Supplemental Indenture No. 1 dated as of March 30, 2005



 Exhibit 10.3 
  
 PNM RESOURCES, INC. 
  
 AND 
  
 JPMORGAN CHASE BANK, N.A., 
  
 as Trustee 
  
 SUPPLEMENTAL INDENTURE NO. 1 
  
 Dated as of
March 30, 2005 







 THIS SUPPLEMENTAL INDENTURE No. 1 (this “Supplemental Indenture No. 1”), dated as of
March 30, 2005, is between PNM RESOURCES, INC., a New Mexico corporation (the “Company”), and JPMORGAN CHASE BANK, N.A., a national banking association, as trustee (the “Trustee”). 
  
 R E C I T A L S 
  
 WHEREAS, the Company has executed and delivered to the Trustee an Indenture dated as of March 15, 2005, between the Company
and the Trustee (the “Base Indenture” and, together with this Supplemental Indenture No. 1, the “Indenture”), providing for the issuance from time to time of one or more series of the Company’s Notes;

  
 WHEREAS, Section 9.01(7) of the Base Indenture provides for
the Company and the Trustee to enter into an indenture supplemental to the Base Indenture without the consent of any Holders to establish the forms or terms of Notes of any series as permitted by Section 2.01 and Section 3.01 of the Base Indenture;

  
 WHEREAS, pursuant to Section 3.01 of the Base Indenture, the
Company wishes to provide for the issuance of a new series of Notes to be known as its Senior Notes, Series A (the “Senior Notes”), the form and terms of such Senior Notes and the terms, provisions and conditions thereof to be set
forth as provided in this Supplemental Indenture No. 1; and 
  
 WHEREAS, the Company has requested that the Trustee execute and deliver this Supplemental Indenture No. 1, and all requirements necessary to make this Supplemental Indenture No. 1 a valid, binding and enforceable instrument in accordance
with its terms, and to make the Senior Notes, when executed by the Company and authenticated and delivered by the Trustee, the valid, binding and enforceable obligations of the Company, have been done and performed, and the execution and delivery of
this Supplemental Indenture No. 1 has been duly authorized in all respects; 
  
 NOW, THEREFORE, in consideration of the covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows: 
  
 ARTICLE 1 
 Definitions 
  
 Section 1.01 Relation to Base Indenture. This Supplemental Indenture No. 1 constitutes an integral part of the Base Indenture. 
  
 Section 1.02 Definition of Terms. For all purposes of this
Supplemental Indenture No. 1: 
  
 (a) Capitalized terms used
herein without definition shall have the meanings set forth in the Base Indenture, or, if not defined in the Base Indenture, in the Purchase Contract and Pledge Agreement or the Remarketing Agreement; 
  

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 (b) a term defined anywhere in this Supplemental Indenture No. 1 has the same meaning throughout;

  
 (c) the singular includes the plural and vice versa;

  
 (d) headings are for convenience of reference only and do not
affect interpretation; 
  
 (e) the following terms have the
meanings given to them in this Section 1.02(e): 
  
 “Accounting Event” means the receipt, at any time prior to the earlier of the date of a Successful Remarketing and the Purchase Contract Settlement Date, by the audit committee of the Board of Directors of a written report
in accordance with Statement on Auditing Standards (“SAS”) No. 97, “Amendment to SAS No. 50 — Reports on the Application of Accounting Principles”, from the Company’s independent auditors, provided at the request
of management of the Company, to the effect that, as a result of a change in accounting rules after the date of original issuance of the Senior Notes, the Company must either (a) account for the Purchase Contracts as derivatives under SFAS 133 (or
otherwise mark-to-market or measure the fair value of all or any portion of the Purchase Contracts with changes appearing in the Company’s income statement) or (b) account for the Units using the if-converted method under SFAS 128, and, in each
case, that such accounting treatment will cease to apply upon redemption of the Senior Notes. 
  
 “Applicable Ownership Interest in Senior Notes” has the meaning set forth in the Purchase Contract and Pledge Agreement. 
  
 “Applicable Principal Amount” means the aggregate principal amount of the Senior Notes underlying the
Applicable Ownership Interests in Senior Notes that are components of Corporate Units on the Special Event Redemption Date. 
  
 “Beneficial Owner” has the meaning set forth in the Purchase Contract and Pledge Agreement. 
  
 “Board of Directors” has the meaning set forth in the
Purchase Contract and Pledge Agreement. 
  
 “Business
Day” has the meaning set forth in the Purchase Contract and Pledge Agreement. 
  
 “Collateral Account” has the meaning set forth in the Purchase Contract and Pledge Agreement. 
  
 “Corporate Unit” has the meaning set forth in the Purchase Contract and Pledge Agreement. 
  
 “Coupon Rate” has the meaning set forth in Section 2.05(a).

  
 “Depositary” has the meaning set forth in the
Purchase Contract and Pledge Agreement. 
  

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 “Depositary Participant” has the meaning set forth in the Purchase Contract and Pledge
Agreement. 
  
 “Final Remarketing Date” has the
meaning set forth in the Purchase Contract and Pledge Agreement. 
  
 “Global Senior Notes” has the meaning set forth in Section 2.04. 
  
 “Interest Payment Date” means a Quarterly Interest Payment Date or a Semiannual Interest Payment Date. 
  
