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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/[X]
Filed by a Party other than the Registrant / /[_]
Check the appropriate box:
/ /[_] Preliminary Proxy Statement / /[_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/[X] Definitive Proxy Statement
/ /[_] Definitive Additional Materials
/ /[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PUBLIC SERVICE COMPANY OF NEW MEXICOPublic Service Company of New Mexico
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ /[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1)(1) Title of each class of securities to which transaction applies:
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2)-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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3)-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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4)-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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5)-------------------------------------------------------------------------
(5) Total fee paid:
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/ /-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
/ /[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1)(1) Amount Previously Paid:
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2)-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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3)-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
[LOGO]Public Service Company
of New Mexico
Alvarado Square
Albuquerque, NM 87158 [LOGO OF PUBLIC SERVICE COMPANY
OF NEW MEXICO ALVARADO SQUARE
ALBUQUERQUE, NEW MEXICO 87158
------------------------APPEARS HERE]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERSSHAREHOLDERS
TUESDAY, APRIL 25, 1995
---------------------
To the Holders of Common Stock of
PUBLIC SERVICE COMPANY OF28, 1998
9:30 A.M., MOUNTAIN DAYLIGHT TIME
UNM CONTINUING EDUCATION CONFERENCE CENTER
1634 UNIVERSITY BOULEVARD, N. E.
ALBUQUERQUE, NEW MEXICO
Notice is hereby given thatMarch 23, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 Public Service Company of New
Mexico Annual Meeting of Stockholders of PUBLIC
SERVICE COMPANY OF NEW MEXICO ("PNM") will be held in the auditorium of the UNM
Continuing Education Conference Center at 1634 University Boulevard, N.E., in
the City of Albuquerque, New Mexico, on April 25, 1995, at 9:30 a.m., Mountain
Daylight Time, for the following purposes:
1. To electShareholders to:
. Elect three directors of PNM to hold office in accordance with the
Restated Articles of Incorporation of PNM until the Annual Meeting of
Stockholders in 1998, or until their successors shall be duly elected and
qualified.
2. To consider and vote upon the approval of the selection by the Board of
Directors of PNMdirectors.
. Approve appointment of Arthur Andersen LLP as independent auditors to audit
the consolidated financial statements of PNM and subsidiariespublic
accountants for the
fiscal year ending December 31, 1995.
3. To consider and act upon such1998.
. Conduct other matters as maybusiness properly come beforebrought up at the meeting.
Only holders of PNM Common StockShareholders of record at the close of business on March 6, 1995 will be entitled9, 1998 may vote
at the meeting.
Your vote is important. Whether you plan to notice ofattend or not, please sign,
date, and to vote on all matters to come beforereturn the enclosed proxy card in the envelope provided. If you
attend the meeting and any adjournment thereof.
By Order ofprefer to vote in person, you may do so.
This Proxy Statement, proxy card and PNM's Annual Report to Shareholders
are being distributed on or about March 23, 1998.
I look forward to seeing you at the Board of Directors
Patrickmeeting.
Sincerely,
/s/ J.T. ACKERMAN
John T. Ortiz
CORPORATE SECRETARY
March 22, 1995
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE MARK, EXECUTE, DATEAckerman
Chairman
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TABLE OF CONTENTS
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PROXY STATEMENT
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Notice of Annual Meeting...................................... Cover
Attendance and Voting Matters................................. 1
The PNM Board of Directors.................................... 2
PNM Common Stock Owned by Executive Officers and Directors.... 7
Persons Owning More than Five Percent of PNM Common Stock..... 8
Performance Graph............................................. 9
Compensation and Human Resources Committee
Report on Executive Compensation.............................. 10
Executive Compensation........................................ 13
Appointment of Arthur Andersen LLP............................ 17
Other Matters
Section 16(a) Beneficial Ownership Reporting Compliance.. 18
Annual Report and Other Matters.......................... 18
Shareholder Proposals for the 1999 Annual Meeting........ 18
Solicitation............................................. 18
Revocability of Proxy.................................... 18
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ATTENDANCE AND RETURN THE ACCOMPANYING PROXY CARD AS SOON AS
POSSIBLE, USING THE ENCLOSED SELF-ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE.
------------------------
PROXY STATEMENT
---------------------
(PNM LOGO)
PUBLIC SERVICE COMPANY OF NEW MEXICO
ANNUAL MEETING OF STOCKHOLDERS
APRIL 25, 1995
A proxyVOTING MATTERS
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ADMISSION TICKETS
Admission Tickets will be distributed at the registration tables in the
accompanying form is solicited on behalf of the Board of
Directors of PUBLIC SERVICE COMPANY OF NEW MEXICO ("PNM") for use at the 1995
Annual Meeting of Holders of the Common Stock of PNM, to be held on April 25,
1995 in the auditoriumlobby of the UNM Continuing Education Conference Center at 1634
University Boulevard, N.E., in Albuquerque, New Mexico, at 9:30 a.m., Mountain
Daylight Time, and at any adjournments thereof, forprior to the purposes set forthAnnual
Meeting. Attendance is limited to shareholders of record on March 9, 1998. If
your shares are held in the accompanying notice. Stockholders may revoke their proxy by attendance atname of your broker, bank, or other nominee, please
bring an account statement or letter from the nominee indicating that you are
the beneficial owner of the shares as of the record date.
VOTING METHODS
You can vote on matters to come before the meeting in two ways:
. You can come to the Annual Meeting and cast your vote there; or
. You can vote by voting theirsigning and returning the enclosed proxy card. If you do
so, your shares in person or by executing a later proxy
changing the vote on the earlier proxy. A proxy, when executed and not so
revoked, will be voted in accordance with the instructions thereon.manner you indicate. In the absence
of specific instructions, proxies will be voted by those named in the
proxy FOR the election of directors nominated, FOR the approval of the
selection of Arthur Andersen LLP as independent auditors of PNM and subsidiaries,public accountants, and
on all other matters in accordance with their best judgment.
This Proxy Statement is first being mailed to the holdersEach share of PNM Common
Stock on or aboutcommon stock you own entitles you to one vote. As of
March 22, 1995, in connection with the solicitation of proxies
by PNM's Board of Directors for use at the Annual Meeting.
In addition to soliciting proxies through the mail, certain employees of PNM
may solicit proxies in person and by telephone. PNM has retained Beacon Hill
Partners, Inc. to assist in the solicitation of proxies, primarily from brokers,
banks and other nominees, for an estimated fee of $2,500. The cost of soliciting
proxies will be borne by PNM. PNM will, upon request, reimburse brokers, banks,
nominees, custodians and other record holders for their out-of-pocket expenses
of forwarding proxy materials to the beneficial owners of the shares.
VOTING INFORMATION
Only holders of PNM Common Stock of record at the close of business on March
6, 1995 will be entitled to vote at the Annual Meeting. At such date,9, 1998, there were 41,774,083 shares of PNM Common Stockcommon stock outstanding.
Each such shareTHE QUORUM REQUIREMENT
A quorum of PNM Common
Stockshareholders is entitlednecessary to one vote on eachhold a valid meeting. If at least
a majority of the matters properly brought before the
Annual Meeting.
In order to elect directors and approve the selection of auditors, a quorum
must be present oroutstanding common stock is represented at the meetingAnnual Meeting,
in person or by proxy, a quorum will exist.
VOTE NECESSARY FOR ACTION
A quorum and the affirmative vote of the holders of a majority of the
shares of PNM Common Stockcommon stock present, in person or by proxy, and entitled to vote
at the Annual Meeting is required.
1
Under PNM's By-laws,are required to elect directors, approve the presence atselection of
independent public accountants, and to approve other actions. Abstentions have
the meeting, either in person or by
properly executed proxy, of the holderseffect of a majority ofvote against the outstanding shares
of PNM Common Stock is necessary to constitute a quorum to conduct business at
the Annual Meeting.
The aggregate number of votes entitled to be cast by all stockholders
present in person or represented by proxy at the meeting, whether those
stockholders vote FOR, AGAINST, or ABSTAIN from voting, will generally be
counted for purposes of determining the minimum number of affirmative votes
required for approval of those matters requiring only the affirmative vote of a
majority of the shares present at the meeting, and the total number of votes
cast FOR each of these matters will be counted for purposes of determining
whether sufficient affirmative votes have been cast. An abstention from votingmatter. Shares not voted on a matter by a stockholder present in person or represented by proxy at the
meeting has the same legal effect as a vote AGAINST the matter even though the
stockholder or interested parties analyzing the results of the voting may
interpret such a vote differently. Shares not voted by
brokers and other entities holding shares on behalf offor beneficial owners will not be
counted in calculating voting results on those matters for which the broker or other entity
hasthat matter.
MATTERS RAISED AT THE MEETING NOT INCLUDED IN THIS STATEMENT
We do not voted.
PNM is not awareknow of any arrangements, the operation of which might at a
subsequent date result in a change in control of PNM.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following persons are the only persons known to PNM, as of March 8,
1995,matters to be acted upon at the beneficial owners of moremeeting other than
5% of PNM's voting securities:
NAME & ADDRESS OF NATURE OF BENEFICIAL NUMBER PERCENT
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP OF SHARES OF CLASS
- ------------------ -------------------------------- -------------------------- --------------- ---------
Common Stock The Prudential Insurance Company Sole Voting & Dispositive 8,700(1)
of America Power
Prudential Plaza Shared Voting & 2,125,430(1)
Newark, NJ 07102-3777 Dispositive Power
TOTAL 2,134,130(1) 5.1%
Common Stock Mellon Bank Corporation Sole Voting Power 3,367,000(2)
One Mellon Bank Center Shared Voting Power 323,239(2)
Pittsburgh, PA 15258 Sole Dispositive Power 4,006,000(2)
Shared Dispositive Power 83,000(2)
TOTAL 4,399,239(2) 10.53%
- ------------------------
(1) As reported on Amendment No. 4 to Schedule 13G dated February 2, 1995 and
filed with the Securities and Exchange Commission by The Prudential
Insurance Company of America. PNM makes no representation as to the
accuracy or completeness of such information.
(2) As reported on Amendment No. 2 to Schedule 13G dated March 8, 1995 filed
with the Securities and Exchange Commission by Mellon Bank Corporation. PNM
makes no representation as to the accuracy or completeness of such
information.
2those discussed in this statement. If any other matter is presented, proxy
holders will vote on the matter in their discretion.
1
ELECTION- --------------------------------------------------------------------------------
THE PNM BOARD OF DIRECTORS
Three directors will be- --------------------------------------------------------------------------------
STRUCTURE
Our Board of Directors is divided into three classes for purposes of
election. One class is elected at theeach Annual Meeting of Shareholders to hold officeserve
for a three-year term.
