---

Exhibit 10.1

FIRST AMENDMENT

TO THE

PNM RESOURCES, INC.

AMENDED AND RESTATED

OMNIBUS PERFORMANCE EQUITY PLAN

PNM Resources, Inc. (the “Company”) previously established the “PNM Resources, Inc. Omnibus Performance Equity Plan” (the “Plan”). The Plan was amended and restated, effective as of May 17, 2005, by the adoption of the PNM Resources, Inc. Amended and Restated Omnibus Performance Equity Plan. By this instrument, the Company wishes to amend the Plan to clearly provide that a transfer to an “Affiliate” will not be considered a termination of employment and to add a definition of “Affiliate.”

1.   This First Amendment shall be effective as of January 1, 2007.

2.   This First Amendment amends only the provisions of the Plan as set forth herein, and those provisions not expressly amended hereby shall be considered in full force and effect. Notwithstanding the foregoing, this First Amendment shall supersede the provisions of the Plan to the extent those provisions are inconsistent with the provisions and intent of this First Amendment.

3.   Section 2.1 ( Definitions ) of the Plan is hereby amended by adding the following new paragraph (ff) to the end thereof:

 

(ff)   “Affiliate” means any member 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 the Company as a member of the group; and 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 the Company as a member of the group. In applying Section 1563(a)(1), (2) and (3) of the Code for purposes of determining the members of a controlled group of corporations under Section 414(b) of the Code, the language “at least 50 percent” shall be used instead of “at least 80 percent” each place it appears in Section 1563(a)(1), (2) and (3) and in 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” shall be used instead of “at least 80 percent” each place it appears in Treas. Reg. § 1.414(c)-2.

 

 

3.   Section 13 ( Termination of Employment ) of the Plan is hereby amended by adding the following new paragraph 13.6 to the end thereof:

13.6   Transfer to Affiliate .

(a)   Transfer of Employer to Affiliate . If a Participant is employed by an Employer and ownership of the Employer is transferred to an Affiliate, the Participant will not be treated as having incurred a termination of employment for purposes of the Plan, regardless of whether the Affiliate has adopted the Plan.

 

(b)   Transfer of Participant to Non-adopting Affiliate. If a Participant leaves the employ of an Employer to become employed by an Affiliate, the Participant will not be treated as having incurred a termination of employment for purposes of the Plan, regardless of whether the Affiliate has adopted the Plan.

 

IN WITNESS WHEREOF, PNM Resources, Inc. has caused this First Amendment to be executed as of this 14 ^th day of February, 2007.

PNM RESOURCES, INC.

 

By:   /s/ Alice A. Cobb      

Its: Senior Vice President & CAO

2

---

Exhibit 10.2

STOCK OPTION AWARD AGREEMENT

PNM RESOURCES, INC.

OMNIBUS PERFORMANCE EQUITY PLAN

 

PNM Resources, Inc., a New Mexico corporation (“PNM” or the “Company”), hereby awards to «First»   «Last» (the “Optionee”), an employee of the Company and a Participant in the PNM Resources, Inc. Omnibus Performance Equity Plan (the “Plan”), as it may be amended, a non-qualified stock option (“Option” or “Options”) to purchase up to, but not to exceed in the aggregate «Stock_Options_» shares of Common Stock of the Company (“Stock”), at an Exercise Price of ______ per share , subject to the following terms and conditions. The grant is given effective as of the ___ day of _______, 2007 (the “Grant Date”).

 

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

 

1.    Grant . This Option is granted pursuant to the Plan, the terms of which are hereby incorporated by reference.

 

2.    Vesting .

 

(a)   Except as set forth herein below, these Options shall vest in the following manner: (i) at the end of the first anniversary of the Grant Date, 33%; (ii) at the end of the second anniversary of the Grant Date, 67%; and (iii) at the end of the third anniversary of the Grant Date, 100%.

 

(b)   Upon (i) the death, Disability, Retirement or Impaction of the Optionee, (ii) a Change in Control of the Company, or (iii) events resulting in full vesting as otherwise described in Section 13.1 of the Plan, all nonvested Options shall be 100% vested.

 

(c)   Upon the involuntary or voluntary termination of employment of an Optionee for reasons other than those set forth in Subparagraph (b) above, the Option, if not previously vested, shall be canceled.

 

(d)   Upon termination of employment with the Company for Cause, all Options (vested and nonvested) shall be terminated and forfeited immediately.

 

3.    Exercise of Options .

 

(a)   Timing of Exercise . Generally, the vested Options shall be exercisable at any time following the vesting thereof, on or before the earlier of (i) three (3) months following an Optionee’s voluntary termination or involuntary termination of employment with the Company for reasons other than Impaction or Cause; (ii) three (3) years following an Optionee’s termination due to Death, Disability, Retirement, Impaction or Change In Control of the Company; or (iii) the tenth anniversary date of the Grant Date of the Options. The time period during which Optionee may exercise any Option will not be extended for any reason. The Company does not represent or guarantee that the Options granted hereunder will actually be exercisable throughout the exercise period. Factors that could affect the exercisability of the Options or the Optionee’s desire to exercise the Options include, but are not limited to, the price of Company Stock remaining below the exercise price for any Option, black-out periods that preclude the sale of Stock acquired through the exercise of any Option, lock-up agreements, or lapse of the exercise period.

