exh4-2_032709.htm


    
 

     

    EXECUTION COPY

    
 

    Exhibit
4.2

    ___________________________________________________________________________

    ___________________________________________________________________________

    


    TEXAS-NEW
MEXICO POWER COMPANY

    


    


    to

     

    


    THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A.,

    as
Trustee

    


    _______________________________________

     

    


    FIRST
SUPPLEMENTAL INDENTURE

    dated
as of March 23, 2009

    


     

    Supplemental
to the First Mortgage Indenture

    dated
as of March 23, 2009

     

     

     

     

    Establishing
a series of Securities designated

    


    9.50%
FIRST MORTGAGE BONDS, DUE 2019, SERIES 2009A

     

    


    


    ___________________________________________________________________________

    ___________________________________________________________________________

    


    


    THIS
INSTRUMENT GRANTS A SECURITY INTEREST BY A UTILITY

    


    THIS
INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS

     


    
      
        
           

        

         


      

      
         


        
          

        

      

      
         


      

    


    FIRST SUPPLEMENTAL INDENTURE,
dated as of March 23, 2009, between TEXAS-NEW MEXICO POWER
COMPANY, a corporation organized and existing under the laws of the State
of Texas (hereinafter called the “Company”), and THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., a national banking association organized and existing
under the laws of the United States (hereinafter called the “Trustee”), as
Trustee under the Indenture hereinafter referred to.

    


    RECITALS
OF THE COMPANY

    


    WHEREAS, the Company has
heretofore executed and delivered to the Trustee a First Mortgage Indenture
dated as of March 23, 2009 (the “Indenture”), providing for the issuance by the
Company from time to time of its bonds, notes or other evidence of indebtedness
to be issued in one or more series (in the Indenture and herein called the
“Securities”) and to provide security for the payment of the principal of and
premium, if any, and interest, if any, on the Securities and the performance and
observance of the other obligations of the Company thereunder; and

    


    WHEREAS, the Company, in the
exercise of the power and authority conferred upon and reserved to it under the
provisions of the Indenture and pursuant to appropriate resolutions of the Board
of Directors, has duly determined to make, execute and deliver to the Trustee
this First Supplemental Indenture to the Indenture as permitted by Sections
2.01, 3.01 and 14.01 of the Indenture in order to establish the form and terms
of, and to provide for the creation and issuance of, a first series of
Securities under the Indenture in an initial aggregate principal amount of
$265,500,000; and

    


    WHEREAS, all things necessary
to make the Securities of the first series, when executed by the Company and
authenticated and delivered by the Trustee or any Authenticating Agent and
issued upon the terms and subject to the conditions hereinafter and in the
Indenture set forth against payment therefor the valid, binding and legal
obligations of the Company and to make this First Supplemental Indenture a
valid, binding and legal agreement of the Company, have been done;

    


    NOW, THEREFORE, THIS FIRST
SUPPLEMENTAL INDENTURE WITNESSETH that, in order to establish the terms
of a series of Securities and for and in consideration of the premises and of
the covenants contained in the Indenture and in this First Supplemental
Indenture and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, intending to be legally bound, it
is mutually covenanted and agreed as follows:

    



    
      
        
           

        

         


      

      
         


        
          

        

      

      
         


      

    


    


    ARTICLE
ONE

    


    DEFINITIONS

     

    Section
1.01 Certain
Definitions. Each capitalized term that is used herein and is defined in
the Indenture shall have the meaning specified in the Indenture unless such term
is otherwise defined herein.

     

    The
following terms have the meanings given to them in this Article One and, for
purposes of this First Supplemental Indenture, such meanings shall supersede and
replace the meanings given them, if any, in the Indenture:

     

    “Agent
Members” has the meaning assigned to it in Section 2.04.

     

    “Certificated
First Mortgage Bond” means any First Mortgage Bond issued in fully-registered,
certificated form (other than a Global First Mortgage Bond), which shall be
substantially in the form of Exhibit A, with
appropriate legends as specified in Exhibit
A.

     

    “Comparable
Treasury Issue” means the U.S. Treasury security or securities selected by the
Independent Investment Banker as having a maturity comparable to the remaining
term of the First Mortgage Bonds (as defined in Section 2.01) to be redeemed
that would be used, at the time of selection and in accordance with customary
market practice, in pricing new issues of corporate debt securities of a
comparable maturity to the remaining term of such First Mortgage
Bonds.

     

    “Comparable
Treasury Price” means, with respect to any Redemption Date:

     

    
      	
               
      

            	
                
      (i)

            	
              the
      bid-side for the Comparable Treasury Issue as of the third Business Day
      preceding the Redemption Date, as set forth in the daily statistical
      release (or any successor release) published by The Wall Street Journal
      in the table entitled “Treasury Bonds, Notes, and Bills,” as
      determined by the Independent Investment Banker,
  or

            


    

     

    
      	
               
      

            	
                
      (ii)

            	
              if
      such release (or any successor release) is not published or does not
      contain such prices on such Business
Day:

            


    

     

    
      	
               
      

            	
              (x)

            	
              the
      average of the Reference Treasury Dealer Quotations for that Redemption
      Date, after excluding the highest and lowest of the Reference Treasury
      Dealer Quotations,

            


    

    


    
      	
               
      

            	
              (y)

            	
              if
      the Trustee obtains fewer than four Reference Treasury Dealer Quotations,
      the average of all Reference Treasury Dealer Quotations so received,
      or

            


    

     

    
      	
               
      

            	
              (z)

            	
              if
      only the Reference Treasury Dealer Quotation is received, such
      quotation.

            


    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    “Distribution
Compliance Period” means, in respect of any Regulation S Global First Mortgage
Bond, the 40 consecutive days beginning on and including the later of (a) the
day on which any First Mortgage Bonds represented thereby are offered to Persons
other than distributors (as defined in Regulation S under the Securities Act)
pursuant to Regulation S and (b) the issue date for such First Mortgage
Bonds.

     

    “DTC”
means The Depository Trust Company, its nominees and their respective successors
and assigns, or such other depositary institution hereinafter appointed by the
Company that is a clearing agency registered under the Exchange
Act.

     

    “First
Mortgage Bond Custodian” means the custodian with respect to any Global First
Mortgage Bond appointed by DTC, or any successor Person thereto, and shall
initially be the Trustee.

     

    “Global
First Mortgage Bond” means a Rule 144A Global First Mortgage Bond or a
Regulation S Global First Mortgage Bond, as the context may require, issued in
fully-registered certificated form to DTC (or its nominee), as depositary for
the beneficial owners thereof, which shall be substantially in the form of Exhibit A, with
appropriate legends as specified in Exhibit
A.

     

    “Independent
Investment Banker” means one of the Reference Treasury Dealers selected by the
Trustee after consultation with the Company.

     

     “Reference
Treasury Dealer” means each of four primary U.S. Government securities dealers
in New York City (each a “Primary Treasury Dealer”), consisting of (i) J.P.
Morgan Securities Inc. and (ii) three other nationally recognized investment
banking firms (or their affiliates) that are selected by the Company in
connection with the particular redemption, and their respective successors,
provided that if any of them ceases to be a Primary Treasury Dealer, the Company
will substitute another nationally recognized investment banking firm (or its
affiliate) that is a Primary Treasury Dealer.

     

    “Reference
Treasury Dealer Quotations” means, with respect to each Reference Treasury
Dealer and any Redemption Date, the average, as determined by the Trustee, of
the bid and asked prices for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) quoted in writing to the Trustee by such
Reference Treasury Dealer at 3:30 p.m., New York City time, on the third
Business Day preceding that Redemption Date.

     

    “Regulation
S Global First Mortgage Bonds” has the meaning assigned to it in Section
2.05.

     

    “Restrictive
Legend” has the meaning assigned to it in Section 2.05.

