SUPPLEMENTAL EMPLOYEE RETIREMENT AGREEMENT FOR PATRICK T. ORTIZ
EXHIBIT
10.3
FOR
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
Effective
as of March 14, 2000, Public Service Company of New Mexico (“PNM”) and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the “Employee”) entered into the Supplemental Employee
Retirement Agreement for ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the
“Agreement”). Effective as of approximately December 31, 2001,
PNM Resources, Inc. (“PNM Resources” or “Company”) became the corporate parent
of PNM. Employee became employed by PNM Resources on or about
December 31, 2001. Effective January 1, 2005, Employee
became employed by PNMR Services Company (“Services”), which also is a
subsidiary of PNM Resources.
Pursuant
to Section 15 of the Agreement, PNM Resources succeeded to PNM’s
obligations under the Agreement. PNM Resources and Services also
assumed the obligations to pay any benefits accruing to Employee during periods
while Employee was employed by PNM Resources or Services and PNM Resources
assumed all of the administrative responsibilities imposed upon the “Company”
pursuant to this Agreement.
By the
adoption of this Agreement, PNM, PNM Resources, Services and Employee amend and
restate the Agreement in its entirety. The purposes of this amendment
and restatement are to clarify certain provisions of the Agreement, coordinate
this Agreement with recent changes in various benefit plans sponsored by Company
and to comply with the requirements of Section 409A of the Internal Revenue
Code of 1986 (the “Code”) or an exception thereto. Section 409A
became applicable to the Agreement as of January 1, 2005. From
January 1, 2005 through the Effective Date, this Agreement has been and
shall be operated in good faith compliance with Section 409A or an
exception thereto. This amended and restated Agreement is effective
as of January 1, 2009 (the “Effective Date”).
1.
Additional
Retirement Benefits.
(a)
General. The
Company agrees to pay Employee the supplemental retirement benefit described in
this Section 1. The supplemental retirement benefit shall be a
monthly benefit payable for Employee’s life equal to the difference between
(1) the monthly retirement benefit that would be payable to Employee under
the PNM Resources, Inc. Employees’ Retirement Plan (the “Retirement Plan”) if
the Employee were credited with the additional service described below in
Section 1(b) and (2) the monthly benefit deemed payable to Employee under
the Retirement Plan without such additional service, calculated in accordance
with Section 3 of this Agreement.
(b)
Additional
Service. The additional service credited to Employee for
purposes of this Section shall be the following: (1) Sufficient
additional Credited Service on January 1, 2000 so that Employee shall have
accrued the equivalent of 10 years of Credited Service as of his Credited
Service Termination Date under the Retirement Plan; and (2) the accrual of
additional Credited Service beyond Employee’s Credited Service Termination Date
at the rate of two years of Credited Service for each year of continuous
employment for the years 2000 through 2009. For purposes of this
Section 1, additional years of Credited Service shall be
determined
in the same manner as if they were being credited under the Retirement Plan
including, but not limited to, the rules regarding crediting partial years of
service and leaves of absence.
(c)
Termination
for Cause. Notwithstanding anything to the contrary contained
in this Section 1, in the event that the Employee is terminated by the
Company for Cause, all of the additional Credited Service awarded to Employee
under this Agreement shall, unless otherwise determined by the Human Resources
and Compensation Committee of the Board of Directors of PNM Resources or its
successor (the “Committee”), be forfeited.
(d)
Definitions. The
terms “Average Earnings,” “Credited Service” and “Credited Service Termination
Date” as used in this Agreement shall have the meanings set forth in the
Retirement Plan, as it may be amended from time to time. The terms
“Cause” and “Change in Control” as used in this Agreement shall have the
meanings set forth in the PNM Resources, Inc. Officer Retention Plan, as it may
be amended from time to time (the “Retention Plan”).