 

 

Optionee is responsible for ascertaining the times and conditions applicable to the exercise of each Grant of Options awarded under the Plan.

 

(b)   Time and Method of Payment . The Options shall be exercised by the Optionee giving written notice to the Company of his or her intent to exercise the Options, along with the tendering of cash in full payment of the Exercise Price of the Options being exercised, times the number of such Options being exercised. Alternatively, in lieu of cash, the Exercise Price may be paid, in full or in part by the Optionee, by delivery to the Company (through actual tender or by attestation), of Stock of the Company owned by the Optionee for more than six months. The amount credited against the Exercise Price for Stock being assigned and delivered to the Company shall equal the Fair Market Value of the Stock on the date of transfer times the number of shares being assigned and delivered. In addition, the Exercise Price for any Option may be paid through a broker-assisted “cashless exercise” arrangement by the Optionee’s delivery of written notice to the Company of his or her intent to exercise the Options together with irrevocable instructions to the broker to promptly deliver to the Company the amount of the sale or loan proceeds that is equal to the Exercise Price. For Optionees subject to Section 16 of the Exchange Act and key employees as specified in the Insider Trading Policy, pre-clearance for sales of stock (including a broker-assisted “cashless exercise”) shall be obtained from the Senior Vice President and General Counsel at PNM Resources, Inc., Alvarado Square, Albuquerque, New Mexico 87158, or his/her successor.

 

(c)   Exercise Following Optionee’s Death . If an Optionee dies, whether or not the Optionee is an employee of the Company at the date of such death, without having fully exercised his or her vested Options, the personal representative or the person receiving such Options from the Optionee or his or her estate shall have the right to exercise the Options pursuant to the timing and methods set forth in Subparagraphs (a) and (b) above.

 

(d)   Delivery of Shares . Within an administratively reasonable period of time after the exercise of an Option and the payment of the full Exercise Price, and after satisfaction of all applicable withholding requirements, the Optionee shall receive a Stock certificate evidencing his or her ownership of such Stock. An Optionee shall have none of the rights of a shareholder with respect to Options until the date a Stock certificate is issued in the Optionee’s name. No adjustment will be made for dividends or other rights for which the record date is prior to the date such Stock certificate is dated.

 

(e)   Holding Period . The shares of Stock obtained upon the exercise of any Option granted hereunder may not, if necessary to meet Rule 16b-3 requirements, be sold by an Optionee subject to Section 16 of the Exchange Act until six (6) months after the delivery to the Participant of the Stock Option Award Agreement.

 

 

4.    Adjustments . Neither the existence of the Plan nor this Option shall affect, in any way, the right or power of the Company to make or authorize: any or all adjustments, recapitalizations, reorganizations, or other changes in the Company’s capital structure or its business; or any merger or consolidation of the Company; or the dissolution or liquidation of the Company; or any sale or transfer of all or any part of its assets or business; or any corporate act or proceeding, whether of a similar character or otherwise; all of which, and the resulting adjustments in, or impact on, the Option are more fully defined in Section 5.3 of the Plan.

 

5.    Withholding and Deductions . The Company shall have the right to deduct from any payments made by the Company to the Optionee any federal, state or local taxes of any kind as are required by law to be withheld with respect to the exercise of Options granted hereunder. The Company also shall have the right to take such other actions as may be necessary in the opinion of the Company to satisfy all obligations for withholding and payment of such taxes, including, in its sole discretion, and subject to the provisions of applicable law and to any 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, to permit the Optionee, at the Optionee’s election, to satisfy, in whole or in part, any tax withholding obligation which may arise in connection with the exercise of Options by requesting that the Company withhold shares of Stock having a Fair Market Value of the Stock equal to the amount of the income tax withholding. Any shares of Stock deliverable to the Optionee under the terms of this Agreement also are subject to offset by the Company, and the Optionee hereby authorizes such offset, to liquidate and reduce any outstanding debt or unpaid sums owed by the Optionee to the Company or its successor.

 

6.    Compliance with Exchange Act . With respect to Optionees subject to Section 16 of the Exchange Act, Options granted or exercised pursuant to this Award are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act.

 

7.    Dividend Equivalents . The Optionee will not be entitled to receive a dividend equivalent for any of the shares of Stock subject to the Options granted hereunder.

 

8.    Non-Assignability . Options shall not be transferable other than by will or by the laws of descent and distribution, and during Optionee’s lifetime shall be exercisable only by the Optionee. The Options are otherwise non-assignable. (See Section 14 of the Plan).

 

9.    Optionee Representation . As a condition to the exercise of any Option, the Company may require a representation from the person exercising the Option that the Stock is being acquired only for investment purposes and without any present intention to sell or distribute such shares.

 

10.    Employment Agreement . Notwithstanding anything to the contrary herein 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 the Optionee and the Company and (b) unless otherwise expressed or provided, in writing, by an authorized officer, the employment relationship between the Optionee and the Company shall be defined as “employment at will” wherein either party, without prior notice, may terminate the relationship with or without cause.

