Document:

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                                                                    EXHIBIT 4.3

                              ARTICLES OF EXCHANGE
                                     BETWEEN
                      PUBLIC SERVICE COMPANY OF NEW MEXICO,

                                       AND
                               PNM RESOURCES, INC.
                     (FORMERLY KNOWN AS MANZANO CORPORATION)

         Pursuant to the provisions of the New Mexico Business Corporation Act,
Public Service Company of New Mexico ("PNM"), a New Mexico corporation, and PNM
Resources, Inc. (formerly known as Manzano Corporation) ("PNM RESOURCES"), a New
Mexico corporation, adopt the following Articles of Exchange, effective DECEMBER
31, 2001 AT 12:01 A.M. (MT) (the "EFFECTIVE TIME").

         PNM is reorganizing into a holding company structure pursuant to the
Plan of Share Exchange (defined below). Prior to the Effective Time, PNM
Resources, Inc. was a wholly-owned subsidiary of PNM. Upon the Effective Time,
PNM Resources will become the parent of PNM. PNM Resources is the acquiring
corporation and PNM is the acquired corporation.

                                    ARTICLE 1
                             PLAN OF SHARE EXCHANGE

         Pursuant to the Agreement and Plan of Share Exchange dated as of April
17, 2000 ("PLAN OF SHARE EXCHANGE") between PNM and PNM Resources, attached
hereto as part of these Articles of Exchange:

         (1) Each share of common stock of PNM ($5.00 par value per share)
issued and outstanding immediately before the Effective Time shall be
automatically exchanged for one share of common stock of PNM Resources (without
par value), which shares of PNM Resources common stock shall thereupon be fully
paid and non-assessable;

         (2) PNM Resources shall acquire and become the owner and holder of each
issued and outstanding share of common stock of PNM so exchanged; and

         (3) Each share of PNM Resources common stock issued and outstanding
immediately prior to the Effective Time shall be cancelled and shall thereupon
constitute an authorized and unissued share of PNM Resources.

         Shares of preferred stock of PNM in existence prior to the Effective
Time shall not be exchanged or otherwise affected in connection with the Plan of
Share Exchange.

                                    ARTICLE 2
                               OUTSTANDING SHARES

Immediately prior to the Effective Time:

         For PNM Resources: 100 shares of PNM Resources common stock issued and
outstanding and owned by PNM, and no issued and outstanding shares of PNM
Resources preferred stock.

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         For PNM:       39,117,799 shares of PNM common stock issued and
outstanding, and 128,000 shares of preferred stock of PNM issued and outstanding
in one series.

                                    ARTICLE 3
                              SHAREHOLDER APPROVAL

         Approval of the Plan of Share Exchange required the affirmative vote of
the holders of two-thirds of the shares of PNM common stock entitled to vote at
the annual meeting of PNM shareholders held on June 6, 2000.

         Holders of 39,535,699 shares of PNM common stock, issued and
outstanding at the close of business on the April 17, 2000 record date, were
entitled to vote on the Plan of Share Exchange. Each share of PNM common stock
was entitled to one vote. Of the 39,535,699 eligible shares, 28,701,001 shares
of PNM common stock were voted in favor of the Plan of Share Exchange, 2,813,624
shares of PNM common stock were voted against the Plan of Share Exchange,
221,815 shares were voted to abstain, and the remainder of the holders of
eligible shares were not voted at the June 6, 2000 meeting of PNM shareholders.

                                    ARTICLE 4
                         ACQUIRING CORPORATION STATEMENT

         The adoption plan, I.E., the Plan of Share Exchange, and performance of
its terms were duly approved by the board of directors of PNM Resources, along
with such other requisite corporate action by PNM Resources.

         Dated:  December 20, 2001.

PNM RESOURCES, INC.

By       /s/ J.E. Sterba
  --------------------------------------------------
         J.E. Sterba, Chairman, President
         and Chief Executive Officer

PUBLIC SERVICE COMPANY
OF NEW MEXICO

By       /s/ J.E. Sterba
  --------------------------------------------------
         J.E. Sterba, Chairman, President
         and Chief Executive Officer

Attachment - Plan of Share Exchange

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                      AGREEMENT AND PLAN OF SHARE EXCHANGE

         THIS AGREEMENT AND PLAN OF SHARE EXCHANGE (this "Agreement"), dated as
of April 17, 2000, is between PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico
corporation (the "Company") and the corporation whose shares of Common Stock,
$5.00 par value per share (the "Company Common Stock"), will be acquired
pursuant to the Exchange (as hereinafter defined) provided for herein, and
MANZANO CORPORATION, a New Mexico corporation ("Manzano") and the corporation
which will acquire the Company Common Stock. The Company and Manzano are
hereinafter referred to, collectively, as the "Companies".

