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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 [ ] Confidential, For Use of the
[x] Definitive Proxy Statement Commission Only
[ ] Definitive Additional Materials (as Permitted by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Public Service Company of New Mexico
...............................................................................
(Name of Registrant as Specified in its Charter)
Patrick T. Ortiz
...............................................................................
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
Set forth the amount on which the filing fee is calculated and state how it
was determined.
...........................................................................
4) Proposed maximum aggregate value of transaction:
...........................................................................
5) Total fee paid:
...........................................................................
[ ] 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:
...........................................................................
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[LOGO APPEARS HERE]
PUBLIC SERVICE COMPANY OF NEW MEXICO
ALVARADO SQUARE
ALBUQUERQUE, NEW MEXICO 87158
__________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 29, 1997
___________________________________
To the Holders of Common Stock of
PUBLIC SERVICE COMPANY OF NEW MEXICO
Notice is hereby given that the Annual Meeting of Shareholders 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 29, 1997, 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
Shareholders in 2000, or until their successors shall be duly elected
and qualified.
2. To consider and vote upon the approval of the selection by PNM's Board
of Directors of Arthur Andersen LLP as independent public accountants to
audit the consolidated financial statements of PNM and subsidiaries for
the fiscal year ending December 31, 1997.
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
10, 1997 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
Secretary
March 24, 1997
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 PRE-ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE.
<PAGE>
____________________
PROXY STATEMENT
____________________
[LOGO APPEARS HERE]
PUBLIC SERVICE COMPANY OF NEW MEXICO
ANNUAL MEETING OF SHAREHOLDERS
APRIL 29, 1997
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 1997
Annual Meeting of Holders of the Common Stock of PNM, to be held on April 29,
1997 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. Shareholders 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 LLP as independent public accountants 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 24, 1997, in connection with the solicitation of proxies by
PNM's Board of Directors for use at the Annual Meeting.
In addition to soliciting proxies through the mail, certain employees of PNM
may solicit proxies in person and by telephone. PNM has retained Beacon Hill
Partners, Inc. to assist in the solicitation of proxies, primarily from brokers,
banks and other nominees, for an estimated fee of $2,500. The cost of soliciting
proxies will be borne by PNM. PNM will, upon request, reimburse brokers, banks,
nominees, custodians and other record holders for their out-of-pocket expenses
of forwarding proxy materials to the beneficial owners of the shares.
VOTING INFORMATION
Only holders of PNM Common Stock of record at the close of business on March
10, 1997 will be entitled to vote at the Annual Meeting. On that date, there
were 41,774,083 shares of PNM Common Stock outstanding. Each 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 independent public
accountants, 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.
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.
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The aggregate number of votes entitled to be cast by all shareholders present
in person or represented by proxy at the meeting, whether those shareholders
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
shareholder present in person or represented by proxy at the meeting has the
same legal effect as a vote AGAINST the matter even though the shareholder 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 14,
1997, to be the beneficial owners of more than 5% of PNM's voting securities:
<TABLE>
<CAPTION>
NAME AND ADDRESS NATURE OF NUMBER OF PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP SHARES CLASS
- -------------- -------------------- -------------------- ------------ -------
<S> <C> <C> <C> <C>
Common Stock President and Fellows of Sole Voting & Dispositive
of Harvard College Power
600 Atlantic Avenue
Boston, MA 02210 TOTAL 4,049,400(1) 9.69%
Common Stock Boston Partners Asset Shared Voting &
Management, L.P. Dispositive Power
One Financial Center
Boston, MA 02111 TOTAL 2,329,252(2) 5.6%
- -----------
</TABLE>
(1) As reported to PNM by the President and Fellows of Harvard College. In
addition, The Harvard University Master Trust Fund and Harvard Charitable
Remainder Trust Equity Partnerships, as members of a group with the
President and Fellows of Harvard College, reported sole voting and
dispositive power of 85,300 and 18,400 shares, respectively, representing
approximately 0.2% and 0.0%, respectively, of PNM's voting securities. PNM
makes no representation as to the accuracy or completeness of such
information.
(2) As reported on Schedule 13G dated February 7, 1997 and filed with the
Securities and Exchange Commission (the "SEC") by Boston Partners Asset
Management, L.P. ("BPAM"), Boston Partners, Inc. and Desmond John Heathwood,
(collectively the "Reporting Persons"). The filing reported that each of
the Reporting Persons may be deemed to own beneficially 2,329,252 shares;
that BPAM owns of record 2,329,252 shares; that, as sole general partner of
BPAM, Boston Partners, Inc. may be deemed to own beneficially all of the
shares owned beneficially by BPAM; and that, as principal stockholder of
Boston Partners, Inc., Desmond John Heathwood may be deemed to own
beneficially the shares owned beneficially by Boston Partners, Inc. The
filing also indicated that BPAM holds all of such shares under management
for its clients; that pursuant to Rule 13d-4, each of Boston Partners, Inc.
and Mr. Heathwood expressly disclaims beneficial ownership of any shares;
and that BPAM, Boston Partners, Inc. and Mr. Heathwood expressly disclaim
membership in a "group" as defined in Rule 13d-5(b)(1). PNM makes no
representation as to the accuracy or completeness of such information.
