Document:

Exhibit 4(b)

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                             AEP TEXAS NORTH COMPANY

                                       TO

                                 BANK ONE, N.A.

                                   AS TRUSTEE

                          FIRST SUPPLEMENTAL INDENTURE

                          DATED AS OF FEBRUARY 1, 2003

                                  $225,000,000

                      5.50% SENIOR NOTES, SERIES A DUE 2013

                      5.50% SENIOR NOTES, SERIES B DUE 2013

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                               TABLE OF CONTENTS

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                                                                                                               PAGE
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ARTICLE I Additional Definitions..................................................................................1

         SECTION 1.01.   Definitions..............................................................................1

ARTICLE II 2013 Notes.............................................................................................3

         SECTION 2.01.   Establishment............................................................................3
         SECTION 2.02.   Aggregate Principal Amount...............................................................4
         SECTION 2.03.   Maturity and Interest....................................................................4
         SECTION 2.04.   Optional Redemption......................................................................4
         SECTION 2.05.   Limitation on Secured Debt...............................................................5
         SECTION 2.06.   Global Securities and Certificated Securities............................................6
         SECTION 2.07.   Form of Securities.......................................................................8
         SECTION 2.08.   Transfer and Exchange....................................................................8

ARTICLE III Miscellaneous Provisions.............................................................................13

         SECTION 3.01.   Recitals by Company.....................................................................13
         SECTION 3.02.   Ratification and Incorporation of Original Indenture....................................13
         SECTION 3.03.   Executed in Counterparts................................................................13
         SECTION 3.04.   Legends.................................................................................13
         SECTION 3.05.   Applicability of Section 4.05 and Article Ten of Original Indenture.....................13
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*    This Table of Contents does not constitute part of the Indenture or have
     any bearing upon the interpretation of any of its terms and provisions.

                                       i
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        THIS FIRST SUPPLEMENTAL INDENTURE is made as of the 1st day of
February, 2003, between AEP TEXAS NORTH COMPANY, a corporation duly organized
and existing under the laws of the state of Texas (herein called the "Company"),
having its principal office at 1 Riverside Plaza, Columbus, Ohio 43215 and Bank
One, N.A., a national banking association, duly organized and existing under the
laws of the United States, having its principal corporate trust office at 1111
Polaris Parkway, Columbus, Ohio 43240, as Trustee (herein called the "Trustee").

                              W I T N E S S E T H:

         WHEREAS, the Company has heretofore entered into an Indenture, dated as
of February 1, 2003 (the "Original Indenture"), with the Trustee;

         WHEREAS, the Original Indenture is incorporated herein by this
reference and the Original Indenture, as supplemented by this First Supplemental
Indenture, is herein called the "Indenture";

         WHEREAS, under the Original Indenture, a new series of unsecured notes
(the "Senior Notes") may at any time be established by the Board of Directors of
the Company in accordance with the provisions of the Original Indenture and the
terms of such series may be described by a supplemental indenture executed by
the Company and the Trustee;

         WHEREAS, the Company proposes to create under the Indenture a series of
Senior Notes to be designated the "5.50% Senior Notes, Series A due 2013" (the
"Series A Notes") and a series of Senior Notes to be designated the "5.50%
Senior Notes, Series B due 2013" (the "Series B Notes" and, together with the
Series A Notes, the "2013 Notes"), the form and substance of the 2013 Notes and
the terms, provisions and conditions thereof to be set forth as provided in the
Original Indenture and this First Supplemental Indenture;

         WHEREAS, additional Senior Notes of other series hereafter established,
except as may be limited in the Original Indenture as at the time supplemented
and modified, may be issued from time to time pursuant to the Indenture as at
the time supplemented and modified; and

         WHEREAS, all conditions necessary to authorize the execution and
delivery of this First Supplemental Indenture and to make it a valid and binding
obligation of the Company have been done or performed.

         NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:

                                   ARTICLE I

                             ADDITIONAL DEFINITIONS

SECTION 1.01.  DEFINITIONS

<PAGE>

         The following defined terms used herein shall, unless the context
otherwise requires, have the meanings specified below. Capitalized terms used
herein for which no definition is provided herein shall have the meanings set
forth in the Original Indenture.

         "Clearstream" means Clearstream Banking, societe anonyme, or any
successor securities clearing agency.

         "Distribution Compliance Period," with respect to the 2013 Notes, means
the period of 40 consecutive days beginning on and including the later of (i)
the day on which such 2013 Notes are first offered to Persons other than
distributors (as defined in Regulation S under the Securities Act) in reliance
on Regulation S and (ii) the Original Issue Date.

         "DTC" means The Depository Trust Company, the initial Clearing Agency.

         "Euroclear" means Euroclear Bank S.A./N.V., as operator of the
Euroclear System or any successor securities clearing agency.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended.

         "Exchange Offer Registration Statement" shall have the meaning assigned
to it in the Registration Rights Agreement.

         "Generation-Related Business" has the meaning set forth in Section
3.05(a).

         "Global Securities" means global certificates representing the 2013
Notes as described in Section 204.

         "Holder" means a registered holder of a 2013 Note.

         "Institutional Accredited Investor" has the meaning set forth in
Section 2.04(a) hereof.

         "Original Issue Date" means February 18, 2003.

         "Owner" means each Person who is the beneficial owner of a Global
Security as reflected in the records of the Depository or, if a Depository
participant is not the Owner, then as reflected in the records of a Person
maintaining an account with such Depository (directly or indirectly, in
accordance with the rules of such Depository).

         "Permanent Regulation S Global Security" has the meaning set forth in
Section 2.04(b).

         "QIBs" means qualified institutional buyers as defined in Rule 144A.

         "Registered Exchange Offer" shall have the meaning assigned to Exchange
Offer in the Registration Rights Agreement

         "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of February 1, 2003 among the Company and the Initial
Purchasers named therein, relating to the registration of the 2013 Notes under
the Securities Act.

                                       2
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         "Regulation S" means Regulation S under the Securities Act and any
successor regulation thereto.

         "Rule 144" means Rule 144 under the Securities Act, as such rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Securities and Exchange Commission.

         "Rule 144A" means Rule 144A under the Securities Act, as such rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Securities and Exchange Commission.

         "Rule 144A Global Security" means any Series A Note that is to be
traded pursuant to Rule 144A.

         "Securities Act" means the Securities Act of 1933, as amended from time
to time, or any successor legislation.

         "Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depository), or any successor Person thereto and
shall initially be the Trustee.

         "Shelf Registration Statement" shall have the meaning assigned to it in
the Registration Rights Agreement.

         "Special Interest Premium" shall have the meaning assigned to it in the
Registration Rights Agreement.

         "Stated Maturity" means March 1, 2013.

         "Subsidiary" means any corporation or other entity of which sufficient
voting stock or other ownership or economic interests having ordinary voting
power to elect a majority of the board of directors (or equivalent body) are at
the time directly or indirectly held by the Company.

         "Temporary Regulation S Global Security" has the meaning set forth in
Section 2.04(b).

         "Transfer Restricted Security" shall have the meaning assigned to
Registrable Note in the Registration Rights Agreement.

                                   ARTICLE II

                                   2013 NOTES

         SECTION 2.01. ESTABLISHMENT. The Series A Notes shall be designated as
the Company's "5.50% Senior Notes, Series A due 2013" and the Series B Notes
shall be designated as the Company's "5.50% Senior Notes, Series B due 2013".
The Series A Notes and the Series B Notes shall be treated for all purposes
under the Indenture as a single class or series of Senior Notes.

                                       3
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         SECTION 2.02. AGGREGATE PRINCIPAL AMOUNT. The Trustee shall
authenticate and deliver (i) Series A Notes for original issue on the Original
Issue Date in the aggregate principal amount of $225,000,000 and (ii) Series B
Notes from time to time thereafter for issue only in exchange for Series A Notes
pursuant to the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement or pursuant to the Shelf Registration Statement in
accordance with the Registration Rights Agreement, in each case upon a Company
Order for authentication and delivery thereof and satisfaction of Section 2.01
of the Original Indenture. The aggregate principal amount of the 2013 Notes
shall be initially limited to $225,000,000 and shall be subject to Periodic
Offerings pursuant to Article Two of the Original Indenture. All 2013 Notes need
not be issued at the same time and such series may be reopened at any time,
without the consent of any Holder, for issuances of additional 2013 Notes. Any
such additional 2013 Notes will have the same interest rate, maturity and other
terms as those initially issued. The Series A Notes shall be issued in
definitive fully registered form.

         SECTION 2.03. MATURITY AND INTEREST. (i) The 2013 Notes shall mature
on, and the date on which the principal of the 2013 Notes shall be payable
(unless earlier redeemed) shall be, March 1, 2013;

     (ii)  the interest rate at which the 2013 Notes shall bear interest shall
           be 5.50% per annum; provided, however, that the Special Interest
           Premium shall accrue on the 2013 Notes under certain circumstances as
           provided in clause (iii) below; interest shall accrue from the date
           of authentication of the 2013 Notes; the Interest Payment Dates on
           which such interest will be payable shall be March 1 and September 1,
           and the Regular Record Date for the determination of holders to whom
           interest is payable on any such Interest Payment Date shall be the
           February 15 or August 15 preceding the relevant Interest Payment
           Date; provided that the first Interest Payment Date shall be
           September 1, 2003 and interest payable on the Stated Maturity or any
           redemption date shall be paid to the Person to whom principal shall
           be paid; each payment of interest shall include interest accrued
           through the day before the Interest Payment Date;

     (iii) Special Interest Premium shall accrue on the Transfer Restricted
           Securities over and above the interest rate set forth herein in
           accordance with Section 2(e) of the Registration Rights Agreement.

     SECTION 2.04. OPTIONAL REDEMPTION. The 2013 Notes shall be redeemable at
the option of the Company, in whole at any time or in part from time to time,
upon not less than thirty but not more than sixty days' previous notice given by
mail to the registered owners of the Notes at a redemption price equal to the
greater of (i) 100% of the principal amount of the 2013 Notes being redeemed and
(ii) the sum of the present values of the remaining scheduled payments of
principal and interest on the 2013 Notes being redeemed (excluding the portion
of any such interest accrued to the date of redemption) discounted (for purposes
of determining present value) to the redemption date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate (as defined below) plus 25 basis points, plus, accrued interest thereon to
the date of redemption.

                                       4
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          "Treasury Rate" means, with respect to any redemption date, the rate
     per annum equal to the semi-annual equivalent yield to maturity of the
     Comparable Treasury Issue, assuming a price for the Comparable Treasury
     Issue (expressed as a percentage of its principal amount) equal to the
     Comparable Treasury Price for such redemption date.

          "Comparable Treasury Issue" means the United States Treasury security
     selected by an Independent Investment Banker as having a maturity
     comparable to the remaining term of the 2013 Notes that would be utilized,
     at the time of selection and in accordance with customary financial
     practice, in pricing new issues of corporate debt securities of comparable
     maturity to the remaining term of the 2013 Notes.

          "Comparable Treasury Price" means, with respect to any redemption
     date, (i) the average of the bid and asked prices for the Comparable
     Treasury Issue (expressed in each case as a percentage of its principal
     amount) on the third Business Day preceding such redemption date, as set
     forth in the daily statistical release (or any successor release) published
     by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m.
     Quotations for U. S. Government Securities" or (ii) if such release (or any
     successor release) is not published or does not contain such prices on such
     third Business Day, the Reference Treasury Dealer Quotation for such
     redemption date.

          "Independent Investment Banker" means one of the Reference Treasury
     Dealers appointed by the Company and reasonably acceptable to the Trustee.

          "Reference Treasury Dealer" means a primary U.S. government securities
     dealer selected by the Company and reasonably acceptable to the Trustee.

          "Reference Treasury Dealer Quotation" means, with respect to the
     Reference Treasury Dealer and any redemption date, the average, as
     determined by the Trustee, of the bid and asked prices for the Comparable
     Treasury Issue (expressed in each case as a percentage of its principal
     amount) quoted in writing to the Trustee by such Reference Treasury Dealer
     at or before 5:00 p.m., New York City time, on the third Business Day
     preceding such redemption date.

     SECTION 2.05. LIMITATION ON SECURED DEBT. So long as any of the 2013 Notes
are outstanding, the Company shall not create or suffer to be created or to
exist or permit any of its Subsidiaries to create or suffer to be created or to
exist any additional mortgage, pledge, security interest, or other lien
(collectively "Liens") on any utility properties or tangible assets now owned or
hereafter acquired by the Company or its Subsidiaries to secure any indebtedness
for borrowed money ("Secured Debt"), without providing that such 2013 Notes will
be similarly secured. Further, this restriction on Secured Debt does not apply
to the Company's existing first mortgage bonds that have previously been issued
under its mortgage indenture or any indenture supplemental thereto; provided
that this restriction will apply to future issuances thereunder (other than
issuances of refunding first mortgage bonds). In addition, this restriction does
not prevent the creation or existence of:

                                       5
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     o    Liens on property existing at the time of acquisition or construction
          of such property (or created within one year after completion of such
          acquisition or construction), whether by purchase, merger,
          construction or otherwise, or to secure the payment of all or any part
          of the purchase price or construction cost thereof, including the
          extension of any Liens to repairs, renewals, replacements,
          substitutions, betterments, additions, extensions and improvements
          then or thereafter made on the property subject thereto;

     o    Financing of the Company's accounts receivable for electric service;

     o    Any extensions, renewals or replacements (or successive extensions,
          renewals or replacements), in whole or in part, of Liens permitted by
          the foregoing clauses; and

     o    The pledge of any bonds or other securities at any time issued under
          any of the Secured Debt permitted by the above clauses.

     In addition to the permitted issuances above, Secured Debt not otherwise so
permitted may be issued in an amount that does not exceed 15% of Net Tangible
Assets as defined below.

     "Net Tangible Assets" means the total of all assets (including revaluations
thereof as a result of commercial appraisals, price level restatement or
otherwise) appearing on the Company's balance sheet, net of applicable reserves
and deductions, but excluding goodwill, trade names, trademarks, patents,
unamortized debt discount, energy trading contracts, regulatory assets, deferred
charges and all other like intangible assets (which term shall not be construed
to include such revaluations), less the aggregate of the Company's current
liabilities appearing on such balance sheet.

     This restriction also will not apply to or prevent the creation or
existence of leases (operating or capital) made, or existing on property
acquired, in the ordinary course of business.

     SECTION 2.06. GLOBAL SECURITIES AND CERTIFICATED SECURITIES.

          (a) GENERAL. The Series A Notes will be resold initially only to (i)
     QIBs in reliance on Rule 144A under the Securities Act ("Rule 144A"), (ii)
     institutional "accredited investors" as such term is defined in rule
     501(a)(1), (2),(3) and (7) of Regulation D under the Securities Act (each,
     an "Institutional Accredited Investor") and (iii) Persons other than U.S.
     Persons (as defined in Regulation S) in reliance on Regulation S under the
     Securities Act ("Regulation S"). Series A Notes may thereafter be
     transferred to, among others, QIBs, purchasers in reliance on Regulation S,
     and Institutional Accredited Investors in each case, subject to the
     restrictions on transfer set forth herein.

