SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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
[ ][x] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
NEW CENTURY ENERGIES, INC.
(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)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction: 5) Total fee paid:
[ ] 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)0- 11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement no.:
3) Filing Party:
4) Date Filed:
[GRAPHIC OMITTED] New Century Energies, Inc.
1225 17th Street
P.O. Box 840
Denver, Colorado 80201-0840
(303) 571-7511 Telephone
March 30, 199829, 1999
Dear Shareholder:
You are invited to attend the Initial Annual Meeting of Shareholders (the "Meeting")
of New Century Energies, Inc. (the "Company" or "NCE"). The 19981999 Meeting will be held:
DATE: May 12, 199811, 1999
TIME: 10:00 A.M., Denver timeCentral Daylight Time
PLACE: Adam's MarkAmbassador Hotel
1550 Court Place
GrandRio Grande Ballroom
- Lobby Level
Denver, Colorado3100 I-40 West
Amarillo, Texas
The attached Notice of Annual Meeting of Shareholders and Proxy Statement
cover the formal business of the Meeting. The Meeting will consider the election
of fivefour "Class I Directors", the approval of the NCE Omnibus Incentive Plan, the
approval of the NCE Outside Directors' Compensation Plan,II Directors," the approval of independent public accountants
and, if presented, twoone shareholder proposalsproposal and such other matters as may
properly come before the Meeting. The accompanying Proxy Statement contains a
discussion of the matters to be considered. At the Meeting, your management will
report on the operations of the Company and the Directors and Officers of the
Company will respond to questions that shareholders may have.
The Board of Directors encourages you to promptly vote, which indicates your
interest in the Company's affairs. This year most shareholders will have a
choice of voting by telephone using the instructions enclosed or by returning
the enclosed Proxy Card. Check your proxy card or the information forwarded by
your bank, broker or other holder of record to see if the telephone voting
option is available to you. A toll-free telephone number is provided for your
convenience on the instructions enclosed, if voting by telephone is available to
you. Otherwise, complete, date, sign and return your Proxy Card. Return of the Proxy Card indicates your interest
in the Company's affairs. Any shareholder
present at the Meeting may, nevertheless, vote personally on all matters with
respect to which such shareholder is entitled to vote.
Sincerely yours,
/s/ Bill D. Helton
-------------------
Chairman of the Board and
Chief Executive Officer
NEW CENTURY ENERGIES, INC.
1225 17TH Street
P.O.P. O. Box 840
Denver, Colorado 80201-0840
Telephone number (303) 571-7511
____________________________________------------------------------------
Notice of Annual Meeting of Shareholders
May 12, 199811, 1999
To the Shareholders of the Company:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of New Century Energies, Inc. will be held on the 12th11th day of May,
1998,1999, at the Adam's MarkAmbassador Hotel, GrandRio Grande Ballroom, 1550 Court Place, Denver,
Colorado,3100 I-40 West, Amarillo,
Texas, at 10:00 A.M., Mountain StandardCentral Daylight Time, for the purposes of (1) electing
fivefour Class III Directors to the Board of Directors to serve for a three year-term expiring in 2001,three-year
term, (2) approving the NCE Omnibus Incentive
Plan, (3) approving the NCE Outside Directors' Compensation Plan, (4) approving the appointment of Arthur Andersen LLP as independent public
accountants, (5)(3) acting upon twoone shareholder proposals,proposal, if presented at the
Meeting, and (6)(4) transacting such other business as may properly come before the
Meeting or any adjournment or adjournments thereof. If elected, the Class III
Directors will serve until the 20012002 Annual Meeting of Shareholders and, if
appointed, Arthur Andersen LLP will serve until the 19992000 Annual Meeting of
Shareholders.
The holders of record of Common Stock at the close of business on March
16, 1998,15, 1999, will be entitled to vote at the Meeting and at any adjournments
thereof. Proxy solicitation material is being mailed to shareholders commencing
on or about March 30, 1998.29, 1999.
By order of the Board of Directors.
Dated: March 30, 1998.29, 1999.
/s/ Teresa S. Madden
TERESA S. MADDENCathy J. Hart
----------------------
CATHY J. HART
Secretary
Please vote now, by telephone (if that option is available to you) or by
returning the enclosed proxy card, even if you presently plan to attend the
Meeting. Telephone voting instructions are enclosed for those shareholders with
that option and who prefer the convenience. Otherwise, complete, date and sign
the enclosed form of proxy card now and mail it promptly in the self-addressed,
postage-paid envelope enclosed for that purpose, even if you presently plan to attend the Meeting.purpose. Any shareholder present at the
Meeting may, nevertheless, vote personally on all matters with respect to which
suchthe shareholder is entitled to vote.
PROXY STATEMENT
Effective August 1, 1997 (the "Effective Date"),
New Century Energies, Inc. ("NCE" or the "Company"), through its
subsidiaries, is principally engaged in the generation, purchase, transmission,
distribution and sale of electricity and in the purchase, transportation,
distribution and sale of natural gas. In addition, NCE has investments in a
number of diversified energy related businesses. The Company and its domestic
utility subsidiaries are subject to the regulatory provisions of the Public
Utility Holding Company Act of 1935. The utility subsidiaries are subject to
regulation by the Federal Energy Regulatory Commission and the state utility
commissions in the states in which each utility subsidiary operates. NCE, a
Delaware corporation, became the holding company of Public Service Company of
Colorado ("PSCo") and Southwestern Public Service Company ("SPS") in a tax-free
"merger of equals" (the "Merger") in which PSCo and SPS became wholly-owned
subsidiaries of NCE.
Each outstanding share of PSCo common stock was canceled and converted into
the right to receive one share of NCE common stock and each outstanding share
of SPS common stock was canceled and converted into the right to receive 0.95
of one share of NCE common stock. At the effective time of the Merger,
certain utility and non-utility subsidiaries of PSCo and SPS prior to the
Merger were transferred within NCE's common controlled subsidiaries. Through
its subsidiaries, NCE is principally engaged in the generation, purchase,
transmission, distribution and sale of electricity and in the purchase,
transmission, distribution, sale and transportation of natural gas. Both the
Company and its subsidiaries are subject to the regulatory provisions of the
Public Utility Holding Company Act of 1935. The utility subsidiaries are
subject to regulation by the Federal Energy Regulatory Commission and the
state utility commissions in the states in which each such utility subsidiary
operates.on August 1, 1997.
This Proxy Statement is being mailed on or about March 30, 1998,29, 1999, to the
holders of common stock of NCE in connection with the solicitation by and on
behalf of the Board of Directors (the "Board") of the Company, of proxies to be
voted at the Annual Meeting of Shareholders of the Company to be held on May 12, 1998,11,
1999, at the time and place and for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders and at any and all adjournments of such
meeting. The Company's Summary Annual Report to Shareholders and the 1998
Financial Report for the year ended December 31, 1997, including financial statements,
accompanies1998, accompany the mailing of
this Proxy Statement.
At March 16, 1998,15, 1999, NCE had outstanding 111,239,530114,924,967 shares of Common Stock,
par value $1 per share, entitled to one vote per share. The Board has
fixedestablished March 16, 1998,15, 1999, as the record date for the determination of
shareholders entitled to vote at the Meeting and at any and all adjournments
thereof.
In accordance with Delaware Law and the Bylaws of the Company, a majority
of the shares entitled to vote shall constitute a quorum at a meeting of
shareholders of the Company. Abstentions and broker non-votes will be counted as
shares present for the purpose of establishing a quorum. If a quorum is present,
approval of each of the items discussed herein to be voted on at the Meeting,
except for item 1, discussed below, will require the affirmative vote of a
majority of the shares represented at the Meeting and entitled to vote on the
matter. As presented in item 1, the Directors shall be elected by a
plurality of the votes cast at the Meeting. For purposes of determining whether an item hasitems 2 and 3 have been approved by
shareholders, abstentions will have the same effect as a vote against items 2
through 6and 3 while broker non-votes will be treated as shares not entitled to vote and,
therefore, will have no effect on the outcome of items 2 through 6 (except if less than 50%these items. As presented in
item 1, the Directors shall be elected by a plurality of the outstanding shares of NCE common stockvotes cast at the
Meeting. "Withheld" votes are voted on item 2 or item 3, eithernot included in the affirmative or the negative, such items will be defeated).
Abstentionstotal vote cast for a nominee
for purposes of determining whether a plurality was received and broker non-votestherefore will
have no negative effect on the outcome of item 1.
The entire cost of the solicitation of proxies will be borne by the
Company. SolicitationsThe Company will be made by the Companymake solicitations primarily by use of the mails.
Additional solicitation of proxies of brokers, banks, nominees and institutional
investors will be made pursuant to the special engagement of Beacon Hill
Partners, Inc., at a cost to the Company of approximately $4,000, plus
out-of-pocket expenses. If necessary to obtain reasonable representation of
shareholders at the Meeting, solicitations by the Company may also be made by
telephone, facsimile, or personal interview. The Company will request brokers,
banks or other persons holding stock in their names or in the names of their
nominees to forward proxy material to the beneficial owners of such stock or
request authority for the execution of the proxies and will reimburse such
brokers or other persons for their expenses in so doing.
A form of proxy card is enclosed for use at the Meeting is enclosed.Meeting. Any shareholder voting
via telephone or signing a proxy has the power to revoke the proxy at any time
before the authority granted therein is exercised.
The Board urges shareholders to complete, date, sign and returnvote promptly. Most shareholders have a
choice of voting by using a toll-free telephone number or by returning their
proxies promptly.proxy card. Check your proxy card or the information forwarded by your bank,
broker or other holder of record to see which options are available to you.
1
ELECTION OF DIRECTORS
ITEM 1 ON PROXY CARD
In accordance with the provisions of the Restated Certificate of
Incorporation and the Corporate By-Laws ("By-Laws") of the Company, upon the
Effective Date, theThe Board wasis divided into three classes (Class I, Class II, and Class
III), with all classes as nearly equal in number as possible. One class of
directors is elected at each annual meeting of shareholders for a three-year
term. Effective with the Merger, 14 directors were selected, of
which 8 were former PSCo directors and 6 were former SPS directors. As listed below, fivefour directors have been nominated by the Board for
election as Class III directors at the Annual Meeting for a term of three years.
In accordance with the age requirements contained in the Corporate Guidelines,
Will F. Nicholson, Jr., who becomes 70 years old in 1999, is retiring from the
Board after 18 years of distinguished service to PSCo and NCE.
UNLESS OTHERWISE DIERECTED, SHARES REPRESENTED BY AN EXECUTED PROXY, EITHER
BY TELEPHONE OR ON THE FORM ENCLOSED, WILL BE VOTED FOR THE NOMINEES NAMED
BELOW. If a nominee becomes unavailable for any reason or if a vacancy should
occur before the election, the shares will be voted for another person in the
discretion of the persons named in the proxy.
Certain information is set forth below concerning the nominees (Messrs.
Brunetti, Burgess, Conklin,Forbess, Helton, Moreno and Hirschfeld, and Ms. Greer)Powers) and the nineten directors whose terms of office
will continue after the Meeting.
All
fourteen directors listed below first became directors of NCE in 1997.
NOMINEES FOR
CLASS III DIRECTORS
(Terms Expire 1998)in year 2002)
First
Year
Served Principal Occupation and
as Business Experience;
Name and Age Director Other Directorships
- --------------------------------------------------------------------------------
Wayne H. Brunetti 55 Vice Chairman, President and Chief Operating Officer,
New Century Energies, Inc., Denver, Colorado, 1997 to present;
Vice Chairman (1997 to present), President (1994 to present), Chief Executive
Officer (1997 to present) and Director (1994 to present), Public Service
Company of Colorado, Denver, Colorado;
Vice Chairman, Chief Executive Officer and Director, Southwestern Public
Service Company, Amarillo, Texas, 1997 to present;
President and Chief Executive Officer, Management Systems International,
Boca Raton, Florida, 1991 to 1994.
C. Coney Burgess[c][e] 60 President, Burgess-Herring Ranch Company, Amarillo, Texas, 1974 to present;
President, Chain-C, Inc.(agricultural firm), Amarillo, Texas, 1968 to present;
Chairman, Herring Bancorp, Inc., Vernon, Texas, 1991 to present;
President, Monarch Trust Company, Amarillo, Texas, 1972 to present;
Director, Herring National Bank, Clarendon, Texas, 1993 to present;
Director, Herring National Bank, Vernon, Texas, 1972 to present;
Director, Southwestern Public Service Company, Amarillo, Texas, 1994 to 1997.
Danny H. Conklin [d][e] 63 Partner, Philcon Development Co. (oil and gas production and exploration),
Amarillo, Texas, 1960 to present;
Director, First National Bank of Amarillo, Amarillo, Texas, 1997 to present;
Director, Parallel Petroleum Corporation, Midland, Texas, 1983 to present;
Director, Southwestern Public Service Company, Amarillo, Texas, 1988 to 1997.
2
Principal Occupation and
Business Experience;
Name and Age Other Directorships
- --------------------------------------------------------------------------------
Gayle L. Greer[b] 56 Senior Vice President, Time Warner Communications, Denver, Colorado, 1997
to present;
Senior Vice President (1996 to 1997) and Group Vice President (1984 to
1996), Time Warner Cable, Denver, Colorado;
Director, ING - North America, 1996 to present;
Director, Public Service Company of Colorado, Denver, Colorado, 1986 to 1997.
A. Barry Hirschfeld [c] 55 President, A. B. Hirschfeld Press, Inc., Denver, Colorado, 1984 to present;
Vice President, Colorado Carphone Corporation, 1983 to present;
Director, Public Service Company of Colorado, Denver, Colorado, 1988 to 1997.
CLASS II DIRECTORS
(Terms Expire in year 1999)
- --------------------------------------------------------------------------------
Giles M. Forbess [a][c] 621997 Chairman (1970 to present) and President and
63 Chief Operating Officer (1970 to 1997)1998),
Benton Oil Company, Lubbock, Texas;
Chairman (1970 to present) and President (1970
to 1997), Petroleum Transport, Inc.,
Lubbock, Texas;
Director, State National Bank of West Texas,
Lubbock, Texas, 1996 to present;
Director, Southwestern Public Service Company,
Amarillo, Texas, 1991 to 1997.
Bill D. Helton 591997 Chairman, Director and Chief Executive Officer,
60 New Century Energies, Inc., Denver, Colorado,
1997 to present;
Chairman and Director, Public Service Company
of Colorado, Denver, Colorado, 1997 to
present;
Chairman (1991 to present), Director (1990 to
present) and Chief Executive Officer (1990 to
1997), Southwestern Public Service Company,
Amarillo, Texas.
Will F. Nicholson, Jr.[a][g] 68Texas;
Chairman Rocky Mountain BankCard, Denver, Colorado, 1995and Director, Cheyenne Light, Fuel and
Power Company, 1997 to present;
President (1975 to 1995), Chairman and Director, NC Enterprises, Inc. and
subsidiaries, 1997 to present;
Chairman and Director, New Century Services,
Inc., 1997 to present.
2
NOMINEES FOR
CLASS II DIRECTORS
(Terms Expire in year 2002)
First
Year
Served Principal Occupation and
as Business Experience;
Name and Age Director Other Directorships
- --------------------------------------------------------------------------------
Albert F. Moreno 1999 Senior Vice President and General Counsel (1996
55 to present), Chief Executive OfficerCounsel (1994 to 1996) and
Deputy General Counsel (1985 to 1995)1994), Colorado National Bankshares, Inc.Levi
Strauss & Co., Denver, Colorado;
Director, Public Service Company of Colorado, Denver, Colorado, 1981 to 1997.San Francisco, California.
J. Michael Powers[c] 55Powers [c] 1997 President, Powers Masonry Supply, Cheyenne,
56 Wyoming and Fort Collins, Colorado, 1974 to
present;
President, Powers Products Company (a specialty
construction company), Cheyenne, Wyoming and
Denver, Colorado, 1974 to present;
Director, American National Bank, Cheyenne,
Wyoming, 1992 to present;
Commissioner, Wyoming Game and Fish Commission,
1997 to present;
Director, Public Service Company of Colorado,
Denver, Colorado, 1978 to 1997.
3
CONTINUING DIRCTORS
CLASS III DIRECTORS
(Terms Expire in year 2000)
First
Year
Served Principal Occupation and
as Business Experience;
Name and Age Director Other Directorships
- --------------------------------------------------------------------------------
R. R. Hemminghaus[f][g] 611997 Chairman (1987 to present) and Chief Executive
Officer (1987 to 1998), Ultramar Diamond
62 Shamrock Corporation, San Antonio, Texas, 1984 to present;Texas;
Chairman, Federal Reserve Bank of Dallas,
Texas, 1994 to present;
Director, Luby's Cafeterias, Inc., San
Antonio, Texas, 1989 to present;
Director, Southwest Research Institute, San
Antonio, Texas, 1999 to present;
Director, Southwestern Public Service Company,
Amarillo, Texas, 1994 to 1997.
J. Howard Mock[a]Mock [a][g] 561997 Chairman and Chief Executive Officer, Jaynes
57 Corporation (general contracting firm),
Albuquerque, New Mexico, 1988 to present;
Chairman, Colorado Jaynes Construction
Company, Durango and Denver, Colorado, 1996
to present;
Advisory Director, Norwest Banks New Mexico,
Albuquerque, New Mexico, 1994 to present;
Chairman, BanesPresident, Associated General Contractors of
America, Washington D.C., 1997 to 1998;
Chairman, Banes General Contractors, El Paso,
Texas, 1988 to 1997;
Director, Southwestern Public Service Company,
Amarillo, Texas, 1992 to 1997.
3
First
Year
Served Principal Occupation and
as Business Experience;
Name and Age Director Other Directorships
- --------------------------------------------------------------------------------
Rodney E. Slifer[a] 63Slifer [a] 1997 Partner, Slifer, Smith & Frampton/Vail
64 Associates Real Estate, Vail, Colorado, 1994
to present;
Partner, Slifer, Smith & Frampton, Vail,
Colorado, 1989 to 1994;
Director, Alpine Banks of Colorado, 1983 to
present;
Director, Public Service Company of Colorado,
Denver, Colorado, 1988 to 1997.
W. Thomas Stephens[e][h] 55Stephens 1997 President, Chief Executive Officer and
[e][h] Director, MacMillan Bloedel Ltd. (Canadian
56 manufacturer of building materials, paper
and packaging), 1997 to present;
Chairman (1990 to 1996), President and Chief
Executive Officer (1986 to 1996), Manville
Corporation, Denver, Colorado;
Director, Putnam Securities, from 1997 to present;
Director, Qwest Communications International,
Inc., from 1997 to present;
Director, Public Service Company of Colorado,
Denver, Colorado, 1989 to 1997.
Robert G. Tointon[e][g] 64Tointon 1997 President, Phelps-Tointon, Inc. (specialty
[e][g] construction contractor and manufacturer),
65 Greeley, Colorado, 1989 to present;
Director, Writer Corporation, Denver,
Colorado, 1992 to present;
Director, Public Service Company of Colorado,
Denver, Colorado, 1988 to 1997.
CLASS I DIRECTORS
(Terms Expire in year 2001)
First
Year
Served Principal Occupation and
as Business Experience;
Name and Age Director Other Directorships
- --------------------------------------------------------------------------------
Wayne H. Brunetti 1997 Vice Chairman, President and Chief Operating
56 Officer, New Century Energies, Inc., Denver,
Colorado, 1997 to present;
Vice Chairman (1997 to present), President
(1994 to present), Chief Executive Officer
(1997 to present) and Director (1994 to
present), Public Service Company of Colorado
and subsidiaries, Denver, Colorado;
Vice Chairman, Chief Executive Officer and
Director, Southwestern Public Service
Company, Amarillo, Texas, 1997 to present;
Vice Chairman and Chief Executive Officer
(1997 to present), Chairman (1997) and
Director (1994 to present) Cheyenne Light,
Fuel and Power Company;
Vice Chairman, President, Chief Executive
Officer and Director, NC Enterprises, Inc.
and subsidiaries, 1997 to present;
Vice Chairman, President, Chief Executive
Officer and Director, New Century Services,
Inc., 1997 to present;
Chairman (1997 to present), President (1995 to
present) and Director (1994 to present),
WestGas InterState, Inc.;
President and Chief Executive Officer,
Management Systems International, Boca Raton,
Florida, 1991 to 1994.
4
First
Year
Served Principal Occupation and
as Business Experience;
Name and Age Director Other Directorships
- --------------------------------------------------------------------------------
C. Coney Burgess [c][e] 1997 Chairman and President, Burgess-Herring Ranch
61 Company, Amarillo, Texas, 1974 to present;
Chairman and President, Chain-C, Inc.
(agricultural firm), Amarillo, Texas, 1968
to present;
Chairman, Herring Bancshares Inc. (a Delaware
Bank Holding Company), Altus, Oklahoma, 1992
to present;
Chairman, Herring Bancorp, Inc., Vernon,
Texas, 1991 to present;
Director, Herring National Bank, Clarendon,
Texas, 1993 to present;
Director, Herring National Bank, Vernon,
Texas, 1972 to present;
President and Director, Monarch Trust Company,
Amarillo, Texas, 1975 to present;
Director, Southwestern Public Service Company,
Amarillo, Texas, 1994 to 1997.