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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
Shareholders of PNM in 2000, or until their successors have been elected and
qualified. It is intended that votes will be cast pursuant to proxies for the
following nominees:
NAME ADDRESS
---- -------
Robert G. Armstrong Roswell, New Mexico
Reynaldo U. Ortiz Denver, Colorado
Paul F. Roth Sanibel, Florida
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. Proxies cannot be
voted for a greater number of persons than three, the number of nominees named
above.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES.
DIRECTOR BIOGRAPHICAL INFORMATION:
DIRECTORS WHOSE TERMS EXPIRE IN 2000 (IF ELECTED):
ROBERT G. ARMSTRONG, age 50, is a resident of Roswell, New Mexico and has
been a director since May 1991. Mr. Armstrong is the President of Armstrong
Energy Corporation, Roswell, New Mexico, an oil and gas exploration and
production company. He is a member of the Executive, Audit, and Compensation
and Human Resources Committees. Mr. Armstrong also serves as Chairman of the
Board of Directors of Sunwest Bank of Roswell, N.A.
REYNALDO U. ORTIZ, age 50, is a resident of Denver, Colorado and has been a
director since April 1992. Mr. Ortiz is the President and Chief Executive
Officer of Sophia Communications, Inc., a startup wireless communications
company. Mr. Ortiz served as President and Chief Executive Officer of
LyncStar Communications, Inc. (a provider of integrated network
communications services) from March through December 1996, served as Chief
Executive Officer of Jones Education Networks, Inc. (a cable television
programming company) from March 1994 through February 1996, and was Senior
Vice President, Jones Financial Group, Inc. from January through March 1994.
Mr. Ortiz served as Vice President, Corporate Public Policy of U S WEST, Inc.
from 1991 to 1994. He is a member of the Audit and Customer and Public
Policy Committees.
PAUL F. ROTH, age 64, is a resident of Sanibel, Florida and has been a
director since May 1991. Mr. Roth served as the President of the Dallas
Chamber of Commerce, Dallas, Texas, from 1991 to 1992. Mr. Roth served as
President of the Texas Division of Southwestern Bell Telephone Company,
Dallas, Texas from November 1988 until his retirement in March 1991. He is a
member of the Executive, Compensation and Human Resources, Finance, and
Nominating and Governance Committees.
3
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DIRECTORS WHOSE TERMS EXPIRE IN 1998:
JOHN T. ACKERMAN, age 55, is a resident of Albuquerque, New Mexico and has
been a director since June 1990. Mr. Ackerman has served as Chairman of the
Board of PNM since 1991 and served as President and Chief Executive Officer
of PNM from 1991 until his retirement in 1993. He is a member of the
Executive Committee.
JOYCE A. GODWIN, age 53, is a resident of Albuquerque, New Mexico and has
been a director since May 1989. Ms. Godwin served as Vice President and
Secretary of Presbyterian Healthcare Services of Albuquerque, New Mexico,
from 1979 until her retirement in December 1993. Ms. Godwin also served as
Chairman and President of Southwest Business Ventures, Inc., a holding
company for Presbyterian Healthcare Services' for-profit ventures, from 1986
until her retirement in December 1993. She is a member of the Executive,
Compensation and Human Resources, Nominating and Governance, and Customer and
Public Policy Committees. She is a nominee for election to the board of TJ
International at its May 21, 1997 meeting of shareholders.
MANUEL LUJAN, JR., age 68, is a resident of Albuquerque, New Mexico and has
been a director since April 1994. Mr. Lujan has been an insurance agent with
Manuel Lujan Insurance, Inc. since 1948. Mr. Lujan has been a consultant on
U.S. governmental matters, focusing on Western U.S. issues, since 1993. Mr.
Lujan served as U.S. Secretary of the Interior from 1989 to 1993. He is a
member of the Audit and Customer and Public Policy Committees. Mr. Lujan
also serves on the Boards of Directors of SODAK Gaming, Inc. and First State
Bank, Albuquerque, New Mexico.
DIRECTORS WHOSE TERMS EXPIRE IN 1999:
LAURENCE H. LATTMAN, age 73, is a resident of Albuquerque, New Mexico and has
been a director since May 1993. Dr. Lattman served as President of New
Mexico Institute of Mining and Technology from 1983 until his retirement in
1993. He is a member of the Audit, Customer and Public Policy, and
Nominating and Governance Committees.
BENJAMIN F. MONTOYA, age 61, is a resident of Rio Rancho, New Mexico and has
been a director since October 1993. Mr. Montoya has served as President and
Chief Executive Officer of PNM since August 1993, and previously served as
Senior Vice President and General Manager, Gas Supply Business Unit, Pacific
Gas and Electric Company (1991-1993). He is a member of the Finance
Committee. Mr. Montoya also serves on the Boards of Directors of Norwest
Corporation, a bank holding company, and Furr's Supermarkets, Inc.
