AFTER-TAX RETIREMENT PLAN

PNM Resources, Inc. (the “Company”) sponsors the PNM Resources, Inc. Executive Savings Plan II (“ESP II”).  The purpose of ESP II is to permit certain key employees of the Company and its Affiliates who participate in the PNM Resources, Inc. Retirement Savings Plan (the “RSP”) to defer compensation on a pre-tax basis and to receive credits without reference to the limitations on contributions in the RSP or those imposed by the Internal Revenue Code of 1986, as amended (the “Code”).

The purpose of this PNM Resources, Inc. After-Tax Retirement Plan (the “Plan”) is to allow the employees who are otherwise eligible to participate in ESP II to save, instead, on an after-tax basis.  Since all savings under the Plan are made on an after-tax basis, the Plan is not subject to the requirements of Section 409A of the Code.  In addition, since the employees will receive all amounts due currently, and will not in any way defer the receipt of the compensation payable pursuant to the Plan until the termination of their employment with the Company, the Plan is not subject to the requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”).

Except as noted below, the Plan will be effective as of January 1, 2009 (the “Effective Date”).

1.1       General .  When a word or phrase appears in this Plan document with the initial letter capitalized, and the word or phrase does not begin a sentence, the word or phrase shall generally be a term defined in this Article I.  The following words and phrases used in this Plan document with the initial letter capitalized shall have the meanings set forth in this Article I, unless a clearly different meaning is required by the context in which the word or phrase is used or the word or phrase is defined for a limited purpose elsewhere in this Plan document:

(a)   “ Account ” means the money market or other account owned by a Participant into which will be deposited any Payroll Savings directed by the Participant and any amounts contributed by the Company on behalf of the Participant pursuant to this Plan.

(b)   “ Adopting Affiliate ” means any Affiliate of the Company that has been authorized by the Board of Directors to adopt the Plan and which has adopted the Plan in accordance with Section 2.4 ( Adoption by Affiliates ).  All Affiliates that are currently “Adopting Affiliates” under the ESP II as of the date of the execution of this Plan will be considered to be Adopting Affiliates under this Plan.

(c)   “ Affiliate ” means (1) a corporation which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code) as is the Company, and (2) any other trade or business (whether or not incorporated) controlling,

controlled by, or under common control with the Company (within the meaning of Section 414(c) of the Code).

(d)   “ Benefits Department ” means the organizational unit of PNMR Services Company with responsibility for administering benefit programs sponsored by PNM Resources and its Affiliates.

(e)   “ Benefits Governance Committee ” means the Benefits Governance Committee or its successor appointed by the Company.

(f)   “ Board ” or “ Board of Directors ” means the Board of Directors of the Company, or any authorized committee of the Board.

(g)   “ Change in Control ” shall have the meaning ascribed to that term in the Retention Plan in which the Participant participates ( i.e. , the Officer Retention Plan or the Employee Retention Plan).

(h)   “ Code ” means the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder.

(i)   “ Company ” means PNM Resources, Inc., and, to the extent provided in Section 9.4 ( Successors ) below, any successor corporation or other entity resulting from a merger or consolidation into or with the Company or a transfer or sale of substantially all of the assets of the Company.

(j)   “ Compensation ” for purposes of determining the Matching and Standard Contributions, means the Participant’s base salary and other elements of compensation that are considered under the RSP (as it may be amended from time to time) for purposes of calculating the Participant’s RSP Employer and Matching Contributions, respectively.  For purposes of determining the amount of a Participant’s permissible Payroll Savings, “Compensation” means the Participant’s base salary and other elements of compensation that are considered under the RSP (as it may be amended from time to time) for purposes of calculating the Participant’s “Before Tax Contributions,” as such term is defined in the RSP.

(k)   “ Disability ” or “ Disabled ” means that a Participant is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under the Company’s long term disability plan.  Any determination of Disability pursuant to the Plan is not an admission by the Company or the Adopting Affiliate that employs the Participant that a Participant is disabled under federal or state law.

(l)   “ Discretionary Contributions ” means the Discretionary Contributions made on a Participant’s behalf in accordance with Section 3.4 ( Discretionary Contributions ).

(m)   “ Effective Date ” means January 1, 2009.

(n)   “ Eligible Officer ” means a Participant who (1) occupies the position of Senior Vice President or higher of the Company, (2) has completed at least three Months of Service, and (3) has been selected by the Plan Administrator with the advance consent of the Human Resources and Compensation Committee to receive a Supplemental Contribution.

(o)   “ Employee Retention Plan ” means the PNM Resources, Inc. Employee Retention Plan, as it may be amended or replaced from time to time.

(p)   “ ESP II ” means the PNM Resources, Inc. Executive Savings Plan II.

