EXHIBIT 10.1
PNM RESOURCES, INC.
OFFICER RETENTION PLAN
 
INTRODUCTION
 
Effective December 7, 1998, Public Service Company of New Mexico adopted the
Public Service Company of New Mexico First Restated and Amended Executive
Retention Plan (the “Plan”).  By an amendment dated November 27, 2002,
sponsorship of the Plan was transferred to PNM Resources, Inc. (the “PNM
Resources”) and the Plan was renamed the “PNM Resources, Inc. First Restated and
Amended Executive Retention Plan.”  Effective as of July 13, 2003, PNM Resources
amended and restated the Plan in its entirety and changed the name of the Plan
to the “PNM Resources, Inc. Officer Retention Plan.”  The purpose of this
amendment and restatement is to satisfy the requirements of Section 409A of the
Internal Revenue Code of 1986 (the “Code”).  Section 409A of the Code became
applicable to the Plan as of January 1, 2005.  The Plan has been and shall
continue to be administered in good faith compliance with the requirements of
Section 409A from January 1, 2005 through December 31, 2008.  By execution of
this document, PNM Resources hereby amends and restates the Plan in its
entirety, effective as of January 1, 2009 (the “Effective Date”).
 
                              
ARTICLE I 
PURPOSE
 
1.1 General.  PNM Resources considers it essential to its best interests and the
best interests of its customers and stockholders to foster the continuous
employment of its key management employees.  PNM Resources also recognizes that,
as is the case with many publicly held corporations, the possibility of a Change
in Control may exist.  The possibility of a Change in Control, and the
uncertainty and the questions which it may raise among employees, may result in
the departure or distraction of key management employees to the detriment of PNM
Resources and its ability to continue to provide efficient and reliable utility
services to its customers.
 
PNM Resources has determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of key management to their
assigned duties and to facilitate recruitment of future employees without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a Change in Control.  PNM Resources also has concluded that one
of the necessary steps is to provide competitive and fair compensation and
benefits to employees terminated following a Change in Control.
 
The purpose of this Plan is to address these concerns for Officers of PNM
Resources and its Affiliates who adopt the Plan.  A separate plan, the PNM
Resources, Inc. Employee Retention Plan, provides retention benefits for the
remaining members of management and other employees of PNM Resources and its
adopting Affiliates.
 

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ARTICLE II
DEFINITIONS
 
2.1 General.  When a word or phrase appears in this Plan with the initial letter
capitalized, and the word or phrase does not commence a sentence, the word or
phrase shall generally be a term defined in this Section 2.1 or in the
Introduction.  The following words and phrases utilized in the Plan with the
initial letter capitalized shall have the meanings set forth below, unless a
clearly different meaning is required by the context in which the word or phrase
is used:
 
(a) “Affiliate” means (1) any member of a “controlled group of corporations”
(within the meaning of Section 414(b) of the Code as modified by Section 415(h)
of the Code) that includes PNM Resources as a member of the group; and (2) any
member of a group of trades or businesses under common control (within the
meaning of Section 414(c) of the Code as modified by Section 415(h) of the Code)
that includes PNM Resources as a member of the group.
 
“50% Affiliate” means any of the following:  (1) an entity that would be a
member of a “controlled group of corporations” (within the meaning of Section
414(b) of the Code as modified by Section 415(h) of the Code) that includes PNM
Resources as a member of the group if for purposes of applying Section
1563(a)(1), (2) or (3) of the Code for determining the members of a controlled
group of corporations under Section 414(b) of the Code, the language “at least
50 percent” is used instead of “at least 80 percent” each place it appears in
Section 1563(a)(1), (2) and (3); and (2) an entity that would be a member of a
group of trades or businesses under common control (within the meaning of
Section 414(c) of the Code) that includes PNM Resources as a member of the group
if for purposes of applying Treas. Reg. § 1.414(c)-2 for purposes of determining
the members of a group of trades or businesses (whether or not incorporated)
that are under common control for purposes of Section 414(c) of the Code, the
language “at least 50 percent” is used instead of “at least 80 percent” each
place it appears in Treas. Reg. § 1.414(c)-2.
 
(b) “Base Salary” means the Participant’s highest annual salary from the Company
in effect during the Protection Period.
 
(c) “Board” or “Board of Directors” means the Board of Directors of PNM
Resources.  The Board may delegate its responsibilities in accordance with its
standard practices and procedures.
 
(d) “Cause” means, for purposes of termination of a Participant’s employment:
 
(1) The willful and continued failure of a Participant to substantially perform
his or her duties with PNM Resources or any Affiliate after written demand for
substantial performance is delivered to the Participant which specifically
identifies the manner in which the Participant has not substantially performed
his or her duties;
 
(2) The willful failure to report to work for more than thirty (30) days; or
 
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(3) The willful engaging by the Participant in conduct which is demonstrably and
materially injurious to PNM Resources or any Affiliate, monetarily or otherwise,
including acts of fraud, misappropriation, violence or embezzlement for personal
gain at the expense of PNM Resources or any Affiliate, conviction of a felony,
or conviction of a misdemeanor involving immoral acts.
 
Cause shall not be deemed to exist on the basis of paragraph (1) or (2) if the
failure results from such Participant’s incapacity due to verifiable physical or
Mental Illness substantiated by appropriate medical evidence.  After the
issuance of a Notice of Termination by the Participant due to Constructive
Termination, an act, or failure to act, by a Participant shall not be deemed
“willful” for purposes of paragraph (1) or (2) and shall not give rise to Cause
pursuant to this Section.  An act, or failure to act, by a Participant shall not
be deemed “willful” if done or omitted to be done by the Participant in good
faith and with a reasonable belief that his or her action was in the best
interests of PNM Resources and its Affiliates.
 
(e) “Change in Control” means any of the following:
 
(1) Any “person,” as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 becoming directly or indirectly the “beneficial
owner” as defined in Rule 13d-3 under the Securities Exchange Act, of securities
of PNM Resources representing twenty percent (20%) or more of the combined
voting power of PNM Resources’ then outstanding securities unless such person
is, or shall be, a trustee or other fiduciary holding securities under an
employee benefit plan of PNM Resources, or a corporation owned, directly or
indirectly, by the stockholders of PNM Resources in substantially the same
proportion as their ownership of stock of PNM Resources;
 
(2) During any period of two (2) consecutive years, excluding any period prior
to the Effective Date of this Plan, the following individuals ceasing, for any
reason, to constitute a majority of the Board of Directors:
 
(i) directors who were directors at the beginning of such period; and
 
(ii) any new directors whose election by the Board or nomination for election by
PNM Resources’ stockholders was approved by a vote of at least two-thirds
(2/3rds) of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, such new directors being referred to as “Approved New
Directors.”
 
For purposes of determining whether a Change in Control has occurred pursuant to
this paragraph (2), a director designated by a person who has entered into an
agreement with PNM Resources to effect a transaction described in
paragraphs (1), (3) or (4) of this Section (e) shall not be considered to be an
“Approved New Director.”
 
