Exhibit 10.5
 
PERFORMANCE CASH AWARD AGREEMENT
PNM RESOURCES, INC. SECOND AMENDED AND RESTATED
OMNIBUS PERFORMANCE EQUITY PLAN
 
PNM Resources, Inc., a New Mexico corporation, (“PNMR” or the “Company”) hereby
awards to «First» «Last», (the “Participant”) a Participant in the PNM
Resources, Inc. Second Amended and Restated Omnibus Performance Equity Plan (the
“Plan”), as it may be amended, a Performance Cash Award (the “Award”) effective
as of the ___ day of March, 2010.
 
Capitalized terms used in this Performance Cash Award Agreement (the
“Agreement”) and not otherwise defined herein shall have the meanings given to
such terms in the 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.
 
2.  Award Subject to Plan.  This Award is granted pursuant to the Plan, the
terms of which are hereby incorporated by reference.
 
3.  Performance Period.  The Performance Period for this Award begins on
January 1, 2010 and ends on December 31, 2010.
 
4.  Performance Goals; Amount of Award.  The amount of the Award to which
Participant is entitled pursuant to this Agreement, if any, is based upon the
level of Company’s Adjusted Cash Earnings during the Performance Period as set
forth below:
 
If Company’s Adjusted Cash Earnings over the Performance Period are:
The Annual Performance Cash Award awarded to Participant will be:
At least $275 MM (but not $310 MM)
$__________ (the Threshold Award), adjusted as described below.
 
At least $310 MM (but not $345 MM)
$__________ (the Target Award), adjusted as described below.
 
$345 MM or more
$__________ (the Maximum Award)
 

If Company’s Adjusted Cash Earnings for the Performance Period are less than
$275,000,000, no payment will be due pursuant to this Agreement.  If Company’s
Adjusted Cash Earnings for the Performance Period exceed $275,000,000 but are
less than $310,000,000, the amount of the payment to which Participant is
entitled will be interpolated between the Threshold and Target Award levels.  If
Company’s Adjusted Cash Earnings for the Performance
 
 
 

--------------------------------------------------------------------------------

 
Period exceed $310,000,000 but are less than $345,000,000, the amount of the
payment to which Participant is entitled will be interpolated between the Target
and Maximum Award levels.
 
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.
 
7.  Form and Timing of Payment. Participant will receive the payment, if any, on
or before March 15, 2011.
 
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 number 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.
 
10.  Non-Assignability.  The Award and Participant’s rights under this Agreement
shall not be transferable other than by will or by the laws of descent and
distribution.  The
 
 
2

--------------------------------------------------------------------------------

 
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 terms and conditions of this
Agreement and the Plan, the provisions of the Plan shall control.
 
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 Agreement
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, Company has caused this Performance Cash Award Agreement to
be executed on March ___, 2010 by its duly authorized representative.
 
PNM RESOURCES, INC.

By                                                                          
     Alice A. Cobb
     Senior Vice President and
     Chief Administrative Officer

 
 
3

--------------------------------------------------------------------------------