Document:

WHOLESALE REQUIREMENTS POWER SALE AND SERVICES AGREEMENT

 EXHIBIT 10(K) 
  
 WHOLESALE REQUIREMENTS POWER SALE 
  
 AND SERVICES AGREEMENT 
  
 BETWEEN 
  
 PUBLIC SERVICE COMPANY OF NEW MEXICO 
  
 AND 
  
 TEXAS-NEW MEXICO POWER COMPANY 

 WHOLESALE REQUIREMENTS POWER SALE 
  
 AND SERVICES AGREEMENT 
  
 BETWEEN 
  
 PUBLIC SERVICE COMPANY OF NEW MEXICO 
  
 AND 
  
 TEXAS-NEW MEXICO POWER COMPANY 
  
 TABLE OF
CONTENTS 
  

	 SECTION

	  	PAGE

	 Recitals
	  	 
		
	 1.   Undertaking of the Parties
	  	7
		
	 2.   Definitions
	  	7
		
	 3.   Effective Date and Term
	  	13
		
	 4.   Services to Be Provided
	  	14
		
	 5.   Appointment of PNM Marketing as Agent
	  	18
		
	 6.   Transmission
	  	18
		
	 7.   Rates for Service
	  	20
		
	 8.   Rate Changes
	  	22
		
	 9.   Billing and Payment
	  	23
		
	 10. Metering
	  	24
		
	 11. Defaults
	  	25
		
	 12. Uncontrollable Forces
	  	28
		
	 13. Waiver
	  	28
		
	 14. Liability and Indemnity
	  	29
		
	 15. Authorized Representatives
	  	30

  

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	 16. Governing Law and Contract Administration
	  	32
		
	 17. Assignment
	  	32
		
	 18. Nondedication of Facilities
	  	33
		
	 19. Notices
	  	33
		
	 20. Entire Agreement
	  	34
		
	 21. Section Headings and Exhibits
	  	34
		
	 22. Invalidity
	  	35
		
	 23. Disputes
	  	35
		
	 24. No Third Party Rights
	  	37
		
	 25. Amendments
	  	37
		
	 26. No Partnership
	  	38
		
	 27. Signature Clause
	  	38

  
 EXHIBITS 
  

	1.	Contract Requirements Schedule 

  

	2.	Texas-New Mexico Power Company New Mexico Transmission Rights 

  

	3.	EPE/TNMP Contract 

  

	4.	Points of Delivery 

  

	5.	Phelps Dodge/TNMP MOU 

  

	6.	SPS/TNMP Contract 

  
 OPERATING PROCEDURES 
  

	1.	Replacement Energy Scheduling 

  

	2.	New Mexico Operating Procedures 

  

	3.	Transmission Loss Accounting 

  

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 WHOLESALE REQUIREMENTS POWER SALE 
 AND SERVICES AGREEMENT 
 BETWEEN 
 PUBLIC SERVICE COMPANY OF NEW MEXICO 
 AND 
 TEXAS-NEW MEXICO POWER COMPANY 
  
 This Wholesale Requirements Power Sale and Services Agreement (“Agreement”) is entered into between PUBLIC SERVICE
COMPANY OF NEW MEXICO, a New Mexico corporation (“PNM”), as seller, and TEXAS-NEW MEXICO POWER COMPANY, a Texas corporation (“TNMP”), as purchaser. PNM and TNMP are hereinafter sometimes referred to as the “Parties” or
individually as a “Party.” 
  
 RECITALS: 
  
 1. TNMP is a public utility engaged in the generation, transmission and
distribution of Power and Energy in the States of Texas and New Mexico. 
  
 2. PNM is a public utility engaged in the generation, transmission, and wholesale sale of Power and Energy in the State of Arizona and in the generation, transmission, distribution, and retail and wholesale sale of Power and Energy in the
State of New Mexico. 
  
 3. TNMP purchases 6 MW of firm
point-to-point transmission service and associated ancillary services from PNM Reliability under PNM’s Open Access Transmission Tariff (“OATT”) for delivery from the 345 kV bus at the Four Corners Switchyard to the Hidalgo 345 kV
Switching Station pursuant to a service agreement dated May 26, 2000. 
  
 4. TNMP purchases 15 MW of firm point-to-point transmission service and associated ancillary services from PNM Reliability under the PNM OATT for delivery from the 345 kV bus at the Four Corners Switchyard to the Hidalgo 345 kV Switching
Station pursuant to a service agreement dated February 9, 2001. 
  

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 5. TNMP purchases control area services from PNM Reliability pursuant to the Control Area Services
Agreement between TNMP and PNM Reliability, dated May 14, 1999, as amended (“Control Area Services Agreement”). 
  
 6. TNMP is a party to an interconnection agreement with Southwestern Public Service Company (“SPS”) dated December 8, 1981 (“SPS/TNMP
Contract”), pursuant to which TNMP purchases Power and Energy under service schedules thereto. TNMP has given notice to SPS of its intent to terminate the SPS/TNMP Interconnection Agreement and all service schedules thereto effective December
8, 2001. 
  
 7. TNMP purchases Capacity and Energy from El Paso
Electric Company (“EPE”) pursuant to a power sales agreement dated April 29, 1987, as amended (“EPE/TNMP Contract”). TNMP has given notice to EPE of its intent to terminate the EPE/TNMP Contract effective December 31, 2002.

  
 8. TNMP provides electric service at retail to Phelps Dodge
Corporation (“Phelps Dodge”) pursuant to a Memorandum of Understanding dated October 30, 1999 (“Phelps Dodge/TNMP MOU”) and to TNMP’s Fourth Revised Rate Schedule No. 9 and Fourth Revised Rate Schedule No. 11 on file with
the New Mexico Public Regulation Commission (“NMPRC”). On March 2, 2001, TNMP filed an advice notice with the NMPRC to substitute Fifth Revised Rate Schedule No. 11 for Fourth Revised Rate Schedule No. 11. TNMP’s filing is pending
before the NMPRC. 
  
 9. Under the Phelps Dodge/TNMP MOU, Phelps
Dodge has the right to utilize, on an interruptible basis, up to 65 MW of transmission from the TNMP side of the 345 kV bus at the Greenlee Switchyard to the Hidalgo Switching Station for the sole purpose of receiving the block energy purchases made
by TNMP on behalf of Phelps Dodge. 
  

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 10. On February 21, 2001, TNMP released a Request for Proposals (“RFP”) seeking a full
requirements contract to serve the TNMP Native Load. As a result of the RFP process, TNMP and PNM Marketing entered into a Letter of Intent dated as of April 19, 2001, pursuant to which TNMP and PNM Marketing agreed to negotiate in good faith to
reach an agreement based on principles embodied in a proposal by PNM Marketing dated April 12, 2001. 
  
 11. TNMP desires to enter into this Agreement to provide adequate, efficient and reasonable service to TNMP Native Load. TNMP desires to purchase Capacity
and Energy at wholesale from PNM Marketing as provided in this Agreement. TNMP further desires PNM Marketing to act as TNMP’s Agent to schedule Energy and transmission for TNMP and to dispatch Energy to TNMP as required by TNMP to serve the
TNMP Native Load Requirements. TNMP further desires PNM Marketing to act as TNMP’s Agent to schedule transmission, Phelps Dodge Block Energy Purchases, and Economy Energy for TNMP as required by TNMP to serve the Phelps Dodge Load. 

 
 12. PNM Marketing will have Capacity and Energy available for sale during
the term of this Agreement and desires to sell TNMP the wholesale Capacity and Energy required to provide adequate, efficient and reasonable service to TNMP so that TNMP may serve the TNMP Native Load in the amount of the TNMP Incremental Native
Load Requirements for the period July 1, 2001 through December 31, 2002 and in the amount of the TNMP Native Load Requirements for the period January 1, 2003 through December 31, 2006. 
  
 13. As a result of, and to comply with, FERC Order Nos. 888 and 889, PNM has created a Wholesale Power Marketing Department
(“PNM Marketing”) and a Transmission and Reliability Department (“PNM Reliability”). This Agreement has been negotiated by TNMP and PNM Marketing and will be administered by TNMP and PNM Marketing. 
  

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 AGREEMENT 
  
 For mutually agreeable consideration, the Parties agree as follows: 
  
 1. UNDERTAKING OF THE PARTIES 
  
 1.1 PNM Marketing shall sell and deliver to TNMP wholesale Capacity and Energy in amounts equal to the TNMP Incremental Native Load Requirements during
the period July 1, 2001 through December 31, 2002 and sell and deliver to TNMP wholesale Capacity and Energy in amounts equal to the TNMP Native Load Requirements during the period January 1, 2003 through December 31, 2006, and shall act as
TNMP’s Agent as provided for herein. 
  
 2. DEFINITIONS

  
 The following terms, when used herein with initial
capitalization, whether in the singular or in the plural, shall have the meanings specified in this Section 2. 
  
 2.1 Agent PNM Marketing, in its capacity hereunder as TNMP’s wholesale supplier, with the authority to communicate, schedule, and
dispatch on TNMP’s behalf as a wholesale entity. 
  
 2.2.1
Annual Peak Demand 
  
 2.2.1 Except
as delineated in Section 2.2.5, for each month during the period July 1, 2001 through November 30, 2001, Annual Peak Demand shall be the higher of (i) 62 MW or (ii) the highest sixty (60) minute integrated kW metered TNMP Native Load demand for the
month, measured by standard measuring equipment, less the combined SPS/TNMP Contract net schedule and EPE/TNMP Contract net schedule (after losses). Once a new Annual Peak Demand is established under (ii) above, the Annual Peak Demand for each
subsequent month in the period shall not be less than the highest such metered demand established during the period. 
  
 2.2.2 For the month of December, 2001, the Annual Peak Demand shall be deemed to be 62 MW. 
  

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 2.2.3 For each month during the period January 1, 2002 through December 31, 2002, Annual
Peak Demand shall be the higher of (i) 32 MW or (ii) the highest sixty (60) minute integrated kW metered TNMP Native Load demand for the month, measured by standard measuring equipment, less the EPE/TNMP Contract net schedule (after losses). Once a
new Annual Peak Demand is established under (ii) above, the Annual Peak Demand for each subsequent month in the period shall not be less than the highest such metered demand established during the period. 
  
 2.2.4 For each month during the period January 1, 2003
through December 31, 2006, Annual Peak Demand shall be the higher of (i) the Contract Requirements for the applicable year as specified in Exhibit 1 hereto, or (ii) the highest sixty (60) minute integrated kW metered TNMP Native Load demand for the
month, measured by standard measuring equipment. Once a new Annual Peak Demand is established under (ii) above, the Annual Peak Demand for each subsequent month shall not be less than the highest such metered demand established during the prior
eleven-month period. 
  
 2.2.5 The Annual Peak
Demand shall not be adjusted for interruption or curtailment of the SPS/TNMP Contract due to the loss or deration of the Eddy County Tie or interruption or curtailment of the EPE/TNMP Contract. In cases where the Eddy County Tie or the EPE/TNMP
Contract is interrupted or curtailed, the Annual Peak Demand will be considered to be as if no interruption or curtailment of the SPS/TNMP Contract or EPE/TNMP Contract occurred. 
  
