<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Public Service of New Mexico
.............................................................................
(Name of Registrant as Specified In Its Charter)
Patrick T. Ortiz, Esq., Corporate Secretary
..............................................................................
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
.......................................................................
2) Aggregate number of securities to which transaction applies:
.......................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
.......................................................................
4) Proposed maximum aggregate value of transaction:
.......................................................................
Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] 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) Amount Previously Paid:
......................................................
2) Form, Schedule or Registration Statement No.:
......................................................
3) Filing Party:
......................................................
4) Date Filed:
......................................................
<PAGE>
[LOGO OF PUBLIC SERVICE COMPANY OF NEW MEXICO APPEARS HERE]
PUBLIC SERVICE COMPANY OF NEW MEXICO
ALVARADO SQUARE
ALBUQUERQUE, NEW MEXICO 87158
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 27, 1994
---------------------
To the Holders of Common Stock of
PUBLIC SERVICE COMPANY OF NEW MEXICO
Notice is hereby given that the 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 27, 1994, at 9:30 a.m., Mountain
Daylight Time, for the following purposes:
1. 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 1997, 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 PNM of Arthur Andersen & Co. as independent auditors to
audit the consolidated financial statements of PNM and subsidiaries for
the fiscal year ending December 31, 1994.
3. To consider and act upon such other matters as may properly come before
the meeting.
Only holders of PNM Common Stock of record at the close of business on March
8, 1994 will be entitled to notice of and to vote on all matters to come before
the meeting and any adjournment thereof.
By Order of the Board of Directors
Patrick T. Ortiz
Corporate Secretary
March 23, 1994
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN
PERSON, PLEASE MARK, EXECUTE, DATE AND RETURN THE ACCOMPANYING PROXY CARD AS
SOON AS POSSIBLE, USING THE ENCLOSED SELF-ADDRESSED ENVELOPE WHICH REQUIRES NO
POSTAGE.
<PAGE>
---------------------
PROXY STATEMENT
---------------------
(LOGO OF PUBLIC SERVICE COMPANY OF NEW MEXICO APPEARS HERE)
PUBLIC SERVICE COMPANY OF NEW MEXICO
ANNUAL MEETING OF STOCKHOLDERS
APRIL 27, 1994
A proxy 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 1994
Annual Meeting of Holders of the Common Stock of PNM, to be held on April 27,
1994 in the auditorium 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, for the purposes set
forth in the accompanying notice. Stockholders may revoke their proxy by
attendance at the meeting and by voting their 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.
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 & Co. as independent auditors of PNM and
subsidiaries, and on all other matters in accordance with their best judgment.
This Proxy Statement is first being mailed to the holders of PNM Common Stock
on or about March 23, 1994, 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 Corporate
Investor Communications, Inc. to assist in the solicitation of proxies,
primarily from brokers, banks and other nominees, for an estimated fee of
$2,900. 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
8, 1994 will be entitled to vote at the Annual Meeting. At such date, there
were 41,774,083 shares of PNM Common Stock outstanding. Each such share of PNM
Common Stock is entitled to one vote on each 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 or represented at the meeting and the affirmative vote of the
holders of a majority of the shares of PNM Common Stock present and entitled to
vote at the Annual Meeting is required.
1
<PAGE>
Under PNM's By-laws, the presence at the meeting, either in person or by
properly executed proxy, of the holders of a majority of 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 voting 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 of beneficial owners will not be counted in calculating voting
results on those matters for which the broker or other entity has not voted.
PNM is not aware 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 1, 1994,
to be the beneficial owners of more than 5% of PNM's voting securities:
<TABLE>
<CAPTION>
TITLE PERCENT
OF NAME AND ADDRESS OF NATURE OF BENEFICIAL NUMBER OF OF
CLASS BENEFICIAL OWNER OWNERSHIP SHARES CLASS
----- ------------------- -------------------- --------- -------
<S> <C> <C> <C> <C>
Common B.A.T. Industries, p.l.c. Shared Voting & 2,547,700(1)
Stock Windsor House Dispositive Power
50 Victoria Street
London SW1H ONL
England
and
Farmers Group, Inc.
4680 Wilshire Boulevard
Los Angeles, CA 90010 TOTAL 2,547,700(1) 6.1%
Common FMR Corp. Sole Voting Power 500,500(2)
Stock 82 Devonshire Street Sole Dispositive Power 4,932,200(2)
Boston, MA 02109
TOTAL 4,932,200(2) 11.81%
Common The Prudential Insurance Sole Voting & 8,600(3)
Stock Company of America Dispositive Power
Prudential Plaza Shared Voting & 2,155,974(3)
Newark, NJ 07102-3777 Dispositive Power
TOTAL 2,164,574(3) 5.2%
Common Scudder, Stevens & Clark, Inc. Sole Voting Power 606,600(4)
Stock 345 Park Avenue Shared Voting Power 1,216,540(4)
New York, NY Sole Dispositive Power 2,409,240(4)
TOTAL 2,409,240(4) 5.8%
</TABLE>
2
<PAGE>
- ---------------------
(1) As reported on Schedule 13G dated February 9, 1994 and filed with the
Securities and Exchange Commission by B.A.T. Industries p.l.c. and Farmers
Group, Inc. PNM makes no representation as to the accuracy or completeness
of such information.