At the ensuing three years in accordance with PNM's Restated Articles1998 Annual Meeting of Incorporation
providing for staggeredShareholders, the terms of three directors
of three years each. The threeare expiring. Those directors elected at this meetingAnnual Meeting will hold office
until the Annual Meeting of
Stockholders of PNMfor a three-year term expiring in 1998, or until their successors have been elected2001. The other directors are not up for
election this year and qualified. It is intended that votes will be cast pursuant to proxiescontinue in office for the following nominees:
NAME ADDRESS
- ---------------------------------------- -------------------------------
John T. Ackerman........................ Albuquerque, New Mexico
Joyce A. Godwin......................... Albuquerque, New Mexico
Manuel Lujan, Jr........................remainder of their terms.
If a nominee is unavailable for election, proxy holders will vote for
another nominee proposed by the Board.
DIRECTORS NOMINATED THIS YEAR FOR TERMS EXPIRING IN 2001
JOHN T. ACKERMAN, 56, is a resident of Albuquerque, New Mexico
If at the timeand has been
a director since June 1990. Mr. Ackerman has served as Chairman of the meeting any of the nominees named herein should be
unable to serve in this capacity, a circumstance not now anticipated by
management, it is intended that the proxies will vote for such substitute
nominees as may be designated by PNM's Board of Directors. Proxies cannot be
voted for a greater number of persons than three, the number of nominees named
above.
A vacancy on the Board of
Directors, created on December 8, 1993 by the
resignationPNM since 1990 and served as President and Chief Executive Officer of PNM from
1991 until his retirement in 1993.
JOYCE A. GODWIN, 54, is a resident of Albuquerque, New Mexico and has been
a director was filled onsince May 1989. Ms. Godwin served as Vice President and Secretary of
Presbyterian Healthcare Services of Albuquerque, New Mexico, from 1979 until her
retirement in December 1993. Ms. Godwin also served as Chairman and President
of Southwest Business Ventures, Inc., a holding company for Presbyterian
Healthcare Services' for-profit ventures, from 1986 until her retirement in
December 1993. Other directorships: TJ International and Charter Bank,
Albuquerque, New Mexico.
MANUEL LUJAN, JR., 69, is a resident of Albuquerque, New Mexico and has
been a director since April 5, 1994 by the appointment of1994. Mr. Lujan has been an insurance agent with
Manuel Lujan Jr. Mr. Lujan's term expires with the 1995 Annual Meeting.Insurance, Inc. since 1948. Mr. Lujan ishas been a nominee for electionconsultant on
U.S. governmental matters, focusing on Western U.S. issues, since 1993. Mr.
Lujan served as U.S. Secretary of the Interior from 1989 to 1993 and served in
the BoardU. S. House of Directors at such meeting.
THERepresentatives from 1969 to 1989. Other directorships:
SODAK Gaming, Inc. and Bank 1st, Albuquerque, New Mexico.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES.
Each2
DIRECTORS WITH TERMS EXPIRING IN 2000
ROBERT G. ARMSTRONG, 51, is a resident of Roswell, New Mexico and has been
a director since May 1991. Mr. Armstrong is the President of Armstrong Energy
Corporation, Roswell, New Mexico, an oil and gas exploration and production
company.
REYNALDO U. ORTIZ, 51, is a resident of Denver, Colorado and has been a
director since April 1992. Mr. Ortiz is the International Managing Director and
Senior Vice President of Qwest Communications International, a
telecommunications company. Mr. Ortiz served as President and Chief Executive
Officer of Sophia Communications, Inc., a startup wireless communications
company, from January 1997 through December 1997. He served as President and
Chief Executive Officer of LyncStar Communications, Inc. (a provider of
integrated network communications services) from March through December 1996,
served as Chief Executive Officer of Jones Education Networks, Inc. (a cable
television programming company) from March 1994 through February 1996, and was
Senior Vice President, Jones Financial Group, Inc. from January through March
1994. Mr. Ortiz served as Vice President, Corporate Public Policy of U S WEST,
Inc. from 1991 to 1994.
PAUL F. ROTH, 65, is a resident of Sanibel, Florida and has been a director
since May 1991. Mr. Roth served as the President of the directorsDallas Chamber of
Commerce, Dallas, Texas, from 1991 to 1992. Between 1956 and 1991, Mr. Roth
served in various executive positions, including President, of the Texas
Division of Southwestern Bell Telephone Company, Dallas, Texas.
DIRECTORS WITH TERMS EXPIRING IN 1999
LAURENCE H. LATTMAN, 74, is a resident of Albuquerque, New Mexico and has
been a director since May 1993. Dr. Lattman served as President of New Mexico
Institute of Mining and Technology from 1983 until his retirement in 1993.
BENJAMIN F. MONTOYA, 62, is a resident of Rio Rancho, New Mexico and has
been a director since October 1993. Mr. Montoya has served as President and
Chief Executive Officer of PNM since August 1993, and eachpreviously served as
Senior Vice President and General Manager, Gas Supply Business Unit, Pacific Gas
and Electric Company (1991-1993). Other directorships: Norwest Corporation, a
bank holding company, and Furr's Supermarkets, Inc.
ROBERT M. PRICE, 67, is a resident of the nominees for election at the
Annual MeetingEdina, Minnesota and has advised PNM that, asbeen a
director since July 1992. Mr. Price has been President of February 1, 1995, he or she
beneficially owned directly or indirectly equity securitiesPSV Inc., a
technology consulting business located in Burnsville, Minnesota, since 1990.
Between 1961 and 1990, Mr. Price served in various executive positions,
including Chairman and Chief Executive Officer, of PNM as set forth
below:Control Data Corporation, a
mainframe computer manufacturer and business services provider. Other
directorships: Tupperware Corporation, International Multifoods Corp., Fourth
Shift Corporation, and Affinity Technology Group, Inc.
3
BOARD MEETINGS AND COMMITTEES
SHARES OF COMMON
STOCK OWNED
BENEFICIALLY AS
OF
NAME, AGE, ADDRESS AND PRINCIPAL OCCUPATION AND BUSINESS FEBRUARY 1, 1995
WHEN TERM OF OFFICE WILL EXPIRE EXPERIENCE DURING PAST FIVE YEARS (H)(I)(J)
- ------------------------------------------ -------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP ROSTER
(STANDING BOARD COMMITTEES)
- -----------------------------------------------------------------------------------------------------------------------------
(a)(b) John
Compensation & Customer & Public Nominating &
Name Board Audit Human Resources Policy Executive Finance Governance
- -----------------------------------------------------------------------------------------------------------------------------
J. T. Ackerman (53) Chairman of the Board since August 1993 10,933
Albuquerque, New Mexico Chairman, President and Chief Executive Officer of
(a director since June 1990); PNM (May 1991 to August 1993)
1998 Annual Meeting
President and Chief Executive Officer of PNM (June
1990 to May 1991)
President and Chief Operating Officer, Gas
Operations of PNM (February 1985 to June 1990)
3
SHARES OF COMMON
STOCK OWNED
BENEFICIALLY AS
OF
NAME, AGE, ADDRESS AND PRINCIPAL OCCUPATION AND BUSINESS FEBRUARY 1, 1995
WHEN TERM OF OFFICE WILL EXPIRE EXPERIENCE DURING PAST FIVE YEARS (H)(I)(J)x* x*
- ------------------------------------------ -------------------------------------------------- -----------------
(a)(b)(d)(f)(g) Joyce-----------------------------------------------------------------------------------------------------------------------------
R. G. Armstrong x x* x x
- -----------------------------------------------------------------------------------------------------------------------------
J. A. Godwin (51) Retired since December 1993 2,434
Albuquerque, New Mexico Vice President and Secretary, Presbyterian
(a director since May 1989); Healthcare Services, Albuquerque, New Mexico, a
1998 Annual Meeting company which owns, leases or manages 13
hospitals and related health care concerns in
New Mexico and Colorado (1979 to December 1993)
Chairman and President, Southwest Business
Ventures, Inc., a holding company for
Presbyterian Healthcare Services' for-profit
ventures (1986 to December 1993)
(a)(c)(g) Manuelx x x* x x*
- -----------------------------------------------------------------------------------------------------------------------------
L. H. Lattman x x x x
- -----------------------------------------------------------------------------------------------------------------------------
M. Lujan, Jr. (66) Insurance Agent, Manuel Lujan 3,000
Albuquerque, New Mexico Insurance, Inc., a local, independent insurance
(a director since April 1994); agency, since 1948
1998 Annual Meeting Consultant on U.S. governmental matters, focusing
on Western U.S. issues, since 1993
U.S. Secretary of the Interior (1989-1993)
Director, SODAK Gaming, Inc.
(b)(c)(d) Robert G. Armstrong (48) President, Armstrong Energy 2,824
Roswell, New Mexico Corporation, Roswell, New Mexico (oil and gas
(a director since May 1991); exploration and production)
1997 Annual Meeting Director, Sunwest Bank of Roswell, N.A.
(c)(g) Reynaldox x x
- -----------------------------------------------------------------------------------------------------------------------------
B. F. Montoya x x
- -----------------------------------------------------------------------------------------------------------------------------
R. U. Ortiz (48) Chief Executive Officer, Jones Education 1,224
Denver, Colorado Networks, Inc. (a cable television programming
(a director since April 1992); company) since March 1994
1997 Annual Meeting
Senior Vice President, Jones Financial Group, Inc.
(a cable-multiple system operator)
(January-March 1994)
Vice President, Corporate Public Policy, U S WEST,
Inc. (a telecommunications company) (1991-1994)
President, U S WEST New Vector, Inc. (1990-1991)
(a subsidiary of U S WEST, Inc.)
President, U S WEST International (1988-1990) (a
subsidiary of U S WEST, Inc.)
