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                                                                     EXHIBIT 4.3



                               PNM RESOURCES, INC.
                         OMNIBUS PERFORMANCE EQUITY PLAN


                                    SECTION 1
               ESTABLISHMENT, PURPOSE, AND EFFECTIVE DATE OF PLAN

         1.1 Establishment. PNM Resources, Inc. (the "Company"), a New Mexico
corporation, hereby establishes the "PNM RESOURCES, INC. OMNIBUS PERFORMANCE
EQUITY PLAN" (the "Plan") for Employees. The Plan permits the grant of Stock
Options, Restricted Stock Rights, Performance Shares, Performance Units, and
Stock Appreciation Rights.

         1.2 Purpose. The purpose of the Plan is to advance the interests of the
Company by encouraging and providing for the acquisition of an equity interest
in the Company by Employees, by providing additional incentives and motivation
toward superior performance of the Company, and by enabling the Company to
attract and retain the services of Employees upon whose judgment, interest, and
special effort the successful conduct of its operations is largely dependent.

         1.3 Effective Date. Subject to shareholder approval, the Plan shall
become effective immediately upon the effective date of the closing of the
mandatory share exchange under the New Mexico Business Corporation Act,
N.M.Stat.Ann. ss.53-13-13 (1983), which will result in the Company becoming the
holding company for the Public Service Company of New Mexico.


                                    SECTION 2
                                   DEFINITIONS

         2.1 Definitions. Whenever used herein, the following terms will have
their respective meanings set forth below:

                  (a) "Award" means any Option, Restricted Stock Right,
Performance Share, Performance Unit or Stock Appreciation Right granted under
this Plan.

                  (b)   "Board" means the Board of Directors of the Company.

                  (c) "Cause," subject to the exception and modification set
forth at the end of this Subsection (c), shall mean termination of employment
due to the willful engaging by the Participant in conduct which is demonstrably
and materially injurious to an Employer, monetarily or otherwise, such as acts
of fraud, misappropriation or embezzlement for personal gain at the expense of
an Employer, conviction of a felony, or conviction of a misdemeanor involving
immoral acts.

For purposes of this definition, 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 reasonable belief that his or her action was in the best
interest of the Employer.

                  (d) "Change in Control," subject to the exceptions and
modifications set forth at the end of this Subsection (d), shall be deemed to
have occurred (any required approval, including any final nonappealable
regulatory order, having been obtained):

                     i.     if any "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act (as hereinafter defined), becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing twenty percent (20%) or
more of the combined voting power of the Company's then outstanding securities;

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                     ii.    if, during any period of two (2) consecutive years,
the following individuals cease, for any reason, to constitute a majority of the
Board:

                         (a) directors who were directors at the beginning of
such period; and

                         (b) any new directors, whose election by the Board or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds (2/3rds) of the directors then still in office, who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved (such new directors being referred to as
"Approved New Directors");

                     iii.   upon the effective date of a merger or consolidation
of the Company with any other corporation; or

                     iv.    upon the effective date of the adoption of a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.

              Subsection (d)(i) shall not apply if the "person" as referred to
therein is, or shall be, (a) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or (b) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company.

              In Subsection (d)(ii), the Approved New Director shall not include
a director designated by a person who has entered into an agreement with the
Company to effect a transaction described in Subsection (d)(i), (d)(iii) or
(d)(iv) hereof.

              Subsection (d)(iii) shall not apply to a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least eighty percent (80%) of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation.

                  (e) "Code" means the Internal Revenue Code of 1986, as
amended.

                  (f) "Committee" means the Compensation and Human Resources
Committee of the Board or any such other committee as may be designated by the
Board to administer the Plan, the membership of such committee not being less
than two (2) members of the Board. All Committee members must be "non-employee
directors" (as defined in Rule 16b-3 under the Exchange Act) if required to meet
the conditions for exemption of the Awards under the Plan from Section 16(b) of
the Exchange Act.

                  (g) "Company" means PNM Resources, Inc., a New Mexico
corporation.

                  (h) "Disability" shall have the same meaning as provided in
the Company's long term disability plan for the provision of long term
disability benefits.

                  (i) "Employee" means any full-time or part-time employee of an
Employer who was not hired for a specific job of limited duration, or for a
position designated for students.

