EXHIBIT
10.1


PNM
RESOURCES, INC.


OFFICER
RETENTION PLAN




INTRODUCTION




Effective
December 7, 1998, Public Service Company of New Mexico adopted the Public
Service Company of New Mexico First Restated and Amended Executive Retention
Plan (the “Plan”).  By an amendment dated November 27, 2002,
sponsorship of the Plan was transferred to PNM Resources, Inc. (the “PNM
Resources”) and the Plan was renamed the “PNM Resources, Inc. First Restated and
Amended Executive Retention Plan.”  Effective as of July 13,
2003, PNM Resources amended and restated the Plan in its entirety and changed
the name of the Plan to the “PNM Resources, Inc. Officer Retention
Plan.”  The purpose of this amendment and restatement is to satisfy
the requirements of Section 409A of the Internal Revenue Code of 1986 (the
“Code”).  Section 409A of the Code became applicable to the Plan as of
January 1, 2005.  The Plan has been and shall continue to be
administered in good faith compliance with the requirements of Section 409A from
January 1, 2005 through December 31, 2008.  By execution of this
document, PNM Resources hereby amends and restates the Plan in its entirety,
effective as of January 1, 2009 (the “Effective Date”).







ARTICLE I


PURPOSE




1.1  General.  PNM
Resources considers it essential to its best interests and the best interests of
its customers and stockholders to foster the continuous employment of its key
management employees.  PNM Resources also recognizes that, as is the
case with many publicly held corporations, the possibility of a Change in
Control may exist.  The possibility of a Change in Control, and the
uncertainty and the questions which it may raise among employees, may result in
the departure or distraction of key management employees to the detriment of PNM
Resources and its ability to continue to provide efficient and reliable utility
services to its customers.




PNM
Resources has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of key management to their
assigned duties and to facilitate recruitment of future employees without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a Change in Control.  PNM Resources also has concluded
that one of the necessary steps is to provide competitive and fair compensation
and benefits to employees terminated following a Change in Control.




The
purpose of this Plan is to address these concerns for Officers of PNM Resources
and its Affiliates who adopt the Plan.  A separate plan, the PNM
Resources, Inc. Employee Retention Plan, provides retention benefits for the
remaining members of management and other employees of PNM Resources and its
adopting Affiliates.










ARTICLE II


DEFINITIONS




2.1  General.  When
a word or phrase appears in this Plan with the initial letter capitalized, and
the word or phrase does not commence a sentence, the word or phrase shall
generally be a term defined in this Section 2.1 or in the
Introduction.  The following words and phrases utilized in the Plan
with the initial letter capitalized shall have the meanings set forth below,
unless a clearly different meaning is required by the context in which the word
or phrase is used:




(a)  “Affiliate”
means (1) any member of a “controlled group of corporations” (within the meaning
of Section 414(b) of the Code as modified by Section 415(h) of the
Code) that includes PNM Resources as a member of the group; and (2) any member
of a group of trades or businesses under common control (within the meaning of
Section 414(c) of the Code as modified by Section 415(h) of the Code)
that includes PNM Resources as a member of the group.




“50%
Affiliate” means any of the following:  (1) an entity that would
be a member of a “controlled group of corporations” (within the meaning of
Section 414(b) of the Code as modified by Section 415(h) of the Code) that
includes PNM Resources as a member of the group if for purposes of applying
Section 1563(a)(1), (2) or (3) of the Code for determining the members of a
controlled group of corporations under Section 414(b) of the Code, the language
“at least 50 percent” is used instead of “at least 80 percent” each place it
appears in Section 1563(a)(1), (2) and (3); and (2) an entity that would be
a member of a group of trades or businesses under common control (within the
meaning of Section 414(c) of the Code) that includes PNM Resources as a member
of the group if for purposes of applying Treas. Reg. § 1.414(c)-2 for
purposes of determining the members of a group of trades or businesses (whether
or not incorporated) that are under common control for purposes of Section
414(c) of the Code, the language “at least 50 percent” is used instead of “at
least 80 percent” each place it appears in Treas. Reg. §
1.414(c)-2.




(b)  “Base
Salary” means the Participant’s highest annual salary from the Company in
effect during the Protection Period.




(c)  “Board”
or “Board of
Directors” means the Board of Directors of PNM Resources.  The
Board may delegate its responsibilities in accordance with its standard
practices and procedures.




(d)  “Cause”
means, for purposes of termination of a Participant’s employment:




(1)  The
willful and continued failure of a Participant to substantially perform his or
her duties with PNM Resources or any Affiliate after written demand for
substantial performance is delivered to the Participant which specifically
identifies the manner in which the Participant has not substantially performed
his or her duties;




(2)  The
willful failure to report to work for more than thirty (30) days;
or




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(3)  The
willful engaging by the Participant in conduct which is demonstrably and
materially injurious to PNM Resources or any Affiliate, monetarily or otherwise,
including acts of fraud, misappropriation, violence or embezzlement for personal
gain at the expense of PNM Resources or any Affiliate, conviction of a felony,
or conviction of a misdemeanor involving immoral acts.




Cause
shall not be deemed to exist on the basis of paragraph (1) or (2) if the
failure results from such Participant’s incapacity due to verifiable physical or
Mental Illness substantiated by appropriate medical evidence.  After
the issuance of a Notice of Termination by the Participant due to Constructive
Termination, an act, or failure to act, by a Participant shall not be deemed
“willful” for purposes of paragraph (1) or (2) and shall not give rise to
Cause pursuant to this Section.  An act, or failure to act, by a
Participant shall not be deemed “willful” if done or omitted to be done by the
Participant in good faith and with a reasonable belief that his or her action
was in the best interests of PNM Resources and its Affiliates.




(e)  “Change in
Control” means any of the following:




(1)  Any
“person,” as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 becoming directly or indirectly the “beneficial owner” as
defined in Rule 13d-3 under the Securities Exchange Act, of securities of PNM
Resources representing twenty percent (20%) or more of the combined voting power
of PNM Resources’ then outstanding securities unless such person is, or shall
be, a trustee or other fiduciary holding securities under an employee benefit
plan of PNM Resources, or a corporation owned, directly or indirectly, by the
stockholders of PNM Resources in substantially the same proportion as their
ownership of stock of PNM Resources;




(2)  During
any period of two (2) consecutive years, excluding any period prior to the
Effective Date of this Plan, the following individuals ceasing, for any reason,
to constitute a majority of the Board of Directors:




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




(ii)  any new
directors whose election by the Board or nomination for election by PNM
Resources’ stockholders was approved by a vote of at least two-thirds (2/3rds)
of the directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously so
approved, such new directors being referred to as “Approved New
Directors.”




For
purposes of determining whether a Change in Control has occurred pursuant to
this paragraph (2), a director designated by a person who has entered into
an agreement with PNM Resources to effect a transaction described in
paragraphs (1), (3) or (4) of this Section (e) shall not be considered to
be an “Approved New Director.”




