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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 Committee1(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.
 

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1  Now known as the Human Resources and Compensation Committee

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PROGRAM DESCRIPTION

·  
Overview

Awards may be issued to participants when the Company’s Total Shareholder Return
(TSR) is at the 40th 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:
 
 Award Level
 Target Award
 Chair, President and CEO   
 $287,000
 Executive Vice Presidents
 $88,000
 Senior Vice Presidents
 $50,000
 Vice Presidents 
 $21,000

 
Awards are paid for PNM Resources, Inc. TSR performance relative to companies in
the S&P Midcap 400 Utility Index as follows:
 
 Performance
 Award
 85th percentile and above
 200% of target award
 55th percentile
 100% of target award
 40th percentile
 50% of target award
 Less than 40th percentile
 0%

 
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”.
 

 
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·  
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.
 

YEAR 1
 (2004)
YEAR 2
(2005)
YEAR 3
(2006)
YEAR 4
 (2007)
YEAR 5
(2008)
 
       
1-Year
Perf. Period
Payout for
Year 1
     
2-Year Performance Period
Payout for Years 1& 2
   
3-Year Performance Period
Payout for Years 1, 2,3
   
3-Year Performance Period
Payout for Years 2,3,4

 

·  
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.

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