on
the face of such new Note, the Principal remaining outstanding (or in the case
of a new Note being issued pursuant to Section 18(a) or Section 18(c), the
Principal designated by the Holder which, when added to the principal
represented by the other new Notes issued in connection with such issuance, does
not exceed the Principal



                                       18


remaining outstanding under this Note immediately prior to such issuance of new
Notes), (iii) shall have an issuance date, as indicated on the face of such new
Note which is the same as the Issuance Date of this Note, (iv) shall have the
same rights and conditions as this Note, and (v) shall represent accrued
Interest and Late Charges on the Principal and Interest of this Note, from the
Issuance Date.

               (19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note, the Securities
Purchase Agreement and the Registration Rights Agreement, at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the Holder's right to pursue actual and consequential
damages for any failure by the Company to comply with the terms of this Note.
Amounts set forth or provided for herein with respect to payments, conversion
and the like (and the computation thereof) shall be the amounts to be received
by the Holder and shall not, except as expressly provided herein, be subject to
any other obligation of the Company (or the performance thereof). The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.

               (20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a)
this Note is placed in the hands of an attorney for collection or enforcement or
is collected or enforced through any legal proceeding or the Holder otherwise
takes action to collect amounts due under this Note or to enforce the provisions
of this Note or (b) there occurs any bankruptcy, reorganization, receivership of
the Company or other proceedings affecting Company creditors' rights and
involving a claim under this Note, then the Company shall pay the costs incurred
by the Holder for such collection, enforcement or action or in connection with
such bankruptcy, reorganization, receivership or other proceeding, including but
not limited to attorneys fees and disbursements.

               (21) CONSTRUCTION; HEADINGS. This Note shall be deemed to be
jointly drafted by the Company and all the Purchasers and shall not be construed
against any person as the drafter hereof. The headings of this Note are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Note.

               (22) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege.

               (23) DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Redemption Price or the arithmetic calculation of the
Conversion Rate or the Redemption Price or any other calculation hereunder, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within one Business Day of receipt of the Conversion



                                       19


Notice or Redemption Notice giving rise to such dispute, as the case may be, to
the Holder. If the Holder and the Company are unable to agree upon such
determination or calculation of the Conversion Rate within one Business Day of
such disputed determination or arithmetic calculation being submitted to the
Holder, then the Company shall, within one Business Day submit via facsimile (a)
the disputed determination of the Weighted Average Price, the Closing Bid Price
or the Closing Sale Price or any other calculation hereunder to an independent,
reputable investment bank selected by the Company and approved by the Holder or
(b) the disputed arithmetic calculation of the Conversion Rate or the Redemption
Price to the Company's independent, outside accountant. The Company, at the
Company's expense, shall cause the investment bank or the accountant, as the
case may be, to perform the determinations or calculations and notify the
Company and the Holder of the results no later than five Business Days from the
time it receives the disputed determinations or calculations. Such investment
bank's or accountant's determination or calculation, as the case may be, shall
be binding upon all parties absent demonstrable error.

               (24) NOTICES; PAYMENTS.

                      (a) Notices. Whenever notice is required to be given under
this Note, unless otherwise provided herein, such notice shall be given in
accordance with Section 9(f) of the Securities Purchase Agreement. The Company
shall provide the Holder with prompt written notice of all actions taken
pursuant to this Note, including in reasonable detail a description of such
action and the reason therefore. Without limiting the generality of the
foregoing, the Company will give written notice to the Holder (i) immediately
upon any adjustment of the Conversion Price, setting forth in reasonable detail,
and certifying, the calculation of such adjustment and (ii) at least twenty days
prior to the date on which the Company closes its books or takes a record (A)
with respect to any dividend or distribution upon the Common Stock, (B) with
respect to any grants, issues or sales of any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property pro rata to
holders of Common Stock or (C) for determining rights to vote with respect to
any Change of Control, dissolution or liquidation, provided in each case that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to such holder. Notwithstanding the foregoing,
Section 4(j) of the Securities Purchase Agreement shall apply to all notices
given pursuant to this Note.