                  (j) "Employer" means the Company, or any of its subsidiaries
which has by resolution of the subsidiary's Board affirmatively adopted the
Plan.

                  (k) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended, or the rules thereunder.

                  (l) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.

                  (m) "Fair Market Value" means the closing sale price of one
share of Stock for "New York Stock Exchange Composite Transactions," as reported
in the Western Edition of the Wall Street Journal, or a successor

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comparable publication, on the date such value is determined (or if Stock is not
traded on such date, on the first immediately preceding business day on which
Stock was so traded).

                  (n) "Grant Date" means the date the Committee approves the
Award.

                  (o) "Impaction" means involuntary termination due to
elimination of job, position, department or work unit or general downsizing.

                  (p) "Option" means the right to purchase Stock at a stated
price for a specified period of time. For purposes of the Plan an Option may be
either (i) a "nonstatutory stock option" (an option which is not an incentive
stock option), or (ii) an "incentive stock option" within the meaning of Section
422 of the Code.

                  (q) "Participant" means any Employee who is selected by an
Employer from time to time to participate in the Plan; provided, however, that
all Employees who are selected to participate in the Plan shall be subject to
approval by the President, in his or her sole discretion. Notwithstanding the
above, the President's right to participate in the Plan shall be determined in
the sole discretion of the Committee.

                  (r) "Performance Period" means the time period during which
the performance goals must be met as determined by the Committee.

                  (s) "Performance Share" means a right to receive a payment in
the form of Stock equal to the value of a Performance Share as determined by the
Committee.

                  (t) "Performance Unit" means a right to receive a payment in
cash or Stock or a combination thereof equal to the value of a Performance Unit
as determined by the Committee.

                  (u) "Plan" shall mean the PNM Resources, Inc. Omnibus
Performance Equity Plan as set forth in this document and as amended from time
to time.

                  (v) "President" means the President of the Company.

                  (x) "Restricted Period" means the period during which a
Restricted Stock Right, Performance Share or Performance Unit is subject to
restrictions pursuant to the relevant provisions of the Plan.

                  (w) "Restricted Stock Right" means the right to receive a
share of Stock at no monetary cost to the Participant.

                  (y) "Retirement," for purposes of this Plan, shall mean
termination of employment and attainment of:

                       i.    age forty-five (45) and twenty (20) years of
service;

                       ii.   age fifty five (55) and ten (10) years of service;

                       iii.  the age at which the early distribution penalty no
longer applies as specified in Codess.72(t) and five (5) years of service; or

                       iv.   any age and thirty (30) years of service.

                  (z) "Stock" means the Common Stock of the Company, no par
value.

                  (aa) "Stock Appreciation Right" and "SAR" mean the right to
receive a payment from the Company equal to the excess of the Fair Market Value
of the share of Stock at the date of exercise over a specified price fixed by
the Committee, which shall not be less than one hundred percent (100%) of the
Fair Market Value of the Stock on the Grant Date. In the case of a Stock
Appreciation Right which is granted in conjunction with an Option, the specified
price shall be the Option exercise price.


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      2.2   Gender and Number. Except when otherwise indicated by the context,
words in the masculine gender when used in the Plan will include the feminine
gender, the singular will include the plural, and the plural will include the
singular.


                                    SECTION 3
                          ELIGIBILITY AND PARTICIPATION

      Awards may be made only to those Participants who are Employees of an
Employer on the Grant Date of the Award.


                                    SECTION 4
                                 ADMINISTRATION

      4.1   Administration. The Committee shall be responsible for the
administration of the Plan. The Committee, by majority action thereof, is
authorized to interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to the Plan, to provide for conditions and assurances
deemed necessary or advisable to protect the interests of the Company, and to
make all other determinations necessary or advisable for the administration of
the Plan, but only to the extent not contrary to the express provisions of the
Plan. Determinations, interpretations, or other actions made or taken by the
Committee in good faith pursuant to the provisions of the Plan shall be final,
binding and conclusive for all purposes of the Plan.

      4.2   Awards. The Committee shall have the authority, in its sole
discretion, to determine the types of Awards, the times when Awards shall be
granted, the number of Awards, the purchase price or exercise price, the
period(s) during which such Awards shall be exercisable (whether in whole or in
part), the restrictions applicable to Awards, and the other terms and provisions
thereof (which need not be identical). The Committee shall have the authority to
modify existing Awards, subject to Section 16 of this Plan.

