TEXAS-NEW MEXICO POWER COMPANY EXECUTIVE AGREEMENT FOR
SEVERANCE COMPENSATION UPON CHANGE IN CONTROL
This Texas-New Mexico Power Company Executive Agreement for Severance
Compensation Upon Change in Control ("Agreement") dated ___________________, is
by and between Texas-New Mexico Power Company ("Company") and _______________
("Executive").
Witnesseth That:
WHEREAS, the Company considers the establishment and maintenance of a
sound and vital management to be essential to protecting and enhancing the best
interests of the Company and its shareholders; and
WHEREAS, the Company has determined that in order to best establish and
maintain such sound and vital management it is appropriate to establish certain
means for reinforcing and encouraging the continued attention and dedication of
the Executive as a part of the management of the Company such that they may
continue their assigned duties in a proper and efficient manner without
distraction because of the possibility of a Change in Control of the Company;
and
WHEREAS, the Executive is willing to continue to serve the Company but
is concerned about the possible effects any Change in Control might have on his
duties and responsibility and status as an Executive:
NOW, THEREFORE, in consideration of the promises and the mutual
agreements herein contained, the Company and Executive hereby enter into this
Agreement setting forth the severance compensation and extended benefits which
the Company agrees it will pay to the Executive if the Executive's employment
with the Company terminates under the circumstances described herein:
1) Company's Right to Terminate
Prior to a Change in Control of the Company as herein defined, this
Agreement shall terminate if Executive shall resign or retire
voluntarily, become disabled, or die. Except as provided in paragraph
3)a)(vi) hereof, this Agreement shall also terminate if Executive's
employment by the Company shall be terminated, with or without Cause,
as herein defined, prior to any Change in Control of the Company by
action of either the Board of Directors or Chief Executive Officer of
the Company, as applicable.
2) Term
(a) The term of this Agreement (the "Term") shall commence as of
the date of this Agreement and shall expire as of the earliest
of (i) the third annual anniversary of the date hereof;
provided that the Board of Directors, by resolution duly
adopted, may extend the Term of this Agreement from time to
time, or (ii) termination of the Executive's employment
because of death, Disability, voluntary termination or
retirement by the Executive for other than Good Reason, or
Cause (as those terms may be herein defined);
(b) Any obligation which has vested under the terms of the
Agreement and remains unpaid as of the date the Agreement
expires or is terminated shall survive such expiration or
termination and be enforceable under the terms of the
Agreement.
3) Change in Control of the Company
(a) For the purposes of this Agreement, a Change in Control of the
Company is defined as the occurrence of any one of the following
events: (i) there shall be consummated any consolidation or
merger of the Company into or with another corporation or other
legal person, and as a result of such consolidation or merger
less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person
immediately after such transactions are held in the aggregate by
holders of Voting Stock, as herein defined, of the Company
immediately prior to such transactions; or (ii) any sale, lease,
exchange or other transfer, whether in one transaction or any
series of related transactions, of all or significant portions of
the assets of the Company to any other corporation or other legal
person, less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person
immediately after such sale, lease, exchange, or transfer is held
in the aggregate by the holders of Voting Stock of the Company
immediately prior to such sale, lease, exchange, or transfer; or
(iii) the shareholders of the Company approve any plan for the
liquidation or dissolution of the Company; or (iv) any person (as
such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")), becomes, either directly or indirectly, the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act)
of securities representing 15% or more of the combined voting
power of the then-outstanding securities entitled to vote
generally in the election of directors of the Company ("Voting
Stock"); provided that the Trustee of the Thrift Plan shall not
be deemed such a person for the purposes of this Section 3(iv);
or (v) if at any time during a fiscal year a majority of the
Board of Directors of the Company shall be replaced by persons
who were not recommended for those positions by at least
two-thirds of the directors of the Company who were directors of
the Company at the beginning of the fiscal year; or (vi) the
Executive's employment is terminated for other than Cause or the
Executive is removed from office or position with the Company in
either case following commencement by one or more representatives
of the Company of discussions (authorized by the Board of
Directors or Chief Executive Officer of the Company) with a third
party that ultimately results in the occurrence of an event
described in clauses (i), (ii), (iii), (iv), or (v) herein,
regardless of whether such third party is a party to such
occurrence, in which event, for the purposes of this Agreement,
the date of the authorization of such discussions is deemed to be
the date of the Change in Control of the Company; (b) For all
purposes of this paragraph 3), the term Company, as previously
