SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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EL PASO ELECTRIC COMPANY |
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EL PASO ELECTRIC COMPANY
100 N. Stanton Street
El Paso, Texas 79901
(915) 543-5711
April 17, 201513, 2018
Dear Shareholder:Shareholders:
TheWe are pleased to invite you to the Annual Meeting of Shareholders (the “Annual Meeting”) of El Paso Electric Company will(the “Company”) to be held at the Stanton Tower Building, located at 100 N. Stanton Street, El Paso, Texas 79901, on May 28, 201524, 2018, at 10:00 a.m., Mountain Daylight Time.
TheAs explained in the enclosed Proxy Statement, the purpose of the Annual Meeting is to give shareholders an opportunity (i) to vote on the election of the Company’s Class III Directors; (ii) to consider and act upon the recommendation of the Board of Directors of the Company (the “Board”) to ratify the selection of KPMG LLP as El Paso Electricthe Company’s independent registered public accounting firm for the fiscal year ending December 31, 2015;2018; and (iii) to approve, by a non-binding advisory vote, the Company’s executive compensation, commonly referred to as a “say-on-pay” vote.
Information concerning these matters is set forth in the accompanying Notice of the Meeting and Proxy Statement. YourThe Board recommends that you vote “FOR” proposals one, two, and three as explained in the enclosed Proxy Statement.
Your vote is important.important to us. To ensure your representation, even if you cannot attend the Annual Meeting, please mark, sign, date, and return the enclosed proxy card promptly.
Thank you for your continued interest in El Paso Electric Company.
Sincerely,
Thomas V. Shockley, IIIMary E. Kipp
President and Chief Executive Officer
EL PASO ELECTRIC COMPANY
100 N. Stanton Street
El Paso, Texas 79901
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
ToDear Shareholders:
You are cordially invited to attend the Shareholders of El Paso Electric Company:
The2018 Annual Meeting of Shareholders of El Paso Electric Company will be heldCompany. This is your notice for the Annual Meeting.
DATE AND TIME
May 24, 2018, at the10:00 a.m., Mountain Daylight Time
PLACE
The Stanton Tower Building, located at 100 N. Stanton Street, El Paso, Texas 79901 on May 28, 2015, at 10:00 a.m., Mountain Daylight Time, for the following purposes:
ITEMS OF BUSINESS
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| (2) |
| (3) |
| (4) |
The Board knows of no matter, other than those set forth in the paragraphs above (which are discussed at greater length in the accompanying Proxy Statement), that will be presented for consideration at the Annual Meeting.
The Board has fixedRECORD DATE
Shareholders of record at the close of business on March 30, 2015, as the record date for the determination of shareholders26, 2018, are entitled to vote.
PROXY VOTING
Each outstanding share of the Company’s common stock entitles the holder to one vote. You may vote ateither by attending the Annual Meeting.
The Board has made these materials available toMeeting or by proxy. For specific voting information, please see the information beginning on page 1 of the enclosed Proxy Statement. Even if you on the Internet or, at your direction, has delivered printed versions of these materials to you by mail, in connection with the Board’s solicitation of proxies for use at the Annual Meeting. Shareholders are invitedplan to attend the Annual Meeting, please sign, date, and requested to votereturn the enclosed proxy card or submit your proxy using the Internet or telephone procedures described on the proposals described in this Proxy Statement.
As owners of El Paso Electric Company, your vote is important. Whether or not you are able to attend the Annual Meeting in person, it is important that your shares be represented. Please vote as soon as possible. If you attend the meeting and decide to vote in person, you may revoke your proxy. Shareholders attending the meeting whose shares are registered in the name of a broker and who intend to vote in person should bring an affidavit of ownership from such broker so that beneficial ownership can be verified without delay on the meeting date.proxy card.
On behalf of the Board, thank you for your participation in this important annual process.
By Order of the Board of Directors,
Jessica Goldman
Corporate Secretary
April 17, 201513, 2018
YOUR VOTE IS IMPORTANT
PLEASE MARK, SIGN, DATE, AND
RETURN YOUR PROXY CARD PROMPTLY OR VOTE BY INTERNET OR TELEPHONE.
THANK YOU.
El Paso Electric Company 2015 Proxy Statement 
El Paso Electric Company 2018 Proxy Statement |  |
TABLE OF CONTENTS
El Paso Electric Company 2015 Proxy Statement
| | El Paso Electric Company 2018 Proxy Statement |
EL PASO ELECTRIC COMPANY
This summary highlights information contained elsewhere in this proxy statement. It does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.
FOR THE
ANNUAL MEETING INFORMATIONOF SHAREHOLDERS
TO BE HELD ON MAY 24, 2018
Page (for more detail) | |||
Proposal No. 1 | Election of Directors | FOR each nominee | Page 5 |
Proposal No. 2 | Ratification of the Appointment of KPMG LLP as the Company’s Independent Registered Public Accounting Firm for 2018 | FOR | Page 17 |
Proposal No. 3 | Advisory Vote on Executive Compensation | FOR | Page 19 |
Record Date: How to VoteMarch 30, 2015
Voting:If you held shares of El Paso Electric Company common stock as of the close of business on the record date (March 26, 2018), you are entitled to vote at the Annual Meeting.
 | • | By Internet – Go to the website at www.proxyvote.com, 24 hours a day, seven days a week. You will need the control number that appears on your proxy card or on your Notice of Internet Availability of Proxy Materials. |
 | • | By Telephone – Call 1-800-690-6903, 24 hours a day, seven days a week. You will need the |
 | • | By Mail – If you |
Attending theAnnual Meeting:
| instructions in your Notice. You do not need to |
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 |  | |||
ANNUAL MEETING AGENDA AND VOTING RECOMMENDATIONS
or telephone. | ||||||
El Paso Electric Company 2015 Proxy Statement i
El Paso Electric Company 2018 Proxy Statement | | 1 |
BOARD NOMINEES AND CONTINUING DIRECTORS
The following table provides summary information about each director nominee and continuing director.
Name | Age | Director Since | Principal Occupation | Independent | AC | CC | EC | EREC | NCG | PPCR | SC | Qualifications & Skills |
NOMINEES FOR CLASS III DIRECTORS (TERM EXPIRING IN 2021) | ||||||||||||
Raymond Palacios, Jr. | 57 | 2017 (Currently a Class I Director) | President, Bravo Cadillac, El Paso, Texas and Bravo Chevrolet Cadillac, Las Cruces, New Mexico |  |  | | • consumer retail and marketing • financial controls and auditing • knowledge of Texas communities • knowledge of New Mexico communities | |||||
Stephen N. Wertheimer | 67 | 1996 | Managing Director and Founding Partner, W Capital Partners |  |  | |  | | | • corporate finance and accounting • regulated financial • environmental/ alternative energy/solar • corporate governance • consumer retail and marketing • strategic planning • technology strategy | ||
Charles A. Yamarone | 59 | 1996 | Chief Corporate Governance and Compliance Officer, Houlihan Lokey Chairman of the Board, El Paso Electric Company | | |  | | | • corporate finance and accounting • regulated financial • legal • corporate governance • financial controls and auditing | |||
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CLASS I DIRECTORS (TERM EXPIRING IN 2019) | ||||||||||||
Paul M. Barbas | 61 | 2017 | Director of Vistra Energy Corp. (successor to Dynegy Inc.) Retired President and Chief Executive Officer, DPL Inc. and its principal subsidiary, The Dayton Power and Light Company | | | | • regulated utility • environmental/ alternative energy/solar • utility operations • technology strategy • strategic planning | |||||
James W. Cicconi | 65 | 1997 | Retired Senior Executive Vice President for External and Legislative Affairs, AT&T Services, Inc. | | | | | • governmental affairs and compliance • legal • telecommunications • technology strategy | ||||
Mary E. Kipp | 50 | 2015 | President and Chief Executive Officer, El Paso Electric Company | • regulated financial • knowledge of Texas communities • governmental affairs and compliance • legal • regulated utility • utility operations • environmental/alternative energy/solar • corporate governance • knowledge of New Mexico communities • strategic planning | ||||||||
CLASS II DIRECTORS (TERM EXPIRING IN 2020) | ||||||||||||
Catherine A. Allen | 71 | 2009 | Founder, Chairman and CEO, The Santa Fe Group | | | | | | | • regulated financial • governmental affairs and compliance • strategic planning • corporate governance • knowledge of New Mexico communities • technology strategy | ||
Edward Escudero | 47 | 2012 | President and CEO, High Desert Capital LLC Vice Chairman of the Board, El Paso Electric Company | | | | | | | • corporate finance and accounting • regulated financial • knowledge of Texas communities • consumer retail and marketing • regulated utility • utility operations • financial controls and auditing | ||
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Eric B. Siegel | 60 | 1996 | Retired Limited Partner of Apollo Advisors, LP and Senior Consultant to and Special Advisor to the Chairman of the Milwaukee Brewers Baseball Club | | | | | | | • corporate finance and accounting • regulated financial • legal • corporate governance • strategic planning | ||
MEETINGS IN 2017 | 12 | 5 | 3 | 4 | 4 | 4 | 4 | |||||
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 | Chairperson | ||||
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AC | Audit Committee | ||||
NCG | Nominating and Corporate Governance Committee | ||||
 | Member | CC | Compensation Committee | PPCR | Public Policy and Corporate Reputation Committee |
 | Financial Expert | EC | Executive Committee | SC | Security Committee |
EREC | Energy Resources and Environmental Committee |
ii El Paso Electric Company 2015 Proxy Statement
2 | | El Paso Electric Company 2018 Proxy Statement |
EL PASO ELECTRIC COMPANY
100 N. Stanton StreetEl Paso, Texas 79901PROXY STATEMENTforANNUAL MEETING OF SHAREHOLDERSTo Be Held on May 28, 2015
GENERAL
The accompanying proxy is solicited on behalf of the Board for use at the 2015 Annual Meeting of Shareholders (the “Annual Meeting”) to be held on May 28, 2015, at 10:00 a.m., Mountain Daylight Time, at El Paso Electric Company’s (the “Company”) principal offices, and at any adjournment thereof. The Company’s principal offices are located at the Stanton Tower Building, 100 N. Stanton Street, El Paso, Texas 79901.
The cost of soliciting proxies will be borne by the Company. In addition to the use of the mail, proxies may be solicited by personal interview, telephone, fax or other electronic means
by the Board, officers, employees and agents of the Company. To assist in the solicitation, the Company has engaged Georgeson Inc. for a fee of $6,500 plus out-of-pocket expenses. The Company will also reimburse brokers, banks and other persons for reasonable expenses in forwarding the Notice of the Meeting to beneficial owners and forwarding printed proxy materials by mail to beneficial owners who specifically request them.
This Proxy Statement and the accompanying form of proxy are first being made available on the Internet to shareholders of the Company on or about April 17, 2015.
AtWho may vote?
Shareholders of record at the close of business on the record date of March 30, 2015,26, 2018, may vote at the 2018 Annual Meeting of Shareholders of El Paso Electric Company (the “Annual Meeting” or “meeting”). As of the March 26, 2018 record date, there were 40,660,737 shares of the Company’s common stock (“Common Stock”) outstanding.
What items will I be voting on?
Proposal Descriptions | More Information | Board Recommendation | Broker non-votes | Abstentions | Votes Required for Approval |
Proposal 1 Election of Directors | Page 5 | FOR each director nominee | Do not count | Do not count | Must receive a majority of shares cast in the election |
Proposal 2 Ratification of Appointment of KPMG LLP as the Company’s Independent Registered Public Accounting Firm for 2018 | Page 17 | FOR | Do not count | Against vote | Must receive a majority of shares entitled to vote on the matter |
Proposal 3 Advisory Vote on Executive Compensation | Page19 | FOR | Do not count | Against vote | Must receive a majority of shares entitled to vote on the matter |
How many votes do I have?
You have one vote for each share of Common Stock you owned as of the record date for the meeting.
How do I vote?
Your vote is important. You may vote in person at the meeting or by proxy. The Company recommends that you vote by proxy even if you plan to attend the meeting. You have the ability to change your vote at the meeting if you are a holder of record or have a proxy from the record holder. Giving the Company your proxy means that you authorize the Company to vote your shares of Common Stock at the meeting in the manner you indicated on your proxy card. You may also provide your proxy using the Internet or telephone procedures described on the proxy card.
You may vote for or against each director nominee and the proposals under Item 2 (Ratification of Appointment of Independent Registered Public Accounting Firm) and Item 3 (Advisory Vote on Executive Compensation), or you may abstain from voting on these items. If you give the Company your proxy but do not specify how to vote, we will vote your shares of Common Stock in accordance with the Board’s recommendations as described above.
What are the Board’s recommendations?
The Board’s recommendations are described in more detail with the description of each proposal in this Proxy Statement. The Board recommends that you vote as follows:
| 1. | FOR the election of the Class III Directors; |
| 2. | FOR the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018; and |
| 3. | FOR the approval, on an advisory basis, of the executive compensation program described in this Proxy Statement. |
What if I change my mind after I have voted?
You may revoke your proxy before it is voted at the meeting by submitting a new proxy card with a later date; voting in person at the meeting; or by filing with the Corporate Secretary of the Company an instrument in writing revoking the proxy.
Will my shares of Common Stock be voted if I do not provide my proxy?
It depends on whether you hold your shares of Common Stock in your own name or in the name of a bank or brokerage firm. If you hold your shares of Common Stock directly in your own name, they will not be voted unless you provide a proxy or vote in person at the meeting. The rules of the New York Stock Exchange (the “NYSE”) determine whether proposals presented at shareholder meetings are routine or non-routine.
Brokerage firms generally have the authority to vote their customers’ unvoted shares on certain “routine” matters. If your shares of Common Stock are held in the name of a broker, bank or other nominee, such nominee can vote your shares of
El Paso Electric Company 2018 Proxy Statement | | 3 |
Common Stock for the ratification of the appointment of KPMG LLP as our independent auditors for the fiscal year ending December 31, 2018, if you do not timely provide your proxy because this matter is considered “routine” under the applicable rules. However, no other items are considered “routine” and may not be voted on by your nominee without your instruction.
For all items other than the ratification of the appointment of our independent auditors, brokers holding shares of Common Stock must vote according to specific instructions they receive from the beneficial owners of those shares because the NYSE precludes brokers from exercising voting discretion on certain proposals without specific instructions from the beneficial owner as to how to vote. Brokers cannot vote on Proposal 1 (Election of Directors) or Proposal 3 (Advisory Vote on Executive Compensation) without instructions from the beneficial owners. If you do not instruct your broker how to vote with respect to Proposal 1 or Proposal 3, your broker will not vote for you with respect to those items. A broker non-vote occurs when the broker or other entity is unable to vote on a proposal because the proposal is non-routine and the owner does not provide any voting instructions.
Abstentions are included in the determination of the shareholders entitled to noticenumber of and to voteshares of Common Stock represented at the Annual Meeting for purposes of determining whether a quorum is present. Abstentions are not counted for purposes of determining whether the Company had outstanding 40,389,970proposal to elect directors has been approved. Abstentions are counted as a vote “against” when determining if the other proposals have been approved.
Broker non-votes are included in the determination of the number of shares of its common stock (the “Common Stock”).
Each outstanding share of Common Stock represented at the Annual Meeting for purposes of determining whether a quorum is entitledpresent and are not counted for purposes of determining whether a proposal has been approved. Broker non-votes occur when a beneficial owner who holds shares of Common Stock through a broker does not provide the broker with voting instructions as to one vote.any matter on which the broker is not permitted to exercise its discretion and vote without specific instruction.
What constitutes a quorum?
To carry on the business of the meeting, the Company must have a quorum. The holders of at least a majority of the issued and outstanding shares of Common Stock must be represented in person or by proxy at the Annual Meetingmeeting for a quorum to be present and businesspresent.
What vote is required to be conducted.
Assuming a quorum is present, directors are elected by a pluralityapprove each of the votes cast at the meeting.proposals?
