$50,000,000




                                CREDIT AGREEMENT

                                   dated as of

                                November 6, 1998

                                      among


                             TNP Enterprises, Inc.,
                                   As Borrower


                               NATIONSBANK, N.A.,
                      As Administrative Agent and a Lender


                       THE FIRST NATIONAL BANK OF CHICAGO,
                        As Syndication Agent and a Lender


                                       and


                         UNION BANK OF CALIFORNIA, N.A.,
                                   As a Lender



                     NATIONSBANC MONTGOMERY SECURITIES LLC,
                                As Lead Arranger


<PAGE>





                                       vii
                                TABLE OF CONTENTS

                                                                          Page

                        ARTICLE I DEFINITIONS
SECTION 1.1. Definitions                                                    1
SECTION 1.2. Accounting Terms and Determinations                           13
SECTION 1.3. Types of Borrowings                                           13
SECTION 1.4. References                                                    13
                      ARTICLE II THE CREDITS
SECTION 2.1. Commitments to Lend; Commitments to Issue Letters of Credit   14
SECTION 2.2. Notice of Borrowing                                           15
SECTION 2.3. Method of Issuing Letters of Credit                           15
SECTION 2.4. Notice to Lenders; Funding of Loans                           17
SECTION 2.5. Maturity of Loans                                             17
SECTION 2.6. Interest Rates                                                17
SECTION 2.7. Fees                                                          18
SECTION 2.8. Optional Termination or Reduction of Commitments              18
SECTION 2.9. Method of Electing Interest Rates                             19
SECTION 2.10.Scheduled Termination of Commitments                          20
SECTION 2.11.Optional Prepayments                                          20
                   ARTICLE III GENERAL PROVISIONS
SECTION 3.1. Notes                                                         20
SECTION 3.2. General Provisions as to Payments                             21
SECTION 3.3. Funding Losses                                                22
SECTION 3.4. Computation of Interest and Fees                              22
SECTION 3.5. Regulation D Compensation                                     22
SECTION 3.6. Past Due Amounts                                              22
                     ARTICLE IV CONDITIONS
SECTION 4.1. Closing                                                       23
SECTION 4.2. Borrowings                                                    23
SECTION 4.3  Letters of Credit                                             24
                  ARTICLE V REPRESENTATIONS AND WARRANTIES
SECTION 5.1. Corporate Existence and Power                                 25
SECTION 5.2. Corporate and Governmental Authorization; No Contravention    25
SECTION 5.3. Binding Effect                                                25
SECTION 5.4. Financial Information                                         25
SECTION 5.5. Litigation                                                    26
SECTION 5.6  Subsequent Events                                             26
SECTION 5.7. Compliance with ERISA                                         26
SECTION 5.8. Environmental Matters                                         27
SECTION 5.9. Taxes and Filing of Tax Returns                               27
SECTION 5.10.Subsidiaries                                                  27
SECTION 5.11 Title to Properties; Liens                                    28
SECTION 5.12.Business; Compliance                                          28
SECTION 5.13.Licenses, Permits, Etc                                        28
SECTION 5.14 Compliance with Law                                           28
SECTION 5.15 Investment Company Act Compliance                             28
SECTION 5.16 Public Utility Holding Company Act Compliance                 28
SECTION 5.17.Year 2000 Preparedness                                        28
SECTION 5.18.Margin Stock                                                  29
SECTION 5.19.Full Disclosure                                               29
                              ARTICLE VI COVENANTS
SECTION 6.1. Information                                                   29
SECTION 6.2. Payment of Debt; Additional Debt                              31
SECTION 6.3. Maintenance of Property; Insurance                            31
SECTION 6.4. Conduct of Business, Consolidations, Mergers, Sales of Assets,
               and Maintenance                                             32
SECTION 6.5. Compliance with Laws                                          33
SECTION 6.6. Inspection of Property, Books and Records                     33
SECTION 6.7. Use of Proceeds and Letters of Credit                         33
SECTION 6.8. Payment of Taxes                                              33
SECTION 6.9. Negative Pledge                                               34
SECTION 6.10.Loans and Advances to Others; Investments; Restricted Payments35
SECTION 6.11.Transactions with Affiliates                                  36
SECTION 6.12.ERISA                                                         36
SECTION 6.13.Sale of Subsidiaries; Issuance of Securities                  36
SECTION 6.14.Quantity of Documents                                         37
SECTION 6.15.Certain Financial Covenants                                   37
SECTION 6.16.Year 2000                                                     37
SECTION 6.17.Exceptions to Covenants                                       38
                              ARTICLE VII DEFAULTS
SECTION 7.1. Events of Default                                             38
SECTION 7.2. Notice of Default                                             40
SECTION 7.3. Letter of Credit Deposit.                                     40
                      ARTICLE VIII THE ADMINISTRATIVE AGENT
SECTION 8.1. Appointment and Authorization                                 40
SECTION 8.2. Administrative Agent and Affiliates                           40
SECTION 8.3. Action by Administrative Agent                                41
SECTION 8.4. Consultation with Experts                                     41
SECTION 8.5. Liability of Administrative Agent                             41
SECTION 8.6. Indemnification                                               41
SECTION 8.7. Credit Decision                                               42
SECTION 8.8. Successor Administrative Agent                                42
SECTION 8.9. Administrative Agent's Fee                                    42
                        ARTICLE IXCHANGE IN CIRCUMSTANCES
SECTION 9.1. Basis for Determining Interest Rate Inadequate or Unfair      42
SECTION 9.2. Illegality                                                    43
SECTION 9.3. Increased Cost and Reduced Return                             43
SECTION 9.4. Taxes                                                         45
SECTION 9.5. Base Rate Loans Substituted for Affected Euro-Dollar Loans    46
SECTION 9.6. Replacement of Lender                                         47
                            ARTICLE X MISCELLANEOUS
SECTION 10.1. Notices                                                      48
SECTION 10.2. No Waivers                                                   49
SECTION 10.3. Expenses; Indemnification                                    49
SECTION 10.4. Right and Sharing of Set-Offs                                50
SECTION 10.5. Amendments and Waivers                                       50
SECTION 10.6. Successors and Assigns                                       51
SECTION 10.7. Collateral                                                   52
SECTION 10.8. Limitation on Interest                                       52
SECTION 10.9. Governing Law; Submission to Jurisdiction; 
               Waiver of Jury Trial                                        53
SECTION 10.10.Counterparts; Integration; Effectiveness                     53
SECTION 10.11.ENTIRE AGREEMENT                                             54


<PAGE>


EXHIBIT A           FORM OF NOTE FOR LOANS
EXHIBIT 2.2         FORM OF NOTICE OF BORROWING UNDER SECTION 2.2;  NOTICE OF 
                    INTEREST RATE ELECTION UNDER SECTION 2.9; AND NOTICE OF
                    LETTER OF CREDIT UNDER SECTION 2.3
EXHIBIT 4.1(b)      OPINION OF BORROWER'S COUNSEL
EXHIBIT 4.1(c)      JACKSON WALKER OPINION OF COUNSEL
EXHIBIT 6.9         EXISTING LIENS
EXHIBIT 10.6(c)     FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
SCHEDULE 1.1(A)     PRICING GRID




<PAGE>

                                CREDIT AGREEMENT


         THIS  AGREEMENT  is entered  into as of  November  6,  1998,  among TNP
ENTERPRISES,  INC.,  the  LENDERS  listed  on the  signature  pages  hereof  and
NATIONSBANK, N.A., as Administrative Agent.

         The parties hereto agree as follows:


                                    ARTICLE I

                                   DEFINITIONS

     SECTION 1.1.  Definitions.  The following  terms, as used herein,  have the
following  meanings:  

     "Administrative   Agent"  means  NationsBank,   N.A.  in  its  capacity  as
administrative  representative for the Lenders hereunder,  and its successors in
such capacity.

         "Administrative  Questionnaire"  means, with respect to each Lender, an
administrative detail reply form prepared by NMS on behalf of the Administrative
Agent and  submitted to the  Administrative  Agent (with a copy to the Borrower)
duly completed by such Lender.

         "Affiliate" means (i) any Person that directly,  or indirectly  through
one or more  intermediaries,  controls the Borrower (a "Controlling  Person") or
(ii) any Person (other than the Borrower or a Subsidiary) which is controlled by
or is under common control with a Controlling  Person. As used herein,  the term
"control" means  possession,  directly or indirectly,  of the power to direct or
cause the direction of the management or policies of a Person,  whether  through
the ownership of voting  securities,  by contract or otherwise.  Notwithstanding
the foregoing,  no individual  shall be an Affiliate  solely by reason of his or
her  being  a  director,  officer  or  employee  of the  Borrower  or any of its
Subsidiaries.

         "Agreement"  means  this  Credit  Agreement,  as  it  may  be  amended,
supplemented or restated from time to time.

         "Applicable  Lending Office" means, with respect to any Lender,  (i) in
the case of its Base Rate Loans,  its  Domestic  Lending  Office and (ii) in the
case of its Euro-Dollar Loans, its Euro-Dollar Lending Office.

         "Assignee" has the meaning set forth in Section 10.6(c).



<PAGE>



     "Assignment and Acceptance  Agreement" has the meaning set forth in Section
10.6(c).


         "Base Rate" means, for any day, a rate per annum equal to the higher of
(i) the Prime  Rate for such day and (ii) the sum of 1/2 of 1% plus the  Federal
Funds Rate for such day.

         "Base Rate Loan" means (i) a Loan which bears interest at the Base Rate
pursuant  to the  applicable  Notice of  Borrowing  or Notice of  Interest  Rate
Election or the  provisions  of Article IX or the  provisions  of Section 2.3 or
(ii) an overdue amount which was a Base Rate Loan  immediately  before it became
overdue.

          "Borrower" means TNP Enterprises, Inc., a Texas corporation, and its
successors.

         "Borrower's 1997 Form 10-K" means the Borrower's  annual report on Form
10-K for 1997, as filed with the Commission  pursuant to the Securities Exchange
Act of 1934.

         "Borrower's Latest Form 10-Q" means the Borrower's  quarterly report on
Form 10-Q for the  quarter  ended June 30,  1998,  as filed with the  Commission
pursuant to the Securities Exchange Act of 1934.

         "Borrowing" has the meaning set forth in Section 1.3.

         "Cash Dividends and Distributions" for the Borrower, means with respect
to  any  capital  stock  owned  by the  Borrower  in its  Subsidiaries  (i)  the
retirement,  redemption,  purchase,  or other  acquisition  for cash of any such
stock by such  Subsidiary  and  (ii) the  receipt  by the  Borrower  of any cash
dividend on or with respect to any such stock.

         "Cash Taxes" means for any period Taxes of the Borrower,  determined on
an  unconsolidated  basis,  actually paid by the Borrower to  applicable  taxing
authorities during such period.

         "Change  of  Control"  shall  occur if any  Person or Group of  Persons
(within the meaning of Section 13 or 14 of the Securities  Exchange Act of 1934,
as amended) shall have acquired beneficial ownership (within the meaning of Rule
13d-3  promulgated by the Securities and Exchange  Commission under such Act) of
(i) 30% or more of the  outstanding  voting stock of the Borrower or (ii) 10% or
more of the  outstanding  voting stock of the Borrower if at any time  following
such  acquisition of 10% or more of the  outstanding  voting stock a majority of
the  Persons  serving on the Board of  Directors  of the  Borrower  are  Persons
proposed  directly or  indirectly by the Person or Group of Persons who acquired
such 10% or more of outstanding voting stock.

         "Closing  Date" means the date on or after the Effective  Date on which
the  conditions  set forth in Section 4.1 have been  satisfied and all documents
described therein have been received by the Administrative Agent.



<PAGE>



         "Commission" means the Securities and Exchange Commission.


         "Commitment"  means, with respect to each Lender,  the amount set forth
opposite the name of such Lender on the signature  pages hereof,  as such amount
may be reduced from time to time  pursuant to Section 2.8, or as set forth in an
Assignment and Acceptance Agreement.

         "Consolidated  Capitalization"  means,  at any date,  the sum  (without
duplication)  of  Consolidated  Indebtedness  plus  Consolidated  Net Worth plus
Minority Interests in Subsidiaries, all determined as of such date.

         "Consolidated  EBIT"  means for any  period,  an amount  determined  in
accordance with generally  accepted  accounting  principles for the Borrower and
its Subsidiaries,  on a consolidated  basis,  equal to operating revenues of the
Borrower  and its  consolidated  Subsidiaries  for such  period  less  operating
expenses of the Borrower and its consolidated  Subsidiaries for such period, but
before the deduction  therefrom of any  applicable  interest  charges and income
taxes for such period, all determined on a consolidated basis in accordance with
generally accepted accounting principles.

         "Consolidated  Indebtedness" means, at any date, all Funded Debt of the
Borrower and its Subsidiaries, determined on a consolidated basis.

         "Consolidated  Interest  Expense" means,  for any period,  the interest
expense  which  is  required  to be  shown on the  financial  statements  of the
Borrower and its  Subsidiaries,  on a  consolidated  basis,  in accordance  with
generally accepted accounting principles.

         "Consolidated  Net  Worth"  means at any date the  consolidated  common
stock equity of the Borrower and its Consolidated  Subsidiaries determined as of
such date.

         "Consolidated  Subsidiary"  means as to any  Person  at any  date,  any
Subsidiary  of such  Person  or other  entity  the  accounts  of which  would be
consolidated with those of such Person in its consolidated  financial statements
if such statements were prepared as of such date.

         "Cumulative Net Income Available for Common  Dividends"  means, for any
period, the sum of all consolidated net income available for common dividends as
reflected in the  Borrower's  consolidated  statements  of  operations  for such
period.

         "Debt" of any Person means at any date, without duplication:



<PAGE>



         (a) all  obligations  of such  Person  for money  borrowed,  including,
without  limitation,  (i) the obligations of such Person for money borrowed by a
partnership of which such Person is a general partner,  (ii)  obligations  which
are  secured  in whole or in part by the  Property  of such  Person,  (iii)  any
obligations  of such  Person in respect  of  letters  of credit  and  repurchase
agreements  and (iv) any  obligations  of such Person under any interest rate or
currency swap, rate cap, rate floor, rate collar,  forward  agreement,  or other
exchange or rate  protection  agreement  or any option with  respect to any such
transaction;


          (b) all  obligations  of such Person  evidenced by notes,  debentures,
bonds or similar instruments;

         (c) all  obligations of such Person to pay the deferred  purchase price
of property or services (except trade accounts arising in the ordinary course of
business if interest is not paid or accrued thereon);

         (d)      all obligations of such Person as lessee under capital leases;

          (e) all  Unfunded  Liabilities  with  respect to any Plan of the ERISA
Group to which such Person is a member;

         (f) all  obligations  of such Person,  contingent  or  otherwise,  that
should be reflected as liabilities on such Person's  balance sheet in accordance
with generally accepted accounting principles; and

         (g)      all Debt of others Guaranteed by such Person.

         "Default"  means any condition or event which  constitutes  an Event of
Default  or which  with the  giving of  notice  or lapse of time or both  would,
unless cured or waived, become an Event of Default.

         "Disclosed Matters" has the meaning set forth in Section 5.5.

         "Domestic  Business  Day"  means any day except a  Saturday,  Sunday or
other day on which commercial lenders in Dallas,  Texas are authorized by law to
close.

         "Domestic Lending Office" means, as to each Lender,  its office located
at its address set forth in its  Administrative  Questionnaire (or identified in
its  Administrative  Questionnaire as its Domestic Lending Office) or such other
office as such Lender may hereafter  designate as its Domestic Lending Office by
notice to the Borrower and the Administrative Agent.

         "Effective  Date" means the date this  Agreement  becomes  effective in
accordance with Section 10.10.



<PAGE>



         "Environmental  Laws"  means  any and all  federal,  state,  local  and
foreign statutes,  laws, judicial  decisions,  regulations,  ordinances,  rules,
judgments, orders, decrees, plans, injunctions,  permits,  concessions,  grants,
franchises, licenses, agreements and other governmental restrictions relating to
the environment,  the effect of the environment on human health or to emissions,
discharges  or releases of  pollutants,  contaminants,  Hazardous  Substances or
wastes into the environment including, without limitation,  ambient air, surface
water,  ground  water,  or  land,  or  otherwise  relating  to the  manufacture,
processing,  distribution,  use,  treatment,  storage,  disposal,  transport  or
handling of  pollutants,  contaminants,  Hazardous  Substances  or wastes or the
clean-up or other remediation  thereof, in each case as in effect and applicable
to the Borrower and its Subsidiaries at the time the  representation  in Section
5.8 is made or deemed made or compliance with Section 6.5 is determined.


         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended, or any successor statute.

         "ERISA Group" means the Borrower,  any  Subsidiary and all members of a
controlled  group of corporations  and all trades or businesses  (whether or not
incorporated)  under common  control  which,  together  with the Borrower or any
Subsidiary,  are treated as a single  employer under Section 414 of the Internal
Revenue Code.

         "Euro-Dollar  Business  Day" means any  Domestic  Business Day on which
commercial lenders are open for international  business  (including  dealings in
dollar deposits) in London.

         "Euro-Dollar  Lending  Office"  means,  as to each Lender,  its office,
branch or  affiliate  located  at its  address  set forth in its  Administrative
Questionnaire  (or  identified  in  its  Administrative   Questionnaire  as  its
Euro-Dollar  Lending  office) or such other office,  branch or affiliate of such
Lender as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Administrative Agent.

         "Euro-Dollar  Loan"  means  (i)  a  Loan  which  bears  interest  at  a
Euro-Dollar  Rate  pursuant to the  applicable  Notice of Borrowing or Notice of
Interest  Rate Election or (ii) an overdue  amount which was a Euro-Dollar  Loan
immediately before it became overdue.

         "Euro-Dollar  Margin"  means a rate per annum  determined in accordance
with the Pricing Grid.

         "Euro-Dollar  Rate"  means a rate of  interest  determined  pursuant to
Section 2.6(b) on the basis of a London Interbank Offered Rate.



<PAGE>



         "Euro-Dollar  Reserve  Percentage"  means  for any day that  percentage
(expressed  as a decimal)  which is in effect on such day, as  prescribed by the
Board  of  Governors  of the  Federal  Reserve  System  (or any  successor)  for
determining  the maximum  reserve  requirement  for a member bank of the Federal
Reserve  System in Dallas with deposits  exceeding  five (5) billion  dollars in
respect of  "Eurocurrency  liabilities"  (or in respect of any other category of
liabilities  which includes  deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets  which  includes  loans by a  non-United  States  office of any Lender to
United States residents).


         "Event of Default" has the meaning set forth in Section 7.1.

         "Facility Fee Rate" has the meaning set forth in Section 2.7(a).

         "Federal  Funds Rate" means,  for any day, the rate per annum  (rounded
upward,  if  necessary,  to the  nearest  1/100th  of 1%) equal to the  weighted
average of the rates on overnight Federal funds transactions with members of the
Federal  Reserve  System  arranged  by Federal  funds  brokers  on such day,  as
published by the Federal  Reserve Lender of Dallas on the Domestic  Business Day
next  succeeding  such  day,  provided  that (i) if such  day is not a  Domestic
Business  Day,  the  Federal  Funds Rate for such day shall be such rate on such
transactions on the next preceding  Domestic Business Day as so published on the
next succeeding  Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding  Domestic  Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to  NationsBank,  N.A., on such day on such
transactions as determined by the Administrative Agent.

         "First  Mortgage  Bonds" means the first  mortgage bonds issued by TNMP
pursuant to the TNMP Bond Indenture.

         "Funded Debt" means at any date, without duplication:

         (a) all  obligations  of such  Person  for money  borrowed,  including,
without  limitation,  (i) the obligations of such Person for money borrowed by a
partnership of which such Person is a general partner,  (ii)  obligations  which
are  secured  in whole or in part by the  Property  of such  Person,  (iii)  any
obligations  of such  Person in respect  of  letters  of credit  and  repurchase
agreements  and (iv) any  obligations  of such Person under any interest rate or
currency swap, rate cap, rate floor, rate collar,  forward  agreement,  or other
exchange or rate  protection  agreement  or any option with  respect to any such
transaction;

          (b) all  obligations  of such Person  evidenced by notes,  debentures,
bonds or similar instruments;

         (c) all  obligations of such Person to pay the deferred  purchase price
of property or services (except trade accounts arising in the ordinary course of
business if interest is not paid or accrued thereon);

         (d)      all obligations of such Person as lessee under capital leases;

          (e) all  Unfunded  Liabilities  with  respect to any Plan of the ERISA
Group to which such Person is a member;

<PAGE>



         (f)      all Funded Debt of others Guaranteed by such Person.


         "Group of Loans" means at any time a group of Loans  consisting  of (i)
all Base Rate Loans at such time or (ii) all  Euro-Dollar  Loans having the same
Interest Period at such time,  provided that, if a Loan of any particular Lender
is  converted  to or made as a Base Rate Loan  pursuant to Article IX, such Loan
shall be  included  in the same Group or Groups of Loans from time to time as it
would have been in if it had not been so converted or made.

         "Guarantee"  by  any  Person  means  any   obligation,   contingent  or
otherwise,  of such Person directly or indirectly  guaranteeing  any Debt of any
other  Person  and,  without  limiting  the  generality  of the  foregoing,  any
obligation,  direct or indirect,  contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt (whether  arising by virtue of  partnership  arrangements,  by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain  financial  statement  conditions or otherwise) or (ii) entered into
for the purpose of  assuring in any other  manner the holder of such Debt of the
payment  thereof or to protect such holder  against loss in respect  thereof (in
whole  or in  part),  provided  that,  the  term  Guarantee  shall  not  include
endorsements  for collection or deposit in the ordinary course of business.  The
term "Guarantee" used as a verb with respect to any Person means the act of such
Person in creating a Guarantee or the  condition of such Person in  permitting a
Guarantee of such Person to exist.

         "Hazardous  Substances"  means  any  toxic,  radioactive,   caustic  or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and  other  hydrocarbons,  or any  substance  having  any  constituent  elements
displaying any of the foregoing characteristics.

         "Indemnified Party" has the meaning set forth in Section 8.6.

         "Indemnitee" has the meaning set forth in Section 10.3(b).

         "Interest  Expense" means,  for any period,  the interest expense which
would be required to be shown on the financial statements of the Borrower, on an
unconsolidated   basis,  in  accordance  with  generally   accepted   accounting
principles.

         "Interest Hedge  Agreements"  means any and all agreements,  devices or
arrangements  designed to protect at least one of the parties  thereto  from the
fluctuations of interest rates  applicable to such party's assets or liabilities
including, but not limited to, interest rate exchange agreements,  interest rate
cap or  collar  protection  agreements,  or  interest  rate  options,  puts  and
warrants.