(2) As reported on Schedule 13G dated February 10, 1994, for beneficial
ownership as of January 31, 1994, and filed with the Securities and
Exchange Commission by FMR Corp. PNM understands that (i) the above shares
include 4,431,700 shares beneficially owned by Fidelity Management &
Research Company ("Fidelity"), a wholly-owned subsidiary of FMR Corp, as a
result of acting as investment advisor to several investment companies;
(ii) Edward C. Johnson 3d, Chairman of FMR Corp., FMR Corp., and the
Fidelity Funds "each has sole power to dispose of the 4,431,700 shares
owned by the Funds"; (iii) Fidelity Management Trust Company ("Trust"), a
wholly-owned subsidiary of FMR Corp., beneficially owns 468,700 shares as a
result of serving as "investment manager of the institutional account(s)";
(iv) FMR Corp., through its control of Trust, has sole voting and
dispositive power over such 468,700 shares; and (v) a former majority-owned
subsidiary of Fidelity, Fidelity International Limited ("FIL"),
beneficially owns 31,800 shares, of which FIL has sole power to vote and
sole power to dispose. PNM makes no representation as to the accuracy or
completeness of such information.
(3) As reported on Amendment No. 3 to Schedule 13G dated January 31, 1994, for
beneficial ownership as of December 31, 1993, 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.
(4) As reported on Schedule 13G dated February 4, 1994 and filed with the
Securities and Exchange Commission by Scudder, Stevens & Clark, Inc. PNM
understands that Scudder, Stevens & Clark, Inc. filed the Schedule 13G on
behalf of itself, Scudder, Stevens & Clark of Canada Ltd., and Asia
Management Corporation. PNM makes no representation as to the accuracy or
completeness of such information.
ELECTION OF DIRECTORS
Three directors will be elected at the Annual Meeting to hold office for the
ensuing three years in accordance with PNM's Restated Articles of Incorporation
providing for staggered terms of directors of three years each. The three
directors elected at this meeting will hold office until the Annual Meeting of
Stockholders of PNM in 1997, or until their successors have been elected and
qualified. It is intended that votes will be cast pursuant to proxies for the
following nominees:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Robert G. Armstrong Roswell, New Mexico
Reynaldo U. Ortiz Denver, Colorado
Paul F. Roth Sanibel, Florida
</TABLE>
If at the time 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.
Vickie L. Fisher, a director whose term of office would have expired in 1995,
resigned on December 8, 1993, due to her appointment as Deputy Chief
Administrative Officer of the City of Albuquerque. The Nominating Committee is
considering potential replacements to fill the vacant position until 1995, but
a decision has not yet been made on Ms. Fisher's replacement. The Board hopes
to be in a position to name a replacement prior to the Annual Meeting.
Notwithstanding the vacancy, proxies cannot be voted for a greater number of
persons than three, the number of nominees named above.
3
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES.
Each of the directors of PNM and each of the nominees for election at the
Annual Meeting has advised PNM that, as of February 1, 1994, he or she
beneficially owned directly or indirectly equity securities of PNM as set forth
below:
<TABLE>
<CAPTION>
SHARES OF COMMON
PRINCIPAL OCCUPATION AND STOCK OWNED
BUSINESS BENEFICIALLY AS
NAME, AGE, ADDRESS AND EXPERIENCE DURING PAST OF FEBRUARY 1,
WHEN TERM OF OFFICE WILL EXPIRE FIVE YEARS 1994 (H)(I)(J)
------------------------------- ------------------------ ----------------
<C> <S> <C>
(a)(b)(c)(d) Robert G. Armstrong President Armstrong Energy 1,824
(47); Roswell, New Mexico Corporation, Roswell, New
(a director since May 1991); Mexico (oil and gas
1997 exploration and produc-
Annual Meeting tion)
Director, Sunwest Bank of
Roswell, N.A.
(a)(c)(g) Reynaldo U. Ortiz (47) Senior Vice President, 924
Denver, Colorado (a director Jones Financial Group,
since April 1992); 1997 Inc. (a cable-multiple
Annual Meeting system
operator) since February
1994
Vice President, Corporate
Public Policy,
U S WEST, Inc. (a tele-
communications
company) (1991-1994)
President, U S WEST
NewVector, Inc.
(1990-1991) (a subsidiary
of U S WEST, Inc.)
President, U S WEST Inter-
national (1988-1990)
(a subsidiary of U S
WEST, Inc.)
(a)(b)(d)(e)(f) Paul F. Roth Retired since October 1992 1,624
(61) President, Greater Dallas
Sanibel, Florida (a director Chamber of
since May 1991); 1997 Commerce, Dallas, Texas
Annual Meeting (September
1991-September 1992)
President, Texas Division
of Southwestern Bell Tel-
ephone Company, Dallas,
Texas
(November 1988 to March
1991)
(c)(f)(g) Laurence H. Lattman Retired since July 1993 500
(70) Albuquerque, New Mexico President, New Mexico In-
(a director since May 1993); stitute of Mining
1996 Annual Meeting and Technology (1983-July
1993)
(e)Benjamin F. Montoya (58) President and Chief Execu- 1,000
Albuquerque, New Mexico tive Officer of
(a director since September PNM since August 1993
1993); 1996 Annual Meeting Senior Vice President and
General Manager,
Gas 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 Divi-
sion, Sacramento Valley
Region, Distribution Busi-
ness Unit,
Pacific Gas and Electric
Company
(1989-1990)
Commander, Naval
Facilities Engineering
Command and Chief of
Civil Engineers, U.S.
