Document:

exh10-1_111308.htm

    EXECUTION COPY

    

     

    Exhibit
10.1

     

    SUPPLEMENTAL REMARKETING
AGREEMENT

     

    November
7, 2008

     

    Citigroup
Global Markets Inc.              

    388
Greenwich Street

    New York,
New York 10013

    

    Wedbush
Morgan Securities Inc.

    1000
Wilshire Boulevard

    Los
Angeles, California 90017

    

    
      Banc of
America Securities LLC

      One
Bryant Park

      New York,
New York 10036

    RBC
Capital Markets Corporation

    Three
World Financial Center

    200 Vesey
Street, 9th Floor

    New York,
New York 10281

     

    UBS
Securities LLC

    299 Park
Avenue

    New York,
New York 10171

    

    

    Ladies
and Gentlemen:

     

    This
Supplemental Remarketing Agreement is dated as of November 7, 2008 (this “Agreement”) by and
among PNM Resources, Inc., a New Mexico corporation (the “Company”), Citigroup
Global Markets Inc., Banc of America Securities LLC, Wedbush Morgan Securities
Inc., RBC Capital Markets Corporation and UBS Securities LLC as the remarketing
agents (together, the “Remarketing Agents”),
and U.S. Bank National Association, a national banking association, not
individually but solely as purchase contract agent (the “Purchase Contract
Agent”) and as attorney-in-fact of the holders of Purchase Contracts (as
defined in the Purchase Contract Agreement referred to below).  This
Agreement amends and supplements the Remarketing Agreement, dated as of October
7, 2005, by and among the Company, the Remarketing Agent named therein and the
Purchase Contract Agent (the “Original Remarketing
Agreement”).

     

    Section
1.   Definitions.  (a)
Capitalized terms used and not defined in this Agreement shall have the meanings
set forth in the Amended and Restated Purchase Contract Agreement, dated as of
August 4, 2008, among the Company and the Purchase Contract Agent, as amended
and supplemented from time to time, and the Amended and Restated Pledge
Agreement, dated as of August 4, 2008, among the Company, the Purchase Contract
Agent and U.S. Bank National Association, as Collateral Agent, Custodial Agent
and Securities Intermediary, as amended and supplemented from time to time (the
“Purchase Contract
Agreement” and the “Pledge Agreement”,
respectively).

     

    (b) As used
in this Agreement, the following terms have the following meanings:

     

    “Applicable Time”
means the time on the applicable Remarketing Date when there is a Successful
Remarketing in accordance with this Agreement.

     

    “Agreement” has the
meaning specified in the first paragraph of this Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Commission” means the
Securities and Exchange Commission.

     

    “Company” has the
meaning specified in the first paragraph of this Agreement.

     

    “Depositary” means a
clearing agency registered under Section 17A of the Exchange Act that is
designated by the Company to act as Depositary for the Units.

     

    “Depositary
Participant” means a broker, dealer, bank, other financial institution or
other Person for whom from time to time the Depositary effects book-entry
transfers and pledges of securities deposited with the Depositary.

     

    “Effective Date” means
any date as of which any part of such registration statement or post effective
amendment thereto relating to the Remarketed Senior Notes became, or is deemed
to have become, effective under the Securities Act in accordance with the Rules
and Regulations (including pursuant to Rule 430B of the Rules and
Regulations).

     

    “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

     

    “Final Remarketing”
has the meaning specified in Section 2(b).

     

    “Final Remarketing
Date” has the meaning specified in Section 2(b).

     

    “Final Term Sheet”
means the term sheet prepared in connection with the Remarketing of the
Remarketed Senior Notes pursuant to Section 5(a)(1) of this Agreement and
substantially in the form attached in Schedule 3 hereto.

     

    “First Supplemental
Indenture” means Supplemental Indenture, dated as of October 7, 2005, to
the Indenture, between the Company and the Trustee.

     

    “Indenture” means the
Indenture dated as of October 7, 2005 between the Company and the Trustee
(including any provisions of the TIA that are deemed incorporated therein), as
supplemented by the First Supplemental Indenture, as supplemented and amended by
the Second Supplemental Indenture and as further supplemented by the Third
Supplemental Indenture.

     

    “Initial Remarketing”
has the meaning specified in Section 2(a).

     

    “Initial Remarketing
Date” has the meaning specified in Section 2(a).

     

    “Issuer Free Writing
Prospectus” means each “free writing prospectus” (as defined in Rule 405
of the Rules and Regulations) prepared by or on behalf of the Company or used or
referred to by the Company in connection with the Remarketing of the Remarketed
Senior Notes, including the Final Term Sheet.

     

    “Material Adverse
Effect” has the meaning specified in Section 3(j).

     

    “Pledge Agreement” has
the meaning specified in Section 1(a).

     

    “Preliminary
Prospectus” means any prospectus included in such registration statement
or filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations, including any preliminary prospectus supplement thereto, relating
to the Remarketed Senior Notes, other than a Prospectus.

     

    
      
        
        

      

      
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    “Pricing Disclosure
Package” means, as of the Applicable Time, the most recent Preliminary
Prospectus, together with the information included on Schedule 2 and each Issuer
Free Writing Prospectus filed or used by the Company on or before the Applicable
Time, other than a road show that is an Issuer Free Writing Prospectus under
Rule 433 of the Rules and Regulations.

     

    “Prospectus” means the
final prospectus, including any prospectus supplement thereto, relating to the
Remarketed Senior Notes, as filed with the Commission pursuant to Rule 424(b) of
the Rules and Regulations.

     

    “Purchase Contract
Agreement” has the meaning specified in Section 1(a).

     

    “Registration
Statement” means, collectively, the various parts of such registration
statement, each as amended as of the Effective Date for such part, including any
Preliminary Prospectus or the Prospectus and all exhibits to, and documents
incorporated by reference in, such registration statement.

     

    “Remarketed Senior
Notes” means the Pledged Senior Notes and the Separate Senior Notes, if
any, issued pursuant to the Indenture, subject to Remarketing as identified to
the Remarketing Agents by the Collateral Agent and the Custodial Agent,
respectively, prior to 12:00 noon, New York City time, on the sixth Business Day
immediately preceding the Purchase Contract Settlement Date, and shall include:
(a) the Senior Notes of the Holders of Corporate Units who have not notified the
Purchase Contract Agent prior to 5:00 p.m., New York City time, on the seventh
Business Day immediately preceding the Purchase Contract Settlement Date of
their intention to effect a Cash Settlement of the related Purchase Contracts
pursuant to the terms of the Purchase Contract Agreement or who have so notified
the Purchase Contract Agent but failed to make the required cash payment prior
to 5:00 p.m., New York City time, on the sixth Business Day immediately
preceding the Purchase Contract Settlement Date pursuant to the terms of the
Purchase Contract Agreement, and (b) the Separate Senior Notes of the holders of
Separate Senior Notes, if any, who have elected to have their Separate Senior
Notes remarketed in such Remarketing prior to 5:00 p.m., New York City time, on
the seventh Business Day immediately preceding the Purchase Contract Settlement
Date pursuant to the terms of the Purchase Contract Agreement.

     

    “Remarketing” means
the remarketing of the Remarketed Senior Notes pursuant to this Agreement on any
Remarketing Date.

     

    “Remarketing Agents”
means Citigroup Global Markets Inc., Banc of America Securities LLC, Wedbush
Morgan Securities Inc., RBC Capital Markets Corporation and UBS Securities LLC,
or any successor remarketing agent appointed by the Company pursuant to Section
9 hereof.

     

    “Remarketing Fee” has
the meaning specified in Section 4.

     

    “Remarketing
Materials” means the Registration Statement, the Preliminary Prospectus,
the Prospectus or any other information furnished by the Company to the
Remarketing Agents for distribution to investors in connection with the
Remarketing.

     

    “Remarketing Settlement
Date” means the Purchase Contract Settlement Date.

     

    
      
        
        

      

      
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    “Reset Rate” has the
meaning specified in Section 2(c).

     

    “Second Remarketing”
has the meaning specified in Section 2(b).

     

    “Second Remarketing
Date” has the meaning specified in Section 2(b).

     

    “Second Supplemental
Indenture” means Supplemental Indenture No. 2, dated as of August 4,
2008, to the Indenture, between the Company and the Trustee.

     

    “Securities” has the
meaning specified in Section 10.

     

    “Securities Act” means
the Securities Act of 1933, as amended.

     

    “Significant
Subsidiaries” has the meaning specified in Section 3(j).

     

    “Third Supplemental
Indenture” means Supplemental Indenture No. 3, to be dated as of November
17, 2008, to the Indenture, between the Company and the Trustee.

     

    “Transaction
Documents” means this Agreement, the Remarketing Agreement, the Purchase
Contract Agreement, the Pledge Agreement, the Indenture, the First Supplemental
Indenture, the Second Supplemental Indenture and the Third Supplemental
Indenture, in each case as amended or supplemented from time to
time.

     

    “Trustee” means U.S.
Bank National Association, as trustee under the Indenture.

     

    Section
2.   Appointment and Obligations
of the Remarketing Agents.  The
Company hereby appoints Banc of America Securities LLC, Wedbush Morgan
Securities Inc., RBC Capital Markets Corporation and UBS Securities LLC as
successor Remarketing Agents together with Citigroup Global Markets Inc., and,
subject to the terms and conditions set forth herein, Banc of America Securities
LLC, Wedbush Morgan Securities Inc., RBC Capital Markets Corporation and UBS
Securities LLC hereby accept appointment as successor Remarketing Agents
together with Citigroup Global Markets Inc., for the purpose of (i) remarketing
the Remarketed Senior Notes on behalf of the holders thereof, (ii) determining,
in consultation with the Company, in the manner provided for herein and in the
Purchase Contract Agreement and the Indenture, the Reset Rate for the Remarketed
Senior Notes, and (iii) performing such other duties as are assigned to the
Remarketing Agents in the Transaction Documents.

     

    (a) Unless a
Special Event Redemption, an Early Settlement or a Cash Merger Early Settlement
has occurred prior to such date, on the fifth Business Day immediately preceding
the Purchase Contract Settlement Date (the “Initial Remarketing
Date”), the Remarketing Agents shall use their commercially reasonable
efforts to remarket (the “Initial Remarketing”)
the Remarketed Senior Notes at a price equal to 100% of the aggregate principal
amount of the Remarketed Senior Notes being remarketed in such Remarketing (the
“Remarketing
Price”).

     

    (b) In the
case of a Failed Remarketing on the Initial Remarketing Date and unless a
Special Event Redemption, an Early Settlement or a Cash Merger Early Settlement
has occurred prior to such date, on the fourth Business Day immediately
preceding the Purchase Contract Settlement Date (the “Second Remarketing
Date”), the Remarketing Agents shall use their commercially reasonable
efforts to remarket (the “Second Remarketing”)
the Remarketed Senior Notes at the Remarketing Price. In the case of a Failed
Remarketing on the Second Remarketing Date and unless a Special Event
Redemption, an Early Settlement or a Cash Merger Early 

     

    
      
        
        

      

      
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    Settlement
has occurred prior to such date, on the third Business Day immediately preceding
the Purchase Contract Settlement Date (the “Final Remarketing
Date”), the Remarketing Agents shall use their commercially reasonable
efforts to remarket (the “Final Remarketing”)
the Remarketed Senior Notes at the Remarketing Price. It is understood and
agreed that the 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 100% of the aggregate principal amount of the Remarketed Senior
Notes.

     

    (c) In
connection with each Remarketing, the Remarketing Agents shall determine, in
consultation with the Company, either the fixed interest rate per annum or, if
the Company has elected for the reset rate to be a floating interest rate, the
sum of the Reset Spread and the Base Rate (as defined in the Second Supplemental
Indenture), that the Remarketed Senior Notes should bear (the “Reset Rate”) in order
for the Remarketed Senior Notes to have an aggregate offering price equal to the
Remarketing Price and that in the sole reasonable discretion of the Remarketing
Agents will enable them to remarket all of the Remarketed Senior Notes at the
Remarketing Price in such Remarketing; provided that such rate shall
not exceed the maximum interest rate permitted by applicable law.

     

    (d) If, by
4:00 p.m., New York City time, on the applicable Remarketing Date, (1) the
Remarketing Agents are unable to remarket all of the Remarketed Senior Notes,
other than to the Company, at the Remarketing Price pursuant to the terms and
conditions hereof or (2) the Remarketing did not occur on such Remarketing Date
because one of the conditions set forth in Section 6 hereof was not satisfied, a
Failed Remarketing shall be deemed to have occurred, and the Remarketing Agents
shall so advise by telephone (promptly confirmed in writing) the Depositary, the
Purchase Contract Agent, the Collateral Agent and the Company. Whether or not
there has been a Failed Remarketing will be determined in the sole reasonable
discretion of the Remarketing Agents.

     

    (e) In the
event of a Successful Remarketing, by approximately 4:30 p.m., New York City
time, on the applicable Remarketing Date, the Remarketing Agents shall advise,
by telephone (promptly confirmed in writing in the case of clause
(1)):

     

    (1) the
Depositary, the Purchase Contract Agent, the Trustee and the Company of the
Reset Rate determined by the Remarketing Agents in such Remarketing and the
number of Remarketed Senior Notes sold in such Remarketing;

     

    (2) each
purchaser (or the Depositary Participant thereof) of Remarketed Senior Notes of
the Reset Rate and the number of Remarketed Senior Notes such purchaser is to
purchase;

     

    (3) each such
purchaser (if other than a Depositary Participant) to give instructions to its
Depositary Participant to pay the purchase price on the Remarketing Settlement
Date in same day funds against delivery of the Remarketed Senior Notes purchased
through the facilities of the Depositary; and

     

    (4) each such
purchaser (or Depositary Participant thereof) that the Remarketed Senior Notes
will not be delivered until the Remarketing Settlement Date, and, in the case of
the Initial Remarketing Date or the Second Remarketing, the Remarketing
Settlement Date will be five Business Days or four Business Days, respectively,
following the date of such Remarketing and that if such purchaser wishes to

     

    
      
        
        

      

      
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    trade the
Remarketed Senior Notes that it has purchased prior to the third Business Day
preceding the Remarketing Settlement Date, such purchaser will have to specify
an alternative settlement cycle at the time of any such trade to prevent failed
settlement.

     

    The
Remarketing Agents shall also, if required by the Securities Act, deliver, in
conformity with the requirements of the Securities Act, to each purchaser a
Prospectus in connection with the Remarketing.

     

    (f) The
proceeds from a Successful Remarketing (i) with respect to the Senior Notes that
are components of the Corporate Units shall be paid to the Collateral Agent in
accordance with Section 5.02 of the Purchase Contract Agreement and (ii) with
respect to the Separate Senior Notes, shall be paid to the Custodial Agent for
payment to the holders of such Separate Senior Notes in accordance with Section
5.02 of the Purchase Contract Agreement.

     

    (g) The right
of each holder of Remarketed Senior Notes to have such Remarketed Senior Notes
remarketed and sold on any Remarketing Date shall be subject to the conditions
that (i) the Remarketing Agents conduct (A) an Initial Remarketing, (B) a Second
Remarketing in the event of a Failed Remarketing on the Initial Remarketing Date
and (C) a Final Remarketing in the event of a Failed Remarketing on the Second
Remarketing Date, each pursuant to the terms of this Agreement, (ii) neither a
Special Event Redemption, an Early Settlement nor a Cash Merger Early Settlement
has occurred prior to such Remarketing Date, (iii) the Remarketing Agents are
able to find a purchaser or purchasers for Remarketed Senior Notes at the
Remarketing Price based on the Reset Rate, and (iv) such purchaser or purchasers
of the Remarketed Senior Notes deliver the purchase price therefor to the
Remarketing Agents as and when required.