(3)  The
shareholders of PNM Resources approving a merger or consolidation of PNM
Resources with another company, corporation or subsidiary that is not affiliated
with PNM Resources immediately before the Change in Control; provided, however,
that if the merger or consolidation would result in the voting securities of PNM
Resources


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outstanding
immediately prior thereto continuing to represent, either by remaining
outstanding or by being converted into voting securities of the surviving
entity, at least sixty percent (60%) of the combined voting power of the voting
securities of PNM Resources or such surviving entity outstanding immediately
after such merger or consolidation, the merger or consolidation will be
disregarded; or




(4)  The
adoption of a plan of complete liquidation of PNM Resources or an agreement for
the sale or disposition by PNM Resources of all or substantially all of PNM
Resources’ assets.




Notwithstanding
the foregoing, a Change in Control will not be deemed to have occurred
until:  (1) any required regulatory approval, including any final
non-appealable regulatory order, has been obtained and (2) the transaction that
would otherwise be considered a Change in Control closes.




(f)  “Class I
Officer” means all Officers with titles higher than Vice President
(VP).




(g)  “Class II
Officer” means all Officers with the title Vice President
(VP).




(h)  “Code”
means the Internal Revenue Code of 1986, as amended.




(i)  “Committee”
means the Benefits Governance Committee appointed by PNM Resources.




(j)  “Company”
means, collectively, PNM Resources and any Affiliate of PNM Resources that has
adopted this Plan in accordance with Section 10.13 (Adoption by
Affiliates).  As used in this Plan, “Company” also means any
successor to the assets of PNM Resources that assumes and agrees to perform PNM
Resources’ obligations hereunder, by operation of law or otherwise.




(k)  “Constructive
Termination” means, without a Participant’s express written consent, the
occurrence during the Protection Period of any of the following circumstances,
subject to the exceptions and modifications noted below:




(1)  A
material diminution in the Participant’s Base Salary;




(2)  A
material diminution in the Participant’s authority, duties, or
responsibilities;




(3)  A
material change in the geographic location of the Participant’s principal
office; or




(4)  Any other
action or inaction that constitutes a material breach by the Company of this
Plan.




4


A
Participant must provide a written Notice of Termination to the Company of the
existence of the Constructive Termination condition described in paragraphs
(1)-(4) above within ninety (90) days of the initial existence of the
condition.




Notwithstanding
anything to the contrary, an event described in paragraphs (1)-(4) above will
not constitute Constructive Termination if, within thirty (30) days after the
Participant gives the Company the Notice of Termination specifying the
occurrence or existence of an event that the Participant believes constitutes
Constructive Termination, the Company has fully corrected (or reversed) such
event.




(l)  “Disability”
shall have the same meaning as provided in the Company’s long-term disability
plan for the provision of long-term disability benefits.




(m)  “Eligible
Compensation” means the sum of the (1) Participant’s Base Salary,
(2) any cash award paid as a merit increase in lieu of an increase in base
salary received during the twelve (12) month period immediately preceding the
Participant’s Separation from Service and (3) the “target” Officer
Incentive Plan award (regardless of the award, if any, actually received under
the Officer Incentive Plan).  Unless otherwise stated in the Officer
Incentive Plan, the “target” award is fifty percent (50%) of the Participant’s
highest maximum award opportunity under the Officer Incentive Plan during the
Protection Period.




(n)  “ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.




(o)  “Health
Plan” means the
PNM Resources, Inc. Comprehensive Health Plan as it may be amended or restated
from time to time or any successor plan or plans that provide the benefits
currently provided under such plan.




(p)  “Mental
Illness” means any disorder, other than a disorder induced by alcohol or
drug abuse, which impairs the behavior, emotional reaction or thought process of
a person.




(q)  “Notice of
Termination” means a notice from either the Company or a Participant, as
applicable.  If the termination is for Cause or based on Constructive
Termination, the notice shall indicate the specific termination provision in
this Plan relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Participant’s
employment.  If a Participant is providing a Notice of Termination
based on Constructive Termination, the Notice of Termination must be provided to
the Company’s Director – Compensation, Benefits & HRIS (or, if that title is
not in use at the time, to the person holding the most comparable position) no
more than ninety (90) days following the occurrence of the condition giving rise
to Constructive Termination and the Notice of Termination must be given at least
thirty (30) days prior to the date of the Participant’s Separation from
Service.  However, the Company retains its rights as an at will
employer to terminate any employee at any time and for any reason.




(r)  “Officer”
means any employee of the Company (1) with the title Chief Executive
Officer (CEO), Chief Administrative Officer (CAO), Executive Vice President
(EVP), Senior Vice President (SVP), or Vice President (VP) or any other title
that describes a position of




5


higher
authority than that of a Vice President and (2) who is classified and coded
as an Officer pursuant to the Company’s compensation system.




(s)  “Officer
Incentive Plan” means the incentive compensation plan maintained by the
Company for Officers.




(t)  “Participant”
means any Officer of the Company who has satisfied the eligibility requirements
of this Plan.




(u)  “Plan” means the PNM Resources,
Inc. Officer Retention Plan, effective January 1, 2009, as amended.




(v)  “PNM
Resources” means
PNM Resources, Inc.  As used in the Plan, “PNM Resources” also means
any successor in interest resulting from merger, consolidation, or transfer of
substantially all of PNM Resources’ assets.




(w)  “Protection
Period” means the period beginning with the date on which a transaction
closes, or an event occurs which results in a Change in Control and ending
twenty-four (24) months thereafter.




(x)  “Separation
from Service” means either (1) the termination of a Participant’s
employment with Company and all Affiliates and 50% Affiliates due to death,
retirement or other reasons, or (2) a permanent reduction in the level of
bona fide services the Participant provides to Company and all Affiliates and
50% Affiliates to an amount that is 20% or less of the average level of bona
fide services the Participant provided to Company and all Affiliates and 50%
Affiliates in the immediately proceeding 36 months, with the level of bona fide
service calculated in accordance with Treas. Reg.
§ 1.409A-1(h)(1)(ii).




A
Participant’s employment relationship is treated as continuing while a
Participant is on military leave, sick leave, or other bona fide leave of
absence (if the period of such leave does not exceed six months, or if longer,
so long as a Participant’s right to reemployment with Company or an Affiliate or
50% Affiliate is provided either by statute or contract).  If a
Participant’s period of leave exceeds six months and a Participant’s right to
reemployment is not provided either by statute or by contract, the employment
relationship is deemed to terminate on the first day immediately following the
expiration of such six-month period.  Whether a termination of
employment has occurred will be determined based on all of the facts and
circumstances and in accordance with regulations issued by the United States
Treasury Department pursuant to Section 409A of the Code.




Generally,
the date of a Participant’s Separation from Service will be specified in the
Notice of Termination.  In the case of a termination for Cause, the
date of Separation from Service shall be immediately upon receipt of the Notice
of Termination.  In the case of an involuntary termination of
employment by the Company for any reason other than Cause, death or Disability,
the date of Separation from Service shall not be less than fifteen (15) days
from the date the Notice of Termination is given.  In the case of
Constructive Termination, the date of Separation from Service shall be not less
than thirty (30) days from the date the Notice of Termination is
given.




6


(y)  “Specified
Employee”means
certain officers and highly compensated employees of Company as defined in
Treas. Reg. § 1.409A-1(i).  The identification date for
determining whether a Participant is a Specified Employee during any calendar
year shall be the September 1 preceding the commencement of such
year.




