exh10-7_052609.htm


    
 

    
      Exhibit
10.7

      Part
II Award Agreement



    PERFORMANCE
CASH AWARD AGREEMENT

    PNM
RESOURCES, INC. SECOND AMENDED AND RESTATED

    OMNIBUS
PERFORMANCE EQUITY PLAN

     

    PNM
Resources, Inc., a New Mexico corporation, (“PNMR” or the “Company”) hereby
awards to «First» «Last» (the “Participant”), a
Participant in the PNM Resources, Inc. Second Amended and Restated Omnibus
Performance Equity Plan (the “Plan”), as it may be amended, a Performance Cash
Award (the “Award”) effective as of April 27, 2009.

     

    Capitalized
terms used in this Performance Cash Award Agreement (the “Agreement”) and not
otherwise defined in this Agreement shall have the meanings given to such terms
in the Plan.

     

    1.    
Grant.  Company
hereby awards to Participant the opportunity to earn a cash payment in an amount
equal to the Threshold, Target or Maximum Award levels listed in
Section 4(a) and (b), based upon Company’s performance over the Performance
Period (defined in Section 3), in accordance with and subject to the terms
and conditions set forth in this Agreement.  In no event will the
Award exceed the Maximum Award levels indicated in Section 4(a) and
(b).  If Participant is a Covered Employee, the Award is intended to
be a Performance-Based Award granted pursuant to Section 12 of the
Plan.

     

    2.    
Award
Subject to Plan.  This Award is granted pursuant to the Plan,
the terms of which are hereby incorporated by reference.

     

    3.    
Performance
Period.  The Performance Period for this Award began on
April 1, 2009 and ends on December 31, 2011.

     

    4.    
Performance
Goals; Amount of Award.  The amount of the Award to which
Participant is entitled pursuant to this Agreement, if any, is based upon the
level of Company’s achievement with respect to the two Performance Goals
described in this Section.  Each of the Performance Goals described in
this Section will account for fifty percent of the Participant’s total Award
opportunity.

     

    (a)    
Funds
from Operations to Debt (“FFO to Debt”) Ratio Goal:  Fifty
percent of Participant’s Award will be determined based upon Company’s FFO to
Debt Ratio during the Performance Period (the “FFO to Debt Ratio Portion”), as
set forth in this Section 4(a).

     

    (i)    
FFO to
Debt Ratio Defined.  For purposes of this Agreement, the term
FFO to Debt Ratio means Company’s funds from operations (as determined
conclusively by Company) for the fiscal year ending on the last day of the
Performance Period divided by Company’s total debt outstanding, including any
long-term leases and unfunded pension plan obligations, as of the last day of
the Performance Period.

     

    (ii)    
FFO to
Debt Ratio Award Levels:  Company’s achievement of
the FFO to Debt Ratio Goal will determine the amount of the FFO to Debt Ratio
Portion of the Award to which Participant is entitled as set forth
below:

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    
      	
              If
      Company’s FFO to Debt Ratio over the Performance Period
is:

            	
              The
      FFO to Debt Ratio Portion of the Award to Participant will
    be

            
	
              Greater
      than 15.0% but does not exceed 15.5%

            	
              [$_______]
      (the Threshold Award), adjusted as described below.1

            
	
              Greater
      than 15.5% but does not exceed 16%

            	
              [$_______]
      (the Target Award), adjusted as described below.2

            
	
              Greater
      than 16.0%

            	
              [$_______]
      (the Maximum Award), adjusted as described below.3

            


    

    


    If
Company’s FFO to Debt Ratio for the Performance Period is equal to or less than
15.0% no payment will be due with respect to the FFO to Debt Ratio Portion of
the Award.  If Company’s FFO to Debt Ratio for the Performance Period
exceeds 15.0% but does not exceed 15.5%, the FFO to Debt Ratio Portion of
Participant’s Award will be interpolated between the Threshold and Target Award
levels.  If Company’s FFO to Debt Ratio for the Performance Period
exceeds 15.5% but does not exceed 16.0%, the FFO to Debt Ratio Portion of
Participant’s Award also will be interpolated between the Target and Maximum
Award levels.

     

    (b)    
Environmental
Goal:  Fifty percent of Participant’s Award will be determined
based upon Company’s attainment of the Environmental Goal (the “Environmental
Goal Portion”), as set forth in this Section 4(b).

