Document:

Exhibit 10.4

 

INCENTIVE PLAN OF

EDGE PETROLEUM
CORPORATION

 

(AS AMENDED AND
RESTATED EFFECTIVE AS OF AUGUST 2, 2006)

 

1. Plan. This Incentive
Plan of Edge Petroleum Corporation (the “Plan”) was adopted by Edge Petroleum
Corporation to reward certain corporate officers and key employees of Edge
Petroleum Corporation and certain independent consultants by enabling them to
acquire shares of common stock of Edge Petroleum Corporation.

 

2. Objectives. This Plan
is designed to attract and retain key employees of the Company and its
Subsidiaries (as hereinafter defined), to attract and retain qualified
directors of the Company, to attract and retain consultants and other
independent contractors, to encourage the sense of proprietorship of such
employees, directors and independent contractors and to stimulate the active
interest of such persons in the development and financial success of the
Company and its Subsidiaries. These objectives are to be accomplished by making
Awards (as hereinafter defined) under this Plan and thereby providing
Participants (as hereinafter defined) with a proprietary interest in the growth
and performance of the Company and its Subsidiaries.

 

3. Definitions. As used
herein, the terms set forth below shall have the following respective meanings:

 

“Annual Director Award
Date” means, for each year beginning on or after the IPO Closing Date, the
first business day of the month next succeeding the date upon which the annual
meeting of stockholders of the Company is held in such year.

 

“Authorized Officer”
means the Chairman of the Board or the Chief Executive Officer of the Company
(or any other senior officer of the Company to whom either of them shall
delegate the authority to execute any Award Agreement).

 

“Award” means an Employee
Award, a Director Award or an Independent Contractor Award.

 

“Award Agreement” means
any Employee Award Agreement, Director Award Agreement or Independent
Contractor Award Agreement.

 

“Board” means the Board
of Directors of the Company.

 

“Cash Award” means an
award denominated in cash.

 

“Code” means the Internal
Revenue Code of 1986, as amended from time to time.

 

“Committee” means the
Compensation Committee of the Board or such other committee of the Board as is
designated by the Board to administer the Plan.

 

“Common Stock” means the
Common Stock, par value $.01 per share, of the Company.

 

“Company” means Edge
Petroleum Corporation, a Delaware corporation.

 

“Director” means an
individual serving as a member of the Board.

 

“Director Award” means
the grant of a Director Option or a Director Stock Award.

 

“Director Award Agreement”
means a written agreement between the Company and a Participant who is a
Nonemployee Director setting forth the terms, conditions and limitations
applicable to a Director Award.

 

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“Director Stock Award”
means a Stock Award granted to a Non-employee Director pursuant to the
applicable terms, conditions and limitations specified in paragraph 9(b)
hereof.

 

“Disability” means, with
respect to a Non-employee Director, the inability to perform the duties of a
Director for a continuous period of more than three months by reason of any
medically determinable physical or mental impairment.

 

“Dividend Equivalents”
means, with respect to shares of Restricted Stock that are to be issued at the
end of the Restriction Period, an amount equal to all dividends and other
distributions (or the economic equivalent thereof) that are payable to
stockholders of record during the Restriction Period on a like number of shares
of Common Stock.

 

“Employee” means an
employee of the Company or any of its Subsidiaries and an individual who has
agreed to become an Employee of the Company or any of its Subsidiaries and
actually becomes such an Employee within the following six months.

 

“Employee Award” means
the grant of any Option, SAR, Stock Award, Cash Award or Performance Award,
whether granted singly, in combination or in tandem, to a Participant who is an
Employee pursuant to such applicable terms, conditions and limitations as the
Committee may establish in order to fulfill the objectives of the Plan.

 

“Employee Award Agreement”
means a written agreement between the Company and a Participant who is an
Employee setting forth the terms, conditions and limitations applicable to an
Employee Award.

 

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

 

“Fair Market Value” of a
share of Common Stock means, as of a particular date, (i) if shares of Common
Stock are listed on a national securities exchange, the mean between the
highest and lowest sales price per share of Common Stock on the consolidated
transaction reporting system for the principal national securities exchange on
which shares of Common Stock are listed on that date, or, if there shall have
been no such sale so reported on that date, on the last preceding date on which
such a sale was so reported, (ii) if shares of Common Stock are not so listed
but are quoted on the Nasdaq National Market, the mean between the highest and
lowest sales price per share of Common Stock reported by the Nasdaq National
Market on that date, or, if there shall have been no such sale so reported on
that date, on the last preceding date on which such a sale was so reported,
(iii) if the Common Stock is not so listed or quoted, the mean between the
closing bid and asked price on that date, or, if there are no quotations
available for such date, on the last preceding date on which such quotations
shall be available, as reported by the Nasdaq Stock Market, or, if not reported
by the Nasdaq Stock Market, by the National Quotation Bureau Incorporated or
(iv) if shares of Common Stock are not publicly traded, the most recent value
determined by an independent appraiser appointed by the Company for such
purpose; provided that, notwithstanding the foregoing, “Fair Market Value” in
the case of any Award made in connection with the IPO, means the price per
share to the public of the Common Stock in the IPO, as set forth in the final
prospectus relating to the IPO.

 

“Incentive Option” means
an Option that is intended to comply with the requirements set forth in
Section 422 of the Code.

 

“Independent Contractor”
means a person providing services to the Company or any of its Subsidiaries
except an Employee or Non-employee Director.

 

“Independent Contractor
Award” means the grant of any Nonqualified Stock Option, SAR, Stock Award, Cash
Award or Performance Award, whether granted singly, in combination or in
tandem, to a Participant who is an Independent Contractor pursuant to such
applicable terms, conditions and limitations as the Committee may establish in
order to fulfill the objectives of the Plan.

 

“Independent Contractor
Award Agreement” means a written agreement between the Company and a
Participant who is an Independent Contractor setting forth the terms,
conditions and limitations applicable to an Independent Contractor Award.

 

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“IPO” means the first
time a registration statement filed under the Securities Act of 1933 and respecting
an underwritten primary offering by the Company of shares of Common Stock is
declared effective under that Act and the shares registered by that
registration statement are issued and sold by the Company (otherwise than
pursuant to the exercise of any over-allotment option).

 

“IPO Closing Date” means
the date on which the Company first receives payment for the shares of Common
Stock it sells in the IPO.

 

“Non-employee Director”
has the meaning set forth in paragraph 4(b) hereof.

 

“Nonqualified Stock
Option” means an Option that is not an Incentive Option.

 

“Option” means a right to
purchase a specified number of shares of Common Stock at a specified price.

 

“Participant” means an
Employee, Director or Independent Contractor to whom an Award has been made
under this Plan.

 

“Performance Award” means
an award made pursuant to this Plan to a Participant who is an Employee or
Independent Contractor who is subject to the attainment of one or more
Performance Goals.

 

“Performance Goal” means
a standard established by the Committee, to determine in whole or in part
whether a Performance Award shall be earned.

 

“Restricted Stock” means
any Common Stock that is restricted or subject to forfeiture provisions.

 

“Restriction Period”
means a period of time beginning as of the date upon which an Award of
Restricted Stock is made pursuant to this Plan and ending as of the date upon
which the Common Stock subject to such Award is no longer restricted or subject
to forfeiture provisions.

 

“Rule 16b-3” means
Rule 16b-3 promulgated under the Exchange Act, or any successor rule.

 

“SAR” means a right to
receive a payment, in cash or Common Stock, equal to the excess of the Fair
Market Value or other specified valuation of a specified number of shares of
Common Stock on the date the right is exercised over a specified strike price,
in each case, as determined by the Committee.

 

“Stock Award” means an
award in the form of shares of Common Stock or units denominated in shares of
Common Stock.

 

“Subsidiary” means (i) in
the case of a corporation, any corporation of which the Company directly or
indirectly owns shares representing more than 50% of the combined voting power
of the shares of all classes or series of capital stock of such corporation
which have the right to vote generally on matters submitted to a vote of the
stockholders of such corporation and (ii) in the case of a partnership or other
business entity not organized as a corporation, any such business entity of
which the Company directly or indirectly owns more than 50% of the voting,
capital or profits interests (whether in the form of partnership interests,
membership interests or otherwise).

 

4. Eligibility.

 

(a) Employees. Key
Employees eligible for Employee Awards under this Plan are those who hold
positions of responsibility and whose performance, in the judgment of the
Committee, can have a significant effect on the success of the Company and its
Subsidiaries, including those individuals who are expected to become Employees
within six months.

 

(b) Directors. Directors
eligible for Director Awards under this Plan are those who are not employees of
the Company or any of its Subsidiaries (“Non-employee Directors”).

 

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(c) Independent
Contractors. Independent Contractors eligible for Independent Contractor Awards
under this Plan are those Independent Contractors providing services to, or who
will provide services to, the Company or any of its Subsidiaries.

 

5. Common Stock Available
for Awards. Subject to the provisions of paragraph 15 hereof, there shall be
available for Awards under this Plan granted wholly or partly in Common Stock
(including rights or options that may be exercised for or settled in Common
Stock) an aggregate of 2,200,000 shares of Common Stock, all of which shall be
available for Incentive Options. The number of shares of Common Stock that are
the subject of Awards under this Plan, that are forfeited or terminated, expire
unexercised, are settled in cash in lieu of Common Stock or in a manner such that
all or some of the shares covered by an Award are not issued to a Participant
or are exchanged for Awards that do not involve Common Stock, shall again
immediately become available for Awards hereunder. The Committee may from time
to time adopt and observe such procedures concerning the counting of shares
against the Plan maximum as it may deem appropriate. The Board and the
appropriate officers of the Company shall from time to time take whatever
actions are necessary to file any required documents with governmental
authorities, stock exchanges and transaction reporting systems to ensure that
shares of Common Stock are available for issuance pursuant to Awards.

 

6. Administration.

 

(a) This Plan, as it
applies to Participants who are Employees or Independent Contractors but not
with respect to Participants who are Non-employee Directors, shall be
administered by the Committee. To the extent required in order for Employee
Awards to be exempt from Section 16 of the Exchange Act by virtue of the
provisions of Rule 16b-3, the Committee shall consist of at least two
members of the Board who meet the requirements of the definition of “non-employee
director” set forth in Rule 16b-3(b)(3)(i) promulgated under the Exchange
Act.

 

(b) Subject to the
provisions hereof, insofar as this Plan relates to the Employee Awards or
Independent Contractor Awards, the Committee shall have full and exclusive
power and authority to administer this Plan and to take all actions that are
specifically contemplated hereby or are necessary or appropriate in connection
with the administration hereof. Insofar as this Plan relates to the Employee
Awards or Independent Contractor Awards, the Committee shall also have full and
exclusive power to interpret this Plan and to adopt such rules, regulations and
guidelines for carrying out this Plan as it may deem necessary or proper, all
of which powers shall be exercised in the best interests of the Company and in
keeping with the objectives of this Plan. The Committee may, in its discretion,
provide for the extension of the exercisability of an Employee Award or
Independent Contractor Award, accelerate the vesting or exercisability of an
Employee Award or Independent Contractor Award, eliminate or make less
restrictive any restrictions contained in an Employee Award or Independent
Contractor Award, waive any restriction or other provision of this Plan
(insofar as such provision relates to Employee Awards or to Independent
Contractor Awards) or an Employee Award or Independent Contractor Award or otherwise
amend or modify an Employee Award or Independent Contractor Award in any manner
that is either (i) not adverse to the Participant to whom such Employee Award
or Independent Contractor Award was granted or (ii) consented to by such
Participant; provided, however, that no Option awarded as an Employee Award or
Independent Contractor Award pursuant to this Plan may be repriced, replaced
with Stock Awards or Cash Awards, or regranted through cancellation without the
approval of the shareholders of the Company (except in connection with a change
in the Company’s capitalization or as otherwise provided in Section 15 hereof),
if the effect would be to reduce the exercise price for the shares underlying
such Employee Award or Independent Contractor Award. The Committee may make an
award to an individual who it expects to become an Employee of the Company or
any of its Subsidiaries within the next six months, with such award being
subject to the individuals actually becoming an Employee within such time
period, and subject to such other terms and conditions as may be established by
the Committee. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in this Plan or in any Employee Award or
Independent Contractor Award in the manner and to the extent the Committee
deems necessary or desirable to further the Plan purposes. Any decision of the
Committee in the interpretation and administration of this Plan shall lie
within its sole and absolute discretion and shall be final, conclusive and
binding on all parties concerned.

 

(c) No member of the
Committee or officer of the Company to whom the Committee has delegated
authority in accordance with the provisions of paragraph 7 of this Plan
shall be liable for anything done or omitted to be done by him or her, by any
member of the Committee or by any officer of the Company in connection with the

 

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performance of any duties
under this Plan, except for his or her own willful misconduct or as expressly
provided by statute.

 

7. Delegation of
Authority. The Committee may delegate to the Chief Executive Officer and to
other senior officers of the Company its duties under this Plan pursuant to
such conditions or limitations as the Committee may establish, except that the
Committee may not delegate to any person the authority to grant Awards to, or
take other action with respect to, Participants who are subject to
Section 16 of the Exchange Act.

 

8. Employee and
Independent Contractor Awards.

 

(a) The Committee shall
determine the type or types of Employee Awards to be made under this Plan and
shall designate from time to time the Employees who are to be the recipients of
such Awards. Each Employee Award may be embodied in an Employee Award Agreement,
which shall contain such terms, conditions and limitations as shall be
determined by the Committee in its sole discretion and shall be signed by the
Participant to whom the Employee Award is made and by an Authorized Officer for
and on behalf of the Company. Employee Awards may consist of those listed in
this paragraph 8(a) hereof and may be granted singly, in combination or in
tandem. Employee Awards may also be made in combination or in tandem with, in
replacement of, or as alternatives to, grants or rights under this Plan or any
other employee plan of the Company or any of its Subsidiaries, including the
plan of any acquired entity. An Employee Award may provide for the grant or
issuance of additional, replacement or alternative Employee Awards upon the
occurrence of specified events, including the exercise of the original Employee
Award granted to a Participant. All or part of an Employee Award may be subject
to conditions established by the Committee, which may include, but are not
limited to, continuous service with the Company and its Subsidiaries,
achievement of specific business objectives, increases in specified indices,
attainment of specified growth rates and other comparable measurements of
performance. Upon the termination of employment by a Participant who is an
Employee, any unexercised, deferred, unvested or unpaid Employee Awards shall
be treated as set forth in the applicable Employee Award Agreement.

 

(i) Stock Option. An
Employee Award may be in the form of an Option. An Option awarded pursuant to
this Plan may consist of an Incentive Option or a Nonqualified Option. The
price at which shares of Common Stock may be purchased upon the exercise of an
Incentive Option shall be not less than the Fair Market Value of the Common
Stock on the date of grant. The price at which shares of Common Stock may be
purchased upon the exercise of a Nonqualified Option shall be not less than the
Fair Market Value of the Common Stock on the date of grant. Subject to the
foregoing provisions, the terms, conditions and limitations applicable to any
Options awarded pursuant to this Plan, including the term of any Options and
the date or dates upon which they become exercisable, shall be determined by
the Committee.

 

(ii) Stock Appreciation
Right. An Employee Award may be in the form of an SAR. The terms, conditions
and limitations applicable to any SARs awarded pursuant to this Plan, including
the term of any SARs and the date or dates upon which they become exercisable,
shall be determined by the Committee.

 

(iii) Stock Award. An
Employee Award may be in the form of a Stock Award. The terms, conditions and
limitations applicable to any Stock Awards granted pursuant to this Plan shall
be determined by the Committee.

 

(iv) Cash Award. An
Employee Award may be in the form of a Cash Award. The terms, conditions and
limitations applicable to any Cash Awards granted pursuant to this Plan shall
be determined by the Committee.

 

(v) Performance Award.
Without limiting the type or number of Employee Awards that may be made under
the other provisions of this Plan, an Employee Award may be in the form of a
Performance Award. A Performance Award shall be paid, vested or otherwise
deliverable solely on account of the attainment of one or more pre-established,
objective Performance Goals established by the Committee prior to the earlier
to occur of (x) 90 days after the commencement of the period of service to
which the Performance Goal relates and (y) the lapse of 25% of the period of
service (as scheduled in good faith at the time the goal is established), and
in any event while the outcome is substantially uncertain. A Performance Goal
is objective if a third party having knowledge of the relevant facts could
determine whether the goal is met. Such a Performance Goal may be based on one
or more 

 

5

 

business criteria that
apply to the individual, one or more business units of the Company, or the
Company as a whole, and may include one or more of the following: increased
revenue, net income, stock price, market share, earnings per share, return on
equity, return on assets or decrease in costs. Unless otherwise stated, such a
Performance Goal need not be based upon an increase or positive result under a
particular business criterion and could include, for example, maintaining the
status quo or limiting economic losses (measured, in each case, by reference to
specific business criteria). In interpreting Plan provisions applicable to
Performance Goals and Performance Awards, it is the intent of the Plan to
conform with the standards of Section 162(m) of the Code and Treasury
Regulations 1.16227(e)(2)(i), and the Committee in establishing such goals
and interpreting the Plan shall be guided by such provisions. Prior to the
payment of any compensation based on the achievement of Performance Goals, the
Committee must certify in writing that applicable Performance Goals and any of
the material terms thereof were, in fact, satisfied. Subject to the foregoing
provisions, the terms, conditions and limitations applicable to any Performance
Awards made pursuant to this Plan shall be determined by the Committee.

 

(b) Notwithstanding
anything to the contrary contained in this Plan, the following limitations
shall apply to any Employee Awards made hereunder:

 

(i) no Participant may be
granted, during any one-year period, Employee Awards consisting of Options or
SARs that are exercisable for more than 135,000 shares of Common Stock;

 

(ii) no Participant may
be granted, during any one-year period, Stock Awards covering or relating to
more than 135,000 shares of Common Stock (the limitation set forth in this
clause (ii), together with the limitation set forth in clause (i) above, being
hereinafter collectively referred to as the “Stock Based Awards Limitations”);
and

 

(iii) no Participant may
be granted Employee Awards consisting of cash or in any other form permitted
under this Plan (other than Employee Awards consisting of Options or SARs or
otherwise consisting of shares of Common Stock or units denominated in such
shares) in respect of any one-year period having a value determined on the date
of grant in excess of $500,000.

 

(c) The Committee shall
have the sole responsibility and authority to determine the type or types of
Independent Contractor Awards to be made under this Plan and may make any such
Awards as could be made to an Employee, other than Incentive Options; provided
that the limitations described in paragraph 8(b) shall be inapplicable to
Independent Contractor Awards.

 

9. Director Awards. Each Non-employee
Director of the Company shall be granted Director Awards in accordance with
this paragraph 9 and subject to the applicable terms, conditions and
limitations set forth in this Plan and the applicable Director Award Agreement.
Notwithstanding anything to the contrary contained herein, Director Awards
shall not be made in any year in which a sufficient number of shares of Common
Stock are not available to make such Awards under this Plan.

 

(a) Director Options.

 

(i) On the IPO Closing
Date, each Non-employee Director shall be automatically awarded a Director
Option for the number of shares of Common Stock determined in the following
table:

 

	
  Years of Service With the Company or its Predecessors

  	
   

  	
  Number of Shares Subject to Option

  	
   

  
	
  4 years or
  greater

  	
   

  	
  8,000

  	
   

  
	
  3 to 4 years

  	
   

  	
  6,000

  	
   

  
	
  2 to 3 years

  	
   

  	
  4,000

  	
   

  
	
  2 years or less

  	
   

  	
  2,000

  	
   

  

 

(ii) Each Non-employee
Director who was first appointed or elected to the Board of Directors during
the year ended December 31, 2002, shall be granted a Director Option that: (A)
provides for the purchase of 5,000 Shares of Common Stock; (B) expires
(notwithstanding any earlier termination of the status of the holder as a
Non-employee Director) as set forth on Annex A hereto; (C) vests and becomes
exercisable as set forth on Annex A; and (D) has a purchase price of each
share of Common Stock subject to such Director Option as set forth on
Annex A (which in any event is equal to or greater than the Fair Market
Value as of February 20, 2003).