     

    “Rule
144” means Rule 144 under the Securities Act (or any successor
rule).

     

    “Rule
144A” means Rule 144A under the Securities Act (or any successor
rule).

     

    “Rule
144A Global First Mortgage Bonds” has the meaning assigned to it in Section
2.05.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    “Temporary
Regulation S Global First Mortgage Bond” has the meaning assigned to it in
Section 2.05.

    


    “Treasury
Rate” means, with respect to any Redemption Date, the rate per year equal to the
semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated on the third Business Day preceding the applicable Redemption Date,
assuming a price for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) equal to the Comparable Treasury Price for that Redemption
Date.

    


    ARTICLE
TWO

    


    TITLE,
FORM AND TERMS OF THE FIRST MORTGAGE BONDS

     

    Section
2.01    Title of the First Mortgage
Bonds. This First Supplemental Indenture hereby creates a series of
Securities designated as the “9.50% First Mortgage Bonds, due 2019, Series
2009A” (the “First Mortgage Bonds”) and such Securities shall be executed,
authenticated and delivered in accordance with the provisions of, and, except as
hereinafter provided, shall in all respects be subject to all of the terms,
conditions and covenants of the Indenture as supplemented by this First
Supplemental Indenture. For purposes of the Indenture, the First Mortgage Bonds
shall constitute a single series of Securities and may be issued in an unlimited
principal aggregate amount (subject to the limitations set forth in Article IV
of the Indenture), although the initial issuance of the First Mortgage Bonds
shall be in the principal amount of $265,500,000.

     

    Section
2.02    Form and Terms of the First
Mortgage Bonds. The form and terms of the First Mortgage Bonds pursuant
to the authority granted by this First Supplemental Indenture in accordance with
Sections 2.01 and 3.01 of the Indenture are set forth herein.  The
First Mortgage Bonds shall be issued in registered form without coupons in the
denominations of $2,000 and integral multiples of $1,000 in excess thereof,
appropriately numbered.

     

    The First
Mortgage Bonds shall mature on April 1, 2019 and shall bear interest at the rate
of 9.50% per annum, payable semi-annually on the first (1st) day of April and
the first (1st) day of October in each year commencing October 1, 2009 (each
such April 1 and October 1 hereinafter called an “Interest Payment
Date”).

     

    If any
Interest Payment Date falls on a day that is not a Business Day, the Interest
Payment Date will be the next succeeding Business Day (and without any interest
or payment in respect of any such delay). Interest will be computed on the basis
of a 360-day year consisting of twelve 30-day months. The First Mortgage Bonds
shall be payable as to principal and interest in any coin or currency of the
United States of America which at the time of payment is legal tender for public
and private debts, and shall be payable (as well the interest on the principal
thereof) as provided for in the Indenture. The Company shall pay interest on
overdue principal at the rate per annum borne by the First Mortgage Bonds, and
it shall pay interest on overdue installments of interest at the rate per annum
borne by the First Mortgage Bonds to the extent lawful.

     

    The
interest so payable on any Interest Payment Date shall be paid to the Persons in
whose names the First Mortgage Bonds are registered at the close of business on
the regular record date for such Interest Payment Date, which shall be the
fifteenth (15th) day of the month 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    next
preceding such Interest Payment Date (hereinafter called a “Regular Record
Date”); except that if the Company shall default in the payment of any interest
due on such Interest Payment Date, the Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the Securities of such series
(or their respective Predecessor Securities) are registered at the close of
business on a date (herein called a “Special Record Date”) to determine the
Holders of record who will receive such Defaulted Interest (which shall be fixed
in accordance with Section 3.07 of the Indenture), which Special Record Date
shall not be more than fifteen (15) days or less than ten (10) days prior to the
date proposed by the Company for payment of such Defaulted
Interest.

     

    Section
2.03     Optional
Redemption.  The Company, at its option, may redeem at any time
all, or from time to time, any part of the First Mortgage Bonds, on not less
than 30 days nor more than 60 days notice as provided in the Indenture (except
that, notwithstanding the provisions of Section 5.04 of the Indenture, any
notice of redemption for the First Mortgage Bonds given pursuant to said Section
need not set forth the Redemption Price but only the manner of calculation
thereof) at a Redemption Price equal to the greater of the following
amounts:

     

    
      	
               
      

            	
              (i)

            	
              100%
      of the principal amount of the First Mortgage Bonds then Outstanding to be
      so redeemed; and

            


    

     

    
      	
               
      

            	
              (ii)

            	
              the
      sum of the present values of the principal amount and the remaining
      scheduled payments of interest on the First Mortgage Bonds to be redeemed
      (not including any portion of payments of interest accrued as of the
      applicable Redemption Date), discounted to the applicable Redemption Date
      in accordance with customary market practice on a semi-annual basis at a
      rate equal to the sum of the Treasury Rate plus 50 basis
      points,

            


    

     

    plus, in
either of the above cases, accrued and unpaid interest on the principal amount
being redeemed to the applicable Redemption Date.

     

    The
Redemption Price will be calculated by the Independent Investment Banker
assuming a 360-day year consisting of twelve 30-day months.

     

    If less
than all of the First Mortgage Bonds are to be redeemed, the Trustee shall
select by lot, on a pro-rata basis or in such other manner as it shall deem
appropriate and fair, the particular First Mortgage Bonds or portions thereof to
be redeemed.  Notice of redemption shall be given by mail not less
than 30 nor more than 60 days prior to the Redemption Date to the Holders of
First Mortgage Bonds to be redeemed (which, as long as the First Mortgage Bonds
are held in the book-entry only system, will be The Depository Trust Company (or
its nominee) or a successor Depositary); provided, however, that the
failure to duly give such notice by mail, or any defect therein, shall not
affect the validity of any proceedings for the redemption of First Mortgage
Bonds as to which there shall have been no such failure or defect. Such notice
may state that such redemption shall be conditional upon receipt by the Paying
Agent or Agents for such First Mortgage Bonds, on or prior to the Redemption
Date, of money sufficient to pay the principal of and premium, if any, and
interest, if any, on such First Mortgage Bonds and that if such money shall not
have been so received such notice shall be of no force or effect and the Company
shall not be required to redeem such First Mortgage Bonds.  On and
after the 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    Redemption
Date (unless the Company shall default in the payment of the First Mortgage
Bonds or portions thereof to be redeemed at the applicable Redemption Price,
together with interest accrued thereon to such date), interest on the First
Mortgage Bonds or the portions thereof so called for redemption shall cease to
accrue.

     

    The
Independent Investment Banker shall give to the Company and the Trustee written
notice of the Redemption Price applicable to the First Mortgage Bonds promptly
after its calculation thereof.

     

    The
Trustee shall be under no duty to inquire into, may conclusively presume the
correctness of, shall be fully protected in relying upon the Independent
Investment Banker’s calculation of any Redemption Price, and shall have no
responsibility for such calculation.

     

          
Section 2.04     Global First Mortgage Bond
Provisions.

    


    (a)           Each
Global First Mortgage Bond initially shall: (i) be registered in the name of DTC
or the nominee of DTC, (ii) be delivered to the First Mortgage Bond Custodian,
and (iii) bear the appropriate legend, as set forth in Exhibit  A.  Any
Global First Mortgage Bond may be represented by more than one
certificate.  The aggregate principal amount of each Global First
Mortgage Bond may from time to time be increased or decreased by adjustments
made on the records of the First Mortgage Bond Custodian, as provided in this
First Supplemental Indenture.