 “Interest Period” means, with respect to any Interest Payment Date, the period from and including the later of the immediately preceding
Interest Payment Date or March 30, 2005 to, but excluding, such Interest Payment Date. 
  
 “Maturity Date” has the meaning set forth in Section 2.02. 
  
 “Pledged Applicable Ownership Interests in Senior Notes” has the meaning set forth in the Purchase Contract and Pledge Agreement.

  
 “Purchase Contract and Pledge Agreement”
means the Purchase Contract and Pledge Agreement, dated as of March 30, 2005, among the Company, JPMorgan Chase Bank, N.A., as Purchase Contract Agent, and attorney-in-fact for Holders of the Purchase Contracts, and U.S. Bank Trust National
Association, as Collateral Agent, Custodial Agent and Securities Intermediary, as amended from time to time. 
  
 “Purchase Contract Settlement Date” has the meaning set forth in the Purchase Contract and Pledge Agreement. 
  
 “Put Price” has the meaning set forth in Section 8.05(a).

  
 “Put Right” has the meaning set forth in
Section 8.05(a). 
  
 “Quarterly Interest Payment
Date” has the meaning set forth in Section 2.05(b)(i). 
  
 “Quotation Agent” means any primary U.S. government securities dealer selected by the Company. 
  
 “Record Date” means, with respect to any Interest Payment Date, the first day of the calendar month in which such Interest Payment Date
falls (whether or not a Business Day). 
  
 “Redemption
Amount” means, for each Senior Note, an amount equal to the product of the principal amount of such Senior Note and a fraction, the numerator of which is the Treasury Portfolio Purchase Price and the denominator of which is the Applicable
Principal Amount; provided that in no event shall the Redemption Amount for any Senior Note be less than the principal amount of such Senior Note. 
  

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 “Redemption Price” shall mean, for each Senior Note, the Redemption Amount plus any
accrued and unpaid interest on such Senior Note to, but excluding, the Special Event Redemption Date. 
  
 “Remarketed Senior Notes” has the meaning set forth in the Remarketing Agreement. 
  
 “Remarketing Agent” means Banc of America Securities LLC, or
any successor thereto or replacement Remarketing Agent appointed by the Company pursuant to the Remarketing Agreement. 
  
 “Remarketing Agreement” means the Remarketing Agreement, dated as of March 30, 2005, among the Company, the Remarketing Agent and
JPMorgan Chase Bank, N.A., as Purchase Contract Agent, as amended from time to time. 
  
 “Remarketing Fee” has the meaning set forth in the Remarketing Agreement. 
  
 “Remarketing Price” has the meaning set forth in the Purchase Contract and Pledge Agreement. 
  
 “Reset Rate” has the meaning set forth in the Remarketing
Agreement. 
  
 “Semiannual Interest Payment Date”
has the meaning set forth in Section 2.05(b)(ii). 
  
 “Separate Senior Notes” has the meaning set forth in the Purchase Contract and Pledge Agreement. 
  
 “Special Event” shall mean either a Tax Event or an Accounting Event. 
  
 “Special Event Redemption” means the redemption of the Senior Notes pursuant to the terms of Article 3
hereof following the occurrence of a Special Event. 
  
 “Special Event Redemption Date” has the meaning set forth in Section 3.01. 
  
 “Tax Event” means the receipt by the Company of an opinion of counsel, rendered by a law firm having a recognized national tax practice,
at any time prior to the earlier of the date of a Successful Remarketing and the Purchase Contract Settlement Date, to the effect that, as a result of any amendment to, change in or announced proposed change in the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative decision, pronouncement, judicial decision or action interpreting or applying such laws or
regulations, which amendment or change is effective or which proposed change, pronouncement, action or decision is announced on or after the date of original issuance of the Senior Notes, there is more than an insubstantial increase in the risk that
interest payable by the Company on the Senior Notes is not, or within 90 days of the date of such opinion, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes. 
  
 “Termination Event” has the meaning set forth in the
Purchase Contract and Pledge Agreement. 
  

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 “Treasury Portfolio” means a portfolio of U.S. Treasury securities (or principal or
interest strips thereof) that mature on or prior to May 15, 2008 in an aggregate amount at maturity equal to the Applicable Principal Amount and with respect to each scheduled Interest Payment Date on the Senior Notes that occurs after the Special
Event Redemption Date, to and including the Purchase Contract Settlement Date, U.S. Treasury securities (or principal or interest strips thereof) that mature on or prior to the Business Day immediately preceding such scheduled Interest Payment Date
in an aggregate amount at maturity equal to the aggregate interest payment (assuming no reset of the interest rate) that would be due on the Applicable Principal Amount of the Senior Notes on such date. 
  
 “Treasury Portfolio Purchase Price” means the lowest
aggregate ask-side price quoted by a primary U.S. government securities dealer to the Quotation Agent between 9:00 a.m. and 11:00 a.m., New York City time, on the third Business Day immediately preceding the Special Event Redemption Date for the
purchase of the Treasury Portfolio for settlement on the Special Event Redemption Date. 
  
 “Treasury Unit” has the meaning set forth in the Purchase Contract and Pledge Agreement. 
  
 The terms “Company,” “Trustee,” “Indenture,” “Base Indenture” and “Senior
Notes” shall have the respective meanings set forth in the recitals to this Supplemental Indenture No. 1 and the paragraph preceding such recitals. 
  