          (b) GLOBAL SECURITIES.

               (i) FORM. Series A Notes initially resold pursuant to Rule 144A
          shall be issued initially in the form of one or more permanent Global
          Securities in definitive, fully registered form (collectively, the
          "Rule 144A Global Security")

                                       6
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          and Series A Notes initially resold pursuant to Regulation S and shall
          be issued initially in the form of one or more temporary global
          securities in definitive, fully registered form (collectively, the
          "Temporary Regulation S Global Security"), in each case without
          interest coupons and with the global securities legend and restricted
          securities legend set forth in Exhibit A hereto, which shall be
          deposited on behalf of the purchasers of the Series A Notes
          represented thereby with the Securities Custodian, and registered in
          the name of the Depository or a nominee of the Depository, duly
          executed by the Company and authenticated by the Trustee as provided
          in the Indenture. Except as set forth in this Section 2.06, beneficial
          ownership interests in the Temporary Regulation S Global Security (x)
          will not be exchangeable for interests in the Rule 144A Global
          Security, the permanent global security (the "Permanent Regulation S
          Global Security"), or any other security without a legend containing
          restrictions on transfer of such security prior to the expiration of
          the Distribution Compliance Period and (y) then may be exchanged for
          interests in a Rule 144A Global Security or the Permanent Regulation S
          Global Security only upon certification that beneficial ownership
          interests in such Temporary Regulation S Global Security are owned
          either by non-U.S. persons or U.S. persons who purchased such
          interests in a transaction that did not require registration under the
          Securities Act.

          The Rule 144A Global Security, the Temporary Regulation S Global
     Security and the Permanent Regulation S Global Security are collectively
     referred to herein as "Global Securities". The aggregate principal amount
     of the Global Securities may from time to time be increased or decreased by
     adjustments made on the records of the Trustee and the Depository or its
     nominee as hereinafter provided.

               (ii) BOOK-ENTRY PROVISIONS. This Section shall apply only to a
          Global Security deposited with or on behalf of the Depository. The
          Company shall execute and the Trustee shall, in accordance with this
          Section 2.06(b)(ii), authenticate and deliver initially one or more
          Global Securities that (a) shall be registered in the name of the
          Depository for such Global Security or Global Securities or the
          nominee of such Depository and (b) shall be delivered by the Trustee
          to such Depository or pursuant to such Depository's instructions or
          held by the Trustee as custodian for the Depository.

          Members of, or participants in, the Depository ("Agent Members") shall
     have no rights under this Indenture with respect to any Global Security
     held on their behalf by the Depository or by the Trustee as the custodian
     of the Depository or under such Global Security, and the Company, the
     Trustee and any agent of the Company or the Trustee shall be entitled to
     treat the Depository as the absolute owner of such Global Security for all
     purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
     prevent the Company, the Trustee or any agent of the Company or the Trustee
     from giving effect to any written certification, proxy or other
     authorization furnished by the Depository or impair, as between the
     Depository and its Agent Members, the operation of customary practices of
     such Depository governing the exercise of the rights of a holder of a
     beneficial interest in any Global Security.

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          To the extent a notice or other communication to the beneficial owners
     of the 2013 Notes is required under the Indenture, unless and until
     Certificated Securities shall have been issued to such owners, the Trustee
     shall give all such notices and communications specified herein to be given
     to such owners to the Depository, and shall have no obligations to such
     Owners.

          (c) CERTIFICATED SECURITIES. Series A Notes sold to Institutional
     Accredited Investors shall be issued initially in the form of a fully
     registered, certificated Series A Note ("Certificated Securities"). Except
     as provided in this Section 2.06, owners of beneficial interests in Global
     Securities shall not be entitled to receive physical delivery of
     Certificated Securities.

     Global Securities shall be exchangeable for Certificated Securities if (i)
the Depository (x) notifies the Company that it is unwilling or unable to
continue as Depository for the Global Securities or (y) shall no longer be
registered or in good standing under the Exchange Act, or other applicable
statute or regulation, and a successor Depository for the Global Securities is
not appointed by the Company within 90 days after the Company receives such
notice or becomes aware of such condition. Upon surrender to the Trustee of the
typewritten certificate or certificates representing the Global Securities by
the Depository, accompanied by registration instructions, the Trustee shall
execute and authenticate the certificates in accordance with the instructions of
the Depository. Neither the Security Registrar nor the Trustee shall be liable
for any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. Upon the issuance of
Certificated Securities, the Trustee shall recognize the Holders of the
Certificated Securities as Holders. The Certificated Securities shall be
printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Company, as evidenced by the execution thereof by
the Company, and shall bear the legend set forth on Exhibit A hereto unless the
Company informs the Trustee that such legend is no longer required.

     SECTION 2.07. FORM OF SECURITIES. The Global Securities and Certificated
Securities shall be substantially in the form attached as Exhibit A thereto.

     SECTION 2.08. TRANSFER AND EXCHANGE.

          (a) GENERAL. The 2013 Notes may not be transferred except in
     compliance with the legend contained in Exhibit A unless otherwise
     determined by the Company in accordance with applicable law. No service
     charge will be made for any transfer or exchange of 2013 Notes, but payment
     will be required of a sum sufficient to cover any tax or other governmental
     charge that may be imposed in connection therewith.

          (b) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES.

               (i) If a holder of a beneficial interest in the Rule 144A Global
          Security wishes at any time to exchange its interest in the Rule 144A
          Global Security for an interest in the Permanent Regulation S Global
          Security, or to transfer its interest in the Rule 144A Global Security
          to a person who wishes to take delivery thereof in the form of an
          interest in the Permanent Regulation S Global Security,

                                       8
<PAGE>

          such holder may, subject to the rules and procedures of the Depository
          and to the requirements set forth in the following sentence, exchange
          or cause the exchange or transfer or cause the transfer of such
          interest for an equivalent beneficial interest in the Permanent
          Regulation S Global Security. Upon receipt by the Trustee, as transfer
          agent, of (1) instructions given in accordance with the Depository's
          procedures from or on behalf of a holder of a beneficial interest in
          the Rule 144A Global Security, directing the Trustee, as transfer
          agent, to credit or cause to be credited a beneficial interest in the
          Permanent Regulation S Global Security in an amount equal to the
          beneficial interest in the Rule 144A Global Security to be exchanged
          or transferred, (2) a written order given in accordance with the
          Depository's procedures containing information regarding the Euroclear
          or Clearstream account to be credited with such increase and the name
          of such account, and (3) a certificate in the form of Exhibit C hereto
          given by the holder of such beneficial interest stating that the
          exchange or transfer of such interest has been made pursuant to and in
          accordance with Rule 903 or Rule 904 of Regulation S under the
          Securities Act, the Trustee, as transfer agent, shall promptly deliver
          appropriate instructions to the Depository, its nominee, or the
          custodian for the Depository, as the case may be, to reduce or reflect
          on its records a reduction of the Rule 144A Global Security by the
          aggregate principal amount of the beneficial interest in such Rule
          144A Global Security to be so exchanged or transferred from the
          relevant participant, and the Trustee, as transfer agent, shall
          promptly deliver appropriate instructions to the Depository, its
          nominee, or the custodian for the Depository, as the case may be,
          concurrently with such reduction, to increase or reflect on its
          records an increase of the principal amount of such Permanent
          Regulation S Global Security by the aggregate principal amount of the
          beneficial interest in such Rule 144A Global Security to be so
          exchanged or transferred, and to credit or cause to be credited to the
          account of the person specified in such instructions (who may be
          Euroclear or Clearstream or another agent member of Euroclear or
          Clearstream or both, as the case may be, acting for and on behalf of
          them) a beneficial interest in such Permanent Regulation S Global
          Security equal to the reduction in the principal amount of such Rule
          144A Global Security.

               (ii) If a holder of a beneficial interest in the Permanent
          Regulation S Global Security wishes at any time to exchange its
          interest in the Permanent Regulation S Global Security for an interest
          in the Rule 144A Global Security, or to transfer its interest in the
          Permanent Regulation S Global Security to a person who wishes to take
          delivery thereof in the form of an interest in the Rule 144A Global
          Security, such holder may, subject to the rules and procedures of
          Euroclear or Clearstream and the Depository, as the case may be, and
          to the requirements set forth in the following sentence, exchange or
          cause the exchange or transfer or cause the transfer of such interest
          for an equivalent beneficial interest in such Rule 144A Global
          Security. Upon receipt by the Trustee, as transfer agent, of (1)
          instructions given in accordance with the procedures of Euroclear or
          Clearstream and the Depository, as the case may be, from or on behalf
          of a beneficial owner of an interest in the Permanent Regulation S
          Global Security directing the Trustee, as transfer agent, to credit or
          cause to be credited a beneficial interest in the Rule

                                       9
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          144A Global Security in an amount equal to the beneficial interest in
          the Permanent Regulation S Global Security to be exchanged or
          transferred, (2) a written order given in accordance with the
          procedures of Euroclear or Clearstream and the Depository, as the case
          may be, containing information regarding the account with the
          Depository to be credited with such increase and the name of such
          account, and (3) prior to the expiration of the Distribution
          Compliance Period, a certificate in the form of Exhibit C hereto given
          by the holder of such beneficial interest and stating that the person
          transferring such interest in such Permanent Regulation S Global
          Security reasonably believes that the person acquiring such interest
          in the Rule 144A Global Security is a QIB and is obtaining such
          beneficial interest for its own account or the account of a QIB in a
          transaction meeting the requirements of Rule 144A and any applicable
          securities laws of any state of the United States or any other
          jurisdiction, the Trustee, as transfer agent, shall promptly deliver
          appropriate instructions to the Depository, its nominee, or the
          custodian for the Depository, as the case may be, to reduce or reflect
          on its records a reduction of the Permanent Regulation S Global
          Security by the aggregate principal amount of the beneficial interest
          in such Permanent Regulation S Global Security to be exchanged or
          transferred, and the Trustee, as transfer agent, shall promptly
          deliver appropriate instructions to the Depository, its nominee, or
          the custodian for the Depository, as the case may be, concurrently
          with such reduction, to increase or reflect on its records an increase
          of the principal amount of the Rule 144A Global Security by the
          aggregate principal amount of the beneficial interest in the Permanent
          Regulation S Global Security to be so exchanged or transferred, and to
          credit or cause to be credited to the account of the person specified
          in such instructions a beneficial interest in the Rule 144A Global
          Security equal to the reduction in the principal amount of the
          Permanent Regulation S Global Security. After the expiration of the
          Distribution Compliance Period, the certification requirement set
          forth in clause (3) of the second sentence of this Section 2.08(b)(ii)
          will no longer apply to such exchanges and transfers.

               (iii) Any beneficial interest in one of the Global Securities
          that is transferred to a person who takes delivery in the form of an
          interest in the other Global Securities will, upon transfer, cease to
          be an interest in such Global Security and become an interest in the
          other Global Securities and, accordingly, will thereafter be subject
          to all transfer restrictions and other procedures applicable to
          beneficial interests in such other Global Security Note for as long as
          it remains such an interest.

               (iv) Beneficial interests in Temporary Regulation S Global
          Securities may be exchanged for interests in Rule 144A Global
          Securities or Permanent Regulation S Global Securities if (1) such
          exchange occurs in connection with a transfer of securities in
          compliance with Rule 144A, and (2) the transferor of the beneficial
          interest in the Temporary Regulation S Global Security first delivers
          to the Trustee a written certificate (in a form satisfactory to the
          Trustee) to the effect that the beneficial interest in the Temporary
          Regulation S Global Security is being transferred to a Person (a) who
          the transferor reasonably believes to be a QIB (b)

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          purchasing for its own account or the account of a QIB in a
          transaction meeting the requirements of Rule 144A, and (c) in
          accordance with all applicable securities laws of the states of the
          United States and other jurisdictions.

               (v) During the Distribution Compliance Period, beneficial
          ownership interests in Temporary Regulation S Global Securities may
          only be sold, pledged or transferred through Euroclear or Clearstream
          in accordance with the applicable procedures relating to such
          institutions and only (i) to the Company, (ii) so long as such
          security is eligible for resale pursuant to Rule 144A, to a Person
          whom the selling holder reasonably believes is a QIB that purchases
          for its own account or for the account of a QIB in a transaction
          meeting the requirements of Rule 144A, (iii) in an offshore
          transaction in accordance with Regulation S (other than a transaction
          resulting in an exchange for interest in a Permanent Regulation S
          Global Security), (iv) pursuant to an exemption from registration
          under the Securities Act provided by Rule 144 (if applicable) under
          the Securities Act or (v) pursuant to an effective registration
          statement under the Securities Act, in each case in accordance with
          any applicable securities laws of any state of the United States.

          (c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES AND CERTIFICATED
     SECURITIES.

               (i) In the event that a Global Security is exchanged for a
          Certificated Security as provided in Section 2.06(c), such
          Certificated Security may be exchanged or transferred for one another,
          subject to Section 2.05 of the Original Indenture, only in accordance
          with such procedures as are substantially consistent with the
          provisions of clauses (b)(i) and (ii) above (including the
          certification requirements intended to ensure that such exchanges or
          transfers comply with Rule 144, Rule 144A or Regulation S, as the case
          may be) and as may be from time to time reasonably adopted by the
          Company.

               (ii) Upon receipt by the Trustee of a Certificated Security, duly
          endorsed or accompanied by appropriate instruments of transfer, the
          Trustee shall cancel such Certificated Security and cause, or direct
          the Securities Custodian to cause, in accordance with the standing
          instructions and procedures existing of the Depository and the
          Securities Custodian, the aggregate principal amount of 2013 Notes
          represented by the Rule 144A Global Security or Permanent Regulation S
          Global Security, as applicable, to be increased by the aggregate
          principal amount of the Certificated Security to be exchanged and
          shall credit or cause to be credited to the account of the Person
          specified in such instructions a beneficial interest in the Rule 144A
          Global Security or Permanent Regulation S Global Security, as
          applicable, equal to the principal amount of the Certificated Security
          so canceled. If no Rule 144A Global Securities or Permanent Regulation
          S Global Securities, as applicable, are then outstanding, the Company
          shall issue and the Trustee shall authenticate, upon written order of
          the Company in the form of an Officers' Certificate, a new Rule 144A
          Global Security or Permanent Regulation S Global Security, as
          applicable, in the appropriate principal amount.

                                       11
<PAGE>

          (d) CERTIFICATES. In connection with any transfer described in
     paragraphs (b) and (c) of this Section 2.08, the Trustee shall receive a
     certificate of transfer in the form attached as Exhibit C hereto.
     Additionally, upon any transfer or exchange to an Institutional Accredited
     Investor, the Company and the Trustee shall receive a certificate in the
     form attached as Exhibit D hereto.