     

    (b)         
Members
of, or participants in, DTC (“Agent Members”) shall have no rights under this
First Supplemental Indenture with respect to any Global First Mortgage Bond held
on their behalf by DTC or by the First Mortgage Bond Custodian under such Global
First Mortgage Bond, and DTC may be treated by the Company, the Trustee, the
Paying Agent and the Security Registrar and any of their agents as the absolute
owner of such Global First Mortgage Bond for all purposes
whatsoever.  Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee, the Paying Agent or the Security Registrar or
any of their agents from giving effect to any written certification, proxy or
other authorization furnished by DTC or impair, as between DTC and its Agent
Members, the operation of customary practices of DTC governing the exercise of
the rights of an owner of a beneficial interest in any Global First Mortgage
Bond.  The registered Holder of a Global First Mortgage Bond may grant
proxies and otherwise authorize any Person, including Agent Members and Persons
that may hold interests through Agent Members, to take any action that a Holder
is entitled to take under this First Supplemental Indenture, the Indenture or
the First Mortgage Bonds.

     

    (c)          
Except as
provided below, owners of beneficial interests in Global First Mortgage Bonds
will not be entitled to receive Certificated First Mortgage
Bonds.  Certificated First Mortgage Bonds shall be issued to all
owners of beneficial interests in a Global First Mortgage Bond in exchange for
such interests if:

     

    (i)    
DTC
notifies the Company that it is unwilling or unable to continue as depositary
for such Global First Mortgage Bond and a successor depositary is not appointed
by the Company within 90 days of such notice or DTC ceases to be a clearing
agency registered under the Exchange Act at a time when DTC is required to be so
registered in order to act as depositary,

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    (ii)   
the
Company executes and delivers to the Trustee and Security Registrar an Officers’
Certificate stating that such Global First Mortgage Bond shall be so
exchangeable, or

     

    (iii)  
an Event
of Default has occurred and is continuing and the Security Registrar has
received a written request from DTC to issue a Certificated First Mortgage
Bond.

     

    (d)           In
connection with the exchange of an entire Global First Mortgage Bond for
Certificated First Mortgage Bonds pursuant to this paragraph (d), such Global
First Mortgage Bond shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and upon Company Order the Trustee
shall authenticate and deliver, to each beneficial owner identified by DTC in
exchange for its beneficial interest in such Global First Mortgage Bond, an
equal aggregate principal amount of Certificated First Mortgage Bonds of
authorized denominations.

     

    (e)           In
connection with the exchange of a portion of a Certificated First Mortgage Bond
for a beneficial interest in a Global First Mortgage Bond, the Trustee shall
cancel such Certificated First Mortgage Bond, and the Company shall execute, and
the Trustee shall authenticate and deliver to the exchanging Holder, a new
Certificated First Mortgage Bond representing the principal amount not so
exchanged.

    


    Section
2.05     Restrictions on
Transfer.  The First Mortgage Bonds and any related documents may be
amended or supplemented from time to time by the Company without the consent of
any Holder to modify the restrictions on and procedures for resales and other
transfers of the First Mortgage Bonds to reflect any change in applicable law or
regulation (or the interpretation thereof) or in practices relating to the
resale or transfer of restricted securities generally. Holders of the First
Mortgage Bonds are deemed by the acceptance of such First Mortgage Bonds to have
agreed to any such amendment or supplement.

    


    Global
First Mortgage Bonds offered and sold to Qualified Institutional Buyers (as such
term is defined under Rule 144A) in the United States of America in reliance on
Rule 144A (the “Rule 144A Global First Mortgage Bonds”) shall be issued in the
form of permanent global First Mortgage Bonds substantially in the form attached
hereto as Exhibit
A containing the second legend set forth thereon (the “Restrictive
Legend”) and the other legends required thereby and numbered from 1 upward with
the prefix “RA”, deposited with the Trustee, as custodian for DTC, duly executed
by the Company and authenticated by the Trustee as herein provided. The
aggregate principal amount of the Rule 144A Global First Mortgage Bonds may from
time to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for DTC or its nominee, as hereinafter
provided.

    


    Global
First Mortgage Bonds offered and sold outside the United States of America will
be issued initially in the form of a single temporary Global First Mortgage Bond
(the “Temporary Regulation S Global First Mortgage Bond”) and shall bear the
Temporary Regulation S Global First Mortgage Bond Legend in the form set forth
in Exhibit
A.  At any time following the Distribution Compliance Period,
upon receipt by the Trustee and the Company of a duly executed certificate in
the form of Exhibit
A to the form of First Mortgage Bond, one or 

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    more
Global First Mortgage Bonds will be issued (together with the Temporary
Regulation S Global First Mortgage Bonds, the “Regulation S Global First
Mortgage Bonds”).  The Regulation S Global First Mortgage Bonds shall
be numbered from 1 upward with the prefix “RS”. The Regulation S Global First
Mortgage Bond will be deposited upon issuance with the Trustee, as custodian for
DTC, duly executed by the Company and authenticated by the Trustee as herein
provided. The aggregate principal amount of the Regulation S Global First
Mortgage Bonds may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for DTC or its nominee, as
hereinafter provided.

    


    The
Trustee shall have no obligation or duty to monitor, determine or inquire as to
compliance with any restrictions on transfer imposed under the Indenture, this
First Supplemental Indenture or under applicable law with respect to any
transfer of any beneficial interest in any Global First Mortgage Bond (including
any transfers between or among Agent Members or beneficial owners in any Global
First Mortgage Bond) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so if
and when expressly required by, the terms of the Indenture or this First
Supplemental Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.

    


    If the
proposed transfer is a transfer of a beneficial interest in one Global First
Mortgage Bond to a beneficial interest in another Global First Mortgage Bond,
the Security Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Global First Mortgage Bond to which such
interest is being transferred in an amount equal to the principal amount of the
interest to be so transferred, and the Security Registrar shall reflect on its
books and records the date and a corresponding decrease in the principal amount
of the Global First Mortgage Bond from which such interest is being
transferred.

    


    A Global
First Mortgage Bond may not be transferred as a whole except by the depository
to a nominee of the depository or by a nominee of the depository to the
depository or another nominee of the depository or by the depository or any such
nominee to a successor depository or a nominee of such successor
depository.

    


    Beneficial
interests in any restricted Global First Mortgage Bond may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in the
same restricted Global First Mortgage Bond in accordance with the transfer
restrictions set forth in the Restrictive Legend; provided, however, that prior
to the expiration of the restricted period under the Securities Act, transfers
of beneficial interests in the Regulation S Global
First Mortgage Bond may not be made to a U.S. Person (as defined in Regulation
S) or for the account or benefit of a U.S. Person (other than an Initial
Purchaser).

    


    Any
Holder of a First Mortgage Bond requesting the transfer or exchange of a Rule
144A Global First Mortgage Bond (or an interest therein) for a Regulation S
Global First Mortgage Bond (or an interest therein) must deliver or cause to be
delivered to the Trustee a duly completed Regulation S Certificate, in the form
attached as Exhibit
A to the form of First Mortgage Bond; provided that if the
requested transfer or exchange is made by the Holder of a First Mortgage Bond
that does not bear a Restrictive Legend, then no certification is
required.

    


    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    Any
Holder of a First Mortgage Bond requesting the transfer or exchange of a
Regulation S Global First Mortgage Bond (or an interest therein) for a Rule 144A
Global First Mortgage Bond (or an interest therein) must deliver or cause to be
delivered to the Trustee a duly completed Rule 144A Certificate, in the form
attached as Exhibit
B to the form of First Mortgage Bond; provided that if the
requested transfer or exchange is made by the Holder of a First Mortgage Bond
that does not bear a Restrictive Legend, then no certification is
required.

    


    The
Company shall issue a First Mortgage Bond that is not a Global First Mortgage
Bond and that does not bear the Restrictive Legend in replacement of a First
Mortgage Bond (that is not a Global First Mortgage Bond) bearing the Restrictive
Legend at the request of any Holder following such request if (i) the Holder
shall have obtained an opinion of counsel reasonably acceptable to the Company
in form and substance reasonably satisfactory to the Company to the effect that
the First Mortgage Bond may lawfully be disposed of without registration,
qualification or legend pursuant to Rule 144, or (ii) the Holder sells the First
Mortgage Bond pursuant to Rule 144 or an effective registration
statement.