Proposal 1 - Election of Directors - Under our majority voting policy, in an uncontested election, if a director nominee does not receive a majority of the votes cast in the election (that is, the director nominee receives a greater number of “withhold” votes than “for” votes), the director nominee is required to tender his or her resignation for consideration by the Nominating and Corporate Governance Committee and ourthe Board. Assuming a quorum is present, directors are elected by a plurality of the votes cast at the meeting. Please see “Corporate Governance—Majority Voting Policy” below for further details on our majority voting policy.
Proposal 2 - Ratification of the Appointment of KPMG LLP as the Company’s Independent Registered Public Accounting Firm for 2018 - The affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on the proposal and represented in person or by proxy at the meeting is required to approveratify the selection of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2015.2018.
Proposal 3 - Advisory Vote on Executive Compensation - The outcome of the advisory vote on the Company’s executive compensation will not be binding on the Compensation Committee or the Board. Therefore,
there is no “required vote” on this resolution.proposal. The Board, inCompensation Committee and the exercise of its fiduciary duties,Board will consider the outcome of the advisory vote in determining how to proceed following such vote. The affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote on the proposal and represented in person or by proxy at the meeting will be considered as the approval, byon an advisory vote,basis, of the compensation of our Named Executive Officers (“NEOs”).
A shareholderWho conducts the proxy solicitation, and how much will it cost?
The cost of record havingsoliciting proxies, including a fee of $6,500 plus expenses to Georgeson LLC, which will help the rightCompany solicit proxies, will be paid by the Company. In addition to votethe use of the mail, proxies may vote eitherbe solicited by telephone, fax, and other electronic means or in person or by proxy. A shareholderthe Board, officers, employees and other agents of record may vote by proxy over the Internet by following the instructions providedCompany. The Company will reimburse brokers, banks and other persons for reasonable expenses in forwarding the Notice of the Meeting or if the shareholder requeststo beneficial owners and forwarding printed copies of the proxy materials by mail the shareholder may also vote by mail or by telephone.to beneficial owners who specifically request them.
A shareholder who signs and returns a proxy may revoke that proxy at any time before the Annual Meeting by filing with the Corporate Secretary of the Company an instrument in writing revoking the proxy, delivering a duly executed proxy bearing a later date, or attending the meeting and voting in person. The shares represented by a proxy given and not so revoked will be voted and, where the shareholder specifies a choice with respect to any matter to be acted upon and for which a ballot is provided in the proxy form, the shares will be voted in accordance with the specification so made. If a proxy is properly executed and returned, but no choice is specified, the shares will be voted “FOR” each director nominee and “FOR” each of proposals two and three. With respect to any other matters that will come before the Annual Meeting, the proxy will be voted in the discretion of the proxy holder. If no proxy is returned by a
El Paso Electric Company 2015 Proxy Statement 1
shareholder of record, the shares represented by such proxy will not be voted.
The Board is not aware of any matter that will be presented at the Annual Meeting other than as set forth in the accompanying Notice. If, however, any other matters are properly presented at the Annual Meeting, the proxy holder will have discretionary authority to vote the shares represented by properly executed proxies in accordance with the proxy holder’s discretion and judgment as to the best interests of the Company and its shareholders.
Abstentions are included in the determination of the number of shares represented at the Annual Meeting for purposes of determining whether a quorum is present and are counted as a vote “AGAINST” when determining whether a proposal has been approved. Broker non-votes are included in the determination of the number of shares represented at the Annual Meeting for purposes of determining whether a quorum is present and are not counted for purposes of determining whether a proposal has been approved. Broker non-votes occur when a beneficial owner who holds company stock through a broker does not provide the broker with voting instructions as to any matter on which the broker is not permitted to exercise its discretion and vote without specific instruction.
The rules of the New York Stock Exchange (the “NYSE”) determine whether proposals presented at shareholder meetings are routine or non-routine. If a proposal is routine, a broker or other entity holding shares for an owner in street name may vote for the proposal without receiving voting instructions from the owner under certain circumstances. If a proposal is non-routine, the broker or other entity may vote on the proposal only if the owner has provided voting instructions. A broker non-vote occurs when the broker or other entity is unable to vote on a proposal because the proposal is non-routine and the owner does not provide any voting instructions.
The NYSE rules provide that the election of directors in an uncontested election, and the advisory vote on executive compensation are non-routine items. This means that brokers who do not receive voting instructions from their clients as to how to vote their shares for these proposals cannot exercise their discretionary authority to vote your shares for these proposals. Therefore, it is important that you instruct your broker as to how you wish to have your shares voted on these proposals, even if you wish to vote as recommended by the Board. The ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2015 is a routine item under the NYSE rules.
4 | | El Paso Electric Company 2018 Proxy Statement |
2 El Paso Electric Company 2015 Proxy Statement
Article III, Section 2, of the Company’s Amended and Restated Bylaws (“Bylaws”(the “Bylaws”) divides the Board into three classes, as equally as numerically possible, each of which is elected for a three-year term. The Board currently has eleven members with three to four members in each class. The Company would like to thank Mr. James W. Harris and Mr. Woodley L. Hunt for their valuable service and time on the Board. Mr. Harris has been an instrumental member of the Board since 1996 but recently expressed his preference to the Board that he not be nominated for reelection. In light of the director retirement policy in the Company’s Corporate Governance Guidelines, Mr. Hunt is not being nominated for reelection. In order for the Board to have equal numbers of
directors in each class, Mr. Raymond Palacios, Jr., currently a Class I Director, is being nominated for election as a Class III Director. The Board intends to reduce the number of directors to nine members promptly following the Annual Meeting.
The shares represented by the accompanying proxy will be voted to elect the fourthree nominees for Class III Directors as
recommended by the Board, unless authority to do so is withheld. Each nominee has agreed to the nomination and has agreed to serve if elected. Should any nominee become unavailable for election, the proxies will be voted for the election of such other person as the Board may recommend in place of such nominee.
The Board, acting through the Nominating and Corporate Governance Committee, is responsible for recommending to the shareholders a group of nominees that, taken together, have the experience, qualifications, attributes and skills to function effectively as a board. Our Corporate Governance Guidelines require the Nominating and Corporate Governance Committee to periodically review the composition of the Board in light of the current challenges and needs of the Company and determine whether to add or remove individuals “after considering issues of judgment, diversity, skills, background and experience.”
Four of the eleven current directors were originally appointed to the Board at the time of the Company’s emergence from bankruptcy in 1996. The various creditor and public constituencies at the time sought individuals with financial, regulatory and managerial skills that both represented a break with the past and an ability to direct a fragile entity back to viability. This core group of directors instituted policies that returned the Company’s debt to investment grade status within a short period and improved its posture with customers and regulators, which led to a substantial increase in the price of the Common Stock in succeeding years. During that period, as directors retired or as the needs of the Company evolved, the Board added other individuals with skills (such as knowledge of the local service areas and of legislative and regulatory affairs) that became more important as the Company stabilized and grew.
In addition to the characteristics common to all of our directors, which include integrity, a strong professional reputation and record of achievement in senior executive capacities, the Nominating and Corporate Governance Committee has included on our Board persons with diverse backgrounds and skills reflecting the needs of the Company. In presenting this year’s nominees, the Nominating and Corporate Governance Committee also considered the invaluable experience they have gained in dealing with the Company’s
unique challenges over many years, their ability to work as a collegial group during intense and stressful periods in the past and their willingness to spend the time necessary to perform their roles despite other professional commitments.
The Nominating and Corporate Governance Committee considers the following additional factors as important qualifications and skills of each member of the current Board:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OFMESSRS. HARRIS, HUNT, WERTHEIMER AND YAMARONE,AS CLASS III DIRECTORS.
El Paso Electric Company 2015 Proxy Statement 3
Included below is information about the nominees for election as directors and the existing directors who will continue in office after the Annual Meeting. The Board has concluded that the skills, qualifications and experience of each of the
each of the director nominees and continuing directors supports such nominee or director’s continued membership on the Company’s Board.
Raymond Palacios, Jr. |
President, Bravo Cadillac, El Paso, Texas and Bravo Chevrolet Cadillac, Las Cruces, New Mexico |
Age: 57 |
Designation: Independent |
Committees: Audit and Public Policy and Corporate Reputation |
Mr. Palacios is president of Bravo Cadillac in El Paso, Texas and Bravo Chevrolet Cadillac in Las Cruces, New Mexico since 2000 and 2004, respectively. He is past district director of the Texas Automobile Dealers Association, past president of the El Paso New Car Dealers Association, past vice chair of General Motors' Minority Dealer Advisory Council, and a past member of the National Chevrolet Dealer Advisory Council and the Hummer Dealer Advisory Council. He is a
James W. Harris
Managing Partner, OP Food Products, LLC and Harris Financial Advisors, LLC
Directormember of the Paul L. Foster School of Medicine Dean's Advisory Council. He has been vice chairman of The Borderplex Alliance since 1996
Mr. Harris, age 68, has served as the Managing Partner of OP Food Products, LLC sinceJanuary 2013 and Managing Partner of Harris Financial Advisors, LLC since 2013. From 1993 until 2013, Mr. Harris served as Founder and President of Seneca Financial Group Inc. Previously, Mr. Harris served as Managing Director at Lehman Brothers and Headboard member of the Financial Restructuring Group. Before joining Lehman Brothers, he spent 10 years at Citibank, N.A. where he worked inCouncil for Economic and Educational Development since April 2014. He is past president of the Bank’s Institutional Recovery GroupAssociation for the Advancement of Mexican Americans, and managed lending activities in the international and domestic banking groups. From 2001 to 2003, he was an adjunct professor at Columbia University's Graduate Schoola past board member of Business in New York. From 2006 to 2012, Mr. Harris was an adjunct professor at the Kenan-Flagler School of Business Administration atLeadership Houston, the University of North Carolina in Chapel Hill, North Carolina where he taught a course on ManagingHouston Alumni Association, Yucca Council Boy Scouts of America, and El Paso Better Business Turnarounds. Mr. Harris currently serves on the advisory board of the public radio station, WUNC, in Chapel Hill, North Carolina.Bureau. He previously served as a director of Peregrine Systems Inc. and was a member of its audit committee. Mr. Harris has been a director of the Company since 1996 and serves on our Compensation, Executive, and Nominating and Corporate Governance Committees.
Woodley L. Hunt
Executive Chairman, Hunt Companies, Inc.
Director since 2012
Mr. Hunt, age 69, is Executive Chairman of the Board of Directors of Hunt Companies, Inc.’s affiliated companies (“Hunt”). Hunt is a national developer, investor and manager of real assets providing a broad range of services to public and private sector clients. For decades, Hunt has focused on the key areas of public-private partnerships, multifamily housing, military housing, community development, commercial and mixed-use development, land development, real asset investment management and property/asset management. In addition to his duties with Hunt, Mr. Hunt is chairman of the Texas Higher Education Strategic Planning Committee;Department of Motor Vehicles since September 2011. He also served on the boards of Capital Bank and First Sun Bank from May 2013 until November 2017. Mr. Palacios also served in the U.S. Marine Corps.
The Board determined that Mr. Palacios should be nominated for election as a memberdirector due to his extensive knowledge of consumer retail and marketing, financial controls and auditing, and of the board of directors for Complete College America; foundation trustee of the College for all Texans Foundation; member of the board of visitors of the University ofCompany’s Texas MD Anderson Cancer Center-Houston; founding chairman of the Borderplex Alliance in El Paso;and New Mexico service territory communities.
El Paso Electric Company 2018 Proxy Statement | | 5 |
previously served as chairman of the Texas Business Leadership Council, where he now serves on the executive committee; member of the Texas Institute for Education Reform; member of the Texans for Education Reform; member of the Western Governors University Texas Advisory Board; member of the Paso del Norte Foundation; and board member of WestStar Bank. He was previously the vice chairman of The University of Texas System Board of Regents; board of directors of the University of Texas Investment Management Company; founding chairman of the Medical Centers of the Americas Foundation; chairman of the Texas Select Commission on Higher Education and Global Competitiveness; and was chairman of the Paso del Norte Health Foundation. He was a member of the board of directors and chairman of the finance committee of PNM Resources and has served on numerous other civic, non-profit and professional boards. Mr. Hunt has been a director of the Company since December 2012 and serves on our Compensation and Public Policy and Corporate Reputation Committees.TABLE OF CONTENTS
Stephen N. Wertheimer |
Stephen N. Wertheimer
Managing Director and Founding Partner, W Capital Partners
Director since 1996
Managing Director and Founding Partner, W Capital Partners |
Age: 67 |
Designation: Independent |
Committees: Energy Resources and Environmental (Chair), Audit, Executive, Nominating and Corporate Governance, and Security |
Mr. Wertheimer age 64, has been a Managing Director and Founding Partner of W Capital Partners since 2001. He has over 30 years of experience in investment banking and principal investments. Prior to founding W Capital Partners, Mr. Wertheimer served as a Managing Director of CRT Capital Group, LLC. He was a Founder and Managing Membermember of Water Capital Management from 1991 to 1997. From 1988 to 1991, he served as a Managing Director and the Group Head of Investment Banking-Asia of PaineWebber Incorporated. Prior to 1988, Mr. Wertheimer was a Managing Director at First Chicago Corporation, where he specialized in tax-structured domestic and international principal investments and was a Vice President with Bank of America’s tax financing group making equity investments for the parent corporation. Mr. Wertheimer has extensive board experience having served on the boards of over thirtyforty companies, both public and private. Mr. Wertheimer is a member of the InternationalHubbard Council of Advisors of the National Geographic Society. He is also a member of the board of directors of Dynacast International, Inc., Moosejaw Inc., and World Kitchen,Ravn Air Group, Inc. Mr. Wertheimer has been a director of the Company since 1996 and serves as Chairman of our Energy Resources and Environmental Committee. He also serves as a memberboard advisor at Inspirato, LLC and Jordan Health Services.
The Board determined that Mr. Wertheimer should be nominated for election as a director due to his extensive knowledge of our Audit, Executive, Nominatingcorporate finance and accounting, regulated financial, environmental/alternative energy/solar, corporate governance, consumer retail and marketing, strategic planning and technology strategy.
Charles A. Yamarone |
Chief Corporate Governance and Compliance Officer, Houlihan Lokey |
Chairman of the Board, El Paso Electric Company |
Age: 59 |
Designation: Independent |
Committees: Compensation (Chair), Audit, Energy Resources and Environmental, and Executive |
Mr. Yamarone has been Chief Corporate Governance and Security Committees.
4 El Paso Electric CompanyCompliance Officer of Houlihan Lokey (“Houlihan”) since January 1, 2016. From January 2014 through December 2015, Proxy Statement
NOMINEES AND DIRECTORS OF THE COMPANY
Charles A. Yamarone
Managing Director, Houlihan Lokey
Chairman of the Board since 2015Director since 1996
Mr. Yamarone, age 56, has beenhe was a Managing Director of Houlihan Lokey since January 2014 where he has been a senior investment bankerSenior Investment Banker since November 2009. He currently manages the Capital Markets Group, providing leadership toadvises senior management on all aspects of Houlihan’s corporate governance and compliance matters arising as a teamresult of 25 professionals crafting customized financing solutions for the firm’s clients.Houlihan’s initial public offering and subsequent status as an NYSE-listed public company. Between 1991 and 2009, he was a senior officer of Libra Securities (“Libra”), an institutional broker dealer, and was involved in all areas of Libra’s business including capital markets, corporate finance, sales and trading, research, legal, compliance and operations. In June 2016, Mr. Yamarone isretired as a director of United Continental Holdings, Inc. (United Airlines), and washaving served as the chairman of the compensation committee since United Airlines and Continental Airlines merged infrom October 2010 until June 2014. He is currently2014, and as a member
of United Continental Holdings, Inc. executivethe audit and compensation committees. He had previously served on the Continental Airlines board of directors since 1995, where he was chairman of the human resources committee and a member of the corporate governance and social responsibility committee. He previously served as a director of four other public companies: Bally’s Grand, Inc.,; LIVE Entertainment,Entertainment; Merry-Go-Round Enterprises, Inc.; and Vagabond Inns, Inc.