      4.3   Award Agreement. Each Award shall be evidenced by an agreement that
shall specify the type of Award granted and such other provisions and
restrictions as the Committee shall determine.

      4.4   Claims. Any claim relating to an Award granted under this Plan shall
be submitted to the Committee or its designee. The Committee shall render a
written decision and, if there is an adverse determination with respect to the
claim, either in whole or in part, the decision will set forth the basis for the
determination. If the Committee does not render a decision within one hundred
and twenty (120) days, the claim shall be deemed denied.


                                    SECTION 5
                              STOCK SUBJECT TO PLAN

      5.1   Number. The total number of shares of Stock subject to all Awards
under the Plan may not exceed two million five hundred thousand (2,500,000),
subject to adjustment upon occurrence of any of the events indicated in Section
5.3. The number of shares of Stock subject to Restricted Stock Right,
Performance Share, Performance Unit, and Stock Appreciation Right Awards may not
exceed five hundred thousand (500,000), subject to adjustment upon occurrence of
any of the events indicated in Section 5.3. The shares to be delivered under the
Plan may consist, in whole or in part, of authorized but unissued Stock or
shares purchased on the open market or, if it becomes allowable under New Mexico
law, treasury Stock not reserved for any other purpose.

      5.2   Availability of Stock for Grant. Subject to the express provisions
of the Plan, if any Award granted under the Plan terminates, expires, lapses for
any reason, or is paid in cash, any Stock subject to or surrendered for such
Award will again be Stock available for the grant of an Award. With respect to
Awards made to insiders under Section 16 of the Exchange Act, shares of such
Stock may be reused to the maximum extent permitted under Section 16 of the
Exchange Act.

      5.3   Adjustment in Capitalization. In the event of any change in the
outstanding shares of Stock by reason of a Stock dividend or split,
recapitalization, merger, consolidation, combination, exchange of shares, or
other similar corporate change, the aggregate number of shares of Stock
available under the Plan and subject to each outstanding Award,

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and its stated exercise price or the basis upon which the Award is measured,
shall be adjusted appropriately by the Committee, whose determination shall be
conclusive; provided, however, that fractional shares shall be rounded to the
nearest whole share. Any adjustment to an incentive stock option shall be made
consistent with the requirements of Section 424 of the Code.

      5.4   Annual Limitation on Number of Shares Subject to Awards.
Notwithstanding any provision in the Plan to the contrary, and subject to
adjustment upon the occurrence of any of the events indicated in Section 5.3,
the maximum number of shares of Stock that may be granted to any one Participant
during any of the Company's fiscal years with respect to one or more Awards
shall be five hundred thousand (500,000).


                                    SECTION 6
                                DURATION OF PLAN

      The Plan shall remain in effect, subject to the Board's right to terminate
the Plan earlier pursuant to Section 16 herein, until all Awards hereunder shall
have expired or terminated or shall have been exercised or fully vested, and any
Stock subject thereto shall have been purchased or acquired pursuant to the
provisions thereof. Notwithstanding the foregoing, no Award may be granted under
the Plan after December 31, 2010.


                                    SECTION 7
                                  STOCK OPTIONS

      7.1   Grant of Options. Subject to the provisions of Sections 5 and 6,
Options may be granted to Participants at any time and from time to time as
shall be determined by the Committee. The Committee shall have complete
discretion in determining the number of Options granted to each Participant. The
Committee may grant any type of Option to purchase Company Stock that is
permitted by law at the time of grant except discounted options. To the extent
the aggregate Fair Market Value (determined at the time the Option is granted)
of the Stock with respect to which incentive stock options are exercisable for
the first time by a Participant in any calendar year (under this Plan and any
other plans of the Company) exceeds the limitations set forth in Code Section
422(d), as amended, such Options shall not be deemed incentive stock options. In
determining which Options may be treated as non-qualified options under the
preceding sentence, Options will be taken into account in the order of their
Grant Dates. No incentive stock option may be granted to any person who owns,
directly or indirectly, more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company. Nothing in this Section 7 of the
Plan shall be deemed to prevent the grant of nonstatutory stock options in
amounts which exceed the maximum established by Section 422 of the Code.

