Exhibit
10.5




PNM
RESOURCES, INC.




AFTER-TAX
RETIREMENT PLAN





PNM
RESOURCES, INC.


AFTER-TAX
RETIREMENT PLAN




PREAMBLE




PNM
Resources, Inc. (the “Company”) sponsors the PNM Resources, Inc. Executive
Savings Plan II (“ESP II”).  The purpose of ESP II is to permit
certain key employees of the Company and its Affiliates who participate in the
PNM Resources, Inc. Retirement Savings Plan (the “RSP”) to defer compensation on
a pre-tax basis and to receive credits without reference to the limitations on
contributions in the RSP or those imposed by the Internal Revenue Code of 1986,
as amended (the “Code”).




The
purpose of this PNM Resources, Inc. After-Tax Retirement Plan (the “Plan”) is to
allow the employees who are otherwise eligible to participate in ESP II to save,
instead, on an after-tax basis.  Since all savings under the Plan are
made on an after-tax basis, the Plan is not subject to the requirements of
Section 409A of the Code.  In addition, since the employees will
receive all amounts due currently, and will not in any way defer the receipt of
the compensation payable pursuant to the Plan until the termination of their
employment with the Company, the Plan is not subject to the requirements of the
Employee Retirement Income Security Act of 1974 (“ERISA”).




Except as
noted below, the Plan will be effective as of January 1, 2009 (the
“Effective Date”).




ARTICLE
I


DEFINITIONS




1.1  General.  When
a word or phrase appears in this Plan document with the initial letter
capitalized, and the word or phrase does not begin a sentence, the word or
phrase shall generally be a term defined in this Article I.  The
following words and phrases used in this Plan document with the initial letter
capitalized shall have the meanings set forth in this Article I, unless a
clearly different meaning is required by the context in which the word or phrase
is used or the word or phrase is defined for a limited purpose elsewhere in this
Plan document:




(a)  “Account” means the money market or
other account owned by a Participant into which will be deposited any Payroll
Savings directed by the Participant and any amounts contributed by the Company
on behalf of the Participant pursuant to this Plan.




(b)  “Adopting
Affiliate” means
any Affiliate of the Company that has been authorized by the Board of Directors
to adopt the Plan and which has adopted the Plan in accordance with
Section 2.4 (Adoption by
Affiliates).  All Affiliates that are currently “Adopting
Affiliates” under the ESP II as of the date of the execution of this Plan will
be considered to be Adopting Affiliates under this Plan.




(c)  “Affiliate” means (1) a corporation
which is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as is the Company, and (2) any
other trade or business (whether or not incorporated) controlling,







controlled
by, or under common control with the Company (within the meaning of Section
414(c) of the Code).




(d)  “Benefits
Department” means
the organizational unit of PNMR Services Company with responsibility for
administering benefit programs sponsored by PNM Resources and its
Affiliates.




(e)  “Benefits
Governance Committee” means the Benefits
Governance Committee or its successor appointed by the Company.




(f)  “Board” or “Board of
Directors” means
the Board of Directors of the Company, or any authorized committee of the
Board.




(g)  “Change in
Control” shall
have the meaning ascribed to that term in the Retention Plan in which the
Participant participates (i.e., the Officer Retention
Plan or the Employee Retention Plan).




(h)  “Code” means the Internal Revenue
Code of 1986, as amended from time to time, and any regulations promulgated
thereunder.




(i)  “Company” means PNM Resources, Inc.,
and, to the extent provided in Section 9.4 (Successors) below,
any successor corporation or other entity resulting from a merger or
consolidation into or with the Company or a transfer or sale of substantially
all of the assets of the Company.




(j)  “Compensation” for purposes of determining
the Matching and Standard Contributions, means the Participant’s base salary and
other elements of compensation that are considered under the RSP (as it may be
amended from time to time) for purposes of calculating the Participant’s RSP
Employer and Matching Contributions, respectively.  For purposes of
determining the amount of a Participant’s permissible Payroll Savings,
“Compensation” means the Participant’s base salary and other elements of
compensation that are considered under the RSP (as it may be amended from time
to time) for purposes of calculating the Participant’s “Before Tax
Contributions,” as such term is defined in the RSP.




(k)  “Disability”or“Disabled” means that a Participant is,
by reason of any medically determinable physical or mental impairment that can
be expected to result in death or can be expected to last for a continuous
period of not less than 12 months, receiving income replacement benefits for a
period of not less than 3 months under the Company’s long term disability
plan.  Any determination of Disability pursuant to the Plan is not an
admission by the Company or the Adopting Affiliate that employs the Participant
that a Participant is disabled under federal or state law.




(l)  “Discretionary
Contributions”
means the Discretionary Contributions made on a Participant’s behalf in
accordance with Section 3.4 (Discretionary
Contributions).




(m)  “Effective
Date” means
January 1, 2009.