 ARTICLE 2 
 General Terms and Conditions of
the Senior Notes 
  
 Section 2.01 Designation and Principal
Amount. There is hereby authorized a series of Notes designated as Senior Notes, Series A limited in aggregate principal amount to $215,000,000 (or $247,250,000, if the Underwriters’ option under the Underwriting Agreement is exercised in
full). The Senior Notes may be issued from time to time upon the execution and delivery of a Company Order for the authentication and delivery of Senior Notes pursuant to Section 3.03 of the Base Indenture and upon the satisfaction of the other
conditions set forth in such Section 3.03. 
  
 Section 2.02
Maturity. Unless a Special Event Redemption occurs prior to the Maturity Date, the date upon which the Senior Notes shall become due and payable at final maturity, together with any accrued and unpaid interest thereon, is May 16, 2010 (the
“Maturity Date”); provided that the Company may extend the Maturity Date in connection with a Successful Remarketing, but in no event to a date later than May 16, 2038. In the event of such an extension, the term
“Maturity Date” shall mean such date as specified by the Company in connection therewith in an Officers’ Certificate delivered to the Trustee. Such extension shall apply to all Senior Notes, whether or not participating in the
Remarketing. 
  
 Section 2.03 Form, Payment and
Appointment. Except as provided in Section 2.04, the Senior Notes shall be issued in fully registered, certificated form, bearing identical terms. Principal of and interest on the Senior Notes will be payable, the transfer of such Senior Notes
will be registrable, and such Senior Notes will be exchangeable for Senior Notes of a like 

  

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aggregate principal amount bearing identical terms and provisions, at the office or agency of the Company maintained for such purpose in the Borough of
Manhattan, The City of New York, which shall initially be the Corporate Trust Office of the Trustee; provided, however, that payment of interest may be made at the option of the Company by check mailed to the Person entitled thereto at
such address as shall appear in the Note Register or by wire transfer to an account appropriately designated by the Person entitled to payment by written notice given at least ten calendar days prior to the Interest Payment Date. 
  
 No service charge shall be made for any registration of transfer or exchange
of the Senior Notes, but the Company may require payment from the holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. 
  
 The Note Registrar and Paying Agent for the Senior Notes shall initially be the Trustee. 
  
 The Senior Notes shall be issuable in denominations of $1,000 and integral
multiples of $1,000 in excess thereof; provided, however, that upon the release by the Collateral Agent of Senior Notes underlying the Pledged Applicable Ownership Interests in Senior Notes (other than any release of Senior Notes underlying Pledged
Applicable Ownership Interests in Senior Notes in connection with (i) the creation of Treasury Units by Collateral Substitution, (ii) a Successful Remarketing, (iii) a Failed Final Remarketing, (iv) Cash Merger Early Settlement, (v) Early Settlement
or (vi) Cash Settlement, in accordance with Section 3.13, Section 5.02(b)(iv), Section 5.02(b)(v), Section 5.04, Section 5.07 or Section 5.02(a) of the Purchase Contract and Pledge Agreement, as the case may be), the Senior Notes shall be issuable
in denominations of $50 and integral multiples of $50 in excess thereof, and the Company shall issue Senior Notes in any such denominations if requested by the Purchase Contract Agent on behalf of any Holder or Beneficial Owner. 
  
 Section 2.04 Global Senior Notes. Senior Notes corresponding to
Applicable Ownership Interests in Senior Notes that are no longer a component of the Corporate Units and are released from the Collateral Account will be issued in the form of a Global Note (a “Global Senior Note”), and, if issued
as one or more Global Senior Notes, the Depositary shall be The Depository Trust Company or such other depositary as any officer of the Company may from time to time designate. Upon the creation of Treasury Units, the re-creation of Corporate Units,
a Successful Remarketing, a Cash Merger Early Settlement, an Early Settlement, a Cash Settlement, a Termination Event or a settlement of Purchase Contracts with separate cash if there has been a Failed Final Remarketing, an appropriate annotation
shall be made on the Schedule of Increases and Decreases on the Global Senior Notes held by the Depositary. Unless and until such Global Senior Note is exchanged for Senior Notes in certificated form, Global Senior Notes may be transferred, in whole
but not in part, and any payments on the Senior Notes shall be made, only to the Depositary or a nominee of the Depositary, or to a successor Depositary selected or approved by the Company or to a nominee of such successor Depositary. 
  
 Section 2.05 Interest. (a) The Senior Notes will bear interest
initially at the rate of 4.80% per year (the “Coupon Rate”) from and including March 30, 2005 to, but excluding, the Maturity Date, or in the event of a Successful Remarketing, the Purchase Contract Settlement Date. In the event of
a Successful Remarketing, the Coupon Rate will be reset by the Remarketing Agent to the Reset Rate with effect from the Purchase Contract Settlement Date, as 

  

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set forth in Section 8.03. If the Coupon Rate is so reset, the Senior Notes will bear interest at the Reset Rate from and including the Purchase Contract
Settlement Date to, but excluding, the Maturity Date. The Senior Notes shall bear interest, to the extent permitted by law, on any overdue principal and interest at the Coupon Rate, unless a Successful Remarketing shall have occurred, in which case
interest on such amounts shall accrue at the Reset Rate from and after the Purchase Contract Settlement Date, in each case, compounded quarterly through the Purchase Contract Settlement Date and compounded semi-annually, thereafter.