          (e) TRANSFER RESTRICTED SECURITY. Upon any sale or transfer of a
     Transfer Restricted Security (including any Transfer Restricted Security
     represented by a Global Security) pursuant to Rule 144 under the Securities
     Act or an effective registration statement under the Securities Act, which
     shall be certified to the Trustee and Security Registrar upon which each
     may conclusively rely:

               (i) in the case of any Transfer Restricted Security represented
          by a Certificated Security, the Security Registrar shall permit the
          Holder thereof to exchange such Transfer Restricted Security for a
          Certificated Security that does not bear the legend set forth in
          Exhibit A hereto and rescind any restriction on the transfer of such
          Transfer Restricted Security; and

               (ii) in the case of any Transfer Restricted Security represented
          by a Global Security, such Transfer Restricted Security shall not be
          required to bear the legend set forth in Exhibit A hereto if all other
          interests in such Global Note have been or are concurrently being sold
          or transferred pursuant to Rule 144 under the Securities Act or
          pursuant to an effective registration statement under the Securities
          Act.

          (f) REGISTERED EXCHANGE OFFER. Notwithstanding the foregoing, upon
     consummation of the Registered Exchange Offer, the Company shall issue and,
     upon receipt of a Company Order in accordance with Section 2.05 of the
     Original Indenture, the Trustee shall authenticate Series B Notes in
     exchange for Series A Notes accepted for exchange in the Registered
     Exchange Offer, which Series B Notes shall not bear the transfer
     restriction legend set forth in Exhibit A hereto and shall not provide for
     Special Interest Premium and the Security Registrar shall rescind any
     restriction on the transfer of such Series B Notes, in each case unless the
     Holder of such Series A Notes (A) is a broker-dealer tendering Series A
     Notes acquired directly from the Company or an "affiliate" (as defined in
     Rule 144 under the Securities Act) of the Company for its own account, (B)
     is a Person who has an arrangement or understanding with any Person to
     participate in the "distribution" (within the meaning of the Securities
     Act) of the Series B Notes, (C) is a Person who is an "affiliate" (as
     defined in Rule 144 under the Securities Act) of the Company or (D) will
     not be acquiring the Series B Notes in the ordinary course of such Holder's
     business. The Company shall identify to the Trustee such Holders in a
     written certification signed by an Officer of the Company and, absent
     certification from the Company to such effect, the Trustee shall assume
     that there are no such Holders.

                                       12
<PAGE>

                                  ARTICLE III

                            MISCELLANEOUS PROVISIONS

     SECTION 3.01. RECITALS BY COMPANY. The recitals in this First Supplemental
Indenture are made by the Company only and not by the Trustee, and all of the
provisions contained in the Original Indenture in respect of the rights,
privileges, immunities, powers and duties of the Trustee shall be applicable in
respect of 2013 Notes and of this First Supplemental Indenture as fully and with
like effect as if set forth herein in full.

     SECTION 3.02. RATIFICATION AND INCORPORATION OF ORIGINAL INDENTURE. As
supplemented hereby, the Original Indenture is in all respects ratified and
confirmed, and the Original Indenture and this First Supplemental Indenture
shall be read, taken and construed as one and the same instrument.

     SECTION 3.03. EXECUTED IN COUNTERPARTS. This First Supplemental Indenture
may be simultaneously executed in several counterparts, each of which shall be
deemed to be an original, and such counterparts shall together constitute but
one and the same instrument.

     SECTION 3.04. LEGENDS. Except as determined by the Company in accordance
with applicable law, each 2013 Note shall bear the applicable legends relating
to restrictions on transfer pursuant to the securities laws in substantially the
form set forth on Exhibit A hereto.

     SECTION 3.05. APPLICABILITY OF SECTION 4.05 AND ARTICLE TEN OF ORIGINAL
INDENTURE. As long as the 2013 Notes are outstanding, Section 4.05 and Article
Ten of the Original Indenture shall be applicable thereto; provided, however,
that if the Company's generation-related assets ("Generation-Related Business")
are transferred or sold (whether or not the Generation-Related Business
constitutes "substantially all" of the Company's total assets), the 2013 Notes
will continue to be obligations of the Company.

                                       13
<PAGE>

     IN WITNESS WHEREOF, each party hereto has caused this instrument to be
signed in its name and behalf by its duly authorized signatories, all as of the
day and year first above written.

                                                     AEP TEXAS NORTH COMPANY

                                                     By_/s/ Susan Tomasky_
                                                       Vice President
Attest:

By_/s/ T. G. Berkemeyer
   Assistant Secretary

                                                     BANK ONE, N. A.,
                                                     as Trustee

                                                     By_/s/ Jeffery L. Eubank__
                                                        Vice President

Attest:

By_/s/ David B. Knox__
   Trust Officer
<PAGE>

                                    EXHIBIT A

                            FORM OF SERIES [A/B] NOTE

                                                     [Rule 144A Global Security]
                                                  [Regulation S Global Security]
                                                         [Certificated Security]

                       [FORM OF FACE OF INITIAL SECURITY]

                           [Global Securities Legend]

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

         TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OR PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.

         [FOR REGULATION S GLOBAL NOTE ONLY] UNTIL 40 DAYS AFTER THE
COMMENCEMENT OF THE OFFERING, AN OFFER OR SALE OF NOTES WITHIN THE UNITED STATES
BY A DEALER (AS DEFINED IN THE U.S. SECURITIES ACT) MAY VIOLATE THE REGISTRATION
REQUIREMENTS OF THE U.S. SECURITIES ACT IF SUCH OFFER OR SALE IS MADE OTHERWISE
THAN IN ACCORDANCE WITH RULE 144A THEREUNDER.]

                         [Restricted Securities Legend]

         THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE

                                    Ex. A-1
<PAGE>

TRANSFERRED OTHER THAN (A)(1) TO THE COMPANY, (2) IN A TRANSACTION ENTITLED TO
AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT,
(3) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (4) OUTSIDE THE UNITED STATES IN A TRANSACTION
MEETING THE REQUIREMENTS OF REGULATION S UNDER THE SECURITIES ACT, (5) IN
ACCORDANCE WITH ANOTHER APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY) OR (6) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT AND (B) IN EACH CASE IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF EACH STATE OF THE UNITED STATES. AN INSTITUTIONAL
ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT WILL FURNISH TO THE COMPANY
AND THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY
REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE
FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT
IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(A)(1), (2),(3) OR (7) UNDER
THE SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES
AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT.

                 [Temporary Regulation S Global Security Legend]

         EXCEPT AS SET FORTH BELOW, BENEFICIAL OWNERSHIP INTEREST IN THIS
TEMPORARY REGULATION S GLOBAL SECURITY WILL NOT BE EXCHANGEABLE FOR INTERESTS IN
THE PERMANENT REGULATION S GLOBAL SECURITY OR ANY OTHER SECURITY REPRESENTING AN
INTEREST IN THE SECURITIES REPRESENTED HEREBY WHICH DO NOT CONTAIN A LEGEND
CONTAINING RESTRICTIONS ON TRANSFER, UNTIL THE EXPIRATION OF THE "40-DAY
DISTRIBUTION COMPLIANCE PERIOD" (WITHIN THE MEANING OF RULE 903(d)(3) OF
REGULATION S UNDER THE SECURITIES ACT) AND THEN ONLY UPON CERTIFICATION IN FORM
REASONABLY SATISFACTORY TO THE TRUSTEE THAT SUCH BENEFICIAL INTERESTS ARE OWNED
EITHER BY NON-U.S. PERSONS OR U.S. PERSONS WHO PURCHASED SUCH INTERESTS IN A
TRANSACTION THAT DID NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT. DURING
SUCH 40-DAY DISTRIBUTION COMPLIANCE PERIOD, BENEFICIAL OWNERSHIP INTEREST IN
THIS TEMPORARY REGULATION S GLOBAL SECURITY MAY ONLY BE SOLD, PLEDGED OR
TRANSFERRED THROUGH EUROCLEAR BANK S.A./N.A., AS OPERATOR OF THE EUROCLEAR
SYSTEM OR CLEARSTREAM BANKING, SOCIETE ANONYME AND

                                    Ex. A-2
<PAGE>

ONLY (I) TO THE COMPANY, (II) IN THE UNITED STATES TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (III) OUTSIDE THE UNITED STATES IN A TRANSACTION IN ACCORDANCE WITH RULE
904 UNDER THE SECURITIES ACT, OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASE (I) THROUGH (IV) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. HOLDERS OF INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL SECURITY WILL
NOTIFY ANY PURCHASER OF THIS SECURITY OF THE RESALE RESTRICTIONS REFERRED TO
ABOVE, IF THEN APPLICABLE.

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

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

                        [Certificated Securities Legend]

         IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH
THE FOREGOING RESTRICTIONS.

                                    Ex. A-3
<PAGE>

                             AEP TEXAS NORTH COMPANY
                               5.50% Senior Notes,
                                Series [A/B] due
                                      2013

CUSIP: [0010EQAA4/144A][U0080FAA4/Reg S]  Original Issue Date: February 18, 2003

Stated Maturity:  March 1, 2013                           Interest Rate:   5.50%

Principal Amount: $225,000,000 (or such other amount as is indicated on
Schedule A)

Redeemable:                Yes      X                No
In Whole:                  Yes      X                No
In Part:                   Yes      X                No

         AEP TEXAS NORTH COMPANY, a corporation duly organized and existing
under the laws of the State of Texas (herein referred to as the "Company", which
term includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to [________]; or registered
assigns, the principal sum of _____ DOLLARS ($_____) [or such other amount as is
indicated on Schedule A hereto]* on the Stated Maturity specified above (or upon
earlier redemption); and to pay interest on said Principal Amount from the
Original Issue Date specified above or from the most recent interest payment
date (each such date, an "Interest Payment Date") to which interest has been
paid or duly provided for, semi-annually in arrears on March 1 and September 1
in each year, commencing on September 1, 2003, at the Interest Rate per annum
specified above, until the Principal Amount shall have been paid or duly
provided for. Interest shall be computed on the basis of a 360-day year of
twelve 30-day months.

         The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date, as provided in the Indenture, as hereinafter defined,
shall be paid to the Person in whose name this Note (or one or more Predecessor
Securities) shall have been registered at the close of business on the Regular
Record Date with respect to such Interest Payment Date, which shall be the
February 15 or August 15 (whether or not a Business Day), as the case may be,
immediately preceding such Interest Payment Date, provided that interest payable
on the Stated Maturity or any redemption date shall be paid to the Person to
whom principal is paid. Any such interest not so punctually paid or duly
provided for shall forthwith cease to be payable to the Holder on such Regular
Record Date and shall be paid as provided in said Indenture.

         If any Interest Payment Date, any redemption date or Stated Maturity is
not a Business Day, then payment of the amounts due on this Note on such date
will be made on the next succeeding Business Day, and no interest shall accrue
on such amounts for the period from

--------------------
*    Insert in the Rule 144A Global Security and the Regulation S Global
     Security only.

                                    Ex. A-4
<PAGE>

and after such Interest Payment Date, redemption date or Stated Maturity, as the
case may be, except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, with the same force and effect as if made on such date. The principal of
(and premium, if any) and the interest on this Note shall be payable at the
office or agency of the Company maintained for that purpose in the Borough of
Manhattan, the City of New York, New York, in any coin or currency of the United
States of America which at the time of payment is legal tender for payment of
public and private debts; provided, however, that payment of interest (other
than interest payable on Stated Maturity or any redemption date) may be made at
the option of the Company by check mailed to the registered holder at such
address as shall appear in the Security Register.

         This Note is one of a duly authorized series of Notes of the Company
(herein sometimes referred to as the "Notes"), specified in the Indenture
(defined below), all issued or to be issued in one or more series under and
pursuant to an Indenture dated as of February 1, 2003 duly executed and
delivered between the Company and Bank One, N. A., a national banking
association organized and existing under the laws of the United States, as
Trustee (herein referred to as the "Trustee") (such Indenture, as originally
executed and delivered and as thereafter supplemented and amended being
hereinafter referred to as the "Indenture"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Trustee, the Company and the holders of the Notes. By the terms of the
Indenture, the Notes are issuable in series which may vary as to amount, date of
maturity, rate of interest and in other respects as in the Indenture provided.
This Note is one of the series of Notes designated on the face hereof as 5.50%
Senior Notes, Series [A/B] due 2013 initially issued in the aggregate principal
amount of $225,000,000.

         This Note may be redeemed by the Company at its option, in whole at any
time or in part from time to time, upon not less than thirty but not more than
sixty days' previous notice given by mail to the registered owners of the Note
at a redemption price equal to the greater of (i) 100% of the principal of the
Note being redeemed and (ii) the sum of the present values of the remaining
scheduled payments of principal and interest on the Note being redeemed
(excluding the portion of any such interest accrued to the date of redemption)
discounted (for purposes of determining present value) to the redemption date on
a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Rate (as defined below) plus 25 basis points, plus, in each
case, accrued interest thereon to the date of redemption.

         "Treasury Rate" means, with respect to any redemption date, the rate
         per annum equal to the semi-annual equivalent yield to maturity of the
         Comparable Treasury Issue, assuming a price for the Comparable Treasury
         Issue (expressed as a percentage of its principal amount) equal to the
         Comparable Treasury Price for such redemption date.

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

                                    Ex. A-5
<PAGE>

         "Comparable Treasury Price" means, with respect to any redemption date,
         (1) the average of the bid and asked prices for the Comparable Treasury
         Issue (expressed in each case as a percentage of its principal amount)
         on the third Business Day preceding such redemption date, as set forth
         in the daily statistical release (or any successor release) published
         by the Federal Reserve Bank of New York and designated "Composite 3:30
         p.m. Quotations for U.S. Government Securities" or (2) if such release
         (or any successor release) is not published or does not contain such
         prices on such third Business Day, the Reference Treasury Dealer
         redemption date.

         "Independent Investment Banker" means one of the Reference Treasury
         Dealers appointed by the Company and reasonably acceptable to the
         Trustee.

         "Reference Treasury Dealer" means a primary U.S. government securities
         dealer selected by the Company and reasonably acceptable to the
         Trustee.

         "Reference Treasury Dealer Quotation" means, with respect to the
         Reference Treasury Dealer and any redemption date, the average, as
         determined by the Trustee, of the bid and asked prices for the
         Comparable Treasury Issue (expressed in each case as a percentage of
         its principal amount) quoted in writing to the Trustee by such
         Reference Treasury Dealer at or before 5:00 p.m., New York City time,
         on the third Business Day preceding such redemption date.

         The Company shall not be required to (i) issue, exchange or register
the transfer of any Notes during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of less than all
the outstanding Notes of the same series and ending at the close of business on
the day of such mailing, nor (ii) register the transfer of or exchange of any
Notes of any series or portions thereof called for redemption. This Global Note
is exchangeable for Notes in definitive registered form only under certain
limited circumstances set forth in the Indenture.

         In the event of redemption of this Note in part only, a new Note or
Notes of this series, of like tenor, for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the surrender of this Note.

         In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Notes may be declared,
and upon such declaration shall become, due and payable, in the manner, with the
effect and subject to the conditions provided in the Indenture.

         The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Note upon compliance by the Company with certain
conditions set forth therein. This Note will not have a sinking fund.

         As described in the supplemental indenture relating to the Notes, so
long as this Note is outstanding, the Company is subject to a limitation on
issuance of Secured Debt as described therein.

