Exhibit 10.3

PNM RESOURCES, INC.
2010 OFFICER INCENTIVE PLAN

INTRODUCTION
 
PNM Resources, Inc. (the “Company”) has adopted the PNM Resources, Inc. Second
Amended and Restated Omnibus Performance Equity Plan (the “PEP”), which was
approved by the Company’s shareholders and became effective in May 2009. The
Company also has adopted this 2010 Officer Incentive Plan (the “Plan”) for the
purpose of providing annual cash-based incentive awards (each an “Award”) to
eligible Officers (as defined below).1  The Awards payable to Officers under the
Plan are intended to qualify as Performance Cash Awards granted pursuant to
Section 9.4 of the PEP.  In the case of Officers who are Covered Employees as
defined by the PEP, the portion of the Award that is based on Performance
Criteria specified in Section 2.1(dd) of the PEP shall be treated as a separate
grant that is intended to qualify as a Performance-Based Performance Cash Award
granted pursuant to Section 12 of the PEP.
 
Capitalized terms used in the Plan and not otherwise defined herein shall have
the meanings given to them under the terms of the PEP.
 
 ELIGIBILITY
 
All Officers of the Company and its Affiliates are eligible to participate in
the Plan with the exception of the First Choice Power, L.P. (“FCP”) or Optim
Energy, LLC (“Optim”) officers, who may be eligible to participate in other
incentive plans.  For purposes of the Plan, the term “Officer” means any
employee of the Company or any Affiliate (other than FCP or Optim) who has the
title of Chief Executive Officer, President, Executive Vice President, Senior
Vice President or Vice President and who is in salary grade H18 or higher.
 
PLAN OBJECTIVES
 
The Plan is designed to motivate and reward eligible Officers for benefiting the
Company’s shareholders by achieving and exceeding the Performance Goals (as
defined below) established for such Officers.
 
 PERFORMANCE PERIOD
 
The period over which the Officer’s performance will be measured for purposes of
determining whether Awards are payable under the Plan began on January 1, 2010
and ends on December 31, 2010 (the “Performance Period”).  The Board Governance
and Human Resources Committee (the “Committee”) of the Company’s Board of
Directors (the “Board”), in its sole discretion, reserves the right to adjust,
amend or suspend the Plan during the Performance Period.
 

 

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1 The Plan was originally signed by Alice Cobb, SVP and CAO on March 31,
2010.  This version of the Plan represents a conformed version of the Plan
document signed on March 31, 2010 which incorporate Ms. Cobb’s handwritten
amendments to the original Plan.

 
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AWARD DETERMINATION
 
Awards are based on the Earnings Per Share (“EPS”) levels set forth in Table 1
below, the weighting between Corporate and Business Area goals as described in
Table 2 and Award levels achieved as described in Table 3.
 
Earnings Per Share
 
First, for any Awards to be payable to eligible Officers, the Company must
achieve the Threshold EPS level set forth in Table 1 below.  If the Company does
not achieve the Threshold EPS level, no Awards are payable under the Plan to any
Officers.
 
For purposes of the Plan, the Company’s EPS will be the net earnings, excluding
non-recurring items that do not factor into ongoing earnings, divided by the
average number of common shares of PNM Resources, Inc, common stock used to
calculate diluted EPS as reported in the Company’s 10-K filed for 2010.  The
Committee’s determination of the EPS shall be binding and conclusive.
 
TABLE 1:
 

 
PNMR EPS
No Award
Less than $0.60
 
Threshold
Greater than or equal to $0.60 and less than $0.64
 
Target
Greater than or equal to $0.64 and less than $0.75
 
Maximum
Greater than or equal to $0.75
 

 
 
If the Threshold, Target or Maximum EPS level is achieved, the aggregate
potential Awards payable to the Officers at that level of performance (e.g., the
aggregate level of Awards payable at Threshold, Target or Maximum as shown in
Table 3 below) will make up the Potential Award Pool.  If the actual EPS exceeds
the minimum level for that performance level by at least $0.01, but is less than
the maximum level for that performance level (e.g., if the actual EPS exceeds
$0.60 but is less than $0.64) the Potential Award Pool will be increased by
using straight line interpolation between the size of the Potential Award Pool
based on the attained level (e.g., Threshold) and the size of the Potential
Award Pool at the next higher level (e.g., Target). The Potential Award Pool is
capped at the Maximum Award level. The Committee has the discretion to increase
the Potential Award Pool by an amount less than amount determined by using
straight-line interpolation.
 
