<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Public Service Company of New Mexico
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] 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 (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:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
Public Service Company
of New Mexico
Alvarado Square
Albuquerque, NM 87158 [LOGO OF PUBLIC SERVICE COMPANY
OF NEW MEXICO APPEARS HERE]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, APRIL 28, 1998
9:30 A.M., MOUNTAIN DAYLIGHT TIME
UNM CONTINUING EDUCATION CONFERENCE CENTER
1634 UNIVERSITY BOULEVARD, N. E.
ALBUQUERQUE, NEW MEXICO
March 23, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 Public Service Company of New
Mexico Annual Meeting of Shareholders to:
. Elect three directors.
. Approve appointment of Arthur Andersen LLP as independent public
accountants for 1998.
. Conduct other business properly brought up at the meeting.
Shareholders of record at the close of business on March 9, 1998 may vote
at the meeting.
Your vote is important. Whether you plan to attend or not, please sign,
date, and return the enclosed proxy card in the envelope provided. If you
attend the meeting and prefer to vote in person, you may do so.
This Proxy Statement, proxy card and PNM's Annual Report to Shareholders
are being distributed on or about March 23, 1998.
I look forward to seeing you at the meeting.
Sincerely,
/s/ J.T. ACKERMAN
John T. Ackerman
Chairman
<PAGE>
- --------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
PROXY STATEMENT
- ---------------
<S> <C>
Notice of Annual Meeting...................................... Cover
Attendance and Voting Matters................................. 1
The PNM Board of Directors.................................... 2
PNM Common Stock Owned by Executive Officers and Directors.... 7
Persons Owning More than Five Percent of PNM Common Stock..... 8
Performance Graph............................................. 9
Compensation and Human Resources Committee
Report on Executive Compensation.............................. 10
Executive Compensation........................................ 13
Appointment of Arthur Andersen LLP............................ 17
Other Matters
Section 16(a) Beneficial Ownership Reporting Compliance.. 18
Annual Report and Other Matters.......................... 18
Shareholder Proposals for the 1999 Annual Meeting........ 18
Solicitation............................................. 18
Revocability of Proxy.................................... 18
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
ATTENDANCE AND VOTING MATTERS
- -------------------------------------------------------------------------------
ADMISSION TICKETS
Admission Tickets will be distributed at the registration tables in the
lobby of the UNM Continuing Education Conference Center prior to the Annual
Meeting. Attendance is limited to shareholders of record on March 9, 1998. If
your shares are held in the name of your broker, bank, or other nominee, please
bring an account statement or letter from the nominee indicating that you are
the beneficial owner of the shares as of the record date.
VOTING METHODS
You can vote on matters to come before the meeting in two ways:
. You can come to the Annual Meeting and cast your vote there; or
. You can vote by signing and returning the enclosed proxy card. If you do
so, your shares will be voted in the manner you indicate. In the absence
of specific instructions, proxies will be voted by those named in the
proxy FOR the election of directors nominated, FOR the approval of the
selection of Arthur Andersen LLP as independent public accountants, and
on all other matters in accordance with their best judgment.
Each share of PNM common stock you own entitles you to one vote. As of
March 9, 1998, there were 41,774,083 shares of PNM common stock outstanding.
THE QUORUM REQUIREMENT
A quorum of shareholders is necessary to hold a valid meeting. If at least
a majority of the outstanding common stock is represented at the Annual Meeting,
in person or by proxy, a quorum will exist.
VOTE NECESSARY FOR ACTION
A quorum and the affirmative vote of the holders of a majority of the
shares of PNM common stock present, in person or by proxy, and entitled to vote
at the Annual Meeting are required to elect directors, approve the selection of
independent public accountants, and to approve other actions. Abstentions have
the effect of a vote against the matter. Shares not voted on a matter by
brokers and other entities holding shares for beneficial owners will not be
counted in calculating voting results on that matter.
MATTERS RAISED AT THE MEETING NOT INCLUDED IN THIS STATEMENT
We do not know of any matters to be acted upon at the meeting other than
those discussed in this statement. If any other matter is presented, proxy
holders will vote on the matter in their discretion.
1
<PAGE>
- --------------------------------------------------------------------------------
THE PNM BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
STRUCTURE
Our Board of Directors is divided into three classes for purposes of
election. One class is elected at each Annual Meeting of Shareholders to serve
for a three-year term.
At the 1998 Annual Meeting of Shareholders, the terms of three directors
are expiring. Those directors elected at this Annual Meeting will hold office
for a three-year term expiring in 2001. The other directors are not up for
election this year and will continue in office for the remainder of their terms.
If a nominee is unavailable for election, proxy holders will vote for
another nominee proposed by the Board.