     

    (h) It is
understood and agreed that the Remarketing Agents shall not have any obligation
whatsoever to purchase any Remarketed Senior Notes, whether in the Remarketing
or otherwise, and shall in no way be obligated to provide funds to make payment
upon tender of Remarketed Senior Notes for Remarketing or to otherwise expend or
risk its own funds or incur or to be exposed to financial liability in the
performance of its duties under this Agreement. Neither the Company nor the
Remarketing Agents shall be obligated in any case to provide funds to make
payment upon tender of the Remarketed Senior Notes for Remarketing.

     

    Section
3.   Representations and
Warranties of the Company. The
Company represents and warrants (i) on and as of the date any Remarketing
Materials are first distributed in connection with the Remarketing, (ii) on and
as of the Applicable Time and (iii) on and as of the Remarketing Settlement
Date, that:

     

    (a) Filing of Registration
Statement and Preliminary Prospectus; No Stop Order: A Registration
Statement on Form S-3 (No. 333-150101) relating to the Remarketed Senior Notes
(i) has been prepared by the Company in conformity with the requirements of
the Securities Act, and the rules and regulations (the “Rules and
Regulations”) of the Commission thereunder; (ii) has been filed with
the Commission under the Securities Act; and (iii) upon its filing with the
Commission automatically became and is effective under the Securities
Act.  Copies of such Registration Statement and any amendment thereto
have been delivered by the Company to the Remarketing Agents.

     

    Any
reference to any Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include any documents incorporated by reference therein pursuant to
Form S-3 under the 

     

    
      
        
        

      

      
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    Securities
Act as of the date of such Preliminary Prospectus or the Prospectus, as the case
may be.  Any reference to the “most recent Preliminary Prospectus”
shall be deemed to refer to the latest Preliminary Prospectus included in the
Registration Statement or filed pursuant to Rule 424(b) prior to or on the date
hereof (including, for purposes hereof, any documents incorporated by reference
therein prior to or on the date hereof).  Any reference to any
amendment or supplement to any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include any document filed under the Exchange Act, after
the date of such Preliminary Prospectus or the Prospectus, as the case may be,
and incorporated by reference in such Preliminary Prospectus or the Prospectus,
as the case may be; and any reference to any amendment to the Registration
Statement shall be deemed to include any annual report of the Company on Form
10-K filed with the Commission pursuant to Section 13(a) or 15(d) of the
Exchange Act after the Effective Date that is incorporated by reference in the
Registration Statement.

     

    The
Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending the effectiveness of the
Registration Statement, and no proceeding or examination for such purpose has
been instituted or, to the knowledge of the Company, threatened by the
Commission.  The Commission has not notified the Company of any
objection to the use of the form of the Registration Statement.

     

    (b) Well-Known Seasoned Issuer;
Automatic Shelf Registration Statement: The Company has been since the
time of initial filing of the Registration Statement and continues to be a
“well-known seasoned issuer” (as defined in Rule 405) eligible to use Form
S-3 for the offering of the Remarketed Senior Notes, including
not having been an “ineligible issuer” (as defined in Rule 405) at any such time
or date.  The Registration Statement is an “automatic shelf
registration statement” (as defined in Rule 405) and
was filed not earlier than the date that is three years prior to the Remarketing
Settlement Date.

     

    (c) Conformity to Description of
Registration Statement, Preliminary Prospectus, Prospectus: The
Registration Statement conformed and will conform in all material respects on
the Effective Date and on the Remarketing Settlement Date, and any amendment to
the Registration Statement filed after the date hereof will conform in all
material respects, when filed, to the requirements of the Securities Act and the
Rules and Regulations.  The Preliminary Prospectus conformed, and the
Prospectus will conform, in all material respects when filed with the Commission
pursuant to Rule 424(b) and on the Remarketing Settlement Date to the
requirements of the Securities Act and the Rules and Regulations.  The
documents incorporated by reference in any Preliminary Prospectus or the
Prospectus conformed, and any further documents so incorporated will conform,
when filed with the Commission, in all material respects to the requirements of
the Exchange Act or the Securities Act, as applicable, and the rules and
regulations of the Commission thereunder.

     

    (d) Registration
Statement: The Registration Statement did not, as of the Effective Date,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided that no representation or warranty is made as to
information contained in or omitted from the Registration Statement in reliance
upon and in conformity with written information furnished to the Company by the
Remarketing Agents specifically for inclusion therein, which information is
specified in Section 7(d) or in a separate letter addressing such
information.

     

    
      
        
        

      

      
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    (e) Prospectus: The
Prospectus will not, as of its date and on the Remarketing Settlement Date,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided that no representation or warranty is made as to information contained
in or omitted from the Prospectus in reliance upon and in conformity with
written information furnished to the Company by the Remarketing Agents
specifically for inclusion therein, which information is specified in Section
7(d) or in a separate letter addressing such information.

     

    (f) Incorporated
Documents: The documents incorporated by reference in the Registration
Statement, any Preliminary Prospectus or the Prospectus did not, and any further
documents filed and incorporated by reference therein will not, when filed with
the Commission, contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that the foregoing
representation and warranty is given on the basis that any statement contained
in a document incorporated by reference therein shall be deemed not to be
contained therein if the statement has been modified or superseded by any
statement in a subsequently filed document incorporated by reference therein or
in any amendment or supplement thereto.

     

    (g) The Pricing Disclosure
Package: The Pricing Disclosure Package did not, as of the Applicable
Time, contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided that no
representation or warranty is made as to information contained in or omitted
from the Pricing Disclosure Package in reliance upon and in conformity with
written information furnished to the Company by the Remarketing Agents
specifically for inclusion therein, which information is specified in Section
7(d) or in a separate letter addressing such information.

     

    (h) Issuer Free Writing
Prospectus: Each Issuer Free Writing Prospectus (including, without
limitation, any road show that is a free writing prospectus under Rule 433) when
considered together with the Pricing Disclosure Package as of the Applicable
Time, did not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

     

    (i) Conformity to Description,
Use, and Retaining of Issuer Free Writing Prospectuses: Each Issuer Free
Writing Prospectus conformed or will conform in all material respects to the
requirements of the Securities Act and the Rules and Regulations on the date of
first use, and the Company has complied with any filing requirements applicable
to such Issuer Free Writing Prospectus pursuant to the Rules and Regulations.
The Company has not made any offer relating to the Remarketed Senior Notes that
would constitute an Issuer Free Writing Prospectus without the prior written
consent of the Remarketing Agents. The Company will, pursuant to reasonable
procedures developed in good faith, retain in accordance with the Rules and
Regulations all Issuer Free Writing Prospectuses that were not required to be
filed pursuant to the Rules and Regulations.

     

    (j) Due Incorporation and
Qualification: Each of the Company and EnergyCo, LLC and the Company’s
significant subsidiaries (within the meaning of Rule 1-02(w) of Regulation S-X
under the Securities Act, and collectively with EnergyCo, LLC only for purposes
of this 

    
      
        
        

      

      
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    Agreement,
the “Significant
Subsidiaries”) has been duly incorporated or organized, is validly
existing as a corporation or other business entity in good standing under the
laws of the jurisdiction in which it is chartered or organized with full
corporate power and authority to own its properties and conduct its business as
described in any Preliminary Prospectus and the Prospectus.  Each of
the Company and each Significant Subsidiary is duly qualified to do business as
a foreign corporation or other business entity and is in good standing under the
laws of each jurisdiction which requires such qualification, except where the
failure to be so qualified or in good standing could not, in the aggregate,
reasonably be expected to have a material adverse effect on (i) the condition
(financial or otherwise), results of operations, stockholders’ equity,
properties or business of the Company and its subsidiaries taken as a whole or
(ii) the ability of the Company to perform its obligations under the Transaction
Documents (a “Material
Adverse Effect”).  The Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
the subsidiaries listed in Schedule 1(j) attached hereto.  None of the
subsidiaries of the Company is a “significant subsidiary” (within the meaning of
Rule 1-02(w) of Regulation S-X under the Securities Act), other than Public
Service Company of New Mexico, Texas-New Mexico Power Company, First Choice
Power Special Purpose, L.P., First Choice Power, L.P., FCP Enterprises, Inc. and
TNP Enterprises, Inc.

     

    (k) Capitalization: The
Company has an authorized capitalization as set forth in each of the most recent
Preliminary Prospectus and the Prospectus.  All of the issued and
outstanding shares of capital stock or equivalent equity rights of each
Significant Subsidiary have been duly authorized and validly issued, are fully
paid and non-assessable and, with the exception of the outstanding preferred
stock of Public Service Company of New Mexico and a 50% interest in EnergyCo,
LLC, which are owned by third parties, are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, and defects of
title.

     

    (l) The Indenture, First
Supplemental Indenture, Second Supplemental Indenture and Third Supplemental
Indenture: The Indenture, the First Supplemental Indenture, the Second
Supplemental Indenture and the Third Supplemental Indenture have been or, on or
prior to the Remarketing Settlement Date, will be duly authorized, executed and
delivered by the Company and are or, upon execution and delivery, will be valid
and binding agreements of the Company enforceable against the Company in
accordance with their terms, except in each case as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization or similar laws
relating to or affecting creditors’ rights generally and by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).  The Indenture, the First
Supplemental Indenture, the Second Supplemental Indenture and the Third
Supplemental Indenture (i) have been or, on or prior to the Remarketing
Settlement Date, will be duly qualified under the Trust Indenture Act of 1939,
as amended (the “Trust
Indenture Act”), (ii) comply or, on or prior to the Remarketing
Settlement Date, will comply as to form with the requirements of the Trust
Indenture Act and (iii) conform or, on or prior to the Remarketing Settlement
Date, will conform to the description thereof in the most recent Preliminary
Prospectus and the Prospectus.

     

    (m) The Remarketed Senior
Notes: The Remarketed Senior Notes have been duly authorized, issued and
delivered by the Company, and constitute valid and binding obligations of the
Company, entitled to the benefits of the Indenture, the First Supplemental
Indenture, the Second Supplemental Indenture and the Third Supplemental
Indenture, enforceable against the Company in accordance with their terms,
except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization or other similar laws relating to or affecting the 

     

    
      
        
        

      

      
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    enforcement
of creditors’ rights generally and by general equitable principles (regardless
of whether such enforceability is considered in a proceeding in equity or at
law), and the Remarketed Senior Notes will conform to the description thereof in
the Pricing Disclosure Package and the Prospectus, respectively.

     

    (n) This Agreement: The
Company has all the requisite corporate power and authority to execute, deliver
and perform its obligations under this Agreement.  This Agreement has
been duly authorized, executed and delivered by the Company.

     

    (o) The Purchase Contract
Agreement and the Pledge Agreement:  The Purchase Contract
Agreement and the Pledge Agreement have been duly authorized, executed and
delivered by the Company and are valid and binding agreements of the Company
enforceable against the Company in accordance with their terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or similar laws relating to or affecting creditors’ rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).  The Purchase
Contract Agreement and the Pledge Agreement conform to the description thereof
in the most recent Preliminary Prospectus and the Prospectus.

     

    (p) No Conflicts: The
execution and delivery of this Agreement and the performance of the Transaction
Documents by the Company, the issuance of the Remarketed Senior Notes, the
consummation of the transactions contemplated in the Transaction Documents and
the application of the proceeds from the sale of the Remarketed Senior Notes as
described under “Use of Proceeds” in the most recent Preliminary Prospectus will
not (i) conflict with or result in a breach or violation of any of the
terms or provisions of, impose any lien, charge or encumbrance upon any property
or assets of the Company and its subsidiaries, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement, or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject;
(ii) result in any violation of the provisions of the charter, by-laws or
other organizational documents of the Company or any of its subsidiaries; or
(iii) result in any violation of any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their properties.

     

    (q) No Consents Required:
No consent, approval, authorization or order of, or filing or registration with,
any court or governmental agency or body having jurisdiction over the Company or
any of its subsidiaries or any of their properties is required to be obtained by
the Company for the execution, delivery and performance of the Transaction
Documents, the issuance of the Remarketed Senior Notes, the consummation of the
transactions contemplated in the Transaction Documents and the application of
the proceeds from the sale of the Remarketed Senior Notes as described under
“Use of Proceeds” in the most recent Preliminary Prospectus, except for the
registration of the Remarketed Senior Notes under the Securities Act and such
consents, approvals, authorizations, registrations or qualifications as may be
required under applicable state securities or blue sky laws in connection with
the purchase and sale of the Remarketed Senior Notes by the Remarketing
Agents.

     

    (r) No Material Adverse
Changes: Except as described in the most recent Preliminary Prospectus,
neither the Company nor any of its subsidiaries has sustained, since the date of
the latest audited financial statements included or incorporated by reference in
the most recent 

    
      
        
        

      

      
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    Preliminary
Prospectus, any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, and since such date,
there has not been any change in the capital stock, long-term debt, consolidated
net current assets or stockholders’ equity of the Company and/or any of its
subsidiaries or any adverse change, or any development involving a prospective
adverse change, in or affecting the condition (financial or otherwise), results
of operations, stockholders’ equity, properties, management, business or
prospects of the Company and its subsidiaries taken as a whole, in each case
except as could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.

     

    (s) Historical Financial
Statements: The consolidated historical financial statements and
schedules of the Company and its consolidated subsidiaries included or
incorporated by reference in the most recent Preliminary Prospectus comply as to
form in all material respects with the requirements of Regulation S-X under the
Securities Act and present fairly in all material respects the consolidated
financial condition of the Company and its consolidated subsidiaries as of the
dates indicated therein and the consolidated results of their operations and
cash flows for the periods specified therein.  Except as stated
therein, such financial statements have been prepared in conformity with
generally accepted accounting principles in the United States applied on a
consistent basis throughout the periods involved.

     

    (t) Independent Public
Accountants: Deloitte & Touche LLP, who have certified certain
financial statements of the Company and its consolidated subsidiaries, and which
have audited the Company’s internal control over financial reporting, are an
independent registered public accounting firm as required by the Securities Act
and the Rules and Regulations and the rules and regulations of the Public
Company Accounting Oversight Board.

     

    (u) Compliance: The
Company owns or leases all such properties as are necessary to the conduct of
its operations as presently conducted.  The Company is not in
non-compliance with any term or condition of, nor has failed to obtain and
maintain in effect, any license, certificate, permit or other governmental
authorization required for the ownership or lease of its property or the conduct
of its business, which violation, non-compliance or failure, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect,
except as set forth the most recent Preliminary Prospectus.  The
Company has not received notice of any proceedings relating to the revocation or
material modification of any such license, certificate, permit or other
authorization.

     

    (v) Litigation: Other
than as set forth in the most recent Preliminary Prospectus, there are no legal
or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of its
subsidiaries is the subject which individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect or could, in the
aggregate, reasonably be expected to have a material adverse effect on the
performance of the Transaction Documents, the issuance of the Remarketed Senior
Notes or the consummation of the transactions contemplated in the Transaction
Documents.  To the Company’s knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others.