Navy (1987-1989)
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK OWNED
BENEFICIALLY AS
NAME, AGE, ADDRESS AND PRINCIPAL OCCUPATION AND BUSINESS OF FEBRUARY 1,
WHEN TERM OF OFFICE WILL EXPIRE EXPERIENCE DURING PAST FIVE YEARS 1994 (H)(I)(J)
------------------------------- --------------------------------- ----------------
<C> <S> <C>
(b)(d)(e) Robert M. Price (63) Retired in 1990 200
Edina, Minnesota (a director Chairman and Chief Executive
since July 1992); 1996 Annual Officer, Control Data Corporation (prior
Meeting to 1990)
Director, Rohr Industries, Inc.
Director, Premark International, Inc.
Director, International Multifoods Corp.
(b) John T. Ackerman (52) Chairman of the Board since August 1993 9,933
Albuquerque, New Mexico (a Chairman, President and Chief Executive
director since June 1990); Officer of PNM (May 1991 to August 1993)
1995 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)
(b)(d)(f)(g) Joyce A. Godwin (50) Retired since December 1993 1,434
Albuquerque, New Mexico (a Vice President and Secretary, Presbyterian
director since May 1989); Healthcare Services, Albuquerque, New
1995 Annual Meeting Mexico, a 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)
</TABLE>
- ---------------------
(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.
(g)A member of the Corporate and Public Responsibility Committee.
5
<PAGE>
(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, 1994, directors and executive officers of PNM as a group
owned beneficially 29,445 shares of PNM Common Stock, or less than 1% of
the total number of shares outstanding. (Such shares include shares owned
by Mr. Eglinton, who retired in 1993). Also included in the shares shown
above for Mr. Ackerman as well as in the 29,445 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, the shares will be distributed to the
participants.
(j) Included in the shares shown above for Mr. Armstrong, Ms. Godwin, 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 1993, the Board held fifteen meetings. The following standing
committees of the Board held the number of meetings indicated: Audit, eight;
Corporate and Public Responsibility, nine; Executive, two; Finance, nine;
Management Development and Compensation, eleven; and Nominating, eight. 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.
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
6
<PAGE>
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
foregoing table. The responsibilities of the committees are as follows:
The Audit Committee consists of three outside members of the Board of
Directors. It reviews the financial statements of PNM and meets with and
receives reports and other communications from PNM's internal and outside
independent auditors. The Committee 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 Corporate and Public Responsibility Committee reviews and monitors
policies and their implementation that deal with PNM's responsibility to the
communities in which it does business and determines the standards which govern
business transactions. These policies include, but are not limited to,
environmental, affirmative action, charitable contributions, political action
committee, and communications to various constituencies.
The Executive Committee consists of the Chairman of the Board of Directors
and of the chairpersons of the standing committees. It exercises the power 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.
The Finance Committee consists of a majority of outside directors. It reviews
and recommends to the Board the capital structure and financial strategy for
PNM, including dividend policy. It has overview of PNM's financial performance,
investment procedures and policies, pension fund performance and funding level,
and risk management strategies and policies. The Committee specifically has
responsibility for the review and approval of all single capital expenditures
in excess of $1 million and reviews capital expenditures in excess of $100,000
and the quarterly capital appropriation reports.
7
<PAGE>
The Management Development and Compensation 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 outside directors. It
has the responsibility to make recommendations to the Board with respect to
nominees to be designated by the Board for election as directors, as well as
recommendations concerning the effectiveness, structure, size and composition
of the Board, including committee assignments and candidates for election as
Chairman of the Board. The Nominating Committee expects normally to be able to
identify from its own resources the names of qualified nominees, but it will
accept from security holders recommendations of individuals to be considered as
nominees. Security holder recommendations for the 1995 Annual Meeting, together
with a description of the proposed nominee's qualifications, relevant
biographical information, and the proposed nominee's signed consent to serve,
should be submitted in writing to the Secretary of PNM and received by that
office on or before October 1, 1994. The determination of nominees recommended
by the Nominating Committee to the Board is within the sole discretion of the
Committee, and the final selection of the Board's nominees is within the sole
discretion 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 Court for the District of New Mexico
that commenced on June 1, 1989 under Chapter 11 of the Bankruptcy Code and
converted 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
management committee of BCD. 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, by the
Board of Directors, of the firm of Arthur Andersen & Co. as independent
auditors to audit the consolidated financial statements of PNM and subsidiaries
for the fiscal year ending December 31, 1994. Arthur Andersen & Co. has no
financial interest in PNM or any of its subsidiaries. A representative of
Arthur Andersen & Co. will be present at the Annual Meeting of Stockholders to
answer appropriate questions and to make any statement the representative might
desire.
On January 5, 1993, PNM notified its certifying accountants for 1992, KPMG
Peat Marwick ("KPMG"), that the client-auditor relationship between PNM and
KPMG would be terminated effective with the completion of the 1992 financial
audit. The decision to change accountants was recommended by management and the
Audit Committee and approved by the Board of Directors.