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(n)  “Eligible
Officer” means a
Participant who (1) occupies the position of Senior Vice President or higher of
the Company, (2) has completed at least three Months of Service, and
(3) has been selected by the Plan Administrator with the advance consent of
the Human Resources and Compensation Committee to receive a Supplemental
Contribution.




(o)  “Employee
Retention Plan”
means the PNM Resources, Inc. Employee Retention Plan, as it may be amended or
replaced from time to time.




(p)  “ESP
II” means the PNM
Resources, Inc. Executive Savings Plan II.




(q)  “Human
Resources and Compensation Committee” means the Human Resources
and Compensation Committee of the Board or its successor.




(r)  “Matching
Contributions”
means the Matching Contributions made on behalf of a Participant in accordance
with Section 3.2(a) (Matching and Standard
Contributions – Matching Contribution).




(s)  “Month of
Service” means a
calendar month during which a Participant performs services for the Company or
an Adopting Affiliate on one or more days.  If the Participant’s
employment with the Company or an Adopting Affiliate includes a break in
employment, then only the Months of Service in the last period of employment
will be considered Months of Service.




(t)  “Normal
Retirement Date”
means the date on which a Participant attains the age of 62 years.




(u)  “Officer
Retention Plan”
means the PNM Resources, Inc. Officer Retention Plan, as it may be amended or
replaced from time to time.




(v)  “Participant” means, for a particular Plan
Year, an employee of the Company or any Adopting Affiliate who is eligible to
participate as determined pursuant to Section 2.1 (Eligible Employees)
and who has elected to participate pursuant to Section 2.2 (Election to
Participate) for the Plan Year in question.  An individual’s
status as a Participant is determined separately for each Plan
Year.




(w)  “Payroll
Savings” means
the payroll savings made by a Participant in accordance with Section 3.1
(Payroll
Savings).




(x)  “Payroll
Savings Agreement” means the written agreement
described in Section 3.1(a) (Payroll Savings – Payroll
Savings Agreement) that is entered into by a Participant pursuant to this
Plan.




(y)  “Plan” means the PNM Resources,
Inc. After-Tax Retirement Plan.




(z)  “Plan
Administrator”
means the Company.  Any action to be taken by the Plan Administrator
may be taken by the Company’s senior human resources officer.  In
addition, the Company’s senior human resources officer may delegate such
authority to the Benefits Department.




3


(aa)  “Plan
Year” means the
calendar year.




(bb)  “RSP” means the PNM Resources,
Inc. Retirement Savings Plan, as it may be amended from time to
time.




(cc)  “RSP
Employer Contribution” means “Discretionary
Contributions,” as such term is defined in the RSP.




(dd)  “Separation
from Service”
means either (1) the termination of a Participant’s employment with the
Company and all Affiliates due to death, retirement or other reasons, or
(2) a permanent reduction in the level of bona fide services the
Participant provides to the Company and all Affiliates to an amount that is 20%
or less of the average level of bona fide services the Participant provided to
the Company and all 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 the
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 the Participant’s right to reemployment with the Company or an
Affiliate is provided either by statute or contract).  If the
Participant’s period of leave exceeds six months and the 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.




(ee)  “Standard
Contributions”
means the Standard Contributions made on behalf of a Participant in accordance
with Section 3.2(b) (Matching and Standard
Contributions – Standard Contribution).




(ff)  “Supplemental
Contributions”
means the Supplemental Contributions made on behalf of an Eligible Officer in
accordance with Section 3.3 (Supplemental
Contributions).




1.2  Construction.  The
masculine gender, when appearing in the Plan, shall include the feminine gender
(and vice versa), and the singular shall include the plural, unless the contract
clearly states to the contrary.  Headings and subheadings are for the
purpose of reference only and are not to be considered in the construction of
this Plan.  If any provision of this Plan is determined to be for any
reason invalid or unenforceable, the remaining provisions shall continue in full
force and effect.  All of the provisions of this Plan shall be
construed and enforced according to the laws of the State of New Mexico and
shall be administered according to the laws of such state, except as otherwise
required by Federal law.




4


ARTICLE
II


ELIGIBILITY AND
PARTICIPATION; ADOPTION BY AFFILIATES




2.1  Eligible
Employees.  Any employee who is classified as an “officer” of
the Company or an Adopting Affiliate shall be eligible to participate in the
Plan for a particular Plan Year.  For this purpose, an “officer” is
someone who occupies the position of Vice President or higher.  The
Plan Administrator, in the exercise of its discretion, and with the concurrence
of the Human Resources and Compensation Committee and/or the Board of Directors,
also may designate any other employee of the Company or an Adopting Affiliate as
eligible to participate in the Plan for a particular Plan Year if the Plan
Administrator concludes, in the exercise of its discretion, that the employee
should be allowed to participate in the Plan.




