exh10-2_052609.htm


    

      Exhibit
10.2


      
        


        PNM
RESOURCES, INC.

        2009
OFFICER INCENTIVE PLAN

      

      
        


      

      


      


      INTRODUCTION

       

      PNM
Resources, Inc. (the “Company”) has adopted the PNM Resources, Inc. Second
Amended and Restated Omnibus Performance Equity Plan (the “PEP”), which
currently is subject to approval by the Company’s shareholders and becomes
effective upon shareholder approval.  The Company also has adopted
this 2009 Officer Incentive Plan (the “Plan”) for the purpose of providing
annual cash-based incentive awards (each an “Award”) to eligible Officers (as
defined below).  The Awards payable to Officers under the Plan are
intended to qualify as Performance Cash Awards granted pursuant to Section 9.4
of the PEP and, in the case of Officers who are Covered Employees, as
Performance-Based Performance Cash Awards granted pursuant to Section 12 of
the PEP.

       

      Capitalized
terms used in the Plan and not otherwise defined herein shall have the meanings
given to them under the terms of the PEP.

       

       ELIGIBILITY

       

      All
Officers of the Company and its Affiliates are eligible to participate in the
Plan with the exception of the First Choice Power officers, who will participate
in the First Choice Power, L.P. Incentive Plan, and the Optim Energy, LLC
officers, who will participate in Optim Energy’s programs.  For
purposes of the Plan, the term “Officer” means any employee of the Company or
any Affiliate (other than First Choice Power or Optim Energy) who has the title
of Chief Executive Officer, President, Executive Vice President, Senior Vice
President or Vice President and who is in salary grade H18 or
higher.

       

      PLAN
OBJECTIVES

       

      The Plan
is designed to motivate and reward Officers for benefiting our customers and
shareholders by achieving and exceeding the Performance Goals (as defined below)
established for such Officers.

       

       PERFORMANCE
PERIOD

       

      The
period over which the Officer’s performance will be measured for purposes of
determining whether Awards are payable under the Plan began on January 1,
2009 and ends on December 31, 2009 (the “Performance
Period”).  The Board Governance and Human Resources Committee (the
“Committee”) of the Company’s Board of Directors (the “Board”), in its sole
discretion, reserves the right to adjust, amend or suspend the Plan during the
Performance Period.

       

      AWARD
DETERMINATION

       

      In order
for Awards to be payable under the Plan, the performance goals described below
(collectively, the “Performance Goals”) must be satisfied.

       

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      
        
          Exhibit
10.2

        

      

       

      Business Area Earnings Per
Share

       

      PNM
Resources, Inc. will be treated as one “Business Area” and its Utility
subsidiaries (Public Service Company of New Mexico and Texas-New Mexico Power
Company), collectively, will be treated as a separate “Business
Area.”  A Business Area must achieve the applicable Earnings Per Share
(“EPS”) levels set forth in the table below in order for Awards to be payable
pursuant to the Plan to Officers within such Business Area.

       

      
        	 
      	
                PNMR
      EPS

              	
                Utility
      EPS

              
	
                No
      Award

              	
                Less
      than or equal to $0.40

              	
                Less
      than or equal to $0.53

              
	
                Threshold

              	
                Greater
      than or equal to $0.41 and less than or equal to $0.45

              	
                Greater
      than or equal to $0.54 and less than or equal to $0.59

              
	
                Target

              	
                Greater
      than or equal to $0.46 and less than or equal to $0.58

              	
                Greater
      than or equal to $0.60 and less than or equal to $0.73

              
	
                Maximum

              	
                Greater
      than or equal to $0.59

              	
                Greater
      than or equal to $0.74

              


      

      


      If a
Business Area does not achieve the Threshold EPS level set forth above, no
Awards are payable under the Plan to Officers within that Business
Area.  In addition, no Awards are payable to Officers of either
Business Area if the PNM Resources EPS is less than $0.41. Subject to the
preceding sentence, if a Business Area achieves the Threshold, Target or Maximum
level of EPS, the aggregate potential Awards payable to the Officers of that
Business Area at that level of performance (e.g., the aggregate Awards payable
at Target for those Officers), as determined pursuant to the table set out
below, will make up the initial potential “Award Pool” for that Business
Area.