 2.3 Authorized Representatives - The persons designated by each Party, and authorized on its behalf to act as
its Authorized Representative and its Alternate pursuant to Section 15. 
  

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 2.4 Business Day - Any day on which financial business is normally conducted; normally, a
Business Day is Monday through Friday except for federally recognized holidays, which are currently: New Year’s Day, Martin Luther King Day, Presidents’ Day, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day,
Thanksgiving and Christmas. 
  
 2.5 Capacity - Firm
electric generation capability, usually expressed in megawatts. 
  
 2.6 Contract Requirements - The forecast TNMP Incremental Native Load Requirements and TNMP Native Load Requirements, as specified in Exhibit 1 hereto. 
  
 2.7 Control Area Services Agreement - The Control Area Services Agreement between TNMP and PNM Reliability,
dated May 14, 1999, as amended. 
  
 2.8 Date of Initial
Service - July 1, 2001, which is the date on which PNM Marketing commences providing the services to TNMP described hereunder, pursuant to Section 4.0. 
  

2.9 Economy Energy - Electric energy that is recallable immediately upon notice by the seller. 
  
 2.10 Eddy County Tie - The AC to DC to AC Intertie located at
the interface between the SPS and EPE systems. 
  
 2.11
Effective Date - The date on which this Agreement has been executed by both Parties. 
  
 2.12 Energy - The energy provided associated with Capacity hereunder, usually expressed in megawatt hours. 
  
 2.13 EPE - El Paso Electric Company. 
  
 2.14 EPE/TNMP Contract, - The Power Sales Agreement between EPE
and TNMP, dated April 29, 1987, as amended. A copy of the EPE/TNMP Contract is attached hereto as Exhibit 3. 
  

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 2.15 FERC - The Federal Energy Regulatory Commission or any successor thereto. 
  
 2.16 FPA - The Federal Power Act. 
  
 2.17 Incremental Ancillary Services - Ancillary services
provided beyond those already procured by TNMP through the Control Area Services Agreement between TNMP and PNM Reliability, dated May 14, 1999, as amended, and beyond those already procured through the PNM Transmission Agreements. 
  
 2.18 Incremental Transmission Service - Transmission service
procured by PNM Marketing to provide service pursuant to this Agreement, and which is beyond transmission service owned or contracted for by TNMP. 
  
 2.19 Market-Based Sales Tariff - PNM’s FERC-approved or accepted Power and Energy Sales Tariff, First Revised Volume No. 3, as it may
be amended from time to time. 
  
 2.20 Market Price
- the applicable Dow Jones Non-Firm On-Peak or Dow Jones Non-Firm Off-Peak Electricity Index price at Four Corners. In the event this index does not exist in the future the Parties shall agree on a suitable replacement. 
  
 2.21 NMPRC - The New Mexico Public Regulation Commission or any
successor thereto. 
  
 2.22 Non-Firm Transmission
Service - Transmission service that is subject to immediate curtailment or interruption upon notice. 
  
 2.23 OATT - Open Access Transmission Tariff. 
  
 2.24 Operating Procedures - Procedures developed and agreed to in writing by the Parties’ respective Authorized Representatives that
are intended to address specific operational details regarding the implementation and administration of the Agreement. 
  
 2.25 Phelps Dodge, - Phelps Dodge Corporation. 
  

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 2.26 Phelps Dodge Block Energy Purchase - Purchases made by TNMP on behalf of Phelps Dodge
using 65 MW of interruptible transmission rights from the TNMP side of the 345 kV bus at the Greenlee Switchyard to the Hidalgo 345 kV Switching Station. 
  
 2.27 Phelps Dodge Load, - The energy sold by TNMP to Phelps Dodge pursuant to the Phelps Dodge/TNMP MOU. 
  
 2.28 Phelps Dodge/TNMP MOU — The Memorandum of
Understanding between Phelps Dodge and TNMP dated October 30, 1999, or its replacement. A copy of the Phelps Dodge/TNMP MOU is attached hereto as Exhibit 5. 
  
 2.29 PNM - Public Service Company of New Mexico, including its subsidiaries and affiliates. 
  
 2.30 PNM Marketing - PNM’s Wholesale Power Marketing
Department. 
  
 2.31 PNM Reliability - PNM’s
Transmission and Reliability Department. 
  
 2.32 PNM
Transmission Agreements - Service agreements under the PNM OATT providing 6 MW of firm point-to-point transmission service and associated ancillary services from the 345 kV bus at the Four Corners Switchyard to the Hidalgo 345 kV Switching
Station pursuant to a service agreement dated May 26, 2000 and providing 15 MW of firm point-to-point transmission service and associated ancillary services from the 345 kV bus at the Four Corners Switchyard to the Hidalgo 345 Kv Switching Station
pursuant to a service agreement dated February 9, 2001, as may be modified from time to time. 
  
 2.33 Points of Delivery — All points of delivery into the TNMP New Mexico Transmission System at which energy deliveries are made to TNMP, as listed in Exhibit 4, and which may be modified from time
to time. 
  
 2.34 Regulatory Authority - A
governmental body having regulatory jurisdiction over one or both of the Parties or over this Agreement or portions of this Agreement including, but not limited to, the New Mexico Public Regulation Commission and the Federal Energy Regulatory
Commission. 
  

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 2.35 Replacement Energy - In accordance with Operating Procedure #1, attached hereto, any
energy that is procured by PNM Marketing, through December 8, 2001, on behalf of TNMP to replace energy lost when energy deliveries under the SPS/TNMP Contract are interrupted or curtailed due to the loss or deration of the Eddy County Tie, and any
energy that is procured by PNM Marketing, through December 31, 2002, on behalf of TNMP to replace energy lost when energy deliveries under the EPE/TNMP Contract are interrupted or curtailed. 
  
 2.36 RTO - Regional Transmission Organization. 
  
 2.37 SPS - Southwestern Public Service Company. 
  
 2.38 SPS/TNMP Contract - The Interconnection Agreement
between TNMP and SPS, dated December 8, 1981, and all service schedules thereto. A copy of the SPS/TNMP Contract is attached hereto as Exhibit 6. 
  
 2.39 2.39 TNMP - Texas-New Mexico Power Company. 
  
 2.40 TNMP Incremental Native Load Requirements - For the period July 1, 2001 through December 31, 2002, all Capacity and Energy required by
TNMP to serve TNMP Native Load, excluding the amount of Capacity and Energy procured by TNMP on its own behalf pursuant to the EPE/TNMP Contract and the SPS/TNMP Contract. 
  
 2.41 TNMP Native Load - The Capacity and Energy sold by TNMP to its retail electric customers in New Mexico
measured at the Points of Delivery, excluding the Phelps Dodge Load. 
  
 2.42 TNMP Native Load Requirements - All Capacity and Energy required by TNMP to serve the TNMP Native Load. 
  
 2.43 TNMP New Mexico Transmission System - The TNMP network of electrical substations and other electric facilities, equipment and systems
used to serve TNMP Native Load and the Phelps Dodge Load. 
  

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 2.44 TNMP Reliability - TNMP Transmission and Reliability Department. 2.45 TSGT -
Tri-State Generation and Transmission Association, Inc. 2.46 WSCC - Western Systems Coordinating Council. 
  
 3. EFFECTIVE DATE AND TERM 
  
 3.1 The Effective Date of this Agreement shall be the date on which this Agreement has been executed by both Parties. Not later than seven (7) Business Days after the Effective Date, PNM shall file this Agreement with
the FERC as a service agreement pursuant to its Market-Based Sales Tariff and the FPA and shall request a waiver of any applicable notice requirements to permit delivery of service hereunder by PNM to TNMP, beginning July 1, 2001. TNMP shall provide
PNM with a certificate pursuant to 18 C.F.R. § 35.1 (a) indicating TNMP’s concurrence in the Agreement and in all of the rates, terms and conditions thereof, to be included with the PNM filing. TNMP shall support the PNM filing by filing a
timely motion at FERC to intervene in support of the PNM filing and by taking other action which TNMP deems appropriate in support of the PNM filing. 
  
 3.2 If the FERC does not accept this Agreement for filing without change or modification, or, if the FERC orders a change or modification to this
Agreement, unless such change or modification is mutually agreeable to the Parties as evidenced by their written agreement subsequent to such FERC order, TNMP and PNM Marketing agree to work together in good faith to agree upon terms and conditions
that are acceptable to them and to the FERC. If the Parties are unable to reach such agreement within fifteen (15) days (or such longer period as they may mutually agree upon) from the date of the FERC order declining to accept this Agreement for
filing without change or modification or ordering a change or modification to this Agreement, this Agreement shall become null and void and all obligations shall terminate on the fifteenth day following the failure to reach such agreement within the
period(s) provided for above, except for obligations to pay for services rendered and liabilities for acts committed prior to the date the Agreement becomes null and void. 
  

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 3.3 The Date of Initial Service hereunder shall be July 1, 2001. 
  
 3.4 Unless terminated earlier in accordance with Sections 3.2 or 11, this
Agreement shall remain in effect through December 31, 2006. 
  
 4. SERVICES
TO BE PROVIDED 
  
 4.1 Commencing on the Date of Initial
Service, and continuing through December 31, 2002, PNM Marketing shall sell and deliver to TNMP and TNMP shall purchase and receive from PNM Marketing, Capacity and Energy in the amount of the TNMP Incremental Native Load Requirements, in accordance
with the terms, covenants and conditions of this Agreement. 
  
 4.1.1 It is understood and agreed by the Parties that sales to TNMP under this Agreement shall take place only after all energy available to TNMP pursuant to the EPE/TNMP Contract and the SPS/TNMP Contract has been
utilized to serve TNMP Native Load. 
  
 4.1.2 To
the extent that all of the energy available to TNMP pursuant to the EPE/TNMP Contract and the SPS/TNMP Contract is not required to serve TNMP Native Load, PNM Marketing may purchase such energy from TNMP at the cost of such energy to TNMP, as
specified in the applicable contract, and such energy may be resold by PNM Marketing to third parties. PNM Marketing will reimburse TNMP for the cost of this energy through a credit netted against invoiced amounts due to PNM Marketing from TNMP
pursuant to this Agreement. 
  
 4.1.3 PNM
Marketing shall provide Replacement Energy in accordance with Operating Procedure #1, attached hereto, on behalf of TNMP, to replace energy lost when energy deliveries under the SPS/TNMP Contract are interrupted or curtailed due to the loss or
deration of the Eddy County Tie, and to energy lost when energy deliveries under the EPE/TNMP Contract are interrupted or curtailed. 
  

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 4.2 Commencing on January 1, 2003, and continuing through December 31, 2006, PNM Marketing shall sell and
deliver to TNMP and TNMP shall purchase and receive from PNM Marketing, Capacity and Energy in the amount of the TNMP Native Load Requirements, in accordance with the terms, covenants and conditions of this Agreement. 
  
 4.3 Commencing on the Date of Initial Service, and continuing through
December 31, 2006, PNM Marketing shall act as TNMP’s Agent for scheduling energy from the SPS/TNMP Contract and the EPE/TNMP Contract, for scheduling deliveries of Energy to serve the TNMP Native Load Requirements, and for scheduling deliveries
of Economy Energy and Phelps Dodge Block Energy Purchases to TNMP in order for TNMP to serve the Phelps Dodge Load, including scheduling of transmission services and associated ancillary services necessary for such deliveries. 
  