(3) The shareholders of PNM Resources approving a merger or consolidation of PNM
Resources with another company, corporation or subsidiary that is not affiliated
with PNM Resources immediately before the Change in Control; provided, however,
that if the merger or consolidation would result in the voting securities of PNM
Resources
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outstanding immediately prior thereto continuing to represent, either by
remaining outstanding or by being converted into voting securities of the
surviving entity, at least sixty percent (60%) of the combined voting power of
the voting securities of PNM Resources or such surviving entity outstanding
immediately after such merger or consolidation, the merger or consolidation will
be disregarded; or
 
(4) The adoption of a plan of complete liquidation of PNM Resources or an
agreement for the sale or disposition by PNM Resources of all or substantially
all of PNM Resources’ assets.
 
Notwithstanding the foregoing, a Change in Control will not be deemed to have
occurred until:  (1) any required regulatory approval, including any final
non-appealable regulatory order, has been obtained and (2) the transaction that
would otherwise be considered a Change in Control closes.
 
(f) “Class I Officer” means all Officers with titles higher than Vice President
(VP).
 
(g) “Class II Officer” means all Officers with the title Vice President (VP).
 
(h) “Code” means the Internal Revenue Code of 1986, as amended.
 
(i) “Committee” means the Benefits Governance Committee appointed by PNM
Resources.
 
(j) “Company” means, collectively, PNM Resources and any Affiliate of PNM
Resources that has adopted this Plan in accordance with Section 10.13 (Adoption
by Affiliates).  As used in this Plan, “Company” also means any successor to the
assets of PNM Resources that assumes and agrees to perform PNM Resources’
obligations hereunder, by operation of law or otherwise.
 
(k) “Constructive Termination” means, without a Participant’s express written
consent, the occurrence during the Protection Period of any of the following
circumstances, subject to the exceptions and modifications noted below:
 
(1) A material diminution in the Participant’s Base Salary;
 
(2) A material diminution in the Participant’s authority, duties, or
responsibilities;
 
(3) A material change in the geographic location of the Participant’s principal
office; or
 
(4) Any other action or inaction that constitutes a material breach by the
Company of this Plan.
 
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A Participant must provide a written Notice of Termination to the Company of the
existence of the Constructive Termination condition described in paragraphs
(1)-(4) above within ninety (90) days of the initial existence of the condition.
 
Notwithstanding anything to the contrary, an event described in paragraphs
(1)-(4) above will not constitute Constructive Termination if, within thirty
(30) days after the Participant gives the Company the Notice of Termination
specifying the occurrence or existence of an event that the Participant believes
constitutes Constructive Termination, the Company has fully corrected (or
reversed) such event.
 
(l) “Disability” shall have the same meaning as provided in the Company’s
long-term disability plan for the provision of long-term disability benefits.
 
(m) “Eligible Compensation” means the sum of the (1) Participant’s Base Salary,
(2) any cash award paid as a merit increase in lieu of an increase in base
salary received during the twelve (12) month period immediately preceding the
Participant’s Separation from Service and (3) the “target” Officer Incentive
Plan award (regardless of the award, if any, actually received under the Officer
Incentive Plan).  Unless otherwise stated in the Officer Incentive Plan, the
“target” award is fifty percent (50%) of the Participant’s highest maximum award
opportunity under the Officer Incentive Plan during the Protection Period.
 
(n) “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.
 
(o) “Health Plan” means the PNM Resources, Inc. Comprehensive Health Plan as it
may be amended or restated from time to time or any successor plan or plans that
provide the benefits currently provided under such plan.
 
(p) “Mental Illness” means any disorder, other than a disorder induced by
alcohol or drug abuse, which impairs the behavior, emotional reaction or thought
process of a person.
 
(q) “Notice of Termination” means a notice from either the Company or a
Participant, as applicable.  If the termination is for Cause or based on
Constructive Termination, the notice shall indicate the specific termination
provision in this Plan relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Participant’s employment.  If a Participant is providing a Notice of Termination
based on Constructive Termination, the Notice of Termination must be provided to
the Company’s Director – Compensation, Benefits & HRIS (or, if that title is not
in use at the time, to the person holding the most comparable position) no more
than ninety (90) days following the occurrence of the condition giving rise to
Constructive Termination and the Notice of Termination must be given at least
thirty (30) days prior to the date of the Participant’s Separation from
Service.  However, the Company retains its rights as an at will employer to
terminate any employee at any time and for any reason.
 
(r) “Officer” means any employee of the Company (1) with the title Chief
Executive Officer (CEO), Chief Administrative Officer (CAO), Executive Vice
President (EVP), Senior Vice President (SVP), or Vice President (VP) or any
other title that describes a position of
 
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higher authority than that of a Vice President and (2) who is classified and
coded as an Officer pursuant to the Company’s compensation system.
 
(s) “Officer Incentive Plan” means the incentive compensation plan maintained by
the Company for Officers.
 
(t) “Participant” means any Officer of the Company who has satisfied the
eligibility requirements of this Plan.
 
(u) “Plan” means the PNM Resources, Inc. Officer Retention Plan, effective
January 1, 2009, as amended.
 
(v) “PNM Resources” means PNM Resources, Inc.  As used in the Plan, “PNM
Resources” also means any successor in interest resulting from merger,
consolidation, or transfer of substantially all of PNM Resources’ assets.
 
(w) “Protection Period” means the period beginning with the date on which a
transaction closes, or an event occurs which results in a Change in Control and
ending twenty-four (24) months thereafter.
 
(x) “Separation from Service” means either (1) the termination of a
Participant’s employment with Company and all Affiliates and 50% Affiliates due
to death, retirement or other reasons, or (2) a permanent reduction in the level
of bona fide services the Participant provides to Company and all Affiliates and
50% Affiliates to an amount that is 20% or less of the average level of bona
fide services the Participant provided to Company and all Affiliates and 50%
Affiliates in the immediately proceeding 36 months, with the level of bona fide
service calculated in accordance with Treas. Reg. § 1.409A-1(h)(1)(ii).
 
A Participant’s employment relationship is treated as continuing while a
Participant is on military leave, sick leave, or other bona fide leave of
absence (if the period of such leave does not exceed six months, or if longer,
so long as a Participant’s right to reemployment with Company or an Affiliate or
50% Affiliate is provided either by statute or contract).  If a Participant’s
period of leave exceeds six months and a Participant’s right to reemployment is
not provided either by statute or by contract, the employment relationship is
deemed to terminate on the first day immediately following the expiration of
such six-month period.  Whether a termination of employment has occurred will be
determined based on all of the facts and circumstances and in accordance with
regulations issued by the United States Treasury Department pursuant to
Section 409A of the Code.
 
Generally, the date of a Participant’s Separation from Service will be specified
in the Notice of Termination.  In the case of a termination for Cause, the date
of Separation from Service shall be immediately upon receipt of the Notice of
Termination.  In the case of an involuntary termination of employment by the
Company for any reason other than Cause, death or Disability, the date of
Separation from Service shall not be less than fifteen (15) days from the date
the Notice of Termination is given.  In the case of Constructive Termination,
the date of Separation from Service shall be not less than thirty (30) days from
the date the Notice of Termination is given.
 
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(y) “Specified Employee” means certain officers and highly compensated employees
of Company as defined in Treas. Reg. § 1.409A-1(i).  The identification date for
determining whether a Participant is a Specified Employee during any calendar
year shall be the September 1 preceding the commencement of such year.
 