       

      The Award
Pool for a Business Area will be increased if the attained EPS level exceeds by
at least $0.01 the minimum EPS number for the Target Award level and is less
than the minimum EPS number for the Maximum Award level.  For example,
if the PNM Resources EPS is at least $0.47 but is less than $0.59, the Award
Pool for the PNM Resources Business Area will be increased.  For each
$0.01 of additional EPS, the Award Pool will be increased by up to the Plan’s
share of 25% of the incremental earnings (i.e., the additional EPS multiplied by
the average number of common shares of PNM Resources, Inc, common stock used to
calculate diluted EPS as reported in Company’s 10-K multiplied by
25%).  The Plan’s share of 25% of the incremental earnings will be
determined by multiplying 25% of the incremental earnings by a fraction, the
numerator of which is the Award Pool for that Business Area and the denominator
of which is the sum of the Award Pool for both Business Areas under this Plan
and the total award pool under Company’s incentive compensation plan for
non-Officer employees.  The Committee, in the exercise of its
discretion, may choose to increase the Award Pool by an amount less than the
Business Area’s share of 25% of the incremental earnings.

       

      For
purposes of the Plan, a Business Area’s EPS will be the net earnings for that
Business Area, excluding non-recurring items that do not factor into ongoing
earnings, divided by the average number of common shares of PNM Resources, Inc,
common stock used to calculate diluted EPS as reported in Company’s
10-K.   The Committee’s determination of the EPS of a particular
Business Unit shall be binding and conclusive.

       

      For
purposes of the Plan, the Chief Executive Officer, the Executive Vice President,
the Chief Operating Officer, the Senior Vice Presidents and the shared services
Vice Presidents are 

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      
        
          Exhibit
10.2

        

      

       

      assigned
to the PNM Resources Business Area.  The utility Vice Presidents are
assigned to the Utility Business Area.

       

      Each
Business Area is broken down into separate “Business Units.”  The
Business Units are identified on Attachment A.  The Award Pool for
each Business Area will be broken into Business Unit Award Pools.  The
Award Pool for each of the Business Units of a Business Area will be determined
by multiplying the Business Area Award Pool by a fraction.  The
numerator of the fraction is the total potential Awards payable at the relevant
EPS performance level (Threshold, Target or Maximum) to all of the Officers
assigned to that Business Unit and the denominator of which is the total
potential Awards payable at the relevant performance level to all of the
Officers assigned to that Business Area.

       

      Business Unit Award Pools
and Scorecard

      


      Performance
measures have been established and weighted for each Business Unit in the two
Business Areas.  These performance measures are described on
Attachment A.  The Committee will use a Business Unit Scorecard to
measure whether a Business Unit met its performance measures at the Threshold,
Target or Maximum levels.  The level of performance of the relevant
Business Unit will be applied to further adjust the Award Pool for that Business
Unit.  The adjusted Award Pool will equal the lesser of the Award Pool
prior to the adjustment or the aggregate potential Awards payable to all of the
Officers of that Business Unit at the level of performance (Threshold, Target or
Maximum), as described in the table set out below, attained by the Business
Unit.

      


      Officer Award Opportunities
(as a percentage of base salary)

       

      The
amount of the potential Award payable to any Officer based upon his or her
Business Unit’s level of achievement of its Performance Goals, expressed as a
percentage of the Officer’s base salary determined as of January 1, 2009,
is as follows:

       

      
        	 
      	
                 

                Threshold

              	
                 

                Target

              	
                 

                Maximum

              
	
                Chairman
      and CEO

              	
                24.0%

              	
                60.0%

              	
                120.0%

              
	 
      	 
      	 
      	 
      
	
                President
      and COO

              	
                19.0%

              	
                48.0%

              	
                96.0%

              
	
                EVP,
      Chief Financial Officer

              	
                19.0%

              	
                48.0%

              	
                96.0%

              
	 
      	 
      	 