8
<PAGE>
During the relevant portion of the last two fiscal years, there was one
disagreement between PNM and KPMG on a matter of accounting principles, which,
if not resolved to the satisfaction of KPMG, would have caused KPMG to make a
reference to the subject matter of disagreement in connection with its report
for the fiscal year ended December 31, 1992. The disagreement arose subsequent
to PNM's decision to terminate the client-auditor relationship with KPMG. The
disagreement was over the appropriateness of recording the Palo Verde Nuclear
Generating Station ("PVNGS") Unit 3 and a power purchase contract with the M-S-
R Public Power Agency ("M-S-R") at their net realizable values as of December
31, 1992. KPMG discussed this disagreement with the Audit Committee of the
Board of Directors. PNM management also consulted with Arthur Andersen & Co. on
this issue. PNM authorized KPMG to respond fully to the inquiries of Arthur
Andersen & Co. concerning the subject matter of this disagreement. This
disagreement was resolved to the satisfaction of KPMG, in that PNM recorded
PNM's interest in PVNGS Unit 3 and a power purchase contract with M-S-R at
their net realizable values as of December 31, 1992 which resulted in an after
tax loss of $126.2 million.
With the exceptions described in this paragraph, KPMG's report on PNM's 1992
financial statements did not contain an adverse opinion or a disclaimer of
opinion, and was not qualified or modified as to uncertainty, audit scope, or
accounting principles. KPMG modified its opinion for the year ended 1992
regarding uncertainty as to the recoverability by PNM of its investment in, and
lease costs related to, its interests in PVNGS. Also, KPMG made a reference in
its opinion for the year ended 1992 regarding a change in PNM's method of
accounting for unbilled revenues in 1992. These matters were not a subject of
disagreement with PNM.
Arthur Andersen & Co.'s report on PNM's 1993 financial statements did not
contain an adverse opinion or a disclaimer of opinion, and was not qualified or
modified as to uncertainty or audit scope. Arthur Andersen & Co.'s report was
modified as to accounting principles to describe PNM's adoption, effective
January 1, 1993, of Statement of Financial Accounting Standards No. 106,
Employer's Accounting for Postretirement Benefits Other Than Pensions, and No.
109, Accounting for Income Taxes.
None of the "reportable events" described under Securities and Exchange
Commission ("SEC") Regulation S-K, Item 304(a)(1)(v), occurred within PNM's two
most recent fiscal years (there being no relevant subsequent interim periods)
preceding the date hereof.
During the last two fiscal years prior to the engagement of Arthur Andersen &
Co., PNM did not consult Arthur Andersen & Co. regarding any of the matters or
events set forth in Item 304(a)(2)(i) and (ii) of SEC Regulation S-K.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE SELECTION OF
ARTHUR ANDERSEN & CO. AS INDEPENDENT AUDITORS.
9
<PAGE>
REPORT OF THE
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE*
COMMITTEE PHILOSOPHY
PNM's compensation program is guided by two basic principles. First, senior
management should have a compensation package that reflects both individual
performance and the achievement of PNM's goals. Second, the compensation
program should be as competitive, relative to the industry, as possible in
order to attract, motivate, and retain key management members. Compensation
trends in New Mexico are also considered.
COMPENSATION ELEMENTS
The senior management compensation program, which is designed to meet the
Committee's philosophy, has three components: base salary, management benefits,
and incentive plans.
Base Salaries. In 1993, base salaries, the fixed component of pay, were
conservatively tied to the average level of base salaries among gas and
electric utility companies. The Management Development and Compensation
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. The companies used for compensation comparisons
are a broad-based group of electric and gas utilities which are included in
compensation surveys sponsored by the Edison Electric Institute and the
American Gas Association.
Management Benefits. The benefits provided for senior management are based
upon benefits provided to all employees. The benefits focus on retirement, life
insurance and health care needs. These benefits were generally unchanged from
the previous year. However, certain new severance and retention benefits were
established to retain key management personnel, including personnel whose
positions will be ultimately eliminated as a result of either the anticipated
sale of certain assets or the consolidation and restructuring of the existing
business. One of the executive officers named in the Summary Compensation Table
received severance benefits in 1993.
Incentive Plans. The Committee believes that the third component of the
compensation program, incentive plans, is critically important in carrying out
PNM's compensation philosophy and achieving PNM's goals. This third element was
implemented in 1993 following shareholders' approval of the Performance Stock
Plan. The Performance Stock Plan is a stock option incentive plan which
provides for initial grants in lieu of base salary merit increases and
subsequent grants based on achieving performance goals. Individual awards are
based on the participant's position with the Company.
The initial grants of stock options in lieu of base salary merit increases
for 1993 and 1994 were made effective July 1, 1993. The exercise price for such
options was the market price of PNM's Common Stock on July 1, 1993, $13.75 per
share. The total number of such options granted to all participants was
370,000, out of which PNM's executive officers received 54,068 options.
Certain Tax Matters. Currently PNM has no policy with respect to qualifying
compensation paid to officers for deductibility under Section 162(m) of the
Internal Revenue Code. There is no policy because PNM's compensation levels do
not approach the limits as defined by the Code and it is not
- ---------------------
* The Report of the Management Development and Compensation Committee shall
not be deemed to be incorporated by reference into any filing by PNM under
either the Securities Act of 1933 or the Securities Exchange Act of 1934.
10
<PAGE>
anticipated that the compensation of PNM's management will approach those
limits in the foreseeable future.