Danny H. Conklin [d][e] 1997 President (1999 to present) and Partner (1960
64 to 1998), Philcon Development Co. (oil and
gas production and exploration), Amarillo,
Texas;
Director, First National Bank of Amarillo,
Amarillo, Texas, 1997to present;
Chairman (1999 to present) and Director (1998
to present), The Don & Sybil Harrington
Foundation;
Director, Parallel Petroleum Corporation,
Midland, Texas, 1983 to 1999;
Director, Southwestern Public Service Company,
Amarillo, Texas, 1988 to 1997.
Gayle L. Greer [b] 1997 Co-Founder/Principal, GS2, Inc., Denver,
57 Colorado, 1998 to present;
Senior Vice President, Time Warner
Communications, Denver, Colorado, 1997 to
1998;
Senior Vice President (1996 to 1997) and Group
Vice President (1984 to 1996), Time Warner
Cable, Denver, Colorado;
Director, ING - North America, 1996 to present;
Director, Public Service Company of Colorado,
Denver, Colorado, 1986 to 1997.
A. Barry Hirschfeld [c] 1997 President, A. B. Hirschfeld Press, Inc.,
Denver, Colorado, 1984 to present;
56 Vice President, Colorado Carphone Corporation,
1983 to present;
Director, Public Service Company of Colorado,
Denver, Colorado, 1988 to 1997.
5
NOTES
The age of each Director iswas as of December 31, 1997.1998.
(a) Member of Nominations and Civic Responsibility Committee.
(b) Chairperson of Nominations and Civic Responsibility Committee.
(c) Member of Audit Committee.
(d) Chairperson of Audit Committee.
(e) Member of Finance Committee.
(f) Chairperson of Finance Committee.
(g) Member of Compensation Committee.
(h) Chairperson of Compensation Committee.
4
In connection with both pre-Merger and post-Merger matters, the 14
members of theThe NCE Board of Directors and committees held sixeight meetings from
April through December 1997.in 1998. All of the above
Directors except for two
directors, attended 75% or more of the aggregate of NCE meetings of the Board and
the committees on which they served in 1997. Messrs. Nicholson and
Stephens attended 69% and 67%, respectively, of the aggregate of NCE meetings
of the Board and the committees during 1997.1998. In accordance with the By-LawsBylaws of
the Company, the Board has four standing committees, which facilitate the carrying
out of its responsibilities.
The Nominations and Civic Responsibility Committee, which held three
meetings in 1997,1998, is responsible for nominating new members to the NCE Board of
Directors. This committee also oversees the Company's procedures for the
compliance with its legal obligations, its relationship with the communities in
which it operates and its corporate governance procedures. Shareholders wishing
to nominate candidate(s) for future consideration by the Nominations and Civic
Responsibility Committee may do so by writing to the Secretary of the Company,
at the address shown on the cover of this proxy, giving the candidate's name,
biographical data and qualifications, along with a statement acknowledging their
willingness to serve. Nominations must be received by September 30 ofas described in the
year preceding the annual meeting date.Shareholder Proposals for 2000 Annual Meeting.
The Audit Committee held threefour meetings during 1997.1998. The functions of the
Audit Committee are to select and recommend to the Board a firm of independent
public accountants to audit the books and records of NCE and its subsidiaries
annually; to review the scope of such audit; to receive and review the audit
reports and recommendations; to transmit such audit reports and recommendations
to the Board; to review the internal control procedures of NCE and its
subsidiaries and recommend to the Board any necessary changes deemed
necessary in such
procedures. Additionally, the Audit Committee assists the Board in fulfilling
its responsibilities related to the accounting policies and reporting practices
of NCE and its subsidiaries and adequacy of disclosures to shareholders.
In 1997, SPS announced that Deloitte & Touche
LLP ("Deloitte") would be terminated effective with the completion of the
audit of SPS's accounts for calendar year ending 1996 and that Arthur
Andersen LLP was engaged to complete the audit for the 1997 calendar year.
The decision to change accountants was made in conjunction with the then
anticipated Merger with PSCo, and was recommended by the SPS Audit Committee
and approved by the SPS Board of Directors. Deloitte's reports on SPS's
financial statements during the two most recent fiscal years and the
transition period ending December 31, 1996, contained no adverse opinion or
disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope, or accounting principles and there were no disagreements between
SPS and Deloitte on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.
The Compensation Committee, which met four times during 1997,1998, reviews the
performance of and recommends salaries and other forms of compensation for all
executive officers. The Compensation Committee annually reviews the process of
establishing salaries and wages of Company employees; reviews the process of
management development and long-range planning for Company development; and
reviews and makes recommendations regarding fees and other compensation for
outside Directors of the Board. In addition, the Compensation Committee is
responsible for the oversight of the retirement, savings and welfare plans
(except for the Finance Committee responsibilities described below), the NCE
Omnibus Incentive Plan, the appointment of executive officers responsible for
the day-to-day management of such plan, and the approval of the guidelines for
the granting of awards under the NCE Omnibus Incentive Plan.
The Finance Committee, which held twofive meetings in 1997,1998, reviews
management's proposedstrategic financial strategic directionplans for the Company, makes recommendations
regarding that strategy to the Board and reviews and approves strategic
financial goals, including new business opportunities for NCE. It will also overseeoversees
the financial management of funds of the retirement, savings and savingswelfare plans
for employees and executive officers, which includes: selection of investment
objectives, monitoring of investments, and establishing policy guidelines, and
selection and evaluation of trustees and investment managers for these plans.
The Committee receives regular reports on the status of these plans and reports,
at least annually, to the Board.
56
Security Ownership of Management and Directors
as of January 29, 19981999 (a)
Title of Class Name of Beneficial Owner Amount and % of
(b) nature of Class
beneficial (d)(f)
ownership
(c) (f)(d)
- --------------------------------------------------------------------------------
Common Stock Wayne H. Brunetti (1) 71,097372,343 (e)
Common Stock C. Coney Burgess (2) 1,6953,003
Common Stock Danny H. Conklin (3) 4,8186,291
Common Stock Giles M. Forbess 1,4642,412
Common Stock Gayle L. Greer 1,0451,100
Common Stock Bill D. Helton (4) 23,442326,760 (e)
Common Stock R. R. Hemminghaus 848866
Common Stock A. Barry Hirschfeld (5) 4,9344,820
Common Stock J. Howard Mock 7231,361
Common Stock Albert F. Moreno (elected 0
January 1, 1999)
Common Stock Will F. Nicholson, Jr.(6) 2,155 (5) 4,022
Common Stock J. Michael Powers 5,7186,012
Common Stock Rodney E. Slifer 7,4617,846
Common Stock W. Thomas Stephens 5,1405,383
Common Stock Robert G. Tointon (7) 5,000(6) 6,265
Common Stock Richard C. Kelly (8) 46,321(e)(7) 110,556 (e)
Common Stock Doyle R. Bunch II 11,053(e)Paul J. Bonavia 88,400 (e)
Common Stock David M. Wilks (9) 12,451(e)(8) 100,027 (e)
Common Stock All the above and other 275,505(e)1,241,297 (e) 1.07%
Executive Officers as a Group
(26(23 persons)
Notes
- -----
(a) As of January 29, 1998,1999, the Company is not aware of any persons who
beneficially own more than 5% of the Company's Common Stock.
(b) Common Stock listed in the table represents the Company's Common Stock, $1
par value.
(c) The common shares represented above include those shares, if any, held under
the PSCoNCE Employees' Savings and Stock Ownership Plan (the "ESOP")Plan.
(d) Excludes share equivalents held by Ms. Greer (973), Mr. Hemminghaus
(2,194), Mr. Mock (2,738), Mr. Powers (926), Mr. Slifer (1,853), Mr.
Stephens (1,946) and Mr. Tointon (587) pursuant to the SPS Employee Investment Plan (the "EIP").
(d) As of January 29, 1998, the percentage of shares beneficially owned by
any DirectorNCE Directors'
Voluntary Deferral Plan. These share equivalents have no voting or
named Executive Officer, or by all Directors and
Executive Officers as a group, does not exceed one percent of the class
of securities described above.investment powers.
(e) The number of shares includes those which the following have the right to
acquire as of January 29, 1998,1999, through the exercise of vested
options, currently
exercisable or exercisable within 60 days, granted under the NCE Omnibus
Incentive Plan and the predecessor PSCo Omnibus Incentive Plan and the SPS
1989 Stock Incentive Plan (the "1989
Plan"):Plan: Mr. Helton, 296,000 shares; Mr. Brunetti, 52,334348,334
shares; Mr. Kelly, 41,050100,000 shares; Mr. Bonavia, 88,000 shares; Mr. Wilks,
67 shares; Mr. Bunch, 16787,543 shares, and all Executive Officersexecutive officers as a group, 27,0181,095,492 shares.
67
(f) Excludes share equivalents heldAs of January 29, 1999, the percentage of shares beneficially owned by Ms. Greer (293), Mr. Hemminghaus (823),
Mr. Mock (1,701), Mr. Powers (279), Mr. Slifer (558), Mr. Stephens (586)
and Mr. Tointon (558) pursuant toany
Director or Named Executive Officer does not exceed one percent of the
NCE Directors' Voluntary Deferral
Plan. These share equivalents have no voting or investment powers.Company's Common Stock.
Unless otherwise specified, each Director and namedNamed Executive Officer has sole
voting and investment power with respect to the shares indicated.
(1) Includes 18,46823,534 shares which Mr. Brunetti and his wife share voting and
investment powers.
(2) SharesIncludes 1,783 shares held by Herring Bancorp, Inc., of which Mr. Burgess
is the majority shareholder.
(3) Includes 100 shares owned by Mr. Conklin's wife, 443 shares held by Philcon
Development Co. Retirement Plan and Trust, and 475 shares held in a trust
of which Mr. Conklin is trustee and his sons are beneficiaries.
(4) Includes 716 shares held in trusts for the benefit of Mr. Helton's
grandchildren. Mr. Helton's wife retains the right to the corpus of the
trusts upon their termination. Mr. Helton disclaims beneficial ownership of
the shares held in the trusts. Includes 17,43623,243 shares which Mr. Helton and
his wife share voting and investment powers.
(5) Mr. Hirschfeld's wife owns 1,231 of these shares; Mr. Hirschfeld
disclaims beneficial ownership of those shares.
(6) Mr. Nicholson's wife owns 500 of these shares; Mr. Nicholson disclaims
beneficial ownership of those shares.
(7)(6) Includes 5,000 shares which Mr. Tointon shares voting and investment power
with respect to those
shares with Phelps-Tointon, Inc., of which heMr. Tointon is President and Chief
Executive Officer.
(8)(7) Mr. Kelly's wife owns 263 of these shares; Mr. Kelly disclaims beneficial
ownership of those shares.
(9)(8) Includes 9,6009,294 shares which Mr. Wilks shares voting and investment powerspower
with his wife or mother.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3, 4 and 5 and written representations
furnished to the Company, the Company believes that all Directors and Officers
filed in a timely manner their 1998 reports required under Section 16(a) of the
Securities Exchange Act of 1934, as amended.
78
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Report of the Compensation Committee Onon Executive Compensation
The executive compensation and benefit programs of the Company are
administered by the Compensation Committee of the Board of Directors (the
"Committee"). The Committee is composed of W. Thomas Stephens (Chairman)(Chairperson), R.
R. Hemminghaus, Robert G. Tointon, Will F. Nicholson, Jr., and J. Howard Mock,
all of whom are independent, "non-employee directors" of the Company as defined
by Section 16(b) of the Securities Exchange Act of 1934 (the "1934 Act"), and
"outside directors" as defined within the meaning of Section 162(m) of the
Internal Revenue Code of 1986. The Board has delegated to the Committee the
responsibility of establishing the Company's compensation philosophy, as well as
the compensation package for the Chairman and Chief Executive Officer and the
other named executives of the Company. This includes establishing and
administering the Company's base salary program, executive annual and long-term
incentive plans,programs, and executive benefit programs. The Committee also
recommends and administers compensation and benefit programs for all Company
executives and key talent.
Compensation Philosophy
Prior to the Merger, PSCo and SPS had similar executive compensation
philosophies. Both companies hadThe Committee has goals of attracting, retaining, and motivating the
outstanding executive talent needed to deliver superior returns to shareholders
and provide the highest quality of service to customers.
The Company's Compensation Committee has retained this philosophy.
Before the Merger, both PSCo and SPS usedexecutive compensation philosophy uses a combination of
salary and cash-based and equity-based incentive plans to reward corporate and
individual performance and align executive interests with those of
shareholders. The Company's executive compensation philosophy is similar,
emphasizing performance-based (incentive) compensation, delivered through short-annual
and long-term incentives, to align management's interests with those of
shareholders. This philosophy results in a compensation mix for senior officers
in which annual and long-term incentives account for more than 50 percent of the
executives' annual compensation. In addition, the Company's compensation program
helps to reinforce managements'management's link to shareholders by establishing plans that
compensate executives based on corporate, business unit, and individual
performance goals. Finally, significant use of equity-based incentives
encourages management to respond to business challenges and opportunities as
owners as well as employees.
In establishing a compensation strategy for the Company, the Committee
worked with an independent, nationally recognized compensation and benefits
consulting firm and took into account several factors:
- The need to attract talent from broader markets as the utility industry
changes, to retain individuals of outstanding ability and to motivate such
individuals to achieve superior performance.
- The desire to strongly link management pay strongly to both annual and long-term
Company performance.
- The desire to align management interests with those of shareholders.
As a result, the Committee has approved a compensation strategy designed
to meet these objectives and encourage executives to achieve in a rapidly
evolving competitive environment: baseenvironment. Base salaries would beare set to the median of utility
industry levels, while annual and long-term incentive opportunities would beare targeted
to broader market (i.e., general industry) levels to provide an incentive for
executives to optimize the Company's performance. In addition, stock-based
compensation wouldwill become a more significant portion of overall executive pay.
Base salaries are to be reviewed annually, with any increases tied to such factors
as individual performance, the executive's duties and responsibilities,
financial results, and changes in the marketplace. However, the overall
opportunity for pay increases through base salary will be de-emphasized, so that
the majority of each executive's opportunity for increased compensation will be
delivered through incentive-based pay.
8
The Company's incentive compensation program, comprisesas administered under the
New Century Energies, Inc. Omnibus Incentive Plan, which was approved by
shareholders in 1998, includes an annual incentive planprogram and a long-term
incentive program. The annual incentive program is based on corporate, business
unit and individual performance; and aperformance. The long-term incentive program is comprised of
two parts that are structured to align with shareholder interests: a) options to
purchase common stock ("Stock Options") and b) a performanceperformance-based cash
and stock9
plan. The performance-based cash plan portion of the long-term incentive program
is based on total shareholder return ("TSR") relative to all major publicly traded
United States utility companies and stock options.companies.
The 1993 Omnibus Budget Reconciliation Act ("OBRA") included several
provisions applicable to executive compensation earned during 1994 and later.
One of OBRA's provisions resulted in the enactment of Section 162(m) of the
Internal Revenue Code of 1986, as amended. This section generally limits the
income tax deductions of publicly traded companies to the extent that the total
compensation for any officer named in the proxy statement exceeds $1 million in
any year, unless such compensation is performance-based. The Committee has
conducted a review of these provisions of OBRA and the potential impact on the
Company in 1998.1999. Aggregate compensation levels did not exceed $1 million for any
of the named executivesNamed Executive Officers in 1997.1998. For future years, the Committee intends
to continue to base its executive compensation decisions principally on
corporate, business unit and individual performance, with some subjective
evaluations and to award compensation that meets the requirements of
excludability under OBRA.
Base Salaries
Base salaries for executives will beare reviewed annually by the Committee
annually.Committee. In
general, salaries are targeted at the median (50th percentile) of similarly-sizedsimilarly
sized companies in the utility industry. The Committee believes that this
strategy, along with incentives at or slightly below general industry levels,
currently allows the Company to attract and retain top quality executive talent.
However, the Committee will continue to monitor this strategy in the near future
as the market for executive talent in the industry intensifies along with
competition. As mentioned above, in determining base salary increases, the
Committee will take into account such factors as individual and Company
performance, executive responsibilities and market characteristics.
In determining executive salary levels, data was collected primarily from
Edison Electric Institute's 1997annual Executive Compensation Survey. This survey
contains data from almost all of the companies included in the Standard and
Poor's Electric PowerUtilities Index, which is used in the Cumulative Total Shareholder Return
Graph.graph. Survey data has been size-adjusted based on NCE's company and business
unit sales volumes using regression analysis, and reflects both domestic
operations as well as the Company's 50 percent ownership of Yorkshire Power
Group Ltd.
Messrs. Helton, Brunetti and Bonavia have employment agreements with the
Company that provide for minimum base salaries during 1998, of $635,000,
$540,000 and $270,000, respectively, as described later in "Employment
Agreements and Change in Control Agreements." None of the Named Executive
Officers received an increase in base salary in 1998.
Annual Incentives
Executives and key employees have the opportunity to earn annual incentive
awards under the Company's annual incentive plan.program. These awards are based on
the achievement of corporate financial, business unit operational and individual
goals, which are designed to benefit shareholders and customers, focus employee
attention on pre-established objectives, and recognize individual performance
while fostering team performance. In 1997,1998, awards were based solely on corporate and individual performance. The single
corporate performance measure was Earnings Per Share (EPS). In 1998, awards
will be based on corporate,
business unit and individual performance. Business unit goals will bewere unique to
each unit and willwere designed to encourage the achievement of objectives, such as
customer service, safety,service reliability, cost
savings, etc.budget compliance and revenue growth.
Target annual incentive awards as a percent of base salary arewere set for all
Company officers, and range from 60 percent of salary for the Chairman and Chief
Executive Officer and Vice Chairman, President and Chief Operating Officer to 35
percent of salary for other Company officers. These levels are in line with the
median of general industry. Maximum awards may be up to two times the target
awards, resulting in awards ranging from 120 percent of base salary for the
Chairman and Chief Executive Officer and Vice Chairman, President and Chief
Operating Officer to 70 percent of salary for other executives.
For executives, anThe annual incentive formula award is calculated based on pre-determined
performance measures. For executive officers, this measure
in 1997 was EPSMessrs. Helton and was adjustedBrunetti, the formula is weighted
100% to the attainment of corporate financial goals. For the other Named
Executives, the formula is weighted 67% to the attainment of corporate financial
goals and 33% to the
10
attainment of business unit operational goals. With the approval of the
Committee, an award may be multiplied by a Leadership Factor described below. Each
level of Company EPS correspondsRating factor from zero to
a specific payout level as a percent of
target as delineated on a pre-specified schedule. For 1997, targetedtwo.
In 1998, for all executives, the corporate financial measure was basic
earnings per share (EPS). Target EPS for the Company was $2.89,$3.14, the achievement
of which would have resulted in target formula awards under the plan.
9
Atcorporate financial
portion of the end of each year, actual Company performance is evaluated and
formula incentive awards are determined based on the difference between
targeted and actual performance. For 1997, actual EPS was $2.50, before an
extraordinary loss of $1.06 per share, which resulted in no awards being
paid.plan. EPS of $2.60 had been$2.83 was established as a threshold below which no
awards would be paid. Had the requiredThe Company's actual EPS level been achieved, the Committee then
would have assessed subjectively the extent to which each executive
contributed toward the accomplishmentfor 1998 was $3.06. Therefore,
all Named Executive Officers earned 87.6% of the Company'starget award for corporate
financial goals, before any applicable weighting.
Messrs. Helton and demonstrated
desired leadership characteristicsBrunetti's awards are weighted 100% to the attainment
of corporate financial goals, which earned them 87.6% of their target awards for
this plan, adjusted for their individual Leadership Rating factor. The other
Named Executive Officers earned awards under the business unit operational goals
ranging from 80.8% to 100%. When weighted at 33% and combined with the corporate
financial goal achievement, the other Named Executive Officers earned awards
ranging from 91.7% to 93.9% of target, adjusted for their individual Leadership
Rating factor. The annual incentive compensation is disclosed in 1997. Based on these goals, the Committee would have awarded each executive a rating, called a "Leadership
Factor," on a sliding scale of 0 to 2.0. The Leadership Factor is then
applied to each executive's formula award as a multiplier, such that a
Leadership Factor of 1.0 delivers an executive his or her full formula award;
Leadership Factors of below 1.0 reduce an executive's formula award, whereas
Leadership Factors of above 1.0 increase the formula award to a maximum of
200 percent of target. Although this determination is subjective, the
Committee believes that such assessments accurately measure the performance
of each executive officer.Summary
Compensation Table.
Executives are allowed tomay elect to receive annual incentive awards in shares of
common stockCommon Stock of the Company, par value $1.00 per share (hereinafter
"Common Stock" or "NCE Common Stock"), in order to meet the Company's defined share
ownership guidelines, discussed below, or to increase ownership levels in the
Company.