                                   WITNESSETH:

         WHEREAS, the authorized capital stock of the Company consists of (a)
80,000,000 shares of Company Common Stock, of which 39,535,699 shares are issued
and outstanding as of the date hereof, and (b) 10,000,000 shares of Cumulative
Preferred Stock, no par value ("Company Preferred Stock"), of which 128,000
shares are issued and outstanding in one series as of the date hereof;

         WHEREAS, Manzano is a wholly-owned subsidiary of the Company with
authorized capital stock consisting of (a) 120,000,000 shares of Common Stock,
without par value ("Manzano Common Stock"), of which 100 shares are issued and
outstanding as of the date hereof and owned of record by the Company, and (b)
50,000,000 shares of Preferred Stock, without par value ("Manzano Preferred
Stock"), of which no shares are issued and outstanding as of the date hereof;

         WHEREAS, the Boards of Directors of the respective Companies deem it
desirable and in the best interests of the Companies and their shareholders
that, at the Effective Time (as hereinafter defined), Manzano acquire each share
of Company Common Stock issued and outstanding immediately prior to the
Effective Time and that each such share of Company Common Stock be automatically
exchanged for one share of Manzano Common Stock with the result that Manzano
becomes the owner of all outstanding Company Common Stock and that each holder
of Company Common Stock becomes the owner of an equal number of shares of
Manzano Common Stock, all on the terms and conditions hereinafter set forth;

         WHEREAS, the implementation of the Exchange is subject, to the extent
required, and among other things as provided herein, to the receipt of orders,
authorizations and approvals of the New Mexico Public Regulation Commission (the
"PRC"), the Federal Energy Regulatory Commission (the "FERC") and the Nuclear
Regulatory Commission (the "NRC"); and

         WHEREAS, the Board of Directors of the Company has recommended that the
Company's shareholders approve the Exchange and this Agreement, and the Exchange
and this Agreement will be submitted to a vote of the holders of Company Common
Stock pursuant to the New Mexico Business Corporation Act (the "Act").

         NOW THEREFORE, in consideration of the premises, and of the agreements,
covenants and conditions hereinafter contained, and subject to satisfaction of
the conditions herein contained, the parties hereto agree with respect to the
acquisition and exchange provided for herein (the "Exchange") that at the
Effective Time each share of Company Common Stock

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issued and outstanding immediately prior to the Effective Time will be
automatically exchanged for one share of Manzano Common Stock, and that the
terms and conditions of the Exchange and the method of carrying the same into
effect are as follows:

                                    ARTICLE I

         Subject to the satisfaction of the terms and conditions contained
herein, the Exchange will be effective upon the filing of Articles of Exchange
(the "Articles") with respect to the Exchange with the Corporations Bureau of
the PRC or at such later time as may be stated in the Articles (the time at
which the Exchange becomes effective being referred to herein as the "Effective
Time").

                                   ARTICLE II

         At the Effective Time:

         (1) each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time shall be automatically exchanged for one
share of Manzano Common Stock, which shares of Manzano Common Stock shall
thereupon be fully paid and non-assessable;

         (2) Manzano shall acquire and become the owner and holder of each
issued and outstanding share of Company Common Stock so exchanged;

         (3) each share of Manzano Common Stock issued and outstanding
immediately prior to the Effective Time shall be cancelled and shall thereupon
constitute an authorized and unissued share of Manzano Common Stock; and

         (4) the former holders of Company Common Stock shall be entitled only
to receive shares of Manzano Common Stock in exchange therefor as provided
herein subject to statutory dissenters' rights under Sections 53-15-3 and
53-15-4 of the Act that may be applicable to such former holders.

         Shares of Company Preferred Stock shall not be exchanged or otherwise
affected in connection with the Exchange. Subject to the terms thereof, each
share of Company Preferred Stock issued and outstanding immediately prior to the
Effective Time shall continue to be issued and outstanding following the
Exchange and shall continue to be a share of Company Preferred Stock of the
applicable series designation.

                                   ARTICLE III

         The consummation of the Exchange is subject to the following conditions
precedent at or prior to the Effective Time:

         (1) the receipt and continued effectiveness of (a) the approval by the
holders of Company Common Stock as required by the Act and (b) such orders,
authorizations, approvals or waivers from the PRC, the FERC, the NRC and any
other jurisdictive regulatory bodies, boards or agencies, or other parties,
which are required to consummate the Exchange at the

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Effective Time and which do not include, in the sole judgment of the Company's
Board of Directors, unacceptable conditions;

         (2) a registration statement relating to the shares of Manzano Common
Stock to be issued or reserved for issuance in connection with the Exchange
shall be effective under the Securities Act of 1933, as amended, and shall not
be the subject of any stop order pursuant to Section 8 thereunder;

         (3) the approval for listing, upon official notice of issuance, by the
New York Stock Exchange of the shares of Manzano Common Stock to be issued in
connection with the Exchange;

         (4) the receipt of an opinion of counsel or an opinion from the
Company's independent public accountants, in form and substance satisfactory to
the Board of Directors of the Company and of Manzano, as to the United States
federal income tax consequences of the Exchange; and

         (5) the receipt of an opinion, in form and substance satisfactory to
the Company's Board of Directors, from Keleher & McLeod, P.A., counsel to the
Company, as to the legality of Manzano Common Stock to be issued by Manzano in
connection with the Exchange.