CHIEF EXECUTIVE OFFICER COMPENSATION FOR 1993
Mr. Ackerman. In January 1993, Mr. John Ackerman, then PNM's Chief Executive
Officer (CEO) and Chairman of the Board, announced his intention to retire as
PNM's CEO. The Board determined that the position and responsibilities of
Chairman of the Board and Chief Executive Officer would be separated.
As noted in last year's Committee Report, Mr. Ackerman's relatively low
compensation was a result of PNM's circumstances prior to 1990. Mr. Ackerman's
1993 compensation did not reflect the Board's perception of his excellent
personal performance. Moreover, even though Mr. Ackerman was not a participant
in the Performance Stock Plan, his 1993 base salary remained unchanged from his
1992 level since the officers and managers participating in the Performance
Stock Plan were ineligible for base salary merit increases. However, their
retirement benefit calculation was adjusted so they would not be penalized for
participating in the Plan. The Board took similar action regarding Mr.
Ackerman. The Board adjusted Mr. Ackerman's benefits to provide him with
retirement benefits to which he would have otherwise been entitled had he been
a designated participant in the Performance Stock Plan. In addition, the Board
adjusted Mr. Ackerman's health care benefits from his date of retirement until
he is Medicare eligible. The combined health care and retirement benefit
adjustments represent an approximate 5% annual increase in overall retirement
benefits.
Mr. Montoya. The Board began a search for a new CEO in 1993. The Board did
not feel it could attract qualified candidates at Mr. Ackerman's relatively low
salary. In order to develop a competitive salary offer, the Board engaged an
executive compensation consultant. The CEO job offer was based on
recommendations from the executive compensation consultant and the executive
search firm which the Company had retained. Following an intensive search, the
Board made an offer to Mr. Ben Montoya in July 1993. Mr. Montoya accepted the
CEO position and he assumed that office on August 1, 1993. Mr. Montoya's 1993
compensation is based on the Board's offer. It is anticipated that any future
changes in Mr. Montoya's compensation will be as a result of his individual
performance and achievement of PNM's goals.
THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE PROCESS
The executive compensation program is administered by the Management
Development and Compensation Committee of the Board of Directors (the
"Compensation Committee"). The Compensation Committee consists of independent
directors who are not PNM employees and who qualify as disinterested persons
for purposes of SEC Rule 16b-3 adopted under the Securities Exchange Act of
1934. The Compensation Committee is accountable for all compensation matters
for PNM's senior management. As described above, the Compensation Committee has
retained an independent executive compensation consulting firm which is used to
make disinterested recommendations to the Committee. These 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
11
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid during each of the last three fiscal years for both the current and former
Chief Executive Officers, each of the four most highly compensated executive
officers serving at the end of the year, and one additional executive officer
who retired in 1993, based on salary and bonus earned during 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------- -------------------------------
AWARDS PAYOUTS
NAME AND --------------------- ---------
PRINCIPAL LONG TERM
POSITION SECURITIES INCENTIVE
(AS OF OTHER ANNUAL RESTRICTED UNDERLYING PLAN ALL OTHER
DECEMBER 31, SALARY BONUS COMPENSATION STOCK OPTIONS/ PAYOUTS COMPENSATION
1993) YEAR ($) ($) ($)* AWARD(S) SARS (#) ($) ($)
- ------------ ---- ------ ----- ------------ ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
B. F. Montoya,** 1993 $164,578 0 -- 0 0 0 $ 6,924
President
and CEO
J. T. Ackerman, 1993 261,996 0 -- 0 0 0 0
Chairman of 1992 258,048 0 -- 0 0 0 0
the Board 1991 257,516 0 -- 0 0 0 0
CEO (prior
to August
1, 1993)
M. P. Bourque, 1993 126,528 0 -- 0 7,889 0 0
Senior Vice 1992 126,169 0 -- 0 0 0 0
President, 1991 127,128 0 -- 0 0 0 0
Marketing
and Cus-
tomer Serv-
ices
W. M. Eglinton,*** 1993 166,656 0 -- 0 0 0 203,213
Executive 1992 165,416 0 -- 0 0 0 0
Vice Presi- 1991 168,687 0 -- 0 0 0 0
dent
M. H. Maerki, 1993 162,240 0 -- 0 7,889 0 0
Senior Vice 1992 161,028 0 -- 0 0 0 0
President 1991 158,560 0 -- 0 0 0 0
and Chief
Financial
Officer
P. T. Ortiz,**** 1993 126,384 0 -- 0 7,889 0 0
Senior Vice 1992 125,203 0 -- 0 0 0 0
President, 1991 49,462 0 -- 0 0 0 0
Regula-
tory Poli-
cy, General
Counsel,
and Secre-
tary
J. E. Sterba, 1993 124,501 0 -- 0 0 0 0
Senior Vice 1992 130,105 0 -- 0 0 0 0
Presi- 1991 148,703 0 -- 0 0 0 0
dent, Cor-
porate De-
velopment
</TABLE>
- ---------------------
* The dollar value of perquisites and other personal benefits for each of the
named executive officers was less than the established reporting thresholds.
**Mr. Montoya became CEO on August 1, 1993, replacing Mr. Ackerman. The
amount shown in the "Salary" column for Mr. Montoya includes $25,500, a one-
time payment to reflect the fact that Mr. Montoya did not receive an initial
grant of options under the Performance Stock Plan in 1993. Moving expenses
for Mr. Montoya are listed in the "All Other Compensation" column.
