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(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. o

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o


(1)	In accordance with Rule 457(f)(2) under the Securities Act of 1933, as amended, the registration fee is based on the book value, which has been calculated as of January 19, 2004, of the outstanding Series C Senior Notes, 6% due 2033 of Southwestern Public Service Company to be canceled in the exchange transaction hereunder.

Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act of 1933. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for original notes where such original notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The registrant has agreed that, starting on the expiration date and ending on the close of business 210 days after the expiration date, it will make this prospectus available to any broker-dealer for use in connection with any such resale. See “Plan of Distribution.”

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until we file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not exchange these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted.

We are offering to exchange notes registered under the Securities Act of 1933, as amended, for a like principal amount of original notes that we issued in a private placement that closed on October 6, 2003.

The terms of the exchange notes are substantially identical to the terms of the original notes, except that the exchange notes will not contain transfer restrictions and will not have the registration rights that apply to the original notes or entitle their holders to additional interest in the event we fail to comply with these registration rights. The terms and conditions of the exchange offer are more fully described in this prospectus.

JPMorgan Chase Bank is serving as the exchange agent. If you wish to tender your original notes, you must complete, execute and deliver, among other things, a letter of transmittal to the exchange agent no later than 5:00 p.m., New York City time, on the expiration date.

You may withdraw tenders of original notes at any time prior to the expiration of the exchange offer. We will exchange all original notes that are validly tendered and not withdrawn prior to the expiration of the exchange offer.

Any outstanding original notes not validly tendered will remain subject to existing transfer restrictions.

There is no existing market for the exchange notes offered by this prospectus and we do not intend to apply for their listing on any securities exchange or any automated quotation system.

We believe that the exchange of original notes for exchange notes will not be taxable for United States federal income tax purposes. See “Material United States Federal Income Tax Considerations.”

The exchange notes will have the same terms and covenants as the original notes, and will be subject to the same business and financial risks.

You should consider carefully the “Risk Factors” beginning on page 10 of this prospectus before tendering your original notes for exchange.

We are not asking you for a proxy and you are requested not to send us a proxy.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

You should rely only on the information provided in this prospectus. We have not authorized anyone else to provide you with different information. This prospectus does not constitute an offer of these securities in any state where the offer is not permitted. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front of this prospectus.

This prospectus contains statements that are not historical fact and constitute “forward-looking statements.” When we use words like “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “objective,” “outlook,” “plans,” “possible,” “potential,” “projected,” “should” or similar expressions, or when we discuss our strategy or plans, we are making forward-looking statements. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Our future results may differ materially from those expressed in these forward-looking statements. These statements are necessarily based upon various assumptions involving judgments with respect to the future and other risks, including, among others:


	•	general economic conditions, including their impact on capital expenditures;

	•	business conditions in the retail and wholesale energy industry;

	•	competitive factors, including the extent and timing of the entry of additional competition in the markets served by us;

	•	unusual weather;


	•	changes in federal or state legislation, including the status and implementation of restructuring legislation in Texas and New Mexico, our two primary jurisdictions;

	•	regulation and regulatory initiatives that affect cost and investment recovery and have an impact on rate structures;

	•	rating agency action;

	•	our ability, and that of our affiliates, to access the capital markets and obtain credit on favorable terms;

	•	costs and other effects of legal and administrative proceedings, settlements, investigations and claims, including without limitation claims brought against our parent, Xcel Energy Inc.;

	•	effects of geopolitical events, including war and acts of terrorism;

	•	changes in accounting principles; and

	•	the other risk factors discussed under “Risk Factors.”

You are cautioned not to rely unduly on any forward-looking statements. These risks and uncertainties are discussed in more detail under “Risk Factors,” “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the notes to the audited consolidated financial statements and interim consolidated financial statements included in this prospectus.

We undertake 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.

SUMMARY

This summary highlights some of the information contained elsewhere in this prospectus. Because this is only a summary, it does not contain all of the information that may be important to you. For a more complete understanding of this exchange offer, we encourage you to read this entire prospectus and the documents to which we refer you in deciding whether to exchange your original notes for exchange notes. The term “original notes” as used in this prospectus refers to our outstanding series C senior notes, 6% due 2033 that we issued on October 6, 2003 and that have not been registered under the Securities Act of 1933, as amended (the “Securities Act”). The term “exchange notes” refers to our series D senior notes, 6% due 2033 offered under this prospectus.

In this prospectus, except as otherwise indicated or as the context otherwise requires, “Southwestern Public Service Company,” “SPS,” “we,” “our,” and “us” refer to Southwestern Public Service Company, a New Mexico corporation.

Our Company

General

We are an operating utility engaged primarily in the generation, transmission, distribution and sale of electricity. We serve approximately 390,000 retail electric customers in portions of Texas, New Mexico, Oklahoma and Kansas. A major portion of our retail revenue is derived from operations in Texas. We derive a significant portion of our operating revenues from the wholesale sale of electric capacity and energy. Substantially all of this part of our business is comprised of sales of capacity and/or energy from our own generating facilities under long-term contracts.

We were incorporated in 1921 under the laws of the State of New Mexico. On August 1, 1997, we combined with Public Service Company of Colorado to form New Century Energies, Inc. (“NCE”), and we became a wholly owned subsidiary of NCE, a registered holding company under the Public Utility Holding Company Act of 1935 (“PUHCA”). On August 18, 2000, NCE merged into Northern States Power Company (“NSP”), which subsequently changed its name to Xcel Energy Inc. (“Xcel Energy”). We are now a wholly owned subsidiary of Xcel Energy. Xcel Energy is a registered holding company under PUHCA. Xcel Energy is a publicly held company and files periodic reports and other documents with the Securities and Exchange Commission (“SEC”). A majority of the members of our Board of Directors and many of our executive officers are also executive officers of Xcel Energy.

Among Xcel Energy’s other subsidiaries are Northern States Power Company, a Minnesota corporation (“NSP-Minnesota”), Public Service Company of Colorado, a Colorado corporation (“PSCo”), Northern States Power Company, a Wisconsin corporation (“NSP-Wisconsin”) and Cheyenne Light, Power and Fuel Company, a Wyoming corporation (“Cheyenne”). Prior to December 5, 2003, Xcel Energy owned all of the common stock of NRG Energy, Inc., a Delaware corporation (“NRG”). NRG is a global energy company, primarily engaged in the ownership and operation of power generation facilities and the sale of energy, capacity and related products. On May 14, 2003, NRG filed a voluntary petition for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. On December 5, 2003, NRG emerged from bankruptcy and Xcel Energy divested its ownership interest in NRG. On January 13, 2004, Xcel Energy announced that it had entered into an agreement with Black Hills Corp. for the sale of Cheyenne, pending regulatory approvals.

At December 31, 2003, we owned a direct subsidiary, Southwestern Public Service Capital I (“SPS Capital I”), a special purpose financing trust formed under the laws of the State of Delaware. A certificate of cancellation was filed to dissolve SPS Capital I on January 5, 2004.

Our principal executive offices are located at Tyler at Sixth Street, Amarillo, Texas 79101, and our telephone number is (303) 571-7511.

Regulatory Overview

As a subsidiary of a registered holding company under PUHCA, we are subject to the regulatory oversight of the SEC under PUHCA. As a result, we are subject to extensive regulation by the SEC with respect to issuances and sales of securities, acquisitions and sales of certain utility properties and intra-system sales of certain goods and services. In addition, PUHCA generally limits our ability to acquire additional public utility systems and to acquire and retain businesses unrelated to utility operations.

The Public Utility Commission of Texas (“PUCT”) has jurisdiction over our Texas operations as an electric utility and over our retail rates and services. The municipalities in which we operate in Texas have original jurisdiction over our rates in those communities. The New Mexico Public Regulatory Commission (“NMPRC”) has jurisdiction over the issuance of securities and accounting. The NMPRC, the Oklahoma Corporation Commission (“OCC”) and the Kansas Corporation Commission (“KCC”) have jurisdiction with respect to retail rates and services in their respective states. We are subject to the jurisdiction of the Federal Energy Regulatory Commission (the “FERC”) with respect to our wholesale electric operations, accounting practices, wholesale sales for resale and the transmission of electricity in interstate commerce. We have received authorization from the FERC to make wholesale electricity sales at market-based prices.

We are unable to predict the impact on our operating results from the future regulatory activities of any of these agencies. We are responsible for compliance with all rules and regulations issued by the various agencies.

Recent Developments


	*NRG Bankruptcy*

Commencing on May 14, 2003, NRG and certain of NRG’s affiliates filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code to restructure their debt. Neither Xcel Energy nor any of its other subsidiaries, including us, were included in the filing. NRG’s plan of reorganization filed with the U.S. Bankruptcy Court for the Southern District of New York incorporated the terms of an overall settlement among Xcel Energy, NRG and NRG’s major creditor constituencies that provided for payments by Xcel Energy to NRG, and that NRG would pay in turn to its creditors, of up to $752 million. NRG’s plan of reorganization was approved by its creditors and the bankruptcy court, and on December 5, 2003, NRG completed its reorganization and emerged from bankruptcy and Xcel Energy divested its ownership interest in NRG.


	*TRANSLink*

On November 21, 2003, the TRANSLink participants, including Xcel Energy, jointly announced that formation of the proposed TRANSLink Transmission Company LLC had been suspended.


	*FERC Rules and Orders*

The FERC has issued several recent regulatory orders or rules that will impact our future operations and costs. First, in August 2003, the FERC issued final rules requiring the standardization of generation interconnection procedures and agreement for interconnection to the transmission systems of all FERC-jurisdictional electric utilities, including us, and establishing pricing rules for interconnections and related system upgrades. In October 2003, the FERC issued final rules asserting jurisdiction over “money pool” arrangements by public utilities, including such arrangements by registered holding company systems regulated by the SEC. We entered into a money pool agreement with Xcel Energy and the other Xcel Energy operating companies in November 2003, subject to receipt of required state regulatory approvals. In November 2003, the FERC issued an order requiring amendments to the market-based wholesale tariffs of all FERC-jurisdictional electric utilities, including us, to impose new market behavior rules, and requiring submission of compliance tariff amendments in December 2003; violations of the new tariffs could result in the disgorgement of certain wholesale sales revenues or even the loss of authority to make sales at market based rates. Finally, in December 2003, the FERC issued final standards of conduct rules affecting all FERC-jurisdictional transmission utilities, which will require greater functional separation of our electric transmission

functions from our wholesale energy markets functions and from our “energy affiliates” (as defined by the final rule). Full compliance with the standards of conduct rules is required by June 1, 2004. Management has not yet estimated the cost of compliance with the new standards of conduct rules, but the cost could be material.

In addition, the Southwest Power Pool (“SPP”), the regional reliability council and power pool for the SPS system, filed in October 2003 for FERC authorization to transform its operation into a Regional Transmission Organization (“RTO”) under regulations issued by the FERC in 1999, known as FERC Order No. 2000. If we become a member of the SPP RTO, we would be required to transfer functional control of our electric transmission system to SPP. In addition, SPP made unilateral changes to the existing SPP membership agreement in a manner which increases the current costs of our membership in SPP by approximately $1.5 million per year. On October 31, 2003, we submitted a conditional notice of withdrawal from SPP in order to preserve our flexibility with regard to future RTO membership.


	*State Regulatory Matters*

Beginning in April 2003, we estimated electricity usage for approximately 9,500 customer accounts in two New Mexico cities. Estimated bills were sent to these customers for between two and five months. On September 25, 2003, the NMPRC entered an order opening an investigation into our practices regarding estimated billing. The commission ordered us to show cause why we are not in violation of the commission rule that limits the use of estimated meter readings.

As part of the September 25, 2003 order, the NMPRC also implemented temporary billing measures for customers whose bills were estimated. The temporary billing measures: (i) require us to apply the lowest fuel and purchased power cost adjustment factor that was applicable during the period when bills were being estimated, (ii) allow customers 6 months to pay bills in full without additional charges or disconnection, (iii) prohibited disconnection of service until November 1, 2003 for any customer that received an estimated bill, (iv) require us to work with the NMPRC staff on a written explanation of the fuel calculation used under the order, and (v) order us to report the amount of fuel and purchased power costs foregone as a result of the interim relief, which amount we will not be allowed to recoup from customers. The deadline for intervention has passed and no parties other than us and the NMPRC staff are parties to the investigation proceeding. The hearings examiner has not set a procedural schedule.

Summary of the Exchange Offer

On October 6, 2003, we completed the private offering of $100 million in aggregate principal amount of our series C senior notes, 6% due 2033. These original notes were not registered under the Securities Act and, therefore, they are subject to significant restrictions on resale. Accordingly, when we sold these original notes, we entered into a registration rights agreement with the initial purchasers that requires us to deliver to you this prospectus and to permit you to exchange your original notes for exchange notes that have substantially identical terms to the original notes, except that the exchange notes will be freely transferable and will not have covenants regarding registration rights or additional interest. The exchange notes will be issued under the same indenture under which the original notes were issued and, as a holder of the exchange notes, you will be entitled to the same rights under the indenture that you had as a holder of original notes.

Set forth below is a summary description of the terms of the exchange offer.


Exchange Offer		We are offering to exchange up to $100 million in aggregate principal amount of exchange notes for a like aggregate principal amount of original notes. Original notes may be tendered only in increments of $1,000.

Expiration Date		The exchange offer will expire at 5:00 p.m., New York City time, on , 2004, unless we extend it. We do not currently intend to extend the exchange offer.

Interest on the Exchange Notes		Interest on the exchange notes will accrue at the rate of 6 percent per year from the date of the last periodic payment of interest on the original notes or, if no interest has been paid, from October 6, 2003.

Conditions to the Exchange Offer		The exchange offer is subject to customary conditions, including that:

		• there is no change in law, regulation or any applicable interpretation of the SEC staff that prevents us from proceeding with the exchange offer;

		• there is no action or proceeding, pending or threatened, that would impair our ability to proceed with the exchange offer;

		• no stop order has been issued by the SEC or any state securities authority suspending the effectiveness of the registration statement of which this prospectus is a part;

		• all government approvals necessary for the consummation of the exchange offer have been obtained; and

		• no change in our business or financial affairs has occurred that might materially impair our ability to proceed with the exchange offer.

Procedure for Exchanging Original Notes		If the original notes you wish to exchange are registered in your name:

		• you must complete, sign and date the letter of transmittal and mail or otherwise deliver it, together with any other required documentation, to JPMorgan Chase Bank, as exchange agent, at the address specified on the cover page of the letter of transmittal.


		If the original notes you wish to exchange are in book-entry form and registered in the name of a broker, dealer or other nominee:

		• you must contact the broker, dealer, commercial bank, trust company or other nominee in whose name your original notes are registered and instruct it to tender your original notes on your behalf. You must comply with the procedures of The Depository Trust Company (“DTC”) for tender and delivery of book-entry securities in order to validly tender your original notes for exchange.

		Questions regarding the exchange of original notes or the exchange offer generally should be directed to the exchange agent at the address specified under the caption “The Exchange Offer — Exchange Agent.”

Guaranteed Delivery Procedures		If you wish to exchange your original notes and you cannot deliver the required documents to the exchange agent by the expiration date or you cannot tender and deliver your original notes in accordance with DTC’s procedures by the expiration date, you may tender your original notes according to the guaranteed delivery procedures described under the caption “The Exchange Offer — Guaranteed Delivery Procedures.”

Withdrawal Rights		You may withdraw the tender of your original notes at any time before 5:00 p.m., New York City time, on the expiration date of the exchange offer.

Acceptance of Original Notes and Delivery of Exchange Notes		We will accept for exchange any and all original notes that are properly tendered in the exchange offer before 5:00 p.m., New York City time, on the expiration date, as long as all of the terms and conditions of the exchange offer are met. We will deliver the exchange notes promptly following the expiration date.

Resale of Exchange Notes		Based on interpretations by the staff of the SEC, as detailed in a series of no-action letters issued by the SEC to third parties, we believe that you may offer for resale, resell or otherwise transfer the exchange notes without complying with the registration and prospectus delivery requirements of the Securities Act if:

		• you are acquiring the exchange notes in the ordinary course of your business and do not hold any original notes to be exchanged in the exchange offer that were acquired other than in the ordinary course of business;

		• you are not a broker-dealer tendering original notes acquired directly from us;

		• you are not participating, do not intend to participate and have no arrangements or understandings with any person to participate in the exchange offer for the purpose of distributing the exchange notes; and

		• you are not our “affiliate” within the meaning of Rule 405 under the Securities Act.


		If any of these conditions is not satisfied and you transfer any exchange notes without delivering a proper prospectus or without qualifying for a registration exemption, you may incur liability under the Securities Act.

		Each broker or dealer that receives exchange notes for its own account in exchange for original notes that were acquired as a result of market-making or other trading activities must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of the exchange notes.

Consequences of Failure to Exchange		If you do not exchange your original notes for exchange notes, you will not be able to offer, sell or otherwise transfer the original notes except:

		• in compliance with the registration requirements of the Securities Act and any other applicable securities laws;

		• pursuant to an exemption from the securities laws; or

		• in a transaction not subject to the securities laws.

		Original notes that remain outstanding after completion of the exchange offer will continue to bear a legend reflecting these restrictions on transfer. In addition, upon completion of the exchange offer, you will not be entitled to any rights to have the resale of original notes registered under the Securities Act (subject to limited exceptions applicable only to certain qualified institutional buyers). We currently do not intend to register under the Securities Act the resale of any original notes that remain outstanding after completion of the exchange offer.

		Upon completion of the exchange offer, there may be no market for the original notes, and if you fail to exchange the original notes, you may have difficulty selling them.

United States Federal Income Tax Considerations		Your acceptance of the exchange offer and the exchange of your original notes for exchange notes will not be taxable for U.S. federal income tax purposes. See “Material United States Federal Income Tax Considerations” beginning on page 80.

Exchange Agent		JPMorgan Chase Bank is serving as exchange agent for the exchange offer.

Appraisal or Dissenter’s Rights		You will have no appraisal or dissenters’ rights in connection with the exchange offer.

Summary Description of the Exchange Notes

The terms of the exchange notes we are issuing in the exchange offer and the original notes are identical in all material respects, except that:

• the exchange notes will have been registered under the Securities Act;

• the exchange notes will not contain transfer restrictions; and

• the exchange notes will not have the registration rights that apply to the original notes or entitle their holders to additional interest in the event we fail to comply with these registration rights.

A brief description of the material terms of the exchange notes is set forth below:


Securities Offered		$100,000,000 principal amount of series D senior notes, 6% due 2033.

Maturity		October 1, 2033.

Interest Rate		6 percent per year.

Interest Payment Dates		April 1 and October 1 of each year, beginning on April 1, 2004.

Ranking		The exchange notes will be our unsecured and unsubordinated obligations and will rank on a parity in right of payment with all our existing and future unsecured and unsubordinated indebtedness. The indenture under which the exchange notes will be issued does not prevent us from incurring additional indebtedness, which may be secured by some or all of our assets. We currently have no outstanding secured debt and no outstanding subordinated debt obligations. As of December 31, 2003, we had approximately $826.8 million of unsecured and unsubordinated obligations outstanding, which amount includes the original notes.

Ratings		The exchange notes have been assigned a rating of “BBB” (CreditWatch positive) by Standard & Poor’s Ratings Services (“Standard & Poor’s”) and “Baa1” (under review for possible upgrade) by Moody’s Investors Services, Inc. (“Moody’s”). For a description of events affecting our credit ratings, see “Risk Factors.” Ratings from credit agencies are not recommendations to buy, sell or hold our securities and may be subject to revision or withdrawal at any time by the applicable rating agency and should be evaluated independently of any other ratings.

Optional Redemption		We may redeem the exchange notes at any time, in whole or in part, at a “make whole” redemption price equal to the greater of (1) the principal amount being redeemed or (2) the sum of the present values of the remaining scheduled payments of principal and interest on the exchange notes being redeemed, discounted to the date fixed for redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield (as defined below under the caption “Description of the Exchange Notes”) plus 20 basis points, plus in each case accrued and unpaid interest to the date fixed for redemption.

Use of Proceeds		We will not receive any proceeds from the issuance of the exchange notes. We are making the exchange offer solely to satisfy our obligations under the registration rights agreement that we

Summary Historical Financial Data

The following tables present our summary consolidated historical financial data. The data presented in these tables are from “Selected Consolidated Financial Data” included elsewhere in this prospectus. You should read that section for a further explanation of the consolidated financial data summarized here. You should also read the summary consolidated financial data presented below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our audited and unaudited consolidated financial statements and related notes and other financial information contained in this prospectus. The historical financial information may not be indicative of our future performance.



	Nine months ended
	September 30,				Year ended December 31,

	2003		2002		2002		2001		2000(1)		1999		1998


	(Thousands of dollars, except ratios)
Consolidated Statement of Operations Data:
Operating revenue	$	909,402	$	770,466	$	1,025,178	$	1,385,458	$	1,079,580	$	925,937	$	951,187
Operating income	$	143,673	$	132,147	$	165,118	$	230,557	$	198,253	$	212,759	$	231,375
Interest charges and financing costs	$	39,187	$	40,292	$	53,898	$	52,917	$	70,718	$	61,435	$	58,303
Net income	$	67,112	$	59,918	$	73,882	$	130,100	$	69,492	$	102,709	$	114,987
Other Consolidated Financial Data
Ratio of earnings to fixed charges(2)		3.8		3.3		3.1		4.5		2.7		3.5		3.8


	September 30, 2003

	(Thousands of dollars)
Consolidated Balance Sheet Data:
Total assets	$	2,290,669
Long-term debt	$	725,878
Mandatorily redeemable preferred securities of subsidiary trusts(3)	$	100,000
Common stockholder’s equity	$	796,973
Total capitalization	$	1,622,851

(1) The 2000 Consolidated Statement of Operations Data has been adjusted to reflect the implementation of Statement of Financial Accounting Standard (“SFAS”) No. 145, which became effective in 2003 and requires retroactive restatement of prior periods. Interest charges and financing costs of $8.225 million related to the defeasance of our first mortgage bonds, previously disclosed in Extraordinary items, was reclassified to Interest charges and financing costs. Associated income tax benefits of $2.923 million have been reclassified from Extraordinary items to Income taxes. The reclassification had no impact on operating income or net income. The 2000 financial data were derived from financial statements audited by Arthur Andersen LLP, independent public accountants. However, due to the reclassification required by SFAS No. 145, the Consolidated Statement of Operations Data in the Summary Historical Financial Data disclosed above does not agree to the financial statements as audited by Arthur Andersen LLP with respect to Interest charges and financing costs. We have been unable to obtain the consent of Arthur Andersen LLP to the use of their report in this prospectus.

(2) For purposes of computing the ratio of earnings to fixed charges, (1) earnings consist of net income plus fixed charges, federal and state income taxes, deferred income taxes and investment tax credits; and (2) fixed charges consist of interest on long-term debt, other interest charges, the interest component on leases and amortization of debt discount, premium and expense.

(3) On October 15, 2003, we redeemed $100 million of our mandatorily redeemable preferred securities of our subsidiary trust (together with our Subordinated Debenture).

You should carefully consider the risks described below as well as other information contained in this prospectus before exchanging your original notes. The risks described in this section are those that we consider to be the most significant to your decision whether to invest in our exchange notes. If any of the events described below occurs, our business, financial condition or results of operations could be materially harmed. In addition, we may not be able to make payments on the exchange notes, and this could result in your losing all or part of your investment.

We are an operating electric utility and a subsidiary of Xcel Energy. Xcel Energy has a number of other utility and non-utility subsidiaries.

Xcel Energy provides various guarantees and bond indemnities supporting some of its subsidiaries by guaranteeing the payment or performance by these subsidiaries of specified agreements or transactions. 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 Xcel Energy’s guarantees limit its exposure to a maximum amount that is stated in the guarantees. As of September 30, 2003, Xcel Energy had guarantees outstanding with a maximum stated amount of approximately $329 million of which $80 million related to Xcel Energy’s former subsidiary, NRG, and actual aggregate exposure of approximately $18 million, which amount will vary over time. Xcel Energy has provided indemnities to sureties in respect of bonds for the benefit of its subsidiaries. The total amount of bonds with these indemnities outstanding as of September 30, 2003 was approximately $33 million, of which $6 million related to NRG. As part of the consummation of NRG’s plan of reorganization, NRG provided Xcel Energy with cash collateral (which NRG may replace with letters of credit) that has the effect of eliminating Xcel Energy’s exposure under the guarantees and sureties related to NRG. If Xcel Energy were to become obligated to make payments under these guarantees and bond indemnities, it could limit Xcel Energy’s ability to contribute equity or make loans to us, or may cause Xcel Energy to seek, within certain regulatory limitations and the limitations provided by corporate law, additional or accelerated funding from us in the form of dividends. If such event were to occur, we may need to seek alternative sources of funds to meet our cash needs.

If either Standard & Poor’s or Moody’s were to downgrade Xcel Energy’s credit rating below investment grade, 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. If either Standard & Poor’s or Moody’s were to downgrade Xcel Energy’s debt securities below investment grade, it would increase Xcel Energy’s cost of capital and restrict its access to the capital markets. This would limit Xcel Energy’s ability to contribute equity or make loans to us, or may cause Xcel Energy to seek additional or accelerated funding from us in the form of dividends. If such event were to occur, we may need to seek alternative sources of funds to meet our cash needs.

We rely on Xcel Energy Services Inc. (“Xcel Energy Services”), a subsidiary service company of Xcel Energy, for many administrative services. If Xcel Energy were to experience severe financial difficulties, it could temporarily disrupt the provision of these services or cause us to provide those services ourselves, at potentially greater cost.

PUHCA contains limitations on the ability of registered holding companies and certain of their subsidiaries to issue securities. Such registered holding companies and their subsidiaries may not issue securities unless authorized by an exemptive rule or order of the SEC. For utility subsidiaries like us, one of the exemptive rules permits utilities to issue securities to finance their business so long as the issuance has been approved by the appropriate state utility commission. In our case, this offering and our other borrowings have been authorized by the NMPRC and are exempt under this rule. To the extent we wish to issue securities that are not exempt by rule under PUHCA, we will need to seek authorization from the SEC under PUHCA.

Because Xcel Energy does not qualify for any of the main exemptive rules, it sought and received financing authority from the SEC under PUHCA for various financing arrangements. Xcel Energy’s current financing authority permits it, subject to satisfaction of certain conditions, to issue through June 30, 2005 up to $2.5 billion of common stock and long-term debt and $1.5 billion of short-term debt at the holding company level. Xcel Energy has issued $2 billion of long-term debt and common stock.

One of the conditions of the SEC financing order, which also includes authorization for intra-system loans for the Xcel Energy subsidiaries to the extent not otherwise exempt, is that Xcel Energy’s ratio of common equity to total capitalization, on a consolidated basis, be at least 30 percent.

During 2002 and 2003, Xcel Energy was required to record significant asset impairment losses from sales or divestitures of NRG assets and businesses, from NRG’s canceling or deferring the funding of certain projects under construction and from NRG’s deciding not to contribute additional funds to certain projects already operating. As a result, Xcel Energy’s common equity ratio fell below 30 percent. As of September 30, 2003 and taking into account the effects of the deconsolidation of NRG following its bankruptcy filing, Xcel Energy’s common equity ratio was approximately 40 percent.

Another condition of the financing order is that (a) if the security to be issued is rated, it is rated investment grade by at least one nationally recognized rating agency and (b) all Xcel Energy’s outstanding securities (except its preferred stock) that are rated must be rated investment grade by at least one nationally recognized rating agency. As of December 31, 2003, Xcel Energy’s senior unsecured debt was rated “BBB-” (CreditWatch positive) by Standard & Poor’s and “Baa3” (under review for possible upgrade) by Moody’s, which is investment grade.

If Xcel Energy’s common equity ratio falls below the 30 percent level or its securities are not rated investment grade, and Xcel Energy is unable to obtain additional relief from the SEC, Xcel Energy may not be able to issue securities (except that it could issue common stock even if the equity ratio is below 30 percent), which could limit its ability to contribute equity or make loans to us or may cause Xcel Energy to seek, within certain regulatory limitations and the limitations provided by corporate law, additional or accelerated funding from us in the form of dividends. If such event were to occur, we may need to seek alternative sources of funds to meet our cash needs. Alternative sources of funds could include the issuance of additional notes or other debt securities. No assurance can be given that such alternatives will be available to us in required amounts or at reasonable costs.

Our unsecured debt has been assigned a rating of “BBB” (CreditWatch positive) by Standard & Poor’s and of “Baa1” (under review for possible upgrade) by Moody’s.

The reductions in our credit ratings and those of Xcel Energy and the other operating utilities of Xcel Energy in 2002 occurred in the context of a severe deterioration in the credit ratings of NRG that began in 2001 and continued in 2002.

Any future downgrade of our securities will likely increase our cost of capital and reduce our access to the capital markets. This could adversely affect our financial condition and results of operations. We cannot assure you that any of our current ratings or those of our affiliates, including Xcel Energy, will remain in effect for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency. Any lowering of the rating of our senior notes would likely reduce the value of the exchange notes offered hereby.

Historically, we have relied on bank lines of credit, the commercial paper market and capital contributions from Xcel Energy to supplement our operating cash flow in order to meet the short-term liquidity requirements of our business. If Xcel Energy’s access to the capital markets is impaired, it could limit Xcel Energy’s ability to contribute equity or make loans to us or may cause Xcel Energy to seek, within certain regulatory limitations and the limitations provided by corporate law, additional or accelerated funding from us in the form of dividends.

We also rely on accessing the capital markets to support our capital expenditure programs and other capital requirements to maintain and build our utility infrastructure and comply with future requirements such as installing emission control equipment. If we are unable to access the capital markets on favorable terms, our ability to fund our operations and required capital expenditures and other investments may be adversely affected.

A majority of the members of our board of directors, as well as many of our executive officers, are officers of Xcel Energy. Our board makes determinations with respect to the following:


	•	our payment of dividends;

	•	decisions on our financings and our capital raising activities;

	•	mergers or other business combinations; and

	•	our acquisition or disposition of assets.

Historically we have paid quarterly dividends to Xcel Energy. In 2001, 2002 and the first nine months of 2003, we paid $85.1 million, $93.4 million and $73.3 million of dividends to Xcel Energy, respectively. Our board of directors could decide to increase dividends, within the limitations of our financial covenants and credit rating objectives, to Xcel Energy to support its cash needs. This could adversely affect our liquidity. Under PUHCA, we can only pay dividends out of current earnings and retained earnings without the prior approval of the SEC. At September 30, 2003, our retained earnings were approximately $416 million.

Our Chairman, Wayne H. Brunetti, our Vice President, Richard C. Kelly, and our Vice President and General Counsel, Gary R. Johnson, have served in similar capacities at Xcel Energy. On July 31, 2002, a lawsuit purporting to be a class action on behalf of purchasers of Xcel Energy common stock between January 31, 2001 and July 26, 2002, was filed in the United States District Court in Minnesota. The complaint named Xcel Energy; Wayne H. Brunetti, our Chairman and Chairman and Chief Executive Officer of Xcel Energy and one of our directors; Edward J. McIntyre, former Vice President and Chief Financial Officer of Xcel Energy; and James J. Howard, former Chairman of Xcel Energy, as defendants. Among other things, the complaint alleged violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 thereunder 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 NRG’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. Thereafter, several additional lawsuits were filed with similar allegations, one of which added claims on behalf of a purported class of purchasers of two series of NRG senior notes issued by NRG in early 2001. The cases have all been consolidated and a consolidated amended complaint has been filed. The amended complaint charges false and misleading disclosures concerning “round trip” energy trades and the existence of provisions in Xcel Energy’s credit agreements with lenders for cross-defaults in the event of a default by NRG and, as to the NRG senior notes, also insufficient disclosures concerning the extent to which NRG’s “fortunes” were tied to those of Xcel Energy, especially in the event of a buy-in of NRG public shares. It adds as additional defendants on the claims relating to the NRG senior notes Gary R. Johnson, our and Xcel Energy’s Vice President and General Counsel and one of our directors, Richard C. Kelly, our Vice President and one of our directors and Xcel Energy’s President and Chief Operating Officer, two former executive officers of NRG (David H. Peterson and Leonard A. Bluhm), one current executive officer of NRG (William T. Pieper) and a former independent director of NRG (Luella G. Goldberg); and, as to the NRG senior notes, it adds claims of similar false and misleading disclosures under Section 11 of the Securities Act. The defendants filed motions to dismiss all the claims, and the court granted the motions in part and denied them in part on September 30, 2003. The court dismissed the claims brought by a sub-class of plaintiffs represented by Catholic Workman. This group consisted of persons who purchased NRG senior notes and alleged false and misleading statements in the registration statement or prospectus under Section 11 of the Securities Act. The court, however, denied the motion with respect to a putative class of plaintiffs consisting of owners of Xcel Energy common stock who alleged fraud in violation of Sections 10(b) and 20(a) of the Exchange Act. The defendants filed an answer on November 21, 2003, and the case is expected to proceed in the normal course as to the claims relating to common stock.

On August 15, 2002, a shareholder derivative action was filed in the United States District Court for the District of Minnesota, purportedly on behalf of Xcel Energy, against Xcel Energy’s directors and certain present and former officers, citing essentially the same circumstances as the class actions described above and asserting breach of fiduciary duty. This action has been consolidated for pre-trial purposes with the securities class actions. After the filing of this action, two additional derivative actions were filed in the state trial court for Hennepin County, Minnesota (and subsequently consolidated with each other), against essentially the same defendants, focusing on allegedly 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. In each of the derivative cases, the defendants have served motions to dismiss the complaint for failure to make a proper pre-suit demand (or, in the federal court case, to make any pre-suit demand at all) upon Xcel Energy’s board of directors. On October 10, 2003, oral arguments related to the defendants’ motion to dismiss in the state cases were presented to the court. On January 6, 2004, the state court granted the defendants’ motion to dismiss the state shareholder derivative lawsuits.

On September 23, 2002 and October 9, 2002, actions were filed in the United States District Court for the District of Colorado, purportedly on behalf of classes of employee participants in Xcel Energy’s (and its predecessors’) 401(k) and employee stock ownership plans from as early as September 23, 1999. The complaints in the actions, which name as defendants Xcel Energy, its directors, certain former directors, and certain of Xcel Energy’s present and former officers, allege breach of fiduciary duty in allowing or encouraging the purchase, contribution and/or retention of Xcel Energy common stock in the plans and making misleading statements and omissions in that regard. The cases have been transferred by the Judicial Panel on Multidistrict Litigation to the Minnesota federal court for purposes of coordination with the securities class actions and shareholder derivative action pending there. The defendants have filed motions to dismiss the complaints. The motions have not yet been ruled upon.

On February 26, 2003, Fortistar Capital, Inc. and Fortistar Methane, LLC (together, “Fortistar”) filed a $1 billion lawsuit in the Federal District Court for the Northern District of New York against Xcel Energy and five present or former employees of NRG and NEO Corp., a subsidiary of NRG. In the lawsuit, Fortistar claims that the defendants violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and

The defense of these lawsuits may divert the attention of our management. In addition, if any one or a combination of these cases or other similar claims result in a substantial monetary judgment against Xcel Energy or are settled on unfavorable terms, Xcel Energy’s results of operations and liquidity could be materially adversely affected and it could limit Xcel Energy’s ability to contribute equity or make loans to us or may cause Xcel Energy to seek additional or accelerated funding from us in the form of dividends.

The profitability of our utility operations is dependent on our ability to recover costs related to providing energy and utility services to our customers. We provide retail electric service to customers in four states and we are regulated by the state public utility commissions in those four states. Although we believe that the current regulatory environment applicable to our business would permit us to recover the costs of our utility services, it is possible that there could be changes in circumstances or in the regulatory environment in one or more of those states that would impair our ability to recover costs historically absorbed by our customers. In particular, as a result of the energy crisis in California and the financial troubles at a number of energy companies, including the financial challenges of Xcel Energy and NRG, the regulatory environments in which we operate have received an increased amount of public attention. That attention could result in changes adverse to our ability to recover our costs.

The FERC has jurisdiction over rates for electric transmission service and electric energy sold at wholesale in interstate commerce. FERC-jurisdictional services comprised approximately 32 percent of our annual revenues as of November 30, 2003. As a result of the energy crisis in California and the alleged market abuses by certain energy companies, the FERC has issued a number of orders substantially increasing their oversight of wholesale sales and requiring further structural separation of the electric transmission function from the energy markets function. These regulatory changes could increase our costs or adversely affect our ability to recover costs. Federal, state and local agencies also have jurisdiction over many of our other activities.

Timely fuel cost recovery has been made more difficult by the volatility of the natural gas market. In Texas, fuel costs are periodically reconciled to fuel costs collected under fixed fuel cost recovery factors in proceedings that examine the prudence of fuel costs including, but not limited to, the terms of purchase, affiliate transactions and the operation and dispatch of generating units. Although we believe that our fuel costs are reasonable and prudent, there is a risk in a retroactive review that some fuel costs could be disallowed.

We are unable to predict the impact on our operating results from the future regulatory activities of any of these agencies. Changes in regulations or the imposition of additional regulations could have an adverse impact on our results of operations and hence could materially and adversely affect our ability to meet our financial obligations, including making payments on the exchange notes.

In light of the financial troubles of Xcel Energy and NRG, we face enhanced scrutiny from our state regulators. State utility commissions generally possess broad powers to ensure that the needs of the utility customers are being met. To the extent that one or more of our state utility commissions takes the position that any of our dividends have been funded by any of our financings, the regulators may not permit us to recover the related financing costs by passing them through to our customers as costs related to providing energy. We also may be asked to otherwise ensure that our ratepayers are not harmed as a result of NRG’s bankruptcy.

As part of the September 25, 2003 order, the NMPRC also implemented temporary billing measures for customers whose meters were estimated. The temporary billing measures: (i) require us to apply the lowest fuel and purchased power cost adjustment factor that was applicable during the period when meters were being estimated, (ii) allow customers 6 months to pay bills in full without additional charges or disconnection, (iii) prohibit disconnection of service until November 1, 2003 for any customer that received an estimated bill, (iv) require us to work with the NMPRC’s staff on a written explanation of the fuel calculation used under the order, and (v) order us to report the amount of fuel and purchased power costs foregone as a result of the interim relief, which amount we will not be allowed to recoup from customers. The deadline for intervention has passed and no parties other than us and the NMPRC staff are parties to the investigation proceeding. The hearings examiner has not set a procedural schedule. If the investigation into our billing practices results in an adverse finding, we may be subject to additional remedial actions and civil penalties, which could have a material adverse affect on our financial position and results of operations.

We engage in wholesale sales and purchases of electric capacity and energy and coal and natural gas fuel, and, accordingly, are also subject to commodity price risk, credit risk and other risks associated with these activities.

We are exposed to market and credit risks in our generation capacity purchases and sales, electric energy purchases and sales, fuel purchases and retail distribution. The level of these risks are reduced somewhat by retail fuel and energy expenses adjustment clauses which allow certain costs to be recovered from retail customers. To minimize the risk of market price and volume fluctuations, we enter into physical and financial derivative instrument contracts to hedge purchase and sale commitments, fuel requirements and inventories of natural gas, distillate fuel oil, electricity and coal. However, physical and financial derivative instrument contracts do not completely eliminate risks, including commodity price changes, market supply shortages, credit risk and interest rate changes. The impact of these variables could result in our inability to fulfill contractual obligations, significantly higher energy or fuel costs relative to corresponding sales contracts or increased interest expense.

Credit risk includes the risk that counterparties that owe us money or energy will breach their obligations. Should the counterparties to these arrangements fail to perform, we may be forced to enter into alternative arrangements. In that event, our financial results could be adversely affected and we could incur losses.

The consequences of a prolonged recession and adverse market conditions may include the continued uncertainty of energy prices and the capital and commodity markets. We cannot predict the impact of any continued economic slowdown or fluctuating energy prices. However, such impact could have a material adverse effect on our financial condition and results of operations.

Also, because our generation and transmission systems are part of an interconnected regional grid, we face the risk of possible loss of business due to a disruption or black-out caused by an event (severe storm, generator or transmission facility outage) on a neighboring system or the actions of a neighboring utility, similar to the August 14, 2003 black-out in portions of the eastern U.S. and Canada. Any such disruption could result in a significant decrease in revenues and significant additional costs to repair assets, which could have a material adverse impact on our financial condition and results of operation.

The conflict in Iraq and any other military strikes or sustained military campaign may affect our operations in unpredictable ways and may cause changes in the insurance markets, force us to increase security measures and cause disruptions of fuel supplies and markets, particularly with respect to gas and energy. The possibility that infrastructure facilities, such as electric generation, transmission and distribution facilities, would be direct targets of, or indirect casualties of, an act of war may affect our operations. War and the possibility of further war may have an adverse impact on the economy in general. A lower level of economic activity might result in a decline in energy consumption, which may adversely affect our revenues and future growth. Instability in the financial markets as a result of war may also affect our ability to raise capital.

Further, like other operators of major industrial facilities, our generation plants, fuel storage facilities and transmission and distribution facilities may be targets of terrorist activities that could result in disruption of our ability to produce or distribute some portion of our energy products. Any such disruption could result in a significant decrease in revenues and significant additional costs to repair and insure our assets, which could have a material adverse impact on our financial condition and results of operation.

Currently, there is no retail restructuring activity in our service territory. In 1999, full retail competition in Texas was mandated by the legislature to begin January 1, 2002. However, due to transmission constraints and market power concerns in the Texas Panhandle, in the 2001 legislative session, the Texas legislature delayed competition in our service territory until at least January 1, 2007. In New Mexico, restructuring proceedings have been dismissed and in 2003 the legislature repealed electric restructuring statutes. Oklahoma has also ceased electric restructuring activities and there are no restructuring activities in Kansas. Although there currently is no retail restructuring activity, as described above, from time to time the states where we operate have explored retail competition, and may in the future decide to pursue retail competition in our service territory.

Retail competition and the unbundling of regulated energy and gas service could have a significant financial impact on us due to an impairment of assets, a loss of retail customers, lower profit margins and/or increased costs of capital. Any such restructuring may have a significant impact on our financial position, results of operations and cash flows. We cannot predict when we will be subject to changes in legislation or regulation, nor can we predict the impact of these changes on our financial position, results of operations or cash flows. We believe that the prices we charge for electricity and the quality and reliability of our service currently place us in a position to compete effectively in the energy market.

Our electric utility business is a seasonal business and weather patterns can have a material impact on our operating performance. Demand for electricity is often greater in the summer and winter months associated

On March 27, 2002, we appointed Deloitte & Touche LLP to be our independent certified public accountant. Our former independent certified public accountant, Arthur Andersen LLP, was convicted on federal obstruction of justice charges arising from the federal government’s investigation of Enron Corp. In light of the conviction, Arthur Andersen ceased practicing before the SEC on August 31, 2002. Arthur Andersen was the auditor of our consolidated financial statements and related schedules as of December 31, 2001 and December 31, 2000 and has not consented to the inclusion of their auditor’s report with respect to such financial statements in this prospectus. Events arising out of the indictment and conviction materially and adversely affect the ability of Arthur Andersen to satisfy any claims arising from the provision of auditing services to us, including claims that may arise out of Arthur Andersen’s audit of financial statements included in this prospectus. We have not had a reaudit of our financial statements as of and for the years ended December 31, 2001 and December 31, 2000.

The exchange notes will be our unsecured obligations. The indenture under which the exchange notes will be issued will not prevent us from incurring additional indebtedness, including secured debt which would have a prior claim on the assets securing that debt.

As described above under the caption “Risk Factors — Risks Related to Our Relationship to Xcel Energy,” our credit ratings were lowered in 2002 and could be further lowered in the future. Any lowering of the credit rating on the exchange notes would likely reduce the value of the exchange notes offered hereby.

Although the exchange notes generally may be resold or otherwise transferred by holders who are not our affiliates without compliance with the registration requirements under the Securities Act, they will constitute a new issue of securities without an established trading market. If an active public market does not develop, the market price and liquidity of the exchange notes may be adversely affected. Furthermore, we do not intend to apply for listing of the exchange notes on any securities exchange or automated quotation system.

Even if a market for the exchange notes does develop, you may not be able to resell the exchange notes for an extended period of time, if at all. In addition, future trading prices for the exchange notes will depend on many factors, including, among other things, prevailing interest rates, our financial condition and the market for similar securities. As a result, you may not be able to liquidate your investment quickly or to liquidate it at an attractive price.


	•	exchanges its original notes in the exchange offer for the purpose of participating in a distribution of the exchange notes; or


	•	exchanges original notes that were received by it for its own account in the exchange offer,

may be deemed to have received restricted securities and may be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction by that broker-dealer. Any profit on the resale of the exchange notes and any commission or concessions received by a broker-dealer may be deemed to be underwriting compensation under the Securities Act.

In addition to broker-dealers, any holder of notes that exchanges its original notes in the exchange offer for the purpose of participating in a distribution of the exchange notes may be deemed to have received restricted securities and may be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction by that holder of notes.

If you do not exchange your original notes for the exchange notes offered in this exchange offer, you will continue to be subject to the restrictions on the transfer of your original notes. Those transfer restrictions are described in the indenture and in the legend contained on the original notes, and arose because we issued the original notes under exemptions from, and in transactions not subject to, the registration requirements of the Securities Act. In general, you may offer or sell your original notes only if they are registered under the Securities Act and applicable state securities laws, or if they are offered and sold under an exemption from those requirements. If you do not exchange your original notes in the exchange offer, you will no longer be entitled to have those original notes registered under the Securities Act.

In addition, if a large number of original notes are exchanged for exchange notes issued in the exchange offer, the principal amount of original notes that will be outstanding will decrease. This will reduce the liquidity of the market for the original notes, making it more difficult for you to sell your original notes.

The exchange of the original notes for the exchange notes can only occur if the proper procedures, as detailed in this prospectus, are followed. The exchange notes will be issued in exchange for the original notes only after timely receipt by the exchange agent of the original notes or a book-entry confirmation, a properly completed and executed letter of transmittal (or an agent’s message in lieu thereof) and all other required documentation. If you want to tender your original notes in exchange for exchange notes, you should allow sufficient time to ensure timely delivery. The exchange agent is not and we are not under any duty to give you notification of defects or irregularities with respect to your tender of original notes for exchange. Original notes that are not tendered will continue to be subject to the existing transfer restrictions. In addition, if you are an affiliate of ours or you tender the original notes in the exchange offer in order to participate in a distribution of the exchange notes, you will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Additional information is set forth below under the captions “The Exchange Offer” and “Plan of Distribution.”

If a market develops for the exchange notes, they might trade at prices higher or lower than the initial offering price of the original notes. The trading price would depend on many factors, such as prevailing interest rates, the market for similar securities, general economic conditions and our financial condition, performance and prospects.

We will not receive any cash proceeds from the issuance of the exchange notes. The exchange offer is intended to satisfy our obligations under the registration rights agreement that we entered into in connection with the private offering of the original notes. In consideration for issuing the exchange notes in exchange for the original notes as described in this prospectus, we will receive, retire and cancel the original notes that are properly offered for exchange. As a result, the issuance of the exchange notes will not result in any increase or decrease in our indebtedness. We have agreed to bear the expenses of the exchange offer to the extent indicated in the registration rights agreement. No underwriter is being used in connection with the exchange offer.

The net proceeds from the issuance and sale of the original notes, after deducting discounts, commissions and offering expenses, were approximately $97.8 million. We added the net proceeds from the sale of the notes to our general funds and applied them, along with cash on hand, to redeem $103,092,775 of our Subordinated Debenture.

We issued and sold the original notes on October 6, 2003 in a private placement. In connection with that issuance and sale, we entered into a registration rights agreement with the initial purchasers of the original notes. In the registration rights agreement, we agreed to:


	•	file with the SEC the registration statement of which this prospectus is a part within 120 calendar days of the issue date of the original notes (or if such day is not a business day, the next succeeding business day) relating to an offer to exchange the original notes for the exchange notes;

	•	cause the registration statement of which this prospectus is a part to be declared effective under the Securities Act within 180 calendar days of the issue date of the original notes (or if such day is not a business day, the next succeeding business day); and

	•	to keep the exchange offer open for at least 20 business days but not more than 30 business days after the date notice of the exchange offer is mailed to holders of original notes and use our best efforts to consummate the exchange offer within 210 calendar days of the issue date of the original notes (or if such day is not a business day, the next succeeding business day).

The exchange offer being made by this prospectus is intended to satisfy our obligations under the registration rights agreement. If we fail to exchange all validly tendered original notes in accordance with the exchange offer on or prior to May 3, 2004, we will be required to pay additional interest to holders of original notes until we have complied with this obligation.

Once the exchange offer is complete, we will have no further obligation to register any of the original notes not tendered to us in the exchange offer, except to the limited extent that certain qualified institutional buyers, if any, are otherwise entitled to have their original notes registered under a shelf registration as described under the caption “Exchange Offer and Registration Rights.” For a description of the restrictions on transfer of the original notes, see “Risk Factors — Risks Related to the Exchange Notes.”

Based on interpretations by the SEC staff set forth in Exxon Capital Holdings Corporation (available April 13, 1989), Morgan Stanley & Co. Incorporated (available June 5, 1991), Shearman & Sterling (available July 7, 1993) and other no-action letters issued to third parties, we believe that you may offer for


	•	you are acquiring the exchange notes in the ordinary course of your business and do not hold any original notes to be exchanged in the exchange offer that were acquired other than in the ordinary course of business;

	•	you are not a broker-dealer tendering original notes acquired directly from us;

	•	you are not participating, do not intend to participate and have no arrangements or understandings with any person to participate in the exchange offer for the purpose of distributing the exchange notes; and

	•	you are not our “affiliate” within the meaning of Rule 405 under the Securities Act.

If you are not able to meet these requirements, you are a “restricted holder.” As a restricted holder, you will not be able to participate in the exchange offer, you may not rely on the interpretations of the SEC staff set forth in the no-action letters referred to above and you may only sell your original notes in compliance with the registration and prospectus delivery requirements of the Securities Act or under an exemption from the registration requirements of the Securities Act or in a transaction not subject to the Securities Act.

We do not intend to seek our own no-action letter, and there can be no assurance that the staff of the SEC would make a similar determination with respect to the exchange notes as it has in such no-action letters to third parties.

In addition, if the tendering holder is a broker-dealer that will receive exchange notes for its own account in exchange for original notes that were acquired as a result of market-making or other trading activities, it may be deemed to be an “underwriter” within the meaning of the Securities Act. Any such holder will be required to acknowledge in the letter of transmittal that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of these exchange notes. This prospectus may be used by those broker-dealers to resell exchange notes they receive pursuant to the exchange offer. We have agreed that we will allow this prospectus to be used by any broker-dealer in any resale of exchange notes until , 2004 (210 days from the completion of this exchange offer).

Except as described above, this prospectus may not be used for an offer to resell, resale or other transfer of exchange notes.

To the extent original notes are tendered and accepted in the exchange offer, the principal amount of original notes that will be outstanding will decrease with a resulting decrease in the liquidity in the market for the original notes. Original notes that are still outstanding following the completion of the exchange offer will continue to be subject to transfer restrictions.

Upon the terms and subject to the conditions of the exchange offer described in this prospectus and in the accompanying letter of transmittal, we will accept for exchange all original notes validly tendered and not withdrawn before 5:00 p.m., New York City time, on the expiration date. We will issue $1,000 principal amount of exchange notes in exchange for each $1,000 principal amount of original notes accepted in the exchange offer. You may tender some or all of your original notes pursuant to the exchange offer. However, original notes may be tendered only in increments of $1,000.

The exchange offer is not conditioned upon any minimum aggregate principal amount of original notes being tendered for exchange. As of the date of this prospectus, an aggregate of $100 million principal amount of original notes was outstanding. This prospectus is being sent to all registered holders of original notes. There will be no fixed record date for determining registered holders of original notes entitled to participate in the exchange offer.

We intend to conduct the exchange offer in accordance with the applicable requirements of the Securities Act and the Exchange Act and the rules and regulations of the SEC. Holders of original notes do not have any appraisal or dissenters’ rights under law or under our indenture under which the exchange notes will be issued,

We will be deemed to have accepted for exchange validly tendered original notes when we have given oral or written notice of the acceptance to the exchange agent. The exchange agent will act as agent for the tendering holders of original notes for the purposes of receiving the exchange notes from us and delivering the exchange notes to the tendering holders.

If we do not accept for exchange any tendered original notes because of an invalid tender, the occurrence of certain other events described in this prospectus or otherwise, such unaccepted original notes will be returned, without expense, to the holder tendering them or the appropriate book-entry will be made, in each case, as promptly as practicable after the expiration date.

We are not making, nor is our board of directors making, any recommendation to you as to whether to tender or refrain from tendering all or any portion of your original notes in the exchange offer. No one has been authorized to make any such recommendation. You must make your own decision whether to tender your original notes in the exchange offer and, if you decide to do so, you must also make your own decision as to the aggregate amount of original notes to tender after reading this prospectus and the letter of transmittal and consulting with your advisers, if any, based on your own financial position and requirements.

The term “expiration date” means 5:00 p.m., New York City time, on , 2004, unless we, in our sole discretion, extend the exchange offer, in which case the term “expiration date” shall mean the latest date and time to which the exchange offer is extended.

If we determine to extend the exchange offer, we will notify the exchange agent of any extension by oral or written notice.


	•	to delay accepting for exchange any original notes; or

	•	to extend or terminate the exchange offer and to refuse to accept original notes not previously accepted if any of the conditions set forth below under “— Conditions to the Exchange Offer” have not been satisfied by the expiration date.

Without limiting the manner in which we may choose to make public announcements of any delay in acceptance, extension, termination or amendment of the exchange offer, we will have no obligation to publish, advertise or otherwise communicate any public announcement, other than by making a timely release to a financial news service.

During any extension of the exchange offer, all original notes previously tendered will remain subject to the exchange offer. We will return any original notes that we do not accept for exchange for any reason without expense to the tendering holder as promptly as practicable after the expiration or earlier termination of the exchange offer.

In order to exchange your original notes, you must complete one of the following procedures by 5:00 p.m., New York City time, on the expiration date:


	•	if your original notes are in book-entry form, the book-entry procedures for tendering your original notes must be completed as described below under “— Book-Entry Transfer”;

	•	if you hold physical original notes that are registered in your name (i.e., not in book-entry form), you must transmit a properly completed and duly executed letter of transmittal, certificates for the original


		notes you wish to exchange and all other documents required by the letter of transmittal, to JPMorgan Chase Bank, the exchange agent, at its address listed below under “— Exchange Agent”; or

	•	if you cannot tender your original notes by either of the above methods by the expiration date, you must comply with the guaranteed delivery procedures described below under “— Guaranteed Delivery Procedures.”

A tender of original notes by a holder that is not withdrawn prior to the expiration date will constitute an agreement between that holder and us in accordance with the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal.

The method of delivery of original notes through The Depository Trust Company and the method of delivery of the letter of transmittal and all other required documents to the exchange agent is at the holder’s election and risk. Holders should allow sufficient time to effect the DTC procedures necessary to validly tender their original notes to the exchange agent before the expiration date. Holders should not send letters of transmittal or other required documents to us.

We will determine, in our sole discretion, all questions as to the validity, form, eligibility (including time of receipt), acceptance of tendered original notes and withdrawal of tendered original notes, and our determination will be final and binding. We reserve the absolute right to reject any and all original notes not properly tendered or any original notes the acceptance of which would, in our opinion or in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any defects or irregularities or conditions of the exchange offer as to any particular original notes either before or after the expiration date. Our interpretation of the terms and conditions of the exchange offer as to any particular original notes either before or after the expiration date, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of original notes for exchange must be cured within such time as we shall determine. Although we intend to notify holders of any defects or irregularities with respect to tenders of original notes for exchange, neither we nor the exchange agent nor any other person shall be under any duty to give such notification, nor shall any of them incur any liability for failure to give such notification. Tenders of original notes will not be deemed to have been made until all defects or irregularities have been cured or waived. Any original notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the exchange agent to the tendering holders or, in the case of original notes delivered by book-entry transfer within DTC, will be credited to the account maintained within DTC by the participant in DTC that delivered such original notes, unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date.

In addition, we reserve the right in our sole discretion (a) to purchase or make offers for any original notes that remain outstanding after the expiration date, (b) as set forth below under “— Conditions to the Exchange Offer,” to terminate the exchange offer and (c) to the extent permitted by applicable law, purchase original notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers could differ from the terms of the exchange offer.

By signing, or otherwise becoming bound by, the letter of transmittal, each tendering holder of original notes (other than certain specified holders) will represent to us that:


	•	it is acquiring the exchange notes and it acquired the original notes being exchanged in the ordinary course of its business;

	•	it is not a broker-dealer tendering original notes acquired directly from us;

	•	it is not participating, does not intend to participate and has no arrangements or understandings with any person to participate in the distribution (within the meaning of the Securities Act) of the exchange notes; and

	•	it is not our “affiliate,” within the meaning of Rule 405 under the Securities Act, or, if it is our affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable.

If the tendering holder is a broker-dealer that will receive exchange notes for its own account in exchange for original notes that were acquired as a result of market-making activities or other trading activities, it may be deemed to be an “underwriter” within the meaning of the Securities Act. Any such holder will be required to acknowledge in the letter of transmittal that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of these exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, the broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

If your original notes are in book-entry form and are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, you must contact the registered holder of your original notes and instruct it to promptly tender your original notes for exchange on your behalf.

The exchange agent will establish an account with respect to the original notes at DTC promptly after the date of this prospectus. Your book-entry notes must be transferred into the exchange agent’s account at DTC in compliance with DTC’s transfer procedures in order for your original notes to be validly tendered for exchange. Any financial institution that is a participant in DTC’s systems may cause DTC to transfer original notes to the exchange agent’s account. The DTC participant, on your behalf, must transmit its acceptance of the exchange offer to DTC. DTC will verify this acceptance, execute a book-entry transfer of the tendered original notes into the exchange agent’s account and then send to the exchange agent confirmation of this book-entry transfer. The confirmation of this book-entry transfer will include an “agent’s message” confirming that DTC has received an express acknowledgement from the DTC participant that the DTC participant has received and agrees to be bound by the letter of transmittal and that we may enforce the letter of transmittal against this participant. Original notes will be deemed to be validly tendered for exchange only if the exchange agent receives the book-entry confirmation from DTC, including the agent’s message, prior to the expiration date.

All references in this prospectus to deposit or delivery of original notes shall be deemed to also refer to DTC’s book-entry delivery method.

Holders who wish to tender their original notes and (1) whose original notes are not immediately available or (2) who cannot deliver the letter of transmittal or any other required documents to the exchange agent prior to the expiration date or (3) who cannot complete the procedures for book-entry transfer on a timely basis may effect a tender if:


	•	the tender is made through an eligible institution;

	•	before the expiration date, the exchange agent receives from the eligible institution a properly completed and duly executed notice of guaranteed delivery, by facsimile transmission, mail or hand delivery, listing the principal amount of original notes tendered, stating that the tender is being made thereby and guaranteeing that, within three New York Stock Exchange, Inc. trading days after the expiration date, a duly executed letter of transmittal, together with a confirmation of book-entry transfer of such original notes into the exchange agent’s account at DTC and any other documents required by the letter of transmittal and the instructions thereto, will be deposited by such eligible institution with the exchange agent; and

	•	within three New York Stock Exchange trading days after the expiration date, the exchange agent receives a confirmation of book-entry transfer of all original notes tendered by the eligible institution into the exchange agent’s account at DTC in the case of book-entry original notes, or a properly completed and executed letter of transmittal and the physical original notes, in the case of original notes in certificated form, and all other documents required by the letter of transmittal.

Upon request to the exchange agent, a notice of guaranteed delivery will be sent to holders who wish to tender their original notes according to the guaranteed delivery procedures described above.

Except as otherwise provided in this prospectus, tenders of original notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration date.

For a withdrawal to be effective, the exchange agent must receive a written or facsimile transmission notice of withdrawal at the address set forth below under “— Exchange Agent.” Any notice of withdrawal must:


	•	specify the name of the person who tendered the original notes to be withdrawn;

	•	identify the original notes to be withdrawn, including the principal amount of such original notes;

	•	state that the holder is withdrawing its election to exchange the original notes to be withdrawn;

	•	be signed by the holder in the same manner as the original signature on the letter of transmittal by which the original notes were tendered and include any required signature guarantees; and

	•	specify the name and number of the account at DTC to be credited with the withdrawn original notes and otherwise comply with the procedures of DTC.

We will determine, in our sole discretion, all questions as to the validity, form and eligibility (including time of receipt) of any notice of withdrawal, and our determination shall be final and binding on all parties. Any original notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offer, and no exchange notes will be issued with respect thereto unless the original notes so withdrawn are validly re-tendered. Properly withdrawn original notes may be re-tendered by following one of the procedures described above under “— Procedures for Tendering” at any time prior to the expiration date.

Any original notes that are tendered for exchange through the facilities of DTC but that are not exchanged for any reason will be credited to an account maintained with DTC for the original notes as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer.

Despite any other term of the exchange offer, we will not be required to accept for exchange, or to issue exchange notes in exchange for, any original notes, and we may terminate the exchange offer as provided in this prospectus prior to the expiration date, if:


	•	we are not permitted to effect the exchange offer according to the registration rights agreement because of any change in law, regulation or any applicable interpretation of the SEC staff; or

	•	a pending or threatened action or proceeding would impair our ability to proceed with the exchange offer.

These conditions are for our sole benefit and may be asserted by us regardless of the circumstances giving rise to any of these conditions or may be waived by us, in whole or in part, at any time and from time to time in our reasonable discretion. Our failure at any time to exercise any of the foregoing rights shall not be deemed a waiver of the right and each right shall be deemed an ongoing right which may be asserted at any time and from time to time.

If we determine in our reasonable judgment that any of the conditions are not satisfied, we may:


	•	refuse to accept and return to the tendering holder any original notes or credit any tendered original notes to the account maintained within DTC by the participant in DTC which delivered the original notes;

	•	extend the exchange offer and retain all original notes tendered before the expiration date, subject to the rights of holders to withdraw the tenders of original notes (see “— Withdrawal of Tenders” above); or


	•	waive the unsatisfied conditions with respect to the exchange offer prior to the expiration date and accept all properly tendered original notes that have not been withdrawn or otherwise amend the terms of the exchange offer in any respect as provided under “— Expiration Date; Extensions; Amendments.”

In addition, we will not accept for exchange any original notes tendered, and we will not issue exchange notes in exchange for any of the original notes, if at that time any stop order is threatened or in effect with respect to the registration statement of which this prospectus constitutes a part or the qualification of the indenture under the Trust Indenture Act of 1939, as amended.

JPMorgan Chase Bank has been appointed as the exchange agent for the exchange offer. All signed letters of transmittal and other documents required for a valid tender of your original notes should be directed to the exchange agent at the address set forth below. Questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for notices of guaranteed delivery should be directed to the exchange agent addressed as follows:

Delivery to other than the above address or facsimile number will not constitute a valid delivery.

We will bear the expenses of soliciting tenders for the exchange offer. These expenses include fees and expenses of the exchange agent and the trustee, the registration fee, accounting and legal fees, printing costs and related fees and expenses. We will principally solicit tenders for the exchange offer by mail or overnight courier, although our officers and regular employees may additionally solicit in person or by telephone or facsimile.

We have not retained any dealer-manager in connection with the exchange offer and will not pay any brokers, dealers or others soliciting acceptance of the exchange offer. We, however, will pay the exchange agent reasonable and customary fees for its services and its reasonable out-of-pocket expenses. We may also pay brokerage houses and other custodians, nominees and fiduciaries their reasonable out-of-pocket expenses for sending copies of this prospectus, letters of transmittal and related documents to holders of the original notes and in tendering original notes for their customers.

Holders who tender their original notes for exchange will not be obligated to pay any transfer taxes in connection with the exchange offer.

We will recognize no gain or loss, for accounting purposes, as a result of the exchange offer. The expenses of the exchange offer and the unamortized expenses relating to the issuance of the original notes will be amortized over the term of the exchange notes.

Holders of original notes who do not exchange their original notes for exchange notes pursuant to the exchange offer will not be able to offer, sell or otherwise transfer the original notes except in compliance with the registration requirements of the Securities Act and other applicable securities laws, pursuant to an exemption from the securities laws or in a transaction not subject to the securities laws. Original notes not exchanged pursuant to the exchange offer will otherwise remain outstanding in accordance with their respective terms and will continue to bear a legend reflecting these restrictions on transfer. Holders of original notes do not have any appraisal or dissenters’ rights in connection with the exchange offer.

Upon completion of the exchange offer, holders of original notes will not be entitled to any rights to have the resale of original notes registered under the Securities Act except to the limited extent that certain qualified institutional buyers, if any, are otherwise entitled under the registration rights agreement to have their original notes registered under a shelf registration. Except for this limited circumstance, we do not intend to register under the Securities Act the resale of any original notes that remain outstanding after completion of the exchange offer. In addition, upon completion of the exchange offer, there may be no market for the original notes, and holders of original notes who fail to exchange their original notes may have difficulty selling them.

The following table sets forth our consolidated capitalization as of September 30, 2003. We will not receive any proceeds from the exchange of the exchange notes for outstanding original notes. You should read the information in this table together with the detailed information and financial statements appearing in this prospectus and with “Selected Consolidated Financial Data” included elsewhere in this prospectus.


(1)	On October 15, 2003, we redeemed $100 million of our mandatorily redeemable preferred securities of our subsidiary trust (together with our Subordinated Debenture).

The following selected consolidated financial data as of and for the years ended December 31, 2002, 2001, 2000, 1999 and 1998 have been derived from our audited consolidated financial statements and the related notes. The consolidated financial data as of September 30, 2003 and 2002 have been derived from our unaudited interim consolidated financial statements. The information set forth below should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our audited and unaudited consolidated financial statements and related notes and other financial information contained in this prospectus. The historical financial information may not be indicative of our future performance.

(1)

The 2000 Consolidated Statement of Operations Data has been adjusted to reflect the implementation of SFAS No. 145, which became effective in 2003 and requires retroactive restatement of prior periods. Interest charges and financing costs of $8.225 million related to the defeasance of our first mortgage bonds, previously disclosed in Extraordinary items, was reclassified to Interest charges and financing costs. Associated income tax benefits of $2.923 million have been reclassified from Extraordinary items to Income taxes. The reclassification had no impact on operating income or net income. The 2000 financial data were derived from financial statements audited by Arthur Andersen LLP, independent public accountants. However, due to the reclassification required by SFAS No. 145, the Consolidated Statement of Operations Data in the Selected Consolidated Financial Data disclosed above does not agree to the financial statements as audited by Arthur Andersen LLP with respect to Interest charges and financing costs, Income taxes and Extraordinary items. We have been unable to obtain the consent of Arthur Andersen LLP to the use of their report in this prospectus.


(2)	This item includes in 2000 charges related to the discontinuance of SFAS No. 71 for the generation portion of our business in the second quarter of 2000, writing off generation related regulatory assets and other deferred costs recorded in anticipation of the implementation of retail competition and restructuring of electric utilities in Texas and includes in 2001 income related to the reapplication of SFAS No. 71 to our generation business when the implementation of retail competition and restructuring of electric utilities in Texas was postponed.

(3)	On October 15, 2003, we redeemed $100 million of our mandatorily redeemable preferred securities of our subsidiary trust (together with our Subordinated Debenture).

The following discussion and analysis should be read in conjunction with “Summary — Summary Historical Financial Data,” “Selected Consolidated Financial Data” and our financial statements and related notes appearing elsewhere in this prospectus. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See “Special Note Regarding Forward-Looking Statements.” The actual results may differ materially from those anticipated in these forward-looking statements as a result of a number of factors including, but not limited to, those set forth under “Special Note Regarding Forward-Looking Statements” and “Risk Factors” in this prospectus.

The following discussion and analysis by management focuses on those factors that had a material effect on our 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 audited and interim consolidated financial statements and notes included in this prospectus.

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. The forward-looking statements are intended to be identified in this document by the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,” “possible,” “potential,” “projected,” “should” 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 their impact on capital expenditures;

	•	business conditions in the retail and wholesale energy industry;

	•	competitive factors, including the extent and timing of the entry of additional competition in the markets served by us;

	•	unusual weather;

	•	changes in federal or state legislation, including the status and implementation of restructuring legislation in Texas and New Mexico, our two primary jurisdictions;

	•	regulation and regulatory initiatives that affect cost and investment recovery and have an impact on rate structures;

	•	rating agency action;

	•	our ability, and that of our affiliates, to access the capital markets and obtain credit on favorable terms;

	•	costs and other effects of legal and administrative proceedings, settlements, investigations and claims, including without limitation claims brought against our parent, Xcel Energy;

	•	effects of geopolitical events, including war and acts of terrorism;

	•	changes in accounting principles; and

	•	the other risk factors discussed under “Risk Factors.”

Our net income was approximately $67.1 million for the first nine months of 2003, compared with approximately $59.9 million for the first nine months of 2002. The change was primarily due to the effects of higher capacity sales and higher revenues shared through the joint operating agreement (“JOA”) with PSCo, NSP-Minnesota and NSP-Wisconsin approved by the FERC. Our net income was $73.9 million for 2002, compared with $130.1 million for 2001. The change was primarily due to decreased capacity margins, lower shared trading margins recorded through the JOA and the effects of the restoration, in 2001, of certain regulatory assets. Our net income was $130.1 million for 2001, compared with $69.5 million for 2000. The change was primarily due to increased electric revenues as a result of increased recovery of fuel and purchased power costs and favorable temperatures during 2001.

Special Charges — Regulatory Recovery Adjustment — During the first quarter of 2002, we wrote off approximately $5 million of restructuring costs relating to costs incurred to comply with legislation requiring a transition to retail competition in Texas, which was subsequently amended to delay the required transition.

Extraordinary Items — Regulatory Recovery Adjustment — In late 2001, we 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, we entered into a settlement agreement with intervenors regarding the recovery of restructuring costs in Texas, subject to approval by the state regulatory commission. Based on the settlement agreement, we wrote off pretax restructuring costs of $5 million.

Extraordinary Items — Electric Utility Restructuring — During early 2001, legislation in both Texas and New Mexico was passed that delayed the planned implementation of restructuring within our service territory for at least five years. Accordingly, in the second quarter of 2001, we reapplied the provisions of SFAS No. 71, “Accounting for the Effects of Certain Types of Regulation,” for our generation business. At that time, we did not restore any regulatory assets or other costs previously written off due to the uncertainty of various regulatory issues, including transition plans to address future rate recovery of our restructuring costs.

During the fourth quarter of 2001, we completed a $500 million medium-term debt financing with the proceeds used to reduce short-term borrowings that had resulted from the 2000 defeasance of our first mortgage bonds. In our regulatory filings and communications, we have proposed to amortize our defeasance costs over the five-year life of the refinancing, consistent with historical ratemaking, and have requested incremental rate recovery of $25 million of other restructuring costs. These non-financing restructuring costs have been deferred and will be amortized in the future consistent with rate recovery. Based on these events and the corresponding reduced uncertainty surrounding the financial impacts of the delay in restructuring, we restored in 2001 certain regulatory assets totaling $17.6 million as of December 31, 2001, and reported related after-tax extraordinary income of $11.8 million. Regulatory assets previously written off in 2000 were restored only for items currently being recovered in rates and items where future rate recovery is considered probable.

For more information on our restructuring developments, including the reapplication of regulatory accounting under SFAS No. 71, see Note 10 to the audited consolidated financial statements and Note 1 to the interim consolidated financial statements.

Special Charges — Staff Consolidation — During 2001, we expensed pretax special charges of approximately $4.5 million for planned staff consolidation costs. The charges related to our allocation of severance costs for utility operations resulting from restaffing plans of several operating and corporate support areas of Xcel Energy.

Extraordinary Items — Our earnings for 2000 were reduced by two extraordinary items related to the discontinuation of regulatory accounting for our generation business. During the second quarter of 2000, we wrote off our generation-related regulatory assets and other deferred costs for an extraordinary charge of approximately $19 million before tax, or $13.7 million after tax. During the third quarter of 2000, we recorded an additional extraordinary charge of $8.2 million before tax, or $5.3 million after tax, related to the tender offer/ defeasance of approximately $295 million of our first mortgage bonds, of which $8.2 million has been reclassified to interest charges and financing costs and $2.9 million of related tax benefit has been reclassified as income tax for current presentation, due to the issuance of SFAS No. 145, as previously discussed.

Special Charges — Our earnings for 2000 were reduced by special charges related to the merger to form Xcel Energy. During the third and fourth quarter of 2000, we expensed pretax special charges of $24.3 million. The pretax charges included expenses related to one-time transaction-related costs incurred in connection with the merger of NSP and NCE and pretax charges pertaining to incremental costs of transition and integration activities associated with the merger.

Electric fuel and purchased power expenses tend to vary with changing retail and wholesale sales requirements and unit cost changes in fuel and purchased power. Due to fuel cost recovery mechanisms for retail customers in several states, most fluctuations in energy costs do not materially affect electric utility margin.

The following table details the change in electric revenue and margin. Fuel and purchased power costs are recoverable in Texas through a fixed fuel factor, which is included in rates. In New Mexico, fuel and purchased energy costs are adjusted through a fuel clause and a fixed annual factor. In all other jurisdictions, we currently recover substantially all increases and refund substantially all decreases in fuel and purchased power costs pursuant to monthly adjustment clauses. Due to these fuel clause cost recovery mechanisms for retail customers and the ability to vary wholesale prices with changing market conditions, most fluctuations in energy costs do not significantly affect electric margin. However, the fuel clause cost recovery does not allow for complete recovery of all variable production expenses and, therefore, changes in costs can affect earnings.

Nine Months Ended September 30, 2003 Comparison to Nine Months Ended September 30, 2002 — Base electric utility revenue increased by approximately $137 million, or 17.9 percent, for the first nine months of 2003, compared with the first nine months of 2002. Base electric utility margin increased by approximately $9 million, or 2.5 percent, for the first nine months of 2003, compared with the first nine months of 2002. Base electric utility revenue increased primarily due to higher fuel and purchased power costs recovered through electric rates, higher sharing of commodity trading margins with PSCo and NSP-Minnesota through the JOA, partially offset by the unfavorable effects of lower average temperatures. The increase in base electric utility margin was primarily due to the effects of higher capacity sales and higher revenues shared through the JOA, partially offset by the settlement impacts of the Texas fuel cost recovery proceeding and the unfavorable effects of lower average temperatures.

2002 Comparison to 2001 — Base electric utility revenue decreased by approximately $363 million, or 26.3 percent, in 2002. Base electric utility margin decreased by approximately $51 million, or 9.8 percent, in 2002. Base electric utility revenue decreased for 2002, compared with 2001, largely due to decreased recovery of fuel and purchased power costs driven by declining fuel costs in 2002 and decreasing wholesale revenues. Base electric utility margin declined due to an approximate $57 million decrease in capacity margins and lower shared trading margins recorded through the JOA, partially offset by growth in retail sales.

2001 Comparison to 2000 — Base electric utility revenue increased by approximately $311 million, or 29.0 percent, for 2001, compared with 2000. Base electric utility margin increased by approximately $24 million, or 4.8 percent, for 2001, compared with 2000. Base electric utility revenue increased for 2001, compared with 2000, largely due to increased recovery of fuel and purchased power costs, particularly the increased cost of natural gas generation. More favorable temperatures during 2001 increased base electric retail revenue by approximately $14 million and base electric retail margin by approximately $6 million. The increase in base electric retail revenue and margin was partially offset by approximately $9 million for 2001, due to rate reductions in Texas and New Mexico agreed to as part of the merger approval process in comparison to approximately $5 million in 2000.

Nine Months Ended September 30, 2003 Comparison to Nine Months Ended September 30, 2002 — Other operating and maintenance expense increased by approximately $9.6 million, or 8.5 percent, for the first nine months of 2003, compared with the first nine months of 2002. The increased costs are due to higher incentive and other employee benefit costs partly offset by lower outage related costs.

Taxes (other than income taxes) decreased by approximately $4.8 million, or 11.9 percent, for the first nine months of 2003, compared with the first nine months of 2002. The decrease is primarily due to a lower assessed franchise tax rate within Texas for 2003.

Interest expense decreased by approximately $1.1 million, or 2.7 percent, for the first nine months of 2003, compared with the first nine months of 2002, primarily due to an increase in the allowance for equity funds used during construction.

Income tax expense increased by approximately $5.6 million, or 15.5 percent, for the first nine months of 2003, compared with the first nine months of 2002, primarily due to an increase in pre-tax income.

As discussed in Note 2 to the interim consolidated financial statements, in late 2001 SPS filed an application requesting a rate rider to recover 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, subject to approval by the state regulatory commission. Based on the settlement agreement, SPS wrote off pretax restructuring costs of approximately $5 million in 2002, which are reported as special charges.

2002 Comparison to 2001 — Other operating and maintenance expense for 2002 increased by approximately $2.5 million, or 1.6 percent, compared with 2001, largely due to increased insurance premiums.

Depreciation and amortization expense increased by approximately $5.1 million, or 6.1 percent, for 2002 compared with 2001, primarily due to capital additions to utility plant.

Taxes (other than income taxes) increased by approximately by $5.7 million, or 11.8 percent, for 2002 compared with 2001, primarily due to higher property and franchise taxes.

Special charges increased slightly in 2002. During 2001, we expensed pretax special charges of approximately $4.5 million for planned staff consolidation costs. The charges related to our allocation of severance costs for utility operations resulting from restaffing plans of several operating and corporate support areas of Xcel Energy. In 2002, special charges of $5.1 million were expensed due to a Texas regulatory recovery adjustment. For more information, see Note 2 to the audited consolidated financial statements.

Other income decreased by $5.8 million, or 49 percent, for 2002 compared with 2001, primarily due to us no longer receiving interest income on a note receivable that was paid off in 2001.

Interest expense increased by approximately $1.0 million, or 2.1 percent, for 2002 compared with 2001. The change is primarily due to an increase in financing costs related to debt that was refinanced in late 2001.

2001 Comparison to 2000 — Other utility operating and maintenance expense for 2001 increased by approximately $5.4 million, or 3.6 percent, compared with 2000. The change is largely due to increased bad debt reserves resulting from higher energy prices and increased generation maintenance overhauls.

Depreciation and amortization expense increased by approximately $5.4 million, or 6.9 percent, for 2001, compared with 2000, primarily due to increased capital additions to utility plant.

Interest expense decreased by approximately $9.6 million, or 17.5 percent, for 2001, compared with 2000, primarily due to lower interest expense resulting from the use of more short-term debt until the issuance of long-term debt in October 2001.

Our earnings can be significantly affected by weather. Unseasonably hot summers or cold winters increase electric sales, but also can increase expenses, which may not be fully recoverable. Unseasonably mild weather reduces electric sales, but may not reduce expenses, which affects overall results. The following summarizes the estimated impact on our earnings due to temperature variations from historical averages:


	•	weather in the first nine months of 2003 increased net income by an estimated $0.4 million;

	•	weather in 2002 increased net income by an estimated $2.5 million;

	•	weather in 2001 increased net income by an estimated $4.2 million; and

	•	weather in 2000 decreased net income by an estimated $1.1 million.

Our utility revenues depend on customer usage, which varies with weather conditions, general business conditions and the cost of energy services. Regulatory agencies approve the prices for electric and natural gas service within their respective jurisdictions. The historical and future trends of our operating results have been, and are expected to be, affected by the following factors:

General Economic Conditions — Economic conditions in the United States, and to a lesser extent in foreign countries, may have a material impact on our operating results. Although the United States economy is showing recent signs of recovery as measured by gross domestic product growth, general economic conditions over the past year contributed to a decline in the price for power and decreased energy commodity-trading margins with respect to the JOA. In addition, certain operating costs, such as insurance and security, have increased due to the dual threats of terrorist activity and war. We could experience a material adverse impact to our results of operations, future growth or ability to raise capital should the current economic recovery stall or further military engagements or terrorist incidents occur. Management cannot predict the impact of a continued economic slowdown, fluctuating energy prices, terrorism, war or the threat of war.

Sales Growth — In addition to weather impacts, customer sales levels can vary with economic conditions, customer usage patterns and other factors. Weather-normalized sales growth was estimated to be 2.2 percent in the first nine months of 2003 compared with the first nine months of 2002, 0.8 percent in 2002 compared with 2001, and 0.6 percent in 2001 compared with 2000. We are projecting that weather-normalized sales growth in 2003 compared with 2002 will be 2.1 percent.

Utility Industry Changes — The structure of the electric utility industry has been subject to change. Merger and acquisition activity over the past few years has been significant as utilities combine to capture economies of scale or establish a strategic niche in preparing for the future. Some regulated utilities are divesting generation assets. All FERC-jurisdictional electric utilities are required to provide nondiscriminatory wholesale access to the use of their transmission systems.

Some states had begun to allow retail customers to choose their electricity supplier, and many other states were considering retail competition proposals. However, the experience of the State of California in instituting competition, as well as the bankruptcy of Enron Corporation in 2001, have caused indefinite delays in most industry restructuring.

We cannot predict the outcome of restructuring proceedings in the electric utility jurisdictions we serve at this time. The resolution of these matters may have a significant impact on our financial position, results of operations and cash flows.

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. This application necessarily involves judgments regarding future events, including 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

Pension Plan Costs and Assumptions — Xcel Energy’s pension costs are based on an actuarial calculation that includes a number of key assumptions, most notably the annual return level that pension investment assets will earn in the future, and the interest rate used to discount future pension benefit payments to a present value obligation for financial reporting. In addition, the actuarial calculation uses an asset smoothing methodology to reduce volatility of varying investment performance over time.

Pension costs have been increasing in recent years, and are expected to increase further over the next several years, due to lower than expected investment returns and decreases in interest rates used to discount benefit obligations. Investment returns in 2000 and 2001 were below the assumed level of 9.5 percent, and interest rates have declined from the 7.5 percent to 8 percent levels used in 1999 and 2000 cost determinations to 7.25 percent used in 2002. Xcel Energy continually reviews its pension assumptions, and for 2003 has changed its investment return assumption to 9.25 percent and the discount rate assumption to 6.75 percent.

Xcel Energy bases its investment return assumption on expected long-term performance for each of the investment types included in its pension asset portfolio. These include equity investments, such as corporate common stocks; fixed-income investments, such as corporate bonds; and U.S. Treasury securities and non-traditional investments, such as timber or real estate partnerships. In reaching a return assumption, Xcel Energy considers the actual historical returns achieved by its asset portfolio over the past 20-year or longer period, as well as the long-term return levels projected and recommended by investment experts in the marketplace. The historical weighted average annual return for the past 20 years for Xcel Energy’s portfolio of pension investments is 12.6 percent, in excess of the current assumption level. The pension cost determinations assume the continued current mix of investment types over the long-term. Xcel Energy’s portfolio is heavily weighted toward equity securities, and includes non-traditional investments that can provide a higher than average return. However, as is the experience in recent years, a higher weighting in equity investments can increase the volatility in the return levels actually achieved by pension assets in any year. Xcel Energy lowered the 2003 pension investment return assumptions to reflect changing expectations of investment experts in the marketplace.

The investment gains or losses resulting from the difference between the expected pension returns assumed on smoothed or “market-related” asset levels and actual returns earned is deferred in the year the

difference arises and recognized over the subsequent five-year period. This gain or loss recognition occurs by using a five-year moving-average value of pension assets to measure expected asset returns in the cost determination process, and by amortizing deferred investment gains or losses over the subsequent five-year period. Based on the use of average market-related asset values, and considering the expected recognition of past investment gains and losses over the next five years, achieving the assumed rate of asset return of 9.25 percent in each future year and holding other assumptions constant, Xcel Energy currently projects that the pension costs recognized by it for financial reporting purposes will increase from a credit, or negative expense, of $84 million in 2002 to a credit of $45 million in 2003, a credit of $20 million in 2004, and a net expense of $20 million in 2005. Pension costs are currently a credit due to the recognized investment asset returns exceeding the other pension cost components, such as benefits earned for current service and interest costs for the effects of the passage of time on discounted obligations.