defined herein, shall include TNP Enterprises, Inc., the parent
of Texas-New Mexico Power Company. 4) Termination Following
Change in Control of the Company (a) Termination If a Change in
Control of the Company shall have occurred while the Executive is
still an employee of the Company, the Executive shall be entitled
to the compensation provided in paragraph 5 upon the subsequent
termination of the Executive's employment with the Company by the
Executive or by the Company unless such termination is the result
of (i) the Executive's death, (ii) the Executive's Disability,
(iii) the Executive's decision voluntarily to terminate his
employment or retire, but only if Good Reason does not exist, or
(iv) the Executive's termination for Cause. Notwithstanding
anything in this Agreement to the contrary, termination of the
Executive shall not have been for Cause if termination occurred
because of (i) bad judgement or negligence on the part of the
Executive unless it is demonstrable from historical events that
the Executive's bad judgement or negligence shall have been of
such an extensive and ongoing nature that it rendered the
Executive unable adequately to perform his duties; or (ii) an act
or omission believed by the Executive in good faith to have been
in, or at least not opposed to, the Company's best interests. For
the purposes of this paragraph a), no act, or failure to act,
shall be considered "willful" unless done, or omitted to be done,
by the Executive without good faith. Good faith shall be based
upon a reasonable belief that the action or omission was in, or
at least not opposed to, the best interests of the Company. (b)
Disability For the purposes of this Agreement, Disability shall
mean that the Executive is incapacitated due to physical or
mental illness or injury and shall have been unable to perform
his duties for the Company on a full time basis for six months
and, within 30 days after written Notice of Termination is
thereafter given by the Company, the Executive shall not have
returned to the full time performance of his duties. (c) Cause
For the purposes of this Agreement, Cause shall mean (i) the
willful and continued failure by the Executive substantially to
perform his duties with the Company (excluding any failure
resulting from Disability), after a written demand for
substantial performance is delivered to the Executive by the
Chief Executive Officer of the Company setting forth the manner
in which the Executive has not been substantially performing his
duties and providing the Executive an opportunity to appear
before the Board of Directors of the Company with counsel in
order to respond to such notice; (ii) the performance by the
Executive of any act or acts constituting a felony involving
moral turpitude and which results or is intended to result in
damage or harm to the Company, whether monetary or otherwise, or
which results in or is intended to result in improper gain or
personal enrichment; and (iii) violations of the Company's
Personnel Policy Manual, as constituted at any time prior to a
Change in Control, concerning personal conduct; provided, that
the Company must follow its disciplinary procedures as set forth
therein. (d) Good Reason The Executive may terminate the
Executive's employment with the Company and retain his rights to
benefits hereunder if Good Reason exists at any time following a
Change in Control of the Company. For the purposes of this
Agreement, Good Reason shall mean any of the following, unless
the Executive has expressly consented in writing otherwise: (i)
within six months after a Change in Control of the Company
occurs, the Executive, at his discretion, determines that he will
not be able to work in a harmonious and effective manner in the
performance of his duties on behalf of the Company; provided
that, notwithstanding anything in this Agreement to the contrary,
the six month period set forth above does not commence until the
satisfaction of all conditions precedent to and the closing of
the transactions contemplated in paragraph 3)a) (i), (ii), (iii),
(iv), or (v) of this Agreement; (ii) the Executive is assigned by
the Company to a position or duties which are inconsistent with
or materially different from the Executive's duties or position
with the Company immediately prior to the Change in Control of
the Company; (iii) the Company removes the Executive from or
fails to re-elect the Executive to any positions or offices held
by the Executive immediately prior to the Change in Control of
the Company, unless such action is for Disability, Cause, the
Executive's death or the Executive's voluntary termination or
retirement if Good Reason does not exist prior to such
termination or retirement; (iv) the Executive's base salary or
total compensation in effect immediately prior to the Change in
Control of the Company is reduced by the Company; (v) the Company
fails to increase the Executive's base salary and total
compensation after the Change in Control of the Company by the
average percentage increase in base salary and total compensation
of other persons holding similar positions and titles within the
Company; (vi) any failure by the Company to continue in effect
any benefit plan or arrangement, or related trust, in which the
Executive is participating or in which he may participate at the
time of a Change in Control of the Company. Such plans,
arrangements, or related trusts (collectively "Plans"), include,
but are not limited to, Texas-New Mexico Power Company's Thrift
Plan for Employees and Trust Agreement ("Thrift Plan"), Texas-New
Mexico Power Company's Pension Plan ("Pension Plan"), Excess