The Board determined that Mr. Yamarone has beenshould be nominated for election as a director due to his extensive knowledge of the Company since 1996. In February 2015, Mr. Yamarone was appointed Chairman of the Board of Directors. He is Chairman of our Compensation Committeecorporate finance and he also serves as a member of our Audit, Energy Resourcesaccounting, regulated financial, corporate governance, and Environmental,financial controls and Executive Committees. He is an ex-officio member of the Nominating and Corporate Governance, Public Policy and Corporate Reputation and Security Committees. As an ex-officio member, Mr. Yamarone has a standing invitation to attend these Board committee meetings, but he does not count for quorum purposes or vote on committee matters.auditing.
Paul M. Barbas |
John Robert Brown
Director of Vistra Energy Corp. (successor to Dynegy Inc.) |
Retired President and Chief Executive Officer, DPL Inc. and its principal subsidiary, The Dayton Power and Light Company |
Age: 61 |
Designation: Independent |
Committees: Compensation and Energy Resources and Environmental |
OwnerMr. Barbas is a director of Vistra Energy Corp. (successor to Dynegy Inc.) and President, Brownco Capital, LLC
Director since 2003
brings extensive utility, management and oversight experience, having served in executive management positions with various utility and other companies. He also has a broad background in finance and marketing and brings a strong understanding of power operations and energy markets. He contributes significantly to the oversight responsibilities on matters relating to executive compensation and compensation strategy and served as the compensation and human resources committee chair of Dynegy Inc. Mr. Brown, age 70, has been the Owner and President of Brownco Capital, LLC, a private investment company, since November 2007. From May 1992 to March 2008, Mr. BrownBarbas was the President and ChairmanChief Executive Officer of the Board of Desert Eagle Distributing of El Paso,DPL Inc. and its principal subsidiary, The Dayton Power and Light Company (“DP&L”), a distributor of Anheuser-Busch products in West Texas and Eastern New Mexico.from October 2006 until December 2011. He currently servesalso served on the board of directors of WestStar BankDPL Inc. and the University of Texas at El Paso Development Board.DP&L. He previously served on the Texas Tech University Boardas Executive Vice President and Chief
6 | | El Paso Electric Company 2018 Proxy Statement |
NOMINEES AND DIRECTORS OF THE COMPANY
Operating Officer of RegentsChesapeake Utilities Corporation, a diversified utility company engaged in natural gas distribution, transmission and marketing, propane gas distribution and wholesale marketing and other related services from 19952005 until 2003October 2006, as Executive Vice President from 2004 until 2005, and served as chairmanPresident of the BoardChesapeake Service Company and Vice President of Regents from 2001 until 2002. He also served as a commissioner for the Texas Parks and Wildlife CommissionChesapeake Utilities Corporation from 2003 until 2009. In 2010, Mr. Brown2004. From 2001 until 2003, he was inducted into the El Paso Business Hall of Fame. Mr. Brown has been a director of the Company since June 2003 and serves on our Audit, Energy Resources and Environmental, and Public Policy and Corporate Reputation Committees.
James W. Cicconi
Senior Executive Vice President of Allegheny Power, responsible for Externalthe operational and Legislative Affairs, AT&T Services,strategic functions of a $2.7 billion company serving 1.6 million customers with 3,200 employees. He joined Allegheny Energy in 1999 as President of its Ventures unit. Mr. Barbas also served on the board of Pepco Holdings, Inc. from September 2013 until April 2016.
Director since 1997
James W. Cicconi |
Retired Senior Executive Vice President for External and Legislative Affairs, AT&T Services, Inc. |
Age: 65 |
Designation: Independent |
Committees: Public Policy and Corporate Reputation (Chair), Audit, and Executive |
Mr. Cicconi age 62, has beenwas Senior Executive Vice President of External and Legislative Affairs for AT&T Services, Inc. sincefrom November 2005.2005 until his retirement in September 2016. Prior to that, Mr. Cicconi served as Executive Vice President for Law and Government Affairs and General Counsel of AT&T Corp. He served as a partner of Akin, Gump, Strauss, Hauer & Feld, LLP (“Akin Gump”) from 1991 to 1998. While practicing law at Akin Gump, Mr. Cicconi specialized in administrative and regulatory law, as well as federal legislation, representing a range of corporate clients. He was also involved in a number
of significant transactions, including public sales, restructurings and acquisitions. Mr. Cicconi served as Deputy Chief of Staff to President George H. W. Bush and also served as the Senior Issues Advisor to President Bush’s 1988 and 1992 election campaigns. Mr. Cicconi has been a directorHe also served as Special Assistant to President Ronald Reagan
and to White House Chief of Staff James A. Baker, from 1981 to 1985. Prior to that he was Administrative Assistant to the Governor of Texas and General Counsel to the Texas Secretary of State.
Mary E. Kipp |
President and Chief Executive Officer, El Paso Electric Company |
Age: 50 |
Designation: Not Independent |
Committees: None |
Ms. Kipp was appointed by the Board to serve as President of the Company since 1997 and servesconcurrently with her position as Chairman of our Public Policy and Corporate Reputation Committee. He also serves as a member of our Audit, and Executive Committees.
Patricia Z. Holland-Branch
Owner, Chairman and Chief Executive Officer,The Facilities Connection, Inc.
Director since 1997
Ms. Holland-Branch, age 71, has been the Owner, Chairman andCompany’s Chief Executive Officer of The Facilities Connection, Inc., headquartered in El Paso, Texas(“CEO”) on May 25, 2017. Ms. Kipp has served as the Company’s CEO since 1986. The company provides its nationalDecember 2015. Previously, she was the Company’s President from September 2014 to December 2015; Senior Vice President, General Counsel and international clients with professional services, including interior design, project management, logistics, installation and order management services for contract furniture, demountable architectural walls and raised access flooring. She currently serves on the board of directorsChief Compliance Officer of the Borderplex Alliance,Company from June 2010 to September 2014; and Vice President, Legal and Chief Compliance Officer from December 2009 to June 2010.
Before rejoining the advisory board for Texas Tech University Gayle Greve Hunt SchoolCompany in 2007, Ms. Kipp spent four years as a senior enforcement attorney in the Federal Energy Regulatory Commission’s Office of Nursing,Enforcement in Washington, D.C., where she investigated and prosecuted violations of federal energy laws. Before entering government service, Ms. Kipp was an attorney at Greenberg Traurig LLP, the Sierra Providence Healthcare Network Women’s Advisory Group and is a former director for El Paso Hispanic Chamber of Commerce Foundation, Regional Economic Development Corporation,Company and El Paso BranchNatural Gas Company.
In addition to her duties with the Company, Ms. Kipp is a board member of the Federal Reserve Bank in Dallas, El Paso Branch; WestStar Bank; SEPA (Smart Electric Power Alliance); Association of DallasWomen in Energy, and Shared Assessments. She also serves as well as a past chairmanthe chair of The Borderplex Alliance, on the executive committee of the board for the Greater El Paso Chamber of Commerce. Ms. Holland-Branch has beenTexas Business Leadership Council and is a director of the Company since 1997 and serves on our Energy Resources and Environmental, Public Policy and Corporate Reputation, and Security Committees.
El Paso Electric Company 2015 Proxy Statement 5
Thomas V. Shockley, III
Chief Executive Officer,El Paso Electric Company
Director since 2010
Mr. Shockley, age 70, is CEO of El Paso Electric Company. He retired in 2004 after a lengthy career in the regulated utility industry. From 2000 to 2004, he served as the Vice Chairman and Chief Operating Officer of American Electric Power Company, Inc. (“AEP”), one of the largest electric utilities in the United States. From 1997 to 2000, Mr. Shockley was President and Chief Operating Officer of Central and South West Corporation, which combined with American Electric Power of Columbus, Ohio in 2000 to form AEP. He
serves on the board of the Borderplex Alliance and University of Texas at El Paso Development Board. In his career, Mr. Shockley served in various other executive and management positions in the utility and energy industries. He previously served on the boards of directors of the Foundation Coal Company, Cellnet and on the board of Chase Energy Development. Mr. Shockley was appointed Interim Chief Executive Officer from January 2012 until May 2012, when he was elected Chief Executive Officer. Previously, he served on our Executive, External Affairs, and Energy Resources and Environmental Committees. Currently, he serves as ex-officio member of the Committees of the Board. As an ex-officio member, Mr. Shockley has a standing invitation to attend the Board committee meetings, but he does not count for quorum purposes or vote on committee matters.WomenCorporateDirectors.
Catherine A. Allen |
Catherine A. Allen
Founder, Chairman and Chief Executive Officer,The Santa Fe Group
Director since 2009
Founder, Chairman and Chief Executive Officer, The Santa Fe Group |
Age: 71 |
Designation: Independent |
Committees: Security (Chair), Energy Resources and Environmental, Executive, Nominating and Corporate Governance, and Public Policy and Corporate Reputation |
Ms. Allen, age 68, has, since 1996, been the Founder, Chairman and Chief Executive Officer of The Santa Fe Group, a strategic consultingadvisory company providing services to financial institutions
and related infrastructure companies in the areas of vendor risk management, cyber securitycybersecurity and emerging technologies. Previously, Ms. Allen was a Vice President of Business Development and Alliances of Citicorp, where her responsibilities included developing and managing strategic alliances with technology and telecommunications companies for technology-based products and services. She was formerly Chief Executive Officer of BITS, a financial services consortium and non-profit industry association from 1997 to 2007. Prior to BITS, she was a senior executive for Dun and Bradstreet, Citicorp, and CBS, focusing on development of technology based products, services and strategies. She sits on the boards and advisory boards of a number of non-profit boardscorporations, including the University of Missouri Research and Development Committee, International Folk Art Alliance, Appleseed New Mexico, Alliance, Communities in Schools, Valles Caldera Trust, Lensic
El Paso Electric Company 2018 Proxy Statement | | 7 |
Performing Arts Center, Museum of New Mexico Foundation, Women Corporate Directors,WomenCorporateDirectors, and is the board chair of the National Foundation for Credit Counseling. She is co-chair of the University of Missouri Capital Campaign Committee and she received an Honorary Doctorate of Humane Letters from the University of Missouri in 2005. She is a former assistant professor of Business Administration at American University. She has received two Lifetime Awards for her service to the financial sector and technology sectors from U.S. Banker and the Executive Womens’ Forum. She was formerly CEO of BITS, a financial services consortium and non-profit industry association from 1997 to 2007. She is the author of four books. She previously served on the board of directors of Stewart Title Guaranty Company and continues to serveNBS Technologies and currently serves on the boardboards of directors of Synovus Financial Corporation and Analytics Pros, where she sits on the advisory board for Houlihan Lokey. Ms. Allen joined our Board in May 2009risk, nominations and serves as Chairman of our Security Committee. She also serves as a member of our Energy Resourcesgovernance, and Environmental, Public Policy and Corporate Reputation, and Nominating and Corporate Governance Committees.executive committees.
Edward Escudero |
President and Chief Executive Officer, High Desert Capital LLC |
Vice Chairman of the Board, El Paso Electric Company |
Age: 47 |
Designation: Independent |
Committees: Audit (Chair), Executive, Nominating and Corporate Governance, Public Policy and Corporate Reputation, and Security |
Edward Escudero
President and Chief Executive Officer, High Desert Capital LLC
Vice Chairman of the Board since 2015Director since 2012
Mr. Escudero age 44, is President and Chief Executive Officer of High Desert Capital LLC, a finance company specializing in providing various types of capital alternatives to small-to-mid-size companies, a role he has held since 2008. Previously, Mr. Escudero was Executive Vice President and Chief Financial Officer of C&R Distributing, a major distributor of fuel and lubricants and the owner of various convenience stores in Westwest Texas and Southernsouthern New Mexico. He also served as Secretary and Chief Financial Officer of Petro Stopping Centers, LP, where he held vital roles of managing various departments including
accounting, legal, human resources, audit, financial planning and information systems. He serves on a number of community boards, including the Medical Center of the Americas Foundation, El Paso CommunityDel Norte Health Foundation, Investment Committee, WestStar Bank, El Paso Hispanic Chamber of Commerce, Trellis Company and Hospitals of Providence Governing Board. Formerly, Mr. Escudero served as chairman of the El Paso Water Utility Public Service Board, as a board member of Capital Bank of El Paso and as co-chair of the University of Texas at El Paso Centennial Commission. Formerly, Mr. Escudero served on the El Paso Water Utility Public Service Board. Mr. Escudero has been a director of the Company since December 2012 and serves as Chairman of our Audit Committee. He also serves as a member of our Executive, Nominating and Corporate Governance, Public Policy and Corporate Reputation, and Security Committees. In February 2015, Mr. Escudero was appointed Vice Chairman of the Board of Directors.
Eric B. Siegel
Eric B. Siegel |
Retired Limited Partner of Apollo Advisors, LP
Consultant and Special Advisor to the Chairman of the Milwaukee Brewers Baseball Club
Director since 1996
Retired Limited Partner of Apollo Advisors, LP and Senior Consultant to and Special Advisor to the Chairman of the Milwaukee Brewers Baseball Club |
Age: 60 |
Designation: Independent |
Committees: Executive (Chair), Nominating and Corporate Governance (Chair), Audit, Compensation, and Security |
Mr. Siegel age 57, is a retired Limited Partner of Apollo Advisors, LP ("Apollo") and has been an independent business consultant since 1995. Since 2004, Mr. Siegel has
6 El Paso Electric Company 2015 Proxy Statement
served as a senior consultant to and onspecial advisor to the advisory boardChairman of the Milwaukee Brewers Baseball Club. He previously served as a Principal and was a Limited Partner of Apollo Advisors, LP (a predecessor to Apollo Management, LP)Global Management) and Lion Advisors, LP. Prior to joining Apollo, Mr. Siegel was a partnerPartner of Irell & Manella LLP, a law firm practicingwhere he practiced corporate law. He serves as the lead independent director and member of the nominating and governance committee of Ares Capital Corporation, where he has been a board member and a member of the audit committee since 2004. Mr. Siegel has
previously served as a director of a number of public and private companies, including Kerzner International Limited ("Kerzner") where he was a director and chairman of its audit and compensation committees for almost two decades, until his retirement from April 1994 to 2006. He rejoined the Kerzner board in 2014.
8 | | El Paso Electric Company 2018 Proxy Statement |
NOMINEES AND DIRECTORS OF THE COMPANY
The Board, from 2008 until April 2014. He has been a director ofacting through the Company since 1996 and serves as Chairman of our Executive Committee and Chairman of our Nominating and Corporate Governance Committee. He also servesCommittee, is responsible for recommending to the Company’s shareholders a group of nominees that, taken together, have the experience, qualifications, attributes and skills to function effectively as a board. Our Corporate Governance Guidelines require the Nominating and Corporate Governance Committee to periodically review the composition of the Board in light of the current challenges and needs of the Company, develop qualification criteria for directors and determine whether to add or remove individuals “after considering issues of judgment, diversity, skills, background and experience.”
In addition to the characteristics common to all of our directors, which include integrity, a strong professional reputation and record of achievement in senior executive capacities, the Nominating and Corporate Governance Committee has included on the Board persons with diverse backgrounds and skills reflecting the needs of the Company. In presenting this year’s nominees, the Nominating and Corporate Governance Committee also considered the invaluable experience they have gained in dealing with the Company’s unique challenges over many years, their ability to work as a collegial group during intense and stressful periods in the past and their willingness to dedicate the time necessary to perform their roles despite other commitments.