    


    Beneficial
interests in any unrestricted Global First Mortgage Bond may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in an
unrestricted Global First Mortgage Bond.

     

    Section
2.06     Sinking Fund. The
First Mortgage Bonds are not subject to any sinking fund.

    


    ARTICLE
THREE

    


    ISSUANCE
OF THE FIRST MORTGAGE BONDS

    


    Section
3.01   Additional First Mortgage
Bonds. The principal amounts of the First Mortgage Bonds which may be
authenticated and delivered hereunder are not limited.  Subject to the
limitations set forth in Article IV of the Indenture, the Company may, from time
to time, without notice to or consent of Holders of the First Mortgage Bonds,
issue additional First Mortgage Bonds with the same form and terms (other than
the date of issuance, the date from which interest thereon will begin to accrue
and the issue price) as the First Mortgage Bonds and such additional First
Mortgage Bonds shall form a single series with the applicable series of First
Mortgage Bonds, including for purposes of voting and redemptions, and shall rank
equally and ratably with the First Mortgage Bonds.

     

    Section
3.02  Authentication. The
First Mortgage Bonds for the aggregate principal amount of Two Hundred
Sixty-Five Million Five Hundred Thousand Dollars ($265,500,000) may forthwith be
executed by the Company and delivered to the Trustee and shall be authenticated
by the Trustee and delivered (either before or after the filing or recording
hereof) to or upon the order of the designated officer or officers of the
Company, upon compliance by the Company with the appropriate provisions and
requirements of Articles III and IV of the Indenture.

     

    


    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    ARTICLE
FOUR

    


    MISCELLANEOUS
PROVISIONS

    


          Section
4.01      Utility and Transmitting
Utility.  The Company is a utility as defined in Section 35.01
of the Texas Business and Commerce Code (the “TBCC”).   The Company
intends to subject this First Supplemental Indenture to the requirements and
benefits of Subchapter A of Chapter 35 of the TBCC. The perfection and notice
provided by this First Supplemental Indenture under Section 35.02 of the TBCC
shall be effective from the date of deposit for filing until the interest
granted as security is released by the filing of a termination statement, and no
renewal, refiling or continuation statement shall be required to continue such
effectiveness.  The Company is also a transmitting utility as defined in
Section 9.102 of the Texas Uniform Commercial Code.  This First
Supplemental Indenture shall remain effective as a financing statement until a
termination statement is filed, as provided in Section 9.515(f) of the Texas
Uniform Commercial Code.

     

    Section
4.02    Ratification. The
Indenture, as supplemented by this First Supplemental Indenture, is in all
respects ratified and confirmed, and this First Supplemental Indenture shall be
deemed part of the Indenture in the manner and to the extent herein and therein
provided.

    


    Section
4.03     Trustee. The Trustee
hereby accepts the trust hereby declared and provided, and agrees to perform the
same upon the terms and conditions set forth in the Indenture, as supplemented
by this First Supplemental Indenture, and upon the following terms and
conditions:

    


    The
Trustee shall not be responsible in any manner whatsoever for or in respect of
the validity or sufficiency of this First Supplemental Indenture or the due
execution hereof by the Company or for or in respect of the recitals contained
herein, all of which recitals are made by the Company solely.

    


    Section
4.04     Governing
Law.  This First Supplemental Indenture and the First Mortgage
Bonds shall be governed by and construed in accordance with the law of the State
of New York (including without limitation Section 5-1401 of the New York General
Obligations Law or any successor to such statute), except to the extent that the
Trust Indenture Act would be applicable were this First Supplemental Indenture
qualified under the Trust Indenture Act and except to the extent that the law of
any other jurisdiction shall mandatorily govern the creation, perfection,
priority or enforcement of the Lien of the Indenture or the exercise of remedies
with respect to the Mortgaged Property.

     

    Section
4.05     Counterparts.  The
First Supplemental Indenture referred to herein is an indenture supplemental to
the Indenture. This First Supplemental Indenture may be simultaneously executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original; but such counterparts shall together constitute but one and the
same instrument.

     


    
      
        
           

           

        

         


      

      
        10

        
          

        

      

      
         


      

    

    


     

    IN WITNESS WHEREOF, said
TEXAS-NEW MEXICO POWER COMPANY has caused this First Supplemental Indenture to
be executed on its behalf, and said THE BANK OF NEW YORK MELLON TRUST COMPANY,
N.A., as Trustee as aforesaid, in evidence of its acceptance of the trust hereby
created, has caused this First Supplemental Indenture to be executed on its
behalf, all on the 19th day of March, 2009, to be effective as of the 23rd day
of March, 2009.

    


    
      	 
      	
              TEXAS-NEW
      MEXICO POWER COMPANY

               

               

            
	 
      	
              By:

            	
              /s/
      Terry R.
      Horn                               
      

            
	 
      	 
      	
              Name:
      Terry R. Horn

            
	 
      	 
      	
              Title:
      Vice President and Treasurer

            


    

    


    


    ACKNOWLEDGMENT:

    


    STATE OF
NEW
MEXICO                                         §

    


    §

    


    COUNTY OF
BERNALILLO                                       §

    


    


    This
instrument was acknowledged before me on this 19th day of March, 2009, by Terry
Horn, Vice President and Treasurer of TEXAS-NEW MEXICO POWER COMPANY, a Texas
corporation, on behalf of said corporation.

    


    


    


       /s/ Sandra L.
Sanchez__________________

    Notary
Public in and for the State of

    New
Mexico

     

     

     

     

    
 

    
      
        
          


          S-1

          


          [Signature Page to First
Supplemental Indenture, dated as of March 23, 2009, to

          First
Mortgage Indenture of Texas-New Mexico Power Company]

          


        

         


      

      
         


        
          

        

      

      
         


      

    


    


    
      	 
      	
              THE
      BANK OF NEW YORK MELLON

                     TRUST
      COMPANY, N.A., as Trustee

               

               

            
	 
      	
              By:

            	
              /s/
      Teresa Petta          
                         
      

            
	 
      	 
      	
              Name:
      Teresa Petta

            
	 
      	 
      	
              Title:
      Vice President

            


    

    


    


    


    ACKNOWLEDGMENT:

    


    


    STATE OF
CALIFORNIA                                           §

    


    §

    


    COUNTY OF
LOS
ANGELES                                    
§

    


    This instrument was acknowledged before
me on this 19th day of March, 2009, by Teresa Petta, Vice President of THE BANK
OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association, on
behalf of said association.

    


    


         /s/ Karen
Yu                                                      


    Notary
Public in and for the State of California

    


     

     

     

     

     

     

    
 


    
      
        
          S-2

          


          [Signature Page to First
Supplemental Indenture, dated as of March 23, 2009, to

          First
Mortgage Indenture of Texas-New Mexico Power Company]

        

         


      

      
         


        
          

        

      

      
         


      

    


    


    Exhibit
A

     

    [FORM
OF 9.50% FIRST MORTGAGE BOND, DUE 2019, SERIES 2009A]

    


    [IF THE
SECURITY IS TO BE A GLOBAL SECURITY, INSERT — UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

     

    THIS
SECURITY IS A GLOBAL SECURITY AS REFERRED TO IN THE INDENTURE HEREINAFTER
REFERENCED AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A
DEPOSITARY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE
INDIVIDUAL SECURITIES REPRESENTED HEREBY IN DEFINITIVE FORM, THIS GLOBAL
SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE
OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.]

    


    THIS
SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN AVAILABLE
EXEMPTION THEREFROM.  EACH PURCHASER OF THIS SECURITY IS HEREBY
NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER (“RULE 144A”) OR ANOTHER EXEMPTION UNDER THE SECURITIES
ACT.