 4.3.1 To the extent available, PNM Marketing shall purchase
Economy Energy for sale to TNMP for service to the Phelps Dodge Load, pursuant to Operating Procedure #2, and shall provide such energy to TNMP at a delivered price to be agreed upon at the time of a proposed Economy Energy transaction. 

 
 4.4 Commencing on the Date of Initial Service, and continuing through
December 31, 2006, PNM Marketing shall procure or self-supply Incremental Ancillary Services for TNMP in order for TNMP to serve the TNMP Native Load, as delineated below: 
  
 4.4.1 PNM Marketing shall reimburse TNMP for costs incurred under the Control Area Services Agreement for
Regulation and Frequency Response Service and Energy Imbalance Service associated with scheduling and dispatch of energy to TNMP in order for TNMP to serve TNMP Native Load. Alternatively, the Parties may arrange for self-provision by PNM Marketing
of Regulation and Frequency Response Service and Energy Imbalance Service associated with scheduling and dispatch of energy to serve TNMP Native Load. 
  

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 4.4.2 PNM Marketing shall procure or self-provide Operating Reserve (Spinning Reserve and
Supplemental Reserve) to TNMP associated with TNMP Native Load in accordance with WSCC requirements. 
  
 4.4.2.1 Until modified by WSCC, the amount of Spinning Reserve to be procured or self-provided to TNMP by PNM Marketing hereunder shall be
equal to three and one-half percent (3.5%) of the hourly metered TNMP Native Load less energy available from the SPS/TNMP Contract and the EPE/TNMP Contract. 
  

4.4.2.2 Until modified by WSCC, the amount of Supplemental Reserve to be procured or self-provided to TNMP by PNM Marketing hereunder
shall be equal to three and one-half percent (3.5%) of the hourly metered TNMP Native Load less energy available from the SPS/TNMP Contract and the EPE/TNMP Contract. PNM Marketing shall continue TNMP’s existing practice of using TNMP’s
right to interrupt or curtail service pursuant to the Phelps Dodge/TNMP MOU as a source of Supplemental Reserve for TNMP Native Load, provided that the Dodge/TNMP MOU or its replacement remains in effect and to the extent that the Phelps Dodge Load
is available for interruption or curtailment. Accordingly, to activate Supplemental Reserve hereunder the Phelps Dodge Load shall be interrupted or curtailed immediately upon notice, pursuant to Operating Procedure # 2. 
  
 4.4.3 Ancillary Services which are bundled together with the
purchase of Incremental Transmission Service shall be procured as part of Incremental Transmission Service and addressed in accordance with Section 6. 
  
 4.4.4 PNM Marketing shall have no obligation to provide Ancillary Services related to the Phelps Dodge Load hereunder, beyond those
already provided by PNM Reliability to TNMP on behalf of Phelps Dodge through the Control Area Services Agreement. 
  

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 4.5 Commencing on the Date of Initial Service, and continuing through December 31, 2006, PNM Marketing
shall procure or self-provide Incremental Transmission Service and losses not otherwise provided by TNMP. 
  
 4.6 It is understood and agreed by the Parties that there may be increases or decreases to TNMP Native Load, during the term of this Agreement. Attached
hereto as Exhibit 1 is a schedule of Contract Requirements for the TNMP Incremental Native Load Requirements and the TNMP Native Load Requirements for the term of this Agreement, which include expected growth in the TNMP Native Load. It is
understood and agreed by the Parties that PNM Marketing currently has, or will obtain, the resources necessary to serve the Contract Requirements under the provisions of this Agreement. To the extent TNMP expects the TNMP Incremental Native Load
Requirements or the TNMP Native Load Requirements to exceed the Contract Requirements specified in Exhibit 1, TNMP shall promptly notify PNM Marketing in writing. PNM Marketing shall be obligated to serve TNMP with respect to loads in excess of the
Contract Requirements resulting from normal load growth. PNM Marketing shall not be obligated to serve TNMP with respect to loads in excess of the Contract Requirements resulting from other than normal load growth, including a change in the
character of service of the Phelps Dodge Load. In the event of an increase in load for reasons other than normal load growth, including a change in the character of service of the Phelps Dodge Load, TNMP shall be free to seek alternate suppliers for
such incremental needs. 
  
 4.6.1 In the event
that metered TNMP Native Load demand for any calendar year, measured according to Section 10, falls below 85% of Contract Requirements for the applicable year of this Agreement, the Parties shall project the 
  

 17 

 
amount and hourly profile of the energy that TNMP will not use in subsequent years in conjunction with the lost load, using the historical load factors
associated with the lost load. If TNMP determines that it will not need such energy (Displaced Energy) TNMP shall release the Displaced Energy to PNM for a period of one calendar year. For any such Displaced Energy that PNM sells in the market, PNM
shall pay TNMP an amount equal to 95% of the Market Price (adjusted for the cost to deliver the energy to Four Corners), minus the applicable energy costs for the period as set forth in Section 7.2. 
  
 5. APPOINTMENT OF PNM MARKETING AS AGENT 
  
 5.1 Effective upon the Date of Initial Service, TNMP hereby appoints PNM
Marketing to act as its Agent as defined herein. 
  
 6. TRANSMISSION

  
 6.1 In accordance with the services provided under
Section 4.5, PNM Marketing will utilize best efforts to economically utilize TNMP’s existing transmission rights (as described in Exhibit 2) and Incremental Transmission Service to serve TNMP with respect to the TNMP Native Load Requirements
and the Phelps Dodge Load. The Parties recognize that the economic balance between power supply and transmission utilization can be difficult to achieve to the satisfaction of both Parties; therefore, the Parties agree, at either Party’s
written request, to negotiate in good faith to arrive at an alternate methodology under which TNMP would receive a defined amount of credit for existing TNMP transmission rights, and PNM Marketing would provide delivery of Capacity and Energy herein
at a fixed cost, thus eliminating Incremental Transmission Service costs hereunder. 
  
 6.1.1 To the extent that PNM Marketing purchases Incremental Transmission Service in order to deliver Capacity and Energy to TNMP pursuant
to Section 4.5, the costs for such Incremental Transmission Service shall be passed through to TNMP pursuant to Section 7.7. 
  

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 6.2 It is understood and agreed by the Parties that PNM Marketing’s ability to provide services to
TNMP pursuant to this Agreement is dependent upon retention by TNMP of the transmission rights to service TNMP’s Native Load, described in Exhibit 2. In the event that TNMP takes any action or fails to take any action (e.g., failure to exercise
rollover rights) that results in any reduction to the transmission rights to service TNMP’s Native Load, described in Exhibit 2: 
  
 6.2.1 TNMP agrees to hold PNM harmless for any failure of performance by PNM Marketing under this Agreement; provided, however, that
nothing in this Section 6.2.1 shall be construed to affect PNM Marketing’s duty under Section 4.3 to schedule specified transmission services. 
  
 6.2.2 TNMP shall not be released from its obligation to pay for Capacity in the amount of the Contract Requirements as specified in
Exhibit 1 for the applicable period(s) pursuant to Section 7.2. 
  
 6.3 The Control Area Services Agreement between TNMP and PNM Reliability currently is due to expire December 31, 2001. Unless replaced by services provided as a result of the formation of an RTO, TNMP will take all commercially reasonable
action to continue in effect the Control Area Services Agreement for the remainder of the term of this Agreement. 
  
 6.4 To the extent permitted under applicable FERC rules and regulations, TNMP Reliability shall, at PNM Marketing’s request, exercise any rights it
may have to acquire the unbundled transmission component of the SPS/TNMP Contract for the remainder of the term of this Agreement. 
  
 6.5 To the extent permitted under applicable FERC rules and regulations, TNMP Reliability shall, at PNM Marketing’s request, exercise any rights it
may have to acquire the unbundled transmission component of the EPE/TNMP Contract for the remainder of the term of this Agreement. 
  

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 6.6 TNMP Reliability shall retain all operational responsibility for transmission maintenance scheduling.
Such scheduling shall be performed in cooperation with EPE, SPS, TSGT and PNM to the mutual benefit and agreement of all the parties affected. 
  
 7. RATES FOR SERVICE 
  
 7.1 The rates for service under this Agreement shall be as set forth in Sections 7.2, 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, and 7.9. 
  
 7.2 TNMP shall pay a monthly charge for Capacity, and an hourly charge for
Energy, in the following amounts for the following periods: 
  
 7.2.1 For the period July 1, 2001 through December 31, 2001, the charge for Capacity shall be $13.00/KW-month times the applicable Annual Peak Demand, and the charge for Energy for service in the amount of the metered
TNMP Incremental Native Load Requirements shall be $45.10/MWh. 
  
 7.2.2 For the period January 1, 2002 through December 31, 2002, the charge for Capacity shall be $10.50/kW-month times the applicable Annual Peak Demand, and the charge for Energy for service in the amount of the
metered TNMP Incremental Native Load Requirements shall be $43.75/MWh. 
  
 7.2.3 For the period January 1, 2003 through December 31, 2006, the charge for Capacity shall be $10.05/kW-month times the applicable Annual Peak Demand, and the charge for Energy for service in the amount of the
metered TNMP Native Load Requirements shall be $43.65/MWh. 7.3 The charges for Replacement Energy shall be: 
  
 7.3.1 PNM Marketing’s cost to procure Replacement Energy, plus fifteen percent (15%), during the first four scheduled hours following
a loss or deration of the Eddy County Tie, or the interruption or curtailment of the EPE/TNMP Contract. 
  

 20 

 7.3.2 PNM Marketing’s cost to procure Replacement Energy, plus ten percent (10%),
beginning in the fifth scheduled hour and continuing for the duration of the loss or deration of the Eddy County Tie, or the interruption or curtailment of the EPE/TNMP Contract. 
  
 7.3.3 In the event a forward purchase of Replacement Energy is made, pursuant to Operating Procedure #1, and
it results in an over-supply of Replacement Energy, TNMP shall pay PNM Marketing’s cost to procure Replacement Energy, plus ten percent (10%). In turn, PNM Marketing agrees to purchase the over-supply from TNMP at an index price designated in
Operating Procedure #1. 
  
 7.4 NMP shall reimburse PNM Marketing
for costs incurred by PNM Marketing (including penalties for non-compliance resulting from TNMP’s actions or inaction) to procure or self-provide Incremental Ancillary Services as follows: 
  
 7.4.1 For Incremental Ancillary Services procured or
self-provided by PNM Marketing for service to TNMP Native Load in conjunction with Incremental Transmission Service, TNMP shall reimburse PNM Marketing for the following services, as defined and at the rates specified in the OATT (or the successor
OATT of any RTO) of the transmission provider: (i) Scheduling, System Control and Dispatch; and (ii) Reactive Supply and Voltage Control from Generation Sources. 
  
 7.4.2 For Spinning Reserve capacity procured or self-provided by PNM Marketing, TNMP shall reimburse PNM
Marketing an amount equal to the Market Price, minus PNM Marketing’s avoided cost, deemed to be $8.00/MWh for the purposes of this Agreement. 
  