 

6

 

(iii) Effective beginning
February 20, 2003, on the date of his or her first appointment or
election to the Board of Directors, a Non-employee Director may, in the
discretion of the Board of Directors, be granted a Director Option that provides
for the purchase of up to 5,000 shares of Common Stock.

 

(iv) Effective beginning
on and including June 1, 2004, on each Annual Director Award Date,
each Non-employee Director may, in the discretion of the Board, be granted a
Director Option that provides for the purchase of up to 3,000 shares of Common
Stock.

 

(v) Except as provided in
or pursuant to (ii): (A) each Director Option shall have a term of ten years
from the date of grant, notwithstanding any earlier termination of the status
of the holder as a Non-employee Director; (B) the purchase price of each share
of Common Stock subject to a Director Option shall be equal to the Fair Market
Value of the Common Stock on the date of grant; and (C) all Director Options
granted after July 27, 1999 shall vest and become exercisable on the
second anniversary of the date of grant.

 

(vi) All unvested
Director Options shall be forfeited if the Non-employee Director resigns as a
Director without the consent of a majority of the other Directors.

 

(vii) Any Award of
Director Options shall be embodied in a Director Award Agreement, which shall
contain the terms, conditions and limitations set forth above and shall be
signed by the Participant to whom the Director Options are granted and by an
Authorized Officer for and on behalf of the Company.

 

(b) Director Stock
Awards. Effective beginning on and including June 1, 2004, on each
Annual Director Award Date, each Non-employee Director who was serving as such
on the date immediately preceding the most recent annual meeting of
stockholders, may, in the discretion of the Board, be awarded shares of Common
Stock in respect of all or a portion of the annual retainer to be paid to the
Non-employee Director for the preceding twelve months. The Board may provide
that all or a portion of any such shares of Common Stock be Restricted Stock
and specify the restrictions thereon (unless otherwise specified by the Board,
no shares of Common Stock issued as a retainer shall be Restricted Stock).

 

10. Payment of Awards.

 

(a) General. Payment of
Employee Awards or Independent Contractor Awards may be made in the form of
cash or Common Stock, or a combination thereof, and may include such
restrictions as the Committee shall determine, including, in the case of Common
Stock, restrictions on transfer and forfeiture provisions. If payment of an
Employee Award or Independent Contractor Award is made in the form of
Restricted Stock, the applicable Award Agreement relating to such shares shall
specify whether they are to be issued at the beginning or end of the
Restriction Period. In the event that shares of Restricted Stock are to be
issued at the beginning of the Restriction Period, the certificates evidencing
such shares (to the extent that such shares are so evidenced) shall contain
appropriate legends and restrictions that describe the terms and conditions of
the restrictions applicable thereto. In the event that shares of Restricted
Stock are to be issued at the end of the Restricted Period, the right to
receive such shares shall be evidenced by book entry registration or in such
other manner as the Committee may determine.

 

(b) Deferral. With the
approval of the Committee, amounts payable in respect of Employee Awards or
Independent Contractor Awards may be deferred and paid either in the form of
installments or as a lump sum payment. The Committee may permit selected
Participants to elect to defer payments of some or all types of Employee Awards
or Independent Contractor Awards in accordance with procedures established by
the Committee. Any deferred payment of an Employee Award or Independent
Contractor Award, whether elected by the Participant or specified by the Award
Agreement or by the Committee, may be forfeited if and to the extent that the
Award Agreement so provides.

 

(c) Dividends and
Interest. Rights to dividends or Dividend Equivalents may be extended to and
made part of any Employee Award or Independent Contractor Award consisting of
shares of Common Stock or units denominated in shares of Common Stock, subject
to such terms, conditions and restrictions as the Committee may establish. The
Committee may also establish rules and procedures for the crediting of interest
on deferred cash 

 

7

 

payments and Dividend
Equivalents for Employee Awards or Independent Contractor Awards consisting of
shares of Common Stock or units denominated in shares of Common Stock.

 

(d) Substitution of
Awards. At the discretion of the Committee, a Participant who is an Employee or
Independent Contractor may be offered an election to substitute an Employee
Award or Independent Contractor Award for another Employee Award or Independent
Contractor Award or Employee Awards or Independent Contractor Awards of the
same or different type.

 

11. Stock Option
Exercise. The price at which shares of Common Stock may be purchased under an
Option shall be paid in full at the time of exercise in cash or, if elected by
the optionee, the optionee may purchase such shares by means of tendering
Common Stock or surrendering another Award, including Restricted Stock or
Director Restricted Stock, valued at Fair Market Value on the date of exercise,
or any combination thereof. The Committee shall determine acceptable methods
for Participants who are Employees or Independent Contractors to tender- Common
Stock or other Employee Awards or Independent Contractor Awards; provided that
any Common Stock that is or was the subject of an Employee Award or Independent
Contractor Award may be so tendered only if it has been held by the Participant
for six months. The Committee may provide for procedures to permit the exercise
or purchase of such Awards by use of the proceeds to be received from the sale
of Common Stock issuable pursuant to an Employee Award or Independent
Contractor Award. Unless otherwise provided in the applicable Award Agreement,
in the event shares of Restricted Stock are tendered as consideration for the
exercise of an Option, a number of the shares issued upon the exercise of the
Option, equal to the number of shares of Restricted Stock or Director
Restricted Stock used as consideration therefore, shall be subject to the same
restrictions as the Restricted Stock or Director Restricted Stock so submitted
as well as any additional restrictions that may be imposed by the Committee.

 

12. Taxes. The Company
shall have the right to deduct applicable taxes from any Employee Award payment
and withhold, at the time of delivery or vesting of cash or shares of Common
Stock under this Plan, an appropriate amount of cash or number of shares of
Common Stock or a combination thereof for payment of taxes required by law or
to take such other action as may be necessary in the opinion of the Company to
satisfy all obligations for withholding of such taxes. The Committee may also
permit withholding to be satisfied by the transfer to the Company of shares of
Common Stock theretofore owned by the holder of the Employee Award with respect
to which withholding is required. If shares of Common Stock are used to satisfy
tax withholding, such shares shall be valued based on the Fair Market Value
when the tax withholding is required to be made. Except to the extent
prohibited by the Section 402 of the Sarbanes-Oxley Act of 2002 or other
applicable law, the Committee may provide for loans, on either a short term or
demand basis, from the Company to a Participant who is an Employee or
Independent Contractor to permit the payment of taxes required by law.

 

13. Amendment,
Modification, Suspension or Termination. The Board may amend, modify, suspend
or terminate this Plan for the purpose of meeting or addressing any changes in
legal requirements or for any other purpose permitted by law, except that (i)
no amendment or alteration that would adversely affect the rights of any
Participant under any Award previously granted to such Participant shall be
made without the consent of such Participant and (ii) no amendment or
alteration shall be effective prior to its approval by the stockholders of the
Company to the extent such approval is then required pursuant to Rule 16b-3
in order to preserve the applicability of any exemption provided by such rule
to any Award then outstanding (unless the holder of such Award consents) or to
the extent stockholder approval is otherwise required by applicable legal
requirements.

 

14. Assignability. Unless
otherwise determined by the Committee and provided in the Award Agreement, no
Award or any other benefit under this Plan constituting a derivative security
within the meaning of Rule 16a-1(c) under the Exchange Act shall be
assignable or otherwise transferable except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act, or the
rules thereunder. The Committee may prescribe and include in applicable Award
Agreements other restrictions on transfer. Any attempted assignment of an Award
or any other benefit under this Plan in violation of this paragraph 14 shall be
null and void.

 

8

 

15. Adjustments.

 

(a) The existence of
outstanding Awards shall not affect in any manner the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the capital stock of the
Company or its business or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stock (whether or not
such issue is prior to, on a parity with or junior to the Common Stock) or the
dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding of
any kind, whether or not of a character similar to that of the acts or
proceedings enumerated above.

 

(b) In the event of any
subdivision or consolidation of outstanding shares of Common Stock, declaration
of a dividend payable in shares of Common Stock or other stock split, then,
except with respect to the Existing Options, (i) the number of shares of Common
Stock reserved under this Plan, (ii) the number of shares of Common Stock
covered by outstanding Awards in the form of Common Stock or units denominated
in Common Stock, (iii) the exercise or other price in respect of such Awards,
(iv) the appropriate Fair Market Value and other price determinations for such
Awards, (v) the number of shares of Common Stock covered by Director Options
granted pursuant to paragraph 9(a) hereof and (vi) the Stock Based Awards
Limitations shall each be proportionately adjusted by the Board to reflect such
transaction. In the event of any other recapitalization or capital
reorganization of the Company, any consolidation or merger of the Company with
another corporation or entity, the adoption by the Company of any plan of
exchange affecting the Common Stock or any distribution to holders of Common
Stock of securities or property (other than normal cash dividends or dividends
payable in Common Stock), the Board shall make appropriate adjustments to (i)
the number of shares of Common Stock covered by Awards in the form of Common
Stock or units denominated in Common Stock, (ii) the exercise or other price in
respect of such Awards, (iii) the appropriate Fair Market Value and other price
determinations for such Awards, (iv) the number of shares of Common Stock
covered by Director Options granted pursuant to paragraph 9(a) hereof and (v)
the Stock Based Awards Limitations to give effect to such transaction shall
each be proportionately adjusted by the Board to reflect such transaction;
provided that such adjustments shall only be such as are necessary to maintain
the proportionate interest of the holders of the Awards and preserve, without
exceeding, the value of such Awards. In the event of a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation, the Board shall be authorized to issue or assume Awards by means
of substitution of new Awards, as appropriate, for previously issued Awards or
to assume previously issued Awards as part of such adjustment.

 

(c) In the event of a
corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Board may make such adjustments to
outstanding Awards or other provisions for the disposition of outstanding
Awards as it deems equitable, and shall be authorized, in its discretion, (i)
to provide for the substitution of a new Award or other arrangement (which, if
applicable, may be exercisable for such property or stock as the Board determines)
for an outstanding Award or the assumption of an outstanding Award, regardless
of whether in a transaction to which Section 424(a) of the Code applies,
(ii) to provide, prior to the transaction, for the acceleration of the vesting
and exercisability of, or lapse of restrictions with respect to, the
outstanding Award and, if the transaction is a cash merger, to provide for the
termination of any portion of the Award that remains unexercised at the time of
such transaction or (iii) to provide for the acceleration of the vesting and
exercisability of an outstanding Award and the cancellation thereof in exchange
for such payment as shall be mutually agreeable to the Participant and the
Board.

 

16. Restrictions. No
Common Stock or other form of payment shall be issued with respect to any Award
unless the Company shall be satisfied based on the advice of its counsel that
such issuance will be in compliance with applicable federal and state
securities laws. It is the intent of the Company that grants of Awards under
this Plan comply with Rule 16b-3 with respect to persons subject to
Section 16 of the Exchange Act unless otherwise provided herein or in an
Award Agreement, that any ambiguities or inconsistencies in the construction of
such an Award or this Plan be interpreted to give effect to such intention.
Certificates evidencing shares of Common Stock delivered under this Plan (to
the extent that such shares are so evidenced) may be subject to such stop
transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations and other requirements of the Securities and
Exchange Commission, any securities exchange or transaction reporting system
upon which the Common Stock is then listed or to which it is admitted for
quotation and any applicable federal or state securities law. The Committee may
cause a legend or legends to be placed upon such certificates (if any) to make
appropriate reference to such restrictions.

 

9

 

17. Unfunded Plan.
Insofar as it provides for Awards of cash, Common Stock or rights thereto, this
Plan shall be unfunded. Although bookkeeping accounts may be established with
respect to Participants who are entitled to cash, Common Stock or rights
thereto under this Plan, any such accounts shall be used merely as a
bookkeeping convenience. The Company shall not be required to segregate any
assets that may at any time be represented by cash, Common Stock or rights
thereto, nor shall this Plan be construed as providing for such segregation,
nor shall the Company, the Board or the Committee be deemed to be a trustee of
any cash, Common Stock or rights thereto to be granted under this Plan. Any
liability or obligation of the Company to any Participant with respect to an Award
of cash, Common Stock or rights thereto under this Plan shall be based solely
upon any contractual obligations that may be created by this Plan and any Award
Agreement, and no such liability or obligation of the Company shall be deemed
to be secured by any pledge or other encumbrance on any property of the
Company. Neither the Company nor the Board nor the Committee shall be required
to give any security or bond for the performance of any obligation that may be
created by this Plan.

 

18. Governing Law. This
Plan and all determinations made and actions taken pursuant hereto, to the
extent not otherwise governed by mandatory provisions of the Code or the
securities laws of the United States, shall be governed by and construed in
accordance with the laws of the State of Delaware.

 

19. Effectiveness. The
Plan as hereby amended and restated shall be effective as of August 2, 2006.

 

10

 

ANNEX A

 

	
  NAME

  	
   

  	
  EXPIRATION DATE

  	
   

  	
  VESTING/ EXERCISABILITY (1)

  	
   

  	
  PER SHARE PURCHASE PRICE

  	
   

  
	
  Joseph R.
  Musolino

  	
   

  	
  06/03/2012

  	
   

  	
  06/03/2004

  	
   

  	
  $

  	
   

  	
  5.69

  	
   

  
	
  Thurmon Andress

  	
   

  	
  01/23/2013

  	
   

  	
  01/23/2005

  	
   

  	
  $

  	
  3.88

  	
   

  
	
  David F. Work

  	
   

  	
  01/23/2013

  	
   

  	
  01/23/2005

  	
   

  	
  $

  	
  3.88

  	
   

  

 

(1) Options vest and
become exercisable in full on the date set forth opposite the name of the
applicable Non-employee Director.

 

A-1Exhibit 4.6

    
      

    

    
      Exhibit
        4.6

      EXECUTION
        COPY

      

       

      PNM
        RESOURCES, INC. 

       

      and
        

       

      U.S.
        BANK NATIONAL ASSOCIATION,
as
        Collateral Agent, Custodial Agent and Securities Intermediary

       

      and
        

       

      U.S.
        BANK NATIONAL ASSOCIATION,
as
        Purchase Contract Agent 

       

      PLEDGE
        AGREEMENT 

       

      Dated
        as of October 7, 2005

       

      
        
          
             

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
            

          

        

      

       

      
        Table
          of Contents

         

        
          	 	 	
                  Page

                

        

         

        ARTICLE
          1

        DEFINITIONS

         

        
          	
                  Section
                    1.01

                	
                  Definitions

                	
                  1

                

        

        ARTICLE
          2

        PLEDGE

         

        
          	
                  Section
                    2.01

                	
                  Pledge

                	
                  5

                
	
                  Section
                    2.02

                	
                  Control

                	
                  5

                
	
                  Section
                    2.03

                	
                  Termination

                	
                  6

                

        

         

        ARTICLE
          3

        DISTRIBUTIONS
          ON PLEDGED COLLATERAL

         

        
          	
                  Section
                    3.01

                	
                  Income
                    and Distributions

                	
                  6

                
	
                  Section
                    3.02

                	
                  Principal
                    Payments Following Termination Event

                	
                  6

                
	
                  Section
                    3.03

                	
                  Principal
                    Payments Prior to or on Purchase Contract Settlement Date

                	
                  6

                
	
                  Section
                    3.04

                	
                  Payments
                    to Purchase Contract Agent

                	
                  7

                
	
                  Section
                    3.05

                	
                  Assets
                    Not Properly Released

                	
                  7

                

        

         

        ARTICLE
          4

        CONTROL

         

        
          	
                  Section
                    4.01

                	
                  Establishment
                    of Collateral Account

                	
                  7

                
	
                  Section
                    4.02

                	
                  Treatment
                    as Financial Assets

                	
                  8

                
	
                  Section
                    4.03

                	
                  Sole
                    Control by Collateral Agent

                	
                  8

                
	
                  Section
                    4.04

                	
                  Securities
                    Intermediary’s Location

                	
                  8

                
	
                  Section
                    4.05

                	
                  No
                    Other Claims

                	
                  8

                
	
                  Section
                    4.06

                	
                  Investment
                    and Release

                	
                  8

                
	
                  Section
                    4.07

                	
                  Statements
                    and Confirmations

                	
                  8

                
	
                  Section
                    4.08

                	
                  Tax
                    Allocations

                	
                  9

                
	
                  Section
                    4.09

                	
                  No
                    Other Agreements

                	
                  9

                
	
                  Section
                    4.10

                	
                  Powers
                    Coupled with an Interest

                	
                  9

                
	
                  Section
                    4.11

                	
                  Waiver
                    of Lien; Waiver of Set-off

                	
                  9

                

        

         

        
          
            
            

          

          
            i

            
              

            

          

          
            
            

          

        

        ARTICLE
          5

        INITIAL
          DEPOSIT; CREATION OF TREASURY UNITS AND RECREATION

        OF
          CORPORATE UNITS

         

        
          	
                  Section
                    5.01

                	
                  Initial
                    Deposit of Senior Notes

                	
                  9

                
	
                  Section
                    5.02

                	
                  Creation
                    of Treasury Units

                	
                  10

                
	
                  Section
                    5.03

                	
                  Recreation
                    of Corporate Units

                	
                  11

                
	
                  Section
                    5.04

                	
                  Termination
                    Event

                	
                  12

                
	
                  Section
                    5.05

                	
                  Cash
                    Settlement

                	
                  13

                
	
                  Section
                    5.06

                	
                  Early
                    Settlement and Cash Merger Early Settlement

                	
                  14

                
	
                  Section
                    5.07

                	
                  Application
                    of Proceeds in Settlement of Purchase Contracts

                	
                  15

                
	
                  Section
                    5.08

                	
                  Special
                    Event Redemption

                	
                  17

                

        

         

        ARTICLE
          6

        VOTING
          RIGHTS - PLEDGED SENIOR NOTES

         

        
          	
                  Section
                    6.01

                	
                  Voting
                    Rights

                	
                  17

                

        

         

        ARTICLE
          7

        RIGHTS
          AND REMEDIES

         

        
          	
                  Section
                    7.01

                	
                  Rights
                    and Remedies of the Collateral Agent

                	
                  18

                
	
                  Section
                    7.02

                	
                  Special
                    Event Redemption

                	
                  19

                
	
                  Section
                    7.03

                	
                  Initial
                    Remarketing

                	
                  19

                
	
                  Section
                    7.04

                	
                  Final
                    Remarketing

                	
                  19

                
	
                  Section
                    7.05

                	
                  Successful
                    Initial Remarketing

                	
                  19

                
	
                  Section
                    7.06

                	
                  Substitutions

                	
                  20

                

        

         

        ARTICLE
          8

        REPRESENTATIONS
          AND WARRANTIES; COVENANTS

         

        
          	
                  Section
                    8.01

                	
                  Representations
                    and Warranties

                	
                  20

                
	
                  Section
                    8.02

                	
                  Covenants

                	
                  21

                

        

         

        ARTICLE
          9

        THE
          COLLATERAL AGENT, THE CUSTODIAL AGENT AND THE

        SECURITIES
          INTERMEDIARY

         

        
          	
                  Section
                    9.01

                	
                  Appointment,
                    Powers and Immunities

                	
                  21

                
	
                  Section
                    9.02

                	
                  Instructions
                    of the Company

                	
                  22

                
	
                  Section
                    9.03

                	
                  Reliance
                    by Collateral Agent, Custodial Agent and Securities
                    Intermediary

                	
                  22

                

        

         

        
          
            
            

          

          
            ii

            
              

            

          

          
            
            

          

        

        
          	
                  Section
                    9.04

                	
                  Certain
                    Rights

                	
                  23

                
	
                  Section
                    9.05

                	
                  Merger,
                    Conversion, Consolidation or Succession to Business

                	
                  23

                
	