         "Interest  Period" means:  with respect to each  Euro-Dollar  Loan, the
period commencing on the date of borrowing specified in the applicable Notice of
Borrowing or on the date  specified in the  applicable  Notice of Interest  Rate
Election and ending one, two,  three or six months  thereafter,  as the Borrower
may elect in the applicable notice and subject to availability; provided that:


<PAGE>



                  (a) any  Interest  Period which would  otherwise  end on a day
         which is not a  Euro-Dollar  Business Day shall,  subject to clause (c)
         below,  be extended to the next  succeeding  Euro-Dollar  Business  Day
         unless such  Euro-Dollar  Business Day falls in another calendar month,
         in which  case such  Interest  Period  shall end on the next  preceding
         Euro-Dollar Business Day;


                  (b) any Interest  Period which begins on the last  Euro-Dollar
         Business  Day of a  calendar  month (or on a day for which  there is no
         numerically  corresponding day in the calendar month at the end of such
         Interest  Period) shall,  subject to clause (c) below,  end on the last
         Euro-Dollar Business Day of a calendar month; and

          (c)  any  Interest   Period  which  would   otherwise  end  after  the
Termination Date shall end on the Termination Date.

         "Internal  Revenue  Code" means the Internal  Revenue Code of 1986,  as
amended, or any successor statute.

          "Issuing  Lender" means  NationsBank  in its capacity as issuer of the
Letters of Credit.

         "Investment" in any Person shall mean any stock,  bond,  note, or other
evidence of Debt, or any other  security  (other than current trade and customer
accounts) of, investment or partnership  interest in or loan or advance to, such
Person.

         "Lender" means each lender listed on the signature  pages hereof,  each
Replacement Lender which becomes a Lender pursuant to Section 9.6, each Assignee
which  becomes a Lender  pursuant  to  Section  10.6(c),  and  their  respective
successors.

         "Letter of Credit  Exposure" means the aggregate amount of the unfunded
portion of the Letters of Credit outstanding at any time.

         "Letter of Credit Fee" has the meaning set forth in Section 2.7(b).

         "Letters of Credit"  means all letters of credit  issued by the Issuing
Lender for the account of Borrower pursuant to this Agreement.

         "Lien" means,  with respect to any asset, any mortgage,  lien,  pledge,
charge,  security  interest  or  encumbrance  of any kind,  or any other type of
preferential  arrangement  that has the practical  effect of creating a security
interest,  in respect of such asset.  For the  purposes of this  Agreement,  the
Borrower  or any  Subsidiary  shall be deemed to own subject to a Lien any asset
which it has  acquired  or holds  subject to the  interest of a vendor or lessor
under any  conditional  sale  agreement,  capital lease or other title retention
agreement relating to such asset.



<PAGE>



         "Loan" means a loan made by a Lender pursuant to Section 2.1, or by the
Issuing Lender pursuant to Section 2.3, provided that, if any such loan or loans
(or  portions  thereof)  are  combined  or  subdivided  pursuant  to a Notice of
Interest Rate  Election,  the term "Loan" shall refer to the combined  principal
amount  resulting  from such  combination  or to each of the separate  principal
amounts resulting from such subdivision, as the case may be.


         "LOC Application" has the meaning set forth in Section 2.3.

         "London Interbank Offered Rate" applicable to any Interest Period means
the rate per annum (rounded upwards,  if necessary,  to the nearest 1/100 of 1%)
appearing on Telerate page 3750 (or any successor  page or any successor to such
service)  as the  London  interbank  offered  rate for  deposits  in  dollars at
approximately  11:00 a.m.  (London time) two Euro-Dollar  Business Days prior to
the first day of such  Interest  Period for a term  comparable  to such Interest
Period. If for any reason such rate is not available, the term "London Interbank
Offered Rate" shall mean, for any Interest  Period,  the rate per annum (rounded
upwards,  if necessary,  to the nearest 1/100 of 1%) appearing on Reuters Screen
LIBO Page as the  London  interbank  offered  rate for  deposits  in  dollars at
approximately  11:00 a.m.  (London time) two Euro-Dollar  Business Days prior to
the first day of such  Interest  Period for a term  comparable  to such Interest
Period; provided,  however, if more than one rate is specified on Reuters Screen
LIBO Page, the applicable rate shall be the arithmetic mean of all such rates.

         "Material  Debt"  means Debt  (other  than the  Notes) of the  Borrower
and/or  one or more of its  Subsidiaries,  arising  in one or  more  related  or
unrelated  transactions,  in an  aggregate  principal  or face amount  exceeding
$10,000,000.

         "Maximum Lawful Rate" means, for each Lender,  the maximum rate (or, if
the  context so  permits  or  requires,  an amount  calculated  at such rate) of
interest which, at the time in question would not cause the interest  charged on
the  portion of the Loans owed to such Lender to such time to exceed the maximum
amount  which such  Lender  would be  allowed to  contract  for,  charge,  take,
reserve,  or receive  under  applicable  law after taking into  account,  to the
extent required by applicable law, any and all relevant payments or charges.  To
the  extent  the laws of the  State of Texas  are  applicable  for  purposes  of
determining the "Maximum Lawful Rate," such term shall mean the "weekly ceiling"
from time to time in effect under  Chapter 303 of the Finance Code of Texas,  as
amended.

         "Minority  Interests in Subsidiaries"  means interests owned by Persons
(other than Borrower or a Subsidiary) in a Subsidiary in which less than 100% of
all classes of the voting securities are owned by the Borrower or a Subsidiary.

         "NationsBank" means NationsBank, N.A., a national banking association.

         "NMS" means NationsBanc Montgomery Securities LLC.


<PAGE>



         "Notes"  means  promissory  Notes  of the  Borrower  issued  hereunder,
substantially in the form of Exhibit A hereto,  evidencing the obligation of the
Borrower to repay the Loans and "Note" means any one of such promissory Notes.


         "Notice of Borrowing" has the meaning set forth in Section 2.2.

          "Notice  of  Interest  Rate  Election"  has the  meaning  set forth in
Section 2.9.

         "Notice of Letter of Credit" has the meaning set forth in Section 2.3.

         "Overhead"  means  operating   expenses  of  the  Borrower  before  the
deduction therefrom of any applicable interest charges and income taxes for such
period, all determined on a stand alone, unconsolidated basis in accordance with
generally accepted accounting principles.
          "Parent"  means,  with respect to any Lender,  any Person  controlling
such Lender.

         "Participant" has the meaning set forth in Section 10.6(b).

         "PBGC" means the Pension  Benefit  Guaranty  Corporation  or any entity
succeeding to any or all of its functions under ERISA.

         "Permitted  Indebtedness"  means with respect to the Borrower,  without
duplication (i) Debt of the Borrower arising under this Agreement and the Notes,
(ii) unsecured,  non-interest  bearing accounts payable of the Borrower incurred
in the ordinary course of business, (iii) unsecured Debt of the Borrower arising
in the ordinary  course of business to its customers  for security  deposits and
advances  to the  Borrower  from  such  customers,  (iv)  unsecured  Debt of the
Borrower  under  Interest  Hedge  Agreements if (A) the purpose of such Interest
Hedge  Agreement is to hedge the Borrower's  interest rate for its floating rate
indebtedness,   (B)  the  purpose  of  such  Interest  Hedge  Agreement  is  not
speculative  in nature and (C) the  Borrower  does not  deviate in any  material
respect from its practices and policies in effect as of the date hereof  related
to obtaining Interest Hedge Agreements;  and (v) Debt in the aggregate amount of
up to $10,000,000 not otherwise permitted by the foregoing.



<PAGE>



         "Permitted   Investments"   means   investments  in  (i)  indebtedness,
evidenced  by notes  maturing  not more  than 180 days  after the date of issue,
issued or  guaranteed by the  government  of the United States of America,  (ii)
certificates of deposit maturing not more than 180 days after the date of issue,
issued  by  commercial  banking  institution  each of which  is a member  of the
Federal Reserve System and which has combined  capital and surplus and undivided
profits of not less than $50,000,000,  (iii) commercial paper, maturing not more
than 90 days  after the date of issue,  issued by (a) the  Lender (or any parent
corporation of the Lender) or (b) a corporation  (other than an Affiliate of the
Borrower)  with a rating of "P1" (or its then  equivalent)  according to Moody's
Investors Service,  Inc., "A-1" (or its then equivalent) according to Standard &
Poor's  Corporation  or "F-1"  (or its then  equivalent)  according  to  Fitch's
Investors   Services,   Inc.,  (iv)  indebtedness  of  or  equity  interests  in
Subsidiaries of the Borrower and other entities or ventures primarily related to
the  energy  industry  which  are not  Subsidiaries  ("Non-Subsidiaries")  in an
aggregate  amount  existing at any time of up to  $50,000,000,  except that such
indebtedness  of or equity  interests  in  Non-Subsidiaries  shall be limited to
$20,000,000  in an  aggregate  amount  existing  at any time,  or (v) such other
instruments,   evidences  of  indebtedness  or  investment   securities  as  the
Administrative Agent may approve.


         "Person"  means  an  individual,  a  corporation,  a  partnership,   an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.

         "Plan"  means at any time an  employee  pension  benefit  plan which is
covered by Title IV of ERISA or subject to the minimum  funding  standards under
Section  412 of the  Internal  Revenue  Code and  either (i) is  maintained,  or
contributed  to, by any member of the ERISA Group for employees of any member of
the ERISA  Group or (ii) has at any time  within the  preceding  five years been
maintained,  or contributed to, by any Person which was at such time a member of
the ERISA Group for  employees  of any Person which was at such time a member of
the ERISA Group.

         "Pricing Grid" means Schedule 1.1(A) attached hereto.

         "Prime  Rate"  means  the  rate  of  interest  publicly   announced  by
NationsBank, N.A., in Dallas, Texas, from time to time as its "prime rate".

         "Pro Rata Part" has the meaning set forth in Section 2.1(a) hereof.

         "Quarterly Date" means March 31, June 30, September 30 and December 31.

         "Regulation  U" means  Regulation  U of the Board of  Governors  of the
Federal Reserve System, as in effect from time to time.

         "Replacement Lender" has the meaning set forth in Section 9.6.

         "Required  Lenders"  means at any time Lenders having more than 66 2/3%
of the aggregate  amount of the Commitments  or, if the  Commitments  shall have
been terminated, holding Notes evidencing more than 66 2/3% of the aggregate (i)
unpaid principal amount of the Loans plus (ii) Letter of Credit Exposure.

         "Restricted Payment" means:

         (a) the declaration or payment of any dividend on, or the incurrence of
any  liability  to make any other  payment or  distribution  in respect  of, any
shares of or other ownership  interests in the Borrower or any Subsidiary  other
than dividends, distributions and payments by a Subsidiary to the Borrower;


<PAGE>



         (b) any payment or distribution on account of the purchase,  redemption
or other  retirement  of any  shares  of or  other  ownership  interests  in the
Borrower or any Subsidiary,  or of any warrant, option or other right to acquire
such  shares  or  such  other  ownership  interests,  or any  other  payment  or
distribution made in respect thereof, either directly or indirectly; or


          (c) the prepayment,  redemption or other  retirement prior to maturity
of any Debt by the Borrower.

The  amount of any  Restricted  Payment  in  Property  shall be deemed to be the
greater of its fair market value or its net book value ("fair market value" will
be determined by an appraisal in form, and prepared by an appraiser,  acceptable
to the Administrative Agent).

         "Revolving  Credit  Period"  means the period  from and  including  the
Closing Date to but not including the Termination Date.

         "Subsidiary"  means, as to any Person,  any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons  performing  similar
functions are at the time directly or  indirectly  owned by such Person.  Unless
otherwise  specified,  "Subsidiary"  means  a  Subsidiary  of the  Borrower  and
includes a Subsidiary of a Subsidiary (and so on).

         "Taxes"  means all taxes,  assessments,  filing or other fees,  levies,
imposts, duties,  deductions,  withholdings,  stamp taxes, interest equalization
taxes,  capital  transaction taxes,  foreign exchange taxes or charges, or other
charges of any nature whatsoever from time to time or at any time imposed by any
law or tribunal.

         "Termination  Date" means  November  6, 2003,  or, if such day is not a
Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.

         "TNMP" means Texas-New Mexico Power Company, a Texas corporation.

         "TNMP Bond  Indenture"  means the  Indenture  of  Mortgage  and Deed of
Trust,  dated as of November 1, 1944,  between  Community Public Service Company
(predecessor  to  TNMP)  and  the  Trustee,   as  amended  and  supplemented  by
supplemental indentures.

         "Trustee" means US Bank Trust, National  Association,  as trustee under
the TNMP Bond Indenture.



<PAGE>



         "Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all  benefit  liabilities  (within the
meaning of Section 4001(a) (16) of ERISA) under such Plan,  determined on a plan
termination  basis using the assumptions  prescribed by the PBGC for purposes of
Section  4044 of ERISA,  exceeds  (ii) the fair market  value of all Plan assets
allocable to such liabilities under Title IV of ERISA (excluding any accrued but
unpaid contributions),  all determined as of the then most recent valuation date
for such Plan,  but only to the extent that such excess  represents  a potential
liability  of a member of the ERISA Group to the PBGC or any other  Person under
Title IV of ERISA.


         "United  States"  means the United  States of  America,  including  the
States  and  the  District  of  Columbia,  but  excluding  its  territories  and
possessions.

         "Unrestricted   Retained  Earnings"  means  the  retained  earnings  of
Borrower's   Subsidiaries  determined  in  accordance  with  generally  accepted
accounting  principles  which are  available for the payment of dividends to the
Borrower  without  violating any  restrictions  or limitations in any agreements
applicable to such Subsidiary.

         Accounting  Terms and  Determinations.  (a)Unless  otherwise  specified
herein,  all accounting  terms used herein shall be interpreted,  all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered  hereunder shall be prepared in accordance with generally  accepted
accounting  principles  as in  effect  from  time to  time,  applied  on a basis
consistent (except for changes concurred in by the Borrower's independent public
accountants) with the most recent audited  consolidated  financial statements of
the  Borrower  and  its  Consolidated  Subsidiaries  delivered  to the  Lenders;
provided  that,  if the  Borrower  notifies  the  Administrative  Agent that the
Borrower  wishes to amend any covenant in Article VI to eliminate  the effect of
any change in generally accepted accounting  principles on the operation of such
covenant (or if the Administrative Agent notifies the Borrower that the Required
Lenders  wish to  amend  Article  VI for  such  purpose),  then  the  Borrower's
compliance  with such  covenant  shall be  determined  on the basis of generally
accepted accounting  principles in effect immediately before the relevant change
in generally accepted accounting principles became effective,  until either such
notice is withdrawn or such covenant is amended in a manner  satisfactory to the
Borrower and the Required Lenders.

          (b) All  references  herein  to  "dollars"  or "$" are  references  to
currency of the United States of America.

         SECTION 1.3.  Types of  Borrowings.  The term  "Borrowing"  denotes the
aggregation  of Loans of the same type (subject to Article IX) to be made to the
Borrower pursuant to Article II on the same date and, except in the case of Base
Rate Loans, which have the same initial Interest Period. A Borrowing  consisting
of Euro-Dollar Loans is a "Euro-Dollar  Borrowing" and a Borrowing consisting of
Base Rate Loans is a "Base Rate Borrowing".



<PAGE>



         SECTION  1.4.  References.  References  in this  Agreement to Exhibits,
Schedules, Annexes, Appendixes,  Attachments,  Articles, or Sections shall be to
exhibits, schedules, annexes, appendixes,  attachments, articles, or sections of
this  Agreement,  unless  expressly  stated to the contrary.  References in this
Agreement to "hereby," "herein,"  "hereinafter,"  "hereinabove,"  "hereinbelow,"
"hereof,"  "hereunder" and words of similar import shall be to this Agreement in
its entirety and not only to the particular Exhibit,  Schedule, Annex, Appendix,
Attachment, Article, or Section in which such reference appears. This Agreement,
for  convenience  only,  has been divided into Articles and Sections;  and it is
understood that the rights and other legal relations of the parties hereto shall
be  determined  from this  instrument  as an entirety and without  regard to the
aforesaid  division  into  Articles and Sections and without  regard to headings
prefixed to such Articles or Sections. Whenever the context requires,  reference
herein made to the single number shall be understood to include the plural;  and
likewise, the plural shall be understood to include the singular. Definitions of
terms  defined in the  singular  or plural  shall be equally  applicable  to the
plural  or  singular,  as the case may be,  unless  otherwise  indicated.  Words
denoting sex shall be construed to include the  masculine,  feminine and neuter,
when such  construction  is  appropriate;  and  specific  enumeration  shall not
exclude  the  general  but  shall be  construed  as  cumulative.  The  Exhibits,
Schedules,  Annexes,  Appendixes and Attachments  attached to this Agreement are
incorporated  herein and shall be  considered a part of this  Agreement  for all
purposes.



                                   ARTICLE II

                                   THE CREDITS

SECTION 2.1.  Commitments to Lend;  Commitments to Issue Letters of Credit.  (a)
During the Revolving Credit Period,  each Lender severally  agrees, on the terms
and  conditions  set  forth in this  Agreement,  to make  loans to the  Borrower
pursuant to this Section  from time to time in amounts  such that the  aggregate
principal  amount of the Loans by such Lender plus the Letter of Credit Exposure
for such Lender at any one time  outstanding  shall not exceed the amount of its
Commitment. Each Borrowing under this Section shall be in an aggregate principal
amount of  $2,500,000 or any larger  multiple of $500,000  (except that any such
Borrowing may be in the aggregate  amount  available in accordance  with Section
4.2(c))  and shall be made from the several  Lenders  ratably in  proportion  to
their respective  Commitments  (such proportion being herein referred to for any
Lender as its "Pro Rata Part").  Within the foregoing  limits,  the Borrower may
borrow under this Section,  prepay Loans to the extent permitted by Section 2.11
and reborrow at any time during the Revolving Credit Period under this Section.



<PAGE>



         (b) Letters of Credit. Each Lender agrees to cause Letters of Credit to
be issued by the  Issuing  Lender  for the  account of  Borrower  for any of the
purposes  for which  Borrower can obtain a Loan under this  Agreement;  provided
that (i) each such  Letter of Credit  shall be issued on a  Business  Day,  (ii)
after the  issuance  of any such  Letter  of  Credit,  (A) the  Letter of Credit
Exposure  must be less  than or  equal  to the  Commitment  (as the  same may be
adjusted as herein  provided) less the sum of all outstanding  Loans and (B) the
Letter  of  Credit  Exposure  shall  not  exceed  twenty  percent  (20%)  of the
Commitment, and (iii) each such Letter of Credit must have an expiry date of not
later than the earlier of (x) one year  following the issue date for such Letter
of Credit or (y) the last day of the Revolving Credit Period. To the extent that
funds are ever  drawn  under any of the  Letters of Credit and not repaid by the
Borrower,  each such draw will be paid by the  Issuing  Lender,  and each of the
Lenders will make a Base Rate Loan under its Note in the amount of such Lender's
Pro Rata Part of the  amount so paid by the  Issuing  Lender  to  reimburse  the
Issuing Lender for such draw, all in accordance with Section 2.3.


         SECTION  2.2.  Notice  of  Borrowing.   The  Borrower  shall  give  the
Administrative  Agent notice (a "Notice of Borrowing")  not later than (x) 11:00
A.M.  (Dallas time) on the date of each Base Rate Borrowing,  and (y) 10:00 A.M.
(Dallas  time) on the third  Euro-Dollar  Business  Day before each  Euro-Dollar
Borrowing in the form of Exhibit 2.2, specifying:

                  (i) the date of such  Borrowing,  which  shall  be a  Domestic
Business Day in the case of a Base Rate Borrowing or a Euro-Dollar  Business Day
in the case of a Euro-Dollar Borrowing;

                  (ii)     the aggregate amount of such Borrowing;

          (iii) whether the Loans comprising such Borrowing are to bear interest
initially at the Base Rate or a Euro-Dollar Rate; and

                  (iv) in the case of a Euro-Dollar  Borrowing,  the duration of
the  Interest  Period  applicable  thereto,  subject  to the  provisions  of the
definition of Interest Period.

         SECTION  2.3.  Method of Issuing  Letters of Credit.  (a) Not less than
three (3) Business Days prior to the requested date of issuance of any Letter of
Credit,  the  Borrower  shall  deliver to the  Administrative  Agent a notice of
Letter of Credit  ("Notice  of Letter of Credit") in the form of Exhibit 2.2 and
shall execute and deliver to the Issuing  Lender the customary  letter of credit
application and agreement used by the Issuing Lender from time to time (the "LOC
Application").  Nothing in this  Agreement  shall be  construed  to prohibit the
Issuing  Lender from  modifying the form of its LOC  Application  in effect from
time to time. In the event of a direct  conflict  between the  provisions of the
LOC  Application  and this  Agreement,  the provisions of this  Agreement  shall
govern.  Upon satisfaction of the applicable  conditions  precedent set forth in
Article IV, and subject to the other terms and conditions of this Agreement, the
Issuing  Lender  shall issue  Letters of Credit for the account of the  Borrower
within  three  (3)  Business  Days from  receipt  by the  Issuing  Lender of the
properly  completed and executed LOC Application (so long as the requested terms
of such Letter of Credit are  acceptable to the Issuing Lender in its reasonable
discretion).



<PAGE>



         (b) Immediately upon the issuance of each Letter of Credit, the Issuing
Lender shall be deemed to have sold and  transferred  to each  Lender,  and each
Lender shall be deemed to have  purchased and received from the Issuing  Lender,
in each case  irrevocably  and  without  any  further  action by any  party,  an
undivided  interest  and  participation  in such Letter of Credit,  each drawing
thereunder  and the  obligations of the Borrower under this Agreement in respect
thereof in an amount  equal to the  product of (x) such  Lender's  Pro Rata Part
times (y) the maximum  amount  available to be drawn under such Letter of Credit
(assuming  compliance  with all  conditions  to drawing).  Each Letter of Credit
shall be in the stated amount of $2,500,000 or any larger multiple of $500,000.


         (c) The Borrower  unconditionally  agrees to pay to the Issuing  Lender
(and the LOC  Application may so provide) all amounts drawn under and payable to
the Issuing Lender under or in connection with any Letter of Credit  immediately
when due (and in any event shall reimburse any Issuing Lender for drawings under
a Letter of Credit no later than the Business  Day after  payment by the Issuing
Lender),  irrespective of any claim,  set-off,  defense or other right which the
Borrower or any other Person may have at any time against the Issuing  Lender or
any other  Person,  including  without  limitation,  (i) any lack of validity or
enforceability  of this Agreement or any of the Notes; (ii) the existence of any
claim,  setoff,  defense or other right which the  Borrower may have at any time
against a  beneficiary  named in a Letter of  Credit  or any  transferee  of any
Letter of Credit (or any Person for whom any such transferee may be acting), the
Administrative  Agent,  the Issuing  Lender,  any Lender,  or any other  Person,
whether  in  connection  with  this  Agreement,   any  Letter  of  Credit,   the
transactions  contemplated  herein  or  any  unrelated  transaction  (including,
without  limitation,  any  underlying  transactions  between  Borrower  and  the
beneficiary named in any Letter of Credit); (iii) any draft,  certificate or any
other  document  presented  under the  Letter of Credit  proving  to be  forged,
fraudulent,  invalid or  insufficient  in any respect or any  statement  therein
being untrue or inaccurate  in any respect;  (iv) the  surrender,  impairment or
lack of existence of any security for the  performance  or  observance of any of
the terms of this Agreement or the Notes;  (v) the  negligence,  whether sole or
concurrent,  of the Issuing Lender or any other Person is honoring  drafts drawn
under any Letter of  Credit;  or (vi) the  existence  of any  Default.  However,
nothing  in this  Agreement  constitutes  a waiver of the  Borrower's  rights to
assert  independently  of its  reimbursement  obligation  any claim  against the
Issuing Lender for its gross negligence or willful misconduct in connection with
its honoring drafts drawn under any Letter of Credit.