Xcel Energy bases its discount rate assumption on benchmark interest rates quoted by an established credit rating agency, Moody’s, and has consistently benchmarked the interest rate used to derive the discount rate to the movements in long-term corporate bond indices for bonds rated AAA through BAA by Moody’s, which have a period to maturity comparable to Xcel Energy’s projected benefit obligations. At December 31, 2002, the annualized Moody’s Aa index rate, roughly in the middle of the AAA and BAA range, was 6.63 percent, which when rounded to the nearest quarter-percent rate, as is Xcel Energy’s policy, resulted in a 6.75 percent pension discount rate at year-end 2002. This rate was used to value the actuarial benefit obligations at that date, and will be used in 2003 pension cost determinations.

If Xcel Energy were to use alternative assumptions for pension cost determinations, a 1 percent change would result in the following impacts on the estimated pension costs recognized by Xcel Energy for financial reporting purposes:


	•	a 1 percent higher rate of return, 10.25 percent, would decrease 2003 pension costs by $22 million;

	•	a 1 percent lower rate of return, 8.25 percent, would increase 2003 pension costs by $22 million;

	•	a 1 percent higher discount rate, 7.75 percent, would decrease 2003 pension costs by $8 million; and

	•	a 1 percent lower discount rate, 5.75 percent, would increase 2003 pension costs by $12 million.

Alternative assumptions would also change the expected future cash funding requirements for the pension plans. Cash funding requirements can be impacted by changes to actuarial assumptions, actual asset levels and other pertinent calculations prescribed by the funding requirements of income tax and other pension-related regulations. These regulations did not require cash funding in recent years for Xcel Energy’s pension plans, and do not require funding in 2003. Assuming future asset return levels equal the actuarial assumption of 9.25 percent for the years 2003-2005, then under current funding regulations Xcel Energy projects that no cash funding would be required for 2004, $35 million in funding would be required for 2005, and $54 million in funding would be required for 2006. Actual performance can affect these funding requirements significantly; projected 2003 investment performance is expected to eliminate pension funding requirements for SPS for 2004 and with assumed return levels in 2004 and 2005, could eliminate funding for 2005 and 2006, as well. Current funding regulations are under legislative review, and if not retained in their current form, could change these funding requirements materially.

Regulation — We are subject to extensive regulation by the SEC under PUHCA with respect to issuances and sales of securities, acquisitions and sales of certain properties and intra-system sales of certain goods and services.

The rates charged to customers are approved by the FERC and the regulatory commissions in the states in which we operate. The rates are generally designed to recover plant investment, operating costs and an

Regulated public utilities are allowed to record as regulatory assets certain costs that are expected to be recovered from customers in future periods and to record as regulatory liabilities certain income items that are expected to be refunded to customers in future periods. In contrast, nonregulated enterprises would expense these costs and recognize the income in the current period. If restructuring or other changes in the regulatory environment occur, we may no longer be eligible to apply this accounting treatment, and may be required to eliminate such regulatory assets and liabilities from our balance sheet. Such changes could have a material adverse effect on our results of operations in the period the write-off is recorded.

At September 30, 2003, we reported on our balance sheet regulatory assets of approximately $72.2 million and regulatory liabilities of approximately $2.3 million that would be recognized in the statement of operations in the absence of regulation. In addition to a potential write-off of regulatory assets and liabilities, restructuring and competition may require recognition of certain stranded costs not recoverable under market pricing. We currently do not expect to write off any stranded costs unless market price levels change or cost levels increase above market price levels. See Notes 1 and 10 to the audited consolidated financial statements for further discussion of regulatory deferrals.

Merger Rate Agreements — As part of the merger approval process, we agreed to reduce our rates in several jurisdictions. The discussion below summarizes the rate reductions in Texas and New Mexico.


	•	guarantee annual merger savings credits of approximately $4.8 million and amortize merger costs through 2005;

	•	retain the current fuel-recovery mechanism to pass along fuel cost savings to retail customers; and

	•	comply with various service quality and reliability standards, covering service installations and upgrades, light replacements, customer service call centers and electric service reliability.


	•	guarantee annual merger savings credits of approximately $780,000 and amortize merger costs through December 2004;

	•	share net nonfuel operating and maintenance savings equally among retail customers and shareholders;

	•	retain the current fuel recovery mechanism to pass along fuel cost savings to retail customers; and

	•	not pass along any negative rate impacts of the merger.

Environmental Matters — Capital expenditures on environmental improvements at our facilities were approximately:


	•	$2.4 million in the nine months ended September 30, 2003;

	•	$1.5 million in 2002;

	•	$5.7 million in 2001; and

	•	$4.9 million in 2000.

We expect to incur approximately $1.5 million in capital expenditures for compliance with environmental regulations during the last three months of 2003 and approximately $9.2 million during the period from 2004 through 2007. Most of the costs are related to water pollution control.

Inflation — Inflation at its current level is not expected to materially affect our prices or returns to our shareholder.

SFAS No. 150 — In May 2003, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 150 — “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity, including:


	•	instruments that represent, or are indexed to, an obligation to buy back the issuer’s shares, regardless whether the instrument is settled on a net-cash or gross physical basis;

	•	mandatorily redeemable equity instruments;

	•	written options that give the counterparty the right to require the issuer to buy back shares; and

	•	forward contracts that require the issuer to purchase shares.

In November 2003, the FASB posted a staff position, which delayed the implementation of SFAS No. 150 indefinitely. On September 30, 2003, we had a special purpose subsidiary trust with outstanding mandatorily redeemable preferred securities of $100 million consolidated in our consolidated balance sheets. These securities were redeemed on October 15, 2003.

SFAS No. 143 — We adopted SFAS No. 143 — “Accounting for Asset Retirement Obligations” effective January 1, 2003. As required by SFAS No. 143, future plant decommissioning obligations were recorded as a liability at fair value as of January 1, 2003, with a corresponding increase to the carrying values of the related long-lived assets. This liability will be increased over time by applying the interest method of accretion to the liability, and the capitalized costs will be depreciated over the useful life of the related long-lived assets. The adoption of the statement had no income statement impact, as the cumulative effect adjustments required under SFAS No. 143 have been deferred through the establishment of a regulatory asset pursuant to SFAS No. 71 — “Accounting for the Effects of Certain Types of Regulation.”

The adoption of SFAS No. 143 in 2003 affects accrued plant removal costs for generation, transmission and distribution facilities of Xcel Energy’s utility subsidiaries, including us. Although SFAS No. 143 does not recognize the future accrual of removal costs as a GAAP liability, long-standing ratemaking practices approved by applicable state and federal regulatory commissions have allowed provisions for such costs in historical depreciation rates. These removal costs have accumulated over a number of years based on varying rates as authorized by the appropriate regulatory entities. Given the long periods over which the amounts were accrued and the changing of rates through time, we have estimated the amount of removal costs accumulated through historic depreciation expense based on current factors used in the existing depreciation rates. Accordingly, at January 1, 2003, our estimated amount of future removal costs, which are considered regulatory liabilities under SFAS No. 71 that are accrued in accumulated depreciation, was $97 million.

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 supersedes previous guidance for the reporting of gains and losses from extinguishment of debt and accounting for leases, among other things. We adopted SFAS No. 145 in July 2003. The impacts of SFAS No. 145 are not material to us.

SFAS No. 146 — In June 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. The impacts of SFAS No. 146 are not expected to be material to us.

SFAS No. 149 — In April 2003, the FASB issued SFAS No. 149 — “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” which amends and clarifies accounting for derivative

FASB Interpretation No. 45 (FIN No. 45) — In November 2002, the FASB issued FIN No. 45 — “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” The initial recognition and measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor’s fiscal year-end. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The interpretation addresses the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees. The interpretation also clarifies the requirements related to the recognition of a liability by a guarantor at the inception of the guarantee for the obligations the guarantor has undertaken in issuing the guarantee.

SFAS No. 133 Implementation Issue No. C20 — In June 2003, for purposes of determining the applicability of the normal purchases and normal sales scope exception, the FASB issued SFAS No. 133 Implementation Issue No. C20 as supplemental guidance to SFAS No. 133 Implementation Issue No. C11. The effective date of the implementation guidance of Issue No. C20 for us is during the fourth quarter of 2003. We are currently in the process of reviewing and interpreting this guidance and do not anticipate any material adverse financial impact due to the implementation of Issue No. C20 guidance as a result of our ability to recover prudently-incurred purchased capacity costs from customers.

Business and Operational Risk — We are exposed to commodity price risk in our fuel for generation and purchased energy. However, we recover purchased fuel and energy expenses on a dollar-for-dollar basis.

We manage commodity price risk by entering into purchase and sales commitments for electric power, long-term contracts for coal supplies and fuel oil, and derivative financial instruments. Our risk management policy allows us to manage the market price risk to the extent such exposure exists and to economically manage system costs.

Interest Rate Risk — We are exposed to fluctuations in interest rates where we enter into variable rate debt obligations to fund certain power projects being developed or purchased. Exposure to interest rate fluctuations may be mitigated by entering into derivative instruments known as interest rate swaps, caps, collars and put or call options. These contracts reduce exposure to interest rate volatility and result in primarily fixed rate debt obligations when taking into account the combination of the variable rate debt and the interest rate derivative instrument. Our risk management policy allows us to reduce interest rate exposure from variable rate debt obligations.

The impacts on our pretax income of a 100 basis point change in the benchmark rate on variable debt were $0.0 at September 30, 2003, $0.3 million at December 31, 2002 and $3.9 million at December 31, 2001.

See Note 11 to the audited consolidated financial statements and Note 6 to the interim consolidated financial statements for a discussion of our interest rate swaps.

Credit Risk — In addition to the risks discussed previously, we are exposed to credit risk in transactions. Credit risk relates to the risk of loss resulting from the non-performance by a counterparty of its contractual obligations. We maintain credit policies which define acceptable credit exposures in terms of quality and size of the counterparty. We actively monitor credit exposures and manage them to within the limits defined by our credit policies.

We conduct standard credit reviews for all wholesale counterparties. Retail customers have credit reviews completed and deposits assessed in accordance with state regulatory guidelines applicable within our service territory. Deposits are held in the form of cash, surety bonds, letters of credit and parental or third party guarantees. Xcel Energy employs additional credit risk control mechanisms when appropriate, such as letters of credit, parental guarantees, standardized master netting agreements and termination provisions that allow for offsetting of positive and negative exposures. The credit exposure is monitored and, when necessary, the activity with a specific counterparty is limited until credit enhancement is provided.

For a further discussion of derivatives, risk management and market risks, see Note 12 to the audited consolidated financial statements.

Net cash provided by operating activities decreased by $32.3 million, or 27.6 percent, for the first nine months of 2003, compared with the first nine months of 2002. The change was primarily due to decreases in recovery of deferred electric energy costs. Net cash provided by operating activities decreased by $125.2 million, or 47.7 percent, for the year ended December 31, 2002, compared with the year ended December 31, 2001. The change was primarily due to a decrease in net income and a decrease in the recovery of deferred energy costs. Net cash provided by operating activities increased by $175.6 million, or 201.5 percent, for the year ended December 31, 2001, compared with the year ended December 31, 2000. The change was primarily due to an increase in recovery of electric energy costs.

Net cash used in investing activities increased by $40.5 million, or 111.6 percent, for the first nine months of 2003, compared with the first nine months of 2002. The change was primarily due to an increase in utility capital/ construction expenditures. Net cash used in investing activities increased by $53.7 million for the year ended December 31, 2002, compared with the year ended December 31, 2001. The change was primarily due to the repayment of notes receivable from an affiliate in 2001, partially offset by a decrease in utility capital/ construction expenditures. Net cash used in investing activities decreased by $112.7 million, or 99.1 percent, for the year ended December 31, 2001, compared with the year ended December 31, 2000. The change was primarily due to the repayment of notes receivable from an affiliate.

Net cash used in financing activities decreased by $13.4 million, or 19.6 percent, for the first nine months of 2003, compared to the first nine months of 2002. The change was primarily due to increased funds from short-term debt partially offset by an increase in dividends paid to our parent. Net cash used in financing activities decreased by $119.5 million, or 57.7 percent for the year ended December 31, 2002, compared with the year ended December 31, 2001. The change was primarily due to a decrease in repayments of short-term debt as a use of cash in 2002, partially offset by a decrease in long-term debt as a source of cash and decreased

See the discussion of trends, commitments and uncertainties with the potential for future impact on cash flow and liquidity under “— Capital Sources.”

Capital Expenditures — The estimated cost as of September 30, 2003 of our capital expenditure programs and other capital requirements for the years 2003, 2004 and 2005 are shown in the table below.

Our capital expenditure programs are subject to continuing review and modification. Actual utility construction expenditures may vary from the estimates due to changes in electric projected load growth, the desired reserve margin and the availability of purchased power, as well as alternative plans for meeting long-term energy needs. In addition, our need to comply with future requirements to install emission-control equipment may impact actual capital requirements.

Contractual Obligations and Other Commitments — We have a variety of contractual obligations and other commercial commitments that represent prospective requirements in addition to our capital expenditure programs. The following is a summarized table of contractual obligations as of June 30, 2003:

Dividend Policy — Historically we have paid quarterly dividends to Xcel Energy. In 2001, 2002 and the first nine months of 2003, we have paid dividends to Xcel Energy of $85.1 million and $93.4 million and $73.3 million, respectively. The amount of dividends that we pay is dictated to some extent by the needs of Xcel Energy but is limited by federal regulatory considerations. Under PUHCA, we can pay dividends only out of current and retained earnings. As of September 30, 2003, our retained earnings were approximately $416 million.

We expect to meet future financing requirements by periodically issuing long-term debt, short-term debt and common equity to maintain desired capitalization ratios. As a result of being a subsidiary of a registered holding company under PUHCA, we are required to maintain a common equity ratio of 30 percent or higher in our consolidated capital structure. Our common equity at September 30, 2003 was 49.1 percent of our total capitalization. To the extent Xcel Energy experiences constraints on available capital sources, it may limit its equity contributions to us.

Short-Term Funding Sources — We use a number of sources to fulfill short-term funding needs. Primary among these is operating cash flow, but also included are short-term borrowing arrangements such as notes payable and bank lines of credit. The amount and timing of short-term funding needs depend in large part on financing needs for utility construction expenditures as discussed previously under “— Capital Requirements.” On February 18, 2003, we entered into a 364-day credit facility with a $100 million capacity. As of December 31, 2003, we had obligations of approximately $3.2 million outstanding under this facility, all of which obligations relate to letters of credit issued under the facility.

In November 2003, we entered into a “money pool” arrangement with Xcel Energy and the other Xcel Energy operating utilities, subject to receipt of required regulatory approvals. This agreement will allow us to borrow or loan short-term funds to the pool participants at competitive costs, rather than use other short-term funding sources. The money pool agreement was approved by the SEC, and will go into effect with respect to us upon NMPRC approval and with respect to each of Xcel Energy’s other operating utilities upon receipt by the utility subsidiary of all necessary regulatory approvals.

Operating cash flow as a source of short-term funding is reasonably likely to be affected by such operating factors as weather; regulatory requirements including rate recovery of costs, environmental regulation compliance and industry restructuring; changes in the trends for energy prices and supply; as well as operational uncertainties that are difficult to predict.

Short-term borrowing as a source of short-term funding is affected by access to the capital markets on reasonable terms. Our access varies based on financial performance and existing debt levels. If current debt levels are perceived to be at or higher than standard industry levels or those levels that can be sustained by current operating performance, access to reasonable short-term borrowings could be limited. These factors are evaluated by credit rating agencies that review Xcel Energy and its subsidiary operations on an ongoing basis.

Our cost of capital and access to capital markets for both long-term and short-term funding are dependent in part on credit rating agency reviews. As discussed above under the caption “Risk Factors — Risks Related to Our Relationship to Xcel Energy,” our credit ratings were lowered in 2002, and could be further lowered in the future, reflecting pressure on our credit profile resulting from NRG’s financial position. As of September 30, 2003, the rating companies assigned the following credit ratings:

As of September 30, 2003, we had cash and cash equivalents of approximately $13.8 million.

Financing Activities — We engaged in the following financing activities in 2003:


	•	On October 6, 2003, we issued $100 million of the original notes to qualified institutional buyers in a private placement not registered under the Securities Act. The debt was issued to refinance existing higher coupon securities as described below.

	•	On October 15, 2003, our trust subsidiary, SPS Capital I, redeemed $100 million of 7.85 percent Trust Originated Preferred Securities. The redemption price for each security was $25 principal amount plus accrued distributions of $0.240 per preferred security.

Financing Plans — We currently plan no additional debt issuances during 2004.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

During 2000, 2001 and 2002 and the first nine months of 2003, there were no disagreements with our independent public accountants on accounting principles or practices, financial statement disclosures, or auditing scope or procedures.

On March 27, 2002, the Audit Committee of Xcel Energy’s Board of Directors recommended, and our Board of Directors approved, the decision to engage Deloitte & Touche LLP, subject to completion of their customary acceptance procedures, as our new principal independent accountants for 2002. Accordingly, on March 27, 2002, our management informed Arthur Andersen LLP that the firm would no longer be engaged as our principal independent accountants. The reports of Arthur Andersen LLP on our financial statements for the year ended December 31, 2001 or 2000 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. Further, during 2000, 2001 and 2002 and the first nine months of 2003, there have been no reportable events (as defined in Commission Regulation S-K Item 304(a)(1)(v)).

Arthur Andersen LLP furnished us with a letter addressed to the SEC stating that it agreed with the above statements.

We were incorporated in 1921 under the laws of the State of New Mexico. On August 1, 1997, we combined with Public Service Company of Colorado to form NCE, and we became a wholly owned subsidiary of NCE, a registered holding company under PUHCA. On August 18, 2000, NCE merged into NSP, which subsequently changed its name to Xcel Energy Inc. We are now a wholly owned subsidiary of Xcel Energy. Xcel Energy is a registered holding company under PUHCA. Xcel Energy is a publicly held company and files periodic reports and other documents with the SEC. A majority of the members of our Board of Directors and many of our executive officers are also executive officers of Xcel Energy.

Among Xcel Energy’s other subsidiaries are NSP-Minnesota, PSCo, NSP-Wisconsin and Cheyenne. Prior to December 5, 2003, Xcel Energy owned all of the common stock of NRG. NRG is a global energy company, primarily engaged in the ownership and operation of power generation facilities and the sale of energy, capacity and related products. On May 14, 2003, NRG filed a voluntary petition for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. On December 5, 2003, NRG emerged from bankruptcy and Xcel Energy divested its ownership interest in NRG. On January 13, 2004, Xcel Energy announced that it had entered into an agreement with Black Hills Corp. for the sale of Cheyenne, pending regulatory approvals.

At December 31, 2003, we owned a direct subsidiary, SPS Capital I, a special purpose financing trust. A certificate of cancellation was filed to dissolve SPS Capital I on January 5, 2004.

Our principal executive offices are located at Tyler at Sixth Street, Amarillo, Texas 79101, and our telephone number is (303) 571-7511.

The PUCT has jurisdiction over our Texas operations as an electric utility and over our retail rates and services. The municipalities in which we operate in Texas have original jurisdiction over our rates in those communities. The NMPRC has jurisdiction over the issuance of securities and accounting. The NMPRC, the OCC and the KCC have jurisdiction with respect to retail rates and services in their respective states.

We are subject to the jurisdiction of the FERC with respect to our wholesale electric operations, accounting practices, wholesale sales for resale and the transmission of electricity in interstate commerce. We have received authorization from the FERC to make wholesale electricity sales at market-based prices. In connection with our market-based rate authority, we have an obligation to file an updated market power analysis in the first quarter of 2004.

We are unable to predict the impact on our operating results from the future regulatory activities of any of these agencies.

Texas — Fuel and purchased power costs are recoverable in Texas through a fixed fuel factor, which is part of our rates. If it appears that we will materially over-recover or under-recover these costs, the factor may be revised upon application by us or action by the PUCT. The regulations require refunding and surcharging over/under-recovery amounts, including interest, when they exceed 4 percent of our annual fuel and purchased power costs, as allowed by the PUCT, if this condition is expected to continue. PUCT regulations require periodic examination of our fuel and purchased power costs, the efficiency of the use of such fuel and purchased power, fuel acquisition and management policies and purchase power commitments. Under the PUCT’s regulations, we are required to file an application for the PUCT to retrospectively review at least every three years the operations of our electric generation and fuel management activities.

In June 2002, we filed an application for the PUCT to retrospectively review the operations of our electric generation and fuel management activities. In this application, we filed our reconciliation for electric generation and fuel management activities, totaling approximately $608 million, from January 2000 through December 2001. In May 2003, a stipulation was approved by the PUCT. The stipulation resolves all issues regarding our fuel costs and wholesale trading activities through December 2001. We will withdraw, without prejudice, our request to share in 10 percent of margins from certain wholesale non-firm sales. We will recover $1.1 million from Texas customers for the proposed sharing of wholesale non-firm sales margins. The parties agreed that we would reduce our December 2001 fuel under-recovery balances by $5.8 million. Including the withdrawal of proposed margin sharing of wholesale non-firm sales, the net impact to our deferred fuel expense, before tax, is a reduction of $4.7 million.

In May 2003, we proposed to increase our voltage-level fuel factors to reflect increased fuel costs since the time our current fuel factors were approved in March 2002. The proposed fuel factors are expected to increase Texas annual retail revenues by approximately $60.2 million.

We also reported to the PUCT that we have under-collected our fuel costs under the current Texas retail fixed fuel factors. In the same May 2003 application, we proposed to surcharge $13.2 million and related interest for fuel cost under-recoveries incurred through March 2003. In June 2003, the administrative law judge approved the increased fuel factors on an interim basis subject to hearings and completion of the case. The increased fuel factors became effective in July 2003. In July 2003, a unanimous settlement was reached adopting the surcharge and providing for the implementation of an expedited procedure for revising the fixed fuel factors on a semi-annual basis. The surcharge will be collected from customers over an eight-month period. In August 2003, the PUCT approved the settlement and the new proposed fuel cost recovery process and the surcharge became effective in September 2003. The Texas retail fuel factors will change each November and May based on the projected cost of natural gas. Revenues will continue to be reconciled to fuel costs in accordance with Texas law.

In July 2003, we filed a second fuel cost surcharge factor application in Texas to recover an additional $26 million of fuel cost under-recoveries accrued during April through June 2003. In August 2003, the parties to the case filed a stipulation resolving various issues. The stipulation provided approval of our modified request to surcharge $15.7 for the months April 2003 and May 2003 over twelve months, beginning with the November 2003 billing cycle. The stipulation was approved by the PUCT in October 2003.

New Mexico — The NMPRC regulations provide for a fuel and purchased power cost adjustment clause for our New Mexico retail jurisdiction. We file monthly and annual reports of our fuel and purchased power costs with the NMPRC.

On December 17, 2001, we filed an application with the NMPRC seeking approval of continued use of our fuel and purchased power cost adjustment using a monthly adjustment factor, authorization to implement the proposed monthly factor on an interim basis and approval of the reconciliation of our fuel and purchase power adjustment clause collections for the period October 1999 through September 2001. In January 2002, the NMPRC authorized us to implement a monthly adjustment factor on an interim basis beginning with the February 2002 billing cycle. On August 19, 2003, the NMPRC gave final approval authorizing a monthly adjustment factor.

On May 27, 2003, a hearing examiner for the NMPRC issued a recommended decision on our fuel proceeding approving our utilizing a monthly fuel factor. We had been utilizing an annual fuel factor, which had allowed significant under-collections. The decision denied the intervenors’ request that all margins from off-system sales be credited to ratepayers. On August 19, 2003, the NMPRC approved the hearing examiner’s recommended decision. In accordance with NMPRC regulations, we must file our next New Mexico fuel factor continuation case no later than August 2005.

Texas Excess Earnings Proceeding — Prior to June 2001, we operated under an earnings test in Texas, which required excess earnings to be returned to our customers. In May 2000, we filed our 1999 earnings report with the PUCT, indicating no excess earnings. In September 2000, the PUCT staff and the Office of Public Utility Counsel filed with the PUCT a notice of disagreement, indicating adjustments to our calculations, which would result in excess earnings. During 2000, we recorded an estimated obligation of approximately $11.4 million for 1999 and 2000. In February 2001, the PUCT ruled on the disputed issues in the 1999 earnings report and found that we had excess earnings of $11.7 million. We appealed this decision to the District Court. On December 11, 2001, we entered into an overall settlement of all earnings issues for 1999 through 2001, which reduced the excess earnings for 1999 to $7.3 million and found that there were no excess earnings for 2000 or through June 2001. The settlement also provided that the remaining excess earnings for 1999 could be used to offset approved transition costs that we were seeking to recover. The PUCT approved the overall settlement on January 10, 2002.

Golden Spread Electric Cooperative, Inc. — In October 2001, Golden Spread Electric Cooperative, Inc. (“Golden Spread”) filed a complaint and request for investigation against us before the FERC. Golden Spread alleged we had violated provisions of a Commitment and Dispatch Service Agreement (the “Commitment Agreement”) pursuant to which we conduct joint dispatch of our and Golden Spread’s resources. We filed a counter complaint against Golden Spread in which we alleged that Golden Spread failed to adhere to certain requirements of the Commitment Agreement. In May 2003, we and Golden Spread reached a settlement that was approved by the FERC in July 2003. The $5 million accrued costs for payments under the settlement have been deferred by us as they are for economic purchased energy and are recoverable from our customers through the respective jurisdictional fuel and purchased power cost recovery mechanisms.

Texas Transition to Competition Cost Recovery Application — In December 2001, we filed an application with the PUCT to recover $20.3 million in costs from Texas retail customers associated with the transition to competition. These costs were incurred to position us for retail competition, which was eventually delayed. The filing was amended in March 2002 to reduce the recoverable costs by $7.3 million, which was associated with over-earnings recognized for the 1999 annual report. The PUCT approved our use of the 1999 annual report over-earnings to offset the claims for reimbursement of transition to competition costs. This reduced the requested net collection in Texas to $13.0 million. 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, we 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.

FERC Order Modifying Market Based Sales Tariffs — In November 2001, the FERC issued an order under Section 206 of the Federal Power Act initiating a “generic” investigation proceeding against all jurisdictional electric suppliers making sales in interstate commerce at market-based rates. We, NSP-Minnesota, and PSCo previously received FERC authorization to make wholesale sales at market-based rates, and have been engaged in such sales subject to a tariff on file at the FERC. The order proposed that all wholesale electric sales at market-based rates conducted starting 60 days after publication of the FERC order in the Federal Register would be subject to refund conditioned on factors determined by the FERC. In December 2001, the FERC issued a supplemental order delaying the effective date of the subject to refund condition, but subject to further investigation and proceedings.

In November 2003, the FERC issued a final order requiring amendments to the market-based wholesale tariffs of all FERC-jurisdictional electric utilities, including us, to impose new market behavior rules, and requiring submission of compliance tariff amendments in December 2003. Violations of the new tariffs could result in the disgorgement of certain wholesale sales revenues or the loss of authority to make sales at market based rates. In connection with our market-based rate authority, we have an obligation to file an updated market power analysis in the first quarter of 2004.

FERC Money Pool Final Rules — In October 2003, the FERC issued final rules asserting jurisdiction over “money pool” arrangements by public utilities, including such arrangements by registered holding company systems regulated by the SEC. As described elsewhere in this prospectus, we entered into a money pool agreement with Xcel Energy and the other Xcel Energy operating companies in November 2003, subject to receipt of required state regulatory approvals. The Xcel Energy money pool arrangements were filed with FERC in December 2003, as required by the final rule.

Generation Interconnection Rules — In August 2003, the FERC issued final rules requiring the standardization of generation interconnection procedures and agreement for interconnection of generators of 20 MW or more to the transmission systems of all FERC-jurisdictional electric utilities, including us, and establishing pricing rules for interconnections and related system upgrades. The FERC required all jurisdictional utilities to submit compliance filings by January 20, 2004. Submission of the mandated changes to the Xcel Energy operating companies tariff and the SPP regional tariff, which will govern most generation interconnections to the SPS transmission system, are pending.

FERC Standards of Conduct Rules — In December 2003, the FERC issued final standards of conduct rules affecting all FERC-jurisdictional transmission utilities, including us, which will require us to maintain greater functional separation of our electric transmission functions from our wholesale energy markets functions and from our “energy affiliates” (as defined by the final rule). Full compliance is required by June 1, 2004. Xcel Energy and other parties have requested the FERC to grant clarification or rehearing of the rules. Management has yet not estimated the cost of compliance with the new standards of conduct rules, but the cost could be material.

Southwest Power Pool Restructuring — In October 2003, SPP, the regional reliability council and power pool for the SPS system, filed for FERC authorization to transform its operation into an RTO under FERC Order No. 2000. The FERC rejected a prior similar SPP proposal in 2001. If we become a member of the SPP RTO, we would be required to transfer functional control of our electric transmission system to SPP and take all transmission services, including services required to serve retail native loads, under the SPP regional tariff. In addition, SPP made unilateral changes to the existing SPP membership agreement in order to fund the start of RTO operations in a manner which increases the current costs of our membership in SPP by approximately $1.5 million per year. On October 31, 2003, we submitted a conditional notice of withdrawal from SPP in order to preserve our flexibility with regard to future RTO membership.

FERC Transmission Inquiry — In 2002, the FERC began 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 asked the Xcel Energy operating companies for certain information and documents. Xcel Energy and its subsidiaries, including us, are complying with the request. Approximately ten other public utilities were made the subject of similar inquiries, with the utilities apparently selected at random.

Texas Fuel Reconciliation, Fuel Factor and Fuel Surcharge Application — In November 2003, we submitted a third fuel cost surcharge factor application in Texas to recover an additional $25 million of fuel cost under recoveries accrued during June through September 2003. If approved, the proposed surcharge will go into effect after the first surcharge is completed and will continue for 12 months beginning in May 2004. This case is pending review and approval by the PUCT.

Merger Agreement — As a part of the NCE and NSP merger approval process in Texas, we agreed to:


	•	guarantee annual merger savings credits of approximately $4.8 million and amortize merger costs through 2005;

	•	retain the current fuel recovery mechanism to pass along fuel cost savings to retail customers; and

	•	comply with various service quality and reliability standards, covering service installations and upgrades, light replacements, customer service call centers and electric service reliability.


	•	guarantee annual merger savings credits of approximately $780,000 and amortize merger costs through December 2004;

	•	share net non-fuel operating and maintenance savings equally among retail customers and shareholders;

	•	retain the current fuel recovery mechanism to pass along fuel cost savings to retail customers; and

	•	not pass along any negative rate impacts of the merger.

New Mexico Renewable Energy Requirements — In December 2002, the NMPRC adopted new regulations requiring investor-owned utilities operating in New Mexico to promote the use of renewable energy technologies by procuring at least ten percent of their New Mexico retail energy requirements from renewable resources by no later than 2011.

NMPRC Billing Practices Investigation — Beginning in April 2003, we estimated electricity usage for approximately 9,500 customer accounts in two New Mexico cities. Estimated bills were sent to these customers for between two and five months. On September 25, 2003, the NMPRC entered an order opening an investigation into our practices regarding estimated billing. The commission ordered us to show cause why we are not in violation of the commission rule that limits the use of estimated meter readings.

Lamb County Electric Cooperative — On July 24, 1995, Lamb County Electric Cooperative, Inc. (“LCEC”) petitioned the PUCT for a cease and desist order against us. LCEC alleged that we had been unlawfully providing service to oil field customers and their facilities in LCEC’s singly certificated area. A trial on the merits was held in October 2002, and on May 23, 2003, the PUCT issued an order denying LCEC’s petition for a cease and desist order against us. The basis of the decision was the determination that we were granted a certificate of convenience and necessity in 1976 to serve the disputed customers. LCEC has filed an appeal of the decision with the District Court in Travis County, Texas. The appeal is expected to include a substantial evidence review of the record evidence introduced at the PUCT proceeding. The Texas Attorney General has responded to the appeal on behalf of the PUCT and we, Texaco Exploration and Production Inc. and Apache Corporation have intervened in the proceeding in support of the PUCT’s decision. A hearing on the appeal is currently scheduled for April 9, 2004.

Retail competition and the unbundling of regulated energy service could have a significant financial impact on us due to an impairment of assets, a loss of retail customers, lower profit margins and/or increased costs of capital. The restructuring may have a significant financial impact on our financial position, results of operations and cash flows. We cannot predict when we will be subject to changes in legislation or regulation, nor can we predict the impacts of such changes on our financial position, results of operations or cash flows. We believe that the prices we charge for electricity and the quality and reliability of our service currently place us in a position to compete effectively in the energy market.

Retail Business Competition — The retail electric business faces increasing competition as industrial and large commercial customers have some ability to own or operate facilities to generate their own electric energy. In addition, customers may have the option of substituting other fuels, such as natural gas for heating, cooling and manufacturing purposes, or the option of relocating their facilities to a lower cost environment. While we face these challenges, we believe our rates are competitive with currently available alternatives. We are taking actions to lower operating costs and are working with our customers to analyze energy efficiency and load management programs in order to better position us to more effectively operate in a competitive environment.

Wholesale Business Competition — The wholesale electric business faces increasing competition in the supply of bulk power, due to federal and state initiatives to provide open access to utility transmission systems. Under current FERC rules, utilities are required to provide wholesale open-access transmission services and to unbundle wholesale merchant and transmission operations. We are operating under a joint tariff in compliance with these rules. To date, these provisions have not had a material impact on our operations.

Utility Industry Changes and Restructuring — The structure of the electric utility industry has been subject to change. Merger and acquisition activity over the past few years has been significant as utilities combine to capture economies of scale or establish a strategic niche in preparing for the future. Some regulated utilities are divesting generation assets. All utilities are required to provide nondiscriminatory access to the use of their transmission systems.

Some states had begun to allow retail customers to choose their electricity supplier, and many other states were considering retail access proposals. However, the experience of the State of California in instituting competition, as well as the bankruptcy filing of Enron Corp. in 2001, have caused indefinite delays in most industry restructuring.

We cannot predict the outcome of restructuring proceedings in the jurisdictions we serve at this time. The resolution of these matters may have a significant impact on our financial position, results of operations and cash flows.

For more information on the delay of restructuring in Texas and New Mexico, see below and Note 10 to the audited consolidated financial statements and Note 2 to the interim consolidated financial statements.

TRANSLink Transmission Company LLC — In September 2001, Xcel Energy’s operating companies, including us, joined a proposal with several other electric utilities in the U.S. mid-continent region to form TRANSLink Transmission Company LLC (“TRANSLink”), an independent transmission company (“ITC”) which would own and/or operate electric high voltage transmission facilities within a FERC-approved RTO. Initially, the applicants proposed that our high voltage transmission system be under the functional control of TRANSLink under an operating agreement between us and TRANSLink. Our electric

In April 2002, the FERC gave approval for the applicants to transfer ownership or operations of their transmission systems to TRANSLink and to form TRANSLink as an ITC operating under the umbrella RTO organization of MISO, subject to several conditions.

Several state approvals also would be required to implement the proposal, and the proposal would require SEC approval. State applications were made in late 2002 and early 2003.

In 2002, we filed for PUCT and NMPRC approval to transfer functional control of our electric transmission system to TRANSLink within the merged SPP/MISO RTO, of which we would be a participant. In March 2003, the SPP and MISO cancelled their planned merger to form a large mid-continent RTO. This development materially impacted our applications in Texas and New Mexico. We requested the cases be dismissed without prejudice while we evaluated possible RTO arrangements for the SPS system. In June 2003, the Minnesota Public Utilities Commission (“MPUC”) held a hearing on the NSP-Minnesota TRANSLink application, filed in December 2002. At the hearing, the MPUC deferred any decision. Instead, the MPUC indicated NSP-Minnesota could submit a supplemental or revised application to explain certain recent changes to the proposal and to respond to a number of issues and questions posed by the MPUC advisory staff and other parties. Similar state regulatory filings by NSP-Minnesota in North Dakota and by NSP-Wisconsin in Wisconsin were not contested, but were not approved.

On November 21, 2003, the TRANSLink participants, including Xcel Energy, jointly announced that the formation of TRANSLink had been suspended due to continued regulatory and market uncertainty.

As of September 30, 2003, Xcel Energy had incurred and deferred approximately $5 million of TRANSLink-related costs based on anticipated allocation to and recovery from participating operating utilities in future rates. None of these costs had been allocated to us or other regulatory jurisdictions at that date, pending resolution of TRANSLink operating uncertainties. Consequently, it is not determinable at this time how much, if any, costs will ultimately be allocated to us or recovered from our ratepayers.

Standard Market Design Rulemaking — In July 2002, the FERC issued a Notice of Proposed Rulemaking on Standard Market Design (“SMD”) rulemaking for regulated utilities. If implemented as proposed, the rulemaking will substantially change how wholesale markets operate throughout the United States. The proposal 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. The market will be administered by RTOs or Independent Transmission Providers. RTOs will also be responsible for putting together 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 were filed in the fourth quarter of 2002, and replies and further comment were filed in the first quarter of 2003. In April 2003, the FERC issued a “whitepaper” describing proposed changes to the proposed SMD rules based on public comments. Pending legislation in Congress would forbid the FERC from implementing the SMD rules for several years, but that legislation has not been adopted. At this time it is unclear when or if the final SMD rules may be implemented. The SPP application for approval as an RTO proposes a phased-in implementation of a market based on SMD principles from 2004 through 2006.

New Mexico Restructuring — In March 2001, the State of New Mexico enacted legislation that delayed customer choice until 2007 and amended the Electric Utility Restructuring Act of 1999. Restructuring laws were repealed in 2003. We have requested recovery of our costs incurred to prepare for customer choice in New Mexico of approximately $5.1 million. The NMPRC is allowing utilities, including us, to retain transition costs as regulatory assets on their books pending recovery, which is scheduled to be completed by January 1, 2010.

Texas Restructuring — In June 2001, the Governor of Texas signed legislation postponing the implementation of retail competition and restructuring of us until at least 2007. This legislation amended the 1999 legislation, Senate Bill No. 7 (“SB-7”), which provided for retail electric competition beginning in January 2002. Under the legislation, prior PUCT orders issued in connection with the restructuring of the SPS system will be considered null and void. Our restructuring and rate unbundling proceedings in Texas have been terminated. In addition, under the new legislation, we are entitled to recover all reasonable and necessary expenditures made or incurred before September 1, 2001 to comply with SB-7. We filed an application with the PUCT requesting a rate rider to recover these costs incurred preparing for customer choice of approximately $20.3 million. These costs were incurred to position us for retail competition, which was eventually delayed. The filing was amended in March 2002 to reduce the recoverable costs by $7.3 million, which were associated with over-earnings for the calendar year 1999. The PUCT approved our use of the 1999 over-earnings to offset the claims for reimbursement of transition to competition costs. This reduced the requested net collection in Texas to $13.0 million. 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, we 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.

For more information on restructuring in Texas and New Mexico, see Note 10 to the audited consolidated financial statements and Note 2 to the interim consolidated financial statements.

Kansas Restructuring — During the 2001 legislative session, several restructuring-related bills were introduced for consideration by the state legislature but, to date, there has been no restructuring mandate in Kansas.

Oklahoma Restructuring — The Electric Restructuring Act of 1997 was enacted in Oklahoma during 1997. This legislation directed a series of studies to define the orderly transition to consumer choice of electric energy supplier by July 1, 2002. In 2001, Senate Bill 440 was signed into law to formally delay electric restructuring until restructuring issues could be studied further and new enabling legislation could be enacted. Senate Bill 440 established the Electric Restructuring Advisory Committee and directed the committee to complete an interim report on the state’s transmission infrastructure needs by December 31, 2001. The Advisory Committee submitted this report to the Governor and Legislature on December 31, 2001. During 2002 and the first nine months of 2003, there was no action taken by the Legislature as a result of this report. Oklahoma continues to delay retail competition.

See also the matters discussed under “Utility Regulation — Pending Regulatory Matters.”

The system peak demand for each of the last three years and the forecast for 2004, assuming normal weather during 2004, are projected below:

Our peak demand typically occurs in the summer. During 2003, our peak demand occurred on August 5, 2003. The 2002 system peak demand occurred on August 1, 2002.

We expect to use the following resources to meet our net dependable system capacity requirements:


	•	our electric generating stations;

	•	purchases from other utilities, independent power producers and power marketers;

	•	demand-side management options; and

	•	phased expansion of existing generation at select power plants, if required or necessary.

We have contractual arrangements to purchase power from other utilities and nonregulated energy suppliers. Capacity, typically measured in kilowatts or megawatts, is the measure of the rate at which a particular generating source produces electricity. Energy, typically measured in kilowatt-hours or megawatt-hours, is a measure of the amount of electricity produced from a particular generating source over a period of time. Purchase power contracts typically require a periodic payment to secure the capacity from a particular generating source and a charge for the associated energy actually purchased from that generating source.

We also make short-term and non-firm purchases to replace generation from company-owned units that are unavailable due to maintenance and unplanned outages, to provide our reserve obligation, to obtain energy at a lower cost than that which could be produced by other resource options, including company-owned generation and/or long-term purchase power contracts, and for various other operating requirements.

We have contractual arrangements with regional transmission service providers to deliver power and energy to our native load customers (retail and wholesale load obligations with terms of more than one year). Point-to-point transmission services typically include a charge for the specific amount of transmission capacity being reserved, although some agreements may base charges on the amount of metered energy delivered. Network transmission services include a charge for the metered demand at the delivery point at the time of the provider’s monthly transmission system peak, usually calculated as a 12-month rolling average.

The following tables present the delivered cost per million British thermal units (“MMBtu”) of each significant category of fuel consumed at our generating plants for electric generation, the percentage of total fuel requirements represented by each category of fuel and the total weighted average cost of all fuels during such years:


*	The lower 2003 coal costs reflect a prior period fuel credit adjustment. The normalized costs per MMBtu was approximately $1.15. This reduced coal cost was due to renegotiated coal transportation contracts.

We purchase all of our coal requirements for Harrington and Tolk electric generating stations from TUCO Inc. (“TUCO”), in the form of crushed, ready-to-burn coal delivered to our plant bunkers. For the Harrington station, the coal supply contract expires in 2016 and the coal-handling agreement expires in 2004. For the Tolk station, the coal supply contract expires in 2017 and the coal-handling agreement expires in 2005. At September 30, 2003, coal inventories at the Harrington and Tolk sites were approximately 37 days supply and 36 days supply, respectively. TUCO has a long-term coal supply agreement to supply approximately

We have a number of short and intermediate-term contracts with natural gas suppliers operating in gas fields with long life expectancies in or near our service area. We also utilize firm and interruptible transportation to minimize fuel costs during volatile market conditions and to provide reliability of supply. We maintain sufficient gas supplies under short and intermediate-term contracts to meet all power plant requirements; however, due to flexible contract terms, approximately 60 percent of our gas requirements during 2003 were purchased under spot agreements.


(1)	Other electric revenues is negative in 2000 primarily due to increased provision for rate refunds.

Certain of our facilities are regulated by federal and state environmental agencies. These agencies have jurisdiction over air emissions, water quality, wastewater discharges, solid wastes and hazardous substances. Various company activities require registrations, permits, licenses, inspections and approvals from these agencies. We have received all necessary authorizations for the construction and continued operation of our generation, transmission and distribution systems. Company facilities have been designed and constructed to operate in compliance with applicable environmental standards.

We strive to comply with all environmental regulations applicable to our operations. However, it is not possible at this time to determine when or to what extent additional facilities or modifications of existing or planned facilities will be required as a result of changes to environmental regulations, interpretations or enforcement policies or, generally, what effect future laws or regulations may have upon our operations. For more information on environmental contingencies, see Note 13 to the audited consolidated financial statements, Note 4 to the interim consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors Affecting Results of Operations — Environmental Matters.”

For a discussion of expected capital expenditures and funding sources, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Listed below are our interests in electricity utility generating stations as of September 30, 2003:

Listed below are electric utility overhead and underground transmission and distribution lines (measured in conductor miles) at December 31, 2003:

We had 492 electric utility transmission and distribution substations at December 31, 2002 and December 31, 2003.

We had 988 employees at December 31, 2003. Of those employees, 685, or 69.3 percent, are covered under collective bargaining agreements. In addition, employees of Xcel Energy Services provide services to us.

In the normal course of business, various lawsuits and claims have arisen against us. Management, after consultation with legal counsel, has recorded an estimate of the probable cost of settlement or other disposition for such matters.

Lamb County Electric Cooperative — On July 24, 1995, LCEC petitioned the PUCT for a cease and desist order against us. LCEC alleged that we had been unlawfully providing service to oil field customers and their facilities in LCEC’s singly certificated area. A trial on the merits was held in October 2002, and on May 23, 2003, the PUCT issued an order denying LCEC’s petition for a cease and desist order against us. The basis of the decision was the determination that we were granted a certificate of convenience and necessity in 1976 to serve the disputed customers. LCEC has filed an appeal of the decision with the District Court in Travis County, Texas. The appeal is expected to include a substantial evidence review of the record evidence introduced at the PUCT proceeding. The Texas Attorney General has responded to the appeal on behalf of the PUCT and we, Texaco Exploration and Production Inc. and Apache Corporation have intervened in the proceeding in support of the PUCT’s decision. A hearing on the appeal is currently scheduled for April 9, 2004.

On October 18, 1996, LCEC filed a suit for damages against us in the District Court in Lamb County, Texas, based the same facts as alleged in its petition for a cease and desist order at the PUCT. This suit has been dormant since it was filed, awaiting a final determination at the PUCT of the legality of us providing electric service to the disputed customers. The PUCT order of May 23, 2003 found that we were legally serving the disputed customers thus collaterally determining the issue of liability contrary to LCEC’s position in the suit. An adverse ruling on the appeal of the May 23, 2003 PUCT order could mean that this issue of liability may not be collaterally determined.

For a discussion of other legal claims and environmental proceedings, see Note 13 to the audited consolidated financial statements and Note 4 to the interim consolidated financial statements. For a discussion of governmental proceedings, see “Business — Pending Regulatory Matters.”

A majority of the members of our Board of Directors and many of our executive officers are also executive officers of Xcel Energy. The following table sets forth certain information about our directors and executive officers as of January 19, 2004.


†	Mr. Ripka resigned as Vice President and Controller of SPS effective January 19, 2004.

††	Ms. Madden was appointed as Vice President and Controller of SPS effective January 19, 2004.

Gary L. Gibson is President, Chief Executive Officer and a Director of SPS. He has served as President since December 2000 and Chief Executive Officer since August 2001. Prior to the merger that formed Xcel Energy on August 18, 2000 (the “Merger”), Mr. Gibson was Vice President of Sales of NCE from May 1997. Previous to that, Mr. Gibson held a variety of positions in marketing, consumer services, industrial services and engineering at SPS. In 2004, Mr. Gibson plans to serve as Co-Chair for the 2004 Amarillo/Canyon United Way and the 2004 Friends of Scouting Campaign Council Chairman.

Wayne H. Brunetti has been Chairman of SPS since August 2001. Mr. Brunetti also serves as Chairman and Chief Executive Officer of Xcel Energy. He has served as Chairman of Xcel Energy since August 18, 2001 and as Chief Executive Officer of Xcel Energy from the completion of the Merger. From the completion of the Merger until October 2003, Mr. Brunetti also served as President of Xcel Energy. Mr. Brunetti has been a Director of Xcel Energy since 2000. From March 1, 2000 until the completion of the Merger, he served as Chairman, President and Chief Executive Officer of NCE and as a director and officer of several of NCE’s subsidiaries. From August 1997 until March 1, 2000, Mr. Brunetti was Vice Chairman, President and Chief Operating Officer of NCE. Before the merger of PSCo and SPS to form NCE, Mr. Brunetti was President and CEO of PSCo. He joined PSCo in July 1994 as President and Chief Operating Officer. In January 1996, he added the title of CEO. Mr. Brunetti is the former President and CEO of Management Systems International, a Florida management consulting firm that he founded in 1991. Prior to that, he was Executive Vice President of Florida Power & Light Company. Mr. Brunetti has been active in various professional and civic groups. He currently serves as a Chairman of Edison Electric Institute and serves on its board, executive committee, policy committee on energy services and policy committee on energy supply. He serves on the boards of Medic Alert Foundation, Capital City Partnership and the Minnesota Orchestra. He is past Chairman of the 2000 Mile High United Way campaign, past Chairman of the board of the Colorado Association of Commerce and Industry and served on the Colorado Association of Commerce and Industry and served on the Colorado Renewable Energy Task Force, an appointment made by Governor Roy Romer. He is the author of Achieving Total Quality in Integrated Business Strategy & Customer Needs. Mr. Brunetti holds a bachelor of science degree in business administration from the University of Florida. He is a graduate of the Harvard Business School’s Program for Management Development. Mr. Brunetti is also Chairman of NSP-Minnesota, NSP-Wisconsin and PSCo. Mr. Brunetti was also the Chairman and Chief Executive

Richard C. Kelly has been Vice President and a Director of SPS since August 2001. Mr. Kelly has also served as President and Chief Operating Officer of Xcel Energy since October 2003. Previously, Mr. Kelly was Vice President and Chief Financial Officer of Xcel Energy from August 2002 to October 2003 and President — Enterprises of Xcel Energy from August 2000 to August 2002. Mr. Kelly also served as Executive Vice President and Chief Financial Officer for NCE from 1997 to August 2000 and Senior Vice President of PSCo from 1990 to 1997. Mr. Kelly is also a Director of NSP-Minnesota, NSP-Wisconsin and PSCo. Mr. Kelly was also the President and Chief Operating Officer of NRG from June 6, 2002 until May 14, 2003 and a Director of NRG from June 2000 until May 14, 2003. In May 2003, NRG and certain of NRG’s affiliates filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code to restructure their debt. NRG emerged from bankruptcy on December 5, 2003.

Gary R. Johnson has been Vice President and General Counsel of SPS since August 2001 and a Director of SPS since August 2002. Mr. Johnson has also served as Vice President and General Counsel of Xcel Energy since August 2000. Previously, Mr. Johnson served as Vice President and General Counsel of NSP from 1991. Mr. Johnson is also a Director of NSP-Minnesota, NSP-Wisconsin and PSCo. Mr. Johnson was a Director of NRG from 1993 until May 14, 2003. In May 2003, NRG and certain of NRG’s affiliates filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code to restructure their debt. NRG emerged from bankruptcy on December 5, 2003.

Benjamin G.S. Fowke, III has been Chief Financial Officer of SPS since October 2003 and Vice President and Treasurer of SPS since November 2002. Mr. Fowke has also served as Chief Financial Officer of Xcel Energy since October 2003 and Vice President and Treasurer of Xcel Energy since November 2002. Previously, Mr. Fowke served as Vice President and Chief Financial Officer of Xcel Energy’s commodity trading and marketing business unit from 2000. He was Vice President of Retail Services and Energy Markets at NCE from January 1999 to July 2000 and Vice President-Finance/ Accounting at e prime, Inc., a subsidiary of Xcel Energy, from May 1997 to December 1998.

David E. Ripka has been Vice President and Controller of SPS from August 2001 through January 19, 2004. Mr Ripka has also served as Vice President and Controller of Xcel Energy since August 2000. Previously, Mr. Ripka served as Vice President and Controller of NRG from June 1999 to August 2000, Controller of NRG from March 1997 to June 1999 and Assistant Controller for NSP from June 1992 to March 1997.

Teresa S. Madden has been named Vice President and Controller of SPS and Xcel Energy effective as of January 19, 2004. Previously, Ms. Madden served as Vice President Finance — Customer and Field Operations of Xcel Energy since August 2003. Prior thereto, Ms. Madden served as Interim Chief Financial Officer of Rogue Wave Software, Inc. from February 2003 through July 2003 and prior thereto as Corporate Controller from October 2000 through February 2003. Prior to her employment with Rogue Wave Software, Inc., Ms. Madden served as Corporate Controller and as Corporate Secretary of NCE from 1997 through September 2000 and May 1998, respectively.

Cathy J. Hart has been Vice President and Secretary since August 2001. She has also served as Vice President and Corporate Secretary of Xcel Energy since August 2000. Previously, Ms. Hart served as Secretary of NCE from 1998 and as Manager of Corporate Communications of PSCo from 1993 to 1996. For family reasons, Ms. Hart resigned as Manager of Corporate Communications at PSCo in June 1996 to move to Australia. From June 1996 to June 1998, Ms. Hart was not employed. She was re-employed by NCE as Corporate Secretary in June 1998.

Paul J. Bonavia has been Vice President of SPS since August 2001. He has also served as President — Commercial Enterprises of Xcel Energy since December 2003. Previously, Mr. Bonavia served as Senior Vice President and General Counsel of NCE from 1997 and President — Energy Markets of Xcel Energy from August 2000 to December 2003.

Raymond E. Gogel has been Vice President of SPS since April 2002. He has also served as Vice President and Chief Information Officer of Xcel Energy since April 2002. Previously, Mr. Gogel was Vice President and Senior Client Services Principal for IBM Global Services since June 2001 and Senior Project Executive for IBM’s Global Services since January 1998.

Patricia K. Vincent has been Vice President of SPS since August 2001. She has also served as President — Energy Customer and Field Operations of Xcel Energy since July 2003. Previously, Ms. Vincent served as President — Retail Services of Xcel Energy from March 2001 to July 2003, Vice President of Marketing and Sales of Xcel Energy from August 2000 to March 2001, Vice President of Marketing & Sales of NCE from January 1999 to August 2000 and Manager, Director and Vice President of Marketing and Sales at Arizona Public Service Company from 1992 to January 1999.

David M. Wilks has been Vice President of SPS since August 2001. He has also served as President — Energy Supply of Xcel Energy since August 2000. Previously, Mr. Wilks served as Executive Vice President and Director of PSCo from 1997 to August 2000, President of Delivery and Director of New Century Services from 1997 to August 2000 and President, Chief Operating Officer and Director of SPS from 1995 to August 2000.

Our Board currently consists of four directors. The Board had no committees during 2003. During 2003, the Board did not meet but approved nine resolutions by unanimous written consent, as permitted by our Amended and Restated Articles of Incorporation and Bylaws.

Each of our directors is employed by Xcel Energy or us. None of our directors receive any compensation for his Board activities.

All of our outstanding common stock is owned by Xcel Energy. The following table sets forth information concerning beneficial ownership of Xcel Energy common stock as of December 31, 2003 for: (a) each director of SPS; (b) the Named Executive Officers set forth in the Summary Compensation Table; and (c) the directors and executive officers of SPS as a group. Unless otherwise indicated, each person has sole investment and voting power (or shares such powers with his or her spouse) with respect to the shares set forth in the following table. None of the individuals listed in the Beneficial Ownership Table below own more than 0.21 percent of Xcel Energy common stock. None of these individuals owns any shares of Xcel Energy preferred stock.


(1)	Mr. Brunetti is also Chairman of the Board and Chief Executive Officer of Xcel Energy.

(2)	Mr. Kelly is also President and Chief Operating Officer of Xcel Energy. Mr. Kelly was elected President and Chief Operating Officer of Xcel Energy effective October 22, 2003.

(3)	Mr. Johnson is also Vice President and General Counsel of Xcel Energy.

(4)	Mr. Bonavia is also President, Commercial Enterprises of Xcel Energy.

(5)	Mr. Petillo resigned as Vice President of SPS effective August 8, 2003. He resigned as President, Energy Delivery of Xcel Energy effective August 31, 2003.

The following tables set forth cash and non-cash compensation for each of the last three fiscal years ended December 31, 2003 for the Chief Executive Officer of SPS, each of the four next most highly compensated executive officers serving as officers of SPS at December 31, 2003 and one former officer of SPS who would have been among such four next most highly compensated executive officers but for the fact that he was not serving as an officer at December 31, 2003 (collectively, the “Named Executive Officers”). As set forth in the footnotes, the data presented in this table and the tables that follow include amounts paid to the Named Executive Officers in 2003 by Xcel Energy or any of its subsidiaries in all capacities in which they served Xcel Energy or its subsidiaries during such periods. A portion of the cost is allocated to SPS pursuant to SEC requirements.

(1)

The amounts in this column for 2003 awards are not yet available. The amounts in this column for 2002 represent awards earned under the Xcel Energy Executive Annual Incentive Award program. For Mr. Brunetti, Mr. Kelly and Mr. Petillo, the amounts for 2001 include the value of 25,068, 4,449, 10,536 and 5,682 shares, respectively, of restricted common stock they received in lieu of a portion of the cash payments to which they were otherwise entitled under the Xcel Energy Executive Annual Incentive Award program. For Mr. Bonavia, the amount for 2001 includes the pre-tax value of 3,023 shares of common stock he received in lieu of a portion of the cash payment to which he was otherwise entitled under the Xcel Energy Executive Annual Incentive Award program.


(2)	The amounts shown include reimbursements for taxes on certain personal benefits, including perquisites received by the named executives.

(3)	As of December 31, 2003, Messrs. Gibson, Brunetti and Kelly held shares of restricted stock. As of December 31, 2003, Mr. Gibson held 1,719.47, Mr. Brunetti held 25,245.99 and Mr. Kelly held 3,312.22 shares of restricted stock with an aggregate value of approximately $29,421, $431,959 and $56,672, respectively. Restricted stock vests in three equal annual installments and the holders are entitled to receive dividends at the same rate as paid on all other shares of common stock. The dividends are reinvested in additional shares of stock which is also restricted for the same periods as the underlying restricted stock on which the dividends are paid.

(4)	The amounts shown for 2001 include cash payments made under the Xcel Energy Long-term Incentive Program. No awards were paid in 2002 or 2003. No performance cash awards under the NCE Value Creation Plan for Messrs. Gibson, Brunetti, Kelly, Bonavia or Petillo were paid during the periods presented.

(5)	The amounts represented in the “All Other Compensation” column for the year 2003 for the Named Executive Officers include the following:

Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values

The following table indicates for each of the Named Executives Officers the number and value of exercisable and unexercisable options and SARs of Xcel Energy as of December 31, 2003.

The following table shows information on awards granted during 2003 under Xcel Energy’s Omnibus Incentive Plan for each person in the Summary Compensation Table.


(1)	Each performance share or restricted stock unit represents the value of one share of Xcel Energy common stock.

(2)	Represents performance share component. If the threshold for the performance share component of the 35th percentile is achieved, the payout could range between 25 percent and 200 percent. The amounts are based on a stock price of $11.10, which was the average high/low price on January 2, 2003.

(3)	Represents the restricted stock unit component. On March 28, 2003, the Governance, Compensation and Nominating Committee of Xcel Energy’s board of directors granted restricted stock units and performance shares under the Xcel Energy Omnibus Incentive Plan approved by the shareholders in 2000. Restrictions on the restricted stock units will lapse, but not before one year from the date of grant, after the achievement of a 27 percent total shareholder return (“TSR”) for 10 consecutive business days and other criteria relating to Xcel Energy’s common equity ratio. If the TSR target and other criteria relating to Xcel Energy’s common equity ratio is not met within four years, the grant will be forfeited. TSR is measured using the market price per share of Xcel Energy common stock, which at the grant date was $12.93, plus common dividends declared after grant date. Additional units are credited during the restricted period at the same rate as dividends paid on shares of outstanding Xcel Energy common stock. The dividend equivalents are subject to all terms of the original grant. As of December 31, 2003, the following dividend equivalents have been credited:

The following table shows estimated combined pension benefits payable to a covered participant from the qualified and non-qualified defined benefit plans maintained by Xcel Energy and its subsidiaries and the Xcel Energy Supplemental Executive Retirement Plan (the “SERP”). The Named Executive Officers are all participants in the SERP and the qualified and non-qualified defined benefit plans sponsored by Xcel Energy.

The benefits listed in the Pension Plan Table are not subject to any deduction or offset. The compensation used to calculate the SERP benefits is base salary as of December 31 plus annual incentive. The Salary and Bonus columns of the Summary Compensation Table for 2003 reflect the covered compensation used to calculate SERP benefits.

The SERP benefit accrues ratably over 20 years and, when fully accrued, is equal to (a) 55 percent of the highest three years covered compensation of the five years preceding retirement or termination minus (b) any other qualified and non-qualified benefits. The SERP benefit is payable as an annuity for 20 years, or as a single lump-sum amount equal to the actuarial equivalent present value of the 20-year annuity. Benefits are payable at age 62, or as early as age 55, but would be reduced 5 percent for each year that the benefit

Notwithstanding any special provisions related to pension benefits described below under “— Employment Agreements and Severance Arrangements, “Xcel Energy has granted additional credited years of service to Mr. Brunetti for purposes of SERP accrual. The additional credited years of service (approximately seven) are included in the table above. Additionally, Xcel Energy has agreed to grant full accrual of SERP benefits to Mr. Brunetti at age 62 and to Mr. Bonavia at age 57 and 8 months, if they continue to be employed by Xcel Energy until such age. A portion of the costs of the SERP arrangements is allocated to SPS by Xcel Energy Services.

At the time of their merger agreement, NCE and NSP-Minnesota also entered into a new employment agreement with Mr. Brunetti, which replaced his existing employment agreement with NCE when the Merger was completed. The initial term of the new agreement is four years, with automatic one-year extensions beginning at the end of the second year and continuing each year thereafter unless notice is given by either party that the agreement will not be extended. Under the terms of the agreement, Mr. Brunetti served as Chief Executive Officer and President of Xcel Energy and a member of Xcel Energy’s board of directors for one year following the Merger, and commencing August 18, 2001 (one year after the Merger) began serving as Chief Executive Officer, President and Chairman of Xcel Energy’s Board of Directors. Mr. Brunetti is required to perform the majority of his duties at Xcel Energy’s headquarters in Minneapolis, Minnesota, and was required to relocate the residence at which he spends the majority of his time to the Twin Cities area. His agreement also provides that if Mr. Brunetti becomes entitled to receive severance benefits, he will be forbidden from competing with Xcel Energy and its affiliates for two years following the termination of his employment, and from disclosing confidential information of Xcel Energy and its affiliates.

Under his employment agreement, Mr. Brunetti will receive the following compensation and benefits:


	•	a base salary not less than his base salary immediately before the Merger;

	•	the opportunity to earn annual and long-term incentive compensation amounts not less than he was able to earn immediately before the Merger;

	•	life insurance coverage and participation in a supplemental executive retirement plan; and

	•	the same fringe benefits as he received under his NCE employment agreement, or, if greater, as those of Xcel Energy’s next highest executive officer.

If Mr. Brunetti’s employment were to be terminated by Xcel Energy without cause or if he were to terminate his employment for good reason, he would be entitled to receive the compensation and benefits described above as if he had remained employed for the employment period remaining under his employment agreement and then retired, at which time he would be eligible for all retiree benefits provided to Xcel Energy’s retired senior executives. In determining the level of his compensation following termination of employment, the amount of incentive compensation he would receive would be based upon the target level of incentive compensation he would have received in the year in which his termination occurred, and he would receive cash equal to the value of stock options, restricted stock and other stock-based awards he would have

Mr. Brunetti also had a change-of-control employment agreement with NCE. The Merger did not cause a “change of control” under this agreement, so it did not become effective as a result of the Merger. However, in case this agreement becomes effective because of a later change of control, Mr. Brunetti has waived his right to receive any severance benefits under the change-of-control employment agreement to the extent they would duplicate severance benefits under his employment agreement.

In connection with and effective upon completion of the Merger, Xcel Energy and Paul J. Bonavia entered into an amendment to an employment agreement between Mr. Bonavia and NCE. Except as discussed below, the original agreement expired December 14, 2000. In connection with the Merger, Mr. Bonavia’s position changed from Senior Vice President, General Counsel and President of NCE’s International Business Unit to President of Xcel Energy’s Energy Markets Business Unit. In the amendment, Mr. Bonavia agreed not to assert before January 6, 2003 that his duties and responsibilities had been diminished, and thus he has waived the right to claim certain benefits under the Xcel Energy Senior Executive Severance Policy, which terminated on August 18, 2003, relating to this change in his status prior to that date. If certain conditions were met on January 6, 2003 or within seven business days thereafter, which conditions include the termination of Mr. Bonavia’s employment, Mr. Bonavia would have been entitled to severance benefits comparable to those provided to the other senior executives under the Xcel Energy Senior Executive Severance Policy. Mr. Bonavia and Xcel Energy have entered into another amendment to this agreement. As part of this amendment, Mr. Bonavia agreed to continue his employment through August 31, 2003. Mr. Bonavia also agreed not to assert that his duties and responsibilities have been diminished. In return, Xcel Energy agreed that if it terminates Mr. Bonavia’s employment for any reason other than cause, or if Mr. Bonavia terminates his employment for any reason after August 31, 2003, then he will be entitled to severance benefits comparable to those that were provided under the Xcel Energy Senior Executive Severance Policy prior to its expiration.

NSP and NCE each adopted a 1999 senior executive severance policy in March 1999. These policies were combined into a single Xcel Energy Senior Executive Severance Policy, which terminated on August 18, 2003 on its scheduled termination date. All of our executive officers other than Mr. Brunetti participated in the policy until its termination.

Under the 1999 policy, a participant whose employment was terminated at any time before August 18, 2003, the third anniversary of the Merger, received severance benefits unless:


	•	the employer terminated the participant for cause;

	•	the termination was because of the participant’s death, disability or retirement;

	•	the participant’s division or subsidiary was sold and the buyer agreed to continue the participant’s employment with specified protections for the participant; or

	•	the participant terminated voluntarily without good reason.

To receive the severance benefits, the participant must have also signed an agreement releasing all claims against the employer and its affiliates, and agreeing not to compete with the employer and its affiliates and not to solicit their employees and customers.

The severance benefits for executive officers under the 1999 policy included the following:


	•	a cash payment equal to 2.5 times the participant’s annual base salary, annual bonus and annualized long-term incentive compensation, prorated incentive compensation for the year of termination and perquisite allowance;

	•	a cash payment equal to the additional amounts that would have been credited to the executive under pension and retirement savings plans, if the participant had remained employed for another 2.5 years;

	•	continued welfare benefits for 2.5 years;

	•	financial planning benefit for two years, and outplacement services costing not more than $30,000; and

	•	an additional cash payment to make the participant whole for any excise tax on excess severance payments that he or she may incur, with certain limitations specified in the policies.

Our former Vice President and Xcel Energy’s former President — Energy Delivery, James T. Petillo resigned as Vice President of SPS effective August 8, 2003 and as President — Energy Delivery of Xcel Energy effective August 31, 2003. In connection with the termination of his employment, Mr. Petillo entered into an agreement with Xcel Energy and its affiliates and subsidiaries under which he waived claims to certain benefits he would have received under the 1999 severance policy had he terminated his employment prior to the expiration of the policy. Mr. Petillo received a cash payment of $2 million, continued welfare benefits for 2.5 years, financial planning benefits for two years and outplacement services costing no more than $30,000. The agreement with Mr. Petillo also contains non-competition, non-solicitation and non-disparagement clauses.

In October of 2003, Xcel Energy adopted the Xcel Energy Senior Executive Severance and Change-in-Control Policy. The 2003 policy was intended to replace the 1999 policy and, in many ways, operates similarly to the 1999 policy. Each of our executive officers, other than Mr. Gibson, Mr. Brunetti and Mr. Bonavia, are participants in the 2003 policy. Additional participants may be named by Xcel Energy’s Board or the Governance, Compensation and Nominating Committee from time to time.

Under the 2003 policy, a participant whose employment is terminated will receive severance benefits unless:


	•	the employer terminated the participant for cause (as defined in the 2003 policy);

	•	termination was because of the participant’s death, disability or retirement;

	•	the participant’s division, subsidiary or business unit was sold and the buyer agreed to continue the participant’s employment with specified protections for the participant; or

	•	the participant terminated voluntarily.

The severance benefits for executive officers under the 2003 policy include the following:


	•	a cash payment equal to two times the participant’s annual base salary and target annual incentive award;

	•	prorated target annual incentive compensation for the year of termination;

	•	financial planning benefit for two years and outplacement services costing not more than $30,000;

	•	a cash payment equal to value of the additional amounts that would have been credited to or paid on behalf of the participant under pension and retirement savings plans, if the participant had remained employed for another two years;

	•	continued medical, dental and life insurance benefits for two years; and

If the participant is terminated, including a voluntary termination following a diminution in salary, benefits or responsibilities, within two years following a change-in-control (as defined in the 2003 policy), the participant will receive benefits under the 2003 policy similar to the severance benefits above, except that for certain of our executive officers, including those of our named executive officers who are participants, the cash payment will be equal to three times the participant’s annual base salary and target annual incentive award, the cash payment for the value of additional retirement savings and pension credits will be for three years instead of two and medical, dental and life insurance, financial planning and perquisite allowance benefits will be continued for three years instead of two. In addition, each of the participants entitled to enhanced benefits upon a change-in-control will be entitled to receive an additional cash payment to make the participant whole for any excise tax on excess parachute payments that he or she may incur, with certain limitations specified in the 2003 policy.

To receive the benefits under the 2003 policy, the participant must also sign an agreement releasing all claims against the employer and its affiliates, and agreeing not to compete with the employer and its affiliates and not to solicit their employees and customers.

A portion of the costs of these various executive and Board of Director compensation and other programs are allocated to us pursuant to the utility services agreement between us and Xcel Energy Services discussed below.

The summaries of the agreements described below are not complete. You should read the agreements in their entirety, copies of which are available upon request from us. See “Where You Can Find More Information.”

The Joint Operating Agreement dated as of July 23, 1999 (the “Joint Operating Agreement”) integrates the generating resources of NSP-Minnesota, NSP-Wisconsin, PSCo and SPS (individually, an “Operating Company” and collectively, the “Operating Companies”). More specifically, the Joint Operating Agreement sets out the framework for the coordinated planning, operations, and maintenance of generation resources (both owned and purchased), and coordinated wholesale marketing activities of the Operating Companies. It also provides for the allocation of associated costs and benefits.

The Joint Operating Agreement provides for the joint planning and coordinated operation of each of the Operating Companies’ resources. While preserving the pre-merger dispatch priorities applicable to each company’s resources to allay any possible state regulatory concern regarding cost-shifts among the Operating Companies, the agreement further provides that “the Control Areas will be dispatched on a coordinated basis in real time to minimize total generation costs for the Operating Companies, subject to the availability of Firm Transmission Entitlements or other transmission arrangements linking the Operating Companies’ Control Areas or other transmission services.” Thus, the Operating Companies are obligated to exchange power when economic subject to the foregoing conditions.

The Joint Operating Agreement also contains service schedules providing for actual power transactions among the Operating Companies or by the Operating Companies acting jointly with non-affiliated third parties.

The FERC has jurisdiction over the actual power transactions set out in the Joint Operating Agreement. The costs for various non-power transaction activities (e.g., for joint planning) are incurred by Xcel Energy Services and allocated to the Operating Companies in accordance with SEC-jurisdictional service agreements.

We received revenue through the Joint Operating Agreement of $613,000 for 2002 and $1,985,000 for the nine months ended September 30, 2003.

Xcel Energy Services is the service company for the Xcel Energy system. Xcel Energy Services provides a variety of administrative, management and support services, including services relating to support of electric and gas plant operations, customer bills and related matters, materials management, facilities, real estate, human resources, finance, accounting, internal auditing, information systems, corporate planning and research, public affairs, corporate communications, legal, environmental matters and executive services to Xcel Energy’s non-utility and utility companies, including us pursuant to individual service agreements. Xcel Energy Services also administers the money pool pursuant to the Money Pool Agreement described below. PUHCA generally requires that Xcel Energy Services provides services to us at cost. We received charges through the agreement of $67.1 million for 2002 and $47.5 million for the nine months ended September 30, 2003.

In September 1997, we entered into an affiliated transactions agreement with Utility Engineering (the “UE Agreement”). Pursuant to the agreement, we provide specified services to Utility Engineering, including:


	•	substation construction, material and operations;

	•	substation engineering and support;

	•	provision of power plant facilities, equipment, tools and personnel;

	•	plant engineering and support; and

	•	use of facilities and real property.

Utility Engineering also performs on behalf of us engineering, development, design, construction and other related services. Pursuant to the UE Agreement, at the discretion of the loaning party, either party may loan employees and equipment to the other party for the purposes of providing services under the agreement in order to meet its needs and obligations. The UE Agreement will continue until terminated by either party on not less than one year’s prior written notice. Utility Engineering earned $13 million of revenue from us in 2002.

In November 2003, Xcel Energy, Xcel Energy Services and each of the operating utility subsidiaries of Xcel Energy (the “Pool Participants”) executed a money pool agreement (the “Money Pool Agreement”), which provides a mechanism for intra-system financing of the Pool Participants, thus reducing total capitalization needs and potentially reducing costs. The agreement will become effective as to each Pool Participant upon the Pool Participant’s receipt of all requisite regulatory approvals and will continue until terminated by the parties thereto.

Pool Participants are not required to borrow through this arrangement if the Pool Participant has the ability and authority to borrow at a lower cost from a bank or other external source. In addition, a Pool Participant will lend surplus funds to the money pool only when the return on such investment is equal to or greater than returns that the Pool Participant could receive elsewhere. Pool Participants will use the money pool when it is most efficient — e.g., a lower cost of borrowing, a better return on investment or more flexible terms as to amount of borrowing, term of borrowing, notice requirements, etc.

On April 5, 2001, we and the other operating utility subsidiaries of Xcel Energy, i.e., NSP-Minnesota, NSP-Wisconsin, PSCo and Cheyenne, entered into an agreement that provides that, to the extent available and mutually beneficial, each of the operating utilities will, at its option, provide and assign certain of its employees and provide, at its cost, certain incidental services and goods to any or all of the other operating utilities. The services that may be provided under the agreement include delivery services such as electric and/or natural gas transmission and/or distribution crews for construction, maintenance, or service restoration; generating plant maintenance, construction and/or operation, and other similar services. The goods that may be provided under the agreement include utility equipment; computers and software; railcars and other

As of December 31, 2003, in addition to the original notes, we had other unsecured and unsubordinated indebtedness in the amount of approximately $726.8 million outstanding that rank pari passu with the original notes and will rank pari passu with the exchange notes, when issued. We currently have no outstanding secured debt and no outstanding subordinated debt obligations.

The description below contains summaries of selected provisions of the Indenture (as defined below) under which the exchange notes will be issued. In the summary below, we have included references to section numbers of the Indenture so that you can easily locate those provisions. The following description of provisions of the exchange notes is not complete and is subject to, and qualified in its entirety by reference to, the exchange notes and the Indenture.

We will issue the exchange notes as a series of securities under the Indenture dated February 1, 1999 between us and JPMorgan Chase Bank, successor in interest to The Chase Manhattan Bank, as trustee (the “Trustee”). We refer to this indenture, as supplemented and to be supplemented by various supplemental indentures, including one or more supplemental indentures relating to the exchange notes being offered by this prospectus, as the “Indenture.” The exchange notes will be unsecured obligations and will rank on a parity with our other existing and future unsecured and unsubordinated indebtedness. We refer to the debt securities issued under the Indenture, whether previously issued or to be issued in the future, including the exchange notes being offered by this prospectus, as the “debt securities.” The amount of debt securities that we may issue under the Indenture is not limited. As of December 31, 2003, there were three series of debt securities, including the original notes, in an aggregate principle amount of $700 million outstanding under the Indenture.

The exchange notes will bear interest from the date of the last periodic payment of interest on the original notes, or, if no interest has been paid, from October 6, 2003, at a rate of 6 percent per year and will mature on October 1, 2033.

The Indenture does not require that future issues of indebtedness be issued under the Indenture. We may use other indentures or documentation, which may contain provisions different from those included in the Indenture, in connection with future issues of other indebtedness.

We will issue the exchange notes in fully registered form, without coupons, in denominations of $1,000 principal amount and whole multiples of $1,000. The exchange notes will be represented by one or more global securities registered in the name of DTC, as Depository (the “Depository”), or its nominee and will be available only in book-entry form. See “Book-Entry System.” We will pay principal and interest in immediately available funds to the registered holder, which will be DTC or its nominee.

The exchange notes will be our unsecured and unsubordinated obligations. The exchange notes will rank on a parity in right of payment with all of our existing and future unsecured and unsubordinated indebtedness. However, the exchange notes will be subordinated to any secured indebtedness that we may issue, as to the assets securing that indebtedness. As of December 31, 2003, we had no secured indebtedness and no

The entire principal amount of the exchange notes will mature and become due and payable, together with any accrued and unpaid interest, on October 1, 2033. Each exchange note will bear interest from the date of the last periodic payment of interest on the original notes, or, if no interest has been paid, from October 6, 2003, at the rate of 6 percent per year. The interest will be payable semi-annually on April 1 and October 1 of each year, commencing April 1, 2004. The interest will be paid to the person in whose name the exchange note is registered at the close of business on the March 15 or September 15 immediately preceding the April 1 or October 1. We will compute the interest on the basis of a 360-day year comprised of twelve 30-day months.

Principal, interest and premium, if any, on the exchange notes will be paid in the manner described under “Book-Entry System.”

All monies paid by us to a paying agent for the payment of principal, interest or premium, if any, on any exchange notes which remain unclaimed at the end of two years after that principal, interest or premium has become due and payable will be repaid to us and the holder of that exchange note will thereafter look only to us for payment of that principal, interest or premium.

There are no provisions in the Indenture or the exchange notes that require us to redeem, or permit the holders to cause a redemption of, the exchange notes or that otherwise protect the holders in the event that we incur substantial additional indebtedness, whether or not in connection with a change in control of our company. However, any change in control transaction that involves the incurrence of substantial additional long-term indebtedness by us in such a transaction could require approval of state regulatory authorities and, possibly, of federal utility regulatory authorities. Management believes that such approvals would be unlikely in any transaction that would result in our company, or a successor to our company, having a highly leveraged capital structure.

We may redeem the exchange notes at any time, in whole or in part, at a redemption price equal to the greater of (1) the principal amount being redeemed or (2) the sum of the present values of the remaining scheduled payments of principal and interest on the exchange notes being redeemed, discounted to the date fixed for redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield plus 20 basis points, plus in each case accrued interest to the date fixed for redemption.

“Treasury Yield” means, for any date fixed for redemption, the rate per year equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for the date fixed for redemption.

“Comparable Treasury Issue” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the exchange notes that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the exchange notes.

“Independent Investment Banker” means Citigroup Global Markets, Inc. or its successor or, if such firm or its successor is unwilling or unable to select the Comparable Treasury Issue, one of the remaining Reference Treasury Dealers appointed by the Trustee after consultation with us.

“Comparable Treasury Price” means, for any date fixed for redemption, (1) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding the date fixed for redemption, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated “Composite 3:30 p.m. Quotations for U.S. Government Securities” or (2) if that release (or any successor

“Reference Treasury Dealer Quotations” means, for each Reference Treasury Dealer and any date fixed for redemption, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker by the Reference Treasury Dealer at 5:00 p.m. on the third business day preceding the date fixed for redemption.

“Reference Treasury Dealer” means (1) each of Citigroup Global Markets Inc. and Credit Suisse First Boston LLC, and any other primary U.S. Government Securities dealer in the United States (a “Primary Treasury Dealer”) designated by, and not affiliated with, Citigroup Global Markets Inc. and Credit Suisse First Boston LLC, and their respective successors, provided, however, that if any of the foregoing or any of their designees ceases to be a Primary Treasury Dealer, we will appoint another Primary Treasury Dealer as a substitute and (2) any other Primary Treasury Dealer selected by us.

Notice of redemption will be given by mail not less than 30 days prior to the date fixed for redemption to the holders of the exchange notes to be redeemed. If we elect to redeem less than all the exchange notes, and the exchange notes are represented a global note, then the Trustee will select the particular exchange notes to be redeemed in a manner it deems appropriate and fair.

We will not consolidate with or merge into, or transfer all or substantially all of our assets to, any person, unless:


	•	the person is organized under the laws of the United States or a state of the United States;

	•	the person assumes by supplemental indenture all of our obligations under the Indenture, the debt securities and any coupons;

	•	all required approvals of any regulatory body having jurisdiction over the transaction have been obtained;

	•	immediately after the transaction no default (as described below) exists; and

	•	we deliver to the Trustee an officer’s certificate and an opinion of counsel stating that the transaction and the supplemental indenture comply with the Indenture.

If these conditions are satisfied, then the successor will be substituted for us, and thereafter all our obligations under the Indenture, the debt securities and any coupons will terminate. (Section 5.01)

The following are events of default with respect to each series of debt securities currently outstanding under the Indenture and with respect to the exchange notes offered pursuant to this prospectus:


	•	default in any payment of interest on any debt securities of that series when due and payable and the default continues for a period of 60 days;

	•	default in the payment of the principal of any debt securities of that series when due and payable at maturity or upon redemption, acceleration or otherwise;

	•	default in the payment or satisfaction of any sinking fund obligation with respect to any debt securities of that series as required by the resolution establishing such series and the default continues for a period of 60 days;


	•	default in the performance of any of our other agreements applicable to the debt securities of that series and the default continues for 90 days after the notice specified below; or

	•	specified events of bankruptcy, insolvency or reorganization of our company.

A default of the type described in the third bullet point above is not an event of default under the Indenture until the Trustee or the holders of at least 25 percent in principal amount of the outstanding exchange notes offered by this prospectus notify us of the default and we do not cure the default within the time specified after receipt of the notice. If the holders notify us of a default, they must notify the Trustee at the same time. (Section 6.01)

Acceleration of Maturity. If an event of default occurs and is continuing on a series, either the Trustee or the holders of at least 25 percent in principal amount of outstanding debt securities of that series may declare the principal of and accrued interest on all debt securities of the series to be due and payable immediately. The holders of a majority in principal amount of the outstanding debt securities of that series may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing events of default on the series have been cured or waived except the nonpayment of amounts due solely because of the acceleration. (Section 6.02)

Indemnification of Trustee. The Trustee generally will be under no obligation to exercise any of its rights or powers under the Indenture unless the Trustee, upon a reasonable belief that exercising such rights or powers would expose it to any loss, liability or expense, receives indemnity satisfactory to it against such loss, liability or expense. (Section 7.01)

Right to Direct Proceedings. The holders of a majority in principal amount of a series generally will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or of exercising any trust or power conferred on the Trustee, relating to that series. However, the Trustee may refuse to follow any direction that conflicts with law or the Indenture or would expose the Trustee to personal liability or be unduly prejudicial to holders not joining in such proceeding. (Section 6.05)

Limitation on Rights to Institute Proceedings. No holder of the debt securities of a series will have any right to pursue a remedy under the Indenture, unless:


	•	the holder has previously given the Trustee written notice of a continuing event of default on the series;

	•	the holders of at least 25 percent in principal amount of the outstanding debt securities of that series have made written request, and the holder or holders have offered indemnity satisfactory to the Trustee to pursue the remedy;

	•	the Trustee has failed to comply with the request within 60 days after the request and offer; and

	•	during such 60-day period the holders of a majority in principal amount of the outstanding debt securities of that series do not give the Trustee any inconsistent directions. (Section 6.06)

No Impairment of Right to Receive Payment. Notwithstanding any other provision of the Indenture, the holder of any debt security will have the absolute and unconditional right to receive payment of the principal, premium, if any, and interest on that debt security when due, and to institute suit for enforcement of that payment. This right may not be impaired without the consent of the holder. (Section 10.02)

Notice of Default. The Trustee is required to give the holders notice of the occurrence of a default within 90 days of the default. Except in the case of a non-payment on the debt securities, the Trustee may withhold the notice if its committee of officers determines in good faith that it is in the interest of holders to do so. (Section 7.04) We are required to deliver to the Trustee each year a certificate as to whether or not we are in compliance with the conditions and covenants under the Indenture. (Section 4.05)

Waiver. The holders of not less than a majority in aggregate principal amount of a series may waive any default on the series, except a default in the payment of the principal, premium, if any, or interest on the series

The Indenture does not have a cross-default provision. Thus, a default by us on any other debt (including any other series of securities issued under the Indenture) would not constitute an event of default.

The exchange notes may be exchanged for other exchange notes of the same series of any authorized denominations and of a like aggregate principal amount and kind.