2.2  Other
Defined Terms.  In addition to the definitions included in
Section 2.1 (General) and the
Introduction, other terms may be defined in the primary Plan provisions to which
they are applicable.




ARTICLE
III


TERM OF
PLAN




3.1  Term of
Plan.  The Plan is effective as of the Effective Date and shall
continue in effect until terminated by the Board, subject to the limitations on
termination set forth in Section 9.1 (Amendment and
Termination).




3.2  Reversion
to Prior Provisions of the Plan.  Pursuant to Section 9.1
(Amendment and
Termination) of the Plan document in effect prior to the Effective Date,
if a Change in Control occurs within the twenty-four (24) month period following
the Effective Date, the provisions of the Plan as in effect prior to the
Effective Date will revive and will control with respect to determining
retention benefits with respect to such Change in Control if the benefits
provided by the provisions of the Plan in effect prior to the Effective Date are
greater than the benefits provided under this Plan
document.  Notwithstanding the foregoing, as provided by Section 9.1
(Amendment and
Termination), all changes made in order to comply with Section 409A of
the Code shall remain in effect.




ARTICLE
IV


ELIGIBILITY FOR RETENTION
BENEFITS




4.1  Eligibility
to Participate.  To be eligible for benefits under this Plan,
an employee must be an Officer of the Company at the beginning of the Protection
Period.  If a Participant’s employment with the Company terminates for
any reason (whether voluntary or involuntary) before the commencement of the
Protection Period, he or she shall not be eligible to receive the benefits
provided by this Plan.  In addition, if a Participant voluntarily
terminates his or her employment during the Protection Period for reasons other
than those that constitute Constructive Termination, or if a Participant dies or
becomes Disabled during the Protection Period, the Participant will not be
entitled to receive any benefits under this Plan.




4.2  Eligibility
for Benefits.




(a)  General
Rule.  A Participant shall be entitled to the benefits
described in Article V (Retention Benefits)
if such Participant Separates from Service during the Protection Period due
to:  (1) a termination of employment by the Company for any
reason other than Cause, death or Disability; or (2) a termination of
employment by the Participant due to Constructive Termination following the
Participant’s giving of a Notice of Termination to the Company.




7


(b)  Exceptions.  A
Participant shall not be entitled to receive the retention benefits offered by
the Plan even if the Participant meets the requirements of paragraph (a),
in the following circumstances:




(1)  If a
Participant’s employment is terminated or Constructively Terminated during the
Protection Period, but such Participant is re-employed by the surviving entity
or the party acquiring the assets of PNM Resources in connection with the Change
in Control before any payments are made in accordance with Section 5.2 (Payment Form and Date;
Section 409A Compliance Strategy), then such Participant shall not be
entitled to the benefits under this Plan.




(2)  Any
Participant who without express authority actively participates in advancing a
Change in Control, whether on his or her own behalf or on behalf of someone
else, shall not be eligible for the benefits provided by this
Plan.  Participants who, by virtue of their position and duties with
the Company, are involved in facilitating an orderly transition to a successor
company shall remain eligible to receive benefits.




(3)  If a
Participant’s employment is terminated or Constructively Terminated as a result
of the acquisition of PNM Resources by a holding company formed in connection
with a corporate restructuring initiated by PNM Resources, and the Participant
is immediately re-employed by PNM Resources or any Affiliate or 50% Affiliate,
then the Participant shall not be entitled to benefits under the
Plan.




(4)  Transfers
between and within PNM Resources and Affiliates and 50% Affiliates shall not be
considered to be a termination of employment or result in the payment of
benefits under this Plan unless the transfer results in a Constructive
Termination.




4.3  Release
Agreement.




(a)  General.  In
order to receive any retention benefits under this Plan, within the time periods
described below, the Participant must sign, deliver and not revoke a Release
Agreement containing such terms and conditions as are satisfactory to the
Company, including, but not limited to, the release of any and all claims that
the Participant may then have, as of the signing of such release, against PNM
Resources or its Affiliates, employees, officers, and directors.  The
Participant shall generally receive the Release Agreement on the date of the
Participant’s Separation from Service and in no event more than five (5) days
following the date of the Participant’s Separation from Service and shall have
up to forty-five (45) days following the date the Release Agreement is given to
the Participant to sign and return the Release Agreement to the
Company.




(b)  Revocation
of the Release Agreement.  Within seven (7) calendar days after
delivery of the Release Agreement to the Company by the Participant, the
Participant shall be entitled to revoke the Release Agreement by following the
revocation procedure described in the Release Agreement.




(c)  Impact of
Revocation.  The revocation of a previously signed and
delivered Release Agreement pursuant to the above paragraph shall be deemed to
constitute an irrevocable forfeiture of retention benefits under the
Plan.




8


4.4  No
Duplication of Benefits.  The right to receive any benefits
under this Plan by any Participant is specifically conditioned upon such
Participant either waiving or being ineligible for any and all benefits under
the PNM Resources, Inc. Employee Retention Plan, including any amendments
thereto, or any benefits due to a Change in Control or similar event under any
successor or other change in control, severance, retention or other plans or
agreements otherwise available to the Participant.  The Company does
not intend to provide any Participant with benefits under both this Plan and
benefits under any other severance, retention, change in control or other plans
or agreements sponsored by the Company or any Affiliate.  The Company
may override this provision by expressly stating in the other change in control,
severance, retention or other plan or agreement that some or all of the benefits
provided by the other change in control, severance, retention or other plan or
agreement are intended to supplement the benefits provided by this
Plan.




ARTICLE
V


RETENTION
BENEFITS




5.1  Retention
Benefits.  Participants satisfying the eligibility requirements
set forth in Section 4.2 (Eligibility for
Benefits) who sign (and do not revoke) the Release Agreement required by
Section 4.3 (Release Agreement)
shall be entitled to the following retention benefits:




(a)  Severance
Pay.  The Company shall pay the Participant, as a retention
benefit, a lump sum amount as set forth below based upon the Participant’s
highest position held with the Company during the Protection
Period:




POSITION
            SEVERANCE PAYClass I
      Officer
            3.0
      times Eligible CompensationClass II
      Officer
            2.0
      times Eligible Compensation




(b)  Officer
Incentive Plan.  A Participant also shall receive a pro-rata
award of the Participant’s highest target incentive under the Officer Incentive
Plan as in effect during the Protection Period, regardless of the award, if any,
actually paid pursuant to the Officer Incentive Plan.  Unless
otherwise stated in the Officer Incentive Plan, the “target” award is 50% of the
maximum award.




(c)  Medical,
Dental and Vision Coverage.  Medical, dental and vision
coverage under the Health Plan, as the Participant had elected prior to the
Participant’s Separation from Service, shall be provided for a period of thirty
(30) months for Class I Officers and a period of twenty-four (24) months
for Class II Officers immediately following the Participant’s Separation
from Service with the cost of such coverage to be shared by the Company and the
Participant on the same basis as in effect prior to the Participant’s Separation
from Service.  Participant contributions that were required for
participation in the Health Plan will continue to be required during the
continuation period.  No Participant may elect to receive cash or any
other allowance in lieu of medical, dental or vision coverage under the Health
Plan.




9


(d)  COBRA
Continuation Coverage.  Continuation of coverage under the
Health Plan pursuant to Section 4980B of the Code will become effective upon the
completion of the twenty-four (24) month or thirty (30) month, as applicable,
period.




