PERFORMANCE CASH AWARD AGREEMENT PNM RESOURCES, INC. SECOND AMENDED AND RESTATED OMNIBUS PERFORMANCE EQUITY PLAN

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

5.  Adjusted Cash Earnings.  For purposes of solely measuring performance under the Agreement, “Adjusted Cash Earnings” is defined as the amount of the Company’s net cash flow from operating activities (as reflected on the Company’s cash flow statement) adjusted for certain items. Specific adjustments to the Company’s net cash flow from operating activities include the following:  (1) adding amounts received by the Company as principal payments on the Palo Verde lessor notes, (2) adding amounts received by the Company as Palo Verde 3 toll revenue, (3) including amounts attributable to Optim Energy, LLC cash earnings, (4) excluding changes in the Company’s working capital, and (5) excluding the impacts of the Valencia Non-Controlling Interest.   The Adjusted Cash Earnings levels are not necessarily identical to any earnings outlook or guidance that may be announced by the Company and are structured to ensure that Award payments are not artificially inflated or deflated.

6.  Determination of Adjusted Cash Earnings and Awards Payable.  The Committee will determine the Adjusted Cash Earnings for the Performance Period and the amount of the Award to which Participant is entitled, if any, on or before February 28, 2011.  If Participant is Company’s CEO, the Committee then will submit its determinations with respect to the Adjusted Cash Earnings and the amount to which such Participant is entitled to the Board of Directors for review and approval.  No amount will be payable to such Participant in the absence of approval by the Board of Directors.

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

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

Performance Cash Award is otherwise non-assignable.  (See Section 14 of the Plan).  The terms of this Agreement and the Plan shall be binding on the executors, administrators, heirs and successors of Participant.

11.  Employment Agreement.  Notwithstanding anything to the contrary contained in this Agreement, (a) neither the Plan nor this Agreement is intended to create an express or implied contract of employment for a specified term between Participant and Company and (b) unless otherwise expressed or provided, in writing, by an authorized officer, the employment relationship between Participant and Company shall be defined as “employment at will” wherein either party, without prior notice, may terminate the relationship with or without cause.

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