Document:

<PAGE>

                                                                    EXHIBIT 4(B)

                             TNP ENTERPRISES, INC.,
                                   as Issuer,

                                      and

                             THE BANK OF NEW YORK,
                                   as Trustee

                              ___________________

                          FIRST SUPPLEMENTAL INDENTURE

                           Dated as of April 7, 2000

                                       to

                                   INDENTURE

                           Dated as of April 7, 2000

                                    between

                             ST ACQUISITION CORP.,
                                   as Issuer,

                                      and

                             THE BANK OF NEW YORK,
                                   as Trustee
                              ___________________

                                  $275,000,000

                   10.25% Senior Subordinated Notes due 2010
<PAGE>

          FIRST SUPPLEMENTAL INDENTURE, dated as of April 7, 2000, by and
between TNP ENTERPRISES, INC., a Texas corporation, as issuer (the "Company"),
and The Bank of New York, as trustee (the "Trustee").

          WHEREAS, ST Acquisition Corp., a Texas corporation ("Acquisition"),
has heretofore executed and delivered to the Trustee an Indenture dated as of
April 7, 2000 (the "Indenture"), providing for the issuance of its 10.25% Senior
Subordinated Notes due 2010 in the principal amount of $275,000,000 (the
"Securities"); and

          WHEREAS, Acquisition has merged with and into the Company and, in
connection herewith, the Company has assumed by operation of law all of
Acquisition's debts, liabilities, duties and obligations, including
Acquisition's obligations in respect of the Securities and under the Indenture;
and

          WHEREAS, the Company desires by this First Supplemental Indenture,
pursuant to and as contemplated by Sections 5.01 and 8.01 of the Indenture, to
expressly assume the covenants, agreements and undertakings of Acquisition in
the Indenture and under the Securities; and

          WHEREAS, the execution and delivery of this First Supplemental
Indenture and the notes evidencing the Securities, substantially in the form
attached hereto as Exhibit A, have been authorized by a resolution of the Board
of Directors of the Company; and

          WHEREAS, the Company authorizes the Trustee to cancel the 10.25 %
Senior Subordinated Notes due 2010 of Acquisition and to authenticate
$275,000,000 principal amount of 10.25% Senior Subordinated Notes due 2010 of
the Company in replacement thereof; and

          WHEREAS, all conditions and requirements necessary to make each of
this First Supplemental Indenture and the Securities a valid, binding and legal
instrument in accordance with its terms upon the Company and the Trustee have
been performed and fulfilled by the applicable parties hereto and the execution
and delivery thereof have been in all respects duly authorized by the applicable
parties hereto.

          NOW, THEREFORE, in consideration of the above premises, each party
agrees, for the benefit of the others and for the equal and ratable benefit of
the Holders of the Securities, as follows:
<PAGE>

                                     -2-

                                  ARTICLE ONE

                           ASSUMPTION OF OBLIGATIONS

          SECTION 1.01.  Assumption of Obligations of Acquisition.
                         ----------------------------------------

          (a)  The Company hereby expressly and unconditionally assumes each and
every covenant, agreement and undertaking of Acquisition in the Indenture as if
the Company had been the original issuer of the Securities, and also hereby
expressly and unconditionally assumes each and every covenant, agreement and
undertaking in each Security outstanding on the date of this First Supplemental
Indenture.

          (b)  Promptly following the execution and delivery of this First
Supplemental Indenture, the Trustee shall, upon the written order of the Company
in the form of an Officers' Certificate of the Company, authenticate and deliver
Securities substantially in the form of Exhibit A hereto in replacement of the
outstanding Securities.

          SECTION 1.02.  Exchange of Outstanding Securities; Exhibits.
                         --------------------------------------------

          Exhibits A, B, C, D, E and F of the Indenture are hereby deleted and
replaced in their entirety by Exhibits A, B, C, D, E and F, respectively,
hereto.

                                  ARTICLE TWO

                           MISCELLANEOUS PROVISIONS

          SECTION 2.01.  Terms Defined.
                         -------------

          For all purposes of this First Supplemental Indenture, except as
otherwise defined or unless the context otherwise requires, terms used in
capitalized form in this First Supplemental Indenture and defined in the
Indenture have the meanings specified in the Indenture.

          SECTION 2.02.  Indenture.
                         ---------

          Except as amended hereby, the Indenture and the Securities are in all
respects ratified and confirmed and all the terms shall remain in full force and
effect.
<PAGE>

                                      -3-

          SECTION 2.03.  Governing Law.
                         -------------

          THIS FIRST SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS.

          SECTION 2.04.  Successors.
                         ----------

          All agreements of the Company in this First Supplemental Indenture and
the Securities shall bind its successors.  All agreements of the Trustee in this
First Supplemental Indenture shall bind its successors.

          SECTION 2.05.  Duplicate Originals.
                         -------------------

          The parties may sign any number of copies of this First Supplemental
Indenture.  Each signed copy shall be an original, but all of them together
shall represent the same agreement.

          SECTION 2.06.  Trustee Disclaimer.
                         ------------------

          The Trustee accepts the amendment of the Indenture effected by this
First Supplemental Indenture and agrees to execute the trust created by the
Indenture as hereby amended, but only upon the terms and conditions set forth in
the Indenture, including the terms and provisions defining and limiting the
liabilities and responsibilities of the Trustee, which terms and provisions
shall in like manner define and limit its liabilities and responsibilities in
the performance of the trust created by the Indenture as hereby amended and,
without limiting the generality of the foregoing, the Trustee shall not be
responsible in any manner whatsoever for or with respect to any of the recitals
or statements contained herein, all of which recitals or statements are made
solely by the Company, or for or with respect to (i) the validity of the terms
of this First Supplemental Indenture or any of the terms or provisions hereof,
(ii) the proper authorization hereof by the Company by corporate action or
otherwise, (iii) the due execution hereof by the Company or (iv) the
consequences (direct or indirect and whether deliberate or inadvertent) of any
amendment herein provided for, and the Trustee makes no representation with
respect to any such matters.

                           [Signature Page Follows]
<PAGE>

                                  SIGNATURES

          IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the date first written above.

                                       TNP ENTERPRISES, INC.,
                                        as issuer

                                       By:  ____________________________
                                             Name:
                                             Title:

                                       THE BANK OF NEW YORK,
                                         as trustee

                                       By:  ____________________________
                                             Name:
                                             Title:
<PAGE>

                                                                    EXHIBIT A
                                                                    ---------

                                                            CUSIP No.:

                             TNP ENTERPRISES, INC.

                   10.25% SENIOR SUBORDINATED NOTE DUE 2010

No.                                                                   $

          TNP ENTERPRISES, INC., a Texas corporation (the "Company," which term
includes any successor entity), for value received promises to pay to
or registered assigns, the principal sum of [                           ]
DOLLARS on April 1, 2010.

          Interest Payment Dates:  April 1 and October 1, commencing October 1,
2000.

          Record Dates:  March 15 and September 15.

          Reference is made to the further provisions of this Note contained
herein and the Indenture (as defined), which will for all purposes have the same
effect as if set forth at this place.

          IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually by its duly authorized officers and a facsimile of its corporate seal
to be affixed hereto or imprinted hereon.

                                    TNP ENTERPRISES, INC.

                                    By:  ______________________
                                         Name:
                                         Title:

                                    By:  ______________________
                                         Name:
                                         Title:

                                      A-1
<PAGE>

Certificate of Authentication

          This is one of the 10.25% Senior Subordinated Notes due 2010 referred
to in the within-mentioned Indenture.

                                      The Bank of New York,
                                        as Trustee

                                      By: ____________________________
                                          Authorized Signatory

Date of Authentication:

                                      A-2
<PAGE>

                             (REVERSE OF SECURITY)

                   10.25% SENIOR SUBORDINATED NOTE DUE 2010

          1.   Interest.  TNP ENTERPRISES, INC., a Texas corporation (the
               --------
"Company"), promises to pay interest on the principal amount of this Note at the
--------
rate per annum shown above.  Interest on the Notes will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from the date of the original issuance of the Notes.  The Company will pay
interest semi-annually in arrears on each Interest Payment Date, commencing
October 1, 2000.  Interest will be computed on the basis of a 360-day year of
twelve 30-day months.

          The Company shall pay interest on overdue principal and on overdue
installments of interest (without regard to any applicable grace periods) to the
extent lawful from time to time on demand at the rate borne by the Notes.

          2.  Method of Payment. The Company shall pay interest on the Notes
              -----------------
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on March 15 or September 15 immediately preceding the Interest
Payment Date (whether or not such day is a Business Day) even if the Notes are
cancelled on registration of transfer or registration of exchange after such
Record Date. Holders must surrender Notes to a Paying Agent to collect principal
payments. Payments of principal and premium, if any, will be made (on
presentation of such Notes if in certificated form) in money of the United
States that at the time of payment is legal tender for payment of public and
private debts; provided, however, that the Company may pay principal, premium,
if any, and interest by check payable in such money. The Company may deliver any
such interest payment to the Paying Agent or to a Holder at the Holder's
registered address.

          3.  Paying Agent and Registrar. Initially, The Bank of New York, a New
              -------------------------
York banking corporation (the "Trustee"), will act as Paying Agent and
                               -------
Registrar. The Company may change any Paying Agent, Registrar or co-Registrar
without notice to the Holders. Neither the Company nor any of its Subsidiaries
or Affiliates may act as Paying Agent but may act as Registrar or co-Registrar.