2.2  Election
to Participate.  In order to participate in the Plan for a
particular Plan Year, an otherwise eligible employee (as determined in
accordance with Section 2.1 (Eligible Employees))
must elect to participate in the Plan for that Plan Year in accordance with such
procedures as may be prescribed by the Plan Administrator.  An
eligible employee may not elect to participate in this Plan for a particular
Plan Year if the eligible employee has elected to participate in the ESP II for
that Plan Year.  If an eligible employee has not elected to
participate in the ESP II for a Plan Year, the eligible employee shall be deemed
to have elected to participate in this Plan for the Plan
Year.




2.3  Discontinuance
of Participation.  The Plan Administrator may discontinue a
Participant’s participation in the Plan at any time, in the exercise of its
discretion.  If an individual’s participation is discontinued, the
individual will no longer be eligible to direct Payroll Savings or receive
contributions under this Plan.




2.4  Adoption
by Affiliates.  An employee of an Affiliate may not become a
Participant in the Plan unless the Affiliate has previously adopted the
Plan.  An Affiliate of the Company may adopt this Plan only with the
approval of the Board.  By adopting this Plan, the Affiliate shall be
deemed to have agreed to assume the obligations and liabilities imposed upon it
by this Plan, agreed to comply with all of the other terms and provisions of
this Plan, delegated to the Plan Administrator, the Benefits Department, the
Benefits Governance Committee, and the Human Resources and Compensation
Committee the power and responsibility to administer this Plan with respect to
the Affiliate’s employees, and delegated to the Company the full power to amend
or terminate this Plan with respect to the Affiliate’s employees.




ARTICLE
III


PAYROLL SAVINGS AND COMPANY
CONTRIBUTIONS




3.1  Payroll
Savings.




(a)  Payroll
Savings Agreement.  In order to save through payroll
deductions, a Participant must execute a Payroll Savings Agreement in the form
prescribed by the Benefits Department from time to time.  The Payroll
Savings Agreement shall be delivered to the Benefits Department by the time
specified in Section 3.1(c) (Payroll Savings – Timing of
Elections).  If a Participant does not complete a Payroll
Savings Agreement, the Participant shall be deemed to have elected not to make
Payroll Savings for the relevant Plan Year.






5


(b)  Amount.  In
the Payroll Savings Agreement, the Participant shall direct the Company to
deduct from his or her Compensation, after taxes and other deductions, a portion
(designated in whole percentages and subject to such limitations as may be
prescribed by the Plan Administrator) of the Compensation otherwise payable to
him or her by the Company or an Adopting Affiliate in the relevant Plan
Year.  The amount of the Participant’s Payroll Savings shall be
transmitted to the Participant’s Account as promptly as possible following the
day on which the Compensation is payable.




(c)  Timing of
Elections.  As a general rule, the Payroll Savings Agreement
shall be signed by the Participant and delivered to the Benefits Department
prior to the beginning of the Plan Year in which the Compensation to be saved is
otherwise payable to the Participant.  The Payroll Savings Agreement
will be effective for a single Plan Year.  A new Payroll Savings
Agreement will be required if the eligible employee chooses to be a Participant
and to make Payroll Savings in any later year.  For the Plan Year in
which an eligible employee first becomes eligible to participate in the Plan,
the eligible employee may elect to make Payroll Savings from Compensation
payable with respect to services to be performed subsequent to the date of the
election by signing and delivering a Payroll Savings Agreement within 30 days
after the date the eligible employee becomes eligible to participate in the
Plan.  An election made by a Participant shall be irrevocable with
respect to the Plan Year covered by the election.




3.2  Matching
and Standard Contributions.  For any Plan Year, the Company may
make a Matching or Standard Contribution to the Account of a Participant in
accordance with the provisions of this Section.  The Matching or
Standard Contribution is in lieu of any Matching or Standard Credits pursuant to
the ESP II, since the employee must decline to participate in ESP II in order to
participate in this Plan for any Plan Year.




(a)  Matching
Contribution.  The Matching Contribution shall be in an amount
equal to 75% of the first six percent of Compensation saved by the Participant
through Payroll Savings pursuant to the Plan.  A Participant shall be
eligible to receive a Matching Contribution under this Plan only if such
Participant has met the service requirements necessary to receive a “Matching
Contribution” as such term is defined in the RSP for that Plan
Year.




(b)  Standard
Contribution.  The Standard Contribution shall be in an amount
equal to (i) the RSP Employer Contribution that would have been made on the
Participant’s behalf to the RSP for the Plan Year if the contributions were not
limited by the Code (including, particularly, the limitations imposed by
Sections 401(a)(17) and 415 of the Code), reduced by (ii) the RSP
Employer Contribution actually made to the RSP on behalf of the Participant for
the Plan Year.  A Participant shall be eligible to receive a Standard
Contribution under this Plan only if such Participant has met the service
requirements necessary to receive RSP Employer Contributions for that Plan
Year.