                  Section
                    9.06

                	
                  Rights
                    in Other Capacities

                	
                  23

                
	
                  Section
                    9.07

                	
                  Non-reliance
                    on Collateral Agent, the Custodial Agent and Securities
                    Intermediary

                	
                  24

                
	
                  Section
                    9.08

                	
                  Compensation
                    and Indemnity

                	
                  24

                
	
                  Section
                    9.09

                	
                  Failure
                    to Act

                	
                  25

                
	
                  Section
                    9.10

                	
                  Resignation
                    of Collateral Agent, the Custodial Agent and Securities
                    Intermediary

                	
                  25

                
	
                  Section
                    9.11

                	
                  Right
                    to Appoint Agent or Advisor

                	
                  27

                
	
                  Section
                    9.12

                	
                  Survival

                	
                  27

                
	
                  Section
                    9.13

                	
                  Exculpation

                	
                  27

                

        

         

        ARTICLE
          10

        AMENDMENT

         

        
          	
                  Section
                    10.01

                	
                  Amendment
                    Without Consent of Holders

                	
                  27

                
	
                  Section
                    10.02

                	
                  Amendment
                    with Consent of Holders

                	
                  28

                
	
                  Section
                    10.03

                	
                  Execution
                    of Amendments

                	
                  29

                
	
                  Section
                    10.04

                	
                  Effect
                    of Amendments

                	
                  29

                
	
                  Section
                    10.05

                	
                  Reference
                    of Amendments

                	
                  29

                

        

         

        ARTICLE
          11

        MISCELLANEOUS

         

        
          	
                  Section
                    11.01

                	
                  No
                    Waiver

                	
                  29

                
	
                  Section
                    11.02

                	
                  Governing
                    Law; Submission to Jurisdiction

                	
                  29

                
	
                  Section
                    11.03

                	
                  Notices

                	
                  30

                
	
                  Section
                    11.04

                	
                  Successors
                    and Assigns

                	
                  30

                
	
                  Section
                    11.05

                	
                  Counterparts

                	
                  30

                
	
                  Section
                    11.06

                	
                  Severability

                	
                  30

                
	
                  Section
                    11.07

                	
                  Expenses,
                    Etc

                	
                  30

                
	
                  Section
                    11.08

                	
                  Security
                    Interest Absolute

                	
                  31

                
	
                  Section
                    11.09

                	
                  Notice
                    of Special Event, Special Event Redemption and Termination
                    Event

                	
                  31

                

        

        
 

      

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

       

       

      
         

      

      EXHIBITS

      

      Exhibit
        A
        - Instruction from Purchase Contract Agent to Collateral Agent (Creation
        of
        Treasury Units)

      Exhibit
        B
        - Instruction from Collateral Agent to Securities Intermediary (Creation
        of
        Treasury Units)

      Exhibit
        C
        - Instruction from Purchase Contract Agent to Collateral Agent (Recreation
        of
        Corporate Units)

      Exhibit
        D
        - Instruction from Collateral Agent to Securities Intermediary (Recreation
        of
        Corporate Units)

      Exhibit
        E
        - Notice of Cash Settlement from Collateral Agent to Purchase Contract
        Agent

      Exhibit
        F
        - Instruction to Custodial Agent Regarding Remarketing

      Exhibit
        G
        - Instruction to Custodial Agent Regarding Withdrawal From
        Remarketing

      
        
          
            
               

            

          

          
          

        

        
          iv

          
            

          

        

        
          
          

          
            

          

        

      

      PLEDGE
        AGREEMENT
        dated as
        of October 7, 2005 between PNM
        RESOURCES, INC.,
        a New
        Mexico corporation (the“Company”),
        and
U.S.
        BANK NATIONAL ASSOCIATION,
        a
        national banking association, as collateral agent (in such capacity, together
        with its successors in such capacity, the “Collateral
        Agent”),
        as
        custodial agent (in such capacity, together with its successors in such
        capacity, the “Custodial
        Agent”),
        and as
        securities intermediary (as defined in Section 8-102(a)(14) of the UCC) with
        respect to the Collateral Account (in such capacity, together with its
        successors in such capacity, the “Securities
        Intermediary”),
        and as
        purchase contract agent and as attorney-in-fact of the Holders from time
        to time
        of the Units (in such capacity, together with its successors in such capacity,
        the “Purchase
        Contract Agent”)
        under
        the Purchase Contract Agreement.

       

      RECITALS

       

      WHEREAS,
        the
        Company and the Purchase Contract Agent are parties to the Purchase Contract
        Agreement dated as of October 7, 2005 (as modified and supplemented and in
        effect from time to time, the “Purchase
        Contract Agreement”),
        pursuant to which 4,000,000 Corporate Units will be issued.

       

      WHEREAS,
        each
        Corporate Unit, at issuance, consists of a unit comprised of (a) a stock
        purchase contract (a “Purchase
        Contract”)
        pursuant to which the Holder will purchase from the Company on the Purchase
        Contract Settlement Date, for an amount equal to $25 (the “Stated
        Amount”),
        a
        number of shares of the Company’s common stock, no par value (“Common
        Stock”),
        equal
        to the Settlement Rate and (b) a 1/40, or 2.5%, beneficial ownership interest
        in
        a Senior Note.

       

      WHEREAS,
        pursuant
        to the terms of the Purchase Contract Agreement and the Purchase Contracts,
        the
        Holders of the Units have irrevocably authorized the Purchase Contract Agent,
        as
        attorney-in-fact of such Holders, among other things, to execute and deliver
        this Agreement on behalf of such Holders and to grant the pledge provided
        herein
        of the Collateral to secure the Obligations.

       

      NOW,
        THEREFORE,
        the
        Company, the Collateral Agent, the Custodial Agent, the Securities Intermediary
        and the Purchase Contract Agent agree as follows:

       

      ARTICLE
        1

       

      DEFINITIONS

       

      Section
        1.01  Definitions.
        For
        all
        purposes of this Agreement, except as otherwise expressly provided or unless
        the
        context otherwise requires:

       

      (a)  the
        terms
        defined in this Article have the meanings assigned to them in this Article
        and
        include the plural as well as the singular, and nouns and pronouns of the
        masculine gender include the feminine and neuter genders;

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (b)  the
        words
“herein,” “hereof”
        and
“hereunder”
        and
        other words of similar import refer to this Agreement as a whole and not
        to any
        particular Article, Section, Exhibit or other subdivision;

       

      (c)  the
        following terms which are defined in the UCC shall have the meanings set
        forth
        therein: “certificated
        security,” “control,” “financial asset,” “entitlement order,” “securities
        account”
        and
“security
        entitlement”;

       

      (d)  capitalized
        terms used herein and not defined herein have the meanings assigned to them
        in
        the Purchase Contract Agreement; and

       

      (e)  the
        following terms have the meanings given to them in this Section
        1.01(e):

       

      “Agreement”
        means
        this Pledge Agreement, as the same may be amended, modified or supplemented
        from
        time to time.

       

      “Cash”
        means
        any coin or currency of the United States as at the time shall be legal tender
        for payment of public and private debts.

       

      “Collateral”
        means
        the collective reference to:

       

      (i)  the
        Collateral Account and all investment property and other financial assets
        from
        time to time credited to the Collateral Account and all security entitlements
        with respect thereto, including, without limitation, (A) the Senior Notes
        and
        security entitlements relating thereto that are a component of the Corporate
        Units from time to time, (B) the Applicable Ownership Interests (as specified
        in
        clause (i) of the definition of such term) in the Treasury Portfolio that
        are a
        component of the Corporate Units from time to time, (C) any Treasury Securities
        and security entitlements relating thereto delivered from time to time upon
        creation of Treasury Units in accordance with Section
        5.02
        hereof
        and (D) payments made by Holders pursuant to Section
        5.05
        hereof;

       

      (ii)  all
        Proceeds of any of the foregoing (whether such Proceeds arise before or after
        the commencement of any proceeding under any applicable bankruptcy, insolvency
        or other similar law, by or against the pledgor or with respect to the pledgor);
        and

       

      (iii)  all
        powers and rights now owned or hereafter acquired under or with respect to
        the
        Collateral.

       

      “Collateral
        Account”
        means
        the securities account of U.S. Bank National Association, as Collateral Agent,
        maintained by the Securities Intermediary and designated “U.S. Bank National
        Association, as Collateral Agent of PNM Resources, Inc., as pledgee of U.S.
        Bank
        National Association, as the Purchase Contract Agent on behalf of and as
        attorney-in-fact for the Holders”.

       

      “Collateral
        Agent”
        has the
        meaning specified in the paragraph preceding the recitals of this
        Agreement.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      “Common
        Stock”
        has the
        meaning specified in the second paragraph of the recitals of this
        Agreement.

       

      “Company”
        means
        the Person named as the “Company”
        in the
        first paragraph of this Agreement until a successor shall have become such
        pursuant to the applicable provisions of the Purchase Contract Agreement,
        and
        thereafter “Company”
        shall
        mean such successor.

       

      “Custodial
        Agent”
        has the
        meaning specified in the paragraph preceding the recitals of this
        Agreement.

       

      “Indemnitees”
        has the
        meaning given such term in Section 9.08(b).

       

      “Loss”
        or “Losses”
        has the
        meaning given such term in Section 9.08(b).

       

      “Obligations”
        means,
        with respect to each Holder, all obligations and liabilities of such Holder
        under such Holder’s Purchase Contract, the Purchase Contract Agreement and this
        Agreement or any other document made, delivered or given in connection herewith
        or therewith, in each case whether on account of principal, interest (including,
        without limitation, interest accruing before and after the filing of any
        petition in bankruptcy, or the commencement of any insolvency, reorganization
        or
        like proceeding, relating to such Holder, whether or not a claim for post-filing
        or post-petition interest is allowed in such proceeding), fees, indemnities,
        costs, expenses or otherwise (including, without limitation, all fees and
        disbursements of counsel to the Company or the Collateral Agent or the
        Securities Intermediary that are required to be paid by the Holder pursuant
        to
        the terms of any of the foregoing agreements).

       

      “Permitted
        Investments”
        means
        any one of the following, in each case maturing on the Business Day following
        the date of acquisition:

       

      (1)
        any
        evidence of indebtedness with an original maturity of 365 days or less issued,
        or directly and fully guaranteed or insured, by the United States of America
        or
        any agency or instrumentality thereof (provided
        that the
        full faith and credit of the United States of America is pledged in support
        of
        the timely payment thereof or such indebtedness constitutes a general obligation
        of it);

       

      (2)
        deposits, certificates of deposit or acceptances with an original maturity
        of
        365 days or less of any institution which is a member of the Federal Reserve
        System having combined capital and surplus and undivided profits of not less
        than $500 million at the time of deposit (and which may include the Collateral
        Agent);

       

      (3)
        investments with an original maturity of 365 days or less of any Person that
        are
        fully and unconditionally guaranteed by a bank referred to in clause
        (2);

       

      (4)
        repurchase agreements and reverse repurchase agreements relating to marketable
        direct obligations issued or unconditionally guaranteed by the United States
        of
        America or issued by any agency thereof and backed as to timely payment by
        the
        full faith and credit of the United States of America;

       

      (5)
        investments in commercial paper, other than commercial paper issued by the
        Company or its Affiliates, of any corporation incorporated under the laws
        of the
        United States of America or any State thereof, which commercial paper has
        a
        rating at the time of purchase at least equal to “A-1”
        by
        Standard & Poor’s Ratings Services (“S&P”)
        or at
        least equal to “P-1”
        by
        Moody’s Investors Service, Inc. (“Moody’s”);
        and

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      (6)
        investments in money market funds (including, but not limited to, money market
        funds managed by the Collateral Agent or an affiliate of the Collateral Agent)
        registered under the Investment Company Act of 1940, as amended, rated in
        the
        highest applicable rating category by S&P or Moody’s.

       

      “Person”
        means
        any individual, corporation, partnership, joint venture, trust, unincorporated
        organization or government or any agency, instrumentality or political
        subdivision thereof.

       

      “Pledge”
        means
        the lien and security interest created by this Agreement.

       

      “Pledged
        Applicable Ownership Interests”
        means
        the Holder’s Applicable Ownership Interests (as specified in clause (i) of the
        definition thereof) in the Treasury Portfolio and security entitlements with
        respect thereto from time to time credited to the Collateral Account and
        not
        then released from the Pledge.

       

      “Pledged
        Senior Notes”
        means
        Senior Notes and security entitlements with respect thereto from time to
        time
        credited to the Collateral Account and not then released from the
        Pledge.

       

      “Pledged
        Securities”
        means
        the Pledged Senior Notes, the Pledged Applicable Ownership Interests and
        the
        Pledged Treasury Securities, collectively.

       

      “Pledged
        Treasury Securities”
        means
        Treasury Securities and security entitlements with respect thereto from time
        to
        time credited to the Collateral Account and not then released from the
        Pledge.

       

      “Proceeds”
        has the
        meaning ascribed thereto in the UCC and includes, without limitation, all
        interest, dividends, cash, instruments, securities, financial assets and
        other
        property received, receivable or otherwise distributed upon the sale (including,
        without limitation, the Remarketing), exchange, collection or disposition
        of any
        financial assets from time to time held in the Collateral Account.

       

      “Purchase
        Contract”
        has the
        meaning specified in the second paragraph of the recitals of this
        Agreement.

       

      “Purchase
        Contract Agent”
        has the
        meaning specified in the paragraph preceding the recitals of this
        Agreement.

       

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

       

      “Purchase
        Contract Settlement Date”
        means
        November 16, 2008.

       

      “Securities
        Intermediary”
        has the
        meaning specified in the paragraph preceding the recitals of this
        Agreement.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      “Stated
        Amount”
        has the
        meaning specified in the second paragraph of the recitals of this
        Agreement.

       

      “TRADES”
        means
        the Treasury/Reserve Automated Debt Entry System maintained by the Federal
        Reserve Bank of New York pursuant to the TRADES Regulations.

       

      “TRADES
        Regulations”
        means
        the regulations of the United States Department of the Treasury, published
        at 31
        C.F.R. Part 357, as amended from time to time. Unless otherwise defined herein,
        all terms defined in the TRADES Regulations are used herein as therein
        defined.

       

      “Transfer”
        means
        (i) in the case of certificated securities in registered form, delivery as
        provided in § 8-301(a) of the UCC, endorsed to the transferee or in blank by an
        effective endorsement, (ii) in the case of Treasury Securities, registration
        of
        the transferee as the owner of such Treasury Securities on TRADES and (iii)
        in
        the case of security entitlements, including, without limitation, security
        entitlements with respect to Treasury Securities, a securities intermediary
        indicating by book entry that such security entitlement has been credited
        to the
        transferee’s securities account.

       

      “Treasury
        Securities”
        means
        zero-coupon U.S. treasury securities that mature on November 15, 2008 (CUSIP
        No.
        912828EC0).

       

      “UCC”
        means
        the Uniform Commercial Code as in effect in the State of New York from time
        to
        time.

       

      “Value”
        means,
        with respect to any item of Collateral on any date, as to (1) Cash, the face
        amount thereof, (2) Treasury Securities or Senior Notes, the aggregate principal
        amount thereof at maturity and (3) Applicable Ownership Interests (as specified
        in clause (i) of the definition of such term), the appropriate percentage
        of the
        aggregate principal amount at maturity of the Treasury Portfolio.

       

      ARTICLE 2

       

      PLEDGE

       

      Section
        2.01  Pledge.
        Each
        Holder, acting through the Purchase Contract Agent as such Holder’s
        attorney-in-fact, and the Purchase Contract Agent, acting solely as such
        attorney-in-fact, hereby pledges and grants to the Collateral Agent, as agent
        of
        and for the benefit of the Company, a continuing first priority security
        interest in and to, and a lien upon and right of set-off against, all of
        such
        Person’s right, title and interest in and to the Collateral to secure the prompt
        and complete payment and performance when due (whether at stated maturity,
        by
        acceleration or otherwise) of the Obligations. The Collateral Agent shall
        have
        all of the rights, remedies and recourses with respect to the Collateral
        afforded a secured party by the UCC, in addition to, and not in limitation
        of,
        the other rights, remedies and recourses afforded to the Collateral Agent
        by
        this Agreement.

       

      Section
        2.02  Control.
        The Collateral Agent shall have control of the Collateral Account pursuant
        to
        the provisions of Article
        4
        of this
        Agreement.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      Section
        2.03  Termination.
        As to each Holder, this Agreement and the Pledge created hereby shall terminate
        upon the satisfaction of such Holder’s Obligations. Upon such termination, the
        Collateral Agent shall, except as otherwise provided herein, instruct the
        Securities Intermediary to Transfer such Holder’s portion of the Collateral to
        the Purchase Contract Agent for distribution to such Holder, free and clear
        of
        the Pledge created hereby.

       

      ARTICLE
        3

       

      DISTRIBUTIONS
        ON PLEDGED COLLATERAL

       

      Section
        3.01  Income
        and Distributions.
        The
        Collateral Agent shall transfer all income and distributions received by
        the
        Collateral Agent on account of the Pledged Senior Notes, the Pledged Applicable
        Ownership Interests or Permitted Investments from time to time held in the
        Collateral Account (ABA No. 789017000, Re: PNM Resources, Inc.) to the Purchase
        Contract Agent for distribution to the applicable Holders as provided in
        the
        Purchase Contracts or Purchase Contract Agreement.

       

      Section
        3.02  Principal
        Payments Following Termination Event. Following a Termination Event, the
        Collateral Agent shall transfer all principal payments it receives, if any,
        in
        respect of (1) the Pledged Senior Notes, (2) the Pledged Applicable Ownership
        Interests and (3) the Pledged Treasury Securities, to the Purchase Contract
        Agent for the benefit of the applicable Holders for distribution to such
        Holders
        in accordance with their respective interests, free and clear of the Pledge
        created hereby.

       

      Section
        3.03  Principal
        Payments Prior to or on Purchase Contract Settlement Date.

      (a)  Subject
        to the provisions of Sections
        5.06 and
        5.08,
        and
        except as provided in Section
        3.03(b)
        below,
        if no Termination Event shall have occurred, all principal payments received
        by
        the Securities Intermediary in respect of (1) the Pledged Senior Notes, (2)
        the
        Pledged Applicable Ownership Interests and (3) the Pledged Treasury Securities,
        shall be held and invested in Permitted Investments until the Purchase Contract
        Settlement Date, and transferred to the Company on the Purchase Contract
        Settlement Date as provided in Section
        5.07
        hereof.
        Any balance remaining in the Collateral Account shall be released from the
        Pledge and transferred to the Purchase Contract Agent for the benefit of
        the
        applicable Holders for distribution to such Holders in accordance with their
        respective interests, free and clear of the Pledge created thereby. The Company
        shall instruct the Collateral Agent in writing as to the type of Permitted
        Investments in which any payments made under this Section
        3.03(a)
        shall be
        invested; provided,
        however,
        that if
        the Company fails to deliver such instructions by 10:30 a.m. (New York City
        time) on the day such payments are received by the Collateral Agent, the
        Collateral Agent shall invest such payments in the Permitted Investments
        as
        described in clause (6) of the definition of Permitted Investments. The
        Collateral Agent shall have no liability in respect of losses incurred as
        a
        result of the failure of the Company to provide timely written investment
        direction.

       

      (b)  All
        principal payments received by the Securities Intermediary in respect of
        (1) the
        Senior Notes, (2) the Applicable Ownership Interests (as specified in clause
        (i)
        of the definition thereof) in the Treasury Portfolio and (3) the Treasury
        Securities or security entitlements thereto, that, in each case, have been
        released from the Pledge pursuant hereto shall be transferred to the Purchase
        Contract Agent for the benefit of the applicable Holders for distribution
        to
        such Holders in accordance with their respective interests.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      Section
        3.04  Payments
        to Purchase Contract Agent.
        The
        Securities Intermediary shall use commercially reasonable efforts to deliver
        payments to the Purchase Contract Agent hereunder to the account designated
        by
        the Purchase Contract Agent for such purpose not later than 12:00 p.m. (New
        York
        City time) on the Business Day such payment is received by the Securities
        Intermediary; provided,
        however,
        that if
        such payment is received on a day that is not a Business Day or after 11:00
        a.m.
        (New York City time) on a Business Day, then the Securities Intermediary
        shall
        use commercially reasonable efforts to deliver such payment to the Purchase
        Contract Agent no later than 10:30 a.m. (New York City time) on the next
        succeeding Business Day.