(q)   “ Human Resources and Compensation Committee ” means the Human Resources and Compensation Committee of the Board or its successor.

(r)   “ Matching Contributions ” means the Matching Contributions made on behalf of a Participant in accordance with Section 3.2(a) ( Matching and Standard Contributions – Matching Contribution ).

(s)   “ Month of Service ” means a calendar month during which a Participant performs services for the Company or an Adopting Affiliate on one or more days.  If the Participant’s employment with the Company or an Adopting Affiliate includes a break in employment, then only the Months of Service in the last period of employment will be considered Months of Service.

(t)   “ Normal Retirement Date ” means the date on which a Participant attains the age of 62 years.

(u)   “ Officer Retention Plan ” means the PNM Resources, Inc. Officer Retention Plan, as it may be amended or replaced from time to time.

(v)   “ Participant ” means, for a particular Plan Year, an employee of the Company or any Adopting Affiliate who is eligible to participate as determined pursuant to Section 2.1 ( Eligible Employees ) and who has elected to participate pursuant to Section 2.2 ( Election to Participate ) for the Plan Year in question.  An individual’s status as a Participant is determined separately for each Plan Year.

(w)   “ Payroll Savings ” means the payroll savings made by a Participant in accordance with Section 3.1 ( Payroll Savings ).

(x)   “ Payroll Savings Agreement ” means the written agreement described in Section 3.1(a) ( Payroll Savings – Payroll Savings Agreement ) that is entered into by a Participant pursuant to this Plan.

(y)   “ Plan ” means the PNM Resources, Inc. After-Tax Retirement Plan.

(z)   “ Plan Administrator ” means the Company.  Any action to be taken by the Plan Administrator may be taken by the Company’s senior human resources officer.  In addition, the Company’s senior human resources officer may delegate such authority to the Benefits Department.

(aa)   “ Plan Year ” means the calendar year.

(bb)   “ RSP ” means the PNM Resources, Inc. Retirement Savings Plan, as it may be amended from time to time.

(cc)   “ RSP Employer Contribution ” means “Discretionary Contributions,” as such term is defined in the RSP.

(dd)   “ Separation from Service ” means either (1) the termination of a Participant’s employment with the Company and all Affiliates due to death, retirement or other reasons, or (2) a permanent reduction in the level of bona fide services the Participant provides to the Company and all Affiliates to an amount that is 20% or less of the average level of bona fide services the Participant provided to the Company and all Affiliates in the immediately proceeding 36 months, with the level of bona fide service calculated in accordance with Treas. Reg. § 1.409A-1(h)(1)(ii).

A Participant’s employment relationship is treated as continuing while the Participant is on military leave, sick leave, or other bona fide leave of absence (if the period of such leave does not exceed six months, or if longer, so long as the Participant’s right to reemployment with the Company or an Affiliate is provided either by statute or contract).  If the Participant’s period of leave exceeds six months and the Participant’s right to reemployment is not provided either by statute or by contract, the employment relationship is deemed to terminate on the first day immediately following the expiration of such six-month period.  Whether a termination of employment has occurred will be determined based on all of the facts and circumstances and in accordance with regulations issued by the United States Treasury Department pursuant to Section 409A of the Code.

(ee)   “ Standard Contributions ” means the Standard Contributions made on behalf of a Participant in accordance with Section 3.2(b) ( Matching and Standard Contributions – Standard Contribution ).

(ff)   “ Supplemental Contributions ” means the Supplemental Contributions made on behalf of an Eligible Officer in accordance with Section 3.3 ( Supplemental Contributions ).

1.2       Construction .  The masculine gender, when appearing in the Plan, shall include the feminine gender (and vice versa), and the singular shall include the plural, unless the contract clearly states to the contrary.  Headings and subheadings are for the purpose of reference only and are not to be considered in the construction of this Plan.  If any provision of this Plan is determined to be for any reason invalid or unenforceable, the remaining provisions shall continue in full force and effect.  All of the provisions of this Plan shall be construed and enforced according to the laws of the State of New Mexico and shall be administered according to the laws of such state, except as otherwise required by Federal law.

2.1       Eligible Employees .  Any employee who is classified as an “officer” of the Company or an Adopting Affiliate shall be eligible to participate in the Plan for a particular Plan Year.  For this purpose, an “officer” is someone who occupies the position of Vice President or higher.  The Plan Administrator, in the exercise of its discretion, and with the concurrence of the Human Resources and Compensation Committee and/or the Board of Directors, also may designate any other employee of the Company or an Adopting Affiliate as eligible to participate in the Plan for a particular Plan Year if the Plan Administrator concludes, in the exercise of its discretion, that the employee should be allowed to participate in the Plan.

