Incentive Compensation Award Agreement
for Short- and Long-Term Awards
This Agreement is dated and effective as of January 1, 1999, and is
between ----------------------------------- ("Participant"), Texas-New Mexico
Power Company (the "Company") and TNP Enterprises, Inc. ("TNP").
RECITALS
A Committee appointed by and having full authority to act on behalf of
the Board of Directors of the Company and TNP, respectively, (collectively, the
"Compensation Committee") adopted the following incentive compensation plans:
A. Texas-New Mexico Power Company Management Short-Term Incentive Plan
("Management Plan"); and
B. TNP Enterprises, Inc. Equity Incentive Plan ("Equity Plan").
On April 28, 1995, the Shareholders approved the adoption by the Board
of Directors of the Equity Plan.
The Management Plan provides for the payment of cash if certain
incentive goals are achieved. The Equity Plan provides for the delivery of stock
options, stock, and performance units upon the achievement of certain incentive
goals which may be short-term and/or long-term goals.
On February 15, 1999, the Compensation Committee (the "Committee")
established the performance goals to be achieved in order to earn incentive
compensation under the plans.
The Participant has been selected to receive awards under each plan
subject to the terms of each applicable plan and the Participant signing this
Award Agreement.
The Participant and the Company agree that this Agreement does not
affect Participant's status as an employee at will and further agree that either
party may terminate Participant's employment at any time with or without cause.
The Committee reserves, in its sole discretion, the right to interpret
the terms and conditions of any award and this agreement and to resolve any
disagreements or disputes concerning this Award Agreement and any decision is
binding upon all parties.
In consideration of the Recitals and mutual covenants and agreements
below, the Participant and the Company desire to and by their respective
signatures do hereby agree to the terms and conditions set forth below.
AGREEMENT
SHORT-TERM AWARDS
Short-Term Cash Award: Participant is hereby granted -----% of the
control point for Participant's salary range as established by the Compensation
Committee at the beginning of each plan year. The cash award is subject to the
1999 short-term goals for the Management Plan being met as such goals are set
forth on Exhibit A attached hereto and made a part hereof for all purposes. Such
award may be adjusted between 50% and 150% on a straight line basis depending
upon where the performance related to each goal occurs within the range
established for each goal. No award payment will be made for performance below
the established minimum for each goal set forth in Exhibit A. The cash award
shall be paid no later than March 15th following the end of the plan year.
The parties agree that no portion of the cash award is due or payable
regardless of whether any Corporate Operational Goal or Departmental/Individual
Goals are met unless the minimum Corporate Financial Goal is met. Further, the
Committee reserves the right to make year-end adjustments which may account for
any unusual or unforeseen events that impact the attainability of any goal.
Allocation of Awards: Participant agrees that the total amount of the
cash award will be allocated among the Corporate Financial Goal, Corporate
Operational Goals, and Departmental/Individual Performance Goals applicable to
such Participant as is set forth in Exhibit B which is attached hereto and made
a part hereof for all purposes.
Participant agrees that to the extent any amount of the total award is
allocated to the Departmental/Individual Performance Goals, such amount will be
due and payable only to the extent the performance of the Participant, as
determined by the officer executing this Agreement on behalf of the Company in
such officer's sole discretion (or, if Participant is the Chief Executive
Officer, then as determined by the Committee in its sole discretion), falls
within the Performance Rating range set forth in Exhibit C which is attached
hereto and made a part hereof for all purposes.
LONG-TERM AWARD
Long-Term Stock Award: Participant is hereby granted a stock award
equal to ------% of the control point for Participant's salary range as
established by the Compensation Committee as of the beginning of the long-term
plan cycle. Such long-term plan cycle award opportunity granted pursuant to the
Equity Plan being met is subject to the goals set forth on Exhibit D which is
attached hereto and made a part hereof for all purposes. Such award may be
adjusted between 50% and 200% on a straight-line basis, depending upon where the
performance related to each goal occurs within the range established for each
goal. No award payment will be made for performance below the established
minimum for each goal set forth in Exhibit D. Any stock award earned shall be
paid no later than March 15th following the end of the 1999 long-term plan
cycle. The 1999 Plan year cycle will be a period of three years beginning
January 1, 1999.