     

    (w) No Labor Disturbance:
No labor disturbance by or dispute with the employees of the Company exists or
is, to the best knowledge of the Company, threatened or is imminent that could
reasonably be expected to have a Material Adverse Effect, except as set forth in
the most recent Preliminary Prospectus.

     

    
      
        
        

      

      
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    (x) No Defaults: Neither
the Company nor any of its Significant Subsidiaries is in violation of its
charter, bylaws or other organizational documents, or, except as would not
reasonably be likely to have a Material Adverse Effect, (i) is in default in the
performance or observance of any term, material obligation, covenant or
condition contained in any indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which it is a party or by which it is
bound or to which any of its properties is subject, (ii) is in violation of any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over it or its property or (iii) has failed to obtain
any license, permit, certificate, franchise or other governmental authorization
or permit necessary to the ownership of its property or to the conduct of its
business.

     

    (y) Sarbanes-Oxley: To
the best of its knowledge, the Company is in compliance in all material respects
with the applicable provisions of the Sarbanes-Oxley Act of 2002 that are
effective and the rules and regulations of the SEC that have been adopted and
are effective thereunder.

     

    (z) Environmental
Matters: Except as described in the most recent Preliminary Prospectus,
each of the Company and each of its subsidiaries (i) is in compliance with any
and all applicable federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental Laws”),
(ii) has received all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business and (iii) is in compliance
with all terms and conditions of any such permit, license or approval, except
where such non-compliance with Environmental Laws or failure to receive, or
comply with the terms and conditions of required permits, licenses or approvals,
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.  In the ordinary course of its business, the
Company periodically reviews the effect of Environmental Laws on the business,
operations and properties of the Company and its subsidiaries, in the course of
which it identifies and evaluates associated costs and liabilities (including,
without limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws, or any permit,
license or approval, any related constraints on operating activities and any
potential liabilities to third parties).  On the basis of such review,
the Company has reasonably concluded that such associated costs and liabilities
would not, singly or in the aggregate, have a Material Adverse Effect on the
condition (financial or otherwise), prospects, earnings, business or properties
of the Company and its subsidiaries, taken as a whole, whether or not arising
from transactions in the ordinary course of business, except as set forth in or
contemplated in the Disclosure Package and the Prospectus (exclusive of any
supplement thereto).

     

    (aa) Accounting Controls and
Disclosure Controls: The Company and its subsidiaries maintain (x)
systems of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences and (y) disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Exchange Act).

     

    
      
        
        

      

      
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    (bb) Distribution of Remarketing
Materials: The Company has not distributed and, prior to the later to
occur of the Remarketing Settlement Date and completion of the distribution of
the Remarketed Senior Notes, will not distribute any offering material in
connection with the offering and sale of the Remarketed Senior Notes other than
any Preliminary Prospectus, the Prospectus, and any Issuer Free Writing
Prospectus to which the Remarketing Agents have consented (which consent being
deemed to have been given with respect to (i) the Final Term Sheet prepared and
filed pursuant to Section 5(a)(1) hereof and (ii) any other Issuer Free Writing
Prospectus identified on Schedule 2 hereto).

     

    (cc) Anti-Manipulation:
The Company has not taken, directly or indirectly, any action intended or which
might reasonably be expected to cause or result in the stabilization or
manipulation of the price of any security of the Company in a manner which would
violate the Securities Act or the Exchange Act.

     

    (dd) Investment Company
Act:  The Company is not, and as of the Remarketing Settlement
Date and, after giving effect to the offer and sale of the Notes and the
application of the proceeds therefrom as described under “Use of Proceeds” in
the most recent Preliminary Prospectus and the Prospectus, will not be, an
“investment company” within the meaning of such term under the Investment
Company Act of 1940, as amended (the “Investment Company
Act”).

     

    (ee) No Conflict Between Issuer
Free Writing Prospectus, Final Term Sheet and Registration
Statement:  Each Issuer Free Writing Prospectus and the Final
Term Sheet prepared and filed pursuant to Section 5(a)(1) hereto does not
include any information that conflicts with the information contained in the
Registration Statement, including any document incorporated therein by reference
and any prospectus supplement deemed to be a part thereof that has not been
superseded or modified.  The foregoing sentence does not apply to
statements in or omissions from any Issuer Free Writing Prospectus based upon
and in conformity with written information furnished to the Company by the
Remarketing Agents specifically for use therein, which information is specified
in Section 7(d) or in a separate letter addressing such
information.

     

    (ff) Documents Described in or
Filed as Exhibit to Registration Statement or
Prospectus:  There is no franchise, contract or other document
of a character required to be described in the Registration Statement or
Prospectus, or filed or to be filed as an exhibit thereto, which is not
described or filed as required (and the Preliminary Prospectus contains in all
material respects the same description of the foregoing matters contained in the
Prospectus).

     

    (gg) Taxes:  The
Company has filed all tax returns that are required to be filed or has requested
extensions thereof (except in any case in which the failure so to file would not
have a Material Adverse Effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and its subsidiaries,
taken as a whole, whether or not arising from transactions in the ordinary
course of business, except as set forth in or contemplated in the Disclosure
Package and the Prospectus (exclusive of any supplement thereto)) and has paid
all taxes required to be paid by it and any other assessment, fine or penalty
levied against it, to the extent that any of the foregoing is due and payable,
except for any such assessment, fine or penalty that is currently being
contested in good faith or as would not have a material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or properties
of the Company and its subsidiaries, taken as a whole, whether or not arising
from transactions in the ordinary course of business, except as set forth in or
contemplated in the Disclosure Package and the Prospectus (exclusive of any
supplement thereto).

     

    
      
        
        

      

      
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    (hh) Insurance:  The
Company and each of its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which they are engaged; all
policies of insurance and fidelity or surety bonds insuring the Company or any
of its subsidiaries or their respective businesses, assets, employees, officers
and directors are in full force and effect; the Company and its subsidiaries are
in compliance with the terms of such policies and instruments in all material
respects; and there are no claims by the Company or any of its subsidiaries
under any such policy or instrument as to which any insurance company is denying
liability or defending under a reservation of rights clause; neither the Company
nor any such subsidiary has been refused any insurance coverage sought or
applied for; and neither the Company nor any such subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and its subsidiaries, taken as a
whole, whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Disclosure Package and
the Prospectus (exclusive of any supplement thereto).

     

    (ii) ERISA, Employee
Matters:  None of the following events has occurred or
exists:  (i) a failure to fulfill the obligations, if any, under the
minimum funding standards of Section 302 of the United States Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), and the
regulations and published interpretations thereunder with respect to a Plan,
determined without regard to any waiver of such obligations or extension of any
amortization period; (ii) an audit or investigation by the Internal Revenue
Service, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation
or any other federal or state governmental agency or any foreign regulatory
agency with respect to the employment or compensation of employees by any of the
Company or any of its subsidiaries that could have a Material Adverse Effect;
(iii) any breach of any contractual obligation, or any violation of law or
applicable qualification standards, with respect to the employment or
compensation of employees by the Company or any of its subsidiaries that could
have a Material Adverse Effect.  None of the following events has
occurred or is reasonably likely to occur:  (i) a material increase in
the aggregate amount of contributions required to be made to all Plans in the
current fiscal year of the Company and its subsidiaries compared to the amount
of such contributions made in the most recently completed fiscal year of the
Company and its subsidiaries; (ii) a material increase in the “accumulated
post-retirement benefit obligations” (within the meaning of Statement of
Financial Accounting Standards 106) of the Company and its subsidiaries compared
to the amount of such obligations in the most recently completed fiscal year of
the Company and its subsidiaries; (iii) any event or condition giving rise to a
liability under Title IV of ERISA that could have a Material Adverse Effect; or
(iv) the filing of a claim by one or more employees or former employees of the
Company or any of its subsidiaries related to their employment that could have a
Material Adverse Effect.  For purposes of this paragraph, the term
“Plan” means a plan (within the meaning of Section 3(3) of ERISA) subject to
Title IV of ERISA with respect to which the Company or any of its subsidiaries
may have any liability.

     

    Any
certificate signed by any officer of the Company and delivered to the
Remarketing Agents or their counsel in connection with the offering of the
Remarketed Senior Notes shall be deemed a representation and warranty by the
Company, as to matters covered thereby but only as of the date thereof, to each
Remarketing Agent.

     

    
      
        
        

      

      
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    Section
4.   Fees. 
In the event of a Successful Remarketing of the Remarketed Senior Notes, the
Company shall pay the Remarketing Agents a remarketing fee equal to 1.00% of the principal amount
of the Remarketed Senior Notes (the “Remarketing Fee”).
Such Remarketing Fee shall be paid by the Company on the Remarketing Settlement
Date in cash by wire transfer of immediately available funds to an account
designated by the Remarketing Agents.

     

    Section
5.   Further Agreements of the
Company and the Remarketing Agents.

     

    (a) The
Company covenants and agrees as follows:

     

    (1) Filing of Prospectus:
Amendments and Supplements; Filing of Exchange Act Reports; Notice of Stop
Orders:  To prepare the Prospectus in a form approved by the
Remarketing Agents and to file such Prospectus pursuant to Rule 424(b) under the
Securities Act not later than the Commission’s close of business on the second
Business Day following the Applicable Time; to make no further amendment or any
supplement to the Registration Statement or the Prospectus prior to the
Remarketing Settlement Date except as provided herein; to advise the Remarketing
Agents, promptly after it receives notice thereof, of the time when any
amendment or supplement to the Registration Statement or the Prospectus has been
filed and to furnish the Remarketing Agents with copies thereof and for so long
as the delivery of a prospectus is required in connection with the offering or
sale of the Remarketed Senior Notes; to file promptly all reports and any
definitive proxy or information statements required to be filed by the Company
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and for so long as the
delivery of a prospectus is required in connection with the offering or sale of
the Remarketed Senior Notes; to prepare the Final Term Sheet, substantially in
the form of Schedule 3 hereto and approved by the Remarketing Agents and file
the Final Term Sheet pursuant to Rule 433(d) of the Rules and Regulations within
the time period prescribed by such Rule; to advise the Remarketing Agents,
promptly after it receives notice thereof, of the issuance by the Commission of
any stop order or of any order preventing or suspending the use of the
Prospectus or any Issuer Free Writing Prospectus, of the suspension of the
qualification of the Remarketed Senior Notes for offering or sale in any
jurisdiction, of the initiation or threatening by the Commission of any
proceeding or examination for any such purpose, of any notice from the
Commission objecting to the use of the form of the Registration Statement or any
post-effective amendment thereto or of any request by the Commission for the
amending or supplementing of the Registration Statement, the Prospectus or any
Issuer Free Writing Prospectus or for additional information; and, in the event
of the issuance of any stop order or of any order preventing or suspending the
use of the Prospectus or any Issuer Free Writing Prospectus or suspending any
such qualification, to use promptly its best efforts to obtain its
withdrawal;

     

    (2) Payment of Commission
Fees:  To pay the applicable Commission filing fees relating to
the Remarketed Senior Notes within the time required by Rule 456(b)(1)
without regard to the proviso therein;

     

    (3) Copies of Preliminary
Prospectus, Prospectus, Issuer Free Writing Prospectus and Incorporated
Documents; Certain Events and Amendments or Supplements:  To
deliver promptly to the Remarketing Agents on or prior to the Remarketing
Settlement Date such number of the following documents as the Remarketing Agents
shall reasonably request: (A) conformed copies of the Registration 

     

    
      
        
        

      

      
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    Statement
as originally filed with the Commission and each amendment thereto (in each case
excluding exhibits other than this Agreement and the computation of per share
earnings), (B) each Preliminary Prospectus, the Prospectus and any amended or
supplemented Prospectus, (C) the Final Term Sheet and each other Issuer Free
Writing Prospectus and (D) any document incorporated by reference in any
Preliminary Prospectus or the Prospectus; and, if the delivery of a prospectus
is required at any time after the date hereof in connection with the offering or
sale of the Remarketed Senior Notes and if at such time any events shall have
occurred as a result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made when such Prospectus is delivered,
not misleading, or, if for any other reason it shall be necessary to amend or
supplement the Prospectus or to file under the Exchange Act any document
incorporated by reference in the Prospectus in order to comply with the
Securities Act or the Exchange Act, to notify the Remarketing Agents and, upon
their request, to file such document and to prepare and furnish without charge
to each Remarketing Agent and to any dealer in securities as many copies as the
Remarketing Agents may from time to time reasonably request of an amended or
supplemented Prospectus that will correct such statement or omission or effect
such compliance;

     

    (4) Filing of Amendments or
Supplements:  To file promptly with the Commission any
amendment or supplement to the Registration Statement or the Prospectus that
may, in the judgment of the Company or the Remarketing Agents, be required by
the Securities Act or requested by the Commission;

     

    (5) Furnishing of Amendments or
Supplements:  Prior to filing with the Commission any amendment
or supplement to the Registration Statement or the Prospectus, any document
incorporated by reference in the Prospectus or any amendment to any document
incorporated by reference in the Prospectus, to furnish a copy thereof to the
Remarketing Agents and their counsel and not file any of the same with the
Commission to which the Remarketing Agents shall reasonably object, for so long
as the delivery of a prospectus is required in connection with the offering or
sale of the Remarketed Senior Notes;

     

    (6) Offers by Issuer Free
Writing Prospectuses:  Not to make any offer relating to the
Remarketed Senior Notes that would constitute an Issuer Free Writing Prospectus
without the prior written consent of the Remarketing Agents (which consent being
deemed to have been given with respect to (A) the Final Term Sheet prepared and
filed pursuant to Section 5(a)(1) hereof and (B) any other Issuer Free Writing
Prospectus identified on Schedule 2 hereto);

     

    (7) Rule 433; Certain Events and
Amendments or Supplements to Issuer Free Writing
Prospectus:  To comply with all applicable requirements of Rule
433 with respect to any Issuer Free Writing Prospectus; and if at any time after
the date hereof any events shall have occurred as a result of which any Issuer
Free Writing Prospectus, as then amended or supplemented, would conflict with
the information in the Registration Statement, the most recent Preliminary
Prospectus or the Prospectus or would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were

    
      
        
        

      

      
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    made, not
misleading, or, if for any other reason it shall be necessary to amend or
supplement any Issuer Free Writing Prospectus, to notify the Remarketing Agents
and, upon their request, to file such document and to prepare and furnish
without charge to the Remarketing Agents as many copies as the Remarketing
Agents may from time to time reasonably request of an amended or supplemented
Issuer Free Writing Prospectus that will correct such conflict, statement or
omission or effect such compliance;

     

    (8) Earnings
Statement:  As soon as practicable after the Effective Date and
in any event not later than 16 months after the date hereof, to make generally
available to the Company’s security holders an earnings statement of the Company
and its subsidiaries (which need not be audited) complying with Section 11(a) of
the Securities Act and the Rules and Regulations (including in accordance with
Rule 158 under the Securities Act);

     

    (9) Blue Sky
Qualifications:  Promptly from time to time to take such action
as the Remarketing Agents may reasonably request to qualify the Remarketed
Senior Notes for offering and sale under the securities laws of such
jurisdictions as the Remarketing Agents may request and to comply with such laws
so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Remarketed Senior Notes; provided that in connection therewith the Company
shall not be required to (i) qualify as a foreign corporation in any
jurisdiction in which it would not otherwise be required to so qualify, (ii)
file a general consent to service of process in any such jurisdiction or (iii)
subject itself to taxation in any jurisdiction in which it would not otherwise
be subject;

     

    (10) Clear
Market:  Until 10 days following the Remarketing Settlement
Date, to not, without the prior written consent of the Remarketing Agents,
directly or indirectly, issue, sell, offer to sell, grant any option for the
sale of or otherwise dispose of, any debt securities that are substantially
similar to the Remarketed Senior Notes (including, without limitation, with
respect to the maturity, currency, interest rate and other material terms of the
Remarketed Senior Notes);

     

    (11) Application of Net
Proceeds:  To apply the net proceeds from the sale of the
Remarketed Senior Notes being sold by the Company as set forth in the
Prospectus; and

     

    (12) Anti-manipulation:  Not
to at any time, directly or indirectly, take any action intended, or which might
reasonably be expected, to cause or result in the stabilization or manipulation
of the price of any security of the Company in a manner that would violate the
Securities Act or the Exchange Act.