4
SHARES OF COMMON
STOCK OWNED
BENEFICIALLY AS
OF
NAME, AGE, ADDRESS AND PRINCIPAL OCCUPATION AND BUSINESS FEBRUARY 1, 1995
WHEN TERM OF OFFICE WILL EXPIRE EXPERIENCE DURING PAST FIVE YEARS (H)(I)(J)x x x
- ------------------------------------------ -------------------------------------------------- -----------------
(b)(d)(e)(f) Paul-----------------------------------------------------------------------------------------------------------------------------
R. M. Price x x x x*
- -----------------------------------------------------------------------------------------------------------------------------
P. F. Roth (62) Retired since October 1992 2,624
Sanibel, Florida President, Greater Dallas Chamberx x* x x x
- -----------------------------------------------------------------------------------------------------------------------------
No. of Commerce,
(a director since May 1991); Dallas, Texas (September 1991Meetings in
1997 10 4 6 10 2 7 4
- September 1992)
1997 Annual Meeting
President, Texas Division of Southwestern Bell
Telephone Company, Dallas, Texas (November 1988
to March 1991)
(c)(f)(g) Laurence H. Lattman (71) Retired since July 1993 1,500
Albuquerque, New Mexico President, New Mexico Institute of Mining and
(a director since May 1993); Technology (1983-July 1993)
1996 Annual Meeting
(e) Benjamin F. Montoya (59) President and Chief Executive Officer of 1,000
Albuquerque, New Mexico PNM since August 1993
(a director since October 1993); Senior Vice President and General Manager, Gas
1996 Annual Meeting Supply Business Unit, Pacific Gas and Electric
Company (1991 to August 1993)
Vice President, Sacramento Valley Region, Pacific
Gas and Electric Company (1990-1991)
Manager, Sacramento Division, Sacramento Valley
Region, Distribution Business Unit, Pacific Gas
and Electric Company (1989-1990)
(b)(d)(e) Robert M. Price (64) Retired in 1990 1,200
Edina, Minnesota Chairman and Chief Executive Officer, Control Data
(a director since July 1992); Corporation, a computer manufacturing company
1996 Annual Meeting (prior to 1990)
Director, Rohr Industries, Inc.
Director, Premark International, Inc.
Director, International Multifoods Corp.
- ------------------------
(a) A nominee for election at the Annual Meeting.
(b) A member of the Executive Committee.
(c) A member of the Audit Committee.
(d) A member of the Management Development and Compensation Committee.
(e) A member of the Finance Committee.
(f) A member of the Nominating Committee.-----------------------------------------------------------------------------------------------------------------------------
5
(g) A member of the Corporate and Public Responsibility Committee.
(h) As used herein, beneficial ownership means the sole or shared power to
vote, or to direct the voting of, a security and/or investment power with
respect to a security.
(i) As of February 1, 1995, directors and executive officers of PNM*Chair
In 1997, the full Board met ten times. In addition, the outside directors
met three times during 1997. Directors attended meetings of individual Board
committees as a group
owned beneficially 34,693 shares of PNM Common Stock, or less than 1% of
the total number of shares outstanding. Such number of shares does not
include 917 shares of PNM Common Stock owned by the spouse of an executive
officer, as to which shares beneficial ownership is disclaimed. Included in
the shares shown above for Mr. Ackerman as well as in the 34,693 shares for
directors and executive officers as a group are shares currently allocated
to executive officers and held in trust under the terms of the Employee
Stock Ownership Plan ("ESOP"), in which the participant has voting rights.
The Board of Directors has voted to take the steps necessary to terminate
the ESOP as of March 1, 1993. Upon termination, which is awaiting Internal
Revenue Service action, the shares will be distributed to the participants.
(j) Included in the shares shown above for Mr. Armstrong, Ms. Godwin, Mr.
Lattman, Mr. Lujan, Mr. Ortiz and Mr. Roth are shares held under the
Director Restricted Stock Retainer Plan, in which the directors have voting
rights. (See "COMPENSATION OF DIRECTORS").
PNM is advised that none of its directors or nominees for director owns
beneficially any shares of PNM Cumulative Preferred Stock, the only other class
of equity securities of PNM presently outstanding, or any shares in its
subsidiary companies.
See "STOCK OWNERSHIP OF CERTAIN EXECUTIVE OFFICERS" and "CERTAIN LEGAL
PROCEEDINGS" for certain information relating to executive officers.
BOARD AND COMMITTEE MEETINGS
During 1994, the Board held nine meetings. The following standing committees
of the Board held the number of meetings indicated: Audit, five; Corporate and
Public Responsibility, eight; Executive, three; Finance, five; Management
Development and Compensation, seven; and Nominating, six. None of the directors
attended fewer than 75% of the aggregate of all meetings held by the Board and
by all committees of the Board on which he or she served.
BOARD AND COMMITTEE POLICIES
In January 1991, the Board modified existing Board service policies and
adopted a new policy to provide for an orderly rotation of the membership of the
Board. This policy was clarified in an amendment adopted in December 1993. The
Board has also adopted certain policies with regard to committee appointments.
The following is a summary of these policies.
RETIREMENT POLICIES. Upon attaining the age of 72 years, a director will
submit a written resignation to the Board for acceptance by the Board at such
time as the Board in its discretion deems advisable. A director who is an
employee of PNM will, on the date of such person's retirement as an employee of
PNM, submit a resignation to the Board for acceptance by the Board at such time
as the Board in its discretion deems advisable. The retirement policy does not
apply to any member of the Board with service as chief executive officer of PNM.
6
MAXIMUM TERM OF OFFICE. Under the Board policies, no person who is
presently serving or who hereafter serves as a director of PNM shall be
nominated to serve more than four times. It is the intent of this policy that
each member of the Board will normally serve for a period of no more than twelve
years, plus a portion of an unexpired term, if any, if the director was
initially appointed to serve out an unexpired term of a director who resigned,
retired or died in office. Terms of office served prior to adoption of the
policies will be counted in determining whether the four-term limitation has
been reached. The maximum term of office policy does not apply to any member of
the Board with service as chief executive officer of PNM.
In adopting the four-term limitation, the Board made it clear that the
policy is not to be construed to mean that renomination for a second, third or
fourth term will be routine. An evaluation process will be implemented by the
Nominating Committee of the Board to determine that each renomination is in the
best interest of PNM.
COMMITTEE APPOINTMENT POLICIES. Under the policies pertaining to committee
appointments, members of the Management Development and Compensation Committee
and the Audit Committee must be non-employee directors only, and the Chairman of
the Nominating Committee must be a non-employee director.
COMMITTEES OF THE BOARD
The members of the standing committees of the Board are shown in the foregoingabove table. The responsibilities ofFor the committees areBoard as follows:
THEa whole, attendance in
1997 at full Board and committee meetings exceeded 93%.
The AUDIT COMMITTEE consists entirely of three outside membersnon-employee directors. It
assesses the work of PNM's internal auditors and independent public accountants
and the effectiveness of the Board of
Directors.business control structure. It also reviews the
financial statements of PNM and meets with and
receives reports and other communications from its internal and outside
independent auditors.oversees PNM's financial reporting. The
Committeecommittee represents the Board of Directors in accounting and auditing related
activities of PNM. It has the responsibility to make recommendations to the
Board with respect to appointment of the independent public accountants, to
approve the scope of the annual audit and to monitor and review the
effectiveness of PNM's management of the accounting functions. THE CORPORATEThe committee also
has the responsibility to monitor and report to the Board the status of PNM's
activities to assure that its computers and other systems will operate at year
2000.
The COMPENSATION AND HUMAN RESOURCES COMMITTEE consists entirely of non-
employee directors. It reviews PNM's compensation policies and benefit programs
and their relationship to the attainment of business goals. The committee
recommends to the Board the compensation philosophy and guidelines for the
entire executive and managerial group, giving emphasis to rewarding long-term
results and maximizing shareholder value. The committee reviews PNM's
affirmative action program, conducts an annual performance evaluation of the
chief executive officer, and assures management continuity through annual review
and approval of a management development and succession program. The committee
also has oversight of PNM's code of conduct and compliance program and interacts
with PNM's employee organizations.
4
The CUSTOMER AND PUBLIC RESPONSIBILITYPOLICY COMMITTEE consists entirely of non-employee
directors. It reviews and monitors policies and their implementation that deal with PNM's responsibility
to the communities in which it does businessbusiness. The subject matter of policies
reviewed and determinesmonitored includes: the standards which govern
business transactions. These policies include, but are not limited to,
environmental, affirmative action,environment, charitable contributions,
PNM's political action
committee,activities, and communications to various constituencies.
THEconstituencies of PNM.
The committee meets with public officials, the media and other opinion leaders
throughout the year to obtain an independent assessment of PNM's public
reputation.
The EXECUTIVE COMMITTEE consists of the Chairman of the Board of Directors
and the
Chairschairs of thePNM's standing Board committees. It exercises the powerpowers of the Board
of Directors in the management of the business affairs and property of PNM
during intervals between the meetings of the Board of Directors.
THEmeetings.
The FINANCE COMMITTEE consists of a majority of outsidenon-employee directors. It
reviews and recommends to the Board the capital structure and financial strategy
for PNM, including dividend policy. It has overviewoversight of PNM's financial
performance, investment procedures and policies, pension fund performance and
funding level, and risk management strategies and policies. The Committeecommittee
specifically has responsibility for the review and approval of all singlecertain capital
expenditures in excess of $1 million$1,000,000 and reviewsof all capital expenditures in excess
of $100,000 and the quarterly capital appropriation reports.
7
THE MANAGEMENT DEVELOPMENT$2,500,000.
The NOMINATING AND COMPENSATIONGOVERNANCE COMMITTEE consists entirely of outside directors. It reviews the compensation policies and benefit programs of
PNM and how they relate to the attainment of goals. The Committee recommends to
the Board the compensation philosophy and guidelines for the entire executive
and managerial group, including members of the Board of Directors, giving
emphasis to rewarding long term results and maximizing shareholder value. The
Committee conducts an annual performance evaluation of the chief executive
officer and is also charged with assuring management continuity through annual
review and approval of a management development and succession program.
THE NOMINATING COMMITTEE currently consists entirely of outsidenon-employee
directors. It has the responsibility to make recommendations to the Board with respect tofor
nominees to be designated by the Board for election as directors, as well as recommendations concerning the
effectiveness, structure, size, composition and compositioncompensation of the Board,
including committee assignments and candidates for election as Chairman of the
Board. The Nominating and Governance Committee expects normallyconducts an annual evaluation of
Board performance and effectiveness, and, at least annually, reviews conflict of
interest questionnaires submitted by directors to be able to
identify from its own resourcesdetermine whether any conflict
of interest exists. In 1995, the namesBoard approved a Nominations Policy which
describes the guidelines, procedures, and selection criteria for filling
vacancies on the Board, recognizing the importance of qualifieda well-balanced Board
which reflects the interests of PNM's shareholders, customers, employees and the
communities it serves. The Nominating and Governance Committee seeks potential
nominees but itfor Board membership in various ways and will accept from security holders recommendations of individuals to be considered as
nominees. Security holder recommendations for the 1996 Annual Meeting,consider suggestions
submitted by shareholders. Suggestions, together with a description of the
proposedpotential nominee's qualifications, relevantappropriate biographical information, and
the proposedpotential nominee's signed consent to serve, should be submitted in writing to the
Secretary of PNM and received by that
office on or before Octoberprior to August 1, 1995. The determination of nominees recommended
by the Nominating Committee1998.
In addition to the standing committees described above, in 1997 the Board
formed an AD HOC COMMITTEE to conduct an independent investigation concerning a
regulatory ruling that accused management of improper acts. The AD HOC
COMMITTEE completed its investigation in 1997 and issued a report finding that
management had not committed the improper acts, but recommended improvements in
some internal processes. The Board members who served on the AD HOC COMMITTEE
were John Ackerman, Robert Armstrong, Joyce Godwin and Paul Roth. The AD HOC
COMMITTEE met 20 times in 1997.