      7.2   Exercise Price. No Option shall be granted pursuant to the Plan at
an exercise price that is less than the Fair Market Value of the Stock on the
Grant Date.

      7.3   Duration of Options. Each Option shall expire at such time or times
as the Committee shall determine at the time it is granted; provided, however,
that no incentive stock option may be granted later than ten (10) years from the
date the Plan is adopted or approved by the shareholders, whichever is earlier.

      7.4   Exercisability of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for all
Participants; provided, however, that no Option shall be exercisable later than
ten (10) years from the Grant Date.

      7.5   No Obligations to Exercise Options. The granting of an Option will
impose no obligation upon the Participant to exercise such Option.

      7.6   Payment. The purchase price of Stock upon exercise of any Option
shall be paid in full either (i) in cash, (ii) in previously-acquired Stock
(through actual tender or by attestation) held for more than six (6) months,
valued at its Fair Market Value on the date of exercise, or (iii) by a
combination thereof as determined by the Committee. The Committee in its sole
discretion may also permit a Participant to make payment of the purchase price
upon exercise of any Option through a broker-assisted "cashless" exercise
arrangement by delivering a properly executed notice together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale
or loan proceeds to pay the

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exercise price. The proceeds from payment of exercise prices shall be added to
the general funds of the Company and shall be used for general corporate
purposes.

      7.7   Delivery of Shares. Within an administratively reasonable period of
time after the exercise of an Option, and the payment of the full exercise
price, and the satisfaction of all withholding obligations incurred pursuant to
such exercise, the Participant shall receive a Stock certificate evidencing his
or her ownership of such Stock. A Participant shall have none of the rights of a
shareholder with respect to Options until the record date of the Stock purchase.
No adjustment will be made for dividends or other rights for which the record
date is prior to the date such Stock certificate is issued in the Participant's
name.


                                    SECTION 8
                             RESTRICTED STOCK RIGHTS

      8.1   Grant of Restricted Stock Rights. Subject to the provisions of
Sections 5 and 6, the Committee, at any time and from time to time, may grant
Restricted Stock Rights under the Plan to such Participants and in such amounts
as it shall determine.

      8.2   Voting Rights. During the Restricted Period, Participants holding
the Restricted Stock Rights granted hereunder shall have no voting rights with
respect to the shares subject to such Restricted Stock Rights prior to the
issuance of such shares pursuant to the Plan.

      8.3   Dividend Equivalents and Other Distributions. During the Restricted
Period, at the discretion of the Committee, Participants holding Restricted
Stock Rights may be entitled to receive dividend equivalents and other
distributions paid with respect to those Rights while they are so held.

      8.4   Form and Timing of Payment. Upon the satisfaction of the
restrictions, shares will be issued to the Participant. If any shares are to be
issued on a deferred basis, the Committee may provide for the payment of
dividend equivalents or interest during the deferral period.


                                    SECTION 9
                    PERFORMANCE SHARES AND PERFORMANCE UNITS

      9.1   Grant of Performance Shares or Performance Units. Subject to the
provisions of Sections 5 and 6, Performance Shares or Performance Units may be
granted to Participants at any time and from time to time as shall be determined
by the Committee. The Committee shall have complete discretion in determining
the number of Performance Shares or Performance Units granted to each
Participant.

      9.2   Value of Performance Shares and Performance Units. Each Performance
Share and each Performance Unit shall have a value determined by the Committee
at the time of grant. The Committee shall set performance goals in its
discretion which, depending on the extent to which they are met, will determine
the ultimate value of the Performance Share or Performance Unit to the
Participant. The time period during which the performance goals must be met
shall be called a Performance Period and shall be determined by the Committee.

      9.3   Form and Timing of Payment. For Performance Shares, payment shall be
made in Stock. For Performance Units, payment shall be made in cash, Stock or a
combination thereof as determined by the Committee. Payment may be made in a
lump sum or installments as prescribed by the Committee. If any payment is to be
made on a deferred basis, the Committee may provide for the payment of dividend
equivalents or interest during the deferral period.