                                    Ex. A-6
<PAGE>

         The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Notes of each series affected at the time
outstanding, as defined in the Indenture, to execute supplemental indentures for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any supplemental indenture or of
modifying in any manner the rights of the Holders of the Notes; provided,
however, that no such supplemental indenture shall (i) extend the fixed maturity
of any Notes of any series, or reduce the principal amount thereof, or reduce
the rate or extend the time of payment of interest thereon, or reduce any
premium payable upon the redemption thereof, or reduce the amount of the
principal of a Discount Security that would be due and payable upon a
declaration of acceleration of the maturity thereof pursuant to the Indenture,
without the consent of the holder of each Note then outstanding and affected;
(ii) reduce the aforesaid percentage of Notes, the holders of which are required
to consent to any such supplemental indenture, or reduce the percentage of
Notes, the holders of which are required to waive any default and its
consequences, without the consent of the holder of each Note then outstanding
and affected thereby; or (iii) modify any provision of Section 6.01(c) of the
Indenture (except to increase the percentage of principal amount of securities
required to rescind and annul any declaration of amounts due and payable under
the Notes), without the consent of the holder of each Note then outstanding and
affected thereby. The Indenture also contains provisions permitting the Holders
of a majority in aggregate principal amount of the Notes of all series at the
time outstanding affected thereby, on behalf of the Holders of the Notes of such
series, to waive any past default in the performance of any of the covenants
contained in the Indenture, or established pursuant to the Indenture with
respect to such series, and its consequences, except a default in the payment of
the principal of or premium, if any, or interest on any of the Notes of such
series. Any such consent or waiver by the registered Holder of this Note (unless
revoked as provided in the Indenture) shall be conclusive and binding upon such
Holder and upon all future Holders and owners of this Note and of any Note
issued in exchange herefor or in place hereof (whether by registration or
transfer or otherwise), irrespective of whether or not any notation of such
consent or waiver is made upon this Note.

         No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Note at the time and place and at the rate and in the money
herein prescribed.

         As provided in the Indenture and subject to certain limitations therein
set forth, this Note is transferable by the registered holder hereof on the
Security Register of the Company, upon surrender of this Note for registration
of transfer at the office or agency of the Company as may be designated by the
Company accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company or the Trustee duly executed by the registered
Holder hereof or his or her attorney duly authorized in writing, and thereupon
one or more new Notes of authorized denominations and for the same aggregate
principal amount and series will be issued to the designated transferee or
transferees. No service charge will be made for any such transfer, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in relation thereto.

                                    Ex. A-7
<PAGE>

         Prior to due presentment for registration of transfer of this Note, the
Company, the Trustee, any paying agent and any Security Registrar may deem and
treat the registered Holder hereof as the absolute owner hereof (whether or not
this Note shall be overdue and notwithstanding any notice of ownership or
writing hereon made by anyone other than the Note Registrar) for the purpose of
receiving payment of or on account of the principal hereof and premium, if any,
and interest due hereon and for all other purposes, and neither the Company nor
the Trustee nor any paying agent nor any Security Registrar shall be affected by
any notice to the contrary.

         No recourse shall be had for the payment of the principal of or the
interest on this Note, or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Indenture, against any incorporator,
stockholder, officer or director, past, present or future, as such, of the
Company or of any predecessor or successor corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of the consideration for the issuance hereof, expressly released waived and
released.

         The Notes of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof except that
a Note issued to an Institutional Accredited Investor will be in denominations
of at $250,000. As provided in the Indenture and subject to certain limitations,
Notes of this series are exchangeable for a like aggregate principal amount of
Notes of this series of a different authorized denomination, as requested by the
Holder surrendering the same.

         All terms used in this Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.

         This Note shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.

         IN WITNESS WHEREOF, the Company has caused this Instrument to be
executed.

                                    AEP TEXAS NORTH COMPANY

                                    By:  ______________________________________

Attest:

By:  ____________________________

                                    Ex. A-8
<PAGE>

                                  ABBREVIATIONS

         The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM- as tenants in common       UNIF GIFT MIN ACT-_____  Custodian ________
                                                             (Cust)      (Minor)
TEN ENT- as tenants by the                             under Uniform Gifts to
         entireties                                    Minors Act

                                                       -------------------------
                                                                (State)
JT TEN- As joint tenants with
        right of survivorship
        and not as tenants in
        common

                    Additional abbreviations may also be used
                          though not on the above list.

         FOR VALUE RECEIVED, the undersigned hereby sell(s) and transfer(s) unto
___________________ (please insert Social Security or other identifying number
of assignee)

--------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF
ASSIGNEE

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing

--------------------------------------------------------------------------------
agent to transfer said Note on the books of the Company, with full power of
substitution in the premises.

Dated___________________        ________________________________________________

                                ________________________________________________
                                NOTICE: The signature to this assignment must
                                correspond with the name as written upon the
                                face of the within instrument in every
                                particular without alteration or enlargement,
                                or any change whatever.

                                    Ex. A-9
<PAGE>

         In connection with any transfer of any of the Series A Notes evidenced
by this certificate, the undersigned confirms that such Series A Notes are
being:

CHECK ONE BOX BELOW

         (1) [ ] exchanged for the undersigned's own account without transfer;
                 or

         (2) [ ] transferred to a person whom the undersigned reasonably
                 believes to be a "qualified institutional buyer" as defined in
                 Rule 144A under the Securities Act of 1933 who is purchasing
                 such Series A Notes for such buyer's own account or the account
                 of a "qualified institutional buyer" in a transaction meeting
                 the requirements of Rule 144A under the Securities Act of 1933
                 and any applicable securities laws of any state of the United
                 States or any other jurisdiction; or

         (3) [ ] exchanged or transferred pursuant to and in compliance with
                 Rule 903 or 904 of Regulation S under the Securities Act of
                 1933; or

         (4) [ ] exchanged or transferred to an institutional "accredited
                 investor" within the meaning of Rule 501(a)(1), (2), (3) or (7)
                 of Regulation D under the Securities Act pursuant to Rule 144A
                 (and based upon an opinion of counsel if the Company or the
                 Trustee so requests) and, to the knowledge of the transferor of
                 the Series A Notes, such institutional accredited investor to
                 whom such Note is to be transferred is not an "affiliate" (as
                 defined in Rule 144 under the Securities Act) of the Company;
                 or

         (5) [ ] transferred pursuant to another available exemption from the
                 registration requirements of the Securities Act of 1933.

         Unless one of the boxes is checked, the Trustee will refuse to register
any of the Series A Notes evidenced by this certificate in the name of any
person other than the registered Holder thereof; PROVIDED, HOWEVER, that if box
(3), (4) or (5) is checked, the Company may require, prior to registering any
such transfer of the Series A Notes, such legal opinions, certifications and
other information as the Company has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933, such as
the exemption provided by Rule 144 under such Act; PROVIDED, FURTHER, that if
box (2) is checked, the transferee must also certify that it is a qualified
institutional buyer as defined in Rule 144A.

                                        ----------------------------------------
                                                        Signature

---------------------------------------

                                    Ex. A-10
<PAGE>

              TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.

         The undersigned represents and warrants that it is purchasing this
Series A Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.

Date: _________________

_______________________

                 NOTICE: TO BE EXECUTED BY AN EXECUTIVE OFFICER.

                                    Ex. A-11
<PAGE>

                                   SCHEDULE A

         The initial aggregate principal amount of Series A Notes evidenced by
the Certificate to which this Schedule is attached is $___________. The
notations on the following table evidence decreases and increases in the
aggregate principal amount of Series A Notes evidenced by such Certificate.

<TABLE>
<CAPTION>
                                                               Principal Amount of
                                                             Series A Notes Remaining
Decrease in Principal Amount      Increase in Principal       After Such Decrease or            Notation by
      of Series A Notes         Amount of Series A Notes             Increase               Security Registrar
----------------------------    ------------------------     -------------------------      ------------------
<S>                             <C>                          <C>                            <C>

</TABLE>

                                    Ex. A-12
<PAGE>

                                    EXHIBIT B

                          CERTIFICATE OF AUTHENTICATION

         This is one of the Notes referred to in the within-mentioned Indenture.

                                                     BANK ONE, N. A.,
                                                     as Trustee

                                                     By:_______________________
                                                         Authorized Signatory

                                     Ex. B-1
<PAGE>

                                    EXHIBIT C

                          FORM OF TRANSFER CERTIFICATE

         In connection with any transfer of any of the Series A Notes evidenced
by this certificate, the undersigned confirms that such Series A Notes are
being:

CHECK ONE BOX BELOW

     (1) [ ] exchanged for the undersigned's own account without transfer; or

     (2) [ ] transferred to a person whom the undersigned reasonably believes to
             be a "qualified institutional buyer" as defined in Rule 144A under
             the Securities Act of 1933 who is purchasing such Series A Notes
             for such buyer's own account or the account of a "qualified
             institutional buyer" in a transaction meeting the requirements of
             Rule 144A under the Securities Act of 1933 and any applicable
             securities laws of any state of the United States or any other
             jurisdiction; or

     (3) [ ] exchanged or transferred pursuant to and in compliance with Rule
             903 or 904 of Regulation S under the Securities Act of 1933; or

     (4) [ ] exchanged or transferred to an institutional "accredited investor"
             within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation
             D under the Securities Act pursuant to Rule 144A (and based upon an
             opinion of counsel if the Company or the Trustee so requests) and,
             to the knowledge of the transferor of the Series A Notes, such
             institutional accredited investor to whom such Note is to be
             transferred is not an "affiliate" (as defined in Rule 144 under the
             Securities Act) of the Company; or

     (5) [ ] transferred pursuant to another available exemption from the
             registration requirements of the Securities Act of 1933. Unless one
             of the boxes is checked, the Trustee will refuse to register any of
             the Series A Notes evidenced by this certificate in the name of any
             person other than the registered Holder thereof; PROVIDED, HOWEVER,
             that if box (3) or (4) is checked, the Company may require, prior
             to registering any such transfer of the Series A Notes, such legal
             opinions, certifications and other information as the Company has
             reasonably requested to confirm that such transfer is being made
             pursuant to an exemption from, or in a transaction not subject to,
             the registration requirements of the Securities Act of 1933, such
             as the exemption provided by Rule 144 under such Act; PROVIDED,
             FURTHER, that if box (2) is checked, the transferee must also
             certify that it is a qualified institutional buyer as defined in
             Rule 144A.

                                          --------------------------------------
                                                        Signature

                                     Ex. C-1
<PAGE>

              TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.

         The undersigned represents and warrants that it is purchasing this
Series A Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.

Date: _______________

      ______________

                 NOTICE: TO BE EXECUTED BY AN EXECUTIVE OFFICER.

                                     Ex. C-2
<PAGE>

                                    EXHIBIT D

                        FORM OF LETTER TO BE DELIVERED BY
                       INSTITUTIONAL ACCREDITED INVESTORS

Ladies and Gentlemen:

         In connection with our proposed purchase of the 5.50% Senior Notes,
Series A due 2013 (the Notes) issued by AEP Texas North Company, a Texas
corporation (Issuer), we confirm that:

         1.   We are purchasing the Notes for our own account, or for one or
              more investor accounts for which we are acting as a fiduciary or
              agent, in each case for investment, and not with a view to, or for
              offer or sale in connection with, any distribution in violation of
              the Securities Act, subject to any requirement of law that the
              disposition of our property or the property of such investor
              account or accounts be at all times within our or their control
              and subject to our or their ability to resell the Notes pursuant
              to Rule 144A, Regulation S or any exemption from registration
              available under the Securities Act.

         2.   We are an institutional "accredited investor" within the meaning
              of Rule 50l(a)(l), (2), (3) or (7) under the Securities Act who is
              purchasing Notes with a principal amount of at least $250,000 and,
              if the Notes are to be purchased for one or more accounts (the
              "investor accounts") for which we are acting as fiduciary or
              agent, each such account is an institutional accredited investor
              who is purchasing Notes with a principal amount of at least
              $250,000. In the normal course of business or our investing
              activities, we invest in or purchase securities similar to the
              Notes and we have such knowledge and experience in financial
              business matters that we are capable of evaluating the merits and
              risks of purchasing the Notes. We are aware that we (or any
              investor account) may be required to bear the economic risk of an
              investment in the Notes for an indefinite period of time and we
              (or such investor account) are able to bear such risk for an
              indefinite period.

         3.   We acknowledge that none of the Issuer, the initial purchasers or
              any persons representing any of them has made any representation
              to us with respect to any such entity or the offering or sale of
              any Notes, other than the information contained in the Issuer's
              offering memorandum dated February 12, 2003, related to the Notes,
              which offering memorandum has been delivered to it and upon which
              it is relying in making its investment decision with respect to
              the Notes. Accordingly, we acknowledge that no representation or
              warranty is made by the initial purchasers as to the accuracy or
              completeness of such materials. We have had access to such
              financial and other information concerning the Issuer and the
              Notes as we have deemed necessary in connection with our decision
              to purchase any of the Notes including an opportunity to ask
              questions of, and request information from, the Issuer and the
              initial purchasers.

                                     Ex. D-1
<PAGE>

         4.   We understand and agree that the offer and sale of the Notes have
              not been registered under the Securities Act and that such Notes
              are being offered only in a transaction not involving any public
              offering within the meaning of the Securities Act, and that (A) if
              we decide to resell, pledge or otherwise transfer such Notes on
              which a legend setting forth these restrictions appears, such
              Notes may be resold, pledged or otherwise transferred only (i) to
              the Issuer, (ii) in a transaction entitled to an exemption from
              registration provided by Rule 144 under the Securities Act, (iii)
              so long as such Notes are eligible for resale pursuant to Rule
              144A, to a person whom we reasonably believe is a qualified
              institutional buyer that purchases for its own account or for the
              account of a qualified institutional buyer to whom notice is given
              that the resale, pledge or other transfer is being made in
              reliance on Rule 144A, (iv) outside the United States in a
              transaction meeting the requirements of Regulation S, (v) in
              accordance with another exemption from the registration
              requirements of the Securities Act (and based upon an opinion of
              counsel acceptable to the Issuer), in each case in accordance with
              any applicable securities laws of any state of the United States
              or (vi) pursuant to a registration statement which has been
              declared effective under the Securities Act and (B) we will, and
              each subsequent holder is required to, notify any purchaser of
              Notes from us or it of the resale restrictions referred to in (A)
              above, if then applicable. We acknowledge that the foregoing
              restrictions apply to holders of beneficial interest in the Notes,
              as well as to holders of the Notes.

         5.   We understand that, on any proposed resale of any Notes, we will
              be required to furnish to the trustee and the Issuer such
              certifications, legal opinions and other information as the
              trustee and the Issuer may reasonably require to confirm that the
              proposed sale complies with the foregoing restrictions. We further
              understand that the Notes purchased by us will bear a legend to
              the foregoing effect.