DIRECTORS NOMINATED THIS YEAR FOR TERMS EXPIRING IN 2001
JOHN T. ACKERMAN, 56, is a resident of Albuquerque, New Mexico and has been
a director since June 1990. Mr. Ackerman has served as Chairman of the Board of
PNM since 1990 and served as President and Chief Executive Officer of PNM from
1991 until his retirement in 1993.
JOYCE A. GODWIN, 54, is a resident of Albuquerque, New Mexico and has been
a director 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. Other directorships: TJ International and Charter Bank,
Albuquerque, New Mexico.
MANUEL LUJAN, JR., 69, is a resident of Albuquerque, New Mexico and has
been a director since April 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 and served in
the U. S. House of Representatives from 1969 to 1989. Other directorships:
SODAK Gaming, Inc. and Bank 1st, Albuquerque, New Mexico.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES.
2
<PAGE>
DIRECTORS WITH TERMS EXPIRING IN 2000
ROBERT G. ARMSTRONG, 51, is a resident of Roswell, New Mexico and has been
a director since May 1991. Mr. Armstrong is the President of Armstrong Energy
Corporation, Roswell, New Mexico, an oil and gas exploration and production
company.
REYNALDO U. ORTIZ, 51, is a resident of Denver, Colorado and has been a
director since April 1992. Mr. Ortiz is the International Managing Director and
Senior Vice President of Qwest Communications International, a
telecommunications company. Mr. Ortiz served as President and Chief Executive
Officer of Sophia Communications, Inc., a startup wireless communications
company, from January 1997 through December 1997. He served as President and
Chief Executive Officer of LyncStar Communications, Inc. (a provider of
integrated network communications services) from March through December 1996,
served as Chief Executive Officer of Jones Education Networks, Inc. (a cable
television programming company) from March 1994 through February 1996, and was
Senior Vice President, Jones Financial Group, Inc. from January through March
1994. Mr. Ortiz served as Vice President, Corporate Public Policy of U S WEST,
Inc. from 1991 to 1994.
PAUL F. ROTH, 65, is a resident of Sanibel, Florida and has been a director
since May 1991. Mr. Roth served as the President of the Dallas Chamber of
Commerce, Dallas, Texas, from 1991 to 1992. Between 1956 and 1991, Mr. Roth
served in various executive positions, including President, of the Texas
Division of Southwestern Bell Telephone Company, Dallas, Texas.
DIRECTORS WITH TERMS EXPIRING IN 1999
LAURENCE H. LATTMAN, 74, is a resident of Albuquerque, New Mexico and has
been a director since May 1993. Dr. Lattman served as President of New Mexico
Institute of Mining and Technology from 1983 until his retirement in 1993.
BENJAMIN F. MONTOYA, 62, is a resident of Rio Rancho, New Mexico and has
been a director since October 1993. Mr. Montoya has served as President and
Chief Executive Officer of PNM since August 1993, and previously served as
Senior Vice President and General Manager, Gas Supply Business Unit, Pacific Gas
and Electric Company (1991-1993). Other directorships: Norwest Corporation, a
bank holding company, and Furr's Supermarkets, Inc.
ROBERT M. PRICE, 67, is a resident of 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. Other
directorships: Tupperware Corporation, International Multifoods Corp., Fourth
Shift Corporation, and Affinity Technology Group, Inc.
3
<PAGE>
BOARD MEETINGS AND COMMITTEES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
MEMBERSHIP ROSTER
(STANDING BOARD COMMITTEES)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Compensation & Customer & Public Nominating &
Name Board Audit Human Resources Policy Executive Finance Governance
- -----------------------------------------------------------------------------------------------------------------------------
J. T. Ackerman x* x*
- -----------------------------------------------------------------------------------------------------------------------------
R. G. Armstrong x x* x x
- -----------------------------------------------------------------------------------------------------------------------------
J. A. Godwin x x x* x x*
- -----------------------------------------------------------------------------------------------------------------------------
L. H. Lattman x x x x
- -----------------------------------------------------------------------------------------------------------------------------
M. Lujan, Jr. x x x
- -----------------------------------------------------------------------------------------------------------------------------
B. F. Montoya x x
- -----------------------------------------------------------------------------------------------------------------------------
R. U. Ortiz x x x
- -----------------------------------------------------------------------------------------------------------------------------
R. M. Price x x x x*
- -----------------------------------------------------------------------------------------------------------------------------
P. F. Roth x x* x x x
- -----------------------------------------------------------------------------------------------------------------------------
No. of Meetings in
1997 10 4 6 10 2 7 4
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Chair
In 1997, the full Board met ten times. In addition, the outside directors
met three times during 1997. Directors attended meetings of individual Board
committees as shown in the above table. For the Board as a whole, attendance in
1997 at full Board and committee meetings exceeded 93%.
The AUDIT COMMITTEE consists entirely of non-employee directors. It
assesses the work of PNM's internal auditors and independent public accountants
and the effectiveness of the business control 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 committee also
has the responsibility to monitor and report to the Board the status of PNM's
activities to assure that its computers and other systems will operate at year
2000.