ROBERT M. PRICE, age 66, is a resident of Edina, Minnesota and has been a
director since July 1992. Mr. Price has been President of PSV, Inc., a
technology consulting business located in Burnsville, Minnesota, since 1990.
Between 1961 and 1990, Mr. Price served in various executive positions,
including Chairman and Chief Executive Officer, of Control Data Corporation,
a mainframe computer manufacturer and business services provider. He is a
member of the Executive, Compensation and Human Resources and Finance
Committees. Mr. Price serves on the Boards of Directors of Rohr
Incorporated, International Multifoods, Inc., Fourth Shift Corporation,
Tupperware, Inc., and Affinity Technology, Inc.
4
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SHARES OF COMMON
STOCK OWNED
BENEFICIALLY AS OF
NAME FEBRUARY 1, 1997(A)(B)
- ---- ----------------------
John T. Ackerman 10,935
Robert G. Armstrong 4,730
Joyce A. Godwin(c) 4,387
Laurence H. Lattman(c) 3,123
Manuel Lujan, Jr.(c) 3,348
Benjamin F. Montoya 135,094
Reynaldo U. Ortiz 3,224
Robert M. Price 4,000
Paul F. Roth(c) 3,715
- ---------------
(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) As of February 1, 1997, directors and executive officers of PNM as a group
owned beneficially 383,687 shares of PNM Common Stock, or less than one
percent of the total number of shares outstanding. Such number includes
shares which such persons have the right to acquire within 60 days of the
date hereof pursuant to options granted under the Director Retainer Plan and
the Performance Stock Plan, as follows: Mr. Armstrong, 1,000; Ms. Godwin,
1,000; Mr. Montoya, 134,094; Mr. Ortiz, 1,000; Mr. Price, 1,000; and 204,374
for all executive officers other than Mr. Montoya. (See "COMPENSATION OF
DIRECTORS"). Such number of shares does not include 914 shares of PNM
Common Stock owned by the spouse of an executive officer, as to which shares
beneficial ownership is disclaimed.
(c) Included in the shares shown above for Ms. Godwin, Dr. Lattman, Mr. Lujan
and Mr. Roth are shares held under the Director 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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished
to PNM pursuant to Rule 16a-3(e) during 1996 and Form 5, and amendments thereto,
and written representations furnished to PNM with respect to 1996 reporting, no
person who was a director, officer, beneficial owner of more than 10 percent of
any class of equity securities of PNM registered pursuant to Section 12 of the
Exchange Act, or any other person subject to Section 16 of the Exchange Act with
respect to PNM, failed to file on a timely basis reports required by Section
16(a) of the Exchange Act during the most recent fiscal year or prior fiscal
years.
5
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BOARD AND COMMITTEE MEETINGS
During 1996, the Board held seven meetings. In addition, the outside
directors met once during 1996. The following standing committees of the Board
held the number of meetings indicated: Audit, five; Compensation and Human
Resources, nine; Customer and Public Policy, nine; Executive, three; Finance,
five; and Nominating and Governance, five. 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 amended in April 1991 and 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.
Dr. Lattman, upon attaining the age of 72 years in November 1995, submitted
his written resignation to the Board for acceptance by the Board at such time as
the Board in its discretion deems advisable. The Board in its discretion has
not deemed it advisable to accept Dr. Lattman's resignation. The Board expects
to continue to waive the age 72 policy for the duration of Dr. Lattman's term as
a director.
MAXIMUM TERM OF OFFICE. Under the Board policies, no person who is presently
serving or who hereafter serves as a director of PNM shall be nominated to serve
more than four times. It is the intent of this policy that each member of the
Board will normally serve for a period of no more than twelve years, plus a
portion of an unexpired term, if any, if the director was initially appointed to
serve out an unexpired term of a director who resigned, retired or died in
office. Terms of office served prior to adoption of the policies will be counted
in determining whether the four-term limitation has been reached. The maximum
term of office policy does not apply to any member of the Board with service as
chief executive officer of PNM.
In adopting the four-term limitation, the Board made it clear that the policy
is not to be construed to mean that renomination for a second, third or fourth
term will be routine. An evaluation process is used by the Nominating and
Governance 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 Compensation and Human Resources Committee and the
Audit Committee must be non-employee directors only, and the Chair of the
Nominating and Governance Committee must be a non-employee director.
COMMITTEES OF THE BOARD
The members of the standing committees of the Board are noted in the
foregoing biographies. The responsibilities of the committees are as follows:
The Audit Committee consists entirely of outside members of the Board of
Directors. It assesses the work of PNM's internal auditors and independent
public accountants and the effectiveness of the business control
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structure. It also reviews the financial statements of PNM and oversees PNM's
financial reporting. 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 accounting functions.