                                   ARTICLE IV

         This Agreement may be amended, modified or supplemented, or compliance
with any provision or condition hereof may be waived, at any time prior to the
Effective Time (including, without limitation after receipt of the affirmative
vote of holders of the Company Common Stock as provided in Article V hereof), by
the mutual consent of the Boards of Directors of the Company and of Manzano;
provided, however, that, after receipt of such holder approval, no such
amendment, modification, supplement or waiver shall be made or effected if such
amendment, modification, supplement or waiver would, in the sole judgment of the
Board of Directors of the Company, materially and adversely affect the rights of
the shareholders of the Company.

         This Agreement may be terminated and the Exchange abandoned at any time
prior to the Effective Time (including, without limitation, after receipt of the
affirmative vote of holders of the Company Common Stock as provided in Article V
hereof), if the Board of Directors of the Company determines, in its sole
judgment, that consummation of the Exchange would for any reason be inadvisable
or not in the best interests of the Company or its shareholders.

                                    ARTICLE V

         The Exchange and this Agreement will be submitted to the holders of
Company Common Stock for approval pursuant to the Act. As required by the Act,
the affirmative vote of the holders of two-thirds of the outstanding shares of
Company Common Stock will be required to approve the Exchange and this
Agreement.

                                   ARTICLE VI

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         Following the Effective Time, each holder of an outstanding certificate
or certificates theretofore representing shares of Company Common Stock may, but
shall not be required to, surrender the same to Manzano for cancellation and
reissuance of a new certificate or certificates in such holder's name or for
cancellation and transfer, and each such holder or transferee will be entitled
to receive a certificate or certificates representing the same number of shares
of Manzano Common Stock as the shares of Company Common Stock previously
represented by the certificate or certificates surrendered. Until so surrendered
or presented for transfer, each outstanding certificate which, immediately prior
to the Effective Time, represents Company Common Stock shall be deemed and
treated for all corporate purposes to represent the ownership of the same number
of shares of Manzano Common Stock as though such surrender or transfer and
exchange had taken place. The holders of Company Common Stock at the Effective
Time shall have no right to have their shares of Company Common Stock
transferred on the stock transfer books of the Company, and such stock transfer
books shall be deemed to be closed for this purpose at the Effective Time, and
at and after the Effective Time, such stock transfer books may be deemed to be
the stock transfer books of Manzano.

                                   ARTICLE VII

         Prior to or as of the Effective Time, the Company shall cause those
directors of the Company identified as Manzano directors in the Company's Proxy
Statement for the Company's 2000 Annual Meeting to be elected directors of
Manzano, and such directors shall remain as directors of Manzano at and after
the Effective Time until Manzano's 2001 Annual Meeting. Each director of the
Company as of the Effective Time shall also remain a director of the Company at
and after the Effective Time until otherwise determined by Manzano.

                                  ARTICLE VIII

         At the Effective Time, Manzano shall become sponsor of a dividend
reinvestment and stock purchase plan ("Manzano Direct Plan") by amendment to the
Company's PNM Direct Plan as in effect immediately prior to the Effective Time.
At the Effective Time, all shares of Company Common Stock held under the PNM
Direct Plan (including fractional and uncertificated shares) immediately prior
to the Effective Time shall be automatically exchanged for a like number of
shares (including fractional and uncertificated shares) of Manzano Common Stock
and shall be held under and pursuant to the Manzano Direct Plan. At the
Effective Time, Manzano shall become the sponsor of, and agree to issue Manzano
Common Stock on and after the Effective Time in connection with, the Company's
Performance Stock Plan and the Company's Director Retainer Plan, each as in
effect immediately prior to the Effective Time, by appropriate amendments to
these plans.

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         IN WITNESS WHEREOF, each of the Company and Manzano, pursuant to
authorization and approval given by its Board of Directors, has caused this
Agreement to be executed by its President and Chief Executive Officer and its
corporate seal to be affixed hereto and attested by its Secretary as of the date
first above written.

                                      PUBLIC SERVICE COMPANY
                                      OF NEW MEXICO

                                      By:      /s/ Benjamin F. Montoya
                                         -------------------------------------
                                               Chairman of the Board
                                               and Chief Executive Officer

ATTEST:

    /s/ Patrick T. Ortiz
-----------------------------------
Secretary

                                      MANZANO CORPORATION

                                      By:      /s/ Benjamin F. Montoya
                                         -------------------------------------
                                               Chairman of the Board
                                               and Chief Executive Officer

ATTEST:

    /s/ Patrick T. Ortiz
-----------------------------------
Secretary<Page>

                                                                     EXHIBIT 4.3

                               PNM RESOURCES, INC.
                             DIRECTOR RETAINER PLAN

              PNM Resources, Inc., a New Mexico corporation (the "Company")
hereby establishes the following PNM Resources, Inc. Director Retainer Plan (the
"Plan") to become effective January 1, 2002, except as otherwise provided in
Article V of the Plan.