     

    (b) The
Company agrees, whether or not the transactions contemplated by the Transaction
Documents are consummated or this Agreement is terminated, to pay all costs,
expenses, fees and taxes incident to and in connection with (a) the Remarketing
of the Remarketed Senior Notes and any stamp duties or other taxes payable in
that connection; (b) the preparation, printing and filing under the Securities
Act of the Registration Statement (including any exhibits thereto), any
Preliminary Prospectus, the Prospectus, any Issuer Free Writing Prospectus and
any amendment or supplement thereto; (c) the distribution of the Registration
Statement (including any exhibits thereto), any Preliminary Prospectus, the
Prospectus, any Issuer Free Writing Prospectus and any amendment or supplement
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    incorporated
by reference therein, all as provided in this Agreement; (d) the production and
distribution of the Transaction Documents and the Remarketed Senior Notes and
any other related documents in connection with the offering, purchase, sale and
delivery of the Remarketed Senior Notes; (e) the qualification of the Remarketed
Senior Notes under the securities laws of the several jurisdictions as provided
in Section 5(a)(9) and the preparation, printing and distribution of a Blue Sky
Memorandum (including related fees and expenses of counsel to the Remarketing
Agents in an amount that is not greater than $5,000);  (f) the
services of the Purchase Contract Agent and the Trustee and any agent therefor
(including the fees and disbursements of counsel for the Purchase Contract Agent
or the Trustee); (g) the services of the Custodial Agent, Collateral Agent and
Securities Intermediary (including the fees and disbursements of counsel
therefor); (h) the investor presentations on any “road show” undertaken in
connection with the marketing of the Remarketed Senior Notes, including, without
limitation, expenses associated with any electronic roadshow, travel and lodging
expenses of the representatives and officers of the Company and the cost of any
aircraft chartered in connection with the road show; (i) the services of the
Company’s independent registered public accounting firm; (j) the services of the
Company’s counsel; (k) any rating of the Remarketed Senior Notes by rating
agencies; (l) any required review by the Financial Industry Regulatory Authority
of the terms of the sale of the Remarketed Senior Notes (including related
reasonable and documented fees and expenses of counsel to the Remarketing
Agents); (m) the reasonable and documented fees and expenses of counsel to the
Remarketing Agents in connection with the negotiation and review of amendments
and supplements to the Transaction Documents and the Remarketing Agents’ duties
thereunder and hereunder; and (n) all other costs and expenses incident to the
performance of the obligations of the Company under the Transaction
Documents.

     

    (c) The
Company covenants and agrees to furnish the Remarketing Agents with such
information and documents as the Remarketing Agents may reasonably request in
connection with the transactions contemplated in the Transaction Documents, and
to make reasonably available to the Remarketing Agents and any accountant,
attorney or other advisor retained by the Remarketing Agents such information
that parties would customarily require in connection with a due diligence
investigation conducted in accordance with applicable securities laws and to
cause the Company’s officers, directors, employees and accountants to
participate in all such discussions and to supply all such information
reasonably requested by any such Person in connection with such
investigation.

     

    (d) Each
Remarketing Agent severally agrees that, unless it obtains the prior consent of
the Company, it has not made and will not make any offer relating to the
Remarketed Senior Notes that would constitute an “issuer free writing
prospectus,” as defined in Rule 433, or that would otherwise constitute a “free
writing prospectus,” as defined in Rule 405, required to be filed with the
Commission; provided, however, that the Remarketing Agents may use a term sheet
substantially in the form of Schedule 3 hereto without the consent of the
Company.  Any such free writing prospectus consented to by the Company
is hereinafter referred to as “Permitted Issuer
Information.”

     

    Section
6.   Conditions to the
Remarketing Agents’ Obligations.  The
respective obligations of the Remarketing Agents hereunder are subject to the
accuracy, as of the date hereof, the Applicable Time and on the Remarketing
Settlement Date, of the representations and warranties of the Company contained
herein, to the performance by the Company of its obligations hereunder, and to
each of the following additional terms and conditions:

     

    
      
        
        

      

      
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    (a) Filing of Prospectus and
Free Writing Prospectus; No Stop Order: The Prospectus shall have been
timely filed with the Commission in accordance with Section 5(a)(1); the Company
shall have complied with all filing requirements applicable to any Issuer Free
Writing Prospectus used or referred to after the date hereof; no stop order
suspending the effectiveness of the Registration Statement or preventing or
suspending the use of the Prospectus or any Issuer Free Writing Prospectus shall
have been issued and no proceeding or examination for such
purpose  shall have been initiated or, to the knowledge of the
Company, threatened by the Commission; any request of the Commission for
inclusion of additional information in the Registration Statement or the
Prospectus shall have been complied with; and the Commission shall not have
notified the Company of any objection to the use of the form of the Registration
Statement.

     

    (b) No Discovery of Untrue
Statements or Omissions: No Remarketing Agent shall have discovered and
disclosed to the Company on or prior to the Remarketing Settlement
Date  that the Registration Statement, the Prospectus or the Pricing
Disclosure Package, or any amendment or supplement thereto, contains an untrue
statement of a fact which, in the opinion of Simpson Thacher & Bartlett LLP,
counsel for the Remarketing Agents, is material or omits to state a fact which,
in the opinion of such counsel, is material and is required to be stated therein
or is necessary to make the statements therein not misleading.

     

    (c) Other Documents and
Certificates: All corporate proceedings and other legal matters incident
to the authorization, form and validity of the Transaction Documents, the
Remarketed Senior Notes, the Registration Statement, the Prospectus and any
Issuer Free Writing Prospectus, and all other legal matters relating to the
Transaction Documents and the transactions contemplated thereby shall be
reasonably satisfactory in all material respects to counsel for the Remarketing
Agents, and the Company shall have furnished to such counsel all documents and
information that they may reasonably request to enable them to pass upon such
matters.

     

    (d) Opinions of Company
Counsel: Charles L. Moore, Associate General Counsel, SEC Reporting and
Corporate Transactions, of the Company, shall have furnished to the Remarketing
Agents his written opinion, as counsel to the Company, addressed to the
Remarketing Agents and dated the Remarketing Settlement Date, substantially in
the form attached hereto as Exhibit
A.  Troutman Sanders LLP shall have furnished to the
Remarketing Agents its written opinion, as counsel to the Company, addressed to
the Remarketing Agents and dated the Remarketing Settlement Date, substantially
in the form attached hereto as Exhibit
B.

     

    (e) Opinions of Remarketing
Agents’ Counsel: The Remarketing Agents shall have received from Simpson
Thacher & Bartlett LLP, counsel for the Remarketing Agents, such opinion or
opinions, dated the Remarketing Settlement Date, with respect to the issuance
and sale of the Remarketed Senior Notes, the Indenture, the First Supplemental
Indenture, the Second Supplemental Indenture, the Registration Statement, the
Prospectus and the Pricing Disclosure Package and other related matters as the
Remarketing Agents may reasonably require, and the Company shall have furnished
to such counsel such documents as they reasonably request for the purpose of
enabling them to pass upon such matters.

     

    (f) Compliance with
Representations and Warranties, Covenants: The representations and
warranties of the Company contained herein shall be true and correct on and as
of the applicable Remarketing Date and the Remarketing Settlement Date, and the
Company, the Purchase Contract Agent and the Collateral Agent shall have
performed all covenants and 

    
      
        
        

      

      
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    agreements
contained herein or in the Purchase Contract Agreement and in the Pledge
Agreement to be performed on their part at or prior to such Remarketing Date and
such Remarketing Settlement Date.

     

    (g) Initial Comfort
Letter: At or prior to the Applicable Time, the Remarketing Agents shall
have received from Deloitte & Touche LLP a letter, in form and substance
satisfactory to the Remarketing Agents, addressed to the Remarketing Agents and
dated the date hereof (i) confirming that they are independent public
accountants within the meaning of the Securities Act and are in compliance with
the applicable requirements relating to the qualification of accountants under
Rule 2-01 of Regulation S-X of the Commission, and (ii) stating, as of the
Applicable Time (or, with respect to matters involving changes or developments
since the respective dates as of which specified financial information is given
in the most recent Preliminary Prospectus, as of a date not more than three
business days prior to the Applicable Time), the conclusions and findings of
such firm with respect to the financial information and other matters ordinarily
covered by accountants’ “comfort letters” to remarketing agents or underwriters
in connection with a remarketing or a registered offering of debt securities, as
the case may be.

     

    (h) Bring-down Comfort
Letter: With respect to the letter of Deloitte & Touche LLP referred
to in the preceding paragraph and delivered to the Remarketing Agents at the
Applicable Time (the “initial letter”), the
Company shall have furnished to the Remarketing Agents a letter (the “bring-down letter”)
of such accountants, addressed to the Remarketing Agents and dated the
Remarketing Settlement Date (i) confirming that they are independent public
accountants within the meaning of the Securities Act and are in compliance with
the applicable requirements relating to the qualification of accountants under
Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the date
of the bring-down letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Prospectus, as of a date not more than three
business days prior to the date of the bring-down letter), the conclusions and
findings of such firm with respect to the financial information and other
matters covered by the initial letter and (iii) confirming in all material
respects the conclusions and findings set forth in the initial
letter.

     

    (i) Officers’
Certificates: The Company shall have furnished to the Remarketing Agents
a certificate, dated the Remarketing Settlement Date, of its Chief Executive
Officer, President and Chief Operating Officer, Executive Vice President, Chief
Financial Officer or any Senior Vice President, and any Vice President or
Treasurer, satisfactory to the Remarketing Agents stating that:

     

    (1) The
representations, warranties and agreements of the Company in Section 3 are true
and correct on and as of the Remarketing Settlement Date, and the Company has
complied with all its agreements contained herein and satisfied all the
conditions on its part to be performed or satisfied hereunder at or prior to the
Remarketing Settlement Date;

     

    (2) No stop
order suspending the effectiveness of the Registration Statement has been
issued; no proceedings or examination for that purpose  have been
instituted or, to the knowledge of such officers, threatened; and the Commission
has not notified the Company of any objection to the use of the form of the
Registration Statement or any post-effective amendment thereto; and

     

    
      
        
        

      

      
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    (3) They have
carefully examined the Registration Statement, the Prospectus and the Pricing
Disclosure Package, and, in their opinion, (A) (1) the Registration Statement,
as of the Effective Date, (2) the Prospectus, as of its date and on the
Remarketing Settlement Date, or (3) the Pricing Disclosure Package, as of the
Applicable Time, did not and do not contain any untrue statement of a material
fact and did not and do not omit to state a material fact required to be stated
therein or necessary to make the statements therein (except in the case of the
Registration Statement, in the light of the circumstances under which they were
made) not misleading and (B) since the Effective Date, no event has occurred
that should have been set forth in a supplement or amendment to the Registration
Statement, the Prospectus or any Issuer Free Writing Prospectus that has not
been so set forth.

     

    (j) No Material Changes:
Except as described in the most recent Preliminary Prospectus, (i) neither the
Company nor any of its subsidiaries shall have sustained, since the date of the
latest audited financial statements included or incorporated by reference in the
most recent Preliminary Prospectus, any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree or (ii) since the date of the most recent Preliminary Prospectus, there
shall not have been any change in the capital stock, long-term debt,
consolidated net current assets or stockholders’ equity of the Company and/or
any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the condition (financial or otherwise),
results of operations, stockholders’ equity, properties, management or business
of the Company and its subsidiaries taken as a whole, the effect of which, in
any such case described in clause (i) or (ii), is, in the judgment of the
Remarketing Agents, so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Remarketed Senior Notes being delivered on the Remarketing Settlement Date on
the terms and in the manner contemplated in the Prospectus.

     

    (k) No Downgrading:
Subsequent to the execution and delivery of this Agreement (i) no downgrading
shall have occurred in the rating accorded the Company’s debt securities or
preferred stock by any “nationally recognized statistical rating organization”
(as that term is defined by the Commission for purposes of Rule 436(g)(2) of the
Rules and Regulations), and (ii) no such organization shall have publicly
announced that it has under surveillance or review, with possible negative
implications, its rating of any of the Company’s debt securities or preferred
stock.

     

    (l) Non-Occurrence of Certain
Events: Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following:  (i) trading in
securities generally on the New York Stock Exchange or the American Stock
Exchange or in the over-the-counter market, or trading in any securities of the
Company on any exchange or in the over-the-counter market, shall have been
suspended or materially limited or the settlement of such trading generally
shall have been materially disrupted or minimum prices shall have been
established on any such exchange or such market by the Commission, by such
exchange or by any other regulatory body or governmental authority having
jurisdiction, (ii) a banking moratorium shall have been declared by federal or
state authorities, (iii) the United States shall have become engaged in
hostilities, there shall have been an escalation in hostilities involving the
United States or there shall have been a declaration of a national emergency or
war by the United States or (iv) there shall have occurred such a material
adverse change in general economic, political or financial conditions,
including, without limitation, as a result of terrorist activities after the
date 

    
      
        
        

      

      
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    hereof
(or the effect of international conditions on the financial markets in the
United States shall be such), as to make it, in the judgment of the Remarketing
Agents, impracticable or inadvisable to proceed with the public offering or
delivery of the Remarketed Senior Notes being delivered on the Remarketing
Settlement Date on the terms and in the manner contemplated in the
Prospectus.

     

    All
opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance as provided in exhibits to this
Agreement, and if not so provided, then in form and substance reasonably
satisfactory to counsel for the Remarketing Agents.

     

    Section
7.   Indemnification.