Long-term Incentives
In 1997 prior to the Merger, PSCo and SPS as sole shareholders of the
Company approved the NCE Omnibus Incentive Plan under which executives and
other key employees are eligible to receive grants from time to time of
stock-related awards of six general types: 1) options to purchase shares of
the Common Stock ("Stock Options"), Stock Options meeting the requirements of
the Code Section 422 ("Incentive Stock Options" or "ISOs"), as well as other
Stock Options ("non-qualified Stock Options or "NQ's"); 2) rights to receive,
upon exercise, the appreciation in the fair market value of shares of Common
Stock ("Stock Appreciation Rights" or "SARs"); 3) rights to receive (a)
shares of Common Stock, or, in lieu of all or any portion of that amount,
their fair market value ("Performance Shares"), or (b) a specified dollar
amount, or in lieu of all or a portion of that amount, shares of Common Stock
having the same fair market value ("Performance Units"), both conditional
upon the attainment of performance goals during a performance cycle; 4)
outright grants of shares or units, subject to transfer restrictions and risk
of forfeiture for a specified restriction period ("Restricted Stock" and
"Restricted Stock Units") and, which may, but need not be, conditional upon
the attainment of specified performance criteria during a specified
performance period; 5) outright grants of shares, subject to specified
restrictions and risk of forfeiture for a specified restriction period
("Bonus Stock"); and 6) other stock-based awards which are denominated or
payable in, valued in whole or in part by reference to, or otherwise based on
or related to, shares of Common Stock ("Stock-Unit Awards"). Such other
stock-based awards may be subject to terms, restrictions, conditions, vesting
requirements and payout rules as determined by the Committee.
In 1997, the Committee also adopted a newThe long-term incentive compensation program for executivesis designed to align management's
interests with those of shareholders and to ensure that a significant percentage
of executive compensation is performance-based. The new long-term incentive program
utilizes two components: a) Stock Options and b) a performance-based cash and stock plan,
called the "ValueValue Creation Plan" and Stock Options. ("VCP"). Approximately two-thirds of each
executive's long-term incentive opportunity are to be delivered through Stock
Options, with one-third of the long-term incentive planprogram opportunity being
delivered through the performance plan.VCP. The annualized value of the long-term incentive
opportunity is targeted to provide total long-term incentive compensation at
approximately the second quartile (25th to 50th percentile) of general industry.
Total executive long-term incentive opportunities rangeranged from 105 percent of
salary for the Chairman and Chief Executive Officer and Vice Chairman, President
and Chief Operating Officer to 35 percent of salary for other executives.
10
Value Creation Plan ("VCP") ComponentStock Options
The first component of the Company's long-term incentive program is Stock
Options, which seek to link the interests of executives with improvements in
long-term shareholder value creation. Stock Options vest one year after the date
of grant. Once vested, they may be exercised at any time during a ten-year
period following the date of grant. The actual number of Stock Options and the
grant price of the Stock Options granted to executives is based on the fair
market value of NCE Common Stock on the date of grant, competitive practices,
and individual contributions and position. No stock options were granted in 1998
under the long-term incentive program.
VCP
The VCP provides executives with the potential to earn awards based upon
Company performance relative to peerspeer companies on a single performance measure:
total shareholder return.Total Shareholder Return ("TSR"). TSR will typically be measured cumulatively
over a three-year period using overlapping cycles. Company TSR will be measured
against all major publicly traded United States utility companies in the United States. This
group will include all of the companies in the Standard and Poor's Electric
Power Index used in the Cumulative Total Shareholder Return Graph.companies. At the end of
each three-year performance period, executives will receive an award that
correlates the extent to which the Company's TSR outperforms or underperforms
the peer group. Target awards will be provided for performance at the 50th
percentile of the peer group. Awards for performance above the 50th percentile
would be adjusted to double the target award for 75th percentile performance,
and could be up to three times target award depending on the
11
degree to which superior returns are delivered to shareholders; smallershareholders. Smaller awards
may occur for performance below the 50th percentile, with no awards for
performance below the 40th percentile.
Stock Options Component
The second component ofNo VCP payments were made during 1998. On January 1, 1998, the Company's long-term incentive program is
stock options, which seek to link the interests ofNamed
Executive Officers, together with other executives, with
improvements in long-term shareholder value creation. In 1997, Stock Options
were granted to 14 executives. Option awards represented three-year
front-loaded grants, such that three years worth of annual Stock Option
grants were awarded to each executive with no option grants expected toVCP incentive
opportunities, which will be awarded to executives in 1998 and 1999. Three-year front-loaded grants were
used to provide a strong shareholder value creation incentive to executives
asmeasured over the merged Company was formed. The annualized value of the Stock Options,
combined with the Value Creation Plan, is targeted to provide total long-term
incentive compensation at approximately the second quartile (25th to 50th
percentile) of general industry.
Stock Options vest one year after the date of grant. Once vested, they
may be exercised at any time during a ten-yearthree-year period following the date of
grant. The actual number of Stock Options, and the grant price of the Stock
Options granted to executives was based on the dollar value of NCE Common
Stock on the date of grant, the historical binomial ratios of PSCo and SPS
common stock prior to the Merger, competitive practices, and individual
contributions and position. These Stock Options grants were the first
options granted to executives in the newly merged Company.ending December
31, 2000.
Chief Executive Officer Compensation
Mr.
Bill D. Helton currently serves as Chairman of the Board and Chief
Executive Officer of New Century Energies, Inc. and, until the date of the Merger, held
the same position at Southwestern Public Service Company. Mr. Helton's base salary of
$635,000 annually was determined in accordance with the Company's base salary
philosophy, as described above.above, and his employment agreement. For the period August 1, 1997 through December 31, 1997,1998, Mr.
Helton received noan annual incentive compensation.
Mr. Wayne H. Brunetti currently serves as Vice Chairman, President and
Chief Operating Officeraward in the amount of New Centuries Energies, Inc. and, from January 1,
1997 to the date of the Merger, held the position of President and Chief
Executive Officer of Public Service Company of Colorado. Mr. Brunetti's base
salary was determined$333,756 in
accordance with the Company's base salaryincentive compensation philosophy, as described
above. ForNo stock options were granted to Mr. Helton during 1998 and no VCP
payments were made under the plan described above. Mr. Helton was awarded, on
January 1, 1998, a VCP incentive opportunity, which will be measured over the
three-year period August 1, 1997 throughending December 31, 1997,
Mr. Brunetti received no annual incentive compensation.
Messrs. Helton and Brunetti each received a three-year, front-loaded
grant of 300,000 non-qualified Stock Options. In determining Messrs. Helton
and Brunetti's compensation for 1997, the Committee also took into account
numerous other factors, including [sic]the successful integration of the two
companies as well as NCE's successful joint purchase with American Electric
Power of Yorkshire Electricity Group plc.2000 (see "Long-Term Incentive Plans -
Awards in Last Fiscal Year" ).
Stock Ownership Guidelines
The Committee believes that it is essential to align management's
interests with those of shareholders. In order to emphasize this belief, NCE
adopted stock ownership guidelines in 1997 for executives who participate in
11
the
Company's long-term incentive program. The Committee believes that linking a
significant portion of an executive's current and potential future net worth to
the Company's success, as reflected in stock price, ensures that executives have
a stake similar to that of Company shareholders and further
encouragesshareholders. Such guidelines also encourage
the long-term management of the Company for the benefit of those
shareholders.
Under the guidelines, the targetThe share ownership guideline for each executive is directly related to
the executive's corporate position, with the most significant ownership
guidelines applying to the top two officers -- the Chairman of the Board and
Chief Executive Officer, and the Vice Chairman, President and Chief Operating
Officer. The target for these top two positions areis three times base salary. The
targetsguideline for Executive Vice Presidents and Senior Vice Presidents, which
include Messrs. Kelly, WilksBonavia and Bunch,Wilks, is two times base salary. All other
officersexecutives have share ownership guidelines of one and one-half times base
salary. Each executive is expected to achieve the ownership guidelines within a
period of five years commencing on August 1, 1997, the effective date of the
Merger. Any shares that the executive is able to vote are included toward
compliance with the ownership guidelines.
Mr. W. Thomas Stephens, Chairman
Mr.Chairperson
R. R. Hemminghaus
Mr. J. Howard Mock
Mr.
Will F. Nicholson, Jr.
Mr.
Robert G. Tointon
12
The following tables set forth information concerning the total
compensation paid or awarded in 1997for 1998 to the Company's Chief Executive Officer
(formerly the Chief Executive Officer of SPS); toand each of the Company's
additional four most highly compensated executive officers serving as such
on December 31, 1997, including PSCo's former Chief Executive Officer, and one additional
executive officer who was among the most highly compensated officers in 1997
but who had resigned her position prior to December 31, 19971998 (collectively, the "Named Executive Officers"). As set
forth in the footnotes, the data presented in this table and the two tables that
follow includesinclude amounts paid to the Named Executive Officers in 1997 by NCE, as
well as PSCo and SPS and their respective
subsidiaries for the period prior to the Merger:
=============================================================================
Summary Compensation Table
=============================================================================
Name and Principal Year Annual Compensation Long-Term Compensation (c) All Other
Name and PrincipalPosition Compensation
Position ($) (d)(e)
-------------------------------------------------------- --------------------------
Year
Awards Payouts
---------------- -------
Salary($) Bonus($) Other Securities LTIP
(a) Annual Underlying Payouts
Compen- Options/ ($)
sation($) SAR's (#) (d)
(b) (c)
- ---------------------------------------------------------- ----------------------------------------------------------------------------------------- -------------------------
Bill D. Helton 1998 635,003 333,756 24,875 0 0 25,881
Chairman of the 1997 455,833455,837 78,363 271,092 300,000 0 27,524
Chairman of the
Board and
Chief Executive
Officer
Wayne H. Brunetti 1998 540,002 283,824 9,000 0 0 35,939
Vice Chairman, 1997 435,853 104,994 3,750 314,400 231,726 27,304
Vice Chairman,
President and
Chief Operating
Officer
Richard C. Kelly 1998 305,000 125,847 9,000 0 0 16,247
Executive Vice 1997 254,382 48,997 3,750 107,100 120,484 16,089
Executive Vice
President and
Chief Financial
Officer
FinancialPaul J. Bonavia 1998 270,000 111,406 34,762 0 0 13,789
Senior Vice 1997 11,250 20,000 375 88,000 0 0
President and
Support
ServicesGeneral Counsel
David M. Wilks 1998 265,000 111,966 9,000 0 0 14,445
President and 1997 238,958 41,285 24,809 87,000 0 9,618
President and
Chief Operating
Officer of SPS and
Executive Vice
President of PSCo
and New Century
Services, Inc.
Patricia T. Smith 1997 216,559 39,723 2,250 6,700 84,593 2,394,914
Senior Vice
President and
General Counsel
Doyle R. Bunch II 1997 176,667 36,080 96,099 67,000 10,400
Senior Vice
President of New Century
Services, Inc.
(a) The amounts shown in the "Bonus"this column for 1997 are related to payments
made to1998 were earned under the Named Executive Officers by PSCo or SPS in connection with the
Merger.annual incentive
program described under "Annual Incentives."
The amounts paid tofor 1997 for Messrs. Helton Wilks, and BunchWilks were based on the average of
their two highest bonuses paid by SPS in fiscal years 1993, 1994 and 1995, in
accordance with their employment agreements. The amounts paid to Messrs.
Brunetti and Kelly and Ms. Smith represented 7/12 of the target award earned under the PSCo
Omnibus Incentive Plan, which were paid in accordance with their Change in
Control agreements.
Mr. Bonavia was hired December 15, 1997. The amount for 1997 represents an
amount paid in accordance with his Employment Agreement, described later in
"Employment Agreements and Change in Control Agreements."
(b) The amounts shown in this column for 1998 include relocation benefits of
$25,762 for Mr. Bonavia and the reimbursement of certain taxes related to the
exercise of NCE stock options of $15,875 for Mr. Helton. Also, the amounts shown
in this column for Messrs. Helton, Brunetti, Kelly, Bonavia and Wilks include
flexible perquisite allowance benefits of $9,000 each.
The amounts shown for 1997 include relocation benefits of $238,125 and $76,875 for Messrs.Mr.
Helton and Bunch, respectively and the reimbursement of certain taxes related to the exercise of SPS
stock options of $24,639, $16,042 and $11,484 for Messrs. Helton and Wilks ($24,639 and Bunch,
respectively.$16,042, respectively).
Also, the amounts shown in this column for Messrs. Helton, Brunetti, Kelly, WilksBonavia and Bunch and Ms. SmithWilks include
flexible perquisite or automobile allowance benefitsallowances ($8,328, $3,750, $3,750, $8,767, $7,740$375 and
$2,250,$8,767, respectively).
13
(c) ThereDuring 1998, no stock option awards were no restricted stock awards granted in 1997 and nomade to any of the Named Executive
Officer held any restrictedOfficers.
The amounts shown for 1997 include stock at December 31, 1997. Also,option awards made to the Named
Executive Officers under the NCE Omnibus Incentive Plan. These awards
represented three-year front-loaded grants, such that three year's worth of
annual stock option grants were awarded to each executive with no performance-based cashoption grants
expected to be awarded to executives in 1998 and 1999. Additionally, the amounts
include stock option awards were granted in 1997 for the VCP component of
13
the long-term incentive compensation program. In accordance with the terms
ofmade under the PSCo Omnibus Incentive Plan Mr.for
Messrs. Brunetti Mr.and Kelly (14,400 and Ms. Smith
received certain stock option7,100, respectively).
(d) No performance cash awards (14,400, 7,100under the VCP were paid during 1998.
The amounts shown for 1997 for Messrs. Brunetti and 6,700 options,
respectively) andKelly represent dividend
equivalentsequivalent payments ($231,726, $120,484 and
$84,593, respectively)made under the PSCo Omnibus Incentive Plan, which vested in
connection with the Merger.
(d)(e) The amounts represented in the "All Other Compensation" column except
for the additional compensation to Ms. Smith as disclosed in footnote (e),
reflect the
total of employer matching contributions made under the PSCo and SPSCompany's employee
savings plans the PSCo and SPS non-qualified savings plans (the
"Executive Savings Plan" and the "Non-Qualified Salary Deferral Plan",
respectively) andtaxable insurance premiums
paid by PSCo and SPS. These amounts are
summarized below:
--------------------------------------------------------------------------
Name Contributions to Contributions to Insurance
Employee Savings the Non-Qualified Premiums ($)
Plans ($) Savings Plans ($)
--------------------------------------------------------------------------
Bill D. Helton 9,330 17,069 1,125
Wayne H. Brunetti 7,150 15,767 4,387
Richard C. Kelly 7,150 6,204 2,735
David M. Wilks 4,773 4,235 610
Patricia T. Smith 7,150 1,554 1,939
Doyle R. Bunch II 5,129 5,002 269
(e) Ms. Smith resigned and was paid severance of $2,384,271 on October 31,
1997. Under the terms of the severance and employment agreements in effect,
she received a severance benefit equal to three years compensation including
base salary and annual incentive paid at target, reimbursement of certain
taxes, immediate vesting of all outstanding incentive awards and the economic
equivalent of any long-term awards she would have received during the
upcoming three year term. Also, Ms. Smith received additional credit under
the then existing PSCo Supplemental Employment Retirement Plan for the
upcoming three-year term, additional contributions under the Executive
Savings Plan that she would have received during the upcoming three years,
continued welfare benefits for three years and a payment equal to the present
value of the benefits Ms. Smith would have received under all then existing
qualified retirement plans had she received credit for three additional years
of service.
=============================================================================
Option/SAR Grants in Last Fiscal Year
=============================================================================
Name Individual Grants
----------------------------------------------------------
Number
of
Securities % ofCompany:
- -------------------------------------------------------------------------------
Name Year Contributions Contributions Insurance Total
Underlying Options/SARs Exercise
Options/ Granted to or Base Grant Date
SARs Employees in Price Expiration Present Value
Granted Fiscal ($/Share) Date ($)(c)
(#)(a) year(b)
- --------------------------------------------------------------------------------
Bill D. Helton 300,000 18.45% 41.625 8/3/07 1,068,000
Wayne H. Brunetti 300,000 18.45% 41.625 8/3/07 1,068,000
14,400 23.19% 39.000 2/18/07 61,344
Richard C. Kelly 100,000 6.15% 41.625 8/3/07 356,000
7,100 11.43% 39.000 2/18/07 30,246
David M. Wilks 87,000 5.35% 41.625 8/3/07 309,720
Patricia T. Smith 6,700 10.79% 39.000 10/31/00 22,378
Doyle R. Bunch II 67,000 4.12% 41.625 8/3/07 238,520
(a) The options with an exercise price of $39.00 were grants of PSCo common
stock granted by the Compensation Committee of the PSCo Board on February 18,
1997. The options were intended to vest and be exercisable only
to the to the Premiums ($)
Employee Non-Qualified ($)
Savings Plans Savings Plans
($) ($)
- -------------------------------------------------------------------------------
Bill D. Helton 1998 6,227 5,125 14,529 25,881
Wayne H. Brunetti 1998 7,400 15,550 12,989 35,939
Richard C. Kelly 1998 7,287 5,674 3,286 16,247
Paul J. Bonavia 1998 7,025 5,125 1,639 13,789
David M. Wilks 1998 4,982 5,425 4,038 14,445
14
extent of 33 1/3% on the first anniversary date of the grant and to the same
extent on the second anniversary and third anniversary. All rights to
exercise were intended to be cumulative to the extent not exercised. All
options expire 10 years from the date of grant. Effective August 1, 1997,
with the completion of the Merger, all PSCo options converted to NCE options
based on the one-for-one conversion ratio used in the Merger and were
immediately vested and exercisable with the $39.00 price and 10-year term
carried forward, except options granted to for Ms. Smith. In accordance with
the terms of Ms. Smith's PSCo Severance Agreement, her options will expire
three years after her date of resignation. The $39.00 exercise price equals
the fair market value of PSCo Common Stock on February 18, 1997.
The options with an exercise price of $41.625 were granted by the NCE
Compensation Committee with an exercise price equal to the opening trade
price on the New York Stock Exchange (NYSE) of NCE Common Stock on August 4,
1997. The options vest and may be fully exercisable on the first anniversary
date of the grant. All options expire 10 years from the date of the grant.
(b) % of Total Options/SARs Granted to Employees in Fiscal Year apply to
shares of PSCo common stock granted prior to the completion of the Merger
with respect to all $39.00 options and to shares of NCE Common Stock granted
following the completion of the Merger with respect to all $41.625 options.
(c) These amounts represent a theoretical present valuation based on the
Black-Scholes Option Pricing Model as adjusted for dividends. The values in
the column are estimates based upon on an option value of $4.26 for the
$39.00 options granted to Messrs. Brunetti and Kelly and $3.34 for the
options granted to Ms. Smith. The options granted at the $41.625 exercise
price are estimates based upon an option price of $3.56. The option values
were derived using the following assumptions:
1. the time to exercise is the option life of ten years (except for
Ms. Smith option life is 3.7 years);
2. the risk-free rate is 6.45% for the $39.00 PSCo options granted to
Messrs. Brunetti and Kelly; 5.89% for the options granted to Ms.
Smith and 6.38% for the $41.625 NCE options. These rates represent
the interest rate on 10-year, 4-year and 10-year treasury strips as
quoted in the Federal Reserve Statistical Release for February 1997,
February 1997 and August 1997, respectively;
3. the option strike prices are $39.00 for the PSCo options and
$41.625 for the NCE options;
4. the stock prices at grant date were $39.00 for the PSCo options
and $41.625 for the NCE options;
5. the standard deviation of PSCo and NCE common stock, which is a
measure of the volatility of the stock, is 14.15% for the $39.00 PSCo
options and 9.16% for the $41.625 NCE options;
6. a dividend yield for the $39.00 PSCo options is 5.94% and for
the $41.625 NCE options is 5.57%.
Executives may not sell or assign these options, which have value only to the
extent of the future stock price appreciation. These amounts or any of the
assumptions should not be used to predict future performance of the stock
price or dividends.
15
============================================================================
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
============================================================================
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options/SARs at
Options/SARs FY-End ($) (a)
at FY-End (#)
--------------------------------------------------------------
Name Shares Value Exercisable/ Exercisable/
Acquired Realized ($) Unexercisable Unexercisable
on
($)
Exercise
(#)
- --------------------------------------------------------------------------------============================================================================
Bill D. Helton 890 7,512 0/ 0/
303,561 1,948,9574,890 30,396 296,000/ 2,109,000/
2,671 43,580
Wayne H. Brunetti 4,000 80,250 348,334/ 2,850,365/
0 0 52,334/ 758,843/
300,000 1,893,750
Richard C. Kelly 41,050 539,079 100,000/ 712,500/
0 0
41,050/ 631,866/
100,000 631,250Paul J. Bonavia 0 0 88,000/ 176,000/
0 0
David M. Wilks 409 3,452 67/ 1,039/
88,905 578,721
Patricia T. Smith 0 0 24,150/ 323,191/
0 0
Doyle R. Bunch II 333 2,811 167/ 2,589/
68,999 453,929
- --------------------------------------------------------------------------------87,543/ 628,734/
1,429 23,315
============================================================================
(a) Option values were calculated based on a $47.9375$48.75 closing price of NCE Common
Stock, as listedreported on the NYSENew York Stock Exchange at December 31, 1997.1998.