          4.  Indenture. The Company issued this Note under an Indenture, dated
              ---------
as of April 7, 2000 (the "Indenture"), by and between the Company and the
                          ---------
Trustee. This Note is one of a duly authorized issue of Initial Notes of the
Company designated as its 10.25% Senior Subordinated Notes due 2010 (the
"Notes"). The Notes are limited in aggregate principal amount to $275,000,000.
 -----
The Notes include the Initial Notes and the Exchange Notes (as defined below)
issued in exchange for the Initial Notes pursuant to the Indenture. The Initial
Notes and the Exchange Notes are treated as a single class of securities under
the Indenture. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined

                                      A-3
<PAGE>

herein. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S. Code Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders are referred to the Indenture and the TIA
for a statement of them. The Notes are general unsecured obligations of the
Company.

          5.   Subordination. The Notes are unsecured obligations of the Company
               -------------
and subordinated in right of payment, in the manner and to the extent set forth
in the Indenture, to the prior payment in full in cash of all Senior
Indebtedness of the Company, whether outstanding on the date of the Indenture or
thereafter created, incurred, assumed or guaranteed. Each Holder by his
acceptance hereof agrees to be bound by such provisions and authorizes and
expressly directs the Trustee, on his behalf, to take such action as may be
necessary or appropriate to effectuate the subordination provided for in the
Indenture and appoints the Trustee his attorney-in-fact for such purposes.

          6.   Redemption.
               ----------

          (a)  Optional Redemption. The Company may redeem the Notes, at its
               -------------------
option, in whole at any time or in part from time to time, on and after April 1,
2005 at the following Redemption Prices (expressed as percentages of the
principal amount thereof) if redeemed during the twelve-month period commencing
on April 1 of the year set forth below, plus, in each case, accrued and unpaid
interest thereon, if any, to the date of redemption.

          Year                                      Percentage
          ----                                      ----------

          2005....................................  105.125%
          2006....................................  103.417%
          2007....................................  101.708%
          2008 and thereafter.....................  100.000%

          (b)  Optional Redemption Upon Equity Offerings.  Notwithstanding the
               -----------------------------------------
foregoing, the Company may redeem in the aggregate up to 35% of the original
principal amount of Notes at any time and from time to time prior to April 1,
2003 at a Redemption Price equal to 110.25% of the aggregate principal amount so
redeemed, plus accrued and unpaid interest, if any, to the Redemption Date out
of the Net Proceeds of one or more Public Equity Offerings; provided that

          (1)  at least 65% of the principal amount of Notes originally issued
remains outstanding immediately after the occurrence of any such redemption and

          (2)  any such redemption occurs within 90 days following the closing
of any such Public Equity Offering.

                                      A-4
<PAGE>

          7.   Notice of Redemption. Notice of redemption under paragraphs 6(a)
               --------------------
and (b) of this Note will be mailed at least 30 days but not more than 60 days
before the Redemption Date to each Holder to be redeemed at such Holder's
registered address.

          Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the Redemption Price plus accrued interest, if any.

          8.   Offers to Purchase.  The Indenture provides that, after certain
               ------------------
Asset Sales (as defined in the Indenture) and upon the occurrence of a Change of
Control (as defined in the Indenture), and subject to further limitations
contained therein, the Company will make an offer to purchase certain amounts of
the Notes in accordance with the procedures set forth in the Indenture.

          9.   Registration Rights.  Pursuant to the Registration Rights
               -------------------
Agreement by and among the Company and the Initial Purchasers, the Company will
be obligated to consummate an exchange offer pursuant to which the Holder of
this Note shall have the right to exchange this Note for the Company's Series B
10.25% Senior Subordinated Notes due 2010 (the "Exchange Notes"), which have
                                                --------------
been registered under the Securities Act, in like principal amount and having
terms identical in all material respects to the Initial Notes.  The Holders of
the Initial Notes shall be entitled to receive certain Additional Interest
payments in the event such exchange offer is not consummated and upon certain
other conditions, all pursuant to and in accordance with the terms of the
Registration Rights Agreement.

          10.  Denominations; Transfer; Exchange.  The Notes are in registered
               ---------------------------------
form, without coupons, in denominations of $1,000 and integral multiples
thereof.  A Holder shall register the transfer or exchange of Notes in
accordance with the Indenture.  The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture.  The Registrar need not register the
transfer of or exchange of any Notes or portions thereof selected for
redemption.

          11.  Persons Deemed Owners.  The registered holder of a Note shall be
               ---------------------
treated as the owner of it for all purposes.

          12.  Unclaimed Money.  If money for the payment of principal or
               ---------------
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company upon written request.  After that, Holders
entitled to money must look to the Company for payment as general creditors
unless an "abandoned property" law designates another person.

                                 A-5
<PAGE>

          13.  Legal Defeasance and Covenant Defeasance.  If the Company at any
               ----------------------------------------
time deposits with the Trustee U.S. legal tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating to
defeasance, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but excluding its
obligation to pay the principal of and interest on the Notes).

          14.  Amendments, Supplements, and Waivers.  Subject to certain
               ------------------------------------
exceptions, the Indenture or the Notes may be amended or supplemented with the
written consent of the Holders of at least a majority in aggregate principal
amount of the Notes  then outstanding, and any existing Default or Event of
Default or noncompliance with any provision may be waived with the written
consent of the Holders of a majority in aggregate principal amount of the Notes
then outstanding.  Without notice to or consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Notes to, among other
things, cure any ambiguity, defect or inconsistency, provide for uncertificated
Notes in addition to or in place of certificated Notes or make any other change
that does not adversely affect in any material respect the rights of any Holder.

          15.  Restrictive Covenants.  The Indenture imposes certain limitations
               ---------------------
on the ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, make payments in respect of its Capital Stock, enter
into transactions with Affiliates, create dividend or other payment restrictions
affecting Restricted Subsidiaries, sell assets, create liens, issue capital
stock, enter into sale and lease-back transactions, make certain Investments,
merge or consolidate with any other Person, or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its assets.  Such
limitations are subject to a number of important qualifications and exceptions.
The Company must quarterly report to the Trustee on compliance with such
limitations.

          16.  Successor Entity.  When a successor entity assumes, in accordance
               ----------------
with the Indenture, all the obligations of its predecessor under the Notes and
the Indenture, and immediately before and thereafter no Default or Event of
Default exists and certain other conditions are satisfied, the predecessor
entity will be released from those obligations.

          17.  Defaults and Remedies.  Events of Default are set forth in the
               ---------------------
Indenture.  If an Event of Default (other than an Event of Default pursuant to
Section 6.01(f) or (g) of the Indenture) shall have occurred and be continuing,
then the Trustee or the Holders of not less than 25% in aggregate principal
amount of the Notes then outstanding, may declare to be immediately due and
payable the entire principal amount of all the Notes then outstanding plus
accrued interest to the date of acceleration; provided, however, that after such
acceleration but before a judgment or decree based on such acceleration is
obtained by the Trustee, the Holders of a majority in aggregate principal amount
of the outstanding Notes may rescind and annul such acceleration and its
consequences if all existing Events of Default, other than the nonpayment of
principal, premium, if any, or interest that has become due solely because of

                                      A-6
<PAGE>

the acceleration, have been cured or waived. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.  In case an Event of
Default specified in Section 6.01(f) or (g) of the Indenture occurs, such
principal amount, together with premium, if any, and interest with respect to
all of the Notes, shall be due and payable immediately without any declaration
or other act on the part of the Trustee or the Holders.

          18.  Trustee Dealings with Company.  The Trustee under the Indenture,
               -----------------------------
in its individual or any other capacity, may make loans to, accept deposits
from, and perform services for the Company, and may otherwise deal  with the
Company, its Subsidiaries or their respective Affiliates as if it were not the
Trustee.

          19.  No Recourse Against Others.  As more fully described in the
               --------------------------
Indenture, no director, officer, employee, stockholder or incorporator, as such,
of the Company shall have any liability for any obligation of the Company under
the Notes or the Indenture or for any claim based on, in respect of or by reason
of such obligations or their creation.  Each Holder by accepting a Note waives
and releases all such liability.  Such waiver and release are part of the
consideration for the issuance of the Notes.

          20.  Authentication.  This Note shall not be valid until the Trustee
               --------------
or Authenticating Agent manually signs the certificate of authentication on this
Note.

          21.  Governing Law.  THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
               -------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.  EACH OF THE PARTIES TO THE INDENTURE HAS AGREED TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE.

          22.  Abbreviations and Defined Terms.  Customary abbreviations may be
               -------------------------------
used in the name of a Holder or an assignee, such as:  TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with
right of survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).

          23.  CUSIP Numbers.  Pursuant to a recommendation promulgated by the
               -------------
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders.  No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.

                                      A-7
<PAGE>

          24.  Indenture.  Each Holder, by accepting a Note, agrees to be bound
               ---------
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.

          The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture, which has the text of this Note in
larger type.  Requests may be made to:  TNP Enterprises, Inc., c/o Laurel Hill
Capital Partners LLC, 2 Robbins Lane, Suite 201, Jericho, New York 11753,
Attention:  Kathleen Marion.

                                      A-8
<PAGE>

                                ASSIGNMENT FORM

          If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:

I or we assign and transfer this Note to:

_______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________
                 (Print or type name, address and zip code and
                 social security or tax ID number of assignee)

and irrevocably appoint _______________________________________________________,
agent to transfer this Note on the books of the Company.  The agent may
substitute another to act for him.