3.3  Supplemental
Contributions.




(a)  General
Rule.  For any Plan Year, the Company also may make a
Supplemental Contribution to the Account of an Eligible Officer who has elected
to participate in this Plan for that Plan Year.  The Supplemental
Contribution shall be made in accordance with the provisions of this
Section.  The Supplemental Contribution is in lieu of any Supplemental




6


Credits
pursuant to the ESP II for the same Plan Year, since the Eligible Officer must
decline to participate in ESP II in order to participate in this Plan for any
Plan Year.




(b)  Amount.  The
Supplemental Contribution shall be an amount calculated by the Plan
Administrator to be necessary to provide the Eligible Officer with retirement
income equal to a specified percentage (the “Replacement Income Percentage”) of
the Eligible Officer’s anticipated pre-retirement income.  The
relevant Replacement Income Percentage will be determined by the Plan
Administrator, with the advance advice and consent of the Human Resources and
Compensation Committee, and will be set forth in a letter or other written
instrument provided by the Plan Administrator to the Eligible
Officer.  The Replacement Income Percentage may be modified from time
to time in the same manner.  In determining the Replacement Income
Percentage for a particular Eligible Officer, the Plan Administrator, and the
Human Resources and Compensation Committee, will act in their discretion and
will not be bound by the Replacement Income Percentage determined for any other
current or former Eligible Officer.




(c)  Determination
of Supplemental Contribution.  The Plan Administrator’s
calculation of the Supplemental Contribution shall be made on the basis of
advice received by an actuarial or other consultant retained by the Plan
Administrator and with the advice and consent of the Human Resources and
Compensation Committee.  In determining the amount of the Supplemental
Contributions necessary to achieve the desired Replacement Income Percentage,
anticipated retirement income from the following sources shall be
considered:  (1) amounts attributable to Company contributions to
this Plan (including earnings on such amounts); (2) amounts attributable to
Company contributions to the RSP (including earnings on such amounts);
(3) benefits provided pursuant to the PNM Resources, Inc. Employees’
Retirement Plan; (4) benefits provided pursuant to ESP II and any
supplemental employee retirement plans or agreements (“SERPs”) entered into by
the Eligible Officer and the Company or an Affiliate; (5) benefits provided
pursuant to the Social Security Act; and (6) amounts provided pursuant to
other employers’ benefit plans.  When determining the amount of the
Supplemental Contributions, the Plan Administrator shall use actuarial
assumptions (interest and mortality), compensation assumptions, rate of return
assumptions and such other assumptions as it deems appropriate.  The
Plan Administrator will review these assumptions periodically and may change
these assumptions as it deems appropriate.  The assumptions used will
have a significant impact on the amount of the Supplemental
Contributions.  Because these assumptions (and the Replacement Income
Percentage) may be altered at any time as described above, no Eligible Officer
will have a contractual or other right to any particular level or amount of
Supplemental Contributions for any Plan Year until such Supplemental
Contribution is actually declared and transmitted to the Eligible Officer’s
Account.




(d)  Termination
During the Plan Year.  An Eligible Officer must be employed on
December 1 of the relevant Plan Year in order have any right to receive the
Supplemental Contribution called for by this Section 3.3 (Supplemental
Contributions) for that Plan Year.  (In most instances, the
Eligible Officer also must be employed on the date on which the Supplemental
Contribution will vest, as provided in paragraph
(e).)  Notwithstanding the foregoing, if an Eligible Officer Separates
from Service before December 1 of any Plan Year due to (1) Separation
from Service after reaching Normal Retirement Date; (2) Disability; or
(3) death of the Eligible Officer, the Eligible Officer shall receive a
pro-rata Supplemental




7


Contribution
(considering the time elapsed between December 1 of the prior Plan Year and
the date of the Eligible Officer’s Separation from Service as compared to 365
days) within thirty (30) days of the Eligible Officer’s Separation from
Service.  For example, if an Eligible Officer terminates employment on
June 1, 2009 due to retirement, the Eligible Officer will receive 50% of
the Supplemental Contributions for the 2009 Plan Year and that amount will be
credited to the Eligible Officer’s Account by July 1, 2009.




(e)  Time of
Payment.  Except as provided in paragraph (d) above, the
Company shall make the Supplemental Contribution to the Eligible Officer’s
Account as of the later of December 1 of the relevant Plan Year or the date
on which the Supplemental Contributions for that Plan Year will
vest.  The Supplemental Contributions for a Plan Year will vest at the
times determined pursuant to Section 4.2 (Vesting of the Supplemental
Contributions).