                      (b) Payments. Whenever any payment of cash is to be made
by the Company to any Person pursuant to this Note, such payment shall be made
in lawful money of the United States of America by a check drawn on the account
of the Company and sent via overnight courier service to such Person at such
address as previously provided to the Company in writing (which address, in the
case of each of the Purchasers (as defined in Section 3(d)(ii)), shall initially
be as set forth on the Schedule of Buyers attached to the Securities Purchase
Agreement); provided that the Holder may elect to receive a payment of cash via
wire transfer of immediately available funds by providing the Company with prior
written notice setting out such request and the Holder's wire transfer
instructions. Whenever any amount expressed to be due by the terms of this Note
is due on any day which is not a Business Day, the same shall instead be due on
the next succeeding day which is a Business Day and, in the case of any Interest
Date which is not the date on which this Note is paid in full, the extension of
the due date thereof shall



                                       20


not be taken into account for purposes of determining the amount of Interest due
on such date. Any amount of Interest, Principal or other amount due under the
Transaction Documents (as defined in the Securities Purchase Agreement) which is
not paid when due shall result in a late charge being incurred and payable by
the Company in an amount equal to interest on such amount at the rate of 12% per
annum from the date such amount was due until the same is paid in full ("LATE
CHARGE").

               (25) CANCELLATION. After all Principal, accrued Interest and
other amounts at any time owed on this Note has been paid in full, this Note
shall automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.

               (26) WAIVER OF NOTICE. To the extent permitted by law, the
Company hereby waives demand, notice, protest and all other demands and notices
in connection with the delivery, acceptance, performance, default or enforcement
of this Note and the Securities Purchase Agreement.

               (27) GOVERNING LAW. This Note shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal
laws of the State of Illinois, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Illinois or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of Illinois.

               (28) CERTAIN DEFINITIONS. For purposes of this Note, the
following terms shall have the following meanings:

                      (a) "BUSINESS DAY" means any day other than Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.

                      (b) "CHANGE OF CONTROL TERMINATION DATE" shall mean, with
respect to any proposed Change of Control for which a public announcement that
it proposes or intends to effect a Change of Control of the Company (the date of
such announcement, the "ANNOUNCEMENT DATE") has been made, the date upon which
the Company or other Person proposing to effect such Change of Control
consummates or publicly announces the termination or abandonment of the proposed
Change of Control which was the subject of the previous public announcement.

                      (c) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means,
for any security as of any date, the last closing bid price and last closing
trade price, respectively, for such security on The New York Stock Exchange,
Inc. (the "PRINCIPAL MARKET") as reported by Bloomberg Financial Markets
("BLOOMBERG"), or, if the Principal Market begins to operate on an extended
hours basis and does not designate the closing bid price or the closing trade
price, as the case may be, then the last bid price or last trade price,
respectively, of such security prior to 4:00:00 p.m. Eastern Time as reported by
Bloomberg, or, if the Principal Market is not the principal securities exchange
or trading market for such security, the last closing bid price or last



                                       21


trade price, respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or last
trade price, respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if
no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price or the
Closing Sale Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as
the case may be, of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to Section 23. All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during any applicable calculation period.

                      (d) "COMMON STOCK" means (i) the Company's common stock,
par value $2.50 per share, and (ii) any capital stock resulting from a
reclassification of such Common Stock.

                      (e) "PERSON" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, any other entity and a government or any department
or agency thereof.

                      (f) "REDEMPTION PREMIUM" means (i) in the case of the
Events of Default described in Section 4(a)(i), (ii), (iii), (iv) and (viii),
115% or (ii) in the case of the Events of Default described in Section 4(a)(v) -
(vii), 100%.

                      (g) "REGISTRATION RIGHTS AGREEMENT" means that certain
registration rights agreement between the Company and the initial holders of the
Notes relating to the registration of the resale of the shares of Common Stock
issuable upon conversion of the Notes.

                      (h) "SECURITIES PURCHASE AGREEMENT" means that certain
securities purchase agreement between the Company and the initial holders of the
Notes pursuant to which the Company issued the Notes.

                      (i) "SEPARATE TRANCHE NOTES" means the First Notes, Second
Notes, First Call Notes, Second Call Notes and Third Notes, collectively.

                      (j) "TRADING DAY" means any day on which the Common Stock
is traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the principal securities
exchange or securities market on which the Common Stock is then traded; provided
that "Trading Day" shall not include any day on which the Common Stock is
scheduled to trade on such exchange or market or actually trades on such
exchange or market for less than 4.5 hours.

                      (k) "VARIABLE SECURITIES" means any stock or securities
other than



                                       22


Options directly or indirectly convertible into or exchangeable for Common Stock
("CONVERTIBLE SECURITIES") or any rights, warrants or option to subscribe for or
purchase Common Stock or Convertible Securities ("OPTIONS") that are convertible
into or exchangeable, directly or indirectly, for Common Stock at a price which
varies or may vary with the market price of the Common Stock, including by way
of one or more adjustments or resets to a fixed price (a "VARIABLE PRICE").