       

      Section
        3.05  Assets
        Not Properly Released. If the Purchase Contract Agent or any Holder shall
        receive any principal payments on account of financial assets credited to
        the
        Collateral Account and not released therefrom in accordance with this Agreement,
        the Purchase Contract Agent or such Holder shall hold the same as trustee
        of an
        express trust for the benefit of the Company and, upon receipt of an Officers’
Certificate of the Company so directing, promptly deliver the same to the
        Securities Intermediary for credit to the Collateral Account or to the Company
        for application to the Obligations of the Holders, and the Purchase Contract
        Agent and Holders shall acquire no right, title or interest in any such payments
        of principal amounts so received. The Purchase Contract Agent shall have
        no
        liability under this Section
        3.05
        unless
        and until it has been notified in writing that such payment was delivered
        to it
        erroneously and shall have no liability for any action taken, suffered or
        omitted to be taken prior to its receipt of such notice.

       

      ARTICLE
        4

       

      CONTROL

       

      Section
        4.01  Establishment
        of Collateral Account.
        The
        Securities Intermediary hereby confirms that:

       

      (a)  the
        Securities Intermediary has established the Collateral Account;

       

      (b)  the
        Collateral Account is a securities account;

       

      (c)  subject
        to the terms of this Agreement, the Securities Intermediary shall identify
        in
        its records the Collateral Agent as the entitlement holder entitled to exercise
        the rights that comprise any financial asset credited to the Collateral
        Account;

       

      (d)  all
        property delivered to the Securities Intermediary pursuant to this Agreement
        or
        the Purchase Contract Agreement, including any Applicable Ownership Interests
        (as specified in clause (i) of such definition) in the Treasury Portfolio
        and
        any Permitted Investments, will be credited promptly to the Collateral Account;
        and

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      (e)  all
        securities or other property underlying any financial assets credited to
        the
        Collateral Account shall be (i) registered in the name of the Purchase Contract
        Agent and endorsed to the Securities Intermediary or in blank, (ii) registered
        in the name of the Securities Intermediary or (iii) credited to another
        securities account maintained in the name of the Securities Intermediary.
        In no
        case will any financial asset credited to the Collateral Account be registered
        in the name of the Purchase Contract Agent or any Holder or specially endorsed
        to the Purchase Contract Agent or any Holder unless such financial asset
        has
        been further endorsed to the Securities Intermediary or in blank.

       

      Section
        4.02  Treatment
        as Financial Assets.
        Each
        item of property (whether investment property, financial asset, security,
        instrument or cash) credited to the Collateral Account shall be treated as
        a
        financial asset.

       

      Section
        4.03  Sole
        Control by Collateral Agent. Except as provided in Section
        6.01,
        at all
        times prior to the termination of the Pledge, the Collateral Agent shall
        have
        sole control of the Collateral Account, and the Securities Intermediary shall
        take instructions and directions with respect to the Collateral Account solely
        from the Collateral Agent. If at any time the Securities Intermediary shall
        receive an entitlement order issued by the Collateral Agent and relating
        to the
        Collateral Account, the Securities Intermediary shall comply with such
        entitlement order without further consent by the Purchase Contract Agent
        or any
        Holder or any other Person. Except as otherwise permitted under this Agreement,
        until termination of the Pledge, the Securities Intermediary will not comply
        with any entitlement orders issued by the Purchase Contract Agent or any
        Holder.

       

      Section
        4.04  Securities
        Intermediary’s Location. The Collateral Account, and the rights and
        obligations of the Securities Intermediary, the Collateral Agent, the Purchase
        Contract Agent and the Holders with respect thereto, shall be governed by
        the
        laws of the State of New York. Regardless of any provision in any other
        agreement, for purposes of the UCC, New York shall be deemed to be the
        Securities Intermediary’s jurisdiction.

       

      Section
        4.05  No
        Other Claims. Except for the claims and interest of the Collateral Agent and
        of the Purchase Contract Agent and the Holders in the Collateral Account,
        the
        Securities Intermediary (without having conducted any investigation) does
        not
        know of any claim to, or interest in, the Collateral Account or in any financial
        asset credited thereto. If any Person asserts any lien, encumbrance or adverse
        claim (including any writ, garnishment, judgment, warrant of attachment,
        execution or similar process) against the Collateral Account or in any financial
        asset carried therein, the Securities Intermediary will promptly notify the
        Collateral Agent and the Purchase Contract Agent.

       

      Section
        4.06  Investment
        and Release. All proceeds of financial assets from time to time deposited in
        the Collateral Account shall be invested and reinvested as provided in this
        Agreement. At no time prior to termination of the Pledge with respect to
        any
        particular property shall such property be released from the Collateral Account
        except in accordance with this Agreement or upon written instructions of
        the
        Collateral Agent.

       

      Section
        4.07  Statements
        and Confirmations. The Securities Intermediary will promptly send copies of
        all statements, confirmations and other correspondence concerning the Collateral
        Account and any financial assets credited thereto simultaneously to each
        of the
        Purchase Contract Agent and the Collateral Agent at their addresses for notices
        under this Agreement.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      Section
        4.08  Tax
        Allocations. The Purchase Contract Agent shall report all items of income,
        gain, expense and loss recognized in the Collateral Account, to the extent
        such
        reporting is required by law, to the Internal Revenue Service authorities
        in the
        manner required by law. Neither the Securities Intermediary nor the Collateral
        Agent shall have any tax reporting duties hereunder.

       

      Section
        4.09  No
        Other Agreements. The Securities Intermediary has not entered into, and
        prior to the termination of the Pledge will not enter into, any agreement
        with
        any other Person relating to the Collateral Account or any financial assets
        credited thereto, including, without limitation, any agreement to comply
        with
        entitlement orders of any Person other than the Collateral Agent.

       

      Section
        4.10  Powers
        Coupled with an Interest. The rights and powers granted in this Article
        4
        to the
        Collateral Agent have been granted in order to perfect its security interests
        in
        the Collateral Account, are powers coupled with an interest and will be affected
        neither by the bankruptcy of the Purchase Contract Agent or any Holder nor
        by
        the lapse of time. The obligations of the Securities Intermediary under this
        Article
        4
        shall
        continue in effect until the termination of the Pledge with respect to any
        and
        all Collateral.

       

      Section
        4.11  Waiver
        of Lien; Waiver of Set-off. The Securities Intermediary waives any security
        interest, lien or right to make deductions or set- offs that it may now have
        or
        hereafter acquire in or with respect to the Collateral Account, any financial
        asset credited thereto or any security entitlement in respect thereof. Neither
        the financial assets credited to the Collateral Account nor the security
        entitlements in respect thereof will be subject to deduction, set-off, banker’s
        lien or any other right in favor of any Person other than the
        Company.

       

      ARTICLE
        5

       

      INITIAL
        DEPOSIT; CREATION OF TREASURY UNITS AND RECREATION OF CORPORATE
        UNITS

       

      Section
        5.01  Initial
        Deposit of Senior Notes.
        

       

      (a)  Prior
        to
        or concurrently with the execution and delivery of this Agreement, the Purchase
        Contract Agent, on behalf of the initial Holders of the Corporate Units,
        shall
        Transfer to the Securities Intermediary, for credit to the Collateral Account,
        the Senior Notes or security entitlements relating thereto, and, in the case
        of
        security entitlements, the Securities Intermediary shall indicate by book-entry
        that a securities entitlement to such Senior Notes has been credited to the
        Collateral Account.

       

      (b)  The
        Collateral Agent may, at any time or from time to time, in its sole discretion,
        cause any or all securities or other property underlying any financial assets
        credited to the Collateral Account to be registered in the name of the
        Securities Intermediary, the Collateral Agent or their respective nominees;
        provided,
        however,
        that
        unless any Event of Default (as defined in the Indenture) shall have occurred
        and be continuing, the Collateral Agent agrees not to cause any Senior Notes
        to
        be so re-registered.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      Section
        5.02  Creation
        of Treasury Units.
        

       

      (a)  Unless
        the Treasury Portfolio has replaced the Senior Notes as a component of the
        Corporate Units, a Holder of Corporate Units shall have the right, at any
        time
        on or prior to 5:00 p.m. (New York City time) on the fifth Business Day
        immediately preceding the Purchase Contract Settlement Date, to create Treasury
        Units by substitution of Treasury Securities or security entitlements with
        respect thereto for the Pledged Senior Notes comprising a part of all or
        a
        portion of such Holder’s Corporate Units, in integral multiples of 40 Corporate
        Units by:

       

      (i)  transferring
        to the Purchase Contract Agent, for credit to the Collateral Account, Treasury
        Securities or security entitlements with respect thereto having a Value equal
        to
        the aggregate principal amount of the Pledged Senior Notes to be released,
        accompanied by a notice, substantially in the form of Exhibit
        C
        to the
        Purchase Contract Agreement, whereupon the Purchase Contract Agent shall
        deliver
        to the Collateral Agent a notice, substantially in the form of Exhibit
        A
        hereto,
        (A) stating that such Holder has notified the Purchase Contract Agent that
        such
        Holder has Transferred Treasury Securities or security entitlements with
        respect
        thereto to the Collateral Agent for credit to the Collateral Account, (B)
        stating the Value of the Treasury Securities or security entitlements with
        respect thereto Transferred by such Holder and (C) requesting that the
        Collateral Agent release from the Pledge the Pledged Senior Notes that are
        a
        component of such Corporate Units; and

       

      (ii)  delivering
        the related Corporate Units to the Purchase Contract Agent.

       

      Upon
        receipt of such notice and confirmation that Treasury Securities or security
        entitlements with respect thereto have been credited to the Collateral Account
        as described in such notice, the Collateral Agent shall instruct the Securities
        Intermediary by a notice, substantially in the form of Exhibit
        B
        hereto,
        to release such Pledged Senior Notes from the Pledge by Transfer to the Purchase
        Contract Agent for distribution to such Holder, free and clear of the Pledge
        created hereby.

       

      If
        the
        Treasury Portfolio has replaced the Senior Notes as a component of the Corporate
        Units and subject to the conditions of the Purchase Contract Agreement, a
        Holder
        of Corporate Units may, at any time on or prior to the second Business Day
        immediately preceding the Purchase Contract Settlement Date, substitute Treasury
        Securities for the Applicable Ownership Interests in the Treasury Portfolio
        with
        respect to such Corporate Units, but only in multiples of 4,000 Corporate
        Units.
        In such an event, the Holder shall transfer the required amount of Treasury
        Securities to the Securities Intermediary, for credit to the Collateral Account,
        and the Purchase Contract Agent shall request the Collateral Agent to instruct
        the Securities Intermediary to release the Pledge of and transfer to the
        Holder
        the appropriate Applicable Ownership Interests in the Treasury Portfolio
        in the
        manner set forth above.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      (b)  Upon
        credit to the Collateral Account of Treasury Securities or security entitlements
        with respect thereto delivered by a Holder of Corporate Units and receipt
        of the
        related instruction from the Collateral Agent, the Securities Intermediary
        shall
        release such Pledged Senior Notes or Applicable Ownership Interest in the
        Treasury Portfolio, as the case may be, from the Pledge and shall promptly
        Transfer the same to the Purchase Contract Agent for distribution to such
        Holder, free and clear of the Pledge created hereby.

       

      Section
        5.03  Recreation
        of Corporate Units.
        

       

      (a)  Unless
        the Treasury Portfolio has replaced the Senior Notes as a component of the
        Corporate Units, at any time on or prior to 5:00 p.m. (New York City time)
        on
        the fifth Business Day immediately preceding the Purchase Contract Settlement
        Date, a Holder of Treasury Units shall have the right to recreate Corporate
        Units by substitution of Senior Notes or security entitlements with respect
        thereto for Pledged Treasury Securities in integral multiples of 40 Treasury
        Units by:

       

      (i)  transferring
        to the Securities Intermediary, for credit to the Collateral Account, Senior
        Notes or security entitlements with respect thereto having a principal amount
        equal to the Value of the Pledged Treasury Securities to be released,
        accompanied by a notice, substantially in the form of Exhibit
        C
        to the
        Purchase Contract Agreement, whereupon the Purchase Contract Agent shall
        deliver
        to the Collateral Agent a notice, substantially in the form of Exhibit
        C
        hereto,
        stating that such Holder has Transferred the Senior Notes or security
        entitlements with respect thereto to the Collateral Account for credit to
        the
        Collateral Account and requesting that the Collateral Agent release from
        the
        Pledge the Pledged Treasury Securities related to such Treasury Units;
        and

       

      (ii)  delivering
        the related Treasury Units to the Purchase Contract Agent.

       

      Upon
        receipt of such notice and confirmation that Senior Notes or security
        entitlements with respect thereto have been credited to the Collateral Account
        as described in such notice, the Collateral Agent shall instruct the Securities
        Intermediary by a notice substantially in the form of Exhibit
        D
        hereto
        to release such Pledged Treasury Securities from the Pledge by Transfer to
        the
        Purchase Contract Agent for distribution to such Holder, free and clear of
        the
        Pledge created hereby.

       

      If
        the
        Treasury Portfolio has replaced the Senior Notes as a component of the Corporate
        Units, a Holder of Treasury Units may, at any time on or prior to the second
        Business Day immediately preceding the Purchase Contract Settlement Date,
        substitute the Applicable Ownership Interests in the Treasury Portfolio for
        the
        Pledged Treasury Securities with respect to such Treasury Units, but only
        in
        multiples of 4,000 Treasury Units. In such an event, the Holder shall Transfer
        the required Applicable Ownership Interests in the Treasury Portfolio to
        the
        Securities Intermediary, for credit to the Collateral Account, and the Purchase
        Contract Agent shall request the Collateral Agent to instruct the Securities
        Intermediary to release and Transfer to the Holder the Pledged Treasury
        Securities in the manner set forth above.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      (b)  Upon
        credit to the Collateral Account of Senior Notes or security entitlements
        with
        respect thereto or Applicable Ownership Interests in the Treasury Portfolio
        delivered by a Holder of Treasury Units and receipt of the related instruction
        from the Collateral Agent, the Securities Intermediary shall release such
        Pledged Treasury Securities from the Pledge and shall promptly Transfer the
        same
        to the Purchase Contract Agent for distribution to such Holder, free and
        clear
        of the Pledge created hereby.

       

      Section
        5.04  Termination
        Event.
        

       

      (a)  Upon
        receipt by the Collateral Agent of written notice from the Company or the
        Purchase Contract Agent that a Termination Event has occurred, the Collateral
        Agent shall release all Collateral from the Pledge and shall promptly instruct
        the Securities Intermediary to Transfer:

       

      (i)  any
        Pledged Senior Notes or security entitlements with respect thereto or Pledged
        Applicable Ownership Interests;

       

      (ii)  any
        Pledged Treasury Securities; and

       

      (iii)  any
        payments by Holders (or the Permitted Investments of such payments) pursuant
        to
Section
        5.05
        hereof,

       

      to
        the
        Purchase Contract Agent for the benefit of the Holders for distribution to
        such
        Holders, in accordance with their respective interests, free and clear of
        the
        Pledge created hereby; provided,
        however,
        if any
        Holder shall be entitled to receive less than $1,000 with respect to its
        interest in the Applicable Ownership Interests (as specified in clause (i)
        of
        the definition of such term) in the Treasury Portfolio, the Purchase Contract
        Agent shall dispose of such interest for cash and deliver to such Holder
        cash in
        lieu of delivering the Applicable Ownership Interests (as specified in clause
        (i) of the definition of such term) in the Treasury Portfolio.

       

      (b)  If
        such
        Termination Event shall result from the Company’s becoming a debtor under the
        Bankruptcy Code, and if the Collateral Agent shall for any reason fail promptly
        to effectuate the release and Transfer of all Pledged Senior Notes, Pledged
        Applicable Ownership Interests, Pledged Treasury Securities and payments
        by
        Holders (or the Permitted Investments of such payments) pursuant to Section
        5.05
        and
        Proceeds of any of the foregoing, as the case may be, as provided by this
        Section
        5.04,
        the
        Purchase Contract Agent shall:

       

      (i)  use
        its
        best efforts to obtain an opinion of a nationally recognized law firm to
        the
        effect that, notwithstanding the Company being the debtor in such a bankruptcy
        case, the Collateral Agent will not be prohibited from releasing or Transferring
        the Collateral as provided in this Section
        5.04
        and
        shall deliver or cause to be delivered such opinion to the Collateral Agent
        within ten days after the occurrence of such Termination Event, and if (A)
        the
        Purchase Contract Agent shall be unable to obtain such opinion within ten
        days
        after the occurrence of such Termination Event or (B) the Collateral Agent
        shall
        continue, after delivery of such opinion, to refuse to effectuate the release
        and Transfer of all Pledged Senior Notes, Pledged Applicable Ownership
        Interests, Pledged Treasury Securities and the payments by Holders (or the
        Permitted Investments of such payments) pursuant to Section
        5.05
        hereof
        and Proceeds of any of 

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      the
        foregoing, as the case may be, as provided in this Section
        5.04,
        then
        the Purchase Contract Agent shall within fifteen days after the occurrence
        of
        such Termination Event commence an action or proceeding in the court having
        jurisdiction of the Company’s case under the Bankruptcy Code seeking an order
        requiring the Collateral Agent to effectuate the release and transfer of
        all
        Pledged Senior Notes, Pledged Applicable Ownership Interests, Pledged Treasury
        Securities and the payments by Holders (or the Permitted Investments of such
        payments) pursuant to Section
        5.05
        hereof
        and Proceeds of any of the foregoing, or as the case may be, as provided
        by this
Section
        5.04;
        or

       

      (ii)  commence
        an action or proceeding like that described in Section
        5.04(b)(i)
        hereof
        within ten days after the occurrence of such Termination Event.

       

      Section
        5.05  Cash
        Settlement.
        

       

      (a)  Upon
        receipt by the Collateral Agent of (1) a notice from the Purchase Contract
        Agent
        promptly after the receipt by the Purchase Contract Agent of a notice from
        a
        Holder of Corporate Units or Treasury Units that such Holder has elected,
        in
        accordance with the procedures specified in Section
        5.02(b)(i)
        of the
        Purchase Contract Agreement, to effect a Cash Settlement and (2) payment
        by such
        Holder by deposit in the Collateral Account on or prior to 5:00 p.m. (New
        York
        City time) on the fourth Business Day immediately preceding the Purchase
        Contract Settlement Date of the Purchase Price in lawful money of the United
        States by certified or cashier’s check or wire transfer of immediately available
        funds payable to or upon the order of the Securities Intermediary, then the
        Collateral Agent shall:

       

      (i)  instruct
        the Securities Intermediary promptly to invest any such Cash in Permitted
        Investments;

       

      (ii)  instruct
        the Securities Intermediary to release from the Pledge such Holder’s related
        Pledged Senior Notes or Pledged Applicable Ownership Interests, as applicable,
        as to which such Holder has effected a Cash Settlement pursuant to this
Section
        5.05(a);
        and

       

      (iii)  instruct
        the Securities Intermediary to Transfer all such Pledged Senior Notes, Pledged
        Applicable Ownership Interests or the Pledged Treasury Securities, as the
        case
        may be, to the Purchase Contract Agent for distribution to such Holder, in
        each
        case free and clear of the Pledge created hereby.