15
================================================================================
Long-Term Incentive Plans - Awards in Last Fiscal Year (a)
================================================================================
Name Year Number Performance Estimated Future Payouts Under
of or Other Non-Stock Price-Based Plans
Shares, Period Until
Units Maturation or
or Payout
Other
Rights
================================
Threshold Target Maximum
($) (b) ($) ($)
- --------------------------------------------------------------------------------
Bill D. Helton 1998 222,250 1/1/98-12/31/00 0 222,250 666,750
1997 179,035 8/1/97-12/31/99 0 179,035 537,105
Wayne H. 1998 189,000 1/1/98-12/31/00 0 189,000 567,000
Brunetti 1997 152,250 8/1/97-12/31/99 0 152,250 456,750
Richard C. Kelly 1998 66,083 1/1/98-12/31/00 0 66,083 198,249
1997 53,234 8/1/97-12/31/99 0 53,234 159,702
Paul J. Bonavia 1998 58,500 1/1/98-12/31/00 0 58,500 175,500
1997 40,625 12/15/97-12/31/99 0 40,625 121,875
David M. Wilks 1998 57,417 1/1/98-12/31/00 0 57,417 172,251
1997 46,253 8/1/97-12/31/99 0 46,253 138,759
- --------------------------------------------------------------------------------
(a) The amounts in this table represent awards made under the VCP described
under "Long-term Incentives" in the Report of the Compensation Committee on
Executive Compensation.
(b) If the threshold or the 40th percentile is achieved, the payout could range
between zero and the target amount.
16
The following table shows estimated aggregate pension benefits payable to
a covered participant from the qualified defined benefit plans maintained by NCE
and its subsidiaries and the NCE Supplemental Executive Retirement Plan (the
"SERP"). ======================================================================The Named Executive Officers are all participants of the SERP, and
participate in qualified defined benefit plans sponsored by the Company.
===========================================================================
Pension Plan Table
=================================================================================================================================================
Remuneration Years of Service
10 15 20 25 or more years
- ----------------------------------------------------------------------
$150,000 $---------------------------------------------------------------------------
$125,000 $34,375 $51,563 $68,750
150,000 41,250 61,875 $ 82,500 $ 82,500
175,000 48,125 72,188 96,250
96,250
200,000 55,000 82,500 110,000
110,000
225,000 61,875 92,813 123,750
123,750
250,000 68,750 103,125 137,500
137,500275,000 75,625 113,438 151,250
300,000 82,500 123,750 165,000
165,000
350,000 96,250 144,375 192,500
192,500
400,000 110,000 165,000 220,000
220,000
450,000 123,750 185,625 247,500
247,500
500,000 137,500 206,250 275,000
275,000
600,000 165,000 247,500 330,000
330,000
700,000 192,500 288,750 385,000
385,000
======================================================================800,000 220,000 330,000 440,000
900,000 247,500 371,250 495,000
1,000,000 275,000 412,500 550,000
===========================================================================
The benefits listed in the Pension Plan Table are not subject to any
deduction or offset. The compensation used to calculate SERP benefits is base
salary plus short-termannual incentive. Such covered compensation is reflected in the
Salary and Bonus columns of the Summary Compensation Table for 1997. Current annual covered compensation for Mr. Helton equals $635,000.1998.
The SERP benefit accrues over 20 years and is equal to (a) 55% of the
highest three years covered compensation of the five years preceding retirement
or termination minus (b) the qualified plan benefit. The SERP benefit is payable
as an annuity for 20 years, or as a single lump-sum amount equal to the
actuarial equivalent present value of the 20-year annuity. Benefits are payable
at age 62, or as early as age 55 reduced 5% for each year that the benefit
commencement date proceedspreceeds age 62.
The estimated credited years of service under the SERP as of December 31,
19971998, were as follows:
Mr. Helton 3334
Mr. Brunetti 1011
Mr. Kelly 3031
Mr. Bonavia 1
Mr. Wilks 20
Mr. Bunch 22
17
21
Notwithstanding any special provisions related to pension benefits
described under "Employment ContractsAgreements and Change in Control Arrangements",Agreements," the
Company has granted additional credited years of service to Mr. Brunetti for
purposes of SERP accrual. The additional credited years of service
(approximately seven) are included in the above table. Additionally, the Company
has agreed to grant full accrual of SERP benefits to Mr.Messrs. Brunetti and
Bonavia at ageages 62 and 57 and 8 months, respectively, in the event he continuesthey continue
to be employed by the Company until such age.
The Board of Directors approved the SERP in December 1997. The above
Named Executive Officers are all participants of the SERP, and participate in
qualified defined benefit plans sponsored by the Company or its subsidiaries.
Prior to the Merger of Public Service Company of Colorado and
Southwestern Public Service Company, each company sponsored one defined
benefit plan covering substantially all represented and non-represented
employees of the respective company. Employees who participated in the
Employees' Retirement Plan of Public Service Company of Colorado and
Participating Subsidiary Companies (the "Public Service Company retirement
plan") prior to the Merger continue to participate in this plan. Employees
who participated in the Retirement Plan for Employees of Southwestern Public
Service Company (the "Southwestern Public Service Company retirement plan")
prior to the Merger continue to participate in this plan. Effective July 1,
1998, the assets and liabilities associated with the non-represented
employees participating in the Public Service Company retirement plan and the
assets and liabilities associated with the non-represented employees
participating in the Southwestern Public Service Company retirement plan will
be spun-off from the respective plans and merged to form the New Century
Energies retirement plan for non-represented employees.
Mr. Brunetti and Mr. Kelly participate in the Employees' Retirement
Plan of Public Service Company of Colorado and Participating Subsidiary
Companies. Messrs. Helton, Wilks and Bunch participate in the Retirement
Plan for Employees of Southwestern Public Service Company. Effective July 1,
1998, all such executives will participate in the NCE retirement plan for
non-represented employees.
Ms. Smith resigned effective October 31, 1997, prior to the effective
date of the SERP benefits illustrated above. Pension benefits were paid to
Ms. Smith under the terms of the plans and employment agreement in effect at
her date of termination.17
Compensation of Directors
Each Director who is not an employee is paid a retainer of $60,000 per
annum. Committee Chairpersons are paid an additional retainer of $3,000 per
annum. For each Board or Committee meeting in excess of twelve per year, each non-employee
Director is paid an additional attendance fee of $1,000 per meeting. If the proposal to adopt the Outside Directors' Compensation Plan
(see Item #3 on Proxy Card) is approved, the Directors
will have 50% or, at their election, more than 50% of retainer(s) and fees paid
in NCE Common Stock and the balance paid in cash. Directors may defer receipt of
all or a portion of such fees on a pre-tax basis under the "Directors' Voluntary
Deferral Plan" portion of the NCE Outside Directors Compensation Plan. Messrs.
Slifer, Tointon, Stephens, Powers, Mock, Hemminghaus, and Ms. Greer elected to
participate in the Directors' Voluntary Deferral Plan, a non-qualified plan,
during 1997.
Former directors of PSCo and SPS receive and are paid retirement and
other certain benefits, as defined by the terms of the agreements/policies of
these subsidiaries, in effect prior to the Merger.1998.
18
Employment ContractsAgreements and Change in Control ArrangementsAgreements
The Company has entered into employment agreements with Messrs. Helton,
Brunetti and Brunetti. TheBonavia. Messrs. Helton's and Brunetti's employment agreements
specify each will serve the Company for an initial period (the "Initial Period")
and for a further period (the "Secondary Period") (jointly referred to as the
"Employment Period"). The Initial Period began August 1, 1997 and ends on the later of (i) June 30,
1999, or (ii) two and one-half (2 1/2) years from August 1, 1997.January
31, 2000. The Secondary Period shall begin on the first day after the end of the Initial
PeriodFebruary 1, 2000 and end on May 31,
2001.
During the Initial Period, Mr. Helton serves as Chairman of the Board of
Directors and as Chief Executive Officer of the Company. During the Secondary
Period, Mr. Helton shall serve as Chairman of the Board. For the performance of
his duties and responsibilities for the positions detailed above, during the
Employment Period, Mr. Helton is entitled to a compensation package comprised of
a base salary, incentive compensation of both an annual and a short-
and long-term nature,
and various other benefits including participation in a supplemental executive
retirement plan, life insurance coverage providing a death benefit of not less
than two times his annual base salary and shall be
entitled to participateparticipation in all applicable
incentive, savings and retirement plans, practices, policies and programs of the
Company to the same extent as other senior executives of the Company. In all
instances, the compensation awarded Mr. Helton shall be at least equal to what
he would have received under similar plans and programs in effect at
Southwestern Public Service Company. If Mr. Helton's employment is terminated
during the Employment Period by the Company for reasons other than cause or
disability (as defined in thatthe agreement) or if Mr. Helton terminates his
employment with the Company for good reason (as defined in thatthe agreement) (i)
Mr. Helton shall receive his base salary, incentive compensation and certain
other benefits including continued accruals under the supplemental executive
retirement plan and life and medical benefits through the Employment Period, and a cash
payment equal to the value of stock based awards that would have been granted
through the remainder of the Employment Period;
(ii) restrictions on restricted stock shall lapse and all options shall be
vested; and (iii) if applicable, Mr. Helton shall receive a tax-free
reimbursement of any excise tax imposed under Code Section 4999. The Board of
Directors, upon the recommendation of the Compensation Committee of the Board,
is responsible for administering Mr. Helton's compensation.
During the Initial Period, Mr. Brunetti serves as Vice Chairman of the
Board of Directors and as President and Chief Operating Officer of the Company.
During the Secondary Period, Mr. Brunetti shall serve as Vice Chairman of the
Board and as President and Chief Executive Officer of the Company. For the
performance of his duties and responsibilities for the positions detailed above,
during the Employment Period, Mr. Brunetti is entitled to a compensation package
comprised of a base salary, incentive compensation of both an annual and a short- and
long-term nature and various other benefits including participation in a
supplemental executive retirement plan, life insurance coverage providing a
death benefit of not less than two times his annual base salary and shall be
entitled to participate in all applicable incentive, savings and retirement
plans, practices, policies and programs of the Company to the same extent as
other senior executives of the Company. In all instances, the compensation
awarded Mr. Brunetti shall be at least equal to what he would have received
under similar plans and programs in effect at Public Service Company of
Colorado. If Mr. Brunetti's employment is terminated during the Employment
Period by the Company for reasons other than cause or disability (as defined in
thatthe agreement) or if Mr. Brunetti terminates his employment with the Company for
good reason (as defined in thatthe agreement) (i) Mr. Brunetti shall receive his
base salary, incentive compensation and certain other benefits including
continued accruals under the supplemental executive retirement plan and life and
medical benefits through the Employment Period; (ii) restrictions on restricted
stock shall lapse and all options shall be vested; and (iii) if applicable, Mr.
Brunetti shall receive a tax-free reimbursement of any excise tax imposed under
Code Section 4999. The Board of Directors, upon the recommendation of the
Compensation Committee of the Board, is responsible for administering Mr.
Brunetti's compensation.
The Company has entered into an employment agreement with Mr. Bonavia for
a term beginning December 15, 1997 and ending December 14, 2000. During the
employment period, Mr. Bonavia is entitled to a compensation package comprised
of a base salary, incentive compensation of both an annual and a long-term
nature, and various other benefits including participation in supplemental
executive retirement plans, life insurance coverage providing a death benefit of
not less than two times his annual base salary and shall be entitled to
participate in all applicable incentive, savings and retirement plans,
practices, policies and programs of the Company to the same extent as other
senior executives of the Company. If Mr. Bonavia's employment is
19
terminated during the period of his employment agreement by the Company for
reasons other than cause or disability (as defined in the agreement) or if Mr.
Bonavia terminates his employment with the Company for good reason (as defined
in the agreement) (i) Mr. Bonavia shall receive his base salary, incentive
compensation and certain other benefits including continued accruals under the
supplemental executive retirement plans and life and medical benefits through
the period of his employment agreement; (ii) restrictions on restricted stock
shall lapse and all options shall be vested; and (iii) if applicable, Mr.
Bonavia shall receive a tax-free reimbursement of any excise tax imposed under
Code Section 4999. The Board of Directors, upon the recommendation of the
Compensation Committee of the Board, is responsible for administering Mr.
Bonavia's compensation.
The Company has entered into Change in Control Agreements with Messrs.
Helton and Brunetti. These Change in Control Agreements provide that if the
covered Executive'sexecutive's employment is terminated during the term of the agreement by
the Company for any reason other than cause (as defined in that agreement) or
death or the Executive terminates employment for good reason (as defined in that
agreement) following, or in anticipation of, a Change in Control (as defined in
that agreement), (i) the Executive will receive a lump sum equal to three times
his 19
base salary and short-annual and long-term bonus, (ii) stock options become vested
and restrictions on restricted shares lapse, (iii) welfare benefits will be
continued for the 36 months following termination of employment, (iv) the
Executive will receive a payment equal to the present value of the benefits he
would have received under the existing qualified retirement plans had he
received credit for 36 additional months, and (v) the Executive will receive a
tax-free reimbursement of any excise taxes imposed under Code Section 4999. The
Change in Control Agreements specifically provide that such agreements supersede
all prior agreements relating to separation payments following a Change in
Control.
Additionally, the Company has entered into Change in Control Agreements
with Messrs. Kelly, Wilks and Bunch.Bonavia. These Change in Control Agreements
provide that if the covered Executive's employment is terminated during the term
of the agreement by the Company for any reason other than cause (as defined in
that agreement) or death or the Executive terminates employment for good reason
(as defined in that agreement) following, or in anticipation of a Change in
Control (as defined in that agreement), (i) the Executive will receive a lump
sum equal to two and 1/2 times his base salary and short-annual and long-term bonus;
(ii) stock options become vested and restrictions on restricted shares lapse;
(iii) welfare benefits will be continued for the 30 months following termination
of employment; (iv) the Executive will receive a payment equal to the present
value of the benefits he would have received under the existing qualified
retirement plans had he received credit for 30 additional months; and (v) the
Executive will receive a tax-free reimbursement of any excise taxes imposed
under Code Section 4999. The Change in Control Agreements specifically provide
that such agreements supersede all prior agreements relating to separation
payments following a Change in Control.
Compensation Committee Interlocks and Insider Participation
During 1997,1998, the following Directors served on the NCE Compensation
Committee: RobertW. Thomas Stephens (Chairperson), R. R. Hemminghaus, J. Howard Mock,
Will F. Nicholson, Jr., W.
Thomas Stephens (chairman) and Robert G. Tointon. None of these Directors are or
have been an officer or employee of the Company or any of its subsidiaries.
20
Performance Graph
The following line graph compares the cumulative total average
shareholder return
of the Company's Common Stock with the cumulative total returns during the same
time period of the S&P Electric PowerUtilities Index and the S&P 500. The graph
tracks performance from August 4, 1997 (the initial trading date of the
Company's Common Stock) through December 31, 1997,1998, and assumes a $100 investment
on August 4, 1997 and dividend reinvestment.
Cumulative
Total Return Graph represented here
CUMULATIVE TOTAL RETURN
ON A DIVIDEND REINVESTED BASIS
August 4, 1997 December 31, 1997
-------------- -----------------
NCE $100.00 $116.80
S&P Electric Power Index $100.00 $121.19
S&P 500 $100.00 $102.43
Assumes that the value of the investment in NCE Common Stock and each index was
$100 on August 4, 1997 and that all dividends were reinvested.
August 4, 1997 December 31, 1997 December 31, 1998
--------------- ------------------- -------------------
NCE $100.00 $116.80 $124.83
S&P Electric Utilities Index $100.00 $121.19 $139.93
S&P 500 $100.00 $102.43 $131.70
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
To the best of the Company's knowledge, there are no relationships or
certain related transactions to be reported in accordance with Regulation 14A of
the Securities and Exchange Act of 1934.
21
PROPOSAL TO ADOPT THE NCE OMNIBUS INCENTIVE PLAN
ITEM 2 ON PROXY CARD
Introduction
The Board of Directors adopted the New Century Energies, Inc. Omnibus
Incentive Plan (the "Omnibus Incentive Plan") on April 30, 1997, subject to
approval by the shareholders of the Company. The Omnibus Incentive Plan was
approved by the pre-merger shareholders of the Company (PSCo and SPS) and
was effective as of August 1, 1997. The Board is now seeking approval of the
Omnibus Incentive Plan from the Company's post-merger shareholders. The
Omnibus Incentive Plan enhances the Company's ability to attract and retain
executive personnel and other key employees with outstanding experience and
ability and uses performance-related incentives to motivate executive
personnel and other key employees to achieve longer range performance goals.
The performance-related incentives permit employees to participate in the
Company's long-term growth and financial success, thus aligning the interests
of the Company, its shareholders, and its executive personnel and key
employees.
The Board believes the approval of the Omnibus Incentive Plan is in the
best interests of the Company and its shareholders because the Omnibus
Incentive Plan provides incentives to executive personnel and other key
employees to devote their best efforts to pursue and sustain the Company's
growth and profitability, enhancing the financial success of the Company and
increasing shareholder value.
The full text of the Omnibus Incentive Plan is attached to this proxy
statement as Exhibit A. Because the following discussion is in the nature of
a summary and does not cover all aspects of the Omnibus Incentive Plan,
shareholders may wish to review Exhibit A in its entirety. Capitalized terms
used in this summary are defined in Section 2 of the Omnibus Incentive Plan.
Material Features of the Plan
General. The Omnibus Incentive Plan authorizes grants to eligible
employees of stock-related awards (an "Award") of six general types: (1)
options to purchase shares of Common Stock ("Options"); (2) rights to
receive, upon exercise, the appreciation in fair market value of shares of
Common Stock ("Stock Appreciation Rights" or "SARs"); (3) rights to receive
Performance Awards, conditional upon the attainment during a specified
performance period of specified Performance Goals; (4) grants of Restricted
Stock or Restricted Stock Units, subject to transfer restrictions and risk of
forfeiture for a specified restriction period, and which may, but need not
be, conditional upon the attainment of specified Performance Goals; (5)
outright grants of shares of Common Stock without cash consideration which
may or may not be subject to restrictions ("Bonus Stock"); and (6) other
stock-based awards, which are in whole or in part based on or related to
shares of Common Stock ("Other Stock-Based Awards"). At the discretion of
the Committee, an Award also may provide the Participant in the Omnibus
Incentive Plan with dividends or dividend equivalents (payable on a current
or deferred basis) and cash payments in lieu of or in addition to an Award.
Each Award must be evidenced in writing and delivered to the
Participant, and must specify the terms and conditions of the Award. Without
the Participant's consent and consistent with the terms of the Omnibus
Incentive Plan, at any time prior to payment or exercise, the Committee may
amend, modify or terminate any outstanding Award, including (i) changing the
date or dates Options or SARs become exercisable, a Performance Award is
deemed earned, or restricted stock becomes nonforfeitable, or (ii) canceling
and reissuing an Award under new terms and conditions.
Subject to the provisions of the applicable Award, no Participant will
have any rights as a shareholder with respect to any shares of Common Stock
to be distributed under the Omnibus Incentive Plan until the Participant is a
holder of those shares, except that Restricted Stock or Stock Unit Awards
will specify the extent to which a Participant is not entitled to the rights
of a Shareholder with respect to the awarded Restricted Stock or Stock Unit.
22
Options meeting the requirements of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and intended to be afforded the
federal income tax treatment of Code Section 422 options ("Incentive Stock
Options" or "ISOs"), as well as other Options ("Non-Qualified Stock Options
or 'NSOs"), may be awarded under the Omnibus Incentive Plan. SARs granted
under the Omnibus Incentive Plan may be awarded either in tandem with Options
or alone. All performance-based Awards will be deemed to include any such
additional terms, conditions, limitations and provisions as are necessary to
comply with the "performance-based compensation" exception under Section
162(m) of the Code, unless the Committee determines that the Award is not
intended to qualify for such exemption.
Shares Available for Award and Limits on SARs. Shares used for Awards
under the Omnibus Incentive Plan may be authorized but unissued shares of
Common Stock or may be shares of Common Stock acquired by the Company on the
open market. Subject to adjustment as provided in the Omnibus Incentive
Plan, the maximum number of shares of Common Stock that may be awarded under
the Omnibus Incentive Plan is 5,000,000 shares, which may be awarded pursuant
to any combination of Options, Restricted Stock, Restricted Stock Units,
Performance Units, Performance Shares, Bonus Stock, or any other right or
option. In the event that an Option or SAR is settled for cash or
terminated, or any Award in respect of shares of Common Stock is canceled or
forfeited without the delivery of shares of Common Stock, such shares shall
again be available for award under the Omnibus Incentive Plan.
The maximum number of shares of Common Stock subject to Options or
Stock Appreciation Rights granted to any "Covered Employee," as defined in
Code Section 162(m)(3) (a "Covered Employee") during a calendar year, or
Restricted Stock or Bonus Stock granted to any Covered Employee during any
measurement period is limited to 500,000 shares of Common Stock, subject to
any adjustments made pursuant to the Omnibus Incentive Plan. The maximum
number of shares of Common Stock subject to Awards of Performance Shares,
Performance Units, Restricted Stock, Restricted Stock Units, Bonus Stock, and
Other Stock-Based Awards for any measurement period is limited to that amount
having an aggregate value in excess of $1,500,000.