                                    SECTION 10
                            STOCK APPRECIATION RIGHTS

      10.1  Grant of Stock Appreciation Rights. Subject to the provisions of
Sections 5 and 6, Stock Appreciation Rights ("SARs") may be granted to
Participants at any time and from time to time as shall be determined by the
Committee. SARs may be granted in connection with the grant of an Option, in
which case the exercise of SARs will result in the

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surrender of the right to purchase the shares under the Option as to which the
SARs were exercised. Alternatively, SARs may be granted independently of
Options.

      10.2  Exercisability of SARs. SARs granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for all
Participants; provided, however, that no SAR shall be exercisable later than ten
(10) years from the Grant Date.

      10.3  Exercise of SARs. Upon of the SAR, the Participant shall be entitled
to receive payment of an amount determined by multiplying:

            (a) The difference between the Fair Market Value of a share of Stock
at the date of exercise over the price fixed by the Committee at the Grant Date,
by

            (b) The number of shares with respect to which the SAR is exercised.

      10.4  Form and Timing of Payment. At the sole discretion of the Committee,
payment for SARs may be made in cash or Stock, or in a combination thereof.

      10.5  Rule 16b-3 Requirements. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on exercise of an SAR (including,
without limitation, the right of the Committee to limit the time of exercise to
specified periods) as may be required to satisfy the requirements of Rule 16b-3
(or any successor rule), under the Exchange Act.

      10.6  Term of SAR. The term of an SAR granted under the Plan shall not
exceed ten (10) years.


                                   SECTION 11
                                  RESTRICTIONS

      The Committee shall impose such restrictions on any Awards under the Plan
as it may deem advisable, including, without limitation, restrictions under
applicable federal securities law, under the requirements of any stock exchange
upon which the Stock is then listed and under any blue sky or state securities
laws applicable to such Awards.


                                   SECTION 12
                            TERMINATION OF EMPLOYMENT

      12.1  Termination of Employment Due to Death, Disability, Retirement,
Impaction or Change in Control.

            (a)   Nonvested Awards.

                  i.    Options and SARs. If a Participant holds any nonvested
Options or SARs upon a termination of employment due to death, Disability,
Retirement, Impaction, or Change in Control, all such nonvested Options or SARs
shall become one hundred percent (100%) vested.

            ii.   Restricted Stock Rights, Performance Shares and Performance
Units. If a Participant holds any nonvested Restricted Stock Rights, Performance
Shares or Performance Units upon a termination of employment due to death,
Disability, Retirement, Impaction or Change in Control, all such nonvested
Restricted Stock Rights, Performance Shares or Performance Units shall vest as
follows:

               (a) If the restriction is based on meeting certain service
requirements, the Restricted Stock Rights, Performance Shares or Performance
Units shall vest at termination of employment. The Participant shall receive pro
rata shares and/or cash payment based on the number of full months of service
during the Restricted Period.

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               (b) If the restriction is based on meeting certain performance
requirements, the Restricted Stock Right, Performance Share or Performance Unit
shall vest at the end of the Performance Period. The Participant shall receive
pro rata shares and/or cash payment based on the achievement of performance
goals during the entire Performance Period, pro rated for the number of full
months of service during the Performance Period. Distribution of shares and/or
cash payment shall be made at the same time as payment is made to those
Participants who did not terminate service during the Performance Period.

            (b)   Vested Awards.

                  i.    Options and SARs. If a Participant holds any vested
Options or SARs upon a termination of employment due to death, Disability,
Retirement, Impaction or Change in Control, vested Options or SARs shall be
exercisable on or before the earlier of: (i) three (3) years following the
termination of employment or (ii) the tenth (10th) anniversary date of the Grant
Date of the Options or SARs.

                  ii.   Incentive Stock Options. Notwithstanding the foregoing,
in the case of an incentive stock option, the favorable tax treatment described
in Section 422 of the Code shall not be available if such Option is exercised
after the date prescribed in Section 422(a)(2), as amended, following a
termination of employment except as otherwise allowed by Sections 421(c)(1)(A)
and 422(c)(6).

                  iii.  Restricted Stock Rights, Performance Shares and
Performance Units. If a Participant holds any vested Restricted Stock Rights,
Performance Shares or Performance Units subject to a deferral period, payment
shall be made at termination of employment.

      12.2  Voluntary Termination or Involuntary Termination of Employment For
Reasons Other Than Impaction or Cause.

            (a)   Nonvested Awards. If a Participant holds any nonvested Awards
upon voluntary termination or involuntary termination of employment for reasons
other than Impaction or Cause, all such nonvested Awards shall be canceled.

