Exhibit 10.2

PNM RESOURCES, INC.
2009 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
currently is subject to approval by the Company’s shareholders and becomes
effective upon shareholder approval.  The Company also has adopted this 2009
Officer Incentive Plan (the “Plan”) for the purpose of providing annual
cash-based incentive awards (each an “Award”) to eligible Officers (as defined
below).  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 and, in
the case of Officers who are Covered Employees, as Performance-Based Performance
Cash Awards 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 officers, who will
participate in the First Choice Power, L.P. Incentive Plan, and the Optim
Energy, LLC officers, who will participate in Optim Energy’s programs.  For
purposes of the Plan, the term “Officer” means any employee of the Company or
any Affiliate (other than First Choice Power or Optim Energy) 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 Officers for benefiting our
customers and 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, 2009
and ends on December 31, 2009 (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.
 
AWARD DETERMINATION
 
In order for Awards to be payable under the Plan, the performance goals
described below (collectively, the “Performance Goals”) must be satisfied.
 
 
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Exhibit 10.2
 
Business Area Earnings Per Share
 
PNM Resources, Inc. will be treated as one “Business Area” and its Utility
subsidiaries (Public Service Company of New Mexico and Texas-New Mexico Power
Company), collectively, will be treated as a separate “Business Area.”  A
Business Area must achieve the applicable Earnings Per Share (“EPS”) levels set
forth in the table below in order for Awards to be payable pursuant to the Plan
to Officers within such Business Area.
 

 
PNMR EPS
Utility EPS
No Award
Less than or equal to $0.40
Less than or equal to $0.53
Threshold
Greater than or equal to $0.41 and less than or equal to $0.45
Greater than or equal to $0.54 and less than or equal to $0.59
Target
Greater than or equal to $0.46 and less than or equal to $0.58
Greater than or equal to $0.60 and less than or equal to $0.73
Maximum
Greater than or equal to $0.59
Greater than or equal to $0.74

If a Business Area does not achieve the Threshold EPS level set forth above, no
Awards are payable under the Plan to Officers within that Business Area.  In
addition, no Awards are payable to Officers of either Business Area if the PNM
Resources EPS is less than $0.41. Subject to the preceding sentence, if a
Business Area achieves the Threshold, Target or Maximum level of EPS, the
aggregate potential Awards payable to the Officers of that Business Area at that
level of performance (e.g., the aggregate Awards payable at Target for those
Officers), as determined pursuant to the table set out below, will make up the
initial potential “Award Pool” for that Business Area.
 
The Award Pool for a Business Area will be increased if the attained EPS level
exceeds by at least $0.01 the minimum EPS number for the Target Award level and
is less than the minimum EPS number for the Maximum Award level.  For example,
if the PNM Resources EPS is at least $0.47 but is less than $0.59, the Award
Pool for the PNM Resources Business Area will be increased.  For each $0.01 of
additional EPS, the Award Pool will be increased by up to the Plan’s share of
25% of the incremental earnings (i.e., the additional EPS multiplied by the
average number of common shares of PNM Resources, Inc, common stock used to
calculate diluted EPS as reported in Company’s 10-K multiplied by 25%).  The
Plan’s share of 25% of the incremental earnings will be determined by
multiplying 25% of the incremental earnings by a fraction, the numerator of
which is the Award Pool for that Business Area and the denominator of which is
the sum of the Award Pool for both Business Areas under this Plan and the total
award pool under Company’s incentive compensation plan for non-Officer
employees.  The Committee, in the exercise of its discretion, may choose to
increase the Award Pool by an amount less than the Business Area’s share of 25%
of the incremental earnings.
 
For purposes of the Plan, a Business Area’s EPS will be the net earnings for
that Business Area, 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
Company’s 10-K.   The Committee’s determination of the EPS of a particular
Business Unit shall be binding and conclusive.
 
For purposes of the Plan, the Chief Executive Officer, the Executive Vice
President, the Chief Operating Officer, the Senior Vice Presidents and the
shared services Vice Presidents are
 
 
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Exhibit 10.2
 
assigned to the PNM Resources Business Area.  The utility Vice Presidents are
assigned to the Utility Business Area.
 
Each Business Area is broken down into separate “Business Units.”  The Business
Units are identified on Attachment A.  The Award Pool for each Business Area
will be broken into Business Unit Award Pools.  The Award Pool for each of the
Business Units of a Business Area will be determined by multiplying the Business
Area Award Pool by a fraction.  The numerator of the fraction is the total
potential Awards payable at the relevant EPS performance level (Threshold,
Target or Maximum) to all of the Officers assigned to that Business Unit and the
denominator of which is the total potential Awards payable at the relevant
performance level to all of the Officers assigned to that Business Area.
 
Business Unit Award Pools and Scorecard

Performance measures have been established and weighted for each Business Unit
in the two Business Areas.  These performance measures are described on
Attachment A.  The Committee will use a Business Unit Scorecard to measure
whether a Business Unit met its performance measures at the Threshold, Target or
Maximum levels.  The level of performance of the relevant Business Unit will be
applied to further adjust the Award Pool for that Business Unit.  The adjusted
Award Pool will equal the lesser of the Award Pool prior to the adjustment or
the aggregate potential Awards payable to all of the Officers of that Business
Unit at the level of performance (Threshold, Target or Maximum), as described in
the table set out below, attained by the Business Unit.