     

    (a) The
Company shall indemnify and hold harmless each Remarketing Agent, its directors,
officers and employees and each person, if any, who controls each Remarketing
Agent within the meaning of Section 15 of the Securities Act, from and against
any loss, claim, damage or liability, joint or several, or any action in respect
thereof (including, but not limited to, any loss, claim, damage, liability or
action relating to purchases and sales of Notes), to which that Remarketing
Agent, director, officer, employee or controlling person may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in (A) any Preliminary
Prospectus, the Registration Statement, the Prospectus or in any amendment or
supplement thereto, (B) any Issuer Free Writing Prospectus or in any amendment
or supplement thereto, (C) any Permitted Issuer Information used or referred to
in any “free writing prospectus” (as defined in Rule 405) used or referred to by
the Remarketing Agents or (D) any “road show” (as defined in Rule 433) not
constituting an Issuer Free Writing Prospectus (a “Non-Prospectus Road
Show”), (ii) the omission or alleged omission to state in any Preliminary
Prospectus, the Registration Statement, the Prospectus, any Issuer Free Writing
Prospectus or in any amendment or supplement thereto or in any Permitted Issuer
Information, any Non Prospectus Road Show, any material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(iii) any act or failure to act or any alleged act or failure to act by each
Remarketing Agent in connection with, or relating in any manner to, the
Remarketed Senior Notes or the Remarketing contemplated hereby (provided that
the Company shall not be liable to a Remarketing Agent under this clause (iii)
to the extent that it is determined in a final judgment by a court of competent
jurisdiction that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to be taken
by such Remarketing Agent through its gross negligence or willful misconduct),
and shall reimburse each Remarketing Agent and each such director, officer,
employee or controlling person promptly upon demand for any legal or other
expenses reasonably incurred by that Remarketing Agent, director, officer,
employee or controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement, the Prospectus, any Issuer Free Writing
Prospectus or in any such amendment or supplement thereto or in any Permitted
Issuer Information, any Non Prospectus Road Show in reliance upon and in
conformity with written information concerning such Remarketing Agent furnished
to the Company by the Remarketing Agents specifically for inclusion therein,
which information 

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    consists
solely of the information specified in Section 7(d) or in a separate letter
addressing such information.  The foregoing indemnity agreement is in
addition to any liability which the Company may otherwise have to each
Remarketing Agent or to any director, officer, employee or controlling person of
that Remarketing Agent.

     

    (b) Each
Remarketing Agent, severally and not jointly, shall indemnify and hold harmless
the Company, its directors, officers and employees, and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act,
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Company or any such director, officer,
employee or controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement, the Prospectus, any Issuer Free Writing Prospectus or in any
amendment or supplement thereto or in any Non-Prospectus Road Show, or (ii) the
omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or in
any amendment or supplement thereto or in any Non-Prospectus Road Show, any
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information concerning such
Remarketing Agent furnished to the Company by such Remarketing Agent
specifically for inclusion therein, which information is limited to the
information set forth in Section 7(d) or in a separate letter addressing such
information.  The foregoing indemnity agreement is in addition to any
liability that each Remarketing Agent may otherwise have to the Company or any
such director, officer, employee or controlling person.

     

    (c) Promptly
after receipt by an indemnified party under this Section 7 of notice of any
claim or the commencement of any action, the indemnified party shall, if a claim
in respect thereof is to be made against the indemnifying party under this
Section 7, notify the indemnifying party in writing of the claim or the
commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 7 except to the extent it has been materially
prejudiced by such failure and, provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section
7.  If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party.  After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or action,
the indemnifying party shall not be liable to the indemnified party under this
Section 7 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that the
indemnified party shall have the right to employ counsel to represent jointly
the indemnified party and those other indemnified parties and their respective
directors, officers, employees and controlling persons who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
under this Section 7 if (i) the indemnified party and the indemnifying party
shall have so mutually agreed; (ii) the indemnifying party has failed within a
reasonable time to retain counsel reasonably satisfactory to the indemnified
party; (iii) the indemnified party and its respective directors, officers,

    
      
        
        

      

      
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    employees
and controlling persons shall have reasonably concluded that there may be legal
defenses available to them that are different from or in addition to those
available to the indemnifying party; or (iv) the named parties in any such
proceeding (including any impleaded parties) include both the indemnified
parties or their respective directors, officers, employees or controlling
persons, on the one hand, and the indemnifying party, on the other hand, and
represen­tation of both sets of parties by the same counsel would be
inappropriate due to actual or potential differing interests between them, and
in any such event the fees and expenses of such separate counsel shall be paid
by the indemnifying party.  No indemnifying party shall
(i) without the prior written consent of the indemnified parties (which
consent shall not be unreasonably withheld), settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding and does not
include any findings of fact or admissions of fault or culpability as to the
indemnified party, or (ii) be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with the consent of the indemnifying party or if there
be a final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.

     

    (d) The
Remarketing Agents severally confirm and the Company acknowledges and agrees
that the statements regarding delivery of the Remarketed Senior Notes by the
Remarketing Agents set forth in the last paragraph on the cover page of, and the
paragraph relating to stabilization by the Remarketing Agents and the concession
and reallowance figures appearing under the caption “Plan of Distribution” in,
the most recent Preliminary Prospectus and the Prospectus constitute the only
information furnished in writing to the Company by or on behalf of the
Remarketing Agents specifically for inclusion in any Preliminary Prospectus, the
Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or in
any amendment or supplement thereto or in any Non-Prospectus Road
Show.

     

    Section
8.   Contribution.

     

    (a) If the
indemnification provided for in Section 7 shall for any reason be unavailable to
or insufficient to hold harmless an indemnified party under Section 7(a) or 7(b)
in respect of any loss, claim, damage or liability, or any action in respect
thereof, referred to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company, on the one hand, and the
Remarketing Agents, on the other, from the Remarketing of the Remarketed Senior
Notes or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company, on the one hand, and the Remarketing Agents, on the other, with
respect to the statements or omissions that resulted in such loss, claim, damage
or liability, or action in respect thereof, as well as any other relevant
equitable considerations.  The relative benefits received by the
Company, on the one hand, and the Remarketing Agents, on the other, with respect
to such Remarketing shall be deemed to be in the same proportions as the

    
      
        
        

      

      
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    aggregate
principal amount of the Remarketed Senior Notes (less the Remarketing Fee)
received by the Company, on the one hand, and the Remarketing Fee received by
the Remarketing Agents, on the other hand, bear to the aggregate principal
amount of the Remarketed Senior Notes.  The relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company on the one hand or the Remarketing Agents
on the other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or
omission.  The Company and the Remarketing Agents agree that it would
not be just and equitable if contributions pursuant to this Section 8 were to be
determined by pro rata allocation (even if the Remarketing Agents were treated
as one entity for such purpose) or by any other method of allocation that does
not take into account the equitable considerations referred to
herein.  The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 8 shall be deemed to include, for purposes of
this Section 8, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim.  Notwithstanding the provisions of this Section 8, no
Remarketing Agent shall be required to contribute any amount in excess of the
amount by which its portion of the Remarketing Fee exceeds the amount of any
damages that such Remarketing Agent has otherwise paid or become liable to pay
by reason of any untrue or alleged untrue statement or omission or alleged
omission.  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.  The Remarketing Agents’ obligations to contribute
as provided in this Section 8 are several on a pro rata basis and not
joint.

     

    Section
9.   Resignation and Removal of
the Remarketing Agents. The
Remarketing Agents may resign and be discharged from their duties and
obligations hereunder, and the Company may remove the Remarketing Agents, by
giving 30 days’ prior written notice, in the case of a resignation, to the
Company and the Purchase Contract Agent and, in the case of a removal, to the
removed Remarketing Agent or Agents and the Purchase Contract Agent; provided, however, that no
such resignation nor any such removal shall become effective until the Company
shall have appointed at least one nationally recognized broker-dealer as
successor Remarketing Agent and each such successor Remarketing Agent shall have
entered into a remarketing agreement with the Company (or agreed to become a
party to this Agreement), in which it shall have agreed to conduct the
Remarketing in accordance with the Transaction Documents in all material
respects.

     

    In any
such case, the Company will use commercially reasonable efforts to appoint a
successor Remarketing Agent and enter into such a remarketing agreement (or an
appropriate amendment to this Agreement) with such person as soon as reasonably
practicable. The provisions of Section 7 and Section 8 shall survive the
resignation or removal of any Remarketing Agents pursuant to this
Agreement.

     

    Section
10.   Dealing in
Securities. The
Remarketing Agents, when acting as Remarketing Agents or in their individual or
any other capacities, may, to the extent permitted by law, buy, sell, hold and
deal in any of the Remarketed Senior Notes, Corporate Units, Treasury Units or
any of the securities of the Company (together, the “Securities”). The
Remarketing Agents may exercise any vote or join in any action which any
beneficial owner of such Securities may be entitled to exercise or take pursuant
to the Indenture with like effect as if 

    
      
        
        

      

      
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    it did
not act in any capacity hereunder. The Remarketing Agents, in their individual
capacities, either as principal or agent, may also engage in or have an interest
in any financial or other transaction with the Company as freely as if they did
not act in any capacity hereunder.

     

    Section
11.   Remarketing Agents’
Performance; Duty of Care. The
duties and obligations of the Remarketing Agents shall be determined solely by
the express provisions of this Agreement and the other Transaction Documents. No
implied covenants or obligations of or against the Remarketing Agents shall be
read into this Agreement or any of the other Transaction Documents. In the
absence of bad faith on the part of the Remarketing Agents, the Remarketing
Agents may conclusively rely upon any document furnished to them, as to the
truth of the statements expressed in any of such documents. The Remarketing
Agents shall be protected in acting upon any document or communication
reasonably believed by them to have been signed, presented or made by the proper
party or parties except as otherwise set forth herein. The Remarketing Agents
shall have no obligation to determine whether there is any limitation under
applicable law on the Reset Rate on the Remarketed Senior Notes or, if there is
any such limitation, the maximum permissible Reset Rate on the Remarketed Senior
Notes, and they shall rely solely upon written notice from the Company (which
the Company agrees to provide prior to the eighth Business Day before the
Initial Remarketing Date) as to whether or not there is any such limitation and,
if so, the maximum permissible Reset Rate. The Remarketing Agents, acting under
this Agreement, shall incur no liability to the Company or to any holder of
Remarketed Senior Notes in their individual capacities or as Remarketing Agents
for any action or failure to act, on their part in connection with a Remarketing
or otherwise, except if such liability is judicially determined to have resulted
from their failure to comply with the material terms of this Agreement or bad
faith, gross negligence or willful misconduct on its part. The provisions of
this Section 11 shall survive the termination of this Agreement and shall
survive the resignation or removal of any Remarketing Agents pursuant to this
Agreement.

     

    Section
12.   No Fiduciary Duty.
The
Company acknowledges and agrees that in connection with the Remarketing or any
other services the Remarketing Agents may be deemed to be providing under the
Transaction Documents, notwithstanding any preexisting relationship, advisory or
otherwise, between the parties or any oral representations or assurances
previously or subsequently made by the Remarketing Agents:  (i) no
fiduciary or agency relationship between the Company and any other person, on
the one hand, and the Remarketing Agents, on the other, exists; (ii) the
Remarketing Agents are not acting as advisors, expert or otherwise, to the
Company, including, without limitation, with respect to the determination of the
Remarketing Price of the Remarketed Senior Notes, and such relationship between
the Company, on the one hand, and the Remarketing Agents, on the other, is
entirely and solely commercial, based on arms-length negotiations; (iii) any
duties and obligations that the Remarketing Agents may have to the Company shall
be limited to those duties and obligations specifically stated herein; and (iv)
the Remarketing Agents and their respective affiliates may have interests that
differ from those of the Company.  The Company hereby waives any
claims that the Company may have against the Remarketing Agents with respect to
any breach of fiduciary duty in connection with the Remarketing.

     

    Section
13.   No Tax Advice. The
Remarketing Agents note that they are not experts in legal, tax or accounting
matters and express no view as to the legal, accounting or tax treatment of the
Remarketed Senior Notes or their purchase in the remarketing by any party,
including the Company.  The Company acknowledges and agrees that the
Remarketing Agents shall not have any liability or responsibility whatsoever
with respect to the Company’s tax 

    
      
        
        

      

      
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    treatment
of the Remarketed Senior Notes or the tax consequences to the Company as a
result of the issuance, sale and remarketing of the Remarketed Senior
Notes.  The Company acknowledges that it has consulted with its own
counsel and tax advisors concerning such matters, and is responsible for making
its own independent investigation and appraisal of the risks, benefits and
suitability of the offer and sale of the Remarketed Senior Notes pursuant to the
remarketing and any purchase of the Remarketed Senior Notes by the Company or
its affiliates in the remarketing.  The Company has not relied on any
statement or representation made by the Remarketing Agents in making its own
independent investigation and appraisal of the risks, benefits and suitability
of the offer and sale of the Remarketed Senior Notes pursuant to the remarketing
and any purchase of the Remarketed Senior Notes by the Company or its affiliates
in the remarketing.

     

    Section
14.   Termination. This Agreement shall
automatically terminate (i) as to the Remarketing Agents on the Effective Date
of the resignation or removal of the Remarketing Agents pursuant to Section 9
and (ii) on the earlier of (x) any Special Event Redemption Date, (y) the
occurrence of a Termination Event and (z) the Business Day immediately following
the Purchase Contract Settlement Date. If this Agreement is terminated pursuant
to any of the other provisions hereof, except as otherwise provided herein, the
Company shall not be under any liability to the Remarketing Agents and the
Remarketing Agents shall not be under any liability to the Company, except that
if this Agreement is terminated by the Remarketing Agents because of any failure
or refusal on the part of the Company to comply with the terms or to fulfill any
of the conditions of this Agreement, the Company will reimburse the Remarketing
Agents for all of their reasonable and documented out-of-pocket expenses
(including the reasonable and documented fees and disbursements of its counsel)
reasonably incurred by it. Notwithstanding any termination of this Agreement, in
the event there has been a Successful Remarketing, the obligations set forth in
Section 4 hereof shall survive and remain in full force and effect until all
amounts payable under said Section 4 shall have been paid in full. In addition,
Sections 7, 8, 11, 17 and 18 hereof shall survive the termination of this
Agreement or the resignation or removal of the Remarketing Agents.

     

    Section
15.   Notices. All
statements, requests, notices and agreements hereunder shall be in writing,
and:

     

    (a) if to the
Remarketing Agents, shall be delivered or sent by mail, telex or facsimile
transmission on behalf of all the Remarketing Agents to Citigroup Global Markets
Inc., 388 Greenwich Street, New York, New York 10013, Attention: General Counsel
(Fax: (212) 816-7912);

     

    (b) if to the
Company, shall be delivered or sent by mail, telex or facsimile transmission to
PNM Resources, Inc., Alvarado Square, Albuquerque, New Mexico 87158, Attention:
Treasurer (Fax: (505) 241-2369); and

     

    (c) if to the
Purchase Contract Agent, shall be delivered or sent by mail or facsimile
transmission to U.S. Bank National Association, 100 Wall Street, Suite 1600, New
York, New York 10005, Attention: Corporate Trust Administration (Fax: (212)
809-4993).

     

    Any such
statements, requests, notices or agreements shall take effect at the time of
receipt thereof.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    Section
16.   Persons Entitled to Benefit
of Agreement. This
Agreement shall inure to the benefit of and be binding upon each party hereto
and its respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that (x) the
representations, warranties, indemnities and agreements of the Company contained
in this Agreement shall also be deemed to be for the benefit of the Remarketing
Agents and the person or persons, if any, who control one or more of the
Remarketing Agents within the meaning of Section 15 of the Securities Act and
(y) the indemnity agreement of the Remarketing Agents contained in Section 7 of
this Agreement shall be deemed to be for the benefit of the Company’s directors
and officers who signed the Registration Statement, if any, and any person
controlling the Company within the meaning of Section 15 of the Securities Act.
Nothing contained in this Agreement is intended or shall be construed to give
any person, other than the persons referred to herein, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
contained herein.

