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EXHIBIT 10.4
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August
30, 2007
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[PNM Resources logo]
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PRIVILEGED AND CONFIDENTIAL
Mr.
Jeffry E. Sterba
Chief
Executive Officer
PNM
Resources, Inc.
Alvarado
Square, MS 2824
Albuquerque,
NM 87158
Re: Retention
Bonus Agreement (the “Agreement”)
Dear
Jeff:
As
you are aware, we previously entered into a Retention Bonus
Agreement with you effective as of October 31,
2003. With this letter, we are offering to amend
and restate the Agreement in its entirety, effective as of
January 1, 2007, except as set forth below.
The
incentive bonus (the “Retention Bonus”) is
designed to encourage you to remain a part of the PNM
Resources, Inc. (the “Company”) for many years to
come. The Retention Bonus has the following terms
and conditions:
1.
Amount of Bonus
The
amount of the Retention Bonus will be the sum of
$1,600,000. The Retention Bonus will be paid out of
the Company’s general assets. It will not be
held in trust or in a separate account. You will
not receive any interest on this amount.
2.
Conditions
You
will be eligible to receive the Retention Bonus if you
continuously work for the Company as Chief Executive Officer
(“CEO”) from the date of this Agreement until
March 1, 2010, or upon your death or
“Disability,” if earlier.
3.
Early Termination
Although
your continuous employment is a condition that must be
satisfied in order to receive the Retention Bonus, the Company
also must reserve the right to terminate your employment or
alter your responsibilities at any time and for any or no
reason, subject to any other contractual commitments of the
Company to you. With that in mind, we have decided
to provide you with the Retention Bonus even if, prior to
March 1, 2010, you are terminated by the Company without
“Cause” or if you terminate under circumstances
that constitute “Constructive
Termination.”
Jeffry
E. Sterba
August
30, 2007
Page
2
4.
Definitions
The
terms “Cause,” “Constructive
Termination” and “Disability” have the
meanings set forth in the PNM Resources, Inc. Officer
Retention Plan, as amended from time to
time. Effective as of January 1, 2008,
however, “Constructive Termination” means a
termination of employment within two years following the
occurrence of one or more of the following circumstances
without your express consent:
(a) a
material diminution in your base compensation;
(b) a
material diminution in your authority, duties or
responsibilities;
(c) a
material change in the geographic location of your principal
office; or
(d) any
other action or inaction that constitutes a material breach by
the Company of this Agreement.
You
must provide written notice to the Company of the existence of
the Constructive Termination condition described in paragraphs
(a)-(d) above within 90 days of the initial existence of the
condition.
Notwithstanding
anything to the contrary, an event described in paragraphs
(a)-(d) above will not constitute Constructive Termination if,
within 30 days after you give the Company notice of the
occurrence or existence of an event that you believe
constitutes Constructive Termination, the
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