     

    THE HOLDER OF THIS SECURITY AGREES
FOR THE BENEFIT OF TEXAS-NEW MEXICO POWER COMPANY (THE “COMPANY”) THAT (A) THIS
SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (I) TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
(AS DEFINED IN RULE 144A) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN


     

    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

    

    ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (IV) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR (VI) TO THE COMPANY OR ONE OF ITS AFFILIATES, AND IN EACH CASE
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF
THE SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN CLAUSE (A)
ABOVE.  THIS SECURITY AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON AND PROCEDURES FOR
RESALES AND OTHER TRANSFERS OF THIS SECURITY TO REFLECT ANY CHANGE IN APPLICABLE
LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO
THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY.  THE HOLDER
OF THIS SECURITY SHALL BE DEEMED BY THE ACCEPTANCE OF THIS SECURITY TO HAVE
AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.

     

    [Include
the following legend on the Temporary Regulation S Global First Mortgage
Bond:]

     

    EXCEPT
AS SET FORTH BELOW, BENEFICIAL OWNERSHIP INTERESTS IN THIS TEMPORARY REGULATION
S GLOBAL FIRST MORTGAGE BOND WILL NOT BE EXCHANGEABLE FOR INTERESTS IN THE
PERMANENT REGULATION S GLOBAL FIRST MORTGAGE BOND OR ANY OTHER SECURITY
REPRESENTING AN INTEREST IN THE FIRST MORTGAGE BONDS REPRESENTED HEREBY WHICH DO
NOT CONTAIN A LEGEND CONTAINING RESTRICTIONS ON TRANSFER, UNTIL THE EXPIRATION
OF THE “40-DAY DISTRIBUTION COMPLIANCE PERIOD” (WITHIN THE MEANING OF RULE
903(B)(2) OF REGULATION S UNDER THE SECURITIES ACT) AND THEN ONLY UPON
CERTIFICATION IN FORM REASONABLY SATISFACTORY TO THE COMPANY AND THE TRUSTEE
THAT SUCH BENEFICIAL INTERESTS ARE OWNED EITHER BY NON-U.S. PERSONS OR U.S.
PERSONS WHO PURCHASED SUCH INTERESTS IN A TRANSACTION THAT DID NOT REQUIRE
REGISTRATION UNDER THE SECURITIES ACT. DURING SUCH 40-DAY DISTRIBUTION
COMPLIANCE PERIOD, BENEFICIAL OWNERSHIP IN THIS TEMPORARY REGULATION S GLOBAL
FIRST MORTGAGE BOND MAY ONLY BE SOLD, PLEDGED OR TRANSFERRED THROUGH EUROCLEAR
BANK SA./N.V. OR CLEARSTREAM BANKING, SOCIÉTÉ ANONYME. AND ONLY (1) TO THE
COMPANY, (2) WITHIN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (3)
OUTSIDE THE UNITED STATES IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF 

     

    
      
        
        

      

      
        A-2

        
          

        

      

      
        
        

      

    

    CASES
(1) THROUGH (4) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES AND OTHER JURISDICTIONS. HOLDERS OF INTERESTS IN THIS
TEMPORARY REGULATION S GLOBAL FIRST MORTGAGE BOND WILL NOTIFY ANY PURCHASER OF
THIS FIRST MORTGAGE BOND OF THE RESALE RESTRICTIONS REFERRED TO ABOVE, IF THEN
APPLICABLE.

     

    BENEFICIAL
INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL FIRST MORTGAGE BOND MAY BE
EXCHANGED FOR INTERESTS IN A RESTRICTED GLOBAL FIRST MORTGAGE BOND ONLY IF (1)
SUCH EXCHANGE OCCURS IN CONNECTION WITH A TRANSFER OF THE SECURITIES IN
COMPLIANCE WITH RULE 144A, AND (2) THE TRANSFEROR OF THE TEMPORARY REGULATION S
GLOBAL FIRST MORTGAGE BOND FIRST DELIVERS TO THE TRUSTEE A WRITTEN CERTIFICATE
(IN THE FORM ATTACHED TO THIS CERTIFICATE) TO THE EFFECT THAT THE REGULATION S
GLOBAL FIRST MORTGAGE BOND IS BEING TRANSFERRED (A) TO A PERSON WHO THE
TRANSFEROR REASONABLY BELIEVES TO BE A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A, (B) TO A PERSON WHO IS PURCHASING FOR ITS OWN ACCOUNT OR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A AND (C) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES
LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.

     

    BENEFICIAL
INTERESTS IN A RESTRICTED GLOBAL FIRST MORTGAGE BOND MAY BE TRANSFERRED TO A
PERSON WHO TAKES DELIVERY IN THE FORM OF AN INTEREST IN THE REGULATION S GLOBAL
FIRST MORTGAGE BOND, WHETHER BEFORE OR AFTER THE EXPIRATION OF THE 40-DAY
DISTRIBUTION COMPLIANCE PERIOD, ONLY IF THE TRANSFEROR FIRST DELIVERS TO THE
TRUSTEE A WRITTEN CERTIFICATE (IN THE FORM ATTACHED TO THIS CERTIFICATE) TO THE
EFFECT THAT IF SUCH TRANSFER IS BEING MADE IN ACCORDANCE WITH RULE 903 OR 904 OF
REGULATION S OR RULE 144 (IF AVAILABLE) AND THAT, IF SUCH TRANSFER OCCURS PRIOR
TO THE EXPIRATION OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD, THE INTEREST
TRANSFERRED WILL BE HELD IMMEDIATELY THEREAFTER THROUGH EUROCLEAR BANK S.A./N.V.
OR CLEARSTREAM BANKING, SOCIÉTÉ ANONYME.

     


    
      
        
           

        

         


      

      
        A-3

        
          

        

      

      
         


      

    


    


     

    TEXAS-NEW
MEXICO POWER COMPANY

    


    (Incorporated
under the laws of the State of Texas)

    


    


    9.50%
First Mortgage Bond, due 2019, Series 2009A

    


    


    No.                                                                                                                                                                                                         $[                      ]

    CUSIP
No.

    ISIN
No.

    


    


    TEXAS-NEW
MEXICO POWER COMPANY, a corporation organized and existing under the laws of the
State of Texas (hereinafter called the “Company”, which term shall include any
Successor Corporation under the Indenture), for value received, hereby promises
to pay to _____________________, or registered assigns, on April 1, 2019, the
principal sum of [___________ dollars ($________)] [as revised by the Schedule of
Increases and Decreases in Global First Mortgage Bond attached hereto],1 in any coin or currency of the United States
of America which at the time of payment is legal tender for public and private
debts, and to pay interest on said principal sum in like coin or currency from
March 23, 2009, or from the most recent April 1 or October 1 to which interest
has been paid or duly provided for, at the rate of nine and one half percent
(9.50%) per annum, payable semi-annually, on the first (1st) day of April and
first (1st) day of October in each year, commencing October 1, 2009 (each an
“Interest Payment Date”), until Maturity.  The Company shall pay
interest on overdue principal at the rate per annum borne by this First Mortgage
Bond, and it shall pay interest on overdue installments of interest at the rate
per annum borne by this First Mortgage Bond to the extent lawful.  For
purposes of the First Supplemental Indenture and this First Mortgage Bond, the
term “interest” shall be deemed to include interest provided for in the first
and second immediately preceding sentences.  If any Interest Payment
Date falls on a day that is not a Business Day then payment of interest payable
on such date will be made on the next succeeding Business Day (and without any
interest or payment in respect of any such delay). The interest so payable on
any Interest Payment Date will, subject to certain exceptions provided in such
Indenture, be paid to the Person in whose name this First Mortgage Bond is
registered at the close of business on the Regular Record Date for such Interest
Payment Date, which shall be the fifteenth (15th) day of the month next
preceding such Interest Payment Date; except that if the Company shall default
in the payment of any interest due on such Interest Payment Date, such defaulted
interest shall be paid to the Holder of such First Mortgage Bond as of the close
of business on a date selected by the Trustee (in accordance with Section 3.07
of the Indenture) (a “Special Record Date”), which Special Record Date shall not
be more than fifteen (15) days or less than ten (10) days prior to the date
proposed by the Company for payment of such defaulted interest.