Administration and Eligibility. The Omnibus Incentive Plan is
administered by the Compensation Committee of the Board of Directors (the
"Committee"). All of the Committee members are required to be non-employee
directors of the Company who are "non-employee directors" who satisfy the
"disinterested administration" requirements of Rule 16b-3 promulgated under
the Securities Exchange Act of 1934 and successor rules, and "outside
directors" within the meaning of Code Section 162(m). The Committee's
determinations and decisions are final, conclusive and binding upon all
persons, including the Company, Shareholders, an Employer, Employees,
Participants and Designated Beneficiaries.
The Committee has exclusive authority to determine, in its sole and
complete discretion, which employees are to be eligible to participate in the
Omnibus Incentive Plan. Currently, 14 executives and 111 other key employees
participate in the Omnibus Incentive Plan. The total number of participants
in the Omnibus Incentive Plan can not be determined at this time, as the
Committee has sole and complete discretion in determining the participating
employees. The Committee may request recommendations for individual Awards
from the Chief Executive Officer of the Company, and may delegate to the
Chief Executive Officer the authority to grant Awards to Participants who are
not executive officers, subject to maximum Award amounts fixed by the
Committee. Awards to executive officers will be determined by the
Committee. The Committee may make grants to employees under any or a
combination of all of the various categories of Awards that are authorized
under the Omnibus Incentive Plan.
Performance Goals. Performance Goals are objectives established by
the Committee for a Performance Period, the attainment of which during the
applicable Performance Period is a pre-condition to the earning of a benefit
pursuant to a Performance Award under the Omnibus Incentive Plan.
Options. The Committee has sole and complete authority, subject to
the provisions of the Omnibus Incentive Plan, to determine the Employees to
whom Options will be granted, the number of shares of Common Stock to be
subject to the Option, the Option price, and the applicable terms and
conditions of exercise. The
23
Committee may grant Incentive Stock Options, Non-Qualified Stock Options, or
both. In the case of ISOs, the terms and conditions will comply with the
requirements of Section 422 of the Code and the accompanying regulations. The
Committee may grant Options that entitle the optionee to purchase shares of
Common Stock at a price not less than their Fair Market Value on the date of
grant. The Fair Market Value of a share of Common Stock on the date of grant
means the closing price of the Common Stock on the last day prior to the date of
grant on which the stock was traded on the national securities exchange on which
shares of such stock were traded. Each Option will be exercisable at the times
and subject to the terms and conditions specified by the Committee in the
applicable Award or thereafter; however, no Option may be exercised after the
expiration of ten years from the date of its grant. Options will be exercisable
by delivery of written notice of exercise accompanied by full payment for the
underlying shares of Common Stock. The Option price is payable in cash or its
equivalent and, to the extent permitted by the Committee, by exchanging shares
of Common Stock owned by the optionee (which are not the subject of a pledge or
security interest), or by any combination of the foregoing provided that the
combined value is at least equal to the Option price on the date the payment is
tendered. At the request of the optionee, the Company may permit a Cashless
Exercise, whereby a Participant uses a brokerage firm to make a payment of the
Option price to the Company either from the proceeds of a loan or from the sale
of Common Stock issued pursuant to exercise of the Option, and the Company
delivers the exercised shares of Common Stock to the brokerage firm. The Company
may lend money to a Participant, guarantee a loan to a Participant, or otherwise
assist a Participant to obtain the necessary funds to exercise an Option.
Stock Appreciation Rights. SARs entitle the Participant to receive
from the Company an amount equal to the excess of the Fair Market Value of a
share of Common Stock upon the exercise of the SAR over its exercise price.
The Committee has sole and complete authority to grant SARs in tandem or in
addition to an Option, or unrelated to any Option. SARs granted in tandem
with or in addition to an Option may be granted either at the same time as
the Option or at a later time. SARs will not be exercisable earlier than six
months after the date of grant, and may not be exercised more than ten years
after their date of grant. The exercise price of a SAR may not be less than
100% of the Fair Market Value of a share of Common Stock on the date of
grant, as defined above. The Committee will determine upon exercise of an
SAR whether the SAR will be settled in cash, shares of NCE Common Stock,
Options, or a combination of the foregoing.
A limited SAR relating to an Option which can only be exercised during
limited periods following a Change in Control of the Company, as defined in
the Omnibus Incentive Plan, may entitle the Participant to receive an amount
based on the highest price paid or offered for Common Stock in any
transaction relating to the Change in Control or paid during the thirty-day
period immediately preceding the occurrence of a Change in Control of the
Company in any transaction reported on the national securities exchange on
which the Common Stock is being traded during that period.
Performance Awards. The Committee has sole and complete authority to
determine the Employees who receive Performance Awards in the form of
Performance Shares or Performance Units, the number and value of such Shares
or Units for each Performance Cycle, the Performance Goals on which each
Award shall be contingent, and the duration of each Performance Cycle. The
Performance Cycles may overlap and may differ from each other in duration.
The Committee will establish Performance Goals for each Performance Cycle,
and may adjust those Performance Goals as it deems equitable due to unusual
or non-recurring events affecting the Company, changes in tax laws or
accounting principles, or other such factors as the Committee may consider.
As soon as practicable after the end of a Performance Cycle, the
Committee will determine the number of Performance Units or Performance
Shares, if any, which have been earned by a Participant on the basis of
performance in relation to the established Performance Goals. Payment Values
of earned Performance Awards will be distributed, either in a lump sum or in
installments, as prescribed by the Committee, to the Participant, or to the
Designated Beneficiary if the Participant has died. Payment may be made in
the form of cash, shares of Common Stock, or a combination thereof, as
determined by the Committee.
Restricted Stock and Restricted Stock Units. The Committee has sole
and complete authority to determine the Employees to whom Restricted Stock
and Restricted Stock Units are granted, the number of such Shares or Units,
the duration of the Restricted Period during which the Restricted Stock and
Restricted Stock Units
24
are subject to forfeiture, and other terms and conditions of the Awards. The
Restricted Period applicable to any Participant or outstanding Award may be
shortened, lengthened or waived by the Committee at any time in its discretion.
During the applicable Restricted Period, an awardee of Restricted Stock will
have full voting rights with respect to those shares of Common Stock, and will
be entitled to receive all dividends and other distributions paid with respect
to such shares. The Restricted Stock will be nontransferable, and any dividends
or other distributions paid in shares of Common Stock would be subject to
transfer restrictions and risk of forfeiture to the same extent as the
Restricted Stock.
During the Restricted Period, shares of Restricted Stock may not be
sold, assigned, transferred, pledged or otherwise encumbered, except as
provided in the Omnibus Incentive Plan. The shares of Restricted Stock will
be registered in the name of the Participant and deposited with the Company.
Upon the expiration of the Restricted Period, the Restricted Stock will be
delivered to the Participant or the Participant's legal representative,
unless the Restricted Stock has been forfeited to the Company. Payment of
Restricted Stock Units will be made to the Company in cash or shares of
Common Stock, at the discretion of the Committee.
Bonus Stock. Subject to the provisions of the Omnibus Incentive
Plan, the Company may at any time award shares of Bonus Stock to Participants
under the Omnibus Incentive Plan without cash consideration. The Committee
will determine and indicate in the related Award Agreement whether such
shares of Bonus Stock awarded under the Omnibus Incentive Plan will be
unencumbered or subject to restrictions similar to those applicable to
Restricted Stock. If any restrictions are assigned to Bonus Stock, then such
Bonus Stock will be subject to at least the following restrictions: (i) the
Bonus Stock may not be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated if such Bonus Stock is subject to restrictions
which have not lapsed or have not been vested; and (ii) if any conditions of
vesting of the Bonus Stock are not met, all such Bonus Stock will be
delivered to the Company within sixty days of the failure to meet the
applicable conditions without any payment from the Company.
Other Stock-Based Awards. In addition to Options, Performance
Awards, Restricted Stock, Restricted Stock Units, SARs or Bonus Stock, the
Committee may grant Stock Unit Awards, which can be in the form of Common
Stock or Units, the value of which is based (in whole or in part) on the
value of Common Stock. The Committee has sole and complete discretion at the
time of the grant of a Stock Unit Award to determine the applicable terms,
restrictions, conditions, vesting requirements, and payments rules. At the
sole and complete discretion of the Committee, a Stock Unit Award may be
granted subject to one or more of the following rules: (i) a Stock Unit
Award may provide that any shares of Common Stock issued pursuant to the
Award may not be assigned, sold, transferred, pledged or otherwise encumbered
prior to the date on which the shares are issued, or if later, the date
provided by the Committee at the time the Stock Unit Award is granted; (ii) a
Stock Unit Award may provide for payment of cash consideration by the Award
recipient, or provide for delivery of any Common Stock issued in connection
with the Award without payment of cash consideration by the Award recipient,
provided that for any Common Stock to be purchased in connection with the
Award, the purchase must be at least 50% of the Fair Market Value of such
Common Stock on the date the Award is granted; (iii) a Stock Unit Award may
relate to performance criteria established by the Committee at the time of
grant; and/or (iv) a Stock Unit Award may provide for deferred payment
schedules or vesting over a specified period of employment. The Committee
may waive or remove, in whole or in part, any restriction or limitation to
which a Stock Unit Award was made subject at the time of grant, if the
Committee determines that such action is advisable.
Section 162(m). Any Award to an employee who is, or is determined by
the Committee likely to become, a Covered Employee is required to be subject
to performance-based measures, goals, standards, formulas or criteria and is
required to be established in writing prior to the beginning of the
applicable performance measurement or by any later date permitted under Code
Section 162(m). Such performance-based measure, goals, standards, formulas
and criteria, as applicable, (i) are required to be objective and to satisfy
third-party objectivity standards under Code Section 162(m) and the
regulations promulgated thereunder; and (ii) shall not allow for any
discretion by the Committee as to an increase in any Award, although
discretion to lower an Award is permissible. The Committee will certify in
writing prior to the payment of an Award to a Covered Employee that the
performance-based measures, goals, standards, formulas and criteria, as
applicable, relating to the Award have been satisfied. Such criteria may
include alternative and multiple measures, goals, standards, formulas and/or
criteria, and may be based
25
on one or more business criteria. In establishing such criteria, the Committee
will consider business or financial goals of the Company, including but not
limited to, the Company's (and/or any of its subsidiaries, divisions, or other
areas) total Shareholder return, revenues, sales, and net income or net worth.
Further, all Awards to Covered Employees will be subject to any other
conditions, restrictions, and requirements as the Committee may deem advisable
to the "performance-based compensation" exception under Code Section 162(m).
Effects of a Change in Control of the Company. In the event of a
"Change in Control" (as defined below) of the Company, (i) all stock-based
Awards, such as Options and Restricted Stock, will vest immediately upon the
Change in Control; and (ii) all cash-based Awards will be paid out
immediately in cash, as if the performance criteria had been satisfied at
target levels through the effective date of the Change in Control, or as the
Committee may otherwise determine. For this purpose, a "Change in Control"
will occur if: (1) the Company receives a report on Schedule 13D, or an
amendment thereto, or the Board obtains actual knowledge of facts giving rise
to an obligation to file a Schedule 13D, disclosing beneficial ownership of
20% or more of the combined voting power of the outstanding stock of the
Company by any "person" (as that term is used in Section 13(d) of the
Securities Exchange Act of 1934); (2) any Person (other than the Company or
its wholly-owned subsidiary) purchases any Common Stock pursuant to a tender
or exchange offer, provided that after consummation of the offer, such Person
is the beneficial owner, directly or indirectly, of 20% or more of the
combined voting power of the outstanding stock of the Company; or (3) the
Shareholders of the Company approve (a) a consolidation or merger of the
Company in which the Company is not the surviving corporation, or pursuant to
which shares of Common Stock would be converted into cash, securities or
other property, unless the Shareholders of the Company immediately prior to
the transaction own at least a majority of the combined voting power of the
surviving corporation (or its parent, if it is a subsidiary of the surviving
corporation); (b) a consolidation or merger in which the Company survives,
but in which the Shareholders of the Company immediately prior to the
transaction do not hold at least a majority of the outstanding stock of the
surviving corporation (or its parent, if it is a wholly owned subsidiary);
(c) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of
the Company, except to a direct or indirect wholly-owned subsidiary of the
Company, or any complete liquidation of the Company; or (d) any merger or
consolidation of the Company where, after the merger or consolidation, one
Person owns 100% of the shares of Common Stock, except where the Shareholders
of the Company immediately prior to the transaction own at least a majority
of the combined voting power of the outstanding stock of the Person
immediately after the merger or consolidation; or (4) a change occurs in the
majority of the members of the Board of Directors within a 24-month period
unless the election or nomination for election of each new director was
approved by the vote of at least two-thirds of the directors then still in
office who were in office at the beginning of the 24-month period.
Transferability. Unless expressly set forth in the written document
evidencing the Award, no Award will be transferable by a Participant except
by will or the laws of descent and distribution, and no right or interest of
a Participant will be subject to any lien, obligation, or liability of the
Participant. Notwithstanding this restriction, at the discretion of the
Committee, an Award may be transferable pursuant to a Qualified Domestic
Relations Order, as provided in the Omnibus Incentive Plan.
Amendment and Termination. The Board of Directors may amend,
suspend, or terminate the Omnibus Incentive Plan, or a portion thereof, at
any time, provided that no amendment may be made without Shareholder approval
if such approval is necessary to comply with tax or regulatory requirements,
including an approval requirement which is a prerequisite for exemptive
relief under Section 16(b) of the Securities Exchange Act of 1934 or which is
a requirement for the "performance-based compensation exception" under Code
Section 162(m). Notwithstanding the foregoing limitation, the Committee may
make amendments to conform the Omnibus Incentive Plan to local rules and
regulations.
26
NEW PLAN BENEFITS
The following table sets forth the benefits or amounts received by the
named executive officers, executive officers of the Company as a group and
all non-executive employees of the Company as a group based on Awards made in
1997. Because awards are made at the discretion of the NCE Compensation
Committee, the Company cannot currently determine the aggregate amount of any
Awards that may be granted in 1998:
NEW CENTURY ENERGIES, INC. OMNIBUS INCENTIVE PLAN
- -------------------------------------------------------------------------------
Name and Position Dollar Value ($) Number of Shares
- -------------------------------------------------------------------------------
Bill D. Helton
Chairman of the Board and Chief 1,068,000 300,000
Executive Officer
- -------------------------------------------------------------------------------
Wayne H. Brunetti
Vice Chairman, President, and Chief 1,068,000 300,000
Operating Officer
- -------------------------------------------------------------------------------
Richard C. Kelly
Executive Vice President and Chief 356,000 100,000
Financial Officer, Financial and
Support Services
- -------------------------------------------------------------------------------
Patricia T. Smith (resigned
effective Oct. 31, 1997) 0 0
Senior Vice President and General
Counsel
- -------------------------------------------------------------------------------
David M. Wilks
President and Chief Operating 309,720 87,000
Officer of SPS and Executive Vice
President of PSCo and New Century
Services, Inc.
- -------------------------------------------------------------------------------
Doyle R. Bunch II
Senior Vice President of New 238,520 67,000
Century Services, Inc.
- -------------------------------------------------------------------------------
Executive Officer Group (14) 4,446,440 1,249,000
- -------------------------------------------------------------------------------
Non-Executive Employee Group 1,341,764 376,900
- -------------------------------------------------------------------------------
Federal Income Tax Consequences of the Plan
The following is a brief summary of the principal federal income tax
consequences of the Omnibus Incentive Plan. This summary is based on the
Company's understanding of present federal income tax law and regulations.
The summary does not purport to be complete or applicable to every specific
situation. RECIPIENTS OF AWARDS ARE ADVISED TO CONSULT THEIR PERSONAL TAX
ADVISORS WITH REGARD TO ALL TAX CONSEQUENCES ARISING WITH RESPECT TO THE
AWARDS.
Tax Withholding. If a distribution is made under the Omnibus
Incentive Plan in cash, the Company will withhold taxes as required by law.
If an Award is satisfied in the form of shares of Common Stock, then no
shares may be issued unless and until arrangements satisfactory to the
Company have been made to satisfy any tax withholding obligations applicable
with respect to such Award.
Deductibility of Awards. The Company's deductions for Omnibus
Incentive Plan Awards are limited by Section 162(m) of the Code, which
generally limits the Company's deduction for non-performance based
compensation to $1 million per year for the Company's CEO and its other four
most highly compensated officers.
Incentive Stock Options. The optionee under an ISO is not taxed and
the Company is not entitled to a federal income tax deduction at the time of
grant or exercise. However, if the optionee sells the shares acquired upon
the exercise of an ISO ("ISO Shares") at any time within (a) one year after
the date of transfer of ISO Shares to the optionee pursuant to the exercise
of such ISO; or (b) two years after the date of grant of such ISO, then (1)
the optionee will recognize capital gain equal to the excess, if any, of the
sales price over the sum of the exercise price
27
of the ISO plus the amount of ordinary income realized per clause (2) which
follows; (2) the optionee will recognize ordinary income equal to the excess, if
any, of the lesser of the sales price or the fair market value of the ISO Shares
on the date of exercise, over the exercise price of such ISO; (3) the optionee
will recognize capital loss equal to the excess, if any, of the exercise price
of such ISO over the sales price of the ISO Shares; and (4) the Company will
generally be entitled to a federal income tax deduction equal to the amount of
ordinary income recognized by the optionee per clause (2) immediately above. If
the optionee sells the ISO Shares at any time after the optionee has held such
ISO Shares for at least (i) one year after the date of transfer of the ISO
Shares to the optionee pursuant to the exercise of the ISO and (ii) two years
after the date of grant of the ISO, then the optionee will recognize capital
gain or loss equal to the difference between the sales price and the exercise
price of such ISO, and the Company will not be entitled to a federal income tax
deduction.
The amount by which the fair market value of the ISO Shares received
upon exercise of an ISO exceeds the exercise price of such ISO will be
included as a positive adjustment in the calculation of an optionee's
"alternative minimum taxable income" ("AMTI") in the year of exercise.
Non-Qualified Stock Options. The optionee under a NQSO is not taxed
and the Company is not entitled to a federal income tax deduction at the time
of grant. The optionee recognizes ordinary income upon the exercise of a
NQSO in an amount equal to the difference between the fair market value of
the stock on the date of exercise of the NQSO and the exercise price of the
NQSO, and the Company will be entitled to a federal income tax deduction in
an amount equal to such amount.
Stock Appreciation Rights. The recipient of a SAR is not taxed and
the Company is not entitled to a federal income tax deduction at the time of
grant. When the SAR is exercised, the recipient recognizes ordinary income
in an amount equal to the amount of cash received and the fair market value
of shares of stock received, and the Company will be entitled to a federal
income tax deduction in an amount equal to such amount.
Restricted Stock. The grantee of Restricted Stock is not taxed and
the Company is not entitled to a federal income tax deduction at the time of
grant. However, when shares of Restricted Stock are no longer subject to a
substantial risk of forfeiture, the grantee recognizes ordinary income in an
amount equal to the fair market value of the stock less the amount paid, if
any, for the stock. Alternatively, the grantee may file an election with the
Internal Revenue Service within 30 days of the date of his receipt of the
shares, to recognize ordinary income at the time of grant rather than at the
time the restrictions lapse. The Company is entitled to a federal income tax
deduction in an amount equal to the fair market value of the stock at the
time the grantee recognizes income related to the grant.
Performance Units, Performance Shares, Restricted Stock Units, Bonus
Stock and Stock Unit Awards. No income generally will be recognized upon
the grant of Performance Units, Performance Shares, Restricted Stock Units,
Bonus Stock or Stock Unit Awards. Upon payment in respect of the earn-out
and/or vesting of Performance Units, Performance Shares, Restricted Stock
Units, Bonus Stock or Stock Award Units, the recipient generally will be
required to include as ordinary income in the year of receipt an amount equal
to the cash received and the fair market value of shares of stock received,
and the Company will be entitled to a federal income tax deduction in an
amount equal to such amount.
28
Vote Required.
Approval of the Omnibus Incentive Plan requires the affirmative vote of
the holders of a majority of the shares present and entitled to vote with
respect to the proposal; provided that the total votes cast on the proposal
represent at least 50% in interest of all shares entitled to vote on the
proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE APPROVAL OF THE NEW CENTURY ENERGIES, INC. OMNIBUS INCENTIVE
PLAN WHICH IS DESIGNATED IN THE PROXY AS ITEM 2.
UNLESS OTHERWISE DIRECTED, SHARES REPRESENTED BY AN EXECUTED PROXY IN
THE FORM ENCLOSED WILL BE VOTED FOR APPROVAL OF THE OMNIBUS INCENTIVE PLAN.
PROPOSAL TO ADOPT THE OUTSIDE DIRECTORS' COMPENSATION PLAN
ITEM 3 ON PROXY CARD
Introduction
The Board of Directors adopted the New Century Energies, Inc., Outside
Directors' Compensation Plan (the "Directors' Plan") on April 30, 1997,
effective as of August 1, 1997, subject to its approval by the Company's
stockholders at their 1998 Annual Meeting. The Directors' Plan provides that
members of the Board of Directors who are not employees of the Company or any
of its subsidiaries ("Non-Employee Directors") shall receive payment of their
retainer(s) and fees one-half in cash and one-half in shares of NCE Common
Stock or, the Non-Employee Director may elect to receive more than one-half
of their retainer(s) and fees in shares of Common Stock. It also permits a
director to elect to defer the payment of all or a portion of the
compensation for his or her service as a director.