 

 

11.    Regulatory Approvals and Listing . The Company shall not be required to issue any certificate for shares of Stock upon the exercise of an Option granted under the Agreement prior to satisfying any regulatory or registration approval, qualification or ruling from the Securities and Exchange Commission, the Internal Revenue Service or any other governmental agency which the Committee, in its sole discretion, shall determine to be necessary or advisable. (See Section 20.1 of the Plan).

 

12.    Nonstatutory Stock Option . The Options granted hereunder are nonstatutory (non-qualified) stock options, and are not “incentive stock options” pursuant to the Code.

 

13.    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 Optionee and the 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

 

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

 

15.    Validity and Construction . The validity and construction of this Option 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, the Company has caused this Stock Option Award Agreement to be executed, effective as of ____________________.

 

PNM RESOURCES, INC.

By : __________________________

JEFFRY E. STERBA

Chairman, President and Chief Executive

Officer

ACKNOWLEDGEMENT BY OPTIONEE

By signing below, the Optionee acknowledges receipt of a copy of the Stock Option Award Agreement dated ___________ ___, 2007 and the Plan and further acknowledges that the Options granted under the terms of the Award Agreement are governed by the terms and conditions of the Plan and the Award Agreement.

_________________________________________

(Name of Optionee)

_________________________________________

(Signature of Optionee)

 

 

6

---

Exhibit 10.3

RESTRICTED STOCK RIGHTS AWARD AGREEMENT

PNM RESOURCES, INC.

OMNIBUS PERFORMANCE EQUITY PLAN

PNM Resources, Inc., a New Mexico corporation, (“PNMR” or the “Company”) hereby awards to «First»   «Last» , (the “Grantee”), a Participant in the PNM Resources, Inc. Omnibus Performance Equity Plan (the “Plan”), as it may be amended, a Restricted Stock Rights Award (the “Award”) for the number of shares of Common Stock of the Company (“Stock”) noted below. The grant is made effective as of the ___ day of ______, 2007 (the “Grant Date”).

 

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

 

1.    Grant . Grantee is hereby granted a Restricted Stock Rights Award for «Restricted_Stock_Rights_» shares of Stock. This Award is granted pursuant to the Plan, the terms of which are hereby incorporated by reference.

 

2.    Vesting .

 

(a)   Except as set forth below, these Restricted Stock Rights shall vest in the following manner: (i) on the first anniversary of the Grant Date, 33%; (ii) on the second anniversary of the Grant Date, 67%; and (ii) on the third anniversary of the Grant Date, 100%.

 

(b)   Upon (i) the death, Disability, Retirement or Impaction of the Grantee, (ii) a Change in Control of the Company, or (iii) events resulting in full vesting as otherwise described in Section 13.1 of the Plan, nonvested Restricted Stock Rights shall vest as described in Section 13.1(a)(ii) of the Plan.

 

(c)   Upon the involuntary or voluntary termination of employment of Grantee for any reason other than those set forth in Subparagraph (b) above, the Restricted Stock Rights, if not previously vested, shall be canceled and forfeited immediately.

 

(d)   Upon termination of employment with the Company for Cause, all nonvested Restricted Stock Rights shall be terminated and forfeited immediately.

 

3.    Form and Timing of Delivery of Certificate . Within an administratively reasonable period of time following the lapse of restrictions and after satisfaction of all applicable withholding requirements, the Grantee shall receive a stock certificate evidencing Grantee’s ownership of the shares.

 

4.    Adjustments . Neither the existence of the Plan nor this Award shall affect, in any way, the right or power of the Company to make or authorize: any or all adjustments, recapitalizations, reorganizations, or other changes in the Company’s capital structure or its business; or any merger or consolidation of the Company; or the dissolution or liquidation of the Company; or any sale or transfer of all or any part of its assets or business; or any corporate act or proceeding, whether of a similar character or otherwise; all of which, and the resulting adjustments in, or impact on, the Award are more fully defined in Section 5.3 of the Plan.

 

 

5.    Withholding and Deductions . The Company shall have the right to deduct from any payments made by the Company to the Grantee, any federal, state or local taxes of any kind as are required by law to be withheld with respect to the Restricted Stock Rights granted hereunder. The Company also shall have the right to take such other actions as may be necessary in the opinion of the Company to satisfy all obligations for withholding and payment of such taxes, including, in its sole discretion, and subject to the provisions of applicable law and to any 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, to permit the Grantee, at the Grantee’s election, to satisfy, in whole or in part, any tax withholding obligation which may arise in connection with the Restricted Stock Rights by requesting that the Company withhold shares of Stock having a Fair Market Value of the Stock equal to the amount of the income tax withholding. Any shares of Stock deliverable to the Grantee under the terms of this Agreement also are subject to offset by the Company, and the Grantee hereby authorizes such offset, to liquidate and reduce any outstanding debt or unpaid sums owed by the Grantee to the Company or its successor.

 

6.    Dividend Equivalents . The Grantee will not be entitled to receive a dividend equivalent for any of the Restricted Stock Rights.