The Compensation and Human Resources Committee consists entirely of outside
directors. It reviews PNM's compensation policies and benefit programs and
their relationship to the attainment of business goals. The Committee
recommends to the Board the compensation philosophy and guidelines for the
entire executive and managerial group, giving emphasis to rewarding long term
results and maximizing shareholder value. The Committee reviews PNM's
affirmative action program, conducts an annual performance evaluation of the
chief executive officer, and assures management continuity through annual review
and approval of a management development and succession program. The Committee
also has oversight of PNM's code of conduct and compliance program and interacts
with PNM's employee organizations.
The Customer and Public Policy Committee reviews and monitors policies and
their implementation that deal with PNM's responsibility to the communities in
which it does business. These policies include, but are not limited to,
environmental, charitable contributions, political action committee,
communications to various constituencies and regular visits with public
officials.
The Executive Committee consists of the Chairman of the Board of Directors
and the Chairs 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 capital
expenditures in excess of $2,500,000 and of certain other capital expenditures
in excess of $1,000,000.
The Nominating and Governance Committee 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,
composition and compensation of the Board, including committee assignments and
candidates for election as Chairman of the Board. In 1995, the Board approved a
Nominations Policy which outlines the guidelines, procedures, and selection
criteria relating to filling vacancies on the Board, recognizing the importance
of a well-balanced board which reflects the interests of PNM's shareholders,
customers, employees and the communities it serves. The Nominating and
Governance 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 1998 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 August 1, 1997.
The determination of nominees recommended by the Nominating and Governance
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
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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 INDEPENDENT PUBLIC ACCOUNTANTS
Action is to be taken with respect to the approval of the selection, by the
Board of Directors, of the firm of Arthur Andersen LLP as independent public
accountants to audit the consolidated financial statements of PNM and
subsidiaries for the fiscal year ending December 31, 1997. The firm has been
the independent public accountants of PNM since 1993. Arthur Andersen LLP has
no financial interest in PNM or any of its subsidiaries. A representative of
Arthur Andersen LLP will be present at the Annual Meeting of Shareholders to
answer appropriate questions and to make any statement the representative might
desire.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE SELECTION OF
ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
8
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REPORT OF THE
COMPENSATION AND HUMAN RESOURCES COMMITTEE
ON EXECUTIVE COMPENSATION*
THE COMPENSATION AND HUMAN RESOURCES COMMITTEE PHILOSOPHY
Two basic principles guide PNM's compensation program. First, senior
management's compensation program should reflect both individual performance and
the achievement of PNM's goals. Second, the program should be as competitive as
possible in order to attract, motivate, and retain key management members.
Utility industry, New Mexico and regional compensation trends are considered in
determining competitiveness of the program.
COMPENSATION ELEMENTS
The senior management compensation program, which is designed to meet the
philosophy of the Compensation and Human Resources Committee (the "Committee"),
has three components: base salary, incentive plans and management benefits.
BASE SALARIES. In 1996, base salaries, the fixed component of pay, were
conservatively tied to the average level of base salaries among gas and electric
utilities which are included in compensation surveys sponsored by the Edison
Electric Institute and the American Gas Association, as well as other
industries. The Committee believes that direct competitors for executive talent
comprise a larger group than the group of companies included in the peer group
established to compare shareholder returns.
INCENTIVE PLANS. The Committee believes that incentive plans are
critically important to PNM's compensation philosophy and in achieving PNM's
goals. The Committee believes this element should have both short-term and
long-term elements. The short-term element should consist of "at risk" pay or
rewards paid out in cash while the long-term element should be stock-based
compensation.
In 1995, a results-based reward program was implemented which introduced an
"at risk" cash compensation element to PNM's existing compensation program
designed to tie one portion of the cash rewards awarded employees to the success
of their business unit and another portion to the success of PNM as a whole. In
1996, payments were made to the participants based upon achieving 1995 goals.
The program was continued in 1996. Goals for 1996 were approved by the
Board of Directors. For 1996, overall Company results were measured by earnings
per share from continuing operations. The earnings per share threshold had to
be maintained before and after the payment of awards. Awards for business unit
results depended on the amount of money in the unit pool and whether unit goals
were met. Unit goals were generally centered on cost control, customer
satisfaction and efficiency in operations. The 1996 goals were partially
achieved and partial payments were made in February 1997.
The long-term element is addressed through implementation of the
Performance Stock Plan. The Performance Stock Plan is a stock option incentive
plan. Prior to 1995, initial grants were granted in lieu of base salary merit
increases. Subsequent grants have been made based on a formula, where
achievement of goals determines if the options will be granted. These goals are
approved by the Board of Directors. The grants are then adjusted based on PNM's
total return to shareholders compared to the industry peer group discussed in
the "STOCK PERFORMANCE" section of the Proxy Statement. Individual awards are
based on the participant's position with PNM. Previous years' grants are not
considered in determining the number of annual awards granted.