         6.   We acknowledge that the Issuer, the trustee, the initial
              purchasers and others will rely upon the truth and accuracy of the
              foregoing acknowledgements, representations and agreements and
              agree that if any of the foregoing acknowledgements,
              representations or agreements are no longer accurate, we shall
              promptly notify the Issuer, the trustee and the initial
              purchasers. If we are acquiring the Notes as a fiduciary or agent
              for one or more investor accounts, we represent that we have sole
              investment discretion with respect to each such account and we
              have full power to make the foregoing acknowledgements,
              representations and agreements on behalf of each account and that
              each such investor account is eligible to purchase the Notes.

                                     Ex. D-2
<PAGE>

         7.   The Issuer, the trustee and the initial purchasers 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 proceeding or official inquiry with
              respect to the matters covered hereby.

                                Very truly yours,

                                By:
                                Name:
                                Title:

                                    Ex. D-3EXHIBIT 4(c)

                          REGISTRATION RIGHTS AGREEMENT

         THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of February 1, 2003 by and among AEP Texas North Company, a
Texas corporation (the "COMPANY"), and the Initial Purchasers (as hereinafter
defined).

         This Agreement is made pursuant to the Purchase Agreement dated
February 12, 2003 (the "PURCHASE AGREEMENT"), by and among the Company, as
issuer of $225,000,000 aggregate principal amount of 5.50% Senior Notes, Series
A due 2013 (the "NOTES"), and the Initial Purchasers, which provides for, among
other things, the sale by the Company to the Initial Purchasers of the aggregate
principal amount of Notes specified therein. In order to induce the Initial
Purchasers to enter into the Purchase Agreement, the Company has agreed to
provide to the Initial Purchasers and their direct and indirect transferees the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the closing under the Purchase Agreement.

         In consideration of the foregoing, the parties hereto agree as follows:

         DEFINITIONS. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:

         "ADVICE" shall have the meaning set forth in the last paragraph of
Section 3 hereof.

         "AFFILIATE" has the meaning given to that term in Rule 405 under the
Securities Act or any successor rule thereunder.

         "APPLICABLE PERIOD" shall have the meaning set forth in Section 3(v)
hereof.

         "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday, or a
day on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed.

         "CLOSING DATE" shall mean February 18, 2003, the initial date of
delivery of the Notes from the Company to the Initial Purchasers.

         "COMPANY" shall have the meaning set forth in the preamble to this
Agreement and also includes the Company's successors and permitted assigns.

         "DEPOSITARY" shall mean The Depository Trust Company, or any other
depositary appointed by the Company; PROVIDED, HOWEVER, that such depositary
must have an address in the Borough of Manhattan, The City of New York.

         "EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 2(b)
hereof.

         "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.

<PAGE>

         "EXCHANGE NOTES" shall mean the 5.50% Senior Notes, Series B due 2013
issued by the Company under the Indenture containing terms identical in all
material respects to the Notes (except that (i) interest thereon shall accrue
from the last date on which interest was paid or duly provided for on the Notes
or, if no such interest has been paid, from the date of their original issue,
(ii) they will not contain terms with respect to transfer restrictions under the
Securities Act, and (iii) they will not provide for any Special Interest Premium
thereon.)

         "EXCHANGE OFFER" shall mean the offer by the Company to the Holders to
exchange all of the Registrable Notes held by each such Holder for a like amount
of Exchange Notes pursuant to Section 2(a) hereof.

         "EXCHANGE OFFER REGISTRATION" shall mean a registration under the
Securities Act effected pursuant to Section 2(a) hereof.

         "EXCHANGE OFFER REGISTRATION STATEMENT" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate
form) of the Company as provided in Section 2(a) hereof, and all amendments and
supplements to such registration statement, in each case including the
Prospectus contained therein, all exhibits thereto and all documents
incorporated by reference therein.

         "EXCHANGE PERIOD" shall have the meaning set forth in Section 2(a)
hereof.

         "HOLDER" shall mean any Initial Purchaser, for so long as it owns any
Registrable Notes, and each of its successors, assigns and direct and indirect
transferees who become registered owners of Registrable Notes under the
Indenture.

         "INDENTURE" shall mean the Indenture, dated as of February 1, 2003,
between the Company and Bank One, N.A., as trustee, as the same may be amended
or supplemented from time to time in accordance with the terms thereof.

         "INITIAL PURCHASERS" shall mean Lehman Brothers Inc., Salomon Smith
Barney Inc., Banc of America Securities LLC, ABN AMRO Incorporated, Banc One
Capital Markets, Inc., Barclays Capital Inc., BNY Capital Markets, Inc.,
McDonald Investments Inc., TD Securities (USA) Inc., and UBS Warburg LLC.

         "INSPECTORS" shall have the meaning set forth in Section 3(p) hereof.

         "MAJORITY HOLDERS" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Notes or Exchange Notes, as the case
may be.

         "NOTES" shall have the meaning set forth in the preamble to this
Agreement.

         "PARTICIPATING BROKER-DEALER" shall have the meaning set forth in
Section 3(v) hereof.

         "PERSON" shall mean an individual, partnership, corporation, trust or
unincorporated organization, limited liability company, or a government or
agency or political subdivision thereof or other legal entity.

                                       2
<PAGE>

         "PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Notes covered by a Shelf Registration Statement, and by all other
amendments and supplements to a prospectus, including post-effective amendments,
and in each case including all documents incorporated by reference therein.

         "PURCHASE AGREEMENT" shall have the meaning set forth in the preamble
to this Agreement.

         "RECORDS" shall have the meaning set forth in Section 3(p) hereof.

         "REGISTRABLE NOTES" shall mean the Notes, until the earliest to occur
of (a) the date on which any Notes has been exchanged by a Person other than a
Participating Broker-Dealer for Exchange Notes in the Exchange Offer, (b)
following the exchange by a Participating Broker-Dealer in the Exchange Offer of
any Note for one or more Exchange Notes, the date on which such Exchange Notes
are sold to a purchaser in accordance with the Exchange Offer Registration
Statement, (c) the date on which any Note has been registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement and (d) the date on which any Note is eligible to be distributed to
the public pursuant to Rule 144(k) under the Securities Act.

         "REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC or National Association of Securities Dealers,
Inc. (the "NASD") registration and filing fees, including, if applicable, the
fees and expenses of any "qualified independent underwriter" (and its counsel)
that is required to be retained by any Holder of Registrable Notes in accordance
with the rules and regulations of the NASD, (ii) all fees and expenses incurred
in connection with compliance with state securities or blue sky laws (including
reasonable fees and disbursements of one counsel for all underwriters and
Holders as a group in connection with blue sky qualification of any of the
Exchange Notes or Registrable Notes) and compliance with the rules of the NASD,
(iii) all expenses of any Persons in preparing or assisting in preparing, word
processing, printing and distributing any Registration Statement, any Prospectus
and any amendments or supplements thereto, and in preparing or assisting in
preparing, printing and distributing any underwriting agreements, notes sales
agreements and other documents relating to the performance of and compliance
with this Agreement, (iv) all rating agency fees, (v) the fees and disbursements
of counsel for the Company and of the independent certified public accountants
of the Company and its subsidiaries, including the expenses of any "cold
comfort" letters required by or incident to the performance of and compliance
with this Agreement, (vi) the reasonable fees and expenses of the Trustee and
its counsel and any exchange agent or custodian, and (vii) the reasonable fees
and expenses of any special experts retained by the Company in connection with
any Registration Statement.

         "REGISTRATION STATEMENT" shall mean any registration statement of the
Company which covers any of the Exchange Notes or Registrable Notes pursuant to
the provisions of this Agreement, and all amendments and supplements to any such
Registration Statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
documents incorporated by reference therein.

                                       3
<PAGE>

         "REPRESENTATIVES" shall mean Lehman Brothers Inc. and Salomon Smith
Barney Inc., as representatives of the Initial Purchasers.

         "RULE 144(K) PERIOD" shall mean the period of two years (or such
shorter period as may hereafter be referred to in Rule 144(k) under the
Securities Act (or similar successor rule)) commencing on the Closing Date.

         "SEC" shall mean the Securities and Exchange Commission.

         "SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time.

         "SHELF REGISTRATION" shall mean a registration effected pursuant to
Section 2(b) hereof.

         "SHELF REGISTRATION EVENT" shall have the meaning set forth in Section
2(b) hereof.

         "SHELF REGISTRATION EVENT DATE" shall have the meaning set forth in
Section 2(b) hereof.

         "SHELF REGISTRATION STATEMENT" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2(b) hereof which
covers all of the Registrable Notes (except Registrable Notes which the Holders
have elected not to include in such Shelf Registration Statement or the Holders
of which have not complied with their obligations under the penultimate
paragraph of Section 3 hereof or under the first paragraph of Section 2(b)
hereof) on an appropriate form under Rule 415 under the Securities Act, or any
similar rule that may be adopted by the SEC, and all amendments and supplements
to such registration statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and all
documents incorporated by reference therein.

         "SPECIAL INTEREST PREMIUM" shall have the meaning set forth in Section
2(e) hereof.

         "TIA" shall have the meaning set forth in Section 3(m) hereof.

         "TRUSTEE" shall mean the trustee under the Indenture.

         2. REGISTRATION UNDER THE SECURITIES ACT.

         (a) EXCHANGE OFFER. Except as set forth in Section 2(b) below, the
Company shall, for the benefit of the Holders, at the Company's cost, (i) file
with the SEC within 210 calendar days after the Closing Date an Exchange Offer
Registration Statement on an appropriate form under the Securities Act relating
to the Exchange Offer, (ii) use its reasonable best efforts to cause such
Exchange Offer Registration Statement to be declared effective under the
Securities Act by the SEC not later than the date which is 270 calendar days
after the Closing Date, and (iii) provided such Exchange Offer Registration
Statement has been declared effective under the Securities Act by the SEC,
promptly commence the Exchange Offer and keep the Exchange Offer open for not
less than 30 days, or longer if required by applicable law, after the date on
which such Registration Statement was declared effective by the SEC (such period
referred to herein as the "EXCHANGE PERIOD") and at the termination thereof,
issue Exchange Notes in exchange for all Registrable Notes tendered prior
thereto in the Exchange Offer.

                                       4
<PAGE>

         Each Holder of Registrable Notes to be exchanged in the Exchange Offer
shall be required, as a condition to participating in the Exchange Offer, to
represent that it acquires the Exchange Notes in the ordinary course of such
Holder's business and that it (i) is not an Affiliate of the Company, (ii) does
not hold any Notes to be exchanged for Exchange Notes in the Exchange Offer that
were acquired other than in the ordinary course of business, (iii) is not a
broker-dealer tendering Registrable Notes acquired directly from the Company,
(iv) at the time of the Exchange Offer, has no arrangements or understandings
with any Person to participate in the Exchange Offer for the purpose of
distributing the Exchange Notes.

         In connection with the Exchange Offer, the Company shall:

         (i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter of
transmittal and related documents;

         (ii) utilize the services of the Depositary for the Exchange Offer with
respect to the Notes represented by a global certificate;

         (iii) permit Holders to withdraw tendered Registrable Notes at any time
prior to the close of business, New York City time, on the last Business Day of
the Exchange Period, by sending to the institution specified in the notice to
Holders, a telegram, telex, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Registrable Notes delivered for
exchange, and a statement that such Holder is withdrawing his election to have
such Registrable Notes exchanged; notify each Holder that any Registrable Note
not tendered by such Holder in the Exchange Offer will remain outstanding and
continue to accrue interest but will not retain any rights under this Agreement
(except in the case of the Initial Purchasers and Participating Broker-Dealers
as provided herein); and

         (iv) otherwise comply in all material respects with all applicable laws
and regulations relating to the Exchange Offer.

         As soon as practicable after the close of the Exchange Offer, the
Company shall:

         (i) accept for exchange all Registrable Notes or portions thereof duly
tendered and not validly withdrawn pursuant to the Exchange Offer in accordance
with the terms of the Exchange Offer Registration Statement and letter of
transmittal;

         (ii) deliver, or cause to be delivered, to the Trustee for cancellation
all Registrable Notes or portions thereof so accepted for exchange by the
Company; and

         (iii) issue, and cause the Trustee under the Indenture to promptly
authenticate and deliver to each Holder, Exchange Notes equal in principal
amount to the principal amount of the Notes as are surrendered by such Holder.

         Interest on each Exchange Note issued pursuant to the Exchange Offer
will accrue from the last date on which interest was paid or duly provided for
on the Note surrendered in

                                       5
<PAGE>

exchange therefor or, if no interest has been paid on such Note, from the date
of original issue of such Note. To the extent not prohibited by any judicial
order, judgment, law, regulation or applicable interpretation of the staff of
the SEC, the Company shall use its reasonable best efforts to complete the
Exchange Offer as provided above, and shall comply with the applicable
requirements of the Securities Act, the Exchange Act and other applicable laws
and regulations in connection with the Exchange Offer. The Exchange Offer shall
not be subject to any conditions other than the conditions referred to in
Section 2(b)(i), (ii) and (iii) below and those conditions that are customary in
similar exchange offers, except as may be required by applicable law. Each
Holder of Registrable Notes who wishes to exchange such Registrable Notes for
Exchange Notes in the Exchange Offer will be required to make certain customary
representations in connection therewith, including, in the case of any Holder,
representations that (i) it is not an Affiliate of the Company, (ii) it is not a
broker-dealer tendering Registrable Notes acquired directly from the Company,
(iii) the Notes being exchanged, and the Exchange Notes to be received, by it
have been or are being acquired in the ordinary course of its business and (iv)
at the time of the Exchange Offer, it has no arrangements or understandings with
any Person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes. The Company shall inform the Initial
Purchasers, after consultation with the Trustee, of the names and addresses of
the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall
have the right to contact such Holders in order to facilitate the tender of
Registrable Notes in the Exchange Offer.

         Upon consummation of the Exchange Offer in accordance with this Section
2(a), the provisions of this Agreement shall continue to apply, MUTATIS
MUTANDIS, solely with respect to Exchange Notes held by Initial Purchasers and
Participating Broker-Dealers, and the Company shall have no further obligation
to register the Registrable Notes held by any other Holder pursuant to Section
2(b) of this Agreement.