 7.4.3 For any energy utilized in conjunction with Spinning Reserve under Section 7.4.2, TNMP shall reimburse PNM an amount equal to PNM
Marketing’s 
  

 21 

 
avoided cost, deemed to be $8.00/MWh for the purposes of this Agreement, provided that energy associated with Spinning Reserve shall only be used for its
intended purpose in accordance with WSCC criteria. 
  
 7.5 PNM
Marketing shall reimburse TNMP for costs incurred under the Control Area Services Agreement for Regulation and Frequency Response Service associated with TNMP Native Load. Alternatively, the Parties may arrange for self-provision by PNM Marketing of
Regulation and Frequency Response Service associated with TNMP Native Load. 
  
 7.6 PNM Marketing shall reimburse TNMP for costs incurred under the Control Area Services Agreement for Energy Imbalance Service associated with scheduling and dispatch of energy to serve TNMP Native Load.
Alternatively, the Parties may arrange for self-provision by PNM Marketing of Energy Imbalance Service associated with scheduling and dispatch of energy to serve TNMP Native Load. 
  
 7.7 TNMP shall reimburse PNM Marketing for all costs incurred by PNM Marketing to procure Incremental Transmission Service
on behalf of TNMP to serve the metered TNMP Native Load. 
  
 7.8
TNMP shall reimburse PNM Marketing for all costs incurred by PNM Marketing to procure or self-provide transmission losses not otherwise provided by TNMP. 
  
 7.9 TNMP shall reimburse PNM Marketing for purchases of Economy Energy for service to Phelps Dodge pursuant to Section 4.3.1. 
  
 8. RATE CHANGES 
  
 8.1 The Capacity Charge and Energy Charge provided for in Section 7.2, and the rate formula provided for in Section 7, shall
remain in effect for the term specified and shall not be subject to change under Section 205 or Section 206 of the FPA absent the mutual agreement of the Parties, except pursuant to action initiated by the FERC under Section 206 
  

 22 

 
of the FPA. It is the intent of the Parties that in any such action initiated by the FERC, the FERC shall adjust the rates provided for in Section 7 only if
the existing rate is contrary to the public interest consistent with the Mobile-Sierra doctrine. Transmission and ancillary services charges shall be as specified in the transmission provider’s OATT as in effect from time to time.

  
 9. BILLING AND PAYMENT 
  
 9.1 The accounting period for transactions under this Agreement shall be one
(1) calendar month. 
  
 9.2 After each month of service, PNM
Marketing shall bill TNMP and TNMP shall pay PNM Marketing the amounts specified by this Agreement. 
  
 9.3 Bills shall be submitted to TNMP by PNM Marketing via facsimile transmission, e-mail or via regular mail, return receipt requested. Bills shall be due
and payable when received by TNMP and shall become delinquent if payment has not been received by PNM Marketing ten (10) days from the date of receipt of the bill by TNMP, unless such due date falls on a non-Business Day, in which case the due date
shall be the first Business Day thereafter. The date of receipt of the bill shall be assumed to be the date upon which PNM Marketing provided the bill via facsimile transmission. In the absence of such facsimile transmission, the bill shall be
mailed return receipt requested and the date of receipt shall be the date indicated on the return receipt form. Bills which are not paid in full within ten (10) days from the date of receipt shall be paid with interest accrued at the rate specified
in Section 9.4. 
  
 9.4 In the event a portion of any bill is
disputed, the entire amount of the bill shall be paid by the due date, but the disputed portion may be paid under protest. Any amounts which through inadvertent errors, or as the result of resolution of a dispute, may have been overpaid or
underpaid, shall be paid or refunded within five (5) Business Days 
  

 23 

 
after determination of the correct amount has been made, including interest accrued thereon at one percent 1.0% per month applied to the period from the
initial due date of the bill to the date that the corrected payment or refund is made. 
  
 9.5 Unless or until changed by TNMP, monthly billings to TNMP shall be sent to: 
  
 Texas-New Mexico Power Company 
  
 4100 International Plaza 
  
 Ft. Worth, Texas 76109 
  
 Attn.: Power Resources/Suzy Braun 
  
 Facsimile No.: (817) 737-1384 
  
 9.6 Unless or until changed by PNM Marketing, monthly payments to PNM Marketing shall be made by electronic transfer to: 
  
 Wells Fargo Bank 
  
 ABA # 121-000-248 ME 
  
 Whsl Pwr Dep Account # 
  
 651-53779-16 
  
 Attn.: EA-Wholesale Power Marketing 
  
 9.7 In the event that TNMP’s electronic transfer becomes lost or is late
arriving through no fault of TNMP’s, PNM Marketing shall waive any interest charge which would otherwise have accrued due to lateness in payment. PNM Marketing further agrees to assist TNMP in resolving any electronic transfer problem which
might arise. 
  
 10. METERING 
  
 10.1 Capacity and associated Energy delivered pursuant to this Agreement
shall be metered at the Points of Delivery by measuring instruments provided by TNMP and PNM. In case of question as to the accuracy of these measuring instruments, either Party shall have the 
  

 24 

 
right at any time, and from time to time, upon giving forty-eight (48) hours’ notice to the other Party, to have them tested, and, if necessary,
recalibrated, with both Parties represented at the test. 
  
 10.2
If it shall be shown by the test that any of the measuring instruments are inaccurate, proper allowance as shown by the test to be necessary shall be made to the Party entitled thereto, but not for a longer period than one hundred twenty (120) days
prior to the time when written complaint of inaccuracy was made. No allowance will be made on any bill on account of a claim for inaccuracy of measurement unless the owner of the meter shall in writing request such allowance within one hundred
twenty (120) days from the date of the bill. The expenses of the test and/or recalibration shall be borne by the Party that requested the test if the meters are found to be accurate within one (1) percent; otherwise, the cost of the test shall be
paid by the owner of the meter. No allowance in the charge for energy to the owner of the meter shall be made unless the error of the meter or meters exceeds one (1) percent. 
  
 10.3 Meter replacements, betterments or additions shall be performed by the owner of the meter. If one of the Parties,
pursuant to this Agreement, asks for the replacement, modification or upgrade of measurement equipment, the owner of the measurement equipment will perform such replacement, modification, or upgrade. Costs for such replacement, modification, or
upgrade shall be borne by the Party making the request. 
  
 10.4
TNMP will provide or cause to be provided to PNM Marketing all metered data received by TNMP at each of the Points of Delivery. 
  
 11. DEFAULTS 
  
 11.1 Each Party agrees that it shall pay all monies and perform all other duties and obligations agreed to be paid or performed by it pursuant to the
terms, covenants and conditions of this Agreement, and a default by either Party in making payments or performing duties and obligations to be paid or performed by it is an act of default under this Agreement. 
  

 25 

 11.2 A failure of TNMP to pay in full a properly rendered bill by the date payment is due shall
constitute a Payment Default. In the event a Payment Default shall continue for more than thirty (30) days after written notice from PNM Marketing specifying the Payment Default and TNMP has still failed to make full payment of the bill, PNM
Marketing may suspend performance of its duties and obligations pursuant to this Agreement for so long as the Payment Default continues and may also pursue other rights and remedies under this Agreement or under applicable law. 
  
 11.3 A failure of PNM Marketing to provide and deliver the Capacity and
Energy required to be delivered pursuant to this Agreement, unless excused by Uncontrollable Forces pursuant to Section 12, shall constitute a Power Delivery Default. If a Power Delivery Default shall continue for more than twelve (12) hours after
notice from, or for, TNMP specifying the Power Delivery Default and PNM Marketing has failed to restore power supply and delivery in amounts required by this Agreement, TNMP may suspend performance of its duties and obligations pursuant to this
Agreement for so long as the Power Delivery Default continues and may also pursue other rights and remedies under this Agreement or under applicable law. 
  
 11.4 In the event of an alleged event of default, other than a Payment Default or a Power Delivery Default, by either Party, the non-defaulting Party
shall send notice to the defaulting Party’s Authorized Representative specifying the nature of the alleged default with a demand that the defaulting Party shall take all steps necessary to cure such default as promptly as possible. Such notice
shall also request a meeting of the Authorized Representatives within five (5) Business Days for the purpose of resolving the alleged default. 
  

 26 

 11.4.1 If the Authorized Representative of the Party receiving the notice of the alleged
default acknowledges the existence of the default and proposes a program for the cure thereof which is concurred in by the Authorized Representative of the non-defaulting Party, the default shall be suspended during the agreed period for the cure.

  
 11.4.2 If the Authorized Representative of
the Party receiving the notice of alleged default concurs with the meeting request but disputes the allegation of default, the matter shall be deemed to be a dispute subject to the dispute resolution process set out in Section 23. 
  
 11.4.3 If the Authorized Representative of the Party
receiving the notice of an alleged default disputes an asserted default by it by notice to the non-defaulting Party, or fails to respond to the notice of alleged default within ten (10) days of receipt, the non-defaulting Party may at its option
proceed to notice the existence of a dispute pursuant to Section 23, or it may pursue the enforcement of any other remedies under applicable law. 
  
 11.5 An allegation of default and demand for cure thereof given by one Party to the other Party pursuant to Section 11.4 shall state the date on which the
non-defaulting Party began to incur costs associated with the default and the date on which interest will begin to accrue with respect to the costs incurred. In the event it is determined by dispute resolution pursuant to Section 23, that a Party is
entitled to a refund of all or a portion of a disputed payment or payments or is entitled to the reasonable equivalent in money of non-monetary performance of the disputed obligation, then, upon such determination, the defaulting Party shall pay the
non-defaulting Party such amount with interest thereon at the rate of interest stated in Section 9.4. 
  
 11.6 If as the result of any default by a Party, the non-defaulting Party suspends or 
  

 27 

 terminates this Agreement, such suspension or termination shall not affect the payment obligations of the defaulting
Party which arose prior to the effective date of the suspension or termination. 
  
 12. UNCONTROLLABLE FORCES 
  
 12.1 Neither
Party shall be considered to be in default in the performance of any of its obligations hereunder (other than the obligation of TNMP to pay bills submitted to it hereunder) when a failure of performance is due to an Uncontrollable Force. The Party
claiming the existence of an Uncontrollable Force shall promptly contact the other Party and, upon request, provide evidence that an Uncontrollable Force has caused the failure of performance. The Party claiming the existence of an Uncontrollable
Force shall exercise diligence in attempting to end its inability to perform. 
  
 12.2 The term “Uncontrollable Force” shall mean any cause beyond the control of the Party unable to perform its obligation, including, but not limited to, Acts of God, failure of or threat of failure of
facilities, explosions, flood, drought, earthquake, storm, fire, pestilence, lightning and other natural catastrophes, epidemic, war, riot, civil disturbance and disobedience, strike, labor disturbance, dispute or unrest of whatever nature, labor,
material or fuel shortage, restraint by court order or public authority or inability of a Party to obtain the necessary authorizations or approvals from any governmental agency or authority, which by exercise of due diligence such Party could not
reasonably have been expected to avoid and which by exercise of due diligence it has been unable to overcome. Nothing contained herein shall be construed as to require a Party to settle any strike or labor dispute against its will. 
  