The exchange notes may be presented for registration of transfer (duly endorsed or accompanied by a duly executed written instrument of transfer), at the office of the Trustee maintained for such purpose with respect to the exchange notes, without service charge and upon payment of any taxes and other governmental charges as described in the Indenture. Such transfer or exchange will be effected upon being satisfied with the documents of title and indemnity of the person making the request.

In the event of any redemption of the exchange notes, the Trustee will not be required to exchange or register a transfer of any exchange note selected, called or being called for redemption except, in the case of any exchange note to be redeemed in part, the portion thereof not to be so redeemed.

We and the Trustee may modify and amend the Indenture from time to time as described below. Depending upon the type of amendment, we may not need the consent or approval of any of the holders of the debt securities, including the exchange notes offered by this prospectus, or we may need either the consent or approval of the holders of a majority in principal amount of all outstanding debt securities affected by the proposed amendment or the consent or approval of each holder affected by the proposed amendment.

We will not need the consent of any holder for the following types of amendments:


	•	to cure any ambiguity, omission, defect or inconsistency;

	•	to provide for assumption of our obligations under the Indenture and the debt securities in the event of a merger or consolidation requiring such assumption;

	•	to provide that specific provisions of the Indenture not apply to a series of debt securities not previously issued;

	•	to create a series and establish its terms;

	•	to provide for a separate trustee for one or more series; or

	•	to make any change that does not materially adversely affect the rights of any holder of debt securities. (Section 10.01)

We will need the consent of the holders of each outstanding debt security affected, if the proposed amendment would do any of the following:


	•	reduce the amount of debt securities whose holders must consent to an amendment or waiver;

	•	reduce the interest rate or change the time for payment of interest on any debt security;

	•	change the fixed maturity of any debt security;

	•	reduce the principal of any non-discounted debt security or reduce the amount of principal of any discounted debt security that would be due on acceleration;

	•	change the currency in which principal or interest is payable;

	•	make any change that materially adversely affects the right to convert any debt security;

	•	waive any default in payment of interest or principal; or

	•	make any change in the Indenture provisions governing waiver of past defaults or the Indenture provisions described in the preceding seven bullet points, except to (a) increase the amount of holders


		whose consent is required for an amendment or waiver or (b) provide that the amendment or waiver of other Indenture provisions requires the consent of each holder affected.

Amendments other than those described in the above paragraphs will require the approval of the holders of a majority in principal amount of the debt securities affected voting as one class. (Section 10.02)

At any time we may terminate as to a series of debt securities issued under the Indenture (including the exchange notes offered by this prospectus) all of our obligations (except for specified obligations regarding the defeasance trust and obligations to register the transfer or exchange of a debt security, to replace destroyed, lost or stolen debt securities and coupons and to maintain paying and other agencies for the debt securities) with respect to the debt securities of that series and any related coupons and the Indenture (“legal defeasance”).

At any time we may terminate as to a series of debt securities issued under the Indenture (including the exchange notes offered by this prospectus) our obligations under any restrictive covenants which may be applicable to that particular series (“covenant defeasance”). We may exercise our legal defeasance option notwithstanding our prior exercise of our covenant defeasance option. If we exercise our legal defeasance option, the debt securities of that particular series may not be accelerated because of an event of default. If we exercise our covenant defeasance option, the debt securities of that particular series may not be accelerated by reference to any restrictive covenant which may be applicable to the debt securities so defeased under their terms.

To exercise either defeasance option as to a series of debt securities issued under the Indenture (including the exchange notes offered by this prospectus), we must deposit in trust (the “defeasance trust”) with the Trustee money or direct obligations of the United States of America which have the full faith and credit of the United States of America pledged for payment and which are not callable at the issuer’s option, or certificates representing an ownership interest in those obligations for the payment of principal, premium, if any, and interest on the debt securities to redemption or maturity and must comply with specified other conditions. In particular, we must obtain an opinion of tax counsel that the defeasance will not result in recognition of any gain or loss to holders for federal income tax purposes. (Article 8)

The Trustee may resign at any time by notifying us; however, the resignation will not take effect until a successor trustee has accepted its appointment as trustee. (Section 7.07)

The holders of a majority in principal amount of the outstanding debt securities may remove the Trustee at any time. (Section 7.07) We may remove the Trustee if the Trustee fails to comply with specific provisions of the Trust Indenture Act of 1939, as amended, or fails to comply with the Indenture’s capital and surplus requirements. We may also remove the Trustee if one of the following occurs:


	•	the Trustee is adjudged a bankrupt or an insolvent;

	•	a custodian or other public officer takes charge of the Trustee or its property;

	•	the Trustee becomes incapable of acting;

	•	or specified events of bankruptcy, insolvency or reorganization with respect to the Trustee occur.

JPMorgan Chase Bank, successor in interest to The Chase Manhattan Bank, is the Trustee. We maintain banking relationships with the Trustee in the ordinary course of business. The Trustee also acts as trustee for some of our other securities as well as securities of some of our affiliates.

The Indenture and the exchange notes are governed by, and construed in accordance with, the laws of the State of New York.

Except as set forth below, the exchange notes will initially be issued in the form of one or more global notes (each, a “new global note”). Each new global note will be deposited on the date of the closing of the exchange of the original notes for the exchange notes with, or on behalf of, The Depository Trust Company and will be registered in the name of DTC or its nominee. Investors may hold their beneficial interests in a new global note directly through DTC or indirectly through organizations which are participants in the DTC system.

Unless and until they are exchanged in whole or in part for certificated notes, the new global notes may not be transferred except as a whole by DTC or its nominee.

DTC has advised us as follows: DTC is a limited-purpose trust company organized under the laws of the State of New York, a “banking organization” within the meaning of New York banking law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds and provides asset servicing for over 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly. DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the SEC. More information about DTC can be found at www.dtcc.com.

Upon the issuance of the new global notes, DTC or its custodian will credit, on its internal system, the respective principal amounts of the exchange notes represented by the new global notes to the accounts of persons who have accounts with DTC. Ownership of beneficial interests in the new global notes will be limited to persons who have accounts with DTC or persons who hold interests through the persons who have accounts with DTC. Persons who have accounts with DTC are referred to as “participants.” Ownership of beneficial interests in the new global notes will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC or its nominee, with respect to interests of participants, and the records of participants, with respect to interests of persons other than participants.

As long as DTC or its nominee is the registered owner or holder of the new global notes, DTC or the nominee, as the case may be, will be considered the sole record owner or holder of the exchange notes represented by the new global notes for all purposes under the Indenture and the exchange notes. No beneficial owners of an interest in the new global notes will be able to transfer that interest except according to DTC’s applicable procedures, in addition to those provided for under the Indenture. Owners of beneficial interests in the new global notes will not:


	•	be entitled to have the exchange notes represented by the new global notes registered in their names, receive or be entitled to receive physical delivery of certificated notes in definitive form; and

	•	be considered to be the owners or holders of any exchange notes under the new global notes.

Accordingly, each person owning a beneficial interest in new global notes must rely on the procedures of DTC and, if a person is not a participant, on the procedures of the participant through which that person owns its interests, to exercise any right of a holder of exchange notes under the new global notes. We understand

Payments of the principal of, premium, if any, and interest on the exchange notes represented by the new global notes will be made by us to the Trustee and from the Trustee to DTC or its nominee, as the case may be, as the registered owner of the new global notes. Neither we, the Trustee, nor any paying agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the new global notes or for maintaining, supervising or reviewing any records relating to the beneficial ownership interests.

We expect that DTC or its nominee, upon receipt of any payment of principal of, premium, if any, or interest on the new global notes will credit participants’ accounts with payments in amounts proportionate to their respective beneficial ownership interests in the principal amount of the new global notes, as shown on the records of DTC or its nominee. We also expect that payments by participants to owners of beneficial interests in the new global notes held through these participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for these customers. These payments will be the responsibility of these participants.

Transfer between participants in DTC will be effected in the ordinary way in accordance with DTC rules. If a holder requires physical delivery of notes in certificated form for any reason, including to sell notes to persons in states which require the delivery of the notes or to pledge the notes, a holder must transfer its interest in the new global notes in accordance with the normal procedures of DTC and the procedures set forth in the Indenture.

Unless and until they are exchanged in whole or in part for certificated exchange notes in definitive form, the new global notes may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC.

DTC has advised us that DTC will take any action permitted to be taken by a holder of notes, including the presentation of notes for exchange as described below, only at the direction of one or more participants to whose account the DTC interests in the new global notes are credited. Further, DTC will take any action permitted to be taken by a holder of notes only in respect of that portion of the aggregate principal amount of notes as to which the participant or participants has or have given that direction.

Although DTC has agreed to these procedures in order to facilitate transfers of interests in the new global notes among participants of DTC, it is under no obligation to perform these procedures, and may discontinue them at any time. Neither we nor the trustee will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

Subject to specified conditions, any person having a beneficial interest in the new global notes may, upon request to the trustee, exchange the beneficial interest for exchange notes in the form of certificated notes. Upon any issuance of certificated notes, the trustee is required to register the certificated notes in the name of, and cause the same to be delivered to, the person or persons, or the nominee of these persons. In addition, if DTC is at any time unwilling or unable to continue as a depositary for the new global notes, and a successor depositary is not appointed by us within 120 days, we will issue certificated notes in exchange for the new global notes.

As part of the sale of the original notes, under a registration rights agreement, dated as of October 6, 2003, we agreed with the initial purchasers in the offering of the original notes, for the benefit of the holders of the original notes, to file with the SEC an exchange offer registration statement (an “Exchange Offer Registration Statement”) for the purpose of offering exchange notes in exchange for original notes (a “Registered Exchange Offer”) or, if applicable, a shelf registration statement (as defined below).


	•	a change in law or in applicable interpretations of the staff of the SEC do not permit us to effect such a Registered Exchange Offer;

	•	any holder of an original note is not eligible to participate in the Registered Exchange Offer;

	•	for any other reason the Registered Exchange Offer is not consummated within 210 days after the date of issue of the original notes;

	•	an initial purchaser so requests with respect to original notes not eligible to be exchanged for exchange notes in the Registered Exchange Officer; or

	•	any initial purchaser who participates in the Registered Exchange Offer does not receive freely tradeable exchange notes in the Registered Exchange Offer;


	•	as promptly as practicable, but in no event more than 120 days after becoming required to do so, file a registration statement under the Securities Act covering continuous resales of the original notes or the exchange notes, as the case may be (“Shelf Registration Statement”);

	•	use our best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act; and

	•	use our best efforts to keep the Shelf Registration Statement effective until the earlier of (a) the time when the original notes covered by the Shelf Registration Statement can be sold pursuant to Rule 144 under the Securities Act without any limitations thereunder and (b) two years from the issuance of the original notes.

We will, in the event a Shelf Registration Statement is filed, among other things, provide to each holder for whom the Shelf Registration Statement was filed copies of the prospectus which is a part of the Shelf Registration Statement, notify each such holder when the Shelf Registration Statement has become effective and take other actions as are required to permit unrestricted resales of the original notes or the exchange notes, as the case may be. A holder that sells original notes issued pursuant to the Shelf Registration Statement generally will be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to applicable civil liability provisions under the Securities Act in connection with sales of that kind and will be bound by the provisions of the registration rights agreement that are applicable to that holder (including certain indemnification obligations).


	(1) the Exchange Offer Registration Statement or the Shelf Registration Statement is not declared effective by the SEC on or prior to the applicable effectiveness deadline specified in the registration rights agreement;

	(2) after either the Exchange Offer Registration Statement or the Shelf Registration Statement is declared effective, such registration statement thereafter ceases to be effective or usable (subject to


	certain exceptions) in connection with resales of original notes or exchange notes, as the case may be, as provided in and during the periods specified in the registration rights agreement (each such event referred to in clauses (1) and (2), a “Registration Default”).

Liquidated damages will be incurred from and including the date on which any such Registration Default shall occur to and including the first week in which all Registration Defaults have been cured in an amount equal to $0.10 per week per $1,000 principal amount of original notes or exchange notes.

We will pay liquidated damages to the holders of global notes by wire transfer of immediately available funds or by federal funds check and to holders of certificated notes by wire transfer to the accounts specified by them or by mailing checks to their registered address if no such accounts have been specified. No liquidated damages will be paid for any week beginning after all Registration Defaults have been cured.

The following is a discussion of the material U.S. federal income tax consequences of the exchange of original notes for exchange notes. This summary is based on the Internal Revenue Code of 1986, as amended, Treasury regulations, administrative pronouncements and judicial decisions, all as in effect on the date of this prospectus and all subject to change or differing interpretations, possibly with retroactive effect. This discussion is limited to holders that purchased the original notes upon their original issuance and that hold the original notes, and will hold the exchange notes, as capital assets within the meaning of Section 1221 of the Internal Revenue Code. This discussion does not address all of the tax consequences that may be relevant to a holder in light of the holder’s particular circumstances or to holders subject to special rules, such as financial institutions, tax-exempt entities, holders whose functional currency is not the U.S. dollar, insurance companies, dealers in securities or foreign currencies, persons holding notes as part of a hedge, straddle or other integrated transaction, or persons who have ceased to be United States citizens or to be taxed as resident aliens. You should consult with your own tax advisor about the application of the U.S. federal income tax laws to your particular situation as well as any consequences of the exchange under the tax laws of any state, local or foreign jurisdiction.

Your acceptance of the exchange offer and your exchange of original notes for exchange notes will not be taxable for U.S. federal income tax purposes because the exchange notes will not be considered to differ materially in kind or extent from the original notes. Rather, the exchange notes you receive will be treated as a continuation of your investment in the original notes. Accordingly, you will not recognize gain or loss upon the exchange of original notes for exchange notes pursuant to the exchange offer, your tax basis in the exchange notes will be the same as your adjusted tax basis in the original notes immediately before the exchange, and your holding period for the exchange notes will include the holding period for the original notes exchanged therefor. There will be no U.S. federal income tax consequences to holders that do not exchange their original notes pursuant to the exchange offer.

Based on interpretations by the staff of the SEC in no-action letters issued to third parties, we believe that you may freely transfer exchange notes issued in the exchange offer if:


	•	you acquire the exchange notes in the ordinary course of your business; and

	•	you are not engaged in, and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of exchange notes.

We believe that you may not transfer exchange notes issued in the exchange offer in exchange for the original notes if you are:


	•	our “affiliate,” within the meaning of Rule 405 under the Securities Act;

	•	a broker-dealer that acquired original notes directly from us; or

	•	a broker-dealer that acquired original notes as a result of market-making activities or other trading activities without compliance with the registration and prospectus delivery provisions of the Securities Act.

If you wish to exchange your original notes for exchange notes in the exchange offer, you will be required to make representations to us as described under the caption “The Exchange Offer — Procedures for Tendering” and in the letter of transmittal.

Each broker-dealer that receives exchange notes for its own account under the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. Broker-dealers may use this prospectus, as it may be amended or supplemented from time to time, for resales of exchange notes received in exchange for original notes where the original notes were acquired as a result of market-making activities or other trading activities. We have agreed that, starting on the date of completion of the exchange offer and ending on the close of business 210 days after such date, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale.

We will not receive any proceeds from any sale of exchange notes by broker-dealers. Broker-dealers may sell exchange notes received for their own account under the exchange offer in one or more transactions:


	•	in the over-the-counter market;

	•	in negotiated transactions;

	•	through the writing of options on the exchange notes; or

	•	a combination of such methods of resale.


	•	at market prices prevailing at the time of resale;

	•	at prices related to such prevailing market prices; or

	•	at negotiated prices.

Broker-dealers may make any such resale directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such exchange notes. Any broker-dealer that receives exchange notes for its own account under the exchange offer and any broker or dealer that participates in a distribution of such exchange notes may be deemed to be an “underwriter” within the meaning of the Securities Act. Any profit on any such resale of exchange notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will deliver, and by delivering, a prospectus, a broker-dealer will not admit that it is an “underwriter” within the meaning of the Securities Act.

Furthermore, any broker-dealer that acquired any of its original notes directly from us:


	•	may not rely on the applicable interpretation of the staff of the SEC’s position contained in Exxon Capital Holdings Corp., SEC no-action letter (available April 13, 1988), Morgan, Stanley & Co. Inc., SEC no-action letter (available June 5, 1991) and Shearman & Sterling, SEC no-action letter (available July 2, 1983); and

	•	must also be named as a selling noteholder in connection with the registration and prospectus delivery requirements of the Securities Act relating to any resale transaction.

For a period of 210 days from the date of completion of this exchange offer, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer other than commissions or concessions of any broker-dealers and will indemnify the holders of the original notes (including any broker-dealers) against some liabilities, including liabilities under the Securities Act.

Legal opinions relating to the exchange notes will be rendered by our counsel, Jones Day, Chicago, Illinois, and Hinkle, Hensley, Shanor & Martin, L.L.P., Austin, Texas. Hinkle, Hensley, Shanor & Martin, L.L.P. will pass upon matters pertaining to the laws of the State of New Mexico. Jones Day will pass only upon matters pertaining to New York and federal law.

The consolidated financial statements and related financial statement schedule as of and for the year ended December 31, 2002 included in this prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

The consolidated financial statements and schedule of Southwestern Public Service Company as of and for the years ended December 31, 2001 and December 31, 2000 have been audited by Arthur Andersen LLP, independent auditors for those periods, as stated in their report with respect thereto. Arthur Andersen LLP was convicted on federal obstruction of justice charges arising from the federal government’s investigation of Enron Corp. In light of the conviction, Arthur Andersen ceased practicing before the SEC on August 31, 2002. Southwestern Public Service Company has been unable to obtain, after reasonable efforts, the written consent of Arthur Andersen LLP to the use of their report in this prospectus. Events arising out of the indictment and conviction materially and adversely affect the ability of Arthur Andersen LLP to satisfy any claims arising from the provision of auditing services to Southwestern Public Service Company, including claims that may arise out of Arthur Andersen LLP’s audit of financial statements included in this prospectus. Southwestern Public Service Company has not had a reaudit of its financial statements as of and for the years ended December 31, 2001 and December 31, 2000.

We have filed with the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, a Registration Statement on Form S-4 under the Securities Act relating to the offering. As permitted by the rules and regulations of the SEC, this prospectus does not contain all the information contained in the registration statement. For further information about us and the offering, you can read the registration statement and the exhibits and financial schedules filed with the registration statement. The statements contained in this prospectus about the contents of any contract or other document are not necessarily complete. You can read a copy of each contract or other document filed as an exhibit to the registration statement.

We file annual, quarterly and special reports and other information with the SEC. Our SEC filings are available free of charge to the public over the Internet at the SEC’s web site at http://www.sec.gov. You may also read and copy any document we file at the SEC’s public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room.

You may request a copy of these filings at no cost, by writing or telephoning us at the following address:

We have audited the accompanying consolidated balance sheet and consolidated statement of capitalization of Southwestern Public Service Company (a New Mexico corporation) and subsidiaries (the Company) as of December 31, 2002, and the related consolidated statements of income, stockholder’s equity and comprehensive income and cash flows for the year then ended. Our audit also included the financial statement schedule listed in the Index at Item 21. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit.

The consolidated financial statements of Southwestern Public Service Company for the years ended December 31, 2001 and 2000 were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion and included an explanatory paragraph related to the Company’s adoption of Statement of Financial Accounting Standards No. 133 — “Accounting for Derivative Instruments and Hedging Activity” on those consolidated financial statements and the financial statement schedules in their report dated February 21, 2002.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements referred to above present fairly, in all material respects, the financial position of Southwestern Public Service Company and subsidiaries as of December 31, 2002, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.

THE FOLLOWING REPORT IS A COPY OF A PREVIOUSLY ISSUED REPORT OF ARTHUR ANDERSEN LLP AND HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP.

We have audited the accompanying consolidated balance sheets and statements of capitalization of Southwestern Public Service Company (a New Mexico corporation) as of December 31, 2001 and 2000, and the related consolidated statements of income, stockholder’s equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements and the schedule referred to below are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Southwestern Public Service Company as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States.

As discussed in Note 12 to the consolidated financial statements, effective January 1, 2001 Southwestern Public Service Company adopted Statement of Financial Accounting Standard No. 133, “Accounting for Derivative Instruments and Hedging Activity,” which changed its method of accounting for certain commodity contracts and other derivatives.

Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index of the consolidated financial statements is presented for purposes of complying with the Securities and Exchange Commission’s rules and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly states, in all material respects, the financial data required to be set forth there in relation to the basic financial statements taken as a whole.

Merger and Basis of Presentation — On Aug. 18, 2000, Northern States Power Co. (NSP) and New Century Energy, Inc. (NCE) merged and formed Xcel Energy Inc. Each share of NCE common stock was exchanged for 1.55 shares of Xcel Energy common stock. NSP shares became Xcel Energy shares on a one-for-one basis. Cash was paid in lieu of any fractional shares of Xcel Energy common stock. The merger was structured as a tax-free, stock-for-stock exchange for shareholders of both companies (except for fractional shares) and accounted for as a pooling-of-interests. At the time of the merger, Xcel Energy registered as a holding company under the PUHCA.

Pursuant to the merger agreement, NCE was merged with and into NSP. NSP, as the surviving legal corporation, changed its name to Xcel Energy. Also, as part of the merger, NSP transferred its existing utility operations that were being conducted directly by NSP at the parent company level to a newly formed wholly owned subsidiary of Xcel Energy, which was renamed NSP-Minnesota.

Consistent with pooling accounting requirements, results and disclosures for all periods prior to the merger have been restated for consistent reporting with post-merger organization and operations.

Business and System of Accounts — SPS is a wholly-owned subsidiary of Xcel Energy and is engaged principally in the generation, purchase, transmission, distribution and sale of electricity. SPS is subject to the regulatory provisions of the PUHCA. SPS is subject to regulation by the FERC and state utility commissions. SPS’ accounting records conform to the FERC uniform system of accounts or to systems required by various state regulatory commissions, which are the same in all material aspects.

Principles of Consolidation — SPS has a subsidiary, which has been consolidated. In the consolidation process, we eliminate all significant intercompany transactions and balances.

Revenue Recognition — Revenues related to the sale of energy are generally recorded when service is rendered or energy is delivered to customers. However, the determination of the energy sales to individual customers is based of the reading of their meter, which occurs on a systematic basis throughout the month. At the end of each month, amounts of energy delivered to customers since the date of the last meter reading are estimated and the corresponding unbilled revenue is estimated.

SPS has various rate adjustment mechanisms in place that currently provide for the recovery of certain fuel and purchased power costs. These cost adjustment tariffs may increase or decrease the level of costs recovered through base rates and are revised periodically, as prescribed by the appropriate regulatory agencies, for any difference between the total amount collected under the clauses and the recoverable costs incurred.

SPS’ rates in Texas have fixed fuel factor and periodic fuel filing, reconciling and reporting requirements, which provide cost recovery. In New Mexico, SPS has recently reinstituted a monthly fuel and purchased power cost recovery factor.

Property, Plant, Equipment and Depreciation — Property, plant and equipment is stated at original cost. The cost of plant includes direct labor and materials, contracted work, overhead costs and applicable interest expense. The cost of plant retired, plus net removal cost is charged to accumulated depreciation and amortization. Significant additions or improvements extending asset lives are capitalized, while repairs and maintenance are charged to expense as incurred. Maintenance and replacement of items determined to be less than units of property are charged to operating expenses.

SPS determines the depreciation of their plant by using the straight-line method, which spreads the original cost equally over the plant’s useful life. Depreciation expense for SPS expressed as a percentage of average depreciable property, for the years ended December 31, is listed in the following table:

Allowance for Funds Used During Construction (AFDC) and Capitalized Interest — AFDC, a noncash item, represents the cost of capital used to finance utility construction activity. AFDC is computed by applying a composite pretax rate to qualified construction work in progress. The amount of AFDC capitalized as a utility construction cost is credited to other income and deductions (for equity capital) and interest charges (for debt capital). AFDC amounts capitalized are included in SPS’ rate base for establishing utility service rates. Interest capitalized as AFDC for SPS is listed in the following table:

Environmental Costs — We record environmental costs when it is probable we are liable for the costs and we can reasonably estimate the liability. We may defer costs as a regulatory asset based on our expectation that we will recover these costs from customers in future rates. Otherwise, we expense the costs. If an environmental expense is related to facilities we currently use, such as pollution-control equipment, we capitalize and depreciate the costs over the life of the plant, assuming the costs are recoverable in future rates or future cash flow.

We record estimated remediation costs, excluding inflationary increases and possible reductions for insurance coverage and rate recovery. The estimates are based on our experience, our assessment of the current situation and the technology currently available for use in the remediation. We regularly adjust the recorded costs as we revise estimates and as remediation proceeds. If we are one of several designated responsible parties, we estimate and record only our share of the cost. We treat any future costs of restoring sites where operation may extend indefinitely as a capitalized cost of plant retirement. The depreciation expense levels we can recover in rates include a provision for these estimated removal costs.

Income Taxes — Xcel Energy and its utility subsidiaries, including SPS, file consolidated federal and combined and separate state income tax returns. Income taxes for consolidated or combined subsidiaries are allocated to the subsidiaries based on separate company computations of taxable income or loss. In accordance with the PUHCA requirements, the holding company also allocates its own net income tax benefits to its direct subsidiaries based on the positive taxable income of each company in the consolidated federal or combined state returns. SPS defers income taxes for all temporary differences between pretax financial and taxable income, and between the book and tax bases of assets and liabilities. We use the tax rates that are scheduled to be in effect when the temporary differences are expected to turn around, or reverse.

Due to the effects of past regulatory practices, when deferred taxes were not required to be recorded, we account for the reversal of some temporary differences as current income tax expense. We defer investment tax credits and spread their benefits over the estimated lives of the related property. Utility rate regulation also has created certain regulatory assets and liabilities related to income taxes, which we summarize in Note 15 to the Consolidated Financial Statements. For more information on income taxes, see Note 8 to the Consolidated Financial Statements.

Derivative Financial Instruments — SPS utilizes a variety of derivatives, including interest rate swaps and locks, to reduce exposure to interest rate risk and energy contracts to reduce exposure to commodity price risk. The energy contracts are both financial- and commodity-based in the energy trading and energy nontrading operations. These contracts consist mainly of commodity futures and options, index or fixed price swaps and basis swaps.

On Jan. 1, 2001, SPS adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activity,” as amended by SFAS No. 137 and SFAS No. 138 (collectively referred to as SFAS No. 133). For more information on the impact of SFAS No. 133, see Notes 11 and 12 to the Consolidated Financial Statements.

Use of Estimates — In recording transactions and balances resulting from business operations, SPS uses estimates based on the best information available. We use estimates for such items as plant depreciable lives,

tax provisions, uncollectible amounts, environmental costs, unbilled revenues and actuarially determined benefit costs. We revise the recorded estimates when we get better information or when we can determine actual amounts. Those revisions can affect operating results. Each year we also review the depreciable lives of certain plant assets and revise them, if appropriate.

Cash Items — SPS considers investments with a remaining maturity of three months or less at the time of purchase to be cash equivalents. Those instruments are primarily commercial paper and money market funds.

Regulatory Accounting — SPS accounts for certain income and expense items using SFAS No. 71. Under SFAS No. 71:


	•	we defer certain costs, which would otherwise be charged to expense, as regulatory assets based on our expected ability to recover them in future rates; and

	•	we defer certain credits, which would otherwise be reflected as income, as regulatory liabilities based on our expectation they will be returned to customers in future rates.

We base our estimates of recovering deferred costs and returning deferred credits on specific ratemaking decisions or precedent for each item. We amortize regulatory assets and liabilities consistent with the period of expected regulatory treatment.

Intangible Assets and Deferred Financing Costs — Effective Jan. 1, 2002, SPS implemented SFAS No. 142, “Goodwill and Other Intangible Assets,” which requires different accounting for intangible assets as compared to goodwill. Intangible assets are amortized over their economic useful life and reviewed for impairment in accordance with SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of.” Goodwill is no longer amortized after adoption of SFAS No. 142. Non-amortized intangible assets and goodwill are tested for impairment annually and on an interim basis if an event or circumstance occurs between annual tests that might reduce the fair value of that asset.

SPS has immaterial amounts of unamortized intangible assets and no amounts of goodwill as of Dec. 31, 2002 and 2001.

Other assets include deferred financing costs, which we are amortizing over the remaining maturity periods of the related debt. SPS’ deferred financing costs, net of amortization at Dec. 31, are listed in the following table:

2002 — Regulatory Recovery Adjustment — In late 2001, SPS 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, subject to approval by the state regulatory commission. Based on the settlement agreement, SPS wrote off pretax restructuring costs of approximately $5 million.

2002 and 2001 — Restaffing — During the fourth quarter of 2001, Xcel Energy expensed pretax special charges of $39 million for expected staff consolidation costs for an estimated 500 employees in several utility operating and corporate support areas of Xcel Energy. Approximately $36 million of these restaffing costs were allocated to Xcel Energy’s utility subsidiaries, including SPS, consistent with service company cost allocation methodologies utilized under the requirements of the PUHCA. In the first quarter of 2002, the identification of affected employees was completed and additional pretax special charges of $9 million were expensed for the

final costs of staff consolidations. Approximately $6 million of these restaffing costs were allocated to Xcel Energy’s utility subsidiaries. All 564 of accrued staff terminations have occurred. See the summary of costs below.

2000 — Merger Costs — Upon consummation of the merger in 2000, Xcel Energy expensed pretax special charges related to its regulated operations totaling $199 million. During 2000, an allocation of approximately $188 million of merger costs was made to Xcel Energy’s utility subsidiaries consistent with prior regulatory filings, in proportion to expected merger savings by the Company and consistent with service company cost allocation methodologies utilized under the requirements of the PUHCA. These costs are reported on the accompanying consolidated financial statements as special charges.

Of the total pretax special charges recorded by Xcel Energy that related to its regulated operations, $159 million was recorded during the third quarter of 2000 and $40 million was recorded during the fourth quarter of 2000. See Note 18 to the Consolidated Financial Statements for the quarterly impacts on Xcel Energy’s utility subsidiaries.

The total pretax charges included $52 million related to one-time transaction related costs incurred in connection with the merger of NSP and NCE. These transaction costs included investment banker fees, legal and regulatory approval costs, and expenses for support of and assistance with planning and completing the merger transaction.

Also included in the total were $147 million of pretax charges pertaining to incremental costs of transition and integration activities associated with merging operations. These transition costs included approximately $77 million for severance and related expenses associated with staff reductions. All 721 of accrued staff terminations have occurred. The staff reductions were non-bargaining positions mainly in corporate and operations support areas. Other transition and integration costs included amounts incurred for facility consolidation, systems integration, regulatory transition, merger communications and operations integration assistance.

Accrued Special Charges — The following table summarizes activity related to accrued special charges in 2002 and 2001:

Notes Payable and Commercial Paper — Information regarding notes payable and commercial paper for the years ended Dec. 31, 2002 and 2001 is:

Bank Lines of Credit — At Dec. 31, 2002, SPS had credit facilities with several banks. SPS paid for these lines of credit with fee payments.

The SPS $250 million facility expired on Feb. 18, 2003 and was replaced on that date with a $100 million unsecured, 364-day credit agreement. The facility provides short-term financing in the form of bank loans and letters of credit.

Certain SPS payments under its pollution control obligations are pledged to secure obligations of the Red River Authority of Texas.

SPS Capital I, a wholly owned, special-purpose subsidiary trust of SPS, has $100 million of 7.85 percent trust preferred securities issued and outstanding that mature in 2036. Distributions paid by the subsidiary trust on the preferred securities are financed through interest payments on debentures issued by SPS and held by the subsidiary trust, which are eliminated in consolidation. The securities are redeemable at the option of SPS, at 100 percent of the principal amount plus accrued interest. Distributions and redemption payments are guaranteed by SPS.

Distributions paid to preferred security holders are reflected as a financing cost in the accompanying Consolidated Statements of Income along with interest expense.

Total income tax expense from operations differs from the amount computed by applying the statutory federal income tax rate to income before income tax expense. The reasons for the difference are:

Income taxes comprise the following expense (benefit) items (Thousands of dollars):

The components of net deferred tax liability (current and noncurrent portions) at Dec. 31 were:

Xcel Energy offers various benefit plans to its benefit employees. Approximately 51 percent of benefit employees are represented by several local labor unions under several collective-bargaining agreements. At Dec. 31, 2002. SPS had 757 union employees covered under a collective bargaining agreement, which expires in October 2005.

Pension Benefits — Xcel Energy has several noncontributory, defined benefit pension plans that cover almost all utility employees. Benefits are based on a combination of years of service, the employee’s average pay and Social Security benefits.

Xcel Energy’s policy is to fully fund into an external trust the actuarially determined pension costs recognized for ratemaking and financial reporting purposes, subject to the limitations of applicable employee benefit and tax laws. Plan assets principally consist of the common stock of public companies, corporate bonds and U.S. government securities.

A comparison of the actuarially computed pension benefit obligation and plan assets for Xcel Energy plans which benefit utility subsidiary employees, on a combined basis, is presented in the following table:

The components of net periodic pension cost (credit) for Xcel Energy plans which benefit employees of its utility subsidiaries are:

Xcel Energy also maintains noncontributory defined benefit supplemental retirement income plans for certain qualifying executive personnel. Benefits for these unfunded plans are paid out of Xcel Energy’s operating cash flows.

Defined Contribution Plans — Xcel Energy maintains 401(k) and other defined contribution plans that cover substantially all employees. Total contributions to these plans, which benefit employees of the utility subsidiaries, were approximately $19 million in 2002, $23 million in 2001, and $24 million in 2000. The contribution for 2002 included $1.9 million for SPS.

Until May 6, 2002 Xcel Energy had a leveraged employee stock ownership plan (ESOP) that covered substantially all employees of NSP-Minnesota and NSP-Wisconsin. Xcel Energy made contributions to this noncontributory, defined contribution plan to the extent it realized tax savings from dividends paid on certain ESOP shares. ESOP contributions had no material effect on Xcel Energy earnings because the contributions were essentially offset by the tax savings provided by the dividends paid on ESOP shares. Xcel Energy allocated leveraged ESOP shares to participants when it repaid ESOP loans with dividends on stock held by the ESOP.

In May 2002 the ESOP was merged into the Xcel Retirement Savings 401(k) Plan. Starting with the 2003 plan year, the ESOP component of the 401(k) will no longer be leveraged.

Xcel Energy’s leveraged ESOP held no shares of Xcel Energy common stock at the end of 2002, 10.7 million shares of Xcel Energy common stock at May 6, 2002, 10.5 million shares of Xcel Energy common stock at the end of 2001, and 12.0 million shares of Xcel Energy common stock at the end of 2000. Xcel Energy excluded the following average number of uncommitted leveraged ESOP shares from earnings per share calculations: 0.7 million in 2002, 0.9 million in 2001, and 0.7 million in 2000. On Nov. 19, 2002, Xcel Energy paid off all of the ESOP loans. All uncommitted ESOP shares were released and will be used by Xcel Energy for its employer matching contribution to its 401(k) plan.

Postretirement Health Care Benefits — Xcel Energy has contributory health and welfare benefit plans that provide health care and death benefits to most Xcel Energy retirees. The former NSP discontinued contributing toward health care benefits for nonbargaining employees retiring after 1998 and for bargaining employees of NSP-Minnesota and NSP-Wisconsin who retired after 1999. However, employees of the former NCE who retired in 2002 continue to receive employer subsidized health care benefits. Employees of the former NSP who retired after 1998 are eligible to participate in the Xcel Energy health care program with no employer subsidy.

In conjunction with the 1993 adoption of SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pension,” Xcel Energy elected to amortize the unrecognized accumulated postretirement benefit obligation (APBO) on a straight-line basis over 20 years.

Plan assets held in external funding trusts principally consist of investments in equity mutual funds, fixed-income securities and cash equivalents.

A comparison of the actuarially computed benefit obligation and plan assets for Xcel Energy postretirement health care plans that benefit employees of its utility subsidiaries is presented in the following table:

The assumed health care cost trend rate for 2002 is approximately 8 percent, decreasing gradually to 5.5 percent in 2007 and remaining level thereafter. A 1 percent change in the assumed health care cost trend rate would have the following effects:

The components of net periodic postretirement benefit cost of Xcel Energy’s plans are:

In the second quarter of 2000, SPS discontinued regulatory accounting under SFAS No. 71 for the generation portion of its business due to the issuance of a written order by the PUCT in May 2000, addressing the implementation of electric utility restructuring. SPS’ transmission and distribution business continued to meet the requirements of SFAS No. 71, as that business was expected to remain regulated. During the second quarter of 2000, SPS wrote off its generation related regulatory assets and other deferred costs totaling approximately $19.3 million. This resulted in an after-tax extraordinary charge of approximately $13.7 million. During the third quarter of 2000, SPS recorded an extraordinary charge of $8.2 million before tax, or $5.3 million after tax, related to the tender offer and defeasance of first mortgage bonds. The first mortgage bonds were defeased to facilitate the legal separation of generation, transmission and distribution assets, which was expected to eventually occur in 2001 under restructuring requirements in effect in 2000.

In March 2001, the state of New Mexico enacted legislation that amended its Electric Utility Restructuring Act of 1999 and delayed customer choice until 2007. SPS has requested recovery of its costs incurred to prepare for customer choice in New Mexico. A decision on this and other matters is pending before the NMPRC. SPS expects to receive future regulatory recovery of these costs.

In June 2001, the Governor of Texas signed legislation postponing the deregulation and restructuring of SPS until at least 2007. This legislation amended the 1999 legislation, SB-7, which provided for retail electric competition beginning January 2002. Under the amended legislation, prior PUCT orders issued in connection with the restructuring of SPS are considered null and void. In addition, under the new legislation, SPS is entitled to recover all reasonable and necessary expenditures made or incurred before Sept. 1, 2001, to comply with SB-7.

As a result of these legislative developments, SPS reapplied the provisions of SFAS No. 71 for its generation business during the second quarter of 2001. More than 95 percent of SPS’ retail electric revenues are from operations in Texas and New Mexico. Because of the delays to electric restructuring passed by Texas and New Mexico, SPS’ previous plans to implement restructuring, including the divestiture of generation assets, have been abandoned. Accordingly, SPS will continue to be subject to rate regulation under traditional cost-of-service regulation, consistent with its past accounting and ratemaking practices for the foreseeable future (at least until 2007).

During the fourth quarter of 2001, SPS completed a $500 million medium-term debt financing with the proceeds used to reduce short-term borrowings that had resulted from the 2000 defeasance. In its regulatory filings and communications, SPS proposed to amortize its defeasance costs over the five-year life of the refinancing, consistent with historical ratemaking, and requested incremental rate recovery of $25 million of other restructuring costs in Texas and New Mexico. These nonfinancing restructuring costs have been deferred and are being amortized consistent with rate recovery. Management believes it will be allowed full recovery of its prudently incurred costs. Based on these 2001 events and the corresponding reduced uncertainty surrounding the financial impacts of the delay in restructuring, SPS restored certain regulatory assets totaling $17.6 million as of Dec. 31, 2001, and reported related after-tax extraordinary income of $11.8 million. Regulatory assets previously written off in 2000 were restored only for items being recovered in current rates and for items where future rate recovery is considered probable.

See Note 2 for discussion of special charges related to SPS restructuring in 2002.

The estimated December 31 fair values of Xcel Energy’s utility subsidiaries’, including SPS, recorded financial instruments were as follows:

The carrying amount of cash, cash equivalents, short-term investments and other financial instruments approximates fair value because of the short maturity of those instruments. The fair values of SPS’ long-term investments are estimated based on quoted market prices for those or similar investments. The fair value of SPS’ long-term debt and the mandatorily redeemable preferred securities are estimated based on the quoted market prices for the same or similar issues, or the current rates for debt of the same remaining maturities and credit quality.

The fair value estimates presented are based on information available to management as of Dec. 31, 2002 and 2001. These fair value estimates have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair values may differ significantly from the amounts presented herein.

The discussion below briefly describes the derivatives of SPS and discloses the respective fair values at Dec. 31, 2002. For more detailed information regarding derivative financial instruments and the related risks, see Note 12 to the Consolidated Financial Statements.

Interest Rate Swaps — On both Dec. 31, 2002 and 2001, SPS had an interest rate swap, converting variable-rate debt to fixed-rate debt, with a notional amount of $25 million. The fair value of the swap on both Dec. 31, 2002 and 2001 was a liability of approximately $7 million.

SPS uses letters of credit, generally with terms of one year, to provide financial guarantees for certain operating obligations. The following table details the letters of credit outstanding for SPS at Dec. 31, 2002. The contract amounts of these letters of credit approximate their fair value and are subject to fees determined by the market.

Business and Operational Risk — SPS is exposed to commodity price risk in their generation and retail distribution operations. SPS recovers purchased energy expenses on a dollar-for-dollar basis.

SPS manages commodity price risk by entering into purchase and sales commitments for electric power, long-term contracts for coal supplies and fuel oil, and derivative financial instruments. Xcel Energy’s risk management policy allows SPS to manage the market price risk within each rate regulated operation to the extent such exposure exists. Management is limited under the policy to enter into only transactions that reduce market price risk where the rate regulation jurisdiction does not already provide for dollar-for-dollar recovery.

Interest Rate Risk — SPS is exposed to fluctuations in interest rates where they enter into variable rate debt obligations to fund certain power projects being developed or purchased. Exposure to interest rate fluctuations may be mitigated by entering into derivative instruments known as interest rate swaps, caps, collars and put or call options. These contracts reduce exposure to interest rate volatility and result in primarily fixed rate debt obligations when taking into account the combination of the variable rate debt and the interest rate derivative instrument. Xcel Energy’s risk management policy allows the utility subsidiaries to reduce interest rate exposure from variable rate debt obligations.

See Note 11 to the Consolidated Financial Statements for a discussion of SPS’ interest rate swaps.

2001 Accounting Change — On Jan. 1, 2001, Xcel Energy and SPS adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” This statement requires that all derivative instruments as defined by SFAS No. 133 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.

A fair value hedge requires that the effective portion of the change in the fair value of a derivative instrument be offset against the change in the fair value of the underlying asset, liability, or firm commitment being hedged. That is, fair value hedge accounting allows the gain or loss on the hedged item to offset the gain or loss on the derivative instrument in the same period. A cash flow hedge requires that the effective portion of the change in the fair value of a derivative instrument be recognized in Other Comprehensive Income, and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The ineffective portion of a derivative instrument’s change in fair value is recognized currently in earnings.

SPS formally documents hedge relationships, including, among other things, the identification of the hedging instrument and the hedged transaction, as well as the risk management objectives and strategies for undertaking the hedged transaction. Derivatives are recorded in the balance sheet at fair value. SPS also formally assesses, both at inception and at least quarterly thereafter, whether the derivative instruments being used are highly effective in offsetting changes in either the fair value or cash flows of the hedged items.

The components of SFAS No. 133 impacts on Other Comprehensive Income for 2002 and 2001, included in Stockholder’s Equity, are detailed in the following table (Millions of dollars).

SPS did not realize any material impact to earnings related to ineffective hedges during 2002 and 2001.

SPS records the fair value of derivative instruments in the Consolidated Balance Sheets as separate line items noted as “Derivative Instruments Valuation” for assets and liabilities, as well as current and non-current.

and the change in the fair value of these instruments is recorded as a component of Other Comprehensive Income. SPS reclassified into earnings during 2002 net after-tax gains from Other Comprehensive Income of approximately $0.5 million.

Normal Purchases or Normal Sales — SPS enters into fixed price contracts for the purchase and sale of various commodities for use in its 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.

SPS evaluates all of its contracts 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.

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

Leases — SPS leases a variety of equipment and facilities used in the normal course of business.

The remainder of the leases, primarily leases of coal-hauling railcars, trucks, cars and power-operated equipment are accounted for as operating leases. The amounts paid under operating leases during 2002 for SPS are listed in the following table:

Fuel Contracts — SPS has contracts providing for the purchase and delivery of a significant portion of its current coal and natural gas requirements. These contracts expire in various years between 2003 and 2025. In addition, SPS is required to pay additional amounts depending on actual quantities shipped under these agreements. The potential risk of loss for SPS, in the form of increased costs, from market price changes in fuel is mitigated through the cost-of-energy adjustment provision of the ratemaking process, which provides for recovery of most fuel costs.

Purchased Power Agreements — SPS has entered into agreements with utilities and other energy suppliers for purchased power to meet system load and energy requirements, replace generation from company-owned units under maintenance and during outages, and meet operating reserve obligations. SPS has various pay-for-performance contracts with expiration dates through the year 2050. In general, these contracts provide for capacity payments, subject to meeting certain contract obligations and energy payments based on actual power taken under the contracts. Most of the capacity and energy costs are recovered through base rates and other cost recovery mechanisms.

At Dec. 31, 2002, the estimated future payments for capacity that SPS is obligated to purchase, subject to availability, are as follows (Thousands of dollars):

We are subject to regulations covering air and water quality, the storage of natural gas and the storage and disposal of hazardous or toxic wastes. We continuously assess our compliance. Regulations, interpretations and enforcement policies can change, which may impact the cost of building and operating our facilities.

Asbestos Removal — Some of our facilities contain asbestos. Most asbestos will remain undisturbed until the facilities that contain it are demolished or renovated. Since we intend to operate most of these facilities indefinitely, we cannot estimate the amount or timing of payments for its final removal. It may be necessary to remove some asbestos to perform maintenance or make improvements to other equipment. The cost of removing asbestos as part of other work is immaterial and is recorded as incurred as operating expenses for maintenance projects, capital expenditures for construction projects or removal costs for demolition projects.

In the normal course of business, SPS is party to routine claims and litigation arising from prior and current operations. SPS is actively defending these matters and have recorded an estimate of the probable cost of settlement or other disposition.

SPS — An electric cooperative in Lamb County, Texas filed a complaint with the PUCT regarding SPS’ alleged unlawful provision of service to oil-field customers and the cooperative’s facilities in the cooperative’s certified service area. SPS is awaiting a decision on this matter from a state administrative law judge. In addition, pending a final administrative determination on the lawfulness of SPS’ service, the cooperative has also commenced related litigation against SPS for damages. Damages resulting from decisions on these legal matters that are adverse to SPS could be material. However, SPS does not consider an adverse outcome probable at this time and consequently no costs have been accrued for this matter.

In 2001, Golden Spread filed a complaint against SPS and a request for investigation before the FERC. Golden Spread alleges SPS has violated provisions of an agreement pursuant to which SPS conducts joint dispatch of SPS and Golden Spread resources. Golden Spread seeks damages in excess of $10 million. SPS

denies all of Golden Spread’s allegations, and has filed a counter-complaint against Golden Spread in which it has alleged that Golden Spread has failed to adhere to certain requirements of the agreement. Both complaints are presently pending before the FERC and settlement procedures have been ordered by the Commission. Settlement discussions are ongoing. Even if SPS is required to pay more to Golden Spread for power purchased under this agreement, we believe that the amounts are likely to be recoverable from customers under SPS’ various fuel clause mechanisms.

In the normal course of business, SPS made a filing to facilitate the PUCT’s review of electric generation and fuel management activities, totaling approximately $608 million, for the period from January 2000 through December 2001. This proceeding is ongoing, and intervenor and PUCT staff testimony is being reviewed. Intervenors have proposed that revenues from certain wholesale transactions be credited to Texas retail customers. SPS is opposing this proposed revenue treatment, and believes all deferred costs under review are recoverable in future rates.

SPS prepares its financial statements in accordance with the provisions of SFAS No. 71, as discussed in Note 1 to the Consolidated Financial Statements. Under SFAS No. 71, regulatory assets and liabilities can be created for amounts that regulators allow us to collect from, or require us to pay back to, customers in future electric rates.

Any portion of our business that is not rate regulated cannot use SFAS No. 71 accounting. Efforts to restructure and deregulate the utility industry may further reduce or end our ability to apply SFAS No. 71 in the future. Write-offs and material changes to our balance sheet, income and cash flows may result in such circumstances.

The components of unamortized regulatory assets and liabilities on the balance sheet of SPS are:


(g)	Earns a return on investment in the ratemaking process. These amounts are amortized consistent with recovery in rates.

	This table excludes deferred energy charges expected to be recovered within the next 12 months of $16 million for 2002, and energy cost recovery expected to be returned to customers within the next 12 months of $40 million for 2001.

The adoption of SFAS No. 143 in 2003 will also affect SPS’ accrued plant removal costs for other generation, transmission and distribution facilities for its utility subsidiaries. Although SFAS No. 143 does not recognize the future accrual of removal costs as a Generally Accepted Accounting Principles liability, long-standing ratemaking practices approved by applicable state and federal regulatory commissions have allowed provisions for such costs in historical depreciation rates. These removal costs have accumulated over a number of years based on varying rates as authorized by the appropriate regulatory entities. Given the long periods over which the amounts were accrued and the changing of rates through time, we have estimated the amount of removal costs accumulated through historic depreciation expense based on current factors used in the existing depreciation rates. Accordingly, the estimated amounts of future removal costs, which are considered regulatory liabilities under SFAS No. 143 that are accrued in accumulated depreciation, are as follows at Dec. 31, 2002:

SPS has only one reportable segment. SPS operates in the regulated electric utility industry providing wholesale and retail electric service in the states of Texas, New Mexico, Kansas and Oklahoma. Revenues from external customers were $1,025.2 million, $1,385.5 million and $1,079.6 million for the years ended Dec. 31, 2002, 2001 and 2000, respectively.

SPS receives various administrative, management, environmental and other support services from Xcel Energy Services Inc., which began operations in August 2000. Prior to this, New Century Services provided these support services to SPS before the merger to form Xcel Energy.

SPS receives construction services from Utility Engineering. In addition, SPS pays interest expense on any short-term borrowings from Xcel Energy.

In 2000, SPS received interest income from Xcel Energy’s Wholesale Energy Group Inc. subsidiary on the note receivable related to the sale of Utility Engineering and its affiliate, Quixx, as part of the PSCo/SPS Merger.

The table below contains significant affiliate transactions among the companies and related parties for the years ended Dec. 31:


*	Operating expense includes $68,045, $72,259, and $210,174 paid to Xcel Energy Services Inc. in 2002, 2001 and 2000.


(a)	2002 results include special charges as discussed in Note 2 to the Financial Statements. First quarter results were decreased by $5 million for a pretax special charge related to restructuring costs.

(b)	2001 results include special charges as discussed in Note 2 to the Financial Statements. Fourth quarter results were decreased by $5 million for a pretax special charge related to employee restaffing costs.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position of SPS as of Sept. 30, 2003, and Dec. 31, 2002; the results of their operations for the three and nine months ended Sept. 30, 2003 and 2002; and their cash flows for the nine months ended Sept. 30, 2003 and 2002. Due to the seasonality of SPS’ electric sales, interim results are not necessarily an appropriate base from which to project annual results.

The accounting policies of SPS are set forth in Note 1 to its consolidated financial statements for the year ended Dec. 31, 2002 beginning on page F-4 of this prospectus. The following notes should be read in conjunction with such policies and other disclosures contained elsewhere in this prospectus.

Certain items in the 2002 statement of operations, statement of cash flows and balance sheet have been reclassified to conform to the 2003 presentation. These reclassifications had no effect on Stockholder’s Equity or Net Income as previously reported.

SPS adopted Statement of Financial Accounting Standard (SFAS) No. 143 — “Accounting for Asset Retirement Obligations” (SFAS No. 143) effective Jan. 1, 2003. As required by SFAS No. 143, future plant decommissioning obligations were recorded as a liability at fair value as of Jan. 1, 2003, with a corresponding increase to the carrying values of the related long-lived assets. This liability will be increased over time by applying the interest method of accretion to the liability, and the capitalized costs will be depreciated over the useful life of the related long-lived assets. The adoption of the statement had no income statement impact, as the cumulative effect adjustments required under SFAS No. 143 have been deferred through the establishment of a regulatory asset pursuant to SFAS No. 71 — “Accounting for the Effects of Certain Types of Regulation.”

The adoption of SFAS No. 143 in 2003 also affects accrued plant removal costs for other generation, transmission and distribution facilities for SPS. Although SFAS No. 143 does not recognize the future accrual of removal costs as a Generally Accepted Accounting Principles liability, long-standing ratemaking practices approved by applicable state and federal regulatory commissions have allowed provisions for such costs in historical depreciation rates. These removal costs have accumulated over a number of years based on varying rates as authorized by the appropriate regulatory entities. Given the long periods over which the amounts were accrued and the changing of rates through time, SPS has estimated the amount of removal costs accumulated through historic depreciation expense based on current factors used in the existing depreciation rates. Accordingly, the estimated amounts of future removal costs, which are considered regulatory liabilities under SFAS No. 71 that are accrued in accumulated depreciation, are as follows at Jan. 1, 2003:

Regulatory Recovery Adjustment (2002) — During the first quarter of 2002, SPS wrote off approximately $5 million of restructuring costs relating to costs incurred to comply with legislation requiring a transition to retail competition in Texas, which was subsequently amended to delay the required transition.

Utility Restaffing (2002) — 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 were expensed for the final costs of the utility-related staff consolidations. Approximately $6 million of these restaffing costs were allocated to the

utility subsidiaries, including SPS. All 564 of accrued staff terminations occurred in 2002 and as of Sept. 30, 2003, all severance payments have been made.

SPS Texas Fuel Reconciliation, Fuel Factor and Fuel Surcharge Applications — In June 2002, SPS filed an application for the Public Utility Commission of Texas (PUCT) to retrospectively review the operations of the utility’s electric generation and fuel management activities. In this application, SPS filed its reconciliation for electric generation and fuel management activities, totaling approximately $608 million, from January 2000 through December 2001. In May 2003, a stipulation was approved by the PUCT. The stipulation resolves all issues regarding SPS’ fuel costs and wholesale trading activities through December 2001. SPS will withdraw, without prejudice, its request to share in 10 percent of margins from certain wholesale non-firm sales. SPS will recover $1.1 million from Texas customers for the proposed sharing of wholesale non-firm sales margins. The parties agreed that SPS would reduce its December 2001 fuel under-recovery balances by $5.8 million. Including the withdrawal of proposed margin sharing of wholesale non-firm sales, the net impact to SPS’ deferred fuel expense, before tax, is a reduction of $4.7 million.

In May 2003, SPS proposed to increase its voltage-level fuel factors to reflect increased fuel costs since the time SPS’ current fuel factors were approved in March 2002. The proposed fuel factors are expected to increase Texas annual retail revenues by approximately $60.2 million. SPS also reported to the PUCT that it has undercollected its fuel costs under the current Texas retail fixed fuel factors. In the same May 2003 application, SPS proposed to surcharge $13.2 million and related interest for fuel cost underrecoveries incurred through March 2003. In June 2003, the administrative law judge approved the increased fuel factors on an interim basis subject to hearings and completion of the case. The increased fuel factors became effective in July 2003. In July 2003, a unanimous settlement was reached adopting the surcharge and providing for the implementation of an expedited procedure for revising the fixed fuel factors on a semiannual basis. The surcharge will be collected from customers over an eight-month period. In August 2003, the PUCT approved the settlement and the new proposed fuel cost recovery process and the surcharge became effective in September 2003. The Texas retail fuel factors will change each November and May based on the projected cost of natural gas. Revenues will continue to be reconciled to fuel costs in accordance with Texas law.

In July 2003, SPS filed a second fuel cost surcharge factor application in Texas to recover an additional $26 million of fuel cost underrecoveries accrued during April through June 2003. In August 2003, the parties to the case filed a stipulation resolving various issues. The stipulation provided approval of SPS’ modified request to surcharge $15.7 million for the months April 2003 and May 2003 over 12 months beginning with the November 2003 billing cycle. The stipulation was approved by the PUCT in October 2003.

In November 2003, SPS submitted a third fuel cost surcharge factor application in Texas to recover an additional $25 million of fuel cost underrecoveries accrued during June through September 2003. If approved, the proposed surcharge will go into effect after the first surcharge is completed and will continue for 12 months beginning in May 2004. This case is pending review and approval by the PUCT.

SPS New Mexico Fuel Reconciliation and Fuel Factor Applications — On May 27, 2003, a hearing examiner for the New Mexico Public Regulatory Commission (NMPRC) issued a recommended decision on SPS’s fuel proceeding approving SPS utilizing a monthly fuel factor. SPS had been utilizing an annual fuel factor, which had allowed significant undercollections. The decision denied the intervernors’ request that all margins from off-system sales be credited to ratepayers. On Aug. 19, 2003, the NMPRC approved the hearing examiner’s recommended decision. In accordance with NMPRC regulations, SPS must file its next New Mexico fuel factor continuation case no later than August 2005.

SPS New Mexico Billing Practice Investigation — On Sept. 25, 2003, the NMPRC entered an order opening an investigation into estimated billing practices used to send estimated bills to approximately 9,500 customers for between two and five months. As part of the Sept. 25, 2003, order, the NMPRC also implemented temporary billing measures for customers whose bills were estimated. The temporary billing

measures: (i) require SPS to apply the lowest fuel and purchased power cost adjustment factor that was applicable during the period when meters were being estimated, (ii) allow customers six months to pay bills in full without additional charges or disconnection, (iii) prohibit disconnection of service until Nov. 1, 2003, for any customer that received an estimated bill, (iv) require a written explanation of the fuel calculation used under the order and (v) order a report of the amount of fuel and purchased power costs foregone as a result of the interim relief, which amount will not be allowed to be recovered from customers. The proceeding has been referred to a hearing examiner.

TRANSLink Transmission Co., LLC (TRANSLink) — In 2002, SPS filed for PUCT and NMPRC approval to transfer functional control of its electric transmission system to TRANSLink, of which SPS would be a participant. In March 2003, the Southwest Power Pool (SPP) and the MISO cancelled their planned merger to form a large mid-continent regional transmission organization (RTO). This development materially impacted SPS’ applications in Texas and New Mexico. SPS requested the cases be dismissed without prejudice while it evaluates possible RTO arrangements for the SPS system.

Xcel Energy is considering these developments, as well as the proceedings in process in other jurisdictions, to evaluate the future role of TRANSLink in providing transmission operations services for the Xcel Energy system. As of Sept. 30, 2003, Xcel Energy’s subsidiaries had deferred approximately $5 million of TRANSLink-related costs based on anticipated recovery in future rates.

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. The ultimate outcome of these matters cannot presently be determined. Accordingly, the ultimate resolution of these matters could have a material adverse effect on SPS’ financial position and results of operations.

Other Environmental Contingencies — SPS has been or is currently involved with the cleanup of contamination from certain hazardous substances at several sites. In many situations, SPS is pursuing, or intends to pursue, insurance claims and believes they will recover some portion of these costs through such claims. Additionally, where applicable, SPS 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, SPS would be required to recognize an expense for such unrecoverable amounts in its consolidated financial statements.

Golden Spread Electric Cooperative, Inc. (SPS) — In October 2001, Golden Spread Electric Cooperative, Inc. (Golden Spread) filed a complaint and request for investigation against SPS at the FERC. Golden Spread alleged SPS has violated provisions of a commitment and dispatch service agreement pursuant to which SPS conducts joint dispatch of SPS and Golden Spread electric generating resources. SPS filed a complaint against Golden Spread in which it has alleged that Golden Spread has failed to adhere to certain requirements of the commitment and dispatch service agreement. In May 2003, SPS and Golden Spread reached a settlement that was approved by the FERC in July 2003. The $5-million accrued costs for payments under the settlement have been deferred by SPS as they are for economic purchased energy and are recoverable from SPS customers through the respective jurisdictional fuel and purchased power cost recovery mechanisms.

Other — The circumstances set forth in Notes 13 and 14 to the consolidated financial statements for the year ended Dec. 31, 2002 contained elsewhere in this prospectus, appropriately represent, in all material respects, the current status of commitments and contingent liabilities, and are incorporated herein by reference.

Financing Activity — On Oct. 6, 2003, SPS issued $100 million of 6-percent, Series C Senior Notes due 2033 in a private placement to qualified institutional buyers. On Oct. 15, 2003, the proceeds were used to redeem $100 million, 7.85-percent Trust Originated Preferred Securities of its trust subsidiary, Southwestern Public Service Capital I.

Dividend Restrictions — SPS has dividend restrictions imposed by state regulatory commissions, debt agreements and the SEC under the PUHCA limiting the amount of dividends SPS can pay to Xcel Energy. These restrictions include, but may not be limited to, the following:


	•	maintenance of a minimum equity ratio of 30 percent;

	•	payment of dividends only from retained earnings; and

	•	debt covenant restrictions under the credit agreement for debt and interest coverage ratios.

SFAS No. 150 — In May 2003, the FASB issued SFAS No. 150 — “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (SFAS No. 150). SFAS No. 150 establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity, including:


	•	instruments that represent, or are indexed to, an obligation to buy back the issuer’s shares, regardless of whether the instrument is settled on a net-cash or gross physical basis;

	•	mandatorily redeemable equity instruments;

	•	written options that give the counterparty the right to require the issuer to buy back shares; and

	•	forward contracts that require the issuer to purchase shares.

In November 2003, the FASB posted a staff position, which delayed the implementation of SFAS 150, indefinitely. SPS had a special purpose subsidiary trust with outstanding mandatorily redeemable preferred securities of $100 million consolidated in SPS’ Consolidated Balance Sheets. This security was redeemed on Oct. 15, 2003.

SPS analyzes derivative financial instruments in accordance with SFAS No. 133 — “Accounting for Derivative Instruments and Hedging Activities” (SFAS No. 133). This statement requires that all derivative instruments as defined by SFAS No. 133 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 statement of operations, 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.

The impact of the components of SFAS No. 133 on Other Comprehensive Income, included in Stockholder’s Equity, are detailed in the following tables:


*	In accordance with SFAS No. 71 — “Accounting for the Effects of Certain Types of Regulation,” certain costs/ benefits have been deferred as they are expected to be recovered in future periods from customers.

SPS enters into derivative instruments to manage variability of future cash flows from changes in commodity prices. 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, 2003, SPS has various commodity-related contracts deemed as cash flow hedges extending through 2009. Amounts deferred in Other Comprehensive Income are recorded in earnings as the hedged purchase or sales transaction is settled. This could include the physical purchase or sale of electric energy, the use of natural gas to generate electric energy or gas purchased for resale. As of Sept. 30, 2003, SPS had no gains or losses accumulated in Other Comprehensive Income that are expected to be recognized in earnings during the next 12 months as the hedged transactions settle. However, due to the volatility of commodities markets, the value in Other Comprehensive Income will likely change prior to its recognition in earnings.

SPS enters 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. SPS expects to reclassify into earnings during the next 12 months net losses from Other Comprehensive Income of approximately $2.1 million.

Hedge effectiveness is recorded 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, hedging transactions for gas purchased for resale are recorded as a component of gas costs and hedging transactions for interest rate swaps and interest rate lock agreements are recorded as a component of interest expense. SPS is allowed to recover in electric rates the costs of certain financial instruments purchased to reduce commodity cost volatility.

SPS enters into 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 and exempted from the accounting and reporting requirements of SFAS No. 133.

SPS evaluates all of their contracts when such contracts are entered 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 qualify for a normal designation.

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

SFAS No. 149 — In April 2003, the Financial Accounting Standards Board (FASB) issued SFAS No. 149 — “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (SFAS No. 149), which amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133. SFAS No. 149 clarifies the discussion around initial net investment, clarifies when a derivative contains a financing component and amends the definition of an underlying to conform it to language used in FASB Interpretation No. 45. In addition, SFAS No. 149 also incorporates certain implementation issues of a derivative implementation group. The provisions of SFAS No. 149 have been applied to contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003.

SFAS No. 133 Implementation Issue No. C20 — In June 2003, for purposes of determining the applicability of the normal purchases and normal sales scope exception, the FASB issued SFAS No. 133 Implementation Issue No. C20 as supplemental guidance to SFAS No. 133 Implementation Issue No. C11. The effective date of the Implementation guidance of Issue No. C20 is the during fourth quarter of 2003 for SPS. SPS is currently in the process of reviewing and interpreting this guidance and do not currently anticipate any material adverse financial impact due to the implementation of Issue No. C20 guidance as a result of the ability to recover prudently-incurred purchased capacity costs from customers.

SPS operates in the regulated electric utility industry, providing wholesale and retail electric service in the states of Texas, New Mexico, Kansas and Oklahoma. Revenues from external customers were $380.5 million and $291.9 million for the three months ended Sept. 30, 2003 and 2002, respectively. Revenues from external customers were $909.4 million and $770.5 million for the nine months ended Sept. 30, 2003 and 2002, respectively.

The accumulated comprehensive income in Stockholder’s Equity at Sept. 30, 2003 and 2002, relates to valuation adjustments on SPS’ derivative financial instruments and hedging activities and unrealized losses related to its minimum pension liability.

In April 2003, Xcel Energy amended certain of its retirement plans to provide the same level of benefits to all non-bargaining employees of its utility and service company operations. While this change did not have a material impact on 2003 costs for the affected pension and retiree health plans, the increased obligations resulting from the plan amendment did create a minimum pension liability, which was recorded in the second quarter of 2003. The additional pension obligation recorded by SPS increased noncurrent liabilities by approximately $21 million and reduced Accumulated Other Comprehensive Income, a component of shareholder’s equity, by approximately $25 million (net of related deferred tax effects of $14 million) during the quarter. The minimum pension liability adjustment also increased SPS’ noncurrent intangible assets by approximately $40 million due to the recording of unamortized prior service costs, and reduced its previously recorded prepaid pension assets accordingly.

UNTIL , 2004, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS’ OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNUSED ALLOTMENTS OR SUBSCRIPTIONS.

Section 53-11-4.1 of the New Mexico Business Corporation Act empowers a corporation to indemnify any officer or director against judgments, penalties, fines, settlements, and reasonable expenses actually incurred by the person in connection with any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, if the person acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to a criminal proceeding, had no reasonable cause to believe the person’s conduct was unlawful. This section empowers a corporation to maintain insurance or furnish similar protection, including, but not limited to, providing a trust fund, a letter of credit, or self-insurance, on behalf of any officer of director against any liability asserted against the person in such capacity whether or not the corporation would have the power to indemnify the person against such liability under the provisions of this section.

The indemnification authorized by Section 53-11-4.1 is not exclusive of any other rights to which an officer of director may be entitled under the articles of incorporation, the bylaws, an agreement, a resolution of shareholders or directors or otherwise.

Article Seventh of our Amended and Restated Articles of Incorporation provides that a director shall not be personally liable to us or to the shareholders for monetary damages for a breach of fiduciary duty as a director unless the director has breached or failed to perform the duties of his or her office in accordance with the New Mexico Business Corporation Act, and the breach or failure to perform constitutes negligence, willful misconduct, or recklessness.

Article IV of our Bylaws requires us, to the fullest extent permitted by the New Mexico Business Corporation Act, to pay or reimburse expenses, liabilities, and losses incurred by an officer or director involved in any action, suit, or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that such person is or was serving as an officer or director of Southwestern Public Service Company.

The Bylaws also require us to pay or reimburse all covered expenses to an officer or director promptly upon receipt of a written claim and, where the claimant seeks an advancement of expenses (including attorney’s fees) incurred or to be incurred by an officer or director in connection with a proceeding. The contracts also provide for indemnification of such persons against expenses, liabilities, and losses.

We are insured up to $160 million against loss in excess of $10 million because of any claim made against our officers or directors and alleged to have been caused by any negligent act, error, omission or breach of duty by our officers or directors. The insurance is subject to specified exclusions.


†	Executive compensation arrangements and benefit plans covering executive officers and directors.


	(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represented no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that clauses (i) and (ii) above do not apply if the registration statement is on Form S-3 or Form S-8, and the information required to be included in a post-effective amendment by those clauses is contained in periodic reports filed by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934.

	(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.


	(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described under Item 15, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement related to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of this registration statement through the date of responding to the request.

The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in this registration statement when it became effective.

Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Amarillo, State of Texas, on the 20th day of January, 2004.


	By:	/s/ BENJAMIN G.S. FOWKE III



	Benjamin G.S. Fowke III
	Vice President, Chief Financial Officer
	and Treasurer
	(Principle Financial Officer)

KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears below constitutes and appoints Richard C. Kelly and Benjamin G.S. Fowke, III his or her true and lawful attorney-in-fact and agent, with full and several power of substitution and resubstitution, for him or her and his or her name, place and stead, in any and all capacities, to sign any or all amendments, to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they, he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on the date listed above by the following persons in the capacities indicated.


†	Executive compensation arrangements and benefit plans covering executive officers and directors.

Re:

Registration Statement on Form S-4 for Series D Senior Notes, 6% due 2033 of Southwestern Public Service Company

We have acted as counsel to Southwestern Public Service Company, a New Mexico corporation (the “Company”), in connection with the preparation of a Registration Statement on Form S-4 (the “Registration Statement”), to be filed with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”). The Registration Statement relates to the proposed issuance and exchange (the “Exchange Offer”) of up to $100,000,000 in aggregate principal amount of Series D Senior Notes, 6% due 2033 of the Company (the “Exchange Notes”) to be registered under the Securities Act for an equal principal amount of Series C Senior Notes, 6% due 2033 of the Company (the “Outstanding Notes”) previously issued by the Company. The Outstanding Notes were, and the Exchange Notes will be, issued pursuant to the Indenture dated as of February 1, 1999, as supplemented and to be supplemented by various supplemental indentures (as supplemented, the “Indenture”), between the Company and JPMorgan Chase Bank, as successor in interest to The Chase Manhattan Bank, as trustee (the “Trustee”).

In rendering this opinion, we have examined such documents and records, including an examination of originals or copies certified or otherwise identified to our satisfaction, and matters of law as we have deemed necessary for purposes of this opinion. Based upon the foregoing and subject to the assumptions, qualifications and limitations stated herein, we are of the opinion that when the Registration Statement has become effective under the Securities Act and the Exchange Notes are executed by the Company, authenticated by the Trustee in accordance with the Indenture and delivered in accordance with the terms of the Exchange Offer in exchange for the Outstanding Notes, the Exchange Notes will constitute valid and binding obligations of the Company.

The opinions set forth above are subject to the following assumptions, qualifications and limitations:

We assume that (a) each the Company is a corporation existing and in good standing in the State of New Mexico, has all requisite power and authority, has obtained all requisite organizational, third party and governmental authorizations, consents and approvals and made all filings and registrations required to enable it to execute, deliver and perform its obligations under the Exchange Notes and (b) such execution, delivery and performance will not violate or conflict with any law, rule, regulation, order, decree, judgment, instrument or agreement binding upon or applicable to it or its properties.

Our examination of matters of law in connection with the opinions expressed herein has been limited to, and accordingly our opinions herein are limited to, the laws of the State of New York as currently in effect. We express no opinion as to the effect of the laws of any other jurisdiction on the opinions expressed herein.

We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to us with respect to this opinion under the caption “Experts” in the prospectus constituting a part of the Registration Statement. In giving such consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission promulgated thereunder.

EX-5.2 4 c81898s4exv5w2.htm EX-5.2 OPINION/CONSENT OF HINKLE HENSLEY SHANOR exv5w2

Re:

Registration Statement on Form S-4 for Series D Senior Notes, 6% due 2033 of Southwestern Public Service Company

We have acted as New Mexico counsel to Southwestern Public Service Company, a New Mexico corporation (the “Company”), in connection with the preparation of a Registration Statement on Form S-4 (the “Registration Statement”), to be filed with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”). The Registration Statement relates to the proposed issuance and exchange (the “Exchange Offer”) of up to $100,000,000 in aggregate principal amount of Series D Senior Notes, 6% due 2033 of the Company (the “Exchange Notes”) to be registered under the Securities Act for an equal principal amount of Series C Senior Notes, 6% due 2033 of the Company (the “Outstanding Notes”) previously issued by the Company. The Outstanding Notes were, and the Exchange Notes will be, issued pursuant to the Indenture dated as of February 1, 1999, as supplemented and to be supplemented by various supplemental indentures (as supplemented, the “Indenture”), between the Company and JP Morgan Chase Bank, as successor in interest to The Chase Manhattan Bank, as trustee.

We have examined all statutes, records, instruments and documents which, in our opinion, it is necessary to examine for the purpose of rending the following opinions. Based on the foregoing we are of the opinion that:

	1.		The Company was duly incorporated and is now a legally existing corporation and in good standing under the laws of the State of New Mexico and has corporate power, right and authority to do business and to own property in that state in the manner and as set forth in the Registration Statement to which this opinion is an exhibit.

	2.		The execution and delivery by the Company of the Exchange Notes and the performance by the Company of its obligations thereunder have been duly authorized by all necessary corporate action.

	3.		The Company has all corporate power, right and authority to create and issue the Exchange Notes in accordance with the terms of the Exchange Offer and to perform its obligations thereunder.

	4.		When and if (a) the Registration Statement becomes effective pursuant to the provisions of the Securities Act and (b) the Exchange Notes are duly executed, authenticated and delivered in accordance with the terms of the Exchange Offer in exchange for the Outstanding Notes, the Exchange Notes will be validly issued by the Company.

We hereby consent to the filing of this opinion as Exhibit 5.2 to the Registration Statement and to the reference to us with respect to this opinion under the caption “Experts” in the prospectus constituting a part of the Registration Statement. In giving such consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission promulgated thereunder.

EX-10.10 5 c81898s4exv10w10.htm EX-10.10 SENIOR EXECUTIVE SEVERANCE POLICY exv10w10

The Xcel Energy Senior Executive Severance Policy expired August 18, 2003. Effective as of such date, all rights and entitlements of participants under such policy ceased.

The Corporation hereby establishes, effective as of October 22, 2003, a separation compensation policy known as the Xcel Energy Senior Executive Severance and Change-in-Control Policy.

As used herein the following words and phrases shall have the following respective meanings unless the context clearly indicates otherwise. (In addition, certain terms used in Section 4.5 of this Policy are defined in Section 4.5.)

(a) Annual Salary. The Participant’s regular annual rate of base salary payable by the Participant’s Employer, including base salary converted to other benefits under a flexible pay arrangement maintained by the Corporation or a Subsidiary or deferred pursuant to a written plan or agreement with the Corporation or a Subsidiary, but excluding overtime pay, allowances, premium pay, compensation paid or payable under any Corporation or Subsidiary long-term or short-term incentive plan or any similar payment.

(c) Change-in-Control. Is the occurrence on or after the Effective Date of any of the events described in subsections (i) through (iv), below:

(i) An acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of either (1) the then outstanding shares of common stock of the Corporation (the “Outstanding Corporation Common Stock”), or (2) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the “Outstanding Corporation Voting Securities”); excluding, however, the following: (A) any acquisition directly from the Corporation, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the

Corporation, (B) any acquisition by the Corporation, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation, or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (1), (2) and (3) of subsection (iii) of this definition; or

(ii) A change in the composition of the Board such that the individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual who becomes a member of the Board subsequent to the Effective Date whose election, or nomination for election by the Corporation’s shareholders, was approved by a vote of at least a majority of those individuals then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board; but, provided further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board; or

(iii) The approval by the shareholders of the Corporation of a reorganization, merger, consolidation, share exchange or sale or other disposition of all or substantially all of the assets of the Corporation (“Corporate Transaction”) or, if consummation of such Corporate Transaction is subject, at the time of such approval by shareholders, to the consent of any government or governmental agency, the obtaining of such consent (either explicitly or implicitly by consummation); excluding, however, such a Corporate Transaction pursuant to which (1) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than sixty percent (60%) of, respectively, the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Corporation or all or substantially all of the Corporation’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities, as the case may be, (2) no Person (other than the Corporation, any employee benefit plan (or related trust) of the Corporation or such corporation resulting from such Corporate Transaction) will beneficially own, directly or indirectly, twenty

percent (20%) or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors except to the extent that such ownership existed prior to the Corporate Transaction and (3) individuals who were members of the board of directors of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or

(iv) The approval by the shareholders of the Corporation of a complete liquidation or dissolution of the Corporation.

(d) Change-in-Control Multiple. For each Participant the number set forth opposite the Participant’s name in the column titled Change-in-Control Multiple on the Schedule I hereto.

(f) Committee. The Governance, Compensation and Nominating Committee of the Board or any successor to such committee.

(h) Date of Termination. The date on which a Participant ceases to be an Employee.

(j) Employee. Any full-time, regular-benefit, non-bargaining employee of an Employer. The term shall exclude all individuals employed as independent contractors, temporary employees, other benefit employees, non-benefit employees or leased employees, even if it is subsequently determined that such classification is incorrect.

(k) Employer. The Corporation or a Subsidiary which has adopted the Policy pursuant to Article V hereof. Notwithstanding the provisions of Article V, however, if an Employee is transferred to a Subsidiary that is not otherwise an Employer, such Subsidiary shall be deemed, effective as of the effective time of such transfer, an Employer with respect to the Participant for all purposes of this Policy even though it has not otherwise adopted the Policy pursuant to Article V.

(m) Policy. The Xcel Energy Senior Executive Severance and Change-in-Control Policy, as it may, from time to time, be amended.

(n) Release Agreement. An agreement substantially in the form set forth in Exhibit A to this Policy, with such amendments as the Committee may determine to be necessary in order for such agreement to constitute a valid release by the Participant in question of all claims described therein.

(o) Separation Benefits. The payments and benefits described in Section 4.3 or Section 4.4, whichever applies, that are provided to qualifying Participants under the Policy.

(p) Separation Period. The period beginning on a Participant’s Date of Termination and ending upon expiration of the number of consecutive 12-month periods computed with reference to such Date of Termination and anniversaries thereof that are equal to the Participant’s Severance Multiple.

(q) Severance Multiple. For each Participant the number set forth opposite the Participant’s name in the column titled Severance Multiple on the Schedule I hereto.

(r) Subsidiary. Any corporation or other entity in which the Corporation, directly or indirectly, holds a majority of the voting power of such corporation’s or entity’s outstanding shares of capital stock or ownership interests. An “affiliate” for purposes of this Policy means with respect to the Corporation or any other entity, an entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Corporation or such other entity.

(s) Target Annual Incentive. The Annual Incentive Award under the Xcel Energy Inc. Executive Annual Incentive Award Plan or successor thereto that the Participant would have earned for the year in which his or her Date of Termination occurs, if the target goals for such year had been achieved.

3.1 Participation. Each of the Employees named on Schedule I hereto shall be a Participant in the Policy as of the Effective Date. Schedule I may be amended by the Board or by the Committee from time to time to add Employees as Participants.

3.2 Duration of Participation. A Participant shall only cease to be a Participant in the Policy as a result of an amendment or termination of the Policy complying with Article VII of the Policy, or when he or she ceases to be an Employee, unless, at the time he or she ceases to be an Employee, such Participant is entitled to payment of Separation Benefits as provided in the Policy or there has been an event or occurrence described in Section 4.2(b) which would enable the Participant to terminate employment and receive Separation Benefits. A Participant entitled to payment of Separation Benefits or any other amounts under the Policy shall remain a Participant in the Policy until the full amount of the Separation Benefits and any other amounts payable under the Policy have been paid to the Participant.

4.1 Right to Separation Benefit. A Participant shall be entitled to receive Separation Benefits in accordance with Section 4.3 or Section 4.4, whichever applies, if the Participant ceases to be an Employee for any reason specified in Section 4.2(a) or Section 4.2(b).

(a) Other than Change-in-Control. Except as set forth in subsection (c) below, a Participant shall be entitled to Separation Benefits if, at any time, other than during the period beginning on the effective date of the occurrence of a Change-in-Control and ending on the day before the second anniversary thereof, the Participant ceases to be an Employee by action of the Employer or any of its affiliates (excluding any transfer to another Employer or a Subsidiary);

(b) Change-in-Control. Except as set forth in subsection (c) below, a Participant shall be entitled to Separation Benefits if at any time beginning on the effective date of the occurrence of a Change in Control and ending on the day before the second anniversary thereof:

(i) the Participant ceases to be an Employee by action of the Employer or any of its affiliates (excluding any transfer to another Employer or a Subsidiary);

(ii) the Participant’s Annual Salary is reduced below the higher of (x) the amount in effect immediately prior to the effective date of the occurrence of the Change-in-Control and (y) the highest amount in effect at any time thereafter, and the Participant ceases to be an Employee by his or her own action within 130 days after the occurrence of such reduction;

(iii) the Participant’s authorities, functions, powers, duties or responsibilities are materially and adversely diminished in comparison to the authorities, functions, powers, duties and responsibilities enjoyed by the Participant immediately prior to the effective date of the occurrence of the Change-in-Control, and the Participant ceases to be an Employee by his or her own action within 130 days after the occurrence after such reduction;

(iv) the program of incentive compensation and retirement and welfare benefits offered to the Participant (determined in the aggregate) is materially and adversely diminished in comparison to the program of such benefits enjoyed by the Participant immediately prior to the effective date of the occurrence of the Change-in-Control, and the Participant ceases to be an Employee by his or her own action within 130 days after the occurrence after such reduction; or

(v) an Employer or any affiliate of an Employer sells or otherwise distributes or disposes of the subsidiary, branch or other business unit in which the Participant was employed before such sale, distribution or disposition and the conditions described in subsection (b)(i), (ii), (iii) or (iv) of this Section 4.2 are not met, and, notwithstanding, the Participant ceases to be an Employee by his or her own action within 130 days after such sale, distribution or disposition.

With respect to a termination by the Participant pursuant to clause (ii), (iii), (iv), or (v) of this Section 4.2(b), such termination shall be effective for purposes of this Section 4.2(b), if and only if the Participant has given written notice to his or her Employer of his or her intent to terminate for such reason (stating the event(s) relied upon for such termination and the provisions of this Section 4.2(b) relied upon) within 90 days of the date on which the event(s) first occurred, and the

Employer or an affiliate of the Employer, as the case may be, has failed to remedy such event within the 30 day period following receipt of such notice.

(c) Terminations Which Do Not Give Rise to Separation Benefits Under This Policy. If a Participant ceases to be an Employee because the Participant’s employment is terminated for Cause, or by death, disability, or retirement, or due to a qualified sale of business (as those terms are defined below), or voluntarily by the Participant unless, if a Change-in-Control has occurred, the termination meets the requirements of subsection (b)(ii), (iii), (iv) or (v) of this Section 4.2, the Participant shall not be entitled to Separation Benefits under the Policy.

(i) A termination by disability shall have occurred where a Participant is terminated because of an illness or injury and the Participant has become eligible to receive long-term disability benefits under the Corporation’s or a Subsidiary’s long-term disability plan, as it exists at the time of termination of employment.

(ii) A termination by retirement shall have occurred where a Participant’s termination is due to his voluntary late, normal or early retirement under a defined benefit pension plan sponsored by his Employer or its affiliates, as “late”, “normal” or “early” retirement may be defined in such plan.

(iii) A termination for Cause shall have occurred where a Participant is terminated because of:

(A) the willful and continued failure of the Participant to perform substantially the Participant’s duties with the Corporation or one of its Subsidiaries (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Participant by the Board which specifically identifies the manner in which the Board believes that the Participant has not substantially performed the Participant’s duties, or

(B) the willful engaging by the Participant in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Corporation, Subsidiaries or one of its affiliates.

For purposes of this provision, no act or failure to act, on the part of the Participant, shall be considered “willful” unless it is done, or omitted to be done, by the Participant in bad faith or without reasonable belief that the Participant’s action or omission was in the best interests of the Corporation, Subsidiaries or its affiliates, as the case may be. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board, or upon the advice of counsel for the Corporation, shall be conclusively presumed to be done, or omitted to be done, by the Participant in good faith and in the best interests of the Corporation, Subsidiaries or its affiliates.

(iv) A termination due to a qualified sale of business shall have occurred where an Employer or an affiliate of an Employer has sold, distributed or otherwise disposed of the subsidiary, branch or other business unit in which the Participant was employed immediately before such sale, distribution or disposition and the Participant has been offered employment with the purchaser of such subsidiary, branch or other business unit or the corporation or other entity which is the owner thereof on substantially the same terms and conditions under which he or she worked for the Employer or Subsidiary (including, without limitation, duties and responsibilities, and the aggregate of the Participant’s base salary and program of benefits). Such terms and conditions shall include, without limitation, a legally binding agreement or plan covering such Participant, providing that upon a termination of employment with the subsidiary, branch or business unit (or the corporation or other entity which is the owner thereof) or any successor thereto of the kind described in Article VI of this Policy, that would have entitled the Participant to Separation Benefits by reason of Section 4.2(a) of this Policy had the Participant still been a Participant herein, at any time before the third anniversary of the date of the sale, distribution or disposition, the Participant’s employer or any successor will pay to such former Participant an amount equal to the Separation Benefits under Section 4.3 of this Policy that such former Participant would have received under the Policy had he or she been a Participant at the time of such termination and been entitled to Separation Benefits thereunder. For purposes of this subsection, the new employer plan or agreement must treat service with any Employer (irrespective of whether the Employer was an affiliate of the Corporation or the Employee was a Participant at the time of such service) and the new employer as continuous service for purposes of calculating separation benefits.