For purposes of this Agreement, the term “Constructive Termination” means,
without Employee’s express written consent, the occurrence of any of the
following circumstances, subject to the exceptions and modifications noted
below:
(1) A
material diminution in the Employee’s base salary;
(2) A
material diminution in the Employee’s authority, duties or
responsibilities;
(3) A
material change in the geographic location of the Employee’s principal office,
including a relocation of Employee’s principal office to a location more than
seventy (70) miles from Santa Fe, New Mexico; or
(4) Any other
action or inaction that constitutes a material breach by Company of this
Agreement.
Employee
must provide a written notice of termination to the Company of the existence of
a Constructive Termination condition described in paragraph (1) through (4)
above within ninety (90) days of the initial existence of the
condition. Notwithstanding anything to the contrary, an event
described in paragraphs (1) through (4) above will not constitute
Constructive Termination if, within thirty (30) days after the Employee gives
the Company the notice of termination specifying the occurrence or existence of
an event that the Employee believes constitutes Constructive Termination, the
Company has fully corrected (or reversed) such event.
2.
Calculation
of Additional Retirement Benefits. The supplemental retirement
benefit provided for in Section 1 of this Agreement shall be calculated
based upon the Retirement Plan in effect on January 1, 2000, after taking
into account the additional service described in
Section 1(b). The monthly benefit that would be payable to
Employee under the Retirement Plan for purposes of clause (1) of Section 1(a)
shall be calculated disregarding limitations imposed by Sections 401(a)(17) and
415 of the Code and similar regulatory limitations.
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3.
Calculation
of Retirement Plan Benefits. For purposes of calculating the
amount of the supplemental retirement benefit due pursuant to Section 1,
the benefits deemed payable under the Retirement Plan for purposes of clauses
(1) and (2) of Section 1(a) shall be calculated as follows:
(a) The
commencement date for the payment of such benefits shall be deemed to be the
later of: (1) the earliest date Employee could have begun receiving
benefits under the Retirement Plan or (2) the date Employee commences receiving
benefits under this Agreement;
(b) The
benefit shall be assumed to be payable in the form of a single life
annuity;
(c) The
calculation shall be based upon the Retirement Plan in effect on the date such
benefits are deemed to have commenced and Employee’s actual Average Earnings as
provided for in the Retirement Plan, using the highest salary for three
consecutive years prior to January 1, 1998, the effective date that the
Retirement Plan was frozen; for purposes of clause (2) of
Section 1(a), the calculation shall be based on Employee’s actual Credited
Service, calculated in accordance with the provisions of the Retirement Plan;
and
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(d) For
purposes of clause (1) of Section 1(a) and Section 1(b), Employee
shall not be credited with more than 30 years of Credited Service (considering
Employee’s actual Credited Service under the Retirement Plan and the additional
Credited Service granted pursuant to Section 1(b)).
4.
Payment
Due to Disability. In the event Employee becomes Disabled
prior to commencing to receive benefits under this Agreement, he shall be
entitled to receive the Supplemental Retirement Benefit provided by
Section 1, payable in accordance with Section 9.
5.
Payment
upon Death.
(a) Death
Following Commencement of Benefit. If Employee dies following
commencement of benefits under this Agreement, whether any benefits will be paid
in the future will be determined in accordance with the benefit option selected
by Employee pursuant to Section 9.
(b) Death
Prior to Commencement of Benefits. If Employee dies prior to
commencement of benefits under this Agreement, the benefit payable under this
Agreement shall equal the difference between (i) the benefit (i.e., the qualified
pre-retirement survivor annuity) that would be payable under the Retirement Plan
if Employee’s accrued benefit under the Retirement Plan was equal to the benefit
calculated in accordance with Section 2 and (ii) the benefit actually
payable under the Retirement Plan upon Employee’s death (i.e., the qualified
pre-retirement survivor annuity). If, at the time of Employee’s
death, he is not survived by either a spouse or Dependent Child, no benefit
shall be payable pursuant to this paragraph. Payment to the surviving
spouse or Dependent Child shall commence as of the first day of the month
following the date of Employee’s death.