In 1996, there were two goals: one based on earnings per share and one
based on customer satisfaction. The customer satisfaction goal was not
achieved. PNM achieved the earnings per share goal and 386,228 options, with an
exercise price of $19.625, were granted effective December 31, 1996. Of those,
117,133 options were granted to the executive officer participants. Pursuant to
an amendment to the
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Performance Stock Plan approved by shareholders in 1995, executive officers are
eligible for an award for the partial achievement of a goal.
A deferred bonus fund of $200,000 was established in December 1994, based
on PNM's 1994 performance, from which lump sums to all officers of PNM,
excluding the President and CEO, were to be paid at such time as PNM reinstated
a dividend to its shareholders. Upon the reinstatement of the dividend in 1996,
such payments were made to those officers. A bonus fund for employees other
than officers in the aggregate amount of $2,094,906 was also established and
paid out in December 1994.
MANAGEMENT BENEFITS. The benefits provided for senior management are based
upon benefits provided to all employees. The benefits focus on retirement, life
insurance, health care, severance and retention.
CHIEF EXECUTIVE OFFICER COMPENSATION FOR 1996
In July 1993, the Board offered Mr. Montoya the position of President and
CEO. Data provided by an executive compensation consultant and an executive
search firm were considered in determining Mr. Montoya's compensation. Mr.
Montoya's 1994 and 1995 base compensation remained unchanged from the amount
originally set when he was hired. His 1996 base compensation was increased by
$30,000 to $350,000.
In 1996, Mr. Montoya received 32,802 stock options under the Performance
Stock Plan based on the attainment of PNM's earnings per share goal. The
exercise price for these options is $19.625.
Mr. Montoya was not a participant in the results-based reward program or in
the deferred bonus fund referred to above.
CERTAIN TAX MATTERS
PNM has no policy with respect to qualifying compensation paid to officers
for deductibility under Section 162(m) of the Internal Revenue Code (the "Code")
because PNM's compensation levels do not approach the limits as defined by the
Code and it is not anticipated that the compensation of PNM's management will
approach those limits in the foreseeable future.
COMMITTEE PROCESS
The executive compensation program is administered by the Committee. The
Committee consists of independent directors who are not PNM employees and who
qualify as non-employee directors for the purposes of SEC Rule 16b-3 adopted
under the Securities Exchange Act of 1934.
The Committee is accountable for all compensation matters for PNM's senior
management. The Committee periodically retains an independent executive
compensation consulting firm whose recommendations are considered by the
Committee in making decisions regarding the appropriateness of the executive
compensation program.
Compensation and Human Resources Committee
Paul F. Roth, Chair
Robert G. Armstrong
Joyce A. Godwin
Robert M. Price
_______________________
*The Report of the Compensation and Human Resources Committee shall not be
deemed to be incorporated into any filing by PNM under the Securities Act of
1933 or the Securities Exchange Act of 1934.
10
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid during each of the last three fiscal years for the current Chief Executive
Officer, each of the four most highly compensated executive officers serving at
the end of the year, and one executive officer who resigned prior to the end of
the year, based on salary and bonuses earned during 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------
LONG TERM
COMPENSATION
AWARDS
------------
SECURITIES
NAME AND PRINCIPAL POSITION OTHER ANNUAL UNDERLYING ALL OTHER
(AS OF DECEMBER 31, 1996, SALARY BONUS COMPENSATION OPTIONS COMPENSATION
EXCEPT AS OTHERWISE NOTED) YEAR ($) ($) ($)(B) (#) ($)
- ---------------------------------- ---- -------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
B. F. Montoya, 1996 $341,927 -0- -- 32,802 -0-
President and CEO 1995 320,205 -0- -- 39,456 -0-
1994 317,967 -0- -- 94,638 -0-
M. P. Bourque, 1996 $138,707 $14,201(a) -- -0- $208,964(i)
Senior Vice President, 1995 132,067 10,000(f) -- 11,750 -0-
Energy Services (resigned 16,757(h)
effective December 24, 1996) 1994 126,537 -0- -- 30,748 -0-
R. J. Flynn, 1996 $153,995 $ 1,183(a) -- 12,301 -0-
Senior Vice President, 37,400(h)
Electric Services 1995 154,056 25,624(h) -- 13,490 16,045(c)
1994 29,686(e) -0- -- 2,552 -0-
M. H. Maerki, 1996 $174,095(d) $14,201(a) -- 12,301 -0-
Senior Vice President and 39,101(h)
Chief Financial Officer 1995 173,486(g) 19,240(h) -- 13,490 -0-
1994 172,243(d) -0- -- 30,748 -0-
W. J. Real, 1996 $137,596(d) $14,201(a) -- 10,853 -0-
Senior Vice President, 30,000(h)
Gas Services 1995 138,306(g) 7,155(h) -- 11,750 -0-
2,500(f)
1994 120,552 -0- -- 30,748 -0-
J. E. Sterba, 1996 $146,965(d) $14,201(a) -- 12,301 -0-
Senior Vice President, 40,801(h)
Bulk Power Services (j) 1995 142,911(g) 12,836(h) -- 13,490 -0-
123,201(f)
1994 126,903(d) -0- -- -0- -0-
</TABLE>
11
<PAGE>
NOTES:
-------------------
(a) A deferred bonus fund of $200,000 was established in December 1994,
based on PNM's 1994 performance, from which lump sum awards to all
officers of PNM, excluding the President and CEO, were to be paid at
such time as PNM paid a dividend to its shareholders. Upon the
reinstatement of the dividend in 1996, the amounts noted above were
paid, as determined by the President and CEO. A bonus fund for
employees other than officers in the aggregate amount of $2,094,906 was
also established and paid out in December 1994.