The purpose of the Directors' Plan is to advance the interests of the
Company and its shareholders by introducing a compensation program that
provides and encourages the acquisition of additional equity interest in the
Company by the Non-Employee Directors, thereby increasing the Non-Employee
Directors' stake in the future growth and prosperity of the Company, and
furthering their identity of interest with those of the Company's
shareholders and to assist the Company in attracting the retaining
well-qualified individuals to serve as Non-Employee Directors. The Board
believes it is in the Company's best interest to adopt the Directors' Plan.
The material features of the Plan are summarized below.
Material Features of the Plan
Participation. Only Non-Employee Directors are eligible to participate
in the Directors' Plan. There are presently 12 Non-Employee Directors of the
Company eligible to participate in the Plan. No current executive officers
or employees of the Company or its subsidiaries are eligible to participate
in the Directors' Plan.
Directors Compensation. Under the Directors' Plan, Non-Employee
Directors shall have their meeting fees and/or any other compensation paid to
them for services as a director (collectively, "Compensation") paid one-half
in cash and one-half in shares of Common Stock. Alternatively, Non-Employee
Directors may elect to have all or a portion of the cash portion of their
Compensation also paid in shares of Common Stock. Compensation paid in the
form of stock will consist of a number of shares of Common Stock (carried out
to four decimal places) that can be purchased with the dollar equivalent of
the fee, determined as described below.
Directors may also elect to defer receipt of all or a portion of such
Compensation. The election shall be made in the year prior to the calendar
year fees would otherwise be paid and is irrevocable for that year. If the
amount to be deferred would have been payable in cash, the Company will
credit, at the election of the participant, either a Cash
29
Account or a Stock Account maintained for the Non-Employee Directors on the date
the Compensation would otherwise have been payable. If the amount to be deferred
would have been payable in Common Stock, the Company will credit a Stock Account
maintained for the Non-Employee Director on the date the Compensation would
otherwise have been payable. Credits to the Stock Account will be in the form of
units ("Stock Units") and the number of Stock Units will be determined in the
manner described below. Cash Accounts will accrue interest in accordance with
the terms of the Plan. As of the payment date of any cash dividend on
outstanding shares of Common Stock, each participant's Stock Account shall be
credited with an equivalent number of additional Stock Units. The number of
shares of Common Stock issued or the number of Stock Units credited to a
Non-Employee Director's Stock Account will be determined by dividing the dollar
amount of the fee or cash dividend that would otherwise have been paid to the
participant by a per share price equal to the arithmetic mean of the highest and
lowest quoted selling prices on the New York Stock Exchange Composite Tape on
the date on which such cash amount would otherwise have been paid.
Stock Units and amounts in a Cash Account are fully vested at all
times. A participant shall receive the value of his or her Cash Account or
Stock Account following termination as an active member of the Board of
Directors. Payment of amounts from a Cash Account shall be made in the form
of either a single lump-sum cash payment or in five annual cash installments,
as selected by the participant. Payment from a Stock Account shall be made
in full shares of Common Stock with a cash equivalent for any fractional
share otherwise distributable from the Stock Account.
The following table sets forth the number of shares of Common Stock to
be issued upon approval of the Directors' Plan for Compensation paid since
August 1, 1997 through January 29, 1998, to those Non-Employee Directors that
have not elected to defer receipt of their Compensation:
NEW PLAN BENEFITS*
Participants Number of Shares
Non-Employee Directors (5) 1,969
___________________________
* The election to receive shares currently or on a deferred basis will
be made from time to time by each participant and the number of shares to be
issued will vary depending on the market price for the Common Stock on the
date of issuance. Therefore, the Company cannot now determine the amount of
shares of Common Stock, subsequent to January 29, 1998, that will be acquired
by participants.
Administration of the Plan. The Directors' Plan is administered by the
Compensation Committee of the Company's Board of Directors, which has full
power and authority to supervise administration of the Directors' Plan and to
interpret the provisions of the Directors' Plan and of any issuance or
payment of Stock or Stock Units. The Committee may delegate any of its
responsibilities to one or more agents. No participant may participate in
the decision made with respect to any questions relating to any Stock or
Stock Unit issued under the Directors' Plan exclusively to that participant.
Unfunded Plan. The Directors' Plan is unfunded. A participant's right
to receive any payment of any Stock Unit or any amount in a Cash Account is
not greater than the rights of an unsecured general creditor of the Company.
Non-Alienation. Stock Units and amounts in a Cash Account may not be
sold, transferred, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution.
Termination or Amendment of Directors' Plan. The Company reserves the
right to amend, modify or terminate the Directors' Plan or any part thereof,
from time to time, by action of the Committee with the approval of the Board;
provided that no such amendment or termination shall in any material manner
adversely affect any participant's rights to deferred amounts, together with
interest earned thereon as well as other compensation earned under the Plan,
without the consent of the participant.
30
Vote Required. Approval of the Directors' Plan requires the
affirmative vote of the holders of a majority of the shares present and
entitled to vote with respect to the proposal; provided that the total votes
cast on the proposal represent at least 50% in interest of all shares
entitled to vote on the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE APPROVAL OF THE DIRECTORS' PLAN, WHICH IS DESIGNATED IN THE PROXY AS
ITEM 3.
UNLESS OTHERWISE DIRECTED, SHARES REPRESENTED BY AN EXECUTED PROXY IN
THE FORM ENCLOSED WILL BE VOTED FOR APPROVAL OF THE DIRECTORS' PLAN.
APPROVAL OF INDEPENDENT PUBLIC ACCOUNTANTS
ITEM 42 ON PROXY CARD
In conjunction with the Merger of SPS and PSCo, the SPS Board of
Directors released Deloitte & Touche LLP and selected Arthur Andersen LLP asaudited the independent public accountants to audit the accounts of SPS. The accounts of the Company and its
consolidated subsidiaries were audited by
Arthur Andersen LLP for the 19971998 calendar year.
Subject to approval by the holders of Common Stock at the Meeting, the
Board of Directors has appointed Arthur Andersen LLP as the independent public
accountants to audit the accounts of the Company and its consolidated
subsidiaries for the 19981999 calendar year. A representative of Arthur Andersen LLP
is expected to be present at the Meeting, will be provided the opportunity to
make a statement if such representative desires to do so, and is expected to be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
19981999 CALENDAR YEAR.
UNLESS OTHERWISE DIRECTED, SHARES REPRESENTED BY AN EXECUTED PROXY, INEITHER
BY TELEPHONE OR ON THE FORM ENCLOSED, WILL BE VOTED FOR THE APPOINTMENT OF
---
ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
22
SHAREHOLDER PROPOSALSPROPOSAL
ITEM 53 ON PROXY CARD
Mr. John and/or Margaret Gilbert, 29 East 64thGerald R. Armstrong, 910 Fifteenth Street, New York, NY
10021-7043, who own or represent a total of 800 shares of Company common
stock and Mr. Allan Frank, 6882 East Center Avenue,No.754, Denver, CO 80224-1503,80202-2924,
who owns a total of 10040 shares of Companythe Company's common stock, havehas informed
management that theyhe will propose the resolution as set forth below at the Annual
Meeting. An affirmative vote of the holders of a majority of the Company's
common stock, represented in person or by proxy and entitled to
vote at the Meeting, is necessary for approval.
"RESOLVED: That the stockholders of New Century Energies [sic] Inc.,
assembled in annual meeting in person and by proxy, hereby request the Board
of Directors to take the steps necessary to provide for cumulative voting in
the election of directors, which means each stockholder shall be entitled to
as many votes as shall equal the number of shares he or she owns multiplied
by the number of directors to be elected, and he or she may cast all of such
votes for a single candidate, or any two or more of them as he or she may see
fit.
31
REASONS: California law still requires that unless stockholders have
voted not to have cumulative voting they will have it. Ohio also has the
same provision.
The National Bank Act provides for cumulative voting. In many cases
companies get around it by forming holding companies without cumulative
voting. Banking authorities have the right to question the capability of
directors to be on banking boards. In many cases authorities come in after
and say the director or directors were not qualified. We were delighted to
see the SEC [sic] has finally taken action to prevent bad directors from
being on boards of public companies. The SEC [sic] should have hearings to
prevent such persons [from] becoming directors before they harm investors.
Many successful corporations have cumulative voting. Example, Pennzoil
defeated Texaco in that famous case. Texaco's recent problem might have also
been prevented with cumulative voting, getting directors on the board to
prevent such things. Ingersoll-Rand also having cumulative voting won two
awards. Further, Union Pacific is a good example having troubles with their
freight shipments, which are backed up for a month. The merger with Southern
Pacific is part of the excuse. Just last year, Union Pacific took away
cumulative voting.
Lockheed-Martin, as well as VWR Corporation, now have a provision that
if anyone has 40% or more of the shares [sic] cumulative voting applies; it
does apply at the latter company.
In 1995 American Premier adopted cumulative voting. Allegheny Power
System tried to take away cumulative voting, as well as put in a stagger
system, and stockholders defeated it, showing stockholders are interested in
their rights. Also, Hewlett Packard, a very successful company, has
cumulative voting."
"If you agree, please mark your proxy for this resolution; otherwise it
is automatically cast against it, unless you have marked to abstain."
RESPONSE OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS CONSIDERED ITEM 5 AND UNANIMOUSLY RECOMMENDS
A VOTE "AGAINST" THIS RESOLUTION.
The Board of Directors is of the opinion that the use of cumulative
voting in the election of directors weakens the cohesiveness and
effectiveness of a board. Each director of the Company currently is elected
by a plurality of votes cast by the Company's stockholders, thereby
permitting the directors to administer the affairs of the corporation for the
benefit of all shareholders. Cumulative voting is directed toward, and can
result in, the election of one or more directors by a special-interest
shareholder or group of shareholders resulting in partisanship among
directors. The shareholder or special-interest group electing a director by
cumulative voting may seek to have that director represent the shareholder's
or group's special interest rather than the interests of the shareholders as
a whole. This partisanship among directors and voting on behalf of special
interests could interfere with the effectiveness of the Board and could be
contrary to the interests of the Company and its owners as a whole. The
Board believes a cohesive group, working together in a timely and decisive
manner on all issues affecting the Company, with accountability to all
shareholders, is necessary in today's environment to provide effective
leadership and protection of your investment.
This proposal is a recommendation to the Board of Directors and would
require future shareholder approval of an amendment to the Company's Restated
Articles of Incorporation to implement.
PLEASE NOTE, AS SPECIFIED IN THE SHAREHOLDER PROPOSAL, UNLESS OTHERWISE
DIRECTED, SHARES REPRESENTED BY AN EXECUTED PROXY IN THE FORM ENCLOSED WILL
BE VOTED AGAINST THIS RESOLUTION.
ITEM 6 ON PROXY CARD
Mr. Gerald R. Armstrong, 910 Fifteenth Street, No.754, Denver, CO
80202, who owns a total of 40 shares of Company common stock, has informed
management that he will propose the resolution set forth below at the Annual
32
Meeting. An affirmative vote of the holders of a majority of the Company's
common stock,Common Stock, represented in person or by proxy and entitled to vote at the
Meeting, is necessary for approval.
RESOLVED: "That the shareholders of New Century Energies, Inc., assembled
in person and by proxy in an annual meeting, request that the Board of Directors
take those steps necessary to cause annual elections for all directors by
providing that at future elections in annual meetings, all directors be elected
annually and not by classes as is now provided and that on the expiration of the
present terms their subsequent elections shall also be on an annual basis."
REASONS: "Buried deeply"Last year, 35,515,796 shares or 42% of the shares
represented in the noticeannual meeting voted in favor of the meeting for the merger
into New Century Energies, Inc. is disclosure that its directors will serve
for three year terms, rather than one year terms, as had been in place at
Public Service Companythis proposal.
As "black-outs," "brown-outs" and construction completion delays are
becoming part of Colorado since its inception.
Thereour corporate style, costly impacts could be felt by
shareholders.
Anti-takeover provisions are also significant other ant-takeover [sic] provisionspresent which negate theany need for three
year terms for thedirectors. Public Service Company of Colorado always had
one year terms for its directors. Although Southwestern Public Service
Company had three year terms for its directors, it never found the needits
presence needed to usedeter any of its anti-takeover measures.
Recently,unwanted offer.
Ameritech, Time-Warner, Lockheed-Martin, Campbell Soups, Atlantic
Richfield, Pacific Enterprises, Westinghouse and other corporations have
replaced three year terms with the annual election of all directors.
---
Occidental Petroleum corporation [sic]Corporation stated in its 1997 proxy statement
in support of replacing three year terms with one year terms for its
directors:
"the current Board of Directors....does recognize that under
current views of corporate governance a classified board is believed
to offer less protection against unfriendly takeover attempts than
previously assumed while frustrating stockholders in their exercise
of oversight of the board. The Board of Directors believes that the
best interests of the stockholders are not currently served by
maintaining a classified board...."
These actions have increased shareholder voting rightrights by 300% --
-----------------------------------------------------------------
and, at no cost to the shareholders.
As it is not known how theIt remains unknown if our directors willcan perform in the
newly-established competitive climate,climate. Accordingly, it is essential that
shareholders have the greatest accountability possible. ThisThe proponent
believes that [sic]the current system produces only a facade onof continuity
which should be displaced; and, accountability and performance be
substituted as the basis for re-election to our board of directors."
"If you agree, please vote FOR this proposal. If your proxy card is
unmarked, your shares will be automatically voted "against" it."
23
RESPONSE OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS CONSIDERED ITEM 63 AND RECOMMENDS A VOTE
"AGAINST" THIS RESOLUTION.
Under the Restated Certificate of Incorporation and the Corporate Bylaws
of New Century Energies, Inc., upon the effective date of the Merger, the Board
of Directors was divided into three classes of directors of approximateapproximately equal
numbers and staggered three-year terms. Approximately one-third of the directors
stand for election each year and the entire Board can be replaced in the course
of three annual meetings, all held within approximately two years. In separate
PSCo and SPS shareholder meetings held on January 31, 1996, the three classes of
directors and staggered terms of the Board were approved by approximately 72%
and 74% of the PSCo and SPS shareholders, respectively. ThisIn addition, in 1998, a
similar shareholder proposal was defeated by the NCE shareholders by a vote of
49,647,986 shares against and 35,515,796 shares for.
Board classification ensures that continuity and experience of the directors in
the business and the affairs of the Company and suchCompany. Such a board is best situated to
maximize long-term shareholder value. For instance, the Board believes that a
board with a historical perspective of the Company
(PSCo and SPS) provides stability during a
time in which fundamental changes continue to occur in the electric utility
industry and is able to make decisions that are best 33
for the Company: decisions
on strategic acquisitions or dispositions, significant capital commitments and
utilization of financial and other resources. Moreover, continuity on the boardBoard
is integral to developing, refining, and executing a long-term strategic plan, a
process that often takes years.
The Board believes that an abrupt change of control could disrupt the
Company in achieving its long-term strategic goals, and thus might deprivegoals. The classified system
affords the shareholders of thedirectors a greater opportunity to realizerespond deliberately to any
coercive proposal and to secure the full value of theirthe shareholders' investment.
At the same time, the shareholdersa classified Board remains fully accountable to its
shareholders. Shareholders have the power to propose and
elect alternative nominees for
the class of directors to be elected each year,year. They have the power to review
Board performance and thus influenceelect directors of their choosing. Five directors stood
for reelection at the Board composition. The Board believeslast annual meeting; each was elected by more than 97% of
the vote. This suggests that a
classified board thus remains accountable to its shareholders.adequate accountability and satisfactory
performance are achieved with the current system.
If approved by the shareholders, the proposal would not result in an
immediate change to declassdeclassify the Board. Instead, it would serve as a
recommendation to the Board to take the necessary steps to end the staggered
system of electing directors. To declassify the Board, it would be necessary to
amend the relevant provisions of the Company's Restated Certificate of
Incorporation and Corporate Bylaws. The affirmative vote of 80% of the
outstanding shares of the Company's common stock would be required to approve
those amendments.
UNLESS OTHERWISE DIRECTED, SHARES REPRESENTED BY AN EXECUTED PROXY, INEITHER
BY TELEPHONE OR ON THE FORM ENCLOSED, WILL BE VOTED AGAINST THIS RESOLUTION.THE SHAREHOLDER
-------
PROPOSAL REGARDING THE ELIMINATION OF A CLASSIFIED BOARD OF DIRECTORS.
TRANSACTION OF OTHER BUSINESS
The Board of Directors does not intend to bring before the Meeting any
matters other than (1) the election of Directors;Directors and (2) the approval of the
Omnibus Incentive Plan; (3) the approval of the Outside Directors'
Compensation Plan; and (4) the appointment of the
Company's independent public accountants; however, management has knowledge of
twoone shareholder proposalsproposal that may be brought before such Meeting.Meeting as described in
this proxy statement. Additionally, if any other matter properly comes before
the Meeting, it is the intention of the persons named in the form of proxy card to vote
the proxies in accordance with their judgment on such matter.
24
SHAREHOLDER PROPOSALS FOR 19992000 ANNUAL MEETING
Shareholder proposals intendedRule 14a-4 of the Securities and Exchange Commission's proxy rules allows
the Company to use discretionary voting authority to vote on matters coming
before an annual meeting of shareholders, if the Company does not have notice of
the matter at least 45 days before the date corresponding to the date on which
the Company first mailed its proxy materials for the prior year's annual meeting
of shareholders or the date specified by an overriding advance notice provisions
in the Company's Restated Certificate of Incorporation or Bylaws. The Company's
Restated Certificate of Incorporation contains such an advance notice provision.
According to the Company's Restated Certificate of Incorporation, in order
for business to be presentedbrought before a meeting of shareholders, that business must
be (a) specified in the notice of the meeting given by or at the 1999 Annual
Meetingdirection of
the Board of Directors, (b) otherwise properly brought before the meeting by or
at the direction of the Board of Directors or (c) otherwise properly brought
before the meeting by a shareholder. The shareholder must give notice in writing
(containing certain information specified in the Restated Certificate of
Incorporation), which must be received by the Secretary of the Company not less
than 60 days nor more than 90 days prior to the first anniversary of the
preceding year's annual meeting. In the event that the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60 days from
such anniversary, notice by the shareholder to be timely must be received not
earlier than the 90th day prior to such Annual Meeting and not later than the
close of business on the later of (a) the 60th day prior to such Annual Meeting
or (b) the 10th day following the date on which notice of the date of the Annual
Meeting was mailed or public disclosure thereof was made, whichever first
occurs. The Restated Certificate of Incorporation also provides that nominations
for Director at an Annual Meeting may be made only by the Board or the
Nominating and Civic Responsibility Committee, or by a shareholder entitled to
vote in the election of directors generally from whom the Secretary of the
Company has received written notice (containing certain information specified in
the Restated Certificate of Incorporation) in accordance with the timetable set
forth above. For the Company's 2000 Annual Meeting of Shareholders, which is not
expected to be advanced or delayed, the Secretary of the Company must have
received notice from any shareholder who intends to bring business before the
meeting or who wishes to nominate a person or persons for election as directors
no earlier than February 11, 2000 and no later than November 29, 1998,the close of business on
March 13, 2000.
This requirement is separate and apart from the Securities and Exchange
Commission's requirements that a shareholder must meet in order to be eligiblehave a
shareholder proposal included in the Company's proxy statement under Rule 14a-8.
For the Company's 2000 Annual Meeting of Shareholders, any shareholder who
wishes to submit a proposal for inclusion in the Company's proxy statement and formmaterials
pursuant to Rule 14a-8 must submit such proposal to the Secretary of proxy relating to that meeting.the Company
on or before November 30, 1999.
By order of the Board of Directors.
Dated: March 30, 1998.29, 1999.
/s/ Teresa S. Madden
TERESA S. MADDENCathy J.Hart
CATHY J. HART
Secretary
ALL SHAREHOLDERS ARE REQUESTED TO VOTE PROMPTLY. SHAREHOLDERS CAN VOTE
THEIR SHARES BY A) TELEPHONE USING THE INSTRUCTIONS ENCLOSED (IF THIS OPTION IS
AVAILABLE), OR B) COMPLETE, DATE, AND SIGN THE ENCLOSED FORM OF PROXY CARD AND RETURN IT
IN THE SELF-ADDRESSED, POSTAGE-PAID ENVELOPE, WHETHER OR NOT THEY PLAN TO ATTEND
THE MEETING.
3425
EXHIBIT A
NEW CENTURY
ENERGIES
INC.
OMNIBUS INCENTIVE PLAN
Section 1. Purpose
The purpose of the{Graphic Omitted)
New Century Energies Inc. Omnibus Incentive Plan (the
"Plan") is pleased to promoteintroduce telephone proxy voting.
Telephone voting is an efficient way for shareholders to vote and is economical
when compared to voting by mail. Consider voting your proxy utilizing a touch
tone phone as follows:
- Obtain the interests ofcontrol number found on the Company and its shareholdersenclosed proxy card.
- Use a touch tone phone to dial 1-800-480-0407.
- Enter your control number at the prompts then follow the step by (a) attracting and retaining executive personnel and other key employees of
outstanding training, experience and ability; (b) motivating executive
personnel and other key employees, by means of performance-related
incentives,step
instructions.