Officer Award Opportunities (as a percentage of base salary)
 
The amount of the potential Award payable to any Officer based upon his or her
Business Unit’s level of achievement of its Performance Goals, expressed as a
percentage of the Officer’s base salary determined as of January 1, 2009, is as
follows:
 

 
 
Threshold
 
Target
 
Maximum
Chairman and CEO
24.0%
60.0%
120.0%
       
President and COO
19.0%
48.0%
96.0%
EVP, Chief Financial Officer
19.0%
48.0%
96.0%
       
Senior Vice-Presidents
14.0%
36.0%
72.0%
       
VP, Corporate Controller
VP, Treasurer
VP, Generation
VP, CIO
VP, People Services
VP, Marketing & Cust. Service
VP, Regulatory
10.0%
24.0%
48.0%
All Other Vice-Presidents
7.0%
18.0%
36.0%

The adjusted Business Unit Award Pool will be allocated among the Officers in
that Business Unit based upon the amount potentially payable to that Officer, as
determined in accordance with the table set out above, for the level of
performance (Threshold, Target or Maximum) attained by the relevant Business
Unit, as compared to the similar amounts payable to all
 
 
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Exhibit 10.2
 
Officers of that Business Unit at the relevant performance level.  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, 2009, as determined in
accordance with the above table, for the attained level of performance.

Individual Goals
 
On or before March 31, 2009, the Committee will establish in writing and provide
to each Officer the individual leadership effectiveness goals (“Individual
Goals”) by which the Committee will measure the Officer’s individual performance
during the Performance Period.  The Committee, in its discretion, will establish
the Individual Goals for the Chief Executive Officer.  The Committee will
establish the Individual Goals for all other Officers based on management’s
recommendations.  The Committee may reduce (but not increase) each Officer’s
Award, as calculated above, by up to 33.33% based on the Committee’s
determination with respect to whether the Officer met the Officer’s Individual
Goals during the Performance Period.  The Committee’s assessment of an Officer’s
performance is final and conclusive.
 
FFO/Debt Modifier
 
The amount of the Award available to the Officers, as determined above, is
subject to a positive or negative adjustment of up to 10% based on the ratio of
the Company’s funds from operations to debt (the “FFO/Debt Modifier”) as set
forth in the table below:
 
Level
FFO/Debt Result
Award Modifier
Threshold
11.0
(10%)
Target
11.5
0
Maximum
12.5
10%

The level of the Award Modifier will be interpolated for each incremental 0.1 of
FFO/Debt result.
 
AWARD APPROVAL AND PAYOUT TIMING
 
In January 2010, the Committee will determine and certify the level of Awards,
if any, payable for the Performance Period in the manner described above.  The
Board then will approve the CEO’s Award and the Committee will have final
approval authority for all other Awards.  To the extent Awards are payable under
the Plan, the Company will make such payment on or before March 15, 2010 in a
single lump sum cash payment.
 
The total of all Awards payable to the Officers of a Business Area or Unit will
not exceed the adjusted Award Pool for that Business Area or Unit.
 
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 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, 2010.
 

 
 
 
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Exhibit 10.2

PRO-RATA AWARDS FOR PARTIAL SERVICE PERIODS
 
In the event an Officer who is eligible for an Award under the Plan does not
participate in the Plan for the entire Performance Period or participates in the
Plan at varying levels during the Performance Period, the Officer may be
entitled to a pro rata portion of the Award, if any, payable at the end of the
Performance Period based on the level of achievement of the Performance Goals
applicable to the Award.  The payment to which the Officer is entitled for the
pro rata portion of the Award shall be 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.  Any pro-rata Awards to which an Officer becomes entitled
pursuant to this paragraph will be paid to the Officer in a single lump sum cash
payment on or before March 15, 2010.  (Note:  Any month in which an Officer is
actively on the payroll for at least one day will count as a full month.)
 
Pro-rata Awards will be payable only to the following Officers or Employees:
 
-  
Officers who are newly hired during the Plan Year and are employed by the
Company or an Affiliate on the day on which Awards are distributed for the
Performance Period.

 
-  
Employees or Officers who are promoted, transferred or demoted during the
Performance Period and are employed by the Company or an Affiliate 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 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 (as defined in the PNM Resources, Inc. Retirement Savings Plan),
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 or the estate of an unmarried Officer.

 
FORFEITURE OF AWARDS
 
An Officer who terminates 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 will not be eligible for payment of an Award.  (Any Officer who
elects voluntary separation or Retirement in lieu of termination for performance
or misconduct will not be eligible for payment of an Award.)
 
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 Company or Affiliate objectives
will be subject to appropriate disciplinary action, up to and including
termination of employment, and will forfeit any bonus under the Plan.
 

 
 
 
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Exhibit 10.2

NONTRANSFERABLE

No award may be assigned or transferred by an Officer other than by will or the
laws of descent and distribution.
 
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 a bonus 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.
 
Approved by:
 

/s/ Alice A.
Cobb                                                                             
Alice A. Cobb, Senior Vice President
and Chief Administrative Officer

Date:  March 30, 2009

 

 

 
 
 
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