2.2 Other Defined Terms.  In addition to the definitions included in Section 2.1
(General) and the Introduction, other terms may be defined in the primary Plan
provisions to which they are applicable.
 
ARTICLE III
TERM OF PLAN
 
3.1 Term of Plan.  The Plan is effective as of the Effective Date and shall
continue in effect until terminated by the Board, subject to the limitations on
termination set forth in Section 9.1 (Amendment and Termination).
 
3.2 Reversion to Prior Provisions of the Plan.  Pursuant to Section 9.1
(Amendment and Termination) of the Plan document in effect prior to the
Effective Date, if a Change in Control occurs within the twenty-four (24) month
period following the Effective Date, the provisions of the Plan as in effect
prior to the Effective Date will revive and will control with respect to
determining retention benefits with respect to such Change in Control if the
benefits provided by the provisions of the Plan in effect prior to the Effective
Date are greater than the benefits provided under this Plan
document.  Notwithstanding the foregoing, as provided by Section 9.1 (Amendment
and Termination), all changes made in order to comply with Section 409A of the
Code shall remain in effect.  
 
ARTICLE IV
ELIGIBILITY FOR RETENTION BENEFITS
 
4.1 Eligibility to Participate.  To be eligible for benefits under this Plan, an
employee must be an Officer of the Company at the beginning of the Protection
Period.  If a Participant’s employment with the Company terminates for any
reason (whether voluntary or involuntary) before the commencement of the
Protection Period, he or she shall not be eligible to receive the benefits
provided by this Plan.  In addition, if a Participant voluntarily terminates his
or her employment during the Protection Period for reasons other than those that
constitute Constructive Termination, or if a Participant dies or becomes
Disabled during the Protection Period, the Participant will not be entitled to
receive any benefits under this Plan.
 
4.2 Eligibility for Benefits.
 
(a) General Rule.  A Participant shall be entitled to the benefits described in
Article V (Retention Benefits) if such Participant Separates from Service during
the Protection Period due to:  (1) a termination of employment by the Company
for any reason other than Cause, death or Disability; or (2) a termination of
employment by the Participant due to Constructive Termination following the
Participant’s giving of a Notice of Termination to the Company.
 
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(b) Exceptions.  A Participant shall not be entitled to receive the retention
benefits offered by the Plan even if the Participant meets the requirements of
paragraph (a), in the following circumstances:
 
     (1) If a Participant’s employment is terminated or Constructively
Terminated during the Protection Period, but such Participant is re-employed by
the surviving entity or the party acquiring the assets of PNM Resources in
connection with the Change in Control before any payments are made in accordance
with Section 5.2 (Payment Form and Date; Section 409A Compliance Strategy), then
such Participant shall not be entitled to the benefits under this Plan.
 
     (2) Any Participant who without express authority actively participates in
advancing a Change in Control, whether on his or her own behalf or on behalf of
someone else, shall not be eligible for the benefits provided by this
Plan.  Participants who, by virtue of their position and duties with the
Company, are involved in facilitating an orderly transition to a successor
company shall remain eligible to receive benefits.
 
     (3) If a Participant’s employment is terminated or Constructively
Terminated as a result of the acquisition of PNM Resources by a holding company
formed in connection with a corporate restructuring initiated by PNM Resources,
and the Participant is immediately re-employed by PNM Resources or any Affiliate
or 50% Affiliate, then the Participant shall not be entitled to benefits under
the Plan.
 
     (4) Transfers between and within PNM Resources and Affiliates and 50%
Affiliates shall not be considered to be a termination of employment or result
in the payment of benefits under this Plan unless the transfer results in a
Constructive Termination.
 
4.3 Release Agreement.
 
(a) General.  In order to receive any retention benefits under this Plan, within
the time periods described below, the Participant must sign, deliver and not
revoke a Release Agreement containing such terms and conditions as are
satisfactory to the Company, including, but not limited to, the release of any
and all claims that the Participant may then have, as of the signing of such
release, against PNM Resources or its Affiliates, employees, officers, and
directors.  The Participant shall generally receive the Release Agreement on the
date of the Participant’s Separation from Service and in no event more than five
(5) days following the date of the Participant’s Separation from Service and
shall have up to forty-five (45) days following the date the Release Agreement
is given to the Participant to sign and return the Release Agreement to the
Company.
 
(b) Revocation of the Release Agreement.  Within seven (7) calendar days after
delivery of the Release Agreement to the Company by the Participant, the
Participant shall be entitled to revoke the Release Agreement by following the
revocation procedure described in the Release Agreement.
 
(c) Impact of Revocation.  The revocation of a previously signed and delivered
Release Agreement pursuant to the above paragraph shall be deemed to constitute
an irrevocable forfeiture of retention benefits under the Plan.
 
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4.4 No Duplication of Benefits.  The right to receive any benefits under this
Plan by any Participant is specifically conditioned upon such Participant either
waiving or being ineligible for any and all benefits under the PNM Resources,
Inc. Employee Retention Plan, including any amendments thereto, or any benefits
due to a Change in Control or similar event under any successor or other change
in control, severance, retention or other plans or agreements otherwise
available to the Participant.  The Company does not intend to provide any
Participant with benefits under both this Plan and benefits under any other
severance, retention, change in control or other plans or agreements sponsored
by the Company or any Affiliate.  The Company may override this provision by
expressly stating in the other change in control, severance, retention or other
plan or agreement that some or all of the benefits provided by the other change
in control, severance, retention or other plan or agreement are intended to
supplement the benefits provided by this Plan.
 
ARTICLE V
RETENTION BENEFITS
 
5.1 Retention Benefits.  Participants satisfying the eligibility requirements
set forth in Section 4.2 (Eligibility for Benefits) who sign (and do not revoke)
the Release Agreement required by Section 4.3 (Release Agreement) shall be
entitled to the following retention benefits:
 
(a) Severance Pay.  The Company shall pay the Participant, as a retention
benefit, a lump sum amount as set forth below based upon the Participant’s
highest position held with the Company during the Protection Period:
 
      POSITION
SEVERANCE PAY
      Class I Officer
3.0 times Eligible Compensation
 
      Class II Officer
2.0 times Eligible Compensation

 
(b) Officer Incentive Plan.  A Participant also shall receive a pro-rata award
of the Participant’s highest target incentive under the Officer Incentive Plan
as in effect during the Protection Period, regardless of the award, if any,
actually paid pursuant to the Officer Incentive Plan.  Unless otherwise stated
in the Officer Incentive Plan, the “target” award is 50% of the maximum award.
 
(c) Medical, Dental and Vision Coverage.  Medical, dental and vision coverage
under the Health Plan, as the Participant had elected prior to the Participant’s
Separation from Service, shall be provided for a period of thirty (30) months
for Class I Officers and a period of twenty-four (24) months for Class II
Officers immediately following the Participant’s Separation from Service with
the cost of such coverage to be shared by the Company and the Participant on the
same basis as in effect prior to the Participant’s Separation from
Service.  Participant contributions that were required for participation in the
Health Plan will continue to be required during the continuation period.  No
Participant may elect to receive cash or any other allowance in lieu of medical,
dental or vision coverage under the Health Plan.
 
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(d) COBRA Continuation Coverage.  Continuation of coverage under the Health Plan
pursuant to Section 4980B of the Code will become effective upon the completion
of the twenty-four (24) month or thirty (30) month, as applicable, period.
 