***Mr. Eglinton retired effective December 31, 1993. The amount shown in the
"All Other Compensation" column reflects payment under Mr. Eglinton's
severance agreement.
****Mr. Ortiz became an employee of PNM in October 1991.
12
<PAGE>
OPTION GRANTS IN 1993 FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
------------------------------------------------------ ----------------
*NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR
OPTIONS GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION 5% 10%
NAME (#) FISCAL YEAR ($/SH) DATE ($)** ($)**
- ---- --------------- --------------- ----------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
B. F. Montoya........... 0 0 0 0 0 0
J. T. Ackerman.......... 0 0 0 0 0 0
M. P. Bourque........... 7,889 2.1% $13.75 6/30/2003 $68,219 $172,879
W. M. Eglinton.......... 0 0 0 0 0 0
M. H. Maerki............ 7,889 2.1% $13.75 6/30/2003 $68,219 $172,879
P. T. Ortiz............. 7,889 2.1% $13.75 6/30/2003 $68,219 $172,879
J. E. Sterba............ 0 0 0 0 0 0
</TABLE>
- ---------------------
* These nonqualified options are exercisable following vesting on June 30,
1996. These options may also become fully exercisable upon the occurrence of
certain other events such as a change in control (as defined in the
Performance Stock Plan) of PNM.
** These are hypothetical values using assumed appreciation rates pursuant to
rules of the Securities & Exchange Commission.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND DECEMBER 31, 1993 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT THE-MONEY OPTIONS AT
DECEMBER 31, 1993 DECEMBER 31, 1993*
------------------------- -------------------------
SHARES
ACQUIRED ON VALUE REALIZED
EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME ------------ -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
B. F. Montoya........... 0 0 0 0 $ 0 $ 0
J. T. Ackerman.......... 0 0 0 0 $ 0 $ 0
M. P. Bourque........... 0 0 0 7,889 $ 0 $ 0
W. M. Eglinton.......... 0 0 0 0 $ 0 $ 0
M. H. Maerki............ 0 0 0 7,889 $ 0 $ 0
P. T. Ortiz............. 0 0 0 7,889 $ 0 $ 0
J. E. Sterba............ 0 0 0 0 $ 0 $ 0
</TABLE>
- ---------------------
* Computed by reference to the New York Stock Exchange composite transaction
closing price of PNM's Common Stock on December 31, 1993 of $11.25 per
share.
13
<PAGE>
STOCK OWNERSHIP OF CERTAIN EXECUTIVE OFFICERS
Each of the executive officers named in the above table (except Mr. Ackerman
and Mr. Montoya, whose stock ownership is reported above under "ELECTION OF
DIRECTORS") has advised PNM that, as of February 1, 1994, he or she
beneficially owned directly or indirectly Common Stock of PNM as set forth
below:
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK OWNED
BENEFICIALLY AS
OF
FEBRUARY 1, 1994
NAME (A)(B)(C)
---- ----------------
<S> <C>
M. P. Bourque.............................. 365
W. M. Eglinton(d).......................... 5,296
M. H. Maerki............................... 979
P. T. Ortiz................................ 0
J. E. Sterba............................... 1,847
</TABLE>
- ---------------------
(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.
(d) Mr. Eglinton retired from PNM in 1993.
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.
STOCK PERFORMANCE*
The following graph compares the yearly percentage change in the cumulative
total shareholder return on PNM's Common Stock during the five fiscal years
ended December 31, 1993, with the cumulative total return on the S&P 500 Stock
Index and the cumulative total return on an index of peer companies selected by
PNM. Companies in the peer group are combined 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, Central Hudson Gas
and Electric, CMS Energy, Commonwealth Energy System, Consolidated Edison,
Delmarva Power & Light, IES Industries, Iowa-Illinois Gas & Electric, Long
Island Lighting, New York State Electric & Gas, Niagara Mohawk Power, Northern
States Power, Pacific Gas and Electric, Philadelphia Electric, Public Service
Enterprise Group, Rochester Gas & Electric, San Diego Gas & Electric, SCANA
Corporation, Wisconsin Energy Corporation, Wisconsin Public Service and WPL
Holdings.
- ---------------------
* The "STOCK PERFORMANCE" section of this Proxy Statement shall not be deemed
to be incorporated by reference into any filing by PNM under either the
Securities Act of 1933 or the Securities Exchange Act of 1934.
14
<PAGE>
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
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
------------------------------------------------------
1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Public Svc Co N Mex ......................... 100 120 69 80 102 93
PEER GROUP .................................. 100 131 131 171 192 213
S & P 500 ................................... 100 132 128 166 179 197
</TABLE>
- ---------------------
(1) This illustration assumes $100 invested on December 31, 1988 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 1988 through 1993
represents 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.
RETIREMENT PLAN AND RELATED MATTERS. PNM and its subsidiaries have a non-
contributory defined benefit plan (the "Retirement Plan") covering employees
who have at least one year of service and have attained the age of 21. During
1993 and 1994, PNM made, or is planning to make, contributions to the
Retirement Plan for plan year 1993 in the amount of $7,441,177. The amount of
any contribution with respect to any one person cannot be determined. Directors
who are not employees do not participate in the Retirement Plan.
15
<PAGE>
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.