     

    (i)    
Environmental
Goal Defined.  For purposes of this Agreement, the term
“Environmental Goal” means the reduction in the emission levels of
(1) nitrous oxide, (2) sulfur dioxide, (3) particulate matter,
and (4) mercury (the “Pollutants”) at Company’s San Juan Generating Station
(“SJGS”) during the Performance Period to levels that are less than the limits
on the emissions of such Pollutants set forth in the Consent Decree entered by
the United States District Court for the District of New Mexico on May 10, 2005
in the case of Grand Canyon
Trust and Sierra Club v. Public Service Company of New Mexico, Case No.
CIV 02-552 (the “Consent Decree”).  The Consent Decree limits are set
forth in the following table.

     

    
      	
              Pollutant

            	
              Consent
      Decree Limit

            
	
              Nitrous
      Oxide

            	
              3.24
      pounds/megawatt hour

            
	
              Sulfur
      Dioxide

            	
              1.51
      pounds per megawatt hour

            
	
              Mercury

            	
              90%
      removal efficiency4

            
	
              Particulates

            	
              0.16
      pounds per megawatt hour

            


    

    


    Company
will use the following method for determining the level of attainment of the
Environmental Goal:  (A) Company will measure the emission levels
of each of the Pollutants from the SJGS over the course of the Performance
Period; (B) Company then will compare the actual emission level for each
Pollutant to the Consent Decree limit; (C) next, Company will 

    ____________________________

    
      1  Insert
50% of the total Threshold Award set by the Committee.  

      
        2  Insert
50% of the total Target Award set by the Committee.  

      

      
        3  Insert
50% of the total Maximum Award set by the Committee.  

      

      
        4  Company
has assumed in establishing the Environmental Goal that, for purposes of
measuring Mercury emission reductions, the Consent Decree limit is 90%
removal.  

      

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    calculate
the simple percentage variance between the emission of such Pollutant from SJGS
and the limit set forth in the Consent Decree, positive or negative (if actual
emission level is less than the Consent Decree limit it will result in a
positive percentage variance); (D) Company will then add the percentage
variances for all four Pollutants and divide the sum of such percentage
variances by four to calculate the average variance for the
Pollutants.  The average variance for the Pollutants will determine
the level of Company’s attainment of the Environmental Goal.

     

    (ii)   
Environmental
Goal Award Levels.  Company’s level of achievement of the
Environmental Goal (described above) will determine the amount of the
Environmental Goal Portion of the Award to which Participant is entitled as set
forth below:

     

    
      	
              If
      the average variance between the level of emission of the Pollutants at
      SJGS and the limits set forth in the Consent Decree over the Performance
      Period is:

            	
              The
      Environmental Goal Portion of Participant’s Award will
  be:

            
	
              Greater
      than or equal to 10%

            	
              [$______]
      (the Threshold Award), adjusted as described below.5

            
	
              Greater
      than or equal to 12%

            	
              [$______]
      (the Target Award), adjusted as described below.6

            
	
              Greater
      than or equal to 14%

            	
              [$______]
      (the Maximum Award) adjusted as described below.7

            


    

    


    If the
level of attainment of the Environmental Goal is not greater than or equal to
10%, no payment for the Environmental Goal Portion of the Award will be due
pursuant to this Agreement.  If the level of attainment of the
Environmental Goal is greater than 10% but less than 12%, the amount of the
Environmental Goal Portion of the Award to which Participant is entitled will be
interpolated between the Threshold and Target Award levels.  If the
level of attainment of the Environmental Goal is greater than 12% but less than
14%, the amount of the Environmental Goal Portion of the Award to which
Participant is entitled also will be interpolated between the Target and Maximum
Award levels.

     

    (iii)  
Discretion
to Reduce Environmental Goal Portion of Award.  The Committee,
in its sole discretion, may reduce (but not increase) the Environmental Goal
Portion of the Award, if any, to which Participant is entitled based on such
factors as the Committee determines to be appropriate.

     

    5.    
Determination
of Performance Goals and Awards Payable.  The Committee will
determine the FFO to Debt Ratio and the level of attainment of the Environmental
Goals for the Performance Period and the amount of the Award to which
Participant is entitled, if any, on or before February 28,
2012.  If payment of an Award to Participant requires approval of the
Board of Directors, the Committee will submit its recommendation with respect to
such 

     

    ______________________________

    
      5  Insert
50% of the total Threshold Award set by the Committee.  

      
        6  Insert
50% of the total Target Award set by the Committee.  

      

      
        7  Insert
50% of the total Maximum Award set by the
Committee.

      

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    Participant’s
Award to the Board of Directors for approval.  No amount will be
payable to Participant in the absence of approval by the Board of
Directors.