 

7.    Compliance with Exchange Act . If the Grantee is subject to Section 16 of the Exchange Act, Restricted Stock Rights granted pursuant to this Award are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act.

 

8.    Non-Assignability . The Award and Grantee’s rights under this Agreement shall not be transferable other than by will or by the laws of descent and distribution. The Restricted Stock Rights are otherwise non-assignable. (See Section 14 of the Plan). The terms hereof shall be binding on the executors, administrators, heirs and successors of the Grantee.

 

9.    Voting Rights . During the Restricted Period, the Grantee will have no voting rights with respect to nonvested Restricted Stock Rights.

 

10.    Grantee Representation . As a condition to the receipt of any shares of Stock hereunder, the Company may require a representation from the Grantee that the Stock is being acquired only for investment purposes and without any present intention to sell or distribute such shares.

 

11.    Tax Issues . Pursuant to Section 83 of the Internal Revenue Code of 1986 (the “Code”) the value of the shares of Stock received by Grantee will be taxed as ordinary income as of the date the restrictions lapse ( i.e. , as they vest). Grantee understands that Grantee may elect to be taxed as of the Grant Date, rather than as the Restricted Stock Rights vest, by filing an election under Section 83(b) of the Code with the Internal Revenue Service within 30 days of the Grant Date. The Grantee acknowledges that Grantee should consult a tax advisor regarding the consequences of this Award and whether or not to file an election under Section 83(b) of the Code.

 

 

12.    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 the Grantee and the Company and (b) unless otherwise expressed or provided, in writing, by an authorized officer, the employment relationship between the Grantee and the Company shall be defined as “employment at will” wherein either party, without prior notice, may terminate the relationship with or without cause.

 

13.    Regulatory Approvals and Listing . The Company shall not be required to issue any certificate for shares of Stock upon the vesting of Restricted Stock Rights granted under this Agreement prior to satisfying any regulatory approval, registration, qualification or other requirements of the Securities and Exchange Commission, the Internal Revenue Service or any other governmental agency which the Committee, in its sole discretion, shall determine to be necessary or advisable. (See Section 20.1 of the Plan).

 

14.    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 Grantee and the 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

 

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

 

16.    Validity and Construction . The validity and construction of this Award 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, the Company has caused this Restricted Stock Rights Award Agreement to be executed, effective as of ______________, 2007.

 

PNM RESOURCES, INC.

 

By                

JEFFRY E. STERBA

Chairman, President and Chief Executive Officer

ACKNOWLEDGMENT BY GRANTEE

By signing below, the Grantee acknowledges receipt of a copy of the Restricted Stock Rights Award Agreement dated ___________ ___, 2007 and the Plan and further acknowledges that the Restricted Stock Rights granted under the terms of the Award Agreement are governed by the terms and conditions of the Plan and the Award Agreement.

_________________________________________

(Name of Grantee)

_________________________________________

(Signature of Grantee

 

 

4

---

Exhibit 10.4

PERFORMANCE SHARE AWARD AGREEMENT

PNM RESOURCES, INC.

OMNIBUS PERFORMANCE EQUITY PLAN

PNM Resources, Inc., a New Mexico corporation, (“PNMR” or the “Company”) hereby awards to __________, (the “Grantee”), a Participant in the PNM Resources, Inc. Omnibus Performance Equity Plan (the “Plan”), as it may be amended, a Performance Share Award (the “Award”) for the number of shares of Common Stock of Company (“Stock”) specified in Section 2 below. The grant is made effective as of the __th day of February, 2007.

 

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

 

1.    Target Award . Pursuant to the provisions of the Plan, the Human Resources and Compensation Committee (the “Committee”) of Company’s Board of Directors adopted the Long-Term Performance Share Program (the “Program”), which established the general guidelines pursuant to which Performance Shares would be granted by the Committee. The Committee amended the Program effective as of January 1, 2004 and Grantee previously received a copy of the amended Program document. In accordance with the provisions of the amended Program, the Committee established a “Target Award” of ______ shares for Grantee. The Target Award was subject to adjustment in accordance with the provisions of the Program, as described in Section 2.

 

2.    Performance Goals . Pursuant to the Program, Grantee is entitled to an award of Performance Shares only if Company’s “Total Shareholder Return” (“TSR”), as that term is defined in the Program document, is at the 40 ^th percentile or higher of companies in the S & P Midcap 400 Utility Index (the “Index”) for the relevant “Performance Period”. The “Performance Period” covered by this Award Agreement is the period beginning on January 1, 2004 and ending on December 31, 2006. Under the Program, Participants may earn from 0% to 200% of the Target Award, depending on Company’s TSR.

 

For the Performance Period, Company’s TSR was ___, placing it in the __ percentile of companies included in the Index. As a result, Grantee is entitled to an award of Performance Shares equal to ___% of the Target Award. Grantee, accordingly, is hereby awarded ____ Performance Shares for the Performance Period.

 

3.    Form and Timing of Delivery of Certificate . Within an administratively reasonable period of time following the date of this Award Agreement, and after satisfaction of all applicable withholding requirements, Grantee shall receive a Stock certificate evidencing Grantee’s ownership of the number of Performance Shares specified in Section 2.