Date:____________________  Signed: ____________________________________________
                                    (Sign exactly as your name appears on the
                                    other side of this Note)

Medallion Guarantee: _____________________________

                                      A-9
<PAGE>

                     [OPTION OF HOLDER TO ELECT PURCHASE]

          If you want to elect to have this Note purchased by the Company
pursuant to Section 4.13 or Section 4.16 of the Indenture, check the appropriate
box:

                                Section 4.13 [_]

                                Section 4.16 [_]

          If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.13 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:

$ _____________

Date:__________________
                             ________________________________________________
                             NOTICE:  The signature on this assignment must
                             correspond with the name as it appears upon the
                             face of the within Note in every particular without
                             alteration or enlargement or any change whatsoever
                             and be guaranteed by the endorser's bank or broker.

Medallion Guarantee:_____________________

                                     A-10
<PAGE>

                                                                       EXHIBIT B
                                                                       ---------
                                                               CUSIP No.:

                             TNP ENTERPRISES, INC.

               SERIES B 10.25% SENIOR SUBORDINATED NOTE DUE 2010

No.                                                                       $

          TNP ENTERPRISES, INC., a Texas corporation (the "Company," which term
includes any successor entity), for value received promises to pay to        or
registered assigns, the principal sum of [           ] DOLLARS on April 1, 2010.

          Interest Payment Dates:  April 1 and October 1, commencing October 1,
2000.

          Record Dates:  March 15 and September 15.

          Reference is made to the further provisions of this Note contained
herein and the Indenture (as defined), which will for all purposes have the same
effect as if set forth at this place.

          IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually by its duly authorized officers and a facsimile of its corporate seal
to be affixed hereto or imprinted hereon.

                                    TNP ENTERPRISES, INC.

                                    By:  _______________________
                                         Name:
                                         Title:

                                    By:  _______________________
                                         Name:
                                         Title:

                                      B-1
<PAGE>

Certificate of Authentication

          This is one of the Series B 10.25% Senior Subordinated Notes due 2010
referred to in the within-mentioned Indenture.

                                    The Bank of New York,
                                     as Trustee

                                    By:  __________________________
                                         Authorized Signatory

Date of Authentication:

                                      B-2
<PAGE>

                             (REVERSE OF SECURITY)

                   10.25% SENIOR SUBORDINATED NOTE DUE 2010

          1.   Interest.  TNP ENTERPRISES, INC., a Texas corporation (the
               --------
"Company"), promises to pay interest on the principal amount of this Note at the
 -------
rate per annum shown above.  Interest on the Notes will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from the date of the original issuance of the Notes.  The Company will pay
interest semi-annually in arrears on each Interest Payment Date, commencing
October 1, 2000.  Interest will be computed on the basis of a 360-day year of
twelve 30-day months.

          The Company shall pay interest on overdue principal and on overdue
installments of interest (without regard to any applicable grace periods) to the
extent lawful from time to time on demand at the rate borne by the Notes.

          2.   Method of Payment. The Company shall pay interest on the Notes
               -----------------
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on March 15 or September 15 immediately preceding the Interest
Payment Date (whether or not such day is a Business Day) even if the Notes are
cancelled on registration of transfer or registration of exchange after such
Record Date. Holders must surrender Notes to a Paying Agent to collect principal
payments. Payments of principal and premium, if any, will be made (on
presentation of such Notes if in certificated form) in money of the United
States that at the time of payment is legal tender for payment of public and
private debts; provided, however, that the Company may pay principal, premium,
if any, and interest by check payable in such money. The Company may deliver any
such interest payment to the Paying Agent or to a Holder at the Holder's
registered address.

          3.   Paying Agent and Registrar. Initially, The Bank of New York, a
               --------------------------
New York banking corporation (the "Trustee"), will act as Paying Agent and
                                   -------
Registrar. The Company may change any Paying Agent, Registrar or co-Registrar
without notice to the Holders. Neither the Company nor any of its Subsidiaries
or Affiliates may act as Paying Agent but may act as Registrar or co-Registrar.

          4.   Indenture. The Company issued this Note under an Indenture, dated
               ---------
as of April 7, 2000 (the "Indenture"), by and between the Company and the
                          ---------
Trustee. This Note is one of a duly authorized issue of Notes of the Company
designated as its Series B 10.25% Senior Subordinated Notes due 2010 (the
"Exchange Notes") issued in exchange for the initial 10.25% Senior Subordinated
 --------------
Notes due 2010 (the "Initial Notes" and, together with the Exchange Notes, the
                     -------------
"Notes"). The Notes are limited in aggregate principal amount to $275,000,000.
 -----
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Notes include those stated in the Indenture and
those made

                                      B-3
<PAGE>

part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.
Code Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
                                  ---
Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders are referred to the Indenture and the TIA
for a statement of them. The Notes are general unsecured obligations of the
Company.

          5.  Subordination. The Notes are unsecured obligations of the Company
              -------------
and subordinated in right of payment, in the manner and to the extent set forth
in the Indenture, to the prior payment in full in cash of all Senior
Indebtedness of the Company, whether outstanding on the date of the Indenture or
thereafter created, incurred, assumed or guaranteed. Each Holder by his
acceptance hereof agrees to be bound by such provisions and authorizes and
expressly directs the Trustee, on his behalf, to take such action as may be
necessary or appropriate to effectuate the subordination provided for in the
Indenture and appoints the Trustee his attorney-in-fact for such purposes.

          6.   Redemption.
               ----------

          (a) Optional Redemption. The Company may redeem the Notes, at its
              -------------------
option, in whole at any time or in part from time to time, on and after April 1,
2005 at the following Redemption Prices (expressed as percentages of the
principal amount thereof) if redeemed during the twelve-month period commencing
on April 1 of the year set forth below, plus, in each case, accrued and unpaid
interest thereon, if any, to the date of redemption.

     Year                                        Percentage
     ----                                        ----------
     2005...................................     105.125%
     2006...................................     103.417%
     2007...................................     101.708%
     2008 and thereafter....................     100.000%

          (b) Optional Redemption Upon Equity Offerings.  Notwithstanding the
              -----------------------------------------
foregoing, the Company may redeem in the aggregate up to 35% of the original
principal amount of Notes at any time and from time to time prior to April 1,
2003 at a Redemption Price equal to 110.25% of the aggregate principal amount so
redeemed, plus accrued and unpaid interest, if any, to the Redemption Date out
of the Net Proceeds of one or more Public Equity Offerings; provided that

          (1) at least 65% of the principal amount of Notes originally issued
remains outstanding immediately after the occurrence of any such redemption and

          (2) any such redemption occurs within 90 days following the closing of
any such Public Equity Offering.

                                      B-4
<PAGE>

          7.   Notice of Redemption. Notice of redemption under paragraphs 6(a)
               --------------------
and (b) of this Note will be mailed at least 30 days but not more than 60 days
before the Redemption Date to each Holder to be redeemed at such Holder's
registered address.

          Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the Redemption Price plus accrued interest, if any.

          8.   Offers to Purchase.  The Indenture provides that, after certain
               ------------------
Asset Sales (as defined in the Indenture) and upon the occurrence of a Change of
Control (as defined in the Indenture), and subject to further limitations
contained therein, the Company will make an offer to purchase certain amounts of
the Notes in accordance with the procedures set forth in the Indenture.

          9.   Denominations; Transfer; Exchange.  The Notes are in registered
               ---------------------------------
form, without coupons, in denominations of $1,000 and integral multiples
thereof.  A Holder shall register the transfer or exchange of Notes in
accordance with the Indenture.  The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture.  The Registrar need not register the
transfer of or exchange of any Notes or portions thereof selected for
redemption.

          10.  Persons Deemed Owners.  The registered holder of a Note shall be
               ---------------------
treated as the owner of it for all purposes.

          11.  Unclaimed Money.  If money for the payment of principal or
               ---------------
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company upon written request.  After that, Holders
entitled to money must look to the Company for payment as general creditors
unless an "abandoned property" law designates another person.

          12.  Legal Defeasance and Covenant Defeasance.  If the Company at any
               ----------------------------------------
time deposits with the Trustee U.S. legal tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating to
defeasance, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but excluding its
obligation to pay the principal of and interest on the Notes).

          13.  Amendments, Supplements, and Waivers.  Subject to certain
               ------------------------------------
exceptions, the Indenture or the Notes may be amended or supplemented with the
written consent of

                                      B-5
<PAGE>

the Holders of at least a majority in aggregate principal amount of the Notes
then outstanding, and any existing Default or Event of Default or noncompliance
with any provision may be waived with the written consent of the Holders of a
majority in aggregate principal amount of the Notes then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes or make any other change that does not adversely affect in
any material respect the rights of any Holder.

          14.  Restrictive Covenants.  The Indenture imposes certain limitations
               ---------------------
on the ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, make payments in respect of its Capital Stock, enter
into transactions with Affiliates, create dividend or other payment restrictions
affecting Restricted Subsidiaries, sell assets, create liens, issue capital
stock, enter into sale and lease-back transactions, make certain Investments,
merge or consolidate with any other Person, or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its assets.  Such
limitations are subject to a number of important qualifications and exceptions.
The Company must annually report to the Trustee on compliance with such
limitations.

          15.  Successor Entity.  When a successor entity assumes, in accordance
               ----------------
with the Indenture, all the obligations of its predecessor under the Notes and
the Indenture, and immediately before and thereafter no Default or Event of
Default exists and certain other conditions are satisfied, the predecessor
entity will be released from those obligations.

