SUPPLEMENTAL EMPLOYEE RETIREMENT AGREEMENT FOR JEFFRY E. STERBA
Exhibit
10.9
FOR
XXXXXX
X. XXXXXX
Effective
as of March 22, 2000, Public Service Company of New Mexico (“PNM”) and
Xxxxxx X. Xxxxxx (“Employee”) entered into the Supplemental Employee
Retirement Agreement for Xxxxxx X. Xxxxxx (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. PNM Resources and Services 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.
Supplemental
Retirement Benefits. 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 (a) the monthly retirement
benefit that would be payable to Employee under the PNM Resources, Inc.
Employees’ Retirement Plan (the “Retirement Plan”) if Employee were credited
with a total of thirty (30) years of Credited Service as of February 28,
2005, calculated in accordance with Section 2, and (b) the monthly
benefit deemed payable to Employee under the Retirement Plan without such
additional service, calculated in accordance with Section 3.
2.
Calculation
of Supplemental Retirement Benefit. The Supplemental
Retirement Benefit provided for in Section 1 of this Agreement shall be
calculated based upon the Retirement Plan in effect on February 28, 2000,
after taking into account the additional service described in Section 1
above. The monthly benefit that would be payable to Employee under
the Retirement Plan for purposes of clause (a) of Section 1 shall be
calculated disregarding limitations imposed by Sections 401(a)(17) and 415 of
the Code and similar regulatory limitations. Employee shall not be
credited with more than thirty (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).
3.
Calculation
of Retirement Plan Benefit, No Duplication of 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 clause (b) of Section 1 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; and
(d)
The
calculation shall be based on Employee’s actual Credited Service, calculated in
accordance with the provisions of the Retirement Plan.
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 8.
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 elected
by Employee pursuant to Section 8.
(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 (1) 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 (2) 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.
Severance
Benefits. In the event Employee is terminated or
Constructively Terminated by 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:
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One cash
lump sum payment equal to sixteen (16) months of Employee’s Base Salary, with no
additional cost of living, promotion, merit or other increases, plus one (1)
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 6, Employee shall
receive the severance pay due pursuant to the Severance Plan in lieu of the
severance pay due pursuant to this Section. For purposes of this
Section 6, the Years of Service taken into account in calculating
Employee’s severance pay shall be deemed to include the years of Credited
Service granted to Employee under this Agreement.
Payments
due pursuant to this Section 6 shall be made at the time specified in the
Severance Plan.
This
Section 6 is intended to supplement the Severance Plan. In
addition to receiving the severance pay called for by this Section 6 and
all of the benefits provided by all of the remaining sections of this Agreement,
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 6
or payments and other benefits due under the Retention Plan, whichever is
applicable.
7. Eligibility
for Retiree Health 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
Employee is terminated by Company for Cause, unless otherwise determined by the
Human Resources and Compensation Committee of the Board of Directors of PNM
Resources or its successor (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.
8. Form,
Timing and Amount of Benefit. All payments shall be made in
accordance with this Section.
(a)
Payment
of Supplemental Retirement Benefit. Prior to the amendment and
restatement of this Agreement, payments of the Supplemental Retirement Benefit
provided by Section 1 to Employee were to be made “upon his retirement
eligibility and election.” Effective as of January 1, 2009, 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 of the Supplemental Retirement Benefit made in accordance with this
Section 8(a), unless Employee elects otherwise as described in
Section 8(a)(1) or (2). The provisions of this Section 8(a)
are
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intended
to be a new payment election in accordance with the transition relief provided
by Notice 2006-79 and Notice 2007-86.
As a
general rule, Employee will commence receiving the Supplemental Retirement
Benefit provided by Section 1 within thirty (30) days following 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 Section 8(a)(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
Sections 1 and 3. Employee shall be permitted to select among
the available annuities at any time up to thirty (30) days before the first
payment is due. Employee also may change any previous annuity
election at any time up to thirty (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)
2008
Election Form. On or before December 31, 2008, Employee
may elect to defer the payment of the supplemental retirement benefit payable
pursuant to Section 1 until the later of 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 Company and must be signed by Employee and delivered to Company
on or before December 31, 2008. Employee may change his election
regarding the commencement of his payments pursuant to this Section 8(a)(1)
by filing a new form with Company prior to December 31,
2008. After December 31, 2008, Employee may change his election
regarding the commencement of his payments only in accordance with
Section 8(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 Employee. If Employee makes an election
pursuant to this Section 8(a)(1), the election will apply only if
Employee’s benefit payments commence in 2009 or later. If, pursuant
to the terms of this Agreement as in effect prior to the adoption of this
restated Agreement, Employee’s benefit payments are to commence in 2008, any
election made by Employee pursuant to this paragraph (1) shall be void and
the amounts payable to Employee shall be paid at the time and in the manner
described in the Agreement as in effect prior to this restatement.
(2)
Changes
in Time of Distribution. An election that is made after
December 31, 2008 that changes the time of payment elected by Employee will
be honored only if the following requirements are met:
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(i)
The new
form will not take effect until at least twelve (12) months after the date on
which the new form is filed with Company;
(ii)
If
Employee elects to have the payment made on a fixed time or date, the election
may not be made less than twelve (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 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 (5) 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 Severance Benefits. The Severance Benefits, if any, due
pursuant to Section 6 are intended to comply with the short-term deferral
exception to Section 409A as defined in Treas. Reg.
§ 1.409A-1(b)(4). As such, the Severance Benefits payable
pursuant to Section 6 will be paid within ten (10) business days following
Employee’s Separation from Service.