  
 (b) (i) Prior to and on the Purchase Contract Settlement Date,
interest on the Senior Notes shall be payable quarterly in arrears on February 16, May 16, August 16 and November 16 of each year (each, a “Quarterly Interest Payment Date”), commencing August 16, 2005, to the Person in whose name
the relevant Senior Notes are registered at the close of business on the Record Date for such Interest Payment Date. 
  
 (ii) After the Purchase Contract Settlement Date, interest on the Senior Notes shall be payable semi-annually in arrears on May 16 and November 16 of each
year (each, a “Semiannual Interest Payment Date”), commencing November 16, 2008, to the Person in whose name the relevant Senior Notes are registered at the close of business on the Record Date for such Interest Payment Date.

  
 (c) The amount of interest payable for any full Interest
Period will be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of interest payable for any period shorter than a full Interest Period for which interest is computed will be computed on the basis of a 30-day
month and, for any period less than a month, on the basis of the actual number of days elapsed per 30-day month. In the event that any scheduled Interest Payment Date falls on a day that is not a Business Day, then payment of interest payable on
such Interest Payment Date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay). 
  
 Section 2.06 No Defeasance. Article XIII of the Base Indenture shall not apply to the Senior Notes. 
  
 Section 2.07 No Sinking Fund. The Senior Notes are not entitled to the
benefit of any sinking fund. 
  
 ARTICLE 3 
 Redemption of the Senior Notes 
  
 Section 3.01 Special Event Redemption. If a Special Event shall occur and be continuing, the Company may, at its option, redeem the Senior Notes in
whole, but not in part, on any Interest Payment Date prior to the earlier of the date of a Successful Remarketing and the Purchase Contract Settlement Date, at a price per Senior Note equal to the Redemption Price, payable on the date of redemption
(the “Special Event Redemption Date”) to the Person in whose name the relevant Senior Notes are registered at the opening of business on the Special Event Redemption Date. 
  
 Section 3.02 Notice of Redemption. If the Company so elects to redeem
the Senior Notes, the Company shall appoint the Quotation Agent to assist the Company in determining the 

  

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Treasury Portfolio Purchase Price. Notice of any Special Event Redemption will be mailed by the Company (with a copy to the Trustee) at least 30 days but not
more than 60 days before the Special Event Redemption Date to each Person in whose name the Senior Notes are registered at its registered address. In addition, the Company shall notify the Collateral Agent in writing that a Special Event has
occurred and that the Company intends to redeem the Senior Notes on the Special Event Redemption Date. 
  
 Section 3.03 Effect of Redemption. Unless the Company defaults in the payment of the Redemption Price, on and after the Special Event Redemption
Date, (a) interest shall cease to accrue on the Senior Notes, (b) the Senior Notes shall become due and payable at the Redemption Price, and (c) the Senior Notes shall be void and all rights of the holders in respect of the Senior Notes shall
terminate and lapse (other than the right to receive the Redemption Price upon surrender of such Senior Notes but without interest on such Redemption Price). Following the notice of a Special Event Redemption, neither the Company nor the Trustee
shall be required to register the transfer of or exchange the Senior Notes to be redeemed. 
  
 Section 3.04 Redemption Procedures. On or prior to the Special Event Redemption Date, the Company shall deposit with the Trustee immediately available funds in an amount sufficient to pay, on the Special Event
Redemption Date, the aggregate Redemption Price for all outstanding Senior Notes. In exchange for any Senior Notes surrendered for redemption on or after the Special Event Redemption Date, the Trustee shall pay an amount equal to the Redemption
Price (a) to the Collateral Agent, in the case of Senior Notes that underlie the Applicable Ownership Interests in Senior Notes included in Corporate Units, which amount shall be applied by the Collateral Agent in accordance with the terms of the
Purchase Contract and Pledge Agreement, and (b) to the holders of the Separate Senior Notes, in the case of Separate Senior Notes. 
  
 Section 3.05 No Other Redemption. Except as set forth in this Article 3, the Senior Notes shall not be redeemable by the Company prior to the
Maturity Date. The provisions of this Article 3 shall supersede any conflicting provisions contained in Article XI of the Base Indenture. 
  
 ARTICLE 4 
 Form of Senior Note

  
 Section 4.01 Form of Senior Note. The Senior Notes and
the Trustee’s Certificate of Authentication to be endorsed thereon are to be substantially in the form attached as Exhibit A hereto, with such changes therein as the officers of the Company executing the Senior Notes (by manual or facsimile
signature) may approve, such approval to be conclusively evidenced by their execution thereof. 
  
 ARTICLE 5 
 Original Issue of Senior Notes 
  
 Section 5.01 Original Issue of Senior Notes. Senior Notes in the
aggregate principal amount of up to $247,250,000 may from time to time, upon execution of this Supplemental Indenture No. 1, be executed by the Company and delivered to the Trustee for authentication, 

  

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and the Trustee shall thereupon authenticate and deliver said Senior Notes upon the execution and delivery of a Company Order pursuant to Section 3.03 of the
Base Indenture, and upon the satisfaction of the other conditions set forth in such Section 3.03, without any further action by the Company (other than as required by the Base Indenture). 
  