The COMPENSATION AND HUMAN RESOURCES COMMITTEE consists entirely of non-
employee directors. It reviews PNM's compensation policies and benefit programs
and their relationship to the attainment of business goals. The committee
recommends to the Board the compensation philosophy and guidelines for the
entire executive and managerial group, giving emphasis to rewarding long-term
results and maximizing shareholder value. The committee reviews PNM's
affirmative action program, conducts an annual performance evaluation of the
chief executive officer, and assures management continuity through annual review
and approval of a management development and succession program. The committee
also has oversight of PNM's code of conduct and compliance program and interacts
with PNM's employee organizations.
4
<PAGE>
The CUSTOMER AND PUBLIC POLICY COMMITTEE consists entirely of non-employee
directors. It reviews and monitors policies that deal with PNM's responsibility
to the communities in which it does business. The subject matter of policies
reviewed and monitored includes: the environment, charitable contributions,
PNM's political activities, and communications to various constituencies of PNM.
The committee meets with public officials, the media and other opinion leaders
throughout the year to obtain an independent assessment of PNM's public
reputation.
The EXECUTIVE COMMITTEE consists of the Chairman of the Board and the
chairs of PNM's standing Board committees. It exercises the powers of the Board
during intervals between Board meetings.
The FINANCE COMMITTEE consists of a majority of non-employee directors. It
reviews and recommends to the Board the capital structure and financial strategy
for PNM, including dividend policy. It has oversight 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 certain capital
expenditures in excess of $1,000,000 and of all capital expenditures in excess
of $2,500,000.
The NOMINATING AND GOVERNANCE COMMITTEE consists entirely of non-employee
directors. It has the responsibility to make recommendations to the Board for
nominees 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. The Nominating and Governance Committee conducts an annual evaluation of
Board performance and effectiveness, and, at least annually, reviews conflict of
interest questionnaires submitted by directors to determine whether any conflict
of interest exists. In 1995, the Board approved a Nominations Policy which
describes the guidelines, procedures, and selection criteria for 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 seeks potential
nominees for Board membership in various ways and will consider suggestions
submitted by shareholders. Suggestions, together with a description of the
potential nominee's qualifications, appropriate biographical information, and
the potential nominee's signed consent to serve, should be submitted to the
Secretary of PNM prior to August 1, 1998.
In addition to the standing committees described above, in 1997 the Board
formed an AD HOC COMMITTEE to conduct an independent investigation concerning a
regulatory ruling that accused management of improper acts. The AD HOC
COMMITTEE completed its investigation in 1997 and issued a report finding that
management had not committed the improper acts, but recommended improvements in
some internal processes. The Board members who served on the AD HOC COMMITTEE
were John Ackerman, Robert Armstrong, Joyce Godwin and Paul Roth. The AD HOC
COMMITTEE met 20 times in 1997.
5
<PAGE>
DIRECTOR COMPENSATION
Of PNM's current Board members, only one, Mr. Montoya, is a salaried
employee. Mr. Montoya receives no compensation for serving on the Board or its
committees. Board members who are not salaried employees of PNM receive
compensation for Board service. That compensation, for other than the Chairman
of the Board, includes:
ANNUAL RETAINER: $20,000
ATTENDANCE FEES: $750 per Board meeting
$500 for each Board committee meeting
Expenses related to attendance
COMMITTEE CHAIRS: $200 for each Board committee meeting
(in addition to attendance fees)
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 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 only 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.
Under PNM's Director Retainer Plan, approved by shareholders in 1996,
directors may choose to receive their annual retainer in the form of cash,
restricted stock or stock options. The restrictions on the restricted stock
generally lapse one-third each year following the year of the grant. The
options generally vest (become exercisable) one year from the date they were
granted and allow the director to purchase 2,000 shares of common stock. The
exercise price of the option is equal to the fair market value of the common
stock on the date of grant less the annual retainer divided by 2000, subject to
a minimum exercise price.