(f)  Earnings.  From
December 1 of the relevant Plan Year until the Supplemental Contributions for
that Plan Year vest in accordance with Section 4.2 (Vesting of the Supplemental
Contributions), such Supplemental Contributions shall be adjusted for
interest using an interest rate equal to 120% of the long-term Applicable
Federal Rate (or “AFR”) for the month of December of the relevant Plan Year, as
determined by the Internal Revenue Service pursuant to Section 1274(d) of the
Code, compounded annually.




3.4  Discretionary
Contributions.  In its sole and absolute discretion, the Human
Resources and Compensation Committee may instruct the Plan Administrator to
cause the Company to make a Discretionary Contribution to a Participant’s
Account at any time during a Plan Year in any amount that the Human Resources
and Compensation Committee deems appropriate and on such terms and conditions
(including deferred vesting provisions) as the Human Resources and Compensation
Committee deems appropriate.  If the Committee imposes deferred
vesting provisions on all or part of the Discretionary Contributions, the
Contributions will not be made until the vesting conditions have been
satisfied.




3.5  Special
Change In Control Provisions.  If a Change in Control occurs
during a Plan Year for which a Participant has elected to participate in this
Plan and the Participant is entitled to receive retention benefits under the
Officer Retention Plan or the Employee Retention Plan, such Participant also
shall be entitled to receive the following additional contributions under this
Plan:




(a)  Matching
and Standard Contributions.  The additional Matching and
Standard Contributions shall be in an amount equal to the Matching and Standard
Contributions made on behalf of the Participant in the prior Plan Year times the
applicable multiplier set forth in the Retention Plan in which the Participant
participates.  For example, if a Change in Control occurs on
July 1, 2009 and a Participant is eligible to receive benefits under the
Officer Retention Plan during 2009 as a “Class I Officer,” such Participant
shall receive Matching Contributions and Standard Contributions equal to three
times the Matching Contributions and three times the Standard Contributions that
were allocated to the Participant’s Account for 2008.  These
additional Matching Contributions and Standard Contributions will be made on the
day on which benefits are paid to the Participant pursuant to the Officer
Retention Plan or Employee Retention Plan, as applicable.  If a
Participant was not eligible to participate in the Plan or the




8


ESP II in
the prior Plan Year, such Participant’s Matching and Standard Contributions due
pursuant to this Section 3.5(a) shall be in the amounts set forth in paragraphs
(1) and (2) below.




(1)  Matching
Contribution.  A Participant who was not eligible to
participate in this Plan or the ESP II in the prior Plan Year shall receive a
Matching Contribution equal to the product of (i) such Participant’s annualized
Compensation for the current Plan Year, multiplied by (ii) the Participant’s
Payroll Savings percentage for the current Plan Year (not to exceed 6%),
multiplied by (iii) 75%, and then multiplied by (iv) the applicable multiplier
set forth in the Retention Plan in which the Participant
participates.  This additional Matching Contribution will be allocated
to the Participant’s Account on the day on which benefits are paid to the
Participant pursuant to the Officer Retention Plan or Employee Retention Plan,
as applicable.




(2)  Standard
Contribution.  A Participant who was not eligible to
participate in this Plan or the ESP II in the prior Plan Year also shall receive
a Standard Contribution equal to the product of (i) the RSP Employer
Contribution that would have been made on the Participant’s behalf to the RSP
for the current Plan Year, based on the Participant’s annualized Compensation,
if the contribution were not limited by the Code (including, particularly, the
limitations imposed by Sections 401(a)(17) and 415 of the Code), reduced by
(ii) the RSP Employer Contribution actually made to the RSP on behalf of
the Participant, annualized, and then multiplied by (iii) the applicable
multiplier set forth in the Retention Plan in which the Participant
participates.  This additional Standard Contribution will be allocated
to the Participant’s Account on the day on which benefits are paid to the
Participant pursuant to the Officer Retention Plan or Employee Retention Plan,
as applicable.




(b)  Supplemental
Contributions.  The additional Supplemental Contributions shall
be in an amount equal to the Supplemental Contributions made on behalf of the
Eligible Officer in the prior Plan Year times the applicable multiplier set
forth in the Officer Retention Plan.  If an Eligible Officer was not
eligible for Supplemental Contributions in the prior Plan Year, such Eligible
Officer’s Supplemental Contributions shall equal the amount of the Supplemental
Contributions determined by the Plan Administrator pursuant to Section 3.3
(Supplemental
Contributions) for the Plan Year in which the Change in Control occurs
times the applicable multiplier set forth in the Retention Plan in which the
Eligible Officer participates.  For example, if a Change in Control
occurs on July 1, 2010 and the Eligible Officer is eligible for benefits
under the Officer Retention Plan during 2010 as a “Class I Officer,” such
Eligible Officer shall receive a Supplemental Contribution that is equal to
three times the Supplemental Contributions that were allocated to the
Participant’s Account as of December 1, 2009.  These additional
Supplemental Contributions will be made as of the day on which benefits are paid
to the Eligible Officer pursuant to the Officer Retention Plan or Employee
Retention Plan, as applicable.