 ARTICLE 6 
 Supplemental Indentures 
  
 Section 6.01
Supplemental Indentures with Consent of Holders of Senior Notes. As set forth in Section 9.02 of the Base Indenture, with the consent of the Holders of a majority in aggregate principal amount of Outstanding Senior Notes directly affected by
such supplemental indenture, the Company and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto or to the Base Indenture for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of the Base Indenture or this Supplemental Indenture or of modifying in any manner the rights of the Holders of the Senior Notes; provided, however, that, in addition to clauses (1) through (3) of Section
9.02 of the Base Indenture, no such indenture or supplemental indenture shall (a) reduce the Put Price, (b) change the exercise date of the Put Right, (c) modify the terms of the Put Right or (d) modify the interest rate reset or Remarketing
provisions of the Senior Notes, without, in the case of each of the foregoing clauses (a), (b), (c) and (d), the consent of the Holder of each Senior Note affected. 
  
 ARTICLE 7 
 Miscellaneous 
  
 Section 7.01 Ratification of
Indenture. The Indenture, as supplemented by this Supplemental Indenture No. 1, is in all respects ratified and confirmed, and this Supplemental Indenture No. 1 shall be deemed part of the Indenture in the manner and to the extent herein and
therein provided. 
  
 Section 7.02 Trustee Not Responsible for
Recitals. The recitals herein contained are made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representation as to the validity or sufficiency of this
Supplemental Indenture No. 1. 
  
 Section 7.03 New York Law To
Govern. THIS SUPPLEMENTAL INDENTURE NO. 1 AND EACH SENIOR NOTE SHALL BE DEEMED TO BE CONTRACTS MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO THE CONFLICTS OF LAW PROVISIONS THEREOF TO THE EXTENT A DIFFERENT LAW WOULD GOVERN AS A RESULT. 
  
 Section 7.04 Separability. In case any one or more of the provisions contained in this Supplemental Indenture or in the Senior Notes shall for any
reason be held to be invalid, illegal or unenforceable in any respect, then, to the extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provisions of this Supplemental Indenture No. 1 or of the Senior
Notes, but this Supplemental Indenture No. 1 and the Senior Notes shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein. 
  

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 Section 7.05 Counterparts. This Supplemental Indenture may be executed in any number of
counterparts each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. 
  
 ARTICLE 8 
 Remarketing 
  
 Section 8.01 Remarketing Procedures. (a) Unless a Special Event
Redemption or a Termination Event has occurred prior to the Initial Remarketing Date, the Company shall engage the Remarketing Agent pursuant to the Remarketing Agreement for the Remarketing of the Senior Notes. The Company will request, not later
than 20 Business Days prior to the Initial Remarketing Date, that the Depositary or its nominee notify the Beneficial Owners or Depositary Participants holding Separate Senior Notes, Corporate Units and Treasury Units of the procedures to be
followed in the Remarketing, including, in the case of a Failed Final Remarketing, the procedures that must be followed by a holder of Separate Senior Notes if such holder wishes to exercise its Put Right or by a holder of Applicable Ownership
Interests in Senior Notes if such Holder elects not to exercise its Put Right. 
  
 (b) Each holder of Separate Senior Notes may elect to have Separate Senior Notes held by such holder remarketed in any Remarketing. A holder making such an election must, pursuant to the Purchase Contract and Pledge
Agreement, notify the Custodial Agent and deliver such Separate Senior Notes to the Custodial Agent prior to 5:00 p.m., New York City time, on the seventh Business Day immediately preceding the Purchase Contract Settlement Date (but no earlier than
the Interest Payment Date immediately preceding the Initial Remarketing Date). Any such notice and delivery may not be conditioned upon the level at which the Reset Rate is established in the Remarketing. Any such notice and delivery may be
withdrawn prior to 5:00 p.m., New York City time, on the seventh Business Day immediately preceding the Purchase Contract Settlement Date in accordance with the provisions set forth in the Purchase Contract and Pledge Agreement. Any such notice and
delivery not withdrawn by such time will be irrevocable with respect to each Remarketing. Pursuant to Section 5.02 of the Purchase Contract and Pledge Agreement, promptly after 5:00 p.m., New York City time, on the sixth Business Day immediately
preceding the Purchase Contract Settlement Date, the Custodial Agent, based on the notices and deliveries received by it prior to such time, shall notify the Remarketing Agent of the aggregate principal amount of Separate Senior Notes tendered for
Remarketing and shall cause such Separate Senior Notes to be presented to the Remarketing Agent. Under Section 5.02 of the Purchase Contract and Pledge Agreement, Senior Notes that underlie Applicable Ownership Interests in Senior Notes included in
Corporate Units will be deemed tendered for Remarketing and will be remarketed in accordance with the terms of the Remarketing Agreement. 
  
 (c) The right of each holder of Remarketed Senior Notes to have such Senior Notes remarketed and sold on any Remarketing Date shall be subject to the
conditions that (i) the Remarketing Agent conducts a Remarketing pursuant to the terms of the Remarketing Agreement on such Remarketing Date, (ii) neither a Special Event Redemption nor a 

  

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Termination Event has occurred prior to such Remarketing Date, (iii) the Remarketing Agent is able to find a purchaser or purchasers for Remarketed Senior
Notes at the Remarketing Price based on the Reset Rate and (iv) the purchaser or purchasers of the Remarketed Senior Notes deliver the purchase price therefor to the Remarketing Agent as and when required. 
  
 (d) Neither the Trustee, the Company nor the Remarketing Agent shall be
obligated in any case to provide funds to make payment upon tender of Senior Notes for remarketing. 
  