     

    ________________________

    1 To be inserted on Bonds in global form only.

     

    
      
        
        

      

      
        A-4

        
          

        

      

      
        
        

      

    

    Principal
of, premium (if any) and interest on this First Mortgage Bond are payable at the
corporate trust office or agency of the Trustee, in New York, New York, as
Paying Agent for the Company.  Interest will be computed on the basis
of a 360 day year consisting of twelve (12) thirty (30) day months.

    


    The
provisions of this First Mortgage Bond are continued on the reverse hereof, and
such continued provisions shall for all purposes have the same effect as though
fully set forth at this place.

    


    This
First Mortgage Bond shall not be entitled to any benefit under the Indenture or
any indenture supplemental thereto, or become valid or obligatory for any
purpose, until The Bank of New York Mellon Trust Company, N.A., the Trustee
under the Indenture, or a successor trustee thereto under the Indenture, shall
have signed the form of certificate endorsed hereon.

    


    IN
WITNESS WHEREOF, TEXAS-NEW MEXICO POWER COMPANY has caused the signature of its
duly authorized officer to be hereto affixed.

    


    Dated:
____________

    
      	
               
      

            	
               

               

               

                     
      By:

            	
              TEXAS-NEW
      MEXICO POWER 

              COMPANY

               

               

              ________________________________________

            
	 
      	 
      	
               
      Name:

            
	 
      	 
      	
               
      Title:

            


    

    


    


    


    


    


    


    


    


    

      

    

      
       

    


    
      
        
           

        

         


      

      
        A-5

        
          

        

      

      
         


      

    


    


     

    CERTIFICATE OF
AUTHENTICATION

    


    This is
one of the First Mortgage Bonds of the series designated therein referred to in
the within-mentioned Indenture, as supplemented by the First Supplemental
Indenture.

    


    
      	 
      	
               

               

               

                        
      By:

            	
              THE
      BANK OF NEW YORK MELLON TRUST 

              COMPANY,
      N.A., as Trustee

               

               

               ___________________________________________

            
	 
      	 
      	
               
      Authorized Officer

            


    

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    



    
      
        
           

        

         


      

      
        A-6

        
          

        

      

      
         


      

    


    [FORM OF
REVERSE OF

    9.50%
FIRST MORTGAGE BOND, DUE 2019, SERIES 2009A]

    


    This
First Mortgage Bond is one of a duly authorized issue of First Mortgage Bonds of
the Company (herein called the “First Mortgage Bonds”), unlimited in aggregate
principal amount, of the series hereinafter specified, all issued and to be
issued under and equally secured by an indenture, dated as of March 23, 2009,
executed by the Company to The Bank of New York Mellon Trust Company, N.A.
(herein called the “Trustee”) (said indenture being herein called the
“Indenture”), to which Indenture and all indentures supplemental thereto
(including the First Supplemental Indenture hereinafter referred to) reference
is hereby made for a description of the properties mortgaged and pledged, the
nature and extent of the security, the rights of the registered owners of the
First Mortgage Bonds and of the Trustee in respect thereto, and the terms and
conditions upon which the First Mortgage Bonds are, and are to be, secured, and
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the First
Mortgage Bonds and of the terms upon which the First Mortgage Bonds are, and are
to be, authenticated and delivered. To the extent permitted by, and as provided
in, the Indenture, modifications or alterations of the Indenture, or of any
indenture supplemental thereto, and of the rights and obligations of the Company
and of the Holders of the First Mortgage Bonds may be made, in certain cases
without the consent of the Holders of the First Mortgage Bonds, as set forth in
Section 14.01 of the Indenture, and otherwise with the consent of the Company by
an affirmative vote of not less than a majority in amount of the First Mortgage
Bonds entitled to vote then outstanding, at a meeting of Holders of the First
Mortgage Bonds called and held as provided in the Indenture, or by an
affirmative vote of not less than a majority in amount of the First Mortgage
Bonds of any series entitled to vote then outstanding and affected by such
modifications or alterations, in case one or more but less than all of the
series of First Mortgage Bonds then outstanding under the Indenture are so
affected; provided,
however, that no such modifications or alterations shall be made which
will affect the terms of payment of the principal of, or interest on, this First
Mortgage Bond, which are unconditional. The First Mortgage Bonds may be issued
in series, for various principal sums, may mature at different times, may bear
interest at different rates and may otherwise vary as provided in the Indenture.
This First Mortgage Bond is one of a series designated as “9.50% First Mortgage
Bonds, due 2019, Series 2009A” of the Company, issued under and secured by the
Indenture and all indentures supplemental thereto and described in an indenture
supplemental thereto (herein called the “First Supplemental Indenture”), dated
as of March 23, 2009, executed by the Company to the Trustee.

     

    The
Company, at its option, may redeem all, or from time to time, any part of the
First Mortgage Bonds of this series on not less than 30 days nor more than 60
days notice by first-class mail, postage prepaid as provided in the Indenture
(except that, notwithstanding the provisions of Section 5.04 of the Indenture,
any notice of redemption for the First Mortgage Bonds of this series given
pursuant to said Section need not set forth the Redemption Price but only the
manner of calculation thereof) at a Redemption Price equal to the greater of the
following amounts:

    


    
      	
               
      

            	
              (i)

            	
              100%
      of the principal amount of the First Mortgage Bonds of this series then
      Outstanding to be so redeemed; and

            


    

     

     

    
      
        
        

      

      
        A-7

        
          

        

      

      
        
        

      

    

    
      	
               
      

            	
              (ii)

            	
              the
      sum of the present values of the principal amount and the remaining
      scheduled payments of interest on the First Mortgage Bonds of this series
      to be redeemed (not including any portion of payments of interest accrued
      as of the applicable Redemption Date), discounted to the applicable
      Redemption Date in accordance with customary market practice on a
      semi-annual basis at a rate equal to the sum of the Treasury Rate plus 50
      basis points,

            


    

     

    plus, in
either of the above cases, accrued and unpaid interest on the principal amount
being redeemed to the applicable Redemption Date.

     

    The Redemption Price for the First
Mortgage Bonds of this series will be calculated by the Independent Investment
Banker assuming a 360-day year consisting of twelve 30-day months. For purposes
of calculating the Redemption Price pursuant to the foregoing optional
redemption provisions, the following terms will have the meanings set forth
below.

    


    “Comparable Treasury Issue” means the
U.S. Treasury security or securities selected by the Independent Investment
Banker as having a maturity comparable to the remaining term of the First
Mortgage Bonds to be redeemed that would be used, at the time of selection and
in accordance with customary market practice, in pricing new issues of corporate
debt securities of a comparable maturity to the remaining term of such First
Mortgage Bonds.

     

        
“Comparable Treasury Price” means, with respect to any Redemption
Date:

     

    
      	
               
      

            	
              (i)

            	
              the
      bid-side for the Comparable Treasury Issue as of the third Business Day
      preceding the Redemption Date, as set forth in the daily statistical
      release (or any successor release) published by The Wall Street Journal
      in the table entitled “Treasury Bonds, Notes, and Bills,” as
      determined by the Independent Investment Banker,
  or

            


    

     

    
      	
               
      

            	
              (ii)

            	
              if
      such release (or any successor release) is not published or does not
      contain such prices on such Business
Day:

            


    

     

    
      	
               
      

            	
              (x)

            	
              the
      average of the Reference Treasury Dealer Quotations for that Redemption
      Date, after excluding the highest and lowest of the Reference Treasury
      Dealer Quotations,

            


    

    


    
      	
               
      

            	
              (y)

            	
              if
      the Trustee obtains fewer than four Reference Treasury Dealer Quotations,
      the average of all Reference Treasury Dealer Quotations so received,
      or

            


    

     

    
      	
               
      

            	
              (z)

            	
              if
      only the Reference Treasury Dealer Quotation is received, such
      quotation.