     

    Section
17.   Survival. The
respective indemnities, representations, warranties and agreements of the
Company and the Remarketing Agents contained in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement, shall survive any
Remarketing and shall remain in full force and effect, regardless of any
investigation made by or on behalf of any of them or any person controlling any
of them.

     

    Section
18.   Governing
Law. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York.

     

    Section
19.   Judicial
Proceedings.

     

    (a) Each
party hereto expressly accepts and irrevocably submits to the non-exclusive
jurisdiction of the United States Federal or New York State court sitting in the
Borough of Manhattan, The City of New York, New York, over any suit, action or
proceeding arising out of or relating to this Agreement or the Remarketed Senior
Notes. To the fullest extent it may effectively do so under applicable law, each
party hereto irrevocably waives and agrees not to assert, by way of motion, as a
defense or otherwise, any claim that it is not subject to the jurisdiction of
any such court, any objection that it may now or hereafter have to the laying of
the venue of any such suit, action or proceeding brought in any such court and
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.

     

    (b) Each
party hereto agrees, to the fullest extent that it may effectively do so under
applicable law, that a judgment in any suit, action or proceeding of the nature
referred to in Section 19(a) brought in any such court shall be conclusive and
binding upon such party, subject to rights of appeal, and may be enforced in the
courts of the United States of America or the State of New York (or any other
court the jurisdiction to which the Company is or may be subject) by a suit upon
such judgment.

     

    Section
20.   Counterparts. This
Agreement may be executed in one or more counterparts and, if executed in more
than one counterpart, the executed counterparts shall each be deemed to be an
original but all such counterparts shall together constitute one and the same
instrument.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    Section
21.   Headings. The
headings herein are inserted for convenience of reference only and are not
intended to be part of, or to affect the meaning or interpretation of, this
Agreement.

     

    Section
22.   Severability. If any
provision of this Agreement shall be held or deemed to be or shall, in fact, be
invalid, inoperative or unenforceable as applied in any particular case in any
or all jurisdictions because it conflicts with any provisions of any
constitution, statute, rule or public policy or for any other reason, then, to
the extent permitted by law, such circumstances shall not have the effect of
rendering the provision in question invalid, inoperative or unenforceable in any
other case, circumstance or jurisdiction, or of rendering any other provision or
provisions of this Agreement invalid, inoperative or unenforceable to any extent
whatsoever.

     

    Section
23.   Amendments. This
Agreement may be amended by an instrument in writing signed by the parties
hereto. Each of the Company and the Purchase Contract Agent agrees that it will
not enter into, cause or permit any amendment or modification of the Transaction
Documents or any other instruments or agreements relating to the Remarketed
Senior Notes or the Corporate Units that would in any way adversely affect the
rights, duties and obligations of the Remarketing Agents, without the prior
written consent of the Remarketing Agents.

     

    Section
24.   Successors and
Assigns. Except
in the case of a succession pursuant to the terms of the Purchase Contract
Agreement and the Pledge Agreement, the rights and obligations of the Company
hereunder may not be assigned or delegated to any other Person without the prior
written consent of the Remarketing Agents. The rights and obligations of the
Remarketing Agents hereunder may not be assigned or delegated to any other
Person (other than an affiliate of the Remarketing Agents) without the prior
written consent of the Company.

     

    If the
foregoing correctly sets forth the agreement by and among the Company, the
Remarketing Agents and the Purchase Contract Agent, please indicate your
acceptance in the space provided for that purpose below.

     

    [SIGNATURES
ON THE FOLLOWING PAGES]

     

    
      
         

      

      
        29 

        
          

        

      

      
         

      

    

    

     

    Very
truly yours,

     

    PNM
RESOURCES, INC.

    

    

    By:           /s/ Charles N.
Eldred__

    Name:      Charles
N. Eldred

    Title:        Executive
Vice President and

     Chief Financial
Officer

    

    

     

    
      
        
          [PNM
Resources, Inc. Supplemental Remarketing Agreement]

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    CONFIRMED
AND ACCEPTED:

     

    CITIGROUP
GLOBAL MARKETS INC., as Remarketing Agent

     

    

     

    

     

    By:           /s/ Brian D.
Bednarski_________

    Name:      Brian
D. Bednarski

    Title:        Managing
Director

     

    
      
        
          [PNM
Resources, Inc. Supplemental Remarketing Agreement]

          

        

         

      

      
         

        
          

        

      

      
         

        
           

        

      

    

    CONFIRMED
AND ACCEPTED:

     

    BANC OF
AMERICA SECURITIES LLC, as Remarketing Agent

     

    

     

    

     

    By:           /s/ Lex
Maultsby______________

    Name:      Lex
Maultsby

    Title:        Managing
Director

     

    
      
        
            [PNM Resources, Inc. Supplemental Remarketing
Agreement]

           

        

      

      
         

        
          

        

      

      
         

        
           

        

      

    

    CONFIRMED
AND ACCEPTED:

     

    WEDBUSH
MORGAN SECURITIES INC., as Remarketing Agent

     

    

     

    

     

    By:           /s/ Michael
Gardner____________

    Name:      Michael
Gardner, CFA

    Title:        Executive
Vice President

     

    
      
        
           
[PNM Resources, Inc. Supplemental Remarketing
Agreement]

           

        

      

      
         

        
          

        

      

      
         

        
           

        

      

    

    CONFIRMED
AND ACCEPTED:

     

    RBC
CAPITAL MARKETS CORPORATION, as Remarketing Agent

     

    

     

    

     

    By:           /s/ David
Capaldi                             

    Name:      David
Capaldi

    Title:        Managing
Director

     

    
      
        [PNM Resources, Inc. Supplemental Remarketing
Agreement]  

      

      
         

        
          

        

      

      
         

        
           

        

      

    

    CONFIRMED
AND ACCEPTED:

     

    UBS
SECURITIES LLC, as Remarketing Agent

     

    

     

    

     

    By:           /s/ Christopher
Forshner                 
     

    Name:      Christopher
Forshner

    Title:        Managing
Director

     

    
      
         
[PNM Resources, Inc. Supplemental Remarketing Agreement] 

      

      
         

        
          

        

      

      
         

        
           

        

      

    

    U.S. BANK
NATIONAL ASSOCIATION,

     

    

     

    not
individually, but solely as Purchase

    Contract
Agent and as attorney-in-fact for

    the
Holders of the Purchase Contracts

     

    

     

    

     

    By:           /s/ Patrick J.
Crowley                              

    Name:      Patrick
J. Crowley

    Title:        Vice
President

     

    

     

    
      
        [PNM Resources, Inc. Supplemental Remarketing
Agreement]    

      

      
         

        
          

        

      

      
         

      

    

    

    SCHEDULE
1(j)

    

    List of all subsidiaries of
the Company

    

    

    
      	
              1.      Avistar,
      Inc.

            	
              19.     EIP
      Refunding Corporation

            
	
              2.      FCP
      Enterprises, Inc.

            	
              20.     Facility
      Works, Inc.

            
	
              3.      First
      Choice Power GP, LLC

            	
              21.     MCB
      Financial Group, Inc.

            
	
              4.      First
      Choice Power Retail LP

            	
              22.     Meadows
      Resources, Inc.

            
	
              5.      First
      Choice Power Special Purpose, L.P.

            	
              23.     PNM
      Electric & Gas Services, Inc.

            
	
              6.      First
      Choice Power, L.P.

            	
              24.     PNMR
      Development and Management Corporation

            
	
              7.      First
      Choice Special Purpose GP, LLC

            	
              25.     PNM
      Merger Sub LLC

            
	
              8.      Luna
      Power Company, LLC

            	
              26.     Republic
      Holding Company

            
	
              9.      PNM
      Receivables Corp.

            	
              27.     Republic
      Savings Bank, F.S.B.

            
	
              10.    PNMR
      Services Company

            	
              28.     Sunbelt
      Mining Company, Inc.

            
	
              11.    Public
      Service Company of New Mexico

            	
              29.     Sunterra
      Gas Gathering Company

            
	
              12.    Texas-New
      Mexico Power Company

            	
              30.     Sunterra
      Gas Processing Company

            
	
              13.    TNP
      Enterprises, Inc.

            	
              31.     Texas
      Generating Company II, LLC

            
	
              14.    
      Bellamah Associates Ltd.

            	
              32.     Texas
      Generating Company, L.P.

            
	
              15.     Bellamah
      Community Development

            	
              33.     TNP
      Operating Company

            
	
              16.     Bellamah
      Holding Company

            	
              34.     TNP
      Technologies L.L.C.

            
	
              17.     Bellamah
      Holding Ltd.

            	
              35.     TNPE
      – Magnus L.L.C.

            
	
              18.     Bellamah
      Investors Ltd.

            	 
      

    

    

    
      
        
           

        

         

      

      
         

        
          

        

      

      
         

      

    

    SCHEDULE
2

     

    

     

     

    ISSUER
FREE WRITING PROSPECTUSES

    

     

    
      	
              ·  

            	
              Final
      Term Sheet, to be dated the Applicable Time relating to the Remarketed
      Senior Notes, as filed pursuant to Rule 433 under the Securities Act and
      attached as Schedule 3 hereto.

            

    

     

    
      	
               

            	 

    

     

    
      
        
           

        

         

      

      
         

        
          

        

      

      
         

      

    

    SCHEDULE
3

     

    FORM PRICING TERM
SHEET

    

    PNM
RESOURCES, INC.

    [__]%
SENIOR NOTES DUE 2010

    

    
      	
              ●% Senior Notes due
      2010

            
	
              Issuer:

            	
              PNM
      Resources, Inc.

            
	
              Security:

            	
              ●%
      Senior Notes due 2010

            
	
              Size:

            	
              $100,000,000

            
	
              Pricing
      Date:

            	
              November
      [  ], 2008

            
	
              Settlement
      Date:

            	
              November
      17, 2008

            
	
              Maturity
      Date:

            	
              November
      16, 2010

            
	
              Coupon:

            	
              ●%
      per annum

            
	
              Interest
      Payment Dates:

            	
              May
      16 and November 16, commencing May 16, 2009

            
	
              Price
      to Public:

            	
              ●%
      plus accrued interest from and including November 16, 2008 to but
      excluding November 17, 2008

            
	
              Benchmark
      Treasury:

            	
              ●

            
	
              Benchmark
      Treasury Yield:

            	
              ●%

            
	
              Spread
      to Benchmark Treasury:

            	
              + ●
      basis points (   %)

            
	
              Yield:

            	
              ●%

            
	
              CUSIP:

            	
              ●

            
	
              Denominations:

            	
              $1,000
      and integral multiples thereof

            
	
              Anticipated
      Ratings:

            	
              [Ba2]
      by Moody’s Investors Service, Inc.

              [BB-]
      by Standard & Poor’s Ratings Services

              [BB]
      by Fitch Ratings, Inc.

            
	
              Remarketing
      Agents:

            	
              Citigroup
      Global Markets Inc., Banc of America Securities LLC, Wedbush Morgan
      Securities Inc., RBC Capital Markets Corporation and UBS Securities
      LLC

            

    

    Note: A
securities rating is not a recommendation to buy, sell or hold securities and
may be subject to revision or withdrawal at any time.

    The
issuer has filed a registration statement (including a prospectus) with the SEC
for the offering to which this communication relates. Before you invest, you
should read the prospectus in that registration statement and other documents
the issuer has filed with the SEC for more complete information about the issuer
and this offering.

    You
may get these documents for free by visiting EDGAR on the SEC Web site at
www.sec.gov. Alternatively, the issuer, any remarketing agent or any dealer
participating in the offering will arrange to send you the prospectus if you
request it by calling Citigroup Global Markets Inc. toll free at
1-877-858-5407.

    
      
        
          

           

        

         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
A

    FORM OF OPINION OF CHARLES
L. MOORE

     

                                                           November
17, 2008

     

    Citigroup
Global Markets Inc.

    388
Greenwich Street

    New York,
New York 10013

    

    Wedbush
Morgan Securities Inc.

    1000
Wilshire Boulevard

    Los
Angeles, California 90017

    

    UBS
Securities LLC

    299 Park
Avenue

    New York,
New York 10171

    

    Banc of
America Securities LLC

    One
Bryant Park

    New York,
New York 10036

    

    RBC
Capital Markets Corporation

    Three
World Financial Center

    200 Vesey
Street, 9th Floor

    New York,
New York 10281

    

    Ladies
and Gentlemen:

    

    I have
acted as counsel for PNM Resources, Inc., a New Mexico corporation (the
“Company”), in connection with the remarketing by the Company of $100,000,000
million aggregate principal amount of [__]% Senior Notes due 2010 (the
“Remarketed Senior Notes”) pursuant to the Supplemental Remarketing Agreement,
dated as of November 7, 2008 (the “Agreement”) by and among the Company,
Citigroup Global Markets Inc., Banc of America Securities LLC, Wedbush Morgan
Securities Inc., RBC Capital Markets Corporation and UBS Securities LLC, as the
remarketing agents (the “Remarketing Agents”), and U.S. Bank National
Association, a national banking association, not individually but solely as
Purchase Contract Agent (the “Purchase Contract Agent”) and as attorney-in-fact
of the holders of Purchase Contracts, and pursuant to the Indenture dated as of
October 7, 2005 between the Company and U.S. Bank National Association, as
Trustee (the “Trustee”) (the “Indenture”), as supplemented by the Supplemental
Indenture dated as of October 7, 2005 between the Company and the Trustee (the
“First Supplemental Indenture”), Supplemental Indenture No. 2 dated as of August
4, 2008 between the Company and the Trustee (the “Second Supplemental
Indenture”) and Supplemental Indenture No. 3 dated as of November 17, 2008,
between the Company and the Trustee (the “Third Supplemental Indenture”).
Capitalized terms used herein which are defined in the Agreement have the
meanings set forth in the Agreement, unless otherwise defined
herein.

     

    This
opinion letter is delivered to you at the request of the Company pursuant to
Section 6(d) of the Agreement.

     

    In
rendering the opinions set forth below, I have reviewed and examined the
Transaction Documents, the global Note, the Registration Statement, the
Preliminary Prospectus, the Prospectus and each Issuer Free Writing Prospectus
and such other documents as I have deemed necessary to render such
opinions.  I have also examined originals or copies, certified or
otherwise identified to my satisfaction, of the articles of incorporation and
the bylaws or other organizational documents of the Company and each Significant
Subsidiary, resolutions of the 

     

    
      
        
          A-1

        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Board of
Directors of the Company and of the pricing committee thereof, and certificates
of public officials concerning the legal existence and/or good standing of the
Company and its Significant Subsidiaries. In addition, I have examined such
other records, agreements, documents and other instruments, and such
certificates or comparable documents of public officials and of officers and
representatives of the Company and its Significant Subsidiaries, and have made
such inquiries of such officers and representatives, as I have deemed relevant
and necessary as a basis for the opinions hereinafter set forth.

     

    As to
questions of fact material to such opinions, I have, when relevant facts were
not independently established, relied upon certificates of the Company and of
its officers, upon certificates and comparable documents of public officials,
and upon statements in the Registration Statement, the Preliminary Prospectus,
the Prospectus and each Issuer Free Writing Prospectus.