(e)  Life and
Accidental Death and Dismemberment Insurance Benefits.  The
Company shall provide life and accidental death and dismemberment insurance
benefits substantially similar to those the Participant was receiving prior to
the Notice of Termination.  The life and accidental death and
dismemberment insurance benefits provided by this Section shall include benefits
provided pursuant to the PNM Resources, Inc. Officer Life Insurance Plan prior
to the Notice of Termination.  As a general rule, such coverage shall
continue for a period of thirty (30) months for Class I Officers and a
period of twenty-four (24) months for Class II Officers.  No
Participant may elect to receive cash or any other allowance in lieu of the
benefits provided by this Section.




(f)  Supplemental
Retirement Benefits.  A Participant shall receive the following
supplemental retirement benefits payable in one lump sum:




(1)  The cash
equivalent of the difference between the following two amounts, each calculated
based on the Participant’s age as of Separation from
Service:  (i) the present value of the early or normal retirement
benefit the Participant would receive under the PNM Resources, Inc. Employees’
Retirement Plan if the Participant had continued in employment for the number of
years equal to the multiplier used to determine severance pay in Section 5.1(a)
(Retention
Benefits – Severance Pay) above
and then terminated employment (at a time when the Participant was, accordingly,
two or three years older and had two or three more years of service, depending
on whether the Participant is a Class I Officer or a Class II Officer) and began
receiving benefits immediately or as soon as possible thereafter as prescribed
under the PNM Resources, Inc. Employees’ Retirement Plan and (ii) the
present value of the early or normal retirement benefit the Participant is
actually entitled to under the PNM Resources, Inc. Employees’ Retirement Plan
assuming immediate termination of employment and benefit commencement as soon as
possible thereafter as prescribed under the PNM Resources, Inc. Employees’
Retirement Plan; plus




(2)  The cash
equivalent of Company contributions to the Participant’s Retirement Savings Plan
account in the amount of seven and a half percent (7.5%) of eligible
compensation (limited as provided in the Retirement Savings Plan and Section
401(a)(17)) of the Code) times the period which corresponds to the number of
years equal to the multiplier used to determine severance pay in
Section 5.1(a) (Retention Benefits –
Severance Pay),
above.




(g)  Retiree
Health Plan Credit.  As of the date of the Participant’s
Separation from Service, the Participant will receive a service credit for
purposes of eligibility for participation in any retiree health plan sponsored
by the Company and its Affiliates equal to the multiplier used to determine
severance pay in Section 5.1(a) (Retention Benefits –
Severance Pay),
above.  The Participant shall be responsible for any tax consequences
of such additional credit.




5.2  Payment
Form and Date; Section 409A Compliance Strategy.  All payments
shall be made in accordance with this Section 5.2.




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(a)  General
Rule Regarding Time of Payments.  Notwithstanding any other
provision of this Plan to the contrary, no payment shall be made prior to the
Participant’s Separation from Service.  The severance pay due pursuant
to Section 5.1(a) (Retention Benefits –
Severance Pay),
the Officer Incentive Plan payment due pursuant to Section 5.1(b) (Retention Benefits –
Officer Incentive
Plan), and the supplemental retirement benefits due pursuant to Section
5.1(f) (Retention
Benefits – Supplemental Retirement
Benefits) shall be paid in a lump sum within ten (10) days following the
last day on which a Participant may revoke a previously executed and timely
delivered Release Agreement.




(b)  Code
Section 409A Compliance Strategy.  Certain of the payments and
benefits provided by this Plan are subject to the requirements of
Section 409A of the Code.  The purpose of this Section 5.2(b) is
to summarize the treatment of each such payment or benefit for purposes of
Section 409A and to comply, as needed, with the requirements of
Section 409A.




(1)  Compliance
Strategy for Lump Sum Payments.  The severance pay due pursuant
to Section 5.1(a) (Retention Benefits –
Severance Pay),
the Officer Incentive Plan payment due pursuant to Section 5.1(b) (Retention Benefits –
Officer Incentive
Plan), and the supplemental retirement benefits due pursuant to Section
5.1(f) (Retention
Benefits – Supplemental Retirement
Benefits) will be considered to be made pursuant to the short-term
deferral exception to Section 409A as described in Treas. Reg.
§ 1.409A-1(b)(4).




(2)  Compliance
Strategy for Medical, Dental and Vision Coverage.  Pursuant to
Section 5.1(c) (Retention Benefits –
Medical, Dental and
Vision Coverage), the Company will provide an eligible Participant with
continued medical, dental and vision coverage for a period of twenty-four (24)
months or thirty (30) months, as applicable.  To the extent that the
Company pays the cost of the Participant’s medical, dental and vision coverage
throughout the first eighteen (18) month period following the Participant’s
Separation from Service, such payments are exempt from Section 409A under the
medical benefits reimbursement exception set forth in Treas. Reg. §
1.409A-1(b)(9)(v)(B).  The Participant’s continued participation in
the Company’s medical, dental and vision programs pursuant to
Section 5.1(c) (Retention Benefits –
Medical, Dental and
Vision Coverage) after the period of time during which the Participant
would be entitled to continuation coverage pursuant to Section 4980B of the
Code if the Participant elected the coverage and paid the premiums (the “Excess
Medical Benefits”) may be considered to be “deferred compensation” subject to
the requirements of Section 409A of the Code.  In order to assure
compliance with the requirements of Section 409A and avoid adverse tax
consequences to the Participant, the only Excess Medical Benefits that will be
subject to reimbursement under such plans will be expenses for medical care
within the meaning of Section 105(b) of the Code.  In addition,
all reimbursements of Excess Medical Benefits under such plans shall be made on
or before the last day of the calendar year following the calendar year in which
the expense was incurred and the right to reimbursement for such Excess Medical
Benefits will not be subject to liquidation or exchange for another
benefit.




(3)  Compliance
Strategy for Life and Accidental Death and Dismemberment Insurance
Benefits.  Pursuant to Section 5.1(e) (Retention Benefits –
Life and Accidental
Death and Dismemberment Insurance Benefits), the Company will provide an
eligible Participant with continued life and accidental death and dismemberment
insurance benefits for a period of twenty-four (24) months or thirty (30)
months, as applicable.


11


This
continued insurance coverage is excepted from Section 409A pursuant to Treas.
Reg. § 1.409A-1(a)(5).




(4)  Compliance
Strategy for Reimbursement of Legal Fees.  Pursuant to Section
5.3 (Reimbursement of
Legal Fees), the Company will provide an eligible Participant with
reimbursement for reasonable legal fees and expenses incurred as a result of a
Separation from Service or Constructive Termination under the terms of the
Plan.  The amount of legal expenses incurred in one calendar year will
not affect the expenses eligible for reimbursement in any other calendar
year.  All expenses incurred in one calendar year must be reimbursed
no later than the last day of the next calendar year.  The right to
reimbursement is not subject to liquidation or exchange for any other
benefit.