(b) These amounts are less than the established reporting thresholds.
(c) These amounts represent relocation, home sale and interim living
expenses paid to Mr. Flynn in 1995.
(d) These amounts include sales of accrued vacation hours during 1994 and
1996 and do not reflect increases in base salaries.
(e) Mr. Flynn became an employee of PNM in December 1994.
(f) These amounts are incentive payments under previously disclosed
incentive plans for efforts leading to the sales of gas gathering and
processing assets and water utility assets which occurred in 1995.
(g) These amounts include sales of accrued vacation hours during 1995 and
also reflect changes in base salaries.
(h) In 1995, a results-based reward program was implemented which was
designed to tie a portion of cash rewards awarded employees to the
success of their business unit and a portion to the success of PNM as
a whole. Goals are approved annually by the Board of Directors. These
amounts reflect incentive award amounts paid in 1997 for 1996
achievements and in 1996 for 1995 achievements.
(i) On December 24, 1996, Ms. Bourque resigned from PNM. This amount
reflects a payment made under the employment termination agreement with
Ms. Bourque.
(j) Appointed Executive Vice President and Chief Operating Officer
effective March 11, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------------------
PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS GRANTED EXERCISE OR GRANT DATE
UNDERLYING OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (#)(A) FISCAL YEAR ($/SH) DATE ($)(B)
---- -------------------- ---------------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C>
B. F. Montoya 32,802 8.5% $19.625 12/31/2006 $120,055
M. P. Bourque -0- -0- -0- -0- -0-
R. J. Flynn 12,301 3.2% 19.625 12/31/2006 45,022
M. H. Maerki 12,301 3.2% 19.625 12/31/2006 45,022
W. J. Real 10,853 2.8% 19.625 12/31/2006 39,722
J. E. Sterba 12,301 3.2% 19.625 12/31/2006 45,022
</TABLE>
12
<PAGE>
NOTES:
-------------------
(a) These nonqualified options are exercisable following vesting on
December 31, 1999. These options may also become fully exercisable
upon (i) the death or disability of the participant, (ii) the
participant being involuntarily terminated by PNM for reasons other
than cause, (iii) a change in control, or (iv) certain other events as
defined in the Performance Stock Plan.
(b) These amounts represent a theoretical present valuation based on the
Black-Scholes Option Pricing Model. The actual value, if any, an
executive officer may realize ultimately depends on the market value of
PNM's Common Stock at a future date. This valuation is provided
pursuant to SEC disclosure rules. There is no assurance that the value
realized will be at or near the value estimated by the Black-Scholes
model. Assumptions used to calculate this value are: price volatility
- 18%; risk-free rate of return - 5.59%; dividend yield - 2.7%; and
time to exercise - four years. Neither these amounts nor any of the
assumptions should be used to predict future performance of stock price
or dividends. The inclusion of a dividend yield assumption for the
sole purpose of calculations using the Black-Scholes Option Pricing
Model is not to be construed as a projection of dividend payments.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND DECEMBER 31, 1996 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1996(#) DECEMBER 31, 1996(A)($)
ACQUIRED ON EXERCISE VALUE
NAME (#)(B) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- -------------------- ------------ ---------------------------- -------------------------
<S> <C> <C> <C> <C>
B. F. Montoya -- -- 134,094/32,802 $718,348/$0
M. P. Bourque 30,748 $188,332 19,639/0 $ 69,848/$0
R. J. Flynn -- -- 16,042/12,301 $ 43,887/$0
M. H. Maerki 15,000 $103,125 37,127/12,301 $177,658/$0
W. J. Real 5,000 $ 35,000 45,387/10,853 $240,428/$0
J. E. Sterba -- -- 13,490/12,301 $ 26,980/$0
- ---------------------------
</TABLE>
(a) Based on the closing price on the New York Stock Exchange Composite
Transactions of PNM's Common Stock on December 31, 1996 of $19.625.
(b) Or, if no shares were received upon exercise, the number of securities
with respect to which the options were exercised.
13
<PAGE>
DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE
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. PNM made
contributions to the Retirement Plan for plan year 1996 in the amount of
$4,000,000. 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.