<PAGE>



         (d) If the  Borrower  fails to  reimburse  the Issuing  Lender as above
required, the payment by the Issuing Lender of a draft drawn under any Letter of
Credit shall  constitute  for all purposes of this  Agreement  the making by the
Issuing  Lender of a Base Rate Loan in the amount of such draft (but without any
requirement for compliance with the conditions set forth elsewhere  herein).  In
the event  that a drawing  under any Letter of Credit is not  reimbursed  by the
Borrower  by 10:00  a.m.  (Dallas  time) on the first  Business  Day after  such
drawing,  the Issuing Lender shall promptly notify the Administrative  Agent and
each other Lender.  Each such Lender shall,  on the first Business Day following
such notification,  make a Base Rate Loan under its Note, which shall be used to
repay its applicable portion of the Issuing Lender's Base Rate Loan with respect
to such  Letter  of  Credit,  in an  amount  equal to its Pro Rata  Part of such
drawing  (but  without  any  requirement  for  compliance  with  the  applicable
conditions set forth elsewhere  herein).  Such amount shall be made available to
the  Administrative  Agent for the account of the Issuing Lender,  by deposit of
such amount at the  Administrative  Agent's  office,  in same day funds.  In the
event that any Lender fails to make  available to the  Administrative  Agent for
the account of the Issuing Lender the amount of such Base Rate Loan, the Issuing
Lender  shall be  entitled  to recover  such  amount on demand  from such Lender
together  with  interest  thereon at a rate per annum equal to the lesser of (i)
the Maximum Lawful Rate or (ii) the Federal Funds Rate.


         SECTION 2.4. Notice to Lenders; Funding of Loans. (a) Upon receipt of a
Notice of Borrowing,  the Administrative Agent shall promptly notify each Lender
of the contents  thereof and of such Lender's share of such Borrowing,  and such
Notice of Borrowing shall not thereafter be revocable by the Borrower.

         (b)  Not  later  than  1:00  P.M.  (Dallas  time)  on the  date of each
Borrowing,  each Lender shall make  available  its share of such  Borrowing,  in
Federal  or  other  funds  immediately   available  in  Dallas,  Texas,  to  the
Administrative  Agent at its  address  referred to in Section  10.1.  Unless the
Administrative  Agent  determines  that any  applicable  condition  specified in
Article IV or elsewhere herein has not been satisfied,  the Administrative Agent
will make the funds so received  from the Lenders  available  to the Borrower at
the Administrative Agent's aforesaid address.

         (c) Unless the  Administrative  Agent shall have received notice from a
Lender  prior  to the  date of any  Borrowing  that  such  Lender  will not make
available to the Administrative Agent such Lender's share of such Borrowing, the
Administrative  Agent may assume that such Lender has made such share  available
to the  Administrative  Agent on the date of such  Borrowing in accordance  with
clause  (b)  above and the  Administrative  Agent  may,  in  reliance  upon such
assumption,  make available to the Borrower on such date a corresponding amount.
If and to the  extent  that such  Lender  shall  have  failed to make such share
available  to the  Administrative  Agent,  such  Lender  and, to the extent such
Lender has failed to do so within  three (3)  Domestic  Business  Days of demand
therefor by the  Administrative  Agent, the Borrower severally agree to repay to
the Administrative  Agent forthwith on demand such corresponding amount together
with interest  thereon for each day from the date such amount is made  available
to the  Borrower  until  the date such  amount  is repaid to the  Administrative
Agent, at (i) in the case of the Borrower,  a rate per annum equal to the higher
of the Federal Funds Rate and the interest rate applicable  thereto  pursuant to
Section 2.6 and (ii) in the case of such Lender, the Federal Funds Rate. If such
Lender shall repay to the Administrative  Agent such corresponding  amount, such
amount so repaid shall  constitute such Lender's Loan included in such Borrowing
for  purposes  of  this   Agreement.   If  the  Borrower   shall  repay  to  the
Administrative  Agent such corresponding  amount, such Lender's Loan included in
such Borrowing  shall be deemed not to have been made. This clause (c) shall not
limit any right of the Borrower pursuant to Section 9.6.

         SECTION  2.5.  Maturity  of Loans.  Each  Loan  shall  mature,  and the
principal  amount  thereof  shall  be due and  payable,  together  with  accrued
interest thereon, on the Termination Date.

         SECTION  2.6.  Interest  Rates.  (a) Each  Base Rate  Loan  shall  bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes  due,  at a rate per annum  equal to the Base
Rate for such day. Such interest  shall be payable  quarterly in arrears on each
Quarterly  Date and, with respect to the principal  amount of any Base Rate Loan
converted to a Euro-Dollar Loan, on each date a Base Rate Loan is so converted.


<PAGE>



         (b) Each  Euro-Dollar  Loan  shall  bear  interest  on the  outstanding
principal  amount thereof,  for each day during each Interest Period  applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such
day plus the London  Interbank  Offered Rate applicable to such Interest Period.
Such interest shall be payable for each Interest  Period on the last day thereof
and, if such Interest Period is longer than three months,  at intervals of three
months after the first day thereof.


         (c) The Administrative  Agent shall, where appropriate,  determine each
interest rate applicable to the Loans hereunder.  The Administrative Agent shall
give prompt notice to the Borrower and the participating Lenders of each rate of
interest so determined, and its determination thereof shall be conclusive in the
absence of manifest error.

         SECTION 2.7.  Fees.  (a) The Borrower  shall pay to the  Administrative
Agent for the account of the Lenders  ratably a facility fee at the Facility Fee
Rate  (determined  daily in  accordance  with the  Pricing  Grid,  and herein so
called). Such facility fee shall accrue from and including the Effective Date to
but  excluding  the  Termination  Date,  on the  daily  aggregate  amount of the
Commitments   (whether  used  or  unused)  or,  if  the  Commitments  have  been
terminated, on the daily aggregate amount of the Loans outstanding.

         (b) The Borrower shall pay to the Administrative  Agent for the account
of each  Lender a letter  of credit  fee (the  "Letter  of  Credit  Fee") on the
average  daily amount  available for drawing  under all  outstanding  Letters of
Credit at the per annum percentages equal to the Euro-Dollar margin as in effect
from day to day.

         (c) Accrued fees under the  foregoing  clauses of this Section shall be
payable  quarterly  in  arrears  on  each  Quarterly  Date  and on the  date  of
termination of the  Commitments  in their entirety (and, if later,  the date the
Loans shall be repaid in their entirety).

         (d) The Borrower shall pay to the Administrative  Agent for the account
of the Issuing Lender a fronting fee (the "Fronting Fee") at a per annum rate of
0.125% on the stated amount of the Letter of Credit for the maximum period which
such  Letter  of Credit  could by its terms  remain  outstanding,  payable  upon
issuance of the Letter of Credit.

         (e) The Borrower shall pay to the Administrative  Agent for the account
of the Lenders an upfront fee (the  "Upfront  Fee") of 0.15% of the  Commitment,
payable at Closing.



<PAGE>



         SECTION 2.8. Optional  Termination or Reduction of Commitments.  During
the Revolving Credit Period,  the Borrower may, upon at least three (3) Domestic
Business Days' notice to the Administrative Agent, (i) terminate the Commitments
at any time,  if no Loans are  outstanding  at such time and no Letter of Credit
Exposure exists or (ii) ratably reduce from time to time by an aggregate  amount
of $2,500,000  or a larger  multiple of $500,000,  the  aggregate  amount of the
Commitments in excess of the aggregate outstanding principal amount of the Loans
plus the Letter of Credit Exposure.


         SECTION 2.9. Method of Electing  Interest Rates. (a) The Loans included
in each Borrowing shall bear interest initially at the type of rate specified by
the Borrower in the applicable Notice of Borrowing. Thereafter, the Borrower may
from time to time elect to change or continue the type of interest rate borne by
each Group of Loans  (subject in each case to the  provisions of Article IX), as
follows:

          (i) if such  Loans  are Base Rate  Loans,  the  Borrower  may elect to
convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day;

                  (ii) if such Loans are  Euro-Dollar  Loans,  the  Borrower may
elect to convert  such Loans to Base Rate Loans or elect to continue  such Loans
as Euro-Dollar Loans for an additional  Interest Period,  subject to Section 3.3
in the case of any such  conversion or  continuation  effective on any day other
than the last day of the then current Interest Period applicable to such Loans.

Each such  election  shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the  Administrative  Agent not later than 10:00 A.M.  (Dallas
time)  on  the  third   Euro-Dollar   Business  Day  before  the  conversion  or
continuation  selected in such notice is to be  effective.  A Notice of Interest
Rate Election may, if it so specifies,  apply to only a portion of the aggregate
principal amount of the relevant Group of Loans;  provided that (i) such portion
is allocated  ratably among the Loans comprising such Group and (ii) the portion
to which such Notice  applies,  and the  remaining  portion to which it does not
apply,  are each $2,500,000 (or, if such remaining  portion is comprised of Base
Rate Loans, $500,000) or any larger multiple of $500,000.

          (b) Each Notice of Interest Rate Election  shall be  substantially  in
the form of Exhibit 2.2 and ----------- shall specify:

                  (i) the Group of Loans (or portion thereof) to which such 
notice applies;

                  (ii) the date on which the conversion or continuation selected
in such notice is to be effective, which shall comply with the applicable clause
of subsection (a) above;

                  (iii) if the Loans  comprising such Group are to be converted,
the new type of Loans and, if the Loans being  converted  are to be  Euro-Dollar
Loans, the duration of the next succeeding  Interest Period applicable  thereto;
and

                  (iv) if such Loans are to be  continued as  Euro-Dollar  Loans
for an additional  Interest  Period,  the duration of such  additional  Interest
Period.



<PAGE>



Each  Interest  Period  specified in a Notice of Interest  Rate  Election  shall
comply with the provisions of the definition of Interest Period.


         (c) Upon  receipt  of a  Notice  of  Interest  Rate  Election  from the
Borrower pursuant to clause (a) above, the  Administrative  Agent shall promptly
notify each Lender of the contents  thereof and such notice shall not thereafter
be revocable by the Borrower.

         (d) An  election  by the  Borrower  to change or  continue  the rate of
interest  applicable  to any Group of Loans  pursuant to this Section  shall not
constitute a "Borrowing" subject to the provisions of Section 4.2.

         (e) If with respect to any Euro-Dollar Loan, the  Administrative  Agent
shall  have not  received  a  Notice  of  Interest  Rate  Election  prior to the
expiration  of  the  Interest  Period  therefor,  such  Euro-Dollar  Loan  shall
automatically  convert  to a Base  Rate  Loan on the last  day of such  Interest
Period.

          SECTION 2.10.  Scheduled  Termination of Commitments.  The Commitments
shall terminate on the Termination Date.

         SECTION 2.11.  Optional  Prepayments.  (a) Subject,  in the case of any
Euro-Dollar  Borrowing  to Section  3.3,  the  Borrower  may,  upon at least one
Domestic Business Day's notice to the Administrative  Agent, prepay any Group of
Base Rate Loans or upon at least three (3) Euro-Dollar  Business Days' notice to
the Administrative Agent, prepay any Group of Euro-Dollar Loans, in each case in
whole  at any  time,  or from  time to  time  in  part  in  amounts  aggregating
$2,500,000 or any larger multiple of $500,000, by paying the principal amount to
be prepaid  together with accrued  interest  thereon to the date of  prepayment.
Each such optional  prepayment  shall be applied to prepay  ratably the Loans of
the Lenders included in such Group.

         (b) Upon receipt of a notice of  prepayment  pursuant to this  Section,
the  Administrative  Agent shall  promptly  notify  each Lender of the  contents
thereof and of such Lender's  ratable share of such  prepayment  and such notice
shall not thereafter be revocable by the Borrower.


                                   ARTICLE III

                               GENERAL PROVISIONS

          Notes.  (a) The Loans of each Lender  shall be  evidenced  by a single
Note  payable  to the order of such  Lender for the  account  of its  Applicable
Lending Office in an amount equal to such Lender's Commitment.

<PAGE>



         (b) Each Lender may, by notice to the Borrower  and the  Administrative
Agent,  request that its Loans of a  particular  type be evidenced by a separate
Note in an amount equal to the aggregate  unpaid principal amount of such Loans.
Each such Note shall be in substantially  the form of Exhibit A with appropriate
modifications to reflect the fact that it evidences solely Loans of the relevant
type.  Each  reference  in this  Agreement to the "Note" of such Lender shall be
deemed to refer to and  include  any or all of such  Notes,  as the  context may
require.


         (c) Upon receipt of each Lender's Note pursuant to Section 4.1(a),  the
Administrative  Agent shall  forward such Note to such  Lender.  Each Lender may
record the date,  amount  and type of each Loan made by it under the  applicable
Note and the date and amount of each payment of  principal  or interest  made by
the  Borrower  with  respect  thereto,  and may,  if such  Lender  so  elects in
connection with any transfer or enforcement of its Note, endorse on the schedule
forming  a  part  thereof  appropriate   notations  to  evidence  the  foregoing
information with respect to each such Loan then outstanding;  provided that, the
failure  of any Lender to make any such  recordation  or  endorsement  shall not
affect the obligations of the Borrower  hereunder or under the Note. Each Lender
is hereby  irrevocably  authorized by the Borrower so to endorse its Note and to
attach to and make a part of its Note a continuation of any such schedule as and
when required.

         SECTION 3.2. General Provisions as to Payments.  (a) The Borrower shall
make each  payment  of  principal  of,  and  interest  on, the Loans and of fees
hereunder,  not  later  than 2:00 p.m.  (Dallas  time) on the date when due,  in
Federal  or  other  funds  immediately   available  in  Dallas,  Texas,  to  the
Administrative   Agent  at  its  address   referred  to  in  Section  10.1.  The
Administrative  Agent will promptly  distribute to each Lender its ratable share
of each such payment received by the Administrative Agent for the account of the
Lenders.  Whenever  any payment of  principal  of, or interest on, the Base Rate
Loans or of fees shall be due on a day which is not a Domestic Business Day, the
date for  payment  thereof  shall be extended  to the next  succeeding  Domestic
Business  Day.  Whenever  any  payment  of  principal  of, or  interest  on, the
Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day,
the  date  for  payment  thereof  shall  be  extended  to  the  next  succeeding
Euro-Dollar  Business Day unless such Euro-Dollar  Business Day falls in another
calendar  month,  in which case the date for payment  thereof  shall be the next
preceding Euro-Dollar Business Day.

         (b) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Lenders  hereunder
that the Borrower will not make such payment in full, the  Administrative  Agent
may assume that the Borrower has made such payment in full to the Administrative
Agent on such date and the  Administrative  Agent  may,  in  reliance  upon such
assumption,  cause to be  distributed  to each Lender on such due date an amount
equal to the amount then due such Lender. If and to the extent that the Borrower
shall  not  have  so  made  such  payment,   each  Lender  shall  repay  to  the
Administrative  Agent forthwith on demand such amount distributed to such Lender
together  with  interest  thereon,  for each day from the date  such  amount  is
distributed  to such Lender until the date such Lender repays such amount to the
Administrative Agent, at the Federal Funds Rate.


<PAGE>



         SECTION  3.3.  Funding  Losses.  If the  Borrower  makes any payment of
principal  with respect to any  Euro-Dollar  Loan,  or any  Euro-Dollar  Loan is
converted  (pursuant to Articles II, VII or IX or  otherwise),  on any day other
than the last day of an Interest Period applicable thereto or the last day of an
applicable period fixed pursuant to any other Section hereof, or if the Borrower
fails to borrow,  convert or prepay any Euro-Dollar  Loans after notice has been
given to any Lender in accordance  with Section  2.4(a) or 2.9(c),  the Borrower
shall  reimburse  each Lender within 15 days after demand for any resulting loss
or expense  incurred by it (or by an existing or prospective  Participant in the
related Loan),  including  (without  limitation) any loss incurred in obtaining,
liquidating  or employing  deposits from third  parties,  but excluding  loss of
margin for the period after any such payment or conversion or failure to borrow,
convert or prepay;  provided  that,  such  Lender  shall have  delivered  to the
Borrower  a  certificate  as to the  amount  of  such  loss  or  expense,  which
certificate shall be conclusive in the absence of manifest error.


         SECTION 3.4.  Computation  of Interest and Fees.  Interest based on the
Prime  Rate  hereunder  shall be  computed  on the basis of a year of 365 or 366
days, as applicable,  and paid for the actual number of days elapsed  (including
the first day but excluding the last day).  All other interest and fees shall be
computed  on the basis of a year of 360 days and paid for the  actual  number of
days elapsed (including the first day but excluding the last day).

         SECTION  3.5.  Regulation  D  Compensation.  For so long as any  Lender
maintains reserves against "Eurocurrency  liabilities" (or any other category of
liabilities  which includes  deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets  which  includes  loans by a non-United  States  office of such Lender to
United  States  residents),  and as a  result  the cost to such  Lender  (or its
Euro-Dollar  Lending Office) of making or maintaining  its Euro-Dollar  Loans is
increased,  then such Lender may require the Borrower to pay,  contemporaneously
with each payment of interest on the Euro-Dollar Loans,  additional  interest on
the  related  Euro-Dollar  Loan of such Lender at a rate per annum up to but not
exceeding the excess of (i) (A) the  applicable  London  Interbank  Offered Rate
divided  by (B) one  minus  the  Euro-Dollar  Reserve  Percentage  over (ii) the
applicable  London Interbank Offered Rate. Any Lender wishing to require payment
of  such  additional   interest  (x)  shall  so  notify  the  Borrower  and  the
Administrative  Agent, in which case such additional interest on the Euro-Dollar
Loans of such Lender  shall be payable to such Lender at the place  indicated in
such  notice  with  respect to each  Interest  Period  commencing  at least four
Euro-Dollar  Business Days after the giving of such notice and (y) shall furnish
to the Borrower at least five  Euro-Dollar  Business  Days prior to each date on
which  interest is payable on the  Euro-Dollar  Loans an  officer's  certificate
setting  forth the  amount to which  such  Lender is then  entitled  under  this
Section (which shall be consistent with such Lender's good faith estimate of the
level at which the related reserves are maintained by it).

         SECTION 3.6. Past Due Amounts.  Any overdue principal of or interest on
any Loan shall bear  interest,  payable on demand,  for each day until paid at a
rate per annum equal to the sum of 2% plus the Base Rate for such day.



<PAGE>



                                   ARTICLE IV


                                   CONDITIONS

         SECTION 4.1. Closing. The closing hereunder shall occur upon receipt by
the Administrative Agent of the following documents, each dated the Closing Date
unless otherwise indicated, and satisfaction of the following conditions:

          (a) the duly executed Notes for the account of each Lender dated on or
before the Closing Date complying with the provisions of Section 3.1;

         (b) an opinion of the  counsel of the  Borrower,  substantially  in the
form of Exhibit 4.1(b) hereto with such changes as the Administrative  Agent may
reasonably  approve  and  covering  such  additional  matters  relating  to  the
transactions contemplated hereby as the Required Lenders may reasonably request;

         (c) an  opinion of  Jackson  Walker  L.L.P.,  special  counsel  for the
Administrative  Agent,  substantially  in the form of Exhibit 4.1(c) hereto with
such changes as the  Administrative  Agent may  reasonably  approve and covering
such additional matters relating to the transactions  contemplated hereby as the
Required Lenders may reasonably request;

         (d) all documents and officer's  certificates the Administrative  Agent
may reasonably request relating to the existence of the Borrower,  the corporate
authority for and the validity of this  Agreement  and the Notes,  and any other
matters  relevant  hereto,  all  in  form  and  substance  satisfactory  to  the
Administrative Agent and its counsel;

         (e) the absence of any disruption or adverse change in the financial or
capital markets generally which the  Administrative  Agent or NMS, in their sole
reasonable discretion, deems material in connection with the syndication of this
facility,  provided that in such an event  Administrative Agent and NMS agree to
reasonably  cooperate  with the Borrower in  attempting  to develop  alternative
financing  structures or terms that would permit a  satisfactory  syndication of
this facility; and

         (f)      receipt of the fees referred to in Sections 2.7(e) and 8.9.

The  Administrative  Agent shall promptly notify the Borrower and the Lenders of
the Closing Date, and such notice shall be conclusive and binding on all parties
hereto.

          SECTION 4.2.  Borrowings.  The obligation of any Lender to make a Loan
on the occasion of any Borrowing is subject to the satisfaction of the following
conditions:

          (a) the fact that the Closing Date shall have  occurred on or prior to
November 10, 1998;
<PAGE>



          (b) receipt by the  Administrative  Agent of a Notice of  Borrowing as
required by Sections 2.2 or ------------- 2.3, as the case may be;

         (c) the fact that,  immediately  after such  Borrowing,  the  aggregate
outstanding  principal  amount of the Loans plus the  Letter of Credit  Exposure
will not exceed the aggregate amount of the Commitments;

          (d) the fact that,  immediately  before and after such  Borrowing,  no
Default shall have occurred and be continuing; and

         (e) the fact that the  representations  and  warranties of the Borrower
contained in this Agreement shall be true in all material  respects on and as of
the date of such Borrowing.

         Each Borrowing  hereunder  shall be deemed to be a  representation  and
warranty by the Borrower on the date of such Borrowing as to the facts specified
in clauses (c), (d) and (e) of this Section.

         SECTION 4.3 Letters of Credit.  The obligation of the Issuing Lender to
issue any Letter of Credit as provided herein is subject to the  satisfaction by
the Borrower of the following conditions and requirements:

          (a) timely  receipt by the  Issuing  Lender of a fully  completed  and
executed LOC Application;

          (b) timely receipt by the  Administrative  Agent of a Notice of Letter
of Credit;

         (c) the fact  that,  immediately  after  such  Letter  of  Credit,  the
aggregate  outstanding  principal  amount of the Loans plus the Letter of Credit
Exposure will not exceed the aggregate amount of the Commitments;

          (d) the fact that  immediately  before and after the  issuance of such
Letter of Credit, no Default shall have occurred and be continuing;

          (e) the fact that the representations and warranties contained in this
Agreement  shall  be  true in all  material  respects  on and as of the  date of
issuance of such Letter of Credit;

         (f)  timely  receipt  by the  Administrative  Agent  (on  behalf of the
Issuing  Lender) of the Fronting  Fee required to be paid to the Issuing  Lender
related to the issuance of such Letter of Credit; and



<PAGE>



         (g) such other  information  and  documentation  as the  Administrative
Agent or the Issuing  Lender  shall  reasonably  deem  necessary or desirable in
connection with the issuance of such Letter of Credit.


         Each issuance of a Letter of Credit  hereunder  shall be deemed to be a
representation  and  warranty  by the  Borrower  on the date of issuance of such
Letter of Credit as to the facts  specified  in clauses (c), (d) and (e) of this
Section.

                                    ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

         The Borrower represents and warrants that:

         SECTION  5.1.  Corporate   Existence  and  Power.  The  Borrower  is  a
corporation duly  incorporated,  validly existing and in good standing under the
laws of the jurisdiction of its incorporation,  and has all corporate powers and
all material  governmental  licenses,  authorizations,  consents  and  approvals
required to carry on its business as now conducted.