         (b) SHELF REGISTRATION. If (i) because of any change in law, regulation
or in currently prevailing interpretations thereof by the staff of the SEC, the
Company is not permitted to effect the Exchange Offer as contemplated by Section
2(a) hereof, (ii) the Exchange Offer is not consummated within 300 calendar days
after the Closing Date or (iii) any Holder of Registrable Notes shall notify the
Company prior to the 20th calendar day following the consummation of the
Exchange Offer (A) that such Holder was prohibited by applicable law or SEC
policy from participating in the Exchange Offer, or (B) that such Holder may not
resell the Exchange Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and that the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resale by such Holder, or (C) that such Holder is a Participating Broker-Dealer
and holds Notes acquired directly from the Company or one of its Affiliates (any
of the events specified in (i), (ii) or (iii) being a "SHELF REGISTRATION
EVENT", and the date of occurrence thereof, the "SHELF REGISTRATION EVENT
DATE"), then in addition to or in lieu of conducting the Exchange Offer
contemplated by Section 2(a), as the case may be, the Company shall promptly
notify the Holders in writing thereof and shall, at its cost, file as promptly
as practicable after such Shelf Registration Event Date and, in any event,
within 210 calendar days after such Shelf Registration Event Date, a Shelf
Registration Statement providing for the sale by the Holders of all of the
Registrable Notes (other than Registrable Notes owned by Holders who have
elected not to include such Registrable Notes in such Shelf Registration
Statement or who have not complied with their obligations under the penultimate
paragraph of Section 3 hereof or

                                       6
<PAGE>

under this paragraph), and shall use its reasonable best efforts to cause such
Shelf Registration Statement to be declared effective by the SEC as soon as
practicable and in any event, on or before the 270th calendar day after the
Shelf Registration Event Date or, if later, the 300th calendar day after the
Closing Date. No Holder of Registrable Notes shall be entitled to include any of
its Registrable Notes in any Shelf Registration pursuant to this Agreement
unless and until such Holder agrees in writing to be bound by all of the
provisions of this Agreement applicable to such Holder and furnishes to the
Company in writing, within 15 calendar days after receipt of a request therefor,
such information as the Company may, after conferring with counsel with regard
to information relating to Holders that would be required by the SEC to be
included in such Shelf Registration Statement or Prospectus included therein,
reasonably request for inclusion in any Shelf Registration Statement or
Prospectus included therein. Each Holder as to which any Shelf Registration is
being effected agrees to furnish to the Company, without request and as soon as
practicable, all information with respect to such Holder necessary to make the
information previously furnished to the Company by such Holder not materially
misleading.

         The Company agrees to use its reasonable best efforts to keep the Shelf
Registration Statement continuously effective and the Prospectus usable for
resales for the earlier of (x) the expiration of the Rule 144(k) Period or (y)
such time as all of the Notes covered by the Shelf Registration Statement have
been sold pursuant to the Shelf Registration Statement or cease to be
Registrable Notes (the period from the effective date of the Shelf Registration
Statement until the earlier of the events described in clauses (x) or (y) being
the "EFFECTIVENESS PERIOD"). The Company shall not permit any securities other
than Registrable Notes to be included in the Shelf Registration. The Company
will, in the event a Shelf Registration Statement is declared effective, provide
to each Holder of Registrable Notes covered thereby, a reasonable number of
copies of the Prospectus which is a part of the Shelf Registration Statement,
notify each such Holder when the Shelf Registration has become effective and
take any other action required to permit unrestricted resales of the Registrable
Notes. The Company further agrees to supplement or amend the Shelf Registration
Statement, if required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Shelf Registration Statement
or by the Securities Act or by any other rules and regulations thereunder for
shelf registrations, and the Company agrees to furnish to the Holders of
Registrable Notes covered by such Shelf Registration Statement copies of any
such supplement or amendment promptly after its being used or filed with the
SEC.

         (c) EXPENSES. The Company shall pay all Registration Expenses in
connection with any Registration Statement filed pursuant to Section 2(a) and/or
2(b) hereof and will reimburse the Initial Purchasers for the reasonable fees
and disbursements Dewey Ballantine LLP incurred in connection with the Exchange
Offer. Except as provided herein, each Holder shall pay all expenses of its
counsel, underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Notes pursuant
to the Shelf Registration Statement.

         (d) EFFECTIVE REGISTRATION STATEMENT. An Exchange Offer Registration
Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement
pursuant to Section 2(b) hereof will not be deemed to have become effective
unless it has been declared effective by the SEC; PROVIDED, HOWEVER, that if,
after it has been declared effective, the offering of Registrable Notes pursuant
to such Exchange Offer Registration Statement or Shelf Registration Statement is

                                       7
<PAGE>

interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Exchange Offer
Registration Statement or Shelf Registration Statement will be deemed not to
have been effective during the period of such interference, until the offering
of Registrable Notes pursuant to such Registration Statement may legally resume.
The Company will be deemed not to have used its reasonable best efforts to cause
the Exchange Offer Registration Statement or the Shelf Registration Statement,
as the case may be, to become, or to remain, effective during the requisite
period if it voluntarily takes any action that would result in any such
Registration Statement not being declared effective or that would result in the
otherwise eligible Holders of Registrable Notes covered thereby not being able
to exchange or offer and sell such Registrable Notes during that period, unless
such action is required by applicable law or regulation.

         (e) SPECIAL INTEREST PREMIUM. In the event that:

              (i) the Exchange Offer Registration Statement is not filed with
         the SEC on or prior to the 210th day after the Closing Date, then,
         commencing on the 211th calendar day after the Closing Date, a special
         interest premium (the "SPECIAL INTEREST PREMIUM") shall accrue on the
         principal amount of the Notes at a rate of 0.25% per annum;

              (ii) the Exchange Offer Registration Statement is not declared
         effective by the SEC on or prior to the 270th calendar day after the
         Closing Date, then, commencing on the 271st calendar day after the
         Closing Date, a Special Interest Premium shall accrue on the principal
         amount of the Notes at a rate of 0.25% per annum;

              (iii) (A) the Company has not exchanged Exchange Notes for all
         Notes validly tendered, in accordance with the terms of the Exchange
         Offer, on or prior to the 300th calendar day after the Closing Date or
         (B) if the Shelf Registration Statement is required to be filed
         pursuant to Section 2(b) but is not declared effective by the SEC on or
         prior to the 300th calendar day after the Closing Date, then,
         commencing on the 301st calendar day after the Closing Date, a Special
         Interest Premium shall accrue on the principal amount of the Notes at
         the rate of 0.50% per annum; or

              (iv) the Shelf Registration Statement has been declared effective
         and such Shelf Registration Statement ceases to be continuously
         effective or the Prospectus contained in such Shelf Registration
         Statement ceases to be usable for resales (A) at any time prior to the
         expiration of the Effectiveness Period or (B) if related to corporate
         developments, public filings with the SEC or similar events or because
         the Prospectus contains an untrue statement of a material fact or omits
         to state a material fact required to be stated therein or necessary in
         order to make the statements therein not misleading, and such failure
         continues for more than 90 calendar days (whether or not consecutive
         and whether or not arising out of a single or multiple circumstances)
         in any twelve-month period, then the Special Interest Premium shall
         accrue on the principal amount of the Notes at a rate of 0.50% per
         annum commencing on the day that (in the case of (A) above), or the
         91st calendar (cumulative) day after (in the case of (B) above), such
         Shelf Registration Statement ceases to be effective or the Prospectus
         ceases to be usable for resales; PROVIDED, HOWEVER, that the aggregate
         amount of the Special Interest Premium in respect of the Notes may not
         exceed 0.50% per annum (regardless of whether multiple

                                       8
<PAGE>

         events triggering a Special Interest Premium under this subsection (e)
         exist); PROVIDED, FURTHER, HOWEVER, that (1) upon the filing of the
         Exchange Offer Registration Statement (in the case of clause (i)
         above), (2) upon the effectiveness of the Exchange Offer Registration
         Statement (in the case of clause (ii) above), (3) upon the exchange of
         Exchange Notes for all Notes validly tendered (in the case of clause
         (iii)(A) above) or upon the effectiveness of the Shelf Registration
         Statement (in the case of clause (iii)(B) above) and (4) upon the
         earlier of (y) such time as the Shelf Registration Statement which had
         ceased to remain effective or the Prospectus which had ceased to be
         usable for resales again becomes effective and usable for resales, as
         applicable, and (z) the expiration of the Effectiveness Period (in each
         case of clause (iv) above), the Special Interest Premium on the
         principal amount of the Notes as a result of such clause (or the
         relevant subclause thereof) shall cease to accrue.

         Any Special Interest Premium due pursuant to Section 2(e)(i), (ii),
(iii) or (iv) above will be payable in cash on the next succeeding March 1 or
September 1, as the case may be, to eligible Holders (as determined under this
subsection (e)) on the relevant record dates for the payment of interest
pursuant to the Indenture.

         (f) SPECIFIC ENFORCEMENT. Without limiting the remedies available to
the Holders, the Company acknowledges that any failure by the Company to comply
with its obligations under Section 2(a) and Section 2(b) hereof may result in
material irreparable injury to the Holders for which there is no adequate remedy
at law, that it would not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, any Holder may obtain such
relief as may be required to specifically enforce the Company's obligations
under Section 2(a) and Section 2(b) hereof.

         3. REGISTRATION PROCEDURES. In connection with the obligations of the
Company with respect to the Registration Statements pursuant to Sections 2(a)
and 2(b) hereof, the Company shall:

         (a) prepare and file with the SEC a Registration Statement or
Registration Statements as prescribed by Sections 2(a) and 2(b) hereof within
the relevant time period specified in Section 2 hereof on the appropriate form
under the Securities Act, which form shall (i) be selected by the Company, (ii)
in the case of a Shelf Registration, be available for the sale of the
Registrable Notes by the selling Holders thereof and, in the case of an Exchange
Offer, be available for the exchange of Registrable Notes, and (iii) comply as
to form in all material respects with the requirements of the applicable form
and include all financial statements required by the SEC to be filed therewith;
and use its reasonable best efforts to cause such Registration Statement to
become effective and remain effective (and, in the case of a Shelf Registration
Statement, the Prospectus to be usable for resales) in accordance with Section 2
hereof; provided, however, that if (1) such filing is pursuant to Section 2(b),
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2(a) is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Notes, before filing
any Registration Statement or Prospectus or any amendments or supplements
thereto, the Company shall furnish to and afford the Holders of the Registrable
Notes and each such Participating Broker-Dealer, as the case may be, covered by
such Registration Statement, their counsel and the managing underwriters, if
any, a reasonable

                                       9
<PAGE>

opportunity to review copies of all such documents (including copies of any
documents to be incorporated by reference therein and all exhibits thereto)
proposed to be filed; and the Company shall not file any Registration Statement
or Prospectus or any amendments or supplements thereto in respect of which the
Holders must be afforded an opportunity to review prior to the filing of such
document if the Majority Holders of the Registrable Notes, depending solely upon
which Holders must be afforded the opportunity of such review, or such
Participating Broker-Dealer, as the case may be, their counsel or the managing
underwriters, if any, shall reasonably object in a timely manner;

         (b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the Effectiveness Period or the Applicable
Period, as the case may be, and cause each Prospectus to be supplemented, if so
determined by the Company or requested by the SEC, by any required prospectus
supplement and as so supplemented to be filed pursuant to Rule 424 (or any
similar provision then in force) under the Securities Act, and comply with the
provisions of the Securities Act, the Exchange Act and the rules and regulations
promulgated thereunder applicable to it with respect to the disposition of all
Notes covered by each Registration Statement during the Effectiveness Period or
the Applicable Period, as the case may be, in accordance with the intended
method or methods of distribution by the selling Holders thereof described in
this Agreement (including sales by any Participating Broker-Dealer);

         (c) in the case of an Exchange Offer Registration Statement, if in the
reasonable opinion of counsel to the Company there is a question as to whether
the Exchange Offer is permitted by applicable law, seek a no-action letter or
other favorable decision from the SEC allowing the Company to consummate an
Exchange Offer for such Notes; the Company hereby agrees to pursue the issuance
of such a decision to the SEC staff level but shall not be required to take
commercially unreasonable action to effect a change of SEC policy; the Company
hereby agrees, however, to (i) participate in telephonic conferences with the
SEC, (ii) deliver to the SEC staff an analysis prepared by counsel to the
Company setting forth the legal bases, if any, upon which such counsel has
concluded that such an Exchange Offer should be permitted and (iii) diligently
pursue a resolution (which need not be favorable) by the SEC staff of such
submission;

         (d) in the case of an Exchange Offer Registration Statement, prior to
the effectiveness of such statement, provide a supplemental letter to the SEC
(i) stating that the Company is registering the Exchange Offer in reliance on
the position of the SEC enunciated in EXXON CAPITAL HOLDINGS CORPORATION
(available May 13, 1988), MORGAN STANLEY AND CO. INC. (available June 5, 1991),
BROWN & WOOD LLP (available February 7, 1997) and, if applicable, any no-action
letter obtained pursuant to Section 3(c) and (ii) including a representation
that the Company has not entered into any arrangement or understanding with any
Person to distribute the Exchange Notes to be received in the Exchange Offer and
that, to the best of the Company's information and belief, each Holder
participating in the Exchange Offer is acquiring the Exchange Notes in its
ordinary course of business and has no arrangement or understanding with any
Person to participate in the distribution of the Exchange Notes received in the
Exchange Offer;

         (e) in the case of a Shelf Registration, (i) notify each Holder of
Registrable Notes included in the Shelf Registration Statement, at least three
Business Days prior to filing, that a

                                       10
<PAGE>

Shelf Registration Statement with respect to the Registrable Notes is being
filed and advising such Holder that the distribution of Registrable Notes will
be made in accordance with the method selected by the Majority Holders of the
Registrable Notes, (ii) furnish to each Holder of Registrable Notes included in
the Shelf Registration Statement and to each underwriter of an underwritten
offering of Registrable Notes, if any, without charge, as many copies of each
Prospectus, including each preliminary prospectus, and any amendment or
supplement thereto, and such other documents as such Holder or underwriter may
reasonably request, in order to facilitate the public sale or other disposition
of the Registrable Notes and (iii) consent to the use of the Prospectus or any
amendment or supplement thereto by each of the selling Holders of Registrable
Notes included in the Shelf Registration Statement in connection with the
offering and sale of the Registrable Notes covered by the Prospectus or any
amendment or supplement thereto;

         (f) in the case of a Shelf Registration, register or qualify the
Registrable Notes under all applicable state securities or "blue sky" laws of
such jurisdictions by the time the applicable Registration Statement is declared
effective by the SEC as any Holder of Registrable Notes covered by a
Registration Statement and each underwriter of an underwritten offering of
Registrable Notes shall reasonably request in writing in advance of such date of
effectiveness, and do any and all other acts and things which may be reasonably
necessary or advisable to enable such Holder and underwriter to consummate the
disposition in each such jurisdiction of such Registrable Notes owned by such
Holder; PROVIDED, HOWEVER, that the Company shall not be required to (i) qualify
as a foreign corporation or as a dealer in securities in any jurisdiction where
it would not otherwise be required to qualify but for this Section 3(f), (ii)
file any general consent to service of process in any jurisdiction where it
would not otherwise be subject to such service of process or (iii) subject
itself to taxation in any such jurisdiction if it is not then so subject;

         (g) (1) in the case of a Shelf Registration or (2) if Participating
Broker-Dealers from whom the Company has received prior written notice that they
will be utilizing the Prospectus contained in the Exchange Offer Registration
Statement as provided in Section 3(v) hereof, are seeking to sell Exchange Notes
and are required to deliver Prospectuses, promptly notify each Holder of
Registrable Notes, or such Participating Broker-Dealers, as the case may be,
their counsel and the managing underwriters, if any, and promptly confirm such
notice in writing (i) when a Registration Statement has become effective and
when any post-effective amendments thereto become effective, (ii) of any request
by the SEC or any state securities authority for amendments and supplements to a
Registration Statement or Prospectus or for additional information after the
Registration Statement has become effective, (iii) of the issuance by the SEC or
any state securities authority of any stop order suspending the effectiveness of
a Registration Statement or the qualification of the Registrable Notes or the
Exchange Notes to be offered or sold by any Participating Broker-Dealer in any
jurisdiction described in Section 3(f) hereof or the initiation of any
proceedings for that purpose, (iv) in the case of a Shelf Registration, if,
between the effective date of a Registration Statement and the closing of any
sale of Registrable Notes covered thereby, the representations and warranties of
the Company contained in any purchase agreement, securities sales agreement or
other similar agreement cease to be true, correct and complete in all material
respects, (v) of the happening of any event or the failure of any event to occur
or the discovery of any facts, during the Effectiveness Period, which makes any
statement, made in such Registration Statement or the related Prospectus untrue
in