(c)  Coordination
with ESP II.  If the Eligible Officer was participating in ESP
II, rather than this Plan, during the prior Plan Year referred to in paragraph
(a) or (b), the Matching, Standard and Supplemental Contributions due pursuant
to paragraph (a) or (b) shall be determined with reference to the applicable
credit under the ESP II rather than the contribution made pursuant to this
Plan.  The additional contribution due pursuant to this Section is in
lieu of any similar credits pursuant to the ESP II, since the eligible employee
must decline to participate




9


in ESP II
in order to participate in this Plan for any Plan Year.  In
determining whether an eligible employee is entitled to receive contributions
pursuant to this Section rather than credits pursuant to ESP II, the determining
factor is whether the eligible employee is a Participant in this Plan rather
than ESP II for the Plan Year in which the Change of Control
occurs.  As a result, if the Change in Control occurs during a Plan
Year in which the eligible employee is a Participant in this Plan, the
contributions called for by this Section will be made to the Participant’s
Account in this Plan even if the Participant has elected to participate in ESP
II for the Plan Year in which the Separation from Service occurs.




3.6  Taxes.  All
contributions will be subject to all applicable tax and withholding
requirements.  In addition, all of the contributions described above
are expressed on a before tax basis.  The actual amounts contributed
will be net of applicable withholding.  For example, assume that the
Matching Contribution due to a Participant is $1,000 and that pursuant to the
Participant’s elections and applicable withholding requirements the Company is
required to withhold 20%.  The amount actually contributed to the
Participant’s Account will be $800.  The remaining $200 will be
withheld and remitted as required by applicable law.




3.7  Benefits
Not Contingent.  The Payroll Savings directed by and the
contributions made on behalf of any Participant under this Plan are not
increased or decreased to the extent a Participant makes or does not make
deferrals under the RSP.




3.8  Allocation
Among Affiliates.  Each Adopting Affiliate shall bear the costs
and expenses of providing benefits accrued by its employee-Participants during
periods while they are employed by that Adopting Affiliate.  Such
costs and expenses shall be allocated among the Adopting Affiliates in
accordance with (a) agreements entered into between the Company and any
Adopting Affiliate, or (b) in the absence of such an agreement, procedures
adopted by the Company.




ARTICLE
IV


VESTING




4.1  Vesting
in Payroll Savings, Matching Contributions, Standard Contributions and
Discretionary Contributions.  Each Participant shall at all
times be fully vested in his or her Payroll Savings and in any Matching
Contributions or Standard Contributions to which he or she is
entitled.  Consistent with Section 3.4 (Discretionary
Contributions), the Human Resources and Compensation Committee, in the
exercise of its discretion, may impose vesting conditions on all or part of the
Discretionary Contributions awarded to a Participant.




4.2  Vesting
of the Supplemental Contributions.  The Supplemental
Contributions for any Plan Year shall vest on a two-year cliff vesting
schedule.  For example, if an Eligible Officer elects to participate
in this Plan for the 2009 Plan Year, the Supplemental Contribution due for the
2009 Plan Year shall vest on December 1, 2011.




Notwithstanding
the foregoing, each Eligible Officer shall be fully vested in the Supplemental
Contribution due for a Plan Year on and after the first to occur of the
following events:




(a)  The
Eligible Officer’s attaining age 55 with two Years of Service;






10


(b)  The
Eligible Officer’s Normal Retirement Date;




(c)  The
Eligible Officer’s Disability;




(d)  The date
of death of the Eligible Officer;




(e)  The
termination (other than for “Cause”) or “Constructive Termination” of the
Eligible Officer’s employment by the Company following a Change in
Control.  For this purpose, the terms “Constructive Termination” and
“Cause” shall have the meanings ascribed to them under the Officer Retention
Plan; or




(f)  Any
earlier date determined by the Human Resources and Compensation Committee in its
sole and absolute discretion.




If an
Eligible Officer Separates from Service before becoming vested in his
Supplemental Contributions, the Eligible Officer’s Supplemental Contributions
under this Plan will be forfeited.




4.3  Vesting
in the Account.  Each Participant is the absolute owner of his
or her Account.  As a result, no contributions will be made to a
Participant’s Account until those contributions are vested in accordance with
this Article.




ARTICLE
V


THE
ACCOUNT




5.1  Selection
of Financial Institution.  The Account shall be established
with a financial institution selected by the Plan Administrator.  The
Plan Administrator may change the financial institution, from time to time, in
the exercise of its discretion.  The change may apply to future
contributions only or it may also entail the transfer of amounts from one
financial institution to another.




5.2  Ownership
of the Account.  The Account will be opened in the name of the
Participant and shall be owned by the Participant.  The Company shall
not have any interest in the Account.