5
DIRECTOR COMPENSATION
Of PNM's current Board members, only one, Mr. Montoya, is withina salaried
employee. Mr. Montoya receives no compensation for serving on the sole discretionBoard or its
committees. Board members who are not salaried employees of PNM receive
compensation for Board service. That compensation, for other than the Committee, and the final selection of the Board's nominees is within the sole
discretionChairman
of the Board, of Directors.
CERTAIN LEGAL PROCEEDINGS
Bellamah Community Development ("BCD"), a general partnership that engaged
in real estate operations in the southwestern United States, is the debtor in a
proceeding in the United States Bankruptcy Courtincludes:
ANNUAL RETAINER: $20,000
ATTENDANCE FEES: $750 per Board meeting
$500 for the District of New Mexico
that commenced on June 1, 1989 under Chapter 11 of the Bankruptcy Code and
convertedeach Board committee meeting
Expenses related to a Chapter 7 proceeding by order entered on January 29, 1990. The
general partners of BCD include Meadows Resources, Inc., a wholly-owned
subsidiary of PNM. Certain former executive officers of PNM had served on the
managementattendance
COMMITTEE CHAIRS: $200 for each Board committee of BCD.meeting
(in addition to attendance fees)
In addition, Mr. Max H. Maerki, Senior Vice
President and Chief Financial Officer of PNM, had served as an executive officer
of Meadows and as vice chairman of the executive committee of BCD.
SELECTION OF AUDITORS
Action is to be taken with respect to the approval of the selection, byDecember 1993, the Board of Directors restructured the duties and
compensation of the firmposition of Arthur Andersen LLP as independent auditorsChairman of the Board, increasing the duties and
establishing the level of compensation. The Chairman receives an annual
retainer that is four times the amount paid to auditother non-employee directors, of
which one-fourth is paid on terms identical to the consolidated financial statements of PNMretainer paid to other non-
employee directors and subsidiariesthe remaining three-fourths in cash, and is only paid
meeting fees for attending Board and Executive Committee meetings. The meeting
fees for the fiscalChairman are three times the meeting fees paid to other non-
employee directors.
Under PNM's Director Retainer Plan, approved by shareholders in 1996,
directors may choose to receive their annual retainer in the form of cash,
restricted stock or stock options. The restrictions on the restricted stock
generally lapse one-third each year ending December 31, 1995. The firm has beenfollowing the independent auditors
of PNM since 1993. Arthur Andersen LLP has no financial interest in PNM or any
of its subsidiaries. A representative of Arthur Andersen LLP will be present at
the Annual Meeting of Stockholders to answer appropriate questions and to make
any statement the representative might desire.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE SELECTION
OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS.
8
REPORT OF THE
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE*
THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE PHILOSOPHY
Two basic principles guide PNM's compensation program. First, senior
management's compensation program should reflect both individual performance and
the achievement of PNM's goals. Second, the program should be as competitive,
relative to the utility industry, as possible in order to attract, motivate, and
retain key management members. New Mexico compensation trends are also
considered in determining competitivenessyear of the program.
COMPENSATION ELEMENTSgrant. The
senior management compensation program, which is designedoptions generally vest (become exercisable) one year from the date they were
granted and allow the director to meet the
philosophypurchase 2,000 shares of the Management Development and Compensation Committee (the
"Committee"), has three components: base salary, management benefits, and
incentive plans.
BASE SALARIES. In 1994, base salaries, the fixed component of pay, were
conservatively tied to the average level of base salaries among gas and electric
utilities which are included in compensation surveys sponsored by the Edison
Electric Institute and the American Gas Association.common stock. The Committee believes that
direct competitors for executive talent comprise a larger group than the group
of companies included in the peer group established to compare shareholder
returns. For incumbent members of senior management, base salaries were
unchanged in 1994 in keeping with the provisions of PNM's Performance Stock
Plan.
MANAGEMENT BENEFITS. The benefits provided for senior management are based
upon benefits provided to all employees. The benefits focus on retirement, life
insurance, health care, severance and retention.
INCENTIVE PLANS. The Committee believes that the third component of the
compensation program, incentive plans, is critically important to PNM's
compensation philosophy and in achieving PNM's goals. The Committee believes
this third element should have both a short-term and long-term focus. The
short-term element should consist of "at risk" pay or rewards paid out in cash
while the long-term element should be equity or stock-based compensation.
Currently, management is in the process of implementing a results-based
reward program. The Committee expects this program to be in place by the end of
the first quarter of 1995. The program would introduce an "at risk" cash
compensation element to PNM's existing compensation program.
The long-term focus is addressed through implementation of the Performance
Stock Plan. The Performance Stock Plan is a stock option incentive plan which
provides grants in two different ways. The first, initial grants, are granted in
lieu of base salary merit increases. The second provides for grants based on a
formula, where achievement of equally weighted goals determines if the options
will be granted. These goals are approved by the Board of Directors. The grants
are then adjusted based on PNM's total return to shareholders compared to the
industry peer group discussed in the "Stock
- ------------------------
*The Report of the Management Development and Compensation Committee shall not
be deemed to be incorporated into any filing by PNM under the Securities Act
of 1933 or the Securities Exchange Act of 1934.
9
Performance" section of the Proxy Statement. Individual awards are based on the
participant's position with PNM. Previous years' grants are not considered in
determining the number of awards granted.
In 1994, there were two goals: one based on earnings per share and one based
on customer satisfaction. PNM achieved both of these goals. Therefore, 250,794
options, with an
exercise price of $13.00, were granted effective December 31,
1994the option is equal to the executive officer participants.
In December 1994,fair market value of the Board approved management's proposal for a one-time
cash bonus to be paid to employees. The bonus was based on PNM's 1994
performance. Bonuses to all PNM officers, in the aggregate amount of $200,000,
will not be paid until PNM resumes paying a dividend. When the dividend is
resumed, the amounts to be paid to executive officers will be determined. Mr.
Montoya, President and CEO, elected, and the Board agreed, that he will not
receive any portion of this bonus amount.
CHIEF EXECUTIVE OFFICER COMPENSATION FOR 1994
In July 1993, the Board offered Mr. Montoya the position of President and
CEO. Data provided by an executive compensation consultant and an executive
search firm were considered in determining Mr. Montoya's compensation. Mr.
Montoya's 1994 base compensation remained unchanged from the amount originally
set when he was hired.
In 1994, Mr. Montoya received an initial grant under the Performance Stock
Plan of 8,306common
stock options and he also earned 86,332 stock options based on the attainmentdate of PNM's earnings per share and customer satisfaction goals. Thegrant less the annual retainer divided by 2000, subject to
a minimum exercise prices for these options are $11.50 and $13.00, respectively.
CERTAIN TAX MATTERSprice.
6
- -------------------------------------------------------------------------------
PNM has no policyCOMMON STOCK OWNED BY EXECUTIVE OFFICERS AND DIRECTORS
(AS OF FEBRUARY 2, 1998)
- -------------------------------------------------------------------------------
Amount and Nature of Shares Beneficially Owned(a)
- ----------------------------------------------------------------------------------------------------------------------------
Name Aggregate No. Right to Acquire Percent of Shares
of Shares Held(b) Within 60 Days(c) Beneficially Owned
- ----------------------------------------------------------------------------------------------------------------------------
John T. Ackerman 10,935 -0- *
- ----------------------------------------------------------------------------------------------------------------------------
Robert G. Armstrong 3,856 1,000 *
- ----------------------------------------------------------------------------------------------------------------------------
Roger J. Flynn 1,000 16,042 *
- ----------------------------------------------------------------------------------------------------------------------------
Joyce A. Godwin 3,502 1,000 *
- ----------------------------------------------------------------------------------------------------------------------------
Laurence H. Lattman 3,123 -0- *
- ----------------------------------------------------------------------------------------------------------------------------
Manuel Lujan, Jr. 3,428 -0- *
- ----------------------------------------------------------------------------------------------------------------------------
Max H. Maerki 817 37,127 *
- ----------------------------------------------------------------------------------------------------------------------------
Benjamin F Montoya 2,461 134,094 *
- ----------------------------------------------------------------------------------------------------------------------------
Patrick T. Ortiz 507 50,387 *
- ----------------------------------------------------------------------------------------------------------------------------
Reynaldo U. Ortiz 2,224 1,000 *
- ----------------------------------------------------------------------------------------------------------------------------
Robert M. Price 3,000 1,000 *
- ----------------------------------------------------------------------------------------------------------------------------
Paul F. Roth 4,909 -0- *
- ----------------------------------------------------------------------------------------------------------------------------
Jeffry E. Sterba 1,523 13,490 *
- ----------------------------------------------------------------------------------------------------------------------------
Directors and Executive
Officers as a Group (17) 43,698 442,594 1.2%
- ----------------------------------------------------------------------------------------------------------------------------
(a) Beneficial ownership means the sole or shared power to vote, or to direct
the voting of, a security and/or investment power with respect to qualifying compensation paid toa
security.
(b) Shares held in the individual's name, individually or jointly with others,
or in the name of a bank, broker or nominee for the individual's account.
The total for directors and executive officers for deductibility under Section 162(m) of the Internal Revenue Code because
PNM's compensation levels doas a group does not approach the limits as definedinclude
914 shares owned by the Codespouse of one executive officer. The executive
officer disclaims beneficial ownership of those shares.
(c) The number of shares directors and it is not anticipated that the compensationexecutive officers have a right to
acquire through stock option exercises within 60 days after February 2,
1998.
- --------------------------------------------------------------------------------
*Less than 1% of PNM's management will approach
those limits in the foreseeable future.
COMMITTEE PROCESS
The executive compensation program is administered by the Committee. The
Committee consistsoutstanding shares of independent directors who are notcommon stock.
7
- --------------------------------------------------------------------------------
PERSONS OWNING MORE THAN FIVE PERCENT OF PNM employees and who
qualify as disinterested persons for the purposes of SEC Rule 16b-3 adopted
under the Securities Exchange Act of 1934.
The Committee is accountable for all compensation matters for PNM's senior
management. The Committee has retained an independent executive compensation
consulting firm whose recommendations are considered by the Committee in making
decisions regarding the appropriateness of the executive compensation program.
Management Development and Compensation Committee
Paul F. Roth, Chair
Robert G. Armstrong
Joyce A. Godwin
Robert M. Price
10
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid during each of the last three fiscal years for the current chief executive
officer and each of the four most highly compensated executive officers serving
at the end of the year, based on salary and bonus earned during 1994.