The Nominating and Corporate Governance Committee considers the following additional factors as important qualifications and skills of each member of our Audit, Compensation,the Board:
| — | Experience in a broad range of occupations and industries, which provides differing viewpoints and |
expertise relating to execution of the Company’s business plan. These include consumer retail and Security Committees.marketing (Messrs. Escudero, Palacios, and Wertheimer), telecommunications (Mr. Cicconi), regulated financial (Messrs. Escudero, Siegel, Wertheimer, and Yamarone, and Mdmes. Allen and Kipp), regulated utility (Ms. Kipp and Messrs. Barbas and Escudero), technology strategy (Ms. Allen and Messrs. Barbas, Cicconi, and Wertheimer), legal (Messrs. Cicconi, Siegel, Yamarone, and Ms. Kipp), corporate finance and accounting (Messrs. Escudero, Siegel, Wertheimer, and Yamarone), environmental/alternative energy/solar (Ms. Kipp and Messrs. Barbas and Wertheimer), financial controls and auditing (Messrs. Escudero, Palacios, and Yamarone); and
| — | Geographic presence in and knowledge of the communities and constituencies served by the Company in Texas (Messrs. Escudero, and Palacios, and Ms. Kipp) and New Mexico (Mdmes. Allen and Kipp, and Mr. Palacios); and |
| — | Experience in areas applicable to service on the Board’s Committees, including governmental affairs and compliance (Mr. Cicconi and, and Mdmes. Allen and Kipp), utility operations (Messrs. Barbas and Escudero, and Ms. Kipp), corporate governance (Mdmes. Allen and Kipp, and Messrs. Siegel, Wertheimer, and Yamarone) and strategic planning (Mdmes. Allen and Kipp, and Messrs. Barbas, Siegel, and Wertheimer). |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF MESSRS. PALACIOS, WERTHEIMER, AND YAMARONE AS CLASS III DIRECTORS. |
El Paso Electric Company 2018 Proxy Statement | | 9 |
Although not required by the Company’s Bylaws, since 1996, the offices of Chairman and Chief Executive Officer (“CEO”)CEO of the Company have been held by different individuals. The Chairman of our Board, Mr. Yamarone, appointed after the resignation of Michael K. Parks from the Board in February 2015, is an independent director. Mr. Parks
was also an independent director when he was our Chairman. Our President and CEO, Mr. Shockley,Ms. Kipp, is the only member of
management on the Board. We believe that this leadership structure enhances the accountability of the CEO to the Board and strengthens the Board’s independence from management.
Corporate Governance Guidelines and Trading PolicyCORPORATE GOVERNANCE GUIDELINES AND TRADING POLICY
The Board has adopted the Corporate Governance Guidelines (the “Guidelines”) that, along with the charters of the Board Committees, provide the framework for the governance of the Company. The Board’s Nominating and Corporate Governance Committee is responsible for overseeing and reviewing the Guidelines at least annually and recommending any proposed changes to the Board for approval. The Guidelines are available on the Company’s website at www.epelectric.com. TheOur website and its contents are not incorporated into or considered a part of this Proxy Statement.
TheTo align the interests of the Board and our shareholders, the Board believes that directors should hold meaningful equity ownership positions in the Company. Each non-employee
director is expected to be a beneficial owner of
shares of the Company’s Common Stock or common stock equivalents with a market value equivalent to at least three years’ annual cash retainer fees by the end of his or her second year of service on the Board. Each non-employee director with two years or more of service on the Board met this stock ownership guideline as of December 31, 2014.2017. The guidelines for our executive officers are described in the Compensation Discussion and Analysis.Analysis section of this Proxy Statement.
In addition, we prohibit our executive officers and directors from engaging in hedging activities related to Company shares of Common Stock such as trading options (for example, puts, calls, options and other derivatives) and also prohibit them from having Companyholding shares of Common Stock in margin accounts.
The Guidelines, among other things, set forth categorical standards to assist the Board in making determinations of director independence in accordance with the rules of the NYSE. The Board makes a determination regarding the independence of each director annually based on all relevant facts and circumstances. Although any director who meets the following criteria and the independence criteria of the NYSE is presumed to be independent (except for purposes of serving as a member of the Audit Committee or the Compensation Committee, each of which requires that the director meet additional requirements), the Board may make an affirmative determination to the contrary based on its review of other factors. Under the Guidelines, the following persons will not be considered to be independent:
| (i) | A director who serves as an executive officer or employee of, or beneficially owns more than a 10% equity interest in, any corporation, partnership or other business entity that during the most recently completed fiscal year made payments to the Company or received payments from the Company for goods and services if such payments were more than the greater of 2% of such other entity’s gross consolidated revenues for such fiscal year or $1 million. |
from the Company for goods and services if such payments were more than the greater of 2% of such other entity’s gross consolidated revenues for such fiscal year or $1 million.
| (ii) | A director who serves as an executive officer or employee of, or beneficially owns more than a 10% equity interest in, any bank, corporation, partnership or other business entity to which the Company was indebted at the end of its most recently completed fiscal |
year in an amount more than the greater of 2% of such other entity’s total consolidated assets at the end of such fiscal year or $1 million.
| (iii) | A director who is a member or employee of a law firm that has provided services to the Company during the most recently completed fiscal year if the total billings for such services were more than the greater of 2% of the law firm’s gross revenues for such fiscal year or $1 million. |
El Paso Electric Company 2015 Proxy Statement 7
| (iv) | A director who is a partner, executive officer or employee of any investment banking firm that has performed services for the Company (other than as a participating underwriter in a syndicate) during the most recently completed fiscal year if the total compensation received for such services was more than the greater of 2% of the investment banking firm’s consolidated gross revenues for such fiscal year or $1 million. |
After a review of all relevant factors and applying these categorical standards and the independence criteria of the NYSE, the Board has determined that:
| — |
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10 | | El Paso Electric Company 2018 Proxy Statement |
CORPORATE GOVERNANCE
In determining the independence of Mr. Cicconi, the Board took into account various bilateral payments which are not
material in amount, between the Company and AT&T (for which Mr. Cicconi servesserved as an executive)executive officer until his retirement in September 2016) relating to utility services and property.
In determining the independence of Mr. Hunt, the Board took into account various bilateral payments which are not material in amount, between the Company and Hunt Companies, Inc. (for which Mr. Hunt serves as an executive)executive officer) relating to utility services extended to newreal estate developments.
In addition,determining the independence of Mr. Palacios, the Board took into account payments of $301,025 during 2017 (including annual membership dues of $250,000) made to The Borderplex Alliance. Mr. Palacios’ son is employed by the organization. The Borderplex Alliance is a non-profit organization dedicated to economic development and policy advocacy in the El Paso, Texas; Las Cruces, New Mexico; and Ciudad Juárez, Chihuahua region. The Company is one of the principal contributors to the organization and has determined that allbeen a member since 2013. Messrs. Hunt and Palacios, Ms. Kipp, and Mr. Hunt’s son are each directors of The Borderplex Alliance.
All members of the Audit Committee are required to meet the independence requirements set forth in Rule 10A-3(b)(1)(ii) under the Securities Exchange Act of 1934, as amended (the “Act”“Exchange Act”). The Board has determined that each member of the Audit Committee meets such independence requirements.
In addition, all members of the Compensation Committee are required to meet the independence requirements set forth in Rules 303A.02(a)(ii) and 303A.05 of the NYSE Manual and Rule 10C-1(b)(1) under the Exchange Act. The Board has determined that each member of the Compensation Committee meets such independence requirements.
Within the last three years, the Company has not made any charitable contributions to any charitable organization for which a director of the Company or his or her immediate family member serves as an executive officer in excess of the greater of $1 million or 2% of the charitable organization’s consolidated gross revenues.
Our Board adopted a Majority Voting Policy (the “Policy”) in 2014,that is included in our Corporate Governance Guidelines, requiringGuidelines. The Policy requires that director nominees to receive a majority of the votes cast (that is, each nominee must receive more “for” votes than “against” or “withhold” votes) in an uncontested election. Any broker non-votes or abstentions will therefore be excluded from the tabulation of shares voted on the election of directors. If an incumbent director in an uncontested election does not receive a majority of the votes cast, he or she must tender a resignation promptly following certification of the shareholder vote. Our Nominating and Corporate Governance Committee will act on an expedited basis to determine whether to accept the director’s resignation and will submit its recommendation for prompt consideration by the Board. The Board will act on the Nominating and Corporate Governance Committee’s recommendation and publicly disclose its decision and the rationale behind the decision
decision within 90 days following certification of the shareholder vote. The Nominating and Corporate Governance Committee in making its recommendation, and the Board in making its decision, may each consider any factors or other information that it considers appropriate and relevant.
Any director who tenders his or her resignation pursuant to thisthe Policy will not participate in the consideration of itsuch resignation by either the Nominating and Corporate Governance Committee or the Board. If an incumbent director’s resignation is not accepted, he or she will continue to serve until the next annual meeting of shareholders and until his or her successor is duly elected, or until his or her earlier resignation or removal. Pursuant to the Policy, the Board will only nominate individuals for directors only individuals whoa position as a director that agree to comply with the Policy.
The Board is actively involved in the oversight of risks that could impact the Company. It is the responsibility of senior management to identify, assess and manage our exposure to riskrisks inherent in the operation of the Company and the implementation of our strategic plan. The Board, however, plays an important role in overseeing management’s performance of these functions. In connection with its review of the operations of the Company’s business, the Board addresses the primary risks associated with various business decisions and operations. In addition, the Board
reviews the risks associated with the Company’s strategic plan periodically throughout the year as part of its consideration of the strategic direction of the Company.
The Company has an enterprise risk management program that was established in 2010. The Company’s Senior Vice President, Corporate Development and Chief Compliance Officer, who reports directly to the President and CEO and has independent reporting access to the Board, is responsible for identifying, evaluating and enabling the development, implementation and monitoring of risk mitigation strategies.
El Paso Electric Company 2018 Proxy Statement | | 11 |
Each of the Board’s Committees also oversees the management of Company risks that fall within such Committee’s areas of responsibility. In performing this function, each Committee has full access to management, as well as the ability to engage advisors.responsibility:
The Company has an enterprise risk management program that was established in 2010. The Company’s Senior Vice President, Corporate Planning & Development and Chief
| — | Pursuant to its charter, the Audit Committee oversees the operation of the enterprise risk management program, and the Senior Vice President, Corporate Development and Chief Compliance Officer and his team make periodic reports to the Audit Committee about the identified risks and the management controls and methodologies in place to manage those risks. In connection with its risk management role, the Audit Committee periodically meets privately with representatives from the Company’s internal auditors and its independent registered public accounting firm. The Audit Committee provides reports to the Board that include these activities. |
Compliance Officer, who reports directly to the Chief Executive Officer and has independent reporting access to the Board of Directors, is responsible for identifying, evaluating and enabling the development, implementation and monitoring of risk mitigation strategies.
Pursuant to its Charter, the Audit Committee oversees the operation of this enterprise risk management program, and the Senior Vice President, Corporate Planning & Development and Chief Compliance Officer and his team make periodic reports to the Audit Committee about the identified risks and the management controls and methodologies in place to manage those risks. In connection with its risk management role, the Audit Committee periodically meets privately with representatives from the Company’s internal auditors and its independent registered public accounting firm. The Audit Committee provides reports to the Board that include these activities.
As part of its oversight of the Company’s executive compensation program, the Compensation Committee considers the impact of the Company’s executive
| — | As part of its oversight of the Company’s executive compensation program, the Compensation Committee considers the impact of the Company’s executive compensation program, and the incentives created by the compensation awards that it approves, on the Company’s risk profile. In addition, the Compensation Committee reviews all of its compensation policies and procedures, including the incentives that they create and factors that may reduce the likelihood of excessive risk taking, to determine whether they present a significant risk to the Company. Based on this review, the Compensation Committee has concluded that its compensation policies and procedures are not reasonably likely to have a material adverse effect on the Company. |
8 El Paso Electric Company 2015 Proxy Statement
CORPORATE GOVERNANCE
compensation program, and the incentives created by the compensation awards that it approves, on the Company’s risk profile. In addition, the Company reviews all of its compensation policies and procedures, including the incentives that they create and factors that may reduce the likelihood of excessive risk taking, to determine whether they present a significant risk to the Company. Based on this review, the Company has concluded that its compensation policies and procedures are not reasonably likely to have a material adverse effect on the Company.
| — | The Nominating and Corporate Governance
|
| — | The Energy Resources and Environmental Committee assists the Board in overseeing risks associated with |
the Company’s electric generating fleet, including plants for which it is an owner and operator and those plants operated by others in which it owns an interest or on which it relies; reviewing and assessing the operations and needs of the Company’s transmission system; and reviewing and assessing issues facing the Company from legislative and regulatory initiatives regarding climate change, emissions, renewables and alternative energy, and
environmental issues, including compliance with applicable environmental laws and regulations.
| — | The Public Policy and Corporate Reputation Committee assists the Board in overseeing risks relating to the Company’s legislative and regulatory affairs including, but not limited to, those relating to local government and the Company’s state and federal regulators; communication and public relations activities related to the Company’s brand and reputation; matters relating to corporate and social responsibility; and contributions by the employee political action committee as well as corporate activities related to civic and charitable affairs in accordance with applicable regulations. |
| — | The Security Committee assists the Board in
|
In performing these functions, each Committee has full access to management, as well as the ability to engage advisors.
The Board has adopted a Code of Ethics that applies to all directors, officers and employees of the Company, including the Chief Executive Officer, the President and CEO, the Senior Vice President and Chief Financial Officer, and the Vice President and Controller. A current copy of the Code of Ethics may be found on the Company’s website at www.epelectric.com. Any amendments to, or waivers from, any provision of the Code of Ethics applicable to the Chief Executive Officer, the President and CEO, the Senior Vice President and Chief Financial Officer, the Vice President and Controller, or persons performing similar functions will be disclosed by posting such information on the Company’s website at www.epelectric.com within five business days.
Current copies of the charters of the Audit, Compensation, Energy Resources and Environmental, Executive,
Nominating and Corporate Governance, Public Policy and Corporate Reputation, and Security Committees (the “Committee Charters”) may also be found on the Company’s website at www.epelectric.com.
Printed copies of the Guidelines, the Committee Charters and the Code of Ethics are available to any shareholder upon request. Requests for printed copies should be addressed to El Paso Electric Company, 100 N. Stanton Street, El Paso, Texas 79901, Attention: Office of the Secretary.
Shareholders and interested parties may correspond directly with non-management directors by writing to Eric B. Siegel, Chairman, Nominating and Corporate Governance Committee, P.O. Box 982, El Paso, Texas 79960.
The Company’s CEO must certify to the NYSE each year that he is not aware of any violation by the Company of NYSE corporate governance listing standards, qualifying the certification to the extent necessary. Such certification
12 | | El Paso Electric Company 2018 Proxy Statement |
must be made within thirty days of the date of the Company’s annual shareholders’ meeting. The 2014 Annual CEO Certification was submitted to the NYSE timely and without qualification.
El Paso Electric Company 2015 Proxy Statement 9
The Board held sixseven meetings in 20142017 and held executive sessions at each meeting.six of these meetings. The Chairman of the Board presides at the executive sessions. All directors attended at least 75% of the total number of meetings of the Board and the Committees on which they served.
The Company encourages, but does not have a formal policy regardingrequire, director attendance at Annual Meetings.Meetings of Shareholders. All members of the Board except Mr. Wertheimer attended the 20142017 Annual Meeting.Meeting of Shareholders.
2014 Director Compensation2017 DIRECTOR COMPENSATION
The table set forth below provides information regarding compensation paid to the non-employee directors of the Company. Mr. Shockley does not receive separate compensation for his Board service.