6
<PAGE>
- -------------------------------------------------------------------------------
PNM COMMON STOCK OWNED BY EXECUTIVE OFFICERS AND DIRECTORS
(AS OF FEBRUARY 2, 1998)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount and Nature of Shares Beneficially Owned(a)
- ----------------------------------------------------------------------------------------------------------------------------
Name Aggregate No. Right to Acquire Percent of Shares
of Shares Held(b) Within 60 Days(c) Beneficially Owned
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John T. Ackerman 10,935 -0- *
- ----------------------------------------------------------------------------------------------------------------------------
Robert G. Armstrong 3,856 1,000 *
- ----------------------------------------------------------------------------------------------------------------------------
Roger J. Flynn 1,000 16,042 *
- ----------------------------------------------------------------------------------------------------------------------------
Joyce A. Godwin 3,502 1,000 *
- ----------------------------------------------------------------------------------------------------------------------------
Laurence H. Lattman 3,123 -0- *
- ----------------------------------------------------------------------------------------------------------------------------
Manuel Lujan, Jr. 3,428 -0- *
- ----------------------------------------------------------------------------------------------------------------------------
Max H. Maerki 817 37,127 *
- ----------------------------------------------------------------------------------------------------------------------------
Benjamin F Montoya 2,461 134,094 *
- ----------------------------------------------------------------------------------------------------------------------------
Patrick T. Ortiz 507 50,387 *
- ----------------------------------------------------------------------------------------------------------------------------
Reynaldo U. Ortiz 2,224 1,000 *
- ----------------------------------------------------------------------------------------------------------------------------
Robert M. Price 3,000 1,000 *
- ----------------------------------------------------------------------------------------------------------------------------
Paul F. Roth 4,909 -0- *
- ----------------------------------------------------------------------------------------------------------------------------
Jeffry E. Sterba 1,523 13,490 *
- ----------------------------------------------------------------------------------------------------------------------------
Directors and Executive
Officers as a Group (17) 43,698 442,594 1.2%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Beneficial ownership means the sole or shared power to vote, or to direct
the voting of, a security and/or investment power with respect to a
security.
(b) Shares held in the individual's name, individually or jointly with others,
or in the name of a bank, broker or nominee for the individual's account.
The total for directors and executive officers as a group does not include
914 shares owned by the spouse of one executive officer. The executive
officer disclaims beneficial ownership of those shares.
(c) The number of shares directors and executive officers have a right to
acquire through stock option exercises within 60 days after February 2,
1998.
- --------------------------------------------------------------------------------
*Less than 1% of PNM's outstanding shares of common stock.
7
<PAGE>
- --------------------------------------------------------------------------------
PERSONS OWNING MORE THAN FIVE PERCENT OF PNM COMMON STOCK
(AS OF MARCH 13, 1998)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
VOTING DISPOSITIVE
AUTHORITY AUTHORITY PERCENT
-------------------------------------------- TOTAL OF
NAME AND ADDRESS SOLE SHARED SOLE SHARED AMOUNT CLASS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Group filing by:
President and Fellows of Harvard College 3,802,800 None 3,802,800 None 3,802,800 9.1%
The Harvard University Master Trust Fund 72,700 None 72,700 None 72,700 0.2%
John Stevens Trust 2,900 None 2,900 None 2,900 0.0%
Nancy Stevens Trust 4,300 None 4,300 None 4,300 0.0%
Harvard College Trust 9,900 None 9,900 None 9,900 0.0%
600 Atlantic Avenue
Boston, MA 02210
- ----------------------------------------------------------------------------------------------------------------
Boston Partners Asset Management, L.P.
and Affiliates 0 3,247,422 0 3,247,422 3,247,422 7.8%
One Financial Center
Boston, MA 02111
- ----------------------------------------------------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co.
1585 Broadway 0 2,751,080 0 2,759,043 2,759,043 6.6%
New York, NY 10036
- ----------------------------------------------------------------------------------------------------------------
The Prudential Insurance Company of America
751 Broad Street 25,700 2,573,041 25,700 2,573,041 2,598,741 6.2%
Newark, NJ 07102-3777
- ----------------------------------------------------------------------------------------------------------------
Franklin Resources, Inc. and Affiliates
777 Mariners Island Boulevard 2,140,700 None 2,140,700 None 2,140,700 5.1%
San Mateo, CA 94404
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The information provided above is based on reports filed with the
Securities and Exchange Commission. PNM makes no representation as to the
accuracy or completeness of such information. These are the only persons known
to PNM, as of March 13, 1998, to be the beneficial owners of more than 5% of
PNM's common stock.
8
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL SHAREHOLDER
RETURN AMONG PNM, A PEER GROUP* AND S&P 500 STOCK INDEX
The following graph assumes that $100 was invested on December 31, 1992 in
PNM Common Stock, the combination gas and electric peer group and the S&P 500
Stock Index, and that all dividends were reinvested. Historical performance
does not necessarily predict future results.
[PERFORMACE GRAPH APPEARS HERE]
-----------------------------------------------------------------------
FISCAL YEAR ENDED
DECEMBER 31, 1992 1993 1994 1995 1996 1997
-----------------------------------------------------------------------
PNM 100 91 105 142 162 202
-----------------------------------------------------------------------
PEER GROUP 100 111 94 119 114 153
-----------------------------------------------------------------------
S&P 500 100 110 112 153 189 252
-----------------------------------------------------------------------
* The peer group companies are 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 Company, CMS Energy Corp., Commonwealth Energy System, Consolidated
Edison, Inc., 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 &
Electric Company, PECO Energy Company, Public Service Enterprises Group,
Rochester Gas & Electric Corp., SCANA Corporation, Wisconsin Energy Corp., WPL
Holdings, Inc., and WPS Resources, Corp.