SUMMARY COMPENSATION TABLECOMMON STOCK
(AS OF MARCH 13, 1998)
- --------------------------------------------------------------------------------
LONG TERM
COMPENSATION
--------------
AWARDS
ANNUAL COMPENSATION --------------
------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER- ----------------------------------------------------------------------------------------------------------------
VOTING DISPOSITIVE
AUTHORITY AUTHORITY PERCENT
-------------------------------------------- TOTAL OF
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
(AS OF DECEMBER 31, 1994) YEAR ($) ($)(A) ($)(B) (#) ($)ADDRESS SOLE SHARED SOLE SHARED AMOUNT CLASS
- ---------------------------------- --------- ----------- --------- ------------- -------------- -----------------------------------------------------------------------------------------------------------------------------
B. F. Montoya 1994 $ 317,967 0 -- 94,638 $ 37,528(d)Group filing by:
President and CEO 1993 164,578(c)Fellows of Harvard College 3,802,800 None 3,802,800 None 3,802,800 9.1%
The Harvard University Master Trust Fund 72,700 None 72,700 None 72,700 0.2%
John Stevens Trust 2,900 None 2,900 None 2,900 0.0%
Nancy Stevens Trust 4,300 None 4,300 None 4,300 0.0%
Harvard College Trust 9,900 None 9,900 None 9,900 0.0%
600 Atlantic Avenue
Boston, MA 02210
- ----------------------------------------------------------------------------------------------------------------
Boston Partners Asset Management, L.P.
and Affiliates 0 --3,247,422 0 $ 6,924(d)
M. P. Bourque 1994 126,537 -- -- 30,7483,247,422 3,247,422 7.8%
One Financial Center
Boston, MA 02111
- ----------------------------------------------------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co.
1585 Broadway 0 Senior Vice President, 1993 126,5282,751,080 0 -- 7,889 0
Energy Services 1992 126,169 0 -- 0 0
M. H. Maerki 1994 172,243(e) -- -- 30,748 0
Senior Vice President 1993 162,240 0 -- 7,889 0
and Chief Financial 1992 161,028 0 -- 0 0
Officer
P. T. Ortiz 1994 126,384 -- -- 30,748 0
Senior Vice President, 1993 126,384 0 -- 7,889 0
General Counsel 1992 125,203 0 -- 0 0
and Secretary
J. E. Sterba 1994 126,903(e) -- -- 0 0
Senior Vice President, 1993 124,501 0 -- 0 0
Bulk Power Services 1992 130,105 0 -- 0 0
- ------------------------
(a) A deferred bonus fund of $200,000 was established in December 1994, based
on PNM's 1994 performance, from which lump sum awards to all officers of
PNM, excluding the President and CEO, will be paid at such time as PNM pays
a dividend to its shareholders. The amount of the individual awards will be
determined by the President and CEO at that time. Amounts ultimately
payable to each of the above-named executive officers are currently
unknown.
(b) The dollar value of perquisites and other personal benefits for each of the
named executive officers was less than the established reporting
thresholds.
(c) Mr. Montoya became an employee of PNM in August 1993.
(d) These amounts represent relocation, home sale and interim living expenses
paid to Mr. Montoya in 1993 and 1994.
(e) These amounts include vacation sales during 1994, and do not reflect an
increase in base salaries.
11
OPTION GRANTS IN 1994 FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS/SARS
OPTIONS/SARS GRANTED TO EXERCISE OR GRANT DATE
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME (#)(A) FISCAL YEAR ($/SH) DATE ($)(B)
- --------------------------------------- ------------- ----------------- ----------- ------------- -------------
B. F. Montoya.......................... 8,306 1.0% $ 11.50 06/30/2004 $ 23,402
86,332 10.7% $ 13.00 12/31/2004 $ 275,399
M. P. Bourque.......................... 30,748 3.8% $ 13.00 12/31/2004 $ 98,086
M. H. Maerki........................... 30,748 3.8% $ 13.00 12/31/2004 $ 98,086
P. T. Ortiz............................ 30,748 3.8% $ 13.00 12/31/2004 $ 98,086
J. E. Sterba........................... 0 0 0 0 0
- ------------------------
(a) These nonqualified options are exercisable following vesting on June 30,
1996. These options may also become fully exercisable upon the occurrence
of certain other events such as a change in control (as defined in the
Performance Stock Plan) of PNM.
(b) These amounts represent a theoretical present valuation based on the
Black-Scholes Option Pricing Model. The actual value, if any, an executive
officer may realize ultimately depends on the market value of PNM's Common
Stock at a future date. This valuation is provided pursuant to Securities
and Exchange Commission disclosure rules. There is no assurance that the
value realized will be at or near the value estimated by the Black-Scholes
model. Assumptions used to calculate this value are: price volatility,
24.35%; risk-free rate of return, 7.83%; dividend yield, 3%; and time to
exercise, four years. These amounts or any of the assumptions should not be
used to predict future performance of stock price or dividends. PNM has not
declared common dividends since January 1989. The inclusion of a dividend
yield assumption for the sole purpose of calculations using the
Black-Scholes Option Pricing Model is not to be construed as a projection
of the resumption of dividend payments.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND DECEMBER 31, 1994 OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1994 DECEMBER 31, 1994(A)
----------------------- -----------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------------------ ----------------------- -----------------------
B. F. Montoya................................... 0/94,638 $0/$12,459
M. P. Bourque................................... 0/38,637 $0/$0
M. H. Maerki.................................... 0/38,637 $0/$0
P. T. Ortiz..................................... 0/38,637 $0/$0
J. E. Sterba.................................... 0/0 $0/$0
- ------------------------
(a) Computed by reference to the2,759,043 2,759,043 6.6%
New York, Stock Exchange composite transaction
closing priceNY 10036
- ----------------------------------------------------------------------------------------------------------------
The Prudential Insurance Company of PNM's Common Stock on December 31, 1994 of $13.00 per
share.America
751 Broad Street 25,700 2,573,041 25,700 2,573,041 2,598,741 6.2%
Newark, NJ 07102-3777
- ----------------------------------------------------------------------------------------------------------------
Franklin Resources, Inc. and Affiliates
777 Mariners Island Boulevard 2,140,700 None 2,140,700 None 2,140,700 5.1%
San Mateo, CA 94404
- ----------------------------------------------------------------------------------------------------------------
12
STOCK OWNERSHIP OF CERTAIN EXECUTIVE OFFICERS
EachThe information provided above is based on reports filed with the
Securities and Exchange Commission. PNM makes no representation as to the
accuracy or completeness of such information. These are the executive officers named in the above table (except Mr. Montoya,
whose stock ownership is reported above under "ELECTION OF DIRECTORS") has
advisedonly persons known
to PNM, that, as of February 1, 1995, he or she beneficially owned directly
or indirectly Common StockMarch 13, 1998, to be the beneficial owners of more than 5% of
PNM's common stock.
8
- --------------------------------------------------------------------------------
PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL SHAREHOLDER
RETURN AMONG PNM, as set forth below:
SHARES OF COMMON STOCK
OWNED BENEFICIALLY AS OF
FEBRUARY 1, 1995
NAME (A)(B)(C)
- ----------------------------------------------------------- -------------------------
M. P. Bourque.............................................. 365
M. H. Maerki............................................... 504
P. T. Ortiz................................................ 507
J. E. Sterba............................................... 1,847
- ------------------------
(a) As used herein, beneficial ownership means the sole or shared power to
vote, or to direct the voting of, a security and/or investment power with
respect to a security.
(b) Includes shares currently allotted to such executive officers and held in
trust under the terms of the ESOP. See footnote (i) to the table under
"ELECTION OF DIRECTORS".
(c) All such amounts are less than one percent of the outstanding Common Stock
of PNM.
PNM is advised that none of its executive officers owns beneficially any
shares of PNM Cumulative Preferred Stock, the only other class of equity
securities of PNM presently outstanding, or any shares in its subsidiary
companies.A PEER GROUP* AND S&P 500 STOCK PERFORMANCE*INDEX
The following graph compares the yearly percentage changeassumes that $100 was invested on December 31, 1992 in
the cumulative
total shareholder return on PNM'sPNM Common Stock, during the five fiscal years
ended December 31, 1994, with the cumulative total return oncombination gas and electric peer group and the S&P 500
Stock Index, and the cumulative total return on an index of peer companies selected by
PNM. Companies in thethat all dividends were reinvested. Historical performance
does not necessarily predict future results.
[PERFORMACE GRAPH APPEARS HERE]
-----------------------------------------------------------------------
FISCAL YEAR ENDED
DECEMBER 31, 1992 1993 1994 1995 1996 1997
-----------------------------------------------------------------------
PNM 100 91 105 142 162 202
-----------------------------------------------------------------------
PEER GROUP 100 111 94 119 114 153
-----------------------------------------------------------------------
S&P 500 100 110 112 153 189 252
-----------------------------------------------------------------------
* The peer group companies are combinedcombination electric and gas utilities each of
which has an investment in a nuclear power generating station. The peer group
companies are as follows: Baltimore Gas & Electric Company, Central Hudson Gas
and& Electric Company, CMS Energy Corp., Commonwealth Energy System, Consolidated
Edison, Company of New York,Inc., Delmarva Power & Light Company, Enova Corp., IES Industries,
Inc.,
Iowa-Illinois Gas & Electric Company, Long Island Lighting Company, New York State Electric & Gas Corp.,
Niagara Mohawk Power Corp., Northern States Power Company, Pacific Gas and&
Electric Company, PECO Energy Company, Public Service Enterprises Group,
Rochester Gas & Electric Corp., San Diego Gas & Electric
Company, SCANA Corporation, Wisconsin Energy Corp., WPL
Holdings, Inc., and WPS Resources, Corp.,
9
- --------------------------------------------------------------------------------
COMPENSATION AND HUMAN RESOURCES COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
COMPENSATION POLICIES
The Compensation and WPL
Holdings, Inc.
- ------------------------
*The "STOCK PERFORMANCE" sectionHuman Resources Committee ("Committee") establishes
compensation guidelines and targets based upon the performance of PNM, business
units within PNM, and individual executive officers. The Committee consists of
four independent directors who are not PNM employees. The Committee's goal is
to establish a compensation program that:
. links the interests of management and shareholders
. links executive compensation with long-term PNM performance
. attracts and retains executives of high caliber and ability
For 1997, that program consisted of base salary, short-term incentive
compensation, and long-term incentive compensation.
The Committee believes this Proxy Statement shallcompensation program was a significant factor
contributing to PNM's success this past year, including earnings per share of
$1.92 and record operating revenues of $1.14 billion. As the performance graph
indicates, PNM stock has provided shareholders with a cumulative return over the
past five years that exceeds PNM's peer group.