(e) Life and Accidental Death and Dismemberment Insurance Benefits.  The Company
shall provide life and accidental death and dismemberment insurance benefits
substantially similar to those the Participant was receiving prior to the Notice
of Termination.  The life and accidental death and dismemberment insurance
benefits provided by this Section shall include benefits provided pursuant to
the PNM Resources, Inc. Officer Life Insurance Plan prior to the Notice of
Termination.  As a general rule, such coverage shall continue for a period of
thirty (30) months for Class I Officers and a period of twenty-four (24) months
for Class II Officers.  No Participant may elect to receive cash or any other
allowance in lieu of the benefits provided by this Section.
 
(f) Supplemental Retirement Benefits.  A Participant shall receive the following
supplemental retirement benefits payable in one lump sum:
 
(1) The cash equivalent of the difference between the following two amounts,
each calculated based on the Participant’s age as of Separation from
Service:  (i) the present value of the early or normal retirement benefit the
Participant would receive under the PNM Resources, Inc. Employees’ Retirement
Plan if the Participant had continued in employment for the number of years
equal to the multiplier used to determine severance pay in Section 5.1(a)
(Retention Benefits – Severance Pay) above and then terminated employment (at a
time when the Participant was, accordingly, two or three years older and had two
or three more years of service, depending on whether the Participant is a Class
I Officer or a Class II Officer) and began receiving benefits immediately or as
soon as possible thereafter as prescribed under the PNM Resources, Inc.
Employees’ Retirement Plan and (ii) the present value of the early or normal
retirement benefit the Participant is actually entitled to under the PNM
Resources, Inc. Employees’ Retirement Plan assuming immediate termination of
employment and benefit commencement as soon as possible thereafter as prescribed
under the PNM Resources, Inc. Employees’ Retirement Plan; plus
 
(2) The cash equivalent of Company contributions to the Participant’s Retirement
Savings Plan account in the amount of seven and a half percent (7.5%) of
eligible compensation (limited as provided in the Retirement Savings Plan and
Section 401(a)(17)) of the Code) times the period which corresponds to the
number of years equal to the multiplier used to determine severance pay in
Section 5.1(a) (Retention Benefits – Severance Pay), above.
 
(g) Retiree Health Plan Credit.  As of the date of the Participant’s Separation
from Service, the Participant will receive a service credit for purposes of
eligibility for participation in any retiree health plan sponsored by the
Company and its Affiliates equal to the multiplier used to determine severance
pay in Section 5.1(a) (Retention Benefits – Severance Pay), above.  The
Participant shall be responsible for any tax consequences of such additional
credit.
 
5.2 Payment Form and Date; Section 409A Compliance Strategy.  All payments shall
be made in accordance with this Section 5.2.
 
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(a) General Rule Regarding Time of Payments.  Notwithstanding any other
provision of this Plan to the contrary, no payment shall be made prior to the
Participant’s Separation from Service.  The severance pay due pursuant to
Section 5.1(a) (Retention Benefits – Severance Pay), the Officer Incentive Plan
payment due pursuant to Section 5.1(b) (Retention Benefits – Officer Incentive
Plan), and the supplemental retirement benefits due pursuant to Section 5.1(f)
(Retention Benefits – Supplemental Retirement Benefits) shall be paid in a lump
sum within ten (10) days following the last day on which a Participant may
revoke a previously executed and timely delivered Release Agreement.
 
(b) Code Section 409A Compliance Strategy.  Certain of the payments and benefits
provided by this Plan are subject to the requirements of Section 409A of the
Code.  The purpose of this Section 5.2(b) is to summarize the treatment of each
such payment or benefit for purposes of Section 409A and to comply, as needed,
with the requirements of Section 409A.
 
(1) Compliance Strategy for Lump Sum Payments.  The severance pay due pursuant
to Section 5.1(a) (Retention Benefits – Severance Pay), the Officer Incentive
Plan payment due pursuant to Section 5.1(b) (Retention Benefits – Officer
Incentive Plan), and the supplemental retirement benefits due pursuant to
Section 5.1(f) (Retention Benefits – Supplemental Retirement Benefits) will be
considered to be made pursuant to the short-term deferral exception to Section
409A as described in Treas. Reg. § 1.409A-1(b)(4).
 
(2) Compliance Strategy for Medical, Dental and Vision Coverage.  Pursuant to
Section 5.1(c) (Retention Benefits – Medical, Dental and Vision Coverage), the
Company will provide an eligible Participant with continued medical, dental and
vision coverage for a period of twenty-four (24) months or thirty (30) months,
as applicable.  To the extent that the Company pays the cost of the
Participant’s medical, dental and vision coverage throughout the first eighteen
(18) month period following the Participant’s Separation from Service, such
payments are exempt from Section 409A under the medical benefits reimbursement
exception set forth in Treas. Reg. § 1.409A-1(b)(9)(v)(B).  The Participant’s
continued participation in the Company’s medical, dental and vision programs
pursuant to Section 5.1(c) (Retention Benefits – Medical, Dental and Vision
Coverage) after the period of time during which the Participant would be
entitled to continuation coverage pursuant to Section 4980B of the Code if the
Participant elected the coverage and paid the premiums (the “Excess Medical
Benefits”) may be considered to be “deferred compensation” subject to the
requirements of Section 409A of the Code.  In order to assure compliance with
the requirements of Section 409A and avoid adverse tax consequences to the
Participant, the only Excess Medical Benefits that will be subject to
reimbursement under such plans will be expenses for medical care within the
meaning of Section 105(b) of the Code.  In addition, all reimbursements of
Excess Medical Benefits under such plans shall be made on or before the last day
of the calendar year following the calendar year in which the expense was
incurred and the right to reimbursement for such Excess Medical Benefits will
not be subject to liquidation or exchange for another benefit.
 
(3) Compliance Strategy for Life and Accidental Death and Dismemberment
Insurance Benefits.  Pursuant to Section 5.1(e) (Retention Benefits – Life and
Accidental Death and Dismemberment Insurance Benefits), the Company will provide
an eligible Participant with continued life and accidental death and
dismemberment insurance benefits for a period of twenty-four (24) months or
thirty (30) months, as applicable.  
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This continued insurance coverage is excepted from Section 409A pursuant to
Treas. Reg. § 1.409A-1(a)(5).
 
(4) Compliance Strategy for Reimbursement of Legal Fees.  Pursuant to Section
5.3 (Reimbursement of Legal Fees), the Company will provide an eligible
Participant with reimbursement for reasonable legal fees and expenses incurred
as a result of a Separation from Service or Constructive Termination under the
terms of the Plan.  The amount of legal expenses incurred in one calendar year
will not affect the expenses eligible for reimbursement in any other calendar
year.  All expenses incurred in one calendar year must be reimbursed no later
than the last day of the next calendar year.  The right to reimbursement is not
subject to liquidation or exchange for any other benefit.
 