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. As discussed below, the Retirement Plan will be revised
effective December 31, 1997. The table and discussion are based on the current
Retirement Plan.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
CREDITED YEARS OF SERVICE
----------------------------------------------------------------
AVERAGE OF HIGHEST
ANNUAL BASE SALARY FOR
3 CONSECUTIVE YEARS(A) 5(B) 10 15 20 25 30 32 1/2(C)
- ------------------------ ---- -- -- -- -- -- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
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, or
overtime pay.
(b) Although years of service begin accumulating from the date of employment,
vesting occurs after five years of service.
(c) The maximum number of years generally taken into account for purposes of
calculating benefits under the Retirement Plan. 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 arrangements discussed below. Credited
years of service so computed as of December 31, 1996 are as follows: Mr.
Montoya, 7 years (however, Mr. Montoya will not be entitled to any retirement
benefits until 1998); Ms. Bourque, 10 years; Mr. Flynn, 2 years; Mr. Maerki,
25.57 years; Mr. Real, 18.33 years; and Mr. Sterba, 21.87 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
arrangements discussed below. Such amounts as of December 31, 1996 are as
follows: Mr. Montoya, $330,004; Ms. Bourque, $135,000; Mr. Flynn, $161,163; Mr.
Maerki, $170,900; Mr. Real, $134,220; and Mr. Sterba, $142,244.
14
<PAGE>
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.
In December 1996, the Board of Directors approved changes to PNM's defined
benefit Retirement Plan and implementation of a defined contribution plan no
later than January 1, 1998. Salaries used in Retirement Plan benefit
calculations will be frozen as of December 31, 1997. Additional credited
service can be accrued under the Retirement Plan up to a limit determined by age
and years of service. PNM contributions in the 401(k) plan will consist of a 3
percent non-matching contribution, and a 75 percent match on the first 6 percent
contributed by the employee on a before-tax basis.
In January 1981, the Board of Directors approved an executive retirement
program for a group of management employees. The program was intended to
attract, motivate and retain key management employees. Messrs. Maerki and
Sterba and certain other key management employees are eligible to participate in
one or more of the plans in the program. Under the program, as originally
adopted, key 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 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, a supplemental employee retirement
agreement was entered into with Mr. Maerki. 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. For a discussion
regarding certain retirement arrangements with Mr. Montoya, see "TERMINATION OF
EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS".
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 arrangements 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 arrangements. Funds in
the amount of approximately $12.7 million were provided to the trust in 1989.
Distributions have been made from the trust since 1989. No additional funds
have been provided to the trust.
COMPENSATION OF DIRECTORS
Shareholders approved the "First Restated and Amended Director Retainer
Plan" at the April 1996 Annual Meeting. The purpose of the Director Retainer
Plan is to provide additional incentives for the non-employee directors to
perform in the best interests of PNM, its shareholders, customers and employees,
as well as provide a means for directors to increase their proprietary interest
in PNM and respond to shareholders' concerns about stock ownership by directors.
The Director Retainer Plan provides for payment of the annual retainer in
the form of cash, restricted stock or stock options. A trust exists for the
purpose of purchasing and holding restricted stock grants pending the lapse of
restrictions. The trustee of the trust is an independent third party. The
number of options granted to each director who selects options was 1,000 in 1996
and will be 2,000 in subsequent years. The exercise price of each option is the
"fair market value" (as defined in the Director Retainer Plan)
15
<PAGE>
of a share of common stock at the date of grant less the annual retainer divided
by the number of options, subject to a minimum exercise price. The grant date of
a stock option is the date of the annual meeting of shareholders each year.
Stock options generally vest on the next annual meeting date.
The current annual cash retainer is $12,000. Directors who were not full-
time employees received $600 for each meeting of the Board and $450 for each
committee meeting attended in 1996. The Chair of each committee, excluding the
Executive Committee, receives an additional $200 per committee meeting.
Directors are also reimbursed for expenses incurred in connection with service
as a director. 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 the remaining three-fourths in cash, 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 other non-employee
directors.
STOCK OWNERSHIP OF CERTAIN EXECUTIVE OFFICERS
Each of the executive officers named in the above table (except Mr.
Montoya, whose stock ownership is reported above under "ELECTION OF DIRECTORS")
has advised PNM that, as of February 1, 1997, he or she beneficially owned,
directly or indirectly, Common Stock of PNM as set forth below:
SHARES OF COMMON STOCK
OWNED BENEFICIALLY AS OF
NAME FEBRUARY 1, 1997 (A)(B)(C)
---- --------------------------
M. P. Bourque. . . . . . . . . . . . . . . .365
R. J. Flynn. . . . . . . . . . . . . . . 17,042
M. H. Maerki . . . . . . . . . . . . . . 37,506
W. J. Real . . . . . . . . . . . . . . . 46,345
J. E. Sterba. . . . . . . . . . . . . . .15,011
___________
(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) All such amounts are less than one percent of the outstanding Common Stock
of PNM.
(c) Includes shares which may be acquired by the exercise of stock options
within 60 days as follows: Mr. Flynn, 16,042; Mr. Maerki, 37,127; Mr.
Real, 45,387; and Mr. Sterba, 13,490.
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.