                                 R E C I T A L S

              WHEREAS, the Company became the parent of Public Service Company
of New Mexico ("PNM"), a New Mexico corporation, upon the completion on December
31, 2001 of a mandatory share exchange (the "Exchange"), on a one-for-one-basis,
of all outstanding shares of common stock of PNM for an equal number of shares
of common stock the Company, pursuant to an Agreement and Plan of Share Exchange
dated as of April 17, 2000 ("Agreement and Plan of Share Exchange") between PNM
and the Company;

              WHEREAS, PNM was the sponsor of the First Amended and Restated
Public Service Company of New Mexico Director Retainer Plan (the "Prior Plan");

              WHEREAS, pursuant to Article VIII of the Agreement and Plan of
Share Exchange, the Company shall become the sponsor of the Prior Plan to be
renamed "PNM Resources, Inc. Director Retainer Plan", and shall issue shares of
common stock of the Company under the Plan.

              WHEREAS, upon completion of the Exchange, the Prior Plan is hereby
replaced by the Plan and all options relating to shares of PNM common stock held
under the Prior Plan are automatically exchanged for a like number of options
relating to shares of Company common stock held under and pursuant to the Plan,
and all participants under the Prior Plan automatically become participants
under the Plan; and

              WHEREAS, the Company desires to adopt and incorporate in the Plan
the following proposed amendments to the Prior Plan that were approved by PNM
shareholders at PNM's Annual Meeting of Shareholders held on July 3, 2001: (1)
increase the number of shares authorized under the Plan from 100,000 shares of
Stock to 200,000 shares effective upon the filing of a Registration Statement on
Form S-8 for the Plan that will increase the total number of registered shares
under the Plan from 100,000 to 200,000 shares; (2) extend the expiration date of
the Plan until July 1, 2005; (3) change the form of payment of the Retainer to a
cash award and Stock Options to be determined by the Board, thereby eliminating
Restricted Stock Grants (as defined in the Prior Plan), and eliminating each
Recipient's right to elect the form of payment of the Retainer; (4) determine
the Exercise Price of Stock Options by the Fair Market Value at the Grant Date;
(5) grant the Committee the authority to determine the timing of the vesting of
Stock Options; and (6) delete all references to Restricted Stock or Restricted
Stock Grants (as defined in the Prior Plan) since none are presently outstanding
under the Prior Plan and none will be granted under the Plan.

              NOW, THEREFORE, the PNM Resources, Inc. Director Retainer Plan is
set forth in its entirety as follows:

                                    ARTICLE I

                                     PURPOSE

              The purpose of the Plan is to provide additional incentives for
the non-employee Directors to perform in the best interests of the Company, its
shareholders, customers and employees, as well as provide a means for members of
the Board to increase their proprietary interest in the Company and respond to
shareholders' concerns about stock ownership by Directors.

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                                   ARTICLE II

                                   DEFINITIONS

              The following words and phrases, when used herein with an initial
capital letter, shall have the same meaning set forth below unless the context
clearly indicates otherwise:

              2.1    "Annual Meeting" or "Annual Meeting Date" shall mean the
dates established for the annual meetings of the Company's shareholders pursuant
to the Company's Bylaws.

              2.2    "Board" shall mean the Board of Directors of PNM Resources,
Inc.

              2.3    "Change in Control" shall mean, subject to the exceptions
and modifications set forth at the end of this Section 2.3., those circumstances
in which any of the following shall occur:

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

                     (b)    during any period of two consecutive years the
              following individuals cease, for any reason, to constitute the
              majority of the Board:

                         (i) those directors who at the beginning of such period
                    constitute the Board, plus

                         (ii) any new directors whose election by the Board or
                    nomination for election by the Company's stockholders was
                    approved by a vote of at least two-thirds (2/3rds) of the
                    directors then still in office who 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");

                     (c)    upon the merger or consolidation of the Company with
              any other corporation; or

                     (d)    upon the complete liquidation of the Company or the
              sale or disposition by the Company of all or substantially all of
              the Company's assets.

              Section 2.3(a) shall not apply if the "person" as referred to
therein is, or shall be (i) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or (ii) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company.

              In Section 2.3(b), the Approved New Director shall not include a
director designated by a person who has entered into an agreement with the
Company to effect a transaction described in Section 2.3(a), 2.3(c), or 2.3(d)
hereof.

              Section 2.3(c) shall not apply to a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least 80% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation.

              2.4    "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.

              2.5    "Committee" shall mean the Board Governance and Human
Resources Committee of the Board or any such other committee as may be
designated by the Board to administer the Plan, the membership of such committee
not being less than three members of the Board. All Committee members must be
"non-employee

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directors", if required to meet the conditions for exemption of the grants under
the Plan from Section 16(b) of the Exchange Act.

              2.6    "Company" shall mean PNM Resources, Inc.

              2.7    "Director" shall mean any member of the Board who, as of
the Grant Date, is not an employee of the Company.