(5) Compliance Strategy for Tax Gross-Up Payment.  Pursuant to Section 5.5 (Tax
Gross-Up), the Company will provide an eligible Participant with a tax gross-up
payment in limited circumstances.  The Company has concluded that the gross-up
payment provided under Section 5.5 (Tax Gross-Up) may be subject to the
requirements of Section 409A.  To ensure that the payments under Section 5.5
(Tax Gross-Up) comply with Section 409A, the payments are payable at a specified
time or pursuant to a fixed schedule within the meaning of Treas. Reg. §
1.409A-3(i)(1)(v).
 
(6) Delay in Payments for Specified Employees.  As a general rule, a Participant
will commence receiving benefits at the times provided in the Plan.  If the
Participant is a “Specified Employee” at the time of his Separation from
Service, and the Participant is eligible for a tax gross-up payment provided by
Section 5.5 (Tax Gross-Up), the tax gross-up payment will commence upon the
later of (i) the time specified in Section 5.5 (Tax Gross-Up) or (ii) the first
day of the seventh month following the Participant’s Separation from
Service.  Any payments that would have been paid during the first six months
following the Participant’s Separation from Service shall be paid on the first
day of the seventh month together with interest at the “applicable federal rate”
(within the meaning of Section 1274(d) of the Code) (the “AFR”) for the month in
which the payment is made to the Participant.  The six-month delay for a
Specified Employee does not apply if the Participant dies or becomes Disabled
prior to his Separation from Service.
 
(7) Payment Disputes.  If a payment is not made due to a dispute with respect to
such payment, the payment may be delayed in accordance with Treas. Reg.
§ 1.409A-3(g).
 
(8) Ban on Acceleration or Deferral.  Under no circumstances may the time or
schedule of any payment made or benefit provided pursuant to this Plan be
accelerated or subject to a further deferral except as otherwise permitted or
required pursuant to regulations and other guidance issued pursuant to
Section 409A of the Code.
 
(9) No Elections.  No Participant has any right to make any election regarding
the time or form of any payment due under this Plan.
 
(10) Distributions Treated as Made Upon a Designated Event.  If the Company
fails to make any payment under this Plan, either intentionally or
unintentionally,
 
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within the time period specified in the Plan, but the payment is made within the
same calendar year, such payment will be treated as made within the time period
specified in the Plan pursuant to Treas. Reg. § 1.409A-3(d).
 
5.3 Reimbursement of Legal Fees.  The Company also shall pay to a Participant
who is entitled to receive benefits pursuant to Section 4.2 (Eligibility for
Benefits) reasonable legal fees and expenses incurred as a result of a
termination or Constructive Termination under the terms of this Plan (including
all such fees and expenses, if any, incurred in contesting or disputing any such
termination or Constructive Termination or in seeking to obtain or enforce any
right or benefit provided by this Plan or in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of the
Code to any payment or benefit provided hereunder).  
 
5.4 Offsetting Benefits.  Benefits otherwise receivable by the Participant
pursuant to Sections 5.1(c) (Retention Benefits – Medical, Dental and Vision
Coverage) and 5.1(e) (Retention Benefits – Life and Accidental Death and
Dismemberment Insurance Benefits) shall be forfeited to the extent comparable
benefits are actually received by the Participant from another employer of the
Participant during the applicable twenty-four (24) or thirty (30) month period
following his or her Separation from Service.  Any such benefits actually
received by the Participant from another employer shall be reported by the
Participant to the Company.
 
5.5 Tax Gross-Up.  
 
(a) General Rule.  Except as provided in Section 5.5(g) (Tax Gross-Up –
Exception), if the “Total Payments” made to a Participant under this Plan result
in an excise tax being imposed pursuant to Section 4999 of the Code, the Company
will provide the Participant with a “Gross-Up Payment,” calculated in accordance
with the provisions of this Section.  The Gross-Up Payment provided by this
Section applies only to excise taxes imposed under Section 4999 of the Code and
not to excise taxes, other taxes, or additions to tax imposed under any other
provision of the Code including Section 409A.
 
(1) Total Payments.  Total Payments as used in this Section, means any payments
in the nature of compensation (as defined in Code Section 280G and the
regulations adopted thereunder), made pursuant to this Plan or otherwise, to or
for the Participant’s benefit, the receipt of which is contingent on a “change
in the ownership or effective control” of PNM Resources, or a “change in the
ownership of a substantial portion of the assets” of PNM Resources (as these
phrases are defined in Code Section 280G and the regulations adopted thereunder)
and to which Code Section 280G applies.
 
(2) Gross-Up Payment.  Except as otherwise noted below, the Gross-Up Payment
will consist of a single lump sum payment and will be in such an amount that
after the Participant has paid (1) the “total presumed federal and state taxes”
and (2) the excise taxes imposed by Code Section 4999 with respect to the
Gross-Up Payment (and any interest or penalties actually imposed), the
Participant retains an amount of the Gross-Up Payment equal to the remaining
excise taxes imposed by Code Section 4999 on the Participant’s Total Payments
(calculated before the Gross-Up Payment).  For purposes of calculating the
Gross-Up Payment, a Participant’s actual federal and state income taxes will not
be used.  Instead, the Company will
 
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use the Participant’s “total presumed federal and state taxes.”  For purposes of
this Plan, a Participant’s “total presumed federal and state taxes” shall be
conclusively calculated using a combined tax rate equal to the sum of the
maximum marginal federal and applicable state income tax rates and the hospital
insurance (or “HI”) portion of F.I.C.A.  Based on the rates in effect for 2007
for a New Mexico resident, the “total presumed federal and state tax rate” is
41.75% (35% federal income tax rate plus 5.3% New Mexico state income tax rate
plus 1.45% HI tax rate).  The state tax rate for the Participant’s actual
principal place of residence will be used and no adjustments will be made for
the deduction of state taxes on the federal return, any deduction of federal
taxes on a state return, the loss of itemized deductions or exemptions, or for
any other purpose.
 
(b) Calculations.  The Company, at its sole expense, will retain a “Consultant”
to advise the Company with respect to the applicability of any Code Section 4999
excise tax with respect to a Participant’s Total Payments.  The Consultant shall
be a law firm, a certified public accounting firm, and/or a firm nationally
recognized as providing executive compensation consulting services.  All
determinations concerning whether a Gross-Up Payment is required pursuant to
Section 5.5(a) (Tax Gross-up – General Rule) and the amount of any Gross-Up
Payment (as well as any assumptions to be used in making such determinations)
shall be made by the Consultant selected pursuant to this Section.  The
Consultant shall provide the Participant and the Company with a written notice
of the amount of the excise taxes that the Participant is required to pay and
the amount of the Gross-Up Payment.  The notice from the Consultant shall
include any necessary calculations in support of its conclusions.  All fees and
expenses of the Consultant shall be borne by the Company.  Except as otherwise
provided in Section 5.2(b)(6) (Payment Form and Date; Section 409A Compliance
Strategy – Code Section 409A Compliance Strategy – Delay in Payments for
Specified Employees), any Gross-Up Payment shall be made by the Company within
ten (10) calendar days after the mailing of such notice and in no event will the
payment be made later than December 31 following the taxable year in which the
Participant remits the related taxes.
 