 13. WAIVER 
  
 13.1 Any waiver at any time by a Party of its right with respect to a default under this Agreement, or with respect to any
other matter arising in connection therewith or with this Agreement, or any failure of a Party to insist on strict performance of any obligation 
  

 28 

 
hereunder, shall not be deemed a waiver with respect to any subsequent default or matter or be deemed to reflect an intent by the Parties to modify this
Agreement or any obligations hereunder. Any delay, short of the statutory period of limitation, in asserting or enforcing any right, shall not be deemed a waiver of such right. 
  
 14. LIABILITY AND INDEMNITY 
  
 14.1 Each Party shall indemnify and save the other Party and the directors, officers, employees and agents of such other Party harmless from liability,
loss, damage, claim, costs and expenses (including attorney fees) on account of injury to persons (including death) or damage or destruction of property, occasioned by the negligence, whether active or passive, of the indemnifying Party and its
officers, directors, employees or agents in the performance of this Agreement; provided, however: 
  
 14.1.1 Each Party shall be solely responsible to its own employees for all claims or benefits due for injuries in the course of their
employment or arising out of any workers’ compensation law. Neither Party shall seek reimbursement or subrogation from the other Party for any benefits paid to the employees of either Party pursuant to any workers’ compensation law except
as necessary to prevent double recovery by the employee. 
  
 14.1.2 Each Party hereby releases the other Party, its officers, directors, employees and agents from any and all liability or responsibility for any loss, damage or injury caused by fire or other casualty for which
insurance is carried by the injured Party at the time of such loss, damage or injury, to the extent of any recovery by the injured Party under such insurance. 
  

14.2 Neither Party or its directors, officers, employees or agents shall be liable for any loss of earnings, revenues, indirect or consequential
damages or injury which may occur to the other Party as a result of outages in delivery of service hereunder. 
  

 29 

 14.3 TNMP shall hold harmless and indemnify PNM from and against any liability for death, injury, loss or
damage to TNMP’s customers arising out of electric service to such customers caused by the performance of either Party under this Agreement, except in the case of PNM’s negligence or willful misconduct. 
  
 14.4 TNMP assumes all responsibility for the electric Capacity and Energy
delivered hereunder after it has been delivered to and received by TNMP. 
  
 14.5 The Parties shall have an obligation to mitigate their damages hereunder. 
  
 15. AUTHORIZED REPRESENTATIVES 
  
 15.1 The Parties shall each designate an Authorized Representative and an Alternate. Such Authorized Representative shall be authorized to act for his or her Party to carry out the provisions of this Agreement. Such
Alternate shall be authorized to act on behalf of the Authorized Representative in the absence of the Authorized Representative. An Authorized Representative may delegate specific responsibilities to the Alternate or other representatives. The
Parties shall each notify the other upon execution of this Agreement of the designation of its Authorized Representative and Alternate and shall promptly notify each other of any subsequent changes in such designation. 
  
 15.2 The Authorized Representatives shall have the following duties and
responsibilities: 
  
 15.2.1 Ensure that written
notification has been provided to Phelps Dodge, PNM Reliability, TNMP Reliability, Tucson Electric Power Company Reliability Group, EPE Reliability, EPE Marketing, Xcel Marketing, SPS Reliability, TSGT Marketing, TSGT Reliability that PNM Marketing
is acting as TNMP’s Agent as delineated in Section 2.1. 
  
 15.2.2 Provide for the establishment of a data communication link between TNMP and PNM which will provide all real-time data from Points of Delivery to PNM Marketing to enable PNM Marketing to provide service pursuant
to this Agreement. 
  

 30 

 15.2.3 Provide liaison and coordination among the Parties on all matters related to this
Agreement. 
  
 15.2.4 Make changes, corrections
or modifications to the notice, billing and payment addresses in this Agreement, as required. 
  
 15.2.5 Review, act upon and resolve alleged defaults or other disputes referred to them pursuant to Sections 11 and 23 or by other action
of the Parties. 
  
 15.2.6 Refer disputes to
binding arbitration pursuant to Section 23 that the Authorized Representatives have not resolved and have agreed to arbitrate. 
  
 15.2.7 Establish any necessary committees and charge such committees with specific duties and responsibilities. 
  
 15.2.8 Develop and approve Operating Procedures and
subsequent revisions thereto. Initial Operating Procedures, attached hereto, shall include the following: 
  

	 Operating Procedure #1
	 	 Replacement Energy Scheduling

		
	 Operating Procedure #2
	 	 New Mexico Operating Procedures

		
	 Operating Procedure #3
	 	 Transmission Loss Accounting

  
 15.2.9
Ensure that services provided under the Agreement are performed in accordance with WSCC criteria. 
  
 15.3 To assure the performance of their responsibilities, the Authorized Representatives shall hold regular meetings in person or by conference call not
less often than yearly at pre-set times that are mutually acceptable. Either Authorized Representative may request special meetings, in person or by conference call, at other times as needed and the other will use his or her best efforts to arrange
an acceptable time. If an Authorized Representative requests a special meeting or conference call relating to a delinquent payment 
  

 31 

 
or to a system emergency, the other Authorized Representative or Alternate shall make every effort to expeditiously respond and to hold the meeting or
conference call. Either Authorized Representative may request the presence of other persons, by name or by area of activity and expertise, at such meetings or conference calls, and the Authorized Representative to whom such request is made shall use
his or her best efforts to have such persons available. 
  
 15.4
The Authorized Representatives shall have no authority to modify any of the provisions of this Agreement, except as specifically provided in this Agreement. 
  
 15.5 To be effective, any action taken by the Authorized Representatives must be agreed to by both Authorized Representatives and reduced to writing.

  
 16. GOVERNING LAW AND CONTRACT ADMINISTRATION 
  
 16.1 This Agreement shall be interpreted, governed by and construed under
the laws of the State of New Mexico. 
  
 16.2 It is the intention
of the Parties that this Agreement shall be interpreted and administered in a manner to effectuate the sale and delivery and purchase and receipt of wholesale Capacity and Energy in the amount of the TNMP Native Load Requirements and PNM’s
performance as Agent for TNMP pursuant to the terms, covenants and conditions of this Agreement and the PNM Market-Based Sales Tariff. 
  
 17. ASSIGNMENT 
  
 17.1 Either Party shall have the right, without obtaining the consent of the other Party, to transfer and assign all or any portion of its rights under,
and interests in and to, this Agreement to a trustee or trustees under a deed of trust, indenture or mortgagee, or to a mortgagee under a mortgage, or to secured parties under a security agreement, as security for its present or future bonds, notes,
or other obligations or securities, and to any successor or assignee of any of the foregoing, without such successor or assignee assuming or becoming obligated in any respect to perform any obligation of the Party making such transfer or assignment.

  

 32 

 17.2 A transferring Party shall have the right to transfer and assign all or part of its rights,
obligations and other interests in this Agreement to any of the following without the need of prior written consent of the other Party: 
  
 17.2.1 By PNM to an entity acquiring all or substantially all of PNM’s electric power supply or all or substantially all of
PNM’s transmission system; and by TNMP to an entity acquiring all or substantially all of its electric distribution system; 
  
 17.2.2 By PNM or TNMP to an entity merged or consolidated into one or the other where the surviving entity that is a Party to this
Agreement will own the property referred to in Section 17.2.1; 
  
 17.2.3 By PNM or TNMP to an entity which is wholly owned or controlled by the transferor or is under common control with the transferor. 
  
 17.3 Except for the transfers and assignments described in Sections 17.1 and 17.2, neither Party shall transfer its
interests in this Agreement, in whole or in part, without the prior written consent of the other Party, which consent shall not be unreasonably withheld. 
  
 18. NONDEDICATION OF FACILITIES 
  
 18.1 No undertaking by one Party to the other under any provision of this Agreement shall constitute the dedication of the system or any portion thereof
of either Party to the public or to the other Party, and it is understood and agreed that any such undertaking by either Party shall cease upon the termination by such Party of its obligations hereunder. 
  
 19. NOTICES 
  
 19.1 Except for routine operational matters and the transmittal of monthly billings and payments, any notice, demand or
request provided for in this Agreement, or served, given or made in connection with it, shall be in writing and shall be deemed properly served, given or made if delivered in person or sent by facsimile transmission with receipt confirmed, or United
States mail, postage prepaid, to the persons specified below: 
  

	 To PNM:
	  	 Public Service Company of New Mexico

		
	 	  	 c/o The Secretary Alvarado Square

		
	 	  	 Albuquerque, NM 87158

		
	 	  	 Facsimile No.: (505) 241-2368

  

 33 

	 To TNMP:
	  	 Texas-New Mexico Power Company 4100

		
	 	  	 International Plaza Ft. Worth, Texas

		
	 	  	 76109 Attn.: Power Resources

		
	 	  	Facsimile No.: (817) 737-1384

  
 19.2 Either Party may,
from time to time, by written notice to the other, change the designation or address of the person so specified as the one to receive notices pursuant to this Agreement. 
  
 19.3 The Authorized Representatives shall establish a list of routine operational matters and designate the manner of
providing notices relating to such matters. 
  
 20. ENTIRE AGREEMENT

  
 20.1 The complete agreement of the Parties with respect
to the subject matter hereof is set forth in this Agreement and all prior communications, negotiations and understandings regarding the subject matter of this Agreement, whether written or oral, are hereby abrogated and withdrawn to the extent not
incorporated in the terms of this Agreement; provided, however, that the rebilling provision set forth in Section 7 of the Power Supply and Services Agreement for June, 2001, between PNM and TNMP, is incorporated herein by reference. 
  
 21. SECTION HEADINGS AND EXHIBITS 
  
 21.1 Section headings appearing in this Agreement are intended for
convenience only and shall not be construed as interpretations of text. 
  

 34 

 21.2 All exhibits attached hereto are incorporated herein and made a part of this Agreement. 

 
 22. INVALIDITY 
  
 22.1 Except as provided for in Section 3.2, if any term or provision, or any
portion thereof, of this Agreement, or the application thereof to any Party or circumstances shall, to any extent, be held to be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to any Party or
circumstances other than those as to which it is held to be invalid or unenforceable, shall not thereby be affected, and each term or provision of this Agreement shall be valid and shall be enforced to the fullest extent permitted by law; provided,
however, that if such invalidity or unenforceability results in a material failure of consideration or imposes a significant disadvantage on one of the Parties, the Parties shall attempt to negotiate a modification of the terms of this Agreement in
order to restore the original balance of benefits, and if such modification is not agreed upon either Party may seek reformation of this Agreement in a court of competent jurisdiction. 
  
 23 DISPUTES 
  
 23.1 Disputes on any matter relating to this Agreement shall be discussed and resolved by the Authorized Representatives or other representatives
designated by the Parties, who shall use their best efforts to amicably and promptly resolve the dispute. If the representatives of the Parties are unable to reach a resolution within thirty (30) days after the matter has been referred to them (or a
longer or shorter period as may be agreed upon by them) the Parties may resort to any available legal or equitable remedies or may elect to submit the dispute to mediation or binding arbitration. If the Parties elect to submit the dispute to binding
arbitration, the dispute shall be resolved in accordance with the arbitration procedures set forth in Sections 23.2, 23.3, 23.4 and 23.5. 
  