9
<PAGE>
- --------------------------------------------------------------------------------
COMPENSATION AND HUMAN RESOURCES COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
COMPENSATION POLICIES
The Compensation and Human Resources Committee ("Committee") establishes
compensation guidelines and targets based upon the performance of PNM, business
units within PNM, and individual executive officers. The Committee consists of
four independent directors who are not PNM employees. The Committee's goal is
to establish a compensation program that:
. links the interests of management and shareholders
. links executive compensation with long-term PNM performance
. attracts and retains executives of high caliber and ability
For 1997, that program consisted of base salary, short-term incentive
compensation, and long-term incentive compensation.
The Committee believes this compensation program was a significant factor
contributing to PNM's success this past year, including earnings per share of
$1.92 and record operating revenues of $1.14 billion. As the performance graph
indicates, PNM stock has provided shareholders with a cumulative return over the
past five years that exceeds PNM's peer group.
BASE SALARIES
EXECUTIVE OFFICERS
------------------
Each year the Committee reviews base salaries of individual executive
officers and their salary ranges. In 1997, base salaries were conservatively
tied to the average level of base salaries among gas and electric utilities
included in compensation surveys sponsored by the Edison Electric Institute and
the American Gas Association, as well as other industries.
CHIEF EXECUTIVE OFFICER
-----------------------
Mr. Montoya became the President and CEO of PNM in 1993. At that time,
data provided by an executive compensation consultant and an executive search
firm were considered in determining Mr. Montoya's compensation. Mr. Montoya's
salary remained unchanged until 1996, when the common stock dividend was
reinstated. In 1996, his compensation was increased by $30,000 to $350,000. In
1997, Mr. Montoya's compensation was increased by $25,000 to $375,000. In
setting Mr. Montoya's 1997 salary, the Committee evaluated his performance in
the prior year. Determinative factors included:
10
<PAGE>
. strategic planning
. cost reduction
. customer retention and targeted market strategy
. financial targets
. human resources targets
. external relations targets
Some of the significant achievements considered are set forth below:
. continued improvement in shareholder returns
. advancement of position as a customer-focused energy services company
. implementation of a strategic planning process
. continued improvement in financial credit rating criteria
. implementation of new business development opportunities
SHORT-TERM INCENTIVE COMPENSATION
EXECUTIVE OFFICERS
------------------
In 1997, executive officers, together with all other PNM employees,
participated in a results-pay plan. The plan has an "at risk" cash compensation
element tied to the success of the individual business units and to the overall
success of PNM. Goals are approved annually by the Board of Directors.
Business unit goals for 1997 were generally centered on customer satisfaction,
cost control, and efficiency in operations and an earnings per share ("EPS")
goal. The business unit goals for 1997 were partially achieved and the EPS goal
was fully achieved. Partial payments were made in February 1998.
CHIEF EXECUTIVE OFFICER
-----------------------
Mr. Montoya was not a participant in the results-pay plan; however, based
on his performance noted above, the Board of Directors awarded Mr. Montoya a
bonus of $75,000 in 1997.
LONG-TERM INCENTIVE COMPENSATION
EXECUTIVE OFFICERS AND CHIEF EXECUTIVE OFFICER
----------------------------------------------
In 1997, all executive officers, including Mr. Montoya, as well as other
key employees, were granted non-qualified stock options under PNM's Performance
Stock Plan ("PSP"). Under the plan, grants were awarded based on achievement of
goals approved annually by the Board of Directors. For 1997, there were two
goals: one based on EPS and one based on customer
11
<PAGE>
satisfaction. The EPS goal was fully achieved. The customer satisfaction goal
was not achieved. Partial awards of 1997 grants were approved in February 1998.
The number of stock option grants awarded was based on a formula with the
following components:
. annual base salary;
. percentage of achievement of the EPS goal; and
. percentage of achievement of the customer service goal; and
. total return to shareholders.
The number of grants awarded to executive officers, including Mr. Montoya,
in 1997 are reflected in the Summary Compensation Table and Option Grants Table.
The plan, as amended in March 1998, provides for the Committee, in its sole
and absolute discretion, to declare annually the level of options to be granted,
based on performance data presented by the President. The President will
establish the criteria for the performance data to be used in recommending the
awards to the Committee.
CERTAIN TAX MATTERS
Under Section 162(m) of the Internal Revenue Code ("Code"), PNM may not
deduct certain forms of compensation in excess of $1 million. PNM has no policy
with respect to Section 162(m).