6.
Supplemental
Retention Provision. Employee participates in the PNM
Resources, Inc. Officer Retention Plan (the “Retention Plan”). The
Retention Plan provides Employee and other participants with a special
supplemental retirement benefit based on the cash
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equivalent
of certain amounts calculated with reference to the Retirement Plan and the PNM
Resources, Inc. Retirement Savings Plan. If, due to an amendment of
the Retention Plan or otherwise, the value of the special supplemental
retirement benefit payment provided by the Retention Plan, as it may be amended
or replaced, is less than the benefit provided by Section 4 of this
Agreement as in effect prior to this restatement, Employee shall be entitled to
receive a lump sum cash payment equal to the difference. Employee
shall not be entitled to receive any payment pursuant to this Section unless
Employee is entitled to receive a payment under the Retention Plan.
The
additional benefits provided by this Agreement, other than the severance
benefits provided by Section 7, are intended to supplement the Retention
Plan. Accordingly, Employee is entitled to receive these additional
benefits in addition to the benefits provided by the Retention
Plan.
7. Severance
Benefits. In the event the Employee is terminated or
Constructively Terminated by the Company for any reason other than Cause or as a
result of a Change in Control, Employee shall receive the following severance
pay in lieu of the severance pay provided pursuant to Section 4.3(a) of the
PNM Resources, Inc. Non-Union Severance Pay Plan (the “Severance Plan”), as it
may be amended from time to time:
One lump
sum payment equal to 14 months of the Employee’s Base Salary, with no additional
cost of living, promotion, merit or other increases, plus one additional week of
Base Salary for each Year of Service.
If, due
to an amendment of the Severance Plan or otherwise, the amount of the severance
pay due pursuant to the Severance Plan, as it may be amended or replaced, is
greater than the severance pay provided by this Section 7, Employee shall
receive the severance pay due pursuant to the Severance Plan in lieu of the
severance pay due pursuant to this Section 7. For purposes of
this Section 7, the Years of Service taken into account in calculating the
Employee’s severance pay shall be deemed to include the years of Credited
Service awarded to the Employee pursuant to Section 1(b).
Payments
due pursuant to this Section 7 shall be made at the time specified in the
Severance Plan.
This
Section 7 is intended to supplement the Severance Plan. In
addition to receiving the severance pay called for by this Section 7 and
all of the benefits provided by all of the remaining sections of this Agreement
other than Section 6, the Employee also shall be entitled to receive any
benefits (other than severance pay) to which he may become entitled under the
Severance Plan. In the event of a termination for any reason other
than Cause, Employee is entitled to receive payments either pursuant to this
Section 7 or payments and other benefits due under the Retention Plan,
whichever is applicable.
8. Retiree
Medical Benefits. The applicable premium amount for benefits
under the PNM Resources, Inc. Comprehensive Retiree Health Plan, or its
successor, will be determined by including the Credited Service granted under
this Agreement. Notwithstanding the preceding sentence, in the event
the Employee is terminated by the Company for Cause,
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unless
otherwise determined by the Committee, all Credited Service granted under this
Agreement shall be disregarded for purposes of calculating the applicable
premium amount. Employee acknowledges that the difference between the
standard applicable premium under the Retiree Health Plan and the reduced
premiums called for by this Section will be treated as taxable compensation to
Employee.
9.
Form,
Timing and Amount of Benefit. All payments shall be made in
accordance with this Section. Prior to the amendment and restatement
of this Agreement, payments to Employee were to be made “upon his retirement
eligibility and election.” That provision is no longer permissible
under the final regulations issued pursuant to Section 409A of the
Code. By the adoption of this amended and restated Agreement,
Employee and Company agree and Employee elects to have payments made in
accordance with Section 9(a), unless Employee elects otherwise as described
in Section 9(a)(1) or (2). The provisions of Section 9(a)
are intended to be a new payment election in accordance with the transition
relief provided by Notice 2006-79 and Notice 2007-86.
