TEXAS-NEW MEXICO POWER COMPANY EXECUTIVE AGREEMENT FOR
SEVERANCE COMPENSATION UPON CHANGE IN CONTROL
This Texas-New Mexico Power Company Executive Agreement for Severance
Compensation Upon Change in Control ("Agreement") dated ___________________, is
by and between Texas-New Mexico Power Company ("Company") and _______________
("Executive").
Witnesseth That:
WHEREAS, the Company considers the establishment and maintenance of a sound
and vital management to be essential to protecting and enhancing the best
interests of the Company and its shareholders; and
WHEREAS, the Company has determined that in order to best establish and
maintain such sound and vital management it is appropriate to establish certain
means for reinforcing and encouraging the continued attention and dedication of
the Executive as a part of the management of the Company such that they may
continue their assigned duties in a proper and efficient manner without
distraction because of the possibility of a Change in Control of the Company;
and
WHEREAS, the Executive is willing to continue to serve the Company but is
concerned about the possible effects any Change in Control might have on his
duties and responsibility and status as an Executive:
NOW, THEREFORE, in consideration of the promises and the mutual agreements
herein contained, the Company and Executive hereby enter into this Agreement
setting forth the severance compensation and extended benefits which the Company
agrees it will pay to the Executive if the Executive's employment with the
Company terminates under the circumstances described herein:
1) Company's Right to Terminate
Prior to a Change in Control of the Company as herein defined, this
Agreement shall terminate if Executive shall resign or retire voluntarily,
become disabled, or die. Except as provided in paragraph 3)a)(vi) hereof,
this Agreement shall also terminate if Executive's employment by the
Company shall be terminated, with or without Cause, as herein defined,
prior to any Change in Control of the Company by action of either the Board
of Directors or Chief Executive Officer of the Company, as applicable.
2) Term
(a) The term of this Agreement (the "Term") shall commence as of the date
of this Agreement and shall expire as of the earliest of (i) the third
annual anniversary of the date hereof; provided that the Board of
Directors, by resolution duly adopted, may extend the Term of this
Agreement from time to time, or (ii) termination of the Executive's
employment because of death, Disability, voluntary termination or
retirement by the Executive for other than Good Reason, or Cause (as
those terms may be herein defined);
(b) Any obligation which has vested under the terms of the Agreement and
remains unpaid as of the date the Agreement expires or is terminated
shall survive such expiration or termination and be enforceable under
the terms of the Agreement.
3) Change in Control of the Company
(a) For the purposes of this Agreement, a Change in Control of the Company
is defined as the occurrence of any one of the following events: (i)
there shall be consummated any consolidation or merger of the Company
into or with another corporation or other legal person, and as a
result of such consolidation or merger less than a majority of the
combined voting power of the then-outstanding securities of such
corporation or person immediately after such transactions are held in
the aggregate by holders of Voting Stock, as herein defined, of the
Company immediately prior to such transactions; or (ii) any sale,
lease, exchange or other transfer, whether in one transaction or any
series of related transactions, of all or significant portions of the
assets of the Company to any other corporation or other legal person,
less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person immediately
after such sale, lease, exchange, or transfer is held in the aggregate
by the holders of Voting Stock of the Company immediately prior to
such sale, lease, exchange, or transfer; or (iii) the shareholders of
the Company approve any plan for the liquidation or dissolution of the
Company; or (iv) any person (as such term is used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), becomes, either directly or indirectly, the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange
Act) of securities representing 15% or more of the combined voting
power of the then-outstanding securities entitled to vote generally in
the election of directors of the Company ("Voting Stock"); provided
that the Trustee of the Thrift Plan shall not be deemed such a person
for the purposes of this Section 3(iv); or (v) if at any time during a
fiscal year a majority of the Board of Directors of the Company shall
be replaced by persons who were not recommended for those positions by
at least two-thirds of the directors of the Company who were directors
of the Company at the beginning of the fiscal year; or (vi) the
Executive's employment is terminated for other than Cause or the
Executive is removed from office or position with the Company in
either case following commencement by one or more representatives of
the Company of discussions (authorized by the Board of Directors or
Chief Executive Officer of the Company) with a third party that
ultimately results in the occurrence of an event described in clauses
(i), (ii), (iii), (iv), or (v) herein, regardless of whether such
third party is a party to such occurrence, in which event, for the
purposes of this Agreement, the date of the authorization of such
discussions is deemed to be the date of the Change in Control of the
Company;
(b) For all purposes of this paragraph 3), the term Company, as previously
defined herein, shall include TNP Enterprises, Inc., the parent of
Texas-New Mexico Power Company.