2.2       Election to Participate .  In order to participate in the Plan for a particular Plan Year, an otherwise eligible employee (as determined in accordance with Section 2.1 ( Eligible Employees )) must elect to participate in the Plan for that Plan Year in accordance with such procedures as may be prescribed by the Plan Administrator.  An eligible employee may not elect to participate in this Plan for a particular Plan Year if the eligible employee has elected to participate in the ESP II for that Plan Year.  If an eligible employee has not elected to participate in the ESP II for a Plan Year, the eligible employee shall be deemed to have elected to participate in this Plan for the Plan Year.  

2.3       Discontinuance of Participation .  The Plan Administrator may discontinue a Participant’s participation in the Plan at any time, in the exercise of its discretion.  If an individual’s participation is discontinued, the individual will no longer be eligible to direct Payroll Savings or receive contributions under this Plan.  

2.4       Adoption by Affiliates .  An employee of an Affiliate may not become a Participant in the Plan unless the Affiliate has previously adopted the Plan.  An Affiliate of the Company may adopt this Plan only with the approval of the Board.  By adopting this Plan, the Affiliate shall be deemed to have agreed to assume the obligations and liabilities imposed upon it by this Plan, agreed to comply with all of the other terms and provisions of this Plan, delegated to the Plan Administrator, the Benefits Department, the Benefits Governance Committee, and the Human Resources and Compensation Committee the power and responsibility to administer this Plan with respect to the Affiliate’s employees, and delegated to the Company the full power to amend or terminate this Plan with respect to the Affiliate’s employees.

3.1       Payroll Savings .

(a)   Payroll Savings Agreement .  In order to save through payroll deductions, a Participant must execute a Payroll Savings Agreement in the form prescribed by the Benefits Department from time to time.  The Payroll Savings Agreement shall be delivered to the Benefits Department by the time specified in Section 3.1(c) ( Payroll Savings – Timing of Elections ).  If a Participant does not complete a Payroll Savings Agreement, the Participant shall be deemed to have elected not to make Payroll Savings for the relevant Plan Year.

(b)   Amount .  In the Payroll Savings Agreement, the Participant shall direct the Company to deduct from his or her Compensation, after taxes and other deductions, a portion (designated in whole percentages and subject to such limitations as may be prescribed by the Plan Administrator) of the Compensation otherwise payable to him or her by the Company or an Adopting Affiliate in the relevant Plan Year.  The amount of the Participant’s Payroll Savings shall be transmitted to the Participant’s Account as promptly as possible following the day on which the Compensation is payable.

(c)   Timing of Elections .  As a general rule, the Payroll Savings Agreement shall be signed by the Participant and delivered to the Benefits Department prior to the beginning of the Plan Year in which the Compensation to be saved is otherwise payable to the Participant.  The Payroll Savings Agreement will be effective for a single Plan Year.  A new Payroll Savings Agreement will be required if the eligible employee chooses to be a Participant and to make Payroll Savings in any later year.  For the Plan Year in which an eligible employee first becomes eligible to participate in the Plan, the eligible employee may elect to make Payroll Savings from Compensation payable with respect to services to be performed subsequent to the date of the election by signing and delivering a Payroll Savings Agreement within 30 days after the date the eligible employee becomes eligible to participate in the Plan.  An election made by a Participant shall be irrevocable with respect to the Plan Year covered by the election.

3.2       Matching and Standard Contributions .  For any Plan Year, the Company may make a Matching or Standard Contribution to the Account of a Participant in accordance with the provisions of this Section.  The Matching or Standard Contribution is in lieu of any Matching or Standard Credits pursuant to the ESP II, since the employee must decline to participate in ESP II in order to participate in this Plan for any Plan Year.  

(a)   Matching Contribution .  The Matching Contribution shall be in an amount equal to 75% of the first six percent of Compensation saved by the Participant through Payroll Savings pursuant to the Plan.  A Participant shall be eligible to receive a Matching Contribution under this Plan only if such Participant has met the service requirements necessary to receive a “Matching Contribution” as such term is defined in the RSP for that Plan Year.

(b)   Standard Contribution .  The Standard Contribution shall be in an amount equal to (i) the RSP Employer Contribution that would have been made on the Participant’s behalf to the RSP for the Plan Year if the contributions were not limited by the Code (including, particularly, the limitations imposed by Sections 401(a)(17) and 415 of the Code), reduced by (ii) the RSP Employer Contribution actually made to the RSP on behalf of the Participant for the Plan Year.  A Participant shall be eligible to receive a Standard Contribution under this Plan only if such Participant has met the service requirements necessary to receive RSP Employer Contributions for that Plan Year.

3.3       Supplemental Contribu