(a) If a Participant’s ceases to be an Employee in circumstances entitling him to Separation Benefits as provided in Section 4.2(a), and the Participant executes and does not revoke a Release Agreement, the Participant’s Employer shall pay such Participant, within fifteen days of the Date of Termination, or if later, upon the date such Release Agreement becomes irrevocable, a cash lump sum as set forth in subsection (b) below and the continued benefits set forth in subsection (c) of Section 4.3, below, subject to Section 4.6 below.

(b) The cash lump sum referred to in Section 4.3(a) shall equal the aggregate of the following amounts:

(i) the sum of (1) the Participant’s Annual Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the Target Annual Incentive and (y) a fraction, the numerator of which is the number of days in such year through the Date of Termination, and the denominator of which is 365, and (3) any compensation previously deferred by the Participant (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid and in full satisfaction of the rights of the Participant thereto;

(ii) an amount equal to the product of (1) the Participant’s Severance Multiple and (2) the sum of (x) the Participant’s Annual Salary as in effect immediately prior to his or her Date of Termination, and (y) the Target Annual Incentive;

(iii) an amount equal to the excess, if any, of (a) the actuarial equivalent present value of the aggregate benefits under the Corporation’s or a Subsidiary’s qualified defined benefit retirement plan (the “Retirement Plan”) and any excess or supplemental retirement plans in which the Participant participates and/or other supplemental retirement benefits to which the Participant may be entitled under any contract or agreement (together, the “SERP”) which the Participant would receive if his or her employment continued during the Separation Period, assuming that the Participant’s compensation during the Separation Period would have been equal to his or her compensation as in effect immediately before the Date of Termination or, if higher, on the Effective Date, over (b) the actuarial equivalent present value of the Participant’s actual benefit (paid or payable), if any, under the Retirement Plan and the SERP to which this Participant is entitled, determined as of the Date of Termination. The actuarial assumptions used for purposes of determining actuarial equivalence shall be no less favorable to the Participant than the most favorable of those in effect under the Retirement Plan and the SERP on the Date of Termination and the Effective Date; and

(iv) the sum of the additional contributions (other than pre-tax salary deferral contributions by the Participant) that would have been made or credited by the Employers to the Participant’s accounts, whether or not the Participant was vested therein, under each qualified defined contribution plan and non-qualified supplemental executive savings plan, if any, that covered the Participant on the day immediately proceeding the Date of Termination determined by assuming that:

(A) The Participant’s employment had continued for the Separation Period and the Participant continued as an active participant in such plans;

(B) The Participant’s rate of compensation being recognized by each plan immediately prior to the Date of Termination had continued in effect during the Separation Period;

(C) In the case of matching contributions, the Participant’s rate of pre-tax salary deferral contributions in effect on the day immediately prior to the Date of Termination had remained in effect throughout the Separation Period; and

(D) In the case of discretionary contributions by the Employers, the Employers continued to make such contributions during the Separation

Period at the rate that applied to the most recent plan year that ended prior to the Date of Termination.

(i) During the Separation Period, the Participant and his family shall be provided with medical, dental and life insurance benefits as if the Participant’s employment as an Employee had not terminated; provided, however, that if the Participant becomes reemployed with another employer and is eligible to receive such medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility; and for purposes of determining eligibility (but not the time of commencement of benefits) of the Participant for retiree medical, dental and life insurance benefits under the Corporation’s or its Subsidiaries’ plans, practices, programs and policies, the Participant shall be considered to have remained employed during the Separation Period and to have retired on the last day of such period;

(ii) The Employer shall, at its sole expense as incurred, provide the Participant with outplacement services the scope and provider of which shall be selected by the Participant in his or her sole discretion (but at a cost to the Employer of not more than $30,000);

(iii) The Employer shall continue to provide the Participant with financial planning counseling benefits through the end of the Separation Period on the same terms and conditions as were in effect immediately before the Date of Termination; and

(iv) The Employer will continue to provide the Executive with his or her “flexible perquisite allowance” through the Separation Period or, at the Employer’s option, to provide a cash lump sum payment equal to the amount of such allowance.

To the extent any benefits described in this Section 4.3(c) cannot be provided pursuant to the appropriate plan or program maintained for Employees, the Employer shall provide such benefits outside such plan or program at no additional cost (including without limitation tax cost) to the Participant. Notwithstanding the foregoing, if a group insurance carrier refuses to provide the coverage described in this Section 4.3(c) under its contract issued to the Corporation or a Subsidiary, as the case may be, or if the Corporation reasonably determines that the coverage required under this Section 4.3(c) would cause a welfare plan sponsored by the Corporation or a Subsidiary to violate any provision of the Code prohibiting discrimination in favor of highly compensated employees or key employees, the Employer will use its best efforts to obtain for the Participant an individual insurance policy providing comparable coverage. However, if the Corporation determines in good faith that comparable coverage cannot be obtained for less than two times the premium or premium equivalent for such coverage under the applicable Corporation or Subsidiary welfare plan or plans, the Employer’s sole obligation under this Section 4.3(c) with respect to that coverage will be limited to paying the Participant a monthly

amount equal to two times the monthly premium or premium equivalent for that coverage under the applicable Corporation or Subsidiary’s plans.

4.4 Separation Benefits (Change-in-Control). If a Participant’s ceases to be an Employee in circumstances entitling him or her to Separation Benefits as provided in Section 4.2(b), and the Participant executes and does not revoke a Release Agreement, the Participant’s Employer shall pay such Participant, within fifteen days of the Date of Termination, or if later, upon the date such Release Agreement becomes irrevocable, a cash lump sum as set forth in subsections (b)(i) through (b)(iv) of Section 4.3 above, together with continued benefits as set forth in Section 4.3(c) above (subject to Section 4.6 below), provided however, that a Participant’s Change in Control Multiple shall be substituted for his Severance Multiple in applying the provisions of said subsections (including in determining the length of the Separation Period as used therein). For purposes of determining the cash lump sum and continued benefits set forth in subsection (b) and (c) of Section 4.3, if on or after the occurrence of a Change-in-Control a reduction of the Participant’s Annual Salary or benefits as described in subsection (b)(ii) or (iv) of Section 4.2 has occurred which would entitle the Participant to terminate employment and receive Separation Benefits under this Section 4.4, such reduction shall be ignored.

4.4A Other Benefits Payable. The cash lump sum and continuing benefits described in Sections 4.3 or 4.4 above shall be payable in addition to, and not in lieu of, all other accrued, vested and earned but deferred compensation, rights, options or other benefits which may be owed to a Participant upon or following termination, including but not limited to accrued vacation or sick pay, amounts or benefits payable under any bonus or other compensation plans, stock option plan, stock ownership plan, stock purchase plan, life insurance plan, health plan, disability plan or similar or successor plan, except to the extent paid as provided in Section 4.3(b)(i) or Section 4.4 (by incorporation of Section 4.3(b)(i)) above or as provided in Section 4.6 below.

4.5 Certain Additional Payments or Reductions in Payments. Eligibility for the Gross-Up Payment in Section 4.5(a) below is limited to those Participants who have been designated as “Tier I Participants” listed on Schedule I herein. Participants designated as “Tier II Participants” shall be entitled to receive the full payment of such Separation Payments if the Parachute Value of all Payments to which they are entitled exceeds 110% of the Safe Harbor Amount, but will not receive a Gross-Up Payment described below. Those Tier II Participants entitled to receive Payments the Parachute Value of which exceeds the Safe Harbor Amount, but is equal to or less than 110% of the Safe Harbor Amount, shall have their Separation Payments reduced (but not below zero) so that the Parachute Value of all Payments to which they are entitled equals the Safe Harbor Amount; provided, however, that the reduction shall be made in such a manner as to maximize the Value of Payments actually made to the Participant.

(i) In the event it shall be determined that any Payment would be subject to the Excise Tax, then except to the extent provided below in this Section 4.5(a), the Participant shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Participant of all taxes (including any interest or penalties imposed with respect to such taxes), including,

without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Participant retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

(ii) Notwithstanding Section 4.5(a)(i), if it shall be determined that the Participant is entitled to a Gross-Up Payment pursuant to Section 4.5(a)(i) (before application of Sections 4.5(a)(ii), (iii) and (iv)), but that the Parachute Value of the Payments does not exceed 110% of the Safe Harbor Amount, then no Gross-Up Payment shall be made to the Participant and the Separation Payments, in the aggregate, shall be reduced (but not below zero) such that the Parachute Value of all Payments equals the Safe Harbor Amount, determined in such a manner as to maximize the Value of all Payments actually made to the Participant.

(iii) If it shall be determined that the Participant is entitled to a Gross-Up Payment pursuant to Section 4.5(a)(i) and the Payments are not reduced pursuant to Section 4.5(a)(ii), but one or more of the Payments that is determined to be subject to the Excise Tax consists of the accelerated vesting of a stock award under the Xcel Energy Inc. Omnibus Incentive Plan or any successor thereto, then the Gross-Up Payment shall be reduced by the portion thereof that is allocable to such accelerated vesting. The allocation of the Gross-Up Payment to the individual Payments shall be made on a pro-rata basis using the methodology set forth in Q&A 38 of Treasury Regulations Section 1.280G-1 or any comparable provision of any successor proposed or final regulations under Sections 280G and 4999 of the Code.

(iv) If it shall be determined that a Participant is entitled to receive a Gross-Up Payment after application of Sections 4.5(a)(i), (ii) and (iii), then a determination shall be made whether it is possible to reduce the Separation Payments (but not below zero) such that the Net After-Tax Amount of all the Payments (taking into account such reduction) exceeds the Net After-Tax Amount of all the Payments (not taking into account such reduction) plus the Gross-Up Payment. If such a reduction is possible, then no Gross-Up Payment shall be made and the aggregate Separation Payments shall be so reduced (but not below zero); provided, that the reduction shall be made in such a manner as to maximize the Value of all Payments actually made to the Participant.

(i) All determinations required to be made under Section 4.5, including whether and when a Gross-Up Payment or a reduction in Separation Payments is required, the amount of such Gross-Up Payment or reduction, and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized public accounting firm or benefits consulting firm selected by the Corporation (the “Accounting/Consulting Firm”), which shall provide detailed supporting calculations both to the Corporation and the Participant within 15 business days of the receipt of notice from the Participant that there has been a

Payment, or such earlier time as is requested by the Corporation; provided, that if the Accounting/Consulting Firm determines that a Participant’s Separation Payments are required to be reduced pursuant to this Section 4.5, including Section 4.5(a)(ii) or (iv), and there is a choice to be made as to which Separation Payments shall be reduced consistent with maximizing the Value of all Payments to the Participant, the Participant shall be permitted to make such choice, and the Accounting/Consulting Firm shall supply the Participant with all necessary information to make an informed choice. All fees and expenses of the Accounting/Consulting Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as determined pursuant to this Section 4.5, shall be paid or caused to be paid by the Corporation to the Participant within five days of the receipt of the Accounting/Consulting Firm’s determination. Any determination by the Accounting/Consulting Firm shall be binding upon the Corporation and the Participant.

(ii) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting/Consulting Firm hereunder, it is possible that amounts will have been paid or distributed to or for the benefit of a Participant pursuant to this Policy which should not have been so paid or distributed (“Overpayment”) or that additional amounts which will have not been paid or distributed to or for the benefit of a Participant pursuant to this Policy could have been so paid or distributed (“Underpayment”), in each case, consistent with the requirements of this Section 4.5. In the event that the Accounting/Consulting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either an Employer or the Participant which the Accounting/Consulting Firm believes has a high probability of success determines that an Overpayment has been made, any such Overpayment paid or distributed to or for the benefit of a Participant shall be treated for all purposes as a loan to the Participant which the Participant shall repay to the Employer together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such loan shall be deemed to have been made and no amount shall be payable by a Participant if and to the extent such deemed loan and payment would not either reduce the amount on which the Participant is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes or would be a prohibited loan under Section 402 of the Sarbanes-Oxley Act of 2002, as amended. In the event that the Accounting/Consulting Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid or caused to be paid by the Corporation to or for the benefit of the Participant together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.

(iii) The Participant shall notify the Corporation in writing of any claim by the Internal Revenue Service that, if successful, could require the payment of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Participant is informed in writing of such claim and shall apprise the Corporation of the nature of such claim and the date

on which such claim is requested to be paid. The Participant shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Corporation (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Corporation notifies the Participant in writing prior to the expiration of such period that it desires to contest such claim, the Participant shall:

(A) give the Corporation any information reasonably requested by the Corporation relating to such claim,

(B) take such action in connection with contesting such claim as the Corporation shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Corporation,

(D) permit the Corporation to participate in any proceedings relating to such claim;

provided, however, that the Corporation shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Participant harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 4.5(b), the Corporation shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Participant to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Participant agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Corporation shall determine; provided, however, that if the Corporation directs the Participant to pay such claim and sue for a refund, the Corporation shall advance the amount of such payment to the Participant, on an interest-free basis and shall indemnify and hold the Participant harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance, except that the Corporation shall not direct the Participant to pay such claim and sue for a refund if such advance would be a prohibited loan under Section 402 of Sarbanes-Oxley Act of 2002, as amended; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Participant with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Corporation’s control of the contest shall be

limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Participant shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(iv) If, after the receipt by the Participant of an amount advanced by the Corporation pursuant to Section 4.5(b)(iii), the Participant becomes entitled to receive any refund with respect to such claim, the Participant shall (subject to the Corporation’s complying with the requirements of Section 4.5(b)(iii)) promptly pay to the Corporation the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Participant of an amount advanced by the Corporation pursuant to Section 4.5(b)(iii), a determination is made that the Participant shall not be entitled to any refund with respect to such claim and the Corporation does not notify the Participant in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid.

(i) “Excise Tax” shall mean the aggregate of the excise taxes imposed by Section 4999 of the Code or by similar state or local law, together with any interest or penalties imposed with respect to such excise taxes.

(ii) The “Net After-Tax Amount” of a Payment shall mean the Value of a Payment net of all taxes imposed on a Participant with respect thereto under Sections 1 and 4999 of the Code and applicable state and local law, determined by applying the highest marginal rates that are expected to apply to the Participant’s taxable income for the taxable year in which the Payment is made.

(iii) “Parachute Value” of a Payment shall mean the present value as of the date of the Change-in-Control or other applicable date of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2), or under any similar state or local law, as determined by the Accounting/Consulting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.

(iv) A “Payment” shall mean any payment or distribution by the Corporation or any affiliates in the nature of compensation to or for the benefit of a Participant, whether paid or payable pursuant to this Policy or otherwise, including, without limitation, the lapse or termination of any restriction on or the vesting or exercisability of any benefits or right thereto.

(v) The “Safe Harbor Amount” means the maximum Parachute Value of all Payments that a Participant can receive without any Payments being subject to the Excise Tax.

(vi) A “Separation Payment” shall mean a Payment paid or payable pursuant to this Policy (disregarding this Section 4.5).

(vii) “Value” of a Payment shall mean the economic present value of a Payment as of the date of Change-in-Control or other applicable date, as determined by the Accounting/Consulting Firm using the discount rate required by Section 280G(d)(4) of the Code.

(a) Except as provided in Section 4.6(b) below, the obligations of the Corporation and the Employers to pay the Separation Benefits and the Gross-Up Payment and other payments described in Section 4.5 shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Corporation or any of its Subsidiaries may have against any Participant.

(b) Notwithstanding any other provision of this Policy or any other plan, program, practice or policy of any Employer: (i) any cash Separation Benefits that a Participant becomes entitled to receive under Section 4.3(b) or Section 4.4 of this Policy shall be reduced (but not below zero) by the aggregate amount of cash severance, separation, or similar benefits that the Participant may be entitled to receive under any other plan, program, policy, contract, agreement or arrangement of any Employer or Subsidiary, except to the extent the Participant waives his or her right thereto, and by the aggregate amount of such cash benefits or pay in lieu of notice that the Participant may be entitled to receive under applicable law; and (ii) any continued benefits that a Participant becomes entitled to receive under Section 4.3(c) or Section 4.4 of this Policy shall be provided concurrently (not consecutively) with any such benefits that such Participant may be entitled to receive under any other plan, program, policy, contract, agreement or arrangement of any Employer or Subsidiary or applicable law (including without limitation the health continuation coverage required by Section 4980B of the Code and Section 601 et seq. of the Employee Retirement Income Security Act of 1974, as amended). In no event shall a Participant be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to a Participant under any of the provisions of this Policy, nor shall the amount of any payment hereunder be reduced by any compensation earned by a Participant as a result of employment by another employer, except as specifically provided in Section 4.3(c)(i) or Section 4.4 (by incorporation of Section 4.3(c)(i)).

With the consent of the Board, this Policy may be adopted by any Subsidiary of the Corporation. Upon such adoption, the Subsidiary shall become an Employer hereunder and the provisions of the Policy shall be fully applicable to the Employees of that Subsidiary who are Participants pursuant to Section 3.1.

This Policy shall bind any successor of the Corporation or other Employer, its assets or its businesses (whether direct or indirect, by purchase, merger, consolidation or otherwise), in the same manner and to the same extent that the Corporation or Employer would be obligated under this Policy if no succession had taken place.

In the case of any transaction in which a successor would not by the foregoing provision or by operation of law be bound by this Policy, the Corporation shall require such successor expressly and unconditionally to assume and agree to perform the Corporation’s or Employer’s obligations under this Policy, in the same manner and to the same extent that the Corporation or Employer would be required to perform if no such succession had taken place. The term “Corporation,” as used in this Policy, shall mean the Corporation as hereinbefore defined and any successor or assignee to the business or assets which by reason hereof becomes bound by this Policy.

(a) Subject to the provisions of Article VII, the Policy may be amended by the Board at any time or from time to time and may be terminated by the Board at any time. No amendment or termination, however, may adversely affect the rights of any Participant without the Participant’s written consent if such person (i) is then receiving Separation Benefits or other payments under the Policy, (ii) upon termination of employment would become entitled to receive Separation Benefits or other payments under the Policy on account of a prior event or occurrence described in Section 4.2(b), or (iii) is entitled to receive Separation Benefits or other payments under the Policy on account of a prior termination of employment.

(b) Notwithstanding the provisions of Section 7.1(a), during the period commencing on October 22, 2003 and ending at the close of business on October 21, 2006 (the “Term”), the Policy may not be amended or terminated in any way, whether or not a Change-in-Control has occurred, that would adversely affect the rights of any person, without such person’s written consent; provided, however, that on October 22, 2004 and on each October 22 thereafter, the Term shall automatically be extended for an additional year unless, not later than the immediately preceding July 22, the Corporation shall give notice to Participants that it does not wish to have the Term extended; and provided further, however, that if a Change-in-Control shall have occurred during the Term, the Term shall expire no earlier than the second anniversary of the date on which the Change-in-Control occurred.

7.2 Duration. Notwithstanding Section 7.1, this Policy shall continue in full force and effect and shall not terminate or expire until after all Participants who become entitled to any payments hereunder shall have received such payments in full and all payments and adjustments required to be made pursuant to Section 4.5 have been made.

7.3 Form of Amendment. The form of any amendment of the Policy shall be a written instrument signed by a duly authorized officer or officers of the Corporation, certifying that the amendment has been approved by the Board.

8.1 Employment Status. This Policy does not constitute a contract of employment or impose on the Participant or the Participant’s Employer any obligation to retain the Participant as an Employee, to change the status of the Participant’s employment, or to change the Corporation’s policies or those of its Subsidiaries regarding termination of employment.

8.2 Claim Procedure. If an Employee or former Employee makes a written request alleging a right to receive benefits under this Policy or alleging a right to receive an adjustment in benefits being paid under the Policy, the Corporation shall treat it as a claim for benefit. All claims for benefit under the Policy shall be sent to the Human Resources Department of the Corporation and must be received within 30 days after termination of employment or, if earlier, within 30 days after the date as of which the alleged right to receive benefits arises. If the Corporation determines that any individual who has claimed a right to receive benefits, or different benefits, under the Policy is not entitled to receive all or any part of the benefits claimed, it will inform the claimant in writing of its determination and the reasons therefor in terms calculated to be understood by the claimant. The notice will be sent within 90 days of the claim unless the Corporation determines additional time, not exceeding 90 days, is needed. The notice shall make specific reference to the pertinent Policy provisions on which the denial is based, and describe any additional material or information is necessary. Such notice shall, in addition, inform the claimant what procedure the claimant should follow to take advantage of the review procedures set forth below in the event the claimant desires to contest the denial of the claim, including a statement of the right to bring a civil suit under Section 502(a) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The claimant may within 60 days thereafter submit in writing to the Corporation a notice that the claimant contests the denial of his or her claim by the Corporation and desires a further review. The notice may include comments, documents, records and other information relating to the claim. The claimant shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits. The review will take into account all comments, documents, records and other information submitted relating to the claim, without regard to whether such information was submitted or considered in the initial determination. The Corporation will render its final decision with specific reasons therefor in writing and will transmit it to the claimant within 60 days of the written request for review, unless the Corporation determines additional time, not exceeding 60 days, is needed, and so notifies the Participant. In the case of an adverse benefit determination, the decision shall set forth, in a manner calculated to be understood by the claimant, the specific reasons for the adverse determination, reference to the specific Policy provisions on which the determination is based, a statement that the claimant is entitled to receive upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim for benefits, and a statement of the claimant’s right to bring an action under Section 502(a) of ERISA.

8.3 Validity and Severability. The invalidity or unenforceability of any provision of the Policy shall not affect the validity or enforceability of any other provision of the Policy, which shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

8.4 Governing Law. The validity, interpretation, construction and performance of the Policy shall in all respects be governed by the laws of Minnesota, without reference to principles of conflict of law, except to the extent pre-empted by federal law.

8.5 Withholding. The Corporation or other applicable Employer may withhold from any and all amounts payable under this Policy all federal, state, local and foreign taxes that may be required to be withheld by applicable laws or regulations.

THIS AGREEMENT is entered into this day of , 20 by and between Xcel Energy Inc. (the “Company”), a Minnesota corporation, and (the “Participant”).

WHEREAS, the Participant has become entitled to receive Separation Benefits under the Xcel Energy Senior Executive Severance and Change-in-Contract Policy (the “Policy”) on the condition that the Participant enter into this Release Agreement; and

NOW, THEREFORE, in consideration of the Covenant Consideration, the Participant, intending to be legally bound, agrees as follows:

(a) The Participant understands and agrees that, in addition to the Participant’s below-described exposure to the Company’s Confidential Information or Trade Secrets, the Participant may, in his capacity as an employee, at times meet with the Company’s customers and suppliers, and that as a consequence of using and associating with the Company’s name, goodwill, and professional reputation, the Participant will be in a position to develop personal and professional relationships with the Company’s past, current, and prospective customers and suppliers. The Participant further acknowledges that during the course and as a result of employment by the Company, the Participant may be provided certain specialized training or know-how. The Participant understands and agrees that this goodwill and reputation, as well as the Participant’s knowledge of Confidential Information or Trade Secrets and specialized training and know-how, could be used unfairly in competition against the Company.

(b) Accordingly, the Participant agrees that during the period of one year after the Date of Termination (the “Covenant Period”), the Participant shall not:

(i) Cause or attempt to cause any existing or prospective customer, client, or account, who then has a relationship with the Company for current or prospective business, to divert, terminate, limit or in any manner modify, or fail to enter into any actual or potential business relationship with the Company; and the Participant and the Company agree that this clause (i) is reasonably enforced with reference to any geographic area applicable to such relationships with the Company; and

(ii) Directly or indirectly solicit, employ or conspire with others to employ any of the Company’s employees; the term “employ” for purposes of this clause (ii) meaning to enter into an arrangement for services as a full-time or part-time employee, independent contractor, consultant, agent or otherwise; and the Participant and the Company agree that this clause (ii) is reasonably enforced as to any geographic area.

2. Return of Property. The Participant agrees that upon the Date of Termination, the originals and all copies of any and all documents (including computer data, diskettes, programs, or printouts) that contain any customer information, financial information, product information, or other information that in any way relates to the Company, its products or services, its clients, its suppliers, or other aspects of its business that are in the Participant’s possession shall be immediately returned to the Company. The Participant further agrees to not retain any summary of such information.

(a) The Participant acknowledges that during the course and as a result of his or her employment, the Participant may receive or otherwise have access to, or contribute to the production of, Confidential Information or Trade Secrets. “Confidential Information or Trade Secrets” means information that is proprietary to or in the unique knowledge of the Company (including information discovered or developed in whole or in part by the Participant); the Company’s business methods and practices; or information that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. It includes, among other things, strategies, procedures, manuals, confidential reports, lists of clients, customers, suppliers, past, current or possible future products or services, and information concerning research, development, accounting, marketing, selling or leases and the prices or charges paid by the Company’s customers to the Company, or by the Company to its suppliers. The Participant acknowledges his continuing agreement to abide by the terms of the Company’s Code of Conduct.

(b) The Participant further acknowledges and appreciates that any Confidential Information or Trade Secret constitutes a valuable asset of the Company and that the Company intends any such information to remain secret and confidential. The Participant therefore specifically agrees that except to the extent required by the Participant’s duties to the Company or as permitted by the express written consent of the Board of Directors, the Participant shall never, either during employment with the Company or at any time thereafter, directly or indirectly use, discuss or disclose any Confidential Information or Trade Secrets of the Company or otherwise use such information to his or her own or a third party’s benefit.

4. Consideration. The Participant and the Company agree that the above provisions of this Agreement are reasonable and necessary for the protection of the Company and its business. In exchange for the Participant’s agreement to be bound by the terms of this Agreement, the Company has provided the Participant the Separation Benefits under the Policy. The Participant accepts and acknowledges the adequacy of such consideration for this Agreement.

5. Remedies for Breach. The Participant acknowledges that a breach of the above provisions of this Agreement will cause the Company irreparable harm that would not be fully remedied by monetary damages. Accordingly, the Participant agrees that the Company shall, in addition to the requirement to return the Covenant Consideration to the Company and any relief afforded by law, be entitled to injunctive relief. The Participant agrees that both damages at law and injunctive relief shall be proper modes of relief and are not to be considered alternative remedies.

(a) In consideration of the Separation Benefits, the Participant does hereby fully and completely release and waive any and all claims, complaints, causes of action or demands of whatever kind which the Participant has or may have against the Company and its predecessors, successors, subsidiaries and affiliates and all officers, employees and agents of those persons and companies arising out of any actions, conduct, decisions, behavior or events occurring to the date of his or her execution of this Release of which the Participant is or has been made aware or has been reasonably put on notice.

(b) The Participant understands and accepts that this release specifically covers but is not limited to any and all claims, complaints, causes of action or demands of whatever kind which the Participant has or may have against the above-referenced released parties relating in any way to the terms, conditions and circumstances of his or her employment to date, whether based on statutory, regulatory or common law claims for employment discrimination, including but not limited to race, color, religion, sex, age or reprisal discrimination, arising under the Federal Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, the Americans with Disabilities Act, Executive Order 11246, the Age Discrimination in Employment Act, as amended, the Colorado Civil Rights Act, Minnesota Human Rights Act, or any other administrative order, federal or state statute or local ordinance, wrongful discharge, equal pay claims, breach of contract, breach of any express or implied promise, misrepresentation, fraud, reprisal, retaliation, breach of public policy, infliction of emotional distress, defamation, promissory estoppel, invasion of privacy, negligence, or any other theory, whether legal or equitable; except that this release will not impair any existing rights the Participant may have under any presently existing pension, retirement or employee benefit plan of the Company.

(c) By signing below, the Participant acknowledges that he or she fully understands and accepts the terms of this release, and represents and agrees that his or her signature is freely, voluntarily and knowingly given and that he or she has been provided a full opportunity to review and reflect on the terms of this release for at least 21days and to seek the advice of legal counsel of his or her choice, which advice the Participant has been encouraged to obtain.

(a) The Participant represents that the Participant has carefully read and fully understands all provisions of this Agreement and that the Participant has had a full opportunity to review this Agreement before signing and to have all the terms of this Agreement explained to him or her by counsel.

Gary Johnson
Vice President and General Counsel
Xcel Energy Inc.
800 Nicollet Mall
Suite 3000
Minneapolis, MN 55402

8. General Provisions. The Participant and the Company acknowledge and agree as follows:

(a) This Agreement contains the entire understanding of the parties with regard to all matters contained herein. There are no other agreements, conditions, or representations, oral or written, express or implied, with regard to such matters;

(b) This Agreement may be amended or modified only by a writing signed by both parties;

(c) Waiver by either the Company or the Participant of a breach of any provision, term or condition hereof shall not be deemed or construed as a further or continuing waiver thereof or a waiver of any breach of any other provision, term or condition of this Agreement;

(d) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place. As used in this Agreement, “the Company” shall mean the Company and its affiliates or assigns and any such successor that assumes and agrees to perform this Agreement, by operation of law or otherwise. No assignment of this Agreement shall be made by the Participant, and any purported assignment shall be null and void;

(e) If any court finds any provision or part of this Agreement to be unreasonable, in whole or in part, such provision shall be deemed and construed to be reduced to the maximum duration, scope or subject matter allowable under applicable law. Any invalidation of any provision or part of this Agreement will not invalidate any other part of this Agreement;

(f) This Agreement will be construed and enforced in accordance with the laws and legal principles of the State of Minnesota. The Participant consents to the jurisdiction of the Minnesota courts for the enforcement of this Agreement; and

(g) This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same instrument.

THIS AGREEMENT IS INTENDED TO BE A LEGALLY BINDING DOCUMENT FULLY ENFORCEABLE IN ACCORDANCE WITH ITS TERMS. IF IN DOUBT, SEEK COMPETENT LEGAL ADVICE BEFORE SIGNING.

The Participant acknowledges that he or she has received a copy of this Agreement.

Background; Amendment and Restatement of Plan. Prior to January 1, 2002, Xcel Energy Inc. (the “Company”) maintained the Xcel Energy Retirement Savings Plan (the “Plan”) to provide retirement benefits for its eligible Employees through a tax-qualified retirement benefit plan. The Plan was previously known as the “Northern States Power Company Retirement Savings Plan,” and was established by Northern States Power Company, a predecessor to the Company, and has been amended from time to time. This document amends and restates the Plan, effective as of January 1, 2002, renames it as the “Xcel Energy 401(k) Savings Plan,” and provides for the amendment, restatement and merger into the Plan of the following plans effective as of the specified date:

	•		New Century Energies, Inc. Employees’ Savings and Stock Ownership Plan for Non-Bargaining Unit Employees, which was established by Public Service Company of Colorado, a predecessor to the Company, effective as of July 1, 1998, as a result of the merger of spun-off portions of the Employees’ Savings and Stock Ownership Plan of Public Service Company of Colorado and Participating Subsidiary Companies and the Southwestern Public Service Company Employee Investment Plan, and was merged into the Plan effective as of December 31, 2001.

	•		Xcel Energy Employee Stock Ownership Plan, previously known as the “Northern States Power Company Employee Stock Ownership Plan,” which was established by Northern States Power Company, a predecessor to the Company, effective as of January 1, 1975 and which shall be merged into the Plan effective May 6, 2002.

Except as may be hereinafter otherwise specifically provided or required by law, the rights and benefits of a Participant who terminated employment before the effective date of this restatement (or before May 6, 2002, with respect to the Xcel Energy Employee Stock Ownership Plan) shall be determined under the terms of the Plan (or the applicable predecessor plan) in effect at the Participant’s termination of employment, and not under the terms of this amendment and restatement.

Purpose of Amendment and Restatement. The Plan is maintained by the Company to enable Eligible Employees of the Employers to: (1) accumulate funds for their future security by electing to make cash or deferral contributions and by sharing in employer contributions to the Plan; and (2) acquire stock ownership interests in the Company. Accordingly, the Plan contains the following two separate components:

•

A Non-ESOP Component intended to constitute a profit sharing plan that meets the applicable requirements of Section 401(a) of the Internal Revenue Code of 1986 (the “Code”), including a cash or deferred arrangement intended to qualify under Code Section 401(k).

•

An ESOP Component that is designed to invest primarily in stock of the Company and that is intended to constitute a stock bonus plan that is an employee stock ownership plan meeting the applicable requirements of Code Sections 401(a), 409, and 4975(e)(7) and Section 407(d)(6) of the Employee Retirement Income Security Act of 1974 (“ERISA”).

The Plan is intended to be administered and operated in accordance with relevant provisions of the Code and other applicable laws and regulations.

Nothing in this amendment and restatement of the Plan, or in any subsequent amendment of this Plan, shall cause any Code Section 411(d)(6) protected benefits (as defined by Treasury Regulations Section 1.411(d)-4) of any Participant to be reduced, eliminated or made subject to employer discretion in a way that violates Code Section 411(d)(6) or any other provision of the Code or ERISA. If any such amendment would appear to have the effect of reducing a protected accrued benefit, such amendment shall not be given effect to reduce the accrued benefit below the level immediately prior to the effective date of the amendment (but such amendment may have the effect of temporarily or indefinitely curtailing the accrual of additional benefits). If any such amendment would appear to have the effect of reducing any other type of Code Section 411(d)(6) protected benefit, such amendment shall not be given effect with respect to the portion of the Participant’s benefit accrued prior to the effective date of the amendment.

In construing the following definitions and the balance of the Plan, the masculine pronoun wherever used includes the feminine, and the singular includes the plural.

The term “ACP” (an acronym for Average Contribution Percentage) means, for a specified group of Eligible Employees for any Plan Year (i.e., HCEs or NHCEs), the average of the Actual Contribution Ratios (calculated separately for each Eligible Employee in the group).

The term “Acquisition Loan” means a loan authorized by and made to this Plan (or a Predecessor Plan), the proceeds of which are used by the Trustee to purchase Company Stock. The terms of each Acquisition Loan shall meet the applicable requirements of Treasury Regulations Section 54.4975-7(b), including the requirements: (a) that the loan bear a reasonable rate of interest, be for a definite period (rather than payable on demand), and be without recourse against the Plan, and (b) that the only assets of the Plan that may be given as collateral are Financed Shares purchased with the proceeds of that loan or with the proceeds of a prior Acquisition Loan.

1.3		Actual Contribution Ratio

(a)		The term “Actual Contribution Ratio” means, for each person who was an Eligible Employee at any time during a Plan Year, the ratio of:

	(1)		the sum of the amount of Matching Contributions and After-Tax Contributions actually paid into the Fund on behalf of such Eligible Employee for such Plan Year, to

	(2)		the Eligible Employee’s Testing Compensation for such Plan Year.

(b)		The Actual Contribution Ratio shall be calculated separately for the ESOP Component and the Non-ESOP Component of the Plan.

(c)		The Actual Contribution Ratio shall be calculated separately for Bargaining Unit Employees.

(d)		The Actual Contribution Ratio for any HCE who is a participant under two or more arrangements described in Code Section 401(m) sponsored by the Company or an Affiliate shall be determined as if all such arrangements (except plans that may not be aggregated under applicable regulations) were one such arrangement.

1.4		Actual Deferral Ratio

(a)		The term “Actual Deferral Ratio” means, for each person who was an Eligible Employee at any time during a Plan Year, the ratio of:

	(1)		the amount of Pre-Tax Contributions actually paid into the Fund on behalf of such Eligible Employee for such Plan Year, to

	(2)		the Eligible Employee’s Testing Compensation for such Plan Year.

(b)		The Actual Deferral Ratio shall be calculated separately for Bargaining Unit Employees.

(c)		The Actual Deferral Ratio for any HCE who is a participant under two or more arrangements described in Code Section 401(k) sponsored by the Company or an Affiliate shall be determined as if all such arrangements (except plans that may not be aggregated under applicable regulations) were one such arrangement.

1.5		Administrator

The term “ADP” (an acronym for Average Deferral Percentage) means, for a specified group of Eligible Employees for any Plan Year (i.e., HCEs or NHCEs), the average of the Actual Deferral Ratios (calculated separately for each Eligible Employee in the group).

The word “Affiliate” means, for an applicable period, a business entity which is under common control with an Employer or which is a member of an affiliated service group that includes an Employer, as those terms are defined in Code Sections 414(b), (c) and (m). A business entity which is a predecessor to an Employer shall be treated as an Affiliate to the extent that such treatment is otherwise required by Code Section 414(a). A business entity shall also be treated as an Affiliate if, and to the extent that, such treatment is required by Code Section 414(o). In addition to said required treatment, the Administrator may, in its discretion, designate as an Affiliate any business entity which is not such a common control, affiliated service group or predecessor business entity but which is otherwise affiliated with the Employer, subject to such limitations as the Administrator may impose.

The term “After-Tax Contributions” means amounts deducted on an after-tax basis from a Participant’s Covered Compensation after the Effective Date and contributed by an Employer on behalf of the Participant.

1.9		Annual Additions

(a)		The term “Annual Additions” means the sum credited to a Participant for any Limitation Year of:

	(1)		employer contributions,

	(2)		employee contributions,

	(3)		forfeitures,

	(4)		amounts allocated to an individual medical account (as defined in Code Section 415(l)(2)) that is part of a pension or annuity plan maintained by the Company or a Related Company, and

	(5)		amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, that are attributable to post-retirement medical benefits allocated to the separate account of a key employee (as defined in Code Section 419A(d)(3)) under a welfare benefit fund (as defined in Code Section 419(e)) maintained by the Company or a Related Company.

		The term Annual Additions shall not include any Rollover Contribution made by a Participant under the Plan, nor any dividends that are distributed or reinvested pursuant to Code Section 404(k)(2)(A)(iii).

(b)		In all instances, the determination of a Participant’s Annual Additions for any Limitation Year shall be made in accordance with Code Section 415, as amended, the provisions of which are hereby incorporated by reference.

1.10		Bargaining Unit Employee

The term “Bargaining Unit Employee” means an Employee whose terms and conditions of employment are subject to collective bargaining.

The word “Beneficiary” means any person designated by the Participant in accordance with Section 10.9 (or automatically by operation of applicable Plan provisions) to receive a death benefit payable under the terms of this Plan. A person so designated shall not be considered a Beneficiary until the death of the Participant.

The word “Code” means the Internal Revenue Code of 1986, as amended, and applicable regulations issued thereunder.

The term “Combined Account” means all of a Participant’s subaccounts under the Plan, which may include one or more of the following separate bookkeeping accounts, as applicable:

	(1)		the Participant’s After-Tax Contributions made to the Plan after the Effective Date; and

	(2)		after-tax contributions made by the Participant to the New Century Energies, Inc. Employees’ Savings and Stock Ownership Plan prior to the Effective Date, to the extent said contributions were not considered part of the employee stock ownership plan maintained under said Predecessor Plan.

	(1)		Pre-Tax Contributions made on the Participant’s behalf after the Effective Date; and

	(2)		pre-tax contributions made on behalf of the Participant under a Predecessor Plan prior to the Effective Date.

	(1)		Matching Contributions made on the Participant’s behalf under the ESOP Component of the Plan after the Effective Date; and

	(2)		matching contributions made on the Participant’s behalf under the New Century Energies, Inc. Employees’ Savings and Stock Ownership Plan for Non-Bargaining Unit Employees prior to the Effective Date.

	(1)		Matching Contributions made on the Participant’s behalf under the Non-ESOP Component of the Plan after the Effective Date; and

	(2)		matching contributions made on the Participant’s behalf under the Xcel Energy Retirement Savings Plan prior to the Effective Date.

(e)

An “ESOP Predecessor Plan Account” to which are credited balances that previously were maintained for the Participant under a predecessor plan (as described in the applicable Supplement hereto) and that are to be invested in the ESOP Component of the Plan, as determined by the Administrator.

(f)		An “ESOP Profit Sharing Account” to which are credited the Profit Sharing Contributions made on a Participant’s behalf under the ESOP Component of the Plan after the Effective Date.

(g)		A “Predecessor Plan Account” to which are credited balances that previously were maintained under a predecessor plan (as described in the applicable Supplement hereto) and that are to be invested in the Non-ESOP Component of the Plan, as determined by the Administrator.

(h)		A “Profit Sharing Account” to which are credited the Profit Sharing Contributions made on a Participant’s behalf under the Non-ESOP Component of the Plan after the Effective Date.

(i)		A “Rollover Account” to which are credited Rollover Contributions made by the Participant, rollover contributions made by the Participant under a Predecessor Plan prior to the Effective Date.

Each of the aforementioned subaccounts shall also be credited with gains and losses attributable to amounts credited thereto. The Administrator may establish such other subaccounts of the Combined Account as it deems appropriate.

The word “Committee” means the Committee, if any, appointed pursuant to Article 11 of the Plan.

The word “Company” means Xcel Energy Inc., a Minnesota corporation, and its successors in interest, as appropriate.

The term “Company Stock” shall mean common stock issued by the Company that is readily tradable on an established securities market; provided, however, if the Company’s common stock ceases to be readily tradable on an established securities market, the term “Company Stock” shall mean common stock issued by the Company having a combination of voting power and dividend rates equal to or in excess of: (a) that class of common stock of the Company having the greatest voting power and (b) that class of common stock of the Company having the greatest dividend rights. Non-callable preferred stock shall be treated as Company Stock for purposes of the Plan if such stock is convertible at any time into stock that is readily tradable on an established securities market (or, if applicable, that meets the requirements of (a) and (b) next above) and if such conversion is at a conversion price that, as of the date of the acquisition by the Plan, is reasonable. For purposes of the immediately preceding sentence, preferred stock shall be treated as non-callable if, after the call, there will be a reasonable opportunity for a conversion that meets the requirements of the immediately preceding sentence. Company Stock shall be held under the Fund only if such stock satisfies the requirements of Section 407(d)(5) of ERISA.

1.17		Covered Compensation

(a)		The term “Covered Compensation” means, for any period, the regular base wages or salary, including any lump sum base pay increase, paid by an Employer for service as an Eligible Employee during such period. Covered Compensation also shall include any Pre-Tax Contributions or After-Tax Contributions made pursuant to Article 3 and salary reduction contributions under a cafeteria plan under Code Section 125 (including amounts considered as “deemed 125 compensation” as provided in Revenue Ruling 2002-27) or a qualified transportation fringe program under Code Section 132(f) from such regular base wages or salary. Effective January 1, 2003, Covered Compensation also shall include deferred compensation.

(b)		Covered Compensation shall not include amounts paid by an Affiliate that is not an Employer, amounts paid to an Employee for any period in which he is not an Eligible Employee and, solely for the 2002 Plan Year, deferred compensation (either when it is deferred or when it is paid).

(c)		In addition to other applicable limitations set forth in the Plan, and notwithstanding any provision of the Plan to the contrary, the annual Covered Compensation of each Employee taken into account under the Plan shall not exceed $200,000, as adjusted from time to time by the Commissioner for increases in the cost of living in accordance with Code Section 401(a)(17)(B).

1.18		Disability

The word “Disability” means the total and permanent disability of a Participant occurring prior to such Participant’s Termination of Employment. A Participant will be determined to be totally and permanently disabled if the Participant is eligible to receive a disability benefit from a plan sponsored by the Company or an Affiliate. Such determination shall be made by the Administrator in accordance with standards that shall be applied uniformly to all Participants.

The term “Effective Date” shall mean January 1, 2002, the effective date of this amendment and restatement of the Plan.

The term “Elective Deferrals” means Pre-Tax Contributions and any other elective deferrals as defined in Code Section 402(g)(3).

1.21		Eligible Employee

(a)		The term “Eligible Employee” means any Employee while employed by an Employer with the exception of:

	(1)		a Bargaining Unit Employee, unless (and to the extent) such collective bargaining agreement provides for participation of the Employee in this Plan;

	(2)		a nonresident alien while not receiving earned income (within the meaning of Code Section 911(d)(2)) from an Employer which constitutes income from sources within the United States;

	(3)		an Employee employed in a division or facility of an Employer which is not in existence on the Effective Date (that is, was acquired, established, founded or produced by the liquidation or similar discontinuation of a separate subsidiary after the Effective Date) unless and to the extent the Administrator shall declare that a person in such employment is an Eligible Employee;

	(4)		an Employee whose employment began as a result of his Employer’s acquisition by merger, asset purchase, or otherwise, of all or a portion of a trade or business to which the person provided services immediately prior to the acquisition, unless and to the extent the Administrator shall declare that a person in such employment is an Eligible Employee; and

	(5)		an Employee who is not classified as a common law employee of the Employer for purposes of both the Employer’s payroll and personnel records, including, without limiting the generality of the foregoing, a leased employee (within the meaning of Code Section 414(n)), leased owner, leased manager, shared employee, shared leased employee, independent contractor, contract worker, agency worker, freelance employee or other similar classification.

(b)		The Employer’s classification of an individual at the time of inclusion in or exclusion from Eligible Employee status shall be conclusive for the purpose of the foregoing rules. No reclassification of an individual’s status with the Employer, for any reason, without regard to whether it is initiated by a court, governmental agency or otherwise and without regard to whether or not the Employer agrees to such reclassification, shall result in the individual’s being retroactively deemed an Eligible Employee. Notwithstanding anything to the contrary in this provision, however, the Administrator may declare that a reclassified individual will be included as an Eligible Employee prospectively. Any uncertainty concerning an individual’s classification shall be resolved by concluding that the individual is not an Eligible Employee.

1.22		Employee

The word “Employee” means a common law employee of an Employer or any Affiliate.

The word “Employer” means (a) the Company, (b) any Affiliate of the Company that participated in one of the Predecessor Plans immediately prior to the Effective Date (or May 6, 2002, with respect to the Xcel Energy Employee Stock Ownership Plan), or (c) any Affiliate of the Company that adopts the Plan after the Effective Date with the approval of the Company

(pursuant to the adoption procedure set forth in Section 17.4, that has not withdrawn from the Plan (pursuant to the withdrawal procedure also set forth in Section 17.4).

The term “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

The term “ESOP Accounts” means a Participant’s Employer Stock Match Account, ESOP Predecessor Plan Account and ESOP Profit Sharing Account, all of which shall be invested in the ESOP Component of the Plan.

The term “ESOP Component” means the portion of the Plan that consists of the ESOP Accounts and the Unreleased Share Account, is intended to constitute an employee stock ownership plan designed to invest primarily in Company Stock, and is intended to meet the applicable requirements of Code Sections 401(a), 409, and 4975(e)(7) and Section 407(d)(6) of the ERISA.

The term “Financed Shares” means shares of Company Stock acquired by the Trustee with the proceeds of an Acquisition Loan.

The term “Former Participant” means any person with an account balance under the Plan (regardless of source) other than a person who is then an Eligible Employee.

The word “Fund” means the trust fund established by the trust agreement(s) as described in Article 7.

	(1)		was a 5% owner (as defined in Code Section 416(i)(1)) of the Company or an Affiliate at any time during the Plan Year or the preceding Plan Year; or

	(2)		for the preceding Plan Year, received Testing Compensation from the Company or an Affiliate in excess of $85,000 (as adjusted from time to time by the Commissioner for increases in the cost of living in accordance with Code Section 414(q)(1)).

(b)		With respect to a Plan Year being tested, the determination of who is an HCE will be made in accordance with Code Section 414(q).

1.31		Investment Fund

The term “Investment Fund” means a portion of the Fund that is separately invested in an investment alternative made available pursuant to Article 7.

The term “Limitation Year” means the calendar year, unless another consecutive 12-month period is adopted by the Administrator.

The term “Matching Contributions” means amounts contributed by the Employers after the Effective Date on behalf of a Participant under Section 4.1.

The term “Non-Bargaining Unit Employee” means an Employee who is not a Bargaining Unit Employee.

The term “Non-ESOP Accounts” means a Participant’s Employee After-Tax Account, Employee Pre-Tax Account, Employer Cash Match Account, Predecessor Plan Account, Profit Sharing Account, and Rollover Account, all of which shall be invested in the Non-ESOP Component of the Plan.

The term “Non-ESOP Component” means the portion of the Plan that consists of the Non-ESOP Accounts and is intended to constitute a profit sharing plan with a cash or deferred feature designed to satisfy the applicable requirements of Code Sections 401(a) and 401(k).

The term “NHCE” (an acronym for Non-Highly Compensated Employee) means any Employee who is not a HCE during the applicable Plan Year.

The term “Pay Period” means the applicable period for which Covered Compensation is paid. The term “Pay Date” means the date upon which Covered Compensation applicable to a Pay Period is regularly paid.

The word “Plan” means the Xcel Energy 401(k) Savings Plan, an amendment and restatement of the Xcel Energy Retirement Savings Plan, effective as of January 1, 2002.

(a)		Xcel Energy Retirement Savings Plan,

(b)		New Century Energies, Inc. Employees’ Savings and Stock Ownership Plan for Non-Bargaining Unit Employees, and

(c)		on and after May 6, 2002, Xcel Energy Employee Stock Ownership Plan.

1.43		Pre-Tax Contributions

The term “Pre-Tax Contributions” means amounts deducted on a pre-tax basis from a Participant’s Covered Compensation payable after the Effective Date and contributed by an Employer on behalf of the Participant.

The term “Profit Sharing Contribution” means any amounts contributed after the Effective Date by an Employer on behalf of a Participant under Section 4.2.

The word “Related Company” means any Affiliate and any corporation or unincorporated trade or business that would be an Affiliate if “more than 50%” were substituted for “80%” where “80%” appears in Code Section 1563(a) or in the regulations promulgated under Code Section 414(c).

The word “Retirement” means the Termination of Employment of a Participant on or after the date on which he attains age 65. For purposes of determining eligibility for the Employer Matching Contribution under Section 4.1(g), “Retirement” shall also mean “Early Retirement Age” under the Xcel Energy Pension Plan or the Xcel Energy Inc. Non-Bargaining Pension Plan (South).

The term “Rollover Contribution” means those cash contributions made by an Eligible Employee after the Effective Date in accordance with Section 3.3 of the Plan. Such contributions must be attributable to an amount distributable from:

(a)		a trust described in Code Section 401(a);

(b)		an annuity plan described in Code Section 403(a);

(c)		an individual retirement account or individual retirement annuity as defined in Code Section 408;

(d)		an arrangement described in Code Section 403(b); or

(e)		an eligible deferred compensation plan described in Code Section 457(b) that is maintained by an eligible employer described in Code Section 457(e)(1)(A);

provided that such amount is an eligible rollover distribution as such term is defined in Code Section 402(c)(4). Notwithstanding the foregoing, a Rollover Contribution shall not include after-tax contributions or amounts attributable to such contributions.

The term “Termination of Employment” means an Employee’s resignation, discharge, retirement, death, cessation of active work due to Disability, failure to return to active work at the end of an authorized leave of absence or the authorized extension or extensions thereof, failure to return to work when duly called following a temporary layoff, or upon the happening of any other event or circumstance which, under the applicable policy then in effect, results in the termination of the employer-employee relationship; provided, however, that a Termination of Employment shall not be deemed to occur upon a transfer to an Affiliate, but will be deemed to occur upon a transfer to an unaffiliated entity.

The term “Testing Compensation” means the gross amount paid to a Participant during a Plan Year by the Participant’s Employer and any Affiliate that is required to be reported on the “Wages, Tips and Other Compensation” Box on Form W-2 or its successor, subject to the following:

(a)		A Participant’s Testing Compensation shall include elective contributions made on behalf of the Participant by an Employer or Affiliate which are not included in gross income under Code Sections 125, 132(f), 402(a)(8), 402(h), or 403(b).

(b)		The annual Testing Compensation of each Participant shall be limited to $200,000, as adjusted from time to time by the Commissioner for increases in the cost of living in accordance with Code Section 401(a)(17)(B).

(c)		Notwithstanding the foregoing provisions of this Section, the Administrator may for any Plan Year use any other definition of Testing Compensation satisfying the requirements of Code Section 415(c).

1.50		Trustee

The word “Trustee” means the trustee or trustees of the Fund at any time acting under one or more trust agreements, as described in Article 7.

The term “Unreleased Share Account” shall mean an account established and maintained by the Administrator, to reflect the Financed Shares acquired by the Trustee with the proceeds of an Acquisition Loan, if any, before the transfer of such Financed Shares to Participants’ ESOP Accounts, any cash dividends attributable to such shares, and any investment income attributable to such dividends.

The term “Valuation Date” means each day the New York Stock Exchange is open for business or such other times as may be agreed to in writing between the Administrator and the Trustee.

2.1		Eligibility

(a)		Each Eligible Employee who was participating in a Predecessor Plan immediately before the Effective Date shall continue to participate in the Plan thereafter, subject to the terms of the Plan.

(b)		Each other Employee shall become a Participant in the Plan on the date he first becomes an Eligible Employee.

2.2		Transferred Employees

(a)		If an Employee is transferred to an Employer from an Affiliate that is not an Employer, the Employee shall become a Participant upon his date of transfer, provided he is then an Eligible Employee.

(b)		If a Participant is transferred to employment with an Affiliate that is not an Employer (or a series of such Affiliates), he shall cease to be an Eligible Employee under the Plan.

2.3		Reemployment

If an Employee, after terminating employment with all Employers and Affiliates, shall be rehired by an Employer as an Eligible Employee, he shall be eligible to resume participation in the Plan upon his rehire.

Notwithstanding any provision of the Plan to the contrary, Participants’ eligibility, vesting and benefit accrual shall satisfy the requirements of Code Section 414(u).

3.1		Pre-Tax and After-Tax Contributions

(a)		Subject to the limitations set forth herein, an Eligible Employee may make the following elections:

	(1)		Pre-Tax Contributions in an amount not less than 1% nor more than 20% (in multiples of 1%) of the Eligible Employee’s Covered Compensation for the applicable Pay Period.

	(2)		After-Tax Contributions in an amount not less than 1% nor more than 10% (in multiples of 1%) of the Eligible Employee’s Covered Compensation for the applicable Pay Period.

(b)		An Eligible Employee who is a Bargaining Unit Employee may also make After-Tax Contributions in the form of cash contributions, but such contributions may be made only in the month of December or in the month of the Eligible Employee’s Termination of Employment. December contributions must be received by the Administrator in time to be processed by the last Friday in December. Contributions in the last month of employment must be received prior to Termination of Employment. Late contributions will be returned to the Eligible Employee. After-Tax Contributions under this subsection plus After-Tax Contributions under subsection (a)(1) above for a Plan Year shall not exceed 10% of the Eligible Employee’s Covered Compensation for the Plan Year.

(c)		The sum of an Eligible Employee’s Pre-Tax Contributions and After-Tax Contributions for a Pay Period shall not exceed 20% of his Covered Compensation for that Pay Period.

(d)		An Eligible Employee may change or terminate an election under this Section as of any subsequent Pay Date or as soon as administratively possible thereafter.

(e)		An Eligible Employee’s elections under this Section and all changes to such elections, including the election to terminate contributions, shall be made in accordance with procedures established by the Administrator, and shall be effective as soon as administratively feasible after the Eligible Employee files his election.

3.2		Time and Medium of Payment of Contributions

The Employers shall pay a Participant’s Pre-Tax Contributions and After-Tax Contributions over to the Trustee in cash as soon as practicable after the Pay Date on which the corresponding amounts would otherwise have been paid to the Participant, but no later than the 15th business day of the next following month.

The Administrator may, under uniform rules applied on a consistent and nondiscriminatory basis, permit the Trustee to accept a Rollover Contribution on behalf of an Eligible Employee who is or

may become a Participant, provided, however, that in the opinion of the Administrator or its legal counsel, the Rollover Contribution will not jeopardize the tax-exempt status of the Plan or the Fund or create adverse tax consequences for the Employers. The Administrator may require such evidence as it deems appropriate to ensure that any such Rollover Contribution to the Plan shall not adversely affect its tax-qualified status. If the Administrator later determines that a contribution is not a valid Rollover Contribution, then the amount of the invalid contribution, plus any earnings attributable thereto, shall be distributed to the Employee. Rollover Contributions by Participants who are not Eligible Employees shall be limited to amounts accrued under tax-qualified retirement plans sponsored by the Company or an Affiliate and any earnings attributable thereto.

4.1		Matching Contributions

(a)		Subject to the limitations set forth herein, for each Plan Year, the Employers shall make a Matching Contribution to the Plan on behalf of each eligible Participant who makes Pre-Tax Contributions during the Plan Year. Except as provided in (d) below, the amount of this Matching Contribution shall be determined as follows:

	(1)		For an eligible Participant who has elected to be covered under the Pension Equity formula of the Xcel Energy Pension Plan or the Xcel Energy Inc. Non-Bargaining Pension Plan (South), the Matching Contribution formula is:

			100% of the Participant’s Pre-Tax Contributions for such Plan Year not in excess of 3% of the Participant’s Covered Compensation, plus 50% of the Participant’s Pre-Tax Contributions for such Plan Year in excess of 3% of the Participant’s Covered Compensation but not in excess of 5% of the Participant’s Covered Compensation.

	(2)		For an eligible Participant who is not described in (1) above, the Matching Contribution formula is:

	(A)		For a Bargaining Unit Employee: 100% of the Participant’s Pre-Tax Contributions, up to a maximum Matching Contribution of $900 in 2002, $1,050 in 2003, and $1,150 in 2004.

	(B)		For a Non-Bargaining Unit Employee: 100% of the Participant’s Pre-Tax Contributions, up to a maximum Matching Contribution of $1,400.

(b)		The Matching Contribution for Bargaining Unit Employees shall be made in cash to the Non-ESOP Component of the Plan.

(c)		The Matching Contribution for Non-Bargaining Unit Employees shall be made to the Non-ESOP Component of the Plan in cash or, at the Company’s discretion, to the ESOP Component of the Plan either in the form of Company Stock or in the form of cash to be invested in Company Stock.

(d)		Notwithstanding anything in (a) above to the contrary, the amount of Matching Contributions made to the ESOP Component of the Plan for a Plan Year shall be determined as follows:

(1)

The amount described in subsection (a) above shall be calculated for each Participant whose Matching Contribution will be made to the ESOP Component of the Plan.

	(2)		The Plan Administrator shall next calculate the average price of Company Stock for the Plan Year by determining the average of the high and low sales prices of Company Stock on the twentieth day of each month that Company Stock is traded (or the first business day immediately following said day if said day is not a business day), adding the price for each month together and then dividing the sum of the monthly prices by 12.

	(3)		The amount determined under subsection (1) for each Participant shall then be divided by the average price determined under subsection (2), and the result shall be the number of shares of Company Stock to be contributed on the Participant’s behalf for the Plan Year. The Company may obtain the required number of shares of Company Stock through one or more of the following methods as it determines in its discretion:

	(A)		Transfer of shares of Company Stock from the Unreleased Share Account to the ESOP Component of the Fund pursuant to Section 8.3.

	(B)		Issuance of new shares, each of which shall be assigned a cost value equal to the average of the high and low sales prices of Company Stock on the day preceding the day the shares are contributed to the Fund.

	(C)		Payment of a cash contribution, the amount of which shall be determined by multiplying the number of shares determined under this subsection (3) by the average of the high and low sales prices of Company Stock on the day preceding the day the contribution is made to the Fund. Said contribution shall then be applied to the purchase of Company Stock.

(e)		Notwithstanding the foregoing, designated officers of the Company may increase or decrease once each year the contribution percentages set forth in subsection (a) above based on profitability or such other reasons that they deem appropriate, provided that such increase or decrease does not exceed 1% of Participants’ Covered Compensation for the applicable year. Moreover, designated officers of the Company may increase or decrease once each year the maximum dollar amounts set forth in subsection (a) above as they deem appropriate, provided that such increase or decrease does not exceed 50% of the dollar amount in effect for the previous year. Any increase or decrease under this subsection shall be effective before the end of the Plan Year to which said increase or decrease applies.

(f)		Matching Contributions shall be made by the Employers following the last day of the Plan Year, but in no event later than the due date of the Company’s tax return (including extensions) for the Plan Year ending in the taxable year of the Company to which such Matching Contributions relate.

(g)		An individual must be an Employee of an Employer or an Affiliate (and not a Bargaining Unit Employee on Seasonal Layoff status) on the last day of the Plan Year to which a Matching Contribution relates to share in such Matching Contribution. However, Participants who cease to be Employees during the Plan Year by reason of death,

		Disability or Retirement shall be eligible to share in the Matching Contribution for that Plan Year.

(h)		The Matching Contribution otherwise payable on behalf of a Participant under this Section 4.1 for any Plan Year (or portion thereof) shall be reduced by the matching contribution (if any) made on behalf of the Participant under the Xcel Energy Employee Stock Ownership Plan for the same Plan Year (or portion thereof).

4.2		Discretionary Profit Sharing Contribution

(a)		Subject to the limitations set forth herein, the Employers may make a Profit Sharing Contribution to the ESOP Component or the Non-ESOP Component of the Plan for any Plan Year. The Board of Directors of the Company, in its discretion, shall determine the amount of the Profit Sharing Contribution. The Board of Directors of the Company also shall determine, in its discretion, whether the Profit Sharing Contribution shall be made under the ESOP Component of the Plan either in the form of Company Stock or in cash to be invested in Company Stock, or whether the Profit Sharing Contribution shall be made in cash under the Non-ESOP Component of the Plan.

(b)		Profit Sharing Contributions to the Plan shall be made by the due date of the Company’s tax return (including extensions) for the Plan Year ending in the taxable year of the Company to which such Profit Sharing Contributions relate.

(c)		The Employers shall make any Profit Sharing Contributions under the Non-ESOP Component in the form of cash. The Employers shall make any Profit Sharing Contributions under the ESOP Component in the form of Company Stock or cash to be invested in Company Stock, as determined by the Company in its sole discretion.

(d)		An individual must be an Employee of an Employer or an Affiliate on the last day of a Plan Year to which a Profit Sharing Contribution relates in order to share in such Profit Sharing Contribution. However, Participants who cease to be Employees during the Plan Year by reason of death, Disability or Retirement shall be eligible to share in the Profit Sharing Contribution for that Plan Year. In its resolutions declaring a Profit Sharing Contribution under the Plan, the Company may impose other conditions upon eligibility to share in such Profit Sharing Contribution, including without limitation a provision that the Profit Sharing Contribution be allocated only to Participants at a certain division or location.

(e)		Participants eligible to receive an allocation of the Profit Sharing Contribution shall share in such contribution in proportion to their relative amounts of Covered Compensation.

4.3		Payment of Acquisition Loans; Company Loan Contributions

(a)		For each Plan Year during which an Acquisition Loan is outstanding, the Trustee may use any Employer contributions made for such Plan Year under the ESOP Component of the Plan to make principal and interest payments then due on the Acquisition Loan(s) outstanding at the end of such Plan Year.

(b)		Subject to the conditions and limitations of the Plan, if, as of the end of the applicable Plan Year: (1) an Acquisition Loan remains outstanding and (2) the sum of dividends applied for the Plan Year pursuant to Section 8.4 and any contributions applied for the Plan Year pursuant to subsection (a) above is insufficient to enable the Trustee to pay the principal and interest due under such Acquisition Loan for such Plan Year, then the Company shall make an additional “Company Loan Contribution” to the Trustee for that Plan Year, in an aggregate amount equal to the amount of the insufficiency described herein. Any Company Loan Contribution under the Plan for any Plan Year shall be paid to the Trustee in cash on the last day of the applicable Plan Year or as soon as practicable after the end of such Plan Year.

4.4		Reinstatements

In addition to the contributions otherwise provided for in this Article 4, the Employers shall contribute such additional amounts as are required for reinstatement of any accounts in accordance with Section 10.6.

A Participant’s Combined Account shall at all times be fully vested and nonforfeitable except as specified in any Supplement to the Plan.

(a)		Excess Elective Deferrals under Section 6.2,

(b)		If required to satisfy Code Section 401(k) because the requirements of Code Section 401(k)(12) have not been met, Excess Contributions under Section 6.3, and

(c)		If required to satisfy Code Section 401(m) because the requirements of Code Section 401(m)(11) have not been met, Excess Aggregate Contributions under Section 6.4.

The amount of Excess Contributions shall be reduced by Excess Elective Deferrals previously distributed to a Participant for the Participant’s taxable year ending with or within the applicable Plan Year.

6.2		Limitation on Elective Deferrals

(a)		Notwithstanding any provision of the Plan to the contrary, Elective Deferrals made on behalf of a Participant in any calendar year under the Plan and all plans, contracts or arrangements maintained by the Company, a Related Company, or any other employer shall not exceed $11,000, as such amount may be adjusted in accordance with Code Section 402(g), the provisions of which are hereby incorporated by reference. Elective Deferrals in excess of the foregoing limitation shall be referred to in this Section as “Excess Elective Deferrals.” In the event a Participant has Excess Elective Deferrals attributable solely to the Participant’s Elective Deferrals under this Plan in any calendar year, the Participant’s Excess Elective Deferrals, increased by any income and decreased by any losses attributable thereto, shall be distributed to the Participant no later than April 15 of the following calendar year.

(b)		If a Participant also participates in other plans, contracts or arrangements subject to the limitation set forth in Section 6.2(a) above and has made Excess Elective Deferrals for any calendar year under this Plan when combined with all other such plans, contracts or arrangements, the Participant may notify the Administrator in writing no later than March 1 of the following calendar year of the amount of Elective Deferrals made under the Plan that constitute Excess Elective Deferrals. Upon such timely notification by a Participant, the Plan shall distribute such Excess Elective Deferrals, increased by any income and decreased by any losses attributable thereto, no later than the April 15 of such following calendar year; provided, however, that in no event may a Participant receive from the Plan a distribution of Excess Elective Deferrals for a calendar year in an amount exceeding the Participant’s total Elective Deferrals under the Plan for such calendar year.

(c)		The determination of the income and loss allocable to Excess Elective Deferrals shall be made in accordance with Code Section 402(g), as they may be amended from time to

		time. Income and loss allocable to the period between the end of the applicable Plan Year and the date of distribution shall be disregarded.

(d)		The amount of Excess Elective Deferrals that may be distributed to a Participant for a calendar year pursuant to this Section 6.2 shall be reduced by any Excess Contributions (as defined in Section 6.3(d)) previously distributed with respect to the Participant for the Plan Year beginning with or within such calendar year. In the event of a reduction under this Section 6.2(d), the amount of Excess Contributions included in the gross income of the Participant and reported as a distribution of Excess Contributions shall be reduced by the amount of the reduction under this Section 6.2(d).

(e)		Notwithstanding any other provision of the Plan, to the extent that Excess Elective Deferrals are distributed to a Participant under this Section 6.2, all corresponding Matching Contributions (increased by any income and decreased by any losses attributable thereto), if any, shall be forfeited at the time of such distribution and shall be applied to reduce the Employers’ future contributions to the Plan.

(f)		Excess Elective Deferrals and income allocable thereto that are distributed to a Participant in accordance with this Section 6.2 shall not be treated as an Annual Addition to the Participant’s Combined Account for purposes of the limitations set forth in Section 6.5.

6.3		ADP Limitation

(a)		Notwithstanding any other provision of the Plan, in each Plan Year, the ADP for the group of eligible HCEs shall satisfy one of the following tests:

	(1)		The ADP for the group of eligible HCEs for that Plan Year shall not exceed the ADP for the group of eligible NHCEs for that same Plan Year multiplied by 1.25, or

	(2)		The ADP for the group of eligible HCEs for that Plan Year shall not exceed the ADP for the group of eligible NHCEs for that same Plan Year multiplied by 2.0, and shall not exceed the ADP for the group of eligible NHCEs by more than 2 percentage points.

		The determination of whether the Plan satisfies the requirements of this Section 6.3(a) shall be made in accordance with Code Section 401(k)(3) (including Treasury Regulations Section 1.401(k)-1(b)), as they may be amended from time to time, the provisions of which are hereby incorporated by reference and shall override the provisions of the Plan to the extent inconsistent therewith. Bargaining Unit Employees shall be disaggregated for testing purposes as required by the Code. In addition, the ESOP Component of the Plan shall be disaggregated from the Non-ESOP Component of the Plan.

(b)		If, during a Plan Year, it is determined that an HCE’s Actual Deferral Ratio would cause the Plan to exceed the maximum permissible ADP specified in Section 6.3(a) above for

		the Plan Year, then the Administrator may, to the extent the Administrator deems it reasonably necessary to prevent the Plan from failing the requirements of Section 6.3(a), reduce the Pre-Tax Contributions of such eligible HCEs in accordance with rules established and uniformly applied by the Administrator that are consistent with the Code.

(c)		In the event that the Plan fails to satisfy the requirements set forth in Section 6.3(a) above for any Plan Year, then the “Excess Contributions” (determined as set forth in Section 6.3(d)) and any income or loss allocable thereto shall be distributed as set forth in Section 6.3(e) within two and one-half months following the Plan Year for which such Excess Contributions were made, but in no event later than the close of the Plan Year following the Plan Year in which such Excess Contributions were made. The determination of the income and loss allocable to Excess Contributions shall be made in accordance with Code Section 401(k). Income and loss allocable to the period between the end of the applicable Plan Year and the date of distribution shall be disregarded.

(d)		Excess Contributions shall mean, with respect to any Plan Year, the excess of:

	(1)		the aggregate amount of Pre-Tax Contributions taken into account in computing the ADP of eligible HCEs for such Plan Year, over

	(2)		the maximum amount of Pre-Tax Contributions permitted by Section 6.3(a). Such maximum amount of Pre-Tax Contributions shall be determined by reducing (not distributing) the Pre-Tax Contributions of eligible HCEs as follows:

	(A)		The Pre-Tax Contributions made by the eligible HCE who has the highest Actual Deferral Ratio shall be reduced by the amount required to cause such eligible HCE’s Actual Deferral Ratio to equal the next highest Actual Deferral Ratio of an eligible HCE.

	(B)		If neither of the tests in Section 6.3(a) is satisfied after such reduction, the Pre-Tax Contributions made by the eligible HCEs who then have the highest Actual Deferral Ratio (including those eligible HCEs whose Pre-Tax Contributions were reduced under (A) above) shall be reduced by the amount required to cause such eligible HCEs’ Actual Deferral Ratios to equal the next highest Actual Deferral Ratio of an eligible HCE.

	(C)		If neither of the tests in Section 6.3(a) is satisfied after such reduction, this method of reduction shall be repeated one or more additional times until one of the tests is satisfied.

(e)

The amount of Excess Contributions to be distributed on behalf of each eligible HCE for the Plan Year shall be equal to the amount of reduction determined as follows:

(1)

The Pre-Tax Contributions made by the eligible HCE who has the highest dollar amount of such contributions shall be reduced by the amount required to cause such eligible HCE’s Pre-Tax Contributions to equal the next highest dollar amount contributed by eligible HCEs.

	(2)		If any Excess Contributions remain after performing (1), then the eligible HCEs who have the next highest dollar amount of Pre-Tax Contributions (including those eligible HCEs reduced under (1) above) shall be reduced by the amount required to cause such eligible HCEs’ Pre-Tax Contributions to equal the next highest dollar amount contributed by eligible HCEs.

	(3)		If any Excess Contributions remain after performing (1) and (2), this method of reduction shall be repeated one or more additional times until no Excess Contributions remain.

		Provided, however, if the total amount of reduction determined in (1), (2) and (3) would be greater than the amount of Excess Contributions, then the final reduction amount shall be decreased so that the total amount of reductions equals the amount of Excess Contributions.

(f)		The amount of Excess Contributions to be distributed under this Section 6.3 with respect to a HCE for a Plan Year shall be reduced by the amount of Excess Elective Deferrals previously distributed to the HCE for the calendar year ending with or within the Plan Year.

(g)		Notwithstanding any other provision of the Plan, to the extent that Excess Contributions are distributed to a Participant under this Section 6.3, all corresponding Matching Contributions (increased by any income and decreased by any losses attributable thereto), if any, shall be forfeited at the time of such distribution and applied to reduce the Employers’ future contributions to the Plan.

(h)		If neither of the tests set forth in Section 6.3(a) has been satisfied and a distribution of Excess Contributions has not been made pursuant to Section 6.3(c), then the Employers shall make a discretionary contribution for the applicable Plan Year. Only those Participants who were not eligible HCEs for that Plan Year and for whom Pre-Tax Contributions were made pursuant to Article 3 for such Plan Year shall share in such allocation. This allocation shall be made first to the Participant with the least amount of Testing Compensation and then, in ascending order of Testing Compensation, to other Participants. The amount of the Employer discretionary contribution to be so allocated shall be that amount required to cause the Plan to satisfy either of the tests set forth in Section 6.3(a) for the Plan Year. Such Employer discretionary contribution shall be treated as an elective contribution subject to Treasury Regulations Section 1.401(k)-1(b)(5), which is incorporated herein. The Employer discretionary contribution that is so allocated to a Participant shall be allocated to that Participant’s Combined Account for the Plan Year with respect to which it is made. Employer discretionary contributions under this paragraph shall comply with the distribution requirements of Code Section 401(k)(2)(B).

6.4		ACP Limitation

(a)		Notwithstanding any other provision of the Plan, in each Plan Year, the ACP for the group of eligible HCEs shall satisfy one of the following tests:

	(1)		The ACP for the group of eligible HCEs shall not exceed the ACP for the group of eligible NHCEs for that same Plan Year multiplied by 1.25, or

	(2)		The ACP for the group of eligible HCEs shall not exceed the ACP for the group of eligible NHCEs for that same Plan Year multiplied by 2.0, and shall not exceed the ADP for the group of eligible NHCEs by more than 2 percentage points.

		The determination of whether the Plan satisfies the requirements of this Section 6.4(a) shall be made in accordance with Code Section 401(m) (including, without limitation, Treasury Regulations Section 1.401(m)-1(b)), as they may be amended from time to time, the provisions of which are hereby incorporated by reference and shall override the provisions of the Plan to the extent inconsistent therewith. Bargaining Unit Employees shall be disaggregated for testing purposes as required by the Code. In addition, the ESOP Component of the Plan shall be disaggregated from the Non-ESOP Component of the Plan.

(b)		If, during a Plan Year, it is determined that a HCE’s Actual Contribution Ratio would cause the Plan to exceed the maximum permissible ACP specified in Section 6.4(a) above for the Plan Year, then the Administrator may, to the extent necessary to prevent the Plan from failing the requirements of Section 6.4(a), reduce the After-Tax Contributions of such eligible HCEs in accordance with rules established and uniformly applied by the Administrator that are consistent with the Code.

(c)		In the event that the Plan exceeds the limitations set forth in Section 6.4(a) above for any Plan Year, then the “Excess Aggregate Contributions” (determined as set forth in Section 6.4(d)) and any income or loss allocable thereto shall be distributed as set forth in Section 6.4(e) within two and one-half months following the Plan Year for which such Excess Aggregate Contributions were made, but in no event later than the close of the Plan Year following the Plan Year in which such Excess Aggregate Contributions were made. The determination of the income and loss allocable to Excess Aggregate Contributions shall be made in accordance with Code Section 401(m). Income and loss allocable to the period between the end of the applicable Plan Year and the date of distribution shall be disregarded.

(d)		Excess Aggregate Contributions shall mean, with respect to any Plan Year, the excess of:

	(1)		the aggregate amount of Matching Contributions and After-Tax Contributions taken into account in computing the ACP of eligible HCEs for such Plan Year, over

	(2)		the maximum amount of Matching Contributions and After-Tax Contributions permitted by Section 6.4(a). Such maximum amount of Matching Contributions and After-Tax Contributions shall be determined by reducing (not distributing) eligible HCEs’ contributions as follows:

(A)

The After-Tax Contributions and Matching Contributions for the eligible HCE who has the highest Actual Contribution Ratio shall be reduced by

			the amount required to cause such eligible HCE’s Actual Contribution Ratio to equal the next highest Actual Contribution Ratio of an eligible HCE.

	(B)		If neither of the tests in Section 6.4(a) is satisfied after such reduction(s), the After-Tax Contributions and Matching Contributions for eligible HCEs who then have the highest Actual Contribution Ratios (including those reduced under (A) above) shall be reduced by the amount required to cause such eligible HCEs’ Actual Contribution Ratios to equal the next highest Actual Contribution Ratio of an eligible HCE.

	(C)		If neither of the tests in Section 6.4(a) is satisfied after such reductions, this method of reduction shall be repeated one or more additional times until one of the tests is satisfied.

(e)

The amount of Excess Aggregate Contributions to be distributed on behalf of each eligible HCE for the Plan Year shall be equal to the amount of reduction determined as follows:

	(1)		The After-Tax Contributions of the eligible HCE who has the highest dollar amount of such contributions shall be reduced by the amount required to cause such eligible HCE’s After-Tax Contributions to equal the next highest dollar amount of After-Tax Contributions allocated to eligible HCEs.

	(2)		If any Excess Aggregate Contributions remain after performing (1), then the eligible HCEs who have the next highest dollar amount of After-Tax Contributions (including those reduced under (1) above) shall be reduced by the amount required to cause such eligible HCEs’ After-Tax Contributions to equal the next highest dollar amount allocated to eligible HCEs.

	(3)		If any Excess Aggregate Contributions remain after performing (1) and (2), this method of reduction shall be repeated one or more additional times until no Excess Aggregate Contributions remain or until HCE After-Tax Contributions have been reduced to zero.

	(4)		If any Excess Aggregate Contributions remain after HCE After-Tax Contributions have been reduced to zero, the Matching Contributions of the eligible HCE who has the highest dollar amount of Matching Contributions shall be reduced by the amount required to cause such eligible HCE’s Matching Contributions to equal the dollar amount of Matching Contributions allocated to the eligible HCE with the next highest dollar amount of Matching Contributions.

	(5)		If any Excess Aggregate Contributions remain after performing (4), this method of reduction shall be repeated one or more additional times until no Excess Aggregate Contributions remain.

Provided, however, if the total amount of reduction determined in (1) through (5) would be greater than the amount of Excess Aggregate Contributions, then the final reduction

		amount shall be decreased so that the total amount of reductions equals the amount of Excess Aggregate Contributions.

(f)		If neither of the tests set forth in Section 6.4(a) has been satisfied and a distribution of Excess Aggregate Contributions has not been made pursuant to Section 6.4(c), then the Employers shall make an additional matching contribution for the applicable Plan Year. Only those Participants who were not eligible HCEs for that Plan Year and who were entitled to receive an Employer matching contribution shall share in such allocation. This allocation shall be made first to the Participant with the least amount of Testing Compensation and then, in ascending order of Testing Compensation, to other Participants. The amount of the Employer matching contribution to be so allocated shall be that amount required to cause the Plan to satisfy either of the tests set forth in Section 6.4(a) for the Plan Year. The Employer matching contribution that is so allocated to a Participant shall be credited to that Participant’s Combined Account for the Plan Year with respect to which it is made. Employer matching contributions under this paragraph shall comply with the distribution requirements of Code Section 401(k)(2)(B).

6.5		Maximum Limitations on Annual Additions

(a)		Notwithstanding any Plan provision to the contrary, Annual Additions credited under the Plan and all other defined contribution plans maintained by the Company or a Related Company with respect to each Participant for any Limitation Year shall not exceed the lesser of:

	(1)		$40,000, as adjusted from time to time by the Commissioner for increases in the cost of living in accordance with Code Section 415, or

	(2)		100% of the Participant’s Testing Compensation for such Limitation Year.

(b)		In the event that Employer contributions are applied to the repayment of an Acquisition Loan and shares of Company Stock are released from the Unreleased Share Account and allocated to Participants’ ESOP Accounts, each Participant’s Annual Addition for a Limitation Year based on the allocated shares of Company Stock shall be calculated as the lesser of: (1) the amount of contributions credited to the Participant’s Combined Account, or (2) the fair market value of Company Stock credited to the Participant’s Combined Account.

(c)		If the Annual Additions credited under the Plan with respect to a Participant for any Limitation Year exceed the limitations of Section 6.5(a) as a result of the allocation of forfeitures, a reasonable error in estimating the Participant’s Testing Compensation, a reasonable error in determining the amount of Elective Deferrals that the Participant may contribute or any other circumstance permitted pursuant to the regulations and rulings promulgated under Code Section 415, then the Participant’s Annual Additions shall be adjusted in the following sequence, but only to the extent necessary to satisfy the limitations of Section 6.5(a):

	(1)		After-Tax Contributions made by the Participant for the Limitation Year which constitute excess Annual Additions, and any income allocable thereto, shall be distributed to the Participant.

	(2)		Pre-Tax Contributions made by the Participant for the Limitation Year which constitute excess Annual Additions and which are not eligible to be matched by the Employers under Section 4.1 shall be distributed to the Participant along with income allocable thereto.

	(3)		Pre-Tax Contributions made by the Participant for the Limitation Year which constitute excess Annual Additions and which are eligible to be matched by the Employers under Section 4.1 shall be distributed to the Participant along with income allocable thereto. To the extent matched Pre-Tax Contributions are distributed, any Matching Contributions made with respect thereto shall be forfeited.

	(4)		If, after the adjustments in subsections (1) through (3), the Annual Additions with respect to the Participant for the Limitation Year still exceed the limitations set forth in Section 6.5(a) above, such excess amounts shall be used to reduce Employer contributions for the Participant for the next Limitation Year (and succeeding Limitation Years, as necessary) if the Participant is covered by the Plan at the end of the Limitation Year. If the Participant is not covered by the Plan as of the end of the Limitation Year, then the excess amounts shall be held unallocated in a suspense account for the Limitation Year and allocated and reallocated in the next Limitation Year to all of the remaining Participants, but only to the extent that such allocation or reallocation would not cause the Annual Additions to such Participants to violate the limitations of Code Section 415 for such Limitation Year. If a suspense account is in existence at any time during a Limitation Year, all amounts in the suspense account must be allocated or reallocated before any Employer contributions or Participant contributions which would constitute Annual Additions may be made to the Plan for the Limitation Year (and succeeding Limitation Years, as necessary) in accordance with the rules set forth in Treasury Regulations Section 1.415-6(b)(6)(i). If a suspense account is in effect, it shall share in investment gains or losses.

(d)		If a Participant also participates in any other defined contribution plan or plans maintained by the Company or a Related Company which are subject to the limitation set forth in Section 6.5(a) above and, as a result, such limitation would be exceeded with respect to the Participant in any Limitation Year, any reduction or other permissible method necessary to ensure compliance with such limitation first shall be made under such other plan or plans in accordance with the terms thereof. If, after such correction, a further reduction is necessary to ensure that the limitation set forth in Section 6.5(a) above is not exceeded, Annual Additions credited under the Plan with respect to the Participant shall be reduced in accordance with the provisions of this Section 6.5.

(e)		If no more than one-third of Employer contributions to the Plan for a year are allocated to HCEs, the limitations imposed by this Section 6.5 and Code Section 415 shall not apply to:

	(1)		forfeitures of Company Stock to the extent such Company Stock was acquired with the proceeds of an Acquisition Loan, or

	(2)		Employer contributions that are deductible under Code Section 404(a)(9)(B) and charged against the Participant’s Combined Account.

(f)		The determination of whether the Plan satisfies the requirements of this Section 6.5 with respect to a Participant shall be made in accordance with Code Section 415, the provisions of which are hereby incorporated by reference and shall override the provisions of the Plan to the extent inconsistent therewith.

6.6		Deduction Limitation

(a)		In no event shall the contributions for any Plan Year, either separately or when combined with the contributions of the Employers under all other qualified retirement plans of the Employers, exceed the amount allowable as a deduction for Federal income tax purposes.

(b)		If any contribution required to be made pursuant to Article 4 would cause the limitation of subsection (a) above to be exceeded in any Plan Year, then such contribution shall not be made and, to the extent not made, any Participant’s agreement to reduce his cash remuneration in consideration thereof shall be deemed null and void.

7.1		Trust Fund

(a)		The Fund shall consist of all Plan assets held by the Trustee from time to time.