       

      The
        Company shall instruct the Collateral Agent in writing as to the type of
        Permitted Investments in which any such Cash shall be invested; provided,
        however,
        that if
        the Company fails to deliver such written instructions by 10:30 a.m. (New
        York
        City time) on the day such Cash is received by the Collateral Agent or to
        be
        reinvested by the Securities Intermediary, the Collateral Agent shall instruct
        the Securities Intermediary to invest such Cash in the Permitted Investments
        described in clause (6) of the definition of Permitted Investments. In no
        event
        shall the Collateral Agent or Securities Intermediary be liable for the
        selection of Permitted Investments or for investment losses incurred thereon.
        The Collateral Agent and Securities Intermediary shall have no liability
        with
        respect to losses incurred as a result of the failure of the Company to provide
        timely written investment direction.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      Upon
        receipt of Proceeds upon the maturity of the Permitted Investments on the
        Purchase Contract Settlement Date, the Collateral Agent shall (A) instruct
        the
        Securities Intermediary to pay the portion of such Proceeds and deliver any
        certified or cashier’s checks received, in an aggregate amount equal to the
        Purchase Price, to the Company on the Purchase Contract Settlement Date,
        and (B)
        release any amounts in excess of the Purchase Price earned from such Permitted
        Investments to the Purchase Contract Agent for distribution to such Holder
        in
        accordance with the Purchase Contract Agreement.

       

      (b)  If
        a
        Holder of Corporate Units (unless the Treasury Portfolio has replaced the
        Senior
        Notes as a component of such Corporate Units) (i) fails to notify the Purchase
        Contract Agent of its intention to make a Cash Settlement as provided in
        Section
        5.02(b)(i)
        of the
        Purchase Contract Agreement or (ii) does notify the Purchase Contract Agent
        of
        its intention to pay the Purchase Price in cash, but fails to make such payment
        as required by Section
        5.02(b)(ii)
        of the
        Purchase Contract Agreement, such Holder shall be deemed to have consented
        to
        the disposition of such Holder’s Pledged Senior Notes in accordance with
Section
        5.02(b)(iii)
        of the
        Purchase Contract Agreement.

       

      (c)  As
        soon
        as practicable after 5:00 p.m. (New York City time) on the fourth Business
        Day
        immediately preceding the Purchase Contract Settlement Date, the Collateral
        Agent shall deliver to the Purchase Contract Agent a notice, substantially
        in
        the form of Exhibit
        E
        hereto,
        stating (i) the amount of Cash that it has received with respect to the Cash
        Settlement of Corporate Units, (ii) the amount of Cash that it has received
        with
        respect to the Cash Settlement of Treasury Units and (iii) the amount of
        Pledged
        Senior Notes to be remarketed in the Final Remarketing pursuant to Section
        5.02(c)
        of the
        Purchase Contract Agreement.

       

      (d)  If
        there
        has been a Failed Final Remarketing, as soon as practicable after 5:00 p.m.
        (New
        York City time) on the Business Day immediately preceding the Purchase Contract
        Settlement Date, the Collateral Agent shall deliver to the Purchase Contract
        Agent a notice, stating (i) the amount of Cash that it has received with
        respect
        to the Cash Settlement of Corporate Units, (ii) the amount of Cash that it
        has
        received with respect to the Cash Settlement of Treasury Units and (iii)
        the
        amount of Pledged Senior Notes with respect to which an automatic deemed
        exercise of the Put Right has occurred pursuant to Section
        5.02(c)
        of the
        Purchase Contract Agreement.

       

      Section
        5.06  Early
        Settlement and Cash Merger Early Settlement.
        Upon
        receipt by the Collateral Agent of a notice from the Purchase Contract Agent
        that a Holder of Units has elected to effect either (i) Early Settlement
        of its
        obligations under the Purchase Contracts forming a part of such Units in
        accordance with the terms of the Purchase Contracts and Section
        5.07
        of the
        Purchase Contract Agreement or (ii) Cash Merger Early Settlement of its
        obligations under the Purchase Contracts forming a part of such Units in
        accordance with the terms of the Purchase Contracts and Section
        5.04(b)(ii)
        of the
        Purchase Contract Agreement (which notice shall set forth the number of such
        Purchase Contracts as to which such Holder has elected to effect Early
        Settlement or Cash Merger Early Settlement), and that the Purchase Contract
        Agent has received from such Holder, and paid to the Company as confirmed
        in
        writing by the Company, the related Purchase Price pursuant to the terms
        of the
        Purchase Contracts and the Purchase Contract Agreement and that all conditions
        to such Early Settlement or Cash Merger Early Settlement, as the case may
        be,
        have been satisfied, then the Collateral Agent shall release from the Pledge,
        (1) 

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      Pledged
        Senior Notes or the Pledged Applicable Ownership Interests in the case of
        a
        Holder of Corporate Units or (2) Pledged Treasury Securities, in the case
        of a
        Holder of Treasury Units, in each case with a Value equal to the product
        of (x)
        the Stated Amount times (y) the number of Purchase Contracts as to which
        such
        Holder has elected to effect Early Settlement or Cash Merger Early Settlement,
        and shall instruct the Securities Intermediary to Transfer all such Pledged
        Applicable Ownership Interests or Pledged Senior Notes or Pledged Treasury
        Securities, as the case may be, to the Purchase Contract Agent for distribution
        to such Holder, in each case free and clear of the Pledge created hereby.
        A
        holder of Treasury Units may settle early only in integral multiples of 40
        Treasury Units, and a Holder of Corporate Units, if the Treasury Portfolio
        has
        replaced the Senior Notes as a component of such Corporate Units, may settle
        early only in integral multiples of 4,000 Corporate Units.

       

      Section
        5.07  Application
        of Proceeds in Settlement of Purchase Contracts. 

       

      (a)  If
        a
        Holder of Corporate Units (unless the Treasury Portfolio has replaced the
        Senior
        Notes as a component of such Corporate Units) has not elected to make an
        effective Cash Settlement by notifying the Purchase Contract Agent in the
        manner
        provided for in Section
        5.02(b)(i)
        of the
        Purchase Contract Agreement or does notify the Purchase Contract Agent as
        provided in Section
        5.02(b)(i)
        of the
        Purchase Contract Agreement of its intention to pay the Purchase Price in
        cash,
        but fails to make such payment as required by Section
        5.02(b)(ii)
        of the
        Purchase Contract Agreement, such Holder shall be deemed to have elected
        to pay
        for the shares of Common Stock or Preferred Stock, as applicable, to be issued
        under such Purchase Contracts from the Proceeds of the Final Remarketing
        of the
        related Pledged Senior Notes. In the event of a Successful Final Remarketing,
        the Collateral Agent shall instruct the Securities Intermediary to Transfer
        the
        related Pledged Senior Notes to the Remarketing Agent, upon confirmation
        of
        deposit by the Remarketing Agent of the Proceeds of such Final Remarketing
        (less, to the extent permitted by the Remarketing Agreement, the Remarketing
        Fee) in the Collateral Account. The Collateral Agent shall instruct the
        Securities Intermediary to invest the Proceeds of the Final Remarketing in
        Permitted Investments set forth in clause (6) of the definition of Permitted
        Investments. On the Purchase Contract Settlement Date, the Collateral Agent
        shall, in consultation with the Purchase Contract Agent, instruct the Securities
        Intermediary to remit a portion of the Proceeds from such Final Remarketing
        equal to the aggregate principal amount of such Pledged Senior Notes to satisfy
        in full such Holder’s obligations to pay the Purchase Price to purchase the
        shares of Common Stock or Preferred Stock, as applicable, under the related
        Purchase Contracts and to remit the balance of the Proceeds from the Final
        Remarketing, if any, to the Purchase Contract Agent for distribution to such
        Holder.

       

      Upon
        a
        Failed Final Remarketing, each Holder of Corporate Units (unless the Treasury
        Portfolio has replaced the Senior Notes represented by such Corporate Units)
        that has not elected to make an effective Cash Settlement by notifying the
        Purchase Contract Agent in the manner provided for in Section
        5.02(e)(i)
        of the
        Purchase Contract Agreement or does notify the Purchase Contract Agent as
        provided in Section
        5.02(e)(i)
        of the
        Purchase Contract Agreement of its intention to pay the Purchase Price in
        cash,
        but fails to make such payment as required by Section
        5.02(e)(ii)
        of the
        Purchase Contract Agreement, shall be deemed to have exercised such Holder’s Put
        Right with respect to the Senior Notes that are a component of Corporate
        Units
        have elected to have a portion of the Proceeds of the Put Right set-off against
        such Holder’s obligation to pay the aggregate Price for the shares of Common
        Stock or Preferred Stock, as applicable, to be issued under the Purchase
        Contracts underlying such Corporate Units in full satisfaction of such Holders’
obligations under the Purchase Contracts. Following such set-off, the Holder’s
        obligations to pay the Purchase Price for the shares of Common Stock or
        Preferred Stock, as 

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      applicable,
        will be deemed to be satisfied in full, and the Collateral Agent shall cause
        the
        Securities Intermediary to release the Pledged Senior Notes from the Collateral
        Account and shall promptly transfer the Pledged Senior Notes to the Company.
        Thereafter, the Collateral Agent shall promptly remit the remaining Proceeds
        of
        the Holder’s exercise of the Put Right in excess of the aggregate Purchase Price
        for the shares of Common Stock or Preferred Stock, as applicable, to be issued
        under such Purchase Contracts to the Purchase Contract Agent for payment
        to the
        Holder of the Corporate Units to which such Senior Notes relate.

       

      (b)  A
        Holder
        of a Treasury Unit or a Corporate Unit (if the Treasury Portfolio has replaced
        the Senior Notes as a component of such Corporate Unit) shall be deemed to
        have
        elected to pay for the shares of Common Stock or Preferred Stock, as applicable,
        to be issued under such Purchase Contracts from the Proceeds of the related
        Pledged Treasury Securities or Pledged Applicable Ownership Interests, as
        the
        case may be. Promptly, after 11:00 a.m. (New York City time) on the Business
        Day
        immediately prior to the Purchase Contract Settlement Date, the Collateral
        Agent
        shall invest the Proceeds in the Permitted Investments set forth in Clause
        (6)
        of the definition of Permitted Investments, unless prior to 10:30 a.m. on
        such
        date the Company shall otherwise instruct the Collateral Agent in writing
        as to
        the type of Permitted Investments in which any Proceeds shall be invested.
        In no
        event shall the Collateral Agent be liable for the selection of Permitted
        Investments or for investment losses incurred thereon. The Collateral Agent
        shall have no liability in respect of losses incurred as a result of the
        failure
        of the Company to provide timely written investment direction. Without receiving
        any instruction from any Holder, the Collateral Agent shall instruct the
        Securities Intermediary to remit the Proceeds of the related Pledged Treasury
        Securities or Pledged Applicable Ownership Interests, as the case may be,
        to the
        Company in settlement of such Purchase Contracts on the Purchase Contract
        Settlement Date. In the event the sum of the Proceeds from the related Pledged
        Treasury Securities or Pledged Applicable Ownership Interests, as the case
        may
        be, and the investment earnings from the investment in Permitted Investments
        exceeds the aggregate Purchase Price of the Purchase Contracts being settled
        thereby, the Collateral Agent shall instruct the Securities Intermediary
        to
        transfer such excess, when received, to the Purchase Contract Agent for
        distribution to Holders.

       

      (c)  On
        or
        prior to 5:00 p.m. (New York City time) on the fifth Business Day immediately
        preceding the applicable Remarketing Date, but no earlier than the Payment
        Date
        immediately preceding such date, Holders of Separate Senior Notes may elect
        to
        have their Separate Senior Notes remarketed under the Remarketing Agreement,
        by
        delivering their Separate Senior Notes along with a notice of such election,
        substantially in the form of Exhibit
        F
        hereto,
        to the Collateral Agent. The Collateral Agent, acting as Custodial Agent,
        shall
        hold Separate Senior Notes in an account separate from the Collateral Account
        in
        which the Pledged Securities shall be held. Holders of Separate Senior Notes
        electing to have their Separate Senior Notes remarketed will also have the
        right
        to withdraw that election by written notice to the Collateral Agent,
        substantially in the form of Exhibit
        G
        hereto,
        on or prior to 5:00 p.m. (New York City time) on the fifth Business Day
        immediately preceding the applicable Remarketing Date, upon which notice
        the
        Custodial Agent shall return such Separate Senior Notes to such Holder. After
        such time, such election shall become an irrevocable election to have such
        Separate Senior Notes remarketed in such Remarketing.

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

      By
        11:00
        a.m. (New York City time) on the Business Day immediately preceding the
        applicable Remarketing Date, the Custodial Agent shall notify the Remarketing
        Agent of the aggregate principal amount of the Separate Senior Notes to be
        remarketed and deliver to the Remarketing Agent for remarketing all Separate
        Senior Notes delivered to the Custodial Agent pursuant to this Section
        5.07(c)
        and not
        validly withdrawn prior to such date. In the event of a Successful Remarketing,
        after deducting the Remarketing Fee, the Remarketing Agent will remit to
        the
        Custodial Agent the remaining portion of the proceeds of such Remarketing
        for
        payment to the Holders of the remarketed Separate Senior Notes, in accordance
        with their respective interests. In the event of a Failed Remarketing, the
        Remarketing Agent will promptly return such Separate Senior Notes to the
        Custodial Agent for distribution to the appropriate Holders.

       

      Section
        5.08  Special
        Event Redemption.
        If the
        Collateral Agent receives written notice that a Special Event Redemption
        has
        occurred while Senior Notes are still credited to the Collateral Account,
        the
        Collateral Agent shall apply the Redemption Amount to purchase the Treasury
        Portfolio, and the Collateral Agent shall credit the Applicable Ownership
        Interests (as specified in clause (i) of the definition of such term) in
        the
        Treasury Portfolio to the Collateral Account and shall transfer the Applicable
        Ownership Interests (as specified in clause (ii) of the definition of such
        term)
        in the Treasury Portfolio to the Purchase Contract Agent for distribution
        to the
        Holders of the Corporate Units. Upon credit to the Collateral Account of
        the
        Applicable Ownership Interests (as specified in clause (i) of the definition
        of
        such term) in the Treasury Portfolio having a Value equal to the aggregate
        principal amount of the Pledged Senior Notes, the Collateral Agent shall
        cause
        the Securities Intermediary to release the Pledged Senior Notes from the
        Collateral Account and shall promptly transfer the Pledged Senior Notes to
        the
        Company.

       

      ARTICLE
        6

       

      VOTING
        RIGHTS - PLEDGED SENIOR NOTES

       

      Section
        6.01  Voting
        Rights.
        Subject
        to the terms of Section
        4.02
        of the
        Purchase Contract Agreement, the Purchase Contract Agent may exercise, or
        refrain from exercising, any and all voting and other consensual rights
        pertaining to the Pledged Senior Notes or any part thereof for any purpose
        not
        inconsistent with the terms of this Agreement and in accordance with the
        terms
        of the Purchase Contract Agreement; provided,
        that
        the Purchase Contract Agent shall not exercise or shall not refrain from
        exercising such right, as the case may be, if, in the reasonable judgment
        of the
        Purchase Contract Agent, such action would impair or otherwise have a material
        adverse effect on the value of all or any of the Pledged Senior Notes; and
        provided,
        further,
        that
        the Purchase Contract Agent shall give the Company and the Collateral Agent
        at
        least five Business Days’ prior written notice of the manner in which it intends
        to exercise, or its reasons for refraining from exercising, any such right.
        Upon
        receipt of any notices and other communications in respect of any Pledged
        Senior
        Notes, including notice of any meeting at which holders of the Senior Notes
        are
        entitled to vote or solicitation of consents, waivers or proxies of holders
        of
        the Senior Notes, the Collateral Agent shall use reasonable efforts to send
        promptly to the Purchase Contract Agent such notice or communication, and
        as

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

      soon
        as
        reasonably practicable after receipt of a written request therefor from the
        Purchase Contract Agent, execute and deliver to the Purchase Contract Agent
        such
        proxies and other instruments in respect of such Pledged Senior Notes (in
        form
        and substance satisfactory to the Collateral Agent) as are prepared by the
        Company and delivered to the Purchase Contract Agent with respect to the
        Pledged
        Senior Notes.

       

      ARTICLE
        7

       

      RIGHTS
        AND REMEDIES

       

      Section
        7.01  Rights
        and Remedies of the Collateral Agent.
        

       

      (a)  In
        addition to the rights and remedies specified in Section
        5.07
        hereof
        or otherwise available at law or in equity, after an event of default (as
        specified in Section
        7.01(b)
        below)
        hereunder, the Collateral Agent shall have all of the rights and remedies
        with
        respect to the Collateral of a secured party under the UCC (whether or not
        the
        UCC is in effect in the jurisdiction where the rights and remedies are asserted)
        and the TRADES Regulations and such additional rights and remedies to which
        a
        secured party is entitled under the laws in effect in any jurisdiction where
        any
        rights and remedies hereunder may be asserted. Without limiting the generality
        of the foregoing, such remedies may include, to the extent permitted by
        applicable law, (1) retention of the Pledged Senior Notes, Pledged Treasury
        Securities or the applicable Pledged Applicable Ownership Interests in full
        satisfaction of the Holders’ obligations under the Purchase Contracts and the
        Purchase Contract Agreement or (2) sale of the Pledged Senior Notes, Pledged
        Treasury Securities or the applicable Pledged Applicable Ownership Interests
        in
        one or more public or private sales.

       

      (b)  Without
        limiting any rights or powers otherwise granted by this Agreement to the
        Collateral Agent, in the event the Collateral Agent is unable to make payments
        to the Company on account of the applicable Pledged Applicable Ownership
        Interests, or on account of principal payments of any Pledged Treasury
        Securities as provided in Article
        3
        hereof,
        in satisfaction of the Obligations of the Holder of the Units of which such
        applicable Pledged Applicable Ownership Interests or such Pledged Treasury
        Securities, as applicable, are a part under the related Purchase Contracts,
        the
        inability to make such payments shall constitute an event of default hereunder
        and the Collateral Agent shall have and may exercise, with reference to such
        Pledged Treasury Securities or Pledged Applicable Ownership Interests, as
        applicable, any and all of the rights and remedies available to a secured
        party
        under the UCC and the TRADES Regulations after default by a debtor, and as
        otherwise granted herein or under any other law.

       

      (c)  Without
        limiting any rights or powers otherwise granted by this Agreement to the
        Collateral Agent, the Collateral Agent is hereby irrevocably authorized to
        receive and collect all payments of (i) the principal amount of the Pledged
        Senior Notes, (ii) the principal amount of the Pledged Treasury Securities
        and
        (iii) the principal amount of the Pledged Applicable Ownership Interests,
        subject, in each case, to the provisions of Article
        3
        hereof,
        and as otherwise granted herein.

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

      (d)  The
        Purchase Contract Agent and each Holder of Units agrees that, from time to
        time,
        upon the written request of the Collateral Agent or the Purchase Contract
        Agent,
        such Holder shall execute and deliver such further documents and do such
        other
        acts and things as the Collateral Agent may reasonably request in order to
        maintain the Pledge, and the perfection and priority thereof, and to confirm
        the
        rights of the Collateral Agent hereunder. The Purchase Contract Agent shall
        have
        no liability to any Holder for executing any documents or taking any such
        acts
        requested by the Collateral Agent hereunder, except for liability for its
        own
        grossly negligent acts, its own grossly negligent failure to act or its own
        willful misconduct.