(a)
Payment
of Additional Retirement Benefits. As a general rule, Employee
will commence receiving the supplemental retirement benefit provided by
Section 1 within 30 days following the Employee’s Separation from
Service. If Employee is a “Specified Employee” at the time of his
Separation from Service, however, payments will commence on the first day of the
seventh month following Employee’s Separation from Service. Any
payments that would have been paid during the first six months following
Employee’s Separation from Service shall be paid on the first day of the seventh
month with interest at the Citibank prime rate as determined as of the date of
the payment. If Citibank no longer publishes a prime rate, interest
shall be paid at the short-term “applicable federal rate” (within the meaning of
Section 1274(d) of the Code), plus 2 percentage points, determined as of
the date of the payment. The six-month delay for a Specified Employee
does not apply if Employee dies or becomes Disabled prior to his Separation from
Service. Notwithstanding the foregoing, by completing an election
form in accordance with paragraph (1), Employee may elect to delay commencement
of benefit payments to a later date. The supplemental retirement
benefit may be paid in the form of any annuity form available under the
Retirement Plan at the time payments are to begin. All annuity forms
shall be actuarially equivalent to the single life annuity form of payment
otherwise payable pursuant to Section 1 and 3. The Employee shall be
permitted to select among the available annuities at any time up to 30 days
before the first payment is due. The Employee also may change any
previous annuity election at any time up to 30 days before the first payment is
due. If no selection is made, the payments will be made in the form
of a single life annuity.
(1)
Election
Form. The Employee may elect to defer the payment of the
supplemental retirement benefit payable pursuant to Section 1 until the
later of the Employee’s Separation from Service or a specified date that
qualifies as a specific time or fixed schedule pursuant to Treas. Reg.
§ 1.409A-3(i)(1). The election must be made on a form provided
by the Company and must be signed by the Employee and delivered to the
Company. The Employee may change his distribution election by filing
a new form with the Company in accordance with
Section 9(a)(2). If a revised election is not honored because it
was not timely filed, distributions shall be made pursuant to the most recent
valid election filed by the Employee. The election permitted by this
Section 9(a)(1) must be made on or before December 31,
2008. If Employee makes his election change in 2007, the election
will apply only if Employee’s benefit payments commence in 2008 or
later. If Employee makes his
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election
in 2008, the election will apply only if Employee’s benefit payments commence in
2009 or later.
(2)
Changes
in Time of Distribution. A new election that changes the time
of a payment elected by Employee will be honored only if the following
requirements are met:
(i) The new
form will not take effect until at least 12 months after the date on which the
new form is filed with the Company;
(ii) If
Employee elects to have the payment made on a fixed time or date, the election
may not be made less than 12 months prior to the date of the first scheduled
payment; and
(iii) In the
case of an election related to a payment not related to the Employee’s
Disability or death, the first payment with respect to which the election is
made must be deferred for a period of not less than five years from the date
such payment would otherwise be made.
The
provisions of this paragraph are intended to comply with
Section 409A(a)(4)(C) of the Code and shall be interpreted in a manner
consistent with the requirements of such section and any regulations, rulings or
other guidance issued pursuant thereto.
(b)
Payment
of Supplemental Retention Benefit and Severance Benefits. The
supplemental retention benefit, if any, payable pursuant to Section 6 will
be paid on the same date that benefits are payable under the Retention
Plan. The severance benefits, if any, payable pursuant to
Section 7 will be paid on the date that benefits are payable under the
Severance Plan.