 

 

Section 409A of the Code imposes a number of requirements on “non-qualified deferred compensation plans and arrangements.” Based on regulations proposed by the Internal Revenue Service, the Company has concluded that this Performance Share Award Agreement is subject to Section 409A. The Company also has concluded, however, that since the Stock Certificate evidencing the Performance Shares granted hereunder will be issued within an administratively reasonable period after the date on which the Performance Period ends and Grantee obtains a vested right to the Performance Shares, the award of Performance Shares qualifies for the short-term deferral exception to Section 409A. In order to ensure compliance with the short-term deferral exception, the Company shall issue the Stock Certificate as soon as possible after the date of the Agreement and in any event by March 15, 2007. If for some unforeseen reason it is administratively impracticable to issue the Stock Certificate by March 15, 2007, the Stock Certificate shall be issued as soon as reasonably practicable following March 15, 2007 and in no event later than December 31, 2007. Under no circumstances may the time or schedule of receipt of the Stock Certificate hereunder 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. Grantee does not have any right to make any election regarding the time or form of any payment. This Agreement and the Plan shall be operated in compliance with Section 409A and each provision of this Agreement and the Plan shall be interpreted, to the extent possible, to comply with Section 409A.

 

4.    Withholding and Deductions . The Company shall have the right to deduct from any payments made by the Company to the Grantee, any federal, state or local taxes of any kind as are required by law to be withheld with respect to the Performance Shares granted hereunder. The Company also shall have the right to take such other actions as may be necessary in the opinion of the Company to satisfy all obligations for withholding and payment of such taxes, including, in its sole discretion, and subject to the provisions of applicable law and to any 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, to permit the Grantee, at the Grantee’s election, to satisfy, in whole or in part, any tax withholding obligation which may arise in connection with the Performance Shares by requesting that the Company withhold shares of Stock having a Fair Market Value of the Stock equal to the amount of the income tax withholding. Any shares of Stock deliverable to the Grantee under the terms of this Agreement also are subject to offset by the Company, and the Grantee hereby authorizes such offset, to liquidate and reduce any outstanding debt or unpaid sums owed by the Grantee to the Company or its successor.

 

5.    Dividend Equivalents . Grantee is not entitled to receive a dividend equivalent with respect to the Performance Shares awarded pursuant to the Program and this Agreement.

 

6.    Compliance with Exchange Act . If Grantee is subject to Section 16 of the Exchange Act, Performance Shares granted pursuant to this Award are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act.

 

7.    Non-Assignability . Grantee’s rights under this Agreement shall not be transferable other than by will or by the laws of descent and distribution.

 

8.    Voting Rights . Grantee will have no voting rights with respect to the Performance Shares until delivery of the Stock certificate in accordance with Section 3.

 

 

9.    Tax Issues . Pursuant to Section 83 of the Code, the value of the Performance Shares will be taxed as ordinary income as of the date distributed to Grantee.

 

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 Grantee and Company and (b) unless otherwise expressed or provided, in writing, by an authorized officer, the employment relationship between Grantee and Company shall be defined as “employment at will” wherein either party, without prior notice, may terminate the relationship with or without cause.

 

11.    Regulatory Approvals and Listing . Company shall not be required to issue any certificate for shares of Stock prior to satisfying any regulatory approval, registration, qualification or other requirements of the Securities and Exchange Commission, the Internal Revenue Service or any other governmental agency which the Committee, in its sole discretion, shall determine to be necessary or advisable. (See Section 20.1 of the Plan).

 

12.    Administration . This Agreement shall at all times be subject to the terms and conditions of the Plan and the Program documents. The Committee shall have the sole and complete discretion with respect to the interpretation of this Agreement and the Plan and the Program documents as well as all matters reserved to it by the Plan.

 

13.    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.

 

14.    Validity and Construction . The validity and construction of this Award 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 OR PROGRAM DOCUMENTS. TO THE EXTENT THIS AGREEMENT IS SILENT ON AN ISSUE OR THERE IS A CONFLICT BETWEEN THE PLAN OR THE PROGRAM DOCUMENTS AND THIS AGREEMENT, THE PROVISIONS OF THE PLAN OR PROGRAM DOCUMENTS SHALL CONTROL.

 

IN WITNESS WHEREOF, the Company has caused this Performance Share Award Agreement to be executed, effective as of February __, 2007.

 

PNM RESOURCES, INC.

By                

JEFFRY E. STERBA

Chairman, President and Chief Executive Officer

ACKNOWLEDGEMENT

By signing below, the Grantee acknowledges receipt of a copy of the Performance Share Award Agreement dated February ___, 2007, the Plan and the Program document and further acknowledges that the Performance Shares granted under the terms of the Award Agreement are governed by the terms and conditions of the Plan, the Program document and the Award Agreement.

_____________________________________

(Name of Grantee)

_____________________________________

(Signature of Grantee)

LONG-TERM PERFORMANCE SHARE PROGRAM

Amended Effective January 1, 2004

INTRODUCTION

PNM Resources, Inc. (the “Company”) has adopted the PNM Resources, Inc. Omnibus Performance Equity Plan (the “PEP”). Under the PEP, the Board Governance and Human Resources Committee* (the “Committee”) of the Company’s Board of Directors has the power to issue Performance Shares (the “Awards”). The PNM Resources, Inc. Long-Term Performance Share Program (the “Program”) sets forth the general guidelines pursuant to which Performance Shares will be made under the PEP.