(c) Determination Binding.  As a general rule, the Consultant’s determination
shall be binding on the Participant and the Company.  The application of the
excise tax rules of Code Section 4999, however, is complex and uncertain and, as
a result, the Internal Revenue Service may disagree with the Consultant
concerning the amount, if any, of the excise taxes that are due.  If the
Internal Revenue Service determines that excise taxes are due, or that the
amount of the excise taxes that are due is greater than the amount determined by
the Consultant, the Gross-Up Payment will be recalculated by the Consultant to
reflect the actual excise taxes that the Participant is required to pay (and any
related interest and penalties).  Any deficiency will then be paid to the
Participant by the Company within fifteen (15) calendar days of the receipt of
the revised calculations from the Consultant and in no event will the payment be
made later than December 31 following the taxable year in which the Participant
remits the related taxes.  If the Internal Revenue Service determines that the
amount of excise taxes that the Participant paid exceeds the amount due, the
Participant shall return the excess to the Company (along with any interest paid
to the Participant on the overpayment) within thirty (30) days upon receipt from
the Internal Revenue Service or other taxing authority.
 
(d) Right to Challenge Reserved.  The Company reserves the right to challenge
any excise tax determinations made by the Internal Revenue Service.  If the
Company
 
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agrees to indemnify the Participant from any taxes, interest and penalties that
may be imposed upon the Participant (including any taxes, interest and penalties
on the amounts paid pursuant to the Company’s indemnification agreement), the
Participant must cooperate fully with the Company in connection with any such
challenge.  The Company shall bear all costs associated with the challenge of
any determination made by the Internal Revenue Service and the Company shall
control all such challenges.  The additional Gross-Up Payments called for by
Section 5.5(c) (Tax Gross-Up – Determination Binding) shall not be made until
the Company has either exhausted its (or the Participant’s) rights to challenge
the determination or indicated that it intends to concede or settle the excise
tax determination.
 
(e) Notification.  The Participant shall notify the Company in writing of any
claim or determination by the Internal Revenue Service that, if upheld, would
result in the payment of excise taxes in amounts different from the amount
initially specified by the Consultant.  Such notice shall be given as soon as
possible but in no event later than fifteen (15) calendar days following your
receipt of notice of the Internal Revenue Service’s position.
 
(f) Effect of Repeal or Inapplicability.  If the provisions of Code Sections
280G and 4999 are repealed without succession, then this Section shall be of no
further force or effect.  Moreover, if the provisions of Code Sections 280G and
4999 do not apply to impose the excise tax on payments made under this Plan,
then the provisions of this Section shall not apply.
 
(g) Exception.  The Consultant selected pursuant to Section 5.5(b) (Tax Gross-Up
– Calculations) above will calculate the Participant’s “Capped Benefit” and
“Uncapped Benefit.”  For this purpose, the “Uncapped Benefit” is equal to the
Total Payments to which the Participant is entitled prior to the application of
this Section 5.5(g).  A Participant’s “Capped Benefit” is the amount to which
the Participant will be entitled after application of the limitations of Section
5.5(h) (Tax Gross-Up – Cap on Benefits).  If the Participant’s Uncapped Benefit
is less than 115% of the Participant’s Capped Benefit, the Participant will not
be entitled to receive the gross-up payment referred to in Section 5.5(a)(2)
(Tax Gross-up – General Rule – Gross-Up Payment).  Instead, the Participant’s
Total Payments will be limited or capped in accordance with Section 5.5(h) (Tax
Gross-Up – Cap on Benefits).
 
(h) Cap on Benefits.  Pursuant to Section 5.5(g) (Tax Gross-Up – Exception)
above, if the Participant’s Uncapped Benefit is less than 115% of the
Participant’s Capped Benefit, one or more of the payments or benefits to which
the Participant is entitled that is not subject to Section 409A of the Code
shall be reduced until the Total Payments are deductible by the Company after
application of Section 280G of the Code.  Examples of payments or benefits that
are not subject to Section 409A and are therefore subject to reduction are
(1) the severance payment provided by Section 5.1(a) (Retention Benefits –
Severance Pay), (2) the Officer Incentive Plan payment due pursuant to Section
5.1(b) (Retention Benefits – Officer Incentive Plan), (3) the supplemental
retirement benefits due pursuant to Section 5.1(f) (Retention Benefits –
Supplemental Retirement Benefits), and (4) the continued life and accidental
death and dismemberment insurance benefits due pursuant to Section 5.1(e)
(Retention Benefits – Life and Accidental Death and Dismemberment Insurance
Benefits).  For purposes of this limitation:
 
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(1) No portion of the Total Payments shall be taken into account which, in the
opinion of the Consultant does not constitute a “parachute payment” within the
meaning of Section 280G(b)(2) of the Code;
 
(2) A payment shall be reduced only to the extent necessary so that the Total
Payments constitute reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code or are otherwise not
subject to disallowance as deductions, in the opinion of the Consultant; and
 
(3) The value of any non-cash benefit or any deferred payment of benefit
included in the Total Payments shall be determined in accordance with Section
280G of the Code and the regulations issued thereunder.
 
(i) Effect of Section 3.2 on Cap on Benefits.  For a period of twenty-four (24)
months following the Effective Date, if a Participant’s capped benefits under
this Plan are less than the benefits payable under the provisions of the Plan
document in effect prior to the Effective Date, pursuant to Section 3.2
(Reversion to Prior Provisions of the Plan), Section 5.5(h) (Tax Gross-Up – Cap
on Benefits) shall be disregarded.  In such instance, the Participant shall be
entitled to a grossed up benefit in accordance with the remaining provisions of
this Section.  All benefits shall be paid at such times and forms as provided in
this Plan document.
 
5.6 Additional Benefits Under Other Plans.  Additional benefits may be provided
to Participants upon a Change in Control through other programs sponsored by the
Company.
 
ARTICLE VI
PLAN ADMINISTRATION
 
6.1 Plan Administration.  The Committee shall administer the Plan.  The
Committee shall be the “Named Fiduciary” for purposes of ERISA and shall have
the authority to control, interpret and construe the Plan and manage the
operations thereof.  Any such interpretation and construction of any provisions
of this Plan by the Committee shall be final.  The Committee shall, in addition
to the foregoing, exercise such other powers and perform such other duties as it
may deem advisable in the administration of the Plan.  The Committee may
delegate some (or all) of its authority hereunder to the PNMR Services Company
Benefits Department.  The Committee also may engage agents and obtain other
assistance from the Company, including Company counsel.  The Committee shall not
be responsible for any action taken or not taken on the advice of legal
counsel.  The Committee is given specific authority to allocate and revoke
responsibilities among its members or designees.  When the Committee has
allocated authority pursuant to the foregoing, the Committee shall not be liable
for the acts or omissions of the party to whom such responsibility has been
allocated, except to the extent provided by law.
 
6.2 Claims Procedures.
 
(a) Initial Claim.  A claim for benefits under this Plan must be submitted to
the senior human resources officer of PNM Resources (the “Human Resources
Officer”).  If the claimant is the Human Resources Officer, a claim for benefits
under this Plan must be submitted to the Chief Executive Officer of PNM
Resources and the term “Human Resources Officer” as used in paragraph (1) below
shall be replaced with the term “Chief Executive Officer.”
 