         SECTION   5.2.   Corporate   and   Governmental    Authorization;    No
Contravention.  The execution,  delivery and performance by the Borrower of this
Agreement  and the Notes are within the corporate  powers of the Borrower,  have
been duly authorized by all necessary corporate action,  require no action by or
in respect  of, or filing  with,  any  governmental  body,  agency or  official,
require no consent of any other Person,  and do not contravene,  or constitute a
default  under,  any  provision  of  applicable  law  or  regulation  or of  the
certificate of  incorporation  or by-laws of the Borrower or of any agreement or
instrument  governing  Debt of the Borrower or any Subsidiary or of any material
agreement,  judgment, injunction, order, decree or other instrument binding upon
the Borrower or any  Subsidiary  or result in the creation or  imposition of any
Lien on any material asset of the Borrower or any Subsidiary.

         SECTION 5.3.  Binding  Effect.  This Agreement  constitutes a valid and
binding  agreement of the Borrower and each Note, when executed and delivered in
accordance with this Agreement,  will constitute a valid and binding  obligation
of the Borrower,  in each case enforceable in accordance with its terms,  except
as may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws  relating to or affecting  the rights of  creditors  generally  and
except as the  enforceability  of the  Agreement and the Notes is subject to the
application of general principles of equity (regardless of whether considered in
a  proceeding  in  equity or at law),  including,  without  limitation,  (a) the
possible unavailability of specific performance,  injunctive relief or any other
equitable remedy and (b) concepts of materiality, reasonableness, good faith and
fair dealing.



<PAGE>



         SECTION 5.4. Financial Information.  (a) The consolidated balance sheet
of the Borrower and its  Consolidated  Subsidiaries as of December 31, 1997, and
the related consolidated statements of income and cash flows for the fiscal year
then ended,  reported on by Arthur  Andersen LLP and set forth in the Borrower's
1997 Form  10-K,  a copy of which  has been  delivered  to each of the  Lenders,
fairly present, in conformity with generally accepted accounting principles, the
consolidated   financial   position  of  the  Borrower   and  its   Consolidated
Subsidiaries  as of such date and their  consolidated  results of operations and
cash flows for such fiscal year.


         (b) The  unaudited  consolidated  balance sheet of the Borrower and its
Consolidated  Subsidiaries  as of  June  30,  1998,  and the  related  unaudited
consolidated  statements of income and cash flows for the six months then ended,
set forth in the Borrower's Latest Form 10-Q, a copy of which has been delivered
to each of the Lenders,  fairly present,  in conformity with generally  accepted
accounting   principles  applied  on  a  basis  consistent  with  the  financial
statements referred to in clause (a) of this Section, the consolidated financial
position of the Borrower and its  Consolidated  Subsidiaries as of such date and
their  consolidated  results of  operations  and cash  flows for such  six-month
period (subject to normal year-end adjustments).

         (c) Except as disclosed in writing by the Borrower to the Lenders prior
to the execution and delivery of this Agreement  since June 30, 1998,  there has
been no material adverse change in the business,  financial position, results of
operations  or  prospects of the  Borrower  and its  Consolidated  Subsidiaries,
considered as a whole.

         SECTION  5.5.  Litigation.  Except  for the  matters  disclosed  in the
Borrower's  1997 Form 10-K and the Borrower's  Latest Form 10-Q (the  "Disclosed
Matters"),  there is no action,  suit or proceeding  pending against,  or to the
knowledge of the Borrower  threatened against or affecting,  the Borrower or any
Subsidiary  before any court or arbitrator or any governmental  body,  agency or
official in which there is a reasonable possibility of an adverse decision which
could materially adversely affect the business,  consolidated financial position
or  consolidated  results of  operations  of the Borrower  and its  Consolidated
Subsidiaries,  considered as a whole, or which in any manner draws into question
the validity of this Agreement or the Notes.

         SECTION 5.6  Subsequent  Events.  To the knowledge of the Borrower,  no
event or  condition  has  occurred  since the date of the most recent  financial
statement  referred to in Section 5.4, and there has been no  development in the
Disclosed Matters,  which could reasonably,  materially and adversely affect the
ability of the Borrower to perform its  obligation  under this Agreement and the
Notes.



<PAGE>



         SECTION 5.7.  Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations  under the minimum funding  standards of ERISA and the
Internal  Revenue  Code with  respect to each Plan and is in  compliance  in all
material  respects  with the  presently  applicable  provisions of ERISA and the
Internal  Revenue Code with  respect to each Plan.  No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal  Revenue  Code  in  respect  of any  Plan,  (ii)  failed  to  make  any
contribution  or payment to any Plan, or made any  amendment to any Plan,  which
has  resulted or could  result in the  imposition  of a Lien or the posting of a
bond or  other  security  under  ERISA  or the  Internal  Revenue  Code or (iii)
incurred any liability  under Title IV of ERISA. No Unfunded  Liabilities  exist
with  respect to any Plan  subject to Title IV of ERISA.  No member of the ERISA
Group has any liability  with respect to prohibited  transactions  as defined in
Section  4975  of  the  Code.   The  Borrower  has  no   obligation  to  provide
post-employment  medical  or other  similar  benefits  to  employees  and  their
dependents  following  termination of employment,  except as provided in Section
4980B of the  Code.  No  member  of the  ERISA  Group  maintains,  sponsors,  or
contributes  to,  or  has  ever  maintained,  sponsored,  or  contributed  to  a
multiemployer pension plan within the meaning of Section 3(37) of ERISA.


         SECTION  5.8.  Environmental  Matters.  In the  ordinary  course of its
business, the Borrower conducts an ongoing review of the effect of Environmental
Laws  on the  business,  operations  and  properties  of the  Borrower  and  its
Subsidiaries, in the course of which it identifies and evaluates liabilities and
costs  arising  under or  imposed  by  Environmental  Laws  (including,  without
limitation,  any capital or  operating  expenditures  required  for  clean-up or
closure of properties  presently or previously  owned,  any capital or operating
expenditures  required  to achieve or  maintain  compliance  with  environmental
protection  standards imposed by Environmental  Law, any related  constraints on
operating  activities,  including  any  periodic  or  permanent  shutdown of any
facility  or  reduction  in the level of or change in the  nature of  operations
conducted thereat, any costs or liabilities in connection with off-site disposal
of wastes or Hazardous  Substances,  and any actual or potential  liabilities to
third parties,  including employees).  On the basis of this review, the Borrower
has no reason  to  conclude  that such  liabilities  and  costs  arising  under,
including the costs of compliance with, Environmental Laws, are likely to have a
material  adverse  effect on the  business,  financial  condition  or results of
operations of the Borrower and its  Consolidated  Subsidiaries,  considered as a
whole.

         SECTION  5.9.  Taxes and Filing of Tax  Returns.  The  Borrower and its
Subsidiaries  have filed all United  States  federal  income tax returns and all
other  material tax returns which are required to be filed by them and have paid
all taxes due pursuant to such returns or pursuant to any assessment received by
the Borrower or any Subsidiary,  other than taxes which are not delinquent,  and
other than those  contested in good faith and for which  adequate  reserves have
been established in accordance with generally  accepted  accounting  principles.
The  charges,  accruals  and  reserves  on the  books  of the  Borrower  and its
Subsidiaries  in  respect of taxes or other  governmental  charges  are,  in the
opinion of the Borrower, adequate.

         SECTION  5.10.  Subsidiaries.  (a)  Each  of the  Borrower's  corporate
Subsidiaries is a corporation  duly  incorporated,  validly existing and in good
standing  under  the  laws of its  jurisdiction  of  incorporation,  and has all
corporate  powers  and  all  material  governmental  licenses,   authorizations,
consents and approvals required to carry on its business as now conducted.

          (b) The Borrower owns and controls 100% of the common stock of TNMP.

<PAGE>



         SECTION 5.11 Title to Properties;  Liens.  Each of the Borrower and its
Consolidated  Subsidiaries  has  good  and  indefeasible  title  to  all  assets
purported  to be owned by it and material in the conduct of its  business,  free
and  clear  of all  Liens  other  than  the  Liens  described  in the  financial
statements identified in Section 5.4.


         SECTION  5.12.  Business;  Compliance.  Each  of the  Borrower  and its
Consolidated  Subsidiaries has performed and abided by all obligations  required
to be  performed  by it to the  extent  it could  be  materially  and  adversely
affected  under any license,  permit,  order,  authorization,  grant,  contract,
agreement,  or  regulation  to  which it is a party or by which it or any of its
assets are bound.

         SECTION  5.13.  Licenses,  Permits,  Etc.  Each of the Borrower and its
Consolidated  Subsidiaries  possesses  such valid  franchises,  certificates  of
convenience  and  necessity,  operating  rights,  licenses,  permits,  consents,
authorizations,  exemptions and order of tribunals, as are necessary to carry on
all material aspects of its business as now being conducted.

         SECTION 5.14  Compliance  with Law. The business and operations of each
of the  Borrower  and its  Consolidated  Subsidiaries  have  been and are  being
conducted in accordance with all applicable  laws,  rules and regulations of all
tribunals,  other  than  violations  which  could not  (either  individually  or
collectively)  have a material  adverse  effect on the  financial  condition  or
operations of the Borrower or any of its Consolidated Subsidiaries.

         SECTION 5.15 Investment  Company Act Compliance.  Neither  Borrower nor
any Subsidiary is or is directly or indirectly controlled by or acting on behalf
of any person which is an "investment  company" or an "affiliated  person" of an
"investment  company" within the meaning of the Investment  Company Act of 1940,
as amended.

         SECTION  5.16  Public  Utility  Holding  Company  Act  Compliance.  The
Borrower  and its  Subsidiaries  are  exempt  from  regulation  under the Public
Utility  Holding  Company  Act of 1935,  as  amended,  other than under  Section
9(a)(2) thereof.

         SECTION 5.17. Year 2000 Preparedness.  The Borrower (i) has initiated a
review and  assessment of material  areas within the business and  operations of
its and each of its  Subsidiaries  (including  those affected by key vendors and
customers) that could be adversely affected by the "Year 2000 Problem" (that is,
the  risk  that  computer  applications  used  by  the  Borrower  or  any of its
Subsidiaries  (or key  vendors and  customers)  may be unable to  recognize  and
perform properly  date-sensitive  functions involving certain dates prior to and
any date after  December 31, 1999),  and (ii) to date,  the Borrower  reasonably
believes that all computer applications of the Borrower that are material to its
or any of its Subsidiaries' business and operations are reasonably expected on a
timely basis to be able to perform  properly  date-sensitive  functions  for all
dates  before and after  January  1, 2000  (that is, be "Year 2000  compliant"),
except to the extent that a failure to do so could not reasonably be expected to
have  material  adverse  effect on the business or operations of the Borrower or
any of its Subsidiaries.


<PAGE>




          SECTION 5.18.  Margin Stock. Less than 5% of the Borrower's assets are
comprised of "margin stock" within the meaning of Regulation U.

         SECTION  5.19.  Full  Disclosure.  All  information  (taken as a whole)
heretofore  furnished in writing by the Borrower to the Administrative  Agent or
any  Lender  for  purposes  of or in  connection  with  this  Agreement  or  any
transaction contemplated hereby is, and all such information hereafter furnished
by the  Borrower  to the  Administrative  Agent or any  Lender  will be,  to the
knowledge of the  Borrower,  true and  accurate in all material  respects on the
date as of which such  information  is stated or  certified.  The  Borrower  has
disclosed,  either  in  reports  on Form  10-K,  Form 10-Q or Form 8-K (or their
equivalents)  filed with the  Commission or otherwise in writing to the Lenders,
any and all facts known to the Borrower which materially and adversely affect or
may  affect  (to the  extent  the  Borrower  can now  reasonably  foresee),  the
business,  financial  condition or results of operations of the Borrower and its
Consolidated  Subsidiaries,  taken as a whole, or the ability of the Borrower to
perform its obligations under this Agreement.

                                   ARTICLE VI

                                    COVENANTS

         The  Borrower  agrees  that,  so long as any Lender has any  Commitment
hereunder or any amount payable under any Note remains unpaid:

          SECTION  6.1.   Information.   The   Borrower   will  deliver  to  the
Administrative Agent (who will promptly deliver to each Lender):

         (a) (i) as soon as available and in any event within 120 days after the
end of each fiscal year of the  Borrower,  the annual report of the Borrower and
its Subsidiaries filed with the Commission on Form 10-K for such year;

                  (ii) as soon as  available  and in any event  within  120 days
after  the end of  each  fiscal  year  of the  Borrower,  the  annual  unaudited
financial statements of the Borrower on an unconsolidated basis, consisting of a
balance  sheet as of such fiscal year end and an income  statement and cash flow
statement for such fiscal year just ended;

         (b) (i) as soon as available  and in any event within 60 days after the
end of each of the first three quarters of each fiscal year of the Borrower, the
quarterly report of the Borrower and its Subsidiaries  filed with the Commission
on Form 10-Q for such quarter;



<PAGE>



                  (ii) as soon as  available  and in any  event  within  60 days
after  the end of each  fiscal  quarter  of each  fiscal  year of the  Borrower,
quarterly unaudited financial statements of the Borrower, both on a consolidated
and  unconsolidated  basis,  consisting of a balance sheet as of the last day of
such fiscal  quarter and an income  statement  and cash flow  statement for such
fiscal  quarter and for the period from the beginning of such fiscal year to the
end of such fiscal quarter;


         (c)  simultaneously   with  the  delivery  of  each  set  of  financial
statements  referred to in Section  6.1(a) and (b), a  certificate  of the chief
financial officer,  principal accounting officer, treasurer or controller of the
Borrower,  (i) setting forth in reasonable  detail the calculations  required to
establish  whether the  Borrower  was in  compliance  with the  requirements  of
Section 6.15 on the date of such  financial  statements,  (ii)  stating  whether
there  exists on the date of such  certificate  any Default  and, if any Default
then exists, setting forth the details thereof and the action which the Borrower
is taking or proposes to take with respect  thereto and (iii) stating whether or
not  such  financial  statements  fairly  reflect  the  business  and  financial
condition of the Borrower and its  Consolidated  Subsidiaries  as of the date of
the delivery of such financial statements;

         (d) concurrently with the delivery of each set of financial  statements
referred to in Section 6.1(a)(i),  a statement of the firm of independent public
accountants which reported on such statements whether anything has come to their
attention  to cause  them to  believe  that  there  existed  on the date of such
statements any Default;

         (e) promptly after any senior officer of the Borrower obtains knowledge
of any Default,  if such Default is then continuing,  a certificate of the chief
financial officer,  principal accounting officer, treasurer or controller of the
Borrower  setting forth the details thereof and the action which the Borrower is
taking or proposes to take with respect thereto;

          (f)  promptly  upon the  mailing  thereof to the  shareholders  of the
Borrower  generally,  copies  of all  financial  statements,  reports  and proxy
statements so mailed;

         (g)  promptly  upon the  filing  thereof,  copies  of all  registration
statements  (other than the exhibits thereto and any registration  statements on
Form S-8 or its equivalent)  and reports on Form 8-K (or its  equivalent)  which
the Borrower shall have filed with the Commission;



<PAGE>



         (h) if and when any member of the ERISA  Group (i) gives  notice to the
PBGC of any  "reportable  event"  (as  defined in  Section  4043 of ERISA)  with
respect to any Plan which might  constitute  grounds for a  termination  of such
Plan under Title IV of ERISA, or knows that the plan  administrator  of any Plan
has given  notice of any such  reportable  event,  a copy of the  notice of such
reportable  event given to the PBGC;  (ii)  receives  notice from the PBGC under
Title IV of ERISA of an intent to terminate,  impose  liability  (other than for
premiums  under  Section  4007 of ERISA) in respect  of, or appoint a trustee to
administer  any Plan, a copy of such notice;  (iii)  applies for a waiver of the
minimum funding  standard under Section 412 of the Internal Revenue Code, a copy
of such  application;  (iv) gives notice of intent to  terminate  any Plan under
Section 4041(c) of ERISA, a copy of such notice and other information filed with
the PBGC; (v) gives notice of withdrawal  from any Plan pursuant to Section 4063
of  ERISA,  a copy of such  notice;  or  (vi)  fails  to  make  any  payment  or
contribution  to any Plan or makes any  amendment to any Plan which has resulted
or which may reasonably be expected to result in the imposition of a lien or the
posting of a bond or other  security  under Section 401(a) (29) or 412(n) of the
Internal  Revenue Code, or Section  302(f) or 307 of ERISA, a certificate of the
chief financial officer or the chief accounting  officer of the Borrower setting
forth details as to such  occurrence  and action,  if any, which the Borrower or
applicable member of the ERISA Group is required or proposes to take;


         (i) promptly upon the Borrower's receiving notice or otherwise learning
of  any  claim,  demand,  action,  event,  condition,  report  or  investigation
indicating any potential or actual liability  arising in connection with (i) the
non-compliance  with or violation of the requirements of any Environmental Laws,
(ii)  the  release  or  threatened  release  of any  toxic or  hazardous  waste,
substance or  constituent  into the  environment,  or (iii) the existence of any
Lien on any  properties  or assets of the  Borrower  resulting  from a breach or
alleged  breach  of any  Environmental  Laws,  which  could  in the  event of an
unfavorable outcome under any of the foregoing have a material adverse effect on
the Borrower, notice thereof;

         (j)  promptly  upon  the  Borrower's  learning  of any  suit  or  other
proceeding   against  or  naming  the  Borrower  before  any  court,   tribunal,
governmental  body,  agency or  instrumentality  which  could in the event of an
unfavorable  outcome  have a material  adverse  effect on the  Borrower,  notice
thereof; and

         (k)  from  time to  time  such  additional  information  regarding  the
financial  position or  business of the  Borrower  and its  Subsidiaries  as the
Administrative Agent, at the request of any Lender, may reasonably request.

         SECTION 6.2.  Payment of Debt;  Additional  Debt. (a) The Borrower will
(i) pay, renew or extend or cause to be paid,  renewed or extended the principal
of, and the prepayment  charge,  if any, and interest on all Debt  heretofore or
hereafter  incurred  or assumed by it when and as the same shall  become due and
payable; (ii) faithfully perform,  observe and discharge all unwaived covenants,
conditions and obligations imposed on it by any instrument  evidencing such Debt
or by any indenture or other  agreement  securing such Debt or pursuant to which
such Debt is issued;  and (iii) not permit the occurrence of any act or omission
which  would  constitute  a default  under  any such  instrument,  indenture  or
agreement.

          (b) The Borrower  will not create,  incur or suffer to exist any Debt,
except Permitted Indebtedness.

         SECTION 6.3. Maintenance of Property;  Insurance. (a) The Borrower will
keep, and will cause each  Subsidiary to keep, all property useful and necessary
in its  business in good working  order and  condition,  ordinary  wear and tear
excepted.



<PAGE>



         (b) The  Borrower  will,  and will cause each of its  Subsidiaries  to,
maintain  (either in the name of the Borrower or in such  Subsidiary's own name)
with financially  sound and responsible  insurance  companies,  insurance on all
their  respective  properties  in at least such  amounts,  against at least such
risks  and  with  no  greater  than  such  risk  retention  as  are  customarily
maintained, insured against or retained, as the case may be, in the same general
area by  companies  of  established  repute  engaged  in the  same or a  similar
business;  and will furnish to the Administrative Agent, upon reasonable request
from the Administrative Agent,  information presented in reasonable detail as to
the insurance so carried.


         SECTION 6.4.  Conduct of Business,  Consolidations,  Mergers,  Sales of
Assets, and Maintenance. (a) The Borrower will not (i) consolidate or merge with
or into any other Person unless  immediately  following  such  consolidation  or
merger  no  Default  will  have  occurred  and  the  Borrower  is the  surviving
corporation,  (ii) sell, lease or otherwise transfer all or substantially all of
its assets to any other Person  except in  connection  with a  consolidation  or
merger permitted by this Section 6.4, (iii) terminate,  or fail to maintain, its
corporate  existence  in the  State  of  Texas  or  (iv)  terminate,  or fail to
maintain,  its good  standing  and  qualification  to  transact  business in all
jurisdictions where the nature of its business requires the same.

         (b) The Borrower will continue to engage in substantially the same type
of business as now conducted by the Borrower, and will preserve,  renew and keep
in full force and effect, and will cause each Subsidiary to preserve,  renew and
keep in full force and effect their  respective  corporate  existences and their
respective  rights,  privileges  and  franchises  necessary  or desirable in the
normal  conduct  of  business;  provided  that,  nothing in this  Section  shall
prohibit  (i) the  merger of a  Subsidiary  into the  Borrower  or the merger or
consolidation  of a Subsidiary  with or into another  Person if the  corporation
surviving such  consolidation or merger is a wholly-owned  Subsidiary and if, in
each case,  after giving effect  thereto,  no Default shall have occurred and be
continuing,   (ii)  the  transfer  of  assets,  rights,  privileges,   licenses,
franchises or businesses  from one  Subsidiary to a  wholly-owned  Subsidiary or
(iii) the  sale,  lease or other  transfer  of all or  substantially  all of the
assets of a Subsidiary to the Borrower.

         (c) The  Borrower  will  not be or  become  party  to or  bound  by any
agreement  (including  without limitation any undertaking in connection with the
incurrence of Debt or issuance of  securities)  which imposes any  limitation on
the disposition of assets more  restrictive  than those set forth above or which
in any way would be contravened by the Borrower's performance of its obligations
hereunder.



<PAGE>



         (d) The Borrower  will not permit any  Subsidiary to become party to or
bound by any  agreement  (including,  without  limitation,  any  undertaking  in
connection  with the  incurrence of Debt or issuance of  securities,  other than
this  Agreement)  which imposes any  limitation on such  Subsidiary's  right and
ability to pay  dividends or make or repay loans to the Borrower or to any other
Subsidiary  or  which  in  any  way  could  be  contravened  by  the  Borrower's
performance of its obligations hereunder, except that any Subsidiary, other than
TNMP,  may incur Debt (if otherwise  permitted  hereunder) not Guaranteed by the
Borrower  and  in  connection   therewith   agree  to  limit  the  dividends  or
distributions  of such  Subsidiary and except to the extent of any agreements of
TNMP  existing  on the date  hereof  and any  renewals  and  extensions  of such
agreements.


         SECTION 6.5.  Compliance with Laws. The Borrower will comply, and cause
each Subsidiary to comply,  in all material  respects with all applicable  laws,
ordinances,  rules,  regulations,  and requirements of governmental  authorities
(including,  without limitation,  Environmental Laws and ERISA and the rules and
regulations  thereunder)  except  where  the  necessity  or fact  of  compliance
therewith is contested in good faith by appropriate proceedings.

         SECTION 6.6.  Inspection of Property,  Books and Records.  The Borrower
will keep,  and will cause each  Subsidiary to keep,  proper books of record and
account in which full,  true and correct  entries  shall be made of all dealings
and  transactions in relation to its business and  activities;  and will permit,
and will cause each Subsidiary to permit,  representatives of the Administrative
Agent and each Lender to visit and inspect any of their  respective  properties,
to examine and make abstracts from any of their respective books and records and
to discuss their respective affairs, finances and accounts with their respective
officers,  employees and independent public accountants,  all at such reasonable
times and as often as may reasonably be desired and, if a Default exists, at the
expense of the Borrower.