            


    

     

    “Independent
Investment Banker” means one of the Reference Treasury Dealers selected by the
Trustee after consultation with the Company.

     

    “Reference
Treasury Dealer” means each of four primary U.S. Government securities dealers
in New York City (each a “Primary Treasury Dealer”), consisting of (i) J.P.
Morgan 

     

    
      
        
        

      

      
        A-8

        
          

        

      

      
        
        

      

    

    Securities
Inc. and (ii) three other nationally recognized investment banking firms (or
their affiliates) that are selected by the Company in connection with the
particular redemption, and their respective successors, provided that if any of
them ceases to be a Primary Treasury Dealer, the Company will substitute another
nationally recognized investment banking firm (or its affiliate) that is a
Primary Treasury Dealer.

     

    “Reference
Treasury Dealer Quotations” means, with respect to each Reference Treasury
Dealer and any Redemption Date, the average, as determined by the Trustee, of
the bid and asked prices for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) quoted in writing to the Trustee by such
Reference Treasury Dealer at 3:30 p.m., New York City time, on the third
Business Day preceding that Redemption Date.

     

    “Treasury
Rate” means, with respect to any Redemption Date, the rate per year equal to the
semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated on the third Business Day preceding the applicable Redemption Date,
assuming a price for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) equal to the Comparable Treasury Price for that Redemption
Date.

     

    The
Trustee shall be under no duty to inquire into, may conclusively presume the
correctness of, shall be fully protected in relying upon the Independent
Investment Banker’s calculation of any Redemption Price, and shall have no
responsibility for such calculation.

     

    In the
event of redemption of the First Mortgage Bonds of this series in part only, a
new Security or First Mortgage Bonds of this series and of like tenor for the
unredeemed portion hereof will be issued in the name of the Holder hereof upon
the cancellation hereof.

     

    The
Indenture contains provisions for satisfaction and discharge of the entire
indebtedness of the First Mortgage Bonds of this series.

    


    In case
an Event of Default shall occur, the principal of all the First Mortgage Bonds
at any such time outstanding under the Indenture may be declared or may become
due and payable, upon the conditions and in the manner and with the effect
provided in the Indenture. The Indenture provides that such declaration may in
certain events be waived by the Holders of a majority in principal amount of the
First Mortgage Bonds outstanding.

    


    [This First Mortgage Bond is a
global First Mortgage Bond and will be exchangeable for Certificated First
Mortgage Bonds of like series and terms and of differing authorized
denominations in a like aggregate principal amount, only if (i) DTC notifies the
Company that it is unwilling or unable to continue as depositary for such Global
First Mortgage Bond and a successor depositary is not appointed by the Company
within 90 days of such notice or DTC ceases to be a clearing agency registered
under the Exchange Act at a time when DTC is required to be so registered in
order to act as depositary, (ii) the Company executes and delivers to the
Trustee and Security Registrar an Officers’ Certificate stating that such Global
First Mortgage Bond shall be so exchangeable, or (iii) an Event of Default has
occurred and is continuing and the Security Registrar has received a written
request from DTC to issue a Certificated First Mortgage Bond.  Upon
any such exchange, Certificated First Mortgage Bonds of this series shall


     

    
      
        
        

      

      
        A-9

        
          

        

      

      
        
        

      

    

    be registered in the names of the beneficial owners of this First
Mortgage Bond, which names shall be provided by DTC’s relevant Participants (as
identified by DTC) to the Trustee.]2

     

    No
recourse shall be had for the payment of the principal of, or the interest on,
this First Mortgage Bond, or for any claim based hereon or on the Indenture or
any indenture supplemental thereto, against any incorporator, or against any
stockholder, director or officer, past, present or future, of the Company, as
such, or of any predecessor or successor corporation, either directly or through
the Company or any such predecessor or successor corporation, whether for
amounts unpaid on stock subscriptions or by virtue of any constitution, statute
or rule of law, or by the enforcement of any assessment or penalty or otherwise,
all such liability, whether at common law, in equity, by any constitution,
statute or otherwise, of incorporators, stockholders, directors or officers
being released by every owner hereof by the acceptance of this First Mortgage
Bond and as part of the consideration for the issue hereof, and being likewise
released by the terms of the Indenture.

    


    This
First Mortgage Bond is transferable by the registered owner hereof, in person or
by duly authorized attorney, on the books of the Company to be kept for that
purpose as provided for in the Indenture upon surrender and cancellation of this
First Mortgage Bond and on presentation of a duly executed written instrument of
transfer, and thereupon a new First Mortgage Bond or Bonds of the same series,
of the same aggregate principal amount and in authorized denominations will be
issued to the transferee or transferees in exchange therefor; and this First
Mortgage Bond, with or without others of like series, may in like manner be
exchanged for one or more new First Mortgage Bonds of the same series of other
authorized denominations but of the same aggregate principal amount; all upon
payment of the charges and subject to the terms and conditions set forth in the
Indenture.

    


    This
First Mortgage Bond shall be subject to certain restrictions on transfer as set
forth in the Indenture and the First Supplemental Indenture.

    


    Any
Holder of a First Mortgage Bond of this series requesting the transfer or
exchange of a Rule 144A Global First Mortgage Bond (as defined in the First
Supplemental Indenture) (or an interest therein) for a Regulation S Global First
Mortgage Bond (as defined in the First Supplemental Indenture) (or an interest
therein) must deliver or cause to be delivered to the Trustee a duly completed
Regulation S Certificate, in the form attached as Exhibit A hereto;
provided that if the
requested transfer or exchange is made by the Holder of a First Mortgage Bond of
this series that does not bear a Restrictive Legend (as defined in the First
Supplemental Indenture), then no certification is required.

    


    Any
Holder of a First Mortgage Bond of this series requesting the transfer or
exchange of a Regulation S Global First Mortgage Bond (or an interest therein)
for a Rule 144A Global First Mortgage Bond (or an interest therein) must deliver
or cause to be delivered to the Trustee a duly completed Rule 144A Certificate,
in the form attached as Exhibit B
hereto; provided that
if the requested transfer or exchange is made by the Holder of a First Mortgage
Bond of this series that does not bear a Restrictive Legend, then no
certification is required.

     

    _________________________

    2 To be inserted on
Bonds in global form only.


    
      
        
        

      

      
        A-10

        
          

        

      

      
        
        

      

    

    Beneficial
interests in a restricted global First Mortgage Bond may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in the
same restricted global First Mortgage Bond in accordance with the transfer
restrictions set forth in the Restrictive Legend (as defined in the First
Supplemental Indenture); provided, however, that prior
to the expiration of the distribution compliance period under the Regulation S,
transfers of beneficial interests in the Regulation S Global
First Mortgage Bond may not be made to a U.S. Person (as defined in Regulation
S) or for the account or benefit of a U.S. Person (other than an Initial
Purchaser (as defined in the First Supplemental Indenture)).

    


    This
First Mortgage Bond shall be governed by, and construed in accordance with, the
laws of the State of New York) (including without limitation Section 5-1401 of
the New York General Obligations Law or any successor to such statute), except
to the extent that the Trust Indenture Act would be applicable were the First
Supplemental Indenture qualified under the Trust Indenture Act and except to the
extent that the law of any other jurisdiction shall mandatorily govern the
creation, perfection, priority or enforcement of the Lien of the Indenture or
the exercise of remedies with respect to the Mortgaged Property.