 

(* now known as the Human Resources and Compensation Committee)

 

All Awards granted pursuant to the Program will subject to the PEP and will be evidenced in an Award agreement. The Award agreement will be in a form approved by the Committee that will contain such terms and restrictions as are appropriate under the PEP. The Committee reserves the right to make grants of Awards separate from this Program and in accordance with the terms of the PEP. The following describes the objectives of the Program, its various elements, and how the Program is intended to function.

 

PROGRAM OBJECTIVES

Through grants of Awards, the Program is designed to motivate and retain participants by rewarding them for their contributions towards the Company’s achievement of superior financial performance measured by comparison to other companies in the industry.

 

EFFECTIVE DATES

The Program is effective for the period from January 1, 2004 until the termination of the PEP, or until the Committee so designates, whichever is earlier. The Committee reserves the right to adjust, amend or suspend the Program in its discretion.

 

ADMINISTRATION

 

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

ELIGIBILITY

As a general matter, all Officers of the Company and its affiliates shall participate the Program, but the Committee retains discretion to select eligible participants from among employees of the Company and its affiliates.

 

 

 

PROGRAM DESCRIPTION

·

Overview

Awards may be issued to participants when the Company’s Total Shareholder Return (TSR) is at the 40 ^th percentile or above of companies in the S&P Midcap 400 Utility Index for each Performance Period. A target number of shares is set for each participant level (the “Target”). Participants may earn a minimum of 0% up to a maximum of 200% of the Target Award.

 

·	Award Opportunity

 

Award amounts are based on the Company’s TSR performance relative to companies in the S&P Midcap 400 Utility Index for each Performance Period. Results will be interpolated between the established targets below to reward for incremental performance. The Target Award for each award level are as follows:

 

 

         

Awards are paid for PNM Resources, Inc. TSR performance relative to companies in the S&P Midcap 400 Utility Index as follows:

 

 

 

Note : Participants that are hired after the start date of a Performance Period will be eligible for a pro-rata award.

 

The issuance of Awards under the Program will be subject to the availability of shares of stock under the PEP.

 

 

·	TSR Calculation

 

TSR will be calculated by using the average stock price over the first 30 days and the last 30 days of the Performance Period.

 

·	Performance Period

 

The “Performance Period” will be a three-year period beginning with the 2004 calendar year. A new Performance Period will begin each year thereafter. Thus, the Performance Periods will overlap.

·	Award Frequency

 

In general, Awards will be granted upon completion of each Performance Period. This means that there will be grants made at the end of each 3-year rolling Performance Period.

 

 

·	Award Payouts

 

Awards will be issued to Participants in the form of Company common stock as soon as administratively possible after completion of the then current Performance Period and calculation of the Company’s TSR performance. Awards issued to Participants will not be subject to any restrictions.

 

·	Disposition of Awards to Employees Who Terminate Employment

Under the Program, no performance shares will be issued to participants until they are fully earned. As a result, participants will not have unvested performance shares in the traditional sense. Participants who terminate employment due to death, disability, retirement, impaction or change in control shall receive pro-rata shares for the number of full months of service during the Performance Period. Distribution of shares shall be at the same time as payment is made to those participants who did not terminate service during the performance period.

Awards will not be issued to any participant who voluntarily or involuntarily terminates employment prior to the end of a Performance Period for any reason other than those described above.

 

·	Voting Rights

 

During the Performance Period, participants will have no voting rights with respect to unissued Awards.

 

·	Dividend Equivalents and Other Distributions

 

During the Performance Period, participants will not be entitled to receive dividend equivalents or other distributions for any unissued Awards.

 

·	Tax Implications

 

The full value of the shares is taxed as ordinary income upon award.

 

8

 

---

Exhibit 10.5

LONG-TERM PERFORMANCE CASH PROGRAM

INTRODUCTION

PNM Resources, Inc. (the “Company”) has adopted the PNM Resources, Inc. Long-Term Performance Cash Plan (the “Plan”). Under the Plan, the Board Governance and Human Resources Committee ¹ (the “Committee”) of the Company’s Board of Directors has the power to issue Performance Cash awards (the “Awards”) to eligible participants. The Plan sets forth the general guidelines pursuant to which Performance Cash will be awarded.

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

PROGRAM OBJECTIVES

Through grants of Awards, the Program is designed to motivate and retain participants by rewarding them for their contributions towards the Company’s achievement of superior financial performance measured by comparison to an industry index.

EFFECTIVE DATES

The Program is effective for the period from January 1, 2004 until the performance period ending December 31, 2010 or until the Committee so designates, whichever is earlier. The Committee reserves the right to adjust, amend or suspend the Program in its discretion.

 

ADMINISTRATION

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

ELIGIBILITY

As a general matter, all Officers of the Company and its affiliates shall participate the Program, but the Committee retains discretion to select eligible participants from among employees of the Company and its affiliates.