Fees Earned or Paid in Cash ($) | Stock Awards ($) | All Other Compensation ($) | Total ($) | |||||||||
Name | (a) | (b)(c) | (d) | |||||||||
Allen, Catherine A. | $28,779 | $170,598 | $4,118 | $203,495 | ||||||||
Brown, John Robert | 74,500 | 132,335 | 3,868 | 210,703 | ||||||||
Cicconi, James W. | 77,250 | 132,335 | 3,868 | 213,703 | ||||||||
Escudero, Edward | 9,750 | 224,729 | 4,125 | 238,604 | ||||||||
Harris, James W. | 61,060 | 132,335 | 3,868 | 197,263 | ||||||||
Holland-Branch, Patricia Z. | 14,000 | 189,997 | 4,183 | 208,180 | ||||||||
Hunt, Woodley L. | 212,371 | 4,212 | 216,583 | |||||||||
Parks, Michael K. | 455,571 | 5,753 | 461,324 | |||||||||
Siegel, Eric B. | 85,500 | 132,335 | 3,868 | 221,703 | ||||||||
Wertheimer, Stephen N. | 216,994 | 4,385 | 221,379 | |||||||||
Yamarone, Charles A. | 84,000 | 132,335 | 3,868 | 220,203 | ||||||||
During 2014,2017, compensation for non-employee directors consisted of the following:
| (1) | Each non-employee director received an annual retainer of $40,000. |
| (2) | The Chairman of the Audit Committee received an additional annual fee of $10,000, and the chairman of each of the other Committees of the Board received an additional annual fee of $5,000. When a Committee Chairman is appointed |
| (3) | Each non-employee director who is a member of a Committee or who is invited to attend by the Committee Chairman received a meeting fee of $1,000 per meeting for each Board and Committee meeting (other than Audit Committee meetings) attended. |
Chairman, received a meeting fee of $1,000 per meeting for each Board and Committee meeting (other than Audit Committee meetings) attended.
| (4) | Each Audit Committee member or Board member invited to attend by the Audit Committee Chairman received a meeting fee of $1,500 per meeting for each Audit Committee meeting attended. |
| (5) | During |
10 El Paso Electric Company 2015 Proxy Statement
DIRECTORS’ MEETINGS, COMPENSATION, AND COMMITTEES
| (6) | Each non-employee director received an award of 3,500 shares of restricted stock. Restricted stock awarded to directors |
Directors are also reimbursed for travel expenses incurred in connection with their duties as directors. Non-employee directors are not eligible to participate in the executive incentive program, savings programs or any of the retirement programs for the Company’s employees. Other than as described in this section, there are no separate benefit plans for active directors.
The Company’s Restated Articles of Incorporation and Bylaws as amended, provide for indemnification of the Company’s directors and executive officers up to the maximum extent provided by the Texas Business Organizations Code (“TBOC”(the “TBOC”), and the Company maintains director and officer liability insurance. The Company has indemnification agreements with each of the Company’s directors and executive officers.
El Paso Electric Company 2018 Proxy Statement | | 13 |
The table set forth below provides information regarding compensation paid to the non-employee directors of the Company. Ms. Kipp did not receive separate compensation for her Board service during 2017 as the Company’s President and CEO.
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | All Other Compensation ($) | Total ($) | ||||||||
(a) | (b)(c) | (d) | ||||||||||
Allen, Catherine A. | $ | 36,000 | $ | 223,780 | $ | 4,603 | $ | 264,383 | ||||
Barbas, Paul M. | 37,000 | 187,775 | 3,518 | 228,293 | ||||||||
Brown, John Robert | 28,000 | — | 1,085 | 29,085 | ||||||||
Cicconi, James W. | 81,000 | 187,775 | 4,603 | 273,378 | ||||||||
Escudero, Edward | 143,000 | 187,775 | 4,603 | 335,378 | ||||||||
Harris, James W. | 59,000 | 187,775 | 4,603 | 251,378 | ||||||||
Hunt, Woodley L. | — | 248,793 | 4,603 | 253,396 | ||||||||
Palacios, Raymond Jr. | 36,000 | 199,733 | 3,518 | 239,251 | ||||||||
Shockley, Thomas V., III | 20,000 | — | 1,085 | 21,085 | ||||||||
Siegel, Eric B. | 94,000 | 187,775 | 4,603 | 286,378 | ||||||||
Wertheimer, Stephen N. | — | 270,785 | 4,603 | 275,388 | ||||||||
Yamarone, Charles A. | 184,000 | 187,775 | 4,603 | 376,378 | ||||||||
| (a) | This column reports the amount of cash compensation earned in 2017 for Board and Committee service based on the compensation policy described above. Annually, directors can elect to receive retainers and meeting fees in cash, stock or a combination of cash and stock. Messrs. Hunt and Wertheimer elected to receive this compensation in stock in 2017. Ms. Allen and Mr. Palacios elected to receive this compensation in a combination of cash and stock. The remaining directors elected to receive their compensation in cash. |
| (b) | This column represents the aggregate grant date fair value of awards granted in 2017 computed in accordance with FASB ASC Topic 718. Fair value for restricted stock is calculated using the closing price of our Common Stock on the grant date. For additional information on valuation assumptions, see Note G-Common Stock of Notes to the Financial Statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (the “2017 Annual Report on Form 10-K”). |
| (c) | On May 25, 2017, each non-employee director received an award of 3,500 shares of restricted stock which vest one year after the grant. These restricted stock awards had a per share grant date fair value of $53.65 and received cash dividends per share of $1.005 and which are included in column (d). There were no other restricted stock awards held by the non-employee directors at fiscal year-end. |
| (d) | The Company paid quarterly dividends of $0.31 per share on its Common Stock on March 31, 2017, and $0.335 per share on its Common Stock each quarter thereafter. Unvested shares of restricted stock qualify as participating securities, and individuals awarded these shares received their respective cash dividends. |
The Board has the following standing Committees: Audit, Compensation, Nominating and Corporate Governance, Executive, Energy Resources and Environmental, Executive, Public Policy and Corporate Reputation, and Security.
During 2014, the Audit Committee was composed of Chairman Escudero and directors Brown, Cicconi, Parks, Siegel and Yamarone. Mr. Parks resigned from the Board in February 2015. In March 2015, Mr. Wertheimer joined the Audit Committee.
The Audit Committee, which held twelve meetings in 2014,2017, is responsible for appointing the Company’s independent auditors of the Company,registered public accounting firm, reviewing all recommendations of the Company’s independent auditorsregistered public accounting firm and the Company’s internal auditors, reviewing and approving non-audit services performed by accountants and other consultants retained by the Company, reviewing the Company’s periodic reports filed with the U.S. Securities and Exchange Commission (the “SEC”) and otherwise overseeing the Company’s financial reporting. The Audit Committee, in conjunction with senior management, also reviews the Company’s internal controls and disclosure controls and procedures. The roles and responsibilities of the Audit Committee are described in detail in a written charter adopted by the Board as amended and amendedavailable on July 29, 2011.the Company’s website at www.epelectric.com.
During 2017, the Audit Committee was composed of Chairman Escudero and directors Cicconi, Palacios (appointed in May 2017), Siegel, Wertheimer, and Yamarone. The Board has determined that each member of the Audit Committee meets the experience and independence requirements of the NYSE rules and Rule 10A-3(b)(1)(ii) underof the Exchange Act. No member of the Audit Committee serves on the audit committee of more than three public companies. The Board has determined that Messrs. Escudero and Yamarone meet the criteria of Audit Committee financial experts under the SEC’s rules and are independent of management. Mr. Parks met the criteria of the Audit Committee financial expert while he served on the Audit Committee. Certain additional information concerning the composition and role of the Audit Committee is set forth under the caption “Audit Committee Report” below.
During 2014, the Compensation Committee was composed of Chairman Yamarone and directors Harris, Hunt, Parks and Siegel. The Board has determined that each member of this Committee is independent under the rules of the NYSE. Mr. Parks was independent under the rules of the NYSE while serving on the Compensation Committee until his resignation in February 2015.
The Compensation Committee, which held elevenfive meetings in 2014,2017, is responsible for evaluating and approving the compensation of executive officers and the Chairman of the Board. It also reviews and approves recommended Company-wide compensation increaseschanges for employees, as well as approves the adoption
of collective bargaining agreements. The Compensation Committee is also responsible for evaluating, adopting, and administering
14 | | El Paso Electric Company 2018 Proxy Statement |
DIRECTORS’ MEETINGS, COMPENSATION AND COMMITTEES
benefit plan programs. The roles and responsibilities of the Compensation Committee are described in detail in a written charter adopted by the Board as amended and amendedavailable on May 9, 2013.the Company’s website at www.epelectric.com. Additional information concerning the Compensation Committee’s process and procedures for the consideration and determination of executive compensation (including its engagement of compensation consultant Frederic W. Cook & Company, Inc. (“FW Cook”) appears under the caption “Compensation Discussion and Analysis” below.
During 2014,2017, the Nominating and Corporate GovernanceCompensation Committee was composed of Chairman Siegel (appointed May 2014)Yamarone and directors Allen, Escudero,Barbas (appointed in May 2017), Harris, (who served as Chairman until May 2014), ParksHunt, and Wertheimer. Mr. Parks resigned in February 2015 and was not replaced on the Nominating and Corporate Governance Committee.Siegel. The Board has determined that each member of thisthe Compensation Committee is independent under the rules of the NYSE. Mr. Parks was independentNYSE and Rule 10C-1(b)(1) under the rules of the NYSE while serving on the Exchange Act.
Nominating and Corporate Governance Committee until his resignation in February 2015.
The Nominating and Corporate Governance Committee, which held twofour meetings in 2014,2017, is responsible for identifying qualified individuals to serve as members of the Board, recommending directors for appointment to Committees, evaluating Board performance, and overseeing and setting compensation for the members of the Board. The roles and responsibilities of the Nominating and Corporate Governance Committee are described in detail in a written charter adopted by the Board and available on November 13, 2003.the Company’s website at www.epelectric.com.
During 2014,2017, the Energy ResourcesNominating and EnvironmentalCorporate Governance Committee was composed of Chairman WertheimerSiegel and directors Allen, Brown, Holland-BranchEscudero, Harris, Hunt, and Yamarone. Wertheimer. The Board has determined that each member of the Nominating and Corporate Governance Committee is independent under the rules of the NYSE.
Energy Resources and Environmental Committee
The Energy Resources and Environmental Committee held four meetings in 2014.2017. The Energy Resources and Environmental Committee is responsible for (i) reviewing and assessing the operations of the Company’s electric generating fleet, including plants for which it is an owner and operator and those plants operated by others in which it owns an interest or on which it relies; (ii) overseeing the affairs and operations of the Company and needs of the Company’s transmission system; (iii) determining whether the Company has operated Company facilities in compliance with applicable environmental laws and regulations; and (iv) identifying existing and potential environmental issues facing the Company under federal, state and local law. The roles and
El Paso Electric Company 2015 Proxy Statement 11
responsibilities of the Energy Resources and Environmental Committee are described in detail in a written charter adopted by the Board as amended and available on September 24, 2009 and amended on January 29, 2015.the Company’s website at www.epelectric.com.
During 2014,2017, the ExecutiveEnergy Resources and Environmental Committee was composed of Chairman Parks (appointed May 2014 until his resignation in February 2015) Cicconi, Harris and Wertheimer. In March 2015, Mr. Siegel was appointed ChairmanWertheimer and directors EscuderoAllen, Barbas (appointed in May 2017), and Yamarone joined the Committee. Yamarone.
Executive Committee
The Executive Committee which did not hold anyheld three meetings in 2014,2017. The Executive Committee consults with senior management on administrative matters and directs the strategic planning effort on behalf of the Board. The Executive Committee may exercise all powers of the Board (except as prohibited by the TBOC) between Board meetings. In addition, the Executive Committee’s responsibilities include analyzing and making recommendations to the Board regarding the maximization of shareholder value. The roles and responsibilities of the Executive Committee are described in detail in a written charter adopted by the Board and available on July 15, 2004.the Company’s website at www.epelectric.com.
During 2014,2017, the Executive Committee was composed of Chairman Siegel, and directors Allen, Cicconi, Escudero, Wertheimer, and Yamarone.
Public Policy and Corporate Reputation Committee was composed of Chairman Cicconi and directors Allen, Brown, Escudero (appointed as a committee member in May 2014), Holland-Branch and Hunt.
The Public Policy and Corporate Reputation Committee, which held four meetings in 2014,2017, is responsible for overseeing matters relating to the Company’s legislative and regulatory affairs
including, but not limited to, those relating to local government and the Company’s state and federal regulators; communication and public relations activities related to the Company’s brand and reputation; matters relating to corporate and social responsibility; and contributions by the employee political action committee as well as corporate activities related to civic and charitable affairs in accordance with applicable regulations. The roles and responsibilities of the Public Policy and Corporate Reputation Committee are described in detail in a written charter adopted by the Board as amended and amendedavailable on July 26, 2013.the Company’s website at www.epelectric.com.
The SecurityDuring 2017, the Public Policy and Corporate Reputation Committee was established on November 20, 2014, and during 2014 was composed of Chairman AllenCicconi and directors Allen, Escudero, Holland-Branch, Siegel,Hunt, and Wertheimer. Palacios (appointed in May 2017).
Security Committee
The Security Committee, which held one meetingfour meetings in 2014,2017, enhances the Board's understanding and oversight of the systems policies, controls, and procedures that management has put in place to (i) identify, manage and mitigate risks related to cybersecurity and physical security; (ii) respond to incidents with respect thereto; and (iii) protect critical infrastructure assets. The Committee will also assistassists in the Board’s assessment of the adequacy of resources, funding, and focus within the Company with respect to cybersecurity and physical security. The roles and responsibilities of the Security Committee are described in detail in a written charter adopted by the Board and available on November 20, 2014.the Company’s website at www.epelectric.com.
During 2017, the Security Committee was composed of Chairman Allen and directors Escudero, Siegel, and Wertheimer.
El Paso Electric Company 2018 Proxy Statement | | 15 |
The Nominating and Corporate Governance Committee will consider nominees for the Board submitted in writing by a shareholder. A shareholder wishing to nominate one or more individuals to stand for election as a director at an annual or special meeting of the shareholders must provide written notice thereof not less than 80 days in advance of such meeting; provided, however, that in the event that the date of the meeting was not publicly announced by the Company more than 90 days prior to the meeting, such notice, to be timely, must be delivered not later than the close of business on the tenth day following the day on which the date of the meeting was publicly announced. A shareholder’s notice must set forth (i) the name and address of the shareholder making the nomination; (ii) such information regarding the nominee(s) proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the SEC had the nominee(s) been nominated by the Board; (iii) a representation of the shareholder as to the number of shares of stock of the CompanyCommon Stock that are beneficially owned by the shareholder and the shareholder’s intent to appear in person or by proxy at the meeting to propose such nomination; and (iv) the written consent of the nominee(s) to serve as a member of the Board if so elected. Any such shareholder notice should be submitted in writing to: El Paso Electric Company, Attn:Attention: Office of the Secretary, 100 N. Stanton Street, El Paso, Texas 79901.
In making its recommendations regarding nominees to serve on the Board, the Nominating and Corporate Governance Committee reviews an individual’s qualifications and makes a determination as to the independence of the candidate based on the independence criteria described above. If the nominee is being evaluated for re-nomination to the Board, the Nominating and Corporate Governance Committee will assess the prior performance of such director.director as well. The Nominating and Corporate Governance Committee will also periodically review the composition of the Board in light of its current challenges and needs and determine whether it may be appropriate to add or remove individuals after considering issues of judgment, diversity, age, skills, background and experience. OurThe Board does not have a formal written policy with regard to the consideration of diversity in identifying director nominees, but its practice has been to seek a combination of skills, experience, geographic and local knowledge, backgrounds and outlook that is in the best interest of the Company and its various constituencies. No director may serve on the boards of directors of more than three other public companies while serving on the Company’s Board.
16 | | El Paso Electric Company 2018 Proxy Statement |
12 El Paso Electric Company 2015 Proxy Statement
The BoardAudit Committee has selected KPMG LLP to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2015.2018. At the Annual Meeting, the Company will ask shareholders to ratify the Board’sAudit Committee’s selection. KPMG LLP, which has served inas the same capacity in 2013 and 2014,Company’s independent auditors continuously since 1983, is expected to be represented at the Annual Meeting. Representatives of KPMG LLP will have an opportunity to make a statement if they desire to do
so and will respond to appropriate questions. If the shareholders do not ratify the Board’s proposal, Audit Committee’s selection,
the BoardAudit Committee will reconsider its actiontake into consideration the shareholder’s vote in connection with respect to the appointmentselection of KPMG LLP.the Company’s independent registered public accounting firm for the current fiscal year and for future fiscal years. Approval of the resolution, however, will in no way limit the Board’sAudit Committee’s authority to terminate or otherwise change the engagement of KPMG LLP during the fiscal year ending December 31, 2015.
KPMG LLP billed related to the services provided to the Company an aggregate of $1,229,000 and $1,162,000 for professional services rendered in connection with the integrated audit of the Company’s financial statements (including the Sarbanes-Oxley Section
404 certification) and review of the Company’s financial statements included in the Company’s Quarterly Reports on Form 10-Q during the fiscal years ended December 31, 20142017 and December 31, 2013, respectively.2016 by KPMG LLP are set forth below.