<TABLE>
<CAPTION>
CREDITED YEARS OF SERVICE
AVERAGE OF HIGHEST ------------------------------------------------------------
ANNUAL BASE SALARY FOR 3 32
CONSECUTIVE YEARS(A) 5(B) 10 15 20 25 30 1/2(C)
- ------------------------ ------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 50,000................ $ 5,000 $10,000 $ 15,000 $ 20,000 $ 25,000 $ 30,000 $ 32,500
100,000................ 10,000 20,000 30,000 40,000 50,000 60,000 65,000
150,000................ 15,000 30,000 45,000 60,000 75,000 90,000 97,500
200,000................ 20,000 40,000 60,000 80,000 100,000 120,000 130,000
250,000................ 25,000 50,000 75,000 100,000 125,000 150,000 162,500
300,000................ 30,000 60,000 90,000 120,000 150,000 180,000 195,000
350,000................ 35,000 70,000 105,000 140,000 175,000 210,000 227,500
400,000................ 40,000 80,000 120,000 160,000 200,000 240,000 260,000
</TABLE>
- ---------------------
(a) For these purposes, compensation consists of base salaries and includes any
amount voluntarily deferred under the Master Employee Savings Plan. It
generally does not include bonuses, payments for accrued vacations,
overtime pay or directors' fees.
(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. 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 agreements discussed below. Credited
years of service so computed as of December 31, 1993 are as follows: Mr.
Montoya, 0 years; Mr. Ackerman, 30 years; Ms. Bourque, 7 years; Mr. Eglinton,
30 years; Mr. Maerki, 21.36 years; Mr. Ortiz, 2.25 years; and Mr. Sterba, 18.76
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 agreements discussed below. Such amounts as of December 31,
1993 are as follows: Mr. Montoya, $320,000 (annualized base salary); Mr.
Ackerman, $257,108; Ms. Bourque, $126,528; Mr. Eglinton, $166,656; Mr. Maerki,
$162,240; Mr. Ortiz, $126,384; and Mr. Sterba, $124,500. Mr. Ackerman and Mr.
Eglinton retired as employees on December 31, 1993.
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. Ackerman,
Eglinton, 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 management employees had the opportunity to
earn additional credit for years of service toward retirement (the "Accelerated
Management Performance Plan"). The Accelerated Management Performance Plan, as
amended and restated, phased out the
16
<PAGE>
accumulation of additional credits by January 1, 1990. In addition, the amended
and restated plan includes a provision allowing key management employees to
receive a reduced benefit from the plan upon attaining early retirement without
having attained the maximum credits for years of service. Monthly benefits
received pursuant to the Accelerated Management Performance Plan are offset by
monthly benefits received pursuant to the Retirement Plan.
As approved by the Board in 1989 and 1990, supplemental employee retirement
agreements were entered into with Messrs. Maerki, Eglinton and Ackerman. Under
the agreement with Mr. Maerki, his retirement benefits would be computed as if
he had been in the continuous employment of PNM since February 15, 1974. Under
the agreements with Mr. Ackerman and Mr. Eglinton, benefits under the
Accelerated Management Performance Plan are computed as if each had accumulated
maximum performance credits. The agreements with Mr. Ackerman and Mr. Eglinton
did not affect their retirement benefits because both participants otherwise
accumulated their maximum performance credits.
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
paragraphs and the supplemental retirement agreements with certain former
executive officers. Under the terms of the trust, PNM may, but is not obligated
to, provide funds to the trust, which has been established with an independent
trustee, to aid in meeting its obligations under such plans. Funds in the
amount of approximately $12.7 million were provided to the trust in 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. The Board took similar action regarding Mr. Ackerman.
The Board adjusted Mr. Ackerman's benefits to provide him with retirement
benefits that he would have otherwise been entitled to had he been a designated
participant in the Performance Stock Plan, resulting in a retirement benefit
adjustment of $4,707 per year.
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). A portion of that stock vested in 1993 in accordance with the terms
of the plan. Mr. Robert M. Price and Dr. Laurence H. Lattman were not directors
at the date of grant and did not receive the 1992 restricted stock grant. Mr.
Price received an $800 monthly retainer in 1993 through May 1993. The Director
Restricted Stock Retainer Plan, as amended, provides 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. In June 1993, directors received the $12,000
annual retainer in cash. Directors are also reimbursed for expenses incurred in
connection with service as a director.
17
<PAGE>
Directors who were not full-time employees received $350 in 1993 for each
meeting of the Board or a committee thereof attended. Any director who is an
employee of PNM or one of its subsidiaries 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.
TERMINATION OF EMPLOYMENT AND
CHANGE OF CONTROL ARRANGEMENTS
As of December 31, 1991, an Executive Retention Plan (the "Retention Plan")
was adopted by the Board of Directors. 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. Mr.
Ackerman is the only executive officer who was not covered by the Retention
Plan. The Retention Plan provides certain severance benefits should the
employee's employment with PNM be terminated 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 such termination is for death, by
PNM for reasons other than cause, or by the employee due to constructive
termination. The severance benefits include: (i) lump sum severance equal to
2.5 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 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 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. An impacted employee would also have the option
to remain with PNM for an additional year but would give up the option to
receive enhanced benefits. 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 impaction up to 5% of base salary. Under the amendment,
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
sale, or withdrawal from sale, of assets for which they are responsible. If an
employee is eligible to receive benefits under the Retention Plan, benefits are
not available to that employee under the severance pay plan. In 1993,
18
<PAGE>
the Board entered into a severance agreement with Mr. Eglinton, under which Mr.