BASE SALARIES
EXECUTIVE OFFICERS
------------------
Each year the Committee reviews base salaries of individual executive
officers and their salary ranges. In 1997, base salaries were conservatively
tied to the average level of base salaries among gas and electric utilities
included in compensation surveys sponsored by the Edison Electric Institute and
the American Gas Association, as well as other industries.
CHIEF EXECUTIVE OFFICER
-----------------------
Mr. Montoya became the President and CEO of PNM in 1993. At that time,
data provided by an executive compensation consultant and an executive search
firm were considered in determining Mr. Montoya's compensation. Mr. Montoya's
salary remained unchanged until 1996, when the common stock dividend was
reinstated. In 1996, his compensation was increased by $30,000 to $350,000. In
1997, Mr. Montoya's compensation was increased by $25,000 to $375,000. In
setting Mr. Montoya's 1997 salary, the Committee evaluated his performance in
the prior year. Determinative factors included:
10
. strategic planning
. cost reduction
. customer retention and targeted market strategy
. financial targets
. human resources targets
. external relations targets
Some of the significant achievements considered are set forth below:
. continued improvement in shareholder returns
. advancement of position as a customer-focused energy services company
. implementation of a strategic planning process
. continued improvement in financial credit rating criteria
. implementation of new business development opportunities
SHORT-TERM INCENTIVE COMPENSATION
EXECUTIVE OFFICERS
------------------
In 1997, executive officers, together with all other PNM employees,
participated in a results-pay plan. The plan has an "at risk" cash compensation
element tied to the success of the individual business units and to the overall
success of PNM. Goals are approved annually by the Board of Directors.
Business unit goals for 1997 were generally centered on customer satisfaction,
cost control, and efficiency in operations and an earnings per share ("EPS")
goal. The business unit goals for 1997 were partially achieved and the EPS goal
was fully achieved. Partial payments were made in February 1998.
CHIEF EXECUTIVE OFFICER
-----------------------
Mr. Montoya was not be deemeda participant in the results-pay plan; however, based
on his performance noted above, the Board of Directors awarded Mr. Montoya a
bonus of $75,000 in 1997.
LONG-TERM INCENTIVE COMPENSATION
EXECUTIVE OFFICERS AND CHIEF EXECUTIVE OFFICER
----------------------------------------------
In 1997, all executive officers, including Mr. Montoya, as well as other
key employees, were granted non-qualified stock options under PNM's Performance
Stock Plan ("PSP"). Under the plan, grants were awarded based on achievement of
goals approved annually by the Board of Directors. For 1997, there were two
goals: one based on EPS and one based on customer
11
satisfaction. The EPS goal was fully achieved. The customer satisfaction goal
was not achieved. Partial awards of 1997 grants were approved in February 1998.
The number of stock option grants awarded was based on a formula with the
following components:
. annual base salary;
. percentage of achievement of the EPS goal; and
. percentage of achievement of the customer service goal; and
. total return to shareholders.
The number of grants awarded to executive officers, including Mr. Montoya,
in 1997 are reflected in the Summary Compensation Table and Option Grants Table.
The plan, as amended in March 1998, provides for the Committee, in its sole
and absolute discretion, to declare annually the level of options to be incorporatedgranted,
based on performance data presented by reference into any filing bythe President. The President will
establish the criteria for the performance data to be used in recommending the
awards to the Committee.
CERTAIN TAX MATTERS
Under Section 162(m) of the Internal Revenue Code ("Code"), PNM under either the
Securities Actmay not
deduct certain forms of 1933 or the Securities Exchange Actcompensation in excess of 1934.
13$1 million. PNM has no policy
with respect to Section 162(m).
Compensation and Human Resources Committee
Paul F. Roth (Chair) Joyce A. Godwin
Robert G. Armstrong Robert M. Price
12
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN(1)
AMONG PUBLIC SERVICE COMPANY OF NEW MEXICO,
A PEER GROUP AND THE S&P 500 STOCK INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994- --------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
----------------------------------------------------------------------
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
- --------------------------------------------------------------------------------------------------------------------
SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(A) OPTIONS(#) COMPENSATION
- --------------------------------------------------------------------------------------------------------------------
Public Svc Co N Mex 100 57 67 85 77 88
PEER GROUP 100 99 127 140 156 132
S&P 500 100 97 126 136 150 152B. F. Montoya 1997 $358,657 $ 75,000(b) -- 20,902 -0-
President and CEO 1996 341,927 -0- -- 32,802 -0-
1995 320,205 -0- -- 39,456 -0-
- --------------------------------------------------------------------------------------------------------------------
R. J. Flynn 1997 $155,574 $ 9,975(c) -- 7,432 -0-
Senior Vice President, 1996 153,995 1,183(d) -- 12,301 -0-
Electric Services 37,400(c)
1995 154,056 25,624(c) -- 13,490 $16,045(e)
- --------------------------------------------------------------------------------------------------------------------
M. H. Maerki 1997 $178,346(f) $ 12,408(c) -- 7,432 -0-
Senior Vice President 1996 174,095(g) 14,201(d) -- 12,301 -0-
and Chief Financial 39,101(c)
Officer 1995 173,486(f) 19,240(c) -- 13,490 -0-
- --------------------------------------------------------------------------------------------------------------------
P. T. Ortiz 1997 $142,884 $ 11,093(c) -- 7,432 -0-
Senior Vice President, 1996 135,000 14,201(d) -- 10,853 -0-
General Counsel and 34,500(c)
Secretary 1995 132,017 16,757(c) -- 11,750 -0-
- --------------------------------------------------------------------------------------------------------------------
J. E. Sterba 1997 $195,033(f) $ 19,968(c) -- 13,935 -0-
Executive Vice President 1996 146,965(g) 14,201(d) -- 12,301 -0-
and Chief Operating 40,801(c)
Officer 1995 142,911(f) 12,836(c) -- 13,490 -0-
123,201(h)
- --------------------------------------------------------------------------------------------------------------------
(a) These amounts are less than the established reporting thresholds.
(b) Bonus paid in August 1997 for previous performance.
(c) In 1995, a results-based reward program was implemented which was designed
to tie a portion of cash rewards awarded employees to the success of their
business unit and a portion of the success of PNM as a whole. Goals are
approved annually by the Board of Directors. These amounts reflect
incentive award amounts paid in 1998 for 1997 achievements, in 1997 for
1996 achievements and in 1996 for 1995 achievements.
(d) A deferred bonus fund of $200,000 was established in December 1994, based
on PNM's 1994 performance, from which lump sum awards to all officers of
PNM, excluding the President and CEO, were to be paid at such time as PNM
paid a dividend to shareholders. Upon the reinstatement of the dividend in
1996, the amounts noted were paid, as determined by the President and CEO.
(e) This amount represents relocation, home sale and interim living expenses
paid to Mr. Flynn in 1995.
(f) These amounts include sales of accrued vacation hours during 1997 and 1995
and also reflect increases in base salaries.
(g) These amounts include sales of accrued vacation hours during 1996 and do
not reflect increases in base salaries.
(h) This amount was an incentive payment under previously disclosed incentive
plans for efforts leading to the sales of gas gathering and processing
assets and water utility assets which occurred in 1995.
- --------------------------------------------------------------------------------
13
- -----------------------------------------------------------------------------------------------------------------------------
OPTION GRANTS IN 1997
-------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------------------------------
% OF TOTAL GRANT DATE
NUMBER OF SECURITIES OPTIONS GRANTED PRESENT
NAME UNDERLYING OPTIONS TO EMPLOYEES IN EXERCISE PRICE EXPIRATION VALUE(b)
GRANTED(a) FISCAL YEAR 1997 PER SHARE DATE
- -----------------------------------------------------------------------------------------------------------------------------
B. F. Montoya 20,902 7% $23.6875 12/31/2007 $88,206
R. J. Flynn 7,432 2% 23.6875 12/31/2007 31,363
M. H. Maerki 7,432 2% 23.6875 12/31/2007 31,363
P. T. Ortiz 7,432 2% 23.6875 12/31/2007 31,363
J. E. Sterba 13,935 5% 23.6875 12/31/2007 58,806
- ------------------------
(1) This illustration assumes $100 invested-----------------------------------------------------------------------------------------------------------------------------
(a) Options are exercisable following vesting on December 31, 2000. Options may
also become fully exercisable upon death, disability, retirement, or a
change in control.
(b) The Black-Scholes option-pricing model was used to determine the fair value
of options. Assumptions used to calculate this value are: price volatility
- 20%; risk-free rate of return - 5.69%; dividend yield - 3%; and time of
exercise - four years. Neither these amounts nor any of the assumptions
should be used to predict future performance of stock price or dividends.
The real value of the options in this table depends on the actual
performance of PNM's common stock during the applicable period and when
they are exercised.
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN 1997
AND 1997 YEAR-END OPTION VALUES
-------------------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1989 in PNM Common
Stock, the S&P 500 Stock Index and the combination gas and electric company
peer group. Each mark on the axis displaying the years 1989 through 1994
represents December1997 DECEMBER 31, of that year. Total Return includes reinvestment of
all dividends. The historical shareholder return shown above may not be
indicative of future performance.1997(a)
- -------------------------------------------------------------------------------------------------------------------------------
NAME SHARES ACQUIRED VALUE
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------------------------------------------------------------------------------------------------
B. F. Montoya -0- -- 134,094 53,704 $1,263,105 $133,258
R. J. Flynn -0- -- 16,042 19,733 109,058 49,973
M. H. Maerki -0- -- 37,127 19,733 328,487 49,973
P. T. Ortiz -0- -- 50,387 18,285 478,251 44,090
J. E. Sterba -0- -- 13,490 26,236 81,783 49,973
- -------------------------------------------------------------------------------------------------------------------------------
(a) Value equals the year-end stock price ($23.6875) minus the exercise price,
times the number of shares underlying the option. "In-the-Money" means that
the year-end stock price was greater than the exercise price of the option.
- --------------------------------------------------------------------------------
RETIREMENT PLAN AND RELATED MATTERS. PNM and its subsidiaries have a
non-contributoryMATTERS
In December 1996, the Board of Directors approved changes to PNM's non-
contributory defined benefit plan (the "Retirement("Retirement Plan") coveringand implementation of a
401(k) defined contribution plan effective January 1, 1998. Salaries used in
Retirement Plan benefit calculations were frozen as of December 31, 1997.
Additional credited service can be accrued under the Retirement Plan up to a
limit determined by age and years of service. PNM contributions to the 401(k)
plan consist of a 3 percent non-matching contribution, and a 75 percent match on
the first 6 percent contributed by the employee on a before-tax basis.