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(1) Notice of Decision.  Written notice of the disposition of the claim shall be
furnished to the claimant within a reasonable period of time, but not later than
ninety (90) days after receipt of the claim by the Human Resources Officer,
unless the Human Resources Officer determines that special circumstances require
an extension of time for processing the claim.  If the Human Resources Officer
determines that an extension is required, written notice (including an
explanation of the special circumstances requiring an extension and the date by
which the Human Resources Officer expects to render the benefits determination)
shall be furnished to the claimant prior to the termination of the original
ninety (90) day period.  In no event shall such extension exceed a period of
ninety (90) days from the end of the initial ninety (90) day period.  If the
claim is denied, the notice required pursuant to this Section shall set forth
the following:
 
(i) The specific reason or reasons for the adverse determination;
 
(ii) Special reference to the specific Plan provisions upon which the
determination is based;
 
(iii) A description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or
information is necessary; and
 
(iv) An explanation of the Plan’s appeal procedure and the time limits
applicable to an appeal, including a statement of the claimant’s right to bring
a civil action under Section 502(a) of ERISA.
 
(b) Appeal Procedures.  Every claimant shall have the right to appeal an adverse
benefits determination to the Committee (including, but not limited to, whether
the Participant’s termination was for Cause).  Such appeal may be accomplished
by a written notice of appeal filed with the Committee within sixty (60) days
after receipt by the claimant of written notification of the adverse benefits
determination.  Claimants shall have the opportunity to submit written comments,
documents, records, and other information relating to the claim for
benefits.  Claimants will be provided, upon request and free of charge,
reasonable access to, and copies of, all documents, records and other
information relevant to the claimant’s claim for benefits, such relevance to be
determined in accordance with Section 6.2(c) (Claims Procedures – Definition of
Relevant) below.  The appeal shall take into account all comments, documents,
records, and other information submitted by claimant relating to the claim,
without regard to whether such information was submitted or considered in the
initial benefit determination.
 
(1) Notice of Decision.  Notice of a decision on appeal shall be furnished to
the claimant within a reasonable period of time, but not later than sixty (60)
days after receipt of the appeal by the Committee unless the Committee
determines that special circumstances (such as the need to hold a hearing if the
Committee determines that a hearing is required) require an extension of time
for processing the claim.  If the Committee determines that an extension is
required, written notice (including an explanation of the special circumstances
requiring an extension and the date by which the Committee expects to render the
benefits determination) shall be furnished to the claimant prior to the
termination of the original sixty (60) day period.  In no event shall such
extension exceed a period of sixty (60) days from the end of the initial sixty
 
17

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(60) day period.  The notice required by the first sentence of this Section
shall be in writing, shall be set forth in a manner calculated to be understood
by the claimant and, in the case of an adverse benefit determination, shall set
forth the following:
 
(i) The specific reason or reasons for the adverse determination;
 
(ii) Reference to the specific Plan provisions upon which the determination is
based;
 
(iii) A statement that the claimant is entitled to receive, upon request and
free of charge, reasonable access to, and copies of, all documents, records, and
other information relevant to the claimant’s claim for benefits, such relevance
to be determined in accordance with Section 6.2(c) (Claims Procedures –
Definition of Relevant), below; and
 
(iv) An explanation of the claimant’s right to bring a civil action under
Section 502(a) of ERISA following an adverse benefit determination on appeal.
 
(c) Definition of Relevant.  For purposes of this Section, a document, or other
information shall be considered “relevant” to the claimant’s claim if such
document, record or other information:
 
(1) Was relied upon in making the benefit determination;
 
(2) Was submitted, considered or generated in the course of making the benefit
determination, without regard to whether such document, record or other
information was relied upon in making the benefit determination; or
 
(3) Demonstrates compliance with the administrative processes and safeguards
required pursuant to this Section 6.2 on making the benefit determination.
 
(d) Decisions Final; Procedures Mandatory.  To the extent permitted by law, a
decision on review or appeal shall be binding and conclusive upon all persons
whomsoever.  To the extent permitted by law, completion of the claims procedures
described in this Section shall be a mandatory precondition that must be
complied with prior to commencement of a legal or equitable action in connection
with the Plan by a person claiming rights under the Plan.  The Committee may, in
its sole discretion, waive these procedures as a mandatory precondition to such
an action.
 
(e) Time For Filing Legal Or Equitable Action.  Any legal or equitable action
filed in connection with the Plan by a person claiming rights under the Plan
must be commenced not later than the earlier of:  (1) the shortest applicable
statute of limitations provided by law; or (2) two (2) years from the date the
written copy of the Committee’s decision on review is delivered to the claimant
in accordance with Section 6.2(b)(1) (Claims Procedures – Appeal Procedures –
Notice of Decision).
 
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ARTICLE VII
SUCCESSORS, BINDING AGREEMENT
 
7.1 Successors.  PNM Resources will negotiate to require any independent
successor to all or substantially all of the assets of PNM Resources to provide
written confirmation, within thirty (30) days of the effective date of the
Change in Control, of its agreement to assume and perform the Company’s
obligations pursuant to this Plan.  The failure of a successor to assume and
perform the Company’s obligations pursuant to the Plan shall constitute a
material breach of the Plan by the Company.
 
7.2 Binding Agreement.  Subject to the right of PNM Resources to amend or
terminate this Plan, and the Committee’s right to interpret this Plan, this Plan
shall be for the benefit of and be enforceable by, a Participant’s personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
 
ARTICLE VIII
NOTICE
 
8.1 General.  For the purpose of this Plan, and except as specifically set forth
herein, notices and all other communications provided for in the Plan shall be
in writing and shall be deemed to have been duly given when hand-delivered or
mailed by United States certified mail, return receipt requested, postage
prepaid, addressed to the Participant at his or her last known address, and to
the Company at Alvarado Square, Albuquerque, New Mexico, 87158, provided that
all notices to the Company shall be directed to the attention of the Secretary
of PNM Resources; or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
 
ARTICLE IX
AMENDMENT AND TERMINATION
 
9.1 Amendment and Termination.  The Plan may be amended, in whole or in part, or
terminated at any time, by PNM Resources, subject to the following exceptions:
 
(a) No amendment or termination of this Plan shall impair or abridge the
obligations of the Company already incurred.
 
(b) No amendment or termination of this Plan shall affect the rights of a
Participant who terminated employment before the effective date of such
amendment or termination and who subsequently satisfied the eligibility
provisions of this Plan.
 
(c) If a Change in Control occurs within twenty-four (24) months following the
later of the adoption or effective date of the amendment or termination of the
Plan, or during the Protection Period triggered by that Change in Control, the
amendment or termination shall be disregarded and this Plan will revive and
continue for the Protection Period to the extent that such amendment or
termination impairs or abridges the rights or benefits of an employee of the
Company who was a Participant upon the effective date of such Plan amendment or
termination.  Notwithstanding the foregoing, all changes made in order to comply
with Section 409A of the Code shall remain in effect.
 
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(d) If the Protection Period has begun, the Plan shall continue and may not be
terminated during the Protection Period.
 
(e) Notwithstanding the foregoing, the Plan may be amended at will at any time
and from time to time by PNM Resources to reflect changes necessary due to
revisions to, or interpretations of:  (1) ERISA, as amended; (2) Sections 280G,
409A or 4999 of the Code; or (3) any other provision of applicable state or
federal law.
 
(f) Notwithstanding any provision of this Plan to the contrary, no amendment may
be made if it will result in a violation of Section 409A of the Code and any
such amendment shall at no time have any legal validity.
 