          16.  Defaults and Remedies.  Events of Default are set forth in the
               ---------------------
Indenture.  If an Event of Default (other than an Event of Default pursuant to
Section 6.01(f) or (g) of the Indenture) shall have occurred and be continuing,
then the Trustee or the Holders of not less than 25% in aggregate principal
amount of the Notes then outstanding, may declare to be immediately due and
payable the entire principal amount of all the Notes then outstanding plus
accrued interest to the date of acceleration; provided, however, that after such
acceleration but before a judgment or decree based on such acceleration is
obtained by the Trustee, the Holders of a majority in aggregate principal amount
of the outstanding Notes may rescind and annul such acceleration and its
consequences if all existing Events of Default, other than the nonpayment of
principal, premium, if any, or interest that has become due solely because of
the acceleration, have been cured or waived. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.  In case an Event of
Default specified in Section 6.01(f) or (g) of the Indenture occurs, such
principal amount, together with premium, if any, and interest with respect to
all of the Notes, shall be due and payable immediately without any declaration
or other act on the part of the Trustee or the Holders.

          17.  Trustee Dealings with Company.  The Trustee under the Indenture,
               -----------------------------
in its individual or any other capacity, may make loans to, accept deposits
from, and perform

                                      B-6
<PAGE>

services for the Company, and may otherwise deal with the Company, its
Subsidiaries or their respective Affiliates as if it were not the Trustee.

          18.  No Recourse Against Others.  As more fully described in the
               --------------------------
Indenture, no director, officer, employee, stockholder or incorporator, as such,
of the Company shall have any liability for any obligation of the Company under
the Notes or the Indenture or for any claim based on, in respect of or by reason
of such obligations or their creation.  Each Holder by accepting a Note waives
and releases all such liability.  Such waiver and release are part of the
consideration for the issuance of the Notes.

          19.  Authentication.  This Note shall not be valid until the Trustee
               --------------
or Authenticating Agent manually signs the certificate of authentication on this
Note.

          20.  Governing Law.  THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
               -------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.  EACH OF THE PARTIES TO THE INDENTURE HAS AGREED TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE.

          21.  Abbreviations and Defined Terms.  Customary abbreviations may be
               -------------------------------
used in the name of a Holder or an assignee, such as:  TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with
right of survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).

          22.  CUSIP Numbers.  Pursuant to a recommendation promulgated by the
               -------------
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders.  No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.

          23.  Indenture.  Each Holder, by accepting a Note, agrees to be bound
               ---------
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.

          The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture, which has the text of this Note in
larger type.  Requests may be made to:  TNP Enterprises, Inc., c/o Laurel Hill
Capital Partners LLC, 2 Robbins Lane, Suite 201, Jericho, New York 11753,
Attention:  Kathleen Marion.

                                      B-7
<PAGE>

                                ASSIGNMENT FORM

          If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:

I or we assign and transfer this Note to:

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________
                  (Print or type name, address and zip code and
                  social security or tax ID number of assignee)

and irrevocably appoint _______________________________________________________,
agent to transfer this Note on the books of the Company.  The agent may
substitute another to act for him.

Date: __________________    Signed: ___________________________________________
                                     (Sign exactly as your name appears on the
                                     other side of this Note)

Medallion Guarantee: _____________________

                                      B-8
<PAGE>

                     [OPTION OF HOLDER TO ELECT PURCHASE]

          If you want to elect to have this Note purchased by the Company
pursuant to Section 4.13 or Section 4.16 of the Indenture, check the appropriate
box:

                                Section 4.13 [_]

                                Section 4.16 [_]

          If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.13 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:

$ __________________

Date: __________________
                             _______________________________________________
                             NOTICE:  The signature on this assignment must
                             correspond with the name as it appears upon the
                             face of the within Note in every particular without
                             alteration or enlargement or any change whatsoever
                             and be guaranteed by the endorser's bank or broker.

Medallion Guarantee: _____________________

                                      B-9
<PAGE>

                                                                       EXHIBIT C
                                                                       ---------
                   CERTIFICATE TO BE DELIVERED UPON EXCHANGE
                      OR REGISTRATION OF TRANSFER OF NOTES

Re:  TNP ENTERPRISES, INC. (the "Company")
                                 -------
          10.25% Senior Subordinated Notes due 2010 (the "Notes")
          -------------------------------------------------------

          This Certificate relates to $_______ principal amount of Notes held in
the form of* ___ a beneficial interest in a Global Note or* _______ Certificated
Notes by ______ (the "Transferor").
                      ----------

The Transferor:

          [_]  has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Note held by the Depository a
Certificated Note or Certificated Notes in definitive, registered form of
authorized denominations and an aggregate number equal to its beneficial
interest in such Global Note (or the portion thereof indicated above); or

          [_]  has requested by written order that the Registrar exchange or
register the transfer of a Certificated Note or Certificated Notes.

          In connection with such request and in respect of each such Note, the
Transferor does hereby certify that the Transferor is familiar with the
Indenture relating to the above captioned Notes and the restrictions on
transfers thereof as provided in Section 2.16 of such Indenture, and that the
transfer of the Notes does not require registration under the Securities Act of
1933, as amended (the "Securities Act"), because*:
                       --------------

          [_]  Such Note is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.16 of the Indenture).

          [_]  Such Note is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act), in reliance on Rule
144A.

          [_]  Such Note is being transferred to an institutional "accredited
investor" (within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule
501 under the Securities Act) which delivers a certificate to the Trustee in the
form of Exhibit D to the Indenture.
        ---------

          [_]  Such Note is being transferred in reliance on Regulation S under
the Securities Act and a transfer certificate for Regulation S transfers in the
form of Exhibit E to the Indenture accompanies this certification.  [An Opinion
        ---------
of Counsel to the effect that such transfer does not require registration under
the Securities Act accompanies this certification.]

          [_]  Such Note is being transferred in reliance on Rule 144 under the
Securities Act.  [An Opinion of Counsel to the effect that such transfer does
not require registration under the Securities Act accompanies this
certification.]

                                 C-1
<PAGE>

          [_]  Such Note is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Securities Act other
than Rule 144A or Rule 144 under the Securities Act to a person other than an
institutional "accredited investor."  [An Opinion of Counsel to the effect that
such transfer does not require registration under the Securities Act accompanies
this certification.]

                                           _________________________________
                                            [INSERT NAME OF TRANSFEROR]

                                            By: ____________________________
                                                   [Authorized Signatory]

Date: _________________
*Check applicable box.

                                      C-2
<PAGE>

                                                                       EXHIBIT D
                                                                       ---------

                  Form of Transferee Letter of Representation

THE BANK OF NEW YORK
101 Barclay Street, Floor 21 West
New York, New York  10286

Attention:  Corporate Trust Trustee Administration

Ladies and Gentlemen:

          This certificate is delivered to request a transfer of $________
principal amount of the 10.25% Senior Subordinated Notes due 2010 of TNP
ENTERPRISES, INC., (the "Company") and any guarantee thereof (the "Notes").
                         -------                                   -----
Upon transfer, the Notes would be registered in the name of the new beneficial
owner as follows:

          Name:______________________________
          Address:___________________________
          Taxpayer ID Number:________________

          The undersigned represents and warrants to you that:

          1.   We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the "Securities
                                                                  ----------
Act")) purchasing Notes for our own account or for the account of such an
---
institutional "accredited investor" and we are acquiring the Notes not with a
view to, or for offer or sale in connection with, any distribution in violation
of the Securities Act.  We have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risk of our
investment in the Notes and we invest in or purchase securities similar to the
Notes in the normal course of our business.  We and any accounts for which we
are acting are each able to bear the economic risk of our or its investment.

          2.   We acknowledge that we have had access to such financial and
other information, and have been afforded the opportunity to ask such questions
of representatives of the Company and receive answers thereto, as we deem
necessary.

          3.   We understand that the Notes have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence.  We agree on our own behalf and on behalf of any
investor account for which we are purchasing Notes that we will not prior to the
date (the "Resale Restriction Termination Date") that is two years after the
           -----------------------------------
later of the original issuance of the Notes and the last date on which the
Company or any affiliate of the Company was the owner of such Notes (or any
predecessor thereto) offer, sell or otherwise transfer such Notes except (a) to
the Company or any subsidiary of the Company, (b) inside the United States to a
"qualified institutional buyer" in compliance with Rule 144A under the
Securities Act (c) inside the United States to an "institutional accredited
investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities

                                      D-1
<PAGE>

Act that, prior to such transfer, furnishes (or has furnished on its behalf by a
U.S. broker-dealer) to the Trustee a signed letter substantially in the form of
this letter (d) outside the United States in an offshore transaction in
compliance with Rule 904 under the Securities Act (e) pursuant to any other
available exemption from the registration requirements of the Securities Act or
(f) pursuant to an effective registration statement under the Securities Act.
We acknowledge that the Company and the Trustee reserve the right prior to any
offer, sale or other transfer prior to the Resale Restriction Termination Date
of the applicable Notes pursuant to clause (c) or (e) above to require the
delivery of an opinion of counsel, certification and/or other information
satisfactory to the Company and the Trustee.

          We understand that the Trustee will not be required to accept for
registration of transfer any Notes acquired by us, except upon presentation of
evidence satisfactory to the Company and the Trustee that the foregoing
restrictions on transfer have been complied with.  We further understand that
any Notes purchased by us will be in the form of definitive physical
certificates and that such certificates will bear a legend reflecting the
substance of  paragraph 3 of this letter.  We further agree to provide to any
person acquiring any of the Notes from us a notice advising such person that
transfers of such Notes are restricted as stated herein and that certificates
representing such Notes will bear a legend to that effect.