Principal Accounting Firm Fees | ||||||
Year Ended December 31, | ||||||
2017 | 2016 | |||||
Integrated audit of financial statements and internal control over financial reporting (1) | $ | 1,515,000 | $ | 1,405,000 | ||
Audit-related fees (2) | 223,000 | 254,000 | ||||
Tax fees | — | — | ||||
All other fees | — | — | ||||
Total fees | $ | 1,738,000 | $ | 1,659,000 | ||
| (1) | For 2017 and 2016, amounts include fees for services provided by the Company’s independent registered public accounting firm relating to the integrated audit of the Company’s financial statements (including the Sarbanes-Oxley Section 404 certification) and review of the Company’s financial statements included in the Company’s Quarterly Reports on Form 10-Q for the fiscal years ended December 31, 2017 and December 31, 2016, respectively. |
| (2) | Amounts include fees for audits of state and federal regulatory filings and audits of benefit plans in 2017 and 2016, consent for the Shelf Registration Statement on Form S-3 filed with the SEC in 2017, and the comfort letter associated with the issuance of Senior Notes in 2016. |
KPMG LLP billed the Company $273,000 and $232,000 for audit-related services during the fiscal years ended December 31, 2014 and 2013, respectively. These audit-
related services included (i) audits of state and federal regulatory filings; (ii) audits of benefits plans; and (iii) comfort letter associated with the issuance of Senior Notes in 2014.
KPMG LLP did not render tax services for the years ended December 31, 2014 or 2013.
The Company paid no other fees to KPMG LLP during the fiscal years ended December 31, 2014 and 2013.
KPMG LLP determined that these services did not affect its independence under applicable auditing standards. The Audit Committee pre-approved the engagement of KPMG LLP to provide the audit and permissible non-audit services
described above in accordance with the requirements of the
Sarbanes-Oxley Act of 2002 and determined that KPMG LLP’s provision of the services described above under “Audit-Related Fees,” “Tax Fees,” and “All Other Fees” is compatible with KPMG LLP’s independence.
Audit Committee Pre-Approval Policies and AUDIT COMMITTEE PRE-APPROVAL POLICIES AND ProceduresPROCEDURES
The Audit Committee Chartercharter provides that the Audit Committee will pre-approve audit services and non-audit services to be provided by the Company’s independent auditorsregistered public accounting firm pursuant to pre-approval policies and procedures established by the Audit Committee. The Audit Committee may consult with management in the decision-making
process but may not delegate this authority to management. The Audit Committee may delegate its authority to pre-approve services to one or more Audit Committee members,
provided that such designees present any such pre-approvals to the full Audit Committee at the next Audit Committee meeting. The Audit Committee pre-approved the engagement of KPMG LLP to provide the audit and permissible non-audit services provided in 2017 in accordance with the requirements of the Sarbanes-Oxley Act of 2002 and determined that KPMG LLP’s provision of the services provided in 2017 is compatible with KPMG LLP’s independence.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE SELECTION OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2015.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE SELECTION OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2018. |
El Paso Electric Company 2015 Proxy Statement 13
El Paso Electric Company 2018 Proxy Statement | | 17 |
AUDIT COMMITTEE REPORT
The Audit Committee assists the Board in reviewing the Company’s financial reporting process. In fulfilling its responsibilities in 2017, the Audit Committee, among other things, (i) reviewed and discussed the interim financial information contained in each quarterly earnings announcement with the Company’s Chief Financial Officer (the “CFO”) and the Company’s independent registered public accounting firm prior to public release; (ii) reviewed and discussed the audited financial information contained in the Annual Report on Form 10-K with the Company’s management, including the CFO, and the Company’s independent registered public accounting firm prior to public release; (iii) obtained from the Company’s independent registered public accounting firm a formal written statement describing all relationships between the Company’s independent registered public accounting firm and the Company that might bear on the auditors’ independence consistent with Independence Standards Board, Standard No. 1, “Independence Discussions with Audit Committees”; (iv) discussed with the Company’s independent registered public accounting firm any relationships that may impact their objectivity and independence, and satisfied itself as to the auditors’ independence; (v) discussed with management, the internal auditors and the Company’s independent registered public accounting firm the quality and adequacy of the Company’s internal controls and the internal audit function’s organization, responsibilities, budget and staffing; and (vi) reviewed with both the Company’s independent registered public accounting firm and the Company’s internal auditors their audit plans, audit scope, and identification of audit risks.
In addition, the Audit Committee discussed and reviewed with the Company’s independent registered public accounting firm all communications and other matters required to be discussed by generally accepted accounting
standards, including those described in Public Company Accounting Oversight Board Auditing Standards No. 1301 (Communications with Audit Committees), as amended, and discussed and reviewed the results of the Company’s independent registered public accounting firm’s examination of the Company’s financial statements with and without management present. The Audit Committee also reviewed the results of the internal audit examinations.
The Audit Committee reviewed with management and the Company’s independent registered public accounting firm the audited financial statements of the Company as of and for the fiscal year ended December 31, 2017. Management is responsible for the preparation of the Company’s financial statements and the Company’s independent registered public accounting firm is responsible for the examination of those statements.
Based on the above-mentioned review and discussions with management and the Company’s independent registered public accounting firm, the Audit Committee recommended to the Board that the Company’s audited financial statements be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2017, for filing with the SEC. The Audit Committee appointed KPMG LLP as the Company’s registered independent public accounting firm for the fiscal year ending December 31, 2018, and the Board concurred in such appointment.
THE AUDIT COMMITTEE
Edward Escudero, Chairman
James W. Cicconi
Raymond Palacios, Jr.
Eric B. Siegel
Stephen N. Wertheimer
Charles A. Yamarone
18 | | El Paso Electric Company 2018 Proxy Statement |
PROPOSAL 3
ADVISORY VOTE TO APPROVE
THE COMPANY’S EXECUTIVE
COMPENSATION
Pursuant toIn accordance with Section 14A of the Dodd-Frank Wall Street ReformExchange Act and Consumer Protection Act, enacted in July 2010 (“Dodd-Frank Act”),related rules of the SEC, we are once again providing our shareholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our named executive officers or NEOs (as hereinafter defined) as disclosed in this Proxy Statement in accordance with the compensation disclosure rules of the SEC. The Dodd-Frank Act and applicable SEC rules also require that, at least once every six years, shareholders be given the opportunity to vote on an advisory basis regarding the frequency (i.e., annually, every two years or every three years) of future shareholder advisory votes on the compensation of our NEOs. At the 2010 Annual Meeting, the shareholders indicated a preference for holding “Say-on-Pay” advisory votes on an annual basis as recommended by the Board. Thus, the advisory vote in this Proposal 3 reflects the approved annual frequency and the next advisory vote on the frequency of future Say-on-Pay votes will occur no later than the 2016 Annual Meeting.Statement.
Shareholders are encouraged to read the Compensation Discussion and Analysis (“CD&A”) section of this Proxy Statement for a more detailed discussion of how our compensation programs further the Company’s objectives.
At this meeting, the shareholders will be asked to vote on the following resolution:
“RESOLVED, that the shareholders approve the compensation paid to the Company’s Named Executive Officers (“NEOs”) as disclosed pursuant to Item 402 of Regulation S-K in the Compensation Discussion and Analysis, compensation tables and related narratives and other materials in the Company’s Proxy Statement.”
Our Board and Compensation Committee urge shareholders to endorse the compensation program for our executive officers by voting “FOR” the above resolution. The Board is
committed to excellence in governance and recognizes that executive compensation is an important matter for our shareholders. The Board and the Compensation Committee believe that the Company’s executive officer compensation program, as described in the CD&A and other related sections of this Proxy Statement, is reasonable and effective in aligning the interests of the executive officers with the interests of the Company’s shareholders. We believe that our executive compensation program is designed to reward our NEOs for the
achievement of short-term and long-term strategic and operational goals and the achievement of increased total shareholder value while at the same time avoiding the encouragement of unnecessary or excessive risk-taking. In particular, as described in detail in our CD&A below, our compensation program has the following features:
| — | Strong focus on performance-based pay consisting of annual incentives tied to key financial and operating measures and long-term incentives tied to shareholder return; |
| — |
| — | Limited perquisites; and |
| — | No tax gross-ups in our change in control or severance |
The vote on this resolution is not intended to address any specific element of compensation; rather, the vote relates to the compensation of our NEOs, as described in this Proxy Statement in accordance with the compensation disclosure rules of the SEC. This vote is advisory, which means that it is not binding on us, ourthe Board or the Compensation Committee of our Board.Committee. The Compensation Committee and ourthe Board value the views of our shareholders and will take into account the outcome of the vote when considering future compensation decisions for our NEOs.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ABOVE RESOLUTION TO APPROVE THE COMPENSATION OF OUR NAMEDEXECUTIVE OFFICERS (“NEOs”).
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ABOVE RESOLUTION TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS. |
14 El Paso Electric Company 2015 Proxy Statement
El Paso Electric Company 2018 Proxy Statement | | 19 |
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION (“CD&A”)
Executive Compensation Philosophy and OverviewEXECUTIVE COMPENSATION PHILOSOPHY AND OVERVIEW
Our executive compensation program is designed to:
| — | Attract and retain highly qualified executives by providing a comprehensive and market-competitive |
| — | Encourage |
| — | Motivate our executive team to successfully execute our business strategy, achieve the Company’s |
To meet these goals,objectives, our executive compensation program currently consists ofincludes a market competitive base salary, an annual performance bonus payable in cash, and stock-based long-term incentive awards, along with retirement and other benefits. The levels of compensation are determined through a combination of competitive market data, companyCompany performance and individual responsibility and performance.
The Named Executive Officers (“NEOs”) whose compensation is discussed in this Compensation HighlightsDiscussion and Analysis (“CD&A”) and their respective positions with the Company are:
Mary E. Kipp | President and Chief Executive Officer |
Nathan T. Hirschi | Senior Vice President and Chief Financial Officer |
Steven T. Buraczyk | Senior Vice President, Operations |
Rocky R. Miracle | Senior Vice President, Corporate Development and Chief Compliance Officer |
William A. Stiller | Senior Vice President, Public and Customer Affairs and Chief Human Resources Officer |
Highlights regardingof our 20142017 executive compensation program and those aspects of our business performance that particularly impacted executive compensation include the following:
| — | In |
| — |
| — |
| — | The |
20 | | El Paso Electric Company 2018 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
| — | These achievements demonstrate excellent progress toward our strategic objectives and, when combined with positive operating results in 2017, are important factors in aligning the compensation of our executives with the interests of our shareholders. |
| — |
| – | Base salary; |
| – | Short-term incentive compensation, currently awarded through an annual cash performance-based bonus plan with annual payouts in cash; and |
| – | Long-term incentive equity compensation, currently awarded in a |
| — | Our Annual Cash Bonus Plan (“ACBP”) is an all-employee plan that measures performance against a variety of financial and operational metrics with a mix of 50% financial and 50% operational measures. We consider this to |
consistent with our philosophy of pay forbalances financial and operational performance to properly motivate employee performance and market competitive executive compensation.aligns our executives and all employees with the interests of our shareholders.
| — | For 2017, the results of our ACBP were determined to be at Target performance for our Earnings Per Share (“EPS”) goal, and above-Target performance for our Controllable Operations and Maintenance Expense, our Call Center Performance, and our Compliance metrics. Below-Target performance was achieved for the Customer Survey metric, and results were below-Threshold performance for our Reliability metric. |
| — | Our performance-based long-term equity awards are determined based on relative Total Shareholder Return (“TSR”) performance versus a peer group of similarly sized electric and diversified utilities over a three-year period. |
| — | The three-year performance period for our |
OurThe Compensation Committee reviews and approves all forms of compensation for alleach executive officers. The Compensation Committeeofficer and regularly reviews the performance of our CEO at leastthe President and CEO.
annually. OurThe President and CEO reviews other executive officers’ performance and reports hisher evaluations to the Compensation Committee. OurThe President and CEO also recommends to and discusses
El Paso Electric Company 2015 Proxy Statement 15
with the Compensation Committee the equity and non-equity compensation elements for the other executive officers, although theofficers. The Compensation Committee ultimately approves the actual compensation awarded.awarded to each executive officer.
Since May 2012, the Compensation Committee has engaged Frederic W. Cook & Company, Inc. (“FW Cook”) as its independent outside executive compensation consulting firm. FW Cook’s services to the Compensation Committee during 20142017 included:
| — | An executive compensation study covering market competitive practices for base salary, short-term incentives, long-term incentives, benefits and perquisites for all executives of the Company, including the President and CEO, using an approved peer group and published compensation surveys. |
| — | A report on |
| — | Regular updates on emerging compensation and governance trends, developments, and best practices at scheduled Compensation Committee meetings. |
| — | A review and comment on proxy statement disclosures, including this CD |
| — | Ad hoc support on issues directly related to the Compensation Committee’s scope of duties and responsibilities such as attraction and retention issues and incentive plan design. |
| — | Comprehensive review of our executive compensation plans, programs and policies. |
The FW Cook consultant regularly attended meetings of the Compensation Committee and, asincluding when requested, attended its executive sessions. In addition, members of the Compensation Committee chair held discussions with the FW Cook consultant between meetings as the need arose. Pursuant to the applicable SEC and NYSE rules, the Compensation Committee reviewed the independence of FW Cook and the FW Cook consultant and concluded that, there waswere no conflictconflicts of interest.interest or other factors that might impair the independence and objectivity of FW Cook or the FW Cook consultant.
The Compensation Committee generally makes decisions regarding base salary, annual bonus targets and equity incentive awards for the executive officers at one or more regularly scheduled meetings during the first quarter of each
El Paso Electric Company 2018 Proxy Statement | | 21 |
year. The Compensation Committee continues to review compensation matters throughout the year and changesmay modify or approvesapprove compensation at other times in response to hiring needs, market changes and other occurrences. The Compensation Committee’s decisions about equity awards are not “timed” or otherwise affected by the planned announcement of material information. At least annually (and at other times when material decisions are being considered), the Compensation Committee reviews a summary of executive total compensation (also called a “tally sheet”) with its outside independent executive compensation consulting firm for each executive officer showing all compensation elements, equity holdings, and accrued retirement benefits, and separation benefits. The tally sheets are designed to inform the Compensation Committee of the total compensation potentially payable to the executive officers, particularly in the event of a change in control and/or separation from the Company, but were not a material factor in making any particular compensation decision during the year.2017.
In 2014,At our 2017 annual meeting of shareholders, we again held a non-binding shareholder advisory vote to approve the
compensation of our NEOs, commonly referred to as a “say-on-pay” vote. More than 95%“Say-on-Pay.” Shareholders overwhelmingly approved our Say-on-Pay advisory vote with 98.6% of shareholder votes (excluding abstentions and broker non-votes) werebeing cast in favor of the compensation ofprogram for our NEOs. Although this was only an advisory vote, we believe the approval by our shareholders showsindicates significant support for our compensation philosophy and approach, and ouraccordingly, the Compensation Committee did not make any specificsubstantive changes to our executive compensation program in response to this vote. Instead, it retained its general approach
At our 2016 annual meeting of shareholders, we conducted our second non-binding shareholder advisory vote on the frequency of Say-on-Pay advisory votes. Shareholders voted in favor of an annual frequency and therefore we intend to determining our executive compensationhold future Say-on-Pay advisory votes annually until we next hold an advisory vote on the frequency of Say-on-Pay advisory votes as described in this CD&A while focusing on particular needs that arise during the year.required under SEC rules.
In consultation with FW Cook, the Compensation Committee approved a peer group of companies (referred to in this discussion as the “Compensation Comparator Group”), which includes United States shareholder-owned electric and diversified utilities, and which is used for an annual benchmarking review of our compensation program. These companies are regional electric and diversified utilities with business issues, scale and organization characteristics similar to our own. The Compensation
Committee reviews compensation information ofderived from the Compensation Comparator Group, compiled from publicly available data, andas well as data from similarly-sized utilities fromreported in the Towers Watson Energy Services Executive Compensation Database.