Eglinton received severance benefits equal to seven months of base salary plus
one additional week of base salary per each year of service. The total amount
of the severance benefit paid to Mr. Eglinton is shown in the Summary
Compensation Table.
In June 1993, the Board made an offer of employment to Mr. Ben Montoya to
become CEO of PNM. The terms of the offer included a base salary offer,
specification and nature of benefits, and terms for relocation, home sale, and
interim living expenses. Under the terms of the offer, Mr. Montoya would
receive supplemental retirement benefits if he completes five years of service
with PNM. He would also receive severance benefits substantially equal to the
level of benefits provided to other members of senior management (which are
discussed above) in the event that he is terminated by the Board. Formal
agreements regarding Mr. Montoya's retirement and severance benefits were
entered into following his acceptance of the CEO position.
Reference is made to the first footnote in the "OPTION GRANTS IN 1993 FISCAL
YEAR" table. 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 well as certain other actions.
Included in the announcement was PNM's intention to file a plan with the New
Mexico Public Utility Commission ("NMPUC") designed to lower electric prices by
consolidating certain gas and electric functions, restructuring assets and
reducing operation and maintenance expenses. In its January 11, 1993
announcement, PNM also stated its intention to dispose of excess electric
generating capacity not needed by New Mexicans including, if possible, some or
all of PNM's share of the Palo Verde Nuclear Generating Station. PNM also
announced its intention to dispose of the Sangre de Cristo Water Company and
PNM's natural gas gathering and natural gas processing assets. Mr. J. E. Sterba
was assigned to head 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.
An agreement has been executed with Williams Gas Processing--Blanco, Inc.,
for the sale of the natural gas gathering and processing assets of PNM and two
subsidiaries for a cash selling price of $155 million, subject to certain
adjustments. Subject to a number of conditions and approvals, including NMPUC
approval, the sale of the gas assets is expected to close in 1995. In addition,
PNM has reached agreement with the City of Santa Fe for the sale of PNM's water
utility division, the Sangre de Cristo Water Company. The purchase price is
approximately $48 million. PNM would also continue to operate the water utility
for up to four years for a fee under a proposed contract with the City. Closing
of the sale of the water utility is anticipated in the second half of 1994,
subject to a number of conditions, including NMPUC approval. The agreements for
the sale of the gas gathering and processing assets and the water utility
assets have been approved by the PNM Board of Directors. Under the terms of the
incentive plan discussed above, Mr. Sterba would be entitled to incentive
payments if the asset sales occur. Although the specific amount of the
incentive payments
19
<PAGE>
is presently unknown, PNM currently estimates the aggregate of the incentive
payments to Mr. Sterba would be approximately $140,000, resulting from closing
of both the gas asset and water utility sales. Mr. Sterba's incentive award
could be increased depending upon the sale of additional water company assets.
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
before the Annual Meeting, the persons named in the accompanying proxy expect
to vote in accordance with their judgment on such matters.
REQUESTS FOR REPORTS
A COPY OF THE 1993 FORM 10-K IS INCLUDED AS PART OF PNM'S ANNUAL REPORT TO
SHAREHOLDERS MAILED ON MARCH 23, 1994. ADDITIONAL COPIES OF THE REPORT ARE
AVAILABLE UPON WRITTEN REQUEST TO PATRICK T. ORTIZ, SENIOR VICE PRESIDENT,
REGULATORY POLICY, GENERAL COUNSEL AND SECRETARY, ALVARADO SQUARE, ALBUQUERQUE,
NEW MEXICO 87158.
DEADLINE FOR PROPOSALS BY STOCKHOLDERS
In order to be considered for inclusion in PNM's Proxy Statement for the 1995
Annual Meeting of Stockholders, proposals from stockholders must be received by
PNM at Alvarado Square, Mail Stop 2828, Albuquerque, New Mexico 87158, on or
before November 23, 1994.
By Order of the Board of Directors
Patrick T. Ortiz
Corporate Secretary
20
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P
R
O
X
Y
PUBLIC SERVICE COMPANY OF NEW MEXICO
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned does hereby constitute and appoint J.A. Godwin, L.H. Lattman
and R.M. Price, and each or any 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 stock of the undersigned at the Annual Meeting of
Stockholders of Public Service 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., Mountain Daylight Time,
on April 27, 1994, and at any adjournments thereof, on all matters coming
before said meeting.
A vote FOR the following proposals is recommended by the Board of Directors.
1. Election of Directors (Robert G. Armstrong, Reynaldo U. Ortiz and Paul F.
Roth).
Mark one:_____ FOR all nominees listed above.
_____ FOR all nominees listed above except
______________________________ .
_____ WITHHOLD AUTHORITY to vote for all nominees listed above.
2. Selection of Arthur Andersen & Co. as independent auditors for the current
year.
[_] FOR [_] AGAINST [_] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before this meeting, or any adjournment or
adjournments thereof.
(Please turn over)
P
R
O
X
Y
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE COMMON STOCKHOLDER.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
PLEASE 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 JOINT 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.
- - -
- - -
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Signature
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Signature
Dated: ___________________________________________________________________, 1994
PLEASE MARK, SIGN,
DATE AND RETURN THE
PROXY CARD PROMPTLY,
USING THE ENCLOSED
ENVELOPE