         SECTION 6.7. Use of Proceeds and Letters of Credit. (a) The proceeds of
the Loans made under this  Agreement  will be used by the  Borrower  for working
capital,  capital  expenditures and other lawful corporate purposes,  including,
without  limitation,  to pay dividends on its common stock,  for investing in or
paying expenses of the Borrower's  Subsidiaries  and for Permitted  Investments.
None of such proceeds  will be used,  directly or  indirectly,  for the purpose,
whether  immediate,  incidental  or ultimate,  of buying or carrying any "margin
stock" within the meaning of Regulation U.

         (b) Letters of Credit may be used by the  Borrower  for any purpose for
which Loan  proceeds  may be used  hereunder;  provided,  however,  no Letter of
Credit may be used in lieu or in support of stay or appeal bonds.



<PAGE>



         SECTION 6.8.  Payment of Taxes.  The Borrower  will and will cause each
Subsidiary to pay all Taxes imposed upon it or any of its assets or with respect
to any of its  franchises,  business,  income or  profits  before  any  material
penalty or interest  accrues  thereon and (b) all  material  claims  (including,
without limitation, claims for labor, services, materials and supplies) for sums
which have become due and  payable and which have or might  become a Lien (other
than a Lien  permitted  under  Section  6.9)  on  any of its  assets;  provided,
however,  that no payment of such Taxes or claims  shall be  required if (i) the
amount,  applicability  or validity thereof is currently being contested in good
faith by appropriate  action promptly initiated and diligently  conducted,  (ii)
the  Borrower  shall  have set aside on its books  reserves  (segregated  to the
extent required by generally accepted accounting  principles)  reasonably deemed
by it to be adequate with respect  thereto,  and (iii) the Borrower has notified
the Administrative  Agent of such  circumstances,  in detail satisfactory to the
Administrative Agent.


         SECTION 6.9. Negative Pledge.  (a) Without the prior written consent of
the Required Lenders,  the Borrower will not create,  assume, or suffer to exist
any Lien upon or with respect to any of its  properties,  now owned or hereafter
acquired,  or sign or file under the Uniform Commercial Code of any jurisdiction
a financing  statement  that names the Borrower as debtor,  or sign any security
agreement  authorizing  any  secured  party  thereunder  to file such  financing
statement; provided, however, that the Borrower may grant or suffer to exist any
of the following described Liens without the Required Lender's consent:

               (i) Liens for taxes or assessments or other governmental  charges
or levies if not yet due and payable;

               (ii)  Liens  imposed  by  law,  such as  operators',  mechanics',
materialmen's, landlords', warehousemen's and carriers' Liens, and other similar
Liens,  securing  obligations  incurred in the ordinary course of business which
are not past due;

               (iii) Liens,  pledges,  or deposits under workers'  compensation,
unemployment insurance, Social Security, or similar legislation; and

               (iv) Liens,  deposits,  or pledges to secure the  performance  of
bids, tenders, contracts (other than contracts for the payment of money), leases
permitted  by the  terms of this  Agreement,  public or  statutory  obligations,
surety,  stay, appeal,  indemnity,  performance or other similar bonds, or other
similar  obligations  arising in the  ordinary  course of business and each case
payment with respect to which is not yet past due;

               (v) Liens in favor of the  lessor on the  property  being  leased
under any equipment lease entered into by the Borrower in the ordinary course of
business;

               (vi) any Lien on any assets  securing  Debt  incurred  or assumed
solely for the  purpose of  financing  all or any part of the cost of  acquiring
such assets,  provided that such Lien attaches to such assets  concurrently with
or within 90 days after the acquisition thereof and attaches to no other assets;
and

               (vii) Liens securing this Agreement and the Notes for the benefit
of all Lenders.

<PAGE>



         (b) Without the prior  written  consent of the  Required  Lenders,  the
Borrower will not permit any  Subsidiary to create,  assume,  or suffer to exist
any Lien upon or with respect to any of such Subsidiary's properties,  now owned
or hereafter acquired,  or sign or file under the Uniform Commercial Code of any
jurisdiction a financing statement that names such Subsidiary as debtor, or sign
any security  agreement  authorizing  any secured party  thereunder to file such
financing statement; provided, however, that such Subsidiary may grant or suffer
to exist any of the  following  described  Liens  without the Required  Lender's
consent:


               (i) any Lien  existing  on any asset of such  Subsidiary  that is
identified on Exhibit 6.9, except any such Lien which is released  subsequent to
the date hereof;
               (ii) any Lien on any assets of such Subsidiary  created  pursuant
to or under the trust  indentures  governing the issuance by such  Subsidiary of
First Mortgage Bonds;
               (iii) Liens securing Debt of such Subsidiary  incurred or assumed
for the  acquisition  of property and the  construction  of  facilities  by such
Subsidiary  and secured  solely by such  property and  facilities  and for which
there is no recourse  against any other  property or assets of such  Subsidiary,
any other Subsidiary or the Borrower;

               (iv) Liens for taxes or assessments or other governmental charges
or levies if not yet due and payable;

               (v)  Liens  imposed  by  law,  such  as  operators',  mechanics',
materialmen's, landlords', warehousemen's and carriers' Liens, and other similar
Liens,  securing  obligations  incurred in the ordinary course of business which
are not past due;

               (vi) Liens,  pledges,  or deposits under  workers'  compensation,
unemployment insurance, Social Security, or similar legislation; and

               (vii) Liens,  deposits,  or pledges to secure the  performance of
bids, tenders, contracts (other than contracts for the payment of money), leases
permitted  by the  terms of this  Agreement,  public or  statutory  obligations,
surety,  stay, appeal,  indemnity,  performance or other similar bonds, or other
similar  obligations  arising in the  ordinary  course of business and each case
payment with respect to which is not yet past due.

         SECTION  6.10.  Loans and Advances to Others;  Investments;  Restricted
Payments.  (a) The Borrower  will not directly or  indirectly  make or suffer to
exist any loan,  advance or extension of credit to any Person except (i) current
trade and customer accounts receivable which are for goods furnished or services
rendered in the ordinary  course of business and which are payable in accordance
with customary trade terms, (ii) customary  advances to employees for travel and
other business expenses to be incurred on behalf of the Borrower in the ordinary
course of business and (iii) Permitted Investments.

         (b) The Borrower will not make any capital  contribution  to or acquire
any Investment in, or purchase or make a commitment to purchase any interest in,
any Person except Permitted Investments or as permitted under clauses (a)(i) and
(a)(ii) above.


<PAGE>



         (c) The  Borrower  will not and  will  not  permit  any  Subsidiary  to
directly or indirectly make or permit any Restricted Payment,  except that if no
Default  exists  and the  payment  thereof  will not  cause a  Default,  (i) the
Borrower may pay cash dividends on its common stock if the payment thereof would
not cause the sum of such dividend  plus all  dividends  declared or paid during
the 24-month period ending upon such declaration or payment to exceed Cumulative
Net Income  Available  for Common  Dividends  for such  period and (ii) TNMP may
declare and pay cash  dividends on its  preferred  stock or redeem its preferred
stock (A) pursuant to mandatory  redemption  requirements  in effect on the date
hereof or (B) with the proceeds of newly-issued preferred stock that will not be
redeemable mandatorily or at the option of any holder thereof (other than in the
event of a Change in Control) prior to the Termination Date.


         SECTION 6.11. Transactions with Affiliates.  The Borrower will not, and
will not permit any Subsidiary to,  directly or indirectly,  pay any funds to or
for the account  of, make any  investment  (whether by  acquisition  of stock or
indebtedness,  by  loan,  advance,  transfer  of  property,  guarantee  or other
agreement to pay,  purchase or service,  directly or  indirectly,  any Debt,  or
otherwise)  in,  lease,  sell,  transfer  or  otherwise  dispose of any  assets,
tangible or intangible,  to, or participate in, or effect, any transaction with,
any Affiliate  except on an arms-length  basis on terms at least as favorable to
the Borrower or such  Subsidiary  as could have been obtained from a third party
who was not an  Affiliate;  provided  that,  the  foregoing  provisions  of this
Section  shall not prohibit any such Person from  declaring or paying any lawful
dividend or other payment  ratably in respect of all of its capital stock of the
relevant class so long as, after giving effect thereto, no Default exists.

         ERISA. As of each day during the term of this  Agreement,  the Borrower
shall cause the representation set forth in Section 5.7, if it were given on and
as of such date, to be true and correct.

         SECTION 6.13.  Sale of  Subsidiaries;  Issuance of Securities.  (a) The
Borrower will not and will not permit any  Subsidiary  to, at any time,  sell or
otherwise transfer, directly or indirectly, any capital stock of or other equity
interest  in  any  Subsidiary  except  to a  wholly-owned  Subsidiary  or to the
Borrower.  Notwithstanding  the  foregoing,  the Borrower  may  transfer  equity
interests  in  TNPE-Magnus,  LLC,  a  Texas  limited  liability  company,  or it
successor in interest,  pursuant to (i)  agreements  requiring that the Borrower
transfer  up to 49% of the  equity  interests  to  third  parties;  and (ii) the
operation of that certain Shareholder Agreement dated May 21, 1997, by and among
the Borrower,  General Grinding  Corporation,  F&F Limited Liability Company and
TNPE-Magnus,  LLC, as  currently  in effect or as may  hereafter  be amended and
restated, requiring the transfer of such interest upon the occurrence of certain
operative events.

         (b) The Borrower  will not permit any  Subsidiary  to issue any capital
stock or other  equity  interest to any Person  other than to the  Borrower or a
wholly-owned  Subsidiary  if such  issuance  of  capital  stock or other  equity
interest would result in such Subsidiary failing thereafter to be a Subsidiary.



<PAGE>



         (c)  Notwithstanding  clauses  (a) and (b) above,  in order to obtain a
market valuation for the purposes of establishing an amount of stranded costs as
required  by the  Transition  to  Competition  Plan  approved  in Docket  17751,
Borrower may transfer the capital stock of any  Subsidiary  (other than TNMP) to
the  Borrower's  shareholders  in a  transaction  in which such capital stock is
listed on a national  securities exchange or permit the sale of capital stock by
a Subsidiary other than TNMP (and such Subsidiary may engage in such actions) in
a  transaction  in which such capital  stock is listed on a national  securities
exchange or the NASDAQ Stock Market.


         SECTION  6.14.  Quantity  of  Documents.  All  certificates,  opinions,
reports and documents to be delivered  from time to time  hereunder  shall be in
such number of counterparts as the Administrative Agent may reasonably request.

           Certain  Financial  Covenants.  (a) As  measured  at the  end of each
fiscal  quarter  of the  Borrower,  the  Borrower  will not  permit the ratio of
Consolidated Indebtedness to Consolidated Capitalization ever to exceed (i) 0.70
to 1.00 for any fiscal  quarter ending on or before March 31, 1999, or (ii) 0.65
to 1.00 for any fiscal quarter ending after March 31, 1999.

         (b) As measured at the end of each fiscal quarter of the Borrower,  the
Borrower  will not permit the ratio of Cash  Dividends  and  Distributions  less
Overhead to the sum of  Interest  Expense  plus Cash Taxes for the  four-quarter
period ending at such date to ever be less than 1.20 to 1.00.

         (c) As measured at the end of each fiscal quarter of the Borrower,  the
Borrower will not permit the ratio of Consolidated EBIT to Consolidated Interest
Expense for the four-quarter  period ending at such date to be less than 1.70 to
1.0.

         (d) As of the Effective Date through September 30, 1999, the sum of (i)
outstanding Loans plus (ii) the Borrower's other Permitted Indebtedness will not
exceed  $25,000,000.  Prior  to such  sum of  outstanding  Loans  and  Permitted
Indebtedness ever exceeding $25,000,000 and in any event subsequent to September
30, 1999, the Borrower will cause the ratio of  Unrestricted  Retained  Earnings
under the most  restrictive  distribution  limitations  applicable to Borrower's
Subsidiaries  to the sum of (i) the aggregate  amount of the  outstanding  Loans
plus (ii) the Borrower's  other  Permitted  Indebtedness to exceed the following
ratios during the periods indicated:

     Closing through September 30, 1999:                           0.75 to 1.00
     December 31, 1999 through September 30, 2000:                 1.00 to 1.00
     December 31, 2000 through September 30, 2001:                 1.50 to 1.00
     December 31, 2001 through September 30, 2002:                 2.00 to 1.00
     December 31, 2002 through September 30, 2003:                 2.50 to 1.00



<PAGE>



         SECTION  6.16.  Year  2000.  The  Borrower  will  promptly  notify  the
Administrative  Agent in the event the Borrower discovers or determines that any
computer application  (including those of its suppliers,  vendors and customers)
that is material to its or any of its Subsidiaries' business and operations will
not be Year 2000  compliant,  except to the extent that such  failure  could not
reasonably  be expected  to have a material  adverse  effect on the  business or
operations of the Borrower or any of its Subsidiaries.


         SECTION 6.17.  Exceptions  to  Covenants.  Neither the Borrower nor any
other  Person shall be permitted to take any action which is permitted by any of
the  covenants  contained  in this  Agreement if such action would result in the
breach of any other covenant contained in this Agreement.

                                                     ARTICLE VII

                                                      DEFAULTS

     SECTION  7.1.  Events of Default.  If one or more of the  following  events
("Events of Default") shall have occurred and be continuing:

         (a) the Borrower  shall fail to pay when due any  principal of any Loan
or  shall  fail to pay  within  one (1)  Domestic  Business  Day of the due date
thereof any interest, any fees or any other amount payable hereunder;

          (b) the  Borrower  shall fail to observe  or perform  its  obligations
under Section 6.1(c), 6.1(e), 6.4, 6.7, 6.8, 6.10, 6.12 or 6.13;

         (c) the  Borrower  shall fail to observe or  perform  any  covenant  or
agreement  contained in this Agreement  (other than those covered by clauses (a)
or (b) above) for 30 days after notice thereof has been given to the Borrower by
the Administrative Agent at the request of any Lender;

         (d) any  representation,  warranty,  certification or statement made by
the Borrower in this  Agreement or in any  certificate,  financial  statement or
other document  delivered  pursuant to this  Agreement  shall prove to have been
incorrect in any material respect when made (or deemed made);

         (e) the  Borrower  or any  Subsidiary  shall  fail to pay  when due any
payments in respect of, or otherwise fails to perform its obligations  under, or
there shall occur any default or event of default  under,  any Material  Debt or
there  shall  occur  any  default  or  event of  default  under  any  instrument
evidencing  or  establishing  a Lien,  and any  applicable  cure or grace period
pertaining to such failure or default shall have expired without such failure or
default  having  been  remedied,  or any event or  condition  shall  occur which
results in the acceleration of any Material Debt;



<PAGE>



         (f) the Borrower or any  Subsidiary  shall commence a voluntary case or
other  proceeding  seeking  liquidation,  reorganization  or other  relief  with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or  hereafter  in  effect  or  seeking  the  appointment  of a  trustee,
receiver,  liquidator,  custodian  or  other  similar  official  of  it  or  any
substantial part of its property,  or shall consent to any such relief or to the
appointment of or taking  possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the  benefit  of  creditors,  or shall fail  generally  to pay its debts as they
become  due,  or  shall  take  any  corporate  action  to  authorize  any of the
foregoing;


         (g) an involuntary case or other proceeding shall be commenced  against
the Borrower or any  Subsidiary  seeking  liquidation,  reorganization  or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the  appointment of a trustee,
receiver,  liquidator,  custodian  or  other  similar  official  of  it  or  any
substantial part of its property,  and such involuntary case or other proceeding
shall remain  undismissed  and unstayed for a period of 60 days; or an order for
relief shall be entered against the Borrower or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;

         (h) any member of the ERISA Group shall fail to pay when due any amount
which it shall have become  liable to pay to a Plan under Title IV of ERISA;  or
notice of intent to  terminate  a Plan shall be filed under Title IV of ERISA by
any member of the ERISA Group, any plan  administrator or any combination of the
foregoing;  or the PBGC shall institute  proceedings  under Title IV of ERISA to
terminate,  to impose  liability  in  respect  of,  or to cause a trustee  to be
appointed to administer any Plan; or a condition  shall exist by reason of which
the PBGC would be entitled to obtain a decree adjudicating that any Plan must be
terminated;

         (i) final,  non-appealable judgments or orders for the payment of money
in  excess  of  $10,000,000  shall  be  rendered  against  the  Borrower  or any
Subsidiary and such judgments or orders shall continue  unsatisfied and unstayed
for a period of 30 days; or

         (j) any  material  provision  of the  Agreement or any Note shall be or
become invalid or unenforceable or the Borrower shall assert in writing that any
such material provision is invalid or unenforceable,

         (k)      any Change of Control shall have occurred,



<PAGE>



then, and in every such event, the  Administrative  Agent shall (i) if requested
by Lenders having at least 51% in aggregate amount of the Commitments, by notice
to the Borrower  terminate the Commitments  and they shall  thereupon  terminate
except to the extent necessary to fund the Letter of Credit  Exposure,  and (ii)
if requested by Lenders holding at least 51% of the aggregate  unpaid  principal
amount of the Loans, by notice to the Borrower  declare the Loans (together with
accrued  interest  thereon) to be, and the Loans (together with accrued interest
thereon)  shall   thereupon   become,   immediately   due  and  payable  without
presentment,  demand,  protest  or other  notice of any  kind,  all of which are
hereby waived by the Borrower;  provided  that, in the case of any of the Events
of Default  specified  in clauses (f) or (g) of this Section with respect to the
Borrower,  without  any  notice  to  the  Borrower  or  any  other  act  by  the
Administrative  Agent or the Lenders,  the Commitments shall thereupon terminate
except to the extent  necessary to fund the Letter of Credit  Exposure,  and the
Loans (together with accrued interest thereon) shall become  immediately due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower.


         Notice of Default.  The  Administrative  Agent shall give notice to the
Borrower  under Section  7.1(c)  promptly  upon being  requested to do so by any
Lender and shall thereupon notify all the Lenders thereof.

         Letter of Credit  Deposit.  Within three (3) Business Days following an
Event of Default,  the Borrower shall deposit with the Administrative  Agent for
the  benefit of the  Lenders an amount  equal to the Letter of Credit  Exposure,
which amount shall be held by the Administrative Agent for payment of any drafts
drawn on any Letters of Credit or returned to the Borrower  upon  expiration  or
cancellation of all Letters of Credit and termination of the Commitments.


                                  ARTICLE VIII

                            THE ADMINISTRATIVE AGENT

         SECTION 8.1.  Appointment and  Authorization.  Each Lender  irrevocably
appoints  and  authorizes  the  Administrative  Agent to take such action as its
contractual  representative on its behalf and to exercise such powers under this
Agreement  and the Notes as are  delegated  to the  Administrative  Agent by the
terms  hereof  or  thereof,  together  with all such  powers  as are  reasonably
incidental thereto.  Notwithstanding the use of the defined term "Administrative
Agent," it is  expressly  understood  and agreed that the  Administrative  Agent
shall not have any  fiduciary  responsibilities  to any Lender by reason of this
Agreement or the Notes and that the Administrative Agent is merely acting as the
contractual  representative  of  the  Lenders  with  only  those  duties  as are
expressly  set forth in this  Agreement  and the Notes.  In its  capacity as the
Lenders'  contractual  representative,  the  Administrative  Agent  (i) does not
hereby assume any  fiduciary  duties to any of the Lenders and (ii) is acting as
an independent  contractor,  the rights and duties of which are limited to those
expressly set forth in this Agreement and the Notes.  Each of the Lenders hereby
agrees to assert no claim against the Administrative  Agent on any agency theory
or any other theory of  liability  for breach of  fiduciary  duty,  all of which
claims each Lender hereby waives. Each Lender hereby appoints The First National
Bank of Chicago as "Syndication  Agent" for the Lenders.  The Syndication Agent,
in it  capacity  as such,  shall  have no  rights,  duties  or  responsibilities
hereunder or under the Notes.



<PAGE>



         SECTION 8.2.  Administrative  Agent and Affiliates.  NationsBank,  N.A.
shall have the same rights and powers  under this  Agreement as any other Lender
and may exercise or refrain from  exercising  the same as though it were not the
Administrative  Agent,  and  NationsBank,  N.A.  and its  affiliates  may accept
deposits from, lend money to, and generally  engage in any kind of business with
the  Borrower or any  Subsidiary  or affiliate of the Borrower as if it were not
the Administrative Agent.


         SECTION 8.3.  Action by  Administrative  Agent.  The obligations of the
Administrative  Agent  hereunder  are only  those  expressly  set forth  herein.
Without limiting the generality of the foregoing, the Administrative Agent shall
not be  required  to take any  action  with  respect to any  Default,  except as
expressly provided in Article VII.

         SECTION 8.4.  Consultation with Experts.  The Administrative  Agent may
consult with legal  counsel (who may be counsel for the  Borrower),  independent
public  accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in  accordance  with
the advice of such counsel, accountants or experts.

         SECTION  8.5.   Liability   of   Administrative   Agent.   Neither  the
Administrative  Agent  nor any of its  affiliates  nor any of  their  respective
directors, officers, agents or employees shall be liable for any action taken or
not taken by it in connection herewith (i) with the consent or at the request of
the  Required  Lenders  or (ii) in the  absence of its own gross  negligence  or
willful misconduct.  Neither the Administrative  Agent nor any of its affiliates
nor any of their respective  directors,  officers,  agents or employees shall be
responsible  for or have any duty to  ascertain,  inquire into or verify (i) any
statement,  warranty or representation made in connection with this Agreement or
any  borrowing  hereunder;  (ii) the  performance  or  observance  of any of the
covenants or agreements of the Borrower; (iii) the satisfaction of any condition
specified in Article IV, except receipt of items required to be delivered to the
Administrative Agent; or (iv) the validity, effectiveness or genuineness of this
Agreement,  the Notes or any other instrument or writing furnished in connection
herewith.  The  Administrative  Agent shall not incur any liability by acting in
reliance  upon any notice,  consent,  certificate,  statement,  or other writing
(which may be a bank wire,  telex,  facsimile  transmission or similar  writing)
believed by it to be genuine or to be signed by the proper party or parties.

     SECTION 8.6. Indemnification. Each Lender shall, ratably in accordance with
its  Commitment,  indemnify  and  defend on a current  basis the  Administrative
Agent, NMS, and their respective  affiliates,  directors,  officers,  agents and
employees (each an "Indemnified Party") and hold each Indemnified Party harmless
from and against any cost, expense of any kind (including,  without  limitation,
counsel fees and  disbursements  and the costs  incurred in  connection  with or
preparing for any investigative,  administrative or judicial proceeding), claim,
demand, action, loss or liability (to the extent not reimbursed by the Borrower)
that  such  Indemnified  Party  may  suffer  or incur in  connection  with  this
Agreement  or the  transactions  contemplated  hereby,  or any  action  taken or
omitted by such  Indemnified  Party  hereunder,  including  any of the foregoing
arising from the negligence, whether sole or concurrent, of any such Indemnified
Party but not as result of such Indemnified  Party's gross negligence or willful
misconduct.