 

---

 

PROGRAM DESCRIPTION

·

Overview

Awards may be issued to participants when the Company’s Total Shareholder Return (TSR) is at the 40 ^th percentile or above of companies in the S&P Midcap 400 Utility Index for each Performance Period. A target award is set for each participant level (the “Target”). Participants may earn a minimum of 0% to a maximum of 200% of the Target award.

 

·	Award Opportunity

Award amounts are based on the Company’s TSR performance relative to companies in the S&P Midcap 400 Utility Index for each Performance Period. Results will be interpolated between the established targets below to reward for incremental performance. The Target Award for each award level are as follows:

 

 

Awards are paid for PNM Resources, Inc. TSR performance relative to companies in the S&P Midcap 400 Utility Index as follows:

 

Note: Participants that are hired after the start date of a Performance Period will be eligible for a pro-rata award.

·	TSR Calculation

TSR will be calculated by using the average stock price including dividends over the first 30 days and the last 30 days of the Performance Period.

·	Performance Period

The “Performance Period” will be a three-year period beginning with the 2004 calendar year. A new Performance Period will begin each year thereafter. Thus, the Performance Periods will overlap. Note: A reduced measurement period will be used to pay partial awards for 2004 and 2005 during the first Performance Period. See explanation under “Award Frequency”.

 

 

·	Award Frequency

In general, Awards will be paid upon completion of each Performance Period. This means that there will be awards paid at the end of each 3-year rolling Performance Period. Except as provided below for the first Performance Period, no Award will be made until the end of the Performance Period to which the Award relates.

In order to avoid having a full three-year Performance Period pass before the first award opportunity, participants will be eligible to earn a portion of a full (3-year Performance Period) award at the end of the 2004 and 2005 plan years. The award opportunity during the first three years of the plan will be as follows:

 

·	In 2004, participants will be eligible for an award equal to 33% of a full award based on the Company’s TSR performance for year 1 (2004) of the Plan.

·	In 2005, participants will be eligible for an award equal to 33% of a full award based on the Company’s TSR performance for years 1 and 2 (2004 and 2005) of the Plan.

·

In 2006, participants will be eligible for an award equal to the remainder of the full award due for the first 3 years of the plan based on the Company’s TSR performance for years 1, 2 and 3 (2004, 2005, and 2006) of the Plan. This will be calculated by determining the full award for the first 3 years of the Plan, and subtracting the partial awards paid in 2004 and 2005.

The chart below illustrates the award schedule that will be used to phase in the plan. Note: As stated above, participants will be eligible for partial awards in years 1,2 and 3 of the Plan, and will be eligible for full awards after year 4 of the Plan.

 

·	Award Payouts

Awards will be issued to Participants in the form of cash as soon as administratively possible after completion of the then current Performance Period and calculation of the Company’s TSR performance.

·	Disposition of Awards to Employees Who Terminate Employment

Participants who terminate employment due to death, disability, retirement, impaction or change in control shall receive receive a pro-rata award for the number of full months of service during the Performance Period. Distribution of the award shall be at the same time as payment is made to those participants who did not terminate service during the performance period.

Awards will not be issued to any participant who voluntarily or involuntarily terminates employment prior to the end of a Performance Period for any reason other than those described above.

 

·	Forfeiture of Awards

Any participant who terminates employment on or before the day on which awards are distributed will not be eligible for payment of a Long-Term Cash Plan award.

3

---

Exhibit 10.6

PNM RESOURCES, INC.

2007 OFFICER INCENTIVE PLAN

 

INTRODUCTION

 

This document serves as a comprehensive single source of information about the PNM Resources, Inc. Officer Incentive Plan (the “Plan”). It describes the objectives of the Plan, its various elements, and how they function. If you have questions that are not addressed by this document, please direct them to the Compensation Department.

 

PLAN OBJECTIVES

 

The Plan is designed to motivate and reward participants for achieving and exceeding annual company, business unit and individual goals, and the company-wide earnings per share (“EPS”) goal.

 

EFFECTIVE DATES

 

The Plan is effective from January 1, 2007 through December 31, 2007 (the “Plan Year”). Management reserves the right, however, to adjust, amend or suspend the Plan at its discretion during the Plan Year, with the approval of the Human Resources and Compensation Committee (the “Committee”) of the Board of Directors (the “Board”).

 

ADMINISTRATION

 

·	Plan Year Goals

 

Individual goals sets (e.g. combined company, business unit, and individual) will be established for each Officer. After considering the recommendations of management, the Committee will approve the company-wide EPS goals against which performance will be measured for the Plan Year.

 

·	Incentive Award Approvals and Payout Timing

 

Shortly after the end of the Plan Year, the Committee or the Board will, in its sole discretion, determine the final performance results, which will be used to calculate awards, if any. Awards will be distributed by check to eligible participants following such approval. The payment, generally, will be made by March 15 following the end of the Plan Year. If it is administratively impractical to make the payment by March 15, the payment shall be made as soon as reasonably practical following March 15. The payments also may be delayed in accordance with regulations issued pursuant to Section 409A of the Internal Revenue Code of 1986.