          We represent that the Company and the Trustee and others are entitled
to rely upon the truth and accuracy of our acknowledgments, representations and
agreements set forth herein, and we agree to notify you promptly in writing if
any of our acknowledgments, representations or agreements herein cease to be
accurate and complete.  You are also irrevocably authorized to produce this
letter or a copy hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered hereby.

          We represent to you that we have full power to make the foregoing
acknowledgments, representations and agreements on our own behalf and on behalf
of any investor account for which we are acting as fiduciary agent.

          As used herein, the terms "offshore transaction," "United States" and
"U.S. person" have the respective meanings given to them in Regulation S under
the Securities Act.

                                      D-2
<PAGE>

          THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.

Dated:  __________             TRANSFEREE:

                                         By:_____________________

                                      D-3
<PAGE>

                                                                       EXHIBIT E

                                                                       ---------
                           Form of Certificate To Be
                            Delivered in Connection
                          with Regulation S Transfers

                                                           _______________, ____

THE BANK OF NEW YORK
101 Barclay Street, Floor 21 West
New York, New York 10286

Attention:  Corporate Trust Trustee Administration

Re:  TNP Enterprises, Inc. 10.25% Senior
     Subordinated Notes due 2010 (the "Notes")
     -----------------------------------------

Ladies and Gentlemen:

          In connection with our proposed sale of $__________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
                       --------------

          (1) the offer of the Notes was not made to a person in the United
     States;

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

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

          (4) the transaction is not part of a plan or scheme to evade the
     registration requirements of the Securities Act; and

          (5) we have advised the transferee of the transfer restrictions
     applicable to the Notes.

                                      E-1
<PAGE>

          You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.  Defined terms used herein without
definition have the respective meanings provided in Regulation S.

                                          Very truly yours,

                                          [Name of Transferor]

                                          By:_______________________

                                      E-2
<PAGE>

                                                                       EXHIBIT F
                                                                       ---------

                        FORM OF SUPPLEMENTAL INDENTURE
                        ------------------------------

          SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of,
among (the "New Guarantor"), a subsidiary of TNP Enterprises, Inc. (or its
            -------------
successor), a Texas corporation (the "Company"), the Guarantors, if any (the
                                      -------
"Existing Guarantors"), under the Indenture referred to below, and The Bank
 -------------------
of New York, as trustee under the Indenture referred to below (the "Trustee").
                                                                    -------

                             W I T N E S S E T H :
                             - - - - - - - - - -

          WHEREAS the Company has heretofore executed and delivered to the
Trustee an Indenture (as such may be amended from time to time, the
"Indenture"), dated as of April 7, 2000, providing for the issuance of its
10.25% Senior Subordinated Notes due 2010 (the "Notes");

          WHEREAS Section 4.22 of the Indenture provides that under certain
circumstances the Company is required to cause the New Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the New
Guarantor shall unconditionally guarantee all of the Company's obligations under
the Notes pursuant to a Guarantee on the terms and conditions set forth herein;
and

          WHEREAS pursuant to Section 8.01 of the Indenture, the Trustee, the
Company and Existing Guarantors are authorized to execute and deliver this
Supplemental Indenture;

          NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Guarantor, the Company, the Existing Guarantors and the Trustee mutually
covenant and agree for the equal and ratable benefit of the Holders as follows:

          1.   Definitions.  (a) Capitalized terms used herein without
               -----------
definition shall have the meanings assigned to them in the Indenture.

          (b)  For all purposes of this Supplemental Indenture, except as
otherwise herein expressly provided or unless the context otherwise requires:
(i) the terms and expressions used herein shall have the same meanings as
corresponding terms and expressions used in the Indenture; and (ii) the words
"herein," "hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
to any particular section hereof.

                                      C-3
<PAGE>

          2.   Agreement to Guarantee.  The New Guarantor hereby agrees, jointly
               ----------------------
and severally with all other Guarantors, to Guarantee the Company's obligations
under the Notes on the terms and subject to the conditions set forth in Article
10 of the Indenture and to be bound by all other applicable provisions of the
Indenture.  From and after the date hereof, the New Guarantor shall be a
Guarantor for all purposes under the Indenture and the Notes.

          3.   Ratification of Indenture; Supplemental Indentures 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 Supplemental Indenture shall form a
part of the Indenture for all purposes, and every Holder heretofore or hereafter
authenticated and delivered shall be bound hereby.

          4.   Governing Law.  THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY
               -------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.  EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE.

          5.   Trustee Makes No Representation.  The Trustee shall not be
               -------------------------------
responsible in any manner whatsoever for or in respect of the validity or
sufficiency of this Supplemental Indenture or for or in respect of the recitals
contained herein, all of which are made solely by the Company.

          6.   Multiple Counterparts.  The parties may sign multiple
               ---------------------
counterparts of this Supplemental Indenture.  Each signed counterpart shall be
deemed an original, but all of them together represent one and the same
agreement.

          7.   Headings.  The headings of this Supplemental Indenture have been
               --------
inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.

                                      F-4
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date and year first above written.

                                             [NEW GUARANTOR]

                                             By:______________________
                                                Name:
                                                Title:

                                             By:______________________
                                                Name:
                                                Title:

                                             TNP ENTERPRISES, INC.

                                             By:______________________
                                                Name:
                                                Title:

                                             By:______________________
                                                Name:
                                                Title:

                                      F-5
<PAGE>

                                             EXISTING GUARANTORS:

                                             By:______________________
                                                Name:
                                                Title:

                                             By:______________________
                                                Name:
                                                Title:

                                             THE BANK OF NEW YORK,
                                             as Trustee

                                             By:______________________
                                                Name:
                                                Title:

                                      F-6<PAGE>   1
                                                                   EXHIBIT 10.22

**This portion of the document has been omitted pursuant to a request for
confidential treatment and this document, including the information, has been
filed separately with such respect.

December 19, 1997                                     [INTERACTIVE TELESIS LOGO]

Maggie M. Agront
AT&T
100 Southgate Parkway
Morristown, NJ

TEL: 973/898-8921
FAX: 973/898-8176

RE:  TELECONFERENCE RECORDING AND REPLAY SERVICE

Dear Maggie:

I apologize for the delay in responding to your Nov. 20 memo in which you
provided me with a draft of the agreement by which Interactive Telesis will
provide recording and playback services to AT&T.

I provided a draft copy of Exhibit B (pricing schedule) to Rob Mayer and have
just received his approval. Attached is the Exhibit B pricing schedule for
inclusion in the agreement. I have not yet received a draft of Exhibit A (the
description of services to be provided) from you and look forward to receiving
same at your earliest convenience.

We commenced providing services approximately Nov. 15, and will be invoicing
AT&T the first week in January for service provided in November and December.
As such, it would be best for all concerned if we could expedite the
finalization and execution of this agreement.

I do not have any comments or revisions on the form of draft agreement that you
forwarded to me so that once the exhibits are finalized we should be in a
position to execute the agreement.

I look forward to hearing from you shortly.

Yours very truly,

/s/ DONALD E. CAMERON
------------------------------
Donald E. Cameron
President

Enc.

cc: Rob Mayer
<PAGE>   2
                                   EXHIBIT B

The following pricing is to be charged for services performed by Interactive
Telesis Inc. pursuant to this Agreement.

<TABLE>
<CAPTION>
                     Services                          Price
<S>                                                    <C>
Teleconference recording and playback
        One time set-up fee                            $3500
        Recording                                      no charge
        Replay                                         **
        Editing                                        $10 per conference call
        Customized greetings                           $45
        Usage reports                                  no charge

Implementation of replay features
        Pause, reverse, fast forward                   $15 per conference call
        Fast-forward to location                       $25 per conference call
        Safe-harbor disclaimer option                  $15 per conference call

Fax-on-demand
        Set up per conference call                     $75 per conference call
        Fax usage                                      $0.40 per minute

Message capture/transcription
        Message capture option                         $75 per conference call
        Transcription (name, address, affiliation)     $0.80 per message
        Transcription (open-ended responses)           $1.65 per minute of
                                                       transcription
        Usage report                                   no charge

Internet replay
        Development fee                                $2500
        Replay (no time restriction)                   $350 per conference call
        Usage report                                   no charge

Specializing programming
        Specialized programming involving
        creation of new applications and
        enhancements to existing applications,
        including revisions to specialized report      $90 per hour

Broadcast fax
        Set-up fee                                     no charge
        Broadcast fax                                  $0.40 per minute
        Standard report                                no charge
</TABLE>

------------
** Confidential treatment requested
   Please refer to the legend on the front page of this document.

<PAGE>   3

FAX                                     DATE November 20, 1997

                                        Number of pages including cover sheet  8

TO:       Don Cameron                   FROM:     Maggie M. Agront
                                                  AT&T
                                                  100 Southgate Parkway
                                                  Morristown, NJ

PHONE                                   PHONE     201-898-8921

FAX PHONE 760-632-1790                  FAX PHONE 201-898-8176

CC:

REMARKS:  [ ] Urgent     [X] For your review  [X] Reply ASAP  [ ] Please Comment

Don:

Attached is a draft of the agreement for the audio teleconference services. The
draft does not include Exhibits A (the specifications for the work to be
performed) or Exhibit B (pricing). I am currently still working on Exhibit A
and will need you to provide me the pricing information for Exhibit B.

I am sending you the attached so that you can review all the legal terms and
conditions which will be included in the agreement and let me know if there are
any concerns that you have.