(b)		The Employers shall have no right, title or interest in the assets of the Fund, except as may be provided in a pledge agreement entered into between the Company and the Trustee in connection with an Acquisition Loan. No part of the assets of the Fund at any time will revert or will be repaid to the Employers, directly or indirectly, except as follows:

	(1)		A contribution that is made by an Employer by a mistake of fact may be returned to the Employer within one year after the payment of the contribution.

	(2)		A contribution that is conditioned upon its deductibility under Code Section 404 may be returned to an Employer, to the extent that the contribution is disallowed as a deduction, within one year after such disallowance.

	(3)		If there is a default on an Acquisition Loan, the Company may exercise its rights under the aforementioned pledge agreement with respect to the shares of Company Stock subject to the pledge agreement (including, but not limited to, the sale of pledged shares, the transfer of pledged shares to the Company, and the registration of pledged shares in the Company’s name).

		If a contribution is to be returned to an Employer pursuant to subsection (1) or (2) above, attributable earnings shall not be returned, but losses attributable to the contribution shall reduce the amount returned to the Employer.

7.2		Investment Funds in the Non-ESOP Component and the ESOP Component

(a)		The Non-ESOP Component of the Fund shall be subdivided into Investment Funds, which shall include a broad range of investment alternatives within the meaning of Section 404(c) of ERISA, and shall provide each Participant or Beneficiary a reasonable opportunity to materially affect the potential return on amounts in such Participant’s Non-ESOP Accounts and the degree of risk to which such amounts are subject. The Investment Funds shall give each Participant or Beneficiary a reasonable opportunity to choose from at least three investment alternatives:

	(1)		each of which is diversified,

	(2)		each of which has materially different risk and return characteristics,

	(3)		which, in the aggregate, enable the Participant or Beneficiary, by choosing among them, to achieve a portfolio with aggregate risk and return characteristics at any point within the range normally appropriate for the Participant or Beneficiary, and

(4)

each of which, when combined with investments in the other alternatives, tends to minimize through diversification the overall risk to a Participant’s or Beneficiary’s portfolio.

(b)		One of the Investment Funds under the Non-ESOP Component shall be a fund invested primarily in Company Stock, which investment fund shall be referred to herein as the Non-ESOP Company Stock Fund.

(c)		One of the Investment Funds under the Non-ESOP Component shall be a brokerage account through which a Participant can invest in one or more specified mutual funds. If a Participant elects this Investment Fund, his account shall be charged the commissions and other costs associated with the brokerage account.

(d)		The portion of the Fund constituting the ESOP Component shall be invested primarily in Company Stock. Company Stock allocated to Participants’ ESOP Accounts in the ESOP Component shall be held in an Investment Fund referred to herein as the ESOP Company Stock Fund.

(e)		Notwithstanding the foregoing, the Fund may retain such investments of another nature or cash balances as may be needed in order to effect distributions or to meet other administrative requirements of the Plan.

7.3		Participants’ Designation of Investments Funds

(a)		Each Participant shall be entitled to designate the percentage (in multiples of 1%) of his future Pre-Tax Contributions, After-Tax Contributions and Rollover Contributions that shall be allocated to each Investment Fund in the Non-ESOP Component. A Participant shall make a single designation to apply to the total of Pre-Tax and After-Tax Contributions, and a separate designation to apply to any Rollover Contributions made under the Plan. If a Participant fails to make any such designation, the Participant’s contributions shall be invested in the Investment Fund specified by the Administrator.

(b)		Profit Sharing Contributions and Matching Contributions made on a Participant’s behalf under the Non-ESOP Component of the Plan shall be invested initially in the same manner as elected by the Participant relative to his Pre-Tax and After-Tax Contributions or, in the absence of such an election, in the Investment Fund specified by the Administrator.

(c)		Each Participant shall be entitled to transfer a percentage (in multiples of 1%) of his non-ESOP Accounts held in an Investment Fund to any of the other available Investment Funds. The Administrator may prescribe rules limiting the availability of an Investment Fund to specified Non-ESOP Accounts (or portions thereof).

(d)		The designation of the allocation of contributions and transfers to the Investment Funds is subject to the procedural rules established by the Administrator from time to time, including the following:

	(1)		Designations and transfers shall be made or changed upon such advance notice, and in such form and manner, as the Administrator shall prescribe by rule established and applied on a uniform and nondiscriminatory basis to all Participants similarly situated.

	(2)		Designations made under this Section 7.3 regarding the investment of contributions shall continue in effect until changed by filing a new designation in accordance with this Section 7.3.

(e)		A Participant who has elected to diversify a portion of his ESOP Accounts by transfer to the Non-ESOP Component shall be permitted to make transfers among the available Investment Funds in the same manner as such transfers are made with respect to the Participant’s Non-ESOP Accounts.

7.4		Investments in Company Stock under the ESOP Component

Employer contributions under the ESOP Component of the Plan shall be invested in shares of Company Stock. In addition, certain participant and company contributions made under an employee stock ownership feature of a Predecessor Plan shall be invested in Company Stock under the ESOP Component of the Plan.

Each Participant who has attained age 55 years (a “Qualified Participant”) may elect during each of the Participant’s Qualified Election Periods (as defined below) to diversify a portion of the Qualified Participant’s ESOP Account balances eligible for diversification (as described below), by: (i) transferring the applicable amount to one or more of the available Investment Funds in the Non-ESOP Component, or (ii) receiving a distribution of the applicable amount, which distribution shall be paid in cash unless the Qualified Participant elects to receive distribution in shares of Company Stock.

(a)		The portion of a Qualified Participant’s ESOP Account balances subject to diversification shall equal 25 percent of the Participant’s ESOP Accounts (excluding any ESOP Predecessor Accounts attributable to the Participant’s after-tax contributions to a Predecessor Plan). However, for the Plan Year in which the Participant attains age 60 years, “50 percent” shall replace “25 percent” in the next preceding sentence, and beginning with the Plan Year in which the Participant attains age 61 years, “100 percent” shall replace “25 percent” in the next preceding sentence. In any one election, a Qualified Participant may diversify the entire remaining portion of his ESOP Account balances eligible for diversification or a part of such diversifiable portion equal to any whole percentage of five percent or more of his ESOP Account balances eligible for diversification.

(b)		For purposes of this Section, a “Qualified Election Period” means: (1) the 90-day period immediately following the last day of the first Plan Year in which the Participant becomes a Qualified Participant, and (2) the 90-day period immediately following the last day of each subsequent Plan Year, and (3) solely with respect to the Plan Year in which

		the Participant attains age 61, each Valuation Date within the Plan Year. Any election made in accordance with subsection (a) next above with respect to any Qualified Election Period shall be implemented no later than 90 days after the end of such Qualified Election Period, or as soon as administratively feasible thereafter, and shall be based on the Participant’s ESOP Account balances eligible for diversification as of the most recent Valuation Date.

(c)		The provisions of this Section shall not apply to any Participant if the value of the participant’s ESOP Accounts eligible for diversification (determined as of the regular Valuation Date immediately preceding the first day on which the Participant would otherwise be entitled to make an election under this Section) is $500 or less.

7.6		Beneficiaries

A Beneficiary who is entitled to installment or other deferred distribution of any interest in the Fund shall be entitled to designate the portion of the Non-ESOP Accounts to be allocated to each Investment Fund in the same manner as prescribed above in this Article 7, as if he were a Participant.

8.1		Valuation of Investment Funds and Adjustment of Non-ESOP Accounts

(a)		A Participant’s interest in his Non-ESOP Accounts as of any Valuation Date shall consist of the sum of the values of his then interest in each Investment Fund in the Non-ESOP Component of the Plan.

(b)		Unit values shall be established for the Investment Funds, and Participants’ Non-ESOP Accounts shall be maintained in terms of such unit values, all in accordance with such rules and procedures as the Administrator shall establish. The value of a Participant’s interest in each Investment Fund (or any portion thereof) at any time shall be an amount equal to the then value of a unit in such Investment Fund (or any portion thereof) multiplied by the number of units then credited to the Participant.

(c)		Each Participant’s interest in each Investment Fund shall be adjusted as of each Valuation Date to reflect his proportionate share of the total value of such Investment Fund, based upon his balance in such Investment Fund as of the immediately preceding Valuation Date, as adjusted for subsequent additions thereto, distributions or withdrawals therefrom, transfers from or to any other Investment Fund, and reductions for the payment of Plan expenses, all in such manner as the Administrator shall determine in its sole discretion.

(d)		Any withdrawals or distributions from a Participant’s Non-ESOP Accounts in the Fund shall be made among the Investment Funds in proportion to the balance of his interest in each separate Investment Fund as of the Valuation Date on which authorized withdrawal or distribution directions are received by the Trustee from the Administrator (or as soon as administratively feasible thereafter).

8.2		Adjustment of ESOP Accounts

(a)		A Participant’s interest in his ESOP Accounts as of any Valuation Date shall consist of his then interest in the ESOP Company Stock Fund.

(b)		Unit values shall be established for the ESOP Company Stock Fund. Each Participant’s ESOP Accounts shall set forth the Participant’s interest in the ESOP Company Stock Fund in terms of such units, all in accordance with such rules and procedures as the Administrator shall establish. The value of a Participant’s interest in the ESOP Component at any time shall equal the then value of a unit in the ESOP Company Stock Fund multiplied by the number of such units then credited to the Participant.

(c)		Each Participant’s interest in the ESOP Company Stock Fund shall be adjusted as of each Valuation Date to reflect his proportionate share of the total value of the ESOP Company Stock Fund, based upon his balance in the ESOP Company Stock Fund as of the immediately preceding Valuation Date, as adjusted for subsequent additions thereto,

		distributions or withdrawals therefrom, and reductions for the payment of Plan expenses, all in such manner as the Administrator shall determine in its sole discretion.

(d)		In the event the Trustee receives shares of Company Stock attributable to stock dividends, stock splits or any reorganization or recapitalization of the Company, such shares, to the extent attributable to the ESOP Component, shall be credited to the ESOP Component so that Participants’ relative interests therein immediately after any such stock dividend, split, reorganization or recapitalization are the same as such interests immediately before such event.

(e)		The Administrator shall maintain or cause to be maintained records as to the cost of shares of Company Stock acquired or transferred by or within the Fund in accordance with the provisions of this Article 8.

8.3		Transfer of Shares From Unreleased Share Account to ESOP Accounts

(a)		At the direction of the Administrator, the Trustee shall use the following to repay an Acquisition Loan:

	(1)		Cash dividends (subject to the provisions of Section 8.4), proceeds from the sale of stock dividends described in subsection (c) below, and any investment income attributable to any such dividends; and

	(2)		To the extent dividends described in (a) are insufficient to make a scheduled Acquisition Loan repayment, Employers’ contributions under the ESOP Component of the Plan (including any Company Loan Contributions under Section 4.3(b)), and any investment income attributable to such contributions.

(b)		The repayment of an Acquisition Loan shall cause a transfer of shares of Company Stock from the Unreleased Share Account to Participants’ ESOP Accounts. The number of shares to be transferred shall be determined by multiplying the number of shares in the Unreleased Share Account by a fraction, the numerator of which is the principal and interest payments during the applicable Plan Year and the denominator of which is the sum of the numerator plus the total projected principal and interest payments during the remainder of the term of the Acquisition Loan. If the requirements of Treasury Regulations Section 54.4975-7(b)(8)(ii) are satisfied, at the discretion of the Administrator, the phrase “principal and interest” in the preceding sentence shall be replaced by the word “principal.”

(c)		Stock dividends attributable to shares of Company Stock in the Unreleased Share Account shall be sold and the proceeds shall be applied to repayment of the Acquisition Loan.

(d)		Shares released under this Section shall be applied first to satisfy the Matching Contribution requirement specified in Section 4.1. Any released shares remaining after the Matching Contribution requirement has been satisfied shall be allocated as Profit Sharing Contributions pursuant to Section 4.2.

8.4		Dividends on Company Stock

(a)		Use of Dividends. The following rules shall apply with respect to cash dividends paid on Company Stock held under the Plan:

	(1)		dividends paid on Company Stock held in the Unreleased Share Account shall be applied to the repayment of an Acquisition Loan to the extent directed by the Company;

	(2)		no other dividends paid on shares of Company Stock shall be used to repay any Acquisition Loan; and

	(3)		shares of Company Stock acquired due to dividends paid on Company Stock held in the Unreleased Share Account that are not used to repay an Acquisition Loan shall be allocated as Matching Contributions in the manner described in Section 4.1.

(b)		Cash Payment Election. Notwithstanding anything in subsection (a) above to the contrary, cash dividends paid on shares of Company Stock held in Participants’ ESOP Accounts shall not be reinvested in Company Stock if the Participant (or his Beneficiary) elects (or is deemed to have elected) a cash payment of the dividend. The Administrator shall establish rules and procedures for Participants’ elections under this Section, which rules may include, without limitation, a minimum dividend amount for cash payment elections.

8.5		Multiple Acquisition Loans

If more than one Acquisition Loan to the Trustee becomes outstanding at any time, the foregoing provisions of this Article 8 and other provisions of the Plan shall be modified by the Administrator to the extent it deems necessary or appropriate to reflect such additional Acquisition Loan or loans.

Proceeds with respect to Company Stock held in the Unreleased Share Account as a result of the sale or redemption of Company Stock or of distributions from the liquidation of the Company resulting from the sale or other disposition of substantially all of the Company’s assets shall be, to the extent permitted under applicable law, first applied to repayment of any outstanding Acquisition Loan with respect to such Company Stock in the Plan Year in which such proceeds are received by the Fund. In the event such proceeds are so applied, any remaining proceeds shall be allocated in the Plan Year received by the Fund to Participants’ Combined Accounts pro rata based on Participants’ Covered Compensation.

9.1		Loans

(a)		A Participant who is an Eligible Employee, and any other Participant or Beneficiary who is a party in interest as defined in ERISA Section 3(14), may apply to the Administrator to borrow from the Participant’s Combined Account, and the Administrator may direct the Trustee to permit such a loan distribution. Loans shall be made on a reasonably equivalent basis in accordance with the procedures, terms, conditions, limitations, and restrictions established by the Administrator and the rules of this Plan. Loans shall not be made available to HCEs, officers or shareholders in an amount greater than is made available to other Participants.

(b)		All loans shall be subject to the following terms and conditions:

(1)

A loan may be made in an amount which, when added to the outstanding balance of all prior loans to the Participant under the Plan and other plans of the Company and its Affiliates, does not exceed the least of:

	(i)		the highest outstanding balance of loans from such plans during the one-year period ending on the day before the date such loan was made, over

	(ii)		the outstanding balance of loans from such plans on the date on which such loan was made;

	(B)		one-half of the vested portion of the Participant’s Combined Account under the Plan; and

	(C)		the balance of the Participant’s Employee Pre-Tax Account, Employee After-Tax Account, Rollover Account, and Employer Cash Match Account.

	(2)		Each loan shall be evidenced by a promissory note. All loans shall be amortized in substantially level payments, made not less frequently than quarterly.

	(3)		Loans shall be repaid over a period of not less than one year nor more than five years; however, Principal Residence Loans may be repaid over a period of not more than fifteen years. For this purpose, a Principal Residence Loan is a loan that is made to a Participant to acquire any dwelling unit that, within a reasonable time, is to be used (determined at the time the loan is made) as the principal residence of the Participant. A Participant requesting a Principal Residence Loan for a term extending beyond five years shall provide copies of any documents relating to the purchase of such principal residence that the Administrator may

			deem necessary to verify that the proceeds of such loan will be used as specified above.

	(4)		The minimum loan amount shall be $1,000.

	(5)		Every loan made under these rules shall be secured by that portion of the Participant’s Combined Account balances which does not exceed 50% of the Participant’s vested Combined Account balances. This dollar amount shall be determined immediately after the origination of the loan. This security interest shall exist without regard to whether it is referenced in the loan documents. The Plan shall be permitted to realize on this collateral (as hereinafter provided) by any means including, but not limited to, offset. No other collateral shall be permitted or required.

	(6)		A loan shall bear a rate of interest equal to the prime rate in effect on the first business day of the month in which the loan request is approved, as published by The Wall Street Journal in its Money Rates column, plus one percent.

	(7)		Repayment by an individual who is actively employed by the Company or an Affiliate will be made by means of payroll deduction from the Participant’s salary. In those circumstances where loan repayment cannot be made by payroll deduction, the Administrator shall establish other loan repayment arrangements. A Participant may repay an outstanding loan in full at any time without penalty. A Participant may also make a partial prepayment of principal, in an amount not less than $1,000, pursuant to procedures established by the Administrator; provided, however, that the loan shall not be reamortized in the event of such a partial prepayment.

	(8)		A Participant may have no more than one loan outstanding from the Plan (and all other qualified plans maintained by the Company or an Affiliate) at any time. Notwithstanding the foregoing, in no event shall a Participant who has repaid a loan be permitted to receive another loan from the Plan for 30 days from the date of such repayment.

	(9)		Each new loan shall be subject to a loan origination fee, which shall be established by the Administrator and shall be charged to the Participant’s Combined Account when the loan is made. A reasonable annual administrative fee may be charged for each year that a loan is outstanding.

	(10)		Failure to pay any installment of interest or principal by the last day of the calendar quarter following the quarter in which the payment was due (or by the end of such shorter grace period as the Administrator may establish from time to time) shall constitute a default on the loan. Upon such default, the entire loan balance shall be declared to be in default to the extent required by applicable regulations. In the event of a default on a loan, foreclosure on the promissory note and application of the Participant’s Combined Account to satisfy the promissory note will occur as of the earliest date on which the Participant or

			Beneficiary is eligible to receive payment of benefits under the Plan attributable to the loan.

	(11)		If a loan remains unpaid 90 days after a Participant’s Termination of Employment for any reason, the total of the unpaid principal and interest shall be charged to the Participant’s Combined Account, and will be considered a payment to the Participant for purposes of the Plan. The death of the Participant shall terminate the loan, and the unpaid principal and interest due and owing on the death of the Participant’s death shall be offset against the Participant’s Combined Account. Notwithstanding the foregoing, if a former employee of New Century Energies, Inc. is receiving benefits under the Xcel Energy Inc. Merger-Related Severance Pay Plan for Non-Bargaining Unit Employees (the “Severance Pay Plan”), the former employee may elect to continue making loan repayments following his Termination of Employment pursuant to applicable provisions of the Severance Pay Plan.

	(12)		Loan repayments will be suspended under the Plan as permitted under Code Section 414(u)(4).

(c)		Proceeds for a Participant’s loan shall be taken from the Participant’s Non-ESOP Accounts, and from each separate Investment Fund, in the order specified by the Administrator. Repayments on loans shall be allocated among the Participant’s Non-ESOP Accounts in the order specified by the Administrator, and shall be reinvested in one or more Investment Funds pursuant to the Participant’s election under Article 3 in effect when each repayment is made, except as otherwise specified by the Administrator.

(d)		The Administrator may adopt additional written procedures with respect to Plan loans made pursuant to this Section 9.1, provided that such procedures do not conflict with the terms of the Plan or applicable law.

(e)		To the extent required by bankruptcy laws, loans shall be subject to stay, discharge, reinstatement and other matters.

9.2		Hardship Withdrawals

(a)		A Participant who is an Employee may apply in writing to the Administrator for a distribution, due to financial hardship, of all or a part of the Participant’s Employee Pre-Tax Account (excluding earnings thereon after 1988), Rollover Account, Employer Stock Match Account, and Employer Cash Match Account, as well as such ESOP Predecessor Plan Account balances as are specified in any applicable Supplement to the Plan. A hardship withdrawal shall be made only if such withdrawal is for an immediate and heavy financial need of the Participant as determined in accordance with subsection (b) below, and is deemed necessary to satisfy such financial need as determined in accordance with subsection (c) below. The determination by the Administrator of the existence of an immediate and heavy financial need and of the amount necessary to meet such need shall be made in a nondiscriminatory and uniform manner.

(b)

The determination by the Administrator of whether a Participant has an immediate and heavy financial need is to be made on the basis of all the relevant facts and circumstances, and must be for one of the reasons specified in subsections (1) through (4) below (and may include any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution). A financial need shall not fail to qualify as immediate and heavy merely because such need was reasonably foreseeable or voluntarily incurred by the Participant. To receive a hardship withdrawal, a Participant must submit a completed application form provided by the Administrator, and any additional written documentation necessary to establish to the satisfaction of the Administrator that such distribution is for:

	(1)		unreimbursed medical expenses described in Code Section 213(d) that are incurred by the Participant, the Participant’s spouse or dependents (as defined in Code Section 152), or necessary for such persons to obtain medical care described in Code Section 213(d);

	(2)		costs directly related to the purchase of a principal residence for the Participant (excluding mortgage payments);

	(3)		payment of tuition, related educational fees, and room and board for the next 12 months of post-secondary education for the Participant or for the Participant’s spouse or dependents (as defined in Code Section 152); or

	(4)		payments necessary to prevent the eviction of the Participant from his principal residence or to prevent foreclosure on the mortgage of the Participant’s principal residence.

(c)

A hardship withdrawal made pursuant to this Section 9.2 will be deemed to be necessary to satisfy an immediate and heavy financial need of a Participant only if:

	(1)		the withdrawal is not in excess of the amount of the Participant’s immediate and heavy financial need (including any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from such distribution); and

	(2)		the Participant has obtained all distributions (other than hardship withdrawals), all nontaxable loans currently available under all plans maintained by the Company and any Affiliate, and all distributions of dividends available under Section 8.4 of the Plan.

(d)

Notwithstanding any provision of the Plan or any other plan maintained by the Company or an Affiliate to the contrary, a Participant who receives a hardship withdrawal shall not be eligible to make any Elective Deferrals or after-tax employee contributions to the Plan and all other plans maintained by the Company or an Affiliate for a period of six months following the date of receipt of the hardship withdrawal, and shall enter into a legally enforceable, written agreement acknowledging same. For this purpose, the term “all other plans” means all qualified and nonqualified plans of deferred compensation including, without limitation, stock option, stock purchase or similar plans and a cash or

		deferred arrangement that is part of a cafeteria plan (within the meaning of Code Section 125), but excluding the mandatory employee contribution portion of a defined benefit plan and a health and welfare benefit plan, including such a plan that is part of a Code Section 125 cafeteria plan.

(e)		A Participant’s hardship withdrawal shall be taken from the Participant’s Non-ESOP Accounts and ESOP Accounts, and from each separate Investment Fund, in the order specified by the Administrator.

(f)		Hardship withdrawals shall be paid in cash. No rollover of any portion of such hardship withdrawals may be made.

(g)		Notwithstanding any provision of the Plan or a Predecessor Plan to the contrary, a Participant who received a hardship withdrawal from a Predecessor Plan in 2001:

	(1)		shall be prohibited from making any Elective Deferrals or after-tax employee contributions to the Plan and all other plans maintained by the Company or an Affiliate for a period of six months following the date of receipt of the hardship withdrawal or until the Effective Date, if later; and

	(2)		may make Elective Deferrals in 2002 up to the applicable Code Section 402(g) limit without regard to the amount of any hardship withdrawal obtained in 2001.

9.3		After-Tax Withdrawals

(a)		A Participant who is an Employee may obtain, at any time, a withdrawal of all or part of his Employee After-Tax Account, as well as such ESOP Predecessor Plan Account balances as are specified in any applicable Supplement to the Plan.

(b)		Any withdrawal under this Section shall be made from the Participant’s Non-ESOP Accounts and ESOP Accounts, and from each separate Investment Fund, in the order specified by the Administrator.

(c)		After-tax withdrawals shall be paid in cash. However, a Participant may elect to receive payment in whole shares of Company Stock, to the extent amounts being withdrawn were invested in Company Stock immediately prior to the withdrawal.

(d)		After-tax withdrawals shall be subject to such other rules and procedures as the Administrator may establish.

9.4		Age 59-1/2 Withdrawals

(a)		A Participant who is an Employee and has attained age 59-1/2 may obtain, at any time, a withdrawal of all or part of his Pre-Tax Contribution Account, Rollover Account, and Employer Cash Match Account.

(b)		Any withdrawal under this Section shall be made from the Participant’s Non-ESOP Accounts, and from each separate Investment Fund, in the order specified by the Administrator.

(c)		Age 59-1/2 withdrawals shall be paid in cash. However, a Participant may elect to receive payment in whole shares of Company Stock, to the extent amounts being withdrawn were invested in Company Stock immediately prior to the withdrawal.

(d)		Age 59-1/2 withdrawals shall be subject to such other rules and procedures as the Administrator may establish.

9.5		Age 70-1/2 Withdrawals

(a)		A Participant who is an Employee and has attained age 70-1/2 may obtain, at any time, a withdrawal of all or part of his Combined Account.

(b)		Any withdrawal under this Section shall be made from the Participant’s Non-ESOP and ESOP Accounts, and from each separate Investment Fund, in the order specified by the Administrator.

(c)		Age 70-1/2 withdrawals shall be paid in cash. However, a Participant may elect to receive payment in whole shares of Company Stock, to the extent amounts being withdrawn were invested in Company Stock immediately prior to the withdrawal.

(d)		Age 70-1/2 withdrawals shall be subject to such other rules and procedures as the Administrator may establish.

10.1		Distribution Options

(a)		Upon a Participant’s Termination of Employment with the Company and all Affiliates for a reason other than the Participant’s death, the Participant may elect to receive payment of his vested Combined Account in the Fund in one of the following forms:

	(1)		an immediate or deferred total lump sum;

	(2)		immediate or deferred monthly, quarterly, semi-annual, or annual installments; or

	(3)		a partial lump sum distribution.

(b)		All distributions shall be paid in cash, except that, if a Participant elects a total lump sum distribution as described in subsection (a)(1) above, he may elect to receive payment in the form of whole shares of Company Stock, with partial shares paid in cash, of that portion of his Combined Account that is invested in Company Stock immediately prior to the distribution.

(c)		Additional Rules

	(1)		Any payments made under this Section 10.1 shall be made as soon as practicable after the date the Participant has elected to receive payment in accordance with procedures established by the Administrator.

	(2)		Upon the death of a Former Participant, any remaining balances in his Combined Account, including unpaid installments, shall be distributed as provided in Section 10.2.

	(3)		A Participant shall be eligible to receive a distribution under this Article 10 if he has a severance of employment, as defined in Code Section 401(k)(2)(B)(i)(I), as amended, regardless of whether the severance of employment occurred before the Effective Date under a Predecessor Plan, or on or after the Effective Date, and regardless of whether the distribution would satisfy the requirements of Code Section 401(k)(2)(B) as in effect prior to the Effective Date.

Upon a Participant’s Termination of Employment with the Company or an Affiliate due to his death, or upon the death of a Former Participant before the complete distribution of his Combined Account, the Participant’s Beneficiary may elect to have the Participant’s Combined Account distributed in accordance with Section 10.1 at any time that complies with the requirements of Section 10.5. Notwithstanding the foregoing, effective January 1, 2003, the option described in Section 10.1(a)(3) shall not be available to a Beneficiary.

The amount of any distribution from a Participant’s Combined Account, or any portion thereof, shall be determined by the value of such Combined Account (or the applicable portion thereof) on the Valuation Date on which authorized distribution directions are received by the Trustee from the Administrator (or as soon as administratively feasible thereafter).

10.4		Participant’s Right to Consent to Distributions

(a)		Notwithstanding any Plan provision to the contrary, if a Participant’s vested Combined Account exceeds $5,000 at his Termination of Employment, no portion of his Combined Account may be distributed to him without his written consent before he attains age 65.

(b)		If the value of the Participant’s vested Combined Account is $5,000 or less at his Termination of Employment, the Participant will receive a cash distribution of the value of the entire vested portion of such Combined Account balance and the nonvested portion will be treated as a forfeiture at the time and to the extent provided in the applicable Supplement to the Plan; provided, however, that this provision shall not be used to accelerate the final installment payment(s) of a series of installment payments. As of the effective date provided in regulations to be issued by the Secretary of the Treasury Department, the Plan shall roll over into an IRA the vested portion of any Participant’s Combined Account if such vested portion exceeds $1,000 but does not exceed $5,000. The rollover shall be done in accordance with the regulations issued by the Secretary of the Treasury Department and according to any rules prescribed by the Administrator.

10.5		Time When Distributions Must Commence

(a)		Unless a Participant elects otherwise, distribution shall commence not later than the 60th day following the close of the Plan Year in which the latest of the following occurs: (1) the Participant attains age 65; (2) the tenth anniversary of the date on which the Participant commenced participation under this Plan; or (3) the Participant terminates employment with the Company and all Affiliates.

(b)		Notwithstanding any contrary provision of the Plan, distribution of the Combined Account balances of a Participant shall commence by April 1 of the calendar year next following the later of: (1) the calendar year in which the Participant attains age 70½ or (2) the calendar year in which the Participant’s Termination of Employment occurs (“Required Commencement Date”); provided, however, that the Required Commencement Date of a Participant who is a five-percent owner (as defined in Code Section 416) of the Company or an Affiliate in the calendar year in which the Participant attains age 70½ shall be April 1 of the calendar year next following the calendar year in which the Participant attains age 70½.

(c)		If a Participant dies on or after his Required Commencement Date, benefits shall be paid to the Participant’s Beneficiary at least as rapidly as benefits were being paid before the Participant’s death.

(d)

If the Participant dies before his Required Commencement Date, benefits shall be paid in full to the Participant’s Beneficiary not later than the fifth anniversary of the Participant’s death; provided, however, that:

	(1)		if the Beneficiary is not the surviving spouse of the Participant, the Beneficiary may irrevocably elect to have distributions begin not later than December 31 of the year following the year of the Participant’s death, in substantially equal amounts over a period of time not extending beyond the life expectancy of such Beneficiary; and

	(2)		if the Beneficiary is the surviving spouse of the Participant, the Beneficiary may irrevocably elect to have distributions begin by the later of the end of the calendar year in which the Participant’s death occurs or the end of the calendar year in which the Participant would have attained age 70-1/2, in substantially equal amounts over a period of time not extending beyond the life expectancy of such surviving spouse.

(e)		Distributions under the Plan shall be determined and made in accordance with Code Section 401(a)(9). The provisions of Code Section 401(a)(9), as they may be amended from time to time, are incorporated herein by reference and shall override any inconsistent provision of the Plan. Notwithstanding the foregoing, the Plan shall apply the minimum distribution requirements of Code Section 401(a)(9) in accordance with the applicable proposed regulations issued in January, 2001 until January 1, 2003, when the final regulations under Code Section 401(a)(9) take effect.

10.6		Inability to Locate Distributee

(a)		Notwithstanding any other provision of the Plan, in the event that the Administrator cannot locate any person to whom a payment or distribution is due under the Plan, and no other distributee has become entitled thereto pursuant to any provision of the Plan, the Combined Account in respect of which such payment or distribution is to be made shall be forfeited at the close of the third Plan Year following the Plan Year in which such payment or distribution first became due (but in all events before the time such Combined Account would otherwise escheat under any applicable State law); provided, that any Combined Account so forfeited shall be reinstated if such person subsequently makes a valid claim for such benefit.

(b)		Such reinstatement shall be provided by an additional contribution for the Plan Year in which such reinstatement is made.

(c)		Any amount forfeited under this Section 10.6 shall be applied to reduce the next succeeding Employer contribution under Article 4.

10.7		Direct Rollovers

(a)		Notwithstanding any Plan provision that would otherwise limit a Distributee’s election under the Plan, a Distributee may elect, at the time and in the manner prescribed by the

		Administrator, to have any portion of an Eligible Rollover Distribution paid directly to one or more Eligible Retirement Plans specified by the Distributee in a Direct Rollover.

(b)		The following terms shall have the following meanings when used in this Section 10.7:

	(1)		An “Eligible Rollover Distribution” is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or life expectancies) of the Distributee and the Distributee’s designated Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code Section 401(a)(9); any distribution made upon hardship of the Distributee; and the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). A portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because it includes after-tax employee contributions that are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Code Section 408(a) or (b), or to a qualified defined contribution plan described in Code Section 401(a) or 403(a) that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution that is includible in gross income and the portion of such distribution that is not so includible.

	(2)		An “Eligible Retirement Plan” is an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), a qualified trust described in Code Section 401(a) that is a defined contribution plan that accepts the Eligible Rollover Distribution, an annuity plan described in Code Section 403(a), an eligible deferred compensation plan described in Code Section 457(b) that is maintained by an eligible employer described in Code Section 457(e)(1)(A), or an annuity contract described in Code Section 403(b), that accepts the Distributee’s Eligible Rollover Distribution.

	(3)		A “Distributee” includes an Employee or a former Employee. In addition, the Employee’s or former Employee’s surviving spouse and the Employee’s or former Employee’s spouse who is the alternate payee under a qualified domestic relations order, as defined in Code Section 414(p), are Distributees with regard to the interest of the spouse or former spouse.

	(4)		A “Direct Rollover” is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee.

Notwithstanding any Plan provision to the contrary, any amount payable with respect to a Participant pursuant to a qualified domestic relations order under Code Section 414(p) may be distributed to the alternate payee before the Participant’s Termination of Employment.

10.9		Designation of Beneficiaries

(a)		Right to Designate. Each Participant may designate, upon forms to be furnished by and filed with the Administrator, one or more primary Beneficiaries or alternative Beneficiaries. The Participant may change or revoke any such designation from time to time without notice to or consent from any Beneficiary or spouse. No such designation, change or revocation shall be effective unless signed by the Participant and received by the Administrator during the Participant’s lifetime. The Administrator may establish rules for the use of electronic signatures. Until such rules are established, electronic signatures shall not be effective.

		Notwithstanding the foregoing, a designation will not be valid for the purpose of paying benefits from the Plan to anyone other than a surviving spouse of the Participant (if there is a surviving spouse) unless that surviving spouse consents in writing to the designation of another person as Beneficiary. To be valid, the consent of such spouse must be in writing, must acknowledge the effect of the designation of the Beneficiary and must be witnessed by a notary public. The consent of the surviving spouse need not be given at the time the designation is made. The consent of the surviving spouse need not be given before the death of the Participant. The consent of the surviving spouse will be required, however, before benefits can be paid to any person other than the surviving spouse. The consent of a spouse shall be irrevocable and shall be effective only with respect to that spouse.

		If a Beneficiary who survives the Participant subsequently dies before receiving any payment to which the Beneficiary was entitled, the balance remaining due will be payable to any successor Beneficiary specified in the Participant’s Beneficiary designation, and otherwise to the personal representative (executor or administrator) of the deceased Beneficiary. A Beneficiary may not designate a successor beneficiary.

(b)		Failure of Designation. If a Participant:

	(1)		fails to designate a Beneficiary, or

	(2)		designates a Beneficiary and thereafter such designation is revoked without another Beneficiary being named, or

	(3)		designates one or more Beneficiaries and all such Beneficiaries so designated fail to survive the Participant,

such Participant’s death benefit, or the part thereof as to which such Participant’s designation fails, as the case may be, shall be payable to the first class of the following

classes of automatic Beneficiaries with a member surviving the Participant and (except in the case of his surviving issue) in equal shares if there is more than one member in such class surviving the Participant:

Participant’s surviving spouse
Participant’s surviving issue per stirpes and not per capita
Participant’s surviving parents
Participant’s surviving brothers and sisters
Representative of Participant’s estate.

(c)		Disclaimers by Beneficiaries. A Beneficiary entitled to a distribution may disclaim his interest therein subject to the following requirements. To be eligible to disclaim, a Beneficiary must not have received a distribution of all or any portion of said interest and must have attained at least age 21 years at the time such disclaimer is signed and delivered. Any disclaimer must be in writing and must be signed by the Beneficiary and acknowledged by a notary public. The Administrator may establish rules for the use of electronic signatures and acknowledgements. Until such rules are established, electronic signatures and acknowledgements shall not be effective. A disclaimer shall state that the Beneficiary’s entire interest is disclaimed or shall specify what portion thereof is disclaimed. To be effective, duplicate original signed copies of the disclaimer must be both signed and actually delivered to both the Administrator and the Trustee after the date of the Participant’s death but not later than nine months after the date of the Participant’s death. A disclaimer shall be irrevocable when delivered to both the Administrator and the Trustee. A disclaimer shall be considered to be delivered to the Administrator or the Trustee only when actually received by the Administrator or the Trustee (and in the case of a corporate Trustee, shall be considered to be delivered only when actually received by a trust officer familiar with the affairs of the Plan). The Administrator (and not the Trustee) shall be the sole judge of the content, interpretation and validity of a purported disclaimer. Upon the filing of a valid disclaimer, the Beneficiary shall be considered not to have survived the Participant as to the interest disclaimed. A disclaimer by a Beneficiary shall not be considered to be a transfer of an interest in violation of any provisions of the Plan and shall not be considered to be an assignment or alienation of benefits in violation of federal law prohibiting the assignment or alienation of benefits under the Plan. No other form of attempted disclaimer shall be recognized by either the Administrator or the Trustee.

(d)		Definitions. When used herein and, unless the Participant has otherwise specified in the Participant’s Beneficiary designation, when used in a Beneficiary designation, “issue” means all persons who are lineal descendants of the person whose issue are referred to, subject to the following:

	(1)		a legally adopted child and the adopted child’s lineal descendants always shall be lineal descendants of each adoptive parent (and of each adoptive parent’s lineal ancestors);

	(2)		a legally adopted child and the adopted child’s lineal descendants never shall be lineal descendants of any former parent whose parental rights were terminated by the adoption (or of that former parent’s lineal ancestors); except that if, after a

			child’s parent has died, the child is legally adopted by a stepparent who is the spouse of the child’s surviving parent, the child and the child’s lineal descendants shall remain lineal descendants of the deceased parent (and the deceased parent’s lineal ancestors); and

	(3)		if the person (or a lineal descendant of the person) whose issue are referred to is the parent of a child (or is treated as such under applicable law) but never received the child into that parent’s home and never openly held out the child as that parent’s child (unless doing so was precluded solely by death), then neither the child nor the child’s lineal descendants shall be issue of the person.

		“Child” means an issue of the first generation; “per stirpes” means in equal shares among living children of the person whose issue are referred to and the issue (taken collectively) of each deceased child of such person, with such issue taking by right of representation of such deceased child; and “survive” and “surviving” mean living after the death of the Participant.

(e)		Special Rules. Unless the Participant has otherwise specified in the Participant’s Beneficiary designation, the following rules shall apply:

	(1)		If there is not sufficient evidence that a Beneficiary was living at the time of the death of the Participant, it shall be deemed that the Beneficiary was not living at the time of the death of the Participant.

	(2)		The automatic Beneficiaries specified in subsection (b) above and the Beneficiaries designated by the Participant shall become fixed at the time of the Participant’s death so that, if a Beneficiary survives the Participant but dies before the receipt of all payments due such Beneficiary hereunder, such remaining payments shall be payable to the representative of such Beneficiary’s estate.

	(3)		If the Participant designates as a Beneficiary the person who is the Participant’s spouse on the date of the designation, either by name or by relationship, or both, the dissolution, annulment or other legal termination of the marriage between the Participant and such person shall automatically revoke such designation. (The foregoing shall not prevent the Participant from designating a former spouse as a Beneficiary on a form signed by the Participant and received by the Administrator after the date of the legal termination of the marriage between the Participant and such former spouse, and during the Participant’s lifetime.)

	(4)		Any designation of a nonspouse Beneficiary by name that is accompanied by a description of relationship to the Participant shall be given effect without regard to whether the relationship to the Participant exists either then or at the Participant’s death.

	(5)		Any designation of a Beneficiary only by statement of relationship to the Participant shall be effective only to designate the person or persons standing in such relationship to the Participant at the Participant’s death.

		A Beneficiary designation is permanently void if it either is signed or is filed by a Participant who, at the time of such signing or filing, is then a minor under the law of the state of the Participant’s legal residence. The Administrator (and not the Trustee) shall be the sole judge of the content, interpretation and validity of a purported Beneficiary designation.

(f)		Continuity. The Beneficiary designations or elections in effect under the Predecessor Plans immediately before the Effective Date shall continue in full force and effect until altered as provided herein, provided such designations or elections satisfied the rules in effect under the applicable Predecessor Plan at the time the designations or elections were submitted.

11.1		Administrator Authority

(a)		The Company shall be the Administrator for purposes of Section 3(16)(A) of ERISA. Except as hereinafter provided, functions generally assigned to the Company, an Employer, or the Administrator shall be discharged by the officers of the Company or delegated and allocated as provided herein. Said officers may delegate or redelegate and allocate and reallocate to one or more persons or to a committee of persons jointly or severally, and whether or not such persons are directors, officers or Employees, such functions assigned to the Company, an Employer or the Administrator hereunder as they may from time to time deem advisable.

(b)		Notwithstanding the foregoing, the Board of Directors of the Company shall have the exclusive authority to act for the Company to terminate the Plan.

(c)		The Administrator, including any person or committee acting as the Administrator, shall have the full discretionary authority to determine all questions arising under the Plan, including the power to determine the rights or eligibility of Participants and their benefits under the Plan, to make factual determinations thereunder, to interpret and construe the Plan document, and to remedy ambiguities, inconsistencies or omissions. The Administrator may from time to time adopt such rules and regulations as may be necessary or desirable for the proper and efficient administration of the Plan and as are consistent with the terms of the Plan. Benefits shall be paid under the Plan only if the Administrator determines in its discretion that the applicant is entitled to them.

11.2		Committee

If a Committee is appointed, the Committee shall consist of such members as may be determined and appointed from time to time by officers of the Company. Members of the Committee shall serve without compensation, but their reasonable expenses shall be an expense of the administration of the Fund and shall be paid by the Trustee from and out of the Fund except to the extent that the Company, in its discretion, directly pays such expenses. The Committee may elect such officers as the Committee may decide upon. The Committee shall:

(a)		establish rules for the functioning of the Committee, including the times and places for holding meetings, the notices to be given in respect of such meetings and the number of members who shall constitute a quorum for the transaction of business;

(b)		organize and delegate to such of its members as it shall select authority to execute or authenticate rules, advisory opinions or instructions, and other instruments adopted or authorized by the Committee; adopt such bylaws or regulations as it deems desirable for the conduct of its affairs; appoint a secretary, who need not be a member of the Committee, to keep its records and otherwise assist the Committee in the performance of its duties; keep a record of all its proceedings and acts and keep all books of account, records and other data as may be necessary for the proper administration of the Plan;

		notify the Employers and the Trustee of any action taken by the Committee and, when required, notify any other interested person or persons;

(c)		determine from the records of the Employers the compensation, service records, status and other facts regarding Participants and other Employees;

(d)		cause to be compiled at least annually, from the records of the Committee and the reports and accountings of the Trustee, a report and accounting of the status of the Plan and the benefits of the Participants and make it available to each Participant who shall have the right to examine that part or portion of such report and accounting (or a true and correct copy of such part) which sets forth his benefits;

(e)		prescribe forms to be used for applications for participation, benefits, notifications, etc., as may be required in the administration of the Plan;

(f)		set up such rules, applicable to all Participants similarly situated, as are deemed necessary to carry out the terms of the Plan;

(g)		perform all other acts reasonably necessary for administering the Plan and carrying out the provisions of the Plan and performing the duties imposed on it;

(h)		resolve all questions of administration of the Plan not specifically referred to in this Section;

(i)		in accordance with regulations of the Secretary of Labor:

	(1)		provide adequate notice in writing to any Participant or Beneficiary whose claim for benefits under the Plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the Participant, and

	(2)		afford a reasonable opportunity to any Participant whose claim for benefits has been denied for a full and fair review by the Committee of the decision denying the claim; and

(j)

delegate or redelegate to one or more persons, jointly or severally, and whether or not such persons are members of the Committee or Employees of the Employers, such functions assigned to the Committee hereunder as it may from time to time deem advisable.

If there shall at any time be three or more members of the Committee serving hereunder who are qualified to perform a particular act, the same may be performed, on behalf of all, by a majority of those qualified, with or without the concurrence of the minority. No person who failed to join or concur in such act shall be held liable for the consequences thereof except to the extent that liability is imposed under ERISA. If at any time there is no Committee appointed, all functions and responsibilities assigned to the Committee shall be performed by the Administrator or its delegate.

No action taken by any fiduciary, if authority to take such action has been delegated or redelegated to it hereunder, shall be the responsibility of any other fiduciary except as may be required by the provisions of ERISA. Except to the extent imposed by ERISA, no fiduciary shall have the duty to question whether any other fiduciary is fulfilling all of the responsibility imposed upon such other fiduciary by the Plan or by ERISA or by any regulations or rulings issued thereunder. The Trustee shall have no authority or duty to determine or enforce payment of any Employer contribution under the Plan or to determine the existence, nature or extent of any individual’s rights under the Plan or question any determination made by the Committee regarding the same.

If any officer or Employee of any Employer, any member of the Board of Directors of the Company, any member of the Committee or any Trustee to whom authority has been delegated or redelegated hereunder shall also be a Participant in the Plan, he shall have no authority as such officer, Employee, member or Trustee with respect to any matter specially affecting his individual interest hereunder (as distinguished from the interests of all Participants and Beneficiaries or a broad class of Participants and Beneficiaries), all such authority being reserved exclusively to the other officers, Employees, member or Trustees, as the case may be, to the exclusion of such Participant, and such Participant shall act only in his individual capacity in connection with any such matter.

Individuals, firms, corporations or partnerships identified herein or delegated or allocated authority or responsibility hereunder may serve in more than one fiduciary capacity.

The Company, the Employers, the Committee and the Trustee shall be named fiduciaries for the purpose of Section 402(a) of ERISA. Participants shall also be named fiduciaries with respect to the voting of Company Stock in their Combined Accounts.

In the absence of any designation to the contrary by Committee, the Secretary of the Company is designated as the appropriate and exclusive agent for the receipt of service of process directed to the Plan in any legal proceeding, including arbitration, involving the Plan.

All usual and reasonable expenses of administering the Plan shall be paid by the Trustee out of the principal or income of the Fund, or, at the Company’s option, by the Employers.

Each individual (as distinguished from corporate) trustee of the Plan or officer, director or Employee of the Employers shall, except as prohibited by law, be indemnified and held harmless by the Company from any and all liabilities, costs and expenses (including legal fees), to the extent not covered by liability insurance, arising out of any action taken by such individual with respect to the Plan, whether imposed under ERISA or otherwise. No such indemnification, however, shall be required or provided if such liability arises (a) from the individual’s claim for his own benefit, (b) from the proven gross negligence or the bad faith of the individual, or (c) from the criminal misconduct of such individual if the individual had reason to believe the conduct was unlawful. This indemnification shall continue as to an individual who has ceased to be a trustee of the Plan or officer, director or Employee of the Employers and shall inure to the benefit of the heirs, executors and administrators of such an individual.

11.10		Claims and Review Procedure

(a)		Initial Claim. An individual may, subject to any applicable deadline, file with the Administrator a written claim for benefits under the Plan in a form and manner prescribed by the Administrator.

	(1)		If the claim is denied in whole or in part, the Administrator shall notify the claimant of the adverse benefit determination within 90 days after receipt of the claim.

	(2)		The 90-day period for making the claim determination may be extended for 90 days if the Administrator determines that special circumstances require an extension of time for determination of the claim, provided that the Administrator notifies the claimant, prior to the expiration of the initial 90-day period, of the special circumstances requiring an extension and the date by which a claim determination is expected to be made.

(b)

Notice of Initial Adverse Determination. A notice of an adverse determination shall set forth in a manner calculated to be understood by the claimant:

	(1)		the specific reasons for the adverse determination;

	(2)		references to the specific provisions of the Plan on which the adverse determination is based;

	(3)		a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary; and

	(4)		a description of the claims review procedure, including the time limits applicable to such procedure, and a statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse determination on review.

(c)		Request for Review. Within 60 days after receipt of an initial adverse benefit determination notice, the claimant may file with the Administrator a written request for a review of the adverse determination and may, in connection therewith, submit written comments, documents, records and other information relating to the claim benefits. Any request for review of the initial adverse determination not filed within 60 days after receipt of the initial adverse determination notice shall be untimely.

(d)		Claim on Review. If the claim, upon review, is denied in whole or in part, the Administrator shall notify the claimant of the adverse benefit determination within 60 days after receipt of such a request for review.

	(1)		The 60-day period for deciding the claim on review may be extended for 60 days if the Administrator determines that special circumstances require an extension of time for determination of the claim, provided that the Administrator notifies the claimant, prior to the expiration of the initial 60-day period, of the special circumstances requiring an extension and the date by which a claim determination is expected to be made.

	(2)		In the event that the time period is extended due to a claimant’s failure to submit information necessary to decide a claim on review, the claimant shall have 60 days within which to provide the necessary information and the period for making the claim determination on review shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information or, if earlier, the expiration of 60 days.

	(3)		The Administrator’s review of a denied claim shall take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

(e)

Notice of Adverse Determination for Claim on Review. A notice of an adverse determination for a claim on review shall set forth in a manner calculated to be understood by the claimant:

	(1)		the specific reasons for the denial;

	(2)		references to the specific provisions of the Plan on which the adverse determination is based;

	(3)		a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits; and

	(4)		a statement of the claimant’s right to bring an action under ERISA Section 502(a).

(f)

Deadline to File Legal Action. No legal action to recover Plan benefits or to enforce or clarify rights under the Plan under Section 502 or Section 510 of ERISA or under any

other provision of law, whether or not statutory, may be brought by any claimant on any matter pertaining to this Plan unless the legal action is commenced in the proper forum before the earlier of:

	(1)		30 months after the claimant knew or reasonably should have known of the principal facts on which the claim is based, or

	(2)		six months after the claimant has exhausted the claim and review procedure.

12.1		Amendment

(a)		Subject to the provisions hereinafter set forth, the Company reserves the right at any time and from time to time to modify or amend in whole or in part any or all of the provisions of the Plan, provided however, that:

	(1)		no modification or amendment may be made which by reason thereof will deprive any Participant or Beneficiary without his consent of any amounts theretofore credited to his Combined Account under the Plan; and

	(2)		no such modification or amendment shall make it possible for any part of any funds contributed under the Plan to be used for, or diverted to, purposes other than for the exclusive benefit of Participants or Beneficiaries under the Plan, subject to subsection (b) below, or as otherwise may be required or permitted under applicable law.

(b)		Notwithstanding subsection (a) above, any modification or amendment of the Plan may be made, retroactively if necessary, that the Company deems necessary or appropriate to bring the Plan or Fund into conformity with governmental regulations that must be complied with in order to qualify the Plan, the Fund and contributions for tax exemption or deduction, or other applicable requirements of statute or governmental regulations.

(c)		The Company may amend the Plan by resolution of its Board of Directors, or by written action of any two officers of the Company, and either the Board of Directors or any two officers of the Company may in turn delegate the authority to amend the Plan to a Committee established pursuant to Section 11.2 hereof.

12.2		Termination

(a)		The Company assumes no obligation to continue this Plan and specifically reserves the right at any time and for any reason deemed sufficient by it to discontinue this Plan and contributions under it. The Company may discontinue the Plan by resolution of its Board of Directors.

(b)		Upon complete or partial termination of, or complete discontinuance of contributions under, the Plan, the rights of all affected Participants to the amounts credited to their Combined Accounts shall be nonforfeitable, except to the extent required to preclude discrimination between Participants and classes of Participants. In the case of a sale of all or a significant portion of the assets used by the Company or a Related Company in a trade or business or of the sale of all or a significant portion of the Company’s or a Related Company’s interest in a subsidiary, the Company, in its sole discretion, may elect to treat any similarly situated employees of such trade or business or such subsidiary as fully vested hereunder.

(c)		In the event of such termination, subject to the limitations set forth in Section 12.1, the Trustee(s) shall dispose of any and all funds held under the Plan by any Trustee in accordance with the written order of the Administrator. The Administrator shall determine the amounts that are payable under the Plan to Participants or for administrative expenses of the Plan, and shall direct the Trustee to pay over any and all funds either directly to the persons certified by it to be entitled to receive such amounts, to an insurance company or companies for the purchase of annuity contracts or to the Company for distribution, or to hold such amounts for distribution at the time and in the manner provided for in Article 10.

12.3		Plan Merger

In the case of any merger or consolidation with, or transfer of assets or liabilities to, any other plan, each Participant in this Plan shall be entitled to a benefit immediately after the merger, consolidation, or transfer (if the Plan then terminated) that is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan had then been terminated).

Neither the terms of the Plan nor the benefits hereunder nor the continuance thereof shall be a term of the employment of any Employee. The Plan shall not give any Employee the right to be retained in the employment of any Employer.

13.2		Spendthrift Provisions

(a)		No Participant or Beneficiary shall have any transmissible interest in any benefit nor shall any Participant or Beneficiary have any power to anticipate, alienate, dispose of, pledge or encumber the same while in the possession or control of the Trustee, nor shall the Employers, the Committee or the Trustee recognize any assignment thereof, either in whole or in part, nor shall it be subject to attachment, garnishment, execution following judgment or other legal process while in the possession or control of the Trustee.

(b)		The power to designate Beneficiaries shall not permit or be construed to permit such power or right to be exercised by the Participant so as thereby to anticipate, pledge, mortgage or encumber his Plan benefit or any part thereof, and any attempt of a Participant so to exercise said power in violation of this provision shall be of no force and effect and shall be disregarded by the Employers, the Committee and the Trustee.

(c)		This Section shall not apply to the offset of a Participant’s benefit under the Plan of an amount the Participant is required to pay to the Plan pursuant to a criminal conviction, civil judgment or settlement agreement described in Code Section 401(a)(13)(C).

(d)		This Section shall apply to the creation, assignment or recognition of a right to any benefit payable pursuant to a domestic relations order, unless such order is determined by the Administrator to be a qualified domestic relations order as defined in Code Section 414(p).

13.3		Incompetents

If a Participant or Beneficiary to whom distributions shall be due under the Plan shall be or become incompetent, either physically or mentally, in the judgment of the Administrator, the Administrator shall have the right to determine to whom such distributions shall be made for the benefit of such Participant or Beneficiary.

If at any time a person entitled to receive any payment hereunder is a minor, such payment may be made for the benefit of such minor to his parent, guardian, or the person with whom he resides, or to the minor himself, and the release of any such parent, guardian, person or minor shall be valid and complete discharge for such payment.

In case at any time any doubt exists as to the identity of any person entitled to any payment hereunder or the amount or time of such payment, or in the event of a dispute between potential beneficiaries, the Administrator shall be entitled to direct the Trustee to hold such sum in trust until such identity or amount or time is determined or until order of a court of competent jurisdiction, or to pay such sum into court in accordance with appropriate rules of law in such case then provided.

If the Administrator or his delegate reasonably believes (taking into account any document purporting to be a valid consent of the Participant’s spouse, or any representation by the Participant that he is not married or any designation of beneficiary) that a distribution in respect of a Participant’s Combined Account is made to a person who properly qualifies as the Participant’s Beneficiary, the Plan shall have no further liability with respect to such Combined Account to the extent of the distribution.

The Administrator or his delegate shall have the right to recover any Plan benefit, loan or withdrawal paid to a Participant or Beneficiary in error, to the extent required by law.

The following provisions of this Article 14 shall apply automatically in any Plan Year in which the Plan is determined to be Top-Heavy, and shall override any inconsistent provisions herein. The determination of whether the Plan is a Top-Heavy Plan in any Plan Year, and the application of these provisions, shall be interpreted in accordance with the definitions set forth in Section 14.4 and Code Section 416.

14.2		Top-Heavy Determination

(a)		For purposes of this Article 14, the Plan is a Top-Heavy Plan with respect to a Plan Year if, as of the Determination Date for the Plan Year, (1) the Plan has a Top-Heavy Ratio greater than 60% and is not a member of a Required Aggregation Group, or (2) the Plan is a member of a Required Aggregation Group that has a Top-Heavy Ratio greater than 60%.

(b)		Notwithstanding subsection (a) above, if the Plan is a member of a Permissive Aggregation Group with a Top-Heavy Ratio less than or equal to 60%, it shall not be considered to be a Top-Heavy Plan.

14.3		Minimum Contributions

(a)		If the Plan is determined to be a Top-Heavy Plan for a Plan Year, minimum employer contributions (including forfeitures) shall be made, on behalf of each Participant who has not separated from service as of the end of the Plan Year and who is not a Key Employee, of not less than the lesser of the following percentage of Testing Compensation:

	(1)		three percent, or

	(2)		the highest percentage at which employer contributions (including forfeitures and amounts contributed pursuant to a salary reduction agreement) are made under the Plan for the Plan Year on behalf of a Key Employee.

		Matching Contributions may be counted toward any minimum contribution requirement under this Section 14.3.

(b)		A Top-Heavy Plan shall not be treated as meeting the requirements of this Section 14.3 unless the Plan meets such requirements without taking into account any Social Security contributions or benefits.

(c)		Notwithstanding subsections (a) and (b) above, this Section 14.3 shall not apply to any Participant to the extent that such Participant is covered under any other qualified plan of the Company or an Affiliate and such other plan provides the minimum allocation or benefit requirement applicable to Top-Heavy Plans.

For purposes of this Article 14, the following terms shall have the following meanings:

(a)		“Determination Date” means, with respect to a Plan Year, the last day of the preceding Plan Year or, in the case of the first Plan Year, the last day of the Plan Year.

(b)		“Key Employee” means any individual considered as such under Code Section 416(i)(1). For this purpose, annual compensation means compensation within the meaning of Code Section 415(c)(3).

(c)		“Permissive Aggregation Group” means each plan in the Required Aggregation Group and any other qualified plan or plans maintained by the Company or an Affiliate if such group of plans, when considered together, would meet the requirements of Code Sections 401(a)(4) and 410.

(d)		“Required Aggregation Group” means, with respect to a Plan Year for which a determination is being made, (1) this Plan, (2) each other qualified plan of the Company and any Affiliate in which at least one Key Employee is a participant and (3) any other qualified plan of the Company or any Affiliate that enables any plan described in items (1) and (2) above to meet the requirements of Code Section 401(a)(4) or 410.

(e)		“Top-Heavy Ratio” means, with respect to the plans taken into consideration, a fraction, the numerator of which is the sum of the Key Employees’ account balances under the applicable defined contribution plans and the present value of the Key Employees’ accrued benefits under the applicable defined benefit plans, and the denominator of which is the sum of all participants’ account balances under the applicable defined contribution plans and the present value of all participants’ benefits under the applicable defined benefit plans. Both the numerator and the denominator of this fraction are adjusted so as to include distributions made in the Plan Year containing the Determination Date, in-service distributions in the four preceding Plan Years, and, in the case of defined contribution plans, any contributions due but unpaid as of the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan that if it had not been terminated would have been included in the Required Aggregation Group. The value of account balances and the present value of accrued benefits will be determined as of the most recent valuation date that falls within or ends with the 12-month period ending on the Determination Date. The account balances and accrued benefits of an individual who is not a Key Employee but who was a Key Employee in a prior year will be disregarded. When more than one plan is being considered, the value of account balances and accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year. Present values shall be based on reasonable actuarial assumptions as to interest and mortality. Solely for the purpose of determining if the Plan, or any other plan included in an aggregation group of which this Plan is a part, is top-heavy, the accrued benefit of a Participant other than a Key Employee shall be determined under (1) the method, if any, that uniformly applies for accrual purposes under all plans maintained by the Company or an Affiliate or (2) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional accrual rate of Code Section

411(b)(1)(C). In all instances, the calculation of the Top-Heavy Ratio, and the extent to which distributions, rollovers, and transfers are taken into account, will be made in accordance with Code Section 416.

The Company shall issue a “Put Option” to each Participant (or each Participant’s Beneficiary) who receives a distribution of Company Stock if, at the time of such distribution, Company Stock is not then readily tradable on an established market, as defined in Code Section 409(h). The Put Option shall permit the Participant (or the Participant’s Beneficiary) to sell such Company Stock at its then fair market value to the Company at any time during the 60-day period commencing on the date the Company Stock was distributed to the Participant (or the Participant’s Beneficiary), and, if not exercised within that period, the Put Option will temporarily lapse. The Administrator, in its sole discretion, may extend the 60-day period referred to in the immediately preceding sentence if such an extension is necessary for the Company Stock to be valued by an independent appraiser as of the applicable Valuation Date coincident with or immediately preceding the date the Company Stock was distributed to the recipient. As of the last day of the Plan Year immediately preceding the Plan Year in which such temporary lapse of the Put Option occurs, the independent appraiser shall determine the fair market value of the Company Stock, and the Administrator shall notify each distributee who did not exercise the initial Put Option prior to its temporary lapse in the preceding Plan Year of the revised value of the Company Stock. The time during which the Put Option may be exercised shall recommence on the date such notice or revaluation is given and shall permanently terminate 60 days thereafter. The Trustee may be permitted by the Company to purchase Company Stock put to the Company under a Put Option. Payment for Company Stock sold pursuant to a Put Option shall be made, as determined in the discretion of the Administrator in the following forms:

(a)		If a Participant’s Combined Account is distributed in a total distribution (that is, a distribution within one taxable year of the balance to the credit of the Participant’s ESOP Account), then payment for such Company Stock may be made with a promissory note that provides for substantially equal annual installments commencing within 30 days from the date of the exercise of the Put Option and over a period not exceeding five years, with interest payable at a reasonable rate (as determined by the Administrator) on any unpaid installment balance, with adequate security provided, and without penalty for any prepayment of such installments; or

(b)		In a lump sum no later than 30 days after such Participant exercises the Put Option.

If the Company’s charter or by-laws restrict ownership of substantially all of the outstanding Company Stock to employees and the Fund, then shares of Company Stock distributed to a Participant (or his Beneficiary) must be immediately sold to the Company in accordance with this Section and the Participant shall not be entitled to the two 60-day put periods described herein.

15.2		Share Legend; Other Restrictions

(a)		Shares of Company Stock held or distributed by the Trustee may include such legend restrictions on transferability as the Company may reasonably require in order to assure

		compliance with applicable Federal and state securities laws and the provisions of this Article 15.

(b)		Except as otherwise provided in this Section, no shares of Company Stock held or distributed by the Trustee may be subject to a put, call or other option, or buy-sell or similar arrangement.

15.3		Nonterminable Rights

The provisions of this Article 15 are nonterminable, and shall continue to be applicable to shares of Company Stock even if the Plan ceases to be an employee stock ownership plan within the meaning of Code Section 4975(e)(7).

The voting of Company Stock held in the Fund shall be subject to the provisions of ERISA and the following provisions, to the extent such provisions are not inconsistent with ERISA:

(a)		As long as the Company Stock is a registration-type class of securities, each Participant shall be entitled to direct the Trustee as to the exercise of any shareholder voting rights attributable to that portion of his Combined Account that is invested in Company Stock. For purposes of the foregoing sentence, each Participant shall be a Named Fiduciary of the Plan as described in Section 402(a)(2) of ERISA. If a Participant is entitled to so direct the Trustee, all Company Stock as to which such instructions have been received (which may include an instruction to abstain) shall be voted by the Trustee in accordance with such instructions. The Trustee shall vote any shares of Company Stock held in the Unreleased Share Account, or any other shares of Company Stock as to which no voting instructions have been received, in proportion to the votes cast pursuant to the preceding sentence; provided, however, that the Trustee may vote the shares as it determines is necessary to fulfill its fiduciary duties.

(b)		In all other circumstances, the Trustee shall vote all shares of Company Stock as directed by the Administrator.

(c)		In carrying out its responsibilities under this Section, the Trustee may rely on information furnished to it by the Administrator, including the names and current addresses of Participants, that portion of Participants’ Combined Accounts that is invested in Company Stock, and the number of shares of Company Stock held by the Trustee (if any) that have not yet been allocated to Participants. The directions received by the Trustee from Participants and Beneficiaries shall be held by the Trustee in confidence and shall not be divulged or released to any person, including officers or employees of an Employer or any Affiliate, except as necessary to administer the Plan.

16.2		Tendering of Company Stock

The tendering of Company Stock held in the Fund shall be subject to the provisions of ERISA and the provisions of this Section, to the extent such provisions are not inconsistent with ERISA. In the event of a tender offer or other offer to purchase shares of Company Stock held by the Fund, the Trustee shall tender or sell the shares as directed by each Participant (or, if applicable, designated beneficiary or alternate payee) with respect to that portion of the Participant’s Combined Account that is invested in Company Stock. To the extent the Participant fails to give a timely direction with respect to that portion of his Combined Account invested in Company Stock, the Participant will be deemed to have directed the Trustee not to tender shares attributable to the Participant’s Combined Account. In carrying out its responsibilities under this Section, the Trustee may rely on information furnished to it by the Administrator, including the names and current addresses of Participants, that portion of Participants’ Combined Accounts that is invested in Company Stock, and the number of shares of Company Stock held by the

Trustee (if any) that have not yet been allocated to Participants. The directions received by the Trustee from Participants and Beneficiaries shall be held by the Trustee in confidence and shall not be divulged or released to any person, including officers or employees of an Employer or any Affiliate, except as necessary to administer the Plan.

17.1		Disclaimers

(a)		Neither the Employers or any of their officers nor any member of their Boards of Directors nor any member of the Committee nor the Trustee in any way guarantee the Fund against loss or depreciation, nor do they guarantee the payment of any benefit or amount which may become due and payable hereunder to any Participant or Beneficiary. Each Participant, Beneficiary or other person entitled at any time to payments hereunder shall look solely to the assets of the Fund for such payments.

(b)		Neither the Employers or any of their officers nor any member of their Boards of Directors nor any member of the Committee shall in any manner be liable to any Participant, Beneficiary, or other person for any act or omission of the Trustee (except to the extent that liability is imposed under ERISA).

(c)		Neither the Employers or any of their officers nor any member of their Boards of Directors nor any member of the Committee nor the Trustee shall be under any liability or responsibility (except to the extent that liability is imposed under ERISA) for failure to effect any of the objectives or purposes of the Plan by reason of loss or fluctuation in the value of the Fund or for the form, genuineness, validity, sufficiency or effect of any Fund asset at any time held hereunder, or for the failure of any person, firm or corporation indebted to the Fund to pay such indebtedness as and when the same shall become due or for any delay occasioned by reason of any applicable law, order or regulation or by reason of any restriction or provision contained in any security or other asset held by the Fund.

(d)		Except as is otherwise provided in ERISA, the Employers and their officers, the members of their Boards of Directors, the members of the Committee, the Trustee and other Named Fiduciaries shall not be liable for an act or omission of another person with regard to a fiduciary responsibility that has been allocated to or delegated to such other person pursuant to the terms of the Plan or pursuant to procedures set forth in the Plan.

17.2		Severability

		If any provision of the Plan is held invalid or unenforceable, its validity or unenforceability shall not affect any other provisions of the Plan and the Plan shall be construed and enforced as if such provisions had not been included therein.

17.3		Automated Voice Response Systems, Computer Systems

The Administrator, in its discretion, may authorize Participants to make various requests for information, elections and other transactions under the Plan through the use of one or more of the following methods: (a) written communications, (b) telephonic, automated voice response system, (c) computer network, or (d) any other method designated by the Administrator.

17.4		Adoption and Withdrawal by Affiliates

(a)		Adoption with Consent. The Committee or a designated officer of the Company may consent to the adoption of or withdrawal from the Plan by an Affiliate subject to such conditions as the Committee (or the designated officer) may impose.

(b)		Procedure for Adoption. Any such Affiliate shall initiate its adoption of the Plan by delivery of a certified copy of the resolutions of its board of directors adopting the Plan to the Committee or designated officer. Upon the consent of the Committee or designated officer of the adoption by the Affiliate, and the delivery to the Trustee of written evidence of the consent of the Committee or designated officer, the adoption of the Plan by the Affiliate shall be effective as of the date specified by the Committee or designated officer.

(c)		Effect of Adoption. Upon the adoption of the Plan by an Affiliate as heretofore provided, the Affiliate shall be an Employer hereunder in all respects. Each Employer that participates in the Plan, as a condition of its continued participation in the Plan, delegates to the Company the sole power and authority:

	(1)		to terminate the Plan (except that each Employer shall have the power to terminate the Plan as applied to it); to amend the Plan (except that each Employer shall have the power to amend the Plan as applied to it by establishing a successor plan to which assets and liabilities may be transferred);

	(2)		to appoint, remove and accept the resignation of a Trustee; to appoint or remove members of the Committee; to appoint or remove an investment manager; to act as the Administrator;

	(3)		to direct the Trustee to return an Employer contribution that was made by mistake or which is not deductible;

	(4)		to designate Employers; to establish conditions and limitations upon such adoption of the Plan by Employers; and

	(5)		to cause the Plan to be merged with another plan and to transfer assets and liabilities between the Plan and another.

(d)

Procedure for Withdrawal. Any Employer may initiate its withdrawal from the Plan by delivery to the Committee or a designated officer of the Company of a certified copy of the resolutions of its board of directors requesting the withdrawal. Upon the consent of the Committee or designated officer to the withdrawal, and the delivery to the Trustee of written evidence of the consent of the Committee or designated officer to the withdrawal, the Employer shall cease its active participation in the Plan effective as of the date specified by the Committee or designated officer.

(e)		Effect of Withdrawal. Except as otherwise provided by the Committee or a designated officer of the Company, following the withdrawal from the Plan of an Employer, no further contributions shall be accepted from that corporation other than contributions with respect to service prior to the date of the withdrawal.

17.5		Captions

The captions contained herein and the table of contents, if any, prefixed hereto are inserted only as a matter of convenience and for reference and in no way define, limit, enlarge or describe the scope or interest of the Plan nor in any way affect the Plan or the construction of any provision thereof.

The Plan shall be construed and enforced in accordance with the laws of the State of Minnesota (without regard to its conflict of laws provisions), except to the extent that such laws are preempted by Federal law.

The provisions of the Plan may be modified by supplements and appendices to the Plan. The terms and provisions of each supplement and appendix are a part of the Plan and supersede the provisions of the Plan to the extent necessary to eliminate inconsistencies between the Plan and such supplement or appendix.

Unless Congress acts to extend the provisions enacted into law under the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”) that sunset as of December 31, 2011, the provisions of this Plan based on EGTRRA shall also sunset as of that date.

If a form or document must be filed with or received by the Administrator, Company, Employer, or Trustee (the “appropriate entity”), it must be actually received by the appropriate entity to be effective. The determination of whether or when a form or document has been received by the appropriate entity shall be made by the Administrator on the basis of what documents are acknowledged by the appropriate entity to be in its actual possession without regard to the “mailbox rule” or similar rule of evidence. The absence of a document in the appropriate entity’s records and files shall be conclusive and binding proof that the document was not received by the appropriate entity.

The Plan shall recognize as valid a document submitted to the Administrator by which a Participant, Beneficiary, or alternate payee appoints another person as his attorney in fact, under the following rules:

(a)		that neither the Company nor the Administrator shall be required to determine whether the document complies with the applicable state law regarding powers of attorneys or attorneys in fact;

(b)		that if the document enumerates one or more specific powers in addition to a general power to act, the enumeration of one or more specific powers shall not be deemed to limit the generality of the general power to act; in other words, the general power shall continue to be in force; and

(c)		that the document is signed by the Participant and is notarized.

The Administrator may establish additional rules for the acceptance of powers of attorneys for Plan purposes. The Administrator, in its sole discretion, may review the document as to whether it complies with the Plan’s rules and the Administrator’s rules. If there is a conflict between the action of a court-appointed guardian or conservator and an attorney in fact, then the authority of the court-appointed guardian or conservator shall be recognized as superior to that of an attorney in fact.

The Plan shall recognize the authority of a court-appointed guardian or conservator to act on behalf of a Participant, Beneficiary, or alternate payee to the extent such action is within the authority granted to the court-appointed guardian or conservator.

SUPPLEMENT A
SPECIAL PROVISIONS APPLICABLE TO PARTICIPANTS WITH ACCOUNTS ATTRIBUTABLE TO THE
NEW CENTURY ENERGIES, INC. EMPLOYEES’ SAVINGS AND STOCK OWNERSHIP PLAN FOR
NON-BARGAINING UNIT EMPLOYEES

Prior to the Effective Date, certain Employees participated in the New Century Energies, Inc. Employees’ Savings and Stock Ownership Plan for Non-Bargaining Unit Employees (the “NCE ESSOP”). As of the Effective Date, the NCE ESSOP was merged into the Plan. This Supplement A is intended to describe special provisions applicable to Employees’ balances under the NCE ESSOP that were transferred to the Plan as a result of the merger of the NCE ESSOP and the Plan.

The Administrator shall maintain Predecessor Plan Accounts and ESOP Predecessor Plan Accounts for former participants in the NCE ESSOP, as described in this Section.

(a)		The Administrator shall maintain a Predecessor Plan Account (referred to in this Supplement as the “Retirement Credit Account”) to reflect retirement program contributions to the NCE ESSOP, and earnings, gains and losses attributable thereto.

(b)		The Administrator shall maintain the following ESOP Predecessor Plan Accounts:

	(1)		An “SPS Employer Contribution Account” to reflect employer contributions to the Southwestern Public Service Company Employee Investment Plan;

	(2)		A “Prior PSCo ESOP After-Tax Account” to reflect Participants’ after-tax contributions to the NCE ESSOP (or a predecessor thereto); and

	(3)		A “Prior PSCo ESOP Employer Contribution Account” to reflect company contributions to predecessors to the NCE ESSOP.

		Each of the aforementioned accounts shall also be credited with gains and losses attributable to amounts credited thereto.

A.3		Retirement Program Credits

Notwithstanding any Plan provision to the contrary, a Participant’s Retirement Credit Account shall be subject to the following vesting rules:

(a)

If the Participant’s Termination of Employment occurs due to his death, the Participant shall be 100% vested in his Retirement Credit Account.

(b)

If the Participant’s Termination of Employment occurs for a reason other than death, the Participant shall be 100% vested in his Retirement Credit Account, provided:

	(1)		The Participant has reached age 65,

	(2)		The Participant’s Termination of Employment has occurred due to a disability that entitled the Participant to benefits under an Employer’s Long Term Disability Income Plan or any successor plan thereto, as determined by the Administrator, or

	(3)		The Participant has completed at least five years of vesting service. The Participant’s years of vesting service for this purpose shall equal the number of years of such service recognized for purposes of vesting in the accrued benefit under the New Century Energies, Inc. Retirement Plan for Non-Bargaining Unit Employees (or a successor thereto) on the date the Participant’s Termination of Employment occurs.

(c)

If the Participant’s Termination of Employment occurs and he is not vested in his Retirement Credit Account, pursuant to the foregoing subsections, then the following provisions shall apply:

(1)

The Participant’s nonvested Retirement Credit Account shall become a forfeiture as of the earlier of the following dates:

	(A)		The date the Participant’s vested Combined Account has been distributed to the Participant.

	(B)		The date the Participant incurs a Recognized Break in Service of 60 months’ duration (as defined in subsection (3) below).

			The Participant shall lose all claim to the nonvested Retirement Credit Account on the date as of which the forfeiture occurs. The forfeiture shall be transferred to the Plan’s forfeiture account for application as provided in subsections (4) and (5) below.

	(2)		If a Participant whose Retirement Credit Account was forfeited under subsection (1) is subsequently reemployed and completes a year of vesting service before incurring a Recognized Break in Service (as defined in subsection (3) below) of at least 60 months’ duration, an amount shall be reinstated to the Participant’s Retirement Credit Account as of the last day of the Plan Year in which such year of vesting service is completed equal to the value of the forfeiture on the date the forfeiture occurred. The reinstated Retirement Credit Account shall be funded as provided in subsection (4). The Participant shall be entitled to such Retirement Credit Account in accordance with the provisions of this Section A.3 upon any subsequent Termination of Employment.

	(3)		For purposes of this subsection (c), a “Recognized Break in Service” is a period of at least 12 consecutive months beginning on the day on which a Participant’s

Termination of Employment occurs. A Recognized Break in Service ends on the day the individual resumes employment with the Company or an Affiliate.

	(A)		If an employee is absent (with or without pay) from service with the Company and all Affiliates for any reason other than quit, discharge, retirement or death, the Termination of Employment for purposes of this subsection shall be deemed to occur not later than the first anniversary of the date such period of absence began.

	(B)		Solely for purposes of determining when an individual has incurred a Recognized Break in Service under this subsection, if the individual is absent from work for maternity or paternity reasons, the 12-month period beginning with the first day of such absence shall not be included in the Recognized Break in Service. For purposes of this subsection, an absence from work for maternity or paternity reasons means an absence (i) by reason of the pregnancy of the individual, (ii) by reason of the birth of a child of the individual, (iii) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement.

(4)

The amount required to reinstate a Retirement Credit Account pursuant to subsection (2) as of the last day of a Plan Year shall be provided from the following sources in the priority indicated:

	(A)		Amounts forfeited under this subsection (c).

	(B)		Employer contributions for the Plan Year.

	(C)		Net income or gain of the Fund not previously allocated to other accounts.

(5)

Any forfeitures occurring during a Plan Year (adjusted for any investment earnings or losses) that are not used to reinstate accounts pursuant to subsection (4) shall, at the discretion of the Administrator, be credited against the Matching Contributions due from the Employers for the Plan Year, or be used to pay reasonable administrative expenses of the Plan that are chargeable against the Fund.

A.4		In-Service Distributions

(a)		Hardship Withdrawals. A former NCE ESSOP participant may obtain a hardship withdrawal from his ESOP Predecessor Plan Accounts, in accordance with applicable provisions of Section 9.2 of the Plan.

(b)		After-Tax Withdrawals. A former NCE ESSOP participant may obtain an after-tax withdrawal from his Prior PSCo ESOP After-Tax Account, in accordance with applicable provisions of Section 9.3 of the Plan.

SUPPLEMENT B
SPECIAL PROVISIONS APPLICABLE TO PARTICIPANTS WITH ACCOUNTS ATTRIBUTABLE TO THE
XCEL ENERGY EMPLOYEE STOCK OWNERSHIP PLAN

Prior to May 6, 2002, certain Employees participated in the Xcel Energy Employee Stock Ownership Plan (the “Xcel ESOP”). As of May 6, 2002, the Xcel ESOP was merged into the Plan. This Supplement B is intended to describe special provisions applicable to Employees’ balances under the Xcel ESOP that were transferred to the Plan as a result of the merger of the Xcel ESOP and the Plan.

The Administrator shall maintain the following ESOP Predecessor Plan Accounts for former Xcel ESOP Participants:

(a)		A “Prior NSP ESOP Employee After-Tax Account” to reflect Participants’ after-tax contributions under the Xcel ESOP;

(b)		A “Prior NSP ESOP Employer Contribution Account” to reflect company contributions under the Xcel ESOP; and

(c)		A “Prior NSP ESOP (ER/EE) Account” to reflect combined company contributions and earnings on company and participant contributions under the Xcel ESOP, for participants who terminated employment thereunder prior to May 6, 2002.

Each of the aforementioned accounts shall also be credited with gains and losses attributable to amounts credited thereto.

A former Xcel ESOP participant may obtain an after-tax withdrawal from his Prior NSP ESOP Employee After-Tax Account, in accordance with applicable provisions of Section 9.3 of the Plan.

A.1		General Rules

(a)		Effective Date. The provisions of this Appendix will apply for purposes of determining required minimum distributions for calendar years beginning with the 2003 calendar year.

(b)		Precedence. The requirements of this Appendix will take precedence over any inconsistent provisions of the Plan.

(c)		Requirements of Treasury Regulations Incorporated, All distributions required under this Appendix will be determined and made in accordance with the Treasury Regulations under Code Section 401(a)(9).

(d)		TEFRA Section 242(b)(2) Elections. Notwithstanding the other provisions of this Appendix, other than paragraph (c) above, distributions may be made under a designation made before January 1, 1984, in accordance with Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the provisions of the Plan that relate to Section 242(b)(2) of TEFRA.

A.2		Time and Manner of Distribution

(a)		Required Commencement Date. The Participant’s entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant’s Required Commencement Date.

(b)		Death of Participant Before Distributions Begin. If the Participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed, no later than as follows:

	(1)		The Participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

	(2)		If the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary and the surviving spouse dies after the Participant but before distributions to the surviving spouse begin, this Section A.2(b) will apply as if the surviving spouse were the Participant.

For purposes of this Section A.2(b) and Section A.4, unless Section A.2(b)(2) applies, distributions are considered to begin on the Participant’s Required Commencement Date. If Section A.2(b)(2) applies, distributions are considered to begin on the date distributions are required to begin to the surviving spouse under Section A.2(b)(1)). If distributions under an annuity purchased from an insurance company irrevocably commence to the Participant before the Participant’s Required Commencement Date (or to the Participant’s surviving spouse before the date distributions are required to begin to the surviving

		spouse under Section A.2(b)(1)), the date distributions are considered to begin is the date distributions actually commence.

(c)		Forms of Distribution. Unless the Participant’s interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the Required Commencement Date, as of the first Distribution Calendar Year, distributions will be made in accordance with Sections A.3 and A.4 of this Appendix. If the Participant’s interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Code Section 401(a)(9).

A.3		Required Minimum Distributions During Participant’s Lifetime

(a)		Amount of Required Minimum Distribution for Each Distribution Calendar Year. During the Participant’s lifetime, the minimum amount that will be distributed for each Distribution Calendar Year is the lesser of:

	(1)		the quotient obtained by dividing the Participant’s Account Balance by the distribution period in the Uniform Lifetime Table set forth in Treasury Regulations Section 1.401(a)(9)-9, using the Participant’s age as of the Participant’s birthday in the Distribution Calendar Year; or

	(2)		if the Participant’s sole Designated Beneficiary for the Distribution Calendar Year is the Participant’s spouse, the quotient obtained by dividing the Participant’s Account Balance by the number in the Joint and Last Survivor Table set forth in Treasury Regulations Section 1.401(a)(9)-9, using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the Distribution Calendar Year.

(b)		Lifetime Required Minimum Distributions Continue Through Year of Participant’s Death. Required minimum distributions will be determined under this Section A.3 beginning with the first Distribution Calendar Year and up to and including the Distribution Calendar Year that includes the Participant’s date of death.

A.4		Required Minimum Distributions After Participant’s Death

(a)		Death on or After Date Distributions Begin.

(1)

Participant Survived by Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is a Designated Beneficiary, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the longer of the remaining Life Expectancy of the Participant or the remaining Life Expectancy of the Participant’s Designated Beneficiary, determined as follows:

	(A)		The Participant’s remaining Life Expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

	(B)		If the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary, the remaining Life Expectancy of the surviving spouse is calculated for each Distribution Calendar Year after the year of the Participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year. For Distribution Calendar Years after the year of the surviving spouse’s death, the remaining Life Expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one for each subsequent calendar year.

	(C)		If the Participant’s surviving spouse is not the Participant’s sole Designated Beneficiary, the Designated Beneficiary’s remaining Life Expectancy is calculated using the age of the beneficiary in the year following the year of the Participant’s death, reduced by one for each subsequent year.

(2)

No Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is no Designated Beneficiary as of September 30 of the year after the year of the Participant’s death, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the Participant’s remaining Life Expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

	(1)		Distribution of the Participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

	(2)		If the Participant dies before the date distributions begin, the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse under Section A.2(b)(1), this Section A.4(b) will apply as if the surviving spouse were the Participant.

A.5		Definitions

(a)		Designated Beneficiary. The individual who is the beneficiary under Section 1.11 of the Plan and is the designated beneficiary under Code Section 401(a)(9) and Treasury Regulations Section 1.401(a)(9)-1, Q&A-4.

(b)		Distribution Calendar Year. A calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first Distribution

		Calendar Year is the calendar year immediately preceding the calendar year which contains the Participant’s Required Commencement Date. For distributions beginning after the Participant’s death, the first Distribution Calendar Year is the calendar year in which distributions are required to begin under Section A.2(b). The required minimum distribution for the Participant’s first Distribution Calendar Year will be made on or before the Participant’s Required Commencement Date. The required minimum distribution for other Distribution Calendar Years, including the required minimum distribution for the Distribution Calendar Year in which the Participant’s Required Commencement Date occurs, will be made on or before December 31 of that Distribution Calendar Year.

(c)		Life Expectancy. Life Expectancy as computed by use of the Single Life Table in Treasury Regulations Section 1.401(a)(9)-9.

