Exhibit
10.2


PNM
RESOURCES, INC.
 ANNUAL
PERFORMANCE CASH PROGRAM
 (for
the Utilities President)











INTRODUCTION




PNM
Resources, Inc. (the “Company”) has adopted the PNM Resources, Inc. Annual
Performance Cash Program for the Utilities President (the
“Program”).  Under the Program, the Human Resources and Compensation
Committee (the “Committee”) of the Company’s Board of Directors (the “Board”)
has the power to issue annual performance cash awards (the “Awards”) for the
years 2007, 2008 and 2009 to the Utilities President.  This document
sets forth the general guidelines pursuant to which performance cash will be
awarded under this Program.




The
following describes the objectives of the Program, its various elements, and how
the Program is intended to function.




PROGRAM
OBJECTIVES




The
Program was implemented as an employment inducement award in connection with
hiring Patricia K. Collawn as the first Utilities President and is designed to
motivate and retain the Utilities President by rewarding her when her leadership
and management efforts facilitate the achievement of business unit (workgroup)
goals by the PNM and TNMP Utility Operations (the “Utility Operations”) which
benefit our customers and shareholders, and for achievement of individual goals
and financial targets.  The Program, as part of Collawn’s employment
package, was disclosed in a Form 8-K dated June 4, 2007.  Awards were
not made for 2007 due to the Board’s decision to suspend payment of short-term
incentive bonus payments.




Ms.
Collawn has the opportunity to earn an Award under the Program of $150,000 to
$225,000 in each of 2007, 2008 and 2009 contingent upon achieving certain
individual utility and generation incentive goals at the threshold ($150,000),
stretch ($187,500) and optimal ($225,000) levels.




EFFECTIVE
DATES




The
Program is effective from June 25, 2007 through December 31,
2009.  The Committee reserves the right, however, to adjust, amend or
suspend the Program at its discretion at any time and from time to time during
this period.




ADMINISTRATION




The
Program will be administered by the Committee.  The Committee will
have the sole authority and discretion to interpret the Program, approve Awards,
and perform other duties necessary to administer the Program.  The
Committee’s interpretation of the Program, any Awards granted under the Program,
any Agreement issued under the Program, and all decisions and determinations by
the Committee with respect to the Program are final, binding, and conclusive on
all parties.




·
            Plan Year
      Goals




Business
Unit (workgroup) and individual goals for each of the applicable 2007, 2008 and
2009 award years will be approved by the Committee as soon as practical after
the beginning of each Program award year.  The Committee will approve
the applicable Financial Measure(s) against which company performance will be
measured at the same time they are approved for the annual Officer Incentive
Plan.




1


·
            Incentive Award
      Approvals and Payout Timing




Shortly
after December 31 of 2007, 2008 and 2009, the Committee will, in its sole
discretion, determine the final performance results, which will be used to
calculate Awards, if any.  The payment, generally, will be made by
March 15 following the end of each of 2007, 2008 and 2009.  If it is
administratively impractical to make the payment by March 15, the payment shall
be made as soon as reasonably practical following March 15.  The
payments also may be delayed in accordance with regulations issued pursuant to
Section 409A of the Internal Revenue Code of 1986.  Awards will be
issued to the Participant in the form of cash.




·
            Provisions for a
      Change in Control




Pursuant
to the PNM Resources, Inc. Officer Retention Plan, if the Utilities President’s
employment is terminated during a “Protection Period” (as defined in the Officer
Retention Plan), she may be entitled to a pro-rata award equal to 50% of the
maximum award available under this Program as in effect during the Protection
Period.  Please refer to the Officer Retention Plan for additional
information.




If Ms.
Collawn’s employment is not terminated prior to the end of the year in which a
“Change in Control” occurs, she shall receive an Award for that Program year
(2007, 2008 or 2009) determined in accordance with the provisions of this
Program.  If the Program is modified in any way as to change the
amounts paid under the Program, Ms. Collawn shall receive an award equal to 50%
of the maximum Award available under this Program as in effect during the
Protection Period.   Please refer to the Officer Retention Plan
for additional information.  For purposes of this Program, the term
“Change in Control” shall mean and refer to any “change in control event” within
the meaning of Prop. Treas. Reg. § 1.409A-3(g)(5).  The payments due
pursuant to this paragraph shall be paid at the same time as incentive awards
normally are paid.