(5)  Compliance
Strategy for Tax Gross-Up Payment.  Pursuant to Section 5.5
(Tax Gross-Up),
the Company will provide an eligible Participant with a tax gross-up payment in
limited circumstances.  The Company has concluded that the gross-up
payment provided under Section 5.5 (Tax Gross-Up) may be
subject to the requirements of Section 409A.  To ensure that the
payments under Section 5.5 (Tax Gross-Up) comply
with Section 409A, the payments are payable at a specified time or pursuant to a
fixed schedule within the meaning of Treas. Reg. §
1.409A-3(i)(1)(v).




(6)  Delay in
Payments for Specified Employees.  As a general rule, a
Participant will commence receiving benefits at the times provided in the
Plan.  If the Participant is a “Specified Employee” at the time of his
Separation from Service, and the Participant is eligible for a tax gross-up
payment provided by Section 5.5 (Tax Gross-Up), the
tax gross-up payment will commence upon the later of (i) the time specified
in Section 5.5 (Tax
Gross-Up) or (ii) the first day of the seventh month following the
Participant’s Separation from Service.  Any payments that would have
been paid during the first six months following the Participant’s Separation
from Service shall be paid on the first day of the seventh month together with
interest at the “applicable federal rate” (within the meaning of Section 1274(d)
of the Code) (the “AFR”) for the month in which the payment is made to the
Participant.  The six-month delay for a Specified Employee does not
apply if the Participant dies or becomes Disabled prior to his Separation from
Service.




(7)  Payment
Disputes.  If a payment is not made due to a dispute with
respect to such payment, the payment may be delayed in accordance with Treas.
Reg. § 1.409A-3(g).




(8)  Ban on
Acceleration or Deferral.  Under no circumstances may the time
or schedule of any payment made or benefit provided pursuant to this Plan be
accelerated or subject to a further deferral except as otherwise permitted or
required pursuant to regulations and other guidance issued pursuant to
Section 409A of the Code.




(9)  No
Elections.  No Participant has any right to make any election
regarding the time or form of any payment due under this Plan.




(10)  Distributions
Treated as Made Upon a Designated Event.  If the Company fails
to make any payment under this Plan, either intentionally or unintentionally,




12


within
the time period specified in the Plan, but the payment is made within the same
calendar year, such payment will be treated as made within the time period
specified in the Plan pursuant to Treas. Reg. § 1.409A-3(d).




5.3  Reimbursement
of Legal Fees.  The Company also shall pay to a Participant who
is entitled to receive benefits pursuant to Section 4.2 (Eligibility for
Benefits) reasonable legal fees and expenses incurred as a result of a
termination or Constructive Termination under the terms of this Plan (including
all such fees and expenses, if any, incurred in contesting or disputing any such
termination or Constructive Termination or in seeking to obtain or enforce any
right or benefit provided by this Plan or in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of the
Code to any payment or benefit provided hereunder).




5.4  Offsetting
Benefits.  Benefits otherwise receivable by the Participant
pursuant to Sections 5.1(c) (Retention Benefits –
Medical, Dental and
Vision Coverage) and 5.1(e) (Retention Benefits –
Life and Accidental
Death and Dismemberment Insurance Benefits) shall be forfeited to the
extent comparable benefits are actually received by the Participant from another
employer of the Participant during the applicable twenty-four (24) or thirty
(30) month period following his or her Separation from Service.  Any
such benefits actually received by the Participant from another employer shall
be reported by the Participant to the Company.




5.5  Tax
Gross-Up.




(a)  General
Rule.  Except as provided in Section 5.5(g) (Tax Gross-Up – Exception), if the
“Total Payments” made to a Participant under this Plan result in an excise tax
being imposed pursuant to Section 4999 of the Code, the Company will provide the
Participant with a “Gross-Up Payment,” calculated in accordance with the
provisions of this Section.  The Gross-Up Payment provided by this
Section applies only to excise taxes imposed under Section 4999 of the Code and
not to excise taxes, other taxes, or additions to tax imposed under any other
provision of the Code including Section 409A.




(1)  Total
Payments.  Total Payments as used in this Section, means any
payments in the nature of compensation (as defined in Code Section 280G and the
regulations adopted thereunder), made pursuant to this Plan or otherwise, to or
for the Participant’s benefit, the receipt of which is contingent on a “change
in the ownership or effective control” of PNM Resources, or a “change in the
ownership of a substantial portion of the assets” of PNM Resources (as these
phrases are defined in Code Section 280G and the regulations adopted thereunder)
and to which Code Section 280G applies.




(2)  Gross-Up
Payment.  Except as otherwise noted below, the Gross-Up Payment
will consist of a single lump sum payment and will be in such an amount that
after the Participant has paid (1) the “total presumed federal and state taxes”
and (2) the excise taxes imposed by Code Section 4999 with respect to the
Gross-Up Payment (and any interest or penalties actually imposed), the
Participant retains an amount of the Gross-Up Payment equal to the remaining
excise taxes imposed by Code Section 4999 on the Participant’s Total Payments
(calculated before the Gross-Up Payment).  For purposes of calculating
the Gross-Up Payment, a Participant’s actual federal and state income taxes will
not be used.  Instead, the Company will




13


use the
Participant’s “total presumed federal and state taxes.”  For purposes
of this Plan, a Participant’s “total presumed federal and state taxes” shall be
conclusively calculated using a combined tax rate equal to the sum of the
maximum marginal federal and applicable state income tax rates and the hospital
insurance (or “HI”) portion of F.I.C.A.  Based on the rates in effect
for 2007 for a New Mexico resident, the “total presumed federal and state tax
rate” is 41.75% (35% federal income tax rate plus 5.3% New Mexico state income
tax rate plus 1.45% HI tax rate).  The state tax rate for the
Participant’s actual principal place of residence will be used and no
adjustments will be made for the deduction of state taxes on the federal return,
any deduction of federal taxes on a state return, the loss of itemized
deductions or exemptions, or for any other purpose.




(b)  Calculations.  The
Company, at its sole expense, will retain a “Consultant” to advise the Company
with respect to the applicability of any Code Section 4999 excise tax with
respect to a Participant’s Total Payments.  The Consultant shall be a
law firm, a certified public accounting firm, and/or a firm nationally
recognized as providing executive compensation consulting
services.  All determinations concerning whether a Gross-Up Payment is
required pursuant to Section 5.5(a) (Tax Gross-up – General Rule) and the
amount of any Gross-Up Payment (as well as any assumptions to be used in making
such determinations) shall be made by the Consultant selected pursuant to this
Section.  The Consultant shall provide the Participant and the Company
with a written notice of the amount of the excise taxes that the Participant is
required to pay and the amount of the Gross-Up Payment.  The notice
from the Consultant shall include any necessary calculations in support of its
conclusions.  All fees and expenses of the Consultant shall be borne
by the Company.  Except as otherwise provided in Section 5.2(b)(6)
(Payment Form and
Date; Section 409A Compliance Strategy – Code Section 409A Compliance
Strategy – Delay in Payments for
Specified Employees), any Gross-Up Payment shall be made by the Company
within ten (10) calendar days after the mailing of such notice and in no event
will the payment be made later than December 31 following the taxable year
in which the Participant remits the related taxes.