       

      Section
        7.02  Special
        Event Redemption.
        Upon
        the occurrence of a Special Event Redemption while Senior Notes are still
        credited to the Collateral Account, the Collateral Agent is hereby authorized
        to
        present the Pledged Senior Notes for payment as may be required by their
        respective terms and to direct the Indenture Trustee to remit the Redemption
        Price to the Securities Intermediary for credit to the Collateral Account
        on or
        prior to 12:30 p.m., New York City time on such Special Event Redemption
        Date,
        by federal funds check or wire transfer of immediately available funds. Upon
        receipt of such funds, the Pledged Senior Notes shall be released from the
        Collateral Account and promptly transferred to the Company. Upon the crediting
        of such funds to the Collateral Account, the Collateral Agent, at the written
        direction of the Company, shall instruct the Securities Intermediary to (a)
        apply an amount of such funds equal to the Redemption Amount to purchase
        the
        Treasury Portfolio from the Quotation Agent, (b) credit to the Collateral
        Account the Applicable Ownership Interests (specified in clause (i) of the
        definition of such term) in the Treasury Portfolio and (c) promptly remit
        the
        remaining portion of such funds, if any, to the Purchase Contract Agent for
        payment to the Holders of Corporate Units, in accordance with their respective
        interests and the Purchase Contract Agreement.

       

      Section
        7.03  Initial
        Remarketing. Unless a Special Event Redemptions has occurred prior to the
        Initial Remarketing Date, the Collateral Agent shall, by 11:00 a.m., New
        York
        City time, on the Business Day immediately preceding the Initial Remarketing
        Date, without any instruction from any Holder of Corporate Units, present
        the
        related Pledged Senior Notes to the Remarketing Agent for Initial Remarketing.
        In the event of a Failed Initial Remarketing, the Senior Notes presented
        to the
        Remarketing Agent pursuant to this Section
        7.03
        for
        Remarketing shall be redeposited into the Collateral Account.

       

      Section
        7.04  Final
        Remarketing. Unless a Special Event Redemption has occurred prior to the
        Final Remarketing Date, if a Failed Initial Remarketing has occurred, the
        Collateral Agent shall, by 11:00 a.m., New York City time, on the Business
        Day
        immediately preceding the Final Remarketing Date, without any instruction
        from
        any Holder of Corporate Units, present the related Pledged Senior Notes to
        the
        Remarketing Agent for Final Remarketing. In the event of a Failed Final
        Remarketing, the Senior Notes presented to the Remarketing Agent pursuant
        to
        this Section
        7.04
        for
        Remarketing shall be redeposited into the Collateral Account.

       

      Section
        7.05  Successful
        Initial Remarketing. In the event of a Successful Initial Remarketing prior
        to the Final Remarketing Date, the Collateral Agent shall, at the direction
        of
        the Company, instruct the Securities Intermediary to (i) Transfer the Pledged
        Senior Notes to the Remarketing Agent upon confirmation of deposit by the
        Remarketing Agent of the Proceeds of such Successful Initial Remarketing
        (after
        deducting any Remarketing Fee in accordance with 

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

      the
        Remarketing Agreement) in the Collateral Account, (ii) apply an amount equal
        to
        the Treasury Portfolio Purchase Price to purchase from the Quotation Agent
        the
        Treasury Portfolio, (iii) credit the Applicable Ownership Interests (specified
        in clause (i) of the definition of such term) in the Treasury Portfolio to
        the
        Collateral Account, and (iv) promptly remit the remaining portion of such
        Proceeds to the Purchase Contract Agent for payment to the Holders of Corporate
        Units, in accordance with their respective interests and the Purchase Contract
        Agreement. With respect to Separate Senior Notes, any Proceeds of such Initial
        Remarketing (after deducting any Remarketing Fee in accordance with the
        Remarketing Agreement) attributable to the Separate Senior Notes will be
        remitted to the Custodial Agent for payment to the holders of Separate Senior
        Notes. The Pledged Applicable Ownership Interests thus credited to the
        Collateral Account will secure the obligation of all Holders of Corporate
        Units
        to purchase Common Stock of the Company under the Purchase Contracts
        constituting a part of such Corporate Units, in substitution for the Pledged
        Senior Notes, which shall be released from the Collateral Account. In the
        event
        of a Failed Final Remarketing, the Pledged Senior Notes shall remain credited
        to
        the Collateral Account and Section
        5.07
        shall
        apply.

       

      Section
        7.06  Substitutions.
        Whenever a Holder has the right to substitute Treasury Securities, Senior
        Notes
        or security entitlements for any of them or the appropriate Applicable Ownership
        Interest (as defined in clause (i) of the definition of such term) in the
        Treasury Portfolio, as the case may be, for financial assets held in the
        Collateral Account, such substitution shall not constitute a novation of
        the
        security interest created hereby.

       

      ARTICLE
        8

       

      REPRESENTATIONS
        AND WARRANTIES; COVENANTS

       

      Section
        8.01  Representations
        and Warranties.
        Each
        Holder from time to time, acting through the Purchase Contract Agent as
        attorney-in-fact (it being understood that the Purchase Contract Agent shall
        not
        be liable for any representation or warranty made by or on behalf of a Holder),
        hereby represents and warrants to the Collateral Agent (with respect to such
        Holder’s interest in the Collateral), which representations and warranties shall
        be deemed repeated on each day a Holder Transfers Collateral, that:

       

      (a)  such
        Holder has the power to grant a security interest in and lien on the
        Collateral;

       

      (b)  such
        Holder is the sole beneficial owner of the Collateral and, in the case of
        Collateral delivered in physical form, is the sole holder of such Collateral
        and
        is the sole beneficial owner of, or has the right to Transfer, the Collateral
        it
        Transfers to the Collateral Agent for credit to the Collateral Account, free
        and
        clear of any security interest, lien, encumbrance, call, liability to pay
        money
        or other restriction other than the security interest and lien granted under
        Article
        2
        hereof;

       

      (c)  upon
        the
        Transfer of the Collateral to the Collateral Agent for credit to the Collateral
        Account, the Collateral Agent, for the benefit of the Company, will have
        a valid
        and perfected first priority security interest therein (assuming that any
        central clearing operation or any securities intermediary or other entity
        not
        within the control of the Holder involved in the 

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

      Transfer
        of the Collateral, including the Collateral Agent and the Securities
        Intermediary, gives the notices and takes the action required of it hereunder
        and under applicable law for perfection of that interest and assuming the
        establishment and exercise of control pursuant to Article
        4
        hereof);
        and

       

      (d)  the
        execution and performance by the Holder of its obligations under this Agreement
        will not result in the creation of any security interest, lien or other
        encumbrance on the Collateral other than the security interest and lien granted
        under Article
        2
        hereof
        or violate any provision of any existing law or regulation applicable to
        it or
        of any mortgage, charge, pledge, indenture, contract or undertaking to which
        it
        is a party or which is binding on it or any of its assets.

       

      Section
        8.02  Covenants.
        The
        Holders from time to time, acting through the Purchase Contract Agent as
        their
        attorney-in-fact (it being understood that the Purchase Contract Agent shall
        not
        be liable for any covenant made by or on behalf of a Holder), hereby covenant
        to
        the Collateral Agent that for so long as the Collateral remains subject to
        the
        Pledge:

       

      (a)  neither
        the Purchase Contract Agent nor such Holders will create or purport to create
        or
        allow to subsist any mortgage, charge, lien, pledge or any other security
        interest whatsoever over the Collateral or any part of it other than pursuant
        to
        this Agreement; and

       

      (b)  neither
        the Purchase Contract Agent nor such Holders will sell or otherwise dispose
        (or
        attempt to dispose) of the Collateral or any part of it except for the
        beneficial interest therein, subject to the Pledge hereunder, transferred
        in
        connection with the Transfer of the Units.

       

      ARTICLE
        9

       

      THE
        COLLATERAL AGENT, THE CUSTODIAL AGENT AND THE SECURITIES
        INTERMEDIARY

       

      It
        is
        hereby agreed as follows:

       

      Section
        9.01  Appointment,
        Powers and Immunities.
        The
        Collateral Agent, the Custodial Agent or the Securities Intermediary shall
        act
        as agent for the Company hereunder with such powers as are specifically vested
        in the Collateral Agent, the Custodial Agent or the Securities Intermediary,
        as
        the case may be, by the terms of this Agreement. The Collateral Agent, the
        Custodial Agent and Securities Intermediary shall:

       

      (a)  have
        no
        duties or responsibilities except those expressly set forth in this Agreement
        and no implied covenants or obligations shall be inferred from this Agreement
        against the Collateral Agent, the Custodial Agent and the Securities
        Intermediary, nor shall the Collateral Agent, the Custodial Agent and the
        Securities Intermediary be bound by the provisions of any agreement by any
        party
        hereto beyond the specific terms hereof;

       

      (b)  not
        be
        responsible for any recitals contained in this Agreement, or in any certificate
        or other document referred to or provided for in, or received by it under,
        this
        Agreement, the Units or the Purchase Contract Agreement, or for the value,
        validity, 

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

      effectiveness,
        genuineness, enforceability or sufficiency of this Agreement (other than
        as
        against the Collateral Agent, the Custodial Agent or the Securities
        Intermediary, as the case may be), the Units, any Collateral or the Purchase
        Contract Agreement or any other document referred to or provided for herein
        or
        therein or for any failure by the Company or any other Person (except the
        Collateral Agent, the Custodial Agent or the Securities Intermediary, as
        the
        case may be) to perform any of its obligations hereunder or thereunder or
        for
        the perfection, priority or, except as expressly required hereby, maintenance
        of
        any security interest created hereunder;

       

      (c)  not
        be
        required to initiate or conduct any litigation or collection proceedings
        hereunder (except pursuant to directions furnished under Section
        9.02
        hereof,
        subject to Section
        9.08
        hereof);

       

      (d)  not
        be
        responsible for any action taken or omitted to be taken by it hereunder or
        under
        any other document or instrument referred to or provided for herein or in
        connection herewith or therewith, except for its own gross negligence or
        willful
        misconduct; and

       

      (e)  not
        be
        required to advise any party as to selling or retaining, or taking or refraining
        from taking any action with respect to, any securities or other property
        deposited hereunder.

       

      Subject
        to the foregoing, during the term of this Agreement, the Collateral Agent,
        the
        Custodial Agent and the Securities Intermediary shall take all reasonable
        action
        in connection with the safekeeping and preservation of the Collateral hereunder
        as determined by industry standards.

       

      No
        provision of this Agreement shall require the Collateral Agent, Custodial
        Agent
        or the Securities Intermediary to expend or risk its own funds or otherwise
        incur any financial liability in the performance of any of its duties hereunder.
        In no event shall the Collateral Agent, Custodial Agent or the Securities
        Intermediary be liable for any amount in excess of the Value of the
        Collateral.

       

      Section
        9.02  Instructions
        of the Company.
        The
        Company shall have the right, by one or more written instruments executed
        and
        delivered to the Collateral Agent, to direct the time, method and place of
        conducting any proceeding for the realization of any right or remedy available
        to the Collateral Agent, or of exercising any power conferred on the Collateral
        Agent, or to direct the taking or refraining from taking of any action
        authorized by this Agreement; provided,
        however,
        that
        (i) such direction shall not conflict with the provisions of any law or of
        this
        Agreement or involve the Collateral Agent in personal liability and (ii)
        the
        Collateral Agent shall be indemnified to its satisfaction as provided herein.
        Nothing contained in this Section
        9.02
        shall
        impair the right of the Collateral Agent in its discretion to take any action
        or
        omit to take any action which it deems proper and which is not inconsistent
        with
        such direction. None of the Collateral Agent, the Custodial Agent or the
        Securities Intermediary has any obligation or responsibility to file UCC
        financing statements.

       

      Section
        9.03  Reliance
        by Collateral Agent, Custodial Agent and Securities Intermediary. Each of
        the Collateral Agent, the Custodial Agent and the Securities Intermediary
        shall
        be entitled, in the absence of bad faith, to rely conclusively upon any
        certification, order, 

       

      
        
          
          

        

        
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      judgment,
        opinion, notice or other written communication (including, without limitation,
        any thereof by e-mail or similar electronic means, telecopy, telex or facsimile)
        believed by it to be genuine and correct and to have been signed or sent
        by or
        on behalf of the proper Person or Persons (without being required to determine
        the correctness of any fact stated therein) and consult with and conclusively
        rely upon advice, opinions and statements of legal counsel and other experts
        selected by the Collateral Agent, the Custodial Agent or the Securities
        Intermediary, as the case may be. As to any matters not expressly provided
        for
        by this Agreement, the Collateral Agent, the Custodial Agent and the Securities
        Intermediary shall in all cases be fully protected in acting, or in refraining
        from acting, hereunder in accordance with instructions given by the Company
        in
        accordance with this Agreement.

       

      Section
        9.04  Certain
        Rights. 

       

      (a)  Whenever
        in the administration of the provisions of this Agreement the Collateral
        Agent,
        the Custodial Agent or the Securities Intermediary shall deem it necessary
        or
        desirable that a matter be proved or established prior to taking or suffering
        any action to be taken hereunder, such matter (unless other evidence in respect
        thereof be herein specifically prescribed) may, in the absence of gross
        negligence or bad faith on the part of the Collateral Agent, the Custodial
        Agent
        or the Securities Intermediary, be deemed to be conclusively proved and
        established by a certificate signed by one of the Company’s officers, and
        delivered to the Collateral Agent, the Custodial Agent or the Securities
        Intermediary and such certificate, in the absence of gross negligence or
        bad
        faith on the part of the Collateral Agent, the Custodial Agent or the Securities
        Intermediary, shall be full warrant to the Collateral Agent, the Custodial
        Agent
        or the Securities Intermediary for any action taken, suffered or omitted
        by it
        under the provisions of this Agreement upon the faith thereof.

       

      (b)  The
        Collateral Agent, the Custodial Agent or the Securities Intermediary shall
        not
        be bound to make any investigation into the facts or matters stated in any
        resolution, certificate, statement, instrument, opinion, report, notice,
        request, consent, entitlement order, approval or other paper or
        document.

       

      Section
        9.05  Merger,
        Conversion, Consolidation or Succession to Business.
        Any
        corporation into which the Collateral Agent, the Custodial Agent or the
        Securities Intermediary may be merged or converted or with which it may be
        consolidated, or any corporation resulting from any merger, conversion or
        consolidation to which the Collateral Agent, the Custodial Agent or the
        Securities Intermediary shall be a party, or any corporation succeeding to
        all
        or substantially all of the corporate trust business of the Collateral Agent,
        the Custodial Agent or the Securities Intermediary shall be the successor
        of the
        Collateral Agent, the Custodial Agent or the Securities Intermediary hereunder
        without the execution or filing of any paper with any party hereto or any
        further act on the part of any of the parties hereto except where an instrument
        of transfer or assignment is required by law to effect such succession, anything
        herein to the contrary notwithstanding.

       

      Section
        9.06  Rights
        in Other Capacities. The Collateral Agent, the Custodial Agent and the
        Securities Intermediary and their affiliates may (without having to account
        therefor to the Company) accept deposits from, lend money to, make their
        investments in and generally engage in any kind of banking, trust or other
        business with the Purchase Contract Agent, any other 

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

      Person
        interested herein and any Holder of Units (and any of their respective
        subsidiaries or affiliates) as if it were not acting as the Collateral Agent,
        the Custodial Agent or the Securities Intermediary, as the case may be, and
        the
        Collateral Agent, the Custodial Agent, the Securities Intermediary and their
        affiliates may accept fees and other consideration from the Purchase Contract
        Agent and any Holder of Units without having to account for the same to the
        Company; provided
        that
        each of the Securities Intermediary, the Custodial Agent and the Collateral
        Agent covenants and agrees with the Company that it shall not accept, receive
        or
        permit there to be created in favor of itself and shall take no affirmative
        action to permit there to be created in favor of any other Person, any security
        interest, lien or other encumbrance of any kind in or upon the Collateral
        other
        than the lien created by the Pledge.

       

      Section
        9.07  Non-reliance
        on Collateral Agent, the Custodial Agent and Securities Intermediary. None
        of the Securities Intermediary, the Custodial Agent or the Collateral Agent
        shall be required to keep itself informed as to the performance or observance
        by
        the Purchase Contract Agent or any Holder of Units of this Agreement, the
        Purchase Contract Agreement, the Units or any other document referred to
        or
        provided for herein or therein or to inspect the properties or books of the
        Purchase Contract Agent or any Holder of Units. None of the Collateral Agent,
        the Custodial Agent or the Securities Intermediary shall have any duty or
        responsibility to provide the Company with any credit or other information
        concerning the affairs, financial condition or business of the Purchase Contract
        Agent or any Holder of Units (or any of their respective affiliates) that
        may
        come into the possession of the Collateral Agent, the Custodial Agent or
        the
        Securities Intermediary or any of their respective affiliates.

       

      Section
        9.08  Compensation
        and Indemnity. The Company agrees to:

       

      (a)  pay
        the
        Collateral Agent, the Custodial Agent and the Securities Intermediary from
        time
        to time such compensation as shall be agreed in writing between the Company
        and
        the Collateral Agent, the Custodial Agent or the Securities Intermediary,
        as the
        case may be, for all services rendered by them hereunder;

       

      (b)  indemnify
        and hold harmless the Collateral Agent, the Custodial Agent, the Securities
        Intermediary and each of their respective directors, officers, agents and
        employees (collectively, the “Indemnitees”),
        from
        and against any and all claims, liabilities, losses, damages, fines, penalties
        and expenses (including reasonable fees and expenses of counsel) and taxes
        (other than those based upon, determined by or measured by the income of
        the
        Collateral Agent, the Custodial Agent and Securities Intermediary)
        (collectively, “Losses”
        and
        individually, a “Loss”)
        that
        may be imposed on, incurred by, or asserted against, the Indemnitees or any
        of
        them for following any instructions or other directions upon which either
        the
        Collateral Agent, the Custodial Agent or the Securities Intermediary is entitled
        to rely pursuant to the terms of this Agreement, provided
        that the
        Collateral Agent, the Custodial Agent or the Securities Intermediary has
        not
        acted with gross negligence or engaged in willful misconduct or bad faith
        with
        respect to the specific Loss against which indemnification is sought;
        and

       

      (c)  in
        addition to and not in limitation of paragraph (b) immediately above, indemnify
        and hold the Indemnitees and each of them harmless from and against any and
        all
        Losses that may be imposed on, incurred by or asserted against, the Indemnitees
        or any of them in connection with or arising out of the Collateral Agent’s, the
        Custodial Agent’s or the 

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

      Securities
        Intermediary’s acceptance or performance of its powers and duties under this
        Agreement, provided
        that the
        Collateral Agent, the Custodial Agent or the Securities Intermediary has
        not
        acted with gross negligence or engaged in willful misconduct or bad faith
        with
        respect to the specific Loss against which indemnification is
        sought.

       

      The
        provisions of this Section
        9.08
        and
Section
        11.07
        shall
        survive the resignation or removal of the Collateral Agent, Custodial Agent
        or
        Securities Intermediary and the termination of this Agreement.

       

      Section
        9.09  Failure
        to Act.
        In the
        event of any ambiguity in the provisions of this Agreement or any dispute
        between or conflicting claims by or among the parties hereto or any other
        Person
        with respect to any funds or property deposited hereunder, then at its sole
        option, each of the Collateral Agent, the Custodial Agent and the Securities
        Intermediary shall be entitled, after prompt notice to the Company and the
        Purchase Contract Agent, to refuse to comply with any and all claims, demands
        or
        instructions with respect to such property or funds so long as such dispute
        or
        conflict shall continue, and the Collateral Agent, the Custodial Agent and
        the
        Securities Intermediary shall not be or become liable in any way to any of
        the
        parties hereto for its failure or refusal to comply with such conflicting
        claims, demands or instructions. The Collateral Agent, the Custodial Agent
        and
        the Securities Intermediary shall be entitled to refuse to act until
        either:

       

      (a)  such
        conflicting or adverse claims or demands shall have been finally determined
        by a
        court of competent jurisdiction or settled by agreement between the conflicting
        parties as evidenced in a writing satisfactory to the Collateral Agent, the
        Custodial Agent or the Securities Intermediary; or

       

      (b)  the
        Collateral Agent, the Custodial Agent or the Securities Intermediary shall
        have
        received security or an indemnity satisfactory to it sufficient to save it
        harmless from and against any and all loss, liability or reasonable
        out-of-pocket expense which it may incur by reason of its acting.