      	 
      
	
                Senior
      Vice-Presidents

              	
                14.0%

              	
                36.0%

              	
                72.0%

              
	 
      	 
      	 
      	 
      
	
                VP,
      Corporate Controller

                VP,
      Treasurer

                VP,
      Generation

                VP,
      CIO

                VP,
      People Services

                VP,
      Marketing & Cust. Service

                VP,
      Regulatory

              	
                10.0%

              	
                24.0%

              	
                48.0%

              
	
                All
      Other Vice-Presidents

              	
                7.0%

              	
                18.0%

              	
                36.0%

              


      

      


      The
adjusted Business Unit Award Pool will be allocated among the Officers in that
Business Unit based upon the amount potentially payable to that Officer, as
determined in accordance with the table set out above, for the level of
performance (Threshold, Target or Maximum) attained by the relevant Business
Unit, as compared to the similar amounts payable to all 

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      
        
          Exhibit
10.2

        

      

       

      Officers
of that Business Unit at the relevant performance level.  In no event
will the amount payable to an Officer exceed the indicated percentage of the
Officer’s base salary, as in effect on January 1, 2009, as determined in
accordance with the above table, for the attained level of
performance.

      


      Individual
Goals

       

      On or
before March 31, 2009, the Committee will establish in writing and provide
to each Officer the individual leadership effectiveness goals (“Individual
Goals”) by which the Committee will measure the Officer’s individual performance
during the Performance Period.  The Committee, in its discretion, will
establish the Individual Goals for the Chief Executive Officer.  The
Committee will establish the Individual Goals for all other Officers based on
management’s recommendations.  The Committee may reduce (but not
increase) each Officer’s Award, as calculated above, by up to 33.33% based on
the Committee’s determination with respect to whether the Officer met the
Officer’s Individual Goals during the Performance Period.  The
Committee’s assessment of an Officer’s performance is final and
conclusive.

       

      FFO/Debt
Modifier

       

      The
amount of the Award available to the Officers, as determined above, is subject
to a positive or negative adjustment of up to 10% based on the ratio of the
Company’s funds from operations to debt (the “FFO/Debt Modifier”) as set forth
in the table below:

       

      
        	
                Level

              	
                FFO/Debt
      Result

              	
                Award
      Modifier

              
	
                Threshold

              	
                11.0

              	
                (10%)

              
	
                Target

              	
                11.5

              	
                0

              
	
                Maximum

              	
                12.5

              	
                10%

              


      

      


      The level
of the Award Modifier will be interpolated for each incremental 0.1 of FFO/Debt
result.

       

      AWARD APPROVAL AND PAYOUT
TIMING

       

      In
January 2010, the Committee will determine and certify the level of Awards, if
any, payable for the Performance Period in the manner described
above.  The Board then will approve the CEO’s Award and the Committee
will have final approval authority for all other Awards.  To the
extent Awards are payable under the Plan, the Company will make such payment on
or before March 15, 2010 in a single lump sum cash payment.

       

      The total
of all Awards payable to the Officers of a Business Area or Unit will not exceed
the adjusted Award Pool for that Business Area or Unit.

       

      PROVISIONS FOR A CHANGE IN
CONTROL

       

      If a
Change in Control occurs during the Performance Period and the Officer still is
employed by the Company or an Affiliate at the end of the Performance Period,
the Officer may be entitled to receive an Award for such Performance
Period.  If the Plan is modified after the occurrence of a Change in
Control in a manner that has the effect of reducing the amounts otherwise
payable under the Plan, the Officer shall receive, at a minimum, an Award equal
to 50% of the Maximum Award available under this Plan for the Performance
Period.  Such Award will be payable in a single lump sum cash payment
on or before March 15, 2010.