     

    In making
the examinations of the Transaction Documents and the other documents described
above, I have assumed the genuineness of all signatures (other than the
signatures of the Company), the legal capacity of all natural persons, the
authenticity of all documents submitted to me as originals, the conformity to
original documents of all documents submitted to me as certified or photostatic
copies (including telecopies) and the authenticity of the originals of such
documents and the correctness of all statements of fact contained in all such
original documents. No opinion is expressed regarding compliance with covenants
in any agreement to which the Company or any of its subsidiaries is a party
incorporating calculations of a financial or accounting nature.  I
have also assumed the validity and constitutionality of each relevant statute,
rule, regulation and agency covered by this opinion letter.

     

    Based
upon the foregoing and subject to and limited by the qualifications stated
herein, I am of the opinion that:

     

    (i)           The
Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of New Mexico, with full corporate
power and authority to own its properties and conduct its business as described
in the most recent Preliminary Prospectus and the Prospectus and to enter into
and to perform its obligations under, or as contemplated by, the
Agreement.  The Company is duly qualified to do business as a foreign
corporation in good standing under the laws of each jurisdiction which requires
such qualification where the failure to be so qualified would, individually, or
in the aggregate, reasonably be expected to have a Material Adverse
Effect.

     

    (ii)           Each
of Public Service Company of New Mexico, a New Mexico corporation, Texas-New
Mexico Power Company, a Texas corporation, TNP Enterprises, Inc., a Texas
corporation, First Choice Power, L.P., a Texas limited partnership, First Choice
Power Special Purpose, L.P., a Texas limited partnership, has been duly
incorporated or organized with full power and authority to own its properties
and conduct its business as described in the Prospectus.  Each
Significant Subsidiary is validly existing as a corporation or other business
entity in good standing under the laws of the jurisdiction in which it is
chartered or organized.  Each Significant Subsidiary is duly qualified
to do business as a foreign corporation or other business entity and is in good
standing under the laws of each jurisdiction which requires such qualification,
where the failure to be so qualified would, individually, or in the aggregate,

    
      
        
          A-2

        

      

      
        
        

        
          

        

      

      
        
        

      

    

    reasonably
be expected to have a Material Adverse Effect. In giving the opinions in the
second sentence of this paragraph (ii), I have relied solely on the certificates
of recent dates issued by the jurisdiction of incorporation or organization of
each respective Significant Subsidiary as to the continued existence and good
standing of each Significant Subsidiary in its jurisdiction of incorporation or
organization listed in Annex A hereto and no other investigation or inquiry with
respect thereto has been made.  In giving the opinion in the third
sentence of this paragraph (ii) as to the due qualification and good standing of
each Significant Subsidiary as a foreign entity, I have relied solely on the
certificates of good standing issued by the jurisdiction where each Significant
Subsidiary is qualified to do business as a foreign entity listed in Annex A
hereto and no other investigation or inquiry with respect thereto has been
made.

     

    (iii)           
The Company has an authorized capitalization as set forth in each of the most
recent Preliminary Prospectus and the Prospectus.

     

    (iv)           All
of the issued and outstanding shares of capital stock or equivalent equity
rights of each Significant Subsidiary of the Company have been duly authorized
and validly issued, are fully paid and non-assessable, and (except for
outstanding preferred stock of Public Service Company of New Mexico and a 50%
interest in EnergyCo, LLC, which is owned by third parties) are owned directly
or indirectly by the Company, and are, to my knowledge after reasonable inquiry,
free from liens, encumbrances and defects of title.

     

    (v)           None
of the execution, delivery and performance of the Transaction Documents by the
Company, the consummation of the transactions contemplated in the Transaction
Documents and the application of the proceeds from the sale of the Remarketed
Senior Notes as described under “Use of Proceeds” in the most recent Preliminary
Prospectus and Prospectus, will (i) conflict with, result in a breach or
violation of, or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any of its Significant Subsidiaries pursuant to, any
statute, law, rule, regulation or, to my knowledge after reasonable inquiry,
judgment, order or decree applicable to the Company or any of its Significant
Subsidiaries of any court, regulatory body, administrative agency, governmental
body, arbitrator or other authority having jurisdiction over the Company or any
of its Significant Subsidiaries or any of its or their properties or (ii)
conflict with, result in a breach or violation of, or imposition of any lien,
charge or encumbrance upon any property or assets of the Company and its
subsidiaries, or constitute a default under any indenture, mortgage, deed of
trust, loan agreement, license or other agreement or instrument known to me
after reasonable inquiry to which the Company or any of its Significant
Subsidiaries is a party or by which the Company or any of its Significant
Subsidiaries is subject.

     

    (vi)           To
my knowledge after reasonable inquiry, and except as described in each of the
most recent Preliminary Prospectus and the Prospectus, (A) no action, suit or
proceeding by or before any court or governmental agency, authority or body or
any arbitrator involving the Company or any of its Significant Subsidiaries or
its or their property is pending or threatened that (1) could reasonably be
expected to have a material adverse effect on the performance of the Agreement
or the consummation of any of the transactions contemplated thereby or (2) could
reasonably be expected to have a Material Adverse Effect; and (B) no labor
disturbance by or dispute with the employees of the Company exists or is
threatened or is imminent that could reasonably be expected to have a Material
Adverse Effect.

     

    
      
        
          A-3

        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (vii)           The
statements set forth in the most recent Preliminary Prospectus and the
Prospectus under the caption “Description of the Notes” insofar as they purport
to constitute a summary of the terms of the securities, are accurate summaries
in all material respects.

     

    (viii)        
Each of the Indenture, the First Supplemental Indenture, the Second Supplemental
Indenture and the Third Supplemental Indenture has been duly authorized,
executed and delivered by the Company.

     

    (ix)           The
Agreement has been duly authorized, executed and delivered by the
Company.

     

    (x)           The
Remarketed Senior Notes have been duly authorized, executed and validly issued
by the Company.

     

    I am a
member of the Bar of the State of New Mexico, and, except as to the opinion
provided in paragraph (ii) above as to the due incorporation or organization of
each Significant Subsidiary incorporated or organized in the State of Texas, as
to which I am relying on [name], [title] of [the Company] who is an expert on
the laws of the State of Texas, for purposes of this opinion, do not hold myself
out as an expert on the laws of any jurisdiction other than the State of New
Mexico and express no opinion as to any choice of law matters nor as to, or the
effect or applicability of, any laws other than the laws of the State of New
Mexico, except that I express no opinion as to the applicability of, or
compliance with, New Mexico “blue sky” or state securities laws.  The
opinions herein are expressed as of the date hereof, and I assume no obligation
to revise, update or supplement such opinions to reflect any change in any fact
or circumstance that hereafter comes to my attention, or any change in law that
may hereafter occur, whether by legislative action, judicial decision, or in any
other manner.  This opinion letter is furnished only to you in
connection with the contemplated transactions and is solely for your
benefit.  This opinion letter may not be used, relied upon,
circulated, quoted or otherwise referred to for any purpose without my prior
written consent (including by any person who acquires Remarketed Senior Notes
from the Remarketing Agents), except as may be required by applicable law or
regulation.

     

    Very truly yours,

     

    By

                                                                                                                               
Charles L. Moore

                                                                                                                               
Associate General Counsel

                                                                                                                               
PNM
Resources, Inc.

    

    

    
      
        
          A-4

           

        

         

      

      
         

        
          

        

      

      
         

      

    

    

    EXHIBIT
B

    FORM OF OPINION OF TROUTMAN
SANDERS LLP

     

    November
17, 2008

    

    Citigroup
Global Markets Inc.

    388
Greenwich Street

    New York,
New York 10013

    

    Wedbush
Morgan Securities Inc.

    1000
Wilshire Boulevard

    Los
Angeles, California 90017

    

    UBS
Securities LLC

    299 Park
Avenue

    New York,
New York 10171

    

    Banc of
America Securities LLC

    One
Bryant Park

    New York,
New York 10036

    

    RBC
Capital Markets Corporation

    Three
World Financial Center

    200 Vesey
Street, 9th Floor

    New York,
New York 10281

    

    Ladies
and Gentlemen:

    

    We have
acted as counsel for PNM Resources, Inc., a New Mexico corporation (the
“Company”), in connection with the remarketing by the Company of $100,000,000
million aggregate principal amount of [__]% Senior Notes due 2010 (the
“Remarketed Senior Notes”) pursuant to the Supplemental Remarketing Agreement,
dated as of November 7, 2008 (the “Agreement”) by and among the Company,
Citigroup Global Markets Inc., Banc of America Securities LLC, Wedbush Morgan
Securities Inc., RBC Capital Markets Corporation and UBS Securities LLC, as the
remarketing agents (the “Remarketing Agents”), and U.S. Bank National
Association, a national banking association (successor to U.S. Bank National
Association), not individually but solely as Purchase Contract Agent (the
“Purchase Contract Agent”) and as attorney-in-fact of the holders of Purchase
Contracts, and pursuant to the Indenture dated as of October 7, 2005 between the
Company and U.S. Bank National Association, as Trustee (the “Trustee”) (the
“Indenture”), as supplemented by the Supplemental Indenture dated as of October
7, 2005 between the Company and the Trustee (the “First Supplemental
Indenture”), Supplemental Indenture No. 2 dated as of August 4, 2008 between the
Company and the Trustee (the “Second Supplemental Indenture”) and Supplemental
Indenture No. 3 dated as of November 17, 2008, between the Company and the
Trustee (the “Third Supplemental Indenture”). Capitalized terms used herein
which are defined in the Agreement have the meanings set forth in the Agreement,
unless otherwise defined herein.

    

    This
opinion letter is delivered to you at the request of the Company pursuant to
Section 6(d) of the Agreement.

    

    In
rendering the opinions set forth below, we have reviewed and examined the
Transaction Documents, the global Note, the Registration Statement, the
Preliminary Prospectus, the Prospectus and each Issuer Free Writing Prospectus
and such other documents as we have

    
      
        
          B-1

        

      

      
        
        

        
          

        

      

      
        
        

      

    

    deemed
necessary to render such opinions.  We have also examined originals or
copies, certified or otherwise identified to our satisfaction, of the articles
of incorporation and the bylaws or other organizational documents of the
Company, FCP Enterprises, Inc., a Delaware corporation (“FCPE”), EnergyCo, LLC,
a Delaware limited liability company (“EC”), and resolutions of the Board of
Directors of the Company and the pricing committee thereof.  In
addition, we have examined such other records, agreements, documents and other
instruments, and such certificates or comparable documents of public officials
and of officers and representatives of the Company, and have made such inquiries
of such officers and representatives, as we have deemed relevant and necessary
as a basis for the opinions hereinafter set forth.

    

    As to
questions of fact material to such opinions, we have, when relevant facts were
not independently established, relied upon certificates of the Company and of
its officers, upon certificates and comparable documents of public officials,
and upon statements in the Registration Statement, the Preliminary Prospectus,
the Prospectus and each Issuer Free Writing Prospectus.  As to all
matters of New Mexico law, including the opinion set out in paragraph 2 below,
to the extent that it relates to New Mexico law, we are relying exclusively on
the opinion letter of Charles L. Moore, Associate General Counsel, SEC Reporting
and Corporate Transactions, of the Company, dated November 17,
2008.  As used herein, the phrase “to the best of our knowledge” means
knowledge based upon and limited to the representations and warranties of the
Company contained in the Agreement and in the documents delivered by the Company
pursuant to the Agreement, inquiries of an appropriate officer of the Company
whom we have determined is likely to have personal knowledge of the matters
covered by the opinion, and the current conscious awareness of facts of the
attorneys currently practicing law with our firm who had involvement in the
transaction contemplated by the Agreement.

    

    In making
the examinations of the Transaction Documents and the other documents described
above, we have assumed the genuineness of all signatures (other than the
signatures of the Company), the legal capacity of all natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies (including telecopies) and the authenticity of the originals of such
documents and the correctness of all statements of fact contained in all such
original documents.  No opinion is expressed regarding compliance with
covenants in any agreement to which the Company or any of its subsidiaries is a
party incorporating calculations of a financial or accounting
nature.  We have also assumed the due authorization, execution and
delivery of such documents by parties other than the Company and the validity
and constitutionality of each relevant statute, rule, regulation and agency
covered by this opinion letter.

    

    Based
upon the foregoing and subject to and limited by the qualifications stated
herein, we are of the opinion that:

    

    (1)           Each
of FCPE and EC have been duly incorporated or organized with full power and
authority to own its properties and conduct its business as described in the
Prospectus.

    

    (2)           Each
of the Indenture, the First Supplemental Indenture, the Second Supplemental
Indenture and the Third Supplemental Indenture constitutes a valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms, except as the 

    
      
        
          B-2

        

      

      
        
        

        
          

        

      

      
        
        

      

    

    enforceability
thereof may be limited by bankruptcy, insolvency, reorganization or similar laws
relating to or affecting creditors’ rights generally and by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law); and the Indenture has been duly qualified under
the Trust Indenture Act.

    

    (3)           The
Remarketed Senior Notes have been duly issued and delivered, and constitute
valid and binding obligations of the Company, entitled to the benefits of the
Indenture, the First Supplemental Indenture, the Second Supplemental Indenture
and the Third Supplemental Indenture, enforceable against the Company in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization or other similar laws relating to or
affecting the enforcement of creditors’ rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

    

    (4)           The
Agreement has been duly and validly authorized, executed and delivered by the
Company.

    

    (5)           None
of the execution, delivery and performance of the Transaction Documents by the
Company, the consummation of the transactions contemplated in the Transaction
Documents and the application of the proceeds from the sale of the Remarketed
Senior Notes as described under “Use of Proceeds” in the most recent Preliminary
Prospectus and Prospectus, will conflict with, result in a breach or violation
or imposition of any lien, charge or encumbrance upon any property or assets of
the Company or any of its Significant Subsidiaries pursuant to, (A) the charter,
bylaws, or other organizational documents of the Company or any of its
Significant Subsidiaries or (B) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other agreement,
obligation, condition, covenant or instrument to which the Company or any of its
Significant Subsidiaries is a party or bound or to which its or their property
is subject and which is filed as an exhibit to the Company’s most recent Annual
Report on Form 10-K filed with the Commission.

    

    (6)           No
consent, approval, authorization, filing with or order of any court or
governmental agency or body is required to be obtained by the Company for the
solicitation of offers to purchase the Remarketed Senior Notes, the remarketing
of the Remarketed Senior Notes or the consummation by the Company of the
transactions contemplated by the Transaction Documents, except such as have been
obtained under the Securities Act and such as may be required under the blue sky
laws of any jurisdiction (as to which we do not express any opinion) in
connection with the remarketing and distribution of the Remarketed Senior Notes
in the manner contemplated in the Agreement and in the Prospectus.

    

    (7)           The
Registration Statement became effective under the Securities Act as of the date
it was filed with the Commission, and the Prospectus was filed with the
Commission pursuant to Rule 424(b) under the Securities Act on November [__],
2008.  To the best of our knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceeding
for that purpose is pending or threatened.

    

    
      
        
          B-3

        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (8)           (A)
The Registration Statement, on the latest Effective Date and on the Remarketing
Settlement Date, and (B) the Prospectus, when filed with the Commission pursuant
to Rule 424(b) and on the Remarketing Settlement Date, (except in each case as
to financial statements and other financial or statistical data contained or
incorporated by reference therein, upon which such counsel need not pass),
complied as to form in all material respects with the requirements of the
Securities Act and the respective rules and regulations of the Commission
thereunder; each document incorporated therein by reference as originally filed
pursuant to the Exchange Act (except as to financial statements and other
financial or statistical data contained or incorporated by reference therein,
upon which we do not express any opinion) complied as to form when so filed in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.