Benefit Plan, group life insurance plan, medical, dental,
accident and disability plans and any other plans and related
trusts which might exist at the time of a Change in Control of
the Company; the Company's obligation hereunder to continue in
effect any benefit plan or arrangement includes the obligation to
irrevocably fund such Plans to the fullest extent allowed by any
applicable rules and regulations, within 90 days of the
occurrence of a Change in Control of the Company, and to maintain
such funding thereafter; (vii) any action taken by the Company
which would adversely affect the Executive's participation in or
reduce the Executive's benefits received from any Plan; (viii)
any action requiring the Executive to relocate outside the county
in which he was officed prior to the Change in Control of the
Company, except for travel required in the performance of his
duties for the Company to an extent substantially consistent with
the Executive's travel obligations immediately prior to a Change
in Control of the Company; (ix) any failure by the Company to
provide an automobile of similar style, class and size which was
provided to the Executive by the Company immediately prior to a
Change in Control of the Company; (x) any failure by the Company
to provide the Executive with the number of paid vacation days to
which the Executive was entitled immediately prior to a Change in
Control of the Company; (xi) any material breach by the Company
of any provision of this Agreement following a Change in Control
of the Company; (xii) any failure by the Company to obtain the
assumption of this Agreement by any successor or assign of the
Company; (xiii) any purported termination by the Company not in
compliance with the Notice of Termination provision in paragraph
4)e) below following a Change in Control of the Company; and
(xiv) after a Change in Control of the Company, the Company gives
notice to the Executive that the term of this Agreement shall not
be extended as provided in paragraph 2)a)(i). (e) Notice of
Termination Any termination of the Executive by the Company
pursuant to paragraphs 4)b) or 4)c) for Disability or Cause shall
be communicated by a Notice of Termination in substantial
compliance with the provisions of paragraph 8). For the purpose
of this Agreement, a Notice of Termination shall mean a written
notice which shall indicate the specific provisions in this
Agreement relied upon for termination of Executive's employment
and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for such termination.
For the purposes of this Agreement, no purported termination by
the Company shall be effective without such Notice of
Termination. (f) Effective Date of Termination Any termination of
the Executive for Disability or Cause pursuant to paragraphs 4)b)
or 4)c) shall be effective 30 calendar days after the Notice of
Termination is delivered to the Executive; provided that, in the
event the termination is for Disability as set out in paragraph
4)b), the Executive has not returned to full time performance of
his duties within the 30-day period. All other terminations
subject to the terms of this Agreement, whether by the Company or
the Executive, shall be effective immediately upon the giving of
the Notice of Termination. 5) Severance Compensation upon
Termination of Employment If, during the period commencing upon a
Change in Control of the Company and ending two years following
the satisfaction of all conditions precedent to and consummation
of an event described in clauses (i), (ii), (iii), (iv), or (v)
of paragraph 3), the Company shall terminate the Executive's
employment for any reason other than as a result of the
Executive's death or the reasons set out in paragraphs 4)b) or
4)c) in full compliance of the requirements for notice set out in
paragraph 4)e) or if the Executive shall terminate his employment
with the Company when Good Reason exists, then the Company shall
provide for and pay to the Executive the following compensation:
(a) severance pay in a lump sum, in cash, no later than the fifth
calendar day following the date of termination, an amount equal
to three times the annual salary as calculated by reference to
the Executive's rate of pay set forth in the Company's payroll
records and in effect for the Executive immediately prior to a
Change in Control of the Company; (b) medical, dental, disability
and life insurance and other employee benefits upon the same
terms and conditions and at the same cost to the Executive that
existed immediately prior to the Change in Control of the Company
for the lesser of three years or until substantially similar
employee benefits are available through other employment; (c) if
the Executive is fifty years of age or older and has at least
twenty years of service with the Company, the Company, in
addition to the foregoing benefits, shall pay to the Executive,
as an early retirement incentive, an amount, on a monthly basis
for the remainder of his life, that is equal to what the
Executive's retirement pay would be, calculated using the formula
set forth in the Company's Pension Plan as supplemented by the
Excess Benefit Plan based upon the base salary earned by the
Executive for the necessary number of years immediately prior to
the Change in Control of the Company and the number of service
credits that the Executive would accumulate if he continued his
employment until age 62; provided that to the extent that the
Executive would be entitled to retire on the date of termination
or upon his achieving an age upon which the Executive could
retire pursuant to the Company's Pension Plan as supplemented by