4) Termination Following Change in Control of the Company
(a) Termination
If a Change in Control of the Company shall have occurred while the
Executive is still an employee of the Company, the Executive shall be
entitled to the compensation provided in paragraph 5 upon the
subsequent termination of the Executive's employment with the Company
by the Executive or by the Company unless such termination is the
result of (i) the Executive's death, (ii) the Executive's Disability,
(iii) the Executive's decision voluntarily to terminate his employment
or retire, but only if Good Reason does not exist, or (iv) the
Executive's termination for Cause. Notwithstanding anything in this
Agreement to the contrary, termination of the Executive shall not have
been for Cause if termination occurred because of (i) bad judgment or
negligence on the part of the Executive unless it is demonstrable from
historical events that the Executive's bad judgment or negligence
shall have been of such an extensive and ongoing nature that it
rendered the Executive unable adequately to perform his duties; or
(ii) an act or omission believed by the Executive in good faith to
have been in, or at least not opposed to, the Company's best
interests.
For the purposes of this paragraph a), no act, or failure to act,
shall be considered "willful" unless done, or omitted to be done, by
the Executive without good faith. Good faith shall be based upon a
reasonable belief that the action or omission was in, or at least not
opposed to, the best interests of the Company.
(b) Disability
For the purposes of this Agreement, Disability shall mean that the
Executive is incapacitated due to physical or mental illness or injury
and shall have been unable to perform his duties for the Company on a
full time basis for six months and, within 30 days after written
Notice of Termination is thereafter given by the Company, the
Executive shall not have returned to the full time performance of his
duties.
(c) Cause
For the purposes of this Agreement, Cause shall mean (i) the willful
and continued failure by the Executive substantially to perform his
duties with the Company (excluding any failure resulting from
Disability), after a written demand for substantial performance is
delivered to the Executive by the Chief Executive Officer of the
Company setting forth the manner in which the Executive has not been
substantially performing his duties and providing the Executive an
opportunity to appear before the Board of Directors of the Company
with counsel in order to respond to such notice; (ii) the performance
by the Executive of any act or acts constituting a felony involving
moral turpitude and which results or is intended to result in damage
or harm to the Company, whether monetary or otherwise, or which
results in or is intended to result in improper gain or personal
enrichment; and (iii) violations of the Company's Personnel Policy
Manual, as constituted at any time prior to a Change in Control,
concerning personal conduct; provided, that the Company must follow
its disciplinary procedures as set forth therein.
(d) Good Reason
The Executive may terminate the Executive's employment with the
Company and retain his rights to benefits hereunder if Good Reason
exists at any time following a Change in Control of the Company. For
the purposes of this Agreement, Good Reason shall mean any of the
following, unless the Executive has expressly consented in writing
otherwise:
(i) within six months after a Change in Control of the Company
occurs, the Executive, at his discretion, determines that he will
not be able to work in a harmonious and effective manner in the
performance of his duties on behalf of the Company; provided
that, notwithstanding anything in this Agreement to the contrary,
the six month period set forth above does not commence until the
satisfaction of all conditions precedent to and the closing of
the transactions contemplated in paragraph 3)a) (i), (ii), (iii),
(iv), or (v) of this Agreement;
(ii) the Executive is assigned by the Company to a position or duties
which are inconsistent with or materially different from the
Executive's duties or position with the Company immediately prior
to the Change in Control of the Company;
(iii)the Company removes the Executive from or fails to re-elect the
Executive to any positions or offices held by the Executive
immediately prior to the Change in Control of the Company, unless
such action is for Disability, Cause, the Executive's death or
the Executive's voluntary termination or retirement if Good
Reason does not exist prior to such termination or retirement;
(iv) the Executive's base salary or total compensation in effect
immediately prior to the Change in Control of the Company is
reduced by the Company;
(v) the Company fails to increase the Executive's base salary and
total compensation after the Change in Control of the Company by
the average percentage increase in base salary and total
compensation of other persons holding similar positions and
titles within the Company;
(vi) any failure by the Company to continue in effect any benefit plan
or arrangement, or related trust, in which the Executive is
participating or in which he may participate at the time of a
Change in Control of the Company. Such plans, arrangements, or
related trusts (collectively "Plans"), include, but are not
limited to, Texas-New Mexico Power Company's Thrift Plan for
Employees and Trust Agreement ("Thrift Plan"), Texas-New Mexico
Power Company's Pension Plan ("Pension Plan"), Excess Benefit
Plan, group life insurance plan, medical, dental, accident and
disability plans and any other plans and related trusts which
might exist at the time of a Change in Control of the Company;
the Company's obligation hereunder to continue in effect any
benefit plan or arrangement includes the obligation to
irrevocably fund such Plans to the fullest extent allowed by any
applicable rules and regulations, within 90 days of the