 Section 8.02 Remarketing. (a) Unless a Special Event Redemption or a Termination Event has occurred prior to the Initial Remarketing Date, on the
Initial Remarketing Date, the Remarketing Agent shall, pursuant and subject to the terms of the Remarketing Agreement, use its reasonable efforts to remarket the Remarketed Senior Notes at the Remarketing Price. 
  
 (b) In the case of a Failed Remarketing on the Initial Remarketing Date, on
the Second Remarketing Date, the Remarketing Agent shall use its reasonable efforts to remarket the Remarketed Senior Notes at the Remarketing Price. In the case of a Failed Remarketing on the Second Remarketing Date, on the Final Remarketing Date,
the Remarketing Agent shall use its reasonable efforts to remarket the Remarketed Senior Notes at the Remarketing Price. It is understood and agreed that Remarketing on any Remarketing Date will be considered successful and no further attempts will
be made if the resulting proceeds are at least equal to the Remarketing Price. 
  
 Section 8.03 Reset Rate. (a) In connection with each Remarketing, the Remarketing Agent shall determine the Reset Rate (rounded to the nearest one-thousandth (0.001) of one percent per annum).

  
 (b) Anything herein to the contrary notwithstanding, the Reset
Rate shall in no event exceed the maximum rate permitted by applicable law. 
  
 (c) In the event of a Failed Remarketing or if no Applicable Ownership Interests in Senior Notes are included in Corporate Units and none of the holders of the Separate Senior Notes elect to have their Senior Notes
remarketed in any Remarketing, the applicable interest rate on the Senior Notes will not be reset and will continue to be the Coupon Rate. 
  
 (d) In the event of a Successful Remarketing, the Coupon Rate shall be reset on the Purchase Contract Settlement Date to the Reset Rate as determined by
the Remarketing Agent under the Remarketing Agreement, and the Company shall issue a press release promptly after such Successful Remarketing containing such Reset Rate and publish such information on its website. 
  
 Section 8.04 Failed Remarketing. If, by 4:00 p.m., New York City time,
on any Remarketing Date, the Remarketing Agent is unable to remarket all of the Remarketed Senior Notes at the Remarketing Price pursuant to the terms and conditions hereof and of the Remarketing Agreement, a Failed Remarketing shall be deemed to
have occurred. 
  
 Section 8.05 Put Right. (a) Subject to
paragraph (b) hereof, if there has not been a Successful Remarketing on or prior to the Final Remarketing Date, holders of Senior Notes will, 

  

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subject to this Section 8.05, have the right (the “Put Right”) to require the Company to purchase such Senior Notes on the Purchase Contract
Settlement Date, at a price per Senior Note to be purchased equal to the principal amount of the applicable Senior Note, plus accrued and unpaid interest to, but excluding, the Purchase Contract Settlement Date (the “Put
Price”). 
  
 (b) The Put Right of holders of
Applicable Ownership Interests in Senior Notes that are part of Corporate Units will be deemed to be automatically exercised unless such holders (1) prior to 5:00 p.m., New York City time, on the second Business Day immediately preceding the
Purchase Contract Settlement Date, provide written notice to the Purchase Contract Agent of their intention to settle the related Purchase Contract with separate cash, and (2) on or prior to 5:00 p.m., New York City time, on the Business Day
immediately preceding the Purchase Contract Settlement Date, deliver to the Collateral Agent $50 in cash per Purchase Contract, in each case pursuant to the terms and conditions of Section 5.02(b)(v) of the Purchase Contract and Pledge Agreement
with respect to such settlement, and such holders shall be deemed to have elected to pay the Purchase Price for the shares of Common Stock to be issued under the related Purchase Contract from a portion of the proceeds of the Put Right of the Senior
Notes underlying such Applicable Ownership Interests in Senior Notes equal to the Purchase Price in full satisfaction of such holders’ obligations under the Purchase Contracts, and any remaining amount of the Put Price following satisfaction of
the related Purchase Contracts will be paid to such holders. 
  
 (c) The Put Right of a holder of a Separate Senior Note shall only be exercisable upon delivery of a notice to the Trustee by such holder on or prior to the second Business Day immediately preceding the Purchase Contract Settlement Date. On
or prior to the Purchase Contract Settlement Date, the Company shall deposit with the Trustee immediately available funds in an amount sufficient to pay, on the Purchase Contract Settlement Date, the aggregate Put Price of all Separate Senior Notes
with respect to which a holder has exercised a Put Right. In exchange for any Separate Senior Notes surrendered pursuant to the Put Right, the Trustee shall then distribute such amount to the holders of such Separate Senior Notes. 
  
 Section 8.06 Additional Event of Default. In addition to the events
listed as Events of Default in Section 5.01 of the Base Indenture, it shall be an additional Event of Default with respect to the Senior Notes, if the Company defaults in the payment of the Put Price with respect to any Senior Note following the
exercise of the Put Right by any holder in accordance with Section 8.05. 
  
 ARTICLE 9 
 Tax Treatment 
  
 Section 9.01 Tax Treatment. The Company agrees, and by acceptance of a Corporate Unit or a Separate Senior Note, each holder will be deemed to have
agreed (1) for United States federal, state and local income and franchise tax purposes to treat the acquisition of a Corporate Unit as the acquisition of an Applicable Ownership Interest in Senior Notes and the Purchase Contract constituting the
Corporate Unit and (2) to treat the Applicable Ownership Interest in Senior Notes or Separate Senior Note, as the case may be, as indebtedness for United States federal, state and local income and franchise tax purposes. 
  