                                       11
<PAGE>

any material respect or which causes such Registration Statement or Prospectus
to omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, as well as any other corporate developments, public filings with the
SEC or similar events causing such Registration Statement not to be effective or
the Prospectus not to be useable for resales and (vi) of the reasonable
determination of the Company that a post-effective amendment to the Registration
Statement would be appropriate;

         (h) obtain the withdrawal of any order suspending the effectiveness of
a Registration Statement as soon as practicable;

         (i) in the case of a Shelf Registration, furnish to each Holder of
Registrable Notes included within the coverage of such Shelf Registration
Statement, without charge, at least one conformed copy of each Registration
Statement relating to such Shelf Registration and any post-effective amendment
thereto (without documents incorporated therein by reference or exhibits
thereto, unless requested);

         (j) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Notes to facilitate the timely preparation and delivery
of certificates representing Registrable Notes to be sold and not bearing any
restrictive legends (except any customary legend borne by securities held
through The Depository Trust Company or any similar depository) and in such
denominations (consistent with the provisions of the Indenture and supplemental
indenture or the officer's certificate establishing the forms and the terms of
the Notes pursuant to the Indenture) and registered in such names as the selling
Holders or the underwriters may reasonably request (provided such names are
consistent with the names of the selling securityholders set forth in the Shelf
Registration Statement) at least two Business Days prior to the closing of any
sale of Registrable Notes pursuant to such Shelf Registration Statement;

         (k) in the case of a Shelf Registration or an Exchange Offer
Registration, promptly after the occurrence of any event specified in Section
3(g)(ii), 3(g)(iii), 3(g)(v) (subject to the 90 calendar day cumulative grace
period within any twelve-month period provided for in Section 2(e)(iv)(B)) or
3(g)(vi) hereof, prepare a supplement or post-effective amendment to such
Registration Statement or the related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Notes, such Prospectus will not
include any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and the Company shall notify each
Holder to suspend use of the Prospectus as promptly as practicable after the
occurrence of such an event, and each Holder hereby agrees to suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission;

         (l) obtain a CUSIP number for the Exchange Notes or the Registrable
Notes, as the case may be, not later than the effective date of a Registration
Statement, and provide the Trustee with certificates for the Exchange Notes or
the Registrable Notes, as the case may be, in a form eligible for deposit with
the Depositary;

                                       12
<PAGE>

         (m) cause the Indenture to be qualified under the Trust Indenture Act
of 1939, as amended (the "TIA"), in connection with the registration of the
Exchange Notes or Registrable Notes, as the case may be, and effect such changes
to such documents as may be required for them to be so qualified in accordance
with the terms of the TIA and execute, and cause the Trustee to execute, all
documents as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such documents to be so
qualified in a timely manner;

         (n) in the case of a Shelf Registration, enter into such agreements
(including underwriting agreements) as are customary in underwritten offerings
and take all such other appropriate actions in connection therewith as are
reasonably requested by the Holders of at least 25% in aggregate principal
amount of the Registrable Notes in order to expedite or facilitate the
registration or the disposition of the Registrable Notes;

         (o) in the case of a Shelf Registration, whether or not an underwriting
agreement is entered into and whether or not the registration is an underwritten
registration, if requested by (x) an Initial Purchaser, in the case where such
Initial Purchaser holds Notes acquired by it as part of its initial placement,
or (y) Holders of at least 25% in aggregate principal amount of the Registrable
Notes covered thereby: (i) make such representations and warranties to Holders
of such Registrable Notes and the underwriters (if any), with respect to the
business of the Company as then conducted and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily made by issuers to
underwriters in underwritten offerings, and confirm the same if and when
requested; (ii) obtain opinions of counsel to the Company and updates thereof
(which may be in the form of a reliance letter) in form and substance reasonably
satisfactory to the managing underwriters (if any) and the Holders of a majority
in amount of the Registrable Notes being sold, addressed to each selling Holder
and the underwriters (if any) covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as may be
reasonably requested by such underwriters (it being agreed that the matters to
be covered by such opinion may be subject to customary qualifications and
exceptions); (iii) obtain "cold comfort" letters and updates thereof in form and
substance reasonably satisfactory to the managing underwriters from the
independent certified public accountants of the Company, addressed to each of
the underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings and such other matters as reasonably requested by such
underwriters in accordance with Statement on Auditing Standards No. 72; and (iv)
if an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable than those set forth
in Section 4 hereof (or such other provisions and procedures acceptable to
Holders of a majority in aggregate principal amount of Registrable Notes covered
by such Registration Statement and the managing underwriters) customary for such
agreements with respect to all parties to be indemnified pursuant to said
Section (including, without limitation, such underwriters and selling Holders);
and in the case of an underwritten registration, the above requirements shall be
satisfied at each closing under the related underwriting agreement or as and to
the extent required thereunder;

         (p) if (1) a Shelf Registration is filed pursuant to Section 2(b) or
(2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2(a) is required

                                       13
<PAGE>

to be delivered under the Securities Act by any Participating Broker-Dealer who
seeks to sell Exchange Notes during the Applicable Period, make reasonably
available for inspection by any selling Holder of Registrable Notes or
Participating Broker-Dealer, as applicable, who certifies to the Company that it
has a current intention to sell Registrable Notes pursuant to the Shelf
Registration, any underwriter participating in any such disposition of
Registrable Notes, if any, and any attorney, accountant or other agent retained
by any such selling Holder, Participating Broker-Dealer, as the case may be, or
underwriter (collectively, the "INSPECTORS"), at the offices where normally
kept, during the Company's normal business hours, all financial and other
records, pertinent organizational and operational documents and properties of
the Company (collectively, the "RECORDS") as shall be reasonably necessary to
enable them to conduct due diligence activities, and cause the officers,
trustees and employees of the Company to supply all relevant information in each
case reasonably requested by any such Inspector in connection with such
Registration Statement; Records and information which the Company determines, in
good faith, to be confidential and any Records and information which it notifies
the Inspectors are confidential shall not be disclosed to any Inspector except
where (i) the disclosure of such Records or information is necessary to avoid or
correct a material misstatement or omission in such Registration Statement, (ii)
the release of such Records or information is ordered pursuant to a subpoena or
other order from a court of competent jurisdiction or is necessary in connection
with any action, suit or proceeding or (iii) such Records or information
previously has been made generally available to the public; each selling Holder
of such Registrable Notes and each such Participating Broker-Dealer will be
required to agree in writing that Records and information obtained by it as a
result of such inspections shall be deemed confidential and shall not be used by
it as the basis for any market transactions in the securities of the Company
unless and until such is made generally available to the public through no fault
of an Inspector or a selling Holder; and each selling Holder of such Registrable
Notes and each such Participating Broker-Dealer will be required to further
agree in writing that it will, upon learning that disclosure of such Records or
information is sought in a court of competent jurisdiction, or in connection
with any action, suit or proceeding, give notice to the Company and allow the
Company at its expense to undertake appropriate action to prevent disclosure of
the Records and information deemed confidential;

         (q) comply with all applicable rules and regulations of the SEC so long
as any provision of this Agreement shall be applicable and make generally
available to its security holders earning statements satisfying the provisions
of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar
rule promulgated under the Securities Act) no later than 45 calendar days after
the end of any 12-month period (or 90 calendar days after the end of any
12-month period if such period is a fiscal year) (i) commencing at the end of
any fiscal quarter in which Registrable Notes are sold to underwriters in a firm
commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of a Registration
Statement, which statements shall cover said 12-month periods, provided that the
obligations under this paragraph (q) shall be satisfied by the timely filing of
quarterly and annual reports on Forms 10-Q and 10-K under the Exchange Act;

         (r) if an Exchange Offer is to be consummated, upon delivery of the
Registrable Notes by Holders to the Company (or to such other Person as directed
by the Company), in exchange for the Exchange Notes, the Company shall mark, or
cause to be marked, on such

                                       14
<PAGE>

Notes delivered by such Holders that such Notes are being cancelled in exchange
for the Exchange Notes; it being understood that in no event shall such Notes be
marked as paid or otherwise satisfied;

         (s) cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in connection
with any filings required to be made with the NASD;

         (t) prior to issuing the Exchange Notes, obtain all regulatory and
governmental approvals necessary for the issuance of the Exchange Notes,
including, without limitation, any required orders or consents of the Public
Utility Commission of Texas or under the Public Utility Holding Company Act of
1935 pertaining to the Company's capital structure;

         (u) take all other steps necessary to effect the registration of the
Registrable Notes covered by a Registration Statement contemplated hereby; and

         (v) (A) in the case of the Exchange Offer Registration Statement (i)
include in the Exchange Offer Registration Statement a section entitled "Plan of
Distribution," which section shall be reasonably acceptable to the Initial
Purchasers or another representative of the Participating Broker-Dealers, and
which shall contain a summary statement of the positions taken or policies made
by the staff of the SEC with respect to the potential "underwriter" status of
any broker-dealer that holds Registrable Notes acquired for its own account as a
result of market-making activities or other trading activities (a "PARTICIPATING
BROKER-DEALER") and that will be the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of Exchange Notes to be received by such broker-dealer
in the Exchange Offer, whether such positions or policies have been publicly
disseminated by the staff of the SEC or such positions or policies, in the
reasonable judgment of the Initial Purchasers or such other representative,
represent the prevailing views of the staff of the SEC, including a statement
that any such broker-dealer who receives Exchange Notes for Registrable Notes
pursuant to the Exchange Offer may be deemed a statutory underwriter and must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes, (ii) furnish to each
Participating Broker-Dealer who has delivered to the Company the notice referred
to in Section 3(g), without charge, as many copies of each Prospectus included
in the Exchange Offer Registration Statement, including any preliminary
Prospectus, and any amendment or supplement thereto, as such Participating
Broker-Dealer may reasonably request (the Company hereby consents to the use of
the Prospectus forming part of the Exchange Offer Registration Statement or any
amendment or supplement thereto by any Person subject to the prospectus delivery
requirements of the Securities Act, including all Participating Broker-Dealers,
in connection with the sale or transfer of the Exchange Notes covered by the
Prospectus or any amendment or supplement thereto), (iii) use its reasonable
best efforts to keep the Exchange Offer Registration Statement effective and to
amend and supplement the Prospectus contained therein in order to permit such
Prospectus to be lawfully delivered by all Persons subject to the prospectus
delivery requirements of the Securities Act for such period of time as such
Persons must comply with such requirements under the Securities Act and
applicable rules and regulations in order to resell the Exchange Notes;
PROVIDED, HOWEVER, that such period shall not be required to exceed 210 days (or
such longer period if extended pursuant to the last sentence of Section 3
hereof) (the "APPLICABLE PERIOD"), and (iv) include in the transmittal letter or
similar documentation to

                                       15
<PAGE>

be executed by an exchange offeree in order to participate in the Exchange Offer
(x) the following provision:

                  "If the exchange offeree is a broker-dealer holding
                  Registrable Notes acquired for its own account as a result of
                  market-making activities or other trading activities, it will
                  deliver a prospectus meeting the requirements of the
                  Securities Act in connection with any resale of Exchange Notes
                  received in respect of such Registrable Notes pursuant to the
                  Exchange Offer";

         and (y) a statement to the effect that by a Participating Broker-Dealer
         making the acknowledgment described in clause (x) and by delivering a
         Prospectus in connection with the exchange of Registrable Notes, the
         Participating Broker-Dealer will not be deemed to admit that it is an
         underwriter within the meaning of the Securities Act; and

         (B) in the case of any Exchange Offer Registration Statement, the
         Company agrees to deliver to the Initial Purchasers or to another
         representative of the Participating Broker-Dealers, if reasonably
         requested by an Initial Purchaser or such other representative of
         Participating Broker-Dealers, on behalf of the Participating
         Broker-Dealers upon consummation of the Exchange Offer (i) an opinion
         of counsel in form and substance reasonably satisfactory to such
         Initial Purchaser or such other representative of the Participating
         Broker-Dealers, covering the matters customarily covered in opinions
         requested in connection with Exchange Offer Registration Statements and
         such other matters as may be reasonably requested (it being agreed that
         the matters to be covered by such opinion may be subject to customary
         qualifications and exceptions), (ii) an officer's certificate
         substantially similar to that specified in Section 7(h) of the Purchase
         Agreement and such additional certifications as are customarily
         delivered in a public offering of debt Notes and (iii) upon the
         effectiveness of the Exchange Offer Registration Statement, comfort
         letters, in each case, in customary form if permitted by Statement on
         Auditing Standards No. 72.

         The Company may require each seller of Registrable Notes as to which
any registration is being effected to furnish to the Company such information
regarding such seller as may be required by the staff of the SEC to be included
in a Registration Statement. The Company may exclude from such registration the
Registrable Notes of any seller who unreasonably fails to furnish such
information within a reasonable time after receiving such request. The Company
shall have no obligation to register under the Securities Act the Registrable
Notes of a seller who so fails to furnish such information and, notwithstanding
anything to the contrary herein, no Special Interest Premium shall accrue on any
such Registrable Notes.

         In the case of a Shelf Registration Statement, or if Participating
Broker-Dealers who have notified the Company that they will be utilizing the
Prospectus contained in the Exchange Offer Registration Statement as provided in
this Section 3(v) are seeking to sell Exchange Notes and are required to deliver
Prospectuses, each Holder agrees that, upon receipt of any notice from the
Company of the occurrence of any event specified in Section 3(g)(ii), 3(g)(iii),
3(g)(v) or 3(g)(vi) hereof, such Holder will forthwith discontinue disposition
of

                                       16
<PAGE>

Registrable Notes pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(k) hereof or until it is advised in writing (the "ADVICE") by the
Company that the use of the applicable Prospectus may be resumed, and, if so
directed by the Company, such Holder will deliver to the Company (at the
Company's expense) all copies in such Holder's possession, other than permanent
file copies then in such Holder's possession, of the Prospectus covering such
Registrable Notes or Exchange Notes, as the case may be, current at the time of
receipt of such notice. If the Company shall give any such notice to suspend the
disposition of Registrable Notes or Exchange Notes, as the case may be, pursuant
to a Registration Statement, the Company shall use its reasonable best efforts
to file and have declared effective (if an amendment), as soon as practicable
after the resolution of the related matters, an amendment or supplement to the
Registration Statement and shall extend the period during which such
Registration Statement is required to be maintained effective and the Prospectus
usable for resales pursuant to this Agreement by the number of days in the
period from and including the date of the giving of such notice to and including
the date when the Company shall have made available to the Holders (x) copies of
the supplemented or amended Prospectus necessary to resume such dispositions or
(y) the Advice.