Corporate and Business Area Scorecards

The Corporate Goals Scorecard and Business Area Scorecards with each Performance
Measure are defined and maintained by the PNM Resources, Inc. Management Systems
Group.  The performance of the Chief Executive Officer (“CEO”), Senior Officers
(Executive
 
 
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Vice Presidents and Senior Vice Presidents), and Vice Presidents will be
measured against their respective Scorecards based on the weightings set forth
in Table 2.

TABLE 2:

Scorecard Results
Scorecard Level
Corporate Weighting
Business Area Weighting
CEO & Senior Officers
100%
0%
Vice Presidents
50%
50%

Performance Award Pools

The Performance Award Pool for each Business Area is the amount that could be
paid in the aggregate to the Officers included in that Business Area based on
performance alone (i.e. determined without regard to any limitations based on
EPS levels set forth in Table 3).  The Performance Award Pool for a Business
Area will be determined by using the following multi-step process:
 
a)  
Select the Scorecard results from the appropriate Corporate Goal and/or Business
Area Scorecards;

 
b)  
Then multiply each result by the appropriate weighting for the Scorecard as set
forth in Table 2 above;

 
c)  
Then multiply the total Officer salaries for that Business Area times the Target
Award Level as set forth in Table 3 below;

 
d)  
Then multiply the result of each Scorecard (step b) times the result of Officer
salaries (step c); and

 
e)  
Sum the results for the Vice President participants.

 
Award Levels

For purposes of the Plan, the Chief Executive Officer, the Executive Vice
President, and the Senior Vice Presidents are measured 100% on the Corporate
Goals Scorecard and Vice Presidents are measured 50% on the Corporate Goals
Scorecard and 50% on the Business Area Goals Scorecard as set forth in Table 2
above.
 
The amount of the potential Award payable to any Officer based upon his or her
Business Area’s level of achievement of its Performance Goals, expressed as a
percentage of the Officer’s base salary determined as of January 1, 2010, is as
follows:
 
TABLE 3:
 
Award Levels
Threshold
Target
Maximum
CEO
28.0%
70.0%
140.0%

 
 
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Senior Officers
20.0%
50.0%
100.0%
       
Vice-Presidents
12.6%
31.5%
63.0%

The Selected Award Pool for a Business Area will be allocated among the Officers
in that Business Area based upon the amount potentially payable to that Officer,
as determined in accordance with Table 3, for the level of performance
(Threshold, Target or Maximum) attained by Corporate and/or the relevant
Business Area, as compared to the similar amounts payable to all Officers of
that Business Area at the relevant performance level.  The Selected Award Pool,
the amount that will actually be paid to the Officers included in the
appropriate Business Area, will equal the lesser of the Potential Award Pool
(which as noted above is based solely on the EPS level) or the Performance Award
Pool (which is based solely on performance as measured and calculated in
accordance with the process above).
 
In no event will the amount payable to an Officer exceed the indicated
percentage of the Officer’s base salary, as in effect on January 1, 2010, as
determined in accordance with Table 3.

AWARD APPROVAL AND PAYOUT TIMING
 
In January 2011, the Committee will determine and certify the level of Awards,
if any, payable for the Performance Period in the manner described above.  The
final Awards calculation and recommendation to the Committee by management is
reviewed and certified by the VP, Human Resources, Director, Audit Services,
Director, Management Systems group, and Corporate Controller respectively.  The
Board then will approve the CEO’s Award and the Committee will have final
approval authority for all other Officer Awards.  To the extent Awards are
payable under the Plan, the Company will make such payment on or before
March 15, 2011 in a single lump sum cash payment subject to applicable
withholding as described below.
 
PROVISIONS FOR A CHANGE IN CONTROL
 
If a Change in Control occurs during the Performance Period and the Officer
still is employed by the Company or an Affiliate (for purposes of this section,
Optim and FCP are not included as Affiliates) at the end of the Performance
Period, the Officer may be entitled to receive an Award for such Performance
Period.  If the Plan is modified after the occurrence of a Change in Control in
a manner that has the effect of reducing the amounts otherwise payable under the
Plan, the Officer shall receive, at a minimum, an Award equal to 50% of the
Maximum Award available under this Plan for the Performance Period.  Such Award
will be payable in a single lump sum cash payment on or before March 15, 2011.
 