Thank you,

Maggie Agront

<PAGE>   4

                                     DRAFT

Interactive Telesis Inc.                          AT&T Corp.
535 Encinitas Blvd                                100 Southgate Parkway Rm. 3B28
Encinitas, CA 92024                               Morristown, NJ 07960
Attention: Mr. Don Cameron                        Attention: Maggie Agront

Subject to the terms and conditions stated in this Agreement and on the reverse
side of page one of this Agreement, Interactive Telesis, Inc. agrees to perform
the professional services described, hereinafter "Work", and AT&T Corp.
("Company") agrees to pay the charges stated. Whenever the terms "you", "your",
"Supplier" or "Contractor" are used in this Agreement, the same shall mean
Interactive Telesis Inc.

STATEMENT OF WORK

Commencing August 1, 1997 and ending on July 31, 1999, Contractor shall perform
services under this agreement.

Contractor shall provide to Company recording and playback services for
Company's Teleconference Services, as specified in Exhibit A, attached hereto
and made a part hereof. Contractor shall complete such services within the time
allowed in this Agreement and shall meet all interim deadlines, if any,
specified in Exhibit A. Services not completed to Company's satisfaction shall
be re-performed at no cost to Company.

COMPENSATION

Upon submission of accurate invoices by Contractor as required herein, Company,
upon acceptance of the work hereunder, shall pay Contractor for the performance
of this Agreement in accordance with the schedule contained in Exhibit B,
attached hereto and made a part hereof. The Work shall be performed to the
satisfaction of Company, and shall be in accordance with the highest
professional standards commonly used in the Automated Call Processing industry,
and with such standards or restrictions as may be lawfully imposed by
governmental authority. Unless otherwise specifically provided in Exhibit B,
the scheduled payments include the cost of all labor required to complete the
services described in Exhibit A.

AUDIT

Contractor shall maintain accurate and complete records of all hours of direct
labor employees engaged in Work for which payment under this Agreement is to be
computed on the basis of actual time worked, at a fixed rate per unit of time
and all other costs, if any, payable by Company under this Agreement. Such
records shall be maintained in accordance with recognized commercial accounting
practices so they may be readily audited and shall be held until costs have
been finally determined under this Agreement and payment or final adjustment of
payment as the case may be has been made. Contractor shall permit Company or

<PAGE>   5
                              TERMS AND CONDITIONS

ASSIGNMENT AND SUBCONTRACTING - Supplier shall not assign any right or interest
under this Agreement (excepting monies due or to become due) or designate or
subcontract any Works or other obligation to ?? ?? or owed under this Agreement
without prior written consent of Company. Any attempted assignment, delegation
or subcontracting in contravention of the above provisions shall be void and
ineffective. Any assignment of monies shall be void and ineffective to the
extend that (1) Supplier shall not have given Company at least thirty (30) days
prior written notice of such assignment or (2) such assignment attempts to ???
upon Company obligations to the assignee additional in the payment of such
monies, or to ??? ??? from dealing solely and directly with Supplier in all
matters pertaining to this Agreement including ?? ??? amendments or settlements
of changes ??. All Work performed by Supplier's subcontractor(s) ?? shall be
deemed Work performed by Supplier.

CHANGES - Company may at any time during the progress of the Work require
additions to or alterations or deductions or deviations (all hereinafter
referred to as a "Change") from the Work called for by the specifications,
drawings and samples. No Change shall be considered as an addition or alteration
to or deduction or deviation from the Work called for by the specifications,
drawings and samples nor shall Supplier be entitled to any compensation for work
done pursuant to or in contemplation of a Change, unless made pursuant to a
written Change Order issued by Company. Within ten (10) days after a request for
a Change, Supplier shall submit a proposal to Company which includes any
increases or decreases in Supplier's costs or changes in a delivery or Work
schedule necessitated by the Change. Company shall, within ten (10) days of
receipt of the proposal, other (i) accept the proposal in which event Company
shall issue a written Change Order ordering Supplier to perform the Change or
(ii) advise Supplier not to perform the Change in which event Supplier shall
proceed with the original Work.

CHOICE OF LAW - The construction interpretation and performance of this
Agreement and all transactions under it shall be governed by the Laws of the
State of New Jersey excluding its choice of laws rules and including the
Convention for the International Sale of Goods. The parties agree that the
provision of the New Jersey Uniform Commercial Code apply to this Agreement and
all transactions under it, including agreements and transactions relating to the
furnishing of services, the lease or rental of equipment or material, and ??? of
software. Supplier agrees to submit to the jurisdiction of any court wherein an
action is commenced against Company based on a claim for which Supplier has
agreed to indemnify Company under this agreement.

COMPLIANCE WITH LAWS - Supplier and all persons furnished by Supplier shall
comply at their own expense with all applicable federal, state, local and
foreign laws, ordinances, regulations and codes, including those relating to the
use of chlorofluorocarbons, and including the identification and procurement of
required permits, certificates, licenses, insurance, approvals and inspections
in performance under this Agreement. Supplier agrees to indemnify, defend (at
Company's request) and save harmless Company, its affiliates, and their
customers and each of their officers, directors and employees from and against
any losses, damages, claims, demands, suits, liabilities, fines, penalties and
expenses (including reasonable attorney's fees) that arise out of or result from
any failure to do so.

ENTIRE AGREEMENT - This Agreement shall incorporate the typed or written
provisions on Company's orders issued pursuant to this Agreement and shall
constitute the entire agreement between the parties with respect to the subject
matter of this Agreement and the order(s) and shall not be modified or
rescinded, except by a writing signed by Supplier and Company. All references in
these terms and conditions to this Agreement or to Work, services, material,
equipment, products, software or information furnished under, in performance of,
pursuant to, or in contemplation of, this Agreement shall also apply to any
orders issued pursuant to this Agreement. Printed provisions on the reverse side
of Company's orders (except as specified otherwise in this Agreement) and all
provisions on Supplier's forms shall be deemed deleted. Additional or different
terms inserted in this Agreement by Supplier, or deletions thereto, whether by
alterations, addends, or otherwise, shall be of no force and effect, unless
expressly consented to by Company in writing. Estimates or forecasts furnished
by Company shall not constitute commitments. The provisions of this Agreement
supersede all contemporaneous oral agreements and all prior oral and written
quotations, communications, agreements and understandings of the parties with
respect to the subject matter of this Agreement. The term "Work" as used in this
Agreement may also be referred to as "services".

     FORCE MAJEURE - Neither party shall be held responsible for any delay or
failure in performance of any part of this Agreement to the extent such delay or
failure is caused by fire, flood, explosion, war, strike, embargo, government
requirement, civil or military authority, act of God, or other similar causes
beyond its control and without the fault or negligence of the delayed or
nonperforming party or its subcontractors ("force majeure conditions").
Notwithstanding the foregoing, Supplier's liability for loss or damage to
Company's material in supplier's possession or control shall not be modified by
this clause. If any force majeure condition occurs, the party delayed or unable
to perform shall give immediate notice to the other party, stating the nature of
the force majeure condition and any action being taken to avoid or minimize its
effect. The party affected by the other's delay or inability to perform may
elect to: (1) suspend this Agreement or an order for the duration of be force
majeure condition and (i) at its option buy, sell, obtain or furnish elsewhere
material or services to be bought, sold, obtained or furnished under this
Agreement or an order (unless such sale or furnishing is prohibited under this
Agreement) and deduct from any commitment the quantity bought, sold, obtained or
furnished or for which commitments have been made elsewhere and (ii) once the
force majeure condition ceases, assume performance under this Agreement or an
order with an option in the affected party to extend the period of this
Agreement or order up to the length of time the force majeure condition endured
and/or (2) when the delay or nonperformance continues for a period of at least
fifteen (15) days, terminate at no charge, this Agreement or an order or the
part of it relating to material not already shipped, or services not already
performed. Unless written notice is given within forty-five (45) days after the
affected party is notified of the force majeure condition, (i) shall be deemed
selected.

GOVERNMENT CONTRACT PROVISIONS - The following provisions regarding equal
opportunity, and all applicable laws, rules, regulations and executive orders
specifically related thereto, including applicable provisions and clauses from
the Federal Acquisition Regulation and all supplements thereto are incorporated
in this Agreement as they apply to work performed under specific U.S. Government
contracts: 41 CFR 60-1.4, Equal Opportunity; 41 CFR 60-1.7, Reports and Other
Required Information; 41 CFR 60-1.6, Segregated Facilities; 41 CFR 60-250.4,
Affirmative Action for Disabled Veterans and Veterans of the Vietnam Era (if in
excess of $10,000); and 41 CFR 60-741.4, Affirmative Action for Disabled Workers
(if in excess of $2,500), wherein the terms "contractor" and "subcontractor"
shall mean "Supplier". In addition, orders placed under this Agreement
containing a notation that the material or service are intended for use under
Government Contracts shall be subject to such other Government provision
printed, typed or written thereon, or on the reverse side thereof, or in
attachments thereto.

IDENTIFICATION - Supplier shall not, without Company's prior written consent,
engage in advertising, promotion or publicity related to this Agreement, or make
public use of any identification in any circumstances related to this Agreement.
"Identification" means any copy or semblance of any trade name, trademark,
service mark, insignia, symbol, logo, or any other product, service or
organization designation, or any specification or drawing of AT&T or its
affiliates, or evidence of inspection by or for any of them. Supplier shall
remove  or obliterate any Identification prior to any use or disposition of any
material rejected or not purchased by Company, and, shall indemnify, defend (at
Company's request) and save harmless AT&T and its affiliates and each of their
officers, directors and employees from and against any losses, damages, claims,
demands, suits, liabilities, fines, penalties and expenses (including reasonable
attorneys' fees) arising out of Supplier's failure to so remove or obliterate.