       


      
        
          
             

             

          

           


        

        
          4

          
            

          

        

        
           


          
            Exhibit
10.2

          

        

      


      PRO-RATA AWARDS FOR PARTIAL
SERVICE PERIODS

       

      In the
event an Officer who is eligible for an Award under the Plan does not
participate in the Plan for the entire Performance Period or participates in the
Plan at varying levels during the Performance Period, the Officer may be
entitled to a pro rata portion of the Award, if any, payable at the end of the
Performance Period based on the level of achievement of the Performance Goals
applicable to the Award.  The payment to which the Officer is entitled
for the pro rata portion of the Award shall be based on the number of full
months that the Officer was actively employed at each eligibility level during
the Performance Period compared to the number of full months included in the
Performance Period.  Any pro-rata Awards to which an Officer becomes
entitled pursuant to this paragraph will be paid to the Officer in a single lump
sum cash payment on or before March 15,
2010.  (Note:  Any month in which an Officer is actively on
the payroll for at least one day will count as a full month.)

       

      Pro-rata
Awards will be payable only to the following Officers or Employees:

       

      
        	
                -  

              	
                Officers
      who are newly hired during the Plan Year and are employed by the Company
      or an Affiliate on the day on which Awards are distributed for the
      Performance Period.

              


      

       

      
        	
                -  

              	
                Employees
      or Officers who are promoted, transferred or demoted during the
      Performance Period and are employed by the Company or an Affiliate on the
      day on which Awards are distributed for the Performance
      Period.

              


      

       

      
        	
                -  

              	
                Officers
      who are on leave of absence for any full months during the Performance
      Period and are employed by the Company or an Affiliate on the day on which
      Awards are distributed for the Performance
  Period.

              


      

       

      
        	
                -  

              	
                Officers
      who terminate employment with the Company or an Affiliate during the
      Performance Period due to Impaction (as defined in the PNM Resources, Inc.
      Non-Union Severance Pay Plan), retirement on or after the Officer’s Normal
      Retirement Date (as defined in the PNM Resources, Inc. Retirement Savings
      Plan), Change in Control (as defined in the PNM Resources, Inc. Officer
      Retention Plan) or Disability (as defined in the PNM Resources Executive
      Savings Plan II).

              


      

       

      
        	
                -  

              	
                Officers
      who die during the Performance Period, in which case the Award will be
      paid to the spouse of a married Officer or the estate of an unmarried
      Officer.

              


      

       

      FORFEITURE OF
AWARDS

       

      An
Officer who terminates employment with the Company or an Affiliate on or before
the date on which Awards are distributed for the Performance Period for any
reason other than death, Impaction, Retirement, Change in Control or Disability
will not be eligible for payment of an Award.  (Any Officer who elects
voluntary separation or Retirement in lieu of termination for performance or
misconduct will not be eligible for payment of an Award.)

       

      ETHICS

       

      The
purpose of the Plan is to fairly reward performance achievement.  Any
Officer who manipulates or attempts to manipulate the Plan for personal gain at
the expense of customers, other employees or Company or Affiliate objectives
will be subject to appropriate disciplinary action, up to and including
termination of employment, and will forfeit any bonus under the
Plan.

       


      
        
          
             

             

          

           


        

        
          5

          
            

          

        

        
           


          
            Exhibit
10.2

          

        

      


      NONTRANSFERABLE

      


      No award
may be assigned or transferred by an Officer other than by will or the laws of
descent and distribution.

       

      WITHHOLDING

      


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

       

      NO RIGHTS OF
OWNERSHIP

      


      While the
Plan is intended to provide Officers with the opportunity to share in the
success of the Company and its Affiliates, the Plan is merely a bonus plan and
does not give any Officer any of the rights of ownership of the Company or any
Affiliate or provide any security interest in any assets of the Company or any
Affiliate.

       

      CONTINUATION OF
EMPLOYMENT

       

      This Plan
shall not be construed to confer upon any Officer any right to continue in the
employment of the Company or any Affiliate and shall not limit the right of the
Company or any Affiliate, in its sole discretion, to terminate the employment of
any Officer at any time.

       

      Approved
by:

       

      


      


      /s/ Alice A.
Cobb                                                                             

      Alice A.
Cobb, Senior Vice President

      and Chief
Administrative Officer

      


      


      Date:  March
30, 2009

      


       

      


       

      


      



      
        
          
             

             

          

           


        

        
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