 23.2 Any arbitration initiated under this Agreement shall be conducted before a 
  

 35 

 single neutral arbitrator appointed by the Parties who shall be knowledgeable in electric utility matters, including
electric transmission and bulk power issues, and who shall not have any current or past substantial business or financial relationships with any Party to the arbitration (except prior arbitration). If, however, the Parties should fail to agree upon
a single arbitrator within ten (10) days of the referral of the dispute to arbitration, each Party shall choose one arbitrator who shall sit on a three-member arbitration panel. The two arbitrators so chosen shall within twenty (20) days select a
third arbitrator to chair the arbitration panel with the goal that such third arbitrator be knowledgeable in electric utility matters, including electric transmission and bulk power issues, and the requirement that such third arbitrator shall not
have any current or past substantial business or financial relationships to a Party (except prior arbitration). If the arbitrators cannot agree upon the selection of a third arbitrator, then the selection of the third arbitrator shall be referred to
the Chief Judge of the United States District Court for the District of New Mexico. In either case, the selected arbitrator(s) shall not have any current or past substantial business or financial relationships with any Party to the arbitration
(except prior arbitration). The arbitrator(s) shall provide each of the Parties an opportunity to be heard and, except as otherwise provided herein, shall generally conduct the arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association and any applicable FERC regulations. 
  
 23.3 Unless otherwise agreed, the arbitrator(s) shall render a written decision within ninety (90) days after the appointment of the last arbitrator and shall notify the Parties in writing of such decision and the reasons therefore. The
arbitrator(s) shall be authorized only to interpret and apply the provisions of this Agreement and shall have no capacity to modify or change this Agreement in any manner. The decision of the arbitrator or of a majority of the arbitrators shall be
final and binding upon the Parties, and judgment on the award may be entered in any court having jurisdiction. The decision of the arbitrator(s) may 
  

 36 

 
be challenged or appealed solely on the grounds that the conduct of the arbitrator(s), or the decision itself, violated the standards set forth in the New
Mexico Uniform Arbitration Act. The final decision of the arbitrator(s) shall be filed with the FERC or other regulatory body by the Party subject to the jurisdiction of such regulatory body if such final decision affects jurisdictional rates, terms
and conditions of service or facilities over which such body has jurisdiction. 
  
 23.4 Each Party shall be responsible for its own costs incurred during the arbitration process and for the following costs, if applicable: 
  
 (A) the fees and costs of the arbitrator chosen by the Party to sit on the three member panel and one half
of the fees and costs of the third arbitrator chosen; or 
  
 (B) one-half the fees and costs of the single arbitrator jointly chosen by the Parties. 
  
 23.4.1 the arbitrator(s) shall have the discretion to change the apportionment of the fees and costs of the arbitrator(s). 
  
 23.5 The rights of a Party that does not elect to submit a
dispute to binding arbitration shall not be restricted or limited by any provision of this Section 23. 
  
 24. NO THIRD PARTY RIGHTS 
  
 24.1 The Parties do not intend to create rights in or to grant remedies to any third party as a beneficiary of this Agreement or of any duty, covenant, obligation or undertaking established hereunder. 
  
 25. AMENDMENTS 
  
 25.1 This Agreement may be amended in writing at any time upon mutual agreement of the Parties, subject to any required
acceptance for filing by the FERC, or any other regulatory body having jurisdiction over a Party or the subject matter of the amendment. 
  

 37 

 26. NO PARTNERSHIP 
  
 26.1 The convenants, obligations and liabilities of the Parties are intended to be several and not joint or collective, and
nothing herein contained shall ever be construed to create an association, joint venture, trust or partnership, or to impose a trust or partnership convenant, obligation or liability on or with regard to any one or more of the Parties. Each Party
shall be individually responsible for its own convenants, obligations and liabilities as herein provided. Neither Party shall be under the control of or shall be deemed to control the other Party. Neither Party shall be the agent of or have a right
or power to bind any other Party without its express written consent, except as expressly provided herein. 
  
 27. SIGNATURE CLAUSE 
  
 27.1 The Parties represent that they have been appropriately authorized by all requisite corporate action to execute this Agreement and the signatories hereto represent that they have been appropriately authorized to enter into this
Agreement on behalf of the Party for whom they sign. 
  
 27.2 IN
WITNESS WHEREOF, the Parties have entered into this Agreement as of the Effective Date. 
  

	 TEXAS-NEW MEXICO POWER COMPANY

		
	 By:
	 	  

	 Title:
	 	  

	 Date:
	 	  

	
	 PUBLIC SERVICE COMPANY OF NEW MEXICO

		
	 By:
	 	  

	 Title:
	 	  

	 Date:
	 	  

  

 38 

 Wholesale Requirements Power Sale And Services Agreement 
  
 Between Public Service Company Of New Mexico And 
  
 Texas-New Mexico Power Company 
  
 Operating Procedure # 1: 
  
 Replacement Energy Scheduling 
  
 Replacement Energy Procedure for Eddy County Tie:

  
 In the event of a loss or deration of the Eddy County Tie,
PNM Marketing will make its best efforts to supply Capacity and Energy to TNMP to replace the Capacity and Energy interrupted or curtailed through the SPS/TNMP Contract at the time of the loss or deration. Procedures for procuring this Replacement
Energy will be as follows: 
  
 1. The first source of supply to
replace the SPS/TNMP energy schedule being interrupted or curtailed will be any unused energy available from TNMP’s existing EPE/TNMP Contract. 
  
 2. The second source of supply to replace the SPS/TNMP energy schedule being interrupted or curtailed will be the Capacity and Energy available pursuant
to the Agreement, up to 38 MW. 
  
 3. When available, the third
source of supply to replace the SPS/TNMP energy schedule being interrupted or curtailed will be the interruption of Economy Energy to Phelps Dodge, including the 65 MW block energy purchase. 
  
 4. When the sources of supply in 1, 2 and 3 above are not available, or not
available in sufficient quantity to replace the entire SPS/TNMP energy schedule being interrupted or curtailed, the fourth source of supply will be Replacement Energy supplied by PNM Marketing. 
  
 5. PNM Marketing will procure resources for the expected duration of the
interruption or deration of the SPS/TNMP energy schedule. If resources are to be procured 
  

 39 

 
forward on a greater than hourly basis, PNM Marketing will advise TNMP Reliability of its intentions to purchase forward. PNM Marketing will obtain approval
from TNMP Reliability prior to making the forward purchase. 
  
 6.
In the event a forward purchase of Replacement Energy is made and it results in an over-supply because the Eddy County Tie returns to service sooner than expected, PNM Marketing will buy back the over-supply from TNMP at ninety percent (90%) of the
applicable Dow Jones Non-Firm On-Peak or Dow Jones Non-Firm Off-Peak Electricity Index price at Four Corners. In the event this index does not exist in the future the Parties shall agree on a suitable replacement. 
  
 Replacement Energy Procedure for EPE/TNMP Contract:

  
 In the event of the interruption or curtailment of the
EPE/TNMP Contract, PNM Marketing will make its best efforts to supply Capacity and Energy to TNMP to replace the Capacity and Energy interrupted or curtailed through the EPE/TNMP Contract. Procedures for procuring this Replacement Energy will be as
follows: 
  
 1. Through December 8, 2001, the first source of
supply to replace the EPE/TNMP energy schedule being interrupted or curtailed will be any unused energy available from the SPS/TNMP Contract. 
  
 2. Through December 31, 2001, the second source of supply to replace the EPE/TNMP energy schedule being interrupted or curtailed will be the Capacity and
Energy available pursuant to the Agreement, up to 38MW. From January 1, 2002 through December 31, 2002, the second source of supply to replace the EPE/TNMP energy schedule being interrupted or curtailed will be the Capacity and Energy available
pursuant to the Agreement, up to 18 MW. 
  
 3. When available, the
third source of supply to replace the EPE/TNMP energy schedule being interrupted or curtailed will be the interruption of Economy Energy to Phelps Dodge. 
  

 40 

 4. When the sources of supply in 1, 2 and 3 above are not available, or not available in sufficient
quantity to replace the entire EPE/TNMP energy schedule being interrupted or curtailed, the fourth source of supply will be Replacement Energy supplied by PNM Marketing. 
  
 5. PNM Marketing will procure resources for the expected duration of the interruption or curtailment of the EPE/TNMP energy
schedule. If resources are to be procured forward on a greater than hourly basis, PNM Marketing will advise TNMP Reliability of its intentions to purchase forward. PNM Marketing will obtain approval from TNMP Reliability prior to making the forward
purchase. 
  
 6. In the event a forward purchase of Replacement
Energy is made and it results in an over-supply, PNM Marketing will buy back the over-supply from TNMP at ninety percent (90%) of the applicable Dow Jones Non-Firm On-Peak or Dow Jones Non-Firm Off-Peak Electricity Index price at Four Corners. In
the event this index does not exist in the future the Parties shall agree on a suitable replacement. 
  

 41 

 Wholesale Requirements Power Sale And Services Agreement 
  
 Between Public Service Company Of New Mexico And 
  
 Texas-New Mexico Power Company 
  
 Operating Procedure # 2: 
  
 New Mexico Operating Procedures 
  
 The following procedures describe daily and real-time procedures for the
scheduling and dispatch of energy for TNMP Native Load and Phelps Dodge Load: 
  
 TNMP Native Load: 
  
 PNM Marketing will schedule all of the needed resources for TNMP Native Load in a manner that is consistent with economic dispatch practices. 

 
 1. Until load forecasting for TNMP’s Native Load is
assumed by PNM Marketing, TNMP Reliability will provide PNM Marketing an estimate of the next day’s Native Load hourly requirements by 10:00 a.m. Estimates for Sundays, Mondays and common holidays will be provided by the previous common
Business Day. 
  
 2. PNM Marketing will monitor
TNMP’s real-time Native Load through a direct real-time communication link provided by TNMP, and schedule accordingly to minimize energy imbalance. 
  
 3. PNM Marketing will call EPE or SPS marketing departments, respectively, to communicate any desired schedule adjustments to the EPE/TNMP
Contract or SPS/TNMP Contract. 
  
 4. PNM
Marketing will then call TNMP Reliability to notify them of the schedule 
  

 42 

 adjustment, including affected delivery point(s). TNMP Reliability will then communicate the schedule
adjustment to the appropriate Control Areas. 
  
 5. PNM Marketing also will communicate the schedule adjustment, including delivery point and total net schedule, to PNM Reliability. 
  
 6. TNMP Reliability will monitor the TNMP transmission system and immediately notify PNM Operations and PNM Marketing of the loss of any
Point of Delivery/Point of Receipt (POD/POR). 
  
 7. Upon notification of such POD/POR loss PNM Marketing will immediately make schedule adjustments to delivery points and notify PNM Reliability and TNMP Reliability of these changes. TNMP Reliability will then notify the affected Control
Areas. 
  
 8. Once the loss of POD/POR has been
restored, TNMP Reliability will notify PNM Reliability and PNM Marketing. PNM Marketing will, at its discretion and as soon as practical, restore schedules and delivery points to the pre-event levels. 
  
 9. In the event of extended outages of facilities (including
scheduled maintenance), TNMP Reliability will advise PNM Reliability and PNM Marketing of the conditions and any required curtailments. 
  
 Phelps Dodge Load: 
  
 Unless and until assumed by PNM Marketing, TNMP Reliability will schedule and dispatch for the Phelps Dodge Load. 
  