IMPLEADER - Supplier shall not implead or bring an action against Company or
its customers or the employees of either based on any claim by any person for
personal injury or death to an employee of Company or its customers occurring
in the course or scope of employment and that arises out of material or
services furnished under this Agreement.

INDEMNITY - All persons furnished by Supplier shall be considered solely
Supplier's employees or agents, and Supplier shall be responsible for payment of
all unemployment, social security and other payroll taxes, including
contributions when required by law. Supplier agrees to indemnify and save
harmless Company, its affiliates, its and their customers and each of their
officers, directors, employees, successors and assigns (all hereinafter referred
to in this clause as "Company") from and against any losses, damages, claims,
demands, suits, liabilities, fines, penalties and expenses (including reasonable
attorney's fees) that arise out of or result from: (1) injuries or death to
persons or damage to property, including theft, in any way arising out of or
occasioned by, caused or alleged to have been caused by or on account of the
performance of the Work or ?? performed by Supplier or persons furnished by
Supplier; (2) assertions under Workers' Compensation ??? under acts made by
persons furnished by Supplier or by any subcontractor or by reason of any
injuries and to those persons for which company would be responsible under
Workers' Compensation or similar acts if the persons were employed by Company;
(3) any failure on the part of Supplier to satisfy all claims for labor,
equipment, materials and other obligations relating directly or indirectly to
the performance of the Work; or (4) any failure by Supplier to perform
Supplier's obligations under this clause of the INSURANCE clause. Supplier
agrees to defend Company, at Company's request, against any such claim, demand
or suit. Company agrees to notify Supplier within a reasonable time of any
written claims or demands against Company for which Supplier is responsible
under this clause.

INFRINGEMENT - Supplier shall indemnify and save harmless Company, its
affiliates, its and their customers and each of their officers, directors,
employees, successors and assigns (all hereinafter referred to in this clause as
"Company") from and against any losses, damages, liabilities, fines, penalties,
and expenses (including reasonable attorneys' fees) that arise out of or result
from any proved or unproved claim (1) of infringement ????? or any other
proprietary or personal interest, and (2) related by circumstances to the
existence of this Agreement or performance under or in contemplation of it (an
Infringement Claim). If the Infringement Claim arises solely from Supplier's
adherence to Company's written instructions regarding services or tangible or
intangible goods provided by Supplier (Items) and if the Items are not (1)
commercial items available on the market or the ??? as such items, or (2) items
of Supplier's designated origin, design or selection Company shall indemnify
Supplier. Company or Supplier (at Company's request) shall defend or settle at
its own expense any demand, action or suit on any Infringement Claim against the
other for which it is indemnified under the proceeding provision and each shall
timely notify the other of any assertion against it of any Infringement Claim
and shall cooperate in good faith with the other to facilitate the defense of
any such Claim.

INSPECTION - Company Representatives shall at all times have access to the Work
for the purpose of inspection or a Quality Review and Supplier shall provide
safe and proper facilities for such purpose.

INSURANCE - Supplier shall maintain and cause Supplier's subcontractors to
maintain during the term Agreement (1) Workers' Compensation insurance as
prescribed by the law of the state or nation in which Work is performed; (2)
employer's liability insurance with limits of at least $300,000 for each
occurrence; (3) comprehensive automobile liability insurance, if the use of
motor vehicles is required, with limits of ??? $1,000,000 combined single limit
for bodily injury and property damage for each occurrence; (4) Commercial
General Liability ("CGL") insurance, including Blanket Contractual Liability and
Broad Form Property Coverage with limits of at least $1,000,000 combined single
limit for bodily injury and property damage for each occurrence; and (5) if the
furnishing to Company (by sale or otherwise) of products or material is ??? CGL
insurance endorsed to include products liability and completed operations
coverage in the amount of $5,000,000 for each occurrence. All CGL and automobile
liability insurance shall designate AT&T Corp. and its affiliates, and each of
their officers, directors and employees (all hereinafter referred to in this
clause as "Company") as an additional insured. All such insurance must be
primary and required to respond and ?? prior to any other available coverage.
Supplier agrees that Supplier, Supplier's insurer(s) and anyone claiming by,
through, under, or in Supplier's behalf shall have no claim, right of action or
right of subrogation against Company and its customers based on any loss or
liability insured against under the foregoing insurance Supplier and Supplier's
subcontractors shall furnish, prior to the start of Work, certificates or
adequate proof of the foregoing insurance including, if specifically requested
by Company, copies of the endorsements of insurance policies. Company shall be
notified in writing at least thirty (30) days prior to cancellation of a change
in the policy.

INVOICING - Supplier's invoices shall be rendered upon completion of the Work or
at other times as expressly provided for in this Agreement or order; and shall
be payable when the Work has been performed to the satisfaction of Company.
Supplier shall mail invoices with copies of any supporting documentation
required by Company to the address shown on this Agreement or order. The Work
shall be delivered free from all claims, liens, and charges whatsoever. Company
reserves the right to require before making payment that all parties furnishing
labor and materials for the Work have been paid.

PAYMENT TERMS - Unless payment terms more favorable to Company appear on
Supplier's invoice, and Company elects to pay on such terms, invoices shall be
paid in accordance with the terms stated in the Agreement, and due dates for
payment of invoices shall be computed from the date of receipt of invoice by
Company.

RELEASES VOID - Neither party shall require (i) waivers or releases of any
personal rights or (ii) execute documents which conflict with the terms of this
Agreement from employees, representatives or customers the other in connection
with visits to its premises and both parties agree that no such releases,
waivers or documents shall be pleaded by them or third persons in any action or
proceeding.

RIGHT OF ENTRY AND PLANT RULES - Each party shall have the right to enter the
premises of the party during normal business hours with respect to the
performance of this Agreement, subject to all rules and regulations security
regulations and procedures and U.S. Government clearance requirement applicable.
Supplier shall become acquainted with conditions governing the delivery, receipt
and storage of materials at the site of the Work so that Supplier will not
interfere with Company's operations. Storage ?? will not necessarily be provided
adjacent to the site of the Work. Therefore, Supplier shall be expected to
select, uncrate, remove and transport materials from the storage areas provided.
Company is not responsible for the safekeeping of Supplier's property on company
premises. Supplier shall not stop, delay or interfere with Company's work
schedule without the prior approval of Company's Representative. Supplier shall
provide and maintain sufficient covering and take any other precautions
necessary to protect Company's lot, equipment and other property from damage due
to Supplier's performance of this Work.

SUPPLIER'S INFORMATION - Supplier shall not provide under, or have provided in
contemplation of, its Agreement any idea, data, program, technical, business or
other intangible information, however conveyed, or any document, print, tapes,
disk, semiconductor memory or other information conveying tangible ?? unless
Supplier has the right to do so, and Supplier shall not view any of the
foregoing as confidential or proprietary.

SURVIVAL OF OBLIGATIONS - The obligations of the parties under this Agreement,
which by their nature would continue beyond the termination, cancellation or
expiration of this Agreement, including by way of illustration only and not
limitation, those in the clauses COMPLIANCE WITH LAWS, IDENTIFICATION,
IMPLEADER, INDEMNITY, INFRINGEMENT, INSURANCE, RELEASES VOID, USE OF INFORMATION
OR WARRANTY, shall survive termination, cancellation or expiration of this
Agreement.

TAXES - Company shall reimburse Supplier only for the following tax payments
with respect to transactions under this Agreement unless Company advises
Supplier that an exemption applies: state and local or use taxes, as applicable.
Taxes payable by Company shall be billed as separate items on Supplier's invoice
and shall not be included in Supplier's prices. Company shall have the right to
have Supplier contest any taxes that Company deems improperly levied at
Company's expense and subject to Company's direction and control.

TERMINATION - Company may at any time terminate this Agreement or an order in
whole or in part by written notice to Supplier. In such case, Company's
liability shall be limited to payment of the amount due for Work performed up to
and including the date of termination (which amount shall be substantiated with
proof satisfactory to Company), and no further Work will be rendered by
Supplier. Such payment shall constitute full and complete discharge of Company's
obligations. In no event shall Company's liability exceed the price for the Work
being terminated.

TOOLS AND EQUIPMENT - Unless otherwise specifically provided in this Agreement,
Supplier shall provide all labor, tools and equipment (the "tools") for
performance of this Agreement. Should Supplier actually use any tools owned or
rented by Company or its customer, Supplier acknowledges that Supplier accepts
the term "as is, where is," that neither Company nor its customer have any
responsibility for the condition or state of repair of the tools and that
Supplier shall have risk of loss and damage to such tools. Supplier agrees not
to remove the tools from Company's or its customer's premises and to return the
tools to Company or its customer upon completion of use, or at such earlier time
as Company or its customer may request in the same condition as when received by
Supplier, reasonable wear and tear excluded.

USE OF INFORMATION - Supplier shall view as Company's property any idea, data,
program, technology, business or other intangible information, however,
conveyed, and any document print, tape, disk, tool or other tangible information
conveying or performance aiding article owned or controlled by Company and
provided to, or acquired by, Supplier under or in contemplation of this
Agreement (information). Supplier shall at no charge to Company, and as Company
directs, destroy or surrender to Company promptly at its request ?? such article
or any copy of such information. Supplier shall keep information confidential
and use it only for or performing under this Agreement and obligate its
employees, subcontractors and others working for it to do so, provided that the
foregoing shall not apply to information previously known to Supplier ??? ??
obligation made public through no fault imputable to Supplier.