5.3  Cooperation.  The
Benefits Department will facilitate the opening of the Account, but each
Participant, as a condition of participation, must cooperate fully with the
Benefits Department by signing any necessary forms and taking any other action
requested by the Benefits Department.




5.4  Type of
Account.  The Benefits Department will determine the type of
account (e.g., a money
market fund, a brokerage account, etc.) to be opened with the financial
institution.  All Payroll Savings and Contributions then will be
deposited into that account, which is the “Account” for purposes of this
Plan.  The Participant may transfer amounts from the Account to any
other type of account or investment product available through the financial
institution, or may withdraw money from the Account, at any time after the
deposit is made.




11


5.5  Investment
Responsibility.  The Participant shall have the sole power and
responsibility to invest the amounts deposited into the Account, either by
transferring the amounts to another investment product offered by the financial
institution or by withdrawing money from the Account for investment with
others.  Neither the Company, any Adopting Affiliate, the Plan
Administrator, the Benefits Department nor any officer, employee, or agent of
the Company or any Affiliate shall be responsible for the investment of the
amounts deposited into the Account.




ARTICLE
VI


WITHDRAWALS




6.1  Right to
Withdraw Amounts from the Account.  As noted above, each
Participant is the sole owner of his or her Account.  Accordingly, the
Participant may withdraw amounts from the Account for any or no reason and at
any time.




6.2  Beneficiary
Designation.  If a Participant should die before receiving a
full distribution of his or her Account, distribution shall be made to the
beneficiary designated by the Participant in accordance with such procedures as
may be established by the financial institution.  The Participant need
not file a separate Beneficiary Designation pursuant to this
Plan.




ARTICLE
VII


ADMINISTRATION OF THE
PLAN




7.1  General
Powers and Duties.




(a)  General.  The
Plan Administrator shall perform the duties and exercise the powers and
discretion given to it in this Plan document and its decisions and actions shall
be final and conclusive as to all persons affected thereby.  The
Company and the Adopting Affiliates shall furnish the Plan Administrator with
all data and information that the Plan Administrator may reasonably require in
order to perform its functions.  The Plan Administrator may rely
without question upon any such data or information.




(b)  Disputes.  Any
and all disputes that may arise involving Participants or beneficiaries shall be
referred to the Plan Administrator and its decision shall be
final.  Furthermore, if any question arises as to the meaning,
interpretation or application of any provisions of this Plan, the decision of
the Plan Administrator shall be final.




(c)  Agents.  The
Plan Administrator may engage agents, including actuaries, to assist it and may
engage legal counsel who may be counsel for the Company.  The Plan
Administrator shall not be responsible for any action taken or omitted to be
taken on the advice of such counsel, including written opinions or certificates
of any agent, counsel or actuary.




(d)  Insurance.  At
the Plan Administrator’s request, the Company shall purchase liability insurance
to cover the Plan Administrator in its activities as the Plan
Administrator.




(e)  Allocations.  The
Plan Administrator is given specific authority to allocate responsibilities to
the Benefits Department and to revoke such allocations.  When the Plan




12


Administrator
has allocated authority pursuant to this paragraph, the Plan Administrator is
not to be liable for the acts or omissions of the party to whom such
responsibility has been allocated.




(f)  Records.  The
Benefits Department shall supervise the establishment and maintenance of records
by the Company and each Adopting Affiliate containing all relevant data
pertaining to any person affected hereby and his or her rights under this
Plan.  In addition, the Plan Administrator may, in its discretion,
establish a system for complete or partial electronic administration of the Plan
and may replace any written documents described in this Plan with electronic
counterparts as it deems appropriate.




(g)  Interpretations.  The
Plan Administrator, in its sole discretion, shall interpret and construe the
provisions of the Plan (and any underlying documents or policies).




The
foregoing list of powers and duties is not intended to be exhaustive, and the
Plan Administrator shall, in addition, exercise such other powers and perform
such other duties as it may deem advisable in the administration of the Plan,
unless such powers or duties are assigned to another pursuant to the provisions
of the Plan.




7.2  Claims.  Claims
for benefits will be processed in accordance with such procedures as may be
established from time to time by the Plan Administrator, which procedures shall
be substantially similar to those used in connection with the ESP
II.  In the absence of established procedures, claims shall be
processed using the ESP II procedures as fully as if those procedures were set
forth in this document.




ARTICLE
VIII


AMENDMENT




8.1  Amendment.  The
Company reserves the right to amend the Plan when, in the sole discretion of the
Company, such amendment is advisable.  Any such amendment shall be
made pursuant to a resolution of the Board (or its delegate) and shall be
effective as of the date of such resolution.




8.2  Effect of
Amendment.  Any amendment of this Plan shall apply
prospectively only and shall not directly or indirectly reduce the amounts due
to any Participant as of the effective date of such amendment.