Compensation and Human Resources Committee
Paul F. Roth (Chair) Joyce A. Godwin
Robert G. Armstrong Robert M. Price
12
<PAGE>
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
----------------------------------------------------------------------
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
- --------------------------------------------------------------------------------------------------------------------
SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(A) OPTIONS(#) COMPENSATION
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
B. F. Montoya 1997 $358,657 $ 75,000(b) -- 20,902 -0-
President and CEO 1996 341,927 -0- -- 32,802 -0-
1995 320,205 -0- -- 39,456 -0-
- --------------------------------------------------------------------------------------------------------------------
R. J. Flynn 1997 $155,574 $ 9,975(c) -- 7,432 -0-
Senior Vice President, 1996 153,995 1,183(d) -- 12,301 -0-
Electric Services 37,400(c)
1995 154,056 25,624(c) -- 13,490 $16,045(e)
- --------------------------------------------------------------------------------------------------------------------
M. H. Maerki 1997 $178,346(f) $ 12,408(c) -- 7,432 -0-
Senior Vice President 1996 174,095(g) 14,201(d) -- 12,301 -0-
and Chief Financial 39,101(c)
Officer 1995 173,486(f) 19,240(c) -- 13,490 -0-
- --------------------------------------------------------------------------------------------------------------------
P. T. Ortiz 1997 $142,884 $ 11,093(c) -- 7,432 -0-
Senior Vice President, 1996 135,000 14,201(d) -- 10,853 -0-
General Counsel and 34,500(c)
Secretary 1995 132,017 16,757(c) -- 11,750 -0-
- --------------------------------------------------------------------------------------------------------------------
J. E. Sterba 1997 $195,033(f) $ 19,968(c) -- 13,935 -0-
Executive Vice President 1996 146,965(g) 14,201(d) -- 12,301 -0-
and Chief Operating 40,801(c)
Officer 1995 142,911(f) 12,836(c) -- 13,490 -0-
123,201(h)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) These amounts are less than the established reporting thresholds.
(b) Bonus paid in August 1997 for previous performance.
(c) In 1995, a results-based reward program was implemented which was designed
to tie a portion of cash rewards awarded employees to the success of their
business unit and a portion of the success of PNM as a whole. Goals are
approved annually by the Board of Directors. These amounts reflect
incentive award amounts paid in 1998 for 1997 achievements, in 1997 for
1996 achievements and in 1996 for 1995 achievements.
(d) A deferred bonus fund of $200,000 was established in December 1994, based
on PNM's 1994 performance, from which lump sum awards to all officers of
PNM, excluding the President and CEO, were to be paid at such time as PNM
paid a dividend to shareholders. Upon the reinstatement of the dividend in
1996, the amounts noted were paid, as determined by the President and CEO.
(e) This amount represents relocation, home sale and interim living expenses
paid to Mr. Flynn in 1995.
(f) These amounts include sales of accrued vacation hours during 1997 and 1995
and also reflect increases in base salaries.
(g) These amounts include sales of accrued vacation hours during 1996 and do
not reflect increases in base salaries.
(h) This amount was an incentive payment under previously disclosed incentive
plans for efforts leading to the sales of gas gathering and processing
assets and water utility assets which occurred in 1995.
- --------------------------------------------------------------------------------
13
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
OPTION GRANTS IN 1997
-------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------------------------------
% OF TOTAL GRANT DATE
NUMBER OF SECURITIES OPTIONS GRANTED PRESENT
NAME UNDERLYING OPTIONS TO EMPLOYEES IN EXERCISE PRICE EXPIRATION VALUE(b)
GRANTED(a) FISCAL YEAR 1997 PER SHARE DATE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
B. F. Montoya 20,902 7% $23.6875 12/31/2007 $88,206
R. J. Flynn 7,432 2% 23.6875 12/31/2007 31,363
M. H. Maerki 7,432 2% 23.6875 12/31/2007 31,363
P. T. Ortiz 7,432 2% 23.6875 12/31/2007 31,363
J. E. Sterba 13,935 5% 23.6875 12/31/2007 58,806
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Options are exercisable following vesting on December 31, 2000. Options may
also become fully exercisable upon death, disability, retirement, or a
change in control.
(b) The Black-Scholes option-pricing model was used to determine the fair value
of options. Assumptions used to calculate this value are: price volatility
- 20%; risk-free rate of return - 5.69%; dividend yield - 3%; and time of
exercise - four years. Neither these amounts nor any of the assumptions
should be used to predict future performance of stock price or dividends.
The real value of the options in this table depends on the actual
performance of PNM's common stock during the applicable period and when
they are exercised.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN 1997
AND 1997 YEAR-END OPTION VALUES
-------------------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997(a)
- -------------------------------------------------------------------------------------------------------------------------------
NAME SHARES ACQUIRED VALUE
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
B. F. Montoya -0- -- 134,094 53,704 $1,263,105 $133,258
R. J. Flynn -0- -- 16,042 19,733 109,058 49,973
M. H. Maerki -0- -- 37,127 19,733 328,487 49,973
P. T. Ortiz -0- -- 50,387 18,285 478,251 44,090
J. E. Sterba -0- -- 13,490 26,236 81,783 49,973
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Value equals the year-end stock price ($23.6875) minus the exercise price,
times the number of shares underlying the option. "In-the-Money" means that
the year-end stock price was greater than the exercise price of the option.