            (b)   Vested Awards.

                  i.    Options and SARs. If a Participant holds any vested
Options or SARs upon voluntary termination or involuntary termination of
employment for reasons other than Impaction or Cause, such vested Options or
SARs shall be exercisable on or before the earlier of: (i) three (3) months
following the termination date or (ii) the tenth (10th) anniversary of the Grant
Date of the Options or SARs.

                  ii.   Restricted Stock Rights, Performance Shares and
Performance Units. If a Participant holds any vested Restricted Stock Rights,
Performance Shares and Performance Units which are subject to a deferral period
upon voluntary termination or involuntary termination of employment for reasons
other than Impaction or Cause, payment shall be made at termination of
employment.

      12.3  Termination of Employment for Cause. If a Participant holds any
Awards, whether vested or nonvested, all Awards shall terminate immediately and
shall be forfeited upon a termination of employment for Cause.

      12.4  Disposition of Vested Awards Upon Death. If a Participant dies
without having fully exercised his or her vested Awards, the estate or
beneficiary, if such designation was made for purposes of the Plan, shall have
the right to exercise the Awards pursuant to the terms and conditions contained
herein. If a Participant dies holding Restricted Stock Rights, Performance
Shares or Performance Units issued on a deferred basis, payment shall be made to
the Participant's estate or beneficiary, if such designation was made for
purposes of the Plan.

      12.5  Discretion of Committee. Notwithstanding the above, the Committee
may, at any time and in its sole discretion, alter the vesting and exercise
provisions for all or part of the Awards which have been or will be granted to
Participants, subject to Section 16 of the Plan.

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                                   SECTION 13
                               NON-TRANSFERABILITY

      The Committee may, in its sole discretion, determine the right of a
Participant to transfer any Award granted under the Plan. Unless otherwise
determined by the Committee, no Award granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated,
otherwise than by will or by the laws of descent and distribution or pursuant to
a qualified domestic relations order as defined by the Code or Title I of ERISA,
or the rules thereunder, or, if applicable, until the termination of any
Restricted or Performance Period as determined by the Committee.


                                   SECTION 14
                               EMPLOYER DISCRETION

      14.1  Employment. Nothing in the Plan shall interfere with or limit in any
way the right of any Employer to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continue in the employ of the
Employer.

      14.2  Participant. No Employee shall have a right to be selected as a
Participant, or, having been so selected, to be selected again as a Participant.


                                   SECTION 15
                             SUBSTITUTION OF AWARDS

      Any Award may be granted under this Plan in substitution for Awards held
by employees of other corporations who are about to become Employees of an
Employer as the result of a merger, consolidation or reorganization of the
employing corporation with an Employer, or the acquisition by an Employer of the
assets of the employing corporation, or the acquisition by an Employer of stock
of the employing corporation as the result of which it becomes a subsidiary of
an Employer. The terms and conditions of the Awards so granted may vary from the
terms and conditions set forth in this Plan to such extent as the Committee at
the time of granting the Award may deem appropriate to conform, in whole or in
part, to the provisions of the Award in substitution for which they are granted.
However, in the event that the Award for which a substitute Award is being
granted is an incentive stock option, no variation shall adversely affect the
status of any substitute Award as an incentive stock option under the Code.


                                   SECTION 16
                AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN

      The Board may at any time, and from time to time, terminate, amend or
modify the Plan; provided however, that any such action of the Board shall be
subject to approval of the shareholders to the extent required by law.
Notwithstanding the above, to the extent permitted by law, the Board may
delegate to the Committee or the President the authority to approve
non-substantive amendments to the Plan. No amendment, modification, or
termination of the Plan or any Award under the Plan shall in any manner
adversely affect any Award theretofore granted under the Plan without the
consent of the holder thereof (unless such change is required in order to cause
the benefits under the Plan to qualify as performance-based compensation within
the meaning of Section 162(m) of the Code and applicable interpretive authority
thereunder). Except as provided in Section 5.3, neither the Board, the President
nor the Committee may reduce the purchase price or exercise price of any
outstanding Award without the approval of the shareholders.