<PAGE>



         SECTION 8.7. Credit  Decision.  Each Lender  acknowledges  that it has,
independently  and without reliance upon the  Administrative  Agent or any other
Lender,   and  based  on  such  documents  and  information  as  it  has  deemed
appropriate,  made its own  credit  analysis  and  decision  to enter  into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon the  Administrative  Agent or any other Lender,  and based on such
documents and information as it shall deem appropriate at the time,  continue to
make its own credit  decisions  in taking or not  taking  any action  under this
Agreement.


         SECTION 8.8. Successor  Administrative  Agent. The Administrative Agent
may resign at any time by giving notice thereof to the Lenders and the Borrower.
Upon any such resignation,  the Required Lenders shall have the right to appoint
a successor  Administrative Agent subject to the approval of the Borrower. If no
successor  Administrative  Agent shall have been so appointed and approved,  and
shall  have  accepted  such  appointment,  within  30 days  after  the  retiring
Administrative   Agent  gives   notice  of   resignation,   then  the   retiring
Administrative  Agent  may,  on  behalf  of the  Lenders,  appoint  a  successor
Administrative  Agent,  which shall be a commercial  bank  organized or licensed
under the laws of the  United  States of  America  or of any State  thereof  and
having  a  combined  capital  and  surplus  of at least  $500,000,000.  Upon the
acceptance of its appointment as  Administrative  Agent hereunder by a successor
Administrative  Agent,  such  successor  Administrative  Agent  shall  thereupon
succeed to and  become  vested  with all the  rights and duties of the  retiring
Administrative Agent, and the retiring  Administrative Agent shall be discharged
from its duties and  obligations  hereunder.  After any retiring  Administrative
Agent's  resignation  hereunder as Administrative  Agent, the provisions of this
Article  shall  inure to its  benefit as to any  actions  taken or omitted to be
taken by it while it was Administrative Agent.

     SECTION 8.9.  Administrative  Agent's  Fee.  The Borrower  shall pay to the
Administrative  Agent for its own  account  fees in the amounts and at the times
previously agreed upon between the Borrower and the Administrative Agent.

                                   ARTICLE IX

                             CHANGE IN CIRCUMSTANCES

          SECTION 9.1. Basis for Determining Interest Rate Inadequate or Unfair.
If on or prior to the first day of any Interest Period for any Euro-Dollar Loan:
         
     (a)deposits in dollars (in the applicable amounts) are not being offered to
the Administrative Agent in the relevant market for such Interest Period, or


<PAGE>



         (b) in the case of Euro-Dollar Loans, Lenders having 51% or more of the
aggregate principal amount of the affected Loans advise the Administrative Agent
that the London  Interbank  Offered Rate,  as  determined by the  Administrative
Agent will not,  together with any increased costs  reimbursable by the Borrower
hereunder,  adequately  and fairly  reflect the cost to such  Lenders of funding
their Euro-Dollar Loans, as the case may be, for such Interest Period,


the Administrative Agent shall forthwith give notice thereof to the Borrower and
the Lenders, whereupon until the Administrative Agent notifies the Borrower that
the  circumstances  giving  rise to such  suspension  no longer  exist,  (i) the
obligations of the Lenders to make Euro-Dollar  Loans, or to continue or convert
outstanding Loans as or into Euro-Dollar Loans, shall be suspended and (ii) each
outstanding Euro-Dollar Loan, as the case may be, shall be converted into a Base
Rate  Loan on the  last  day of the  then  current  Interest  Period  applicable
thereto.  Unless the  Borrower  notifies the  Administrative  Agent at least two
Domestic Business Days before the date of any Euro-Dollar  Borrowing for which a
Notice of Borrowing  has  previously  been given that it elects not to borrow on
such date, such Borrowing shall instead be made as a Base Rate Borrowing.

         SECTION 9.2.  Illegality.  If, on or after the date of this  Agreement,
the adoption of any  applicable  law, rule or  regulation,  or any change in any
applicable  law,  rule or  regulation,  or any change in the  interpretation  or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration  thereof, or compliance
by any Lender (or its Euro-Dollar  Lending Office) with any request or directive
(whether or not having the force of law) of any such authority,  central bank or
comparable  agency shall make it unlawful or  impossible  for any Lender (or its
Euro-Dollar  Lending Office) to make, maintain or fund its Euro-Dollar Loans and
such Lender shall so notify the Administrative  Agent, the Administrative  Agent
shall  forthwith  give notice  thereof to the other  Lenders  and the  Borrower,
whereupon until such Lender notifies the Borrower and the  Administrative  Agent
that the  circumstances  giving rise to such  suspension  no longer  exist,  the
obligation of such Lender to make Euro-Dollar  Loans, or to convert  outstanding
Loans into Euro-Dollar  Loans,  shall be suspended.  Before giving any notice to
the Administrative Agent pursuant to this Section, such Lender shall designate a
different Euro-Dollar Lending Office if such designation will avoid the need for
giving such notice and will not, in the  judgment of such  Lender,  be otherwise
disadvantageous  to such Lender.  If such notice is given, each Euro-Dollar Loan
of such Lender then  outstanding  shall be  converted to a Base Rate Loan either
(a) on the last day of the  then  current  Interest  Period  applicable  to such
Euro-Dollar Loan if such Lender may lawfully  continue to maintain and fund such
Loan to such day or (b)  immediately if such Lender shall  determine that it may
not lawfully continue to maintain and fund such Loan to such day.



<PAGE>



         SECTION 9.3.  Increased Cost and Reduced Return. (a) If on or after the
date hereof,  the adoption of any  applicable  law, rule or  regulation,  or any
change  in  any  applicable  law,  rule  or  regulation,  or any  change  in the
interpretation or administration thereof by any governmental authority,  central
bank or comparable  agency  charged with the  interpretation  or  administration
thereof, or compliance by any Lender (or its Applicable Lending Office) with any
request  or  directive  (whether  or not  having  the  force of law) of any such
authority,  central  bank or  comparable  agency  shall  impose,  modify or deem
applicable any reserve  (including,  without  limitation,  any such  requirement
imposed by the Board of Governors of the Federal Reserve  System,  but excluding
with respect to any Euro-Dollar  Loan any such requirement for which such Lender
is entitled to compensation for the relevant Interest Period under Section 3.5),
special deposit,  insurance assessment or similar requirement against assets of,
deposits  with or for the account of, or credit  extended by, any Lender (or its
Applicable  Lending  Office) or shall  impose on any  Lender (or its  Applicable
Lending  Office) or on the United States market for  certificates  of deposit or
the London interbank market any other condition affecting its Euro-Dollar Loans,
its Notes or its obligation to make  Euro-Dollar  Loans and the result of any of
the foregoing is to increase the cost to such Lender (or its Applicable  Lending
Office) of making or maintaining any  Euro-Dollar  Loan, or to reduce the amount
of any sum  received or  receivable  by such Lender (or its  Applicable  Lending
office)  under this  Agreement  or under its Note with  respect  thereto,  by an
amount  reasonably  deemed by such Lender to be material,  then,  within 15 days
after  demand by such  Lender  (with a copy to the  Administrative  Agent),  the
Borrower  shall pay to such  Lender  such  additional  amount or amounts as will
compensate such Lender for such increased cost or reduction.


         (b) If any Lender shall have reasonably determined that, after the date
hereof, the adoption of any applicable law, rule or regulation regarding capital
adequacy,  or any change in any such law, rule or  regulation,  or any change in
the  interpretation  or  administration  thereof by any governmental  authority,
central  bank  or  comparable   agency  charged  with  the   interpretation   or
administration  thereof,  or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority,  central bank or
comparable agency  (including any  determination by any such authority,  central
bank or comparable  agency that, for purposes of capital adequacy  requirements,
the  Commitments  hereunder  do not  constitute  commitments  with  an  original
maturity of one year or less), has or would have the effect of reducing the rate
of return on capital of such  Lender (or its  Parent) as a  consequence  of such
Lender's  obligations  hereunder to a level below that which such Lender (or its
Parent) could have achieved but for such adoption,  change, request or directive
(taking into  consideration its policies with respect to capital adequacy) by an
amount deemed by such Lender to be material,  then from time to time,  within 15
days after demand by such Lender (with a copy to the Administrative  Agent), the
Borrower  shall pay to such  Lender  such  additional  amount or amounts as will
compensate such Lender (or its Parent) for such reduction.



<PAGE>



         (c)  Each   Lender  will   promptly   notify  the   Borrower   and  the
Administrative Agent of any event of which it has knowledge, occurring after the
date hereof,  which will entitle  such Lender to  compensation  pursuant to this
Section and will designate a different  Lending office if such  designation will
avoid the need for, or reduce the amount of, such  compensation and will not, in
the sole judgment of such Lender, be otherwise disadvantageous to such Lender. A
certificate of any Lender claiming  compensation  under this Section and setting
forth the  additional  amount or  amounts  to be paid to it  hereunder  shall be
conclusive in the absence of manifest  error. In determining  such amount,  such
Lender may use any reasonable averaging and attribution methods. Notwithstanding
the foregoing  clauses (a) and (b) of this Section,  the Borrower  shall only be
obligated to compensate any Lender for any amount arising or accruing during (i)
any time or period  commencing  not more than 90 days prior to the date on which
such Lender notifies the Administrative  Agent and the Borrower that it proposes
to demand such compensation and identifies to the  Administrative  Agent and the
Borrower  the  statute,  regulation  or  other  basis  upon  which  the  claimed
compensation  is or will be based  and (ii) any  time or  period  during  which,
because of the retroactive application of such statute, regulation or other such
basis, such Lender did not know that such amount would arise or accrue.


          SECTION  9.4.  Taxes.  (a)  For the  purposes  of  this  Section,  the
following terms have the following meanings:

         "Taxes"  means any and all  present or future  taxes,  duties,  levies,
imposts, deductions,  charges or withholdings with respect to any payment by the
Borrower  pursuant to this  Agreement or under any Note,  and all  penalties and
interest with respect thereto,  excluding (i) in the case of each Lender and the
Administrative  Agent,  taxes  imposed on its income,  and  franchise or similar
taxes  imposed on it, by a  jurisdiction  under the laws of which such Lender or
the  Administrative  Agent  (as the case may be) is  organized  or in which  its
principal executive office is located, in which its Applicable Lending office is
located or in which it would be subject to tax due to some connection other than
that created by this  Agreement and (ii) in the case of each Lender,  any United
States withholding tax imposed on such payments but only to the extent that such
Lender is subject to United States withholding tax at the time such Lender first
becomes a party to this Agreement.

         "Other  Taxes" means any present or future stamp or  documentary  taxes
and any other  excise or property  taxes,  or similar  charges or levies and all
penalties and interest with respect thereto,  which arise from the making of any
payment  pursuant to this  Agreement or under any Note or from the  execution or
delivery of this Agreement or any Note.

         (b) Any and all  payments by the  Borrower to or for the account of any
Lender or the  Administrative  Agent  hereunder  or under any Note shall be made
without  deduction for any Taxes or Other Taxes;  provided that, if the Borrower
shall be  required  by law to  deduct  any  Taxes or Other  Taxes  from any such
payments,  (i) the sum payable  shall be  increased  as  necessary so that after
making all required deductions  (including  deductions  applicable to additional
sums payable under this Section) such Lender or the Administrative Agent (as the
case may be) receives an amount  equal to the sum it would have  received had no
such deductions been made, (ii) the Borrower shall make such  deductions,  (iii)
the  Borrower  shall  pay the full  amount  deducted  to the  relevant  taxation
authority or other  authority in  accordance  with  applicable  law and (iv) the
Borrower shall furnish to the  Administrative  Agent, at its address referred to
in Section  10.1,  the  original  or a  certified  copy of a receipt  evidencing
payment thereof.

         (c) The Borrower agrees to indemnify each Lender and the Administrative
Agent  for  the  full  amount  of  Taxes  or  Other  Taxes  (including,  without
limitation, any Taxes or Other Taxes on amounts payable under this Section) paid
by  such  Lender  or the  Administrative  Agent  (as  the  case  may  be).  This
indemnification  shall  be  paid  within  15  days  after  such  Lender  or  the
Administrative Agent (as the case may be) makes appropriate demand therefor.



<PAGE>



         (d) Each Lender organized under the laws of a jurisdiction  outside the
United  States,  on or prior to the date of its  execution  and delivery of this
Agreement in the case of each Lender listed on the signature pages hereof and on
or prior to the date on which  it  becomes  a Lender  in the case of each  other
Lender, and from time to time thereafter if requested in writing by the Borrower
(but only so long as such Lender remains  lawfully able to do so), shall provide
the Borrower and the  Administrative  Agent with Internal  Revenue  Service form
1001 or 4224, as  appropriate,  or any successor form prescribed by the Internal
Revenue  Service,  certifying  that such Lender is entitled to benefits under an
income tax treaty to which the United States is a party which exempts the Lender
from United States  withholding  tax or reduces the rate of  withholding  tax on
payments of  interest  for the  account of such  Lender or  certifying  that the
income receivable  pursuant to this Agreement is effectively  connected with the
conduct of a trade or business in the United States.


         (e) For any period with respect to which a Lender has failed to provide
the Borrower or the  Administrative  Agent with the appropriate form pursuant to
clause (d) above  (unless  such  failure  is due to a change in  treaty,  law or
regulation  occurring  subsequent to the date on which such form  originally was
required to be provided),  such Lender shall not be entitled to  indemnification
under  clause  (b) or (c) above  with  respect  to Taxes  imposed  by the United
States;  provided that if a Lender, which is otherwise exempt from or subject to
a reduced  rate of  withholding  tax,  becomes  subject to Taxes  because of its
failure to deliver a form required hereunder, the Borrower shall take such steps
(at the  expense of such  Lender) as such  Lender  shall  reasonably  request to
assist such Lender to recover such Taxes.

         (f) If the Borrower is required to pay additional amounts to or for the
account of any Lender pursuant to this Section, then such Lender will change the
jurisdiction  of its  Applicable  Lending  Office  if, in the  judgment  of such
Lender,  such change (i) will  eliminate or reduce any such  additional  payment
which may thereafter  accrue and (ii) is not otherwise  disadvantageous  to such
Lender in its sole judgment.

SECTION 9.5. Base Rate Loans Substituted for Affected  Euro-Dollar Loans. If (i)
the  obligation  of any  Lender  to  make,  or  convert  outstanding  Loans  to,
Euro-Dollar Loans has been suspended  pursuant to Section 9.2 or (ii) any Lender
has  demanded  compensation  under  Sections  9.3 or  9.4  with  respect  to its
Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar  Business
Days' prior notice to such Lender through the Administrative Agent, have elected
that the provisions of this Section shall apply to such Lender, then, unless and
until such Lender  notifies the Borrower that the  circumstances  giving rise to
such suspension or demand for compensation no longer exist:

         (a) all  Loans  which  would  otherwise  be made by such  Lender as (or
continued as or converted  into)  Euro-Dollar  Loans,  as the case may be, shall
instead be Base Rate Loans (on which  interest  and  principal  shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Lenders); and



<PAGE>



         (b) after each of its  Euro-Dollar  Loans, as the case may be, has been
repaid (or converted to a Base Rate Loan), all payments of principal which would
otherwise be applied to repay such  Euro-Dollar  Loans shall be applied to repay
its Base Rate Loans instead.


If such Lender notifies the Borrower that the circumstances  giving rise to such
notice no longer apply,  the principal  amount of each such Base Rate Loan shall
be converted into an  Euro-Dollar  Loan, as the case may be, on the first day of
the next succeeding  Interest Period applicable to the related Euro-Dollar Loans
of the other Lenders.

         Replacement of Lender.nt of Lender.

         (a)      In the event that:

          (i) any Lender  requests  compensation  pursuant to Section 9.3 or 9.4
hereof; 

                  (ii) the obligation of any Lender to make Euro-Dollar Loans or
to  continue,  or to convert  Base Rate Loans into,  Euro-Dollar  Loans shall be
suspended pursuant to Section 9.2 hereof;

                  (iii) any Lender  becomes  insolvent or fails to make any Loan
in response to a timely Notice of Borrowing where the Required Lenders have made
the respective Loans to be made by them in response to such notice; or

                  (iv) any Lender  fails or refuses to agree to a request by the
Borrower to amend or waive, or to grant any consent under,  any provision of the
Agreement under  circumstances  when such amendment,  waiver or consent has been
approved by the Required Lenders, such amendment, waiver or consent requires the
approval of all of the Lenders to be  effective  and such  failure or refusal is
evidenced by (x) written objection by such Lender to any such request made to it
by the  Administrative  Agent in writing  describing such  amendment,  waiver or
requested consent in principle, (y) failure by such Lender to respond in writing
to any such  request so made to it on or before the 15th  Domestic  Business Day
after it  receives  such  request,  or (z) failure by such Lender to execute and
deliver definitive  documentation furnished to it by the Administrative Agent to
effectuate any such amendment,  waiver or consent on or before the 15th Domestic
Business Day after it receives such documentation;

         then, so long as such condition exists, the Borrower may either:



<PAGE>



                  (1) designate  another  financial  institution (such financial
institution  being  herein  called a  "Replacement  Lender")  acceptable  to the
Administrative  Agent (which  acceptance will not be unreasonably  withheld) and
which is not an Affiliate of the Borrower,  to assume such  Lender's  Commitment
hereunder  and to  purchase  the Loans of such Lender and such  Lender's  rights
under this Agreement and the Note held by such Lender,  all without  recourse to
or  representation  or warranty  by, or expense to such  Lender,  for a purchase
price equal to the  outstanding  principal  amount of the Loans  payable to such
Lender plus any accrued but unpaid interest on such Loans and accrued but unpaid
fees owing to such Lender plus any amounts  payable to such Lender under Section
3.3 hereof calculated as if such purchase constituted a prepayment of Loans plus
any other  amounts  payable to such Lender under this  Agreement,  and upon such
assumption, purchase and substitution, and subject to the execution and delivery
to  the  Administrative   Agent  by  the  Replacement  Lender  of  documentation
satisfactory to the  Administrative  Agent  (pursuant to which such  Replacement
Lender  shall  assume  the  obligations  of  such  original  Lender  under  this
Agreement),  the Replacement  Lender shall succeed to the rights and obligations
of such Lender hereunder; or


                  (2) with the prior  written  consent of the Required  Lenders,
pay to such Lender the outstanding principal amount of the Loans payable to such
Lender plus any accrued but unpaid interest on such Loans and accrued but unpaid
fees owing to such Lender plus any amounts  payable to such Lender under Section
3.3 hereof calculated as if such purchase  constituted a prepayment of Loans. In
the event that the Borrower  exercises its rights under the preceding  sentence,
the Lender  against which such rights are  exercised  shall no longer be a party
hereto or have any rights or obligations hereunder;

         provided  that the  obligations  of the  Borrower to such Lender  under
Article  IX and  Section  10.3  hereof  with  respect  to  events  occurring  or
obligations arising before or as a result of such replacement shall survive such
exercise.

         (b) If the  Borrower  exercises  its rights under clause (2) of Section
9.6(a)  hereof,  the Borrower may, not later than 180 days after such  exercise,
designate a Replacement  Lender  acceptable to the  Administrative  Agent (which
acceptance will not be  unreasonably  withheld) and which is not an Affiliate of
the Borrower, to assume a Commitment hereunder in an amount not greater than the
Commitment of the Lender against which such rights were  exercised and,  subject
to the execution  and delivery to the  Administrative  Agent by the  Replacement
Lender of documentation satisfactory to the Administrative Agent the Replacement
Lender shall become party to this  Agreement as a Lender.  Upon the  Replacement
Lender so becoming a party  hereto,  the  Borrower  shall  borrow Loans from the
Replacement Lender and/or prepay the principal of the Loans of the other Lenders
in such manner as will result in the outstanding  principal  amount of the Loans
being held by the Lenders pro rata according to the amounts of their  respective
commitments.


                                    ARTICLE X

                                  MISCELLANEOUS



<PAGE>



         SECTION 10.1. Notices.  All notices,  requests and other communications
to any  party  hereunder  shall  be in  writing  (including  bank  wire,  telex,
facsimile transmission or similar writing) and shall be given to such party: (a)
in the  case  of the  Borrower  or the  Administrative  Agent,  at its  address,
facsimile number or telex number set forth on the signature pages hereof, (b) in
the case of any Lender,  at its  address,  facsimile  number or telex number set
forth in its Administrative  Questionnaire or (c) in the case of any party, such
other  address,  facsimile  number or telex  number as such party may  hereafter
specify for the purpose by notice to the Administrative  Agent and the Borrower.
Each such notice, request or other communication shall be effective (i) if given
by telex,  when such telex is transmitted to the telex number  specified in this
Section and the appropriate  answerback is received,  (ii) if given by facsimile
transmission, when transmitted to the facsimile number specified in this Section
and confirmation of receipt is received,  (iii) if given by mail, 72 hours after
such  communication  is deposited in the mails with first class postage prepaid,
addressed as aforesaid  or (iv) if given by any other means,  when  delivered at
the  address   specified  in  this   Section;   provided  that  notices  to  the
Administrative Agent under Article II or Article IX shall not be effective until
received.


         SECTION  10.2.  No Waivers.  No failure or delay by the  Administrative
Agent or any Lender in  exercising  any right,  power or privilege  hereunder or
under any Note shall operate as a waiver thereof nor shall any single or partial
exercise  thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.  The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.

         SECTION 10.3. Expenses; Indemnification. (a) The Borrower shall pay (i)
all reasonable  out-of-pocket  expenses of the Administrative  Agent,  including
reasonable  fees and  disbursements  of special  counsel for the  Administrative
Agent,  in connection  with the  preparation  of this  Agreement,  any waiver or
consent  hereunder or any amendment hereof or any Default  hereunder and (ii) if
an Event of Default occurs,  all reasonable  out-of-pocket  expenses incurred by
the Administrative  Agent and each Lender,  including (without  duplication) the
reasonable fees and  disbursements of outside  counsel,  in connection with such
Event of Default and collection,  bankruptcy,  insolvency and other  enforcement
proceedings resulting therefrom.



<PAGE>



         (b) The Borrower  agrees to indemnify and defend on a current basis the
Administrative  Agent,  NMS, the Issuing  Lender,  the Syndication  Agent,  each
Lender  and  their  respective  affiliates,   directors,  officers,  agents  and
employees  (each an  "Indemnitee")  and hold harmless each  Indemnitee  from and
against any loss, cost, liability,  damage, or expense (including the reasonable
fees and  out-of-pocket  expenses of counsel to such  Indemnitee,  including all
necessary  local counsel hired by such counsel)  incurred by such  Indemnitee in
investigating  or preparing  for,  defending  against,  or  providing  evidence,
producing documents, or taking any other action with respect to any commenced or
threatened  litigation,  administrative  proceeding,  or investigation under any
federal  securities  law or  any  other  statute  of  any  jurisdiction,  or any
regulation,  or at common law or  otherwise  that arises out of or is based upon
any acts, practices, or omissions or alleged acts, practices or omissions of the
Borrower,  any  Subsidiary  or  their  respective  agents  relating  to (i) this
Agreement or the use of the proceeds of the Loans or (ii) the acquisition by the
Borrower  or any  Subsidiary  of all or any part of the stock or property of any
Person  whether by merger or otherwise  and  regardless  of whether the Borrower
shall have  borrowed  hereunder to finance all or any part of such  acquisition,
including  any of the  foregoing  arising  from the  negligence,  whether  sole,
concurrent or  contributory,  of any Indemnitee.  The indemnity set forth herein
shall be in addition to any other  obligations or liabilities of the Borrower to
the  Administrative  Agent,  the Issuing Lender and the Lenders  hereunder or at
common law or otherwise and shall survive any  termination of this Agreement and
the payment of all  indebtedness  of the Borrower to the Lenders  hereunder  and
under the Notes,  provided that the Borrower shall have no obligation under this
Section 10.3(b) to any Indemnitee  with respect to any of the foregoing  arising
out of the gross negligence or willful misconduct of such Indemnitee.