              2.8    "Disability" shall mean the inability of a Director to
engage in any substantially gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than twelve (12) months. The permanence and degree of such impairment
shall be supported by medical evidence.

              2.9    "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as it may be amended from time to time.

              2.10   "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

              2.11   "Exercise Date" shall mean the date a Recipient holding
Stock Options elects to exercise any or all such Stock Options.

              2.12   "Exercise Price" shall mean:

                     (a)    For Stock Options granted after July 3, 2001,
              "Exercise Price" shall mean that the price to exercise Stock
              Options granted under this Plan shall be equal to the Fair Market
              Value of the Stock on the Grant Date;

                     (b)    For Stock Options granted on or before July 3, 2001
              under the Prior Plan, "Exercise Price" shall mean the Exercise
              Price of the Stock Options granted hereunder, which shall be
              determined by dividing the Retainer by the number of Stock Options
              granted to each Recipient and subtracting this result from the
              Fair Market Value of one share of Stock on the Grant Date; this
              Exercise Price shall not be less than thirty percent (30%) of the
              Fair Market Value of the Stock on the Grant Date.

              2.13   "Fair Market Value" or "FMV" shall mean the closing price
of one share of Stock pursuant to the "New York Stock Exchange Composite
Transactions," as reported in the Western Edition of the Wall Street Journal, on
the date such value is determined (or, if Stock is not traded on such date, on
the first immediately preceding business day on which Stock was so traded).

              2.14   "Grant Date" shall mean the date a Stock Option is granted
under this Plan.

              2.15   "Plan" shall mean the PNM Resources, Inc. Director Retainer
Plan, as set forth herein, and as may hereafter be amended.

              2.16   "Prior Plan" means the First Amended and Restated Public
Service Company of New Mexico Director Retainer Plan.

              2.17   "Recipient" shall mean a Director who receives a Stock
Option pursuant to the terms and conditions of the Plan. Such Director shall
remain a Recipient with respect to a Stock Option until the Option is exercised
or is either forfeited, pursuant to Section 8.3, or is canceled pursuant to
Section 7.5.

              2.18   "Retainer" shall mean the annual retainer to which each
Director is entitled as a Director of the Company, as may be determined by the
Board from time to time, in effect on the Grant Date.

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              2.19   "Retirement" shall mean a Recipient's retirement and
related resignation from the Board pursuant to the "Director Service Policy" or
equivalent policy that may be adopted or amended from time-to-time by the Board.

              2.20   "Stock" shall mean the common stock of the Company.

              2.21   "Stock Equivalent" shall mean the number of shares to which
Stock Options can be converted through the exercise thereof. Generally, one
Stock Option can be converted to one share of Stock.

              2.22   "Stock Option" shall mean the option to acquire Stock of
the Company granted to Directors pursuant to Section 6.1, which is a
non-qualified stock option and shall not qualify as an "incentive stock option"
as defined in the Code.

              2.23   "Stock Option Grant" shall mean a grant of Stock Options.

              2.24   "Termination of Directorship" shall mean the termination of
a Director's membership on the Board, for any reason, including but not limited
to voluntary or involuntary resignation, removal, death, Disability, or failure
to be re-nominated or reelected.

                                   ARTICLE III

                             ADMINISTRATION OF PLAN

              3.1    PLAN ADMINISTRATION. The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the Committee shall have the
sole and exclusive power, discretion and authority to:

                     (a) conclusively interpret the provisions of this Plan and
              decide all questions of fact arising in its application, including
              but not limited to, the right to determine whether an individual
              satisfies the requirements to receive Stock Option Grants, and the
              right to determine the application of the rights, conditions,
              restrictions and forfeitures, set forth herein, if any, with
              respect to the Stock Option Grants;

                     (b) adopt, amend and rescind rules and regulations relating
              to this Plan; and

                     (c) make any other determinations it deems necessary or
              advisable, subject only to those determinations which may be
              reserved to the Board.

              3.2    QUORUM AND VOTING REQUIREMENTS. A majority of the Committee
shall constitute a quorum. The acts of a majority of the members present at a
meeting at which a quorum is present, or acts unanimously approved in writing by
the Committee, shall be deemed the acts of the Committee.

              3.3    CONSISTENCY OF GRANTS AND CONDITIONS. Notwithstanding any
of the above, all Stock Options shall be subject to the same conditions, with
respect to each and every Director receiving Stock Options at the same Grant
Date.

                                   ARTICLE IV

                             SHARES SUBJECT TO PLAN

              4.1    MAXIMUM SHARES AVAILABLE. The aggregate maximum number of
shares of Stock and Stock Equivalents which may be granted under the Plan shall
not exceed 100,000 shares, subject to adjustment pursuant to Section 4.3.
Immediately upon the filing of a Registration Statement on Form S-8 for the Plan
to increase the number of registered shares to 200,000, the aggregate maximum
number of shares of Stock and Stock Equivalents which may be granted under the
Plan shall be increased from an amount not to exceed 100,000 shares to an amount
not to exceed 200,000 shares, subject to adjustment pursuant to Section 4.3.
Shares of Stock issued shall be authorized and unissued shares or shares
purchased on the open market. If such Stock granted is authorized but

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unissued Stock, the Committee shall obtain an opinion of counsel that such
issuance pursuant to this Plan conforms with applicable law and regulatory
requirements.