(c)  Determination
Binding.  As a general rule, the Consultant’s determination
shall be binding on the Participant and the Company.  The application
of the excise tax rules of Code Section 4999, however, is complex and uncertain
and, as a result, the Internal Revenue Service may disagree with the Consultant
concerning the amount, if any, of the excise taxes that are due.  If
the Internal Revenue Service determines that excise taxes are due, or that the
amount of the excise taxes that are due is greater than the amount determined by
the Consultant, the Gross-Up Payment will be recalculated by the Consultant to
reflect the actual excise taxes that the Participant is required to pay (and any
related interest and penalties).  Any deficiency will then be paid to
the Participant by the Company within fifteen (15) calendar days of the receipt
of the revised calculations from the Consultant and in no event will the payment
be made later than December 31 following the taxable year in which the
Participant remits the related taxes.  If the Internal Revenue Service
determines that the amount of excise taxes that the Participant paid exceeds the
amount due, the Participant shall return the excess to the Company (along with
any interest paid to the Participant on the overpayment) within thirty (30) days
upon receipt from the Internal Revenue Service or other taxing
authority.




(d)  Right to
Challenge Reserved.  The Company reserves the right to
challenge any excise tax determinations made by the Internal Revenue
Service.  If the Company




14


agrees to
indemnify the Participant from any taxes, interest and penalties that may be
imposed upon the Participant (including any taxes, interest and penalties on the
amounts paid pursuant to the Company’s indemnification agreement), the
Participant must cooperate fully with the Company in connection with any such
challenge.  The Company shall bear all costs associated with the
challenge of any determination made by the Internal Revenue Service and the
Company shall control all such challenges.  The additional Gross-Up
Payments called for by Section 5.5(c) (Tax Gross-Up – Determination
Binding) shall not be made until the Company has either exhausted its (or
the Participant’s) rights to challenge the determination or indicated that it
intends to concede or settle the excise tax determination.




(e)  Notification.  The
Participant shall notify the Company in writing of any claim or determination by
the Internal Revenue Service that, if upheld, would result in the payment of
excise taxes in amounts different from the amount initially specified by the
Consultant.  Such notice shall be given as soon as possible but in no
event later than fifteen (15) calendar days following your receipt of notice of
the Internal Revenue Service’s position.




(f)  Effect of
Repeal or Inapplicability.  If the provisions of Code Sections
280G and 4999 are repealed without succession, then this Section shall be of no
further force or effect.  Moreover, if the provisions of Code Sections
280G and 4999 do not apply to impose the excise tax on payments made under this
Plan, then the provisions of this Section shall not apply.




(g)  Exception.  The
Consultant selected pursuant to Section 5.5(b) (Tax Gross-Up – Calculations) above
will calculate the Participant’s “Capped Benefit” and “Uncapped
Benefit.”  For this purpose, the “Uncapped Benefit” is equal to the
Total Payments to which the Participant is entitled prior to the application of
this Section 5.5(g).  A Participant’s “Capped Benefit” is the amount
to which the Participant will be entitled after application of the limitations
of Section 5.5(h) (Tax
Gross-Up – Cap
on Benefits).  If the Participant’s Uncapped Benefit is less
than 115% of the Participant’s Capped Benefit, the Participant will not be
entitled to receive the gross-up payment referred to in Section 5.5(a)(2) (Tax Gross-up – General Rule – Gross-Up
Payment).  Instead, the Participant’s Total Payments will be
limited or capped in accordance with Section 5.5(h) (Tax Gross-Up – Cap on
Benefits).




(h)  Cap on
Benefits.  Pursuant to Section 5.5(g) (Tax Gross-Up – Exception) above, if
the Participant’s Uncapped Benefit is less than 115% of the Participant’s Capped
Benefit, one or more of the payments or benefits to which the Participant is
entitled that is not subject to Section 409A of the Code shall be reduced until
the Total Payments are deductible by the Company after application of Section
280G of the Code.  Examples of payments or benefits that are not
subject to Section 409A and are therefore subject to reduction are (1) the
severance payment provided by Section 5.1(a) (Retention Benefits –
Severance Pay),
(2) the Officer Incentive Plan payment due pursuant to Section 5.1(b)
(Retention
Benefits – Officer Incentive
Plan), (3) the supplemental retirement benefits due pursuant to
Section 5.1(f) (Retention Benefits –
Supplemental
Retirement Benefits), and (4) the continued life and accidental
death and dismemberment insurance benefits due pursuant to Section 5.1(e) (Retention Benefits –
Life and Accidental
Death and Dismemberment Insurance Benefits).  For purposes of
this limitation:




15


(1)  No
portion of the Total Payments shall be taken into account which, in the opinion
of the Consultant does not constitute a “parachute payment” within the meaning
of Section 280G(b)(2) of the Code;




(2)  A payment
shall be reduced only to the extent necessary so that the Total Payments
constitute reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code or are otherwise not subject to
disallowance as deductions, in the opinion of the Consultant; and




(3)  The value
of any non-cash benefit or any deferred payment of benefit included in the Total
Payments shall be determined in accordance with Section 280G of the Code and the
regulations issued thereunder.




(i)  Effect of
Section 3.2 on Cap on Benefits.  For a period of twenty-four
(24) months following the Effective Date, if a Participant’s capped benefits
under this Plan are less than the benefits payable under the provisions of the
Plan document in effect prior to the Effective Date, pursuant to Section 3.2
(Reversion to Prior
Provisions of the Plan), Section 5.5(h) (Tax Gross-Up – Cap on Benefits)
shall be disregarded.  In such instance, the Participant shall be
entitled to a grossed up benefit in accordance with the remaining provisions of
this Section.  All benefits shall be paid at such times and forms as
provided in this Plan document.




5.6  Additional
Benefits Under Other Plans.  Additional benefits may be
provided to Participants upon a Change in Control through other programs
sponsored by the Company.




ARTICLE
VI


PLAN
ADMINISTRATION




6.1  Plan
Administration.  The Committee shall administer the
Plan.  The Committee shall be the “Named Fiduciary” for purposes of
ERISA and shall have the authority to control, interpret and construe the Plan
and manage the operations thereof.  Any such interpretation and
construction of any provisions of this Plan by the Committee shall be
final.  The Committee shall, in addition to the foregoing, exercise
such other powers and perform such other duties as it may deem advisable in the
administration of the Plan.  The Committee may delegate some (or all)
of its authority hereunder to the PNMR Services Company Benefits
Department.  The Committee also may engage agents and obtain other
assistance from the Company, including Company counsel.  The Committee
shall not be responsible for any action taken or not taken on the advice of
legal counsel.  The Committee is given specific authority to allocate
and revoke responsibilities among its members or designees.  When the
Committee has allocated authority pursuant to the foregoing, the Committee shall
not be liable for the acts or omissions of the party to whom such responsibility
has been allocated, except to the extent provided by law.




6.2  Claims
Procedures.




(a)  Initial
Claim.  A claim for benefits under this Plan must be submitted
to the senior human resources officer of PNM Resources (the “Human Resources
Officer”).  If the claimant is the Human Resources Officer, a claim
for benefits under this Plan must be submitted to the Chief Executive Officer of
PNM Resources and the term “Human Resources Officer” as used in paragraph (1)
below shall be replaced with the term “Chief Executive Officer.”