(c)
Payment
of Retiree Health Benefits. To ensure compliance with
Section 409A, Company will assure that the Retiree Health Benefits provided
by Section 7 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. 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.
(f)
Distributions
Treated as Made Upon a Designated Event. If 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).
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9.
No
Assignment. This Agreement shall inure only to the benefit of
Employee (or Employee’s spouse or Dependent Child in the case of death) and
Employee’s estate or heirs and may not be assigned, transferred, pledged or
hypothecated in any way by Employee or Employee’s spouse, Dependent Child,
personal representative, heir, distributee, or other person claiming under
Employee and shall not be subject to execution, attachment or similar
process.
10.
Source of
Payments of Benefits. This Agreement is a non-qualified,
unfunded 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 (a) 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 (b) acquire any interest greater than that
of an unsecured creditor in any assets of Company, Services or PNM.
If a
Change in Control occurs, Employee may request that the Company, Services or PNM
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 (collectively the “Rabbi Trust”)
to provide in full for any benefits accrued under this Agreement as of the date
of the occurrence of the Change in Control. If Employee’s request is
accompanied by an opinion of counsel acceptable to Company that the funding of
the Rabbi Trust will not result in violation of, or the immediate taxation of
Employee pursuant to, Section 409A of the Code, Company, Services or PNM
shall fund the Rabbi Trust as requested.
11.
Administrator. This
Agreement shall be administered by the Committee.
12. 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.
(a)
Average
Earnings. Average Earnings shall have the meaning set forth in
the Retirement Plan, as it may be amended from time to time.
(b)
Cause. Cause
shall have the meaning set forth in the PNM Resources, Inc. Officer Retention
Plan, as it may be amended from time to time.
(c)
Change in
Control. Change in Control shall have the meaning set forth in
the PNM Resources, Inc. Officer Retention Plan, as it may be amended from time
to time.
(d)
Constructive
Termination. During 2008, Constructive Termination shall have
the meaning set forth in the prior version of the Agreement that was entered
into on March 22, 2000. Effective as of January 1, 2009,
“Constructive Termination” means a
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termination
of employment within two (2) years following the occurrence of one or more of
the following circumstances without Employee’s express consent:
(1)
a
material diminution in Employee’s base compensation;
(2)
a
material diminution in Employee’s authority, duties or
responsibilities;
(3)
a
material change in the geographic location of Employee’s principal office;
or
(4)
any other
action or inaction that constitutes a material breach by the Company of this
Agreement.
Employee
must provide written notice to Company of the existence of the Constructive
Termination condition described in paragraphs (i)-(iii) above within ninety (90)
days of the initial existence of the condition.
Notwithstanding
anything to the contrary, an event described in paragraphs (i)-(iii) above will
not constitute Constructive Termination if, within thirty (30) days after
Employee gives Company notice of the occurrence or existence of an event that
Employee believe constitutes Constructive Termination, Company has fully
corrected such event.
(e)
Credited
Service. Credited Service shall have the meaning set forth in
the Retirement Plan, as it may be amended from time to time.
(f)
Dependent
Child. Dependent Child shall have the meaning set forth in the
Retirement Plan, as it may be amended from time to time.
(g) Disability. Disability
or Disabled means that the Employee is, by reason of 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 3 months under the
Company’s long term disability plan.
(h)
Separation
from Service. Separation from Service means either
(1) termination of Employee’s employment with Company and all Affiliates
due to death, retirement or other reasons, or (2) a permanent reduction in
the level of bona fide services Employee provides to Company to an amount that
is 20% or less of the average level of bona fide services Employee provided to
Company in the immediately proceeding 36 months, with the level of bona fide
service calculated in accordance with Treas. Reg.
§ 1.409A-1(h)(1)(ii). For purposes of determining whether a
Separation from Service has occurred, the term “Affiliate” means (1) an
entity that would be a member of a “controlled group of corporations” (within
the meaning of Section 414(b) of the Code as modified by
Section 415(h) of the Code) that includes Company as a member of the group
if for purposes of applying Section 1563(a)(1), (2) or (3) of the Code for
determining the members of a controlled group of corporations under
Section 414(b) of the Code, the language “at least 50 percent” is used
instead of “at least 80 percent” each place it appears in
Section 1563(a)(1), (2) and (3) and (2) a group of trades or
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businesses
under common control (within the meaning of Section 414(c) of the Code)
that includes Company as a member of the group if for purposes of applying
Treas. Reg. § 1.414(c)-2 for purposes of determining the members of a group
of trades or businesses (whether or not incorporated) that are under common
control for purposes of Section 414(c) of the Code, the language “at least
50 percent” is used instead of “at least 80 percent” each place it appears in
Treas. Reg. § 1.414(c)-2.
Employee’s
employment relationship is treated as continuing while 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 Employee’s right to
reemployment with Company or an Affiliate is provided either by statute or
contract). If Employee’s period of leave exceeds six months and
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.
(i)
Specified
Employee. Specified Employee means certain officers and highly
compensated employees of 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.
13.
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.
14.
Controlling
Law. This Agreement shall be interpreted under the laws of the
State of New Mexico.
15.
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.
16.
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” 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.
[REMAINDER
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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/ Xxxxx
X. Xxxx
Its:
SVP, Chief Administration
Officer
PUBLIC
SERVICE COMPANY OF NEW MEXICO
By: /s/ Xxxxx
X. Xxxx
Its:
SVP, Chief Administration
Officer
PNMR
SERVICES COMPANY
By: /s/ Xxxxx X.
Xxxx
Its: SVP,
Chief Administration
Officer
By: /s/ Xxxxxx X.
Xxxxxx
Xxxxxx X.
Xxxxxx
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