              4.2    FORFEITURE OF STOCK OPTIONS. Subject to the limitation set
forth in Section 6.2(b), if, for any reason, non-vested Stock Options are
forfeited, an equivalent number of shares shall again be available for new
granting of Stock Options in accordance with the terms hereof. Vested Stock
Options that are canceled for failure to exercise shall not increase the number
of shares available for the granting of new Stock Options.

              4.3    ADJUSTMENTS. The shares related to Stock Options granted
hereunder, and, if and to the extent allowed by Rule 16b-3 or applicable state
law without further shareholder approval, the aggregate maximum number of shares
of Stock subject to the Plan pursuant to Section 4.1 and 4.2 above, shall be
adjusted by the Committee, as is necessary to prevent dilution or enlargement of
such grants in the event of a stock dividend, stock split-up or share
combination, exchange of shares, re-capitalization, merger, consolidation,
acquisition of property or shares, reorganization, liquidation, or the like of
or by the Company. For purposes of any such adjustment, the then outstanding,
Stock Equivalents shall be treated like any other then outstanding Stock.

                                    ARTICLE V

                         EFFECTIVE DATE AND TERM OF PLAN

              The Plan is effective as of January 1, 2002, or such later date as
may be required for regulatory or legal reasons, except that all Stock Options
outstanding under the Prior Plan immediately before December 31, 2001 may be
exercised in accordance with this Plan effective December 31, 2001. Stock Option
Grants may be made as provided herein from January 1, 2002 (or such later date
as may be required for regulatory or legal reasons), until July 1, 2005. The
Plan shall continue in effect until all matters relating to the Stock Option
Grants and administration of the Plan have been settled.

                                   ARTICLE VI

                       CASH AND GRANTING OF STOCK OPTIONS

              6.1    PAYMENT OF RETAINER. The Retainer is payable in cash and/or
Stock Options. The Board shall determine the amount of cash and the number of
Stock Options payable to each Director under this Plan, and may take into
consideration any relevant factors, such as a shortened term, in setting the
amount of Retainer payable to each Director. Each grant of Stock Options under
the Plan shall be specifically approved by the full Board. Notwithstanding
anything to the contrary in the Plan, effective July 3, 2001, the Retainer shall
no longer be payable in Restricted Stock (as defined in the Prior Plan), and a
Director shall have no right to select the form in which to receive the
Retainer. Unless the Board or Committee determines otherwise, the Grant Date for
Stock Options and distribution of cash under this Plan shall be each Annual
Meeting Date.

              6.2    LIMITATIONS AND PROCEDURES.

                     (a)    LIMITATION ON DISPOSITION OF STOCK. Notwithstanding
              any contrary provisions herein, any Stock held by a Recipient,
              obtained hereunder, or Stock acquired through the exercise of a
              Stock Option granted hereunder, shall not be sold, transferred,
              assigned, pledged, encumbered or otherwise alienated or
              hypothecated unless and until six (6) months has elapsed since the
              acquisition date of such Stock Options. The restriction in this
              Section 6.2 shall apply only if required to satisfy the conditions
              for exemption from Section 16(b) of the Exchange Act pursuant to
              Rule 16b-3 promulgated thereunder.

                     (b)    LIMITATION ON THE GRANT OF STOCK OPTIONS.

                        (i)   Subject to the limitations set forth in Section
                  6.2(b)(ii) below and in Articles IV and V above, the Stock
                  Options shall be granted as of the Grant Date until the
                  cumulative total of shares of Stock and Stock Equivalents is
                  no longer available for the granting of Stock Options as set
                  forth in Article IV above.

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                        (ii)  If as of any Grant Date, no shares are available
                  for a grant pursuant to Article IV, no Stock Options will
                  thereafter be granted under the Plan, notwithstanding that
                  forfeitures would otherwise, in the absence of this
                  restriction, result in additional shares subsequently becoming
                  available for such grants pursuant to the provisions of
                  Section 4.2.

              6.3    NOTICE. The Committee shall promptly provide each Recipient
with written notice setting forth:

                      (a)    the number of shares of Stock Options granted,

                      (b)    the Exercise Price of Stock Options so granted, and

                      (c) such other terms and conditions relevant thereto
              consistent with the terms and conditions of this Plan, which may
              be considered appropriate by the Committee.

              6.4    GOVERNMENT AND OTHER REGULATORY REQUIREMENTS. The
obligations of the Company to issue or transfer Stock Options granted pursuant
hereto are subject to:

                      (a)    compliance with all applicable  laws,  government
              rules and  regulations and  administrative actions;

                      (b)    the  effectiveness of a registration  statement
              under the Securities Act of 1933, as amended, if deemed necessary
              or appropriate by the Company; and

                      (c)    the satisfaction of any listing requirements (or
              authority for listing upon official notice of issuance) for each
              stock exchange on which outstanding shares of the same class may
              then be listed.