     

    6.    
Vesting
on Termination of Employment.

     

    (a)    
Due to
Death, Disability, Retirement, Impaction or Change in
Control.  Upon Participant’s Termination of Employment due to
death, Disability, Retirement, Impaction or Change in Control prior to the end
of the Performance Period, Participant shall vest in a pro rata portion of the
Award to which Participant is entitled at the end of the Performance Period
based on the level of achievement of the Performance Goals described in Section
4(a) and (b).  The Payment to which Participant is entitled for the
pro rata portion of the vested Award shall be based on the number of full months
included in the Performance Period as of the date of Participant’s Termination
of Employment compared to the number of full months included in the Performance
Period.  The amount of the Award to which Participant is entitled
hereunder shall be determined at the conclusion of the Performance Period based
upon actual performance during the Performance Period.  The Award, if
any, shall be paid at the time and in the form described in Section
7.

     

    (b)    
Involuntary
or Voluntary Termination of Employment for Other
Reasons.  Subject to Section 6(c), upon Participant’s
involuntary or voluntary Termination of Employment for any reason other than
those set forth in Section 6(a), the Award, if not previously vested, shall be
canceled and forfeited immediately.

     

    (c)    
Termination
for Cause.  Upon Participant’s Termination of Employment for
Cause, Participant’s right to any Award hereunder shall be canceled and
forfeited immediately.

     

    7.    
Form and
Timing of Payment. Participant will receive
the payment of the Award, if any, in one lump sum cash payment on or before
March 15, 2012.

     

    8.    
Withholding
and Deductions.  Company is authorized to withhold from any
payments called for by this Agreement all withholding and other taxes due to the
federal and any state governments and to take such other action as Company may
deem necessary or advisable to enable Company and Participant to satisfy
obligations for the payment of withholding taxes and other tax liabilities
relating to any payment.

     

    9.    
Non-Assignability.  The
Award and Participant’s rights under this Agreement shall not be transferable
other than by will or by the laws of descent and distribution.  The
Performance Cash Award is otherwise non-assignable.  (See
Section 14 of the Plan).  The terms of this Agreement and the
Plan shall be binding on the executors, administrators, heirs and successors of
Participant.

     

    10.   
Employment
Agreement.  Notwithstanding anything to the contrary contained
in this Agreement, (a) neither the Plan nor this Agreement is intended to
create an express or implied contract of employment for a specified term between
Participant and Company and (b) unless otherwise expressed or provided, in
writing and by an authorized officer, the employment relationship between
Participant and Company shall be defined as “employment at 

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    will”
wherein either party, without prior notice, may terminate the relationship with
or without cause.

     

    11.    
Administration.  This
Agreement shall at all times be subject to the terms and conditions of the Plan
and the Plan shall in all respects be administered by the Committee in
accordance with the terms of and as provided in the Plan.  The
Committee shall have the sole and complete discretion with respect to the
interpretation of this Agreement and the Plan, and all matters reserved to it by
the Plan.  The decisions of the majority of the Committee with respect
thereto and to this Agreement shall be final and binding upon Participant and
Company.  In the event of any conflict between the terms and
conditions of this Agreement and the Plan, the provisions of the Plan shall
control.

     

    12.   
Waiver
and Modification.  The provisions of this Agreement may not be
waived or modified unless such waiver or modification is in writing signed by
Company.

     

    13.   
Validity
and Construction. The validity and construction of this Agreement shall
be governed by the laws of the State of New Mexico.

     

    MANY
OF THE PROVISIONS OF THIS AWARD AGREEMENT ARE SUMMARIES OF SIMILAR PERTINENT
PROVISIONS OF THE PLAN.  TO THE EXTENT THIS AGREEMENT IS SILENT ON AN
ISSUE OR THERE IS A CONFLICT BETWEEN THE PLAN AND THIS AGREEMENT, THE PLAN
PROVISIONS SHALL CONTROL.

     

    IN
WITNESS WHEREOF, Company has caused this Performance Cash Award Agreement to be
executed on ____________ ___, 2009, by its duly authorized
representative.

     

    PNM
RESOURCES, INC.

    


    


    


    By                                                                 
                          

         Alice
A. Cobb

         Senior
Vice President and

         Chief
Administrative Officer

    

      

    


    
      
        
           

        

         


      

      
        5