 13 








 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture No. 1 to be duly executed,
as of the day and year first written above. 
  

			
	PNM RESOURCES, INC.
		
	By:	 	 /s/ John R. Loyack


	Name:	 	John R. Loyack
	Title:	 	Senior Vice President and Chief
	 	 	Financial Officer
		
	By:	 	 /s/ T.R. Horn


	Name:	 	T. R. Horn
	Title:	 	Vice President and Treasurer
	
	JPMORGAN CHASE BANK, N.A., as Trustee
		
	By:	 	 /s/ Rosa Ciaccia


	Name:	 	Rosa Ciaccia
	Title:	 	Trust Officer


  

 14 








 EXHIBIT A 
  
 [IF THIS SENIOR NOTE IS TO BE A GLOBAL NOTE, INSERT:] 
  
 THIS SENIOR NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST
COMPANY OR A NOMINEE OF THE DEPOSITORY TRUST COMPANY. THIS SENIOR NOTE IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY TRUST COMPANY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TRUST COMPANY TO A NOMINEE OF THE DEPOSITORY TRUST COMPANY OR BY A NOMINEE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITORY TRUST COMPANY OR ANOTHER NOMINEE OF THE DEPOSITORY
TRUST COMPANY. 
  
 UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE
& CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. 
  
 PNM RESOURCES, INC. 
  
 Senior Note, Series A 
  
 CUSIP: 69349H AA
5                                        
     
 ISIN:
US69349HAA59                                      
       
  

			
	No.	 	$        

  
 PNM RESOURCES, INC., a
corporation organized and existing under the laws of New Mexico (hereinafter called 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, [Insert in certificated Senior Notes not part of Corporate Units -
             DOLLARS ($            )][Insert in Global Notes or certificated Senior Notes that are part
of Corporate Units - the principal sum as set forth in the Schedule of Increases or Decreases In Senior Note attached hereto], on May 16, 2010; provided that the Company may extend the Maturity Date in connection with a Successful
Remarketing as provided in the within-mentioned Supplemental Indenture No. 1, but in no event to a date later than May 16, 2038 (such date, as it may be extended, is hereinafter referred to as the “Maturity Date”), and to pay
interest thereon 

  

 15 








 
from March 30, 2005 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, quarterly in arrears on February 16,
May 16, August 16 and November 16 of each year (each, a “Quarterly Interest Payment Date”), commencing August 16, 2005 at the rate of 4.80% per annum through and including the day immediately preceding the Purchase Contract
Settlement Date, and thereafter semi-annually in arrears on May 16 and November 16 of each year (each, a “Semiannual Interest Payment Date”), commencing November 16, 2008, at the Reset Rate, or if there has not been a Successful
Remarketing prior to the Purchase Contract Settlement Date, at the Coupon Rate, until the principal hereof is paid or duly provided for or made available for payment. This Senior Note shall bear interest, to the extent permitted by law, on any
overdue principal and interest at the Coupon Rate, unless a Successful Remarketing shall have occurred, in which case interest on such amounts shall accrue at the Reset Rate from and after the Purchase Contract Settlement Date, in each case,
compounded quarterly through the Purchase Contract Settlement Date and compounded semi-annually thereafter. The Reset Rate, if any, shall be established pursuant to the terms of the Indenture and the Remarketing Agreement. The amount of interest
payable for any full Interest Period will be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of interest payable for any period shorter than a full Interest Period for which interest is computed will be
computed on the basis of a 30-day month and, for any period less than a month, on the basis of the actual number of days elapsed per 30-day month. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will,
as provided in the Indenture, be paid to the Person in whose name this Senior Note (or one or more predecessor Senior Notes) is registered at the close of business on the Record Date for such Interest Payment Date. 
  
 Payment of the principal of and interest on this Senior Note will be made at
the office or agency of the Company maintained for that purpose in The Borough of Manhattan, The City of New York, which shall initially be the Corporate Trust Office of the Trustee, in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the Person entitled thereto at such address as shall appear in the Note
Register or by wire transfer to an account appropriately designated by the Person entitled to payment by written notice given at least ten calendar days prior to the Interest Payment Date. 
  
 Reference is hereby made to the further provisions of this Senior Note set
forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. 
  
 Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Senior Note
shall not be entitled to any benefit under the within-mentioned Indenture or be valid or obligatory for any purpose. 
  

 16 








 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal.

  

			
	PNM RESOURCES, INC.
		
	By:	 	  


	Name:	 	 
	Title:	 	 


  
 TRUSTEE’S
CERTIFICATE OF AUTHENTICATION 
  
 This is one of the Notes of the series
designated therein referred to in the within-mentioned Indenture. 
  
 Dated:                              
  

			
	JPMORGAN CHASE BANK, N.A.,
	as Trustee
		
	By:	 	  


	 	 	Authorized Officer

  

 17 








 REVERSE OF SENIOR NOTE 
  
 This Senior Note is one of a duly authorized issue of notes of the Company (herein called the “Senior
Notes”), issued and to be issued in one or more series under an Indenture (the “Base Indenture”), dated as of March 15, 2005, between the Company and JPMorgan Chase Bank, N.A., as Trustee (herein called the
“Trustee”, which term includes any successor trustee), as amended and supplemented by Supplemental Indenture No. 1, dated as of March 30, 2005, between the Company and the Trustee (the “Supplemental Indenture No. 1”
and, together with the Base Indenture, the “Indenture”), to which Indenture reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and
the holders of the Senior Notes and of the terms upon which the Senior Notes are, and are to be, authenticated and delivered. This Senior Note is one of the series designated on the face hereof. 
  