(d)		Participant’s Account Balance. The Combined Account balance as of the last Valuation Date in the calendar year immediately preceding the Distribution Calendar Year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the Combined Account as of dates in the valuation calendar year after the Valuation Date and decreased by distributions made in the valuation calendar year after the Valuation Date. The Combined Account for the valuation calendar year includes any amounts rolled over or transferred to the Plan either in the valuation calendar year or in the Distribution Calendar Year if distributed or transferred in the valuation calendar year.

(e)		Required Commencement Date. The date specified in Section 10.5(b).

NEW CENTURY ENERGIES, INC.
EMPLOYEE INVESTMENT PLAN FOR
BARGAINING UNIT EMPLOYEES AND
FORMER NON-BARGAINING UNIT EMPLOYEES

(As Amended and Restated Effective January 1, 2002
But With Certain Retroactive Amendments)

NEW CENTURY ENERGIES, INC.
EMPLOYEE INVESTMENT PLAN FOR
BARGAINING UNIT EMPLOYEES AND
FORMER NON-BARGAINING UNIT EMPLOYEES

(As Amended and Restated Effective January 1, 2002
But With Certain Retroactive Amendments)

1.01 Establishment of the Plan. Southwestern Public Service Company previously adopted and established a tax benefit, investment savings stock bonus plan (the “Tax Benefit Plan”) for the exclusive benefit of its eligible employees and their beneficiaries, effective as of March 1, 1985. Subsequent thereto, the Tax Benefit Plan was amended from time to time and was adopted by certain Affiliated Companies. Effective as of September 1, 1989, Southwestern Public Service Company and certain Affiliated Companies amended and restated the Tax Benefit Plan in its entirety, and effective December 1, 1994, the Tax Benefit Plan was amended to satisfy the requirements of an employee stock ownership plan and to permit the distribution of cash dividends to participants.

Effective as of September 1, 1974, Southwestern Public Service Company adopted and established a tax credit employee stock ownership plan and trust (the “ESOP”) for the benefit of its eligible employees. Subsequent thereto, the ESOP was amended from time to time, and was adopted by certain Affiliated Companies. Effective as of September 1, 1989, Southwestern Public Service Company and certain Affiliated Companies amended and restated the ESOP in its entirety.

Effective as of March 1, 1995 (the “Effective Date”), Southwestern Public Service Company and certain Affiliated Companies, merged the ESOP into the Tax Benefit Plan creating the Southwestern Public Service Company Employee Investment Plan, a new stock bonus/employee stock ownership plan as a continuation of the Tax Benefit Plan in accordance with the terms and conditions hereinafter set forth.

Except as otherwise provided herein, and subject to the following sentence, the provisions of the Plan as contained herein are applicable to Employees and Participants who die, retire, suffer Total and Permanent Disability or Termination of Employment on or after March 1, 1995, or who are reemployed by an Employer or Affiliated Company on or after March 1, 1995. Except as otherwise provided herein, any employee or participant in either the ESOP or the Tax Benefit Plan who died, retired, became disabled or terminated employment prior to March 1, 1995 shall receive any benefits to which he or she is entitled based upon the appropriate provisions of the ESOP or Tax Benefit Plan, as the case may be, as in effect prior to March 1, 1995.

Effective July 1, 1998, the portion of this Plan consisting of the accounts of the Plan Participants who were eligible employees on June 30, 1998, was spun off into a separate plan, and this Plan was renamed the New Century Energies, Inc. Employee Investment Plan for Bargaining Unit Employees and Former Non-Bargaining Unit Employees. Effective as of the date of the merger of New Century Energies, Inc. and Northern States Power Company to form Xcel Energy Inc., Xcel Energy Inc. is substituted in place of New Century Energies, Inc. as the Sponsoring Company.

This plan document was amended and restated generally effective January 1, 2002 but with certain retroactive amendments required by changes in the law.

1.02 Purpose. The purposes of the Plan are to encourage employee thrift and savings by allowing eligible employees to enter into a cooperative savings program ( with their employer, to provide an additional opportunity for eligible employees to share in the growth and prosperity of the Sponsoring Company and to provide eligible employees with an opportunity to accumulate additional capital for their future economic security. The primary purpose of the Plan is to enable Participants to acquire stock ownership interests in the Sponsoring Company, and therefore, the Plan is designed to invest primarily in Company Stock. To provide all of the intended benefits described herein, a Participant must elect to defer a portion of his Compensation through salary reduction, and the Employer will contribute an amount which, in part, will be allocated on the basis of the salary reduction deferred amounts and, in part, allocated on the basis of Compensation, as well as an amount equal to the salary reduction deferred amounts. Such contributions and any income derived therefrom shall be for the exclusive benefit of the Employers’ employees and their beneficiaries and shall not be used for, or diverted to, any other purpose except as otherwise provided in Article XIX of the Plan.

It is the intention of the Employers that the Plan shall continue to meet all of the requirements necessary or appropriate to qualify it as an employee stock ownership plan with a cash or deferred arrangement feature, under Code Sections 401(a), 401(k), 409 (where applicable) and 4975(e)(7) and, if and where appropriate, with respect to the tax credit employee stock ownership plan features, Section 301(d) of the Tax Reduction Act of 1975, and Sections 41, 44G and 409(A) (or 409, where applicable) of the Internal Revenue Code of 1954, as amended, and that the Trust made a part hereof shall continue to be exempt from tax under Code Section 501(a) and all provisions hereof shall be interpreted accordingly.

1.03 Trust Agreement. In furtherance of this Plan, the trust agreements under the ESOP and the Tax Benefit Plan are being amended and restated to create the Trust Agreement, effective as of March 1, 1995, which is made a part hereof, for the purpose of maintaining the Trust to fund the benefits of this Plan as hereinafter set forth.

2.01 “Account” or “Accounts” shall mean all or any of the Company Contribution Account, the ESOP Employer Contribution Account, the ESOP Employee Contribution Account,

the Company Matching Contribution Account, the Employee Elective Contribution Account, the Rollover Account and the QDRO Account to the extent any one or more of such accounts have been created for a Participant, Beneficiary or Alternate Payee. Any of the Accounts may have such subaccounts as are from time to time administratively necessary, as determined by the Committee.

2.02 “Affiliated Company” shall mean any of the following which itself is not an Employer: (i) a member of a controlled group of corporations of which an Employer is a member as defined in Code Section 414(b), (ii) any trade or business (whether or not incorporated) which is under common control with an Employer as determined in accordance with Code Section 414(c) and regulations issued thereunder, (iii) a member of an “affiliated service group” (whether or not incorporated) as determined in accordance with Code Section 414(m) and regulations issued thereunder, of which an Employer is a member, or (iv) any other entity which is required to be aggregated with an Employer in accordance with Code Section 414(o) and the regulations issued thereunder. “Affiliated Company” as defined in clauses (i) and (ii) shall be modified as required by Code Section 415(h) when used in Sections 5.04, 5.05 and 5.06 hereof with respect to limitations on Annual Additions.

2.03 “Alternate Payee” shall mean an individual or trust entitled to benefits under the Plan pursuant to a Qualified Domestic Relations Order.

2.04 “Beneficiary” shall mean any person or entity entitled to receive benefits which are payable upon or after a Participant’s death pursuant to Article IX hereof.

2.05 “Board” shall mean the Board of Directors of the Sponsoring Company, as from time to time constituted.

2.06 “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time. References to any section of the Internal Revenue Code shall include any successor provision thereto.

2.07 “Committee” shall mean the Committee provided for in Section 13.01 hereof. “Committee” shall have the same meaning as Committee as defined in the Tax Benefit Plan.

2.08 “Company Contribution Account” shall mean the separate account maintained for each Participant reflecting Company Contributions and Forfeitures allocated to such Participant in accordance with Sections 4.01 and 5.03 hereof, as adjusted in accordance with the provisions of Article VI hereof.

2.09 “Company Matching Contribution Account” shall mean the separate account maintained for each Participant reflecting Company Matching Contributions allocated to such Participant as provided in Sections 4.04 and 5.01 hereof, as adjusted in accordance with the provisions of Article VI hereof and shall include the amounts held in the Company Contribution Account under the Tax Benefit Plan.

2.10 “Company Stock” shall mean (a) the common stock issued by the Sponsoring Company (or by a corporation which is a member of the same controlled group, as determined under Code Section 409(l)(4)) which is readily tradable on an established securities market, or

(b) if there is no common stock which meets the requirements of clause (a) above, the common stock issued by the Sponsoring Company (or by a corporation which is a member of the same controlled group) having a combination of voting power and dividend rights equal to or in excess of (i) that class of common stock of the Sponsoring Company (or of any other such corporation) having the greatest voting power, and (ii) that class of common stock of the Sponsoring Company (or of any other such corporation) having the greatest dividend rights.

2.11 “Compensation” shall mean base compensation as reflected on the Employer’s payroll records actually paid by an Employer to an Employee during the Plan Year, including an Employee’s Elective Contributions under this Plan and an Employee’s elective salary deferrals pursuant to Code Section 125 or commencing January 1, 2001 pursuant to Code Section 132(f)(4), but excluding overtime, bonuses, commissions, moving expense allowances and other extraordinary compensation, and excluding Company Contributions or any other Employer contributions to this Plan or employer contributions under any other employee benefit plan and all other deferred compensation; provided, however, in the event that an employee is disabled and is receiving payments under any workers’ compensation laws but is simultaneously receiving compensation from the Employer, such Participant’s Compensation for the period while receiving such workers’ compensation payments shall be based upon his rate of pay from the Employer as in effect from time to time during such period determined without regard to the fact that such Participant is receiving payments under any workers’ compensation laws.

Compensation shall not include any Compensation in excess of One Hundred Fifty Thousand Dollars ($150,000) for Plan Years commencing on or after January 1, 1994 and before January 1, 1997; in excess of One Hundred Sixty Thousand Dollars ($160,000) for Plan Years commencing on or after January 1, 1997 and before January 1, 2000; and in excess of One Hundred Seventy Thousand Dollars ($170,000) for Plan Years commencing on or after January 1, 2000.

In applying the compensation limitation for Plan Years commencing prior to January 1, 1997, the family group of a Highly Compensated Employee who is subject to the family member aggregation rules of Code Section 414(q)(6) because such Employee is either a five percent owner of the Employer or one of the ten (10) Highly Compensated Employees paid the greatest Limitation Year Compensation during the year, shall be treated as a single Participant, except that for this purpose, Family Members shall include only the affected Participant’s spouse and any lineal descendants who have not attained age nineteen (19) before the close of the year. In the event the Highly Compensated Employee’s and one or more Family Member’s Compensation for a Plan Year from an Employer are limited pursuant to the provisions of this Section, then the Compensation of each such person for such Plan Year shall be reduced proportionately based on the ratio of their respective Compensation to the aggregate Compensation of both (or all) of such persons for such Plan Year.

2.12 “Date of Employment” or “Date of Reemployment” shall mean the day on which an Employee first commences employment or reemployment following Termination of Employment, retirement after attaining his Retirement Date-or recovery from Total and Permanent Disability, as the case may be, with an Employer or an Affiliated Company by performing an Hour of Service.

2.13 “Elective Contributions” shall mean the amount each Participant has elected to have the Employer contribute on his behalf, in lieu of cash compensation, pursuant to the provisions of Section 4.02 hereof. Such amounts are intended to qualify as elective contributions under Code Section 401(k) and the regulations thereunder. “Elective Contributions” shall also mean Elective Contributions as defined in and made to the Tax Benefit Plan.

2.14 “Eligible Employee” shall mean any Employee who is employed in a bargaining unit covered by a collective bargaining agreement that provides for participation in this Plan. However, the following Employees are not Eligible Employees: (i) a nonresident alien who receives no earned income within the meaning of Code Section 911(b), (ii) any Employee who is a “leased employee” as defined in Section 2.15 hereof and (iii) from and after the date on which occurs the “Effective Time” of the “Mergers” pursuant to Section 1.4 of the Agreement and Plan of Reorganization by and among Public Service Company of Colorado, Southwestern Public Service Company and M-P New Co., dated as of August 22, 1995 (the “Merger Effective Date”), any Employee who is not hired by an Employer to work in the geographic area comprising the service area of Southwestern Public Service Company immediately prior to the Merger Effective Date.

2.15 “Employee” shall mean any person who is employed by one or more Employers, is on an Employer’s payroll, and whose wages are subject to FICA withholding. Employee also includes any person who is not employed by an Employer but is performing services for an Employer pursuant to an agreement between such Employer or an Affiliated Company and a leasing organization and who is a “leased employee” as that term is defined in Code Section 414(n). A “leased employee” shall not be an Employee, however, if (1) such person is covered by a money purchase pension plan qualified under Code Section 401(a) providing (i) a nonintegrated employer contribution rate of at least ten (10) percent of Limitation Year Compensation as defined in Subsection 5.07(5) hereof, but including amounts contributed pursuant to a salary reduction agreement which are excludable from such person’s gross income under Code Sections 125, 402(a)(8), 402(h) or 403(b), (ii) immediate participation, and (iii) full and immediate vesting, and (2) “leased employees” do not constitute more than twenty percent (20%) of the Employer’s or Affiliated Company’s work force who are Non-Highly Compensated Employees. However, except to the extent otherwise provided in regulations under Code Section 414(n), in the event a “leased employee” subsequently becomes an Employee as defined herein, the period from and after January 1, 1984 during which said leased employee performed services for an Employer or an Affiliated Company as a leased employee shall be taken into account in determining such person’s Eligibility Years of Service under the Plan in accordance with and subject to the remainder of the provisions of the Plan, as if such employee were employed by an Employer or an Affiliated Company during such period.

2.16 “Employee Elective Contribution Account” shall mean the separate account maintained for each Participant reflecting the Elective Contributions made on behalf of such Participant pursuant to Section 4.02 hereof, if any, as adjusted in accordance with the provisions of Article VI of the Plan, and shall include amounts held in the Elective Contribution Account under the Tax Benefit Plan.

2.17 “Employer” shall mean the Sponsoring Company, Southwestern Public Service Company, Utility Engineering Corporation, Quixx Corporation, or any other Affiliated Company which adopts the Plan pursuant to Article XV hereof.

2.18 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. References to any Section of ERISA shall include any successor provision thereto.

2.19 “ESOP” shall mean the Southwestern Public Service Company Employee Stock Ownership Plan and Trust as in effect at any time and from time to time on and prior to February 28, 1995, as the context so requires.

2.20 “ESOP Employee Contribution Account” shall mean the separate account maintained for each Participant who was a participant in the ESOP consisting of the contributions made by the participant as described in Section 5(a) of the ESOP as in effect on and prior to February 28, 1995, plus earnings and/or losses (including appreciation and depreciation) credited to such contributions under the ESOP and credited to such Account hereunder. Any amounts credited to a Participant’s ESOP Employee Contribution Account shall at all times, be fully vested and nonforfeitable.

2.21 “ESOP Employer Contribution Account” shall mean the separate account maintained for each Participant who was a participant in the ESOP consisting of the contributions made by the Employers as described in Sections 2.02(a), 2.02(b), 2.02(c) and 5(b)(i)(A) of the ESOP as in effect on and prior to February 28, 1995, plus earnings and/or losses (including appreciation and depreciation) credited to such contributions under the ESOP and credited to such Account hereunder. Any amounts credited to a Participant’s ESOP Employer Contribution Account shall at all times, for all purposes and in all respects be fully vested and nonforfeitable.

2.22 “Fiscal Year” shall mean the fiscal year of an Employer. The Fiscal Year of the Sponsoring Company ends on August 31.

2.23 “Hour of Service” shall mean each hour for which an Employee is paid or entitled to payment for the performance of duties for an Employer or an Affiliated Company.

2.24 “Investment Manager” shall mean any fiduciary other than the trustee or a Named Fiduciary that: (i) is either (a) registered as an investment adviser under the Investment Advisers Act of 1940 and registered under the laws of Texas, or (b) a bank (as defined in the Investment Advisers Act of 1940), or (c) an insurance company qualified to manage, acquire or dispose of Plan assets under the laws of more than one state, (ii) acknowledges in writing that it is a fiduciary with respect to the Plan, and (iii) is granted the power to manage, acquire or dispose of any asset of the Plan pursuant to Section 13.11 hereof.

2.25 “Leave of Absence” shall mean an absence from the active employment of an Employer by reason of an approved absence granted by such Employer on the basis of a uniform policy applied by such Employer without discrimination.

2.26 “One-Year Period of Severance” shall mean a twelve (12)-consecutive month Period of Severance.

Notwithstanding any other provision of this Section 2.26 to the contrary, solely for purposes of determining whether an Employee has a One-Year Period of Severance, in the case of an Employee who is first absent from work for any period: (i) by reason of (a) the Employee’s pregnancy, (b) the birth of the Employee’s child, (c) the placement of a child with the Employee in connection with adoption of such child by the Employee, or (ii) for the purpose of caring for such child for a period beginning immediately following such birth or placement, the (12)-consecutive month period beginning on the first anniversary of the first date of such absence shall not constitute a One-Year Period of Severance. The period between the first and second anniversaries of the first date of such absence is neither a Period of Service nor a Period of Severance. Notwithstanding the provisions of this Section, no credit shall be given pursuant to this Section unless the Employee furnishes the Committee with such information as the Committee shall require to establish: (i) that the absence from work was for the reasons referred to herein, and (ii) the number of days for which there was such an absence.

2.27 “Participant” shall mean an Eligible Employee who participates in the Plan as provided in Article III hereof or a former Employee who has a vested interest in the Plan.

2.28 “Period of Service” shall mean the period of time commencing on an Employee’s Date of Employment or Date of Reemployment, as the case may be, and ending on such Employee’s Severance from Service Date. For the period prior to the Effective Date, a Participant’s or Employee’s Period of Service shall equal his Period of Service under the ESOP, if greater than his Period of Service as defined herein. A Period of Service shall also include a Period of Severance of twelve (12) consecutive months or less. Notwithstanding the preceding sentence:

2.28(1) If an Employee who is on Leave of Absence or is temporarily laid off, retires or terminates employment during the first twelve (12) months of such Leave of Absence or temporary layoff, as the case may be, such Employee’s Period of Service shall not include any Period of Severance beginning on the date such Employee retired after attaining his Retirement Date or the date he terminated employment and ending on such Employee’s Date of Reemployment, if any, so long as such Date of Reemployment does not occur within the twelve (12) month period commencing on the date such Leave of Absence or temporary layoff began.

2.28(2) If an Employee works simultaneously for more than one Employer and/or Affiliated Company, the total Period of Service for such Employee shall not be increased by reason of such simultaneous employment.

2.28(3) In the case of any Employee (i) who became an employee of Southwestern Public Service Company on November 1, 1982 as a result of the merger of Cochran Power & Light Company (“CP&L”) into Southwestern Public Service Company and who immediately prior to such merger was an employee of CP&L (a “Former CP&L Employee”), (ii) who became an employee of Southwestern Public Service Company on May 5, 1983 as a result of the acquisition of the business and assets of New Mexico Electric Service Company (“NME”) by Southwestern Public Service Company and who immediately prior to such acquisition was an employee of NME (a “Former NME Employee”), or (iii) who is a

Former CP&L Employee and who immediately prior to commencing employment with CP&L was employed by NME, so that his employment with said two companies prior to becoming an employee of Southwestern Public Service Company was continuous and uninterrupted (a “Former CP&L/NME Employee”), “Period of Service” shall include such employee’s period of employment with NME and/or CP&L, as the case may be, beginning with such employee’s last date of hire by CP&L, in the case of a Former CP&L Employee, or by NME, in the case of a Former NME Employee or a Former CP&L/NME Employee.

2.29 “Period of Severance” shall mean the period of time commencing on an Employee’s Severance from Service Date and ending on such Employee’s Date of Reemployment, if any.

2.30 “Plan” shall mean the New Century Energies, Inc. Employee Investment Plan for Bargaining Unit Employees and Former Non-Bargaining Unit Employees as set forth in this document, and as hereafter amended.

2.31 “Plan Quarter” shall mean the quarter-annual portion beginning on each January 1, April 1, July 1 and October 1. The month of December, 1998 was also treated as a Plan Quarter for purposes of this Plan.

2.32 “Plan Year” shall mean, commencing on January 1, 1999, the calendar year. Prior to September 1, 1998, the Plan Year was the 12-consecutive month period ending on August 3l. The period from September 1, 1998 to December 31, 1998 was a short Plan Year.

2.33 “QDRO Account” shall mean that part of any other Account which has been isolated from such Account for the benefit of an Alternate Payee pursuant to a Qualified Domestic Relations Order.

2.34 “Qualified Domestic Relations Order” shall mean a judgment, order or decree which:

2.34(1) Relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a Participant; and

2.34(2) Is made pursuant to a state domestic relations law (including a community property law); and

2.34(3) Creates or recognizes the existence of an Alternate Payee’s right to, or assigns to an Alternate Payee the right to, receive all or a portion of the benefits payable with respect to a Participant under the Plan; and

2.34(4) Is determined by the Plan Administrator to meet all applicable requirements pursuant to the procedure established by the Committee for determining whether an order is a Qualified Domestic Relations Order pursuant to Code Section 414(p).

2.35 “Required Beginning Date” shall mean April 1 of the calendar year following the calendar year in which the Participant attains age seventy and one-half (70-1/2).

2.36 “Retirement Date” shall mean the date on which occurs the Participant’s sixty-fifth (65th) birthday.

2.37(1) The date on which an Employee suffers a Termination of Employment, retires after attaining his Retirement Date or after sustaining Total and Permanent Disability or dies; or

2.37(2) In the case of an Employee on Leave of Absence who does not return to the active employment of the Employer or an Affiliated Company at or ( prior to the expiration of such Leave of Absence, the earlier of (i) the expiration date of such Leave of Absence, or (ii) the date which is twelve (12) months after the date on which such Leave of Absence began, or, in the case of an Employee who becomes absent (whether the absence is with or without pay) from the active employment of an Employer or an Affiliated Company by reason of a temporary layoff, the date which is twelve (12) months after the date on which such Employee first becomes absent.

2.39 “Tax Benefit Plan” shall mean the Southwestern Public Service Company Tax Benefit Plan as in effect at any time and from time to time on and prior to February 28, 1995, as the context so requires.

2.40 “Termination of Employment” shall mean the earlier of (i) the termination of employment with all Employers and all Affiliated Companies, whether voluntarily or involuntarily, other than by reason of a Participant’s retirement after attaining his Retirement Date or as otherwise provided in Article VII hereof, or after sustaining Total and Permanent Disability, or death, or (ii) in the case of an Employee on Leave of Absence who does not return to the active employment of the Employer or an Affiliated Company at or prior to the expiration of such Leave of Absence, the earlier of (i) the expiration date of such Leave of Absence, or (ii) the date which is twelve (12) months after the date on which such Leave of Absence began, or, in the case of an Employee who becomes absent (whether the absence is with or without pay) from the active employment of an Employer or an Affiliated Company by reason of layoff, the date which is twelve (12) months after the date on which such Employee first becomes absent. A Leave of Absence will not constitute a Termination of Employment provided the Employee returns to the active employment of the Employer at or prior to the expiration of his leave, or if not specified therein, within the period of time which accords with such Employer’s policy with respect to permitted absences. Notwithstanding the foregoing provisions of this Section, absence from the active service of the Employer because of military service will be considered a Leave of Absence granted by an Employer and will not terminate the employment of an Employee if he returns to the active employment of an Employer within the period of time during which he has reemployment rights under any applicable federal law or within sixty (60) days from and after discharge or separation from such military service if no federal law is applicable. However, no provision of this Section or of the remainder of the Plan shall require reemployment of any Employee whose active service with an Employer was terminated by reason of military service.

2.41 “Total and Permanent Disability” shall mean the determination under the Employer’s Long-Term Disability Plan that the Participant is eligible to receive a disability benefit.

2.42 “Trust” shall mean the legal entity resulting from the Trust Agreement between the Sponsoring Company and the Trustee who receives the contributions under the Plan, as well as the amounts held under the trusts funding the ESOP and the Tax Benefit Plan, and holds, invests, and disburses funds to or for the benefit of Participants and their Beneficiaries.

2.43 “Trust Agreement” shall mean the instrument establishing the Trust, as amended from time to time.

2.44 “Trust Fund” shall mean all assets of whatsoever kind or nature from time to time held by the Trustee pursuant to the Trust Agreement without distinction as to income and principal.

2.45 “Trustee” shall mean the party or parties, individual or corporate, named in the Trust Agreement and any duly appointed additional or successor Trustee or Trustees acting thereunder.

2.47 “Valuation Period” shall mean the period from the close of business on the previous Valuation Date to the close of business on the current Valuation Date.

2.48 Whenever a noun, or a pronoun in lieu thereof, is used in this Plan in plural form and there be only one person, thing or institution within the scope of the word so used, or in singular form and there be more than one person, thing or institution within the scope of the word so used, such word, or the pronoun used in lieu thereof, shall have a plural or singular meaning, as the case may be. Pronouns of the masculine gender may mean the feminine and vice versa.

2.49 The words “herein,” “hereof,” and “hereunder” shall refer to the Plan.

2.50 The expressions listed below shall have the meanings stated in the Sections or Subsections hereof respectively indicated:

3.01 Service. Each Eligible Employee shall become a Participant as of the January 1, April 1, July 1 or October 1 (the “Entry Date”) coinciding with or next following the date upon which such Eligible Employee completes an Eligibility Year of Service, provided such Eligible Employee is so employed on such Entry Date.

In the event an Eligible Employee suffers a Termination of Employment before or after the completion of his Eligibility Year of Service but prior to the Entry Date upon which such Eligible Employee would have begun participating in the Plan, and such Eligible Employee is reemployed by an Employer prior to a twelve (12) consecutive month Period of Severance, such Eligible Employee shall, upon his reemployment, participate in the Plan as of the Entry Date that the Participant would have begun participation had the Employee not incurred a Termination of Employment, and shall be eligible to elect to have made on his behalf Elective Contributions from and after the later of his Entry Date or his Reemployment Commencement Date, provided he complies with the provisions of Section 4.02 hereof.

In the event an Eligible Employee suffers a Termination of Employment prior to completing an Eligibility Year of Service or after completing an Eligibility Year of Service but prior to the Entry Date upon which such Eligible Employee would have become a Participant, and such Eligible Employee is reemployed by the Employer after incurring one (1) One-Year Period of Severance but prior to incurring five (5) One-Year Periods of Severance, such Employee’s Period of Service prior to the Periods of Severance shall be aggregated with his Period of Service subsequent to such Periods of Severance for purposes of determining his eligibility for the Plan, and such Eligible Employee shall become a Participant as of the later of (i) his Date of Reemployment, or (ii) the Entry Date coinciding with or next following the date upon which such Employee completes an Eligibility Year of Service, provided such Eligible Employee is so employed on such Entry Date.

In the event an Eligible Employee transfers to an Affiliated Company prior to or after completing an Eligibility Year of Service but prior to the Entry Date upon which such Eligible Employee would have become a Participant, and is employed continuously with an Affiliated Company until his transfer back to an Employer, such Eligible Employee shall become a Participant as of the later of (i) the date of his transfer back to an Employer, or (ii) the Entry Date

coinciding with or next following the date upon which such Employee completes an Eligibility Year of Service, provided such Eligible Employee is so employed on such Entry Date.

3.02 Employment with a Predecessor Employer. If the Plan had previously been maintained by a predecessor of an Employer, whether a corporation, partnership, sole proprietorship or other business entity, any period of employment with such predecessor shall be treated as a period of employment with an Employer. Effective July 1, 1998, if the Plan had not been previously maintained by a predecessor of an Employer, employment with such predecessor shall be taken into account to the extent permitted by regulations prescribed by the Secretary of the Treasury.

3.03 Eligibility Year of Service. An “Eligibility Year of Service” shall mean a Period of Service of three hundred sixty-five (365) days, commencing with an Employee’s Date of Employment, or, if applicable, an Employee’s Date of Reemployment, subject to the provisions of Section 3.02 hereof.

3.04 Reemployment of Participants. In the event that a Participant incurs a Period of Severance and is subsequently reemployed by an Employer, he shall resume participation in the Plan for all purposes effective as of his Date of Reemployment.

3.05(1) In the event an Employee, including an Employee who previously was not defined as an Eligible Employee under Section 2.14 hereof, becomes defined as an Eligible Employee, such individual shall become a Participant in the Plan as of the date he becomes defined as an Eligible Employee, provided he has met the other requirements for eligibility set forth in Section 3.01 hereof and previously would have begun to participate in the Plan had he been defined as an Eligible Employee, or, if he has not met the other requirements for eligibility set forth in Section 3.01 hereof, as of the Entry Date after he meets such other eligibility requirements.

3.05(2) In the event a Participant who ceased to be defined as an Eligible Employee under Section 2.14 hereof but who did not incur a Termination of Employment with an Employer or an Affiliated Company subsequently becomes defined as an Eligible Employee again, such Eligible Employee shall recommence participation in the Plan for all purposes without regard to the limitations imposed by Section 5.08 hereof, as of the date he again becomes defined as an Eligible Employee.

3.06 Participation in the Plan. Each Eligible Employee who was a Participant in the ESOP and/or the Tax Benefit Plan immediately prior to the Effective Date shall be eligible to make Elective Contributions on and after the Effective Date, provided he is still an Eligible Employee. In addition, any Designation of Beneficiary on file for such Eligible Employee under the Tax Benefit Plan shall be a valid Designation under this Plan, unless and until changed in accordance with the provisions of this Plan. Each other Eligible Employee who becomes a Participant shall be notified when he is eligible to make Elective Contributions and shall be provided with such information as is required by the Plan and by ERISA, within the time prescribed for providing such information. Each such Participant also shall be provided with a Designation of Beneficiary Form which shall provide for a designation of one or more

Beneficiaries to receive benefits in the event of the Employee’s death, and shall be provided with such forms as may be necessary to cause Elective Contributions to be made on his behalf to the Trust.

3.07 Participation After March 1, 1995. Any Eligible Employee who met the eligibility requirements under the ESOP and/or the Tax Benefit Plan as it existed prior to the Effective Date shall continue to be a Participant in the Plan on the Effective Date. Each person who was a Participant in the Plan on the day immediately preceding the Merger Effective Date (as defined in Section 2.14 hereof) shall remain a Participant in the Plan after said Date.

3.08 Participation After July 1, 1998. Notwithstanding anything in the Plan to the contrary, on and after July 1, 1998, the Participants in this Plan shall consist solely of those Eligible Employees who have met the requirements of this Article to be a Participant and who are employed in a bargaining unit covered by a collective bargaining agreement that provides for participation in this Plan, and those other persons who were Participants on June 30, 1998, but who were not Eligible Employees on June 30, 1998. Any person who was both a Participant and an Eligible Employee on June 30, 1998, but who is not described in the previous sentence shall not be entitled to any benefit under this Plan on or after July 1, 1998.

3.09 Special Rule for Employees of Cabot Corporation or Texas-New Mexico Power Company. Notwithstanding the provisions of Section 3.01, any Eligible Employee who was a former employee of Cabot Corporation or Texas-New Mexico Power Company and who was hired as an Eligible Employee of Southwestern Public Service Company on or about August, 1995 in connection with and at the time of Southwestern Public Service’s acquisition of certain assets of Cabot Corporation and Texas-New Mexico Power Company, shall become a Participant as of the Entry Date coinciding with or next following the date upon which such Eligible Employee completes an Eligibility Year of Service computed as if such Eligible Employee’s Date of Employment was measured from the date such Eligible Employee last commenced employment with Cabot Corporation or Texas-New Mexico Power Company, as the case may be, prior to being hired by the Employer.

3.10 Periods of Military Service. Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Code Section 414(u).

4.01 Company Contributions. As of the last day of each Plan Quarter, each Employer shall make a contribution (the “Company Contribution”) in cash, or if appropriate, in shares of Company Stock, to the Trust in such amount as may be determined by the Committee, to be allocated among the Company Contribution Accounts of Participants in accordance with Section 5.03 hereof. In no event, however, shall any Company Contribution for any Plan Quarter by any Employer be required. In addition, in no event, however, shall any Company Contribution, when added to any Elective Contributions and Company Matching Contributions, exceed the

maximum deductible contribution under Code Section 404(a) including any amount which may be deductible by the Employer under the carryover provisions of the Code.

For purposes of determining and allocating Company Contributions and Company Matching Contributions under this Article IV and Article V in the case of Participants whose Accounts were transferred to the New Century Energies, Inc. Employees’ Savings and Stock Ownership Plan for Non-Bargaining Unit Employees effective as of July 1, 1998, the Plan Quarter that began on June 1, 1998 was deemed to end on June 30, 1998 and contributions on behalf of such non-bargaining unit Participants for said period were made and allocated separately from contributions on behalf of other Participants based on the Elective Contributions and Compensation of such non-bargaining unit Participants during said period.

4.02 Elective Contributions. In addition to any Company Contribution permitted hereunder, each Employer shall contribute to the Trust Fund an amount determined under the provisions of this Section, as an Elective Contribution, on behalf of each Participant who has in effect an agreement electing to reduce his or her Compensation (“Salary Reduction Agreement”). The rate to be contributed as an Elective Contribution on behalf of each such Participant, for each payroll period, as such Participant shall elect, shall be equal to (i) for Participants who are Non-Highly Compensated Employees (as defined in Subsection 4.03(8) hereof) from one to fifteen percent (1% – 15%) of such Participant’s Compensation for the payroll period, and (ii) for Participants who are Highly Compensated Employees (as defined in Subsection 4.03(8) hereof) from one to fifteen percent (1% – 15%) of such Participant’s Compensation for the payroll period, as determined from time to time and set by the Committee and communicated to such Participants, based in part on the anticipated Limitations on Elective Contributions under Section 4.03 hereof for such Participants. The percentage rate of Elective Contributions, if any, which each Participant elects must be in whole percentage points and shall be made on a Salary Reduction Agreement provided by and filed with the Committee.

An election of a rate shall initially be effective as of the date as specified by the Committee, provided the Salary Reduction Agreement is filed at the time and in the manner prescribed by the Committee. An election shall not have retroactive effect and shall remain in force until revoked or changed. The Committee shall establish and communicate to Participants uniform and nondiscriminatory procedures for the election of salary reduction amounts, including procedures regarding the effective dates of any such elections and for changes in elections and discontinuances of such elections, and may change said procedures at such times and in such manner as the Committee may determine to be necessary or desirable.

Elective Contributions made on behalf of a Participant shall be credited to his Employee Elective Contribution Account under the Plan. Any amounts credited to a Participant’s Employee Elective Contribution Account shall, for all purposes and in all respects, be fully vested and nonforfeitable.

4.03 Limitations on Elective Contributions. The limitations described in this Section 4.03 shall be determined in accordance with the applicable sections of the Code and regulations thereunder.

4.03(1) Notwithstanding any other provision of this Plan, in no event shall the Employer make an Elective Contribution in any Plan Year if such contribution would cause the

“Actual Deferral Percentage” (or “ADP”) of Highly Compensated Employees to exceed the greater of the limitations indicated below:

(a) One hundred twenty-five percent (125%) of the ADP for all Non-Highly Compensated Employees; or

(b) The lesser of (A) the sum of the ADP for all Non-Highly Compensated Employees plus two percent (2%), or (B) two hundred percent (200%) of the ADP for all Non-Highly Compensated Employees.

4.03(2) The Committee may, at any time prior to or during a Plan Year, to the extent necessary to conform the Elective Contributions to the above limitations or, if applicable, the limitations of Subsection 4.06(8) hereof, reduce or eliminate prospectively the percentage rates of Elective Contributions to be made on behalf of Highly Compensated Employees. Such prospective elimination or reduction shall be applied among the Highly Compensated Employees who have elected Elective Contributions in such manner as the Committee, in its sole discretion, shall deem appropriate, taking into consideration the ability of any Highly Compensated Employee to defer compensation under any non-qualified plan maintained by an Employer.

4.03(3) In the event that following the end of a Plan Year, it is determined by the Committee that the Elective Contributions for Highly Compensated Employees exceed the limitations of Subsection 4.03(1), then the amount in excess of such limitation (“Excess Contributions”) (and the income thereon) shall be distributed to the Highly Compensated Employees, notwithstanding any Plan provision to the contrary, within two and one-half (2-1/2) months after the close of the Plan Year in which such Excess Contributions occurred. In determining the amount of the Excess Contributions, the following rules shall apply: First, the Elective Contributions of all those Highly Compensated Employees who have elected the highest percentage rate of Elective Contributions shall be hypothetically reduced to the percentage rate elected by all those Highly Compensated Employees (including those Employees whose percentage rate was previously reduced) whose elected percentage rate is at the next highest percentage rate of Elective Contributions and shall thereafter continue to be applied to the extent necessary in like manner in descending order on the basis of elected percentage rates until the hypothetical reductions enable the Elective Contributions to conform to the limitations of Subsection 4.03(1). The sum of the hypothetical reductions in the previous sentence is the amount of the Excess Contributions.

The amount of the Excess Contributions that are distributed to each affected Highly Compensated Employee shall be determined as follows: First, the Elective Contributions of all those Highly Compensated Employees who have elected the greatest dollar amount of Elective Contributions shall have their Elective Contributions reduced to the dollar amount elected by all those Highly Compensated Employees (including those Employees whose dollar amount of Elective Contributions was previously reduced) whose elected dollar amount is at the next greatest amount of Elective Contributions and shall thereafter continue to be applied to the extent necessary in like manner in descending order on the basis of dollar amounts of Elective Contributions until the amount of reductions equal the amount of Excess Contributions.

The amount of Excess Contributions that may be distributed under this Subsection with respect to a Highly Compensated Employee for a Plan Year shall be reduced by

any Excess Deferrals (as defined in Subsection 4.03(7)) attributable to such Plan Year previously distributed to such Employee. In the event a distribution of Elective Contributions constitutes a distribution of Excess Contributions and a distribution of Excess Deferrals pursuant to Subsection 4.03(7), the amounts distributed shall be treated as a simultaneous distribution of both Excess Contributions and Excess Deferrals.

4.03(4) In determining the amount of income allocable to Excess Contributions which are being distributed, the following rules shall apply:

(a) The income allocable to Excess Contributions for the Plan Year in which the contributions are made is the income for the Plan Year allocable to Elective Contributions and amounts treated as Elective Contributions with respect to the Highly Compensated Employee, multiplied by a fraction, the numerator of which is the amount of Excess Contributions made on behalf of the Highly Compensated Employee for the Plan Year and the denominator of which is the balance of such Employee’s Employee Elective Contribution Account as of the end of the Plan Year before adjustment of such Account as provided for in Subsection 6.04(3).

(b) No income shall be allocable to the Excess Contributions for the period between the end of the Plan Year and the date of the distribution.

(c) For purposes of this Subsection, the income of the Plan shall mean all earnings, gains and losses, computed in accordance with the provisions of Article VI.

4.03(5) Effective for Plan Years beginning on or after January 1, 1997, this subsection (5) ceases to apply. For Plan Years beginning before January 1, 1997, notwithstanding anything to the contrary contained herein, in the case of a Highly Compensated Employee who is, pursuant to the requirements of Code Section 414(q)(6), to be treated as part of an Aggregated Family Group, as defined in Subsection 4.03(8)(f), the following rules shall apply:

(a) The ADP for the Aggregated Family Group shall be determined by aggregating the Elective Contributions and Total Compensation of all Family Members, as defined in Subsection 4.03(8)(f), who are Employee Participants.

(b) If the limitations of Subsection 4.03(1) are exceeded, the ADP of the Aggregated Family Group shall be reduced as provided in Subsection 4.03(2) or (3) in order to comply with the limitations of Subsection 4.03(1), and if the provisions of Subsection 4.03(3) are applicable, Excess Contributions shall be allocated among and distributed to all of the Family Members in proportion to each such Family Member’s Elective Contributions.

4.03(6) In addition to or in lieu of the above procedures to conform Elective Contributions to the limitations of Subsection 4.03(1), the Employer may, in its sole discretion, contribute on behalf of any Participant who is a Non-Highly Compensated Employee additional contributions (which shall meet the requirements of Treasury Regulation Section 1.401(k)-1(b)(5) (or any successor thereto), shall be treated as Elective Contributions and shall be allocated to such Participant’s Employee Elective Contribution Account) to the extent necessary to insure that the limitations of Subsection 4.03(1) are met. Any such additional

contributions shall be allocated in a manner proportionate to the Total Compensation of the affected Participants. Such additional contributions shall be immediately fully vested and subject to the distribution restrictions of Sections 4.08 and 11.04 hereof, applicable to Elective Contributions. In addition, the Committee may designate that all or part of the Company Contributions or Company Matching Contributions, or both, allocated to a Participant’s Accounts shall be included in the calculations under Subsection 4.03(1) to the extent necessary to insure that the limitations of Subsection 4.03(1) are met, provided such use complies with the requirements of Treasury Regulation Section 1.401(k)-1(b)(5) (or any successor thereto). Any Company Contributions or Company Matching Contributions, or both, so designated shall not be included in the calculations under Subsection 4.06(1), shall be treated as Elective Contributions, shall be allocated to such Participant’s Employee Elective Contribution Account, shall be immediately fully vested and, to the extent applicable, shall be subject to the distribution restrictions of Sections 4.08 and 11.04 hereof applicable to Elective Contributions.

4.03(7) Notwithstanding anything herein to the contrary, in no event shall the Employer make an Elective Contribution in any Plan Year on behalf of any Participant if such contribution would cause the Elective Contributions for such Participant for the Participant’s taxable year to exceed Eleven Thousand Dollars ($11,000), or such higher amount as provided in Code Section 402(g) or such higher amount to which such amount has been adjusted by the Secretary of the Treasury or his delegate at the same time and in the same manner as under Code Section 415(d), as of the beginning of such taxable year. Should any Elective Contribution made to the Plan by the Employer on behalf of a Participant exceed Eleven Thousand Dollars ($11,000), as so adjusted (“Excess Deferrals”) on account of the Participant’s Elective Contributions to another plan, contract or arrangement, the Participant may, not later than March 15 following the close of his taxable year, notify the Committee in writing of the amount of the Excess Deferral and the Committee thereafter shall cause such Excess Deferral (and income allocable thereto) to be distributed to such Participant, notwithstanding any Plan provision to the contrary, no later than the April 15 next following the close of the Participant’s taxable year in which such Excess Deferral is made. In the event the Participant’s Elective Contributions to the Plan and other plans, contracts or arrangements of an Employer or an Affiliated Company constitute Excess Deferrals, such Participant shall be deemed to have timely notified the Committee of the amount of such Excess Deferral as provided for in the preceding sentence and the appropriate Employers or Affiliated Companies shall notify the Committee on behalf of the Participant under these circumstances. The amount of Excess Deferrals which may be distributed to the Participant shall not exceed the Participant’s Elective Contributions under the Plan during the Participant’s taxable year.

In determining the amount of income allocable to Excess Deferrals, the following rules shall apply:

(a) The income allocable to Excess Deferrals for the taxable year in which the deferrals are made is the income for the Plan Year ending with or within said taxable year allocable to Elective Contributions for the Participant multiplied by a fraction, the numerator of which is the amount of Excess Deferrals made on behalf of the Participant for the Plan Year ending with or within said taxable year and the denominator of which is the balance of the Participant’s Employee Elective Contribution Account as of the end of the Plan Year ending

with or within said taxable year before adjustment of such Account as provided for in Subsection 6.04(3).

(b) No income shall be allocable to the Excess Deferrals for the period between the end of the Plan Year and the date of the distribution.

(c) For purposes of this Subsection, the income of the Plan shall mean all earnings, gains and losses computed in accordance with the provisions of Article VI.

The amount of Excess Deferrals that may be distributed under this Subsection with respect to a Highly Compensated Employee for any taxable year of said Employee shall be reduced by any Excess Contributions previously distributed to the Employee attributable to such taxable year. In the event a distribution of Elective Contributions constitutes a distribution of Excess Contributions pursuant to Subsection 4.03(3) and a distribution of Excess Deferrals pursuant to this Subsection, the amounts distributed shall be treated as a simultaneous distribution of both Excess Contributions and Excess Deferrals.

4.03(8) For purposes of this Section 4.03, the following terms shall have the following meanings:

(a) “Actual Deferral Percentage” (or “ADP”) shall mean for the Highly Compensated Employees, as a group, and for the Non-Highly Compensated Employees, as a group, the average of the ratios (calculated separately for each such Employee Participant in such group) of the Elective Contributions, if any, made on behalf of each such Employee Participant for each Plan Year, to the Employee Participant’s Total Compensation, as defined in Subsection 4.03(8)(e), for such Plan Year. For purposes of computing ADP, an Employee Participant who makes no Elective Contributions for a Plan Year shall be treated as making a zero percent contribution for the Plan Year.

In calculating ADP, an Elective Contribution shall be taken into account for a Plan Year only if such Elective Contribution: (i) relates to Total Compensation that would have been received by the Employee Participant during such Plan Year (but for the salary reduction election) or is attributable to services performed by the Employee Participant during such Plan Year and would have been received by the Employee Participant within two and one-half (2-1/2) months after the close of such Plan Year (but for the salary reduction agreement); and (ii) is allocated to the Employee Participant during such Plan Year. An Elective Contribution is treated as allocated as of a particular date during a Plan Year if allocation of such contribution is not contingent on participation in the Plan or the performance of services after such date and such contribution is paid to the Trust not later than twelve (12) months after the close of such Plan Year.

In calculating the ADP of a Highly Compensated Employee who participates in more than one plan maintained by an Employer or an Affiliated Company, all elective deferrals (as defined in Code Section 401(m)(4)) of such Highly Compensated Employee shall be aggregated for purposes of determining such percentage.

In calculating the ADP of a Highly Compensated Employee who has Excess Deferrals, such Excess Deferrals shall be treated as Elective Contributions for purposes of determining such percentage.

In calculating ADP, all elective deferrals (as defined in Code Section 401(m)(4)) to any plan required to be aggregated with the Plan for purposes of Code Section 401(a)(4) or 410(b) shall be treated as if made under the Plan. If the Plan is permissively aggregated with another plan in order to comply with the limitations of Subsection 4.03(1), such aggregated plans must also meet the requirements of Code Sections 401(a)(4) and 410(b) as a single plan.

(b) “Highly Compensated Employee” shall mean, effective for Plan Years commencing on or after January 1, 1997, any employee of an Employer or Affiliated Company who is a highly compensated employee as defined in Code Section 414(q) and the regulations thereunder. Generally, any such employee is considered a Highly Compensated Employee if such employee:

(i) was at any time during the current Plan Year or the prior Plan Year, a “five percent owner”, as defined in Code Section 416(i)(1), with respect to an Employer;

(ii) received Limitation Year Compensation from the Employer in excess of Eighty Thousand Dollars ($80,000) during the prior Plan Year in the case of determinations for Plan Years commencing prior to 2001, or in excess of Eighty Five Thousand Dollars ($85,000) during the prior Plan Year in the case of determinations for Plan Years commencing in 2001 or 2002, or in excess of $90,000 for the prior Plan Year in the case of determinations for Plan Years commencing in 2003 or later. The dollar amount in this paragraph (ii) shall be adjusted to reflect increases in the cost-of-living published by the Secretary of Treasury pursuant to Code Section 414(q)(1). For any Plan Year, the applicable dollar amount shall be the dollar amount in effect for the calendar year in which the Plan Year commences.

For purposes of this Section 4.03, “Limitation Year Compensation” shall have the same meaning as set forth in Subsection 5.07(5) hereof, subject to the following: (i) the determination of “Limitation Year Compensation” shall include amounts deferred pursuant to Code Sections 125, 401(k), 408(k)(6), 403(b) and, for Limitation Years commencing on or after January 1, 2000, Code Section 132(f)(4) and (ii) Limitation Year Compensation shall include compensation paid by any employer required to be aggregated with an Employer under Code Section 414(b), (c), (m) or (o).

A Former Employee who is an Employee Participant shall be treated as a Highly Compensated Employee if such Former Employee was a Highly Compensated Employee when he separated from service with the Employer or was a Highly Compensated Employee at any time after attaining age fifty-five (55). “Former Employee” shall mean a person who has been an employee, but who ceased to be an employee for any reason and later returned to employment with an Employer.

For Plan Years commencing before January 1, 1997, “Highly Compensated Employee” also included any employees who were, pursuant to the requirements

of Code Section 414(q)(6), to be treated as part of an Aggregated Family Group, as defined in Subsection 4.03(8)(f) hereof.

(d) “Employee Participant” shall mean each Eligible Employee who is a Participant.

(e) “Total Compensation” shall mean an Employee Participant’s total compensation for services rendered to an Employer during the Plan Year, as reported in Box 10 on Form W-2 or other similar location on any successor federal wage statement as taxable for federal income tax purposes but determined without regard to any rules that limit the amount taken into account based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code Section 3401(a)(2)). Total Compensation shall not include amounts paid or reimbursed by an Employer or Affiliated Company for moving expenses incurred by an Employee Participant, but only to the extent that at the time of the payment it is reasonable to believe that these amounts are deductible by the Employee Participant under Code Section 217.

In the event an employee begins, resumes or ceases to be an Employee Participant during a Plan Year, the amount of such Employee Participant’s Total Compensation for the entire Plan Year that shall be taken into account for purposes of Section 4.03 shall not include that portion of the Employee’s Total Compensation paid for any period prior to the Entry Date on which an Employee first becomes a Participant or the date on which a Participant resumes active participation hereunder or after the date that a Participant ceases to be an active Participant hereunder.

Total Compensation shall be limited to One Hundred Fifty Thousand Dollars ($150,000) for Plan Years commencing on or after January 1, 1994 and before January 1, 1997; One Hundred Sixty Thousand Dollars ($160,000) for Plan Years commencing on or after January 1, 1997 and before January 1, 2000; and One Hundred Seventy Thousand Dollars ($170,000) for Plan Years commencing on or after January 1, 2000.

In applying the compensation limitation for Plan Years commencing prior to January 1, 1997, the family group of a Highly Compensated Employee who is subject to the family member aggregation rules of Code Section 414(q)(6) because such Employee is either a five percent owner of the Employer or one of the ten (10) Highly Compensated Employees paid the greatest Limitation Year Compensation ( during the year, shall be treated as a single Participant. For this purpose, “Family Members” shall include any spouse, lineal ascendant, lineal descendant, spouse of a lineal ascendant, or spouse of a lineal descendant of the Highly Compensated Employee. In the event the Highly Compensated Participant’s and one or more Family Member’s Total Compensation for a Plan Year from an Employer are limited pursuant to the provisions of this Section, then the Total Compensation of each such person for such Plan Year shall be reduced proportionately based on the ratio of their respective Total Compensation to the aggregate Total Compensation of both (or all) of such persons for such Plan Year.

If elected by the Committee in accordance with Treasury Regulations, Total Compensation shall include any amount that is not currently includable in the Employee Participant’s gross income by reason of an elective salary deferral pursuant to an Employer’s cafeteria plan established pursuant to Code Section 125 or any other Employer plan established pursuant to Code Section 401(k), including this Plan.

If elected by the Committee in accordance with Treasury Regulations, Total Compensation shall not include reimbursements or other expense allowances, fringe benefits (cash and non-cash), moving expenses, deferred compensation and welfare benefits, even if includable in gross income; provided, however, that if the Committee elects to exclude such amounts, a Self-Employed Individual’s total Earned Income for the Plan Year shall be multiplied by a fraction, the numerator of which is the Total Compensation of all Non-Highly Compensated Employees (who are not Self-Employed Individuals) excluding the foregoing exclusions, and the denominator of which is the Total Compensation of all Non-Highly Compensated Employees (who are not Self-Employed Individuals) including the foregoing exclusions.

(f) “Aggregated Family Group” shall mean a family group of employees employed by an Employer required to be aggregated under Code Section 414(q)(6) and regulations thereunder and shall include any member of the family, as defined in Code Section 414(q)(6) and regulations thereunder, of either (i) a five percent (5%) owner, or (ii) one of the ten (10) Highly Compensated Employees paid the greatest Limitation Year Compensation for the current Plan Year. Any spouse, lineal ascendant, lineal descendant, spouse of a lineal ascendant, or spouse of a lineal descendant of such a Highly Compensated Employee (a “Family Member”) shall be included in the “Aggregated Family Group.”

4.04 Company Matching Contributions. As of the last day of each Plan Quarter, each Employer shall make a contribution (the “Company Matching Contribution”) in cash or, if appropriate, in shares of Company Stock, to the Trust in such amount as may be determined by the Committee, to be allocated among the Company Matching Contribution Accounts of Participants in accordance with Section 5.01 hereof. In no event, however, shall any Company Matching Contribution for any Plan Quarter by any Employer be required. In addition, in no event, however, shall any Company Matching Contributions, when added to any Company Contributions and Elective Contributions, exceed the maximum deductible contribution under Code Section 404(a) including any amount which may be deductible by the Employer under the carryover provisions of the Code.

4.05 Date of Payment and Allocation of Company Contributions, Company Matching Contributions and Elective Contributions. An Employer shall make its Company Contributions and Company Matching Contributions to the Trust Fund for a Plan Quarter as soon as administratively possible on or after the last day of such Plan Quarter. Company Contributions and Company Matching Contributions shall be deemed to have been made and shall be allocated to the Company Matching Contribution Accounts and Company Contribution Accounts of Eligible Participants in accordance with Sections 5.01 and 5.03 hereof as of the last day of the Plan Quarter for which they are made. An Employer shall make all Elective Contributions as provided for in Section 4.02 hereof to the Trust Fund as soon as such amounts reasonably can be

segregated from the general assets of the Employer but in all events by the fifteenth (15th) day of the calendar month following the close of the payroll period in which such amounts would otherwise have been payable to the Participant in cash. Elective Contributions shall be deemed to have been made and shall be allocated to the Employee Elective Contribution Accounts of the Participants for whom they are made in accordance with Section 4.02 as of the last day of the Plan Quarter for which they are made.

4.06 Limitation on Company Matching Contributions. This section 4.06 shall only apply for Plan Years in which non-collectively bargained employees benefit under the Plan. The limitations described in this Section shall be determined in accordance with the applicable Sections of the Code and regulations thereunder.

4.06(1) Notwithstanding any other provision of this Plan, the “Actual Contribution Percentage” (or “ACP”) of Company Matching Contributions made to this Plan for Highly Compensated Employees during any Plan Year shall not exceed the greater of the limitations indicated below:

(a) One hundred twenty-five percent (125%) of the ACP for all Non-Highly Compensated Employees; or

(b) The lesser of (A) the sum of the ACP for all Non-Highly Compensated Employees plus two percent (2%), or (B) two hundred percent (200%) of the ACP for all Non-Highly Compensated Employees.

4.06(2) The Committee may, at any time prior to or during a Plan Year, to the extent necessary to conform the Company Matching Contributions to the above limitations or, if applicable, the limitations of Subsection 4.06(8) hereof, reduce or eliminate prospectively the allocation of Company Matching Contributions for the benefit of Highly Compensated Employees. Such prospective elimination or reduction shall be applied among the Highly Compensated Employees who have elected Elective Contributions in such manner as the Committee, in its sole discretion, shall deem appropriate, taking into consideration the ability of any Highly-Compensated Employee to defer compensation under any non-qualified plan maintained by an Employer.

4.06(3) In the event that following the end of the Plan Year, it is determined by the Committee that the Company Matching Contributions for Highly Compensated Employees exceed the limitations of Subsection 4.06(1), then the amount in excess of such limitation (“Excess Aggregate Contributions”) (and income thereon) either shall be distributed to the Highly Compensated Employees, notwithstanding any Plan provision to the contrary, within two and one-half (2-1/2) months after the close of the Plan Year in which such Excess Aggregate Contributions occurred, or forfeited in accordance with the following rules: First, the Company Matching Contributions of all those Highly Compensated Employees who have elected the highest percentage rate of Matching Contributions shall be hypothetically reduced to the percentage rate elected by all those Highly Compensated Employees (including those Employees whose percentage rate was previously reduced) whose elected percentage rate is at the next highest percentage rate of Company Matching Contributions and shall thereafter continue to be applied to the extent necessary in like manner in descending order on the basis of elected percentage rates until the hypothetical reductions enable the Company Matching Contributions to

conform to the limitations of Subsection 4.06(1). The sum of the hypothetical reductions in the previous sentence is the amount of the Excess Aggregate Contributions.

The amount of the Excess Aggregate Contributions that are either distributed to each affected Highly Compensated Employee or forfeited shall be determined as follows: First, the Company Matching Contributions of all those Highly Compensated Employees who have elected the greatest dollar amount of Company Matching Contributions shall have their Elective Contributions reduced to the dollar amount elected by all those Highly Compensated Employees (including those Employees whose dollar amount of Company Matching Contributions was previously reduced) whose elected dollar amount is at the next greatest amount of Company Matching Contributions and shall thereafter continue to be applied to the extent necessary in like manner in descending order on the basis of dollar amounts of Company Matching Contributions until the amount of reductions equal the amount of Excess Aggregate Contributions.

In applying the reduction, distribution and forfeiture rules of this Subsection 4.06(3), a Highly Compensated Employee’s Excess Aggregate Contributions shall be distributed, if vested, or forfeited, if nonvested, in proportion to the Participant’s vested and nonvested interests in all Company Matching Contributions. For purposes of the foregoing sentence, the Employee’s Excess Aggregate Contributions attributable to the vested portion of the Highly Compensated Employee’s Company Matching Contributions for any Plan Year shall be the product of (i) the amount of the Employee’s Excess Aggregate Contributions (as adjusted for allocable income) multiplied by (ii) his vested percentage, determined as of the last day of said Plan Year. The amount of Excess Aggregate Contributions to be distributed to each affected Highly Compensated Employee or forfeited, as appropriate, is equal to the Company Matching Contributions on behalf of such Employee (prior to reduction of the Excess Aggregate Contributions), less the product of such Employee’s ACP (after reduction for such Excess Aggregate Contributions) times such Participant’s Total Compensation, rounded to the nearest one cent ($.01), and likewise is equal to the amount of reduction provided for hereinabove.

4.06(4) In determining the amount of income allocable to Excess Aggregate Contributions which are being distributed or forfeited, the following rules shall apply.

(a) The income allocable to Excess Aggregate Contributions for the Plan Year in which the contributions are made is the income for the Plan Year allocable to Company Matching Contributions with respect to the Highly Compensated Employee multiplied by a fraction, the numerator of which is the amount of Excess Aggregate Contributions made on behalf of the Highly Compensated Employee for the Plan Year and the denominator of which is the combined balance of the Participant’s Company Matching Contributions Account as of the end of the Plan Year before adjustment of such Account as provided for in Subsection 6.04(3) hereof.

(b) No income shall be allocable to the Excess Aggregate Contributions for the period between the end of the Plan Year and the date of the distribution.

(c) For purposes of this Subsection, the income of the Plan shall mean all earnings, gains and losses computed in accordance with the provisions of Article VI.

4.06(5) Effective for Plan Years beginning on or after January 1, 1997, this subsection (5) ceases to apply. For Plan Years beginning before January 1, 1997, notwithstanding anything to the contrary contained herein, in the case of a Highly Compensated Employee who is, pursuant to the requirements of Code Section 414(q)(6), to be treated as part of an Aggregated Family Group, the following rules shall apply:

(a) The ACP for the Aggregated Family Group shall be determined by aggregating the Company Matching Contributions and Total Compensation of all Family Members who are Employee Participants.

(b) If the limitations of Subsection 4.06(1) are exceeded, the ACP of the Aggregated Family Group shall be reduced as provided in Subsection 4.06(3) in order to comply with the limitations of Subsection 4.06(1), and if the provisions of Subsection 4.06(3) are applicable, Excess Aggregate Contributions shall be allocated among and forfeited or distributed to all of the Family Members in proportion to each such Family Member’s Company Matching Contributions.

4.06(6) In addition to or in lieu of the above procedures to conform Company Matching Contributions to the limitations of Subsection 4.06(1), the Employer may, in its sole discretion, contribute on behalf of any Participant who is a Non-Highly Compensated Employee additional contributions (which shall meet the ( requirements of Treasury Regulation Section 1.401(m)-1(b)(5) (or any successor thereto), shall be treated as Elective Contributions and shall be allocated to such Participant’s Employee Elective Contribution Account) to the extent necessary to insure that the limitations of Subsection 4.06(1) are met. Any such additional contributions shall be allocated in a manner proportionate to the Total Compensation of the affected Participants. Such additional contributions shall be immediately fully vested and subject to the distribution restrictions of Section 4.08 and 11.04 hereof, applicable to Elective Contributions. In addition, the Committee may designate that all or part of the Elective Contributions or Company Contributions, or both, allocated to a Participant’s Accounts shall be included in the calculations under Subsection 4.06(1) to the extent necessary to insure that the limitations of Subsection 4.06(1) are met, provided such use complies with the requirements of Treasury Regulation Section 1.401(m)-1(b)(5) (or any successor thereto). Any Elective Contributions or Company Contributions so designated shall not be included in the calculations under Subsection 4.03(1), shall be treated as Elective Contributions, shall be allocated to such Participant’s Employee Elective Contribution Account, shall be immediately fully vested and, to the extent applicable, shall be subject to the distribution restrictions of Sections 4.08 and 11.04 hereof applicable to Elective Contributions.

4.06(7) For purposes of this Section 4.06, the following terms shall have the following meanings:

(a) “Actual Contribution Percentage” (or “ACP”) shall mean for the Highly Compensated Employees, as a group, and for the Non-Highly Compensated Employees, as a group, the average of the ratios (calculated separately for each Employee Participant in such group) of the amount of Company Matching Contributions paid to the Trust on behalf of each such Employee Participant for each Plan Year to the Employee Participant’s Total Compensation for such Plan Year. For purposes of computing ACP, an Employee Participant who makes no

Elective Contributions for a Plan Year and who receives no Company Matching Contributions for a Plan Year shall be treated as having an ACP of zero for the Plan Year.

In calculating ACP, a Company Matching Contribution shall be taken into account for a Plan Year only if such Company Matching Contribution: (i) is made on account of the Employee Participant’s Elective Contributions for the Plan Year, (ii) is allocated to the Employee Participant during such Plan Year, and (iii) is paid to the Trust not later than the last day of the twelfth (12th) month following the close of such Plan Year.

In calculating ACP, all employee contributions and employer matching contributions (as defined in Code Section 401(m)(4)) of any Highly Compensated Employee who participates in more than one plan maintained by an Employer or an Affiliated Company shall be aggregated for purposes of determining such percentage.

In calculating ACP, all employee contributions and employer matching contributions (as defined in Code Section 401(m)(4)) to any plan required to be aggregated with the Plan for purposes of Code Section 401(a)(4) or 410(b) shall be treated as if made under the Plan. If the Plan is permissively aggregated with another plan in order to comply with the limitations of Subsection 4.06(1), such aggregated plans must also meet the requirements of Code Sections 401(a)(4) and 410(b) as a single plan.

(b) “Highly Compensated Employee,” “Employee Participant,” “Non-Highly Compensated Employee,” “Total Compensation,” “Aggregated Family Group,” and “Family Member” shall all have the meanings set forth in Subsection 4.03(8).

(a) the sum of (i) 125% of the greater of the ADP of the Non-Highly Compensated Employees (as a group) for the Plan Year or the ACP of the Non-Highly Compensated Employees (as a group) for the Plan Year and (ii) two percentage points plus the lesser of such ADP or ACP; or

(b) the sum of (i) 125% of the lesser of the ADP of the Non-Highly Compensated Employees for the Plan Year or the ACP of the Non-Highly Compensated Employees for the Plan Year and (ii) two percentage points plus the greater of such ADP or ACP.

4.06(8) If one or more Highly Compensated Employees participates in this Plan and the sum of the ADP and ACP of those Highly Compensated Employees exceeds the Aggregate limit, then the ACP of those Highly Compensated Employees will be reduced in accordance with Subsection 4.06(3) so that the Aggregate Limit is not exceeded. The amount by which each Highly Compensated Employee’s Company Matching Contributions are reduced shall be treated as an Excess Aggregate Contribution. The ADP and ACP of the Highly Compensated Employees are determined after any corrections required to meet the ADP and ACP tests or to correct Excess Deferrals under Subsection 4.03(7) hereof. No reduction will be required under this Subsection if both the ADP and ACP of the Highly Compensated Employees does not exceed 1.25 multiplied by the ADP and ACP of the Non-Highly Compensated Employees. Effective for Plan Years commencing on or after January 1, 2002, this subsection (8) ceases to apply.

4.07(1) With the consent of the Committee, “Rollover Contributions” in cash or such other form as may be permitted by the Committee may be received by the Trustee on behalf of any Eligible Employee or Participant. Such amounts shall be allocated and credited to a separate Account herein referred to as a “Rollover Account” as of the date on which such amounts were received by the Trustee. However, the transfer of such an amount to the Trustee will not cause such Eligible Employee to be eligible to participate in the Plan prior to the time specified in Section 3.01. Prior to the time such Eligible Employee becomes eligible to participate in the Plan, the Eligible Employee shall be treated as a Participant solely with respect to the amount in his Rollover Account.

4.07(2) An amount credited to a Rollover Account (iii) shall be held by the Trustee pursuant to the provisions of this Plan, (ii) shall be fully vested at all times and shall not be subject to forfeiture for any reason, and (iii) shall be distributed to the Eligible Employee, Participant or Beneficiary at such time and in the same manner as provided in this Article IV or Article XI hereof for the distribution of a Participant’s Accounts under the Plan.

4.07(3) During the Plan Quarter in which the Rollover Contribution is initially received by the Plan, all of the balance of the Eligible Employee’s or Participant’s Rollover Account shall be segregated for investment purposes and any earnings thereon shall inure to the benefit of the Eligible Employee or Participant. Such segregated amounts may be temporarily held in cash, and as soon as practical, shall be invested as directed by the Participant or Eligible Employee in accordance with the provisions of Section 14.02 hereof.

4.07(4) For purposes of this Section, the term “Rollover Contributions” shall include:

(a) Amounts which are properly characterized as a qualifying rollover distribution (including a lump sum distribution) received by a person who is now an Eligible Employee or a Participant from another qualified plan, which amounts are eligible for tax free rollover treatment and which are transferred by the Eligible Employee or Participant to the Trustee of this Plan within sixty (60) days following receipt thereof;

(b) Amounts transferred to this Plan from an individual retirement account as defined in Code Section 7701(a)(37), provided that the individual retirement account contains no assets other than (1) assets which were previously distributed to the person who is now an Eligible Employee or a Participant by another qualified corporate (and, after December 31, 1983, qualified non-corporate) employer’s plan as a qualifying rollover distribution (including a lump sum distribution) with respect to such person’s service for such employer, which amounts were eligible for tax-free rollover treatment, and which amounts were deposited in such individual retirement account within sixty (60) days of receipt thereof, and (2) earnings on said assets; and

(c) Amounts distributed to a person who is now an Eligible Employee or a Participant from an individual retirement account meeting the requirements of Subsection 4.07(4)(b) above, and transferred by the Eligible Employee or Participant to this Plan within sixty (60) days of receipt thereof from such individual retirement account.

Prior to accepting any transfers to which this Section 4.07 applies, the Committee may require the Eligible Employee or Participant to establish that the amounts to be transferred to this Plan meet the requirements of this Section and may also require that the Eligible Employee or Participant provide an opinion of counsel satisfactory to the Committee that the amounts to be transferred meet the requirements of this Section and will not jeopardize the tax exempt status of this Plan or the Trust Fund for any reason (including, but not limited to, the failure of the amount to be excluded from the definition of annual addition in Code Section 415(c)(2), thereby causing the annual addition to the Account to exceed the permissible limits of Code Section 415, or to create adverse tax consequences to an Employer).

4.08(1) Hardship Withdrawals of Elective and Company Matching Contributions. Subject to the provisions of Subsection 4.08(2), upon application by a Participant, the Committee may, in accordance with the provisions of this Subsection, permit such Participant to withdraw all or a portion of such Participant’s Elective Contributions, but no earnings on such Contributions, or Company Matching Contributions (including Company Contributions made under the Tax Benefit Plan), including earnings on such Contributions, or both, if the Committee determines that the Participant suffered a Hardship. For purposes hereof, “Hardship” shall mean an immediate and heavy financial need of the Participant on account of (i) medical expenses described in Code Section 213(d) previously incurred by the Participant, the Participant’s spouse or dependents (as defined in Code Section 152) or necessary for these persons to obtain medical care as described in Code Section 213(d), (ii) purchase (excluding mortgage payments) of a principal residence of the Participant, (iii) payment of tuition, related educational fees and room and board expenses for the next twelve (12) months of post-secondary education for the Participant or such Participant’s spouse, children or dependents (as defined in Code Section 152), or (iv) the need to prevent eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant’s principal residence. Notwithstanding the foregoing, in no event shall a Hardship withdrawal of any amount allocated to a Participant’s Account pursuant to Subsection 4.03(6) or 4.06(6) be permitted.

(a) Application for withdrawal must be made in writing on a form approved by the Committee, and must set out in detail the circumstances establishing that the proposed withdrawal is for a Hardship.

(b) The Committee’s determination of whether the application meets the requirements of this Section shall be final and conclusive, and in making such determination, the Committee shall follow uniform and nondiscriminatory rules.

(c) If the Committee is satisfied that the application meets the requirements of this section and the Code and regulations thereunder, the application shall be granted.

(d) A withdrawal shall not be permitted unless the Committee determines the Participant has obtained all distributions (other than hardship distributions) and

all nontaxable loans (determined at the time of the loan) currently available under all plans maintained by the Employer or any Affiliated Company, and in no event will such payment exceed the amount required to meet such financial need plus an amounts necessary to pay any federal, state or local taxes or penalties reasonably anticipated to result from such payment.

(e) Any withdrawal taken on or after January 1, 2002 shall terminate the Participant’s right to make Elective Contributions and employee contributions to this Plan or “Any Other Plans Maintained by the Employer” until the first day of the first payroll period of the Plan Quarter which commences at least six (6) months following such withdrawal. For purposes hereof, “Any Other Plans Maintained by the Employer” shall mean all qualified and nonqualified plans of deferred compensation maintained by the Employer, including a stock option, stock purchase, or similar plan, or a cash or deferred arrangement that is part of a cafeteria plan within the meaning of Code Section 125. However, it does not include the mandatory employee contribution portion of a defined benefit plan. It also does not include a health or welfare benefit plan, including one that is part of a cafeteria plan within the meaning of Code Section 125.

4.08(2) Procedure for Withdrawals. All withdrawals under Subsection 4.08(1) shall be subject to Committee approval. All withdrawals under this Section 4.08 shall require a written request for withdrawal on such forms as the Committee shall prescribe. If any withdrawal under this Section 4.08 is less than the entire amount which is available for withdrawal at such time from the Employee Elective Contribution and Company Matching Contribution Accounts, then such Participant must withdraw a minimum amount equal to Five Hundred Dollars ($500.00). Any withdrawal shall be made from a Participant’s Accounts in the following order of priority, provided at the time of such withdrawal such Participant either (i) has an amount credited to such Account, or (ii) is entitled to withdraw from such Account: Such Participant’s Company Matching Contribution Account and such Participant’s Employee Elective Contribution Account. When an application for withdrawal is granted under the provisions of this Subsection, the Committee shall give such directions to the Trustee as shall be appropriate to effectuate the distribution in accordance with the terms hereof of the amount withdrawn. The date of withdrawal payment shall be specified by the Committee. Withdrawals shall be paid in the form of a single lump sum. A Participant’s Account shall, for purposes of determining its current value at the time of withdrawal, be based on the value as of the Valuation Date preceding the effective date of the withdrawal. For purposes of allocating appreciation or depreciation of the Trust Fund and income of the Trust Fund, where appropriate, any withdrawal pursuant to this Article IV shall be subtracted from the Participant’s Account balance at the beginning of the Valuation Period in which the withdrawal occurs.

4.08(3) Spousal Consent to Withdrawals. Notwithstanding anything to the contrary contained in this Section 4.08, if, at the time a withdrawal is to be paid to a married Participant, the value of his or her Accounts (including amounts in his Accounts that are not being withdrawn) is equal to or exceeds $3,500 for withdrawals prior to January 1, 1998 or $5,000 for withdrawals on or after January 1, 1998, the Participant’s spouse must, within the 90-day period before withdrawal amounts are to be paid, consent to the payment of the withdrawal amount. The spouse’s consent to any such withdrawal (i) must be in writing, (ii) must consent to the lump sum form of payment, (iii) must acknowledge the effect of the consent and be witnessed by a Plan representative or notary public, and (iv) shall be irrevocable.

5.01(1) Subject to Sections 4.06, 5.04, 5.05 and 5.06 hereof, the Company Matching Contribution made for each Plan Quarter shall be allocated as of the last day of such Plan Quarter among the Company Matching Contribution Accounts of all Participants who were Eligible Employees for all or any part of such Plan Quarter and who elected to have made on their behalf Elective Contributions during such Plan Quarter. Each Participant’s allocable share of Company Matching Contributions shall be in the proportion that the Elective Contributions made on his behalf for such Plan Quarter that were not otherwise distributed or withdrawn pursuant to the provisions of Section 4.03 or 4.08 hereof bears to the total Elective Contributions made on behalf of all Participants for such Plan Quarter that were not otherwise distributed or withdrawn pursuant to the provisions of Section 4.03 or 4.08 hereof. Notwithstanding the foregoing, if Company Matching Contributions have been allocated to a Participant’s Company Matching Contribution Account and it is later determined that such Company Matching Contributions are attributable to Excess Contributions or Excess Deferrals, such Company Matching Contributions shall be forfeited and such Forfeitures shall be allocated as provided in Section 5.03 hereof.

5.01(2) Any amounts of Company Matching Contributions credited to a Participant’s Company Matching Contribution Account shall, for all purposes and in all respects, be fully vested and nonforfeitable.

5.01(3) If, during a Plan Quarter, a Participant is transferred from one Employer to another Employer, such Participant’s share of each Employer’s Company Matching Contributions shall be determined on the basis of the Elective Contributions made on behalf of such Participant for the portion of the Plan Quarter that such Participant was employed by such Employer.

5.02 Allocation to a Participant Transferred to an Affiliated Company Which Has Not Adopted the Plan. Notwithstanding any other provisions of the Plan to the contrary, if a Participant who is an Eligible Employee ceases to be an Eligible Employee or is transferred from an Employer to an Affiliated Company, he or she shall continue to participate in the Plan as provided in Section 5.08 hereof as a Participant who has elected a voluntary suspension of Elective Contributions. If such Participant is subsequently reemployed by an Employer or returns to Eligible Employee status, he or she shall be eligible to elect to have made on his or her behalf Elective Contributions from and after the day on which occurs such transfer back to an Employer or return to Eligible Employee status, provided he or she complies with the provisions of Section 4.02 of the Plan.

5.03(1) Subject to Sections 5.04, 5.05 and 5.06, the total Company Contribution made for each Plan Quarter and any Forfeitures pursuant to Subsection 5.01(1) or Section 12.06 hereof shall be allocated as of the last day of such Plan Quarter among the Company

Contribution Accounts of all Participants who were Eligible Employees for all or any part of such Plan Quarter. Each such Participant’s allocable share of Company Contributions and any Forfeitures shall be in the proportion that his or her Compensation while an Eligible Employee for such Plan Quarter bears to the total Compensation of all such Participants while Eligible Employees for such Plan Quarter.

5.03(2) Any amounts credited to a Participant’s Company Contribution Account shall, for all purposes and in all respects, be fully vested and nonforfeitable.

5.03(3) If, during a Plan Quarter, a Participant is transferred from one Employer to another Employer, such Participant’s share of each Employer’s Company Contributions shall be determined on the basis of the Compensation received by such Participant from each such Employer.

5.04(1) Notwithstanding any other provision of the Plan, the sum of the Annual Additions to a Participant’s Account for any Limitation Year shall not exceed the lesser of:

(i) Thirty Thousand Dollars ($30,000) for Plan Years ending prior to 2001; Thirty Five Thousand Dollars ($35,000) for Plan Years ending in 2001 or commencing in 2001 and ending in 2002, and Forty Thousand Dollars ($40,000) for Plan Years commencing on or after January 1, 2002 adjusted for each subsequent Plan Year to reflect cost of living increases for the Plan Year provided under Code Section 415(d) or published by the Secretary of the Treasury, or

(ii) twenty-five percent (25%) of such Participant’s Limitation Year Compensation for the entire Limitation Year (even though such Participant may not have been a Participant for the entire Limitation Year) for Limitation Years commencing prior to 2002, and 100% of such Participant’s Limitation Year Compensation for the entire Limitation Year (even though such Participant may not have been a Participant for the entire Limitation Year) for Limitation Years commencing in 2002 or later. This paragraph (ii) shall not apply to any contribution for medical benefits after separation from service within the meaning of Code Section 401(h) or 419.

If a Limitation Year is less than a 12-consecutive month period, the above dollar limitations for the short Limitation Year shall not exceed the amount determined in the preceding sentence multiplied by a fraction, the numerator of which is the number of whole months in the short Limitation Year and the denominator of which is twelve (12). The term “Annual Additions” to a Participant’s Account for any Limitation Year shall mean the sum of:

(a) such Participant’s allocable share of the Company Contributions and Company Matching Contributions credited to such Participant within such Limitation Year; and

(b) the amount of such Participant’s Elective Contributions (including any amounts characterized as Excess Contributions and amounts characterized as Excess Deferrals, if such Excess Deferrals are not distributed as provided for in Subsection 4.03(7) hereof), and Excess Aggregate Contributions under the Plan, if any, for such Limitation Year; and

(c) such Participant’s allocable share of Forfeitures, if any, credited to such Participant within such Limitation Year; and

(d) any amount allocated to an “individual medical account,” as defined in Code Section 415(1)(2), which is part of a Defined Benefit Plan maintained by an Employer; and

(e) any amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, which are attributable to post-retirement medical benefits allocated to the separate account of a key employee (as defined in Code Section 419A(d)(3)) under a welfare benefit fund (as defined in Code Section 419(e)) maintained by an Employer.

Solely for purposes of this Section 5.04, the determination of a Participant’s Elective Contributions and after-tax employee contributions, if any, for a Limitation Year shall exclude the items set forth in Sections 1.415-6(b)(3)(i)-(iv) of the Income Tax Regulations, and the determination of a Participant’s allocable share of Company Matching Contributions, Company Contributions and Forfeitures, if any, for a Limitation Year shall exclude any Company Matching Contributions, Company Contributions, Elective Contributions, if any, and Forfeitures, if any, allocated to such Participant for any of the reasons set forth in Sections 1.415-6(b)(2)(ii)-(vi) of the Income Tax Regulations (except as otherwise provided in such Sections).

5.04(2) In the event that as a result of: (i) a reasonable error in estimating Participant’s Limitation Year Compensation, or (ii) other facts and circumstances which the Internal Revenue Service finds justify the availability of the provisions of this Subsection 5.04(2) and Subsections 5.04(3) and 5.04(4), it is determined that, but for the limitations contained in Subsection 5.04(1), the Annual Additions to a Participant’s Account for any Limitation Year would be in excess of the limitations contained herein, such Annual Additions shall be reduced to the extent necessary to bring such Annual Additions within the limitations contained in Subsection 5.04(1) by reducing such Participant’s allocable share of Forfeitures, if any, and Company Contributions for the Plan Year ending within such Limitation Year, then by reducing such Participant’s allocable share of Company Matching Contributions for the Plan Year ending within such Limitation Year, and then by reducing Elective Contributions made on such Participant’s behalf for the Plan Year ending within such Limitation Year and distributing such Elective Contributions (and income attributable to such Contributions) to the Participant.

5.04(3) If, and to the extent that the amount of any Participant’s allocable share of Forfeitures, if any, or Company Contributions or Company Matching Contributions, if any, pursuant to Sections 4.01 and 4.04 hereof are reduced in accordance with the provisions of Subsection 5.04(2) above, the amount of such reduction shall be used to reduce the applicable contributions made for such Participant for the next Limitation Year (and succeeding Limitation Years, as necessary), if that Participant is covered by the Plan as of the end of the Limitation Year. However, if that Participant is not covered by the Plan as of the end of the Limitation Year, then such amounts shall be maintained in a separate suspense account under the Trust for the Limitation Year and allocated and reallocated in the next Limitation Year among all of the remaining Participants in the Plan in the manner prescribed in Section 5.03 for the allocation of any Company Contributions. If in said next Limitation Year, after the allocations as provided for

herein, there are any amounts remaining which cannot be allocated to any Participant as a result of the limitations contained herein, such amount shall be maintained in a separate suspense account under the Trust to be used to reduce Company Contributions in the next Limitation Year (and succeeding Limitation Years, as necessary) for all of the remaining Participants in the Plan.

5.04(4) Any suspense account established pursuant to this Section 5.04 shall not be adjusted to reflect net income, loss, appreciation or depreciation in the value of the Trust Fund as provided for an Employee’s regular Accounts pursuant to Section 6.04 of the Plan. Notwithstanding any other provision of the Plan to the contrary, in the event amounts are credited to a suspense account, no Company Contributions, Company Matching Contributions or Elective Contributions shall be made to the Plan for a Plan Year while there are any amounts in such separate suspense accounts attributable to prior Plan Years which cannot be allocated to Participants in accordance with the terms of this Subsection.

5.05 Limitations on Annual Additions for Employers or Affiliated Companies Maintaining Other Defined Contribution Plans. In the event that any Participant in this Plan is also a participant under any other Defined Contribution Plan maintained by an Employer or an Affiliated Company (whether or not terminated), the total amount of Annual Additions to such Participant’s accounts under all such Defined Contribution Plans shall not exceed the limitations set forth in Subsection 5.04(1) hereof. If such total amount of Annual Additions to a Participant’s accounts under all such Defined Contribution Plans does exceed the limitations set forth in Subsection 5.04(1) hereof, then the Annual Additions to such Participant’s Accounts in this Plan shall be reduced, and such reduction shall be accomplished in accordance with the provisions of Section 5.04 hereof.

5.06 Limitations on Annual Additions for Employers or Affiliated Companies Maintaining Defined Benefit Plans. Code Section 415(e) ceased to apply to this Plan effective January 1, 2000.

5.07 Definitions for Purposes of Determining the Annual Addition Limitations. For purposes of Sections 5.04, 5.05 and 5.06 hereof and this Section 5.07, the following definitions shall apply:

5.07(1) “Retirement Plan” shall mean (a) any profit-sharing, pension or stock bonus plan described in Code Sections 401(a) and 501(a), (b) any annuity plan or annuity contract described in Code Section 403(a) or 403(b), and (c) any simplified employee pension plan described in Code Section 408(k).

5.07(2) “Defined Benefit Plan” shall mean any Retirement Plan which does not meet the definition of a Defined Contribution Plan.

5.07(3) “Defined Contribution Plan” shall mean a Retirement Plan which provides for an individual account for each participant and for benefits based solely on the amount contributed to the participant’s account, and any income, expenses, gains or losses, and any forfeitures of accounts of other participants which may be allocated to such participant’s account. For purposes of Sections 5.04, 5.05 and 5.06, a Participant’s voluntary nondeductible contributions to a Defined Benefit Plan shall be treated as being part of a separate Defined Contribution Plan.

5.07(5) “Limitation Year Compensation” shall mean an Employee Participant’s total compensation for services rendered to an Employer during a Limitation Year, as reported in Box 10 on Form W-2 or other similar location on any successor federal wage statement as taxable for federal income tax purposes but determined without regard to any rules that limit the amount taken into account based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code Section 3401(a)(2)). Compensation shall not include amounts paid or reimbursed by the Employer or Affiliated Company for moving expenses incurred by an Employee Participant, but only to the extent that at the time of the payment it is reasonable to believe that these amounts are deductible by the Employee Participant under Code Section 217.