For paycompensation decisions made in 2014,2017, the companies in the Compensation Comparator Group consisted of the following:following*:
Avista Corporation | |
Black Hills Corporation | |
IDACORP, Inc. | |
| * | The 2017 Compensation Comparator Group includes 12 companies following the removal of Cleco Corporation, Empire District Electric Company, and ITC Holdings Corporation from the 2016 Compensation Comparator Group due to their acquisition by other entities. |
1 UNS was acquired by Fortis in August 2014.
TABLEPRIMARY COMPONENTS OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS (“CD&A”)
The primary components of our compensation program for the NEOs (as hereinafter defined) are:
| — | Base salary; |
| — | Short-term incentive compensation, currently awarded through an annual cash performance-based bonus plan; and |
| — | Long-term incentive equity compensation, currently awarded in |
We do not target any element of compensation to be a particular percentage of total compensation.
Base Salary. Base salary levels for our continuing executive officers are reviewed and set annually or, as warrantedmerited, in connection with hiring, promotions or reassignments. The Compensation Committee generally targets the 50th percentile50th-percentile level of the Compensation Comparator Group, although the Compensation Committee also considers each
executive officer’s responsibility level, experience and individual performance.performance in setting base salaries. The Compensation Committee approved base salary increases effective January 2014,2017 for the President and CEO and other NEOs ranging from 0%3.1% to 8%8.0%. For 2014, each of the NEOs’ salaries fell within 15% of the 50th percentile, as determined by FW Cook, with the average being below the 50th percentile of similarly-positioned executives at members of the Compensation Comparator Group. Individual variations from the 50th percentile primarily reflect each executive’s skills, experience and performance in the position. Although individual performance and contributions are considered, no specific individual performance factors had a material impact on salaries for fiscal 2014.
22 | | El Paso Electric Company 2018 Proxy Statement |
The Compensation Committee also approved a promotional increase for Ms. Kipp in September 2014 when she was promoted to President.
COMPENSATION DISCUSSION AND ANALYSIS
The following table reflects changes in annual base salary during 20142017 for the President and CEO and other NEOs.
2014 Base Salary Changes for NamedExecutive Officers (“NEOs”)2017 BASE SALARY CHANGES FOR NEOS
Annual Base Salary | |||||||||
2013 | 2014 | Percent Change | |||||||
Thomas V. Shockley, III Chief Executive Officer | $625,000 | $675,000 | 8.0% | ||||||
Nathan T. Hirschi Senior Vice President and Chief Financial Officer | $285,000 | $300,000 | 5.3% | ||||||
Hector R. Puente Executive Vice President | $324,500 | $324,500 | 0.0% | ||||||
David G. Carpenter Executive Vice President | $370,800 | $370,800 | 0.0% | ||||||
William A. Stiller Senior Vice President, Human Resources and Customer Care | $275,000 | $283,000 | 2.9% | ||||||
Mary E. Kipp* President | $425,000 | 30.8% | |||||||
Mary E. Kipp Senior Vice President and General Counsel | $310,000 | $325,000 | 4.8% | ||||||
Rocky R. Miracle Senior Vice President, Corporate Planning & Development and Chief Compliance Officer | $281,000 | $295,000 | 5.0% | ||||||
Annual Base Salary | |||||||||
Name and Principal Position | 2016 | 2017 | Percent Change | ||||||
Mary E. Kipp President and Chief Executive Officer | $ | 625,000 | $ | 675,000 | 8.0 | % | |||
Nathan T. Hirschi Senior Vice President and Chief Financial Officer | $ | 350,000 | $ | 365,000 | 4.3 | % | |||
Steven T. Buraczyk Senior Vice President, Operations | $ | 325,000 | $ | 335,000 | 3.1 | % | |||
Rocky R. Miracle Senior Vice President, Corporate Development and Chief Compliance Officer | $ | 315,000 | $ | 325,000 | 3.2 | % | |||
William A. Stiller Senior Vice President, Public and Customer Affairs and Chief Human Resources Officer | $ | 302,000 | $ | 315,000 | 4.3 | % | |||
Annual Cash Bonus Plan. The purpose of our Annual Cash Bonus PlanACBP is to provide market-based compensation opportunities based on achievement of specific business goals and objectives that are established in advance on an annual basis. All employees, including all of our NEOs, are eligible to participate in the Annual Cash Bonus Plan.ACBP.
Each executive officer is assigned a targetTarget award opportunity expressed as a percentage of base salary. The target for each of the NEOs for 2014 was as follows: (i) 80% for Mr. Shockley; (ii) 50% for the President (formerly our Senior Vice President (“SVP”) and General Counsel until September 2014) and for the SVP and Chief Financial Officer (“CFO”); and (iii) 45% for the other NEOs. The targetTarget award represents the level of bonus payment the executive officer may earn inif the plan performance goals are achieved at Target (i.e. expected) levels of performance.
the event that plan performance is achieved at target or expected levels of performance. Payments at the targetTarget levels combined with base salary are further intended to approximate the 50th percentile of the total annual cash compensation opportunity among the Compensation Comparator Group.Group and published survey data. In addition, maximum“Maximum” for superior performance and threshold award“Threshold” for minimum acceptable performance levels are established for each metric that adjust payouts for performance levels that exceed or fall below our plan.expected or target level of performance. The CEO could earn 30% of his targetTarget and the respective bonus opportunity (19% for the PresidentThreshold and the SVP & CFO and 21%Maximum level of performance for the other NEOs) if all metrics were achieved at threshold performance, and could earn no more than 195%each of the target bonus opportunity (176%NEOs for the President and the SVP & CFO and 174% for the other NEOs) at maximum.2017 were as follows:
Name and Principal Position | Threshold (% of Target) | Target (% of Base Salary) | Maximum (% of Target) | ||||||
Mary E. Kipp President and Chief Executive Officer | 26 | 85 | 200 | ||||||
Nathan T. Hirschi Senior Vice President and Chief Financial Officer | 16 | 55 | 182 | ||||||
Steven T. Buraczyk Senior Vice President, Operations | 18 | 50 | 180 | ||||||
Rocky R. Miracle Senior Vice President, Corporate Development and Chief Compliance Officer | 20 | 45 | 178 | ||||||
William A. Stiller Senior Vice President, Public and Customer Affairs and Chief Human Resources Officer | 20 | 45 | 178 | ||||||
For our NEOs, the goals under the Annual Cash Bonus Plan Metrics. The goals established for 2014the ACBP for 2017, for all employees including the NEOs, were based solely on the following corporate financial and operational performance measures.measures:
| — | Financial performance measured by |
| — | Operational performance, measured by a combination of |
The safety goals under operational performance includeEarnings Per Share (“EPS”) goal for 2017 was established based on a range between a Threshold of $2.24 and a Maximum of $2.64. All participants in the following:ACBP, including our NEOs, would receive no bonus if the Threshold EPS goal was not achieved.
The Controllable O&M Expense metric, new for 2017, is intended to focus executives on adherence to budgeted expense levels with Target award opportunity set at the approved 2017 budget. The metric excludes certain expenses over which management has limited control, namely, those expenses including: (i) Days Away/Restricted Duty/Job Transfer (“DART”), a measurePalo Verde Generating Station operating costs; (ii) asset retirement obligations; (iii) the Four Corners Generating Station; (iv) benefit plan obligations as determined by the Company’s actuary, PricewaterhouseCoopers; (v) the effect of accidentthe Annual Cash Bonus Plan; and injury severity; (ii) vehicle accident frequency(vi) expenses associated with the Company’s rate (“Vehicle”);cases. The Threshold and (iii) Leading Indicators (“LI”), a measure of each employee’s completion of defined safety activities designed to foster safety awareness and compliance with established safety rules and regulations. For 2014, the targetMaximum goals for DART and Vehicle were established using the average performance of those metrics for the past five years. The goals established for LI wereControllable O&M are based on the minimum expected performance at target with upside opportunity at maximum for additional defined achievement.Target plus or minus a 2.0% variance.
El Paso Electric Company 2018 Proxy Statement | | 23 |
The customer satisfactionCustomer Satisfaction goal under operational performance is to increase customer satisfaction to a level of customer loyalty.based on two separate measures: the Customer loyalty is defined as the point where, given a choice, a customer is less likely to switch to a competitor.Satisfaction Survey and Call Center Service Level. The establishment and measurement of the customer satisfactionCustomer Satisfaction Survey goal is based on an annual customer survey designed and conducted by a third-party market research organization. Survey responses are provided by a combination of customer classes and are weighted as follows: (i) 50% for residential customers; (ii) 25% for small commercial customers; and (iii) 25% for large commercial customers.industrial customers, and are designed to measure overall customer satisfaction and meeting our customers’ expectations.
For 2014, we established an additionalThe second customer satisfaction goal (“(Call Center Service Level”)Level) is designed to focus our customer call center employees on fast and efficient service for customers contacting us via the call center.our Call Center. The Call Center Service Level is a measure of the percentage of incoming calls answered within the first minute.
The complianceReliability goal in 2017 measured system-wide SAIDI (system average interruption duration index) with Target set at the prior five-year average. Our Reliability goal provides a broad measure of how quickly we are able to restore power to those customers who have lost electric service. For 2017, Threshold was set at the highest (worst) annual SAIDI performance over the last five years and Maximum was set at the lowest (best) annual SAIDI performance over the last five years.
The Compliance goal under operational performance is designed to ensure employees complete all required
compliance-related trainingtrainings and activityactivities during the year. The 2014Target performance level is based on the individual employee’s satisfactory completion of this training during the year. Maximum performance is contingent upon the employee’s (i) completion of training at Target level and (ii) completion of additional defined activities as determined by the Company. For 2017, additional defined activities included a project based assignment and a cyber-security training and awareness component.
The earnings per share bonus goal for 2014 was established based on a range between a threshold of $2.20 and a maximum of $2.45. Executive officers would receive no bonus if the threshold earnings per share goal was not achieved. Because the plan provides that bonus payments are made only if the Company’s reported earnings per share exceed the threshold amount, and earnings per share reflect the bonus payments, any amounts otherwise earned based on achievement of various targets would need to be reduced pro rata in the event the full payments would cause the Company’s earnings per share to be lower than the threshold amount.
Thefollowing table below “2014entitled “2017 Annual Cash Bonus Plan” shows the individual metrics, their respective weighting and the performance goals at target, thresholdTarget, Threshold and maximumMaximum levels of performance. Except for the complianceCompliance metric described above, results that fall between the thresholdThreshold and target,Target levels, or between the targetTarget and maximum,Maximum levels, are interpolated to calculate the actual achievement of thefor that metric. The complianceCompliance metric pays out only at target performance, assuming the individual employee achieves that levelTarget for full compliance or at Maximum for completion of results.additional defined activities. The table also shows the actual performance result for each metric and the resulting final payout percentage of targetTarget opportunity earned by the NEOs. As noted above, the President and CEO has a wider and higher range of payout under this plan to better focus his short termshort-term compensation on performance. This resulted in a payout for the President and CEO at a higher percentage of Target than other NEOs.
2014 Annual Cash Bonus Plan2017 ANNUAL CASH BONUS PLAN
Metric | Weighting (%) | Performance Goals | Performance Result | ||||
Threshold | Target | Maximum | Actual Result | Final Payout (as % of Target Bonus) | |||
CEO | Other NEOs (averaged) | ||||||
EPS | 50 | $2.20 | $2.30 | $2.45 | $2.27 | 39.7 | 38.2 |
Customer Satisfaction | |||||||
3rd Party Customer Survey | 10 | 75 | 78 | 81 | 81 | 20 | 17.9 |
Call Center Performance (%) | 10 | 70% | 80% | 90% | 86% | 16 | 14.7 |
Reliability (SAIDI) (min) | 15 | 45.6 min | 41.9 min | 39.9 min | 46.6 min | 0 | 0 |
Safety | |||||||
DART (measure of injuries) | 3.75 | 1.5 | 1.2 | 0.9 | 1.73 | 0 | 0 |
Vehicle accident | 3.75 | 3.6 | 2.6 | 1.6 | 1.55 | 7.5 | 6.7 |
Leading Indicator activities | 2.5 | 4 points | 6 points | 8 points | Maximum | 5 | 3.7 |
Compliance | 5 | N/A | Fully Compliant | N/A | Target | 5 | 5 |
Total | 100 | 93.2 | 86.2 | ||||
Performance Goals | Performance Result | ||||||
Metric | Weighting (%) | Threshold | Target | Maximum | Actual Result | Final Payout (as % of Target Bonus) | |
President and CEO | Other NEOs (averaged) | ||||||
Earnings Per Share | 37.5 | $2.24 | $2.44 | $2.64 | $2.55* | 58.1 | 53.9 |
Controllable O&M | 12.5 | $200.1 M | $197.0 M | $193.1 M | $195.3 M | 18.0 | 16.9 |
Customer Satisfaction | |||||||
Customer Survey | 10 | 76 | 79 | 82 | 78 | 7.6 | 7.4 |
Call Center Performance | 10 | 70% | 80% | 90% | 83% | 13.0 | 12.4 |
Reliability (SAIDI in minutes) | 20 | 46.8 min | 42.5 min | 39.6 min | 48.8 min | 0.0 | 0.0 |
Compliance | 10 | N/A | Fully Compliant | Defined Activity | Maximum | 20.0 | 18.0 |
TOTAL | 100 | 116.7 | 108.6 | ||||
| * | The ACBP EPS result of $2.55 includes a $0.13 adjustment as described below and reflects the performance result of final payout percent of Target Bonus. |
Bonuses are paid in late February or early March after the Compensation Committee reviews the audited financial results and operational performance for the previous year. As reported in theour 2017 Annual Report on Form 10-K, for the year
ended December 31, 2014, and as shown in the above table, the Company had net income of $2.27$2.42 per basic share, which includes an accrual for the cost of the bonus pool.
Adjustment to EPS. The Company also met (or failedCompensation Committee established goals for the 2017 ACBP in January 2017 and determined to meet)set the EPS Target at budgeted earnings.
Budgeted earnings included an amount representing the Company’s achievement of 100% of its customerrequested rate relief in its 2017 Texas retail rate case as filed. The Compensation Committee intended to set the 2017 Target at budgeted earnings and adjust the Target for the expected rate relief attained at mid-year, when visibility into the outcome of the 2017 Texas retail rate case was expected. However, the parties to the settlement in the 2017 Texas retail rate case did not reach an agreement until early November, and the
18 El Paso Electric Company 2015 Proxy Statement
24 | | El Paso Electric Company 2018 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS (“CD&A”)
satisfaction goals, its reliability goal, its three safety goals and its compliance goal, in each instancefinal order was not issued by the Public Utility Commission of Texas until December 2017. Accordingly, the Compensation Committee determined to adjust EPS for purposes of the 2017 ACBP by $0.18, equal to the portion of rate relief that was expected, but not ultimately achieved, at the time the EPS goal was established. The Compensation Committee then exercised its discretion to reduce the adjustment to EPS to $0.13, given their assessment that the 2017 ACBP should be set at Target level reflectedperformance for the year. This approach was consistent with the Compensation Committee’s previous years’ treatment of the EPS metric during years of a rate case filing, most recently in the above table. 2012.
As a result, each NEO received a bonus, as set forth in the table below and also in the Summary“Summary Compensation TableTable” that is shown later in this proxy statement.Proxy Statement. The total bonus paid under the 2017 ACBP to Companythe Company’s approximately 1,100 employees for 2014 was approximately $7.4$9.7 million, of which approximately
$1.9 $2.3 million was paid to the NEOs and the 11 other executive officers.officers as a group.