PRO-RATA AWARDS FOR PARTIAL SERVICE PERIODS
 
In certain circumstances (as set forth below) Officers may or may not be
eligible for a Pro-rata  Award under the Plan.
 
The following Officers may be eligible for a Pro-rata Award:
 
-  
Officers who are newly hired during the Plan Year and are employed by the
Company or an Affiliate (including FCP or Optim) on the day on which Awards are
distributed for the Performance Period.

 
 
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-  
Employees or Officers who are promoted, transferred or demoted during the
Performance Period and are employed by the Company or an Affiliate (including
FCP or Optim) on the day on which Awards are distributed for the Performance
Period.

 
-  
Officers who are on leave of absence for any full months during the Performance
Period and are employed by the Company or an Affiliate (including FCP or Optim)
on the day on which Awards are distributed for the Performance Period.

 
-  
Officers who terminate employment with the Company or an Affiliate during the
Performance Period due to Impaction (as defined in the PNM Resources, Inc.
Non-Union Severance Pay Plan), Retirement on or after the Officer’s Normal
Retirement Date, Change in Control (as defined in the PNM Resources, Inc.
Officer Retention Plan) or Disability (as defined in the PNM Resources Executive
Savings Plan II).

 
-  
Officers who die during the Performance Period, in which case the Award will be
paid to the spouse of a married Officer, including same sex spouse, or the
estate of an unmarried Officer.

 
The following Officers are not eligible for any Award, including a Pro-rata
Award:
 
Officers who:
 
 
-Terminate employment with the Company or an Affiliate on or before the date on
which Awards are distributed for the Performance Period for any reason other
than death, Impaction, Retirement, Change in Control or Disability;

 
 
- Elect voluntary separation or Retirement in lieu of termination for
performance or misconduct.

 
If an Officer is eligible for a Pro-rata Award, it will be calculated based on
the number of full months that the Officer was actively employed at each
eligibility level during the Performance Period compared to the number of full
months included in the Performance Period.  (Note:  Any month in which an
Officer is actively on the payroll for at least one day will count as a full
month.) Any Pro-rata Awards to which an Officer becomes eligible pursuant to
this paragraph will be paid to the Officer in a single lump sum cash payment
subject to applicable withholding on or before March 15, 2011.
 
ETHICS
 
The purpose of the Plan is to fairly reward performance achievement.  Any
Officer who manipulates or attempts to manipulate the Plan for personal gain at
the expense of customers, other employees, or the Company or its Affiliates,
will be subject to disciplinary action, up to and including termination of
employment, and will forfeit and be ineligible to receive any Award under the
Plan.
 
NONTRANSFERABLE

No Award may be assigned or transferred by an Officer other than by will or the
laws of descent and distribution of the State in which the Officer is employed.
 
 
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WITHHOLDING

The Company or any Affiliate has the authority and the right to deduct or
withhold, or to require an Officer to remit to the Company, an amount sufficient
to satisfy federal, state, and local and foreign taxes (including the Officer’s
FICA obligation) required by law to be withheld with respect to any taxable
event arising as a result of this Plan.  Any potential payment to an Officer
under the terms of this Plan also is subject to withholdings and deductions by
the Company or any Affiliate, and the Officer hereby authorizes the Company or
any Affiliate to apply such withholdings and deductions to liquidate and reduce
any outstanding debt or unpaid sums owed by the Officer to the Company or any
Affiliate or to the successor of either of them.
 
NO RIGHTS OF OWNERSHIP

While the Plan is intended to provide Officers with the opportunity to share in
the success of the Company and its Affiliates, the Plan is merely an incentive
plan and does not give any Officer any of the rights of ownership of the Company
or any Affiliate or provide any security interest in any assets of the Company
or any Affiliate.
 
CONTINUATION OF EMPLOYMENT
 
This Plan shall not be construed to confer upon any Officer any right to
continue in the employment of the Company or any Affiliate and shall not limit
the right of the Company or any Affiliate, in its sole discretion, to terminate
the employment of any Officer at any time, or in accordance with any written
employment agreement the Company and Officer may have.
 
Approved by:
 

/s/ Alice A. Cobb                                                               
Alice A. Cobb, SVP and Chief Administrative Officer

March 31,
2010                                                                   
Date

 
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