              The Plan is intended to be construed so that participation in the
Plan will be exempt from Section 16(b) of the Exchange Act, pursuant to Rule
16b-3 as promulgated thereunder, as may be further amended or interpreted by the
Securities and Exchange Commission. In the event that any provision of the Plan
shall be deemed not to be in compliance with such rules, in order to enjoy the
exemption from the Exchange Act, such provision shall be deemed of no force or
effect and the remaining provisions of the Plan shall remain in effect.

              6.5    CASH RETAINER. Notwithstanding any other contrary
provisions in this Plan, in the event the Company is unable to grant Stock
Options to a Director pursuant to this Article VI, due to regulatory, legal or
contractual restrictions on the issuing or repurchasing of Stock for the Plan,
the Directors shall receive an appropriate cash retainer in lieu of such Stock
Options.

                                   ARTICLE VII

                    GRANTING OF AND EXERCISE OF STOCK OPTIONS

              7.1    GRANTING OF STOCK OPTIONS. A Director shall be entitled to
acquire one share of Stock upon exercise of each Stock Option at the Exercise
Price, subject to the limitations of Article IV and Section 6.2 and the vesting
and forfeiture provisions in Article IX. The number of the Stock Options, and
the applicable terms, conditions and restrictions with respect thereto, shall be
set forth in a certificate provided to the Recipient thereof, within an
administratively reasonable period of time following the Grant Date of such
Stock Options.

              7.2    TIMING OF EXERCISE. The Stock Options shall be exercisable
at any time following the vesting as set forth in Article VIII hereof, and on or
before the earlier of (i) one (1) year after the date of the Recipient's
Termination of Directorship; or (ii) the tenth anniversary date of the Grant
Date of the Stock Options.

              7.3    METHOD OF PAYMENT. The Stock Options shall be exercised by
the Recipient giving written notice to the Company of his or her intent to
exercise the Stock Option, and tendering payment in full of the Exercise Price
of the Stock Options being exercised either:

                       (i)    in cash,

<Page>

                       (ii)   in previously acquired Stock (through actual
              tender or by attestation) held for more than six (6) months,
              valued at its Fair Market Value on the date of exercise,

                       (iii)  by a combination thereof as determined by the
              Committee, or

                        (iv)   if the Committee, in its sole discretion so
              permits, a Recipient may make payment of the Exercise Price of any
              Stock Option through a broker-assisted "cashless" exercise
              arrangement, whereby the Recipient delivers a properly executed
              notice together with irrevocable instruction to a broker to
              promptly deliver to the Company the amount of sale or loan
              proceeds to pay the Exercise Price.

              The proceeds from payment of exercised Stock Options shall be
added to the general funds of the Company and shall be used for general
corporate purposes.

              7.4    EXERCISE FOLLOWING RECIPIENT'S DEATH. If a Recipient of
Stock Options dies, without having fully exercised his or her Stock Options, the
personal representative or the person receiving such Stock Options from the
Recipient or his or her estate shall have the right to exercise the Stock
Options, that have vested pursuant to Article VIII, provided, however, that in
no event may the Stock Options be exercised later than the earlier of (i) ten
(10) years from the Grant Date of such Options or (ii) one (1) year following
the Recipient's Termination of Directorship with the Company.

              7.5    CANCELLATION OF STOCK OPTIONS. Any Stock Options not
exercised within the time periods specified in Sections 7.2 and 7.4 shall be
canceled.

              7.6    CASH OUT RIGHT. Notwithstanding any other contrary
provisions in this Plan, subject to the provisions of applicable law and to
conditions the Committee may determine to be necessary in order to comply with
all applicable conditions of Rule 16b-3 or its successors under the Exchange
Act, the Committee, in its sole discretion, may elect to settle all or a portion
of a Stock Option following the exercise thereof by a Recipient, in cash, in
lieu of delivering Stock. Such cash shall be determined based upon the FMV of
the Stock on the date such Stock Option is exercised less the Exercise Price.

                                  ARTICLE VIII

                            VESTING OF STOCK OPTIONS

              8.1    VESTING OF OPTIONS. Subject to the provisions of Section
8.2, and except as otherwise determined by the Committee or the Board, all Stock
Options shall vest on the immediately following Annual Meeting Date following
the Grant Date of such Stock Options, but only if the Recipient has remained as
a Director of the Company continuously from the Grant Date of such Stock Option
Grant to the next Annual Meeting Date or such other vesting date determined by
the Board or Committee.

              8.2    IMMEDIATE VESTING OF STOCK OPTIONS. Notwithstanding the
provisions of Section 8.1 hereof, there will be a vesting of Stock Options upon
a Recipient's Termination of Directorship as a result of:

                      (i)    the death of such Director;

                      (ii)   the Disability of such Director;

                      (iii)  the Retirement of such Director;

                      (iv)   a Change in Control; or

                      (v)    completion of the Director's elected term, pursuant
              to circumstances in which he or she is not reelected for an
              ensuing term (regardless of the reason for the Director not being
              reelected).