(c)
Payment
of Retiree Health Benefits. To ensure compliance with Section
409A, the Company will assure that the Retiree Health Benefits provided by
Section 8 are payable at a specified time or pursuant to a fixed schedule
within the meaning of Treas. Reg. § 1-409A-3(i)(1)(iv). In order
to ensure compliance with this provision of the regulations, the Retiree Health
Benefits reimbursed in one taxable year will not affect the benefits eligible
for reimbursement by the Company in a different taxable year. All
reimbursements of the benefits must be made no later than December 31 of
the calendar year following the calendar year in which the expense was
incurred. The Employee may not elect to receive cash or any other
benefit in lieu of the benefits provided by the Agreement.
(d)
Payment
Disputes. If a payment is not made due to a dispute with
respect to such payment, the payment may be delayed in accordance with Treas.
Reg. § 1.409A-3(g).
(e)
Ban on
Acceleration or
Deferral. Under no circumstances may the time or schedule of
any payment made or benefit provided pursuant to this Agreement be accelerated
or subject to a further deferral except as otherwise permitted or required
pursuant to regulations and other guidance issued pursuant to Section 409A
of the Code.
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(f)
Distributions
Treated as Made Upon a Designated Event. If the Company
fails to make any payment, either intentionally or unintentionally, within the
time period specified in this Agreement, but the payment is made within the same
calendar year, such distribution will be treated as made within the time period
specified in this Agreement pursuant to Treas. Reg. § 1.409A-3(d).
(g)
Definitions. For
purposes of this Agreement, the following words and phrases shall have the
meanings set forth below, unless a clearly different meaning is required by the
context in which the word or phrase is used.
(1) Disability. Disability
or Disabled means that the Employee is, by reason of any medically determinable
physical or mental impairment that can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, receiving
income replacement benefits for a period of not less than three months under the
Company’s long-term disability plan.
(2) Separation
from Service. Separation from Service means the termination of
Employee’s employment with the Company and all affiliates due to death,
retirement or other reasons. The Employee’s employment relationship
is treated as continuing while the Employee is on military leave, sick leave, or
other bona fide leave of absence (if the period of such leave does not exceed
six months, or if longer, so long as the Employee’s right to reemployment with
the Company or an affiliate is provided either by statute or
contract). If the Employee’s period of leave exceeds six months and
the Employee’s right to reemployment is not provided either by statute or by
contract, the employment relationship is deemed to terminate on the first day
immediately following the expiration of such six-month
period. Whether a termination of employment has occurred will be
determined based on all of the facts and circumstances and in accordance with
regulations issued by the United States Treasury Department pursuant to
Section 409A of the Code.
(3) Specified
Employee. Specified Employee means certain officers and highly
compensated employees of the Company as defined in Treas. Reg. §
1.409A-1(i). The identification date for determining whether Employee
is a Specified Employee during any calendar year shall be the September 1
preceding the commencement of such year.
10.
Designation
of Beneficiary. The latest designation of beneficiary form
filed by Employee under the Retirement Plan shall be deemed to be a designation
of the person or fiduciary to receive any amount payable under this Agreement
upon Employee’s death. If no beneficiary designation has been filed,
the Employee’s spouse shall be the designated beneficiary or in the event
Employee has no spouse, the Employee shall be deemed to have designated his
estate as beneficiary.
11.
No
Assignment. This Agreement shall inure only to the benefit of
Employee, Employee’s designated beneficiary, and Employee’s estate or heirs and
may not be assigned, transferred, pledged or hypothecated in any way by Employee
or Employee’s personal representative, heir, distributee, or other person
claiming under Employee and shall not be subject to execution, attachment or
similar process.
12.
Source of
Payments of Benefits. This Agreement is a non-qualified,
unfunded
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and
unsecured deferred compensation arrangement. All benefits owing under
this Agreement shall be paid out of the general corporate funds of Company,
Services or PNM which are subject to the claims of creditors, or out of any
trust Company, Services or PNM shall establish or authorize; provided that all
assets paid into any such trust shall at all times prior to actual payment to
Employee or his beneficiaries remain subject to the claims of the general
creditors of Company, Services or PNM. Neither Employee, his
designated beneficiaries, his estate nor his heirs shall (i) have any
right, title or interest whatsoever in, or claim to, preferred or otherwise, any
particular assets of Company, Services or PNM or any trust that Company,
Services or PNM may establish or designate to aid in providing the payment
described in this Agreement; or (ii) acquire any interest greater than that
of an unsecured creditor in any assets of Company, Services or PNM.