Your telephone vote authorizes the named proxies to achieve longer-range performance goals and (c) enabling such
employees to participatevote your shares in the
long-term growthsame manner as if you signed and financial successreturned the proxy card by mail. If you vote
your proxy by telephone, there is no need to return your proxy card by mail.
Thank you for your continued support of the
Company.
Section 2. Definitions
"Act" shall mean the Securities Exchange Act of 1934, as amended.
"Affiliate" shall mean any corporation or other entity which is not a
Subsidiary but as to which the Company possesses a direct or indirect
ownership interest and has representation on the board of directors or any
similar governing body.
"Award" shall mean a grant or award under Section 6 through 11 inclusive, of
the Plan, as evidenced in a written document delivered to a Participant as
provided in Section 13(b).
"Board" or "Board of Directors" shall mean the Board of Directors of the
Company.
"Bonus Stock" means an Award granted pursuant to Section 10 of the Plan
expressed as a Share of Common Stock which may or may not be subject to
restriction.
"Cashless Exercise" means the exercise of an option by the Participant
through the use of a brokerage firm to make payment to the Company of the
exercise price either from the proceeds of a loan to the Participant from the
brokerage firm or from the proceeds of the sale of Stock issued pursuant to
the exercise of the option, and upon receipt of such payment, the Company
delivers the exercised shares to the brokerage firm.
"Change in Control" is the occurrence of any of the events described in
subsections (a) through (d), below:
(a) Either (i) receipt by New Century Energies, Inc. ("the Company") of a
report on Schedule 13D, or an amendmentEnergies.
VOTE BY TELEPHONE
24 HOURS A DAY, 7 DAYS A WEEK
UNTIL 10 A.M. CDT ON
MAY 11, 1999
TELEPHONE MAIL
1-800-480-0407
Use any touch-tone telephone to such a report, filed with the
Securitiesvote Mark, sign and Exchange Commission pursuant to Section 13(d) of the Act
disclosing that any person (as such term is useddate your proxy card
your proxy. Have your proxy card in Section 13(d) of the
Act) ("Person"), is the beneficial owner, directly or indirectly, of
twenty percent or more of the combined voting power of the outstanding
stock of the Company, or (ii) actual knowledge by the Board of facts on
the basis of which any Person is required to file such a report on
Schedule 13D, or to make an amendment to such a report, with the SEC (or
would be required to file such a report or amendment upon the lapse of
the applicable period of time specified in Section 13(d) of the Act)
disclosing that such Person is the beneficial owner, directly or
indirectly, of twenty percent or more of the combined voting power of
the outstanding stock of the Company.
(b) Purchase by any Person other than the Company or a wholly-owned
subsidiary of the Company, of shares pursuant to a tender or exchange
offer to acquire any stock of the Company (or securities convertible
into stock) for cash, securities or any other consideration provided
that, after consummation of the offer, such Person is the beneficial
owner (as defined in Rule 13d-3 under the Act), directly or indirectly,
of twenty percent or more of the combined voting power of the
outstanding stock of the Company (calculated as provided in paragraph
(d) of Rule 13d-3 under the Actand return it in the case of rightspostage-paid
hand when you call. You will be envelope we have provided.
prompted to acquire stock).
(c) Approval by the shareholders of the Company of a transaction described
in any of the following paragraphs:
A-1
(1) Any consolidation or merger of the Company in which the Company is
not the continuing or surviving corporation or pursuant to which
shares of stock of the Company would be converted into cash,
securities or other property, other than a consolidation or merger
of the Company in which holders of its stock immediately prior to
the consolidation or merger own at least a majority of the combined
voting power of the outstanding stock of the surviving corporation
immediately after the consolidation or merger (or at least a
majority of the combined voting power of the outstanding stock of a
corporation which owns directly or indirectly all of the voting
stock of the surviving corporation).
(2) Any consolidation or merger in which the Company is the continuing
or surviving corporation but in which the shareholders of the
Company immediately prior to the consolidation or merger do not hold
at least a majority of the combined voting power of the outstanding
stock of the continuing or surviving corporation (or where such
holders of stock hold at least a majority of the combined voting
power of the outstanding stock of the corporation which owns
directly or indirectly all of the voting stock of the Company).
(3) Any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all the
assets of the Company (except such a transfer to a corporation which
is wholly owned, directly or indirectly, by the Company), or any
complete liquidation of the Company.
(4) Any merger or consolidation of the Company where, after the merger
or consolidation, one Person owns 100% of the shares of stock of the
Company (except where the holders of the Company's voting stock
immediately prior to such merger or consolidation own at least a
majority of the combined voting power of the outstanding stock of
such Person immediately after such merger or consolidation).
(d) A changeenter your control
number, located in the majority ofbox below,
and then follow the members ofsimple directions.
Your telephone vote authorizes the Board within a 24-month
period unless the election or nomination for electionnamed If you have submitted your proxy by
the Company's
shareholders of each new director was approved by theproxies to vote of at least
two-thirds of the directors then still in office who were in office at
the beginning of the 24-month period.
A Change In Control occurs on the date that an event described in subsection
(a), (b) or (d) occurs. In the case of a transaction described in subsection
(c) which is subject to approval by the shareholders, the Change In Control
occurs on the date the transaction is completed.
"Code" shall mean the Internal Revenue code of 1986, as amended from time to
time.
"Committee" shall mean the Compensation Committee of the Board of Directors.
The committee shall be made up of at least two outside directors who qualify
as Non-Employee Directors, as defined in Rule 16-3, including the rule
regarding disinterested administration. Only outside directors may serve on
the Committee.
"Common Stock" or "Stock" shall mean the common stock of the Company.
"Company" shall mean New Century Energies, Inc.
"Covered Employee' means a Participant who is a "covered employee" as defined
in Section 162(m)(3) of the Code, and the regulations promulgated thereunder,
or who the Committee believes will be such a covered employee for a
Performance Period, and who the Committee believes will have compensation in
excess of $1,000,000 for the Performance Period, as provided in Section
162(m) of the Code.
"Designated Beneficiary" shall mean the beneficiary designated by the
Participant, in a manner determined by the Committee to receive amounts due
the Participantyour shares in the event of the Participant's death. In the absence of
an effective designation by the Participant, Designated Beneficiary shall
mean the Participant's estate.
"Employee" shall mean any employee of the Employer.
A-2
"Employer" shall mean the Company and any Subsidiary or Affiliate.
"Fair Market Value" shall mean the closing price of the Stock on the last day
prior to the date in question on which the Stock was traded.
"Fiscal Year" shall mean the fiscal year of the Company.
"Incentive Stock Option" shall mean a stock option granted under Section 6
whichsame telephone there is intended to meet the requirements of Section 422 of the Code.
"Key Employee' means an officer or other key employee of the Company or its
Subsidiaries, who, in the opinion of the Committee, can contribute
significantly to the growth and profitability of, or perform services of
major importance to, the Company and its Subsidiaries.
"Non-Stock Based Incentive Compensation" refers to incentive compensation
whose value is not based in whole or in part on the value of Common Stock.
"Nonqualified Stock Option" shall mean a stock option granted under Section 6
which is not intended to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Nonqualified Stock Option.
"Participant" shall mean an individual who is selected by the Committee to
receive an Award under the Plan.
"Payment Value" shall mean the dollar amount assigned to a Performance Unit
or Performance Share under Section 8 with respect to the applicable
Performance Cycle.
"Performance Award" means a performance-based Award, which may be in the form
of either Performance Shares or Performance Units
"Performance Cycle" or "Cycle" shall mean the period of years selected by the
Committee during which the performance is measuredno need for the purpose of
determining the extent to which an award of Performance Shares has been
earned.
"Performance Goals" shall mean the objectives established by the Committee
for a Performance Cycle, for the purpose of determining the extent to which
Performance Shares which have been contingently awarded for such Cycle are
earned.
"Performance Share" means an Award, designatedyou
manner as a Performance Share,
granted to a Participant pursuant to Section 8 herein, the value of which is
determined, in whole or in part, by the value of Company Stock in a manner
deemed appropriate by the Committee and described in the Agreement.
"Performance Unit" means an Award, designated as a Performance Unit, granted
to a Participant pursuant to Section 8 herein, the value of which is
determined, in whole or in part, by the attainment of pre-established goals
relating to Company financial or operating performance as deemed appropriate
by the Committee and described in the Agreement.
"Period of Restriction" means the period during which the transfer of shares
of Restricted Stock is restricted, pursuant to Section 9 herein.
"Restricted Period" shall mean the period of years selected by the Committee
during which a grant of Restricted Stock or Restricted Stock Units may be
forfeited to the Company.
A-3
"Restricted Stock" shall mean shares of Common Stock contingently granted to
a Participant under Section 9 of the Plan.
"Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange Act as
adopted in Exchange Act Release No. 34-37260 (May 31, 1996), or any successor
rule as amended from time to time.
"Section 162(m)" means Section 162(m) of the Code, or any successor section
under the Code, as amended from time to time and as interpreted by final or
proposed regulations promulgated thereunder from time to time.
"Stock" or "Shares" means the Common Stock of the Company.
"Stock Appreciation Right" means the right to receive an amount equal to the
excess of the Fair Market Value of a share of Stock (as determined on the
date of exercise) over the Exercise Price of a related Option or the Fair
Market Value of the Stock on the Date of Grant of the Stock Appreciation
Right.
"Stock Exchange" shall mean the national securities exchange on which the
Common Stock is traded as of the particular time in question.
"Stock Unit Award" shall mean an award of Common Stock or units granted under
Section 11.
"Subsidiary" shall mean any business entity in which the Company possesses
directly or indirectly fifty percent (50%) or more of the total combined
voting power.
Section 3. Administration
The Plan shall be administered by the Committee. The Committee shall have
sole and complete authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing the operation of the Plan as it
shall from time to time deem advisable,if you marked, signed and to interpretmail back your proxy.
returned the terms and
provisions of the Plan. The Committee may delegate to one or more its
members or to one or more agents such non-discretionary administrative duties
as it may deem advisable, and the Committee or any person to whom it has
delegated duties as aforesaid may employ one or more persons to render advice
with respect to any responsibility the Committee or such person may have
under the Plan. The Committee may take action by a meeting in person, by
unanimous written consent, or by meeting with the assistance of
communications equipment which allows all Committee members participating in
the meeting to communicate in either oral or written form. The Committee's
determinations and decisions shall be final, conclusive and binding upon all
persons, including the Company, stockholders, an Employer, Employees,
Participants and Designated Beneficiaries.
Section 4. Eligibility
The Committee shall have sole and complete discretion in determining those
Employees who shall participate in the Plan. The Committee may request
recommendations for individual awards from the Chief Executive Officer of the
Company and may delegate to the Chief Executive Officer of the Company the
authority to make Awards to Participants who are not executive officers of
the Company, subject to a fixed maximum Award amount for such a group and a
maximum amount for any one Participant, as determined by the Committee.
Awards made to the Executive Officers shall be determined by the Committee.
Section 5. Maximum Amount Available for Awards
a) The maximum number of shares of Stock in respect of which Awards may be
made under the Plan shall be a total of 5,000,000 shares of Common Stock
which may be any combination of Options, Restricted Stock, Restricted
Stock Units, Performance Units, Performance Shares, Bonus Shares, or any
other right or option. Shares of Common stock may be made available from
the authorized but unissued shares of the Company or from shares acquired
by the Company, including shares purchased in the open market. In the
event that (i) an Option or Stock Appreciation Right is settled for cash
or expires or is terminated unexercised as to any shares
A-4
of Common Stock covered thereby, or (ii) any Award in respect of shares is
canceled or forfeited for any reason under the Plan without the delivery of
shares of Common Stock, such shares shall thereafter be again available for
award pursuant to the Plan.
In the event that the Committee shall determine that any stock dividend,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares, warrants
or rights offering to purchase Common Stock at a price substantially below
fair market value, or other similar corporate event affects the Common Stock
such that an adjustment is required in order to preserve the benefits or
potential benefits intended to be made available under this Plan, then the
Committee shall adjust appropriately any or all of (i) the number and kind of
shares which thereafter may be awarded or optioned and sold or made the
subject of Stock Appreciation Rights under the Plan, (ii) the number and kind
of shares subject of Stock Options and other Awards and (iii) the grant,
exercise or conversion price with respect to any of the foregoing and/or, if
deemed appropriate, make provision for cash payment to a Participant or a
person who has an outstanding Option or other Award; provided, however, that
the number of shares subject to any Option or other Award shall always be a
whole number.
Section 6. Stock Options
a) Grant
Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to determine the Employees to whom Options shall be
granted, the number of shares to be covered by each Option, the option
price therefor and the conditions and limitations applicable to the
exercise of the Option. The Committee shall have the authority to grant
Incentive Stock Options, or to grant Nonqualified Stock Options, or to
grant both types of Options. In the case of Incentive Stock Options, the
terms and conditions of such grants shall be subject to and comply with
such rules as may be prescribed by Section 422 of the Code, as from time
to time amended, and any implementing regulations.
b) Option Price
The Committee shall, in its discretion, establish the exercise price per
share of Stock covered by an Option ("Option Price") at the time each
Option is granted which shall not be less than 100% of the Fair Market
Value of the Common Stock on the date of grant.
c) Exercise
1) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Committee may, in its sole discretion
specify in the applicable Award or thereafter; provided, however, that
in no event may any Option granted hereunder be exercisable after the
expiration of ten years from the date of such grant. The Committee may
impose such conditions with respect to the exercise of Options,
including without limitation, any relating to the application of
federal or state securities laws, as it may deem necessary or advisable.
2) Options shall be exercised by the delivery of a written notice from
the Participant to the Company in the form prescribed by the Committee
setting forth the number of shares with respect to which the Option is
to be exercised accompanied by full payment for the shares. No shares
shall be delivered pursuant to any exercise of an Option until payment
may be made in cash, or its equivalent, or, if and to the extent
permitted by the Committee, by exchanging shares of Common Stock owned
by the optionee (which are not the subject of any pledge or other
security interest), or by combination of the foregoing, provided that
the combined value of all cash and cash equivalents and the Fair Market
Value of any such Common Stock so tendered to the Company, valued as of
the date of such tender, is at least equal to such Option price. In
addition, at the request of the Participant, and subject to applicable
laws and regulations, the Company may (but shall not be required to)
cooperate in a Cashless Exercise of the Option. As soon as
practicable, after receipt of written notice and payment, the Company
shall deliver to the Participant, stock certificates in an appropriate
amount based upon the number of Shares with respect to which the
option is exercised, issued in the Participant's name.
A-5
3) The Company, in its sole discretion, may lend money to an Employee,
guarantee a loan to an Employee or otherwise assist an Employee to
obtain the cash necessary to exercise all or any portion of an Option
granted under the Plan.
Section 7. Stock Appreciation Rights
a) The Committee may, with sole and complete authority, grant Stock
Appreciation Rights in tandem with an Option, in addition to an Option, or
freestanding and unrelated to an Option. Stock Appreciation Rights
granted in tandem with or in addition to an Option may be granted either
at the same time as the Option or at a later time. Stock Appreciation
Rights shall not be exercisable earlier than six months after grant, shall
not be exercisable after the expiration of ten years from the date of
grant and shall have an exercise price of not less than 100% of the Fair
Market Value of the Common Stock on the date of grant.
b) A Stock Appreciation Right shall entitle the Participant to receive from
the Company an amount equal to the excess of the Fair Market Value of a
share of Common Stock on the exercise of the Stock Appreciation Right over
the exercise price thereof. Any such determination by the Committee may
be changed by the Committee from time to time and may govern the exercise
of Stock Appreciation Rights granted prior to such determination as well
as Stock Appreciation Rights thereafter granted. The Committee shall
determine upon the exercise of a Stock Appreciation Right whether such
Stock Appreciation Right shall be settled in cash, shares of Common Stock,
Stock Options, or a combination thereof.
c) A limited Stock Appreciation Right related to an Option which can only be
exercised during limited periods following a Change in Control of the
Company, may entitle the Participant to receive an amount based upon the
highest price paid or offered for Common Stock in any transaction relating
to the Change in Control or paid during the thirty-day period immediately
preceding the occurrence of the Change in Control in any transaction
reported on the Stock Exchange.
Section 8. Performance Awards
a) Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to determine the Employees who shall receive
Performance Awards in the form of Performance Units or Performance Shares,
the number and value of such Performance Units or Performance Shares for
each Performance Cycle, the Performance Goals on which each Award shall be
contingent, and the duration of each Performance Cycle. There may be more
than one Performance Cycle in existence at any one time, and the duration
of each Performance Cycle may differ from each other.
b) The Committee shall establish Performance Goals for each Cycle on the
basis of such criteria and to accomplish such objectives as the Committee
may from time to time select. During any Cycle, the Committee may adjust
the Performance Goals for such Cycle as it deems equitable in recognition
of unusual or non-recurring events affecting the Company, changes in
applicable tax laws or accounting principles, or such other factors as the
Committee may determine.
c) As soon as practicable after the end of a Performance Cycle, the
Committee shall determine the number of Performance Units or Performance
Shares which have been earned on the basis of performance in relation to
the established Performance Goals.
d) Payment Values of earned Performance Awards shall be distributed to the
Participant or, if the participant has died, to the Participant's
Designated Beneficiary, as soon as practicable after the expiration of the
Performance Cycle and the Committee's determination under paragraph (c),
above. The Committee shall determine whether Payment Values are to be
distributed in the form of cash, shares of Common Stock, or a combination
thereof as determined by the Committee. Payment may be made in a lump sum
or installments as prescribed by the Committee.
A-6
Section 9. Restricted Stock and Restricted Stock Units
a) Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to determine the Employees to whom shares of Restricted
Stock and Restricted Stock Units shall be granted, the number of shares of
Restricted Stock and the number of Restricted Stock Units to be granted to
each Participant, the duration of the Restricted Period during which, and
the conditions under which, the Restricted Stock and Restricted Stock
Units may be forfeited to the Company, and the other terms and conditions
of such awards. The Restricted Period may be shortened, lengthened or
waived by the Committee at any time in its discretion with respect to one
or more Participants or Awards outstanding.
b) Shares of Restricted Stock and Restricted Stock Units may not be sold,
assigned, transferred, pledged or otherwise encumbered, except as herein
provided, during Restricted Period. Certificates issued in respect of
shares of Restricted Stock shall be registered in the name of the
Participant and deposited by such Participant with the Company. At the
expiration of the Restricted Period, the Company shall deliver such
certificates to the Participant or the Participant's legal representative,
except to the extent such Restricted Stock and Restricted Stock Units have
been forfeited to the Company under the terms and conditions of the
Award. Payment of Restricted Stock Units shall be made to the Company in
cash or shares of Common Stock, as determined at the discretion of the
Committee.
c) During the Period of Restriction, Participants in whose name Restricted
Stock is granted under the Plan may exercise full voting rights with
respect to those shares.
d) During the Period of Restriction, Participants in whose name Restricted
Stock is granted under the Plan shall be entitled to receive all dividends
and other distributions paid with respect to those Shares. If any such
dividends or distributions are paid in Shares, the Shares shall be subject
to the same restrictions on transferability as the Restricted Stock with
respect to which they were distributed.
Section 10. Bonus Stock
a) Subject to the provisions of the Plan, the Committee, at any time and
from time to time, may award shares of Bonus Stock to participants under
the Plan without cash consideration. The Committee shall determine and
indicate in the related Award Agreement whether such shares of Bonus Stock
awarded under the Plan shall be unencumbered of any restrictions (other
than those advisable to comply with law) or shall be subject to
restrictions and limitations similar to those referred to in Section 9.
In the event the Committee assigned any restrictions on the shares of
Bonus Stock awarded under the Plan, then such shares shall be subject to
at least the following restrictions:
1) No shares of Bonus Stock may be sold, transferred, pledged, assigned
or otherwise alienated or hypothecated if such shares are subject to
restrictions which have not lapsed or have not been vested.
2) If any condition of vesting of the shares of Bonus Stock are not met,
all such shares of subject to such vesting shall be delivered to the
Company (in a manner determined by the Committee) within 60 days of the
failure to meet such conditions without any payment from the Company.
Section 11. Other Stock Based Awards
a) Subject to the provisions of the Plan, in addition to granting Options,
Stock Appreciation Rights, Performance Units, Performance Shares,
Restricted Stock, Restricted Stock Units and Bonus Stock, the Committee
shall have authority to grant to Participants Stock Unit Awards which can
be in the form of Common Stock or units, the value of which is based, in
whole or in part, on the value of Common Stock. Subject to the provisions
of the Plan, including Section 11 (b) below, Stock Unit Awards shall be
subject to such terms, restrictions, conditions, vesting requirements and
payment rules (all of which are sometimes hereinafter collectively
referred to as "rules") as the Committee may determine in its sole and
complete discretion at the time of grant. The rules need not be identical
for each Stock Unit Award.
A-7
b) In the sole and complete discretion of the Committee, a Stock Unit Award
may be granted subject to the following rules:
1) Any shares of Common Stock which are part of a Stock Unit Award may
not be assigned, sold, transferred, pledged or otherwise encumbered
prior to the date on which the shares are issued or, if later, the date
provided by the Committee at the time of grant of the Stock Unit Award.