occurrence of a Change in Control of the Company, and to maintain
such funding thereafter;
(vii)any action taken by the Company which would adversely affect the
Executive's participation in or reduce the Executive's benefits
received from any Plan;
(viii) any action requiring the Executive to relocate outside the
county in which he was officed prior to the Change in Control of
the Company, except for travel required in the performance of his
duties for the Company to an extent substantially consistent with
the Executive's travel obligations immediately prior to a Change
in Control of the Company;
(ix) any failure by the Company to provide an automobile of similar
style, class and size which was provided to the Executive by the
Company immediately prior to a Change in Control of the Company;
(x) any failure by the Company to provide the Executive with the
number of paid vacation days to which the Executive was entitled
immediately prior to a Change in Control of the Company;
(xi) any material breach by the Company of any provision of this
Agreement following a Change in Control of the Company;
(xii)any failure by the Company to obtain the assumption of this
Agreement by any successor or assign of the Company;
(xiii) any purported termination by the Company not in compliance with
the Notice of Termination provision in paragraph 4)e) below
following a Change in Control of the Company; and
(xiv)after a Change in Control of the Company, the Company gives
notice to the Executive that the term of this Agreement shall not
be extended as provided in paragraph 2)a)(i).
(e) Notice of Termination
Any termination of the Executive by the Company pursuant to paragraphs
4)b) or 4)c) for Disability or Cause shall be communicated by a Notice
of Termination in substantial compliance with the provisions of
paragraph 8). For the purpose of this Agreement, a Notice of
Termination shall mean a written notice which shall indicate the
specific provisions in this Agreement relied upon for termination of
Executive's employment and which sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for such
termination. For the purposes of this Agreement, no purported
termination by the Company shall be effective without such Notice of
Termination.
(f) Effective Date of Termination
Any termination of the Executive for Disability or Cause pursuant to
paragraphs 4)b) or 4)c) shall be effective 30 calendar days after the
Notice of Termination is delivered to the Executive; provided that, in
the event the termination is for Disability as set out in paragraph
4)b), the Executive has not returned to full time performance of his
duties within the 30-day period. All other terminations subject to the
terms of this Agreement, whether by the Company or the Executive,
shall be effective immediately upon the giving of the Notice of
Termination.
5) Severance Compensation upon Termination of Employment
If, during the period commencing upon a Change in Control of the Company
and ending two years following the satisfaction of all conditions precedent
to and consummation of an event described in clauses (i), (ii), (iii),
(iv), or (v) of paragraph 3), the Company shall terminate the Executive's
employment for any reason other than as a result of the Executive's death
or the reasons set out in paragraphs 4)b) or 4)c) in full compliance of the
requirements for notice set out in paragraph 4)e) or if the Executive shall
terminate his employment with the Company when Good Reason exists, then the
Company shall provide for and pay to the Executive the following
compensation:
(a) severance pay in a lump sum, in cash, no later than the fifth calendar
day following the date of termination, an amount equal to three times
the annual base salary as calculated by reference to the Executive's
rate of pay set forth in the Company's payroll records and in effect
for the Executive immediately prior to a Change in Control of the
Company;
(b) incentive compensation under the Company's several incentive
compensation plans in existence immediately prior to the Change in
Control for which Executive has been granted an award and to the
extent an agreement exists between Executive and the Company
addressing a Change in Control, such agreement shall control the
manner and amount of payment, otherwise payments of incentive
compensation shall be determined as if the goals required to be met
for payment had been attained at target and shall be made in the same
manner as payments under paragraph 5)(a) above;
(c) medical, dental, disability and life insurance and other employee
benefits upon the same terms and conditions and at the same cost to
the Executive that existed immediately prior to the Change in Control
of the Company for the lesser of three years or until substantially
similar employee benefits are available through other employment;
(d) if the Executive is fifty years of age or older and has at least
fifteen years of service with the Company, the Company, in addition to
the foregoing benefits, shall pay to the Executive, as an early
retirement incentive, an amount, on a monthly basis for the remainder
of his life, that is equal to what the Executive's retirement pay
would be, calculated using the applicable formula set forth in the
Company's Pension Plan as supplemented by the Excess Benefit Plan
based upon the base salary earned by the Executive for the necessary
number of years immediately prior to the Change in Control of the
Company and the number of service credits that the Executive would
accumulate if he continued his employment until age 62; provided that
to the extent that the Executive would be entitled to retire on the
date of termination or upon his achieving an age upon which the
Executive could retire pursuant to the Company's Pension Plan as
supplemented by the Excess Benefit Plan, and receive payments pursuant
to said Pension Plan and Excess Benefit Plan, the Company's obligation