ARTICLE X
MISCELLANEOUS
 
10.1 Governing Law.  The laws of the State of New Mexico shall govern the
validity, interpretation, construction and performance of this Plan, except to
the extent preempted by federal law.
 
10.2 Withholding.  Any payments provided for hereunder shall be paid subject to
any applicable withholding required under federal, state or local law.
 
10.3 No Right of Assignment.  Neither a Participant nor any person taking on
behalf of a Participant may anticipate, assign or alienate (either by law or
equity) any benefit provided under the Plan and the Company shall not recognize
any such anticipation, assignment or alienation.  Furthermore, to the extent
permitted by law, a benefit under the Plan is not subject to attachment,
garnishment, levy, execution or other legal or equitable process.
 
10.4 Survival of Rights.  In addition to the limitations on termination of this
Plan set forth in Section 9.1 (Amendment and Termination), any obligations of
the Company to make payments that have been due to Participants who have, at the
time of expiration of the Plan, satisfied the eligibility requirements pursuant
to Articles IV (Eligibility for Retention Benefits) and V (Retention Benefits)
above during the term hereof, shall survive the termination of this Plan.
 
10.5 No Employment Contract.  Notwithstanding anything to the contrary contained
in this Plan, by the execution of this Plan the Company does not intend to
change the employment-at-will relationship with any of its employees.  Instead,
the Company retains its absolute right to terminate any employee at any time,
for any or no reason and without notice.  
 
10.6 Mitigation of Benefits.  A Participant shall not be required to mitigate
the amount of payment provided for in Article V (Retention Benefits) by seeking
other employment or otherwise, nor, except as specifically provided in Article V
(Retention Benefits), shall the amount of any payment or benefit provided for in
Article V (Retention Benefits) be reduced by:  (a) any compensation earned by
the Participant as the result of employment by another employer; (b) by
retirement benefits; or (c) offsets against any amount claimed to be owed by the
Participant to the Company.
 
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10.7 Service of Process.  The Secretary of PNM Resources shall be the agent for
service of process in matters relating to this Plan.
 
10.8 Headings.  The headings and subheadings in this Plan are inserted for
convenience and reference only and are not to be used in construing this Plan or
any provision hereof.
 
10.9 Gender and Number.  Where the context so requires, words in the masculine
gender shall include the feminine and neutral genders, the plural shall include
the singular, and the singular shall include the plural.
 
10.10 ERISA Plan.  This Plan shall be interpreted as, and is intended to qualify
as, a severance pay plan under ERISA, and therefore does not constitute an
employee pension benefit plan pursuant to Section 3(2) of ERISA.
 
10.11 Validity.  The invalidity or unenforceability of any provision of this
Plan shall not affect the validity or enforceability of any other provision of
this Plan, which shall remain in full force and effect.
 
10.12 Compliant Operation and Interpretation.  This Plan shall be operated in
compliance with Section 409A or an exception thereto and each provision of this
Plan shall be interpreted, to the extent possible, to comply with Section 409A
or to qualify for an exception thereto.  
 
10.13 Adoption by Affiliates.  
 
(a) An Affiliate, by action of its board of directors, may adopt the Plan with
respect to its Officers only with the approval of the Board.
 
(b) Except as otherwise clearly indicated by the context (such as in the
definitions of Affiliate, Board, Change in Control and Committee) the term
“Company” as used herein shall include each Affiliate that has adopted this Plan
in accordance with this Section 10.13 but not any Affiliate that has not adopted
this Plan.
 
(c) By adopting the Plan, the Affiliate shall be deemed to have agreed to:
 
(1) Assume the obligations and liabilities imposed upon it by the Plan with
respect to the its Officers;
 
(2) Comply with all of the terms and provisions of the Plan;
 
(3) Delegate to the Committee the power and responsibility to administer the
Plan with respect to the Affiliate’s Officers;
 
(4) Delegate to PNM Resources, Inc. the full power to amend or terminate the
Plan with respect to the Affiliate’s Officers; and
 
21

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(5) Be bound by any action taken by PNM Resources pursuant to the terms and
provisions of the Plan, regardless of whether such action is taken with or
without the consent of the Affiliate.
 
(d) Any Affiliate that has adopted this Plan for the benefit of its Officers may
terminate its adoption of the Plan by action of its board of directors and
timely providing notice to PNM Resources of such termination.
 
(e) PNM Resources and each participating Affiliate shall bear the costs and
expenses of providing benefits to their respective Officers who are
Participants.  Such costs and expenses shall be allocated among PNM Resources
and participating Affiliates in accordance with agreements entered into between
PNM Resources and any participating Affiliate, or in the absence of such an
agreement, procedures adopted by PNM Resources.
 
IN WITNESS WHEREOF, the Company has caused this Plan document to be executed by
its duly authorized representative on this 2nd day of September, 2008.
 
PNM RESOURCES, INC.
 
 
By:  /s/ Alice A.
Cobb                                                                
         Its: SVP, Chief Administrative Officer
 

 
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TABLE OF CONTENTS
 
Page
ARTICLE I
PURPOSE
 
1.1
General 
1

 
ARTICLE II
DEFINITIONS
 
2.1
General 
2

 
2.2
Other Defined Terms 
7

 
ARTICLE III
TERM OF PLAN
 
3.1
Term of Plan 
7

 
3.2
Reversion to Prior Provisions of the Plan 
7

 
ARTICLE IV
ELIGIBILITY FOR RETENTION BENEFITS
 
4.1
Eligibility to Participate 
7

 
4.2
Eligibility for Benefits 
7

 
4.3
Release Agreement 
8

 
4.4
No Duplication of Benefits 
9

 
ARTICLE V
RETENTION BENEFITS
 
5.1
Retention Benefits 
9

 
5.2
 Payment Form and Date; Section 409A Compliance Strategy
10

 
5.3
Reimbursement of Legal Fees 
13

 
5.4
Offsetting Benefits 
13

 
5.5
Tax Gross-Up 
13

 
5.6
Additional Benefits Under Other Plans 
16

 
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TABLE OF CONTENTS
(continued)
 
 
ARTICLE VI
PLAN ADMINISTRATION
 
6.1
Plan Administration 
16

 
6.2
Claims Procedures 
16

 
ARTICLE VII
SUCCESSORS, BINDING AGREEMENT
 
7.1
Successors 
19

 
7.2
Binding Agreement 
19

 
ARTICLE VIII
NOTICE
 
8.1
General 
19

 
ARTICLE IX
AMENDMENT AND TERMINATION
 
9.1
Amendment and Termination 
19

 
ARTICLE X
MISCELLANEOUS
 
10.1
Governing Law 
20

 
10.2
Withholding 
20

 
10.3
No Right of Assignment 
20

 
10.4
Survival of Rights 
20

 
10.5
No Employment Contract 
20

 
10.6
Mitigation of Benefits 
20

 
10.7
Service of Process 
21

 
10.8
Headings 
21

 
10.9
Gender and Number 
21

 
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TABLE OF CONTENTS
(continued)
 
 
10.10
ERISA Plan
21

 
10.11 
Validity
21

 
10.12 
Compliant Operation and Interpretation
21

 
10.13 
Adoption by Affiliates
21

 

 

 

                                                                  
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