14
Through December 31, 1997, the Retirement Plan covered employees who havehad at
least one year of service and havehad attained the age of 21. During
1994 and 1995,Vesting occurred
after five years of service. PNM made contributions in 1997 to the Retirement
Plan for plan year 19941996 in the amount of $7,090,847.$6,000,000. The amount of any
contribution with respect to any one person cannot be determined. Directors who
arewere not employees dodid not participate in the Retirement Plan.
14
The following table illustrates the annual benefits that would be provided
under the Retirement Plan to employees who retire at the indicated compensation
and year of service levels and who elect to receive the benefits, which are
calculated on a straight-life annuity basis, over their remaining lives.
Benefits shown are maximum annual benefits payable at age 65 to participants who
retire at age 65. The table is based on the Retirement Plan. The amounts shown
in the table are not subject to any deduction for Social Security benefits or
other offset amounts.
- ---------------------------------------------------------------------------------------------------------------------------------
PENSION PLAN TABLE
- ---------------------------------------------------------------------------------------------------------------------------------
AVERAGE OF
HIGHEST
ANNUAL BASE CREDITED YEARS OF SERVICE
ANNUAL BASE SALARY FOR -----------------------------------------------------------------------------------
3
CONSECUTIVE YEARS(A) 5(B)-------------------------------------------------------------------------------------------------------------------
YEARS(a) 5(b) 10 15 20 25 30 32 1/2(C)2(c)
- -------------------------- --------- --------- --------- ----------- ----------- ----------- --------------------------------------------------------------------------------------------------------------------------------------------
$ 50,000.................. $ 5,000 $ 10,000 $ 15,000 $ 20,000 $ 25,000$100,000 $10,000 $20,000 $ 30,000 $ 32,500
100,000.................. 10,000 20,000 30,000 40,000 $ 50,000 $ 60,000 $ 65,000
150,000..................$150,000 15,000 30,000 45,00045.000 60,000 75,000 90,000 97,500
200,000..................$200,000 20,000 40,000 60,000 80,000 100,000 120,000 130,000
250,000..................!30,000
$250,000 25,000 50,000 75,000 100,000 125,000 150,000 162,500
300,000..................$300,000 30,000 60,000 90,000 120,000 150,000 180,000 195,000
350,000..................$350.000 35,000 70,000 105,000 140,000 175,000 210,000 227,500
400,000..................$400,000 40,000 80,000 120,000 160,000 200,000 240,000 260,000
450,000..................$450,000 45,000 90,000 135,000 180,000 225,000 270,000 292,500
500,000.................. 50,000 100,000 150,000 200,000 250,000 300,000 325,000
- ------------------------
(a) For these purposes, compensation consists of base salaries and includes any
amount voluntarily deferred under the---------------------------------------------------------------------------------------------------------------------------------
(a) For these purposes, compensation consists of base salaries and includes any
amount voluntarily deferred under PNM's Master Employee Savings Plan. It
generally does not include bonuses, payments for accrued vacations, or
overtime pay.
(b) Although years of service begin accumulating from the date of employment,
vesting occurs after five years of service.
(c) The maximum number of years generally taken into account for purposes of
calculating benefits under the Retirement Plan.
Generally, compensation for these purposes does not include bonuses,
payments for accrued vacation, or overtime pay.
(b) Although years of service begin accumulating from the date of employment,
vesting occurs after five years of service.
(c) The maximum number of years generally taken into account for purposes of
calculating benefits under the non-contributory defined benefit plan. Under
limited circumstances, an additional 3% retirement benefit could be earned
by an employee working beyond age 62.
The amounts shown in the table above are not subject to any deduction for
Social Security benefits or other offset amounts.- --------------------------------------------------------------------------------
Credited years of service which can be used to calculate benefits as shown
in the above table have been accumulated by executive officers under the
Retirement Plan, the Accelerated Management Performance Plan discussed below and
the supplemental employee retirement agreementsarrangements discussed below. Credited
years of service so computed as of December 31, 19941997, are as follows: Mr. Montoya,
1.42
years; Ms. Bourque, 8 years (however, Mr. Montoya will not be entitled to any retirement benefits
until June 1, 1998); Mr. Flynn, 3.08 years; Mr. Maerki, 22.3625.57 years; Mr. Ortiz,
3.256.25 years; and Mr. Sterba, 19.7623.29 years. The executive officers' remuneration
which would be used to calculate benefits is determined by reference to the
Retirement Plan and the supplemental employee retirement agreementarrangements discussed
below. Such amounts asAs of December 31, 1994 are1997, the remuneration used to calculate benefits
would be as follows: Mr. Montoya, $320,004; Ms. Bourque,
$134,932;$373,336; Mr. Flynn, $161,163; Mr. Maerki,
$170,312;$170,900; Mr. Ortiz, $134,456;$138,332; and Mr. Sterba, $124,832.$167,412.
15
Federal tax legislation imposes a $160,000 limitation beginning in 1997 on
compensation that can be considered in determining retirement benefits under
qualified retirement plans. A PNM plan provides non-qualified deferred
compensation benefits to executives to the extent their retirement benefits
under the Retirement Plan, the Accelerated Management Performance Plan and
supplemental employee retirement agreements are limited as a result of the
$160,000 compensation limitation.
In January 1981, the Board of Directors approved an executive retirement
program for a group of management employees. The program was intended to
attract, motivate and retain key management employees. Messrs. Maerki and
Sterba and certain other key management employees are eligible to participate in
one or more of the plans in the program. Under the program, as originally
adopted, key 15
management employees had the opportunity to earn additional credit
for years of service toward retirement (the "Accelerated("Accelerated Management Performance
Plan" or "AMPP"). The Accelerated Management Performance Plan,AMPP, as amended and restated, phased out the
accumulation of additional credits by January 1, 1990. In addition, the amended
and restated plan includes a provision allowingwhich allows key management employees who
have not attained the maximum credits for years of service to receive a reduced
benefit from the plan upon attainingaccepting early retirement without
having attained the maximum credits for years of service.retirement. Monthly benefits
received pursuant to the Accelerated Management Performance PlanAMPP are offset by monthly benefits received pursuant
to the Retirement Plan.
As approved by the Board in 1989, a supplemental employee retirement
agreement was entered into with Mr. Maerki. Under the agreement, with Mr. Maerki,
hisMaerki's
retirement benefits would be computed as if he had been in the continuous
employmentan employee of PNM since
February 15, 1974.
Under the terms of employment agreements with Mr. Montoya, he will be
eligible to receive supplemental retirement benefits if he completes five years
of service.
The Board of Directors has approved the establishment of an irrevocable
grantor trust, under provisions of the Internal Revenue Code, generally in
connection with the management benefit plans discussed in the preceding two
paragraphsAMPP and the supplemental retirement agreementsarrangements with Mr.
Montoya, Mr. Maerki, Mr. Sterba, and certain former executive officers. Under the terms of the trust, PNM
may, but is not obligated to, provide funds to the trust, which has beenwas established
with an independent trustee, to aid in meeting its obligations under such
plans.arrangements. Funds in the amount of approximately $12.7 million were provided to the trust
in 1989. Distributions have been made from the trust since 1989. No additional
funds have been provided to the trust.
The Retirement Plan was amended in 1993. The amendment affected the officers
and managers who participated in the Performance Stock Plan and were ineligible
for base salary merit increases. The retirement benefit calculation was adjusted
so that such persons would not be penalized for participating in the Performance
Stock Plan.
Federal tax legislation enacted in 1993 imposed a $150,000 limitation on
compensation that can be considered in determining retirement benefits under
qualified retirement plans. A PNM plan adopted in 1993 provides nonqualified
deferred compensation benefits to executives to the extent their retirement
benefits under the Retirement Plan, the Accelerated Management Performance Plan
and supplemental employee retirement agreements are limited as a result of the
$150,000 compensation limitation imposed by the 1993 tax legislation.
COMPENSATION OF DIRECTORS
Shareholders approved the "Director Restricted Stock Retainer Plan" at the
May 1992 Annual Meeting. Subsequent to that Annual Meeting, each non-employee
director received a restricted stock grant of 924 shares (fair market value of
$12,012). Portions of that stock vested in 1993 and 1994 in accordance with the
terms of the plan. Mr. Robert M. Price, Dr. Laurence H. Lattman, and Mr. Manuel
Lujan, Jr. were not directors at the date of grant and did not receive the 1992
restricted stock grant. The Director Restricted Stock Retainer Plan was amended
to provide for a cash retainer to be paid in lieu of restricted stock in the
event PNM is unable to grant restricted stock because of regulatory, legal or
contractual restrictions on issuing or repurchasing stock for the plan and to
allow directors the election, upon specified prior notice, to receive cash
instead of restricted stock. A trust was established for the purpose of
purchasing and holding restricted stock grants pending the lapse of
restrictions. The trustee of such trust is an independent third party.
Directors who were not full-time employees received $350 in 1994 for each
meeting of the Board or a committee thereof attended. Any director who is an
employee of PNM or one of its subsidiaries
16
receives no compensation for services as director. In December 1993, the Board
of Directors restructured the duties and compensation of the position of
Chairman of the Board, increasing the duties and establishing the level of
compensation. The Chairman now receives an annual retainer that is four times
the amount paid to other non-employee directors, of which one-fourth is paid on
terms identical to the retainer paid to other non-employee directors, and is
paid meeting fees for attending Board and Executive Committee meetings. The
meeting fees for the Chairman are three times the meeting fees paid to
non-employee directors.
Effective January 1, 1995, the fees for attendance at Board meetings and
committee meetings were increased to $600 and $450, respectively, per meeting.
The Chair of each committee, excluding the Executive Committee, receives an
additional $200 per committee meeting. Directors are also reimbursed for
expenses incurred in connection with service as a director.
EMPLOYMENT CONTRACTS, AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROLCHANGE IN CONTROL ARRANGEMENTS
An Executive Retention Plan (the "Retention("Retention Plan") was adopted by the Board of
Directors effective January 1, 1992. The Retention Plan covers executive
officers and other key employees designated by the Board. Mr. Montoya has been
provided with substantially similar benefits by agreement with PNM. The
Retention Plan provides certain severance benefits should the employee's
employment with PNMemployee be
terminated from PNM subsequent to a change in control of PNM or as the result of
a sale or other disposition of all or substantially all the assets of a major
operating unit, if suchthat termination is (a) for death or by PNM for reasons other
than cause, or (b) by the employee due to constructive termination. The
severance benefits include: (i) lump sum severance equal to 2.5
16
times current base salary for executive officers; (ii) reimbursement of all
legal fees and expenses incurred as a result of termination of employment; and
(iii) certain insurance benefits which are substantially similar to those
received by the employee immediately prior to termination of employment. The
Retention Plan was effective for an initial term through December 31, 1992, and
is subject to automatic extension for additional one year terms unless revoked
by the Board by the October 1 date immediately preceding the commencement of the
next successive
one year term. The plan was reaffirmed in 1994. The Retention Plan is also subject to automatic extension,
or revival if it has been revoked, in the event of a change in control during
certain time periods.