the Excess Benefit Plan, and receive payments pursuant to said
Pension Plan and Excess Benefit Plan, the Company's obligation to
make monthly payments shall be equal to the difference between
the amount actually received by the Executive under the Pension
Plan as supplemented by the Excess Benefit Plan and the amount
required to be paid by the Company as set forth above; provided
further that if the Executive becomes entitled to any of the
benefits set forth in paragraph 5)b) as a retiree under the
Company's Pension Plan on or after the date of termination, then
the benefits provided under said Pension Plan and Excess Benefit
Plan shall be substituted for and take the place of the benefits
that the Company would otherwise be required to provide; and
further provided that to the extent any payment or obligation to
pay under this paragraph 5)c) is determined by the Internal
Revenue Service to be subject to taxation upon the net present
value of the stream of payments for which the Company is
obligated to pay, then the Company shall pay to the Executive
within 30 days of such determination, a lump sum equal to the
amount determined by the Internal Revenue Service to be subject
to taxation; (d) without limiting the generality or effect of any
other provision hereof, employee benefit plan, arrangement, or
related trust referred to in paragraph 4)d)(vi), the Company
shall fully fund each Plan in which the Executive is a
participant or is otherwise entitled to payments or benefits
within 5 calendar days of the termination of the Executive's
employment; (e) any excise tax payable pursuant to Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"), as
a result of the payment of the amounts described in subparagraphs
a), b), and c); and (f) any additional federal, state, or local
income tax liability (calculated at the highest effective rate
applicable to individuals) and excise tax liability (under
Section 4999 of the Code) attributable to payments made pursuant
to this paragraph 5) hereof. 6) No Obligation to Mitigate
Damages; No Effect on Other Contractual Rights (a) The Company
hereby acknowledges that it will be difficult, and may be
impossible, for the Executive to find reasonably comparable
employment following the date of termination. In addition, the
Company acknowledges that its severance pay plans applicable in
general to its salaried employees do not provide for mitigation,
offset, or reduction of any severance payment received
thereunder. Accordingly, the parties hereto expressly agree that
the payment of the severance compensation by the Company to the
Executive in accordance with the terms of this Agreement will be
liquidated damages, and that the Executive shall not be required
to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor shall any
profits, income, earnings, or other benefits from any source
whatsoever create any mitigation, offset, reduction, or any other
obligation on the part of the Executive hereunder or otherwise;
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or
in any way diminish the Executive's existing rights, or rights
which would accrue solely as a result of the passage of time,
under any benefit plan, incentive plan or securities plan,
employment agreement or other contract, plan or arrangement. 7)
Successor to the Company (a) The Company will require any
successor or assign (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly,
absolutely and unconditionally to assume and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession or
assignment had taken place. Any failure of the Company to obtain
such agreement prior to the effectiveness of any such succession
or assignment shall be a material breach of this Agreement and
shall entitle the Executive to terminate the Executive's
employment for Good Reason. As used in this paragraph 7, Company
shall have the same meaning as hereinbefore defined and shall
include any successor or assign to its business and/or assets as
aforesaid which executes and delivers the agreement provided for
in this paragraph 7 or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law. If at
any time during the term of this Agreement, the Executive is
employed by any corporation a majority of the voting securities
of which is then owned by the Company, the Company as used in
paragraphs 3, 4, 5, 12, and 13 hereof shall in addition include
such employer. In such event, the Company shall pay or shall
cause such employer to pay any amount owed to the Executive
pursuant to paragraph 5 hereof; (b) This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal and
legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If the Executive
should die while any amounts are still payable to him hereunder,
all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to the Executive's
devisee, legatee, or other designee or, if there be no such
designee, to the Executive's estate; (c) This Agreement is
personal in nature and neither of the parties hereto shall,
without the consent of the other, assign, transfer, or delegate
this Agreement or any rights or obligations hereunder except as
expressly provided in paragraph 7)a) above. Without limiting the
generality of the foregoing, the Executive's right to receive
payments hereunder shall not be assignable, transferable, or
delegable, whether by pledge, creation of a security interest, or
otherwise, other than by a transfer by his or her will or by the
laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this paragraph 7)c),
the Company shall have no liability to pay any amount so
attempted to be assigned, transferred, or delegated; (d) The