<Page>

              8.3    FORFEITURE. Except as set forth in Section 8.2, hereof, in
the event of Termination of Directorship, all non-vested Stock Options, then
owned by such terminating Director, shall be returned to or canceled by the
Company and shall be deemed to have been forfeited by the Recipient.

              8.4    CORPORATE REORGANIZATION - IMPACT ON STOCK OPTIONS. Nothing
in this Article VIII shall be construed to prohibit any exchange or conversion
of Stock Options by operation of law in the event of a merger, consolidation,
reorganization or other similar transaction of or by the Company which does not
constitute a Change in Control, provided that the Stock Options shall be
exchanged or converted shall thereafter constitute Stock Options, as applicable,
subject to the restrictions in Article VIII, as applicable.

                                   ARTICLE IX

                            TERMINATION AND AMENDMENT

              9.1    TERMINATION AND AMENDMENTS. Subject to Section 9.2, the
Board may amend, terminate or suspend the Plan at any time, in its sole and
absolute discretion; provided, however, that no such amendment or termination
shall adversely affect Stock Options previously granted without the written
consent of the Recipients holding such Stock Options.

              9.2    OTHER RESTRICTIONS ON AMENDMENTS. If required to satisfy
the conditions for exemption from Section 16(b) of the Exchange Act pursuant to
Rule 16b-3 promulgated thereunder or applicable state law:

                     (a)    no amendment that would change the amount, price or
              timing of the Stock Option Grants, other than to comport with
              changes in the Code or ERISA, or the rules and regulations
              promulgated thereunder, shall be made more than once every six
              months;

                     (b)    no amendment shall be made without the approval of
              the Company's stockholders that would:

                         (i) increase the maximum number of shares of Stock
                 available for grants under Article IV hereof;

                         (ii)  modify the requirements as to eligibility for
                 Stock Options under the Plan; or

                         (iii) otherwise materially increase the benefits
                 accruing to participants under the Plan (subject, however, to
                 the Board's right to establish the Retainer).

The approval of the Company's stockholders for such amendments shall be
solicited in a manner which conforms to the rules and regulations in effect
under the Section 14(a) of the Exchange Act.

                                    ARTICLE X

                           NONEXCLUSIVITY OF THE PLAN

              Nothing contained herein is intended to amend, modify or rescind
any previously approved compensation plans or programs entered into by the
Company, other than the Original Plan. This Plan shall be in addition to any and
all other Company plans or programs. Neither the adoption of this Plan by the
Board nor the submission of the Plan to the Company's stockholders for approval
shall be construed as creating any limitations on the power or authority of the
Board to adopt such other additional incentive or other compensation
arrangements as the Board may deem necessary or desirable.

                                   ARTICLE XI

                                  MISCELLANEOUS

              11.1   WITHHOLDING TAXES. The Company shall have the right to
deduct from any payments made by the Company to the Directors, any federal,
state or local taxes of any kind required by law to be withheld with

<Page>

respect to Stock Options or related cash distributions or cash retainer, or to
take such other action as may be necessary in the opinion of the Company to
satisfy all obligations for the payment of such taxes.

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

              11.2   NO RIGHT OF REELECTION. Nothing in the Plan or in any
instrument executed pursuant to the Plan will confer upon any Recipient any
right to continue as a Director of the Company, to be renominated by the Board
or to be elected or reelected by the shareholders of the Company.

              11.3   PLAN ADMINISTRATION EXPENSES. All expenses of administering
the Plan shall be borne by the Company.

              11.4   HEADINGS. The headings of the Articles and their Sections
in this Plan are for convenience of reading only and are not meant to be of
substantive significance and shall not add or detract from the meaning of such
Article or Section.

              11.5   GENDER AND USE OF SINGULAR/PLURAL. The use of the masculine
gender herein shall also include within its meaning the feminine, and the
singular shall include the plural, and the plural shall include the singular,
unless the context clearly indicates to the contrary.

              11.6   APPLICABLE LAW. The place of administration of the Plan
shall be conclusively deemed to be within the State of New Mexico, and the
validity, construction, interpretation, administration and effect of the Plan
and of its rules and regulations and the rights of any and all Directors having
or claiming to have an interest herein or hereunder shall be governed by and
determined exclusively and solely in accordance with the laws of the State of
New Mexico.

              11.7   NONAPPLICABILITY OF ERISA. It is not intended that this
Plan be subject to the requirements of ERISA, and the reference thereto in
Section 9.2(a) shall not be interpreted so as to require compliance with ERISA.

              IN WITNESS WHEREOF, the Company has caused this PNM Resources,
Inc. Director Retainer Plan to be executed this December 31, 2001 to become
effective as provided above in Article V.

                                           PNM RESOURCES, INC.

                                           By:  /s/ JEFFRY E. STERBA
                                                --------------------
                                               JEFFRY E. STERBA
                                               Chairman, President and
                                               Chief Executive Officer

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