       

      The
        Collateral Agent, the Custodial Agent and the Securities Intermediary may
        in
        addition elect to commence an interpleader action or seek other judicial
        relief
        or orders as the Collateral Agent, the Custodial Agent or the Securities
        Intermediary may deem necessary. Notwithstanding anything contained herein
        to
        the contrary, none of the Collateral Agent, the Custodial Agent or the
        Securities Intermediary shall be required to take any action that is in its
        opinion contrary to law or to the terms of this Agreement, or which would
        in its
        opinion subject it or any of its officers, employees or directors to
        liability.

       

      Section
        9.10  Resignation
        of Collateral Agent, the Custodial Agent and Securities
        Intermediary.
        

       

      (a)  Subject
        to the appointment and acceptance of a successor Collateral Agent, Custodial
        Agent or Securities Intermediary as provided below:

       

      (i)  the
        Collateral Agent, the Custodial Agent and the Securities Intermediary may
        resign
        at any time by giving notice thereof to the Company and the Purchase Contract
        Agent as attorney-in-fact for the Holders of Units;

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

      (ii)  the
        Collateral Agent, the Custodial Agent and the Securities Intermediary may
        be
        removed at any time by the Company; and

       

      (iii)  if
        the
        Collateral Agent, the Custodial Agent or the Securities Intermediary fails
        to
        perform any of its material obligations hereunder in any material respect
        for a
        period of not less than 20 days after receiving written notice of such failure
        by the Purchase Contract Agent and such failure shall be continuing, the
        Collateral Agent, the Custodial Agent and the Securities Intermediary may
        be
        removed by the Purchase Contract Agent, acting at the direction of the Holders
        of Units.

       

      The
        Purchase Contract Agent shall promptly notify the Company of any removal
        of the
        Collateral Agent, the Custodial Agent or the Securities Intermediary pursuant
        to
        clause (iii) of this Section
        9.10.
        Upon
        any such resignation or removal, the Company shall have the right to appoint
        a
        successor Collateral Agent, Custodial Agent or Securities Intermediary, as
        the
        case may be, which shall not be an Affiliate of the Purchase Contract Agent.
        If
        no successor Collateral Agent, Custodial Agent or Securities Intermediary
        shall
        have been so appointed and shall have accepted such appointment within 30
        days
        after the retiring Collateral Agent’s, Custodial Agent’s or Securities
        Intermediary’s giving of notice of resignation or the Company’s or the Purchase
        Contract Agent’s giving notice of such removal, then the retiring or removed
        Collateral Agent, Custodial Agent or Securities Intermediary may petition
        any
        court of competent jurisdiction, at the expense of the Company, for the
        appointment of a successor Collateral Agent, Custodial Agent or Securities
        Intermediary. The Collateral Agent, the Custodial Agent and the Securities
        Intermediary shall each be a bank or a national banking association which
        has an
        office (or an agency office) in New York City with a combined capital and
        surplus of at least $50,000,000. Upon the acceptance of any appointment as
        Collateral Agent, Custodial Agent or Securities Intermediary hereunder by
        a
        successor Collateral Agent, Custodial Agent or Securities Intermediary, as
        the
        case may be, such successor Collateral Agent, Custodial Agent or Securities
        Intermediary, as the case may be, shall thereupon succeed to and become vested
        with all the rights, powers, privileges and duties of the retiring Collateral
        Agent, Custodial Agent or Securities Intermediary, as the case may be, and
        the
        retiring Collateral Agent, Custodial Agent or Securities Intermediary, as
        the
        case may be, shall take all appropriate action, subject to payment of any
        amounts then due and payable to it hereunder, to transfer any money and property
        held by it hereunder (including the Collateral) to such successor. The retiring
        Collateral Agent, Custodial Agent or Securities Intermediary shall, upon
        such
        succession, be discharged from its duties and obligations as Collateral Agent,
        Custodial Agent or Securities Intermediary hereunder. After any retiring
        Collateral Agent’s, Custodial Agent’s or Securities Intermediary’s resignation
        hereunder as Collateral Agent, Custodial Agent or Securities Intermediary,
        the
        provisions of this Article
        9
        shall
        continue in effect for its benefit in respect of any actions taken or omitted
        to
        be taken by it while it was acting as the Collateral Agent, Custodial Agent
        or
        Securities Intermediary. Any resignation or removal of the Collateral Agent,
        Custodial Agent or Securities Intermediary hereunder, at a time when such
        Person
        is acting as the Collateral Agent, Custodial Agent or Securities Intermediary,
        shall be deemed for all purposes of this Agreement as the simultaneous
        resignation or removal of the Collateral Agent, Securities Intermediary or
        Custodial Agent, as the case may be.

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

      (b)  Because
        U.S. Bank National Association is serving as the Collateral Agent hereunder
        and
        the Purchase Contract Agent under the Purchase Contract Agreement, if an
        event
        of default (other than an event of default occurring as a result of a Failed
        Final Remarketing) occurs hereunder or under the Purchase Contract Agreement,
        U.S. Bank National Association will resign as the Collateral Agent, but continue
        to act as the Purchase Contract Agent. A successor Collateral Agent will
        be
        appointed in accordance with the terms hereof. If any such event of default
        is
        cured or waived prior to the appointment of a successor Collateral Agent,
        the
        duty of U.S. Bank National Association to resign in respect of such event
        of
        default shall cease.

       

      Section
        9.11  Right
        to Appoint Agent or Advisor.
        The
        Collateral Agent shall have the right to appoint agents or advisors in
        connection with any of its duties hereunder, and the Collateral Agent shall
        not
        be liable for any action taken or omitted by, or in reliance upon the advice
        of,
        such agents or advisors selected in good faith. The appointment of agents
        pursuant to this Section
        9.11
        shall be
        subject to prior written consent of the Company, which consent shall not
        be
        unreasonably withheld.

       

      Section
        9.12  Survival.
        The provisions of this Article
        9
        shall
        survive termination of this Agreement and the resignation or removal of the
        Collateral Agent, the Custodial Agent or the Securities
        Intermediary.

       

      Section
        9.13  Exculpation.
        Anything contained in this Agreement to the contrary notwithstanding, in
        no
        event shall the Collateral Agent, the Custodial Agent or the Securities
        Intermediary or their officers, directors, employees or agents be liable
        under
        this Agreement to any third party for indirect, special, punitive, or
        consequential loss or damage of any kind whatsoever, including, but not limited
        to, lost profits, whether or not the likelihood of such loss or damage was
        known
        to the Collateral Agent, the Custodial Agent or the Securities Intermediary,
        or
        any of them and regardless of the form of action.

       

      ARTICLE
        10

       

      AMENDMENT

       

      Section
        10.01  Amendment
        Without Consent of Holders.
        Without
        the consent of any Holders, the Company, when duly authorized, the Collateral
        Agent, the Custodial Agent, the Securities Intermediary and the Purchase
        Contract Agent, at any time and from time to time, may amend this Agreement,
        in
        form satisfactory to the Company, the Collateral Agent, the Custodial Agent,
        the
        Securities Intermediary and the Purchase Contract Agent, to:

       

      (a)  evidence
        the succession of another Person to the Company and the assumption by any
        such
        successor of the covenants of the Company;

       

      (b)  evidence
        and provide for the acceptance of appointment hereunder by a successor
        Collateral Agent, Custodial Agent, Securities Intermediary or Purchase Contract
        Agent;

       

      (c)  add
        to
        the covenants of the Company for the benefit of the Holders, or surrender
        any
        right or power herein conferred upon the Company, provided
        that
        such covenants or such surrender do not adversely affect the validity,
        perfection or priority of the Pledge created hereunder;

       

      
        
          
          

        

        
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      (d)  cure
        any
        ambiguity (or formal defect), correct or supplement any provisions herein
        which
        may be inconsistent with any other such provisions herein; or

       

      (e)  make
        any
        other provisions with respect to such matters or questions arising under
        this
        Agreement, provided
        that
        such action shall not adversely affect the interests of the Holders in any
        material respect.

       

      Section
        10.02  Amendment
        with Consent of Holders.
        With
        the consent of the Holders of not less than a majority of the Purchase Contracts
        at the time outstanding, including without limitation the consent of the
        Holders
        obtained in connection with a tender or an exchange offer, by Act of such
        Holders delivered to the Company, the Purchase Contract Agent, the Custodial
        Agent, the Securities Intermediary and the Collateral Agent, as the case
        may be,
        the Company, when duly authorized by a Board Resolution, the Purchase Contract
        Agent, the Collateral Agent, the Securities Intermediary and the Collateral
        Agent may amend this Agreement for the purpose of modifying in any manner
        the
        provisions of this Agreement or the rights of the Holders in respect of the
        Units; provided,
        however,
        that no
        such supplemental agreement shall, without the unanimous consent of the Holders
        of each Outstanding Unit adversely affected thereby in any material
        respect:

       

      (a)  change
        the amount or type of Collateral underlying a Unit (except for the rights
        of
        holders of Corporate Units to substitute the Treasury Securities for the
        Pledged
        Senior Notes or the Pledged Applicable Ownership Interests, as the case may
        be,
        or the rights of Holders of Treasury Units to substitute Senior Notes or
        the
        Applicable Ownership Interests (as specified in clause (i) of the definition
        of
        such term) in the Treasury Portfolio, as applicable, for the Pledged Treasury
        Securities), unless such change is not adverse to the Holders, impair the
        right
        of the Holder of any Unit to receive distributions on the underlying Collateral
        or otherwise adversely affect the Holder’s rights in or to such Collateral;
        or

       

      (b)  otherwise
        effect any action that would require the consent of the Holder of each
        Outstanding Unit affected thereby pursuant to the Purchase Contract Agreement
        if
        such action were effected by a modification or amendment of the provisions
        of
        the Purchase Contract Agreement; or

       

      (c)  reduce
        the percentage of Purchase Contracts the consent of whose Holders is required
        for the modification or amendment of the provisions of this
        Agreement;

       

      provided
        that if
        any amendment or proposal referred to above would adversely affect only the
        Corporate Units or only the Treasury Units, then only the affected class
        of
        Holders as of the record date for the Holders entitled to vote thereon will
        be
        entitled to vote on such amendment or proposal, and such amendment or proposal
        shall not be effective except with the consent of Holders of not less than
        a
        majority of such class; provided,
        further,
        that
        the unanimous consent of the Holders of each outstanding Purchase Contract
        of
        such class affected thereby shall be required to approve any amendment or
        proposal specified in clauses (a) through (c) above.

       

      It
        shall
        not be necessary for any Act of Holders under this Section to approve the
        particular form of any proposed amendment, but it shall be sufficient if
        such
        Act shall approve the substance thereof.

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

      Section
        10.03  Execution
        of Amendments.
        In
        executing any amendment permitted by this Article, the Collateral Agent,
        the
        Custodial Agent, the Securities Intermediary and the Purchase Contract Agent
        shall be entitled to receive and (subject to Section
        7.01
        of the
        Purchase Contract Agreement with respect to the Purchase Contract Agent)
        shall
        be fully authorized and protected in relying upon, an Opinion of Counsel
        and an
        officers’ certificate stating that the execution of such amendment is authorized
        or permitted by this Agreement and that all conditions precedent, if any,
        to the
        execution and delivery of such amendment have been satisfied. The Collateral
        Agent, Custodial Agent, Securities Intermediary and Purchase Contract Agent
        may,
        but shall not be obligated to, enter into any such amendment which affects
        their
        own respective rights, duties or immunities under this Agreement or
        otherwise.

       

      Section
        10.04  Effect
        of Amendments. Upon the execution of any amendment under this Article, this
        Agreement shall be modified in accordance therewith, and such amendment shall
        form a part of this Agreement for all purposes; and every Holder of Certificates
        theretofore or thereafter authenticated, executed on behalf of the Holders
        and
        delivered under the Purchase Contract Agreement shall be bound
        thereby.

       

      Section
        10.05  Reference
        of Amendments. Certificates authenticated, executed on behalf of the Holders
        and delivered after the execution of any amendment pursuant to this Section
        may,
        and shall if required by the Collateral Agent or the Purchase Contract Agent,
        bear a notation in form approved by the Purchase Contract Agent and the
        Collateral Agent as to any matter provided for in such amendment. If the
        Company
        shall so determine, new Certificates so modified as to conform, in the opinion
        of the Collateral Agent, the Purchase Contract Agent and the Company, to
        any
        such amendment may be prepared and executed by the Company and authenticated,
        executed on behalf of the Holders and delivered by the Purchase Contract
        Agent
        in accordance with the Purchase Contract Agreement in exchange for Certificates
        representing Outstanding Units.

       

      ARTICLE
        11

       

      MISCELLANEOUS

       

      Section
        11.01  No
        Waiver.
        No
        failure on the part of the Company, the Collateral Agent, the Custodial Agent,
        the Securities Intermediary or any of their respective agents to exercise,
        and
        no course of dealing with respect to, and no delay in exercising, any right,
        power or remedy hereunder shall operate as a waiver thereof; nor shall any
        single or partial exercise by the Company, the Collateral Agent, the Custodial
        Agent, the Securities Intermediary or any of their respective agents of any
        right, power or remedy hereunder preclude any other or further exercise thereof
        or the exercise of any other right, power or remedy. The remedies herein
        are
        cumulative and are not exclusive of any remedies provided by law.

       

      Section
        11.02  Governing
        Law; Submission to Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY, AND
        CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The Company,
        the Collateral Agent, the Custodial Agent, the Securities Intermediary and
        the
        Holders from time to time of the Units, acting through the Purchase Contract
        Agent as their attorney-in-fact, hereby submit to the nonexclusive jurisdiction
        of the United States District Court for the Southern District of New York
        and of
        any New York 

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

      state
        court sitting in New York City for the purposes of all legal proceedings
        arising
        out of or relating to this Agreement or the transactions contemplated hereby.
        The Company, the Collateral Agent, the Custodial Agent, the Securities
        Intermediary and the Holders from time to time of the Units, acting through
        the
        Purchase Contract Agent as their attorney-in-fact, irrevocably waive, to
        the
        fullest extent permitted by applicable law, any objection that they may now
        or
        hereafter have to the laying of the venue of any such proceeding brought
        in such
        a court and any claim that any such proceeding brought in such a court has
        been
        brought in an inconvenient forum.

       

      Section
        11.03  Notices.
        All notices, requests, consents and other communications provided for herein
        (including, without limitation, any modifications of, or waivers or consents
        under, this Agreement) shall be given or made in writing (including, without
        limitation, by telecopy) delivered to the intended recipient at the “Address
        for Notices”
        specified below its name on the signature pages hereof or, as to any party,
        at
        such other address as shall be designated by such party in a notice to the
        other
        parties. Except as otherwise provided in this Agreement, all such communications
        shall be deemed to have been duly given when transmitted by telecopier or
        personally delivered or, in the case of a mailed notice, upon receipt, in
        each
        case given or addressed as aforesaid.

       

      Section
        11.04  Successors
        and Assigns. This Agreement shall be binding upon and inure to the benefit
        of the respective successors and assigns of the Company, the Collateral Agent,
        the Custodial Agent, the Securities Intermediary and the Purchase Contract
        Agent, and the Holders from time to time of the Units, by their acceptance
        of
        the same, shall be deemed to have agreed to be bound by the provisions hereof
        and to have ratified the agreements of, and the grant of the Pledge hereunder
        by, the Purchase Contract Agent.

       

      Section
        11.05  Counterparts.
        This Agreement may be executed in any number of counterparts, all of which
        taken
        together shall constitute one and the same instrument, and any of the parties
        hereto may execute this Agreement by signing any such counterpart.

       

      Section
        11.06  Severability.
        If any provision hereof is invalid and unenforceable in any jurisdiction,
        then,
        to the fullest extent permitted by law, (i) the other provisions hereof shall
        remain in full force and effect in such jurisdiction and shall be liberally
        construed in order to carry out the intentions of the parties hereto as nearly
        as may be possible and (ii) the invalidity or unenforceability of any provision
        hereof in any jurisdiction shall not affect the validity or enforceability
        of
        such provision in any other jurisdiction.

       

      Section
        11.07  Expenses,
        Etc. The Company agrees to reimburse the Collateral Agent, the Custodial
        Agent and the Securities Intermediary for:

       

      (a)  all
        reasonable costs and expenses of the Collateral Agent, the Custodial Agent
        and
        the Securities Intermediary (including, without limitation, the reasonable
        fees
        and expenses of counsel to the Collateral Agent, the Custodial Agent and
        the
        Securities Intermediary), in connection with (i) the negotiation, preparation,
        execution and delivery or performance of this Agreement and (ii) any
        modification, supplement or waiver of any of the terms of this
        Agreement;

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

      (b)  all
        reasonable costs and expenses of the Collateral Agent, the Custodial Agent
        and
        the Securities Intermediary (including, without limitation, reasonable fees
        and
        expenses of counsel) in connection with (i) any enforcement or proceedings
        resulting or incurred in connection with causing any Holder of Units to satisfy
        its obligations under the Purchase Contracts forming a part of the Units
        and
        (ii) the enforcement of this Section
        11.07;

       

      (c)  all
        transfer, stamp, documentary or other similar taxes, assessments or charges
        levied by any governmental or revenue authority in respect of this Agreement
        or
        any other document referred to herein and all costs, expenses, taxes,
        assessments and other charges incurred in connection with any filing,
        registration, recording or perfection of any security interest contemplated
        hereby;

       

      (d)  all
        reasonable fees and expenses of any agent or advisor appointed by the Collateral
        Agent and consented to by the Company under Section
        9.11
        of this
        Agreement; and

       

      (e)  any
        other
        out-of-pocket costs and expenses reasonably incurred by the Collateral Agent,
        the Custodial Agent and the Securities Intermediary in connection with the
        performance of their duties hereunder.

       

      Section
        11.08  Security
        Interest Absolute.
        All
        rights of the Collateral Agent and security interests hereunder, and all
        obligations of the Holders from time to time hereunder, shall be absolute
        and
        unconditional irrespective of:

       

      (a)  any
        lack
        of validity or enforceability of any provision of the Purchase Contracts
        or the
        Units or any other agreement or instrument relating thereto;

       

      (b)  any
        change in the time, manner or place of payment of, or any other term of,
        or any
        increase in the amount of, all or any of the obligations of Holders of the
        Units
        under the related Purchase Contracts, or any other amendment or waiver of
        any
        term of, or any consent to any departure from any requirement of, the Purchase
        Contract Agreement or any Purchase Contract or any other agreement or instrument
        relating thereto; or

       

      (c)  any
        other
        circumstance which might otherwise constitute a defense available to, or
        discharge of, a borrower, a guarantor or a pledgor.

       

      Section
        11.09  Notice
        of Special Event, Special Event Redemption and Termination Event.
        Upon
        the occurrence of a Special Event, a Special Event Redemption or a Termination
        Event, the Company shall deliver written notice to the Purchase Contract
        Agent,
        the Collateral Agent and the Securities Intermediary. Upon the written request
        of the Collateral Agent or the Securities Intermediary, the Company shall
        inform
        such party whether or not a Special Event, a Special Event Redemption or
        a
        Termination Event has occurred.

       

      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

       

      [SIGNATURE
        PAGE TO PLEDGE AGREEMENT]

       

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

       

      
        	
                PNM
                  RESOURCES, INC.

                 

              	
                U.S.
                  BANK NATIONAL ASSOCIATION

                as
                  Purchase Contract Agent and as attorney-in-fact of the Holders
                  from time
                  to time of the Units

                 

              
	
                By: /s/
                  Terry R. Horn

                Terry
                  R. Horn

                Vice
                  President, Corporate Secretary, and Acting Chief Financial
                  Officer

                 

              	
                By:/s/
                  Marlene J. Fahey

                Name:
                  Marlene J. Fahey

                Title:
                  Vice President

                 

              
	
                Address
                  for Notices:

                 

              	
                Address
                  for Notices:

                 

              
	
                PNM
                  Resources, Inc.