PNM also has a non-union severance pay plan that covers any non-union
employee who is terminated due to the elimination of his or her position
(an
"impacted("impacted employee"), including executive officers. Benefits include severance
pay in the amount of two months of base salary plus one additional week of base
salary for each year of service, which may be enhanced if the participant signs
a release agreement with PNM. Under a program adopted in 1993,1992, an impacted
employee would have the option to remain with PNM for up to an additional year but
would give up the option to receive enhanced benefits. Also inyear.
In 1993, the Board approved an amendment to the non-union severance pay plan.
The amendment provides a benefit for impacted executives under which an
executive would receive a lump sum distribution in lieu of the option that other
employees have to remain with PNM for an additional year and reimbursement for
placement assistance expenses incurred during the year after impactionbeing impacted up
to 5% of base salary. Under the amendment,salary, plus certain employees, including one executive officer,
who are members of the team of employees involved in PNM's asset restructuring
effort described below, would receive executive severance benefits if they are
impacted because of the
17
sale, or withdrawal from sale, of assets for which they are responsible.insurance benefits. If an employee is
eligible to receive benefits under the Retention Plan, benefits are not
available to that employee under the severance pay plan.
Mr. Montoya became President and CEO of PNM in August 1993. Under the terms of employment agreements entered into between PNM and Mr.
Montoya, if Mr. Montoya willwere to be eligible to receive supplemental retirement benefits ifterminated by the Board, he completes
five years of service with PNM. He will alsowould receive
severance benefits substantially equal to the level of benefits provided to
other members of senior management (discussed above) in the event he is terminated by the Board.
Reference is made to the first footnote in the "OPTION GRANTS IN 1994 FISCAL
YEAR" table.discussed above.
- --------------------------------------------------------------------------------
APPOINTMENT OF ARTHUR ANDERSEN LLP
- --------------------------------------------------------------------------------
The options referred to in the table may become exercisable upon
certain events such as change in control (as defined in the Performance Stock
Plan) of PNM.
RELATED TRANSACTION
On January 11, 1993, PNM announced specific actions which were determined to
be necessary in order to accelerate PNM's preparation for the new challenges in
the competitive electric energy market. As part of this announcement, PNM stated
its intention to attempt to sell its interest in Palo Verde Nuclear Generating
Station ("PVNGS") Unit 3. PNM also announced its intention to disposeAudit Committee of the Sangre de Cristo Water CompanyBoard of Directors selects and PNM's natural gas gathering and natural gas
processing assets. Mr. J. E. Sterba was assignedhires independent
public accountants to headaudit the asset restructuring
effort.
The Board approved an incentive plan for a team of employees involved in the
asset restructuring, and Mr. Sterba is one of the participants in the plan. Mr.
Sterba is eligible for incentive payments under the plan upon certain asset
dispositions.
On February 12, 1994, an agreement was executed with Williams Gas Processing
- - Blanco, Inc., for the sale of substantially all of the natural gas gathering
and processing assetsconsolidated financial statements of PNM and
two subsidiariessubsidiaries. The Audit Committee's selection for a cash selling price1998 must be approved by you.
The Audit Committee selected Arthur Andersen LLP to audit PNM's books of
$155 million, subject to certain adjustments. Subject to a numberaccount and other corporate records for 1998. This firm has audited PNM's books
since 1993, and no relationship exists other than the usual relationship between
independent public accountant and client. A representative of conditions
and approvals, including New Mexico Public Utility Commission ("NMPUC")
approval, the sale of the gas assets is expected to close by the end of the
second quarter of 1995. However, PNM cannot predict the ultimate timing or
outcome of the NMPUC action. In addition, on February 28, 1994, PNM reached
agreement with the City of Santa Fe for the sale of the utility assets of PNM's
water division, the Sangre de Cristo Water Company, and operation of the water
system by a subsidiary of PNM for up to four years following the sale. The
purchase price, as currently adjusted, is approximately $56 million. Closing of
the sale of the water utility is anticipated in the second quarter of 1995,
subject to a number of conditions, including NMPUC approval. Certain other
assets of Sangre de Cristo Water Company may alsoArthur Andersen
LLP will be sold. Although the specific
amount of the incentive payments is presently unknown, PNM currently estimates
the aggregate of the incentive payments to Mr. Sterba resulting from completing
such asset sales would be approximately $171,000.
OTHER BUSINESS
The management of PNM knows of no other business which is likely to be
brought before the meeting. If other matters not now known to management come
beforeavailable at the Annual Meeting to respond to questions and to make
any statement the representative may desire.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
17
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Securities Exchange Act of 1934 requires PNM's executive officers and
directors to file certain reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Based upon a review of reports
filed with the SEC and written representations by persons named inrequired to report,
all reports required to be filed pursuant to Section 16(a) of the accompanying proxy expectExchange Act
with respect to vote in accordance with their judgment1997 reporting were filed on such matters.
18
REQUESTS FOR REPORTS
A COPYa timely basis, except that one
transaction by M. D. Christensen, Senior Vice President, New Mexico Retail
Services, was reported late on a Form 5 rather than on a Form 4.
ANNUAL REPORT AND OTHER MATTERS
PNM's Annual Report, including consolidated financial statements,
accompanies this Proxy Statement. COPIES OF THE 1994PNM'S 1997 ANNUAL REPORT ON FORM
10-K IS INCLUDED AS PART OF PNM'S ANNUAL REPORT TO
SHAREHOLDERS MAILED ON MARCH 22, 1995. ADDITIONAL COPIES OF THE REPORT ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO PATRICK T. ORTIZ, SENIORBARBARA BARSKY, VICE
PRESIDENT, GENERAL COUNSELSTRATEGY, ANALYSIS AND SECRETARY,INVESTOR RELATIONS, ALVARADO SQUARE MS 2720,
ALBUQUERQUE, NEW MEXICO 87158.
DEADLINENM 87158, or electronically at bbarsky@mail.pnm.com. You may also
obtain our SEC filings through the internet at http://www.sec.gov.
SHAREHOLDER PROPOSALS FOR PROPOSALS BY STOCKHOLDERS
In orderTHE 1999 ANNUAL MEETING
Any proposal to be considered for possible inclusion in PNM's 1999 Proxy
Statement for the
1996 Annual Meeting of Stockholders, proposals from stockholders must be received by PNM, atAttention: Secretary, Alvarado Square, Mail
Stop 2828,2822, Albuquerque, New MexicoNM 87158, on or before November 23, 1995.1998.
SOLICITATION
The enclosed proxy is being solicited on behalf of PNM's Board of
Directors. This solicitation is being made by mail but also may be made in
person, by telephone or other means of electronic communication. We have hired
Beacon Hill Partners, Inc. to assist in the solicitation, for an estimated fee
of $2,500. PNM will pay all costs related to solicitation.
REVOCABILITY OF PROXY
You may revoke the enclosed proxy by attending the Annual Meeting and
voting your shares in person or by providing a later executed proxy.
By Order of the Board of Directors
/s/ PATRICK T. ORTIZ
Patrick T. Ortiz
CORPORATE SECRETARY
19Secretary
18
PUBLIC SERVICE COMPANY OF NEW MEXICO
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
The undersigned does hereby constitute and appoint R.G.R. G. Armstrong, R.U.R. U. Ortiz
and P.F.P. F. Roth, and each or any one of them, the true and lawful attorney-in-fact
and proxy for the undersigned, with full power of substitution, to represent and
vote the common stockCommon Stock of the undersigned at the Annual Meeting of StockholdersShareholders
of Public Service
P Company of New Mexico to be held in the auditorium of the UNM
Continuing Education Conference Center at 1634 University Boulevard, N.E.,
Albuquerque, New Mexico, at 9:30 a.m.9.30 am., Mountain Daylight Time, on April 25, 1995,28, 1998
and at any adjournments thereof, on all matters coming before said meeting.
R
A VOTE FOR THE FOLLOWING PROPOSALS IS RECOMMENDED BY THE BOARD OF
DIRECTORS.
O
1. Election of Directors (John T. 2. Selection of Arthur Andersen LLP
Ackerman, Joyce A. Godwin and as independent auditors forThis proxy, when properly executed, will be voted in the Manuel Lujan, Jr.). current year.
X
Mark one: FOR all nominees
listed above. / / FOR / / AGAINST / / ABSTAIN
FOR all nominees 3. In their discretion,manner directed herein
by the proxies
listed above except are authorized to vote upon
Y . such other matters as may
WITHHOLD AUTHORITY to properly come before this
vote for all nominees listed meeting, or any adjournment or
above. adjournments thereof.
(Please turn over)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE COMMON STOCKHOLDER.undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.
PLEASE DATEPlease date and sign exactly as name appears hereon. When signing as attorney,
executor, administrator, trustee, guardian, etc., give full title. If stock is
held jointly, each owner should sign. If stock is owned by a corporation, please
sign full corporate name by duly authorized officer. If a partnership, please
sign in partnership name by authorized person.
[LOGO OF PUBLIC SERVICE COMPANY APPEARS HERE]
The Annual Meeting of Shareholders of Public Service Company of New Mexico will
be held in the Auditorium of the UNM Continuing Education Conference Center at
1634 University Boulevard, NE, Albuquerque, New Mexico, at 9:30 a.m., Mountain
Daylight Time, on April 28, 1998.
(VOTING INSTRUCTIONS ARE ON BACK)
V FOLD AND SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN, ETC., GIVE FULL
TITLE. IF STOCK IS HELD JOINTLY, EACH JOINT OWNER SHOULD SIGN. IF
P STOCK IS OWNED BY A CORPORATION, PLEASE SIGN FULL CORPORATE NAME BY
DULY AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP
NAME BY AUTHORIZED PERSON.
R
Signature
O
Signature
X
Dated: , 1995DETACH HERE V
- -------------------------------------------------------------------------------
A vote FOR the following proposals is recommended by the Board of Directors.
1. Election of Directors (John T. Ackerman, Joyce A. Godwin, 2. Selection of Arthur Andersen LLP as independent
and Manuel Lujan Jr.) public accountants for the current year.
Mark one: _______ FOR all nominees listed above. [_] FOR [_] AGAINST [_] ABSTAIN
_______ FOR all nominees listed above except
_______________________________________.
_______ WITHHOLD AUTHORITY to vote for all 3. In their discretion, the proxies are
nominees listed above. authorized to vote upon such other matters as
may properly come before this meeting, or any
adjournment or adjournments thereof.
p ______________________________________________ [ ]
R Signature
O
X ______________________________________________
Y Signature
Dated: _______________________________________, 1998 [ ]
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PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY, USING THE ENCLOSED ENVELOPE
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