Allocation of Award: Participant agrees that the total amount awarded
under the Equity Plan will be allocated 100% to the goal established for Total
Shareholder Return in comparison to the Redwood Small Cap Utility index. The
amounts allocated to each set of goals will be due and payable only to the
extent each such goal shall be met as set forth in Exhibit D.
GENERAL TERMS
Dividend Equivalents: Participant shall have the right to receive, at
the time any stock awards are paid, cash in an amount equal in value to the
dividends declared on each Share on each record date occurring during the
applicable performance period established for each plan. Dividend equivalents
will not include any dividends on the dividend equivalents accrued during the
applicable performance periods.
Pro-Ration of Awards: If a Participant begins employment or
Participant's employment is terminated due to retirement, death, or disability
during a plan year or the 1999 long-term performance cycle, any award earned
shall be prorated based on the number of months of participation within the plan
year or long-term plan cycle. The prorated award will be based upon performance
determined at year or cycle end and will be paid at the same time as all other
awards are paid from each of the plans under which awards are made.
Termination of Employment: If employment is terminated for any reason
other than retirement, death, or disability, any award opportunity granted under
either plan shall be forfeited, provided that the Committee may waive such
forfeiture upon the CEO's recommendation, provided that if the Change in Control
paragraph is applicable that paragraph shall control.
Change in Control: In the event a Change in Control occurs as
that term is defined in the Executive Agreement for Severance Compensation, then
performance under this Agreement will be deemed to have been at target. To the
extent any payment of an award would have been in stock, such award shall be
deemed converted to a cash award in an amount equal to the value of the stock as
of the day the Change in Control event occurs. Provided that Participant is not
terminated for Cause, as that term is defined in the Executive Agreement for
Severance compensation, the Participant shall be entitled to receive payment of
the awards granted herein no later than the fifth calendar day following the
date of termination or 30 days following the Change in Control event, whichever
first occurs.
Valuation of Shares: Shares issued under the Equity Plan pursuant to
having been earned under the plan and the terms of this Agreement shall be
valued by averaging the high and low prices of the stock on the first trading
day of the plan performance period (the "Share Value"). The Share Value shall be
applied to the dollar value of the award to arrive at the equivalent number of
shares awarded. The awarded shares shall be adjusted for the average of the high
and low stock price on the last trading day of the plan year.
Tax Treatment: Payments are taxable to the Participant in the year of
receipt. The Company will have the right to deduct any federal, state, or local
taxes required by law to be withheld. In regard to any award made hereunder, a
Participant, at Participant's option, may elect to have the Company withhold
sufficient stock, to the extent payable, to pay the taxes then due on such
award.
Provisions Consistent with Plan: This Agreement shall be construed
consistent with the provisions of the applicable plan under which any award may
be made. Where matters are not addressed in this Award Agreement, but are
addressed in the Management Plan or Equity Plan, then such terms are deemed a
part of this Award Agreement and shall apply equally to all awards granted
herein, except for where such terms obviously apply solely to one of the plans.
If there is a conflict between the provisions of this Agreement and such plan,
the provisions of the applicable plan control. Unless otherwise noted to the
contrary, the definition of terms in each Plan also apply in this Agreement.
Attorney Fees: In the event either party is required to bring a cause
of action against the other to enforce the terms of this Agreement, then such
party, to the extent such party is successful in such action, shall be entitled
to reasonable attorney fees.
Governing Law: This Agreement shall be governed by the laws of the State of
Texas. Venue for any cause of action shall be Tarrant County, Texas.