- --------------------------------------------------------------------------------
RETIREMENT PLAN AND RELATED MATTERS
In December 1996, the Board of Directors approved changes to PNM's non-
contributory defined benefit plan ("Retirement Plan") and implementation of a
401(k) defined contribution plan effective January 1, 1998. Salaries used in
Retirement Plan benefit calculations were frozen as of December 31, 1997.
Additional credited service can be accrued under the Retirement Plan up to a
limit determined by age and years of service. PNM contributions to the 401(k)
plan consist of a 3 percent non-matching contribution, and a 75 percent match on
the first 6 percent contributed by the employee on a before-tax basis.
14
<PAGE>
Through December 31, 1997, the Retirement Plan covered employees who had at
least one year of service and had attained the age of 21. Vesting occurred
after five years of service. PNM made contributions in 1997 to the Retirement
Plan for plan year 1996 in the amount of $6,000,000. The amount of any
contribution with respect to any one person cannot be determined. Directors who
were not employees did 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. The table is based on the Retirement Plan. The amounts shown
in the table are not subject to any deduction for Social Security benefits or
other offset amounts.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
PENSION PLAN TABLE
- ---------------------------------------------------------------------------------------------------------------------------------
AVERAGE OF
HIGHEST
ANNUAL BASE CREDITED YEARS OF SERVICE
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 !30,000
$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
$450,000 45,000 90,000 135,000 180,000 225,000 270,000 292,500
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For these purposes, compensation consists of base salaries and includes any
amount voluntarily deferred under PNM's Master Employee Savings Plan.
Generally, compensation for these purposes does not include bonuses,
payments for accrued vacation, or overtime pay.
(b) Although years of service begin accumulating from the date of employment,
vesting occurs after five years of service.
(c) The maximum number of years generally taken into account for purposes of
calculating benefits under the non-contributory defined benefit plan. Under
limited circumstances, an additional 3% retirement benefit could be earned
by an employee working beyond age 62.
- --------------------------------------------------------------------------------
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 computed as of December 31, 1997, are as follows: Mr. Montoya,
8 years (however, Mr. Montoya will not be entitled to any retirement benefits
until June 1, 1998); Mr. Flynn, 3.08 years; Mr. Maerki, 25.57 years; Mr. Ortiz,
6.25 years; and Mr. Sterba, 23.29 years. The executive officers' remuneration
which would be used to calculate benefits is determined by reference to the
Retirement Plan and the supplemental employee retirement arrangements discussed
below. As of December 31, 1997, the remuneration used to calculate benefits
would be as follows: Mr. Montoya, $373,336; Mr. Flynn, $161,163; Mr. Maerki,
$170,900; Mr. Ortiz, $138,332; and Mr. Sterba, $167,412.
15
<PAGE>
Federal tax legislation imposes a $160,000 limitation beginning in 1997 on
compensation that can be considered in determining retirement benefits under
qualified retirement plans. A PNM plan provides non-qualified deferred
compensation benefits to executives to the extent their retirement benefits
under the Retirement Plan, the Accelerated Management Performance Plan and
supplemental employee retirement agreements are limited as a result of the
$160,000 compensation limitation.
In January 1981, the Board of Directors approved an executive retirement
program for a group of management employees. The program was intended to
attract, motivate and retain key management employees. Messrs. Maerki and
Sterba and certain other key management employees are eligible to participate in
one or more of the plans in the program. Under the program, as originally
adopted, key management employees had the opportunity to earn additional credit
for years of service toward retirement ("Accelerated Management Performance
Plan" or "AMPP"). The AMPP, as amended and restated, phased out the
accumulation of additional credits by January 1, 1990. In addition, the amended
and restated plan includes a provision which allows key management employees who
have not attained the maximum credits for years of service to receive a reduced
benefit from the plan upon accepting early retirement. Monthly benefits
received pursuant to the AMPP 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, Mr. Maerki's
retirement benefits would be computed as if he had been an employee of PNM since
February 15, 1974.
Under the terms of employment agreements with Mr. Montoya, he will be
eligible to receive supplemental retirement benefits if he completes five years
of service.
The Board of Directors has approved the establishment of an irrevocable
grantor trust, under provisions of the Internal Revenue Code, generally in
connection with the AMPP and the supplemental retirement arrangements with Mr.