The
Company, Services and/or PNM shall sufficiently fund the Public Service Company
of New Mexico and Paragon Resources, Inc. Deferred Compensation Trust Agreement
and/or any successor trust established by Company, Services or PNM (the “Rabbi
Trust”) to provide in full for any benefits accrued under this Agreement as of
the date of the funding within sixty (60) days of the first to occur of the
following:
(a) A Change
in Control; or
(b) The day
on which the IRS issues a definitive ruling or guidance that the funding of the
Rabbi Trust upon a change in control will result in treatment as a plan failure
under Section 409A of the Code.
The
Company shall provide Employee thirty (30) days written notice of its intent to
fund the Rabbi Trust pursuant to this Agreement under either occurrence with an
explanation as to whether (a) or (b) triggered the requirement to fund to allow
Employee to determine the tax implications for him of funding the Rabbi
Trust. Notwithstanding the foregoing, the Rabbi Trust shall not be
funded if, prior to the funding date, Employee provides written notice to the
Company officer with responsibility for compensation and benefits that he waives
the requirement to fund the Rabbi Trust.
13.
Administrator. This
Agreement shall be administered by the Committee.
14.
Amendment
or Termination. This Agreement may be amended or terminated
only by written consent of Company and Employee. Any amendment to
this Agreement that violates the provisions of Section 409A of the Code
shall be void.
15.
Controlling
Law. This Agreement shall be interpreted under the laws of the
State of New Mexico.
16.
Compliant
Operation and Interpretation. This Agreement shall be operated
in compliance with Section 409A or an exception thereto and each provision
of this Agreement shall be interpreted, to the extent possible, to comply with
Section 409A or to qualify for an exception thereto.
17.
Binding
Effect. This Agreement shall be binding upon and inure to the
benefit of any successor of PNM Resources and any such successor shall be deemed
substituted for PNM Resources under the terms of this Agreement. As
used in this Agreement, the term “successor”
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shall
include any person, firm, corporation or other business entity which, at any
time, whether by merger, purchase or otherwise, acquires all or substantially
all of the assets or business of PNM Resources.
18.
Relocation. Employee
may not be required to move his residence from Santa Fe, New
Mexico. If Employee is required to move his residence from Santa Fe,
New Mexico, Employee’s sole remedy will be to declare a Constructive Termination
and to receive the benefits due as a result of a Constructive
Termination.
19.
Allocation
of Responsibility. Employee also acknowledges that he has had
the opportunity to review this Agreement with legal counsel selected by Employee
and that a number of changes have been made to this Agreement at the request of
Employee and/or his legal counsel. If any additional taxes are
imposed on Employee by the Internal Revenue Service pursuant to
Section 409A, Employee acknowledges that the responsibility for those taxes
is Employee’s and that the Company shall have no obligation for any taxes
imposed upon the Employee pursuant to Section 409A.
IN
WITNESS WHEREOF, the parties hereto, personally or by their authorized
representatives, have executed this Supplemental Employee Retirement Agreement
as of the date first above written.
PNM
RESOURCES, INC.
By: /s/ ▇▇▇▇▇ ▇.
▇▇▇▇
Its: Senior
Vice President and
Chief
Administrative Officer
PUBLIC
SERVICE COMPANY OF NEW MEXICO
By: /s/ ▇▇▇▇▇ ▇.
▇▇▇▇
Its: Senior
Vice President and
Chief
Administrative Officer
PNMR
SERVICES COMPANY
By: /s/ ▇▇▇▇▇ ▇.
▇▇▇▇
Its: Senior
Vice President and
Chief
Administrative Officer
By: /s/ ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
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