 1. Phelps Dodge will communicate their desired energy
requirements each hour to TNMP Reliability. 
  
 2.
TNMP Reliability will contact PNM Marketing no later than 15 minutes past each hour to communicate TNMP’s desired energy requirements for Phelps Dodge for the upcoming scheduling hour. 
  

 43 

 3. PNM Marketing will attempt to procure energy, on TNMP’s behalf, to meet
TNMP’s requirements. If PNM fords energy that is acceptable to TNMP, the Parties will communicate and record the pertinent information, such as price, volume, POD, product, etc. 
  
 4. PNM Marketing will then communicate the schedule adjustment, including delivery point and total net
schedule to PNM Reliability. 
  
 5. TNMP
Reliability will communicate the schedule to the appropriate control areas and Phelps Dodge. 
  
 6. PNM Marketing, TNMP Reliability, PNM Reliability and Phelps Dodge will check out interchange numbers each night after midnight for
accuracy. 
  

 44 

 Wholesale Requirements Power Sale And Services Agreement 
 Between Public Service Company Of New Mexico And 
 Texas-New Mexico Power Company 
  
 Operating Procedure #3:

 Transmission Loss Accounting 
  
 This Agreement is being entered into with the understanding that losses hereunder will be determined according to the following: 
  
 1. In accordance with the El Paso Interchange Agreement,
Service Schedule C - Wheeling Service Exhibit A - Transmission Loss Determination, TNMP compensates EPE for energy losses associated with (1) the provision by EPE of transmission service to TNMP under Service Schedule C and (2) TNMP’s
importation of power across the DC terminal and the Artesia to Amrad 345 KV transmission system. 
  
 2. By mutual agreement, TNMP accommodates this loss obligation by reducing schedules of energy of TNMP delivered to Amrad in the amount of
2 MW per hour (physical losses). 
  
 3. The EPE
net schedule consists of the SPS/TNMP Contract, the EPE/TNMP Contract and the Eddy County Tie schedules, reduced by 2 MW per hour. There is no anticipated change to the 2 MW loss obligation; it will continue to exist regardless of scheduling
activity volumes. 
  
 4. In accordance with the
SWNMI New Mexico Operating procedures Section 8.8, TNMP is responsible for losses on the Greenlee 345 KV and Hidalgo 345 KV at the rate of .68%. By mutual agreement, TNMP accommodates this obligation “after the fact” by calculating the
losses at the rate of .68% of the Greenlee schedule. TNMP has “pre-scheduled” this loss obligation and is meeting current loss obligations by depleting the “loss bank”. TNMP is currently in discussions with EPE to financially

  

 45 

 
settle future losses once the “bank” is depleted. No resources need to be scheduled for current loss obligations and if discussions are mutually
acceptable, no resources need to be scheduled going forward. 
  
 5. TNMP has 21 MW of contracted transmission with PNM. These contracts define the loss obligation to be 3% of what is scheduled on the Four Corners to Hidalgo path. TNMP presently has the right to settle these losses
either financially at the rate of $100/MWH or with physical losses. 
  
 6. TNMP has no other loss obligations. 
  

 46EXHIBIT 4(e)

      THIS FIRST SUPPLEMENTAL INDENTURE, dated as of November 3, 2003
 (this "First Supplemental Indenture"), is by and among SEARS ROEBUCK
ACCEPTANCE CORP., a corporation organized and existing under the laws
of the State of Delaware (the "Company"), SEARS, ROEBUCK AND CO., a
corporation organized and existing under the laws of the State
of New York ("Sears") and BNY MIDWEST TRUST COMPANY, an Illinois trust
company (the "Trustee").

                PRELIMINARY STATEMENT

      The Company and the Trustee have entered into an Indenture,
dated as of October 1, 2002  (the "Indenture").  Capitalized terms
used herein have the meanings assigned to them in the Indenture unless
otherwise indicated.  In Section 11.1 of Article XI of the Indenture
it is provided that, among other things, the Company, when authorized by
resolution of its Board, and the Trustee, subject to the conditions and
restrictions in the Indenture contained, may from time to time and at any
time enter into an indenture or indentures supplemental thereto for the
following purposes among others: to add to the covenants and agreements
of the Company for the benefit of the Holders of all or any series of
Securities.

     The Company created and issued under and in accordance with the
provisions of the Indenture, the Securities identified on Annex A hereto
(collectively, the "Notes").

     Sears now desires to guarantee payment of principal, interest and
premium (if any) on the Notes irrevocably and unconditionally and to
enter into this First Supplemental Indenture to evidence this guarantee
of the Notes.

    NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:

1.The following shall be added as additional definitions in
Section 1.1 of Article I of the Indenture:

Benefitted Party

The term "Benefitted Party" shall have the meaning specified in
Section 14.13.

First Supplemental Indenture

The term "First Supplemental Indenture" shall mean the First
Supplemental Indenture, dated November 3, 2003, by and among the
Company, Sears and the Trustee.

Notes

The term "Notes" shall have the meaning specified in the
Preliminary Statement of the First Supplemental Indenture and
shall include all Securities outstanding under the Indenture on the
date hereof and any Security  issued upon registration of transfer
or exchange of any such Security or upon replacement of a lost,
stolen, mutilated or destroyed such Security, but shall not
mean any Securities authorized and issued after the date hereof.

Guarantee

The term "Guarantee" shall mean the guarantee of Sears set forth
in Section 14.13.

2.The following shall be added as new Section 14.13 of  Article XIV
  of the Indenture:

  Section 14.13.  Guarantee.  Subject to the provisions of this
Indenture and any supplemental indenture hereto, Sears hereby
irrevocably and unconditionally guarantees to each
Holder of a Note outstanding on the date of the First
Supplemental Indenture or any Note thereafter authenticated
and delivered by the Trustee and to the Trustee and its successors
and assigns, that: (i) the principal of (and premium, if any) and
interest on the Notes shall be paid in full when due, whether at
maturity, by acceleration or otherwise, and (ii) in case of any
extension of time in payment or renewal of any Notes or pursuant
to any cure period provisions of the Notes or the Indenture, they
shall be paid in full when due in accordance with the terms of the
extension or renewal or cure period.  Failing payment when due of
any amount so guaranteed, Sears shall be obligated to pay the same.
Sears agrees that this is a guarantee of payment and not
a guarantee of collection.  For the avoidance of doubt, the
Guarantee does not extend to nor shall it benefit the Holder of
any Security issued under the Indenture other than the Notes, including
any Security authorized and issued after the date hereof,
unless the terms of such Security specifically make this
Guarantee applicable thereto and Sears consents to such application.

   Sears hereby agrees that its obligations with regard to
the Guarantee shall be unconditional, irrespective of any circumstances
which might otherwise constitute a legal or equitable defense
of a guarantor.  In the event of a default in the payment of
principal, interest or premium (if any) the Trustee or any
Holder of Notes may seek to enforce the Guarantee against
Sears without first proceeding against the Company.
Sears further, to the extent permitted by law, hereby
waives (a) any defense that may arise by reason of the
incapacity, lack of authority, death or disability of
any other person or the failure of the Trustee, the Holders
or the Company (each a "Benefitted Party") to file or
enforce a claim against the estate (in administration,
bankruptcy or any other proceeding) of any other person,
(b) notice of the existence, creation or incurring of any new
or additional indebtedness or obligation, (c) any defense based
upon an election of remedies by a Benefitted Party, including
but not limited to an election law which provides that the
obligation of a surety must be neither larger in amount nor
in other respects more burdensome than that of the principal,
(d) any defense arising because of a Benefitted
Party's election, in any proceeding instituted under
Federal bankruptcy law, of the application of
11 U.S.C. Section 1111(b)(2) or (e) any defense based
on any borrowing or grant of a security
interest under 11 U.S.C. Section 364.  Sears hereby
covenants that the Guarantee shall not be
discharged except by complete payment of principal,
interest and premium (if any) in accordance
with the provisions contained in the Notes, the Guarantee,
this Indenture and any supplemental indenture hereto.

    If any Holder or the Trustee is required by any
court or otherwise to return to either the Company or
Sears, or any custodian acting in relation to either
the Company or Sears, any amount paid by the Company
or Sears to the Trustee or such Holder, the Guarantee,
to the extent theretofore discharged, shall be reinstated
in full force and effect.  Sears agrees that it shall not
be entitled to any right of subrogation in relation to the
Holders or the Trustee in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby.

   The Guarantee is a continuing guarantee and shall remain
in full force and effect and shall be binding upon Sears and
its successors and assigns until full and final payment of all of
principal, interest and premium (if any) under the Notes and
shall inure to the benefit of the successors and assigns of the
Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights
and privileges herein conferred upon that party shall automatically
 extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof.

  Sears acknowledges that it will receive direct and indirect
 benefits from the financing arrangements contemplated by this
First Supplemental Indenture.  Sears, and by its acceptance
hereof, each beneficiary hereof, hereby confirms that it is its
intention that the Guarantee not constitute a fraudulent transfer
or conveyance for purposes of any Federal bankruptcy law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer
Act or any similar Federal, state or foreign law to the extent
applicable to the Guarantee.  To effectuate the foregoing intention,
each such person hereby irrevocably agrees that the obligation of Sears
under the Guarantee shall be limited to the maximum amount as will,
after giving effect to such maximum amount and all other (contingent
or otherwise) liabilities of Sears that are relevant
under such laws, result in the obligations of Sears in respect
of such maximum amount not constituting a fraudulent transfer or
conveyance.

3.	Effect of First Supplemental Indenture

   Sears hereby agrees that by virtue of its execution and delivery
of this First Supplemental Indenture, it shall be deemed to have
signed on each Note issued under the Indenture the notation
of the Guarantee and accordingly, the Guarantee shall be deemed
to be a part of each Note.

4.	Miscellaneous

Ratification of Indenture; First Supplemental Indenture; Part of Indenture.
Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions
thereof shall remain in full force and effect.  This First Supplemental
Indenture shall form a part of the Indenture for all purposes, and every Holder
of a Note heretofore or hereafter authenticated and delivered shall be
bound hereby.

Governing Law.  This First Supplemental Indenture shall be governed in
accordance with the internal laws of the State of Delaware.

Trustee Makes No Representations.  The Trustee makes no representation
as to the validity or sufficiency of this First Supplemental Indenture.

Counterparts.  This First Supplemental Indenture may be simultaneously
executed in any number of counterparts, each of which when so executed
and delivered shall be an original; but such counterparts shall together
constitute but one and the same instrument.

Effect of Headings.  All descriptive headings of this First Supplemental
Indenture are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.

    IN WITNESS HEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed, and the corporate seal of the Trustee to be
hereunto affixed and attested, all as of the day and year first above written.