 All terms used in this Senior Note that are defined in the Indenture shall
have the meaning assigned to them in the Indenture. 
  
 If a
Special Event shall occur and be continuing, the Company may, at its option, redeem the Senior Notes of this series in whole, but not in part, on any Interest Payment Date prior to the earlier of the date of a Successful Remarketing or the Purchase
Contract Settlement Date, at a price per Senior Note equal to the Redemption Price as set forth in the Indenture. Except as set forth in the preceding sentence and in Article 3 of the Supplemental Indenture No. 1, the Company may not redeem the
Senior Notes at its option prior to the Maturity Date. 
  
 Pursuant to Section 8.05 of the Supplemental Indenture No. 1, if there has not been a Successful Remarketing on or prior to the Final Remarketing Date, holders of Senior Notes will have the right (the “Put Right”) to
require the Company to purchase such Senior Notes on the Purchase Contract Settlement Date, in the case of Separate Senior Notes upon a notice to the Trustee on or prior to the second Business Day prior to the Purchase Contract Settlement Date, at a
price per Senior Note to be purchased equal to the principal amount of the applicable Senior Note, plus accrued and unpaid interest to, but excluding, the Purchase Contract Settlement Date (the “Put Price”). 
  
 The Senior Notes are not entitled to the benefit of any sinking fund and will
not be subject to Defeasance or Covenant Defeasance. 
  
 If an
Event of Default with respect to Senior Notes of this series shall occur and be continuing, the principal of the Senior Notes of this series may be declared due and payable in the manner and with the effect provided in the Indenture. 
  
 The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the Company and the rights of the holders of the Senior Notes at any time by the Company and the Trustee with the consent of the holders of a majority in principal amount of the
Senior Notes of all series at the time outstanding considered as one class. The Indenture also contains provisions permitting the holders of specified percentages in principal amount of the Senior Notes at the time outstanding to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults 

  

 R-1 








 
under the Indenture and their consequences. Any such consent or waiver by the holder of this Senior Note shall be conclusive and binding upon such holder and
upon all future holders of this Senior Note and of any Senior Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Senior Note. 

 
 As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Senior Note is registrable in the Note Register, upon surrender of this Senior Note for registration of transfer at the office or agency of the Company in any place where the principal of and interest on this Senior
Note are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Note Registrar duly executed by the holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Senior Notes of this series, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. 
  
 The Senior Notes of this series are issuable only in registered form without coupons in denominations of $1,000 and any
integral multiple thereof, except as provided for in Section 2.03 of Supplemental Indenture No. 1. As provided in the Indenture and subject to certain limitations therein set forth, Senior Notes of this series are exchangeable for a like aggregate
principal amount of Senior Notes of this series of a different authorized denomination, as requested by the holder surrendering the same. 
  
 No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. 
  
 The Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Senior Note is registered as the owner hereof for all purposes, whether or not this Senior Note is overdue, and neither the Company, the Trustee
nor any such agent shall be affected by notice to the contrary. 
  
 The Company agrees, and by acceptance of a Corporate Unit or a Separate Senior Note, each holder will be deemed to have agreed (1) for United States federal, state and local income and franchise tax purposes to treat the acquisition of a
Corporate Unit as the acquisition of an Applicable Ownership Interest in Senior Notes and the Purchase Contract constituting the Corporate Unit and (2) to treat the Applicable Ownership Interest in Senior Notes or Separate Senior Note, as the case
may be, as indebtedness for United States federal, state and local income and franchise tax purposes. 
  
 THIS SENIOR NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW
PROVISIONS THEREOF TO THE EXTENT A DIFFERENT LAW WOULD GOVERN AS A RESULT. 
  

 R-2 








 ASSIGNMENT 
  
 FOR VALUE RECEIVED, the undersigned assigns and transfers this Senior Note to: 
  

  

  

  

  
 (Insert assignee’s social security or tax identification number)

  

  

  

  

  
 (Insert address and zip code of assignee)

  
 and irrevocably appoints 
  

  

  

  

  
 agent to transfer this Senior Note on the books of the
Company. The agent may substitute another to act for him or her. 
  

					
	Date:	 	_________	 	 
			
	 	 	 	 	 Signature:

			
	 	 	 	 	  


			
	 	 	 	 	 Signature Guarantee:



  
 (Sign exactly as your name appears on
the other side of this Senior Note) 
  

 R-3 








 SIGNATURE GUARANTEE 
  
 Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Note
Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Note Registrar in
addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 







 [Insert in Global Notes or certificated Senior Notes that are part of Corporate Units] 

 
 SCHEDULE OF INCREASES OR DECREASES IN SENIOR NOTE 
  
 The initial principal amount of this Senior Note is $    ,000,000.
The following increases or decreases in a part of this Senior Note have been made: 
  

									
	 Date

	 	 Amount of
decrease in
principal
amount of this
Senior Note

	 	 Amount of
increase in
principal
amount of this
Senior Note

	  	Principal
amount of this
Senior Note
following such
decrease
or increase

	  	Signature of
authorized
officer of
Trustee