ETHICS




The
purpose of the Program is to fairly reward performance
achievement.  If the Participant manipulates or attempts to manipulate
the Program for personal gain at the expense of customers, other employees or
company objectives, the Participant will be subject to appropriate disciplinary
action, up to and including termination of employment, and will forfeit any
Award otherwise payable under the Program.




ELIGIBILITY




The sole
Participant in this program is Patricia K. Collawn, Utilities
President.




·
            Forfeiture of
      Awards




If the
Participant terminates employment on or before Awards are distributed for the
Program Year (2007, 2008 or 2009) for any reason other than death, Impaction (as
defined under the PNM Resources, Inc. Non-Union Severance Pay Plan), Disability
(as defined under the PNM Resources, Inc. Long-Term Disability Plan) or
Retirement, will not be eligible for payment of an award.  (Any
Participant who elects voluntary separation or retirement in lieu of termination
for performance or misconduct will not be eligible for payment of a Program
award.)  For purposes of the Program, “Retirement” means termination
of employment with the company and all affiliates after the employee has
attained: (1) age forty-five and twenty years of service; (2) age fifty-five and
ten years of service; (3) age 591⁄2 and five years of service; or (4) any age and
thirty years of service.)




2


·
            Eligible Base for
      Incentive Purposes




For the
purpose of incentive calculations, the Participant’s annual base rate of pay
effective December 31 of the Program Year will be used unless the Participant
has been demoted during the Program Year.  In this event, the
Participant’s annual base rate of pay may be pro-rated based on the period of
time worked at each level.




PROGRAM
DESCRIPTION




Awards
will be based on a combination of business unit (workgroup), corporate
(financial) and individual performance.  A baseline award will be
calculated using a formula based on business unit (workgroup) and financial
performance, which can then be modified up or down based on individual
performance at the Committee’s discretion.




·
            Performance
      Thresholds




Business Unit / Individual Goal Set performance that meets or exceeds the
threshold performance level will be eligible for a Program award.





·
            Award
      Opportunity




Awards
are based on each goal’s performance relative to established Threshold, Stretch
and Optimal targets.




·
            Award
      Calculation




1.
            Target
      Award = $150,000.





2.
            The
      Participant may earn a minimum of 0% to a maximum of 150% of the Target
      Award.





Performance
      Level
            Performance
      Target
            AwardBelow
      Threshold
            Less
      than 121 points
            0%
      of Target AwardThreshold
            121
      – 268 points
            50%
      of Target AwardStretch
            269
      – 425 points
            100%
      of Target AwardOptimal
            426
      or more points
            150%
      of Target Award





Results
will be interpolated between the established targets to reward for incremental
performance.





NONTRANSFERABLE





No Award
may be assigned or transferred by the Participant other than by will or the laws
of descent and distribution.





WITHHOLDING





PNM
Resources, Inc. and its affiliates (“PNM Resources”) has the authority and the
right to deduct or withhold, or require the Participant to remit to PNM
Resources, an amount sufficient to satisfy Federal, state, and local and foreign
taxes (including the Participant’s FICA obligation) required by law to be
withheld with respect to any taxable event arising as a result of this
Program.  Any potential payment to the Participant under the terms of
this Program is also subject to withholdings and deductions by PNM Resources,
and the Participant hereby authorizes PNM Resources to apply such withholdings
and deductions to liquidate and reduce any outstanding debt or unpaid sums owed
by the Participant to PNM Resources or its successor.





3


NO RIGHTS OF
OWNERSHIP





While the
Program is intended to provide the Participant with the opportunity to share in
the success of PNM Resources, Inc., the Program is merely a bonus program and
does not give the Participant any of the rights of ownership of PNM Resources or
provide any security interest in any assets of PNM Resources or any of its
affiliates.





CONTINUATION OF
EMPLOYMENT





This
Program shall not be construed to confer upon the Participant any right to
continue in the employment of PNM Resources and shall not limit the right of PNM
Resources at its sole discretion, to terminate the employment of the Participant
at any time.

















Approved
by:








/s/  Alice A.
Cobb





Alice A.
Cobb, SVP and Chief Administrative Officer








08/01/08


Date
















4