                                   SECTION 17
                                 TAX WITHHOLDING

      17.1  Tax Withholding. The Company shall have the power to withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
federal, state, and local withholding tax requirements on any Award under the
Plan. To the extent that alternative methods of withholding are available under
applicable tax laws, the Company shall have the power to choose among such
methods.

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      17.2  Form of Payment. To the extent permissible under applicable tax,
securities, and other laws, the Company may, in its sole discretion, permit the
Participant to satisfy a tax withholding requirement by (i) using already owned
shares that have been held by the Participant for at least six (6) months; (ii)
a broker-assisted "cashless" transaction; or (iii) directing the Company to
apply shares of Stock to which the Participant is entitled as a result of the
exercise of an Option or the lapse of a Restricted Period (including, for this
purpose, the filing of an election under Section 83(b) of the Code), to satisfy
the required minimum statutory withholding amount.

      17.3  Tax Upon Disposition of Shares Subject to ss. 422 Restrictions. In
the event that a Participant shall dispose (whether by sale, exchange, gift, the
use of a qualified domestic relations order as defined by the Code or Title I of
ERISA, or the rules thereunder, or any like transfer) of any shares of Stock of
the Company (to the extent such shares are deemed to be purchased pursuant to an
incentive stock option) acquired by him within two (2) years of the Grant Date
of the related Option or within one (1) year after the acquisition of such
shares, he will notify the secretary of the Company no later than fifteen (15)
days from the date of such disposition of the date or dates and the number of
shares disposed of by him and the consideration received, if any, and, upon
notification from the Company, promptly forward to the secretary of the Company
any amount requested by the Company for the purpose of satisfying its liability,
if any, to withhold federal, state or local income or earnings tax or any other
applicable tax or assessment (plus interest or penalties thereon, if any, caused
by delay in making such payment) incurred by reason of such disposition.


                                   SECTION 18
                                 INDEMNIFICATION

      Each person who is or shall have been a member of the Committee or of the
Board shall be indemnified and held harmless by the Company against and from any
loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him in connection with or resulting from any claim, action, suit, or
proceeding to which he may be a party or in which he may be involved by reason
of any action taken or failure to act under the Plan and against and from any
and all amounts paid by him in settlement thereof, with the Company's approval,
or paid by him in satisfaction of any judgment in any such action, suit, or
proceeding against him, provided he shall give the Company an opportunity, at
its own expense, to handle and defend the same before he undertakes to handle
and defend it on his own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such person may
be entitled under the Company's articles of incorporation, bylaws, resolution or
agreement, as a matter of law, or otherwise, or any power that the Company may
have to indemnify him or hold him harmless.


                                   SECTION 19
                               REQUIREMENTS OF LAW

      19.1  Requirements of Law. The granting of Awards and the issuance of
shares and/or cash under the Plan shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.

      19.2  Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of New
Mexico. This Plan is an unfunded performance-based bonus plan for a select group
of management or highly compensated employees and is not intended to be either
an employee pension or welfare benefit plan subject to ERISA.

      19.3  Code Section 162(m). If the Plan is subject to Section 162(m) of the
Code, it is intended that the Plan comply fully with and meet all the
requirements of Section 162(m) of the Code so that Awards granted hereunder
shall constitute "performance-based" compensation within the meaning of such
section. If any provision of the Plan would disqualify the Plan or would not
otherwise permit the Plan to comply with Section 162(m) as so intended, such
provision shall be construed or deemed amended to conform to the requirements or
provisions of Section 162(m); provided that no such construction or amendment
shall have an adverse effect on the economic value to a Participant of any Award
previously granted hereunder.

<Page>

                                   SECTION 20
                                     FUNDING

      The Company shall not be required to segregate any of its assets to ensure
the payment of any Award under the Plan. Neither the Participant nor any other
persons shall have any interest in any fund or in any specific asset or assets
of the Company or any other entity by reason of any Award, except to the extent
expressly provided hereunder. The interests of each Participant and former
Participant hereunder are unsecured and shall be subject to the general
creditors of the Company.

                                          PNM RESOURCES, INC.



December 31, 2001                           Date: /s/ Jeffry E. Sterba
---------------------------                       ---------------------------
Date                                              Jeffry E. Sterba
                                                  Chairman, President, and
                                                  Chief Executive Officer