Montoya, Mr. Maerki, Mr. Sterba, and certain former executive officers. PNM
may, but is not obligated to, provide funds to the trust, which was established
with an independent trustee, to aid in meeting its obligations under such
arrangements. Funds in the amount of $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.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL ARRANGEMENTS
An Executive Retention Plan ("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 be
terminated from PNM subsequent to a change in control of PNM or as the result of
a sale or other disposition of all or substantially all the assets of a major
operating unit, if that termination is (a) for death or by PNM for reasons other
than cause, or (b) by the employee due to constructive termination. The
severance benefits include: (i) lump sum severance equal to 2.5
16
<PAGE>
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 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
("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 being impacted 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.
Under the terms of employment agreements entered into between PNM and Mr.
Montoya, if Mr. Montoya were to be terminated by the Board, he would receive
severance benefits substantially equal to the level of benefits provided to
other members of senior management discussed above.
- --------------------------------------------------------------------------------
APPOINTMENT OF ARTHUR ANDERSEN LLP
- --------------------------------------------------------------------------------
The Audit Committee of the Board of Directors selects and hires independent
public accountants to audit the consolidated financial statements of PNM and
subsidiaries. The Audit Committee's selection for 1998 must be approved by you.
The Audit Committee selected Arthur Andersen LLP to audit PNM's books of
account and other corporate records for 1998. This firm has audited PNM's books
since 1993, and no relationship exists other than the usual relationship between
independent public accountant and client. A representative of Arthur Andersen
LLP will be available at the Annual Meeting to respond to questions and to make
any statement the representative may desire.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
17
<PAGE>
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Securities Exchange Act of 1934 requires PNM's executive officers and
directors to file certain reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Based upon a review of reports
filed with the SEC and written representations by persons required to report,
all reports required to be filed pursuant to Section 16(a) of the Exchange Act
with respect to 1997 reporting were filed on a timely basis, except that one
transaction by M. D. Christensen, Senior Vice President, New Mexico Retail
Services, was reported late on a Form 5 rather than on a Form 4.
ANNUAL REPORT AND OTHER MATTERS
PNM's Annual Report, including consolidated financial statements,
accompanies this Proxy Statement. COPIES OF PNM'S 1997 ANNUAL REPORT ON FORM
10-K ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO BARBARA BARSKY, VICE
PRESIDENT, STRATEGY, ANALYSIS AND INVESTOR RELATIONS, ALVARADO SQUARE MS 2720,
ALBUQUERQUE, NM 87158, or electronically at [email protected]. You may also
obtain our SEC filings through the internet at http://www.sec.gov.
SHAREHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Any proposal to be considered for possible inclusion in PNM's 1999 Proxy
Statement must be received by PNM, Attention: Secretary, Alvarado Square, Mail
Stop 2822, Albuquerque, NM 87158, on or before November 23, 1998.
SOLICITATION
The enclosed proxy is being solicited on behalf of PNM's Board of
Directors. This solicitation is being made by mail but also may be made in
person, by telephone or other means of electronic communication. We have hired
Beacon Hill Partners, Inc. to assist in the solicitation, for an estimated fee
of $2,500. PNM will pay all costs related to solicitation.
REVOCABILITY OF PROXY
You may revoke the enclosed proxy by attending the Annual Meeting and
voting your shares in person or by providing a later executed proxy.
By Order of the Board of Directors
/s/ PATRICK T. ORTIZ
Patrick T. Ortiz
Secretary
18
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
The undersigned does hereby constitute and appoint R. G. Armstrong, R. U. Ortiz
and P. F. Roth, 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, N.E.,
Albuquerque, New Mexico, at 9.30 am., Mountain Daylight Time, on April 28, 1998
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.
<PAGE>
[LOGO OF PUBLIC SERVICE COMPANY APPEARS HERE]
The Annual Meeting of Shareholders of Public Service Company of New Mexico will
be held in the Auditorium of the UNM Continuing Education Conference Center at
1634 University Boulevard, NE, Albuquerque, New Mexico, at 9:30 a.m., Mountain
Daylight Time, on April 28, 1998.
(VOTING INSTRUCTIONS ARE ON BACK)
V FOLD AND DETACH HERE V
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
A vote FOR the following proposals is recommended by the Board of Directors.
1. Election of Directors (John T. Ackerman, Joyce A. Godwin, 2. Selection of Arthur Andersen LLP as independent
and Manuel Lujan Jr.) public accountants for the current year.
Mark one: _______ FOR all nominees listed above. [_] FOR [_] AGAINST [_] ABSTAIN
_______ FOR all nominees listed above except
_______________________________________.
_______ WITHHOLD AUTHORITY to vote for all 3. In their discretion, the proxies are
nominees listed above. authorized to vote upon such other matters as
may properly come before this meeting, or any
adjournment or adjournments thereof.
p ______________________________________________ [ ]
R Signature
O
X ______________________________________________
Y Signature
Dated: _______________________________________, 1998 [ ]
---------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY, USING THE ENCLOSED ENVELOPE
---------------------------------------------
</TABLE>