Texas-New Mexico Power Company Participant:
By: By:
--------------------------- ----------------------
Kevern R. Joyce
President & Chief Executive Officer
TNP Enterprises, Inc. Participant
By: By:
-------------------------- ----------------------
Kevern R. Joyce
President & Chief Executive Officer
TNP ENTERPRISES, INC. EXHIBIT A
TEXAS-NEW MEXICO POWER COMPANY
Short-Term Incentive Compensation Plans
1999 Goals
1999 Goals
1998
Measurement Status Objectives Performance Minimum Target Maximum
----------- ------ ----------
---------------- ------------ ---------- ------------
Financial
- ---------
1. Cash Value Added Same Improve Financial Condition $4.40 $3.86 $4.46 $5.06
2. Excess Earnings Transition New Focus on an important phase $.42 $.62 $.82
Plan of TNMP's transition plan
Operational TNMP
- ----------
1. Customer Satisfaction Same Improve Customer Service 83 80 83 86
Rating
2. Number of Recordable Same Reduce Employee Accidents 32 39 32 24
Accidents
3. System Reliability Same
A) Average Minute of Reduce Customer Outage Time 64 79 67 55
Outage per
customer
B) Average Number of Reduce no. of Customers .97 1.18 1.04 .88
Outage per Interrupted
Customer
SHORT-TERM MANAGEMENT INCENTIVE COMPENSATION EXHIBIT B
WEIGHTING OF 1999 SHORT-TERM GOALS
Excess
Earnings Corporate
TNMP Transition Operational
Position CVA Plan Goals* Departmental Individual Total
- --------------------------------------- ---------- --------------- ----------------- ---------------- -------------- -----------
- - CORPORATE EMPLOYEES
Chairman, President CEO 50 20 10 20 100%
Sr. VP/CCO 50 20 15 15 100%
Remaining Sr. VP's 50 20 5 10 15 100%
Other Officers 50 15 5 20 10 100%
Directors\Asst VPs 50 15 5 20 10 100%
Key Employees 50 10 5 35 100%
- - TNMP EMPLOYEES
RCOs 50 10 15 15 10 100%
Plant Manager 50 10 5 25 10 100%
Key Employees 50 10 5 35 100%
*Eliminate O&M/KWH Goal
EXHIBIT C
DEPARTMENTAL/INDIVIDUAL PERFORMANCE TARGET GOALS
Individual Performance as a % of
Performance Rating Target Award
- ------------------ --------------------------------
4 -- Greatly exceeded expectations for objective(s) 150%
(maximum)
3 -- Exceeded expectations for objective(s) 125%
2 -- Achieved expectations for objective(s) (target) 100%
1 -- Almost achieved expectations for objective(s) 50%
(minimum)
0 -- Improvement needed, failed to meet objective(s) 0%
EXHIBIT D
LONG-TERM STOCK AWARD GOALS
Total Shareholder Return Payout on the basis of matrix reflecting
total shareholder return in relation to
the Redwood Small Cap Utility Index.
TSR to Redwood Small Cap Utility Index (100% weighting)
-------------------------------------------------------
Performance Ranking % of Target Shares Earned
- ------------ ------------------ -------------------------
Maximum Greater than or equal
to 100th percentile 200%
Greater than or equal
Target to 62.5th percentile 100%
Greater than or equal
Minimum to 35th percentile 50%
Below Minimum Less than 35th percentile 0%
1999 Recipients of Incentive Compensation Award
Name Position
1. Kevern Joyce Chairman, President & CEO
2. Jack Chambers SR VP & Chief Customer Officer
3. Manjit Cheema SR VP & Chief Financial Officer
4. John Edwards SR VP - Corporate Relations
5. Ralph Johnson SR VP - Power Resources
6. Mike Matte VP - Business Development
7. Mike Blanchard VP - General Counsel
8. Dennis Cash VP - Regional Customer Officer
9. Allan Davis VP - Regional Customer Officer
10. Melissa Davis VP - Human Resources
11. Larry Dillon VP - Regional Customer Officer
12. Doug Hobbs VP - Business Development
13. John Montgomery VP - Marketing
14. Pat Bridges Treasurer
15. Scott Forbes Chief Information Officer
16. Robert Castillo Assistant VP - New Mexico
17. Mike Ricketts Controller
18. Paul Talbot Corporate Secretary
19. Mark Coulson Assistant VP - Industrial Marketing
20. Larry Gunderson Director - Regulatory Affairs
21. Mark Wilson Director - Power Production