                      (l) "WEIGHTED AVERAGE PRICE" means, for any security as of
any date, the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30 a.m., New York Time (or
such other time as the Principal Market publicly announces is the official open
of trading), and ending at 4:00 p.m., New York Time (or such other time as the
Principal Market publicly announces is the official close of trading), as
reported by Bloomberg through its "Volume at Price" functions (ignoring any
trade of more than 100,000 shares of such security pursuant to an individual
transaction (subject to adjustment for stock splits, stock dividends, stock
combinations and other similar transactions involving such security after the
Issuance Date)), or, if the Principal Market is not the principal securities
exchange or trading market for such security, the dollar volume-weighted average
price for such security on the principal securities exchange or trading market
where such security is listed or traded during the period beginning at 9:30
a.m., New York Time (or such other time as such principal securities exchange or
trading market publicly announces is the official open of trading), and ending
at 4:00 p.m., New York Time (or such other time as such principal securities
exchange or trading market publicly announces is the official close of trading),
as reported by Bloomberg through its "Volume at Price" functions (ignoring any
trade of more than 100,000 shares of such security pursuant to an individual
transaction (subject to adjustment for stock splits, stock dividends, stock
combinations and other similar transactions involving such security after the
Issuance Date)), or, if the foregoing does not apply, the dollar volume-weighted
average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30 a.m., New
York Time (or such other time as the Principal Market publicly announces is the
official open of trading), and ending at 4:00 p.m., New York Time (or such other
time as the Principal Market publicly announces is the official close of
trading), as reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg for such hours, the average of
the highest closing bid price and the lowest closing ask price of any of the
market makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Weighted Average Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the Weighted
Average Price of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to Section 23. All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during applicable calculation period.


                            [SIGNATURE PAGE FOLLOWS]




                                       23


        IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
as of the Date of Issuance set out above.

                                            XCEL ENERGY INC.



                                            By:
                                               ---------------------------------
                                                  Name:
                                                  Title: Chief Executive Officer






                                    EXHIBIT I

                                XCEL ENERGY INC.
                                CONVERSION NOTICE

Reference is made to the Convertible Note (the "NOTE") issued to the undersigned
by XCEL ENERGY INC. (the "COMPANY"). In accordance with and pursuant to the
Note, the undersigned hereby elects to convert the Conversion Amount (as defined
in the Note) of the Note indicated below into shares of Common Stock, par value
$2.50 per share (the "COMMON STOCK"), of the Company as of the date specified
below.

        Date of Conversion:
                           -----------------------------------------------------

        Aggregate Conversion Amount to be converted:
                                                    ----------------------------

Please confirm the following information:

        Conversion Price:
                         -------------------------------------------------------

        Number of shares of Common Stock to be issued:
                                                      --------------------------

Please issue the Common Stock into which the Note is being converted and, if
applicable, any check drawn on an account of the Company in the following name
and to the following address:

        Issue to:
                 ---------------------------------------------------------------
                 ---------------------------------------------------------------
                 ---------------------------------------------------------------

        Facsimile Number:
                         -------------------------------------------------------

        Authorization:
                      ----------------------------------------------------------
               By:
                  --------------------------------------------------------------
                                                   Title:
                                                         -----------------------
Dated:
      --------------------------------------------------------------------------

        Account Number:
                       ---------------------------------------------------------
          (if electronic book entry transfer)

        Transaction Code Number:
                                ------------------------------------------------
          (if electronic book entry transfer)





                                 ACKNOWLEDGMENT


        The Company hereby acknowledges this Conversion Notice and hereby
directs [TRANSFER AGENT] to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated November 8, 2002
from the Company and acknowledged and agreed to by [TRANSFER AGENT].

                                            XCEL ENERGY INC.



                                            By:
                                               ---------------------------------
                                                  Name:
                                                  Title:

EX-99.01

                 EXHIBIT 99.01 - XCEL ENERGY CAUTIONARY FACTORS

The Private Securities Litigation Reform Act provides a "safe harbor" for
forward-looking statements to encourage disclosures without the threat of
litigation, providing those statements are identified as forward-looking and are
accompanied by meaningful, cautionary statements identifying important factors
that could cause the actual results to differ materially from those projected in
the statement. Forward-looking statements are made in written documents and oral
presentations of Xcel Energy. These statements are based on management's beliefs
as well as assumptions and information currently available to management. When
used in Xcel Energy's documents or oral presentations, the words "anticipate,"
"estimate," "expect," "projected," objective," "outlook," "forecast,"
"possible," "potential" and similar expressions are intended to identify
forward-looking statements. In addition to any assumptions and other factors
referred to specifically in connection with such forward-looking statements,
factors that could cause Xcel Energy's actual results to differ materially from
those contemplated in any forward-looking statements include, among others, the
following:

o    Economic conditions, including inflation rates, monetary fluctuations and
     their impact on capital expenditures;

o    The risk of a significant slowdown in growth or decline in the U.S.
     economy, the risk of delay in growth recovery in the U.S. economy or the
     risk of increased cost for insurance premiums, security and other items as
     a consequence of the Sept. 11, 2001, terrorist attacks;

o    Trade, monetary, fiscal, taxation and environmental policies of
     governments, agencies and similar organizations in geographic areas where
     Xcel Energy has a financial interest;

o    Customer business conditions, including demand for their products or
     services and supply of labor and materials used in creating their products
     and services;

o    Financial or regulatory accounting principles or policies imposed by the
     Financial Accounting Standards Board, the SEC, the Federal Energy
     Regulatory Commission and similar entities with regulatory oversight;

o    Availability of credit or cost of capital, changes in: interest rates;
     market perceptions of the utility industry, Xcel Energy or any of its
     subsidiaries; or security ratings;

o    Effect of recent credit agency actions;

o    Factors affecting utility and nonutility operations such as unusual weather
     conditions; catastrophic weather-related damage; unscheduled generation
     outages, maintenance or repairs; unanticipated changes to fossil fuel,
     nuclear fuel or gas supply costs or availability due to higher demand,
     shortages, transportation problems or other developments; nuclear or
     environmental incidents; or electric transmission or gas pipeline
     constraints;

o    Employee workforce factors, including loss or retirement of key executives,
     collective bargaining agreements with union employees, or work stoppages;

o    Increased competition in the utility industry or additional competition in
     the markets served by Xcel Energy and its subsidiaries;

o    State, federal and foreign legislative and regulatory initiatives that
     affect cost and investment recovery, have an impact on rate structures and
     affect the speed and degree to which competition enters the electric and
     gas markets; industry restructuring initiatives; transmission system
     operation and/or administration initiatives; recovery of investments made
     under traditional regulation; nature of competitors entering the industry;
     retail wheeling; a new pricing structure; and former customers entering the
     generation market;

o    Rate-setting policies or procedures of regulatory entities, including
     environmental externalities, which are values established by regulators
     assigning environmental costs to each method of electricity generation when
     evaluating generation resource options;

o    Nuclear regulatory policies and procedures, including operating regulations
     and spent nuclear fuel storage;

o    Social attitudes regarding the utility and power industries;

o    Risks associated with the California power and other western markets;

o    Cost and other effects of legal and administrative proceedings,
     settlements, investigations and claims;

o    Technological developments that result in competitive disadvantages and the
     potential for impairment of existing assets;

o    Factors associated with nonregulated investments, including risks
     associated with timely completion of projects, including obtaining
     competitive contracts and construction delays, foreign government actions,
     foreign economic and currency risks, political instability in foreign
     countries, partnership actions, competition, operating risks, dependence on
     certain suppliers and customers, domestic and foreign environmental and
     energy regulations;

o    Many of the project investments made by Xcel Energy's subsidiary NRG, Inc.
     consist of minority interests, and a substantial portion of future
     investments may take the form of minority interests, which limits NRG's
     ability to control the development or operation of the project;

o    The realization of expectations regarding the NRG financial improvement
     plan; and

o    Other business or investment considerations that may be disclosed from time
     to time in Xcel Energy's SEC filings or in other publicly disseminated
     written documents.

Xcel Energy undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. The foregoing review of factors should not be construed as
exhaustive.

EX-99.02

                      EXHIBIT 99.02 - OFFICER CERTIFICATION


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


         In connection with the Quarterly Report of Xcel Energy Inc. (Xcel
Energy) on Form 10-Q for the quarter ended Sept. 30, 2002, as filed with the
Securities and Exchange Commission on the date hereof (Form 10-Q), each of the
undersigned officers of the Xcel Energy certifies, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to such officer's knowledge:

         (1)      The Form 10-Q fully complies with the requirements of Section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

         (2)      The information contained in the Form 10-Q fairly presents, in
                  all material respects, the financial condition and results of
                  operations of Xcel Energy as of the dates and for the periods
                  expressed in the Form 10-Q.



Date: November 18, 2002
                                       /s/ Wayne H. Brunetti
                                       -----------------------------------------
                                       Wayne H. Brunetti
                                       Chairman, President and Chief Executive
                                       Officer

                                       /s/ Richard C. Kelly
                                       -----------------------------------------
                                       Richard C. Kelly
                                       Vice President and Chief Financial
                                       Officer


         The foregoing certification is being furnished solely pursuant to 18
U.S.C. Section 1350 and is not being filed as part of the Report or as a
separate disclosure document.