8.3  Termination.  It
is the expectation of the Company that this Plan will be continued
indefinitely.  However, continuance of the Plan is not assumed as a
contractual obligation of the Company and the right is reserved at any time to
terminate this Plan.




ARTICLE
IX


GENERAL
PROVISIONS




9.1  No
Guaranty of Benefits.  Nothing contained in the Plan shall
constitute a guaranty by the Company or any other person or entity that the
assets of the Company will be sufficient to pay any benefit
hereunder.




13


9.2  No
Enlargement of Employee Rights.  Establishment of the Plan
shall not be construed to give any Participant the right to be retained in the
service of the Company.




9.3  Incapacity
of Participant.  If the Benefits Department is served with a
court order holding that a Participant is incapable of personally receiving and
giving a valid receipt for such a contribution, the Benefits Department shall
postpone payment until such time as a claim therefore shall have been made by a
duly appointed guardian or other legal representative of such
person.  The Benefits Department is under no obligation to inquire or
investigate as to the competency of any Participant.  Any payment to
an appointed guardian or other legal representative under this Section shall be
a payment for the account of the incapacitated person and a complete discharge
of any liability of the Company and the Plan therefore.




9.4  Successors.  This
Plan shall be binding upon the successors and assigns of the Company and upon
the heirs, beneficiaries and personal representatives of the individuals who
become Participants hereunder.




9.5  Limitations
on Liability.  Notwithstanding any of the preceding provisions
of the Plan, neither the Plan Administrator, the Benefits Department, the
Benefits Governance Committee, or the Human Resources and Compensation
Committee, nor any individual acting as the Plan Administrator’s, the Benefits
Department’s, the Benefits Governance Committee’s, the Human Resources and
Compensation Committee’s, the Company’s, or any Adopting Affiliate’s employee,
agent, or representative shall be liable to any Participant, former Participant
or other person for any claim, loss, liability or expense incurred in connection
with the Plan.




9.6 Conflicts.  If
any person holds a position under this Plan through which he or she is charged
with making a decision about his or her own (or any immediate family member’s)
Plan participation, then such person shall be recused and the decision shall be
made by the Plan Administrator.  If a decision is required regarding
the senior human resources officer’s Plan participation, such decision shall be
made by the Company’s Chief Executive Officer.




IN
WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly
authorized officer as of the 17th day of  December,
2008.




PNM
RESOURCES, INC.




By:      /s/ Alice
A. Cobb


Alice A.
Cobb


Senior
Vice President and Chief Administrative Officer


14
 TABLE
OF CONTENTS
 
 Page


ARTICLE
I


DEFINITIONS




1.1
            General
            1




1.2
            Construction
            4




ARTICLE
II


ELIGIBILITY
AND PARTICIPATION; ADOPTION BY AFFILIATES




2.1
            Eligible
      Employees
            5




2.2
            Election
      to Participate
            5




2.3
            Discontinuance
      of Participation
            5




2.4
            Adoption
      by Affiliates
            5




ARTICLE
III


PAYROLL
SAVINGS AND COMPANY CONTRIBUTIONS




3.1
            Payroll
      Savings
            5




3.2
            Matching
      and Standard Contributions
            6




3.3
            Supplemental
      Contributions
            6




3.4
            Discretionary
      Contributions
            8




3.5
            Special
      Change In Control Provisions
            8




3.6
            Taxes
            10




3.7
            Benefits
      Not Contingent
            10




3.8
            Allocation
      Among Affiliates
            10




ARTICLE
IV


VESTING




4.1
            Vesting
      in Payroll Savings, Matching Contributions, Standard Contributions and
      Discretionary Contributions
            10




4.2
            Vesting
      of the Supplemental Contributions
            10




4.3
            Vesting
      in the Account
            11




ARTICLE
V


THE
ACCOUNT




5.1
            Selection
      of Financial Institution
            11




5.2
            Ownership
      of the Account
            11




5.3
            Cooperation
            11




5.4
            Type
      of Account
            11




5.5
            Investment
      Responsibility
            12




i


ARTICLE
VI


WITHDRAWALS




6.1
            Right
      to Withdraw Amounts from the Account
            12




6.2
            Beneficiary
      Designation
            12




ARTICLE
VII


ADMINISTRATION
OF THE PLAN




7.1
            General
      Powers and Duties
            12




7.2
            Claims
            13




ARTICLE
VIII


AMENDMENT




8.1
            Amendment
            13




8.2
            Effect
      of Amendment
            13




8.3
            Termination
            13




ARTICLE
IX


GENERAL
PROVISIONS




9.1
            No
      Guaranty of Benefits
            13




9.2
            No
      Enlargement of Employee Rights
            14




9.3
            Incapacity
      of Participant
            14




9.4
            Successors
            14




9.5
            Limitations
      on Liability
            14




9.6
            Conflicts
            14










ii