 

·	Provisions for a Change in Control

 

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

 

 

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

 

ETHICS

 

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

 

ELIGIBILITY

 

All officers are eligible to participate in the Plan with the exception of the Vice Presidents and Co-Presidents for First Choice Power, who will participate in the First Choice Power, L.P. Incentive Plan or the First Choice Power, L.P. Energy Trading Plan. For purposes of this Plan, officer means any employee of the company named by the Board with the title of Chief Executive Officer, President, Executive Vice President, Senior Vice President or Vice President.

 

·	Pro Rata Awards for Partial Service Periods

 

Pro rata awards for the number of months actively employed at each eligibility level during the Plan Year will be paid to the following participants at the time awards are paid to all participants: (Note: Any months in which a participant is actively on the payroll for at least one day will count as a full month.)

 

-	Participants who are newly hired during the Plan Year.

 

-	Participants who are promoted, transferred or demoted during the Plan Year.

 

-	Participants who are on leave of absence for any full months during the Plan Year.

 

-

Participants who are impacted or leave the company due to retirement or disability during the Plan Year. (Note: For purposes of the Plan, “retirement” means termination of employment with the company and all affiliates after the employee has attained: (1) age forty-five and twenty years of service; (2) age fifty-five and ten years of service; (3) the age at which the early distribution penalty of Section 72(t) of the Internal Revenue Code no longer applies and five years of service; or (4) any age and thirty years of service.)

 

-	Participants who die during the Plan Year, in which case the award will be paid to the spouse of a married participant or the legal representative of an unmarried participant.

 

·	Forfeiture of Awards

 

Any participant who terminates employment on or before awards are distributed for the Plan Year for any reason other than death, impaction or retirement (e.g., voluntary separation, termination for performance or misconduct - even if the terminated participant elects to take retirement) will not be eligible for payment of an award.

 

 

 

·	Eligible Base for Incentive Purposes

 

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

 

AWARD DETERMINATION

 

Awards may be earned for performance that provides additional value to our shareholders. The incremental performance needed to fund awards is taken into consideration in establishing performance thresholds and goals under the Plan.

 

·	Performance Thresholds

 

In order to be eligible for incentive awards, the following performance threshold must be met for 2007 (Individual Award):

 

-	Individual goal results at the “Threshold” performance level or above. If this performance threshold is not met, no award will be paid for the Plan Year.

 

In order to be eligible for the award enhancement, the following performance threshold must be met for 2007:

 

-	Company-wide EPS of $1.78 or more. If this performance threshold is not met, no award enhancement will be applied.

 

·	Individual Goals Award Opportunity

 

For the 2007 Plan Year, individual goals award opportunities are as follows:

 

  Note: Vice Presidents and Co-Presidents of First Choice Power do not participate in the Officer Incentive Plan

 

 

·	Earnings Per Share (EPS) Award Enhancement

 

For the 2007 Plan Year, the EPS award enhancement opportunities are as follows:

 

 

For this Plan, EPS is defined as net income related to running the business (excluding certain extraordinary items or events that result in windfalls or penalties which are not in keeping with the spirit of the Plan) divided by the number of shares of PNM Resources, Inc. common stock outstanding.

 

·	Cash Flow Award Modifier

 

The award opportunity will be modified by a cash flow measure. The cash flow measure is Funds from Operations (FFO)to Debt, which is a debt coverage ratio that is used to measure cash-based earnings compared to total debt.

 

The Cash Flow modifier will be calculated as a percentage of the Officer Incentive Plan bonus amount, and will be added or subtracted from this amount to determine the final award.

·	Award Calculation

 

Individual goal performance that meets or exceeds the threshold level will be eligible for an award. The amount of each participant’s award is determined by the participant’s eligibility level and individual goal results.

 

Company EPS performance that meets or exceeds the threshold level will serve as an enhancement to the award paid for Individual performance. As identified in the “EPS Award Enhancement” table above, the award enhancement will be a minimum of 1.15x at the EPS threshold level, a maximum of 5.0x at the EPS optimal level, and interpolated between the EPS threshold and optimal levels.

 

The resulting percent is multiplied by the participant’s eligible annual base salary to determine the amount of the participant’s award. The FFO/Debt modifier achievement modifies the calculated bonus depending on the level of achievement outlined in the table above.

 

 

Award Example : Assume that overall Individual results are at the optimal performance level, company-wide EPS performance is $1.90 (3.0x multiplier), and the FFO/Debt is 15.1%. A participant who is eligible for an award at the Vice-President eligibility level would receive an award of 30.0% of annual salary. That is, individual goal results at the optimal performance level resulting in an award of 10%. This amount then enhanced by 3.0x for EPS performance and modified by (6.667%) for the cash flow measure. Assuming the participant’s annual base salary at year-end is $185,000 the award would be $51,800, which is calculated as follows:

 

Step 1: 10% (individual goal results) x 3.0 (EPS multiplier) = 30.0%

 

Step 2: $185,000 (base salary) x 30.0% = $55,500

 

Step 3: $55,500 x 6.667% (cash flow modifier) = $3,700

 

Step 4: $55,500 - $3,700 = $51,800 (final award)

 

 

5