    

    (9)           The
statements made in each of the most recent Preliminary Prospectus and the
Prospectus under the caption “Certain United States Federal Income Tax
Considerations,” insofar as they purport to constitute summaries of matters of
United States federal tax law and regulations or legal conclusions with respect
thereto, constitute accurate summaries of the matters described therein in all
material respects.

    

    (10)           The
Company is not and after the application of the proceeds from the remarketing of
the Remarketed Senior Notes as described in the Prospectus, will not be, an
“investment company,” or an entity “controlled” by an investment company, as
such terms are defined in the Investment Company Act of 1940, as
amended.

    

    *           *           *           *

    We have
participated in conferences with officers and other representatives of the
Company at which the contents of the Registration Statement, the Prospectus, the
Preliminary Prospectus and related matters were discussed and we have consulted
with officers and other employees of the Company to inform them of the
disclosure requirements under the Securities Act.  We have examined
various reports, records, contracts and other documents of the Company and
orders and instruments of public officials, which our investigation led us to
deem pertinent.  In addition, we participated in one or more due
diligence conferences with representatives of the Company and attended the
closing at which the Company satisfied the conditions contained in Section 7 of
the Agreement.  We have not, however, undertaken to make any
independent review of other records of the Company which our investigation did
not lead us to deem pertinent.  As to the statistical statements in
the most recent Preliminary Prospectus, Prospectus and Registration Statement
(which includes the documents incorporated by reference therein), we have relied
solely on the officers of the Company.  We accordingly assume no
responsibility for the accuracy, completeness or fairness of the statements
contained in the most recent Preliminary Prospectus, the Prospectus or the
Registration Statement, except as specifically stated in numbered opinion (7)
above, and we have not made any independent check or verification
thereof.  But such conferences, consultation, examination and
attendance disclosed to us no information with respect to such other matters
that gives us reason to believe that and, on the basis of the foregoing, no
facts have come to our attention which have led us to believe that (i) the
Registration Statement, as of the Effective Date and as of November 17, 2008,
contained or contains any untrue statement of a material fact or omitted or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, (ii) the 

    
      
        
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    Prospectus,
as of its date and as of the date hereof, contained or contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, or (iii) the most recent Preliminary Prospectus,
together with the Issuer Free Writing Prospectuses in the Pricing Disclosure
Package, as of the Applicable Time, contained any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; in each case, except with respect to the financial statements and
other financial or statistical data included in or incorporated by reference in
the Registration Statement, the Prospectus, the most recent Preliminary
Prospectus and the Issuer Free Writing Prospectus in the Disclosure Package, as
to which we express no opinion.

    

    The
Agreement is governed by the laws of the State of New York.  We
express no opinion as to, or the effect or applicability of, any laws other than
the laws of the State of New York, the federal laws of the United States of
America and, in the case of the opinion in paragraph (1) above relating to FCPE,
the general corporate  laws of the State of Delaware.  We
express no opinion as to the applicability of, or compliance with, any state
securities or blue sky laws.

    

    The
opinions herein are expressed as of the date hereof, and we assume no obligation
to revise, update or supplement such opinions to reflect any change in any fact
or circumstance that hereafter comes to our attention, or any change in law that
may hereafter occur, whether by legislative action, judicial decision, or in any
other manner.  This opinion letter is furnished only to you in
connection with the contemplated transactions and is solely for your
benefit.  This opinion letter may not be used, relied upon,
circulated, quoted or otherwise referred to for any purpose without our prior
written consent (including by any person who acquires Remarketed Senior Notes
from the Remarketing Agents), except as may be required by applicable law or
regulation.

    

    Very
truly yours,

    

    

    
      
        
          B-5DIRECTOR NON-QUALIFIED

Exhibit 10.1

DIRECTOR NON-QUALIFIED STOCK OPTION AGREEMENT

THIS STOCK OPTION AGREEMENT (the “Agreement”) entered into as of this ____ day of ________, 2008 between GelTech Solutions, Inc. (the “Company”) and ___________ (the “Director”), a member of the Company’s board of directors (the “Board”).

WHEREAS, by action taken by the Board it has adopted the 2007 Equity Incentive Plan (the “Plan”); and

WHEREAS, by action taken by the Board it has been determined that in order to enhance the ability of the Company to attract and retain qualified directors it will grant the Director the right to purchase stock in the Company pursuant to non-qualified options.

NOW THEREFORE, in consideration of the mutual covenants and promises hereafter set forth and for other good and valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows:

1.

Grant of Non-Qualified Options.  The Company irrevocably grants to the Director, as a matter of separate agreement and not in lieu of salary or other compensation for services, the right and option to purchase all or any part of _______ shares of authorized but unissued or treasury common stock of the Company (the “Options”) on the terms and conditions herein set forth.  

2.

Price.  The exercise price of the shares of common stock subject to the Options shall be $_______ per share. 

3.

Vesting -When Exercisable.  

(a)

The Options shall vest on June 30, 20__ as long as the Director remains a director on such vesting date.  

(b)

Subject to Sections 3(c) and 4 of this Agreement, Options may be exercised prior to vesting and remain exercisable for 10 years from the date of grant or until 6:00 p.m. New York time on ________________________, 2018.

(c)

However, notwithstanding any other provision of this Agreement at the option of the Board, all Options, whether vested or unvested shall be immediately forfeited in the event of:

(1)

Purchasing or selling securities of the Company without written authorization in accordance with the Company’s inside information guidelines then in effect;

(2)

Breaching any duty of confidentiality including that required by the Company’s inside information guidelines then in effect;

(3)

Competing with the Company; or

(4)

Recruitment of Company personnel after ceasing to be a director.

(d)

Notwithstanding any other provision in this Agreement, the Options automatically vest on the date of a “Change in Control.”  A “Change in Control” shall mean any of the following: 

(1)

the consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entity’s securities outstanding immediately after such merger, consolidation or other corporate reorganization are owned by persons who were not shareholders of the Company immediately prior to such merger, consolidation or other corporate reorganization; 

(2)

any entity or person not now an executive officer, director or 30% beneficial owner of the Company becomes either individually or as part of a group (required to file a Schedule 13D or 13G with the Securities and Exchange Commission (“SEC”)) the beneficial owner of 30% or more of the Company’s common stock; for this purpose, the terms “person” and “beneficial ownership” shall have the meanings provided in Section 13(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) or related rules promulgated by the SEC;

(3)

the closing of a sale of all or substantially all of the assets of the Company in a transaction which requires shareholder approval;  

(4)

individuals who, as of the date of this Agreement, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided, however, that any individual becoming a director subsequent to the date of this Agreement whose election or nomination for election by the Company’s shareholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company (as such term is used in Rule 14a-11 of Regulation 14A, or any successor section, promulgated under the Exchange Act); or

(5)

the Board, in its sole and absolute discretion, determines that there is a Change in Control of the Company.

4.

Termination of Relationship.

(a)

If for any reason, except death or disability as provided below, the Director 

ceases to act as a director of the Company, all rights granted hereunder shall terminate effective one year from the date the Director ceases to act as a director, except as otherwise provided for herein.

(b)

If the Director shall die while a director of the Company, his estate or any Transferee, as defined herein, shall have the right within one year from the date of the Director’s death to exercise the Director’s vested Options subject to Section 3(c). For the purpose of this Agreement, “Transferee” shall mean a person to whom such shares are transferred by will or by the laws of descent and distribution.

(c)

No transfer of the Options by the Director by will or by the laws of descent and distribution shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of the letters testamentary or such other evidence as the Board may deem necessary to establish the authority of the state and the acceptance by the Transferee or Transferees of the terms and conditions of the Options.

(d)

If the Director becomes disabled while a director of the Company within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, the three-month period referred to in Section 4(a) of this Agreement shall be extended to one year.

5.

Profits on the Sale of Certain Shares; Redemption.  If any of the events specified in Section 3(c) of this Agreement occur within one year from the last date the Director is a director of the Company (the “Termination Date”), all profits earned from the sale of the Company’s securities, including the sale of shares of common stock underlying Options, during the two-year period commencing one year prior to the Termination Date shall be forfeited and forthwith paid by the Director to the Company.  Further, in such event, the Company may at its option redeem shares of common stock acquired upon exercise of Options by payment of the exercise price to Director.  The Company’s rights under this Section 5 do not lapse one year from the Termination Date but are a contract right subject to any appropriate statutory limitation period.

6.

Method of Exercise.  The Options shall be exercisable by a written notice which shall:

(a)  

state the election to exercise the Options, the number of shares to be exercised, the person in whose name the stock certificate or certificates for such shares of common stock is to be registered, his address and social security number (or if more than one, the names, addresses and social security numbers of such persons);

(b)  

contain such representations and agreements as to the holder’s investment intent with respect to such shares of common stock as set forth in Section 11 hereof;

(c)  

be signed by the person or persons entitled to exercise the Options and, if the Options are being exercised by any person or persons other than the Director, be accompanied by proof, satisfactory to counsel for the Company, of the right of such person or persons to exercise the Options; and

(d) 

be accompanied by full payment of the purchase or exercise price in United States dollars in cash or by check.  

The certificate or certificates for shares of common stock as to which the Options shall be exercised shall be registered in the name of the person or persons exercising the Options.

7.

Sale of Shares Acquired Upon Exercise of Options.  Any shares of the Company’s common stock acquired pursuant to Options granted hereunder as set forth herein cannot be sold by the Director until at least six months elapse from the date of grant of the Options except in case of death or disability or if the grant was exempt from the short-swing profit provisions of Section 16(b) of the Securities Exchange Act of 1934. 

8.

Anti-Dilution Provisions.  The Options granted hereunder shall have the anti-dilution rights set forth in the Plan.

9.  

Necessity to Become Holder of Record.  Neither the Director nor his/her estate shall have any rights as a shareholder with respect to any shares covered by the Options until such person shall have become the holder of record of such shares.  No adjustment shall be made for cash dividends or cash distributions, ordinary or extraordinary, in respect of such shares for which the record date is prior to the date on which he/she shall become the holder of record thereof.

10.  

Reservation of Right to Terminate Relationship.  Nothing contained in this Agreement shall restrict the right of the Company to terminate the relationship of the Director at any time, with or without cause. The termination of the relationship of the Director by the Company, regardless of the reason therefor, shall have the results provided for in Sections 3 and 5 of this Agreement.  

11.  

Conditions to Exercise of Options.  In order to enable the Company to comply with the Securities Act of 1933 (the “Securities Act”) and relevant state law, the Company may require the Director, the Director’s estate, or any transferee as a condition of the exercising of the Options granted hereunder, to give written assurance satisfactory to the Company that the shares subject to the Options are being acquired for his/her own account, for investment only, with no view to the distribution of same, and that any subsequent resale of any such shares either shall be made pursuant to a registration statement under the Securities Act and applicable state law which has become effective and is current with regard to the shares being sold, or shall be pursuant to an exemption from registration under the Securities Act and applicable state law.

The Options are subject to the requirement that, if at any time the Board shall determine, in its discretion, that the listing, registration, or qualification of the shares of common stock subject to the Options upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or in connection with the issue or purchase of shares under the Options, the Options may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected.  

12.

Duties of Company.  The Company will at all times during the term of Options:

(a)  

Reserve and keep available for issue such number of shares of its authorized and unissued common stock as will be sufficient to satisfy the requirements of this Agreement;

(b)  

Pay all original issue taxes with respect to the issue of shares pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection therewith;

(c)  

Use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Company, shall be applicable thereto.

13.

Parties Bound by Plan.  The Plan and each determination, interpretation or other action made or taken pursuant to the provisions of the Plan shall be final and shall be binding and conclusive for all purposes on the Company and the Director and his/her respective successors in interest.

14.

Severability.  In the event any parts of this Agreement are found to be void, the remaining provisions of this Agreement shall nevertheless be binding with the same effect as though the void parts were deleted.

15.

Arbitration.  Any controversy, dispute or claim arising out of or relating to this Agreement, or its interpretation, application, implementation, breach or enforcement which the parties are unable to resolve by mutual agreement, shall be settled by submission by either party of the controversy, claim or dispute to binding arbitration in Palm Beach County, Florida (unless the parties agree in writing to a different location), before a single arbitrator in accordance with the rules of the American Arbitration Association then in effect. The decision and award made by the arbitrator shall be final, binding and conclusive on all parties hereto for all purposes, and judgment may be entered thereon in any court having jurisdiction thereof.

16.

Benefit.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their legal representatives, successors and assigns.

17.

Notices and Addresses.  All notices, offers, acceptance and any other acts under this Agreement (except payment) shall be in writing, and shall be sufficiently given if delivered to the addressees in person, by Federal Express or similar receipted delivery, or by facsimile delivery as follows:

				
	 
	The Director:

	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

	 
	Facsimile:

	 
	 

	 
	 
	 
	 

				
	 
	The Company:

	Mr. Michael Cordani

	 

	 
	 
	GelTech Solutions, Inc

	 

	 
	 
	1460 Park Lane South, Suite 1

	 

	 
	 
	Jupiter, FL 33458

	 

	 
	 
	Facsimile: (561) 427-6182

	 

	 
	 
	 
	 

	 
	with a copy to:

	Michael D. Harris, Esq.

	 

	 
	 
	Harris Cramer LLP

	 

	 
	 
	1555 Palm Beach Lakes Blvd., Suite 310

	 

	 
	 
	West Palm Beach, FL 33401

	 

	 
	 
	Facsimile:  (561) 659-0701

	 

or to such other address as either of them, by notice to the other may designate from time to time.  The transmission confirmation receipt from the sender’s facsimile machine shall be evidence of successful facsimile delivery. Time shall be counted to, or from, as the case may be, the delivery in person or by mailing.

18.

Attorney’s Fees.  In the event that there is any controversy or claim arising out of or relating to this Agreement, or to the interpretation, breach or enforcement thereof, and any action or proceeding is commenced to enforce the provisions of this Agreement, the prevailing party shall be entitled to a reasonable attorney’s fee, costs and expenses.

19.

Governing Law.  This Agreement and any dispute, disagreement, or issue of construction or interpretation arising hereunder whether relating to its execution, its validity, the obligations provided herein or performance shall be governed or interpreted according to the laws of the State of Delaware without regard to choice of law considerations.  

20.

Oral Evidence.  This Agreement constitutes the entire Agreement between the parties and supersedes all prior oral and written agreements between the parties hereto with respect to the subject matter hereof. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, except by a statement in writing signed by the party or parties against which enforcement or the change, waiver discharge or termination is sought.

21.

Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.  The execution of this Agreement may be by actual or facsimile signature.

22.

Section or Paragraph Headings.  Section headings herein have been inserted for reference only and shall not be deemed to limit or otherwise affect, in any matter, or be deemed to interpret in whole or in part any of the terms or provisions of this Agreement.

IN WITNESS WHEREOF the parties hereto have set their hand and seals the day and year first above written.

					
	WITNESSES:

	 
	GELTECH SOLUTIONS, INC.

	 

	 
	 
	 
	 

	 
	 
	By:

	 
	 

	 
	 
	 
	Michael Cordani

	 

	 
	 
	 
	Chief Executive Officer

	 

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	 
	 
	 
	DIRECTOR:

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