16


(1)  Notice of
Decision.  Written notice of the disposition of the claim shall
be furnished to the claimant within a reasonable period of time, but not later
than ninety (90) days after receipt of the claim by the Human Resources Officer,
unless the Human Resources Officer determines that special circumstances require
an extension of time for processing the claim.  If the Human Resources
Officer determines that an extension is required, written notice (including an
explanation of the special circumstances requiring an extension and the date by
which the Human Resources Officer expects to render the benefits determination)
shall be furnished to the claimant prior to the termination of the original
ninety (90) day period.  In no event shall such extension exceed a
period of ninety (90) days from the end of the initial ninety (90) day
period.  If the claim is denied, the notice required pursuant to this
Section shall set forth the following:




(i)  The
specific reason or reasons for the adverse determination;




(ii)  Special
reference to the specific Plan provisions upon which the determination is
based;




(iii)  A
description of any additional material or information necessary for the claimant
to perfect the claim and an explanation of why such material or information is
necessary; and




(iv)  An
explanation of the Plan’s appeal procedure and the time limits applicable to an
appeal, including a statement of the claimant’s right to bring a civil action
under Section 502(a) of ERISA.




(b)  Appeal
Procedures.  Every claimant shall have the right to appeal an
adverse benefits determination to the Committee (including, but not limited to,
whether the Participant’s termination was for Cause).  Such appeal may
be accomplished by a written notice of appeal filed with the Committee within
sixty (60) days after receipt by the claimant of written notification of the
adverse benefits determination.  Claimants shall have the opportunity
to submit written comments, documents, records, and other information relating
to the claim for benefits.  Claimants will be provided, upon request
and free of charge, reasonable access to, and copies of, all documents, records
and other information relevant to the claimant’s claim for benefits, such
relevance to be determined in accordance with Section 6.2(c) (Claims Procedures –
Definition of
Relevant) below.  The appeal shall take into account all
comments, documents, records, and other information submitted by claimant
relating to the claim, without regard to whether such information was submitted
or considered in the initial benefit determination.




(1)  Notice of
Decision.  Notice of a decision on appeal shall be furnished to
the claimant within a reasonable period of time, but not later than sixty (60)
days after receipt of the appeal by the Committee unless the Committee
determines that special circumstances (such as the need to hold a hearing if the
Committee determines that a hearing is required) require an extension of time
for processing the claim.  If the Committee determines that an
extension is required, written notice (including an explanation of the special
circumstances requiring an extension and the date by which the Committee expects
to render the benefits determination) shall be furnished to the claimant prior
to the termination of the original sixty (60) day period.  In no event
shall such extension exceed a period of sixty (60) days from the end of the
initial sixty




17


(60) day
period.  The notice required by the first sentence of this Section
shall be in writing, shall be set forth in a manner calculated to be understood
by the claimant and, in the case of an adverse benefit determination, shall set
forth the following:




(i)  The
specific reason or reasons for the adverse determination;




(ii)  Reference
to the specific Plan provisions upon which the determination is
based;




(iii)  A
statement that the claimant is entitled to receive, upon request and free of
charge, reasonable access to, and copies of, all documents, records, and other
information relevant to the claimant’s claim for benefits, such relevance to be
determined in accordance with Section 6.2(c) (Claims Procedures –
Definition of
Relevant), below; and




(iv)  An
explanation of the claimant’s right to bring a civil action under Section 502(a)
of ERISA following an adverse benefit determination on appeal.




(c)  Definition
of Relevant.  For purposes of this Section, a document, or
other information shall be considered “relevant” to the claimant’s claim if such
document, record or other information:




(1)  Was
relied upon in making the benefit determination;




(2)  Was
submitted, considered or generated in the course of making the benefit
determination, without regard to whether such document, record or other
information was relied upon in making the benefit determination; or




(3)  Demonstrates
compliance with the administrative processes and safeguards required pursuant to
this Section 6.2 on making the benefit determination.




(d)  Decisions
Final; Procedures Mandatory.  To the extent permitted by law, a
decision on review or appeal shall be binding and conclusive upon all persons
whomsoever.  To the extent permitted by law, completion of the claims
procedures described in this Section shall be a mandatory precondition that must
be complied with prior to commencement of a legal or equitable action in
connection with the Plan by a person claiming rights under the
Plan.  The Committee may, in its sole discretion, waive these
procedures as a mandatory precondition to such an action.




(e)  Time For
Filing Legal Or Equitable Action.  Any legal or equitable
action filed in connection with the Plan by a person claiming rights under the
Plan must be commenced not later than the earlier of:  (1) the
shortest applicable statute of limitations provided by law; or (2) two (2) years
from the date the written copy of the Committee’s decision on review is
delivered to the claimant in accordance with Section 6.2(b)(1) (Claims Procedures –
Appeal
Procedures – Notice of
Decision).




18


ARTICLE
VII


SUCCESSORS, BINDING
AGREEMENT




7.1  Successors.  PNM
Resources will negotiate to require any independent successor to all or
substantially all of the assets of PNM Resources to provide written
confirmation, within thirty (30) days of the effective date of the Change in
Control, of its agreement to assume and perform the Company’s obligations
pursuant to this Plan.  The failure of a successor to assume and
perform the Company’s obligations pursuant to the Plan shall constitute a
material breach of the Plan by the Company.




7.2  Binding
Agreement.  Subject to the right of PNM Resources to amend or
terminate this Plan, and the Committee’s right to interpret this Plan, this Plan
shall be for the benefit of and be enforceable by, a Participant’s personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.




ARTICLE
VIII


NOTICE




8.1  General.  For
the purpose of this Plan, and except as specifically set forth herein, notices
and all other communications provided for in the Plan shall be in writing and
shall be deemed to have been duly given when hand-delivered or mailed by United
States certified mail, return receipt requested, postage prepaid, addressed to
the Participant at his or her last known address, and to the Company at Alvarado
Square, Albuquerque, New Mexico, 87158, provided that all notices to the Company
shall be directed to the attention of the Secretary of PNM Resources; or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.




ARTICLE
IX


AMENDMENT AND
TERMINATION




9.1  Amendment
and Termination.  The Plan may be amended, in whole or in part,
or terminated at any time, by PNM Resources, subject to the following
exceptions:




(a)  No
amendment or termination of this Plan shall impair or abridge the obligations of
the Company already incurred.




(b)  No
amendment or termination of this Plan shall affect the rights of a Participant
who terminated employment before the effective date of such amendment or
termination and who subsequently satisfied the eligibility provisions of this
Plan.




(c)  If a
Change in Control occurs within twenty-four (24) months following the later of
the adoption or effective date of the amendment or termination of the Plan, or
during the Protection Period triggered by that Change in Control, the amendment
or termination shall be disregarded and this Plan will revive and continue for
the Protection Period to the extent that such amendment or termination impairs
or abridges the rights or benefits of an employee of the Company who was a
Participant upon the effective date of such Plan amendment or
termination.  Notwithstanding the foregoing, all changes made in order
to comply with Section 409A of the Code shall remain in
effect.




19


(d)  If the
Protection Period has begun, the Plan shall continue and may not be terminated
during the Protection Period.




(e)  Notwithstanding
the foregoing, the Plan may be amended at will at any time and from time to time
by PNM Resources to reflect changes necessary due to revisions to, or
interpretations of:  (1) ERISA, as amended; (2) Sections
280G, 409A or 4999 of the Code; or (3) any other provision of applicable
state or federal law.