to make monthly payments shall be equal to the difference between the
amount actually received by the Executive under the Pension Plan as
supplemented by the Excess Benefit Plan and the amount required to be
paid by the Company as set forth above; provided further that if the
Executive becomes entitled to any of the benefits set forth in
paragraph 5)(c) as a retiree under the Company's Pension Plan on or
after the date of termination, then the benefits provided under said
Pension Plan and Excess Benefit Plan shall be substituted for and take
the place of the benefits that the Company would otherwise be required
to provide; and further provided that to the extent any payment or
obligation to pay under this paragraph 5)(d) is determined by the
Internal Revenue Service to be subject to taxation upon the net
present value of the stream of payments for which the Company is
obligated to pay, then the Company shall pay to the Executive within
30 days of such determination, a lump sum equal to the amount
determined by the Internal Revenue Service to be subject to taxation;
further, provided that if the Executive has an employment agreement
that provides for treatment of pension benefits, then the amount of
compensation payable hereunder shall be determined by the terms of the
employment agreement;
(e) without limiting the generality or effect of any other provision
hereof, employee benefit plan, arrangement, or related trust referred
to in paragraph 4)d)(vi), the Company shall fully fund each Plan in
which the Executive is a participant or is otherwise entitled to
payments or benefits within 5 calendar days of the termination of the
Executive's employment;
(f) any excise tax payable pursuant to Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), as a result of the
payment of the amounts described in this paragraph 5); and
(g) any additional federal, state, or local income tax liability
(calculated at the highest effective rate applicable to individuals)
and excise tax liability (under Section 4999 of the Code) attributable
to payments related to any incremental payment for excise taxes.
6) No Obligation to Mitigate Damages; No Effect on Other Contractual Rights
(a) The Company hereby acknowledges that it will be difficult, and may be
impossible, for the Executive to find reasonably comparable employment
following the date of termination. In addition, the Company
acknowledges that its severance pay plans applicable in general to its
salaried employees do not provide for mitigation, offset, or reduction
of any severance payment received thereunder. Accordingly, the parties
hereto expressly agree that the payment of the severance compensation
by the Company to the Executive in accordance with the terms of this
Agreement will be liquidated damages, and that the Executive shall not
be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor shall any
profits, income, earnings, or other benefits from any source
whatsoever create any mitigation, offset, reduction, or any other
obligation on the part of the Executive hereunder or otherwise;
(b) The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any
way diminish the Executive's existing rights, or rights which would
accrue solely as a result of the passage of time, under any benefit
plan, incentive plan or securities plan, employment agreement or other
contract, plan or arrangement.
7) Successor to the Company
(a) The Company will require any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Executive,
expressly, absolutely and unconditionally to assume and agree to
perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession or
assignment had taken place. Any failure of the Company to obtain such
agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall
entitle the Executive to terminate the Executive's employment for Good
Reason. As used in this paragraph 7, Company shall have the same
meaning as hereinbefore defined and shall include any successor or
assign to its business and/or assets as aforesaid which executes and
delivers the agreement provided for in this paragraph 7 or which
otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law. If at any time during the term of this
Agreement, the Executive is employed by any corporation a majority of
the voting securities of which is then owned by the Company, the
Company as used in paragraphs 3, 4, 5, 12, and 13 hereof shall in
addition include such employer. In such event, the Company shall pay
or shall cause such employer to pay any amount owed to the Executive
pursuant to paragraph 5 hereof;
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If the Executive should die while any amounts are still
payable to him hereunder, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement
to the Executive's devisee, legatee, or other designee or, if there be
no such designee, to the Executive's estate;
(c) This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign, transfer, or delegate
this Agreement or any rights or obligations hereunder except as
expressly provided in paragraph 7)(a) above. Without limiting the
generality of the foregoing, the Executive's right to receive payments
hereunder shall not be assignable, transferable, or delegable, whether
by pledge, creation of a security interest, or otherwise, other than
by a transfer by his or her will or by the laws of descent and
distribution and, in the event of any attempted assignment or transfer
contrary to this paragraph 7)(c), the Company shall have no liability
to pay any amount so attempted to be assigned, transferred, or
delegated;
(d) The Company and the Executive recognize that each party will have no
adequate remedy at law for breach by the other of any of the
agreements contained herein and, in the event of any such breach, the
Company and the Executive hereby agree and consent that the other
shall be entitled to a decree of specific performance, mandamus, or
other appropriate remedy to enforce performance of this Agreement.