         SECTION 10.4.  Right and Sharing of Set-Offs.  (a) Upon the  occurrence
and  during  the  continuance  of any  Event of  Default  each  Lender is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all  deposits  (general  or  special,  time or
demand,  provisional or final, but excluding deposits held in trust in the trust
department  of any such Lender) at any time held and other  indebtedness  at any
time owing by such  Lender to or for the credit or the  account of the  Borrower
against any and all of the obligations of the Borrower now or hereafter existing
under this Agreement and any Note held by such Lender,  irrespective  of whether
or not such Lender shall have made any demand under this  Agreement or such Note
and although such  obligations may be unmatured.  Each Lender agrees promptly to
notify the Borrower after any such set-off and application  made by such Lender,
provided  that, the failure to give such notice shall not affect the validity of
such set-off and  application.  The rights of each Lender under this Section are
in addition to other rights and remedies (including,  without limitation,  other
rights of set-off) which such Lender may have.

         (b) Each Lender  agrees that if it shall,  by  exercising  any right of
set-off or  counterclaim  or otherwise,  receive  payment of a proportion of the
aggregate  amount of principal and interest due with respect to any Note held by
it which is greater than the proportion  received by any other Lender in respect
of the  aggregate  amount of principal and interest due with respect to any Note
held by such other Lender,  the Lender  receiving such  proportionately  greater
payment  shall  purchase  such  participations  in the  Notes  held by the other
Lenders,  and such other  adjustments  shall be made, as may be required so that
all such  payments of principal  and interest  with respect to the Notes held by
the Lenders shall be shared by the Lenders pro rata;  provided that,  nothing in
this  Section  shall  impair  the right of any Lender to  exercise  any right of
set-off  or  counterclaim  it may have and to apply the  amount  subject to such
exercise  to  the  payment  of  indebtedness  of the  Borrower  other  than  its
indebtedness  hereunder.  The  Borrower  agrees,  to the  fullest  extent it may
effectively do so under  applicable law, that any holder of a participation in a
Note,  whether or not  acquired  pursuant  to the  foregoing  arrangements,  may
exercise rights of set-off or counterclaim and other rights with respect to such
participation  as  fully  as if such  holder  of a  participation  were a direct
creditor of the Borrower in the amount of such participation.



<PAGE>



         SECTION 10.5.  Amendments and Waivers.  Any provision of this Agreement
or the Notes may be amended or waived if, but only if, such  amendment or waiver
is in writing and is signed by the Borrower and the Required  Lenders  (and,  if
the rights or duties of the  Administrative  Agent are affected thereby,  by the
Administrative Agent);  provided that, no such amendment or waiver shall, unless
signed by all the Lenders, (i) increase or decrease the Commitment of any Lender
(except for a ratable decrease in the Commitments of all Lenders) or subject any
Lender to any  additional  obligation,  (ii) reduce the  principal of or rate of
interest on any Loan, or any fees  hereunder,  (iii) postpone the date fixed for
any payment of  principal of or interest on any Loan,  or any fees  hereunder or
for the scheduled  termination of any Commitment,  (iv) change the percentage of
the Commitments or of the aggregate unpaid principal amount of the Notes, or the
number of Lenders,  which  shall be  required  for the Lenders or any of them to
take any action under this Section or any other  provision of this  Agreement or
(v) amend this Section 10.5.


         SECTION  10.6.  Successors  and  Assigns.  (a) The  provisions  of this
Agreement  shall be binding upon and inure to the benefit of the parties  hereto
and their  respective  successors and assigns,  except that the Borrower may not
assign or otherwise  transfer any of its rights under this Agreement without the
prior written consent of all Lenders.

         (b) Any Lender  may at any time  grant to one or more  lenders or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its  Loans.  In the  event  of any such  grant  by a  Lender  of a
participating  interest  to a  Participant,  whether  or not upon  notice to the
Borrower and the Administrative  Agent, such Lender shall remain responsible for
the  performance  of  its  obligations  hereunder,  and  the  Borrower  and  the
Administrative Agent shall continue to deal solely and directly with such Lender
in connection with such Lender's  rights and  obligations  under this Agreement.
Any  agreement  pursuant  to which any  Lender  may grant  such a  participating
interest  shall  provide  that  such  Lender  shall  retain  the sole  right and
responsibility to enforce the obligations of the Borrower  hereunder  including,
without limitation,  the right to approve any amendment,  modification or waiver
of any provision of this Agreement;  provided that, such participation agreement
may provide  that such Lender will not agree to any  modification,  amendment or
waiver of this  Agreement  described in clauses  (i),  (ii),  (iii),  or (iv) of
Section 10.5 without the consent of the  Participant.  The Borrower  agrees that
each Participant  shall, to the extent provided in its participation  agreement,
be entitled  to the  benefits  of Article IX with  respect to its  participating
interest.  An assignment or other transfer which is not permitted by clauses (c)
or (d) of this Section shall be given effect for purposes of this Agreement only
to the extent of a participating interest granted in accordance with this clause
(b).



<PAGE>



         (c) Any Lender may at any time  assign to one or more  lenders or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to an
initial  Commitment  of not less than  $5,000,000)  of all,  of its  rights  and
obligations  under this Agreement and the Notes,  and such Assignee shall assume
such rights and obligations,  pursuant to an Assignment and Acceptance Agreement
(herein so called) in substantially  the form of Exhibit 10.6(c) hereto executed
by  such  Assignee  and  such  transferor  Lender,  with  (and  subject  to) the
subscribed consent of the Borrower and the Administrative Agent, which shall not
be unreasonably withheld,  except that while a Default exists the consent of the
Borrower shall not be required; provided that, if an Assignee is an affiliate of
such transferor Lender or was a Lender immediately prior to such assignment,  no
such consent shall be required.  Upon execution and delivery of such  instrument
and payment by such Assignee to such transferor Lender of an amount equal to the
purchase price agreed  between such  transferor  Lender and such Assignee,  such
Assignee shall be a Lender party to this Agreement and shall have all the rights
and obligations of a Lender with a Commitment as set forth in such instrument of
assumption,  and the  transferor  Lender shall be released from its  obligations
hereunder to a  corresponding  extent,  and no further  consent or action by any
party shall be required.  Upon the  consummation  of any assignment  pursuant to
this clause (c) above, the transferor Lender,  the Administrative  Agent and the
Borrower shall make appropriate arrangements so that, if required, a new Note is
issued to the Assignee.  In connection with any such assignment,  the transferor
Lender  shall  pay  to  the  Administrative  Agent  an  administrative  fee  for
processing  such  assignment  in the amount of $3,500.  If the  Assignee  is not
incorporated  under the laws of the United States of America or a state thereof,
it shall deliver to the Borrower and the Administrative  Agent  certification as
to exemption  from  deduction or withholding of any United States federal income
taxes in accordance with Section 9.4.


         (d) Any Lender may at any time  assign all or any portion of its rights
under  this  Agreement  and its  Notes  to a  Federal  Reserve  Lender.  No such
assignment shall release the transferor Lender from its obligations hereunder.

         (e) No Assignee, Participant or other transferee of any Lender's rights
shall be entitled to receive any greater  payment  under Section 9.3 or 9.4 than
such  Lender  would have been  entitled  to receive  with  respect to the rights
transferred,  unless such  transfer is made with the  Borrower's  prior  written
consent or by reason of the provisions of Section 9.2, 9.3 or 9.4 requiring such
Lender  to  designate  a  different  Applicable  Lending  Office  under  certain
circumstances  or at a time when the  circumstances  giving rise to such greater
payment did not exist.

          SECTION  10.7.  Collateral.  Each  of the  Lenders  represents  to the
Administrative  Agent and each of the other Lenders that it in good faith is not
relying upon any "margin  stock" (as defined in  Regulation  U) as collateral in
the extension or maintenance of the credit provided for in this Agreement.


<PAGE>



         SECTION  10.8.  Limitation  on Interest.  Regardless  of any  provision
contained  in the Loan Papers,  the Lenders  shall never be entitled to receive,
collect, or apply, as interest on the Loans, any amount in excess of the Maximum
Lawful Rate, and in the event Lenders ever receive, collect or apply as interest
any such excess,  such amount which would be deemed excessive  interest shall be
deemed a partial  prepayment of principal and treated  hereunder as such; and if
the Loan be paid in full,  any  remaining  excess shall  promptly be paid to the
Borrower.  In determining  whether or not the interest paid or payable under any
specific  contingency  exceeds the Maximum  Lawful  Rate,  the  Borrower and the
Lenders shall, to the extent  permitted under  applicable law, (a)  characterize
any nonprincipal  payment as an expense, fee or premium rather than as interest,
(b) exclude  voluntary  prepayments  and the effects  thereof and (c)  amortize,
prorate,  allocate and spread,  in equal parts, the total amount of the interest
through the entire  contemplated term of the Notes, so that the interest rate is
the Maximum  Lawful  Rate  throughout  the entire  term of the Notes;  provided,
however,  that if the unpaid principal  balance thereof is paid and performed in
full prior to the end of the full contemplated term thereof, and if the interest
received for the actual period of existence  thereof  exceeds the Maximum Lawful
Rate, the Lenders shall refund to the Borrower the amount of such excess and, in
such event,  the Lenders shall not be subject to any  penalties  provided by any
laws for contracting for,  charging,  taking,  serving or receiving  interest in
excess of the Maximum Lawful Rate.


         SECTION 10.9. Governing Law; Submission to Jurisdiction; Waiver of Jury
Trial.  This  Agreement  and each Note shall be  governed  by and  construed  in
accordance  with  the  laws of the  State  of Texas  without  giving  effect  to
principles  thereof  relating  to  conflicts  of law;  provided,  however,  that
pursuant to Section  346.004 of the Finance Code of Texas,  the Borrower  agrees
that Chapter 346 of such Finance Code (which regulates  certain revolving credit
loan accounts and revolving triparty accounts) shall not govern or in any manner
apply to the Loans. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY
OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS AGREEMENT MAY
BE LITIGATED,  AT THE SOLE DISCRETION AND ELECTION OF THE ADMINISTRATIVE  AGENT,
IN COURTS HAVING SITUS IN DALLAS,  DALLAS  COUNTY,  TEXAS.  THE BORROWER  HEREBY
SUBMITS TO THE  JURISDICTION  OF ANY LOCAL,  STATE,  OR FEDERAL COURT LOCATED IN
DALLAS,  DALLAS  COUNTY,  TEXAS,  AND  HEREBY  WAIVES  ANY RIGHTS IT MAY HAVE TO
TRANSFER OR CHANGE THE  JURISDICTION OR VENUE OF ANY LITIGATION  BROUGHT AGAINST
IT BY THE  BANKS IN  ACCORDANCE  WITH THIS  SECTION.  The  Borrower  irrevocably
waives,  to the fullest extent  permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such  proceeding  brought in
such a court and any claim that any such proceeding  brought in such a court has
been brought in an  inconvenient  forum.  BORROWER AND LENDERS EACH HEREBY WAIVE
ANY RIGHT TO A JURY TRIAL WITH RESPECT TO ANY MATTER ARISING OR RELATING TO THIS
AGREEMENT,  THE NOTES OR THE OTHER DOCUMENTS RELATED THERETO OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.

         SECTION 10.10. Counterparts; Integration; Effectiveness. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures  thereto and hereto were upon the same
instrument.  This Agreement  constitutes the entire agreement and  understanding
among  the  parties  hereto  and  supersedes  any and all prior  agreements  and
understandings,  oral or written,  relating to the subject matter  hereof.  This
Agreement  shall become  effective upon receipt by the  Administrative  Agent of
counterparts hereof signed by each of the parties hereto (or, in the case of any
party as to which an executed counterpart shall not have been received,  receipt
by the Administrative Agent in form satisfactory to it constituting  delivery of
telegraphic,  telex,  facsimile or other written confirmation from such party of
execution of a counterpart hereof by such party).


<PAGE>



         SECTION 10.11. ENTIRE AGREEMENT.  THIS AGREEMENT CONSTITUTES THE ENTIRE
AGREEMENT  BETWEEN THE PARTIES  HERETO  WITH  RESPECT TO THE SUBJECT  HEREOF AND
SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO,  WHETHER WRITTEN
OR ORAL,  RELATING TO THE SUBJECT  HEREOF.  FURTHERMORE,  IN THIS  REGARD,  THIS
AGREEMENT  REPRESENTS THE FINAL  AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT
BE  CONTRADICTED  BY  EVIDENCE OF PRIOR,  CONTEMPORANEOUS,  OR  SUBSEQUENT  ORAL
AGREEMENTS OF SUCH PARTIES.


         THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.

         Executed as of the date first set forth herein:

                                   BORROWER:

                                   TNP ENTERPRISES, INC.
4100 International Plaza
Fort Worth, Texas 76109
Facsimile: 817/377-5577            By:/s/ Patrick L. Bridges
                                      Name:  Patrick L. Bridges   
                                      Title: Treasurer

                                   ADMINISTRATIVE AGENT:

901 Main Street, 64th Floor        NATIONSBANK, N.A., as Administrative Agent
Dallas, Texas 75202
Facsimile: 214/508-3943
                                   By:/s/ Curtis L. Anderson      
                                      Name:    Curtis L. Anderson
                                      Title:   Senior Vice President

                                   SYNDICATION AGENT:

                                   THE FIRST NATIONAL BANK OF CHICAGO,
                                   as Syndication Agent


                                   By:/s/ Madeleine N. Pember
                                      Name:    Madeleine N. Pember
                                      Title:   Assistant Vice President



<PAGE>



Commitment: 
                              LENDERS: (continued)


Commitment:                        LENDERS:

$15,000,000                        THE FIRST NATIONAL BANK OF CHICAGO


                                   By:/s/ Madeleine N. Pember
                                      Name:    Madeleine N. Pember
                                      Title:   Assistant Vice President

$10,000,000                        UNION BANK OF CALIFORNIA, N.A.


                                   By:/s/ David Musicant
                                      Name:  David Musicant
                                      Title: Vice President


$25,000,000                        NATIONSBANK, N.A.


                                   By:/s/ Curtis L. Anderson
                                      Name:    Curtis L. Anderson
                                      Title:   Senior Vice President


<PAGE>






                                   EXHIBIT A-2
                                    EXHIBIT A

                             FORM OF NOTE FOR LOANS

$_______________                                             [__________], 1998

          FOR VALUE RECEIVED, TNP ENTERPRISES, INC., a [___________] corporation
(the  "Borrower"),  hereby  promises to pay to the order of  ("Lender"),  at the
office of NATIONSBANK,  N.A. (the "Administrative  Agent"), the principal sum of
Dollars  ($ ) or so  much  of  the  Loans  as  may  have  been  advanced  and be
outstanding  hereunder,  in lawful money of the United  States of America and in
immediately  available funds at the office of the Administrative Agent specified
in the Credit  Agreement on the dates and in the principal  amounts  provided in
the Credit Agreement, and to pay interest on the unpaid principal amount of each
such Loan, at such office, in like money and funds, for the period commencing on
the date of such Loan until  such Loan  shall be paid in full,  at the rates per
annum and on the dates provided in the Credit Agreement.

         The date,  amount,  type,  interest rate,  Interest Period, if any, and
maturity of each Loan made by the Lender to the  Borrower,  and payment  made on
account of the principal thereof,  may be recorded by Lender on its books and/or
endorsed  by the  Lender  on the  schedules,  if  any,  attached  hereto  or any
continuation thereof.

         This  Note is  issued  pursuant  to the  Credit  Agreement  dated as of
[____________],   1998,  executed  by  the  Borrower,   NATIONSBANK,   N.A.,  as
Administrative   Agent,   and  the  Lenders   defined  therein  (as  amended  or
supplemented from time-to-time,  the "Credit Agreement"), and is entitled to the
benefits  provided  for in the Credit  Agreement  and the other  loan  documents
related  thereto.  The Credit  Agreement  provides for the  acceleration  of the
maturity of this Note upon the occurrence of certain events and other provisions
relevant to this Note.

         This Note shall be governed by, and construed in accordance  with,  the
laws of the State of Texas.

                                        TNP ENTERPRISES, INC.


                                        By:
                                         Name:    [___________________________]
                                         Title:   [___________________________]


<PAGE>



Attached to and forming a part of that certain Note dated November [___],  1998,
issued by TNP ENTERPRISES, INC..



                             Advances and Payment of
                             Principal and Interest



                              Principal     Amount of   Unpaid
       Type of   Amount of    Paid or       Interest    Principal    Interest
Date   Loan      Loan         Prepaid       Paid        Balance      Paid to
-============================================================================
=============================================================================

<PAGE>


                                   EXHIBIT 2.2

              FORM OF NOTICE OF BORROWING UNDER SECTION 2.2; NOTICE
        OF INTEREST RATE ELECTION UNDER SECTION 2.9; AND NOTICE OF LETTER
                           OF CREDIT UNDER SECTION 2.3


                             ________________, 199__


         TNP ENTERPRISES, INC., a [______________] corporation (the "Borrower"),
pursuant to the Credit  Agreement dated as of  [_________],  1998 (together with
all  amendments  or  supplements  thereto,  the  "Credit  Agreement")  among the
Borrower,  NATIONSBANK,  N.A., as  Administrative  Agent for the Lenders defined
therein,  and  the  Lenders,  hereby  makes  the  requests  indicated  below  in
connection  with  Borrowings  and Loans to the  Borrower  or  Letters of Credit.
Unless otherwise  defined herein,  capitalized terms shall have the meanings set
forth in the Credit Agreement.

/ /      1.       New Borrowings:

         (a)      Aggregate amount of Borrowing to be $-------------;
                                                      
         (b)      Requested funding date is -----------------, 199--;
                                           
         (c)      Type of Borrowing:           ------- Euro-Dollar
                                                
                                               ------- Base Rate
                                                        
         (d)      Length of Interest Period for Euro-Dollar Borrowings is: 
                  ---------------;
                   
/ /      2.       Continuation for Euro-Dollar Loans maturing on ------------;
                                                                 
         (a)      Aggregate amount to be continued as Euro-Dollar Loans is 
                  $---------------;
                  
         (b)      Length of new Interest Period for Euro-Dollar Loans is----- ;
                                                                       
/ /      3.      Conversion of outstanding Base Rate Loans to Euro-Dollar Loans:

         Convert $------------- of the outstanding Base Rate Loans to
         Euro-Dollar Loans on -------------- with an initial Interest Period of
         ---------------.                     
         

<PAGE>



/ /      4.      Conversion of outstanding Euro-Dollar Loans to Base Rate Loans:


         Convert $ ---------- of the outstanding  Euro-Dollar Loans with an 
         Interest Period ending on -------------, 199--, to Base Rate Loans.

/ /      5.       Letter of Credit.

         A Letter of Credit in the  amount of  $[_______].  The Letter of Credit
         will be used for  [______________________].  The Borrower requests that
         the    original   of   the   Letter   of   Credit   be   delivered   to
         [________________________].

         The  undersigned is authorized to execute this request on behalf of the
Borrower.  The undersigned further certifies,  represents and warrants on behalf
of the  Borrower  that (a) the  Borrower is  entitled  to receive the  requested
Borrowing,  continuation,  conversion  or Letter  of Credit  under the terms and
conditions of the Credit Agreement,  (b) the  representations  and warranties of
the Borrower  contained in Article V of the Credit  Agreement  (i) were true and
correct  when made,  and are true and  correct at and as of the date  hereof and
(ii)  will  be  deemed  repeated  at  and  as of  the  date  of  the  Borrowing,
continuation,  conversion or issuance of Letter of Credit requested hereby,  and
(c) no Default  exists as of the date hereof or will exist as of the date of the
Borrowing,  continuation,  conversion or issuance of Letter of Credit  requested
hereby.

                                    TNP ENTERPRISES, INC.



                                     By:____________________________________
                                     Name:    [_____________________________]
                                     Title:   [_____________________________]




<PAGE>





                                 EXHIBIT 4.1(b)

                          OPINION OF BORROWER'S COUNSEL


                                                November [___], 1998


To:      The Lenders and the Agent
         Referred to Below

         c/o NationsBank, N.A., as Agent
         901 Main Street, 64th Floor
         Dallas, Texas 75202

         Attention:        Mr. Curtis L. Anderson
                           Senior Vice President
                           Utility Finance Group

Dear Mr. Anderson:

         This opinion is being  delivered  to you pursuant to Section  4.1(b) of
that certain  $50,000,000  Credit  Agreement  dated November  [___],  1998, (the
"Agreement"),   by  and  among  TNP  ENTERPRISES,   INC.,  a  Texas  corporation
("Borrower"),  NATIONSBANK,  N.A. , as Agent,  and the Lenders parties  thereto.
Except as otherwise  specified,  terms which are defined in the  Agreement,  and
which are used but not defined  herein shall have the meanings given them in the
Agreement.  The term "Loan Papers," as used herein,  means the Agreement and the
Notes issued pursuant to the Agreement.

         I am the General Counsel of Borrower and, as such, am familiar with the
legal affairs of Borrower and its Subsidiaries. In connection with this opinion,
I or a member of my legal staff under my direct  supervision  has  examined  the
Loan  Papers and has  discussed  the  matters  addressed  in this  opinion  with
officers and  representatives  of Borrower and its  Subsidiaries to the extent I
have deemed appropriate to enable me to render this opinion.

         In preparing this opinion,  I have also examined original  counterparts
or  photostatic  or  certified  copies  of all  other  instruments,  agreements,
certificates,  records, and other documents (whether of Borrower,  its officers,
directors, shareholders and representatives, public officials, or other persons)
which I have considered  relevant  hereto.  In making this  examination,  I have
assumed the genuineness of all signatures and the  authenticity of all documents
submitted  to me as  originals,  the  conformity  to original  documents  of all
documents   submitted  to  me  as  photostatic  or  certified  copies,  and  the
authenticity of the originals of such copies.


<PAGE>



Mr. Curtis L. Anderson

November [____], 1998
Page 3


         Based  upon  the  foregoing,  and  subject  to the  qualifications  and
expectations hereinafter set forth, I am of the opinion that:

         1.  Borrower  and each  Subsidiary  is a  corporation  duly  organized,
validly  existing,  and in good standing under the laws of the  jurisdiction  in
which it was  incorporated,  has the  corporate  power and  authority to own its
assets and to transact the business in which it is now engaged or proposes to be
engaged,  and is duly qualified as a foreign  corporation  in all  jurisdictions
wherein  the  failure to qualify  would  have a material  adverse  effect on the
business,  assets, or financial condition of Borrower and its Subsidiaries taken
as a whole.