16
<PAGE>
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 in
the period ended December 31, 1996, with the cumulative total return on an index
of peer companies selected by PNM and the cumulative total return on the S&P 500
Stock Index. Companies in the peer group are combination electric and gas
utilities each of which has an investment in a nuclear power generating station.
The peer group companies are as follows: Baltimore Gas & Electric Company,
Central Hudson Gas & Electric, CMS Energy Corp., Commonwealth Energy System,
Consolidated Edison Company of New York, Delmarva Power & Light Company, Enova
Corp., IES Industries, Inc., Long Island Lighting Company, New York State
Electric & Gas Corp., Niagara Mohawk Power Corp., Northern States Power Company,
Pacific Gas and Electric Company, PECO Energy Company, Public Service
Enterprises Group, Rochester Gas & Electric Corp., SCANA Corporation, Wisconsin
Energy Corp., WPS Resources, Corp., and WPL Holdings, Inc.
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
Cumulative Total Return
------------------------------------
12/91 12/92 12/93 12/94 12/95 12/96
Public Svc Co N Mex PNM 100 127 115 133 181 205
PEER GROUP PPEERI 100 111 124 105 132 127
S & P 500 I500 100 108 118 120 165 203
____________
(1) This illustration assumes $100 invested on December 31, 1991 in PNM Common
Stock, the combination gas and electric company peer group and the S&P 500
Stock Index. Each mark on the axis displaying the years 1991 through 1996
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.
*NOTE:
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.
17
<PAGE>
TERMINATION OF EMPLOYMENT AND
CHANGE OF CONTROL ARRANGEMENTS
An Executive Retention Plan (the "Retention Plan") was adopted by the Board
of Directors effective January 1, 1992. The Retention Plan covers executive
officers and other key employees designated by the Board. Mr. Montoya has been
provided with substantially similar benefits by agreement with PNM. The
Retention Plan provides certain severance benefits should the employee's
employment with 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. Under a program adopted in 1992, an impacted
employee would have the option to remain with PNM for up to an additional year.
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, plus certain insurance benefits. If an employee is eligible to
receive benefits under the Retention Plan, benefits are not available to that
employee under the severance pay plan. In connection with Ms. Bourque's
resignation from PNM effective December 24, 1996, she entered into a termination
agreement with PNM under which she received severance benefits equal to the
severance benefits for executives described above, including severance pay of
$208,964.
Mr. Montoya became President and CEO of PNM in August 1993. Under the
terms of employment agreements entered into between PNM and Mr. Montoya, Mr.
Montoya will be eligible to receive supplemental retirement benefits if he
completes five years of service with PNM. He will also receive severance
benefits substantially equal to the level of benefits provided to other members
of senior management (discussed above) in the event he is terminated by the
Board.
Reference is made to the first footnote in the "OPTION GRANTS IN LAST
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.
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.
18
<PAGE>
REQUESTS FOR REPORTS
A COPY OF PNM'S ANNUAL REPORT TO SHAREHOLDERS FOR 1996, INCLUDING FINANCIAL
STATEMENTS, ACCOMPANIES THIS PROXY STATEMENT. COPIES OF THE PNM 1996 ANNUAL
REPORT ON FORM 10-K ARE AVAILABLE UPON WRITTEN REQUEST TO BARBARA BARSKY, VICE
PRESIDENT, STRATEGY, ANALYSIS AND INVESTOR RELATIONS, ALVARADO SQUARE MS 2720,
ALBUQUERQUE, NEW MEXICO 87158.
DEADLINE FOR PROPOSALS BY SHAREHOLDERS
In order to be considered for inclusion in PNM's Proxy Statement for the
1998 Annual Meeting of Shareholders, proposals from shareholders must be
received by PNM, Attention: Secretary, Alvarado Square, Mail Stop 2822,
Albuquerque, New Mexico 87158, on or before November 25, 1997.
By Order of the Board of Directors
Patrick T. Ortiz
Secretary
19
<PAGE>
[LOGO]
The Annual Meeting of Shareholders of Public Service Company of New Mexico will
be held in the Auditorium of the UNM Continuing Education Conference Center at
1634 University Boulevard, NE, Albuquerque, New Mexico, at 9:30 a.m. Mountain
Daylight Time, on April 29, 1997.
(VOTING INSTRUCTIONS ARE ON BACK)
FOLD AND DETACH HERE
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 LLP as independent public accountants 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.
PROXY
______________________________
Signature
______________________________
Signature
Dated:______________________ , 1997
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE
20
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
The undersigned does hereby constitute and appoint L. H. Lattman, B. F. Montoya
and R. M. Price, and each or any one of them, 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 Shareholders
of Public Service Company of New Mexico to be held in the auditorium of the UNM
Continuing Education Conference Center at 1634 University Boulevard, NE,
Albuquerque, New Mexico, at 9:30 a.m., Mountain Daylight Time, on April 29,
1997, and at any adjournments thereof, on all matters coming before said
meeting.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. 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 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.
21