                Alvarado
                  Square MS-2704

                Albuquerque,
                  New Mexico 87158

                Telephone
                  No.: (505) 241-2700 

                Telecopier
                  No.: (505) 241-2369

                Attention:
                  Treasurer

                 

              	
                U.S.
                  Bank National Association

                100
                  Wall Street, Suite 1600

                New
                  York, New York 10005

                Telephone
                  No.: (212) 361-2505 

                Telecopier
                  No.: (212) 509-3384

                Attention:
                  Corporate Trust Administration

                 

              
	
                U.S.
                  Bank National Association,

                as
                  Collateral Agent, Custodial Agent and Securities Intermediary

                 

              	 
	 	 
	
                By:  
                  /s/ Marlene J. Fahey

                Name:
                  Marlene J. Fahey

                Title:
                  Vice President

                 

              	 
	
                Address
                  for Notices:

                 

              	 
	
                U.S.
                  Bank National Association

                100
                  Wall Street, Suite 1600

                New
                  York, New York 10005

                Telephone
                  No.: (212) 361-2505

                Telecopier
                  No.: (212) 509-3384

                Attention:
                  Corporate Trust Administration

              	 

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      EXHIBIT
        A

       

      INSTRUCTION
        

      FROM
        PURCHASE CONTRACT AGENT

      TO
        COLLATERAL AGENT

      (Creation
        of Treasury Units)

       

      U.S.
        Bank
        National Association

      as
        Purchase Contract Agent

      100
        Wall
        Street, Suite 1600

      New
        York,
        New York 10005

      Telephone
        No.: (212) 361-2505

      Telecopier
        No.: (212) 509-3384

      Attention:
        Corporate Trust Administration

       

      Re:
        ___________ Corporate Units of PNM Resources, Inc. (the “Company”)

       

      The
        securities account of U.S. Bank National Association, as Collateral Agent,
        maintained by the Securities Intermediary and designated “U.S. Bank National
        Association, as Collateral Agent of PNM Resources, Inc., as pledgee of U.S.
        Bank
        National Association, as the Purchase Contract Agent on behalf of and as
        attorney-in-fact for the Holders” (the “Collateral
        Account”)

       

      Please
        refer to the Pledge Agreement, dated as of October 7, 2005 (the “Pledge
        Agreement”),
        among
        the Company, you, as Collateral Agent, as Securities Intermediary and as
        Custodial Agent and the undersigned, as Purchase Contract Agent and as
        attorney-in-fact for the holders of Corporate Units from time to time.
        Capitalized terms used herein but not defined shall have the meaning set
        forth
        in the Pledge Agreement.

       

      We
        hereby
        notify you in accordance with Section 5.02 of the Pledge Agreement that the
        holder of securities named below (the “Holder”)
        has
        elected to substitute $___ Value of Treasury Securities or security entitlements
        with respect thereto in exchange for an equal Value of Pledged Senior Notes
        relating to _____ Corporate Units and has delivered to the undersigned a
        notice
        stating that the Holder has Transferred such Treasury Securities or security
        entitlements with respect thereto to the Securities Intermediary, for credit
        to
        the Collateral Account.

       

      
        
          A-1

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      We
        hereby
        request that you instruct the Securities Intermediary, upon confirmation
        that
        such Treasury Securities or security entitlements thereto have been credited
        to
        the Collateral Account, to release to the undersigned an equal Value of Pledged
        Senior Notes in accordance with Section 5.02 of the Pledge
        Agreement.

       

      Date:
        ____________________

      U.S.
        Bank
        National Association, as Purchase Contract Agent and as attorney-in-fact
        of the
        Holders from time to time of the Units

       

      By:
        _____________________

           
Name:

      Title:

       

      

       

      Please
        print name and address of Holder electing to substitute Treasury Securities
        or
        security entitlements with respect thereto for the Pledged Senior
        Notes:

      
        

        
          	 	 	 
	 	 	 
	
                  Name

                	 	
                  Social
                    Security or other Taxpayer

                
	 	 	
                  Identification
                    Number, if any

                
	 	 	 
	 	 	 
	
                  Address

                	 	 
	 	 	 
	 	 	 
	 	 	 

        

        

          
            
              
                A-2

              

              
              

            

            
              
              

              
                

              

            

            
              
              

              
                

              

            

          

        

      

      EXHIBIT
        B

       

      INSTRUCTION
        

      FROM
        COLLATERAL AGENT 

      TO
        SECURITIES INTERMEDIARY 

      (Creation
        of Treasury Units)

       

      U.S.
        Bank
        National Association

      as
        Securities Intermediary

      100
        Wall
        Street, Suite 1600

      New
        York,
        New York 10005

      Telephone
        No.: (212) 361-2505

      Telecopier
        No.: (212) 509-3384

      Attention:
        Corporate Trust Administration

       

      Re:
        __________ Corporate Units of PNM Resources, Inc. (the “Company”)

       

      The
        securities account of U.S. Bank National Association, as Collateral Agent,
        maintained by the Securities Intermediary and designated “U.S. Bank National
        Association, as Collateral Agent of PNM Resources, Inc. as pledgee of U.S.
        Bank
        National Association, as the Purchase Contract Agent on behalf of and as
        attorney-in-fact for the Holders” (the “Collateral
        Account”)

       

      Please
        refer to the Pledge Agreement, dated as of October 7, 2005 (the “Pledge
        Agreement”),
        among
        the Company, you, as Collateral Agent, as Securities Intermediary and as
        Custodial Agent and the undersigned, as Purchase Contract Agent and as
        attorney-in-fact for the holders of Corporate Units from time to time.
        Capitalized terms used herein but not defined shall have the meanings set
        forth
        in the Pledge Agreement.

       

      
        
          B-1

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      When
        you
        have confirmed that $                   
        Value of
        Treasury Securities or security entitlements thereto has been credited to
        the
        Collateral Account by or for the benefit of _________, as Holder of Corporate
        Units (the “Holder”),
        you
        are hereby instructed to release from the Collateral Account an equal Value
        of
        Pledged Senior Notes or security entitlements with respect thereto relating
        to
        Corporate Units of the Holder by Transfer to the Purchase Contract
        Agent.

       

      Dated:______________________

       

      U.S.
        Bank
        National Association,

      as
        Collateral Agent

       

      By:
        ______________________

      Name:

      Title:

       

      Please
        print name and address of Holder:

      
         

        
          	 	 	 
	
                  Name

                	 	
                  Social
                    Security or other Taxpayer

                
	 	 	
                  Identification
                    Number, if any

                
	 	 	 
	 	 	 
	
                  Address

                	 	 
	 	 	 
	 	 	 
	 	 	 

        

         

        
 

        
          
            
              
                B-2

              

              
              

            

            
              
              

              
                

              

            

            
              
              

              
                

              

            

          

        

      

      EXHIBIT
        C

       

      INSTRUCTION
        

      FROM
        PURCHASE CONTRACT AGENT 

      TO
        COLLATERAL AGENT 

      (Recreation
        of Corporate Units)

       

      U.S.
        Bank
        National Association

      as
        Purchase Contract Agent

      100
        Wall
        Street, Suite 1600

      New
        York,
        New York 10005

      Telephone
        No.: (212) 361-2505

      Telecopier
        No.: (212) 509-3384

      Attention:
        Corporate Trust Administration

       

      Re:
        __________ Treasury Units of PNM Resources, Inc. (the “Company”)

       

      Please
        refer to the Pledge Agreement dated as of October 7, 2005 (the “Pledge
        Agreement”),
        among
        the Company, you, as Collateral Agent, as Securities Intermediary, as Custodial
        Agent and the undersigned, as Purchase Contract Agent and as attorney-in-fact
        for the holders of Treasury Units from time to time. Capitalized terms used
        herein but not defined shall have the meaning set forth in the Pledge
        Agreement.

       

      We
        hereby
        notify you in accordance with Section 5.03 of the Pledge Agreement that the
        holder of securities named below (the “Holder”)
        has
        elected to substitute $__________ Value of Senior Notes or security entitlements
        with respect thereto in exchange for $__________ an equal Value of Pledged
        Treasury Securities with respect to _______ Treasury Units and has delivered
        to
        the undersigned a notice stating that the holder has Transferred such Senior
        Notes or security entitlements with respect thereto to the Securities
        Intermediary, for credit to the Collateral Account.

       

      
        
          C-1

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      We
        hereby
        request that you instruct the Securities Intermediary, upon confirmation
        that
        such Senior Notes or security entitlements with respect thereto have been
        credited to the Collateral Account, to release to the undersigned $__________
        an
        equal Value of Treasury Securities in accordance with Section 5.03 of the
        Pledge
        Agreement.

      
         

        Dated:______________________

         

        U.S.
          Bank
          National Association,

        as
          Collateral Agent

         

        By:
          ______________________

        Name:

        Title:

         

      

      Please
        print name and address of Holder electing to substitute Senior Notes or security
        entitlements with respect thereto for Pledged Treasury Securities:

      
         

        
          	 	 	 
	
                  Name

                	 	
                  Social
                    Security or other Taxpayer

                
	 	 	
                  Identification
                    Number, if any

                
	 	 	 
	 	 	 
	
                  Address

                	 	 
	 	 	 
	 	 	 
	 	 	 

        

         

      

      
        
          
            C-2

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
            

          

        

      

      EXHIBIT
        D

       

      INSTRUCTION
        

      FROM
        COLLATERAL AGENT 

      TO
        SECURITIES INTERMEDIARY 

      (Recreation
        of Corporate Units)

       

      U.S.
        Bank
        National Association

      as
        Securities Intermediary

      100
        Wall
        Street, Suite 1600

      New
        York,
        New York 10005

      Telephone
        No.: (212) 361-2505

      Telecopier
        No.: (212) 509-3384

      Attention:
        Corporate Trust Administration

       

      Re:
        ____
        Treasury Units of PNM Resources, Inc. (the “Company”)

       

      The
        securities account of U.S. Bank National Association, as Collateral Agent,
        maintained by the Securities Intermediary and designated “U.S. Bank National
        Association, as Collateral Agent of PNM Resources, Inc., as pledgee of U.S.
        Bank
        National Association, as the Purchase Contract Agent on behalf of and as
        attorney-in-fact for the Holders” (the “Collateral
        Account”)

       

      Please
        refer to the Pledge Agreement dated as of October 7, 2005 (the “Pledge
        Agreement”),
        among
        the Company, you, as Securities Intermediary, Custodial Agent and Collateral
        Agent and U.S. Bank National Association, as Purchase Contract Agent and
        as
        attorney-in-fact for the holders of Corporate Units from time to time.
        Capitalized terms used herein but not defined shall have the meanings set
        forth
        in the Pledge Agreement.

       

      
        
          D-1

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      When
        you
        have confirmed that $___________ Value of Senior Notes or security entitlements
        with respect thereto has been credited to the Collateral Account by or for
        the
        benefit of _______________, as Holder of Treasury Units (the “Holder”),
        you
        are hereby instructed to release from the Collateral Account an equal Value
        of
        Treasury Securities or security entitlements with respect thereto relating
        to
        ____ treasury Units of the Holder by Transfer to the Purchase Contract
        Agent.

      
        
           

          Dated:______________________

           

          U.S.
            Bank
            National Association,

          as
            Collateral Agent

           

          By:
            ______________________

          Name:

          Title:

        

      

      

      
         

        Please
          print name and address of Holder:

        
           

          
            	 	 	 
	
                    Name

                  	 	
                    Social
                      Security or other Taxpayer

                  
	 	 	
                    Identification
                      Number, if any

                  
	 	 	 
	 	 	 
	
                    Address

                  	 	 
	 	 	 
	 	 	 
	 	 	 

          

           

          

            
              
                
                  D-2

                

                
                

              

              
                
                

                
                  

                

              

              
                
                

                
                  

                

              

            

          

        

      

      EXHIBIT
        E

       

      NOTICE
        OF CASH SETTLEMENT 

      FROM
        COLLATERAL AGENT 

      TO
        PURCHASE CONTRACT AGENT

      (Cash
        Settlement Amounts)

       

      U.S.
        Bank
        National Association

      as
        Purchase Contract Agent

      100
        Wall
        Street, Suite 1600

      New
        York,
        New York 10005

      Telephone
        No.: (212) 361-2505

      Telecopier
        No.: (212) 509-3384

      Attention:
        Corporate Trust Administration

       

      Re: __________
        Corporate Units of PNM Resources, Inc. (the “Company”)

            
        __________ Treasury Units of the Company

       

      Please
        refer to the Pledge Agreement dated as of October 7, 2005 (the “Pledge
        Agreement”),
        by and
        among you, the Company, and U.S. Bank National Association, as Collateral
        Agent,
        Custodial Agent and Securities Intermediary. Unless otherwise defined herein,
        terms defined in the Pledge Agreement are used herein as defined
        therein.

       

      In
        accordance with Section 5.05(c) of the Pledge Agreement, we hereby notify
        you
        that as of 5:00 p.m. (New York City time) on the fourth Business Day immediately
        preceding __________ (the “Purchase
        Contract Settlement Date”),
        we
        have received (i) $___________ in immediately available funds paid in an
        aggregate amount equal to the Purchase Price due to the Company on the Purchase
        Contract Settlement Date with respect to ___________ Corporate Units, and
        (ii)
        based on the funds received set forth in clause (i) above, an aggregate
        principal amount of $___________ of Pledged Senior Notes are to be tendered
        for
        purchase in the Final Remarketing.

       

      
        
          
             

            Dated:______________________

             

            U.S.
              Bank
              National Association,

            as
              Collateral Agent

             

            By:
              ______________________

            Name:

            Title:

          

        

        

       

      
        
          
            E-1

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
            

          

        

      

      EXHIBIT
        F

       

      INSTRUCTION
        TO CUSTODIAL AGENT 

      REGARDING
        REMARKETING

       

      U.S.
        Bank
        National Association

      as
        Custodial Agent

      100
        Wall
        Street, Suite 1600

      New
        York,
        New York 10005

      Telephone
        No.: (212) 361-2505

      Telecopier
        No.: (212) 509-3384

      Attention:
        Corporate Trust Administration

       

      Re:
        Senior Notes Due 2010 of PNM Resources, Inc. (the “Company”)

       

      The
        undersigned hereby notifies you in accordance with Section 5.07(c) of the
        Pledge
        Agreement, dated as of October 7, 2005 (the “Pledge
        Agreement”),
        among
        the Company, you, as Collateral Agent, Custodial Agent and Securities
        Intermediary and U.S. Bank National Association, as the Purchase Contract
        Agent
        and as attorney-in-fact for the holders of Corporate Units from time to time,
        that the undersigned elects to deliver $__________ aggregate principal amount
        of
        Separate Senior Notes for delivery to the Remarketing Agent on or prior to
        5:00
        p.m. (New York City time) on the fifth Business Day immediately preceding
        the
        Initial Remarketing Date for remarketing pursuant to Section 5.07(c) of the
        Pledge Agreement. The undersigned will, upon request of the Remarketing Agent,
        execute and deliver any additional documents deemed by the Remarketing Agent
        or
        by the Company to be necessary or desirable to complete the sale, assignment
        and
        transfer of the Separate Senior Notes tendered hereby. Capitalized terms
        used
        herein but not defined shall have the meaning set forth in the Pledge
        Agreement.

       

      The
        undersigned hereby instructs you, upon receipt of the Proceeds of such
        remarketing from the Remarketing Agent, to deliver such Proceeds to the
        undersigned in accordance with the instructions indicated herein under “A.
        Payment Instructions.” The undersigned hereby instructs you, in the event of a
        Failed Final Remarketing, upon receipt of the Separate Senior Notes tendered
        herewith from the Remarketing Agent, to deliver such Separate Senior Notes
        to
        the person(s) and the address(es) indicated herein under “B. Delivery
        Instructions.”

       

      
        
          F-1

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      With
        this
        notice, the undersigned hereby (i) represents and warrants that the undersigned
        has full power and authority to tender, sell, assign and transfer the Separate
        Senior Notes tendered hereby and that the undersigned is the record owner
        of any
        Senior Notes tendered herewith in physical form, (ii) agrees to be bound
        by the
        terms and conditions of Section 5.07(c) of the Pledge Agreement and (iii)
        acknowledges and agrees that after 5:00 p.m. (New York City time) on the
        fifth
        Business Day immediately preceding the Remarketing Date, such election shall
        become an irrevocable election to have such Separate Senior Notes remarketed
        in
        the Remarketing. In the case of a Failed Remarketing, such Separate Senior
        Notes
        shall be returned to the undersigned.

       

      

        
          	
                  Dated:

                	 	
                  By:

                	 
	 	 	 	
                  Name:

                
	 	 	 	
                  Title:

                

        

        
 

        
          	 	 	
                  Signature
                    Guarantee:

                	 
	 	 	 
	 	 	 
	
                  Name

                	 	
                  Social
                    Security or other Taxpayer

                
	 	 	
                  Identification
                    Number, if any

                
	 	 	 
	 	 	 
	
                  Address

                	 	 
	 	 	 
	 	 	 
	 	 	 

        

        

      

      
        
          F-2

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      A.
        PAYMENT INSTRUCTIONS

       

      Proceeds
        of the remarketing should be paid by check in the name of the person(s) set
        forth below and mailed to the address set forth below.

       

      Name(s)

       

      (Please
        Print)

       

      Address

       

      (Please
        Print)

       

      (Zip
        Code)

       

      (Taxpayer
        Identification or Social Security Number)

       

      B.
        DELIVERY INSTRUCTIONS

       

      In
        the
        event of a Failed Final Remarketing, Senior Notes that are in physical form
        should be delivered to the person(s) set forth below and mailed to the address
        set forth below.

       

      Name(s)

       

      (Please
        Print)

       

      Address

       

      (Please
        Print)

       

      (Zip
        Code)

       

      (Tax
        Identification or Social Security Number)

       

      

       

      
        
          
            F-3

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
            

          

        

      

      EXHIBIT
        G

       

      INSTRUCTION
        TO CUSTODIAL AGENT

      REGARDING
        WITHDRAWAL FROM REMARKETING

       

      U.S.
        Bank
        National Association

      as
        Custodial Agent

      100
        Wall
        Street, Suite 1600

      New
        York,
        New York 10005

      Telephone
        No.: (212) 361-2505

      Telecopier
        No.: (212) 509-3384

      Attention:
        Corporate Trust Administration

       

      Re:
        Senior Notes due 2010 of PNM Resources, Inc. (the “Company”)

       

      The
        undersigned hereby notifies you in accordance with Section 5.07(c) of the
        Pledge
        Agreement, dated as of October 7, 2005 (the “Pledge
        Agreement”),
        among
        the Company and you, as Collateral Agent, Custodial Agent and Securities
        Intermediary, and U.S. Bank National Association, as Purchase Contract Agent
        and
        as attorney-in-fact for the holders of Corporate Units from time to time,
        that
        the undersigned elects to withdraw the $__________ aggregate principal amount
        of
        Separate Senior Notes delivered to the Collateral Agent on __________, 2010
        for
        remarketing pursuant to Section 5.07(c) of the Pledge Agreement. The undersigned
        hereby instructs you to return such Senior Notes to the undersigned in
        accordance with the undersigned’s instructions. With this notice, the
        undersigned hereby agrees to be bound by the terms and conditions of Section
        5.07(c) of the Pledge Agreement. Capitalized terms used herein but not defined
        shall have the meaning set forth in the Pledge Agreement.

       

      

        
          	
                  Dated:

                	 	
                  By:

                	 
	 	 	 	
                  Name:

                
	 	 	 	
                  Title:

                

        

         

        

        
          	 	 	
                  Signature
                    Guarantee:

                	 
	 	 	 
	 	 	 
	
                  Name

                	 	
                  Social
                    Security or other Taxpayer

                
	 	 	
                  Identification
                    Number, if any

                
	 	 	 
	 	 	 
	
                  Address

                	 	 
	 	 	 
	 	 	 
	 	 	 

        

        

        G-1

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