WAIVER - The failure of either party at any time to enforce any right or remedy
advisable to it under Agreement or otherwise with respect to any breach or
failure by the other party shall not be construed to be a waiver of such right
or remedy with respect to any other breach or failure by the other party.

WARRANTY - Supplier warrants to Company and its customers that material
furnished will be new merchandisable, free from defects in design, material and
workmanship and will conform to and perform in accordance with the
specifications, drawings and samples. These warranties extend to the future
performance of the material and shall continue for the longer of (a) the
warranty period applicable to Company's sales to customers of the material or of
products which incorporate the material, (b) one year after the material
accepted by Company or (c) such greater period as may be specified elsewhere in
this Agreement. Supplier also warrants to Company and its customers that
services will be performed in a first class, workmanlike manner. In addition, if
material furnished contains one or more manufacturers' warranties, Supplier
hereafter assigns such warranties to Company and its customers. All warranties
that survive inspection, acceptance and payment. Material or services not
meeting the warranties will be, at Company's option, returned, refund, repaired,
replaced or reperformed by Supplier at no cost to Company or its customer and
with transportation costs and risk or loss and damage in transit borne by
Supplier. Repaired and replacement materials shall be warranted as set forth
above in this clause.

WORK DONE BY OTHERS - If any part of the Work is dependent upon work done by
others, Supplier shall inspect and promptly report to Company's Representative
any defect that renders such other ?? for Supplier's proper performance.
Supplier's silence shall constitute approval of such other work as ??????
<PAGE>   6

Company's Representative to examine and audit these records and all supporting
records at all reasonable times. Audits shall be made not later than (a) three
(3) calendar year(s) after the final delivery date of material ordered or
completion of services rendered or (b) three (3) calendar year(s) after
expiration date of this Agreement, whichever comes later.

INVOICING

The clause INVOICING printed on the reverse side of page one of this Agreement
is amended to include the following:

Contractor's invoice shall be rendered in accordance with the clause
COMPENSATION contained herein, shall reference Agreement No. LF9D14D, and shall
be payable when the Work has been performed to the satisfaction of Company's
Representative.

Contractor shall submit an original and duplicate copy to:

                  Rob Mayer
                  AT&T Corp.
                  290 Davidson Avenue, Rm. E3B095
                  Somerset, NJ 08875

LIMIT OF EXPENDITURE

The maximum expenditure against this Agreement shall not exceed One Million
Dollars ($1,000,000.00).

Notwithstanding any other provisions in this Agreement, the total amount payable
by Company for the Work shall be determined by applying the stated rate of
compensation to the Work actually performed by Contractor. Contractor shall not
render Work and Company shall not be required to pay for Work in excess of the
amount stipulated in this Agreement, unless Contractor has first secured an
amendment to this Agreement authorizing the increased expenditure.

MEDIATION

If a dispute arises out of or relates to this Agreement, or its breach, and the
parties have not been successful in resolving such dispute through negotiation,
the parties agree to attempt to resolve the dispute through mediation by
submitting the dispute to a sole mediator selected by the parties or, at any
time at the option of a party, to mediation by the American Arbitration
Association ("AAA"). Each party shall bear its own expenses and an equal share
of the expenses of the mediator and the fees of the AAA. The parties, their
representatives, other participants and the mediator shall hold the existence,
content and result of the mediation in confidence. If such dispute is not
resolved by such mediation, the parties shall have the right to resort to any
remedies permitted by law. All defenses based on passage of time shall be
tolled pending the termination of the mediation. Nothing in this clause shall
be construed to preclude any party from seeking injunctive relief in order to
protect its rights pending mediation. A request by a party to a court for such
injunctive relief shall not be deemed a waiver of the obligation to mediate.
<PAGE>   7

NONEXCLUSIVE MARKET RIGHTS

It is expressly understood and agreed that this Agreement neither grants to
Contractor an exclusive right or privilege to sell to Company any or all
material or services of the type described in this Agreement which Company may
require, nor requires the purchase of any material or services from Contractor
by Company. It is, therefore, understood that Company may contract with other
Contractors for the procurement of comparable material or services. In
addition, Company shall at its sole discretion, decide the extent to which
Company will market, advertise, promote, support, or otherwise assist in
further offerings of the material or services.

NOTICES

Any notice or demand which under the terms of this Agreement or under any
statute must or may be given or made by Contractor or Company shall be in
writing and shall be given or made by telegram, tested telex, confirmed
facsimile, or similar communication or by certified or registered mail
addressed to the respective parties as follows:

To Company:           Maggie Agront
                      AT&T Corp.
                      Room 3B28
                      100 Southgate Parkway
                      Morristown, NJ 07960

To Contractor:        Don Cameron
                      Interactive Telesis, Inc.
                      535 Encinitas Blvd., Suite 116
                      Encinitas, CA 92024

Such notice or demand shall be deemed to have been given or made when sent by
telegram, telex, or facsimile, or other communication or when deposited, postage
prepaid in the U.S. mail.

The above addresses may be changed at any time by giving prior written notice
as above provided.

ORDERLY TRANSITION

In the event of expiration or termination of this Agreement, in whole or in
part, wherein all or some portion of the work will be performed by Company
itself or elsewhere, Contractor agrees to provide its full cooperation in the
orderly transition of the work to Company or elsewhere, including, but not
necessarily limited to packing and preparing for shipment any materials or
other inventory to be transferred, provision of reports, files and similar
media necessary for continuation of the work transferred, continuation of work
at reducing levels if necessary during a transition period and at reduced levels
if work is transferred in part. Prices for additional work such a packing and
preparation for shipment, and revision of prices resulting from revised
volumes, if necessary, shall be proposed by Contractor and shall be mutually
agreed upon by the parties.
<PAGE>   8
RELATIONSHIP

Contractor shall exercise full control and  direction over the employees of
Contractor performing the Work covered by this Agreement. Any changes in
personnel that may be reasonably requested by Company through its authorized
representative shall be made as soon as reasonably possible.

Neither Contractor nor its employees or agents shall be deemed to be Company's
employees or agents. It is understood that Contractor is an independent
contractor for all purposes and at all times. Contractor is wholly responsible
for withholding and payment of all applicable federal, state and local income
and other payroll taxes with respect to its employees, including contributions
from them as required by law.

REPRESENTATIVES

Company's Technical Representative is Robert Mayer (908-805-2738) Company's
Agreement Representative is Maggie Agront (201-898-8921) or such other person
as may be designated in writing by Company from time to time. Contractor's
Representative is Don Cameron or such other person as may be designated in
writing by Contractor from time to time.

SEVERABILITY

If any of the provisions of this Agreement shall be invalid or unenforceable,
such invalidity or unenforceability shall not invalidate or render
unenforceable the entire agreement, but rather the entire agreement shall be
construed as if not containing the particular invalid or unenforceable
provision or provisions, and the rights and obligations of Contractor and
Company shall be construed and enforced accordingly.

TITLE TO WORK PRODUCTS

All right, title and interest in and to all tangible and intangible work and
work products developed or produced under this Agreement by or on behalf of
Contractor for Company, whether comprising or incorporated in specifications,
drawings, sketches, models, samples, data, computer programs, reports,
documentation or other technical or business information, and all right, title
and interest in and to patents, copyrights, trade secrets, trademarks and other
intellectual property derived from such work and work products are hereby
assigned by Contractor to Company and are hereby agreed by Contractor to be
transferred to Company or otherwise vested therein, effective when first
capable of being so assigned, transferred or vested. Contractor shall obligate
its employees, subcontractors and others to provide, and shall supply to
Company at no extra cost, all such assignments, rights and covenants as Company
deems appropriate to assure and perfect such transfer or other vesting. All
work and work products shall be provided to Company as required herein or
on termination or completion of this Agreement, whichever is earlier, unless
Contractor is requested in writing to do otherwise. All such work and work
products shall be considered and arranged to be a "work made for hire" to the
extent allowed by law.

The work and work products developed or produced under this Agreement shall be
the original work of Contractor, unless Company's Technical Representative has
consented in writing to the inclusion of work or work products owned or
copyrighted by others (hereafter "included works"). In requesting such consent,
Contractor shall notify Company of the scope of the rights and permissions
Contractor intends to obtain for

<PAGE>   9
Company with respect to such included works and modify the scope of same as
requested by Company. Copies of all rights and permissions, clearly identifying
the included works to which they apply, shall be supplied to Company promptly
after their acquisition.

Company shall not acquire title hereunder to any intangible work or work
products preexisting execution of this Agreement and not developed or produced
in anticipation hereof.

Contractor agrees, for itself and its affiliates, not to assert patents and
copyrights owned or controlled by Contractor or any parent thereof or
subsidiary of either against Company, its affiliates, and its or their direct
or indirect customers, in connection with any work product or other subject
matter directly or indirectly derived from work done hereunder.

IN WITNESS WHEREOF, Contractor and Company have executed this Agreement in
duplicate on the day and year below written.

      INTERACTIVE TELESIS, INC.                 AT&T CORP.

By:                                       By:
   ----------------------------------        ----------------------------------
              (Signature)                               (Signature)

                                                Maggie M. Agront
                                                Contract Specialist

-------------------------------------     -------------------------------------
   (Name & Title Typed or Printed)           (Name & Title Typed or Printed)

-------------------------------------     -------------------------------------
                (Date)                                     (Date)

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