8) Notice
For purposes of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States registered
mail, return receipt requested, postage prepaid, as follows:
If to the Company:
Texas-New Mexico Power Company
0000 Xxxxxxxxxxxxx Xxxxx, Xxxxx XX
Xxxx Xxxxx, Xxxxx 00000
If to the Executive:
_________________________________________________
_________________________________________________
or such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
9) Miscellaneous
No provisions of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing
signed by the Executive and the Company. No waiver by either party hereto
at any time of any breach by the other party hereto of, or compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set
forth expressly in this Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
10) Validity
The invalidity or unenforceability of any provision or any part of a
provision of this Agreement shall not affect the validity or enforceability
of the remaining provisions of this Agreement, which shall remain in full
force and effect.
11) Counterparts
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together will constitute
one and the same instrument.
12) Legal Fees and Expenses
The Company is aware that the Board of Directors or a shareholder of the
Company or the Company's parent may then cause or attempt to cause the
Company to refuse to comply with its obligations under this Agreement, or
may cause or attempt to cause the Company or the Company's parent to
institute, or may institute, litigation seeking to have this Agreement
declared unenforceable, or may take, or attempt to take other action to
deny the Executive the benefits intended under this Agreement. In these
circumstances, the purpose of this Agreement could be frustrated. It is the
intent of the Company that the Executive not be required to incur the
expenses associated with the enforcement of his rights under this Agreement
by litigation or other legal action because the cost and expense thereof
would substantially detract from the benefits intended to be extended to
the Executive hereunder, nor be bound to negotiate any settlement of his
rights hereunder under threat of incurring such expenses. Accordingly, if
it should appear to the Executive that the Company has failed to comply
with any of its obligations under this Agreement or in the event that the
Company or any other person takes any action to declare this Agreement void
or unenforceable, or institutes any litigation or other legal action
designed to deny, diminish or to recover from the Executive the benefits
intended to be provided to the Executive hereunder, the Company irrevocably
authorizes the Executive from time to time to retain counsel of his choice
at the expense of the Company as provided in this paragraph 12, to
represent the Executive in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Company or any
Director, officer, shareholder or other person affiliated with the Company,
in any jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company irrevocably
consents to the Executive entering into an attorney-client relationship
with such counsel, and in that connection the Company and Executive agree
that a confidential relationship shall exist between the Executive and such
counsel. The Company shall pay or cause to be paid and shall be solely
responsible for any and all attorneys' and related fees and expenses
incurred by the Executive as a result of the Company's failure to perform
this Agreement or any provision hereof or as a result of the Company or any
person contesting the validity or enforceability of this Agreement or any
provision hereof. Such fees and expenses shall be paid or reimbursed to the
Executive by the Company on a regular, periodic basis, within thirty days
following receipt by the Company of statements of such counsel in
accordance with such counsel's customary practice. In no event shall the
Executive be required to reimburse the Company for attorneys' fees or
expenses previously paid on behalf of the Executive or reimbursed to the
Executive, or for any attorneys' fees or expenses incurred by the Company
in connection with any contest of validity or enforceability of this
Agreement or any provisions hereof; provided, however, that any litigation
by the Executive, whether as plaintiff or defendant, shall be in good
faith.
13) Confidentiality
The Executive shall retain in confidence any and all confidential
information known to the Executive concerning the Company and its business
so long as such information is not otherwise publicly disclosed.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
TEXAS-NEW MEXICO POWER COMPANY
By:___________________________
Name: Xxxxxx X. Xxxxx
Title: Chairman, President & Chief
Executive Officer
By:___________________________
Name:
Title:
ATTEST:
__________________________________
Secretary