5.08 Cessation of Eligible Employee Status. Subject to the exception at Section 5.02, if any Participant does not incur a Termination of Employment but ceases to be an Eligible Employee as defined in Section 2.14 hereof, then, during the period that such Participant is not an Eligible Employee as defined in such Section 2.14 hereof: (i) such Participant shall not have any Elective Contributions made on his behalf, (ii) except for any Company Contributions pursuant to Section 4.01 or Company Matching Contributions pursuant to Section 4.04 hereof owing for the Plan Quarter in which such Participant ceases to be an Eligible Employee, such Participant shall not receive any further allocation of any Company Contributions and Forfeitures, if any, or Company Matching Contributions, if any, under the Plan pursuant to Sections 5.01 and 5.03, and (iii) such Participant’s Accounts shall continue to share in the earnings or losses of the Trust Fund

6.01 Participant’s Accounts. The assets of the Trust Fund shall constitute a single fund in which each Participant, Beneficiary or Alternate Payee shall have his proportionate interest as provided in this Plan. The Committee shall maintain, or cause to be maintained, with respect to each Employer, individual Accounts for each Participant, Beneficiary or Alternate Payee. A Participant shall have a Company Contribution Account, a Company Matching Contribution Account, and an Employee Elective Contribution Account, and, if applicable, an ESOP Employer Contribution Account and/or an ESOP Employee Contribution Account and/or a Rollover Account, and, where appropriate, an Alternate Payee shall have a QDRO Account. Each Account shall reflect the credits and charges allocable thereto in accordance with the Plan. The Committee shall maintain, or cause to be maintained, records which will adequately disclose at all times the state of the Trust Fund and of each separate interest therein. The books, forms and methods of accounting shall be entirely in the hands of and subject to the supervision of the Committee.

6.02 Accounts of Participants Transferred to an Affiliated Company. If a Participant is transferred to an Affiliated Company and his or her Accounts are not transferred pursuant to Section 6.06, the amount in the Trust which is credited to his Accounts shall continue to share in

the earnings or losses of the Trust Fund, and such Participant’s rights and obligations with respect to such Accounts shall be governed by the provisions of the Plan and Trust.

6.03(1) Within a reasonable time after each Valuation Date, the Committee shall have the Trustee prepare a statement of the condition of the Trust Fund as of the close of business of such Valuation Date setting forth: (i) the assets of the Trust Fund as of such Valuation Date, and the cost and current value thereof as defined in ERISA Section 3(26) (the “Current Value”), and (ii) all investments, receipts, disbursements and other transactions effected by it during the Valuation Period. The Current Value of any shares of Company Stock that are not readily tradeable on an established securities market shall be determined by an independent appraiser meeting requirements similar to the requirements of the Treasury Regulations under Section 170(a)(1) of the Code. This statement shall be delivered to the Committee. As soon as practicable after each Valuation Date, the Committee shall cause to be prepared, and shall deliver to each Participant, Beneficiary or Alternate Payee, a report disclosing the status of each such individual’s Accounts in the Trust Fund.

6.03(2) The Trustee’s determination of the Current Value of the assets in the Trust Fund and the Committee’s charges or credits to the individual Accounts with respect to Participants, Beneficiaries or Alternate Payees, as provided in Section 6.04, shall be final and conclusive on all persons ever interested hereunder.

6.04(1) Allocations in General. For the purpose of making allocations as of any Valuation Date, except as otherwise provided herein, the Net Earnings and Adjustments in Value of the Trust Fund shall be allocated pursuant to Subsection 6.04(3) below, the Net Earnings and Adjustments in Value of the Cash Dividend Account shall be allocated pursuant to Subsection 6.04(4) hereof, Rollover Contributions received during such Valuation Period shall be allocated pursuant to Subsection 4.07(1) hereof, and Elective Contributions, Company Contributions and Company Matching Contributions made for such Valuation Period shall be allocated pursuant to Section 4.05 hereof. Whenever an allocation or credit is required to be made hereunder, it shall be made by the Committee, or at the Committee’s direction and subject to its supervision.

(a) “Net Earnings and Adjustments in Value of the Trust Fund” for a particular Valuation Period means the Current Value of the Trust Fund as of the Valuation Date (determined pursuant to Section 6.03 hereof) less the sum of:

(i) The total of all Account balances respectively as of the first (1st) day of such Valuation Period of all Participants, Beneficiaries and Alternate Payees as of such time whose Accounts had not been segregated under Subsection 4.07(3) hereof; and

(ii) Company Contributions, Company Matching Contributions, Elective Contributions and Rollover Contributions for the Valuation Period under consideration, to the extent that such Company Contributions, Company Matching

Contributions, Elective Contributions and Rollover Contributions were actually paid over to the Trustee and not otherwise distributed to Participants, Beneficiaries or Alternate Payees prior to the close of such Valuation Period; and

(iii) The amount credited to the Cash Dividend Account as of such Valuation Date.

(b) “Net Earnings and Adjustments in Value of the Cash Dividend Account” means the Current Value of the Cash Dividend Account as of the Valuation Date (determined pursuant to Section 6.03 hereof) less the sum of:

(i) The Cash Dividend Account balance as of the first (1st) day of such Valuation Period; and

(ii) All cash dividends credited to such Cash Dividend Account which were actually paid over to the Trustee during such Valuation Period and not otherwise distributed prior to the dose of such Valuation Period.

6.04(3) Allocation of Net Earnings and Adjustments in Value of the Trust Fund. Subject to the provisions of Subsections 6.04(2) and 6.04(4) hereof, the Net Earnings and Adjustments in Value of the Trust Fund for a particular Valuation Period shall be allocated as of the Valuation Date to those Accounts that had not, for such Valuation Period been segregated under Subsection 4.07(3) hereof, and the total value of which had not been distributed prior to the Valuation Date, as follows: Such Net Earnings and Adjustments in Value of the Trust Fund shall be credited to or charged against such Accounts in proportion to the average funds credited to each such Account during such Valuation Period.

(a) Notwithstanding the foregoing provisions of this Article VI, any cash dividends received by the Trustee with respect to shares of Company Stock held under the Plan on the record date for such dividends and allocated under the Plan to one or more of the Accounts of the Participants (whether or not so allocated on such record date), will be paid in accordance with one of the following methods, as determined by the Sponsoring Company in its sole discretion:

(i) To such Participant (or the Participant’s Beneficiary following the Participant’s death), or

(ii) To the Trust Fund and distributed to such Participant (or the Participant’s Beneficiary following the Participant’s death), or

(iii) To the Trust Fund and invested in additional Company Stock on or as soon as administratively feasible after the dividend payment date.

(b) In lieu of direct payment in cash under subsection (a)(i), the Sponsoring Company may permit a Participant (or Beneficiary following the Participant’s death)

to direct that such payment instead be invested in Company Stock in the name of the Participant (or Beneficiary), and not owned by or subject to the provisions of this Plan.

6.04(5) Computations. All of the computations required to be made under the provisions of this Article VI, when made, shall be conclusive with respect thereto and shall be binding upon all the Participants, Beneficiaries, Alternate Payees, and all other persons ever having an interest in the Trust Fund.

6.05 Correction of Participants’ Accounts. If an error or omission is discovered in the Accounts of a Participant, or in the amount distributed to a Participant, the Committee, as authorized by Section 13.05 hereof, shall make such equitable adjustments in the records of the Plan as may be necessary or appropriate to correct such error or omission as of the Plan Year in which such error or omission is discovered. Further, an Employer may, in its discretion, make a special contribution to the Plan which shall be allocated by the Committee only to the Accounts of a Participant as is necessary to correct such error or omission.

6.06 Transfers To Non-Bargaining Unit NCE Plan. The Sponsoring Company shall cause a direct transfer of a Participant’s Accounts between defined contribution plans sponsored by the Sponsoring Company as follows:

(a) Transfers From This Plan. If a Member ceases to be an active Member in the Plan and thereafter is an active participant in another defined contribution plan maintained by the Sponsoring Company that benefits non-collectively bargained employees, the Member’s Accounts shall be transferred to the other plan. Following such a transfer, the Member shall have no right to benefits from this Plan.

(b) No Transfers To This Plan. No transfers shall be made to this Plan under this section.

(c) Time or Form of Transfer. The Company shall determine the date as of which any transfer between plans shall occur. The Company shall also determine whether the transfer shall be in cash or in kind or partly in each. Transfers in kind may include the promissory note with respect to any outstanding loan from a plan to the Participant.

(d) No Reduction of Benefits. No such transfer shall occur unless the Company determines that the requirements of Sec. 17.02 have been satisfied.

A Participant who continues in the Employer’s employment after his Retirement Date shall continue to be a Participant in the Plan until his actual retirement. In addition, any Participant who has retired under a defined benefit pension plan maintained by the Sponsoring Company and has immediately commenced the receipt of monthly retirement income from said Retirement Plan shall be deemed to have retired under this Article VII. Upon actual retirement

on or after his Retirement Date or as otherwise provided herein, a Participant shall be entitled to the benefits provided for in this Article VII. Subject to the provisions of Subsections 11.01(2), 11.02(1) and 12.03(2) hereof, any Participant who becomes entitled to benefits under this Article VII shall receive benefits equal to the total amounts in his Accounts valued as of the Valuation Date coinciding with or immediately following the date on which such Participant becomes entitled to such benefits. Payment upon retirement shall be made by the Trustee at the direction of the Committee at the time and manner provided in Article XI hereof.

8.01 Disability Retirement Benefits. If a Participant retires by reason of Total and Permanent Disability while in the employ of an Employer or an Affiliated Company or on Leave of Absence, subject to the provisions of Subsections 11.01(2), 11.02(1) and 12.03(2) hereof, he shall be entitled to receive benefits equal to the total amounts in his Accounts valued as of the Valuation Date coinciding with or immediately following the date on which such Participant retires on account of Total and Permanent Disability. However, if distribution is delayed because the Participant’s Account balances exceed $3,500 (for distributions prior to January 1, 1998) or $5,000 (for distributions on or after January 1, 1998), such distribution shall be based upon the balance in such Participant’s Accounts as of the Valuation Date coinciding with or immediately preceding the earlier of (iv) the date of the Participant’s election to receive such distribution, or (v) the date on which such Participant attains age sixty-five (65) or dies. Payments resulting from a Participant’s retirement on account of Total and Permanent Disability shall be made by the Trustee at the direction of the Committee at the time and in the manner provided in Article XI hereof.

8.02 Determination of Disability. The Committee shall determine whether a Participant has suffered Total and Permanent Disability, and its determination in that respect is binding upon the Participant, provided that the Committee may rely upon professional medical advice in making such determination. In making its determination, the Committee may require the Participant to submit to medical examinations by doctors selected by the Committee. The provisions of this Article VIII shall be uniformly and consistently applied to all Participants.

9.01 Death Benefits. Upon the death of a Participant while in the employ of an Employer or an Affiliated Company or on Leave of Absence, subject to the provisions of Subsections 11.01(2), 11.02(1) and 12.03(2) hereof, his Beneficiary, determined in accordance with Section 9.02 hereof, shall receive, provided proper proof of death has been filed with the Committee, the full amount of his Accounts as of the Valuation Date coinciding with or immediately following the date on which the Participant dies.

Upon the death of a Participant who is no longer employed by an Employer or an Affiliated Company, his Beneficiary, determined in accordance with Section 9.02, shall receive

the balance of such Participant’s Accounts as of the Valuation Date coinciding with or immediately following the date on which the Participant died.

Payments resulting from the death of a Participant shall be made by the Trustee at the direction of the Committee at the time and in the manner provided in Article XI hereof.

9.02(1) Subject to the provisions of Section 3.06 and Subsections 9.02(2) and 12.03(2) hereof, each Participant may designate a Beneficiary or Beneficiaries, and contingent Beneficiary or Beneficiaries, if desired, including the executor or administrator of his estate, to receive his interest in the Trust Fund in the event of his death, but the designation of a Beneficiary shall not be effective for any purpose unless and until it has been filed with the Committee on the form provided therefor. If the Participant has a surviving spouse and the surviving spouse consented to the naming of another Beneficiary in accordance with Subsection 9.02(2) hereof, but the deceased Participant failed to name a Beneficiary in the manner herein prescribed, or the Beneficiary or Beneficiaries so named predecease the Participant, the amount, if any, which is payable hereunder in respect of such deceased Participant shall be paid to the surviving spouse. If the Participant does not have a surviving spouse and the deceased Participant failed to name a Beneficiary in the manner herein prescribed, or the Beneficiary or Beneficiaries so named predecease the Participant, the amount, if any, which is payable hereunder in respect of such deceased Participant shall be paid to either (i) the spouse of the deceased Participant, (ii) the surviving children of the deceased Participant or on their behalf as provided in Section 11.03 below, (iii) any one or more or all of the next-of-kin of the deceased Participant in such proportions as the Committee may determine, or (iv) the legal representative or representatives of the estate of the deceased Participant. Notwithstanding the foregoing, the Committee may elect to have a court of applicable jurisdiction determine to whom a payment or payments should be made. Any payment made to any person pursuant to the power and discretion conferred upon the Committee by the preceding sentence shall operate as a complete discharge of all obligations under the Plan in respect of such deceased Participant and shall not be subject to review by anyone, but shall be final, binding and conclusive on all persons ever interested hereunder.

Subject to the provisions of Subsection 9.02(2) below, a Participant may from time to time change any Beneficiary designated by him without notice to such Beneficiary, under such rules and regulations as the Committee may from time to time promulgate, but the last Beneficiary designation filed with the Committee shall control.

9.02(2) With respect to a Participant who has been credited with an Hour of Service on or after August 23, 1984, notwithstanding any other provision herein to the contrary, but subject to the provisions of Subsection 12.03(2) hereof, if, as of such Participant’s death, such Participant is married, such Participant’s Accounts shall, on his death, be paid to the surviving spouse to whom he was married at the date of his death unless the surviving spouse has made a Qualified Consent to the payment of any or all of said Accounts to a designated Beneficiary other than the surviving spouse. “Qualified Consent” means an irrevocable written consent executed by the Participant’s spouse which acknowledges the effect of the consent and is witnessed by a Plan representative or a notary public. A Participant may, after obtaining a

Qualified Consent, change his Beneficiary designation as permitted by Subsection 9.02(1) above, but any such change is subject to the requirements of this Subsection 9.02(2) and will require another Qualified Consent should the spouse, if surviving, not be the sole Beneficiary of all amounts in the Account. A Qualified Consent is effective only with respect to the spouse who executes it. If the Plan Administrator is satisfied that there is no spouse, or that the spouse cannot reasonably be located, or in such other circumstances as permitted by governmental regulations, no Qualified Consent shall be required as a condition to payment, under Section 9.01 hereof, to a Beneficiary who is not the surviving spouse.

9.02(3) Where a Participant’s spouse fails to survive the Participant and has a community interest in a portion of the Participant’s vested interest at the spouse’s death, and where the Participant may not lawfully retain and dispose of the whole interest including the community interest of the non-participating spouse, the non-participating spouse shall be deemed a Participant entitled to make a Beneficiary designation of his or her community share; however, the funds shall not be available out of the Trust until the Participant becomes entitled and the method of payment shall not be controlled by the method of payment provided for in the Plan. In the absence of a designation of Beneficiary by the non-participating spouse or if no designee survives, the Participant’s spouse shall be deemed to have named the Participant as his or her Beneficiary, if he or she survives, and if not, then the Beneficiaries (other than the Participant’s spouse) named by the Participant who survives the Participant. Otherwise, the Committee shall have the power described in Subsection 9.02(1) hereof to determine the recipients as in the case of the Participant’s death.

Subject to the provisions of Subsections 11.01(2), 11.02(1) and 12.03(2) hereof, in the event of the Termination of Employment of a Participant, such Participant shall be entitled to receive the entire balance in his Accounts, all valued as of the Valuation Date coinciding with or immediately following the date on which such Participant suffered a Termination of Employment. If distribution is delayed because the Participant’s Account balances exceed $3,500 (for distributions prior to January 1, 1998) or $5,000 (for distributions on or after January 1, 1998), such distribution shall be based upon the entire balance in such Participant’s Accounts as of the Valuation Date coinciding with or immediately preceding the earlier of (i) the date of the Participant’s election to receive such distribution, or (ii) the date on which such Participant attains age sixty-five (65) or dies.

Payment pursuant to this Article X shall be made by the Trustee, at the direction of the Committee, at the time and manner provided in Article XI hereof.

11.01(1) Upon a Participant’s: (i) retirement on or after his Retirement Date or as otherwise provided in Article VII hereof, (ii) retirement due to Total and Permanent Disability, (iii) death, or (iv) Termination of Employment, subject to the provisions of this Section 11.01 and Section 11.02, the Participant or his Beneficiary shall be entitled to a distribution pursuant to and in an amount computed in accordance with Article VII, VIII, IX or X, as the case may be. Except as otherwise provided in this Article XI, and except to the extent a Participant elects to diversify his Account pursuant to Section 14.03 hereof, the entire amount payable to a Participant or Beneficiary shall be distributed in a single lump sum in whole shares of Company Stock, or cash in the case of any fractional shares of Company Stock, as soon as administratively practicable after the Valuation Date on which such amounts were valued as provided in Article VII, Section 8.01, Section 9.01 or Article X as applicable. If a Participant has elected to diversify his Account pursuant to Section 14.03 hereof, any amounts so diversified will be distributed in a single lump sum cash payment, at the time provided herein. In no event, however, will any such distribution be paid later than one year after the close of the Plan Year:

(i) in which the Participant dies or retires after attaining his Retirement Date under the plan, or retires after sustaining Total and Permanent Disability; or

(ii) which is the fifth Plan year following the Plan Year in which the Participant has a Termination of Employment for any other reason, provided that the Participant has not been reemployed before such distribution.

In no event will such amounts be paid later than the sixtieth (60th) day after the close of the Plan Year in which occurs the latest of:

(a) The date on which the Participant attains or would have attained sixty-five (65) years of age or if earlier, his Retirement Date;

(b) The tenth (10th) anniversary of the year in which the Participant commenced participation in the Plan; or

Shares of Company Stock and the certificates representing such shares which are distributed by the Trustee may contain such restrictions on transferability and legends regarding restrictions on transfer as the Sponsoring Company may reasonably require to ensure compliance with applicable federal or state securities laws.

11.01(2) Notwithstanding any other provision of this Plan to the contrary, if actual distribution pursuant to Subsection 11.01(1) above is delayed for any reason beyond the Valuation Date upon which the amount of such distribution was to be based, the distribution shall

be based on the value of the Participant’s Accounts as of the Valuation Date coinciding with or immediately preceding the date on which such distribution is actually made.

11.01(3) Notwithstanding the provisions of Subsection 11.01(1), and subject to Section 11.02 below, if a Participant has a Termination of Employment or retires due to Total and Permanent Disability and the vested portion of the Participant’s Accounts at such time exceed Three Thousand Five Hundred Dollars ($3,500) for determinations prior to January 1, 1998 or Five Thousand Dollars ($5,000) for determinations on or after January 1, 1998, the amounts owing to such Participant shall be distributed in a single lump sum as soon as administratively practicable after such Participant attains age sixty-five (65) or dies, unless such Participant delivers to the Committee his written consent to an earlier distribution.

11.01(4) Notwithstanding the provisions of Subsection 11.01(1), if a Participant has elected to direct the investment of a portion of certain Account balances into investments other than Company Stock pursuant to Article XIV hereof or if a Participant has cash amounts credited to any of his Accounts which are earmarked for the purchase of Company Stock but have not been used to purchase Company Stock on or prior to the Valuation Date upon which the amount of such Participant’s distribution is to be based, or if the Participant has a Rollover Account which is invested in whole or in part in investments other than Company Stock, distribution of such portion or portions of such Account balances (or such portion or all of his Rollover Account) under Subsection 11.01(1) shall be in cash rather in shares of Company Stock, unless such Participant elects in writing, within the time prescribed and on a form provided by the Committee to receive his entire distribution (less the value of his Rollover Account, if he so elects) in shares of Company Stock pursuant to Subsection 11.01(1).

11.01(5) If, upon termination of service for any reason, or, when distributions are required to commence to a Participant pursuant to Subsection 11.02(1), the value of the vested portion of a Participant’s Accounts is Three Thousand Five Hundred Dollars ($3,500) or less, then his total Account shall be paid to or for the benefit of the Participant, or in the case of his death, to or for the benefit of his Beneficiary or Beneficiaries, only as a non-deferred lump sum payment as provided in Subsection 11.01(1). Effective January 1, 1998, notwithstanding the foregoing, if the total vested value of the Accounts of a Participant (or a Beneficiary following the Participant’s death) is $5,000 or less at any time following the date the Participant’s Termination of Employment or death occurs, a single-sum distribution of the entire vested benefit shall be made to the Participant (or Beneficiary) as soon as administratively feasible following the Termination of Employment or death (or following the date the value is determined to be $5,000 or less, if later) equal to the value determined as of a Valuation Date selected by the Trustee which is on or a reasonable time prior to the date the distribution occurs.

11.02 Limitations on Timing. Notwithstanding any other provision of the Plan to the contrary, distributions must occur at least as rapidly as required under this Section 11.02.

11.02(1) A Participant’s entire interest in the Plan shall be distributed to him no later than the Required Beginning Date based on the balance in his Accounts as of the Valuation Date coinciding with or immediately preceding the Required Beginning Date.

11.02(2) In the event of the death of a Participant prior to distribution of his benefits under the Plan, distribution of such deceased Participant’s entire interest under the Plan shall be made within five (5) years after the death of such Participant.

11.03 Payments on Personal Receipt Except in Case of Minors or Persons Under a Legal Disability. All payments to any Participant, Beneficiary or Alternate Payee from the Trust Fund shall be made to the recipient entitled thereto in person or upon his personal receipt, in a form satisfactory to the Committee, except when the recipient entitled thereto shall be a minor or under a legal disability, or, in the sole judgment of the Committee, shall otherwise be unable to apply such payments in furtherance of his own interests and advantage. The Committee may, in such event, in its sole discretion, direct all or any portion of such payments to be made in any one or more of the following ways: (i) directly to such person, (ii) to the guardian of his person or of his estate, even if appointed by a court other than a Texas state court, (iii) to a custodian under any applicable Uniform Gifts to Minors Act or Uniform Transfers to Minors Act, or (iv) to a person appointed as his personal representative through a Power of Attorney. Notwithstanding the foregoing, the Committee may elect to have a court of applicable jurisdiction determine to whom a payment or payments should be made. The decision of the Committee, in each case, will be final, binding and conclusive upon all persons ever interested hereunder, and the Committee shall not be obliged to see to the proper application or expenditure of any payments so made. Any payment made pursuant to the power herein conferred upon the Committee shall operate as a complete discharge of all obligations of the Trustee and the Committee, to the extent of the amounts so paid.

Notwithstanding any provisions to the contrary herein, except as otherwise provided in Sections 4.03 and 4.08 and Subsection 6.04(4) hereof, no distribution shall be made of any Elective Contributions or the earnings thereon prior to the earliest of:

(a) Termination of Employment, retirement, death, or Total and Permanent Disability.

(b) Termination of the Plan without establishment of or maintenance of another successor defined contribution plan as defined in Code Section 414(i) (other than an employee stock ownership plan as defined in Code Section 4975(e)(7) or Code Section 409 or a simplified employee pension as defined in Code Section 408(k)) by an Employer or an Affiliated Company at the time of termination of the Plan or within the period ending twelve months after distribution of all assets from the Plan; provided, however, that if fewer than two percent (2%) of the Participants in this Plan at the time of the Plan’s termination are or were eligible under another defined contribution plan (as defined in this Subsection) at any time during the twenty-four (24) month period beginning twelve (12) months before the time of this Plan’s termination, such other plan is not a successor defined contribution plan.

11.05 Distribution Limitations Applicable to ESOP Accounts. Notwithstanding any other provisions to the contrary in this Plan, except as otherwise provided in Sections 11.01, 11.02 and 14.03 hereof, and except as otherwise provided in Code Section 409(d)(2) and (3), no

distribution of any Company Stock attributable to contributions made by the Employers under the provisions of the ESOP and allocated to the ESOP Employer Contribution Accounts and contributions made by participants in the ESOP and allocated to the ESOP Employee Contribution Accounts shall be made before the end of the eighty-four (84)-month period which begins the month immediately following the month in which such Company Stock was allocated to the appropriate account under the ESOP.

11.06(1) This Section applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee’s election under this Section, a Distributee may elect, at the time and in the manner prescribed by the Committee, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover.

11.06(2) For purposes of this Section 11.06, the following terms shall have the following meanings:

(i) “Eligible Rollover Distribution” means any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee’s designated Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code Section 401(a)(9); and the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities).

(a) Any hardship withdrawal from a Participant’s Employee Elective Contribution Account prior to age 59½ pursuant to Sec. 6.02 which is described in Code section 401(k)(2)(B)(i)(IV) and which occurs after December 31, 1998 and prior to January 1, 2002, and any withdrawal from any of the Participant’s Accounts due to financial hardship prior to age 59½ pursuant to Sec. 6.02 which occurs on or after January 1, 2002, is not an eligible rollover distribution.

(b) Commencing January 1, 2002, a portion of a distribution shall not fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Code Section 408(a) or (b), or to a qualified defined contribution plan described in Code Section 401(a) or 403(a) that agrees to separately account for the amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

(ii) “Eligible Retirement Plan” means an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), or a qualified trust described in Code Section 401(a), that accepts the distributee’s eligible rollover distribution. Commencing January

1, 2002, an eligible retirement plan also means an annuity contract described in Code Section 403(b), or an eligible plan under Code Section 457(b) which is maintained by a state, a political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to account separately for amounts transferred into such plan from this Plan. Prior to January 1, 2002, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan was limited to an individual retirement account or individual retirement annuity.

(iii) “Distributee” means an Employee or former Employee. In addition, the Employee’s or former Employee’s surviving spouse and the Employee’s or former Employee’s spouse or former spouse who is the Alternate Payee under a Qualified Domestic Relations Order are Distributees with regard to the interest of the spouse or former spouse.

(iv) “Direct Rollover” means a payment by the Plan to the Eligible Retirement Plan specified by the Distributee.

12.01(1) Each Participant shall furnish to the Committee such information as the Committee considers necessary or desirable for purposes of administering the Plan, and the provisions of the Plan respecting any payments hereunder are conditional upon the Participant’s furnishing promptly such true, full and complete information as the Committee may reasonably request.

12.01(2) Each Participant shall submit proof of such Participant’s age to the Committee. The Committee shall, if such proof of age is not submitted as required, use as conclusive evidence thereof, such information as is deemed by it to be reliable, regardless of the source of such information. Any adjustment required by reason of lack of proof or the misstatement of the age of persons entitled to benefits hereunder, by the Participant or otherwise, shall be in such manner as the Committee deems equitable.

12.01(3) Any notice or information which according to the terms of the Plan or the rules of the Committee must be filed with the Committee, shall be deemed so filed if addressed and either delivered in person or mailed, postage fully prepaid, to the Committee. Whenever a provision herein requires that a Participant (or the Participant’s Beneficiary) give notice to the Committee within a specified number of days or by a certain date, and the last day of such period, or such date, falls on a Saturday, Sunday, or Employer holiday, the Participant (or the Participant’s Beneficiary) will be deemed in compliance with such provision if notice is delivered in person to the Committee or is mailed, properly addressed, postage prepaid, and postmarked on or before the business day next following such Saturday, Sunday or Employer holiday. The Committee may, in its sole discretion, modify or waive any specified notice requirement; provided, however, that such modification or waiver must be administratively feasible, must be in the best interest of the Participant, and must be made on the basis of rules of the Committee which are applied uniformly to all Participants.

12.02 Participants’ Rights in Trust Fund. No Participant or other person shall have any right, title or interest in, to or under the Trust Fund, or any part of the assets thereof, except and to the extent expressly provided in the Plan.

12.03(1) Restrictions on Assignment. The benefits provided hereunder are intended for the personal security of persons entitled to payment under the Plan, and are not subject in any manner to the debts or other obligations of the persons to whom they are payable. The interest of a Participant or such Participant’s Beneficiary or Beneficiaries may not be sold, transferred, assigned or encumbered in any manner, either voluntarily or involuntarily, and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be null and void; neither shall the Trust Fund nor any benefits thereunder or hereunder be liable for or subject to the debts, contracts, liabilities, engagements or torts of any person to whom such benefits or funds are payable, nor shall they be subject to garnishment, attachment, or other legal or equitable process nor shall they be an asset in bankruptcy. All of the provisions of this Section 12.03, however, are subject to Section 11.03, to withholding of any applicable taxes and to assignments permitted by Code Section 401(a)(13).

12.03(2) Exception for Benefit Payable Pursuant to a Qualified Domestic Relations Order.

(a) The prohibitions contained in Subsection 12.03(1) hereof shall not apply to the creation, assignment or recognition of a right to any benefit payable with respect to a Participant pursuant to a Qualified Domestic Relations Order.

(b) The Plan Administrator shall establish written procedures for the determination of the qualified status of a domestic relations order.

(c) Upon receiving a domestic relations order, the Plan Administrator shall notify the Participant and Alternate Payee named in the order, in writing, of the receipt of the order and the Plan’s procedures for determining the qualified status of the order. Within a reasonable period of time after receiving the domestic relations order, the Plan Administrator shall determine the qualified status of the order and shall notify the Participant and the Alternate Payee, in writing, of its determination. The Plan Administrator shall provide notice under this paragraph by mailing such notice to the individual’s address specified in the domestic relations order, or in a manner consistent with Department of Labor regulations.

(d) During any period in which the issue of whether a domestic relations order is a Qualified Domestic Relations Order is being determined, notwithstanding any other provision of the Plan to the contrary, the Committee shall separately account for the amounts which would have been payable during such period to an Alternate Payee pursuant to a Qualified Domestic Relations Order, if such order had been determined to be a Qualified Domestic Relations Order. During the period such amounts are separately accounted for under the Plan, such amounts shall remain subject to the general investment provisions of the Plan. If within the eighteen (18) month period beginning with the date on which the first payment would be required to be made under such domestic relations order, the domestic relations order is determined to be a Qualified Domestic Relations Order, the Committee shall direct the Trustee to

distribute to the Alternate Payee the separately accounted for amounts including any earnings (or losses) thereon in accordance with Section 11.05 and the order. However, if within such eighteen (18) month period, it is determined that such order is not qualified, or if by the end of such eighteen (18) month period the issue of qualification is not resolved, then the Committee shall pay the separately accounted for amounts including any earnings (or losses) thereon to the person or persons who would have been entitled to such amounts if there had been no such order.

(e) Notwithstanding any other provision of the Plan to the contrary, all rights and benefits, including rights to make elections or to give directions, provided to a Participant under this Plan shall be subject to the rights, benefits and elections or directions afforded to an Alternate Payee, pursuant to a Qualified Domestic Relations Order, and this Plan shall be interpreted and administered by the Committee in such manner as to effectuate the provisions of any such Qualified Domestic Relations Order as they relate to the rights, benefits and elections or directions afforded to such Alternate Payee under such Qualified Domestic Relations Order. Furthermore, to the extent provided in any such Qualified Domestic Relations Order, a former spouse of a Participant shall be treated as a spouse or surviving spouse for all applicable purposes under the Plan.

(f) The Trustee shall make any payments or distributions required under this Subsection 12.03(2) by separate benefit checks or other separate distribution to the Alternate Payee(s).

12.04 Conditions of Employment Not Affected by Plan. Neither the Plan nor the Trust nor the Trust Agreement shall confer on any employee, including any Participant, any right to be retained in the service of any Employer or any Affiliated Company, and nothing contained herein or in the Trust Agreement shall be construed in any way to limit or restrict the right of any Employer or any Affiliated Company to discharge any employee, regardless of whether such employee is a Participant, or to change such employee’s position or the basis or amount of such employee’s compensation.

12.05(1) Each Participant and each other person entitled to benefits hereunder shall file with the Committee from time to time in writing such Participant’s post office address and each change of address. Any payment hereunder and any communication addressed to a Participant, an Employee or Beneficiary, at such person’s last address filed with the Committee, or if no such address has been filed, then at such person’s last address as indicated on the records of an Employer, shall be deemed to have been delivered to such person on the date on which such payment or communication is deposited, postage prepaid, in the United States mail.

12.05(2) If the Committee is in doubt as to whether payments are being received by the person entitled thereto, it shall, by registered mail addressed to the person concerned, at his address last known to the Committee, notify such person that all unmailed and future payments shall be withheld until he provides the Committee with a sworn statement, properly notarized, evidencing his continued life and his proper mailing address.

12.06(1) Neither the Trustee nor the Committee shall be obliged to search for, or ascertain the whereabouts of any Participant, Beneficiary or Alternate Payee. The Committee, by certified or registered mail addressed to such Participant’s, Beneficiary’s or Alternate Payee’s last known address, shall notify the Participant, Beneficiary or Alternate Payee that such Participant, Beneficiary or Alternate Payee is entitled to a distribution under this Plan, and the notice shall quote the provisions of Subsections 12.06(1) and (2). The Committee shall utilize the services of the Internal Revenue Service (pursuant to its Policy Statement P-1-187 or any successor thereto) in attempting to ascertain the current mailing address of a Participant, Beneficiary or Alternate Payee.

12.06(2) If any distribution or payment is not claimed by the person entitled thereto within one (1) year from the date of the mailing of the notice referred to in subsection (1) above, the Participant’s, Beneficiary’s or Alternate Payee’s Accounts, valued as of the Valuation Date coinciding with or immediately preceding the date such one (1) year period ends, shall be forfeited (“Forfeitures”) and if not used to restore previous Forfeitures as provided herein, reallocated pursuant to Section 5.03 hereof. If a Participant, Beneficiary or Alternate Payee makes a claim, at any time, such Forfeitures shall be restored and the Committee shall direct the Trustee to distribute such amount to the individual entitled to the distribution. Such restorations shall be made from Forfeitures which occurred during the Plan Year pursuant to this Subsection. Should such Forfeitures, if any, be insufficient to restore the claimed amount owing to any Participant or Beneficiary, the additional amount necessary for restoration shall be contributed by the Employer as a special contribution to be specially allocated to the Account of such Participant or Beneficiary.

12.06(3) Notwithstanding Subsection 12.06(1) or 12.06(2) above, if upon termination of the Plan and the liquidation of the Trust, all or any distribution payable to a Participant or his Beneficiary has not been claimed after sending the notice described in Subsection 12.06(1) above, the Committee shall establish an Individual Retirement Account or an interest-bearing, federally insured account in a bank or savings and loan association in the name of the Participant or Beneficiary, shall purchase a deferred annuity providing the form(s) of benefit prescribed in Article XI or, if the Committee is unable to accomplish any of the foregoing, shall dispose of the Participant’s Account in any other method permitted by the Code and ERISA. If a Participant’s Account has been forfeited pursuant to Subsection 12.06(2) above, it shall be restored upon Plan termination and distributed as provided in the preceding sentence. The Committee shall direct the Trustee to distribute the Participant’s Account valued as of the last Valuation Date, or special valuation date as provided in Section 18.03 hereof, preceding distribution.

13.01 Appointment of Committee. The administration of the Plan will be the responsibility of the Committee which shall be appointed by the Board and shall consist of at least one (1) but no more than eight (8) members. The President or Vice President of the

Sponsoring Company shall certify to the Trustee the names of the members of the Committee. The Board shall be authorized to remove any member of the Committee with or without cause by notifying such member and the Chairman, in writing, and may fill vacancies in the Committee, however caused. A member of the Committee may resign upon ten (10) days’ prior notice by delivery of his written resignation to the President of the Sponsoring Company. The Committee shall have the sole power, duty and responsibility for directing the administration of the Plan in accordance with its provisions. Until such time as the Board so determines otherwise, the Committee of this Plan shall be the Retirement Committee under the Retirement Plan for Employees of Southwestern Public Service Company.

13.02 Compensated Expenses of the Committee. The members of the Committee shall serve without compensation for their services as such, but the reasonable and necessary expenses of the Committee shall be paid as provided in Section 13.14. When, in its discretion, the Committee, or any Employer, deems it advisable, the Committee shall be authorized to have the records of the Committee and the Trustee audited by an independent auditor, and reasonable and necessary ( expenses thereby incurred shall be paid as provided in Section 13.14 hereof.

13.03 Secretary and Agents of the Committee. The Committee or the Trustee may employ such agents and such clerical and other administrative personnel as reasonably may be required for the purpose of administering the Plan. Such administrative personnel shall carry out the duties and responsibilities assigned to them by the Committee or Trustee, as applicable. Expenses necessarily incurred for such purpose shall be paid by the Trust Fund unless paid by the Employers, as provided in Section 13.14.

13.04(1) A majority of the members of the Committee shall constitute a quorum for the transaction of business, and shall have full power to act hereunder. Action by the Committee shall be official if approved by a vote of a majority of the members present at any official meeting. The Committee may, without a meeting, authorize or approve any action by written instrument signed by a majority of all of the members. Any written memorandum signed by the Chairman, or any other member of the Committee, or by any other person duly authorized by the Committee to act, in respect of the subject matter of the memorandum, shall have the same force and effect as a formal resolution adopted in open meeting. The Committee shall give to the Trustee any order, direction, consent, certificate or advice required or permitted under the terms of the Trust Agreement, and the Trustee shall be entitled to rely on, as evidencing the action of the Committee, any instrument delivered to the Trustee when: (i) if a resolution, it is certified by the Chairman and Secretary, or (ii) if a memorandum, it is signed by a majority of all of the members of the Committee, or by a person who shall have been authorized to act for the Committee in respect of the subject matter thereof.

13.04(2) A member of the Committee may not vote or decide upon any matter relating solely to him or vote in any case in which his individual right or claim to any benefit under the Plan is specifically involved. If, in any case in which a Committee member is so disqualified to act, the remaining members then present cannot, by majority vote, act or decide, the Board will appoint a temporary substitute member to exercise all of the powers of the disqualified member concerning the matter in which he is disqualified.

13.04(3) The Committee shall maintain minutes of its meetings and written records of its actions, and as long as such minutes and written records are maintained, members may participate and hold a meeting of the Committee by means of conference telephone or similar communications equipment which permits all persons participating in the meeting to hear each other. Participation in such a meeting constitutes presence in person at such meeting.

13.05 Authority of Committee. The Committee is authorized to take such actions as may be necessary to carry out the provisions and purposes of the Plan and shall have the authority to control and manage the operation and administration of the Plan, including complying with all reporting and disclosure requirements under applicable laws and regulations. In order to effectuate the purposes of the Plan, the Committee shall have the fiduciary power and discretion to construe and interpret the Plan, to supply any omissions therein, to reconcile and correct any errors or inconsistencies, to decide any questions in the administration and application of the Plan, and to make equitable adjustments for any mistakes or errors made in the administration of the Plan. The Committee shall also have the power to direct the purchase by the Trustee of or the investment by the Trustee in any insurance company investment or annuity contracts acquired for the purpose of funding benefits under the Plan. All such actions or determinations made by the Committee, and the application of rules and regulations to a particular case or issue by the Committee, in good faith, shall not be subject to review by anyone, but shall be final, binding and conclusive on all persons ever interested hereunder. In construing the Plan and in exercising its fiduciary power under provisions requiring Committee approval, the Committee shall attempt to ascertain the purpose of the provisions in question and when such purpose is known or reasonably ascertainable, such purpose shall be given effect to the extent feasible. Likewise, the Committee is, in the exercise of its fiduciary powers, authorized to determine all questions with respect to the individual rights of all Participants and their Beneficiaries and Alternate Payees under this Plan, including, but not limited to, all issues with respect to eligibility, Compensation, service, valuation of Accounts, allocation of consolidated contributions and Trust Fund earnings, and retirement or Termination of Employment, and shall direct the Trustee concerning the allocation, payment and distribution of all funds held in trust for purposes of the Plan. The Committee, in the exercise of any discretionary powers hereunder, shall not exercise that discretion so as to discriminate in favor of Employees who are officers, shareholders, or highly compensated Employees. The Committee shall establish investment objectives and monitor, or cause to be monitored, the investment performance of the Trustee or any Investment Manager which may be appointed with respect to any assets of the Plan, and shall make such reports and give such recommendations to the Board as determined to be appropriate with respect thereto.

13.06 General Administrative Powers. The Committee shall have authority to make, and from time to time, revise, rules and regulations for the administration of the Plan.

13.07 Plan Administrator. “Plan Administrator” (as defined in Section 3(16)(A) of ERISA) shall mean the Sponsoring Company. Except as otherwise delegated herein, the Plan Administrator shall exercise such authority and responsibility as it deems appropriate to comply with the provisions of federal law and governmental regulations issued thereunder and to carry out any duties imposed hereby, including, but not limited to, records of Participants’ service, accrued benefits and the percentage of such benefits which are nonforfeitable under the Plan, notification to Participants, annual registration with the Internal Revenue Service, annual reports to the Department of Labor, and furnishing the Trustee with any directions or information

regarding income tax withholding required by law. The Plan Administrator is hereby designated as the agent for service of process unless the Committee designates another person or entity.

13.08 Duties of Administrative Personnel. Administrative personnel appointed pursuant to Section 13.03 hereof, shall be responsible for such matters as the Committee shall delegate to them by written instrument, including, but not limited to communications to Employees at the direction of the Committee, reports to the Committee involving questions of eligibility and the amount of Compensation of Participants, assisting Participants, Beneficiaries and Alternate Payees in the completion of forms prescribed by the Committee, maintenance of records concerning terminated vested Participants, Participants who have retired and Beneficiaries. Administrative personnel may not make any decision as to Plan policy, interpretations, practices or procedures unless the authority to make such decisions has been delegated to them in writing by the Committee and they accept fiduciary responsibilities in accordance with the provisions of Section 13.09 hereof. All administrative personnel shall perform their allocated function within the policies, interpretations, rules, practices and procedures established by the Committee, except that administrative personnel shall coordinate matters related to the Plan with the appropriate departments of each Employer as the Committee directs.

13.09 Designation of Named Fiduciaries and Allocation of Responsibility. ERISA requires that certain persons, who are deemed to be “fiduciaries,” as defined in ERISA Section 3(21)(A), be designated as “Named Fiduciaries” in the Plan. The Board, the Committee and the Plan Administrator are hereby designated Named Fiduciaries. Each Named Fiduciary shall have only the powers, duties and responsibilities specifically allocated to such fiduciary pursuant to the terms of this Plan. The Board shall not have power or fiduciary responsibility hereunder other than the power to name and to remove the persons who shall comprise the Committee and to continue to those persons such allocation of fiduciary responsibilities. In addition to all of the other rights, powers and responsibilities delegated to it hereunder, the Committee shall have the fiduciary responsibility and the power to appoint (and remove) one or more Investment Managers, and the Committee shall have the power to appoint (and remove) the Trustee. Each Named Fiduciary may, by written instrument, allocate some or all of its responsibilities to another fiduciary or designate another person to carry out some or all of its fiduciary responsibilities. The Committee, Plan Administrator and each other fiduciary under the Plan (including fiduciaries to whom responsibilities are allocated by a Named Fiduciary) will be furnished a copy of the Plan, and their acceptance of such responsibility will be made by agreeing in writing to act in the capacity designated. No Named Fiduciary shall be liable for an act or omission of any person who is allocated a fiduciary responsibility or who is designated to carry out such responsibility by a Named Fiduciary, except to the extent that the Named Fiduciary did not act in accordance with the standards contained in Subsection 13.10(2) hereof with respect to the allocation or designation of a fiduciary duty. Any person or group of persons may serve in more than one (1) fiduciary capacity with respect to the Plan.

13.10(1) Any action herein permitted or required to be taken by an Employer shall, subject to the provisions of Section 21.07 hereof, be by resolution of its board of directors or by written instrument signed by a person or group of persons who has been authorized by resolution of such board of directors as having authority to take such action. Any action herein

permitted or required to be taken by the Committee shall be in the manner specified in Section 13.04 hereof.

13.10(2) Each fiduciary with respect to the Plan shall perform all of his duties and responsibilities and exercise his powers hereunder with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims, and no fiduciary shall be liable for any act or failure to act on his part (including reliance on the advice of counsel) which conforms to that standard, unless: (i) he knowingly participates in or knowingly undertakes to conceal an act or omission of another fiduciary of the Plan, with the knowledge that such act or omission is a breach of fiduciary responsibility, or (ii) knowing of a breach of fiduciary responsibility, he fails to make reasonable efforts under the circumstances to remedy the breach, or (iii) by failing to carry out his specific responsibilities, in accordance with such standard, he has enabled another fiduciary of the Plan to commit a breach.

13.10(3) Each fiduciary shall furnish or cause to be furnished to each other fiduciary all information needed for the proper performance of its duties. Each fiduciary warrants that any directions given, information furnished or action taken by it shall be in accordance with the provisions of the Plan or the Trust Agreement, as the case may be, authorizing or providing for such direction, information or action.

13.11 Appointment of Professional Assistants and the Investment Manager. The Committee may appoint such accountants, counsel, and actuaries and other advisers as it deems necessary or desirable in connection with the administration of the Plan. The Committee, in its sole discretion, may appoint one or more Investment Managers to manage (including the power to acquire or dispose of) all or any of the assets of the Trust Fund. The Committee shall be entitled to rely upon and shall not be liable for any act or failure to act in reliance, on any opinion or reports, which shall be furnished to the Committee by any such accountant with respect to accounting matters, counsel in respect to legal matters, or actuary in respect of actuarial matters as long as the Committee’s reliance is in accordance with the standard set forth in Subsection 13.10(2) hereof. The fees and costs of such services are an administrative expense to the Plan to be paid out of the Trust Fund except to the extent that such fees and costs are paid by any of the Employers.

13.12 Bond. The Committee shall see that the appropriate fiduciaries are bonded as required by federal law or regulation. Except as required by state or federal statute, irrespective of this provision, no bond or other security shall be required of any fiduciary.

13.13 Indemnity. In the event and to the extent not insured against under any contract of insurance with an insurance company, the Employers shall indemnify and hold harmless each “Indemnified Person”, as defined below, against any and all claims, demands, suits, proceedings, losses, damages, interest, penalties, expenses (specifically including, but not limited to counsel fees to the extent approved by the Sponsoring Company or otherwise provided by law, court costs and other reasonable expenses of litigation), and liability of every kind, including amounts paid in settlement, with the approval of the Sponsoring Company, arising from any action or cause of action related to the Indemnified Person’s act or acts or failure to act. Such indemnity shall apply regardless of whether such claims, demands, suits, proceedings, losses, damages,

interest, penalties, expenses, and liability arise in whole or in part from (i) the negligence or other fault of the Indemnified Person, except when the same is judicially determined to be due to gross negligence, fraud, recklessness, willful or intentional misconduct of such Indemnified Person or (ii) from the imposition on such Indemnified Person of any penalties imposed by the Secretary of Labor, pursuant to Section 502(1) of ERISA, relating to any breaches of fiduciary responsibility under Part 4 of Title I of ERISA. “Indemnified Person” shall mean each member of the Board of Directors of the Company, the Committee, the Trustee (other than a corporate Trustee), each other individual (but not any independent business entity) who is allocated fiduciary responsibility hereunder, and each individual (but not any independent business entity) otherwise acting in an administrative capacity with respect to the Plan.

13.14(1) The expenses of agents or advisers, the expenses of the Trustee and any other reasonable expenses of the Committee approved by the Sponsoring Company or as otherwise provided for in Section 13.02, shall, subject to Subsection 13.14(2) hereof, be paid by the Plan out of the Trust Fund unless paid by the Employers. If such expenses are to be paid by the Employers, the portion thereof payable by each may be determined by the ratio that the number of Participants who are Employees of each Employer bears to the total of all such Participants; provided, that if any expense is incurred solely on account of a single Employer or group of Employers, such expense shall be paid by such Employer or Employers to the extent and in such proportion as the Sponsoring Company may determine.

13.14(2) Notwithstanding any provisions of Subsection 13.14(1) to the contrary, as reimbursement for the expenses of administering the Plan, the Plan may pay so much of the amounts paid or incurred during the taxable year as expenses of administering the Plan as does not exceed the lesser of:

(a) The sum of ten percent (10%) of the first One Hundred Thousand Dollars ($100,000.00), and five percent (5%) of any amount in excess of One Hundred Thousand Dollars ($100,000.00) of the dividends paid to the Plan during the Plan Year ending with or within the Employer’s taxable year, with respect to the aggregate Company Stock held in the ESOP Employer Contribution Accounts and ESOP Employee Contribution Accounts, or

14.01(1) Except as otherwise provided in Sections 14.02 or 14.03 hereof, the Trustee shall invest all Accounts solely in shares of Company Stock which shall be held by the Trustee in a separate investment fund under the Trust (the “Company Stock Fund”). The Trustee may acquire those shares in the open market or may acquire those shares from the Sponsoring Company, either from treasury stock or from previously authorized but unissued stock, at a price equal to the average of the high and low, as reported on the composite tape for the New York

Stock Exchange, on the last day on which Company Stock is traded preceding the date of purchase by the Trustee of the Company Stock. Monies in amounts estimated by the Trustee to be needed for cash withdrawals or in amounts too small to be reasonably invested may be retained by the Trustee in cash in a separate subaccount under the Company Stock Fund. Likewise, monies may be retained in cash or invested temporarily in short-term (less than one year) U. S. Treasury obligations, high grade commercial paper, certificates of deposit and other money market investments as selected by the Trustee (or in interest-bearing securities similar to such investments) until such time as stock is normally purchased by the Trustee in accordance with its administrative procedures, or during periods when Company Stock is not reasonably available for purchase, or if, in the opinion of the Trustee, the purchase of Company Stock might involve a possible violation of any Federal or state law, including any Federal or state securities law or any regulation or rule thereunder, or as the Trustee deems to be in the best interest of the Participants. To the extent not otherwise provided in the Plan, dividends and other distributions received and gains realized on Company Stock shall, to the extent permissible, be invested in Company Stock and held in the Company Stock Fund. Rights to purchase Company Stock issued to the Trustee as stockholder shall be exercised to the fullest extent practicable through the application of cash, and if that be insufficient to exercise the rights in full, then through the application of cash derived from the sale of a part of the rights under a procedure that will permit the purchase of the maximum number of shares from the cash thus made available.

14.01(2) The Committee shall establish and maintain, or cause the Trustee to establish and maintain procedures and records which will adequately reflect (i) the number of shares (including fractional shares) of Company Stock in the Company Stock Fund and/or the cash available for the purchase of Company Stock attributable to each Account of a Participant, (ii) the dividends accrued in the form of Company Stock, stock splits and similar changes with respect to shares of Company Stock attributable to a Participant’s Accounts, (iii) the net unrealized gain or loss attributable to such shares of Company Stock, and (iv) the cost basis of all shares of Company Stock attributable to a Participant’s Accounts.

14.02(1) Notwithstanding the provisions of Subsection 14.01(1) hereof, each Participant may elect to have twenty-five percent (25%) of such Participant’s Elective Contributions made on and after the Effective Date and the Company Matching Contributions which are allocated for the benefit of the Participant on the basis of such twenty-five percent (25%) of the Participant’s Elective Contributions, and may elect to have any amount credited to a Rollover Account, to the extent provided for in Section 4.07 hereof, invested in any Investment Fund established hereunder, including the Company Stock Fund, in accordance with the rules and procedures established from time to time by the Committee and communicated in writing to the Participants. To the extent a Participant fails to direct the investment of all or a portion of such amounts (other than amounts credited to a Rollover Account), they shall be invested in the Company Stock Fund. If a Participant fails to direct the investment of all or any portion of a Rollover Account, the Trustee shall direct and redirect such investment among the Investment Funds other than the Company Stock Fund as the Trustee, in its sole discretion, may determine. Any amounts invested in the Company Stock Fund under this Section 14.02 shall thereafter no longer be eligible for investment direction pursuant to this Section 14.02. Upon a Participant’s Termination of Employment or cessation of participation for any reason, including death, Total

and Permanent Disability or retirement, if payment of such Participant’s Accounts is to be deferred pursuant to Section 11.01 hereof, such Participant (or Beneficiary) shall continue to have the right to direct the investment of the portion of his Accounts as provided herein.

14.02(2) On the last day of each Plan Quarter, a Participant may change such Participant’s designation of the manner for investment of the amounts the Participant previously directed into Investment Funds other than the Company Stock Fund and future contributions described in Subsection 14.02(1) made on behalf of or by the Participant to any other manner of investment permitted under Subsection 14.02(1) hereof, provided that (1) application for the change is made in the form and in accordance with the rules prescribed by the Committee, (ii) any such change shall not become effective unless made within the time the Committee designates, and (iii) the change shall be applicable to contributions made after the application for change shall have become effective, or to the interest of the Participant in each Investment Fund as of the date the application for change shall have become effective, as the case may be. In order to comply with applicable federal or state securities laws, the Committee may establish such rules with respect to the change of investment designation by Participants as it shall deem necessary or advisable to prevent possible violations of such laws.

14.02(3) The Trustee shall maintain such investment funds (including the Company Stock Fund) as the Committee may direct from time to time, ( for the investment of the Trust Fund (“Investment Funds”). Such Investment Funds shall be communicated to Participants in writing. Except as provided hereinafter in this Section, the assets of each such Investment Fund other than the Company Stock Fund shall be invested exclusively in shares of the registered investment company or mutual fund designated by the Committee, provided that such shares constitute securities described in ERISA Section 401(b)(1). Assets in any such Investment Fund in amounts estimated by the Trustee to be needed for cash withdrawals, or in amounts too small to be reasonably invested, or in amounts designated for the purchase of Company Stock but which have not yet been so used due to the Trustee’s normal procedures regarding the purchase of Company Stock, or in amounts which the Trustee deems to be in the best interest of the Participants, may be retained by the Trustee in cash or invested temporarily.

14.02(4) Any part or all of an Investment Fund other than the Company Stock Fund may be invested and reinvested by the Trustee in one or more collective investment funds or commingled trust funds maintained by the Trustee, as the same may have heretofore been or may hereafter be established or amended, so long as the Trustee is a bank or other applicable financial institution or another fiduciary with respect to the Plan. Any such fund must be invested principally in assets of the kind specified for the respective Investment Fund and must be authorized to accept investments by retirement plans qualified under the provisions of Section 401(a) and exempt under the provisions of Code Section 501(a). During such period of time as an investment in or through any such fund shall exist, the declaration of trust of such collective investment fund or commingled trust fund shall be incorporated by reference in, and shall constitute a part of, the Trust instrument.

14.02(5) The Trustee may, in Trustee’s sole discretion, invest cash balances held by the Trustee, as permitted in Subsection 14.02(3) hereof, from time to time, in short-term cash equivalents having ready marketability, including, but not limited to, U.S. Treasury bills, commercial paper (including such forms thereof, other than Trustee’s own paper, as may be

available through Trustee’s own trust department), certificates of deposit, and similar type securities.

14.03 Diversification of Participant’s Accounts. This Section 14.03 shall apply to (1) the shares of Company Stock, if any, credited to a Participant’s ESOP Employer Contribution Account and/or his ESOP Employee Contribution Account, to the extent such shares were acquired by the Plan after December 31, 1986, and (ii) all of the shares of Company Stock credited to a Participant’s other Accounts in the Plan, regardless of when such shares were acquired (hereinafter individually or collectively referred to as “Eligible Shares”). A Participant who has attained age fifty-five (55) and who has completed ten (10) or more years of participation in the Plan (including participation in the ESOP and/or the Tax Benefit Plan) shall be, for purposes of this Section, an “Eligible Participant.” An Eligible Participant may elect either to direct the investment of, or to receive a single lump sum distribution of twenty-five percent (25%) of the Eligible Shares in his Accounts, after taking into account all shares as to which a prior election under this Section (or the comparable section under the ESOP and/or Tax Benefit Plan) has been made. The total number of Eligible Shares subject to election at any time shall be determined by rounding such Shares to the nearest whole share. During each year of the period of six (6) consecutive Plan Years beginning with the Plan Year in which the Participant first becomes an Eligible Participant, an election hereunder shall be permitted. Each such yearly election shall be permitted during the period of ninety (90) days after the close of the applicable Plan Year (the “Yearly Election Period”). During the last such Yearly Election Period, an Eligible Participant may either elect to direct the investment of, or to receive a single lump sum distribution of fifty percent (50%) of the Eligible Shares in his Accounts, taking into account all Shares as to which he has previously made an election. To the extent an Eligible Participant makes an election under this Section 14.03, the Eligible Shares in the Eligible Participant’s Accounts that are subject to the election shall, no later than ninety (90) days after the end of the Yearly Election Period, be liquidated, if necessary, and either be invested among the investment options available for participant direction in accordance with the instructions of the Eligible Participant pursuant to the provisions of Section 14.02 of the Plan, or be distributed to said Participant in a single lump sum. Any amounts diversified as provided for in this Section 14.03 through investment among the investment options shall thereafter be subject to the rules and other provisions of Sections 14.01 and 14.02 regarding the reinvestment or change in investment of those amounts.

14.04 Funding Policy. The Committee shall establish a funding policy and method consistent with the objectives of the Plan, the investments authorized under the Trust Agreement and the requirements of Title I of ERISA. The Committee shall periodically review such funding policy and method. In establishing and reviewing such funding policy and method, the Committee shall endeavor to determine the Plan’s short-term and long-term objectives and financial needs, taking into account the need for liquidity to pay benefits and the need for investment growth. All actions of the Committee taken pursuant to this Section 14.04 shall be communicated to the Trustee.

14.05 Reservation of Cash. In the implementation of its duties under Section 14.04, the Committee may communicate to the Trustee the need to reserve from permanent investment from time to time such amounts of cash as it deems necessary or advisable in the administration of the Plan.

14.06(1) Voting of Stock – Registered Stock. All Shares of Company Stock, including fractional shares, held in the Company Stock Fund for a Participant’s various Accounts shall be voted by the Trustee in accordance with the directions of the Participant acting in his right as a shareholder. The Trustee shall combine fractional shares to the extent possible to reflect the direction of the Participants holding fractional shares. The Trustee shall establish such uniform and nondiscriminatory procedures as it deems necessary or appropriate in order to effectuate the voting rights granted to Participants hereunder. The Trustee shall be bound to follow the instructions of Participants, acting as named fiduciaries under Section 403(a)(1) of ERISA, with respect to voting of shares of Company Stock which have been allocated to Accounts; provided, however, that if a Participant does not respond in a timely fashion to the solicitation of voting instructions, the shares of Company Stock allocated (or treated as having been allocated) to such Participant’s Accounts shall, to the extent consistent with ERISA, be voted by the Trustee in its sole discretion.

(a) Notwithstanding the provisions of Subsection 14.06(1), if any Company Stock allocated to a Participant’s Accounts is not a “registration type class of securities,” the Participant shall be entitled to instruct the Trustee with respect to voting such Company Stock (in accordance with the provisions of Subsection 14.06(1)) only with respect to any corporate matter which involves the approval or disapproval of any corporate merger or consolidation, recapitalization, reclassification, liquidation, dissolution, sale of substantially all assets of a trade or business, or such similar transaction as the Secretary of the Treasury may prescribe ( in regulations pursuant to the provisions of Section 409(e) of the Code.

(b) If a matter is to be submitted to the holders of Company Stock which is not a “registration type class of securities” and it is not necessary that the Participant be entitled to instruct the Trustee with respect to voting in accordance with this Section, the Trustee, in its discretion, shall vote all shares of such Company Stock held by it (or exercise dissenter’s rights, if applicable), after consultation with the Committee. “Registration type class of securities” shall mean any class of securities required to be registered under Section 12 of the Securities Exchange Act of 1934, or exempt from such registration solely by reason of Section 12(g)(2)(h) (concerning interests in pooled investment vehicles issued to annuity plans or qualified pension, profit sharing, or stock bonus plans).

(a) In the event of a tender offer, exchange offer, or other offer for 10% or more of the shares of Company Stock held in the Company Stock Fund in the Trust (such offer hereinafter referred to as an “Offer”), the Trustee shall cause each Participant to whose Account any shares are credited to be advised in writing of the terms of the Offer as soon as practicable after the commencement of the Offer and shall furnish each Participant with a form by which the Participant may instruct the Trustee confidentially whether or not to tender shares Credited to his Account. For purposes of this Section, “Tender” shall mean tender, exchange, sale or any other form of disposition in connection with an Offer. The Trustee shall immediately notify the Committee of any Offer made to the Trustee including all terms and conditions of any

such Offer. The Trustee shall tender those shares which a Participant, acting as a named fiduciary under Section 403(a)(1) of ERISA, has so instructed it to tender, and the Trustee shall not tender shares which it is instructed not to tender. If a Participant does not respond in a timely fashion to the solicitation for instructions regarding a Tender, the decision on whether or not to tender the shares allocated to such Participant’s Accounts shall, to the extent consistent with ERISA, be made by the Trustee in its sole discretion. The provisions of this Section 14.06(3) are intended to establish each Participant as a named fiduciary as defined in Section 403(a)(1) of ERISA in connection with any such Tender; however, to the extent the Trustee retains any fiduciary responsibility with respect to any such Tender, the Trustee shall not be required to take any action, or omit to take any action, which would cause the Trustee to commit a breach of fiduciary duty under ERISA.

(b) In advising Participants of the terms of the Offer, the Trustee shall advise the Participant that if the Trustee receives no instructions, the decision on whether or not to Tender the shares allocated to the Participant’s Accounts will be made by the Trustee in its sole discretion, and shall provide Participants with such documents relating to the Offer as are prepared by any person and provided to shareholders. In addition, the Trustee may provide Participants with such other material concerning the Offer as the Trustee in its sole discretion determines to be appropriate. Reasonable means shall be employed by the Trustee to provide confidentiality with respect to the tendering directions by each Participant, and the Trustee shall hold such directions in confidence and shall not divulge or release such directions to any person, including all Employers or any director, officer, employee or agent of an Employer, it being the intent of this provision to ensure that the Employers (and their directors, officers, employees and agents) cannot determine the tendering directions given by any Participant. A Participant’s instructions to the Trustee to tender shares shall not be deemed a withdrawal or suspension from the Plan or a forfeiture of any portion of the Participant’s interest in the Plan. The Committee shall advise the Trustee of the commencement date of any Offer and, until receipt of such advice, the Trustee shall not be obligated to take any action under this Section.

(c) Funds or property received in exchange for tendered stock shall be credited to the Accounts of the Participants whose stock was tendered. If Company Stock is available on a national securities exchange, such funds or property may be used by the Trustee to purchase Company Stock. Pending investment in Company Stock pursuant to the preceding sentence, the Trustee shall invest such funds in Authorized Investments permitted under the Trust Agreement.

15.01 Adoption of Plan by Affiliated Company. Any Affiliated Company, whether or not presently existing, may adopt this Plan, effective as of the date indicated in the instrument of adoption, if (i) its application is made in writing to the Board, (ii) such application is accepted in writing by the Board, and (iii) such Affiliated Company executes an instrument in writing duly authorized by it adopting this Plan and the Trust forming a part hereof and delivers a copy thereof to the Committee, the Trustee and to the Board. The provisions of this Plan shall apply

only to each Employer severally, except as otherwise specifically provided herein or in such Employer’s instrument of adoption.

15.02 Rights and Obligations of the Sponsoring Company and the Employers. Throughout this instrument, a distinction is purposely drawn between rights and obligations of the Sponsoring Company and rights and obligations of each other Employer. The rights and obligations specified as belonging to the Sponsoring Company shall belong only to the Sponsoring Company. Each Employer shall have the obligation, as hereinafter provided, to make Company Contributions, Company Matching Contributions and Elective Contributions for its own Participants, and no Employer shall have the obligation to make Company Contributions, Company Matching Contributions or Elective Contributions for the Participants of any other Employer. Any failure by an Employer to fulfill its own obligations under this Plan shall have no effect upon any other Employer. An Employer may withdraw from this Plan without affecting any other Employer.

15.03(1) Notice of Withdrawal. Any Employer may, with the approval of the Board, as of any Valuation Date withdraw from the Plan upon giving the Committee and the Trustee at least thirty (30) days’ notice in writing of its intention to withdraw.

15.03(2) Trustee Segregation of Trust Assets upon Withdrawal. Upon the withdrawal by an Employer pursuant to this Article, the Trustee shall segregate the share of the assets in the Trust Fund, the value of which shall equal the total credited to the Accounts of Participants of the withdrawing Employer. The determination as to which assets are to be so segregated shall be made by the Trustee in its sole discretion.

15.03(3) Exclusive Benefit of Participants. Neither the segregation and transfer of any Trust assets upon the withdrawal of an Employer nor the execution of a new agreement and declaration of trust by such withdrawing Employer shall operate to permit any part of the Trust Fund to be used for or diverted to purposes other than for the exclusive benefit of the Participants.

15.03(4) Applicability of Withdrawal Provisions. The withdrawal provisions contained in this Article XV shall be applicable only if the withdrawing Employer continues to cover its Participants and eligible Employees in another stock bonus/employee stock ownership plan and trust qualified under Code Sections 401, 409, 4975(e)(7) and 501. Otherwise, the termination provisions of the Plan and Trust shall apply.

16.01 Authority to Amend. The Sponsoring Company reserves the right to amend the Plan with respect to all Employers at any time and from time to time provided that a copy of any such amendment is delivered to all other Employers within thirty (30) days of the adoption of the amendment. Each Employer may amend the Plan with respect to such Employer at any time, and from time to time, provided the Sponsoring Company approves such amendment. No

amendment shall permit any part of the Trust Fund to revert to or be recoverable by an Employer or be used for or diverted to purposes other than the exclusive benefit of the Participants or their Beneficiaries, or deprive any Participant of any interest he might have in the Trust Fund at the time of the amendment to the extent that such interest would be available to the Participant under Article X hereof were he to voluntarily resign as of the effective date of the amendment.

16.02 Trustee’s Consent. Under no condition, shall such amendment, amendments, or restatements increase the duties or responsibilities, or decrease the compensation, privileges, and immunities of the Trustee without the Trustee’s written consent.

16.03 Limitations of Vesting Changes. Under no condition, shall such amendment change the vesting schedule to one which would result in the nonforfeitable percentage of the accrued benefit derived from Company Contributions and Company Matching Contributions (determined as of the later of the date of the adoption of the amendment or of the effective date of the amendment) of any Participant being less than such nonforfeitable percentage computed under the Plan without regard to such amendment; no amendment shall change the vesting schedule unless each Participant with three (3) or more Eligibility Years of Service as of the expiration date of the election period described below, is permitted to elect, within the election period described below, to have his nonforfeitable percentage computed under the Plan without regard to the amendment. The election period described herein shall begin no later than the date upon which the amendment is adopted and shall end no later than the latest of the following dates: (i) the date which is sixty (60) days after the day the amendment is adopted, (ii) the date which is sixty (60) days after the day the amendment becomes effective, or (iii) the date which is sixty (60) days after the day the Participant is issued a written notice of the amendment by the Sponsoring Company.

16.04 Limitations on Other Changes. Subject to the above stated limitations and the requirement that no amendment shall eliminate, except with respect to any future contributions or future accrual of benefits, any nondiscretionary optional form of payment (as provided in Treasury Regulation Section 1.411(d)-4, and Treasury Regulation Section 1.401(a)(4)-4(d) and Code Section 411(d)(6)) with respect to any Participant who is a Participant immediately prior to the amendment, the Sponsoring Company shall have the power to amend the Plan and Trust Agreement, retroactively or otherwise, in any manner in which it deems desirable, including, but not by way of limitation, the power to change any provisions relating to the administration of the Plan and Trust Fund, and to change any provisions relating to the benefits or payment of any of the assets of the Trust Fund. Each such amendment shall become effective when executed by the Sponsoring Company unless a different effective date is specified in the amendment.

16.05 Statutorily Required Amendments. Notwithstanding anything herein to the contrary, this Plan may be amended at any time by the Sponsoring Company if necessary or desirable in order to have it conform to the provisions and requirements of the Code or any federal statute with respect to qualified employees’ plans and trusts, and no such amendment shall be considered prejudicial to the rights of any Participant hereunder or of any Beneficiary, Alternate Payee or Employee. Further, it is understood that any provisions of this Plan as herein contained which are contrary to the requirements of the Code for a qualified tax exempt employees’ plan and trust shall be deemed void and of no effect, without affecting the validity of other provisions hereof.

17.01 Right to Terminate Plan. Each Employer contemplates that the Plan shall be permanent and that it shall be able to make contributions to the Plan. Nevertheless, in recognition of the fact that future conditions and circumstances cannot now be entirely foreseen, the Sponsoring Company reserves the right to terminate the Plan and each Employer reserves the right to terminate the Plan as to such Employer.

17.02 Merger or Consolidation of Plan and Trust. Neither the Plan nor the Trust may be merged or consolidated with, nor may its assets or liabilities be transferred to, any other plan or trust, unless each Participant would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan had then terminated).

17.03 Continuance by Successor Company. In the event of the liquidation, dissolution, merger, consolidation or reorganization of an Employer, the successor company may adopt the Plan and Trust for the benefit of the Employees of such Employer. If such successor company does adopt the Plan and Trust, it shall, in all respects, be substituted for such Employer under the Plan and Trust. Any such substitution of such successor company shall constitute an assumption of Plan liabilities by such successor company, and such successor company shall have all of the powers, duties and responsibilities of such Employer under the Plan and Trust. If such successor company does not adopt the Plan and Trust, the Plan and Trust shall be terminated with respect to such Employer in accordance with the provisions of the Plan and Trust Agreement.

18.01 Suspension of Contributions. Should an Employer fail for any reason to make Company Contributions and/or Company Matching Contributions in any one (1) or more years, such failure shall not, of itself, terminate or discontinue this Plan and Trust as to the Employer and its Participants, nor shall the Employer incur any obligation to make up such Company Contributions and/or Company Matching Contributions in whole or in part.

18.02 Discontinuance of Contributions. Whenever an Employer determines that it is impossible or inadvisable for it to make further Company Contributions and/or Company Matching Contributions, such Employer may, without terminating the Trust, permanently discontinue all further Company Contributions and/or Company Matching Contributions by such Employer. A certified copy of such Employer’s resolution or other formal written instrument pursuant to Section 21.07 hereof, shall be delivered to the Committee and the Trustee. Thereafter, the Committee and the Trustee shall continue to administer all the provisions of the Plan which are necessary and remain in force, other than the provisions relating to Company Contributions and/or Company Matching Contributions by such Employer. Unless otherwise provided by such resolutions, the Trust shall remain in existence ( with respect to such Employer and all of the provisions of the Trust Agreement shall remain in force.

18.03 Termination of Plan and Trust. If an Employer determines to terminate (as to such Employer) the Plan and Trust completely, they shall be terminated insofar as they are applicable to such Employer as of the date specified in certified copies of resolutions or other formal written instrument pursuant to Section 21.07 hereof, delivered to the Committee and the Trustee. Upon such termination of the Plan and Trust and before liquidation of the Trust, the Committee shall require a special valuation of the Trust, if the liquidation is not to occur as of a Valuation Date. After payment of all expenses and proportional adjustment of Accounts of Participants with respect to such Employer to reflect such expenses, Trust Fund profits or losses, and subject to the limitations contained in Section 5.04 hereof, allocations of any previously unallocated funds to the date of termination, such Employer’s Participants shall be entitled to receive the amount then credited to their respective Accounts in the Trust Fund in a lump-sum payment. If, in the opinion of the Committee, assets in the Trust Fund or certain of them may possibly not be readily salable (i) because of federal or state securities laws, or the rules and regulations thereunder, or (ii) at their fair market value, the Committee may direct and the Trustee shall effect, a distribution of such assets in kind. If the entire Plan is terminating, upon completion of liquidation and distribution of the assets of the Trust to the Participants as provided for herein, the Trustee shall thereby complete the Trustee’s duties, and the Trust shall terminate.

18.04 Participant’s Rights to Benefits upon Termination or Partial Termination of Plan or Complete Discontinuance of Contributions. Upon the termination or partial termination (as determined by the Internal Revenue Service) of the Plan or the complete discontinuance of Company Contributions and Company Matching Contributions by an Employer, the rights of each such Employer’s Employees who are then Participants (or, in the case of a partial termination, who are then Participants affected by the partial termination) and the rights of each other person to the amounts credited to his Accounts at such time shall be nonforfeitable without reference to any formal action on the part of such Employer, the Committee or the Trustee.

19.01 Limitation on Reversions. Except as otherwise provided in this Article XIX, it shall be impossible, at any time, for any part of the Trust Fund, other than such part as is required to pay taxes and administration expenses or such part as may otherwise be permitted by law to be returned to the Employer, to be recoverable by an Employer, or to be used for, or diverted to, purposes other than for the exclusive benefit of the Participants, Beneficiaries and Alternate Payees.

19.02 Unallocated Amounts upon Termination of Plan and Trust. In the event the Plan and Trust are terminated, any previously unallocated amounts maintained in the suspense account in accordance with the provisions of Section 5.04 hereof which cannot be allocated to Participants upon the termination of the Plan and Trust pursuant to Section 18.03 hereof because of the limitations contained in Sections 5.04 through 5.07 hereof, shall revert to the Employer or Employers employing the Participant at the time of such termination.

19.03 Mistake of Fact or Disallowance of Deduction. If the Committee in good faith determines that (a) a Company Contribution or Company Matching Contribution or Elective

Contribution, or all of them was made by reason of a mistake of fact, or (b) a Company Contribution or Company Matching Contribution or Elective Contribution, or all of them is conditioned on its being deductible under Code Section 404, but the Internal Revenue Service disallows such deduction, the Trustee shall, upon direction of the Committee, return the amount of the excess Company Contribution or Company Matching Contribution or Elective Contribution, or all of them to the contributing Employer. All payments of returned Company Contributions or Company Matching Contributions or Elective Contribution, or all of them under this Section shall be made within one (1) year from the date of the payment of such mistaken Company Contribution or Company Matching Contribution or Elective Contribution, or all of them or the disallowance by the Internal Revenue Service of the deduction, whichever is applicable. The amount of the excess Company Contribution or Company Matching Contribution or Elective Contribution, or all of them shall be the excess of (1) the amount contributed over (2) the amount that would have been contributed had there not occurred a mistake of fact or had the deduction not been disallowed. Earnings attributable to the excess Company Contribution or Company Matching Contribution or Elective Contribution, or all of them shall not be returned to the contributing Employer, but losses attributable thereto shall reduce the amount of such Company Contribution or Company Matching Contribution or Elective Contribution, or all of them to be so returned. Furthermore, if the withdrawal of the amount attributable to the mistaken Company Contribution or Company Matching Contribution or Elective Contribution, or all of them would cause the balance of a Participant’s Account to be reduced to an amount which is less than the balance which would have been in said Account had the mistaken amount not been contributed, then the amount to be returned to the Employer under this Section will be reduced so as to avoid any such reduction.

19.04 Failure of Qualification of Plan and Trust. The initial establishment of the Plan and Trust by any Employer is contingent upon obtaining the approval of the Internal Revenue Service. In the event that the Internal Revenue Service fails initially to approve the Plan and Trust as to any Employer and the application for determination of the initial qualification of the Plan was made within the time prescribed by law for filing the Employer’s Federal income tax return for the taxable year in which the Plan was adopted, or such later date as the Secretary of the Treasury may prescribe, the Trustee shall, after paying any expenses attributable to such initial establishment, return to such Employer any remaining Company Contribution or Company Matching Contribution made by such Employer. Such remaining Company Contribution or Company Matching Contribution shall be returned as promptly as practicable, but in no event later than one (1) year after the date of the final denial of qualification of the Plan as to such Employer, including the final resolution of any appeals before the Internal Revenue Service or the courts.

The Top Heavy rules under Code Section 416 ceased to apply to this Plan effective September 1, 1998, the first day of the first Plan Year in which the Plan no longer benefited any non-collectively bargained employees.

21.01 Effect of Article. The following provisions of this Article XXI and the appropriate provisions of the Trust Agreement shall apply notwithstanding any other provisions of the Plan or the Trust Agreement to the contrary, in the event the Trustee executes a Promissory Note for an exempt loan to the Trust as defined in the regulations under Section 4975(e)(7) of the Code.

21.02 Definitions. For purposes of this Article XXI, the following terms shall have the following meanings:

21.02(1) “Promissory Note” shall mean each purchase money obligation executed by the Trustee for the purpose of acquiring shares of Company Stock (i) from a “disqualified person” within the meaning of Code Section 4975 or a “party in interest” within the meaning of Section 3(14) of ERISA or (ii) from any other person if the purchase money obligation payable to such other person is guaranteed by a “disqualified person” or a “party in interest.” Shares of Company Stock acquired with each Promissory Note shall be held in separate Suspense Accounts. The terms of each Promissory Note and any security agreements executed by the Trustee in connection therewith shall be subject to the provisions set forth in the Trust Agreement.

21.02(2) “Suspense Account” shall mean the record maintained by the Committee pursuant to Section 21.04 of shares of Company Stock which have been acquired by the Trustee with a Promissory Note and which have not been allocated to the Accounts of Participants.

21.03 Company Contributions. Notwithstanding the provisions of Section 4.01 hereof, subject to the limitations contained in Section 404(a) of the Code including the carryover provisions thereof, each Employer shall make a Company Contribution for each Plan Year in which a Promissory Note is outstanding in an amount which shall not be less than the amount required to be paid under each Promissory Note for such Plan Year. In no event will Elective Contributions be used to repay any exempt loan.

(a) The Committee shall establish a separate Suspense Account for shares of Company Stock acquired with each Promissory Note. The earnings, including cash dividends paid on the allocated and unallocated shares of Company Stock acquired with indebtedness represented by a Promissory Note shall be accounted for separately from other assets of the Trust Fund and shall be used to pay interest and/or principal on the Promissory Note until the Promissory Note has been retired. For purposes of allocating to Participants’ Company Contribution Accounts shares released from a Suspense Account by reason of the payment of principal and/or interest with earnings on such Company Stock, such earnings shall be deemed to have been allocated first to Participants’ Company Contribution Accounts pursuant to Section 6.04 and then charged to such Accounts in the manner provided in Section 21.04(2).

(b) As of each Valuation Date there shall be released from the applicable Suspense Account for allocation to Participants’ Company Contribution Accounts in the manner specified in Section 21.04(2) below a number of shares of Company Stock equal to the number of shares of Company Stock in such Suspense Account on such Valuation Date multiplied by a fraction, the numerator of which shall be the amount of principal and interest payments under the terms of the applicable Promissory Note made since the previous Valuation Date, and the denominator of which shall be the sum of (1) the numerator and (2) the remaining principal and interest to be paid under such Promissory Note for the current Plan Year and all future Plan Years, without regard to any possible extension or renewal periods of such Promissory Note. If the interest rate under a Promissory Note is variable, the calculation of the remaining interest to be paid in future Plan Years for the denominator of the fraction described above shall be based on the interest rate in effect under such Promissory Note on the Valuation Date with respect to which the fraction is applied. The interest of each Participant in Company Stock released from a Suspense Account shall be allocated to his Company Contribution Account in shares of such Company Stock.

21.04(2) Charges and Credits to Company Contribution Accounts. Each Participant’s Company Contribution Account shall be charged with the Participant’s share of any cash or property allocated to his Company Contribution Account which is used by the Trustee to release shares of Company Stock from the Suspense Account in the manner described in Section 21.04(1) above, and the shares of Company Stock so purchased or released shall be allocated to the Participant’s Company Contribution Account to the extent that such Account has been so charged.

21.04(3) Prohibited Allocations. No portion of the assets of the Plan attributable to Company Stock acquired by the Plan in a sale to which Code Section 1042 applies may accrue to or be allocated, directly or indirectly, under any plan of the Sponsoring Company (or any Affiliated Company) meeting the requirements of Code Section 401(a), during the “non-allocation period,” for the benefit of: (i) any Participant who makes an election under Code Section 1042(a) with respect to Company Stock; or (ii) any individual who is related to such a Participant within the meaning of Code Section 267(b); or (iii) for the benefit of any other person who owns (after application of Code Section 318(a)) more than (x) 25% of any class of

outstanding stock of the corporation which issued the Company Stock or of any corporation which is a member of the same controlled group of corporations (within the meaning of Code Section 409(l)(4)) as such corporation, or (y) 25% of the total value of outstanding stock of any such corporation. The “non-allocation period” shall be the period beginning on the date of the sale of the Company Stock and ending on the later of (i) the date which is 10 (ten) years after the sale of Company Stock; or (ii) the date of allocation attributable to the final payment under the Promissory Note incurred in connection with such sale. The Trustee may establish subaccounts that it deems necessary in order to comply with the provisions of this Section 21.04(3).

21.05 Limitations on Annual Additions. Notwithstanding the provisions of Section 5.04, if no more than one-third (1/3) of the Company Contributions to the Plan for a Plan Year are allocated to accounts of Highly Compensated Employees, the following amounts shall be excluded in determining the Annual Addition of each Participant for such Plan Year: (i) Forfeitures of Company Stock acquired with the proceeds of a Promissory Note, (ii) Company Contributions to the Plan which are used to pay the interest on a Promissory Note and which are deductible under Code Section 404(a)(9)(B) and which are charged against the Participant’s Company Contribution Account.

21.06 Determination of Net Earnings and Adjustments in Value. For purposes of Section 6.04, the share of net income or net loss of the Trust Fund allocable to the Company Contribution Accounts of Participants shall not include any unrealized increase or decrease in the fair market value of Company Stock held in a Suspense Account.

21.07 Voting of Company Stock. For all purposes of Section 14.06, the shares of Company Stock allocated to an active Participant’s Company Contribution Account (not including inactive Participants) shall be treated as including a portion of the unallocated shares of Company Stock held in a Suspense Account; for this purpose the unallocated shares shall be considered allocated to active Participants’ Company Contribution Accounts by assuming that all such unallocated shares of Company Stock had been allocated to active Participants in the Plan as of a date selected by the Committee, based upon such active Participants’ comparative Company Stock account balances (i.e., Company Stock in an active Participant’s Company Contribution Account as a percentage of all Company Stock in the Company Contribution Accounts of all active Participants).

21.08 Tender Offer on Company Stock. With respect to unallocated shares of Company Stock, for purposes of Section 14.06, rights to tender in connection with an Offer shall be exercised at the discretion of the Participants by assuming that all such shares of Company Stock had been allocated to active Participants (not including former Participants) in the Plan as of a date selected by the Committee, based upon such Participants’ comparative Company Stock account balances (i.e., Company Stock in an active Participant’s Company Contribution Account as a percentage of all Company Stock in the Company Contribution Accounts of all active Participants), and by permitting the respective Participants to exercise tender rights as if such shares had been finally and completely allocated to such Participants’ Accounts. Funds or property received in exchange for tendered stock constituting unallocated shares of Company Stock shall be credited to the Suspense Account.

21.09 Forfeiture of Accounts. If a portion of a Participant’s Company Contribution Account is forfeited, Company Stock allocated to such Account shall be forfeited only after all other assets in such Account. If interests in more than one class of Company Stock have been allocated to the Participant’s Company Contribution Account, the Participant shall be treated as forfeiting the same proportion of each such class.

21.10(1) Notwithstanding the provisions of the fourth sentence of Subsection 11.01(1) hereof to the contrary, a distribution of a Participant’s Accounts under said fourth sentence shall not include Company Stock allocated to an Account which was acquired with the proceeds of a Promissory Note until the end of the Plan Year in which any acquisition indebtedness related to such Company Stock is repaid in full, including any refinancings which are permitted to be treated as acquisition indebtedness in accordance with rules prescribed by the Secretary of the Treasury.

21.10(2) If interests in more than one class of Company Stock have been allocated to the Participant’s Company Contribution Account, each distribution to the Participant shall be made in substantially the same proportion of each such class.

21.11 Further Conditions. Except as otherwise provided in Section 12.03 and Section 22.08, shares of Company Stock acquired with a Promissory Note shall not be subject to any other put, call, or other option, or buy-sell or similar arrangement while held under the Plan or when distributed from the Plan to a Participant or Beneficiary, whether or not the Plan then constitutes an “employee stock ownership plan” within the meaning of Section 4975(e)(7) of the Code. In addition, the provisions of the preceding sentence and of Section 22.08 shall continue to apply to shares of Company Stock acquired with a Promissory Note after the Promissory Note has been satisfied and after the Plan ceases to constitute an “employee stock ownership plan” as described above.

22.01 Effect of Bankruptcy and Other Contingencies Affecting an Employer. Neither the bankruptcy, receivership, insolvency, liquidation, dissolution, merger, consolidation or reorganization of an Employer, or any other eventuality affecting the Employer, shall terminate the Trust or render ineffectual this Plan or discharge any Employer from any liabilities to the Trust for which it shall already have become obligated, but the same shall continue in full force and effect as though such eventuality had not occurred; however, the Committee shall in such event be authorized hereby to make any and all rules and regulations not inconsistent with the purposes of the Plan as shall be necessary to deal with such change in the situation of the Plan and Trust.