2) Stock Unit Awards may provide for the payment of cash consideration by
the person to whom such Award is granted or provide that the Award, and
any Common Stock to be issued in connection therewith, if applicable,
shall be delivered without the payment of cash consideration, provided
that for any Common Stock to be purchased in connection with a Stock
Unit Award the purchase shall be at least 50% of the Fair Market Value
of such Common Stock on the date such Award is granted.
3) Stock Unit Awards may relate in whole or in part to certain
performance criteria established by the Committee at the time of grant.
4) Stock Unit Awards may provide for deferred payment schedules and/or
vesting over a specified period of employment.
5) In such circumstances as the Committee may deem advisable, the
Committee may waive or otherwise remove, in whole or in part, any
restriction or limitation to which a Stock Unit Award was made subject
at the time of grant.
c) In the sole and complete discretion of the Committee, an Award, whether
made as a Stock Unit Award under this Section 11 or as an Award granted
pursuant to Sections 6 through 10 may provide the Participant with (i)
dividends or dividend equivalents (payable on a current or deferred basis)
and (ii) cash payments in lieu of or in addition to an Award.
Section 12. Special Provisions Applicable to Covered Employees
Awards subject to performance criteria paid to Covered Employees under this
Plan shall be governed by the conditions of this Section 12 in addition to
the requirements of Sections 8,9, 10 and 11 above. Should conditions set
forth under this Section 12 conflict with the requirements of sections 8, 9,
10 and 11, the conditions of this Section 12 shall prevail.
a) All performance measures, goals, standards, formulas, or criteria
relating to Covered Employees for a relevant performance period shall
be established by the Committee in writing prior to the beginning of
the Performance Period, or by such other later date for the Performance
Period as may be permitted under Section 162(m) of the Code.
Performance Goals may include alternative and multiple Performance
Goals and may be based on one or more business criteria. In
establishing Performance Goals, the Committee shall consider business
or financial goals of the Company, including, but not limited to,
absolute or relative increases in total shareholder return, revenues,
sales, net income, or net worth of the Company, any of its
Subsidiaries, divisions, or other areas of the Company.
b) The Performance Goals must be objective and must satisfy third party
"objectivity" standards under Section 162(m) of the Code, and the
regulations promulgated.
c) The Performance Goals shall not allow for any discretion by the
Committee as to an increase in any Award, but discretion to lower an
Award is permissible.
d) The Award and payment of any Award under this Plan to a Covered
Employee with respect to a relevant Performance Period shall be
contingent upon the attainment of the Performance Goals that are
applicable to such Covered Employee. The Committee shall certify in
writing prior to payment of any such Award that such applicable
Performance Goals relating to the Award are satisfied. Approved
minutes of the Committee may be used for this purpose.
e) The maximum Award that may be paid to any covered Employee under the
Plan pursuant to Sections 8, 9, 10 and 11 for any Performance Period is
$1,500,000. The maximum number of shares of Stock subject to Options
or Stock Appreciation Rights granted during a calendar year to any
Employee or Restricted Stock or Bonus Stock granted to any Employee for
any Performance Period shall be 500,000 shares.
A-8
f) All Awards to Covered Employees under this Plan shall be further
subject to such other conditions, restrictions, and requirements as the
Committee may determine to be necessary to carry out the purpose of
this Section 12.
Section 13. General Provisions
a) Withholding
1) The Employer shall have the right to deduct from all amounts paid to a
Participant in cash (whether under this Plan or otherwise) any taxes
required by law to be withheld in respect of Awards under this Plan.
In the case of payments of incentive awards in the form of Common
Stock, the employer may require the Participant to pay to the Employer
the amount of any taxes required to be withheld with respect to such
Common Stock. However, the Participant may pay all or any portion of
the taxes required to be withheld by the employer or paid by the
Participant with respect to such Common Stock by electing have the
Employer withhold shares of Common Stock, or by delivering previously
owned shares of Common Stock having a Fair Market Value equal to the
amount required to be withheld or paid. The Participant must make the
forgoing election on or before the date that the amount of tax to be
withheld is determined ("Tax Date"). Any such election is irrevocable
and subject to disapproval by the Committee.
b) Awards
Each Award hereunder shall be evidenced in writing, delivered to the
Participant and shall specify the terms and conditions thereof and any
rules applicable thereto, including but not limited to the effect on such
Award of the death, retirement or other termination of employment of the
Participant and the effect thereon, if any, of a Change in Control of the
Company.
c) Nontransferability
Unless otherwise expressly set forth by the Committee in the written
document evidencing an Award, no Award shall be assignable or transferable
except by will or the laws of descent and distribution, and no right or
interest of any Participant shall be subject to any lien, obligation or
liability of the Participant. Notwithstanding the above, in the
discretion of the Committee, awards may be transferable pursuant to a
Qualified Domestic Relations Order ("QDRO"), as determined by the
Committee or its designee.
d) No Rights to Employment
No person shall have claim or right to be granted an Award, and the grant
of an Award shall not be construed as giving a Participant the right to be
retained in the employ of the Employer. Further, the employer expressly
reserves the right at any time to dismiss a participant, free any
liability or any claim under the Plan, except as provided herein or in any
agreement entered into with respect to an Award.
e) No Rights as Stockholder
Subject to the provisions of the applicable Award, no Participant or
Designated Beneficiary shall have any rights as a stockholder with respect
to any shares of Common Stock to be distributed under the Plan until he or
she has become the holder thereof. Notwithstanding the foregoing, in
connection with each grant of Restricted Stock or Stock Unit Award
hereunder, the applicable Award shall specify if and to what extent the
Participant shall not be entitled to the rights of a stockholder in
respect of such Restricted Stock or Stock Unit Award.
f) Construction of the Plan
The validity, construction, interpretation, administration and effect of
the Plan and of its rules and regulations, and rights relating to the
Plan, shall be determined solely in accordance with the laws of the State
of Colorado.
A-9
Effective Date
Subject to the approval of the stockholders of the Company, the Plan shall
be effective on August 1, 1997.
h) Amendment of Plan
The Board of Directors may amend, suspend or terminate the Plan or any
portion thereof at any time, provided that no amendment shall be made
without stockholder approval if such approval is necessary to comply with
any tax or regulatory requirement, including for these purposes any
approval requirement which is a prerequisite for exemptive relief under
Section 16 (b) of the Act or which is a requirement for the
performance-based compensation exception under Section 162(m) of the
Code. Notwithstanding anything to the contrary contained herein, the
Committee may amend the Plan in such manner as may be necessary so as to
have the Plan conform with local rules and regulations.
i) Amendment of Award
The Committee may amend, modify or terminate any outstanding Award without
the Participant's consent at any time prior to payment or exercise in any
manner not inconsistent with the terms of the Plan, including without
limitation, (i) to change the date or dates as of which (a) an Option or
Stock Appreciation Right becomes exercisable; (b) a Performance Unit or
Performance Share is deemed earned; (c) Restricted Stock becomes
nonforfeitable; or (ii) to cancel and reissue an Award under such
different terms and conditions as it determines appropriate.
j) Certain Participants
All performance-based Awards shall be deemed to include any such
additional terms, conditions, limitations and provisions as are necessary
to comply with the performance-based compensation exemption of Section
162(m) of the Code, unless the Committee in its discretion determines that
any such Award to an Executive Officer is not intended to qualify for the
exemption for performance-based compensation under Section 162(m).
k) Change in Control
In the event a Change in Control occurs, all stock-based awards, such as
Stock Options and Restricted Shares, shall vest 100% immediately upon a
Change in Control and all cash-based awards shall be paid out immediately
in cash, as if the performance objectives have been obtained at target
levels through the effective date of the Change in Control or as the
Committee may otherwise determine.
A-10
New Century Energies, Inc.
[Graphic Omitted]
ADMITTANCEproxy card.
THE OPPOSOSITE SIDE OF THIS FORM CAN BE UTILIZED AS
YOU ANNUAL MEETING ADMISSION TICKET
Annual Meeting of Shareholders
May 12, 1998
10:00 AM
Adam's Mark Hotel
1550 Court Place
Grand BallroomCall Toll-Free To Vote - Lobby Level
Denver, Colorado
Note: Parking is available in the hotel's underground garage or in nearby
parking lots. Shareholders are responsible for their parking costs.
PRINT NAME: ___________________________________
Detach Proxy Card HereIt's Fast And Convenient CONTROL NUMBER FOR
1-800-480-0407 TELEPHONING VOTING
DETACH PROXY CARD HERE IF YOU ARE NOT
VOTING BY TELEPHONE
- --------------------------------------------------------------------------------
1. ELECTION OF DIRECTORS:
FOR all nominees (X) WITHHOLD AUTHORITY to
The Board of Directors recommends that you vote (X) *EXCEPTIONS (X)
listed below for all nominees listed below.
Election of Class I Directors: Wayne H. Brunetti; C. Coney Burgess; Danny H.
Conklin; Gayle L. Greer, and A. Barry Hirschfeld.
(INSTRUCTIONS: To withhold authority to vote for any nominee, mark the
"Exceptions" box and write that nominee's name in the space provided below.)
*Exceptions_____________________________________________________________________
"FOR" Items 1 and 2. The Board of Directors recommends that you vote
"AGAINST" Item 3.
2. Adoption1. ELECTION OF DIRECTORS: Election of the Omnibus Incentive Plan.Class II Directors: 01 - Giles M. Forbess, 3. AdoptionShareholder proposal regarding elimination
02 - Bill D. Helton, 03 - Albert F. Moreno, 04 - J. Michael Powers of the Outside Directors' Compensation Plan.a classified Board of Directors, if
presented.
FOR all (X) WITHHOLD AUTHORITY (X) *EXCEPTIONS (X)
nominees to vote for all nominees FOR (X) AGAINST (X) ABSTAIN (X)
FOR (X) AGAINST (X) ABSTAIN (X)
4.(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark In their discretion, the proxy holders are
the "Exceptions" box and write that nominee's name on the line below.) authorized to vote upon such other business
*Exceptions ________________________________________________________________ as may properly come before the Annual
2. Approval of the appointment of Arthur Andersen LLP as 5. Shareholder proposal regarding cumulative voting for Directors, if
independent public Meeting or any adjournment thereof.
accountants.
presented.Mark here if you plan
FOR (X) AGAINST (X) ABSTAIN (X) FOR (X) AGAINST (X) ABSTAIN (X)
6. Shareholder proposal regarding elimination of a classified
Board of Directors, if presented.
FOR (X) AGAINST (X) ABSTAIN (X)
Mark here if you plan to attend meeting:the meeting. (X)
Change of Address and
or Comments Mark Here (X)
The shareholder hereby acknowledges receipt
of the Notice of Annual Meeting of
Shareholders and the Proxy Statement attached
thereto, the 1998 Summary Annual Report and
the 1997 Annual1998 Financial Report. PLEASE DATE AND
SIGN exactly as name appears on this card
indicating, where proper, official position
or representation capacity. For joint
accounts, each joint owner must sign.
Dated:_____________________________________________________ ,1998
__________________________________________ ------------------------------ , 1999
--------------------------------------------
Signature of Shareholder
__________________________________________--------------------------------------------
Signature of Shareholder
Sign, Date and Return this Card Promptly Using the Enclosed Envelope. Votes MUST be indicated (x)
in Blackblack or Blueblue ink. (X)
Please Detach Here
You Must Detach This Portion of the Proxy Card
Before Returning it in the Enclosed Envelope
New Century Energies, Inc.NEW CENTURY
ENERGIES
[Graphic Omitted]
ADMITTANCE TICKET
Annual Meeting of Shareholders
May 12, 199811, 1999
10:00 AM
Adam's MarkAmbassador Hotel
1550 Court Place
GrandRio Grande Ballroom
- Lobby Level
Denver, Colorado3100 I-40 West
Amarillo, Texas
PRINT NAME: ___________________________________
Detach Proxy Card Here
- --------------------------------------------------------------------------------
NEW CENTURY ENERGIES, INC.
The undersigned, a holder of common stock of New Century Energies, Inc.
(the "Company"(the"Company") hereby appoints Bill D. Helton, W. Thomas Stephens, Danny H.
Conklin, R.R.R. R. Hemminghaus and Gayle L. Greer, or any one or more of them, as
proxies, each with full power of substitution, to represent the undersigned at
the Annual Meeting of Shareholders of the Company to be held on May 12, 199811, 1999 and
any adjournment or adjournments thereof, and to vote as designated hereon and in
their discretion with respect to any other business properly brought before the
annual meeting all shares of the common stock of the Company which the
undersigned would be entitled to vote if personally present at such meeting,
except for shares of common stock held of record in the undersigned's account
with the Plans (defined below), the voting instructions for which are explained
below.
THIS CARD ALSO CONSTITUTESCONSTIUTES YOUR VOTINGVOITNG INSTRUCTIONS FOR SHARES HELD OF
RECORD IN THE SOUTHWESTERN PUBLIC SERVICE COMPANY EMPLOYEE INVESTMENT PLAN AND
THENEW CENTURY ENERGIES,INC. EMPLOYEES' SAVINGS AND STOCK OWNERSHIP
PLAN OF PUBLIC SERVICE COMPANY OF
COLORADOFOR NON-BARGAINING UNIT EMPLOYEES, the NEW CENTURY ENERGIES, inc. EMPLOYEE
INVESTMENT PLAN FOR BARGAINING UNIT EMPLOYEES AND FORMER NON-BARGAINING UNIT
EMPLOYEES AND THE NEW CENTURY ENERGIES, INC. EMPLOYEES' SAVINGS AND STOCK
OWNERSHIP PLAN FOR BARGAINING UNIT EMPLOYEES AND FORMER NON-BARGAINING UNIT
EMPLOYEES AND PARTICIPATING SUBSIDIARY COMPANIES ("PLANS") AND THE UNDERSIGNED
HEREBY AUTHORIZES THE TRUSTEESTURSTEES OF THESE PLANS TO VOTE THE UNDERSIGNED SHARES
HELD IN ITS ACCOUNTS.
This proxy when properly executed will be voted in the manner designated
hereon and in the discretion of the proxies with respect to any other matters
properly brought before the meeting. If no direction
is made, this proxy will be voted FOR Items 1 2, 3 and 42
and AGAINST Items 5 and 6.Item 3.
NEW CENTURY ENERGIES, INC.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE NEW CENTURY ENERGIES, INC.
P.O. BOX 11012
NEW YORK, NYN.Y. 10203-0012
Address Change/Comments _______________________________________________________
SUPPLEMENT TO NEW CENTURY ENERGIES, INC. PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 11, 1999
On March 25, 1999, New Century Energies, Inc. (the "Company") and
Northern States Power Company ("NSP") announced that they plan to merge (the
"Merger"). On March 24, 1999, the Company entered into a new employment
agreement with Mr. Brunetti and established the NCE 1999 Senior Executive
Severance Policy, as discussed below.
The Company and NSP have entered into a new employment agreement with
Mr. Brunetti which will become effective if the Merger is consummated. If the
new employment agreement becomes effective, it will supersede Mr. Brunetti's
current employment agreement. The new employment agreement specifies that Mr.
Brunetti will serve the surviving company in the Merger (the "Surviving
Company") for an initial period (the "New Initial Period") and for a secondary
period (the "New Secondary Period") (jointly referred to as the "New Employment
Period"). The New Initial Period would begin at the effective time of the Merger
(the "Effective Time") and end on the first anniversary of the Effective Time.
The New Secondary Period would begin on the first day after the end of the New
Initial Period and end on the third anniversary of such day; provided, that on
each anniversary of such day, the New Secondary Period will be automatically
extended by an additional year unless either the Surviving Company or Mr.
Brunetti gives notice that the period shall not be so extended.
Under Mr. Brunetti's new employment agreement, during the New Initial
Period, Mr. Brunetti would serve as Chief Executive Officer and President of the
Surviving Company. During the New Secondary Period, Mr. Brunetti would serve as
Chief Executive Officer and Chairman of the Board of the Surviving Company. For
the performance of his duties and responsibilities for the positions detailed
above, during the New Employment Period, Mr. Brunetti would be entitled to a
compensation package comprised of a base salary, incentive compensation of both
an annual and a long-term nature and various other benefits including
participation in a supplemental executive retirement plan, life insurance
coverage providing a death benefit of not less than four times his annual base
salary if death occurs during the New Employment Period or two times his annual
base salary if death occurs after the New Employment Period, and would be
entitled to participate in all applicable incentive, savings and retirement
plans, practices, policies and programs in effect at the Surviving Company to
the same extent as other senior executives of the Surviving Company. In all
instances, the compensation awarded Mr. Brunetti would be at least equal to what
he would have received under similar plans and programs in effect at the
Company. If Mr. Brunetti's employment is terminated during the New Employment
Period by the Surviving Company for reasons other than cause or disability (as
defined in the agreement) or if Mr. Brunetti terminates his employment with the
Surviving Company for good reason (as defined in the agreement) (i) Mr. Brunetti
would receive his base salary, incentive compensation and certain other benefits
including continued accruals under the supplemental executive retirement plan
and welfare benefits through the New Employment Period; (ii) restrictions on
restricted stock shall lapse and all options shall be vested; and (iii) if
applicable, Mr. Brunetti shall receive a tax-free reimbursement of any excise
tax imposed under Code Section 4999. These provisions under termination are
equal to what he would receive under his current employment agreement with the
Company. The new employment agreement has been reviewed by the Company's
compensation
consultant which has represented that such benefits provided under this
agreement are commercially reasonable.
The Company also established the NCE 1999 Senior Executive Severance
Policy, in which Messrs. Kelly, Wilks and Bonavia are participants. The policy
became effective on March 24, 1999 and will continue in effect until the fifth
anniversary of such date, unless extended for additional periods by the Board of
Directors. The severance policy provides that if at any time before the third
anniversary of the Effective Time a participant's employment is terminated by
the Company for any reason other than cause (as defined in the policy), death,
disability (as defined in the policy), retirement (as defined in the policy) or
a qualified sale of business (as defined in the policy) or by the participant
for good reason (as defined in the policy), and provided the participant enters
into a release, confidentiality and non-solicitation agreement, the participant
will receive the following separation payments and benefits: (i) a cash amount
equal to aggregate of (a) a multiple of (which in the case of Messrs. Kelly,
Wilks, and Bonavia is two and one-half times) the participant's annual base
salary and short and long-term incentive compensation, (b) the additional
retirement benefits and/or contributions and accruals the executive would have
received under applicable pension, supplemental executive retirement plans and
retirement savings plans had he remained employed through the "Severance Period"
(which is the participant's multiple expressed in years), and (c) prorated
incentive compensation for the year of termination; and (ii) continuation of (a)
welfare benefits and a perquisite allowance through the Severance Period, (b)
out placement services (not to exceed $30,000), and (c) financial planning
through the second anniversary of the date of termination. In addition, the
participant will receive a tax-free reimbursement of any excise taxes imposed
under Code Section 4999, unless the separation payments and benefits do not
exceed by more than 10% the amount which would not give rise to excise taxes, in
which case payments and benefits are reduced so that no excise taxes are
imposed. The policy specifically provides that any cash separation payments that
a participant becomes entitled to receive under the policy will be reduced by
the aggregate amount of cash severance, separation or similar benefits that the
participant may be entitled to receive under any other agreement between the
participant and his employer, except to the extent the participant waives his
rights to such payments. The 1999 Senior Executive Severance Policy has been
reviewed by the Company's compensation consultant which has represented that
such benefits provided under the plan are commercially reasonable.
MARCH 29, 1999
March 29, 1999
Dear New Century Energies Shareholder:
On MArch 25, 1999, New Century Energies and Northern States Power entered into a
definitive merger agreement. The merged company will streatch from Mexico to the
Canadian border, with operations on both coasts and the United Kingdom, Central
Europe, Australia and South America.
The merger is expected to be a tax-free stock-for-stock exchange for
shareholders of both companies, and to be accounted for as a pooling of
interests. NCE and NSP anticipate that the merger will be accretive in the first
full year and thereafter to both sets of shareholders. Upon completion, holders
of New Century energies stock will receive 1.55 shares of the merged company
stock for each share of NCE stock. Each share of Northern States Power stock
will continue as one share of combined company.
It is anticipated that the merged company will continue the current equivalent
NCE dividend payment level. Based on the fact that you will receive 1.55 shares
of stock in the merged company divided level. The board of directors of the new
holding company will determine the dividend declarations.
The merged company will be headquarted in Mnneapolis, but key business units or
operations will be located in Denver and Amarillo. The merged company will serve
three million electricity customers and approximately 1.5 million natural gas
customers in 12 states.
The merger is expected to take 12 to 18 months to complete and requires approval
by the shareholders of the two existing holding companies, as well as approval
or regulatory review by numerous state and federal agencies. After a record date
is established for the meeting of shareholders, shareholders of record will
receive a detailed proxy statement/prospectus describing the proposed
transaction.. It is essential that shareholders take the time to review and
consider the critical disclosure document before making a decision on the
transaction.
Thank you in advance for your attention to this matter, and we will keep you
apprised of developments throughout the merger process.
Sincerely,
/s/ Bill D. Helton /s/Wayne H. Brunetti
Bill D. Helton Wayne H. Brunetti
Chairman of the Board and CEO Vice Chairman, President and COO
This letter is not a offer of securities for sale, which offering will be made
only by means of a prospectus.