                SEARS ROEBUCK ACCEPTANCE CORP.
                By: /s/ Keith E. Trost
                   -------------------
               Name:  Keith E. Trost
               Title:  President

Attest:

/s/Kristin L. Kruska
--------------------
Name:  Kristin L. Kruska
Title:   Assistant Secretary

                SEARS, ROEBUCK AND CO.
                By:  /s/Glenn R. Richter
                   ---------------------
                Name:  Glenn R. Richter
                Title:    Senior Vice President and Chief Financial Officer

Attest:

/s/April Hanes-Dowd
-----------------------
Name:  April Hanes-Dowd
Title: Secretary

               BNY MIDWEST TRUST COMPANY,
               As Trustee

               By: /s/M. Callahan
                   ----------------------
                  Name: M. Callahan
                  Title:  Assistant Vice President

Attest:
 /s/ D. G. Donovan
--------------------
Name:  D. G. Donovan
Title:  Assistant Vice President

                                           ANNEX A

                              MATURITY
 SERIES                        DATE       COUPON    CUSIP#     PRINCIPAL
--------------               --------     -------   -------    ---------
Medium Term Notes Series VI    1/7/04    Variable  81240QMS8 $  201,385,000
Medium Term Notes Series VI    1/7/04    Variable  81240QMS8 $   57,000,000
Medium Term Notes Series VI   2/23/04    Variable  81240QMT6 $   60,100,000
Medium Term Notes Series VI   2/23/04    Variable  81240QMT6 $   95,500,000
Medium Term Notes Series VI   2/23/04    Variable  81240QMT6 $    3,000,000
Medium Term Notes Series VI   2/23/04    Variable  81240QMT6 $   20,000,000
Medium Term Notes Series VI   2/23/04    Variable  81240QMT6 $   15,000,000
Medium Term Notes Series VI   3/23/04    Variable  81240QMU3 $   50,000,000
Medium Term Notes Series VI   4/23/04    Variable  81240QMV1 $   85,500,000
Medium Term Notes Series VI   4/23/04    Variable  81240QMV1 $   45,000,000
Medium Term Notes Series VI   4/23/04    Variable  81240QMV1 $   25,000,000
Medium Term Notes Series VI   5/11/04    Variable  81240QMW9 $  132,000,000
Medium Term Notes Series VI   5/11/04    Variable  81240QMW9 $   31,500,000
Medium Term Notes Series VI   5/11/04    Variable  81240QMW9 $      500,000
Medium Term Notes Series VI   5/11/04    Variable  81240QMW9 $    2,000,000
Medium Term Notes Series VI   5/11/04    Variable  81240QMW9 $    5,000,000
Medium Term Notes Series VI   5/12/04    Variable  81240QMX7 $   25,000,000
Medium Term Notes Series VII  2/20/04    Variable  81240QMY5 $   98,050,000
Medium Term Notes Series VII  2/20/04    Variable  81240QMY5 $      200,000
Medium Term Notes Series VII  2/20/04    Variable  81240QMY5 $    6,500,000
Medium Term Notes Series VII  2/20/04    Variable  81240QMY5 $   40,000,000
Medium Term Notes Series VII  2/20/04    Variable  81240QMY5 $    5,000,000
Medium Term Notes Series VII  2/25/04    Variable  81240QMZ2 $   35,500,000
Medium Term Notes Series VII  2/25/04    Variable  81240QMZ2 $    1,000,000
Medium Term Notes Series VII  2/25/04    Variable  81240QMZ2 $   77,000,000
Medium Term Notes Series VII  2/25/04    Variable  81240QMZ2 $   50,000,000
Medium Term Notes Series VII  2/25/04    Variable  81240QMZ2 $   25,000,000
Medium Term Notes Series VII  2/25/04    Variable  81240QMZ2 $   61,700,000
Medium Term Notes Series VII   3/9/04    Variable  81240QNA6 $    6,000,000
Medium Term Notes Series VII   3/9/04    Variable  81240QNA6 $    6,000,000
Medium Term Notes Series VII   3/9/04    Variable  81240QNA6 $   50,000,000
Medium Term Notes Series VII   3/9/04    Variable  81240QNA6 $   69,700,000
InterNotes Series I          12/15/05      5.650%  8124JFAA4 $   35,384,000
InterNotes Series I          12/17/07      6.600%  8124JFAB2 $   32,125,000
InterNotes Series I          12/17/12      7.400%  8124JFAC0 $   45,163,000
InterNotes Series I          12/15/09      7.250%  8124JFAD8 $   34,341,000
InterNotes Series I          12/15/05      5.750%  8124JFAE6 $   42,917,000
InterNotes Series I          12/17/07      6.700%  8124JFAF3 $   25,351,000
InterNotes Series I          12/17/12      7.500%  8124JFAG1 $   54,895,000
InterNotes Series I          12/15/09      7.300%  8124JFAH9 $   27,994,000
InterNotes Series I           1/16/06      6.000%  8124JFAJ5 $   16,419,000
InterNotes Series I           1/15/08      7.000%  8124JFAK2 $   17,834,000
InterNotes Series I           1/15/13      7.500%  8124JFAL0 $   14,229,000
InterNotes Series I           1/15/10      7.400%  8124JFAM8 $   10,459,000
InterNotes Series I           1/17/06      5.900%  8124JFAN6 $   23,187,000
InterNotes Series I           1/15/08      6.900%  8124JFAP1 $   19,777,000
InterNotes Series I           1/15/13      7.500%  8124JFAQ9 $   21,498,000
InterNotes Series I           1/15/10      7.400%  8124JFAR7 $   19,068,000
InterNotes Series I           1/17/06      5.900%  8124JFAS5 $   50,190,000
InterNotes Series I           1/15/08      6.750%  8124JFAT3 $   56,371,000
InterNotes Series I           1/15/13      7.500%  8124JFAU0 $   36,380,000
InterNotes Series I           1/15/10      7.450%  8124JFAV8 $   40,699,000
InterNotes Series I           1/17/06      5.400%  8124JFAW6 $   59,717,000
InterNotes Series I           1/15/08      6.150%  8124JFAX4 $   43,647,000
InterNotes Series I           2/15/05      4.950%  8124JFAY2 $   89,413,000
InterNotes Series I           2/15/08      6.200%  8124JFAZ9 $   39,998,000
InterNotes Series I           2/15/06      5.400%  8124JFBA3 $   50,182,000
InterNotes Series I           2/15/08      6.100%  8124JFBB1 $   27,315,000
InterNotes Series I           2/15/06      5.500%  8124JFBC9 $   40,414,000
InterNotes Series I           2/15/08      6.250%  8124JFBD7 $   24,063,000
InterNotes Series I           2/15/06      5.800%  8124JFBE5 $   58,535,000
InterNotes Series I           2/15/08      6.650%  8124JFBF2 $   46,362,000
InterNotes Series I           3/15/06      5.400%  8124JFBG0 $   40,439,000
InterNotes Series I           3/17/08      6.200%  8124JFBH8 $   24,349,000
InterNotes Series I           3/15/13      7.150%  8124JFBJ4 $   13,819,000
InterNotes Series I           3/15/10      7.000%  8124JFBK1 $   20,171,000
InterNotes Series I           3/15/06      5.200%  8124JFBL9 $   26,670,000
InterNotes Series I           3/17/08      6.000%  8124JFBM7 $   15,595,000
InterNotes Series I           3/15/13      7.050%  8124JFBN5 $    8,358,000
InterNotes Series I           3/15/10      6.800%  8124JFBP0 $    6,002,000
InterNotes Series I           3/15/06      5.750%  8124JFBQ8 $   27,233,000
InterNotes Series I           3/17/08      6.650%  8124JFBR6 $   18,041,000
InterNotes Series I           3/15/10      7.375%  8124JFBS4 $   10,572,000
InterNotes Series I           3/15/13      7.750%  8124JFBT2 $   10,792,000
InterNotes Series I           4/17/06      4.800%  8124JFBU9 $   17,315,000
InterNotes Series I           4/15/08      5.600%  8124JFBV7 $   11,146,000
InterNotes Series I           4/17/06      4.350%  8124JFBW5 $    8,084,000
InterNotes Series I           4/15/08      5.250%  8124JFBX3 $    7,349,000
InterNotes Series I           4/15/10      5.850%  8124JFBY1 $    2,062,000
InterNotes Series I           4/15/13      6.450%  8124JFBZ8 $    8,666,000
InterNotes Series I           5/15/06      4.050%  8124JFCA2 $    5,190,000
InterNotes Series I           5/15/08      5.000%  8124JFCB0 $   17,614,000
InterNotes Series I           5/17/10      5.625%  8124JFCC8 $    2,288,000
InterNotes Series I           5/15/13      6.200%  8124JFCD6 $   12,360,000
InterNotes Series II          5/15/06      3.850%  8124JFCE4 $    5,562,000
InterNotes Series II          5/15/08      4.800%  8124JFCF1 $    5,681,000
InterNotes Series II          5/17/10      5.450%  8124JFCH7 $    4,309,000
InterNotes Series II          5/15/13      6.000%  8124JFCJ3 $    8,851,000
InterNotes Series II          5/15/06      3.750%  8124JFCK0 $    6,963,000
InterNotes Series II          5/15/08      4.750%  8124JFCL8 $    5,872,000
InterNotes Series II          5/17/10      5.350%  8124JFCM6 $    4,042,000
InterNotes Series II          5/15/13      6.000%  8124JFCN4 $   13,799,000
InterNotes Series II          5/15/06      3.500%  8124JFCP9 $    5,095,000
InterNotes Series II          5/15/08      4.350%  8124JFCQ7 $    6,396,000
InterNotes Series II          5/17/10      5.000%  8124JFCR5 $    4,386,000
InterNotes Series II          5/15/13      5.650%  8124JFCS3 $    6,782,000
InterNotes Series II          5/15/06      3.550%  8124JFCT1 $    5,709,000
InterNotes Series II          5/15/08      4.300%  8124JFCU8 $    3,331,000
InterNotes Series II          5/17/10      4.950%  8124JFCV6 $    3,570,000
InterNotes Series II          5/15/13      5.550%  8124JFCW4 $    8,128,000
InterNotes Series II          6/15/06      3.500%  8124JFCX2 $    4,169,000
InterNotes Series II          6/16/08      4.300%  8124JFCY0 $    4,599,000
InterNotes Series II          6/15/10      4.950%  8124JFCZ7 $    1,899,000
InterNotes Series II          6/17/13      5.500%  8124JFDA1 $    6,340,000
InterNotes Series II          6/15/06      3.300%  8124JFDB9 $    5,513,000
InterNotes Series II          6/16/08      4.100%  8124JFDC7 $    6,630,000
InterNotes Series II          6/15/10      4.750%  8124JFDD5 $    2,249,000
InterNotes Series II          6/17/13      5.400%  8124JFDE3 $   14,202,000
InterNotes Series II          6/15/06      2.700%  8124JFDF0 $    4,823,000
InterNotes Series II          6/16/08      3.550%  8124JFDG8 $    2,480,000
InterNotes Series II          6/15/10      4.250%  8124JFDH6 $    3,806,000
InterNotes Series II          6/17/13      4.900%  8124JFDJ2 $    4,289,000
InterNotes Series II          6/15/06      2.700%  8124JFDK9 $    1,808,000
InterNotes Series II          6/15/08      3.500%  8124JFDL7 $    1,682,000
InterNotes Series II          6/15/10      4.150%  8124JFDM5 $    2,234,000
InterNotes Series II          7/15/06      2.900%  8124JFDN3 $    4,112,000
InterNotes Series II          7/15/08      3.850%  8124JFDP8 $    2,450,000
InterNotes Series II          7/15/10      4.550%  8124JFDQ6 $    5,013,000
 Retail                        2/1/43      7.400%  812404507 $  250,000,000

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00057-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00057-of-00352.parquet"}]]