22.02 Benefits Payable by Trust. All benefits payable under the Plan shall be paid or provided for solely from the Trust Fund. No Employer assumes any liability or responsibility therefor.

22.03 Withholding. The Committee shall determine whether or not federal income tax withholding is required with respect to any distribution or withdrawal hereunder, shall direct the Trustee to withhold any amounts required by law to be withheld, and shall furnish the Trustee with any information required by Treasury regulations regarding withholding. Notwithstanding any other provision of this Plan to the contrary, all rights and benefits of a Participant, Beneficiary or Alternate Payee are subject to withholding of any tax required by law to be withheld.

22.04 Interpretation of the Plan and Trust. It is the intention of the Employers that the Plan, and the Trust established by the Employers to implement the Plan, shall be an employee stock ownership plan and trust, with a cash or deferred arrangement feature and shall comply with the provisions of Code Sections 401, 409, 4975(e)(7) and 501 and the requirements of ERISA, and the corresponding provisions of any subsequent laws, and the provisions of the Plan and Trust Agreement shall be construed to effectuate such intention.

22.05 Provisions Hereof for Sole Benefit of Parties Hereto and Participants. All of the covenants, stipulations and agreements contained in this Plan are and shall be for the sole and exclusive benefit of and binding upon the parties hereto, their successors and assigns, and the Participants and their Beneficiaries.

22.06 Article and Section Headings. The titles or headings of the respective Articles and Sections in this Plan are inserted merely for convenience and shall be given no legal effect.

22.07 Formal Action by Employer. Any formal action herein permitted or required to be taken by an Employer shall be:

(a) if and when a partnership, by written instrument executed by one or more of its general partners or by written instrument executed by a person or group of persons who has been authorized by written instrument executed by one or more general partners as having authority to take such action;

(b) if and when a proprietorship, by written instrument executed by the proprietor or by written instrument executed by a person or group of persons who has been authorized by written instrument executed by the proprietor as having authority to take such action;

(c) if and when a corporation, by resolution of its board of directors or other governing board, or by written instrument executed by a person or group of persons who has been authorized by resolution of its board of directors or other governing board as having authority to take such action; or

(d) if and when a joint venture, by written instrument executed by one of the joint venturers or by written instrument executed by a person or group of persons who has been authorized by written instrument executed by one of the joint venturers as having authority to take such action.

22.08(1) Subject to the following provisions of this Section 22.08, if at the time of distribution hereunder the shares of Company Stock distributed from the Trust Fund to a Participant or his Beneficiary with respect to a Plan Year are not publicly traded or are subject to a trading limitation (as hereafter defined), the former Participant or Beneficiary shall have an option (the “Put”) to require the Sponsoring Company to purchase all shares of Company Stock distributed from the Trust Fund to the former Participant or Beneficiary for such Plan Year. For purposes of the preceding sentence, a “trading limitation” is a restriction under any federal or state securities law, or any regulation thereunder, or an agreement, which would make the shares of Company Stock not as freely tradable as shares of Company Stock not subject to such restriction.

22.08(2) The Put may be exercised at any time during the Option Period (as hereinafter defined) by giving the Sponsoring Company written notice of the election to exercise the Put. The Option Price (as hereinafter defined) shall be payable in cash and/or in installments (as provided below) beginning not later than 30 days after the Sponsoring Company receives written notice of the election by the former Participant or Beneficiary to exercise the Put. The Put may be exercised by a former Participant or the Beneficiary only during the Option Period relating to a distribution of shares of Company Stock under Section 11.01 to the former Participant or Beneficiary.

22.08(3) The “Option Period” shall be the sixty (60) day period following the day on which a Participant or his Beneficiary receives a distribution of shares of Common Stock under Section 11.01; if the Put is not exercised within this first sixty (60) day period, it may be exercised during a second “Option Period” which shall be a sixty (60) day period beginning on the first day of the third month of the Plan Year which follows the Plan Year of distribution of such shares of Common Stock. Notwithstanding the foregoing, the Option Period shall be extended by the amount of time during which the Sponsoring Company is unable to honor the Put by reason of applicable federal or state law.

22.08(4) The “Option Price” shall be the fair market value as determined pursuant to Treasury Regulations Section 54.4975-11(d)(5) (or, in the case of any shares of Company Stock that are not readily tradable on an established securities market, as determined by an independent appraiser meeting requirements similar to the requirements of the Treasury Regulations under Section 170(a)(1) of the Code) of each share of Company Stock as determined by the Sponsoring Company as of the Valuation Date immediately preceding the date the Put is exercised, multiplied by the number of shares to be sold under the Put. Notwithstanding the provisions of this paragraph, the Option Price shall be determined on the date the Put is exercised if the transaction involves a “disqualified person” within the meaning of Code Section 4975.

22.08(5) Payment of the Option Price for shares of Company Stock subject to the Put shall be made either in a lump sum or in installments as determined by the Sponsoring Company. In the event payments are made in installments, the installment obligation shall (1) be adequately secured as determined by the Sponsoring Company, (2) bear a reasonable rate of interest as determined by the Sponsoring Company on a uniform and nondiscriminatory basis, but in no event shall such rate of interest be greater than the maximum non-usurious rate of

interest permitted to be charged on such indebtedness under Texas law, (3) require that the payments be made in annual installments, (4) have a payment period of five (5) years from the date the Put is exercised, (5) require that any payments pursuant to the installment obligation must begin to be made no later than thirty (30) days after the date the Put is exercised, and (6) permit the Sponsoring Company to prepay the amount of any remaining installments without penalty.

22.08(6) The Put granted to a former Participant or Beneficiary hereunder shall not be assignable, except that the former Participant’s donees or, in the event of a Participant’s death, his personal representative shall be entitled to exercise the Put during the Option Period for which it is applicable.

22.08(7) The Committee shall notify each former Participant or Beneficiary who is eligible to exercise the Put of the fair market value of each share of Company Stock for the Valuation Date next following the date the Participant receives a distribution as soon as practicable following such determination.

22.08(8) The Committee and the Sponsoring Company shall send all notices required under this Section to the last known address of a former Participant or Beneficiary, and it shall be the duty of such persons to inform the Committee of any changes in address.

22.08(9) The Trustee in its discretion may, with the Sponsoring Company’s consent, assume the Sponsoring Company’s obligation under this Section at the time a former Participant or Beneficiary exercises the Put. If the Trustee does assume the Sponsoring Company’s obligations, the foregoing provisions of this Section that apply to the Sponsoring Company shall also apply to the Trustee.

22.08(10) The Put provided for in this Section shall also apply to shares of Company Stock that are publicly traded without restriction when distributed but which cease to be publicly traded or which become subject to a trading limitation during the Option Period. In such event, the Committee shall notify in writing each former Participant or Beneficiary to whom the Put becomes applicable that the shares of Company Stock held by the former Participant or Beneficiary are subject to the Put for the remainder of such Option Period and shall inform the Participant or Beneficiary of the terms of the Put. If written notice is given pursuant to this Section later than ten days after the shares of Company Stock cease to be publicly traded or become subject to a trading limitation, the period during which the Put may be exercised shall be extended by the number of days between such tenth day and the date such notice is actually given.

22.09(1) Federal Securities Laws. If the Sponsoring Company does not register under the Securities Act of 1933 (the “1933 Act”) any shares of Company Stock to be distributed to Participants or their Beneficiaries, such shares of Company Stock distributed under the Plan may be “restricted securities.” Restricted securities may not be sold unless they are registered under the 1933 Act by the Sponsoring Company, or unless an exemption from registration is available. If the Sponsoring Company does not register shares of Company Stock for resale by Participants or their Beneficiaries, and if such persons desire to sell the shares of Company Stock

distributed to them, they will be required to sell the shares of Company Stock in transactions exempt from registration under the 1933 Act. The Sponsoring Company will not permit shares of Company Stock to be transferred unless it is satisfied that any proposed transfer of Company Stock is exempt from the registration requirements of the 1933 Act.

22.09(2) Other Restrictions. All transactions involving shares of Company Stock, including distributions, purchases and sales, shall be made only in compliance with applicable federal and state laws, regulations and rules. All such transactions shall also be subject to all restrictions and limitations imposed on all shares of Company Stock provided for in the Sponsoring Company’s Articles of Incorporation and Bylaws as amended from time to time.

22.09(3) Legends. The Sponsoring Company reserves the right to cause appropriate legends to be imprinted on the certificates representing shares of Company Stock distributed under this Plan to reflect all restrictions and limitations referred to in this Section 22.09.

22.09(4) Notices. The Committee and the Sponsoring Company shall send all notices required with respect to shares of Company Stock to the last known address of each Participant or Beneficiary who is required to receive notices regarding such stock, and it shall be the duty of the Participant and Beneficiary to inform the Committee of any changes in address.

22.10 APPLICABLE LAW. THIS PLAN SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS TO THE EXTENT NOT PREEMPTED BY APPLICABLE FEDERAL LAW.

Commencing on the effective date (hereinafter, the “Merger Date”), of the merger of New Century Energies, Inc. (hereinafter “NCE”) and Northern States Power Company (hereinafter “NSP”) to form Xcel Energy Inc. (hereinafter “Xcel”), the individuals who will be eligible to accrue benefits under this Plan with respect to service and compensation on or after the Merger Date are limited to the following:

	(1)		Those persons who were accruing benefits under this Plan (or who would have been eligible to accrue benefits under this Plan if they had satisfied any applicable age and/or service requirements) immediately prior to the Merger Date.

	(2)		Persons who are hired by Xcel or a subsidiary of Xcel after the Merger Date in a position or job category that was covered by this Plan immediately prior to the Merger Date and whose principal place of employment is at a facility or location that was owned and/or operated by NCE or an NCE subsidiary and was covered by this Plan immediately prior to the Merger Date.

	(3)		Any person who was a participant in this Plan at some time prior to the Merger Date, who had ceased to accrue benefits under this Plan due to a termination of employment prior to the Merger Date, who had not become a participant in any qualified retirement plan sponsored by NSP or an NSP subsidiary at any time after such termination of employment and prior to the Merger Date, who was not employed by NCE, NSP or any of their subsidiaries immediately prior to the Merger Date, and who is rehired by Xcel or a subsidiary of Xcel after the Merger Date.

(1)

Any individual (i) who was actively participating in and accruing benefits under any qualified retirement plan sponsored by NSP or an NSP subsidiary immediately prior to the Merger Date (or who would have been participating in such an NSP plan if he or she had satisfied any applicable age and/or service requirements), or (ii) who became a participant in such an NSP retirement plan after the Merger Date, shall not be eligible to participate in or accrue benefits under this Plan after the Merger Date, even if the individual subsequently satisfies the requirements of paragraph A. The previous sentence also applies to any individual who was a participant in such an NSP retirement plan at some time prior to the Merger Date, who had ceased to accrue benefits under such NSP retirement plan due to a termination of employment prior to the Merger

			date, who had not become a participant in this Plan at any time after such termination of employment and prior to the Merger Date, who was not employed by NCE, NSP or any of their subsidiaries immediately prior to the Merger Date, and who is rehired by Xcel or a subsidiary of Xcel after the Merger Date.

	(2)		Any individual (other than an individual described in paragraph B(1), above) who (i) has satisfied the requirements of paragraph A(1), A(2) or A(3), and (ii) is subsequently transferred to the employ of an Xcel subsidiary that is not a participating employer in this Plan, or to an Xcel facility or location that was not owned and/or operated by NCE or an NCE subsidiary immediately prior to the Merger Date, will nevertheless continue to participate in this Plan following the transfer. An Xcel subsidiary that is not otherwise a participating employer in this Plan, but that employs one or more transferred participants described in this paragraph B(2) following the transfer, shall be deemed to be a participating employer in this Plan solely with respect to such transferred participants.

	(3)		Notwithstanding paragraph B(2), if an individual described in that paragraph is employed following the transfer in a collective bargaining unit that is not covered by this Plan, paragraph B(2) shall not apply, the individual shall cease to actively participate in and accrue benefits under this Plan following the transfer, and the individual shall become eligible to participate following the transfer in any qualified retirement plan that covers that collective bargaining unit pursuant to the terms of such plan. The previous sentence shall also apply to any individual who is rehired by Xcel or a subsidiary of Xcel after the Merger Date in a collective bargaining unit that is not covered by this Plan, notwithstanding anything in this Appendix to the contrary.

	(4)		If an individual (other than an individual described in paragraph B(1)) who meets the requirements of paragraph A(1), A(2) or A(3) is subsequently transferred from a position or job category that was covered by this Plan prior to the Merger Date to a position or job category that was covered prior to the Merger Date by another qualified retirement plan of the same type (i.e. defined benefit or defined contribution) that was sponsored by NCE prior to the Merger Date, or if an individual covered by such other NCE plan at any time following the Merger Date is subsequently transferred to a position or job category covered by this Plan, the individual’s participation in this Plan or the other NCE Plan following the transfer shall be determined pursuant to the provisions of the applicable NCE plans in effect immediately prior to the Merger Date.

If an individual who does not satisfy the requirements of paragraph A(1), A(2) or A(3) remains entitled to a benefit under this Plan that accrued prior to the Merger Date, such benefit shall continue to be held under the provisions of this Plan in

effect at the applicable times prior to the Merger Date for distribution pursuant to such provisions following the termination of the individual’s employment with Xcel and the subsidiaries of Xcel (or the occurrence of any other event that permits distribution of such benefit).

75 EX-12.1 8 c81898s4exv12w1.htm EX-12.1 COMPUTATION OF RATIO OF EARNINGS exv12w1

We consent to the use in this Registration Statement of Southwestern Public Service Company (a New Mexico Corporation and wholly-owned subsidiary of Xcel Energy, Inc.) and subsidiaries on Form S-4, of our report dated February 24, 2003 (which report expresses an unqualified opinion), appearing in the Prospectus, which is part of this Registration Statement.

We also consent to the reference to us under the heading “Experts” in such Prospectus.

EX-25.1 11 c81898s4exv25w1.htm EX-25.1 FORM T-1 STATEMENT OF ELIGIBILITY exv25w1

STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE

William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)

(a) Name and address of each examining or supervising authority to which it is subject.

Federal Reserve Bank of New York, District No. 2, 33 Liberty Street, New York, N.Y.

If the obligor or any Guarantor is an affiliate of the trustee, describe each such affiliation.

1. A copy of the Restated Organization Certificate of the Trustee dated March 25, 1997 and the Certificate of Amendment dated October 22, 2001 (see Exhibit 1 to Form T-1 filed in connection with Registration Statement No. 333-76894, which is incorporated by reference.)

2. A copy of the Certificate of Authority of the Trustee to Commence Business (see Exhibit 2 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference). On November 11, 2001, in connection with the merger of The Chase Manhattan Bank and Morgan Guaranty Trust Company of New York, the surviving corporation was renamed JPMorgan Chase Bank.

3. None, authorization to exercise corporate trust powers being contained in the documents identified above as Exhibits 1 and 2.

4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1 filed in connection with Registration Statement No. 333-76894, which is incorporated by reference.)

6. The consent of the Trustee required by Section 321(b) of the Act (see Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference). On November 11, 2001, in connection with the merger of The Chase Manhattan Bank and Morgan Guaranty Trust Company of New York, the surviving corporation was renamed JPMorgan Chase Bank.

7. A copy of the latest report of condition of the Trustee, published pursuant to law or the requirements of its supervising or examining authority.

Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, JPMorgan Chase Bank, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York and State of New York, on the 20th day of January, 2004.

JPMorgan Chase Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,

at the close of business September 30, 2003, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.


		Dollar Amounts
		in Millions

ASSETS
Cash and balances due from depository institutions:
	Noninterest-bearing balances and currency and coin			$	17,578
	Interest-bearing balances				9,823
Securities:
Held to maturity securities					210
Available for sale securities					57,792
Federal funds sold and securities purchased under agreements to resell
	Federal funds sold in domestic offices				9,491
	Securities purchased under agreements to resell				91,241
Loans and lease financing receivables:
	Loans and leases held for sale				35,681
	Loans and leases, net of unearned income	$	170,168
	Less: Allowance for loan and lease losses		3,448
	Loans and leases, net of unearned income and allowance				166,720
Trading Assets					178,938
Premises and fixed assets (including capitalized leases)					6,057
Other real estate owned					110
Investments in unconsolidated subsidiaries and associated companies					732
Customers’ liability to this bank on acceptances outstanding					260
Intangible assets
	Goodwill				2,198
	Other Intangible assets				4,096
Other assets					57,193

TOTAL ASSETS				$	638,120


		Dollar Amounts
		in Millions

LIABILITIES
Deposits
	In domestic offices			$	188,866
	Noninterest-bearing	$	76,927
	Interest-bearing		111,939
	In foreign offices, Edge and Agreement subsidiaries and IBF’s				124,493
	Noninterest-bearing	$	6,439
	Interest-bearing		118,054
Federal funds purchased and securities sold under agreements to repurchase:
	Federal funds purchased in domestic offices				4,679
	Securities sold under agreements to repurchase				82,206
Trading liabilities					136,012
Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases)					24,937
Bank’s liability on acceptances executed and outstanding					260
Subordinated notes and debentures					8,040
Other liabilities					31,270
TOTAL LIABILITIES					600,763
Minority Interest in consolidated subsidiaries					358
EQUITY CAPITAL
Perpetual preferred stock and related surplus					0
Common stock					1,785
Surplus (exclude all surplus related to preferred stock)					16,306
Retained earnings					18,875
Accumulated other comprehensive income					33
Other equity capital components					0
TOTAL EQUITY CAPITAL					36,999

TOTAL LIABILITIES, MINORITY INTEREST, AND EQUITY CAPITAL				$	638,120

I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief.

We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the in- structions issued by the appropriate Federal regulatory authority and is true and correct.

          WILLIAM B. HARRISON, JR. )
          LAWRENCE A. BOSSIDY       ) DIRECTORS
          ELLEN V. FUTTER                   )

EX-99.1 12 c81898s4exv99w1.htm EX-99.1 FORM OF EXCHANGE AGENCY AGREEMENT exv99w1

JPMorgan Chase Bank, as Exchange Agent
Institutional Trust Services
4 New York Plaza, 15th Floor
New York, New York 10004

Southwestern Public Service Company, a New Mexico corporation (the “Company”), proposes to make an offer (the “Exchange Offer”) to exchange any and all of its outstanding Series C Senior Notes, 6% due 2033 (the “Original Senior Notes”) for its Series D Senior Notes, 6% due 2033 (the “Exchange Senior Notes”). The terms and conditions of the Exchange Offer as currently contemplated are set forth in a prospectus, dated , 2004 (as the same may be amended or supplemented from time to time, the “Prospectus”), to be distributed to all record holders of the Original Senior Notes. A copy of the Prospectus is attached hereto as Exhibit A. The Original Senior Notes were, and subject to the satisfaction of the terms and conditions of the Exchange Offer the Exchange Senior Notes will be, issued pursuant to the Indenture dated as of February 1, 1999, as supplemented and to be supplemented by various supplemental indentures, between the Company and JPMorgan Change Bank, as successor in interest to The Chase Manhattan Bank, as trustee (the “Trustee”). The Original Senior Notes and the Exchange Senior Notes are collectively referred to herein as the “Securities.” Capitalized terms used but not defined herein shall have the same meaning given them in the Prospectus.

A copy of each of the form of the Letter of Transmittal, the form of the Notice of Guaranteed Delivery, the form of letter to clients and the form of letter to brokers to be used in connection with the Exchange Offer are attached hereto as Exhibit B.

The Company hereby appoints JPMorgan Chase Bank to act as exchange agent (the “Exchange Agent”) in connection with the Exchange Offer and, by executing this Exchange Agency Agreement, JPMorgan Chase Bank hereby accepts such appointment. References hereinafter to “you” shall refer to the Exchange Agent.

The Exchange Offer is expected to be commenced by the Company on or about , 2004. The Letter of Transmittal accompanying the Prospectus (or in the case of book-entry securities, the ATOP system) is to be used by the holders of the Original Senior Notes to accept the Exchange Offer and contains instructions with respect to (i) the delivery of certificates for Original Senior Notes tendered in connection therewith and (ii) the book-entry transfer of Securities to the Exchange Agent’s account.

The Exchange Offer shall expire at 5:00 p.m., New York City time, on , 2004 or on such later date or time to which the Company may extend the Exchange Offer (the “Expiration Date”). Subject to the terms and conditions set forth in the Prospectus, the Company expressly reserves the right to extend the Exchange Offer from time to time by giving oral (to be confirmed in writing) or written notice to you before 9:00 a.m., New York City time, on the Business Day following the previously scheduled Expiration Date.

The Company expressly reserves the right to amend or terminate the Exchange Offer, and not to accept for exchange any Original Senior Notes not theretofore accepted for exchange, upon the occurrence of any of the conditions of the Exchange Offer specified in the Prospectus under the caption “The Exchange Offer — Conditions to the Exchange Offer.” The Company will give you prompt oral (confirmed in writing) or written notice of any amendment or termination of the Exchange Offer or nonacceptance of Original Senior Notes; provided, however, that the Company’s obligation to pay the reasonable fees and expenses of the Exchange Agent as set forth in Schedule I shall survive such amendment or termination of the Exchange Offer or nonacceptance of Original Senior Notes.

In carrying out your duties as Exchange Agent, you are to act in accordance with the following instructions:

1. You will perform such duties and only such duties as are specifically set forth in the section of the Prospectus captioned “The Exchange Offer” or in the Letter of Transmittal or as specifically set forth herein; provided, however, that in no way will your general duty to act in good faith be discharged by the foregoing.

2. You will establish an account with respect to the Original Senior Notes at The Depository Trust Company (the “Book-Entry Transfer Facility”) for purposes of the Exchange Offer as soon as practicable after the execution of this Exchange Agency Agreement, and any financial institution that is a participant in the Book-Entry Transfer Facility’s system may make book-entry delivery of the Original Senior Notes by causing the Book-Entry Transfer Facility to transfer such Original Senior Notes into your account in accordance with the Book Entry Transfer Facility’s procedure for such transfer.

3. You are to examine each of the Letters of Transmittal and certificates for Original Senior Notes (or confirmation of book-entry transfer into your account at the Book-Entry Transfer Facility) and any other documents received by you from or for holders of the Original Senior Notes to ascertain whether: (i) on their face the Letters of Transmittal and any such other documents are duly executed and properly completed in accordance with instructions set forth therein and (ii) the Original Senior Notes have otherwise been properly tendered in accordance with the terms of the Exchange Offer. In each case where the Letter of Transmittal or any other document has been improperly completed or executed or any of the certificates for Original Senior Notes are not in proper form for transfer or some other irregularity in connection with the acceptance of the Exchange Offer exists, you will, if in your reasonable determination the time available to you permits, endeavor to inform such tendering holders of the need for fulfillment of all requirements and to take any other action as may be necessary or advisable to cause such irregularity to be corrected.

4. With the approval of any person designated in writing by the Company (a “Designated Officer”) (such approval, if given orally, to be confirmed in writing) or any other party designated by any such Designated Officer in writing, you are authorized to waive any irregularities in connection with any tender of Original Senior Notes pursuant to the Exchange Offer. Determination of all questions as to the proper completion or execution of a Letter of Transmittal or Notice of Guaranteed Delivery or as to the proper form for transfer of the certificates of the Original Senior Notes or as to any other irregularity in connection with the acceptance of such documents shall be made by the Company, in its sole discretion; provided, however, that any discretion by the Company to accept a nonconforming Letter of Transmittal or Notice of Guaranteed Delivery shall be set forth in an officer’s certificate of the Company.

5. Tenders of Original Senior Notes may be made only as set forth in the Letter of Transmittal and in the section of the Prospectus captioned “The Exchange Offer — Procedures for Tendering,” and Original Senior Notes shall be considered properly tendered to you only when tendered in accordance with the procedures set forth therein. Determination of all questions as to the proper completion or execution of a Letter of Transmittal or Notice of Guaranteed Delivery or as to the proper form for transfer of the certificates of the Original Senior Notes or as to any other irregularity in connection with the acceptance of such documents shall be made by the Company, in its sole discretion; provided, however, that any discretion by the Company to accept a nonconforming Letter of Transmittal or Notice of Guaranteed Delivery shall be set forth in an officer’s certificate of the Company.

Notwithstanding the provisions of this paragraph 5, Original Senior Notes that any Designated Officer of the Company shall approve as having been properly tendered shall be considered to be properly tendered. Such approval, if given orally, shall be confirmed in writing.

6. You shall advise the Company with respect to any Original Senior Notes received subsequent to the Expiration Date and accept their instructions with respect to disposition of such Original Senior Notes.

(a)

in cases where the Original Senior Notes are registered in two or more names only if signed by all named holders;

(b)

in cases where the signing person (as indicated on the Letter of Transmittal) is acting in a fiduciary or a representative capacity only when proper evidence of such person’s authority to so act is submitted; and

(c)

from persons other than the registered holder of Original Senior Notes provided that customary transfer requirements are satisfied.

You shall accept partial tenders of Original Senior Notes where so indicated and as permitted in the Letter of Transmittal and deliver certificates or Original Senior Notes to the transfer agent for division and return any untendered Original Senior Notes to the holder (or such other person as may be designated in the Letter of Transmittal) as promptly as practicable after expiration or termination of the Exchange Offer. Any additional handling, copy or retention requests from the Company shall be at the expense of the Company.

8. Upon satisfaction or waiver of all of the conditions to the Exchange Offer, the Company will notify you (such notice, if given orally, to be confirmed in writing) of its acceptance, promptly after the Expiration Date, of all Original Senior Notes properly tendered and, upon authentication of the Exchange Senior Notes by the Trustee, you, on behalf of the Company, will exchange such Original Senior Notes for Exchange Senior Notes provided to you by or on behalf of the Company and cause such Original Senior Notes to be delivered to the Trustee for cancellation. Upon authentication of the Exchange Senior Notes by the Trustee, you shall deliver Exchange Senior Notes on behalf of the Company at the rate of $1,000 principal amount of Exchange Senior Notes for each $1,000 principal amount of the corresponding series of Original Senior Notes tendered promptly after notice (such notice, if given orally, to be confirmed in writing) of acceptance of said Original Senior Notes by the Company; provided, however, that in all cases, Original Senior Notes tendered pursuant to the Exchange Offer will be exchanged only after timely receipt by you of certificates for such Original Senior Notes (or confirmation of book-entry transfer into your account at the Book-Entry Transfer Facility), a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees and any other required documents. The Company shall issue Exchange Senior Notes only in increments of $1,000. Original Senior Notes may be tendered in whole or in part in increments of $1,000, provided that if any Original Senior Notes are tendered for exchange in part, the untendered principal amount thereof must be in increments of $1,000.

9. Tenders pursuant to the Exchange Offer are irrevocable, except that, subject to the terms and upon the conditions set forth in the Prospectus and the Letter of Transmittal, Original Senior Notes tendered pursuant to the Exchange Offer may be withdrawn at any time on or prior to the Expiration Date.

10. The Company shall not be required to exchange any Original Senior Notes tendered if any of the conditions set forth in the Exchange Offer are not met. Notice of any decision by the Company not to exchange any Original Senior Notes tendered shall be given orally (and promptly confirmed in writing) by the Company to you.

11. If, pursuant to the Exchange Offer, the Company does not accept for exchange all or part of the Original Senior Notes tendered because of an invalid tender, the occurrence of certain other events set forth in the Prospectus under the caption “The Exchange Offer — Conditions to the Exchange Offer” or otherwise, you shall promptly after the expiration or termination of the Exchange Offer return those certificates of Original Senior Notes not accepted for exchange (or effect appropriate book-entry transfer), together with any related required documents and the Letters of Transmittal relating thereto that are in your possession, to the persons who deposited them. You will have no liability whatsoever for returning any certificates of Original Senior Notes together with any related required documents and the Letters of Transmittal relating thereto pursuant to this Paragraph 11, provided that such returns are properly made in accordance with the terms of the Exchange Offer.

12. All certificates for reissued Original Senior Notes, unaccepted Original Senior Notes or Exchange Senior Notes shall be forwarded: (a) by first-class certified mail, return receipt requested, under a blanket surety bond at the direction and expense of the Company protecting you and the Company from loss or liability arising out of the non-receipt or non-delivery of such certificates; (b) by registered mail insured separately by you at the expense of the Company, protecting you and the Company from loss or liability arising out of the non- receipt or non-delivery of such certificates; or (c) by effectuating appropriate book-entry transfer.

13. You are not authorized to pay or offer any concessions, commissions or solicitation fees to any broker, dealer, bank or other persons or to engage or utilize any person to solicit tenders.

(a)

shall have no duties or obligations other than those specifically set forth in the section of the Prospectus captioned “The Exchange Offer” or in the Letter of Transmittal or as specifically set forth herein or as may be subsequently agreed to in writing by you and the Company;

(b)

will be regarded as making no representations and having no responsibilities as to the validity, sufficiency, value or genuineness of any of the certificates or the Original Senior Notes or Exchange Senior Notes represented thereby deposited with you or issued pursuant to the Exchange Offer, and will not be required to and will make no representation as to the validity, value or genuineness of the Exchange Offer, the Prospectus or the Letter of Transmittal or any other disclosure materials delivered in connection therewith;

(c)

shall not be obligated to take any legal action hereunder; if, however, you determine to take any legal action hereunder, and, where the taking of such action might, in your judgment, subject or expose you to any expense or liability, you shall not be required to act unless you shall have been furnished with an indemnity from the Company satisfactory to you;

(d)

may rely on, and be fully authorized and protected in acting or failing to act upon, any certificate, instrument, opinion, direction, officer’s certificate of the Company, notice, letter, telegram, telex, facsimile transmission or other document or security delivered to you and believed by you to be genuine and to have been signed by the proper party or parties;

(e)

may reasonably act upon any tender, statement, request, agreement or other instrument whatsoever not only as to its due execution and validity and effectiveness of its provisions, but also as to the truth and accuracy of any information contained therein, which you shall in good faith believe to be genuine or to have been signed or represented by a proper person or persons;

(f)

may rely on, and shall be authorized and protected in acting or failing to act upon, the written, telephonic and oral instructions with respect to any matter relating to you acting as Exchange Agent covered by this Agreement (or supplementing or qualifying any such actions) of officers of the Company;

(g)

may consult with counsel satisfactory to you, including counsel for the Company, with respect to any questions relating to your duties and responsibilities and the advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by you hereunder in good faith and in accordance with the advice or opinion of such counsel;

(h)

are not authorized, and shall have no obligation, to pay any brokers, dealers or soliciting fees to any person;

(i)

shall not advise any person tendering Original Senior Notes pursuant to the Exchange Offer as to the wisdom of making such tender or as to the market value or decline or appreciation in market value of any Original Senior Notes;

(j)

shall not be liable or responsible for any recital or statement contained in the Prospectus, Letter of Transmittal or Notice of Guaranteed Delivery to the extent such recitals or statements were not provided by you to the Company in connection with your duties under this Exchange Agency Agreement; and

(k)

shall not be liable or responsible for any failure on the part of the Company to comply with any of its covenants and obligations relating to the Exchange Offer, including without limitation obligations under applicable securities laws.

15. You shall take such action as may from time to time be requested by the Company or its counsel or any Designated Officer of the Company (and such other action as you may reasonably deem appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the Notice of Guaranteed Delivery or such other forms as may be approved and provided to you from time to time by the Company, to all persons requesting such documents and to accept and comply with telephone requests for information relating to the Exchange Offer, provided that such information shall relate only to the procedures for accepting (or withdrawing from) the Exchange Offer. The Company will furnish you with copies of such documents at your request. All other requests for information relating to the Exchange Offer shall be directed to the Company, Attention: Vice President and Chief Financial Officer.

16. You shall advise by facsimile transmission or telephone, and promptly thereafter confirm by email or in other writing to the Vice President and Chief Financial Officer of the Company (email: ben.fowke@xcelenergy.com), and such other person or persons as the Company may request, daily (and more frequently during the week immediately preceding the Expiration Date and if otherwise requested by the Company) up to and including the Expiration Date, as to the aggregate principal amount of Original Senior Notes which have been tendered pursuant to the Exchange Offer and the items received by you pursuant to this Agreement, separately reporting and giving cumulative totals as to items properly received and items improperly received. In addition, you will also inform, and cooperate in making available to, the Company or any such other person or persons, upon oral request (promptly confirmed in writing) made from time to time on or prior to the Expiration Date, such other information as it or such person reasonably requests. Such cooperation shall include, without limitation, the granting by you to the Company and such person as the Company may request, of access to those persons on your staff who are responsible for receiving tenders, in order to ensure that immediately prior to the Expiration Date the Company shall have received information in sufficient detail to enable it to decide whether to extend the Exchange Offer. You shall prepare a final list of all persons whose tenders were accepted, the aggregate principal amount of Original Senior Notes tendered, the aggregate principal amount of Original Senior Notes accepted and deliver said list to the Company promptly after the Expiration Date.

17. Letters of Transmittal and Notices of Guaranteed Delivery received by you shall be stamped by you as to the date and the time of receipt thereof and shall be preserved by you for a period of time at least equal to the period of time you preserve other records pertaining to the transfer of securities.

18. You hereby expressly waive any lien, encumbrance or right of set-off whatsoever that you may have with respect to funds deposited with you for the payment of transfer taxes by reasons of amounts, if any, borrowed by the Company, or any of its subsidiaries or affiliates pursuant to any loan or credit agreement with you or for compensation owed to you hereunder.

19. For services rendered as Exchange Agent hereunder, you shall be entitled to the compensation set forth on Schedule I attached hereto, plus reasonable out-of-pocket expenses and reasonable attorneys’ fees, incurred in connection with your services hereunder, within thirty days following receipt by the Company of an itemized statement of such expenses and fees in reasonable detail. This paragraph 19 shall survive any termination of this Exchange Agency Agreement.

20. (a) The Company covenants and agrees to indemnify and hold you (which for purposes of this paragraph shall include your directors, officers and employees) harmless in your individual capacity and in your capacity as Exchange Agent hereunder from and against any and all loss, liability, cost, damage, expense and claim, including but not limited to reasonable attorneys’ fees and expenses, incurred by you as a result of, arising out of or in connection with any action taken (or omitted to be taken at the direction of the Company) by you in performance

of your duties under this Agreement or the compliance by you with the instructions set forth herein or delivered hereunder or delivered to you by the Company in connection with the Exchange Offer subsequent to the date of this Agreement; provided, however, that in the event that any question or dispute arises with respect to your duties described under Paragraphs 4 and 5 hereof or with respect to other matters that are deemed by you in good faith to require the instruction or direction of the Company, unless instructed or directed by the Company, you shall not be required to act, and shall be held harmless and indemnified for any loss, liability, costs, damage, expense or claim arising out of such refusal to act, until receiving such instruction or direction; provided further, however, that the Company shall not be liable for indemnification or otherwise, or hold you harmless, for any loss, liability, costs, damage, expense or claim arising out of your bad faith, gross negligence or willful misconduct. You shall use your best efforts to notify the Company of the written assertion of a claim against you or of any other action commenced against you, promptly after you shall have received such written assertion of a claim or notice of such commencement, giving information as to the nature and basis of the claim; provided, however, that your failure to so notify shall not affect the obligations hereunder of the Company unless and to the extent such failure to notify the Company results in the forfeiture by the Company of substantial rights and defenses. The Company shall be entitled to participate at its own expense in the defense of any such claim or other action, and, if the Company so elects, the Company may assume the defense of any suit brought to enforce any such claim; provided, that the Company shall not be entitled to assume the defense of any such action if the named parties to such action include both the Company and you and representation of both parties by the same legal counsel would, in the written opinion of counsel reasonably suitable to you, be inappropriate due to actual or potential conflicting interests between them. In the event that the Company shall assume the defense of any such suit or threatened action in respect of which indemnification may be sought hereunder, the Company shall not be liable for the fees and expenses of any counsel thereafter retained by you. The Company shall not be liable under this paragraph for the fees and expenses of more than one legal counsel for you.

(b)

You agree that, without the prior written consent of the Company (which consent shall not be unreasonably withheld), you will not settle, compromise or consent to the entry of any pending or threatened claim, action, or proceeding in respect of which indemnification could be sought in accordance with the indemnification provisions of this Agreement (whether or not you or the Company or any of its directors or controlling persons is an actual or potential party to such claim, action or proceeding).

21. The Company understands that you are required in certain instances to deduct 30% of the amounts to be paid with respect to interest paid on the Exchange Senior Notes and proceeds from the sale, exchange, redemption or retirement of the Exchange Senior Notes from holders who have not supplied their correct Taxpayer Identification Number or required certification. You will remit any such funds to the Internal Revenue Service in accordance with applicable regulations.

22. You shall notify the Company of the amount of any transfer taxes of which you have actual knowledge are payable in respect of the exchange of Original Senior Notes.

23. This Agreement and your appointment as Exchange Agent hereunder shall be construed and enforced in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within such state, and without regard to conflicts of law principles, and shall inure to the benefit of, and the obligations created hereby shall be binding upon, the successors and assigns of each of the parties hereto, and no other person shall have any rights hereunder.

24. The Company represents and warrants that (a) it is duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, (b) the making and consummation of the Exchange Offer, the execution and delivery of this Exchange Agency Agreement and the performance of all the transactions contemplated by the Exchange Offer have been duly authorized by all necessary corporate action and will not result in a breach or constitute a default under the Amended and Restated Articles of Incorporation of the Company, or any material indenture, agreement or instrument to which it is a party or is bound, (c) this Exchange Agency Agreement has been duly executed and delivered by the Company and constitutes its legal, valid, binding and enforceable obligation, (d) the consummation of the Exchange Offer as contemplated in the Prospectus will comply in all material respects with all applicable requirements of law and (e) to its knowledge, there is no litigation pending or threatened as of the date hereof in connection with the Exchange Offer.

25. The parties hereto hereby irrevocably submit to the venue and jurisdiction of any New York State or federal court sitting in the Borough of Manhattan in New York City in any action or proceeding arising out of or relating to this Exchange Agency Agreement and the parties hereby irrevocably agree that all claims in respect of such action or proceeding arising out of or relating to this Exchange Agency Agreement shall be heard and determined in such a New York State or federal court. The parties hereby consent to and grant to any such court jurisdiction over the persons of such parties and over the subject matter of any such dispute and agree that delivery or mailing of any process or other papers in the manner provided herein, or in such other manner as may be permitted by law, shall be valid and sufficient service thereof.

26. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

27. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

28. This Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged. This Agreement may not be modified orally.

29. Unless otherwise provided herein, all notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be given to such party, addressed to it, at its address or facsimile number set forth below:

30. Unless terminated earlier by the parties hereto, this Agreement shall terminate 90 days following the Expiration Date. Notwithstanding the foregoing, Paragraphs 19, 20 and 21 shall survive the termination of this Agreement. Upon any termination of this Agreement, you shall promptly deliver to the Company any certificates for Securities, funds or property then held by you as Exchange Agent under this Agreement and you shall be relieved and discharged of any further responsibilities with respect to your duties hereunder.

Please acknowledge receipt of this Agreement and confirm the arrangements herein provided by signing and returning the enclosed copy.

Exchange of
Series D Senior Notes, 6% due 2033
For any and all outstanding
Series C Senior Notes, 6% due 2033

Covers review of the Letter of Transmittal, the Exchange Agent Agreement and other related documentation; establishment of accounts and systems link with depositories; operational and administrative charges and time spent in connection with the review, receipt and processing of Letters of Transmittal, Agent’s Messages and Notices of Guaranteed Delivery.

Out-of-pocket expenses and disbursements, including your reasonable counsel fees, incurred in the performance of your duties will be added to the billed fees.

Fees for any services not specifically covered in this or other applicable schedules will be based on an appraisal of services rendered.

Delivery of this Letter of Transmittal to the Exchange Agent at an address other than as set forth above or transmission via a facsimile transmission to a number other than as set forth above will not constitute a valid delivery.

The undersigned acknowledges receipt of the prospectus dated , 2004 (the “Prospectus”) of Southwestern Public Service Company (the “Company”), and this letter of transmittal (the “Letter of Transmittal”), which together describe the Company’s offer (the “Exchange Offer”) to exchange its Series D Senior Notes, 6% due 2033 (the “Exchange Notes”), which have been registered under the Securities Act of 1933, as amended (the “Securities Act”), for each of its outstanding Series C Senior Notes, 6% due 2033 issued on October 6, 2003 (the “Original Notes”) from the holders thereof.

The terms of the Exchange Notes are identical in all material respects (including principal amount, interest rate and maturity) to the terms of the Original Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes are freely transferable by holders thereof (except as provided herein or in the Prospectus).

Capitalized terms used but not defined herein shall have the same meaning given them in the Prospectus.

CONTACT YOUR BANK OR BROKER TO ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.

The undersigned has checked the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer.

List below the Original Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and aggregate principal amounts should be listed on a separate signed schedule affixed hereto.


o	CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:


o	CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO PERSON OTHER THAN PERSON SIGNING THIS LETTER OF TRANSMITTAL:


o	CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO ADDRESS DIFFERENT FROM THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL:


o	CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE ORIGINAL NOTES FOR YOUR OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A “PARTICIPATING BROKER-DEALER”) AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO:

If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer holding Original Notes acquired for its own account as a result of market-making activities or other trading activities, it will deliver a Prospectus meeting the requirements of the Securities Act in connection with any resale of Exchange Notes received in respect of such Original Notes pursuant to the Exchange Offer; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. A broker-dealer may not participate in the Exchange Offer with respect to Original Notes acquired other than as a result of market-making activities or other trading activities. Any holder who is an “affiliate” of the Company or who has an arrangement or understanding with respect to the distribution of the Exchange Notes to be acquired pursuant to the Exchange Offer, or any broker-dealer who purchased Original Notes from the Company to resell pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act must comply with the registration and prospectus delivery requirements under the Securities Act.

The undersigned hereby tenders to Southwestern Public Service Company, a New Mexico corporation (the “Company”), the above described aggregate principal amount of the Company’s Series C Senior Notes, 6% due 2033 (the “Original Notes”) in exchange for like Series D Senior Notes, 6% due 2033 (the “Exchange Notes”) which have been registered under the Securities Act of 1933, as amended (the “Securities Act”), upon the terms and subject to the conditions set forth in the Prospectus dated , 2004 (as the same may be amended or supplemented from time to time, the “Prospectus”), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with the Prospectus, constitute the “Exchange Offer”).

Subject to and effective upon the acceptance for exchange of all or any portion of the Original Notes tendered in accordance with the terms and conditions of the Exchange Offer (including, if the Exchange Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby exchanges, assigns and transfers to or upon the order of the Company all right, title and interest in and to such Original Notes as are being tendered in accordance herewith. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its true and lawful agent and attorney-in-fact (with full knowledge that the Exchange Agent is also acting as agent of the Company in connection with the Exchange Offer) to cause the Original Notes to be assigned, transferred and exchanged.

The undersigned hereby represents and warrants that it has full power and authority to tender, exchange, sell, assign and transfer the Original Notes and to acquire Exchange Notes issuable upon the exchange of such tendered Original Notes, and that, when the same are accepted for exchange, the Company will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances, and not subject to any adverse claim. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of the Original Notes or transfer ownership of such Original Notes on the account books maintained by the book-entry transfer facility. The undersigned further agrees that acceptance of any and all validly tendered Original Notes by the Company and the issuance of the Exchange Notes in exchange therefor shall constitute full performance by the Company of its obligations under the Registration Rights Agreement dated October 6, 2003, by and among the Company and the initial purchasers of the Original Notes (the “Registration Rights Agreement”) and that the Company will have no further obligations or liabilities thereunder. The undersigned will comply with its obligations under the Registration Rights Agreement. The undersigned has read and agrees to all of the terms of the Exchange Offer.

If any tendered Original Notes are not exchanged pursuant to the Exchange Offer for any reason, the Original Notes not exchanged will be returned or, in the case of Original Notes tendered by book-entry transfer, such Original Notes will be credited to an account maintained at The Depository Trust Company (“DTC”), without expense to the tendering holder, promptly following the expiration or termination of the Exchange Offer.

The undersigned understands that tenders of Original Notes pursuant to any one of the procedures described in “The Exchange Offer — Procedures for Tendering” in the Prospectus and in the instructions herein will, upon the Company’s acceptance for exchange of such tendered Original Notes, constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. The undersigned recognizes that, under certain circumstances set forth in the Prospectus, the Company may not be required to accept for exchange any of the Original Notes tendered by the undersigned.

By tendering Original Notes and executing this Letter of Transmittal, the undersigned hereby represents and agrees that:


	(i) the undersigned is not an “affiliate” of the Company (as defined in Rule 405 under the Securities Act);


	(ii) any Exchange Notes to be received by the undersigned are being acquired in the ordinary course of its business and the undersigned received the Original Notes being tendered for exchange in the ordinary course of its business;

	(iii) if the undersigned is not a broker-dealer, the undersigned or the person receiving the Exchange Notes is not engaged in, does not intend to engage in and has no arrangement or understanding with any person to engage in a distribution (within the meaning of the Securities Act) of Exchange Notes to be received in the Exchange Offer; and

	(iv) the undersigned is not a broker-dealer tendering Original Notes acquired directly from the Company.

If any holder of Original Notes is an affiliate of the Company or is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the Exchange Notes to be acquired pursuant to the Exchange Offer, such holder (i) may not rely on certain interpretive letters issued by the staff of the Division of Corporation Finance of the Securities and Exchange Commission to third parties relating to exchange offers and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction.

By tendering Original Notes pursuant to the Exchange Offer, a holder of Original Notes who is a broker-dealer represents and agrees that (a) such Original Notes held by the broker-dealer are held only as a nominee, or (b) such Original Notes were acquired by such broker-dealer for its own account as a result of market-making activities or other trading activities and it will deliver a Prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes (provided that, by so acknowledging and by delivering a Prospectus, such broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act).

The Company has agreed that, subject to the provisions of the Registration Rights Agreement, the Prospectus may be used by a broker-dealer who acquired Original Notes for its own account as a result of market-making or other trading activities (a “Participating Broker-Dealer”) in connection with resales of Exchange Notes received in exchange for such Original Notes, for a period ending 210 days after the Expiration Date (subject to extension under certain limited circumstances described in the Prospectus) or, if earlier, when all such Exchange Notes have been disposed of by such Participating Broker-Dealer. However, a Participating Broker-Dealer who intends to use the Prospectus in connection with the resale of Exchange Notes received in exchange for Original Notes pursuant to the Exchange Offer must notify the Company, or cause the Company to be notified, on or prior to the Expiration Date, that it is a Participating Broker-Dealer. Such notice may be given in the space provided herein for that purpose or may be delivered to the Exchange Agent at the address set forth on the cover page of this Letter of Transmittal. In that regard, each Participating Broker-Dealer, by tendering such Original Notes, agrees that, upon receipt of notice from the Company of the occurrence of any event or the discovery of any fact which makes any statement contained or incorporated by reference in the Prospectus untrue in any material respect or which causes the Prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference therein, in the light of the circumstances under which they were made, not misleading or of the occurrence of certain other events specified in the Registration Rights Agreement, such Participating Broker-Dealer will suspend the sale of Exchange Notes pursuant to the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented Prospectus to the Participating Broker-Dealer or the Company has given notice that the sale of the Exchange Notes may be resumed, as the case may be. If the Company gives such notice to suspend the sale of the Exchange Notes, it shall extend the 210-day period referred to above during which Participating Broker-Dealers are entitled to use the Prospectus in connection with the resale of Exchange Notes by the number of days during the period from and including the date of the giving of such notice to and including the date when Participating Broker-Dealers shall have received copies of the supplemented or amended Prospectus necessary to permit resales of the Exchange Notes or to and including the date on which the Company has given notice that the sale of Exchange Notes may be resumed, as the case may be.

All authority herein conferred or agreed to be conferred in this Letter of Transmittal shall survive the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal representatives, trustees in bankruptcy, legal representatives, successors and assigns of the undersigned. Except as stated in the Prospectus, this tender is irrevocable.

THE UNDERSIGNED, BY COMPLETING THE SECTION TITLED “DESCRIPTION OF ORIGINAL NOTES TENDERED” ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO BE TENDERING THE ORIGINAL NOTES IN THE AMOUNT SET FORTH IN SUCH SECTION.

Unless otherwise indicated herein in the box entitled “Special Issuance Instructions” below, the undersigned hereby directs that the Exchange Notes be issued in the name(s) of the undersigned or, in the case of a book-entry transfer of Original Notes, the undersigned hereby directs that such Exchange Notes be credited to the DTC account of the DTC participant in whose name the Original Notes are registered. Unless otherwise indicated under “Special Delivery Instructions,” please deliver certificates evidencing Exchange Notes to the undersigned at the address shown below the undersigned’s signature.

TENDERING HOLDER(S) SIGN HERE

(Please Complete Substitute Form W-9 Below)

Must be signed by the registered holder(s) exactly as the name(s) appear(s) on the certificate(s) for the Original Notes being tendered or on a security position listing or by any person(s) authorized to become the registered holder(s) by endorsements and documents transmitted herewith (including such opinions of counsel, certifications and other information as may be required by the Company or the Exchange Agent to comply with the restrictions on transfer applicable to the Original Notes). If a signature is by an attorney-in-fact, executor, administrator, trustee, guardian, officer of a corporation or another acting in a fiduciary capacity or representative capacity, please set forth the signer’s full title. See Instruction 3.

(Signature(s) of holder(s))

Date

Name(s)

(Please Print)

Capacity (full title)

Address

(Include Zip Code)

GUARANTEE OF SIGNATURE(S)

(If required — See Instruction 3)

Authorized Signature

Dated

Name

Capacity or Title

Name of Firm

Address

(Include Zip Code)

Area Code and Telephone Number

To be completed ONLY if the Exchange Notes and/or any non-tendered or non-exchanged Original Notes are to be issued in the name of someone other than the holder(s) of the Original Notes whose name(s) appear(s) above.

To be completed ONLY if the Exchange Notes and/or non-tendered or non-exchanged Original Notes are to be sent to someone other than the registered holder of the Original Notes whose name(s) appear(s) above, or to such registered holder(s) at an address other than that shown above.

A holder of Original Notes may tender the same by (i) properly completing and signing this Letter of Transmittal or a facsimile hereof (all references in the Prospectus to the Letter of Transmittal shall be deemed to include a facsimile thereof) and delivering the same, together with the certificate or certificates, if applicable, representing the Original Notes being tendered, and any required signature guarantees and any other documents required by this Letter of Transmittal, to the Exchange Agent at its address set forth above on or prior to the Expiration Date, or (ii) complying with the procedure for book-entry transfer described below, or (iii) complying with the guaranteed delivery procedures described below.

Holders of Original Notes may tender Original Notes by book-entry transfer by crediting the Original Notes to the Exchange Agent’s account at DTC in accordance with DTC’s Automated Tender Offer Program (“ATOP”) and by complying with applicable ATOP procedures with respect to the Exchange Offer. DTC participants that are accepting the Exchange Offer should transmit their acceptance to DTC, which will edit and verify the acceptance and execute a book-entry delivery to the Exchange Agent’s account at DTC. DTC will then send a computer-generated message (an “Agent’s Message”) to the Exchange Agent for its acceptance in which the holder of the Original Notes acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, this Letter of Transmittal, the DTC participant confirms on behalf of itself and the beneficial owners of such Original Notes all provisions of this Letter of Transmittal (including any representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter of Transmittal to the Exchange Agent. Delivery of the Agent’s Message by DTC will satisfy the terms of the Exchange Offer as to execution and delivery of a Letter of Transmittal by the participant identified in the Agent’s Message. DTC participants may also accept the Exchange Offer by submitting a Notice of Guaranteed Delivery through ATOP.

THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE ORIGINAL NOTES AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. RATHER THAN MAIL THESE ITEMS, THE COMPANY RECOMMENDS THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IF DELIVERY IS BY MAIL, IT IS SUGGESTED THAT CERTIFIED OR REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO PERMIT TIMELY DELIVERY. NO ORIGINAL NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR THEM.

Holders whose Original Notes are not immediately available or who cannot deliver their Original Notes and all other required documents to the Exchange Agent on or prior to the Expiration Date or who cannot complete the procedures for book-entry transfer on a timely basis must tender their Original Notes pursuant to the guaranteed delivery procedures set forth in the Prospectus. Pursuant to such procedures: (i) such tender must be made by or through an Eligible Institution (as defined below); (ii) prior to the Expiration Date, the Exchange Agent must have received from such Eligible Institution a properly completed and duly executed notice of guaranteed delivery, by facsimile transmission, mail or hand delivery, setting forth the name and address of the holder, the principal amount of Original Notes tendered, stating that the tender is being made thereby, and guaranteeing that, within three (3) New York Stock Exchange trading days after the Expiration Date, this Letter of Transmittal, or facsimile of this Letter of Transmittal, duly executed, together with a book-entry confirmation, and any other documents required by this Letter of Transmittal will be deposited by

No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the Original Notes for exchange.

If less than the entire principal amount of Original Notes, as the case may be, evidenced by a submitted certificate is tendered, the tendering holder must fill in the aggregate principal amount of Original Notes tendered in the box entitled “Description of Original Notes Tendered.” Original Notes may be tendered only in increments of $1,000, provided that if any Original Notes are tendered for exchange in part, the untendered amount thereof must be in increments of $1,000. A newly issued certificate for the Original Notes submitted but not tendered will be sent to such holder as soon as practicable after the Expiration Date. All Original Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise clearly indicated.

If not yet accepted, a tender pursuant to the Exchange Offer may be withdrawn prior to the Expiration Date.

To be effective with respect to the tender of Original Notes, a written notice, which may be by telegram, telex, facsimile transmission or letter of withdrawal, must be received by the Exchange Agent at the address for the Exchange Agent set forth above. Any notice of withdrawal must (i) specify the name of the person who tendered the Original Notes to be withdrawn; (ii) identify the Original Notes to be withdrawn including the certificate number or numbers and principal amount of such Original Notes; and (iii) be signed by the holder in the same manner as the original signature on this Letter of Transmittal (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the trustee with respect to the Original Notes register the transfer of the Original Notes into the name of the person withdrawing the tender. If Original Notes have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn Original Notes and otherwise comply with DTC procedures. All questions as to the validity of notices of withdrawals, including time of receipt, will be determined by the Company, and such determination will be final and binding on all parties.

Any Original Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Original Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Original Notes tendered by book-entry transfer into the Exchange Agent’s account at DTC pursuant to the book-entry transfer procedures described above, such Original Notes will be credited to an account with DTC for Original Notes as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer). Properly withdrawn Original Notes may be retendered by following one of the procedures described under the caption “The Exchange Offer — Procedures for Tendering” in the Prospectus at any time prior to the Expiration Date.

If this Letter of Transmittal is signed by the registered holder(s) of the Original Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever.

If any of the Original Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal.

If a number of Original Notes registered in different names are tendered, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of Original Notes.

When this Letter of Transmittal is signed by the registered holder or holders (which term, for the purposes described herein, shall include the book-entry transfer facility whose name appears on a security listing as the owner of the Original Notes) of Original Notes listed and tendered hereby, no endorsements of certificates or separate written instruments of transfer or exchange are required.

Signatures on this Letter of Transmittal or a notice of withdrawal must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or another “eligible guarantor institution” within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (each, an “Eligible Institution”), unless the Original Notes tendered pursuant thereto are tendered: (i) by a registered holder who has not completed the box entitled “Special Issuance Instructions” or “Special Delivery Instructions” on this Letter of Transmittal; or (ii) for the account of an Eligible Institution.

If this Letter of Transmittal is signed by a person other than the registered holder or holders of the Original Notes listed, such Original Notes must be endorsed by the registered holder with the signature guaranteed by an Eligible Institution or accompanied by proper documentation of transfer or exchange, in satisfactory form as determined by the Company in its sole discretion, and signed by the registered holder with the signature guaranteed by an Eligible Institution.

If this Letter of Transmittal, any certificates or separate written instruments of transfer or exchange are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted with this Letter of Transmittal.

Tendering holders should indicate, as applicable, the name and address to which the Exchange Notes or certificates for Original Notes not exchanged are to be issued or sent, if different from the name and address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the tax identification number of the person named must also be indicated. Holders tendering Original Notes by book-entry transfer may request that Original Notes not exchanged be credited to such account maintained at the book-entry transfer facility as such holder may designate.

Holders who tender their Original Notes for exchange will not be obligated to pay any transfer taxes in connection therewith, except that holders who instruct the Company to register Exchange Notes in the name of, or request that Original Notes not tendered or not accepted in the Exchange Offer be returned to, a person other than the registered tendering holder will be responsible for the payment of any applicable transfer tax thereon. If satisfactory evidence of payment of such transfer taxes or exception therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder.

The Company reserves the absolute right to waive, in whole or in part, any of the conditions to the Exchange Offer set forth in the Prospectus.

Any holder whose Original Notes have been mutilated, lost, stolen or destroyed, should contact the Exchange Agent at the address indicated below for further instructions.

U.S. federal income tax law generally requires a holder whose tendered Original Notes are accepted for exchange to provide the Exchange Agent with such holder’s correct taxpayer identification number (“TIN”) on Substitute Form W-9 below. If the Exchange Agent is not provided with the correct TIN or an adequate basis for an exemption from backup withholding, the Internal Revenue Service (the “IRS”) may subject the holder or other payee to a $50 penalty. In addition, payments to such holders or other payees with respect to Exchange Notes may be subject to backup withholding.

Certain holders (including, among others, corporations, financial institutions and certain foreign persons) may not be subject to these backup withholding and reporting requirements. Such holders should nevertheless complete the attached Substitute Form W-9 below, and write “exempt” on the face thereof, to avoid possible erroneous backup withholding. A foreign person may qualify as an exempt recipient by submitting a properly completed IRS Form W-8, signed under penalties of perjury, attesting to that holder’s exempt status. Please consult the enclosed “Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9” for additional guidance on which holders are exempt from backup withholding.

The box in Part 2 of the Substitute Form W-9 may be checked if the tendering holder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 2 is checked, the holder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 2 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Exchange Agent will withhold up to 30% of all payments made prior to the time a properly certified TIN is provided to the Exchange Agent. The Exchange Agent will retain such amounts withheld during the 60-day period following the date of the Substitute Form W-9. If the holder furnishes the Exchange Agent with its TIN within 60 days after the date of the Substitute Form W-9, the amounts retained during the 60-day period will be remitted to the holder and no further amounts shall be retained or withheld from payments made to the holder thereafter. If, however, the holder has not provided the Exchange Agent with its TIN within such 60-day period, amounts withheld will be remitted to the IRS as backup withholding. In addition, up to 30% of all payments made thereafter will be withheld and remitted to the IRS until a correct TIN is provided.

The holder is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the registered owner of the Original Notes or of the last transferee appearing on the transfers attached to, or endorsed on, the Original Notes. If the Original Notes are registered in more than one name or are not in the name of the actual owner, consult the enclosed “Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9” for additional guidance on which number to report.

Backup withholding is not an additional U.S. federal income tax. Rather, the U.S. federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained.

Questions and requests for assistance may be directed to the Exchange Agent at its address and telephone number set forth on the front of this Letter of Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the Letter of Transmittal may be obtained from the Exchange Agent or from your broker, dealer, commercial bank, company or other nominee.

No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Original Notes, by execution of this Letter of Transmittal, shall waive any right to receive notice of the acceptance of their Original Notes for exchange.

Neither the Company, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Original Notes nor shall any of them incur any liability for failure to give any such notice.

IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE OR COPY THEREOF (TOGETHER WITH CERTIFICATES OF ORIGINAL NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.


NOTE:	FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES RESULT IN BACKUP WITHHOLDING OF AS MUCH AS 30% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.

CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, as much as 30% of all payments made to me on account of the Exchange Notes shall be retained until I provide a taxpayer identification number to the Exchange Agent and that, if I do not provide my taxpayer identification number within 60 days, such retained amounts shall be remitted to the Internal Revenue Service as backup withholding and as much as 30% of all reportable payments made to me thereafter will be withheld and remitted to the Internal Revenue Service until I provide a taxpayer identification number.



Signature		Date

GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER FOR THE PAYEE (YOU) TO GIVE THE PAYOR. Social security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employee identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the Payor. All “Section” references are to the Internal Revenue Code of 1986, as amended. “IRS” is the Internal Revenue Service.


1.	List first and circle the name of the person whose number you furnish. If only one person on a joint account has a social security number, that person’s number must be furnished.
2.	Circle the minor’s name and furnish the minor’s social security number.
3.	You must show your individual name, but you may also enter your business or “doing business as” name. You may use either your social security number or your employer identification number (if you have one).
4.	List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the taxpayer identification number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)


NOTE:	IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.

OTHER PAYEES THAT MAY BE EXEMPT FROM BACKUP WITHHOLDING PAYEES THAT MAY BE EXEMPT FROM BACKUP WITHHOLDING INCLUDE:


•	A corporation.
•	A financial institution.
•	A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States.
•	A real estate investment trust.
•	A common trust fund operated by a bank under Section 584(a).
•	An entity registered at all times during the tax year under the Investment Company Act of 1940.
•	A middleman known in the investment community as a nominee or who is listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List.
•	A futures commission merchant registered with the Commodity Futures Trading Commission.
•	A foreign central bank of issue.

PAYMENTS OF INTEREST GENERALLY EXEMPT FROM BACKUP WITHHOLDING INCLUDE:


•	Payments of interest on obligations issued by individuals. NOTE: You may be subject to backup withholding if this interest is $600 or more and you have not provided your correct taxpayer identification number to the Payor.
•	Payments of tax-exempt interest (including exempt-interest dividends under Section 852).
•	Payments described in Section 6049(b)(5) to nonresident aliens.
•	Payments on tax-free covenant bonds under Section 1451.
•	Payments made by certain foreign organizations.
•	Mortgage interest paid to you.

Certain payments, other than payments of interest, dividends, and patronage dividends, that are exempt from information reporting are also exempt from backup withholding. For details, see the regulations under sections 6041, 6041A, 6042, 6044, 6045, 6049, 6050A and 6050N.

EXEMPT PAYEES DESCRIBED ABOVE MUST FILE FORM W-9 OR A SUBSTITUTE FORM W-9 TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYOR, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE “EXEMPT” IN PART II OF THE FORM, AND RETURN IT TO THE PAYOR. IF THE PAYMENTS ARE OF INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.

PRIVACY ACT NOTICE. Section 6109 requires you to provide your correct taxpayer identification number to payors, who must report the payments to the IRS. The IRS uses the number for identification purposes and may also provide this information to various government agencies for tax enforcement or litigation purposes. Payors must be given the numbers whether or not recipients are required to file tax returns. Payors must generally withhold as much as 30% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a Payor. Certain penalties may also apply.

(1) FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail to furnish your taxpayer identification number to a Payor, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect.

(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty.

(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment.

FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.3 14 c81898s4exv99w3.htm EX-99.3 FORM OF NOTICE OF GUARANTEED DELIVERY exv99w3

This Notice of Guaranteed Delivery, or one substantially equivalent to this form, must be used to accept the Exchange Offer (as defined below) if (i) certificates for the Company’s (as defined below) Series C Senior Notes, 6% due 2033 (the “Original Notes”) are not immediately available, (ii) Original Notes, the Letter of Transmittal and all other required documents cannot be delivered to JPMorgan Chase Bank, as Exchange Agent (the “Exchange Agent”) on or prior to the Expiration Date (as defined in the Prospectus referred to below) or (iii) the procedures for delivery by book-entry transfer cannot be completed on or prior to the Expiration Date. This Notice of Guaranteed Delivery may be delivered by hand, overnight courier or mail, or transmitted by facsimile transmission, to the Exchange Agent. See “The Exchange Offer — Procedures for Tendering” in the Prospectus.

DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.

THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN “ELIGIBLE INSTITUTION” UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.

The undersigned hereby tenders to Southwestern Public Service Company, a New Mexico corporation (the “Company”), upon the terms and subject to the conditions set forth in the Prospectus dated , 2004 (as the same may be amended or supplemented from time to time, the “Prospectus”), and the related Letter of Transmittal (which together constitute the “Exchange Offer”), receipt of which is hereby acknowledged, the aggregate amount of Original Notes set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus under the caption “The Exchange Offer — Procedures for Tendering.”

GUARANTEE

(NOT TO BE USED FOR SIGNATURE GUARANTEE)

The undersigned, a firm or other entity identified in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, as an “eligible guarantor institution,” including (as such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities broker, municipal securities dealer, government securities broker, government securities dealer; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association recognized program (each of the foregoing being referred to as an “Eligible Institution”), hereby guarantees to deliver to the Exchange Agent, at its address set forth above, either the Original Notes tendered hereby in proper form for transfer together with one or more properly completed and duly executed Letter(s) of Transmittal (or facsimile thereof), or confirmation of the book-entry transfer of such Original Notes to the Exchange Agent’s account at The Depository Company (“DTC”), pursuant to the procedures for book-entry transfer set forth in the Prospectus, together with, in either case, any other required documents within three business days after the date of execution of this Notice of Guaranteed Delivery.

The undersigned acknowledges that it must deliver the Letter(s) of Transmittal and the Original Notes tendered hereby to the Exchange Agent within the time period set forth above and that failure to do so could result in a financial loss to the undersigned.

Name of Firm:

Authorized Signature:

Title:

Address:

(Zip Code)

Area Code and Telephone Number:

Date:

DO NOT SEND CERTIFICATES FOR ORIGINAL NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. ACTUAL SURRENDER OF CERTIFICATES FOR ORIGINAL NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.

We are enclosing herewith a Prospectus (the “Prospectus”), dated , 2004 of Southwestern Public Service Company, a New Mexico corporation (the “Company”), and a related Letter of Transmittal (which together constitute the “Exchange Offer”) relating to the offer by the Company to exchange its Series D Senior Notes, 6% due 2033 (the “Exchange Notes”), pursuant to an offering registered under the Securities Act of 1933, as amended (the “Securities Act”), for an amount of its issued and outstanding Series C Senior Notes, 6% due 2033 (the “Original Notes”), upon the terms and subject to the conditions set forth in the Exchange Offer.

Please note that the Exchange Offer will expire at 5:00 p.m., New York City time, on , 2004, unless extended.

The Exchange Offer is not conditioned upon any minimum number of Original Notes being tendered.

We are the holder of record of your Original Notes and/or a participant of The Depository Trust Company (“DTC”), the book-entry depository and transfer facility for the Original Notes. A tender of such Original Notes can be made only by us as the record holder and DTC participant and pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Original Notes held by us for your account.

We request instructions as to whether you wish to tender any or all of the Original Notes held by us for your account pursuant to the terms and conditions of the Exchange Offer. We also request that you confirm that we may on your behalf make the representations contained in the Letter of Transmittal.

Pursuant to the Letter of Transmittal, each holder of Original Notes will represent to the Company that (i) the holder is not an “affiliate” of the Company (as defined in Rule 405 under the Securities Act), (ii) any Exchange Notes to be received by the holder are being acquired in the ordinary course of its business and each holder received the Original Notes being tendered for exchange in the ordinary course of its business, (iii) if the holder is not a broker-dealer, the holder is not engaged in, does not intend to engage in and has no arrangement or understanding with any person to engage in a distribution (within the meaning of the Securities Act) of Exchange Notes to be received in the Exchange Offer, and (iv) the holder is not a broker-dealer tendering Original Notes acquired directly from the Company. If the tendering holder is a broker-dealer it represents and agrees, consistent with certain interpretive letters relating to exchange offers issued by the staff of the Division of Corporation Finance of the Securities and Exchange Commission to third parties, that (a) such Original Notes held by the broker-dealer are held only as a nominee, or (b) such Original Notes were acquired by such broker-dealer for its own account as a result of market-making activities or other trading activities and it will deliver a Prospectus (as amended or supplemented from time to time) meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes (provided that, by so acknowledging and by delivering a Prospectus, such broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act).

The undersigned hereby acknowledges receipt of the Prospectus dated , 2004 (the “Prospectus”) of Southwestern Public Service Company, a New Mexico corporation (the “Company”), and the accompanying Letter of Transmittal (the “Letter of Transmittal”), that together constitute the Company’s offer (the “Exchange Offer”). Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus.

This will instruct you, the registered holder and/or book-entry transfer facility participant, as to the action to be taken by you relating to the Exchange Offer with respect to the Original Notes held by you for the account of the undersigned.

The aggregate amount of the Original Notes held by you for the account of the undersigned is (fill in amount):

With respect to the Exchange Offer, the undersigned hereby instructs you (check appropriate box):

o To TENDER the following Original Notes held by you for the account of the undersigned (insert amount of Original Notes to be tendered, (if any):

o NOT to TENDER any Original Notes held by you for the account of the undersigned.

If the undersigned instructs you to tender the Original Notes held by you for the account of the undersigned, it is understood that you are authorized to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representation and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner, including but not limited to the representations that (i) the undersigned is not an “affiliate” of the Company (as defined in Rule 405 under the Securities Act), (ii) any Exchange Notes to be received by the undersigned are being acquired in the ordinary course of its business and the undersigned received the Original Notes being tendered for exchange in the ordinary course of its business, (iii) if the undersigned is not a broker-dealer, the undersigned is not engaged in, does not intend to engage in and has no arrangement or understanding with any person to engage in a distribution (within the meaning of the Securities Act) of Exchange Notes to be received in the Exchange Offer, and (iv) the holder is not a broker-dealer tendering Original Notes acquired directly from the Company. If the undersigned is a broker-dealer it represents and agrees, consistent with certain interpretive letters relating to exchange offers issued by the staff of the Division of Corporation Finance of the Securities and Exchange Commission to third parties, that (a) such Original Notes held by the undersigned broker-dealer are held only as a nominee, or (b) such Original Notes were acquired by such broker-dealer for its own account as a result of market-making activities or other trading activities and it will deliver a Prospectus (as amended or supplemented from time to time) meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes (provided that, by so acknowledging and by delivering a Prospectus, such broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act).

We are enclosing herewith the material listed below relating to the offer by Southwestern Public Service Company (the “Company”), a New Mexico corporation, to exchange Series D Senior Notes, 6% due 2033 (the “Exchange Notes”), pursuant to an offering registered under the Securities Act of 1933, as amended (the “Securities Act”), for a like amount of the issued and outstanding Series C Senior Notes, 6% due 2033 of the Company (the “Original Notes”) issued in a private placement, upon the terms and subject to the conditions set forth in the Company’s Prospectus, dated , 2004, and the related Letter of Transmittal (which together constitute the “Exchange Offer”).


	1.	Prospectus dated , 2004 (the “Prospectus”);

	2.	Letter of Transmittal;

	3.	Notice of Guaranteed Delivery;

	4.	Instruction to Registered Holder and/or Book-Entry Transfer participant from the beneficial owner (the “Owner”); and

	5.	Letter which may be sent to your clients for whose account you hold Original Notes in your name or in the name of your nominee, to accompany the instruction form referred to above, for obtaining such client’s instruction with regard to the Exchange Offer.

We urge you to contact your clients promptly. Please note that the Exchange Offer will expire 5:00 p.m., New York City time, on , 2004, unless extended.

The Exchange Offer is not conditioned upon any minimum number of Original Notes being tendered.

Pursuant to the Letter of Transmittal, each holder of Original Notes will represent to the Company that (i) the holder is not an “affiliate” of the Company (as defined in Rule 405 under the Securities Act), (ii) any Exchange Notes to be received by the holder are being acquired in the ordinary course of its business and each holder received the Original Notes being tendered for exchange in the ordinary course of its business, (iii) if the holder is not a broker-dealer, the holder is not engaged in, does not intend to engage in and has no arrangement or understanding with any person to engage in a distribution (within the meaning of the Securities Act) of Exchange Notes to be received in the Exchange Offer, and (iv) the holder is not a broker-dealer tendering Original Notes acquired directly from the Company. If the tendering holder is a broker-dealer it represents and agrees, consistent with certain interpretive letters relating to exchange offers issued by the staff of the Division of Corporation Finance of the Securities and Exchange Commission to third parties, that (a) such Original Notes held by the broker-dealer are held only as a nominee, or (b) such Original Notes were acquired by such broker-dealer for its own account as a result of market-making activities or other trading activities and it will deliver a Prospectus (as amended or supplemented from time to time) meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes (provided that, by so acknowledging and by delivering a prospectus, such broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act).

The enclosed Instruction to Registered Holder and/or Book-Entry Transfer Participant from Owner contains an authorization by the beneficial owners of the Original Notes for you to make the foregoing representations.

The Company will not pay any fee or commission to any broker or dealer or to any other persons (other than the Exchange Agent) in connection with the solicitation of tenders of Original Notes pursuant to the Exchange Offer. The Company will pay or cause to be paid any transfer taxes payable on the transfer of Original Notes to it, except as otherwise provided in Instruction 5 of the enclosed Letter of Transmittal.

Additional copies of the enclosed material may be obtained from the undersigned.

NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE AGENT OF SOUTHWESTERN PUBLIC SERVICE COMPANY OR JPMORGAN CHASE BANK OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.


New Mexico	4911	75-0575400
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)






		Proposed Maximum	Proposed Maximum	Amount of
Title of Each Class	Amount to	Offering Price	Aggregate	Registration
of Securities to be Registered	be Registered	Per Unit(1)	Offering Price(1)	Fee


Series D Senior Notes, 6% due 2033	$100,000,000	100%	$100,000,000	$8,090.00


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
SUMMARY
RISK FACTORS
USE OF PROCEEDS
THE EXCHANGE OFFER
CAPITALIZATION
SELECTED CONSOLIDATED FINANCIAL DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS
MANAGEMENT
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
DESCRIPTION OF OTHER INDEBTEDNESS
DESCRIPTION OF THE EXCHANGE NOTES
BOOK-ENTRY SYSTEM
EXCHANGE OFFER AND REGISTRATION RIGHTS
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
PLAN OF DISTRIBUTION
LEGAL OPINIONS
EXPERTS
WHERE YOU CAN FIND MORE INFORMATION
PART II.
SIGNATURES
INDEX TO EXHIBITS
EX-5.1 Opinion/Consent of Jones Day
EX-5.2 Opinion/Consent of Hinkle Hensley Shanor
EX-10.10 Senior Executive Severance Policy
EX-10.19 401(k) Savings Plan
EX-10.20 Employee Investment Plan
EX-12.1 Computation of Ratio of Earnings
EX-21.1 Subsidiaries of the Company
EX-23.1 Consent of Deloitte & Touche LLP
EX-25.1 Form T-1 Statement of Eligibility
EX-99.1 Form of Exchange Agency Agreement
EX-99.2 Form of Letter of Transmittal
EX-99.3 Form of Notice of Guaranteed Delivery
EX-99.4 Form of Letter to Clients
EX-99.5 Form of Letter to Nominees



				December 31,
		September 30,
		2003		2002		2001		2000		1999		1998


		(Thousands of dollars)
Consolidated Balance Sheet Data:
Current assets		$	248,675	$	226,997	$	237,327	$	296,037	$	156,690	$	117,537
Net property, plant and equipment			1,816,251		1,803,538		1,836,394		1,800,754		1,773,815		1,729,339
Other assets			225,743		234,809		227,059		295,845		291,656		282,988

	Total assets	$	2,290,669	$	2,265,344	$	2,300,780	$	2,392,636	$	2,222,161	$	2,129,864

Current liabilities		$	233,606		175,987		209,270		928,071		348,668		361,151
Deferred credits and other liabilities			434,212		434,985		420,115		386,430		406,235		399,875
Long-term debt			725,878		725,662		725,375		226,506		605,875		530,618
Mandatorily redeemable preferred securities of subsidiary trust(3)			100,000		100,000		100,000		100,000		100,000		100,000
Common stockholder’s equity			796,973		828,710		846,020		751,629		761,383		738,220

	Total liabilities and equity	$	2,290,669	$	2,265,344	$	2,300,780	$	2,392,636	$	2,222,161	$	2,129,864


	Base
	Electric			Short-Term			Consolidated
	Utility			Wholesale			Totals


	(Millions of dollars)
Nine months ended September 30, 2003
Electric utility revenue	$	904		$	5		$	909
Electric fuel and purchased power		(539	)		(4	)		(543	)

Gross margin before operating expenses	$	365		$	1		$	366

Margin as a percentage of revenue		40.4	%		20.0	%		40.3	%
Nine months ended September 30, 2002
Electric utility revenue	$	767		$	4		$	771
Electric fuel and purchased power		(411	)		(4	)		(415	)

Gross margin before operating expenses	$	356		$	—		$	356

Margin as a percentage of revenue		46.4	%		—	%		46.2	%


Benjamin G.S. Fowke III Vice President, Chief Financial Officer and Treasurer Southwestern Public Service Company Tyler at Sixth Street Amarillo, Texas 79101 (303) 571-7511		Teresa S. Madden Vice President and Controller Southwestern Public Service Company Tyler at Sixth Street Amarillo, Texas 79101 (303) 571-7511


	Page

Special Note Regarding Forward-Looking Statements		i
Summary		1
Risk Factors		10
Use of Proceeds		19
The Exchange Offer		19
Capitalization		27
Selected Consolidated Financial Data		28
Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
Business		45
Management		58
Certain Relationships and Related Transactions		68
Description of Other Indebtedness		70
Description of the Exchange Notes		70
Book-Entry System		76
Exchange Offer and Registration Rights		78
Material United States Federal Income Tax Considerations		80
Plan of Distribution		81
Legal Opinions		82
Experts		82
Where You Can Find More Information		82
Index to Financial Statements		F-1


	•	the exchange notes will have been registered under the Securities Act;

	•	the exchange notes will not contain transfer restrictions; and

	•	the exchange notes will not have the registration rights that apply to the original notes or entitle their holders to additional interest in the event we fail to comply with these registration rights.


		entered into in connection with the private offering of the original notes.

Risk Factors		See “Risk Factors” and the other information in this prospectus for a discussion of factors you should carefully consider before deciding to exchange your original notes for exchange notes.


(1)	The 2000 Consolidated Statement of Operations Data has been adjusted to reflect the implementation of Statement of Financial Accounting Standard (“SFAS”) No. 145, which became effective in 2003 and requires retroactive restatement of prior periods. Interest charges and financing costs of $8.225 million related to the defeasance of our first mortgage bonds, previously disclosed in Extraordinary items, was reclassified to Interest charges and financing costs. Associated income tax benefits of $2.923 million have been reclassified from Extraordinary items to Income taxes. The reclassification had no impact on operating income or net income. The 2000 financial data were derived from financial statements audited by Arthur Andersen LLP, independent public accountants. However, due to the reclassification required by SFAS No. 145, the Consolidated Statement of Operations Data in the Summary Historical Financial Data disclosed above does not agree to the financial statements as audited by Arthur Andersen LLP with respect to Interest charges and financing costs. We have been unable to obtain the consent of Arthur Andersen LLP to the use of their report in this prospectus.

(2)	For purposes of computing the ratio of earnings to fixed charges, (1) earnings consist of net income plus fixed charges, federal and state income taxes, deferred income taxes and investment tax credits; and (2) fixed charges consist of interest on long-term debt, other interest charges, the interest component on leases and amortization of debt discount, premium and expense.

(3)	On October 15, 2003, we redeemed $100 million of our mandatorily redeemable preferred securities of our subsidiary trust (together with our Subordinated Debenture).


	Xcel Energy is subject to regulatory restrictions on accessing capital. If Xcel Energy fails to meet financing conditions imposed on it by the SEC under PUHCA, Xcel Energy would be prevented from raising capital by issuing securities, forcing us to seek alternate sources of funds to meet our cash needs.


	In 2002, our credit ratings were lowered and could be further lowered as a consequence of changes in the credit ratings of our affiliates or otherwise. If this were to occur, the value of the exchange notes could be reduced.


	*Any reduced access to sources of liquidity may increase our cost of capital and our dependence on bank lenders and external capital markets.*


	We are a wholly owned subsidiary of Xcel Energy. Xcel Energy can, within certain regulatory limitations and the limitations provided by corporate law, exercise substantial control over our dividend policy and business and operations and may exercise that control in a manner that may be perceived to be adverse to our interests.


	*Recent and ongoing lawsuits relating to Xcel Energy’s former ownership of NRG could impair Xcel Energy’s profitability and liquidity and could divert the attention of our management.*


	Our profitability depends on our ability to recover costs from our customers and there may be changes in circumstances or in the regulatory environment that impair our ability to recover costs from our customers.


	*We are facing increased scrutiny from our state regulators as a result of the financial situation at Xcel Energy and NRG.*


	*We are currently the subject of an investigation by the NMPRC regarding estimated billing practices and we may face remedial or punitive action.*


	*We are subject to commodity price risk, credit risk and other risks associated with energy markets.*


	*Recession, regional black-outs or acts of war or terrorism could negatively impact our business.*


	*Increased competition resulting from restructuring efforts could have a significant financial impact on us and consequently decrease our revenue.*


	*Our operating results may fluctuate on a seasonal and quarterly basis and can be adversely affected by milder weather.*


	*Your ability to recover from our former independent certified public accountant, Arthur Andersen LLP, is limited.*


	*The exchange notes would have a claim that is junior with respect to the assets securing any secured debt that we may issue.*


	*Any lowering of the credit ratings on the exchange notes would likely reduce their value.*


	*The exchange notes have no prior public market and a public market may not develop or be sustained after the offering.*


	*Broker-dealers or holders of our notes may become subject to the registration and prospectus delivery requirements of the Securities Act.*


	*You may have difficulty selling the original notes which you do not exchange.*


	*You must tender the original notes in accordance with proper procedures in order to ensure the exchange will occur.*


	*If a market develops for the exchange notes, the exchange notes might trade at prices higher or lower than the initial offering price of the original notes.*


By Registered, Certified or by Hand or Overnight Delivery: JPMorgan Chase Bank Institutional Trust Services 2001 Bryan Street 9th Floor Dallas, Texas 75221 Attention: Frank Ivins		By Facsimile: Attention: Frank Ivins (214) 468-6494



		As of September 30, 2003
		(unaudited)

		(Thousands of dollars)		(% of Capitalization)

Long-term debt		$	725,878		44.7	%
Mandatorily redeemable preferred securities of subsidiary trust(1)			100,000		6.2	%
Common stockholder’s equity			796,973		49.1	%

	Total capitalization	$	1,622,851		100.0	%



		Nine months ended
		September 30				Year Ended December 31,

		2003		2002		2002		2001		2000(1)			1999		1998


		(Thousands of dollars)
Consolidated Statement of Operations Data:
Operating revenue		$	909,402	$	770,466	$	1,025,178	$	1,385,458	$	1,079,580		$	925,937	$	951,187
Operating expense			765,729		638,319		860,060		1,154,901		881,327			713,178		719,812

	Operating income		143,673		132,147		165,118		230,557		198,253			212,759		231,375
Other income, net			4,319		4,174		6,025		11,814		11,468			10,784		7,611
Interest charges and financing costs			39,187		40,292		53,898		52,917		70,718			61,435		58,303
Income taxes			41,693		36,111		43,363		71,175		55,853			59,399		65,696
Extraordinary items(2)			—		—		—		11,821		(13,658	)		—		—

	Net income	$	67,112	$	59,918	$	73,882	$	130,100	$	69,492		$	102,709	$	114,987


	*Significant Factors that Impacted Results for the Nine Months Ended September 30, 2002*


Accounting Policy		Judgments/ Uncertainties Affecting Application

Regulatory Mechanisms and Cost Recovery		• External regulatory decisions, requirements and regulatory environment
		• Anticipated future regulatory decisions and their impact
		• Impact of deregulation and competition on ratemaking process and ability to recover costs
Environmental Issues		• Approved methods for cleanup
		• Responsible party determination
		• Governmental regulations and standards
		• Results of ongoing research and development regarding environmental impacts
Benefit Plan Accounting		• Future rate of return on pension and other plan assets, including impacts of changes to investment portfolio composition
		• Interest rates used in valuing benefit obligation
		• Actuarial period selected to recognize deferred investment gains and losses