         4. INDEMNIFICATION AND CONTRIBUTION. (b) In connection with a Shelf
Registration Statement or in connection with any delivery of a Prospectus
contained in an Exchange Offer Registration Statement by any Participating
Broker-Dealer or Initial Purchaser, as applicable, who seeks to sell Exchange
Notes, to the extent permitted by law, the Company shall indemnify and hold
harmless each Holder of Registrable Notes included within any such Shelf
Registration Statement and each Participating Broker-Dealer or Initial Purchaser
selling Exchange Notes, its officers and directors and each Person, if any, who
controls any such Person within the meaning of Section 15 of the Securities Act,
against any and all losses, claims, damages or liabilities, joint or several, to
which you, they or any of you or them may become subject under the Exchange Act
or otherwise, and to reimburse you and such controlling person or persons, if
any, for any legal or other expenses incurred by you or them in connection with
defending any action, insofar as such losses, claims, damages, liabilities or
actions arise out of or are based upon any alleged untrue statement or untrue
statement of a material fact contained in any Registration Statement or in any
Prospectus, or if the Company shall furnish or cause to be furnished to you any
amendments or any supplements to any Prospectus, in any Prospectus covering
Registrable Notes or Exchange Notes, as applicable, as so amended or
supplemented, or arise out of or are based upon any alleged omission or omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities or actions arise out of or are based upon any such
alleged untrue statement or omission, or untrue statement or omission which was
made in a Registration Statement or in a Prospectus, or in such Prospectus as so
amended or supplemented, in reliance upon and in conformity with information
furnished in writing to the Company by or through any Initial Purchaser or
Participating Broker-Dealer expressly for use therein or with any statements in
or omissions from that part of the Registration Statement that shall constitute
the Statement of Eligibility under the Trust Indenture Act of any indenture
trustee under an indenture of the Company, and except that this indemnity shall
not inure to the benefit of any Participating Broker-Dealer and Initial
Purchaser (or of any person controlling any Initial Purchaser or Participating
Broker-Dealer) on account of any losses, claims, damages, liabilities or actions
arising from the sale of the Notes to any person if such loss arises from the
fact that a copy of the Prospectus, as the same may then be supplemented or
amended to the extent such Prospectus was

                                       17
<PAGE>

provided to such Initial Purchaser or Participating Broker-Dealer by the Company
(excluding, however, any document then incorporated or deemed incorporated
therein by reference), was not sent or given by such Initial Purchaser or
Participating Broker-Dealer to such person with or prior to the written
confirmation of the sale involved and the alleged omission or alleged untrue
statement or omission or untrue statement was corrected in the Prospectus as
supplemented or amended at the time of such confirmation, and such Prospectus,
as amended or supplemented, was timely delivered to such Initial Purchaser or
Participating Broker-Dealer by the Company. Each Initial Purchaser or
Participating Broker-Dealer agrees promptly after the receipt by such Initial
Purchaser or Participating Broker-Dealer of written notice of the commencement
of any action in respect to which indemnity from the Company on account of its
agreement contained in this Section 4(a) may be sought by such Initial Purchaser
or Participating Broker-Dealer, or by any person controlling such Initial
Purchaser or Participating Broker-Dealer, to notify the Company in writing of
the commencement thereof, but the omission so to notify the Company of any such
action shall not release the Company from any liability which it may have to
such Initial Purchaser or Participating Broker-Dealer or to such controlling
person otherwise than on account of the indemnity agreement contained in this
Section 4(a). In case any such action shall be brought against any Initial
Purchaser or Participating Broker-Dealer or any such person controlling any
Initial Purchaser or Participating Broker-Dealer or such Initial Purchaser or
Participating Broker-Dealer shall notify the Company of the commencement
thereof, as above provided, the Company shall be entitled to participate in,
and, to the extent that it shall wish, including the selection for counsel (such
counsel to be reasonably acceptable to the indemnified party), to direct the
defense thereof at its own expense. In case the Company elects to direct such
defense and selects such counsel (hereinafter, Company's counsel), such Initial
Purchaser or Participating Broker-Dealer or any controlling person shall have
the right to employ its own counsel, but in any such case, the fees and expenses
of such counsel shall be at the expense of such Initial Purchaser or
Participating Broker-Dealer or controlling person unless (i) the Company has
agreed in writing to pay such fees and expenses or (ii) the named parties to any
such action (including any impleaded parties) include both such Initial
Purchaser or Participating Broker-Dealer or any controlling person and the
Company and such Initial Purchaser or Participating Broker-Dealer or any
controlling person shall have been advised by its counsel that a conflict of
interest between the Company and such Initial Purchaser or Participating
Broker-Dealer or any controlling person may arise (and the Company's counsel
shall have concurred in good faith with such advice) and for this reason it is
not desirable for the Company's counsel to represent both the indemnifying party
and the indemnified party (it being understood, however, that the Company shall
not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for such Initial Purchaser
or Participating Broker-Dealer or any controlling person (plus any local counsel
retained by such Initial Purchaser or Participating Broker-Dealer or any
controlling person in their reasonable judgment), which firm (or firms) shall be
designated in writing by such Initial Purchaser or Participating Broker-Dealer
or any controlling person).

         (b) Each Initial Purchaser or Participating Broker-Dealer agrees, to
the extent permitted by law, severally and not jointly, to indemnify, hold
harmless and reimburse the Company, its directors and such of its officers as
shall have signed any Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act, to
the same extent and upon the same terms as the indemnity agreement of the

                                       18
<PAGE>

Company set forth in Section 4(a) hereof , but only with respect to untrue
statements or alleged untrue statements or omissions or alleged omissions made
in a Registration Statement, or in a Prospectus, or in such Prospectus as
amended or supplemented, in reliance upon and in conformity with information
furnished in writing to the Company by an Initial Purchaser or Participating
Broker-Dealer expressly for use therein. The Company agrees promptly after the
receipt by it of written notice of the commencement of any action in respect to
which indemnity from such Initial Purchaser or Participating Broker-Dealer on
account of your agreement contained in this Section 4(b) may be sought by the
Company, or by any person controlling the Company, to notify such Initial
Purchaser or Participating Broker-Dealer in writing of the commencement thereof,
but the Company's omission so to notify such Initial Purchaser or Participating
Broker-Dealer of any such action shall not release such Initial Purchaser or
Participating Broker-Dealer from any liability which you may have to the Company
or to such controlling person otherwise than on account of the indemnity
agreement contained in this Section 4(b).

         (c) If recovery is not available or insufficient under Section 4(a) or
4(b) hereof for any reason other than as specified therein, the indemnified
party shall be entitled to contribution for any and all losses, claims, damages,
liabilities and expenses for which such indemnification is so unavailable or
insufficient under this Section 4(c). In determining the amount of contribution
to which such indemnified party is entitled, there shall be considered the
portion of the proceeds of the offering of the Notes realized, the relative
knowledge and access to information concerning the matter with respect to which
the claim was asserted, the opportunity to correct and prevent any statement or
omission, and any equitable considerations appropriate under the circumstances.
The Company and the Holders agree that it would not be equitable if the amount
of such contribution were determined by pro rata or per capita allocation (even
if the Holders were treated as one entity for such purpose) without reference to
the considerations called for in the previous sentence. No Initial Purchaser or
Participating Broker-Dealer or any person controlling such Initial Purchaser or
Participating Broker-Dealer shall be obligated to contribute any amount or
amounts hereunder which in the aggregate exceed the total price of the Notes
purchased by such Initial Purchaser or Participating Broker-Dealer less the
aggregate amount of any damages which such Initial Purchaser or Participating
Broker-Dealer and its controlling persons have otherwise been required to pay in
respect of the same claim or any substantially similar claim. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. An Initial Purchaser's or
Participating Broker-Dealer's obligation to contribute under this Section 4 is
in proportion to its purchase obligations under the Purchase Agreement and not
joint with any other Initial Purchaser or Participating Broker-Dealer.

         (d) No indemnifying party shall, without the prior written consent of
the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which contribution could be sought under this Section 4
(whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding

                                       19
<PAGE>

or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of such indemnified party.

         (e) In no event shall any indemnifying party shall have any liability
or responsibility in respect of the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim effected without its prior written consent.

         The agreements contained in this Section 4 hereof shall remain in full
force and effect regardless of any investigation made by or on behalf of any
Person.

         5. PARTICIPATION IN AN UNDERWRITTEN REGISTRATION. No Holder may
participate in an underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's Registrable Notes on the basis provided in the
underwriting arrangement approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lock-up letters and
other documents reasonably required under the terms of such underwriting
arrangements.

         6. SELECTION OF UNDERWRITERS. The Holders of Registrable Notes covered
by the Shelf Registration Statement who desire to do so may sell the Notes
covered by such Shelf Registration in an underwritten offering, subject to the
provisions of Section 3(l) hereof. In any such underwritten offering, the
underwriter or underwriters and manager or managers that will administer the
offering will be selected by the Holders of a majority in aggregate principal
amount of the Registrable Notes included in such offering; PROVIDED, HOWEVER,
that such underwriters and managers must be reasonably satisfactory to the
Company.

         7. MISCELLANEOUS.

         (a) RULE 144 AND RULE 144A. For so long as the Company is subject to
the reporting requirements of Section 13 or 15 of the Exchange Act and any
Registrable Notes remain outstanding, the Company will file the reports required
to be filed by it under the Securities Act and Section 13(a) or 15(d) of the
Exchange Act and the rules and regulations adopted by the SEC thereunder;
PROVIDED, HOWEVER, that if the Company ceases to be so required to file such
reports, it will, upon the request of any Holder of Registrable Notes, (a) make
publicly available such information as is necessary to permit sales of its
securities pursuant to Rule 144 under the Securities Act, (b) deliver such
information to a prospective purchaser as is necessary to permit sales of its
securities pursuant to Rule 144A under the Securities Act, and (c) take such
further action that is reasonable in the circumstances, in each case, to the
extent required from time to time to enable such Holder to sell its Registrable
Notes without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 under the Securities Act, as such rule may
be amended from time to time, (ii) Rule 144A under the Securities Act, as such
rule may be amended from time to time, or (iii) any similar rules or regulations
hereafter adopted by the SEC. Upon the request of any Holder of Registrable
Notes, the Company will deliver to such Holder a written statement as to whether
it has complied with such requirements.

                                       20
<PAGE>

         (b) NO INCONSISTENT AGREEMENTS. The Company has not entered into, nor
will the Company on or after the date of this Agreement enter into, any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Notes in this Agreement or otherwise conflicts with the provisions
hereof without the written consent of Holders of a majority in aggregate
principal amount of the outstanding Registrable Notes. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's other issued and outstanding
securities under any such agreements.

         (c) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the Company has obtained the written consent of Holders of a
majority in aggregate principal amount of the outstanding Registrable Notes
affected by such amendment, modification, supplement, waiver or departure;
PROVIDED that no amendment, modification or supplement or waiver or consent to
the departure with respect to the provisions of Section 4 hereof shall be
effective as against any Holder of Registrable Notes unless consented to in
writing by such Holder of Registrable Notes. Notwithstanding the foregoing
sentence, (i) this Agreement may be amended, without the consent of any Holder
of Registrable Notes, by written agreement signed by the Company and the
Representatives, to cure any ambiguity, correct or supplement any provision of
this Agreement that may be inconsistent with any other provision of this
Agreement or to make any other provisions with respect to matters or questions
arising under this Agreement which shall not be inconsistent with other
provisions of this Agreement, (ii) this Agreement may be amended, modified or
supplemented, and waivers and consents to departures from the provisions hereof
may be given, by written agreement signed by the Company and the Representatives
to the extent that any such amendment, modification, supplement, waiver or
consent is, in their reasonable judgment, necessary or appropriate to comply
with applicable law and regulation (including any interpretation of the Staff of
the SEC) or any change therein and (iii) to the extent any provision of this
Agreement relates to an Initial Purchaser, such provision may be amended,
modified or supplemented, and waivers or consents to departures from such
provisions may be given, by written agreement signed by such Initial Purchaser
and the Company.

         (d) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 7(d), which address initially is, with respect to the Initial
Purchasers:

                  Lehman Brothers Inc.
                  745 Seventh Avenue
                  New York, NY 10019
                  Attention:  Debt Capital Markets Group

                  Salomon Smith Barney Inc.
                  388 Greenwich Street
                  New York, NY  10013
                  Attention:  Henry A. Clark III

                                       21
<PAGE>

and (ii) if to the Company, initially at the Company's address:

                  AEP Texas North Company
                  c/o American Electric Power Service Corporation
                  1 Riverside Plaza
                  Columbus, OH  43215
                  Attn:  A.A. Pena, Treasurer

and thereafter at such other address, notice of which is given in accordance
with the provisions of this Section 7(d).

         All such notices and communications shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; five Business Days
after being deposited in the mail, postage prepaid, if mailed; when answered
back, if telexed; when receipt is acknowledged, if telecopied; and on the next
Business Day, if timely delivered to an air courier guaranteeing overnight
delivery.

         Copies of all such notices, demands, or other communications shall be
concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.

         (e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors, assigns and transferees of the Initial
Purchasers, including, without limitation and without the need for an express
assignment, subsequent Holders; PROVIDED, HOWEVER, that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Notes in violation of the terms of the Purchase Agreement or the Indenture. If
any transferee of any Holder shall acquire Registrable Notes in any manner,
whether by operation of law or otherwise, such Registrable Notes shall be held
subject to all of the terms of this Agreement, and by taking and holding such
Registrable Notes, such Person shall be conclusively deemed to have agreed to be
bound by and to perform all of the terms and provisions of this Agreement and
such Person shall be entitled to receive the benefits hereof.

         (f) THIRD PARTY BENEFICIARIES. Each Holder of Registrable Notes and
Exchange Notes and any Participating Broker-Dealer shall be third party
beneficiaries of the agreements made hereunder among the Initial Purchasers and
the Company, and the Initial Purchasers shall have the right to enforce such
agreements directly to the extent it deems such enforcement necessary or
advisable to protect its rights or the rights of such holders hereunder.

         (g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

         (h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

         (i) GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE IN
THE STATE OF NEW YORK. THE VALIDITY AND

                                       22
<PAGE>

INTERPRETATION OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN,
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.

         (j) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.

         (k) NOTES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the consent
or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Company or its Affiliates
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.

                                       23
<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

                                             AEP TEXAS NORTH COMPANY

                                             By:      /s/ SUSAN TOMASKY
                                                      --------------------------
                                                      Name:  Susan Tomasky
                                                      Title:    Vice President

Confirmed and accepted as of the date first above written:

For themselves and as Representative of the
several Initial Purchasers

LEHMAN BROTHERS INC.

By:__/s/ Gregory J. Hall_____
     Name:  Gregory J. Hall
     Title: Managing Director

SALOMON SMITH BARNEY INC.

By:__/s/ Yukari Saegusa_______
     Name:  Yukari Saegusa
     Title: Vice President

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