         2.  Borrower is duly  authorized  and empowered to create and issue the
Notes,  to  execute,  deliver,  and perform  the Loan  Papers,  and to incur the
obligations  provided  for  therein;  and all  corporate  and  other  action  on
Borrower's part requisite for the due creation and issuance of the Notes and for
the due execution,  delivery, and performance of the Loan Papers and to make the
borrowings thereunder has been duly and effectively taken.

         3. Assuming that the Loan Papers have been duly  authorized,  executed,
and  delivered  by the  Lenders,  the Loan Papers  constitute  valid and binding
obligations of Borrower,  enforceable in accordance with their  respective terms
(except  that   enforcement  may  be  subject  to  any  applicable   bankruptcy,
insolvency,  or similar laws generally  affecting the  enforcement of creditors'
rights and to the availability of equitable remedies).

         4. The Loan Papers do not  violate,  contravene,  or conflict  with any
law, regulation, order, injunction,  judgment, decree, or writ or any provisions
of any material  contract or material  agreement to which Borrower is subject or
result in the creation or  imposition  of any lien or other  encumbrance  of any
nature upon any assets or properties now owned or hereafter acquired of Borrower
or any Subsidiary.

         4. The  execution,  delivery,  and  performance by Borrower of the Loan
Papers does not  require the consent or approval of any other  person or entity,
including without  limitation any consent of shareholders  required by law or by
its  articles  of  incorporation  or  bylaws  or  any  regulatory  authority  or
governmental  body of the United  States or any state  thereof or any  political
subdivision of the United States or any state thereof.



<PAGE>



         5. To the best of my  knowledge,  except as disclosed in the  documents
referred to in Section 5.5 of the Agreement,  there is no  litigation,  legal or
administrative proceeding,  investigation, or other action of any nature pending
or  threatened  against  or  affecting  Borrower  or any  Subsidiary  which,  if
adversely  determined,  would have a material  adverse  effect on the  business,
assets, or financial condition of Borrower and its Subsidiaries taken as a whole
or the ability of Borrower to perform its obligations under the Loan Papers.


         6.  No  Debt  of  Borrower  is  senior  to,  or has  collection  rights
preferential to, the Notes except to the extent certain preferential  collection
rights may exist with respect to the assets of Borrower  that are  encumbered by
liens permitted under Section 6.9 of the Agreement.

         Except as  specifically  indicated  otherwise  herein,  this opinion is
limited in all respects to the laws of the State of Texas and applicable federal
law. Furthermore, the opinions herein expressed are for the benefit of the Agent
and the Lenders and may be relied  upon only by the Agent and the  Lenders,  and
their counsel.

                             Respectfully submitted,


                                Michael Blanchard




<PAGE>



                                 EXHIBIT 4.1(c)


                        JACKSON WALKER OPINION OF COUNSEL



                                                 [__________], 1998



To:      The Lenders and the Administrative Agent
         Referred to Below

         c/o NationsBank, N.A., as Administrative Agent
         901 Main Street, 64th Floor
         Dallas, Texas 75202

         Attention:        Mr. Curtis L. Anderson
                           Senior Vice President
                           Utility Finance Group

         We  have  acted  as   special   counsel  to   NationsBank,   N.A.,   as
Administrative Agent, in connection with the preparation, execution and delivery
of the Credit Agreement, dated as of [_________], 1998 (the "Credit Agreement"),
among TNP Enterprises,  Inc. (the  "Borrower"),  the Lenders parties thereto and
NationsBank, N.A., as Administrative Agent, and in connection with the execution
and delivery pursuant thereto of the Notes to be delivered therewith.

         This  opinion is  delivered  to you  pursuant to Section  4.1(c) of the
Credit Agreement. Terms defined in the Credit Agreement are used herein with the
same meanings unless otherwise defined herein.

         In  arriving at the  opinion  expressed  below,  we have  examined  the
following documents:

          (a) a counterpart of the Credit  Agreement  signed by the Borrower and
the Administrative Agent;

         (b)      forms of Notes to be signed by the Borrower; and

         (c) a copy  of the  opinion  letter  of  [__________],  counsel  to the
Borrower,  addressed to you and dated the date hereof,  in respect of the Credit
Agreement and the Notes.



<PAGE>

         In rendering the opinion  expressed  below, we have assumed,  with your
permission,  without independent  investigation or inquiry, (a) the authenticity
of all  documents  submitted  to us as  originals,  (b) the  due  authorization,
execution and delivery of the Credit  Agreement by each party  thereto,  (c) the
genuineness  of all  signatures  on all  documents  that we examined and (d) the
conformity  to authentic  originals of documents  submitted to us as  certified,
conformed or photostatic copies.

         Insofar as our opinion expressed below relates to the matters set forth
in paragraphs [___], [___], and [___] of the  above-mentioned  opinion letter of
[______________],   we  have  assumed  without  independent   investigation  the
correctness of the matters set forth in such opinion, and our opinion is subject
to the  assumptions,  qualifications  and  limitations set forth in such opinion
letter.

         Based  upon  the  foregoing,  and  subject  to the  qualifications  and
comments set forth below, we are of the opinion that, insofar as the laws of the
State of Texas are applicable, the Credit Agreement and the Notes, when executed
and delivered, constitutes legal, valid and binding obligations of the Borrower,
enforceable  against the Borrower in  accordance  with their  respective  terms,
except  as   affected  by   bankruptcy,   insolvency,   fraudulent   conveyance,
reorganization,  moratorium  and other  similar  laws  relating to or  affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.

         Our opinion is subject to the following qualifications:

         (1) We express no opinion as to any indemnification  obligations of the
Borrower  under the Credit  Agreement  to the extent such  obligations  might be
deemed to be inconsistent with public policy.

         (2) We express no opinion as to any  provision of the Credit  Agreement
that purports to establish an  evidentiary  standard for  determinations  by the
Lenders or the Administrative Agent.

         We are  members of the Bar of the State of Texas and we do not  express
any opinion  herein  concerning any law other than the law of the State of Texas
and of the United States of America.

         This opinion has been  rendered  solely for your benefit in  connection
with the Credit Agreement and the transactions  contemplated thereby and may not
be relied upon by you for any other purpose, or relied upon by any other Person,
firm or corporation without our prior written consent.

                                Very truly yours,



<PAGE>


                                   EXHIBIT 6.9

                                 EXISTING LIENS

     1.   First lien on substantially all assets of TNMP created under TNMP Bond
          Indenture and securing the First Mortgage Bonds (the "Bonds  Indenture
          Estate").
     2.   First lien on substantially all assets of Texas Generating  Company I,
          a  wholly  owned  subsidiary  of  TNMP,  and  second  lien on the Bond
          Indenture Estate in Texas,  existing  pursuant to the Project Loan and
          Credit Agreement among TNMP, Texas Generating Company, the banks named
          in such agreement,  and The Chase Manhattan Bank, As Agent dated as of
          October 4, 1988,  the First  Amended  and  Restated  Project  Loan and
          Credit Agreement among TNMP, Texas Generating Company, the banks named
          in such agreement,  and The Chase Manhattan Bank, As Agent dated as of
          January 8, 1992, and the Amendment  Number 1 to, the First Amended and
          Restated   Project  Loan  and  Credit   Agreement  among  TNMP,  Texas
          Generating Company,  the banks named in such agreement,  and The Chase
          Manhattan   Bank,   As  Agent,   dated  as  of   September   29,  1993
          (collectively, the "Unit 1 Credit Agreement").
     3.   First lien on substantially all assets of Texas Generating Company II,
          a  wholly  owned  subsidiary  of  TNMP,  and  second  lien on the Bond
          Indenture Estate in Texas,  existing  pursuant to the Project Loan and
          Credit Agreement among TNMP,  Texas  Generating  Company II, the banks
          named in such agreement,  and The Chase Manhattan Bank, As Agent dated
          as of October 4, 1988, the First Amended and Restate  Project Loan and
          Credit Agreement among TNMP,  Texas  Generating  Company II, the banks
          named in such agreement,  and The Chase Manhattan Bank, As Agent dated
          as of  January  8,  1992,  and the  Amendment  Number 1 to,  the First
          Amended and  Restated  Project Loan and Credit  Agreement  among TNMP,
          Texas Generating Company I, the banks named in such agreement, and The
          Chase  Manhattan  Bank,  As  Agent,  dated as of  September  29,  1993
          (collectively, the "Unit 2 Credit Agreement").
     4.   Pledges of First Mortgage Bonds and other instruments created pursuant
          to the  Unit 1  Credit  Agreement  and  the  Unit 2  Credit  Agreement
          pursuant  to the  Revolving  Credit  Facility  Agreement,  dated as of
          November 3, 1995 and as amended as of October 30,1998, among TNMP, the
          Lenders party thereto, The Chase National Bank (as Successor by merger
          to Chemical Bank), as  Administrative  Agent and Collateral Agent, and
          the Bank of New York, CIBC, Inc., NationsBank of Texas, N.A. and Union
          Bank, as Co-Agents.
     5.   Collateral  notes created  pursuant to the Unit 1 Credit Agreement and
          Unit 2 Credit  Agreement,  pledged  to secure  TNMP's  12 1/2  Secured
          Debentures, due 1999, and TNMP's 10 3/4% Secured Debentures, due 2003.
     6.   Lien created by judgments dated August 13, 1998 rendered  against TNMP
          in the amount of $1.8  million in case styled  Texas-New  Mexico Power
          Company v. Moody, in Galveston County, Texas, Court at Law No. 2.


<PAGE>


                                EXHIBIT 10.6(c)-7
                                 EXHIBIT 10.6(c)

                   FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT

         THIS ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Agreement") dated as of
 1998, is executed by and between ("Assignor") and ("Assignee").

                                 R E C I T A L S

         A. Assignor is a party to the Credit  Agreement dated as of [________],
1998 (as amended or supplemented  from  time-to-time,  the "Credit  Agreement"),
among [________________] (the "Borrower"),  NATIONSBANK, N.A., as Administrative
Agent, and the Lenders defined therein.

         B. Assignor  proposes to sell,  assign,  and transfer to Assignee,  and
Assignee  proposes to purchase  and assume from  Assignor,  [all][a  portion] of
Assignor's Commitment, and outstanding Loans, all on the terms and conditions of
this Agreement.

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

                                    ARTICLE I

                                   Definitions

          Section 1.01  Definitions.  All capitalized terms used but not defined
herein have the respective meanings given to such terms in the Credit Agreement.

          Section 1.02 Other  Definitions.  As used herein,  the following terms
have the following respective meanings:

         "Assigned  Interest" shall mean all of Assignor's (in its capacity as a
"Lender")  rights and obligations  (i) under the Credit  Agreement and the other
loan documents in respect of the Commitment of Assignor in the principal  amount
equal to $ , and (ii) to make Loans under the Commitment and to receive payments
for the Loans outstanding  under the Commitment  assigned hereby of $ (the "Loan
Balance"),  plus the interest and fees thereon  which will accrue from and after
Assignment  Date, and (iii) to issue Letters of Credit related to the Commitment
assigned  hereunder,  and make Loans on account of the Letter of Credit Exposure
outstanding  assigned  hereby  of $ (the  "Letter  of Credit  Balance"),  and to
receive fees thereon which will accrue from and after the Assignment Date.

         "Assignment Date" shall mean  -----------------,199--.


<PAGE>



                                   ARTICLE II


                               Sale and Assignment

         Section 2.01 Sale and Assignment. On the terms and conditions set forth
herein,  effective on and as of the  Assignment  Date,  Assignor  hereby  sells,
assigns and  transfers to Assignee,  and Assignee  hereby  purchases and assumes
from Assignor,  all of the right, title, and interest of Assignor in and to, and
all of the  obligations of Assignor in respect of, the Assigned  Interest.  Such
sale,  assignment and transfer is without  recourse to and,  except as expressly
provided in this Agreement, without representation or warranty by Assignor.

         Section 2.02 Assumption of  Obligations.  Assignee agrees with Assignor
(for the express  benefit of Assignor and the Borrower) that Assignee will, from
and after the  Assignment  Date,  perform all of the  obligations of Assignor in
respect  of the  Assigned  Interest.  From and after the  Assignment  Date:  (a)
Assignor  shall be  released  from  Assignor's  obligations  in  respect  of the
Assigned Interest, and (b) except as provided in the Credit Agreement,  Assignee
shall be entitled to all of Assignor's  rights,  powers and privileges under the
Credit  Agreement  and the other  loan  documents  in  respect  of the  Assigned
Interest.

         Section 2.03 Consent by the Borrower and the  Administrative  Agent. By
executing this Agreement as provided  below,  in accordance with Section 10.6(c)
of the Credit  Agreement,  the  Borrower  and the  Administrative  Agent  hereby
acknowledge  notice  of the  transactions  contemplated  by this  Agreement  and
consent to such transactions.

                                   ARTICLE III

                                    Payments

         Section 3.01 Payments. As consideration for the sale,  assignment,  and
transfer contemplated by Section 2.01 hereof,  Assignee shall, on the Assignment
Date, assume Assignor's  obligations in respect of the Assigned Interest and pay
to Assignor an amount equal to the Loan Balance and Letter of Credit Balance, if
any. An amount  equal to all accrued and unpaid  interest and fees shall be paid
to Assignor as provided in Section 3.02(iii) below. Except as otherwise provided
in this  Agreement,  all  payments  hereunder  shall be made in  Dollars  and in
immediately available funds, without setoff, deduction or counterclaim.



<PAGE>



         Section 3.02  Allocation of Payments.  Assignor and Assignee agree that
(i) Assignor  shall be entitled to any payments of principal with respect to the
Assigned Interest made prior to the Assignment Date,  together with any interest
and fees with respect to the Assigned  Interest  accrued prior to the Assignment
Date,  (ii) Assignee shall be entitled to any payments of principal with respect
to the Assigned Interest made from and after the Assignment Date,  together with
any and all interest and fees with  respect to the  Assigned  Interest  accruing
from and after the  Assignment  Date,  and  (iii)  the  Administrative  Agent is
authorized  and  instructed to allocate  payments  received by it for account of
Assignor and Assignee as provided in the  foregoing  clauses.  Each party hereto
agrees that it will hold any interest, fees or other amounts that it may receive
to which the other  party  hereto  shall be entitled  pursuant to the  preceding
sentence  for account of such other party and pay, in like money and funds,  any
such amounts that it may receive to such other party promptly upon receipt.


         Section 3.03 Further Assurances.  Assignor and Assignee hereby agree to
execute and deliver  such other  instruments,  and take such other  actions,  as
either  party  may  reasonably  request  in  connection  with  the  transactions
contemplated by this Agreement.

                                   ARTICLE IV

                              Conditions Precedent

          Section 4.01  Conditions  Precedent.  The  effectiveness  of the sale,
assignment and transfer  contemplated  hereby is subject to the  satisfaction of
each of the following conditions precedent:

          (a) the  execution  and  delivery of this  Agreement  by Assignor  and
Assignee;

          (b) the  receipt by  Assignor 

          (c)  the   acknowledgment   and  consent  by  the   Borrower  and  the
Administrative Agent contemplated by Section 2.03 hereof.

                                    ARTICLE V

                         Representations and Warranties

          Section 5.01  Representations  and  Warranties  of Assignor.  Assignor
represents and warrants to Assignee as follows:

         (a) it has all requisite power and authority,  and has taken all action
necessary,  to execute and deliver this Agreement and to fulfill its obligations
under, and consummate the transactions contemplated by, this Agreement,

         (b) the execution,  delivery,  and compliance  with the terms hereof by
Assignor  and the  delivery of all  instruments  required to be  delivered by it
hereunder do not and will not violate any laws, rules or regulations  applicable
to it;

         (c) this  Agreement  has been duly  executed  and  delivered  by it and
constitutes  the legal,  valid and binding  obligation of Assignor,  enforceable
against it in accordance with its terms;



<PAGE>



         (d) all  approvals  and  authorizations  of, all  filings  with and all
actions  by  any   governmental   authority   necessary   for  the  validity  or
enforceability of its obligations under this Agreement have been obtained;


         (e)  Assignor  has good title to, and is the sole legal and  beneficial
owner  of,  the  Assigned  Interest,  free  and  clear  of  all  Liens,  claims,
participations or other charges of any nature whatsoever;

          (f) the  transactions  contemplated  by this  Agreement are commercial
lending transactions entered into in the ordinary course of the lending business
of Assignor; and

         (g)  Assignor  confirms  it  has  paid  the  Administrative  Agent  the
$3,500.00 administrative fee pursuant to Section 10.6(c).

         Section 5.02 Disclaimer.  Except as expressly  provided in Section 5.01
hereof, Assignor does not make any representation or warranty, nor shall it have
any  responsibility  to Assignee,  with respect to the accuracy of any recitals,
statements,  representations or warranties  contained in the Credit Agreement or
in any certificate or other document referred to or provided for in, or received
by  any  Lender  under  the  Credit  Agreement,  or  for  the  value,  validity,
effectiveness,  genuineness, execution, effectiveness,  legality, enforceability
or sufficiency  of the Credit  Agreement,  or any  certificate or other document
referred  to or provided  for therein or for any failure by the  Borrower or any
other Person (other than Assignor) to perform any of its obligations  thereunder
or for the existence,  value,  perfection or priority of any collateral security
or the  financial or other  condition  the Borrower or its  Subsidiaries  or any
other matter relating to the Credit Agreement,  any other loan documents related
thereto or any extension of credit thereunder.

          Section 5.03  Representations  and  Warranties  of Assignee.  Assignee
represents and warrants to Assignor as follows:

         (a) it has all requisite power and authority,  and has taken all action
necessary,  to execute and deliver this Agreement and to fulfill its obligations
under and consummate the transactions contemplated by, this Agreement;

         (b) the execution,  delivery,  and compliance  with the terms hereof by
Assignee  and the  delivery of all  instruments  required to be  delivered by it
hereunder do not and will not violate any law, rule or regulation  applicable to
it;

         (c) this  Agreement  has been duly  executed  and  delivered  by it and
constitutes the legal,  valid, and binding  obligation of Assignee,  enforceable
against it in accordance with its terms;

         (d) all  approvals  and  authorizations  of, all  filings  with and all
action  by  any   governmental   authority   necessary   for  the   validity  or
enforceability of its obligations under this Agreement have been obtained;



<PAGE>



         (e) Assignee has fully  reviewed the terms of the Credit  Agreement and
the other loan  documents  related  thereto  and has  independently  and without
reliance  upon Assignor or any other Lenders or the  Administrative  Agent,  and
based on such  information  as  Assignee  has deemed  appropriate,  made its own
credit analysis and decision to enter into this Agreement;


         (f)  Assignee  hereby  affirms  that  Assignee  has   contemporaneously
herewith   delivered  to  the   Administrative   Agent  and  the  Borrower  such
certifications  as are required thereby to avoid the withholding  taxes referred
to in Section 9.4(d) of the Credit Agreement; and

         (g) the  transactions  contemplated  by this  Agreement are  commercial
lending transactions entered into in the ordinary course of the lending business
of Assignee.

                                   ARTICLE VI

                                  Miscellaneous

         Section 6.01 Notices. All notices and other communications provided for
herein  (including,  without  limitation,  any  modifications  of,  or  waivers,
requests or consents under,  this  Agreement)  shall be given or made in writing
(including,  without limitation, by telex or telecopy) to the intended recipient
at its "Address for Notices"  specified  below its name on the  signature  pages
hereof or, as to either  party,  at such other address as shall be designated by
such party in a notice to the other party.

          Section 6.02 Amendment,  Modification or Waiver.  No provision of this
Agreement may, be amended, modified or waived except by an instrument in writing
signed by Assignor and Assignee. and consented to by the Administrative Agent.

         Section 6.03  Successors and Assigns.  This Agreement  shall be binding
upon and  inure to the  benefit  of the  parties  hereto  and  their  respective
successors and permitted assigns. The representations and warranties made herein
by Assignee  are also made for the benefit of the  Administrative  Agent and the
Borrower),  and Assignee agrees that the  Administrative  Agent and the Borrower
are entitled to rely upon such representations and warranties.

          Section 6.04  Assignments.  Neither party hereto may assign any of its
rights  or  obligations  hereunder  except in  accordance  with the terms of the
Credit Agreement.
         Section 6.05  Captions.  The captions  and section  headings  appearing
herein are included  solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.



<PAGE>



         Section 6.06 Counterparts. This Agreement may be executed in any number
of  counterparts,  each of which  shall be  identical  and all of  which,  taken
together,  shall  constitute one and the same instrument and each of the parties
hereto may execute this Agreement by signing any such counterpart.


          Section 6.07 Governing  Law. This Agreement  shall be governed by, and
construed in accordance with, the law of the State of Texas.

         Section 6.08 Expenses.  To the extent not paid by the Borrower pursuant
to the terms of the  Credit  Agreement,  each  party  hereto  shall bear its own
expenses in connection  with the  execution,  delivery and  performance  of this
Agreement.

         Section 6.09 Waiver of Jury Trial.  EACH OF THE PARTIES  HERETO  HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO
TRIAL  BY  JURY IN ANY  LEGAL  PROCEEDING  ARISING  OUT OF OR  RELATING  TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

                                   ASSIGNOR:

                                   [NAME]


                                   By:
                                   Name:
                                   Title:


                                   ADDRESS FOR NOTICES:


                                   By:
                                   Name:
                                   Title:


                                   ASSIGNEE:

                                   [NAME]


                                   By:
                                   Name:
                                   Title:




<PAGE>



                                   ADDRESS FOR NOTICES:



                                   By:
                                   Name:
                                   Title:


ACKNOWLEDGED AND CONSENTED TO:

TNP ENTERPRISES, INC.


By:
Name:
Title:


ACKNOWLEDGED BY:

NATIONSBANK, N.A., as Administrative Agent


By:
Name:
Title:








<PAGE>



                                 SCHEDULE 1.1(A)

                                  PRICING GRID


         The Facility Fee Rate and Euro-Dollar Margin shall be, at any time, the
rate per annum set forth in this table below the  applicable  long term  senior,
secured  debt  rating of  Texas-New  Mexico  Power  Company by Standard & Poor's
Ratings Group and Moody's  Investors  Service Inc. In the case of a split rating
of one level,  the higher  rating will apply.  In the case of a split  rating of
more than one level,  the  rating  which is one  rating  level  below the higher
rating will apply.

<TABLE>
<CAPTION>

------------------------------- ----------------- -------------- -------------- -------------- -------------- --------------
<S>                             <C>               <C>            <C>            <C>            <C>            <C>

     Subsequent to Rating           Level I         Level II       Level III      Level IV        Level V       Level VI
                                   BBB+/Baa1        BBB/Baa2       BBB-/Baa3       BB+/Ba1        BB/Ba2       BB-/Ba3 or
                                   or higher                                                                      Lower
------------------------------- ----------------- -------------- -------------- -------------- -------------- --------------
------------------------------- ----------------- -------------- -------------- -------------- -------------- --------------

Facility Fee Rate                           .20%           .25%           .35%           .50%           .60%           .50%
360-day
------------------------------- ----------------- -------------- -------------- -------------- -------------- --------------
------------------------------- ----------------- -------------- -------------- -------------- -------------- --------------

Euro-Dollar Margin                          .30%           .50%           .65%           1.0%          1.15%          1.70%
360-day
------------------------------- ----------------- -------------- -------------- -------------- -------------- --------------


</TABLE>