(f)  Notwithstanding
any provision of this Plan to the contrary, no amendment may be made if it will
result in a violation of Section 409A of the Code and any such amendment shall
at no time have any legal validity.




ARTICLE
X


MISCELLANEOUS




10.1  Governing
Law.  The laws of the State of New Mexico shall govern the
validity, interpretation, construction and performance of this Plan, except to
the extent preempted by federal law.




10.2  Withholding.  Any
payments provided for hereunder shall be paid subject to any applicable
withholding required under federal, state or local law.




10.3  No Right
of Assignment.  Neither a Participant nor any person taking on
behalf of a Participant may anticipate, assign or alienate (either by law or
equity) any benefit provided under the Plan and the Company shall not recognize
any such anticipation, assignment or alienation.  Furthermore, to the
extent permitted by law, a benefit under the Plan is not subject to attachment,
garnishment, levy, execution or other legal or equitable process.




10.4  Survival
of Rights.  In addition to the limitations on termination of
this Plan set forth in Section 9.1 (Amendment and
Termination), any obligations of the Company to make payments that have
been due to Participants who have, at the time of expiration of the Plan,
satisfied the eligibility requirements pursuant to Articles IV (Eligibility for Retention
Benefits) and V (Retention Benefits)
above during the term hereof, shall survive the termination of this
Plan.




10.5  No
Employment Contract.  Notwithstanding anything to the contrary
contained in this Plan, by the execution of this Plan the Company does not
intend to change the employment-at-will relationship with any of its
employees.  Instead, the Company retains its absolute right to
terminate any employee at any time, for any or no reason and without
notice.




10.6  Mitigation
of Benefits.  A Participant shall not be required to mitigate
the amount of payment provided for in Article V (Retention Benefits)
by seeking other employment or otherwise, nor, except as specifically provided
in Article V (Retention Benefits),
shall the amount of any payment or benefit provided for in Article V (Retention Benefits)
be reduced by:  (a) any compensation earned by the Participant as
the result of employment by another employer; (b) by retirement benefits;
or (c) offsets against any amount claimed to be owed by the Participant to
the Company.




20


10.7  Service
of Process.  The Secretary of PNM Resources shall be the agent
for service of process in matters relating to this Plan.




10.8  Headings.  The
headings and subheadings in this Plan are inserted for convenience and reference
only and are not to be used in construing this Plan or any provision
hereof.




10.9  Gender
and Number.  Where the context so requires, words in the
masculine gender shall include the feminine and neutral genders, the plural
shall include the singular, and the singular shall include the
plural.




10.10  ERISA
Plan.  This Plan shall be interpreted as, and is intended to
qualify as, a severance pay plan under ERISA, and therefore does not constitute
an employee pension benefit plan pursuant to Section 3(2) of
ERISA.




10.11  Validity.  The
invalidity or unenforceability of any provision of this Plan shall not affect
the validity or enforceability of any other provision of this Plan, which shall
remain in full force and effect.




10.12  Compliant
Operation and Interpretation.  This Plan shall be operated in
compliance with Section 409A or an exception thereto and each provision of this
Plan shall be interpreted, to the extent possible, to comply with Section 409A
or to qualify for an exception thereto.




10.13  Adoption
by Affiliates.




(a)  An
Affiliate, by action of its board of directors, may adopt the Plan with respect
to its Officers only with the approval of the Board.




(b)  Except as
otherwise clearly indicated by the context (such as in the definitions of
Affiliate, Board, Change in Control and Committee) the term “Company” as used
herein shall include each Affiliate that has adopted this Plan in accordance
with this Section 10.13 but not any Affiliate that has not adopted this
Plan.




(c)  By
adopting the Plan, the Affiliate shall be deemed to have agreed to:




(1)  Assume
the obligations and liabilities imposed upon it by the Plan with respect to the
its Officers;




(2)  Comply
with all of the terms and provisions of the Plan;




(3)  Delegate
to the Committee the power and responsibility to administer the Plan with
respect to the Affiliate’s Officers;




(4)  Delegate
to PNM Resources, Inc. the full power to amend or terminate the Plan with
respect to the Affiliate’s Officers; and




21


(5)  Be bound
by any action taken by PNM Resources pursuant to the terms and provisions of the
Plan, regardless of whether such action is taken with or without the consent of
the Affiliate.




(d)  Any
Affiliate that has adopted this Plan for the benefit of its Officers may
terminate its adoption of the Plan by action of its board of directors and
timely providing notice to PNM Resources of such termination.




(e)  PNM
Resources and each participating Affiliate shall bear the costs and expenses of
providing benefits to their respective Officers who are
Participants.  Such costs and expenses shall be allocated among PNM
Resources and participating Affiliates in accordance with agreements entered
into between PNM Resources and any participating Affiliate, or in the absence of
such an agreement, procedures adopted by PNM Resources.




IN
WITNESS WHEREOF, the Company has caused this Plan document to be executed by its
duly authorized representative on this 2nd day of September,
2008.




PNM
RESOURCES, INC.






By:  /s/ Alice A.
Cobb


Its: SVP, Chief
Administrative Officer




22
 
 TABLE
OF CONTENTS
  Page


ARTICLE
I


PURPOSE




1.1
            General
            1




ARTICLE
II


DEFINITIONS




2.1
            General
            2




2.2
            Other
      Defined Terms
            7




ARTICLE
III


TERM OF
PLAN




3.1
            Term
      of Plan
            7




3.2
            Reversion
      to Prior Provisions of the Plan
            7




ARTICLE
IV


ELIGIBILITY
FOR RETENTION BENEFITS




4.1
            Eligibility
      to Participate
            7




4.2
            Eligibility
      for Benefits
            7




4.3
            Release
      Agreement
            8




4.4
            No
      Duplication of Benefits
            9




ARTICLE
V


RETENTION
BENEFITS




5.1
            Retention
      Benefits
            9




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




5.3
            Reimbursement
      of Legal Fees
            13




5.4
            Offsetting
      Benefits
            13




5.5
            Tax
      Gross-Up
            13




5.6
            Additional
      Benefits Under Other Plans
            16




i




TABLE OF
CONTENTS








ARTICLE
VI


PLAN
ADMINISTRATION




6.1
            Plan
      Administration
            16




6.2
            Claims
      Procedures
            16




ARTICLE
VII


SUCCESSORS,
BINDING AGREEMENT




7.1
            Successors
            19




7.2
            Binding
      Agreement
            19




ARTICLE
VIII


NOTICE




8.1
            General
            19




ARTICLE
IX


AMENDMENT
AND TERMINATION




9.1
            Amendment
      and Termination
            19




ARTICLE
X


MISCELLANEOUS




10.1
            Governing
      Law
            20




10.2
            Withholding
            20




10.3
            No
      Right of Assignment
            20




10.4
            Survival
      of Rights
            20




10.5
            No
      Employment Contract
            20




10.6
            Mitigation
      of Benefits
            20




10.7
            Service
      of Process
            21




10.8
            Headings
            21




10.9
            Gender
      and Number
            21




ii




TABLE OF
CONTENTS




10.10
            ERISA
      Plan
            21




10.11
            Validity
            21




10.12
            Compliant
      Operation and Interpretation
            21




10.13
            Adoption
      by Affiliates
            21














iii