Company and the Executive recognize that each party will have no
adequate remedy at law for breach by the other of any of the
agreements contained herein and, in the event of any such breach,
the Company and the Executive hereby agree and consent that the
other shall be entitled to a decree of specific performance,
mandamus, or other appropriate remedy to enforce performance of
this Agreement. 8) Notice For purposes of this Agreement, notices
and all other communications provided for in the Agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, as follows: If to the
Company: Texas-New Mexico Power Company 4100 International Plaza,
Tower II Fort Worth, Texas 76109 If to the Executive:
================================================= or such other
address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt. 9) Miscellaneous No
provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company. No
waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made
by either party which are not set forth expressly in this
Agreement. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas. 10) Validity The
invalidity or unenforceability of any provision or ny part of a
provision of this Agreement shall not affect the validity or
enforceability of the remaining provisions of this Agreement,
which shall remain in full force and effect. 11) Counterparts
This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original but all of which
together will constitute one and the same instrument. 12) Legal
Fees and Expenses The Company is aware that the Board of
Directors or a shareholder of the Company or the Company's parent
may then cause or attempt to cause the Company to refuse to
comply with its obligations under this Agreement, or may cause or
attempt to cause the Company or the Company's parent to
institute, or may institute, litigation seeking to have this
Agreement declared unenforceable, or may take, or attempt to take
other action to deny the Executive the benefits intended under
this Agreement. In these circumstances, the purpose of this
Agreement could be frustrated. It is the intent of the Company
that the Executive not be required to incur the expenses
associated with the enforcement of his rights under this
Agreement by litigation or other legal action because the cost
and expense thereof would substantially detract from the benefits
intended to be extended to the Executive hereunder, nor be bound
to negotiate any settlement of his rights hereunder under threat
of incurring such expenses. Accordingly, if it should appear to
the Executive that the Company has failed to comply with any of
its obligations under this Agreement or in the event that the
Company or any other person takes any action to declare this
Agreement void or unenforceable, or institutes any litigation or
other legal action designed to deny, diminish or to recover from
the Executive the benefits intended to be provided to the
Executive hereunder, the Company irrevocably authorizes the
Executive from time to time to retain counsel of his choice at
the expense of the Company as provided in this paragraph 12, to
represent the Executive in connection with the initiation or
defense of any litigation or other legal action, whether by or
against the Company or any Director, officer, shareholder or
other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company
irrevocably consents to the Executive entering into an
attorney-client relationship with such counsel, and in that
connection the Company and Executive agree that a confidential
relationship shall exist between the Executive and such counsel.
The Company shall pay or cause to be paid and shall be solely
responsible for any and all attorneys' and related fees and
expenses incurred by the Executive as a result of the Company's
failure to perform this Agreement or any provision hereof or as a
result of the Company or any person contesting the validity or
enforceability of this Agreement or any provision hereof. Such
fees and expenses shall be paid or reimbursed to the Executive by
the Company on a regular, periodic basis, within thirty days
following receipt by the Company of statements of such counsel in
accordance with such counsel's customary practice. In no event
shall the Executive be required to reimburse the Company for
attorneys' fees or expenses previously paid on behalf of the
Executive or reimbursed to the Executive, or for any attorneys'
fees or expenses incurred by the Company in connection with any
contest of validity or enforceability of this Agreement or any
provisions hereof; provided, however, that any litigation by the
Executive, whether as plaintiff or defendant, shall be in good
faith. 13) Confidentiality The Executive shall retain in
confidence any and all confidential information known to the
Executive concerning the Company and its business so long as such
information is not otherwise publicly disclosed. IN WITNESS
WHEREOF, the parties have executed this Agreement as of the date
first above written.
TEXAS-NEW MEXICO POWER COMPANY
By:___________________________
Name: Kevern R. Joyce
Title: Chairman, President & Chief
Executive Officer
By:___________________________
Name:
Title:
ATTEST:
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Secretary
SCHEDULE TO EXHIBIT 10(qq)
1996 Employees with Executive Severance Compensation Contracts
Contracts Extended by Board on 11-7-95 to 12-1-96:
Kevern Joyce
Jack Chambers
Manjit Cheema
Larry Dillon
Allan Davis
Douglas Hobbs
Mike Blanchard
Randy Ownby
Dennis Cash
Ralph Johnson
Pat Bridges
Melissa Davis
John Montgomery (Provided effective 12-4-95)
*Monte Smith
*will expire 12-1-98