    


    All
capitalized terms used but not defined in this First Mortgage Bond shall have
the meanings assigned to them in the Indenture or the First Supplemental
Indenture, as applicable.

     

    


    [TO BE ATTACHED TO GLOBAL
FIRST MORTGAGE BONDS]

    

      

    

      
       

    


    
      
         


      

      
        A-11

        
          

        

      

      
         


      

    


    


    SCHEDULE
OF INCREASES OR DECREASES IN GLOBAL FIRST MORTGAGE BOND

    


    The
following increases or decreases in this Global First Mortgage Bond have been
made:

    


    
      	
              Date
      of

              Exchange

            	
              Amount
      of decrease 

              in
      Principal Amount 

              of
      this Global First 

              Mortgage
      Bond

            	
              Amount
      of increase 

              in
      Principal Amount 

              of
      this Global First 

              Mortgage
      Bond

            	
              Principal
      

              Amount
      of this 

              Global
      First 

              Mortgage
      Bond 

              following
      such 

              decrease
      or 

              increase

            	
              Signature
      of 

              authorized
      

              signatory
      of 

              Trustee
      or 

              Securities
      

              Custodian

            


    

    


    


    


    


    


    


    


    


    



    
      
        
           

        

         


      

      
        A-12

        
          

        

      

      
         


      

    


    


    


    Exhibit
A

    Regulation
S Certificate3

    


    [Date]

     

     

    Texas-New
Mexico Power Company (the “Company”)

    577 North
Garden Ridge Boulevard

    Lewisville,
Texas  75067

    Attention:
Vice President and Treasurer

    


    The Bank
of New York Mellon Trust Company, N.A., as Trustee (the “Trustee”)

    101
Barclay Street

    New York,
New York 10286

    Attention:
Corporate Trust Division - Corporate Finance Unit

    


    
      	
              Re:

            	
              Texas-New
      Mexico Power Company 9.50% First Mortgage Bonds, due 2019, Series 2009A
      (“First Mortgage Bonds of 2009A Series”) Issued under the Indenture (the
      “Indenture”) dated as of March 23, 2009, and the First Supplemental
      Indenture dated as of March 23,
2009.

            


    

    


    


    Dear
Ladies and Gentlemen:

    


    In
connection with our proposed transfer of $                            
aggregate principal amount of First Mortgage Bonds of 2009A Series, we confirm
that:

    


    
      	 
      	
              (a)

            	 
      	
              the
      offer of the First Mortgage Bonds of 2009A Series was not made to a Person
      in the United States;

            


    

    


    
      	 
      	
              (b)

            	 
      	
              either
      (i) at the time the buy order was originated, the transferee was outside
      the United States or we and any Person acting on our behalf reasonably
      believed that the transferee was outside the United States or (ii) the
      transaction was executed in, on or through the facilities of a designated
      off-shore securities market and neither we nor any Person acting on our
      behalf knows that the transaction has been pre-arranged with a buyer in
      the United States;

            


    

    


    
      	 
      	
              (c)

            	 
      	
              no
      directed selling efforts have been made in the United States in
      contravention of the requirements of Rule 903(b) or Rule 904(b) of
      Regulation S, as applicable; and

            


    

    


    
      	 
      	
              (d)

            	 
      	
              the
      transaction is not part of a plan or scheme to evade the registration
      requirements of the Securities Act.

            


    

     

    ________________________

    3 To be inserted only in Bonds of 2009A Series that are not
registered under the Securities Act of 1933, as amended.


    
      
        
        

      

      
        A-13

        
          

        

      

      
        
        

      

    

    In
addition, if the sale is made during the Distribution Compliance Period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may
be.

    


    Capitalized terms used herein, but not
defined herein, shall have the meaning assigned to such terms in the First
Mortgage Indenture dated as of March 23, 2009 between the Company and the
Trustee, as supplemented by the First Supplemental Indenture dated as of March
23, 2009 between the Company and the Trustee.

    


    The
Company and the Trustee are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.

    


    Very
truly yours,

    


    [Name of
Transferor]

    


    
      	
               

              By:

            	 
      	
               

              __________________________

               

            	 
      	
               

              ___________________________

               

            
	 
      	 
      	
              Authorized
      Signature

            	 
      	
              Signature
      Medallion Guarantee

            


    

    


    


    


    


    


    


    


    


    


    


    


    


    


    

      

    

      
       

    


    
      
        
           

        

         


      

      
        A-14

        
          

        

      

      
         


      

    


    


     

    Exhibit
B

    Rule 144A
Certificate4

    


    [Date]

    


    Texas-New
Mexico Power Company (the “Company”)

    577 North
Garden Ridge Boulevard

    Lewisville,
Texas  75067

    Attention:
Vice President and Treasurer

     

    The Bank
of New York Mellon Trust Company, N.A., as Trustee (the “Trustee”)

    101
Barclay Street

    New York,
New York 10286

    Attention:
Corporate Trust Division - Corporate Finance Unit

    


    


    
      	
              Re:

            	
              Texas-New
      Mexico Power Company 9.50% First Mortgage Bonds, due 2019, Series 2009A
      (“First Mortgage Bonds of 2009A Series”) Issued under the Indenture (the
      “Indenture”) dated as of March 23, 2009, and the First Supplemental
      Indenture dated as of March 23,
2009.

            


    

    


    


    This is
to certify that as of the date hereof with respect to U.S. $ [               
] principal amount of the above-captioned securities presented or
surrendered on the date hereof (the “Surrendered Bonds”) for registration of
transfer or for exchange where the securities issuable upon such exchange are to
be registered in a name other than that of the undersigned Holder (each such
transaction being a “transfer”), the undersigned Holder (as defined in the
Indenture) of the Surrendered Bonds represents and certifies for the benefit of
Texas-New Mexico Power Company and the Trustee, that the transfer of Surrendered
Bonds associated with such transfer complies with the restrictive legends set
forth on the face of the Surrendered Bonds for the reason [checked
below]

     

    
      	
              o

            	 
      	
              The
      Surrendered Bonds are being transferred to a Person whom we reasonably
      believe is a “qualified institutional buyer” (as defined in Rule 144A
      under the Securities Act of 1933) (a “QIB”) that purchases for its own
      account or for the account of one or more QIBs to whom notice has been
      given that the resale, pledge or transfer is being made in reliance on
      Rule 144A under the Securities Act;
or

            


    

     

    
      	
              o

            	 
      	
              The
      transfer of the Surrendered Bonds complies with Rule 144 under the
      Securities Act;* or

            


    

     

    ____________________________

    4 To be inserted only in Bonds of 2009A Series that are not
registered under the Securities Act of 1933, as amended.

     

    
      
        
        

      

      
        A-15

        
          

        

      

      
        
        

      

    

    
      	
              o

            	 
      	
              The
      Surrendered Bonds are being transferred to the
  Company.

            


    

     

    Capitalized terms used herein, but not
defined herein, shall have the meaning assigned to such terms in the First
Mortgage Indenture dated as of March 23, 2009 between the Company and the
Trustee, as supplemented by the First Supplemental Indenture dated as of March
23, 2009 between the Company and the Trustee.

    


    The
Company and the Trustee are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.

    


    Very
truly yours,

    


    [Name of
Transferor]

    


    
      	
               

              By:

            	 
      	
               

                   ___________________________

               

            	 
      	
               

                   ____________________________

               

            
	 
      	 
      	
              Authorized
      Signature

            	 
      	
              Signature
      Medallion Guarantee

            


    

    


     

     

    ________

    
      	
              *

            	 
      	
              These
      transfers may require an opinion of
counsel.

            


    

    


     

    

      

    

      
       

    


    
      
        
           

        

         


      

      
        A-16