The following table shows the payout amountamounts of the 2014 Annual Cash Bonus Plan2017 ACBP compared with the payout opportunity at target payoutTarget for each of the NEOs:
2014 Annual Cash Bonus Plan Payoutsto Named Executive Officers (“NEOs”)2017 ANNUAL CASH BONUS PLAN PAYOUTS TO NEOS
Target Incentive Opportunity ($) | Annual Cash Bonus Paid | ||||||||||||||||||||
($) | (% of Target) | ||||||||||||||||||||
Thomas V. Shockley, III | 535,385 | 498,912 | 93.2 | ||||||||||||||||||
Name | Target Incentive Opportunity | Annual Cash Bonus Paid | |||||||||||||||||||
(% of Base Salary) | ($) | (% of Target) | |||||||||||||||||||
Mary E. Kipp | 85 | % | 573,750 | 669,000 | 116.7 | % | |||||||||||||||
Nathan T. Hirschi | 149,135 | 129,822 | 87.1 | 55 | % | 200,750 | 219,000 | 109.1 | % | ||||||||||||
Hector R. Puente | 145,828 | 120,227 | 82.4 | ||||||||||||||||||
David G. Carpenter | 166,636 | 144,788 | 86.9 | ||||||||||||||||||
Steven T. Buraczyk | 50 | % | 167,500 | 182,000 | 108.7 | % | |||||||||||||||
Rocky R. Miracle | 45 | % | 146,250 | 158,000 | 108.0 | % | |||||||||||||||
William A. Stiller | 126,935 | 110,292 | 86.9 | 45 | % | 141,750 | 153,000 | 107.9 | % | ||||||||||||
Mary E. Kipp | 172,212 | 149,910 | 87.1 | ||||||||||||||||||
Rocky R. Miracle | 132,023 | 114,713 | 86.9 | ||||||||||||||||||
Other Cash Awards. In 2014, the Compensation Committee approved2017, no other cash bonus award forwas awarded to any NEO, except the annual strategy execution bonus provided under Mr. Shockley’s employment agreement as described below.NEO.
Long-Term Equity Incentives. Generally, we grant stock awards annually to our NEOs with a three-year performance cycle and payout. These awards are designed to focus executive officers on the relative performance of our stockCommon Stock relative to our peers, and secondarily, as a retention tool.tool based on deferred vesting. Since 2004, the Compensation Committee has granted annual long-term equity incentives consisting of two elements:
| — | Performance shares, which are earned based on our relative |
| — | Time-vested restricted stock, which vests in one installment at the end of |
All of our NEOs (other than our CEO and Messrs. Carpenter and Puente) receivedwere awarded these awardsshares in March 2014,February 2017, in the amounts set forth below in the “Grants of Plan-Based Awards” table. The CEO did not receive an equity awardtable shown later in March 2014 when the other NEOs received their annual long-term incentive grant because his employment term will end in December 2015 and the March 2014 grants were based on a three-year performance cycle ending in 2016. However, in light of Mr. Shockley agreeing to extend his term until December 2015 and in recognition of his service and performance, he received a special restricted stock grant in January 2014, which vests at the end of his December 2015 term. Messrs. Carpenter and Puente did not receive long-term equity awards in 2014 consistent with the terms of an Employment Transition Agreement each had entered into with the Company in 2013 and because their employment was expected to end in January 2015. In consideration of Mr. Stiller staying beyond his original contract period, he was awarded a restricted stock grant of $100,000 grant value which will vest at the end of 2015.this Proxy Statement.
For our NEOs, (excluding the CEO and Messrs. Carpenter and Puente), the mix for each annual equity award was again based on a weighting of 75%67% for performance shares and 25%33% for time-basedtime-vested restricted stock. WeConsistent with the Company’s compensation philosophy, we have chosen to place more weight on the performance shares to emphasize long-term performance and shareholder returns, consistent with the Company’s compensation philosophy.returns. We believe that the time-basedtime-vested restricted stock awards are also an effective retention and incentive toolstool because their actual value is tied to the value of the Company’s stockCommon Stock no earlier than the vesting date, and the vesting schedulesschedule require that participants be employed at the end of the three-year vesting period. The initial targetTarget values (i.e., the initial value of the time-basedtime-vested restricted stock plus performance shares at target)Target), when combined with annual cash compensation,
are intended to approximate the 50th percentile of the annual total direct compensation value among the Compensation Comparator Group. Dividends on Company stockshares of Common Stock are paid quarterly on time-vested restricted stock but are not paid on unearned performance shares, until such time as they are earned and converted to shares.
The actual numbershares of performance shares earned at the end of each three-year cycle depends on the Company’s total shareholder return percentile ranking within a specific group of companies approved by the Compensation Committee (called the “Performance Comparator Group”). The Performance Comparator Group for the 2014 equity awards was modified from previous year so that it consisted of the same companies used in the Compensation Comparator Group discussed earlier in this CD&A. This change to our Performance Comparator Group was reviewed with our independent executive compensation consultant.Common Stock.
The actual number of performance shares earned at the end of the three-year cycle can range from 0% to 200% of target,Target, depending on our ranking within the 17-member PerformanceCompensation Comparator Group (including the Company) for total shareholder return. As with the time-based restricted stock, participants are required to be employed at the end of the three-year cycle to be eligible for any award. Total Shareholder
El Paso Electric Company 2015 Proxy Statement 19
ReturnTSR. TSR is defined as the change in stock value, plus dividends paid, over the three-year performance period. To eliminate volatility from measuring stock price on a particular date, the beginning and ending stock price used to calculate total shareholder returnTSR is the average closing price for the month of December. Participants other than certain eligible retirees (as described below) are required to be employed at the end of the three-year cycle to be eligible for any earned award.
In 2017, after significant review and consultation with the Compensation Committee’s independent executive compensation consultant, the Compensation Committee approved a change to the Compensation Comparator Group used to determine the Company’s relative TSR performance. This review was prompted by a continued decline in the number of available companies represented in the previous comparator group due to ongoing consolidation in the industry and a concern that an appropriate and relevant comparator group be maintained. The Compensation Committee therefore approved the use of a peer-based Edison Electric Institute (“EEI”) index composed of regulated electric utilities as the Company’s Compensation Comparator Group for the 2017 long term incentive grant cycle. Further, for the 2017 grant cycle, the
El Paso Electric Company 2018 Proxy Statement | | 25 |
Compensation Committee modified the threshold for payout of performance shareshares from the 30th percentile to the 25th percentile reflecting competitive practice among peer
regulated electric utilities. The payout scale for the performance shares granted in 2017 is as follows:
TSR Rank in Comparator Group | Performance Share Payout as Percent of Target |
90th percentile or above | 200% |
75th to 90th percentiles | 175% |
Above median to 75th percentiles |
Interpolate between 100% and 150% | ||
50th percentile (Median) | 100% | |
25th to 50th percentiles | Interpolate between 30% | |
Below 25th percentile | 0% |
For the 20122015 to 20142017 performance cycle, which ended on December 31, 2014,2017, our total shareholder returnTSR ranked belowat the 30th83rd percentile within the PerformanceCompensation Comparator Group established at the time that long-term incentive wasincentives were granted in 2012. Therefore,2015. As
a consequence of this TSR percentile ranking, 175% of performance shares awarded in 2015 were paid out, as shown in the following table:
2015-2017 PERFORMANCE CYCLE PAYOUTS TO NEOS
Name | 2015 PSU* Grants (Target Shares) | 2015 PSU Grants (Shares Paid at 175%) | ||||
Mary E. Kipp | 7,073 | 12,377 | ||||
Nathan T. Hirschi | 5,305 | 9,283 | ||||
Steven T. Buraczyk | 3,537 | 6,189 | ||||
Rocky R. Miracle | 3,537 | 6,189 | ||||
William A. Stiller | 3,094 | 5,414 | ||||
| * | Performance Share Units are abbreviated as PSU. |
In 2017, after reviewing market practice with respect to long-term awards, the Compensation Committee changed the terms applicable to qualifying retirements under our performance share awards. The Committee approved form Performance Share Award Agreements for new and outstanding awards that enable eligible retirees to receive a payout of performance shares following their retirement from the Company subject to non-compete and non-solicit provisions. Under the LTIP, performance share grants require that the holder be actively employed by the Company to receive a payout of shares on the vesting date. If the holder’s employment is terminated due to retirement (defined as a termination of employment on or after the attainment of age 55 and at least five years of service; provided that such holder gives the Company six months of notice of the intention to retire), the holder shall have the opportunity to vest in a pro rata portion of the performance shares awardedsubject to the achievement of the performance goals set forth in the Performance Share Award Agreement. The Performance Share Award Agreement for thatoutstanding awards for the 2016 and 2017 grant cycles were entered into with employees who hold outstanding performance cycle wereshares
and either (i) as of the date of the Compensation Committee’s action, are age 55 or older with at least five years of service, or (ii) prior to the end of the performance period to which such performance shares relate, will be age 55 or older with at least five years of service (including Nathan T. Hirschi, Rocky R. Miracle, and William A. Stiller). This rule took effect with respect to the outstanding performance shares granted in the 2016 and 2017 award cycles. This rule does not earned and were forfeited.affect time-based restricted share grants. There is no retirement provision for time-based restricted share grants.
Type of Equity Awards. We have chosen to make recent long-term awards to executive officers in the form of “full-value” stock awards because they have significant retention value due to their value being directly linked to the stock price in the future. In addition, this type of award limits the negative retention impact of short-term volatility in our stock price compared to stock options. The Compensation Committee regularly reviews our equity incentive program and reserves the right to grant different types of equity awards in the future. We began paying dividends on our Common Stock in 2011, but do not pay dividends on unearned performance share awards.
CEO Compensation. Mr. Shockley has served as CEO since January 2012, first as interim CEO and then as CEO effective June 1, 2012, at which time the Compensation Committee approved an employment agreement for him. In determining Mr. Shockley’s compensation both at the time of his hiring and since that time, the Compensation Committee and the independent members of the Board considered several key factors that are unique to his role; in particular:
The original term of Mr. Shockley’s employment agreement was through December 31, 2014. During 2013, the parties agreed to extend the term of his agreement (and his expected commitment to remain in his role) through December 15, 2015. In 2014, as a result of its review of Mr. Shockley’s compensation package, the Compensation Committee consulting with its independent executive compensation consultant, FW Cook, determined to make certain changes to his compensation. His compensation arrangements for 2014 included the following compensation elements:
20 El Paso Electric Company 2015 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS (“CD&A”)
progress. For 2014, based on its review of Mr. Shockley’s 2014 performance, the Compensation Committee approved payment of a $250,000 strategic bonus based on its assessment of his performance and progress toward strategic goals during this period in particular by continuing to advance the Company’s priorities with the community, advancing the leadership development and succession planning process and improving the corporate culture at the Company.
Mr. Shockley’s agreement also provides for payments and benefits in the event of his termination by the Company without cause (or by Mr. Shockley under defined circumstances), including in connection with a change of control of the Company, as further described below. Because of the limited term of the agreement, the Compensation Committee decided not to provide Mr. Shockley a Change in Control Agreement as is provided to other senior executives. Instead, in the event he is terminated without cause or terminates his employment for good reason (such as if he is removed as CEO or has his duties materially reduced), including in connection with a change in control of the Company, Mr. Shockley will receive severance benefits of up to 12 months base salary, a prorated bonus for the year in which termination occurs and reimbursement of COBRA benefits for 12 months, or a cash payment in lieu thereof, and accelerated vesting of certain outstanding unvested equity awards as described below under “Change of Control Agreements and Other Termination Benefits.”
The Compensation Committee reviewed with FW Cook the costs and benefits compared to those provided by the members of our Compensation Comparator Group to their respective CEOs in determining that the arrangement was reasonable and appropriate for the circumstances. FW Cook reported to the Compensation Committee that the annualized value of Mr. Shockley’s proposed target total direct compensation for 2014 was within 2% of the market median of the Compensation Comparator Group comparability data, including up to the maximum annual strategic bonus of $350,000 and the $400,000 restricted stock grant awarded in 2014.
Retirement Benefits. We provide our employees, including our executive officers, with a tax-qualified defined benefit pension plan, which provides employees the opportunity to earn service toward income replacement at retirement.
However, the Internal Revenue Code (the(“IRS” or the “Code”) imposes a limit on the amount of compensation that can be taken into accountconsidered for purposes of determining these retirement benefits and the qualified plan does not achieve a market-competitivemarket-
26 | | El Paso Electric Company 2018 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
competitive structure for executive officers whose total compensation can include a significant amount of variable short-term incentive compensation. WeTo address this situation, we established a non-qualified excess benefit plan to provide supplemental retirement benefits to executive officers calculated on basic compensation, together withincluding both regular wages and bonuses paid pursuant to the Company’s Annual Cash Bonus Plan,ACBP, applied to the qualified retirement plan formula without regard to the Code’s limitations on qualified plan benefits.
Perquisites and Other Benefits. The Company generally provides to our NEOs the same benefits as it does to other executive officers and employees. For example, our NEOs participate in the same medical, dental, vision, life insurance, accidental death & dismemberment, and short-term and long-term disability plans as do other employees, and theiremployees. In addition, NEOs’ Company matching contributions to the 401(k) plan are on the same basis as other employees.
The Company provides limited perquisites to executive officers such as aincluding car allowance, and for senior officers, an allowance for financial, tax and estate planning.planning and a health evaluation and wellness services benefit.
Change of Control/Termination Agreements. The Compensation Committee has approved a change of control severance agreement for each of our NEOs (except Mr. Shockley, whose arrangement is further described above and below) and all other executive officers. As further described in this Proxy Statement, these agreements provide
El Paso Electric Company 2015 Proxy Statement 21
executive officers with benefits in the event of involuntary termination (other than for cause or disability) or adverse job changes in connection with or after a change inof control. These agreements do not provide for any tax gross-up of termination benefits should they be found to trigger a parachute excise tax. The Compensation Committee periodically reviews the costs of these agreements and current market practice. The Compensation Committee believes these agreements offer important protection in the event of a change of control, while also
ensuring that in the event of an actual proposed change of control, key executive officers will be willing to remain through the closing of a transaction because of this protection. This is especially important in the utility industry when the need for regulatory approvals can result in significant delays in consummating transactions following the execution of definitive agreements.
We believe that stock ownership by executive officers can directly correlate to improved performance and enhancement of shareholder value. Therefore, the Compensation
Compensation Committee has established recommended stock ownership guidelines for executive officers. The guidelines are as follows:
Position | Guideline | |
President and CEO | Three times base salary | |
Other Executive Officers | Two times base salary | |
For purposes of the guidelines, the ownership requirement is determined based on the executive officer’s 2017 base salary. The base salary multiple amount is converted to a fixed number of shares of Common Stock using the closing price of our Common Stock as of the last business day of the prior calendar year, December 29, 2017.
Our executive officers are expected to meet these guidelines within five years after becoming executive officers. As of the
end of 2014,2017, all of our NEOs met or are progressing towards meeting the guidelines within their initial five-year terms.exceeded these guidelines.
Mary E. Kipp has served as CEO and a member of Accountingthe Board since December 15, 2015 and Tax Treatment of President and CEO since May 25, 2017. In determining Ms. Kipp’s compensation for 2017, the Compensation Committee approved the following:
| — | Ms. Kipp’s annual base salary was set at $675,000 reflecting the Compensation Committee’s assessment of her performance in 2016 and to better align her pay with the Compensation Comparator Group. |
| — | Ms. Kipp’s annual Target performance bonus opportunity under the ACBP was approved at 85% of annualized base compensation with a Maximum annual bonus set at 200% of the Target opportunity. This increase in target bonus opportunity, from 80% in 2016, brought Ms. Kipp to 101% of market median of the Compensation Comparator Group for target total |
cash compensation. The actual cash bonus paid for 2017 under this provision is described above in the section entitled, “Annual Cash Bonus Plan.”
| — | The intrinsic grant value of annual long-term incentive award(s) that Ms. Kipp was granted in 2017 was set at $1,350,000. The composition of the long-term incentive award comprised 33% restricted stock with a three-year vesting period and 67% performance shares with a three-year performance cycle based on TSR compared to the revised Compensation Comparator Group used for the 2017 equity grants described in the Long-Term Equity Incentives section of this CD&A. The terms governing payout of the performance shares are the same as those described above in such section. |
El Paso Electric Company 2018 Proxy Statement | | 27 |
| — | Ms. Kipp’s 2015 Employment Agreement also provided for a performance-based1 and time-restricted equity award representing a right to receive shares of Common Stock (the “Retention Grant”) under the Long-Term Incentive Plan valued at $1,000,000 as of the effective date of her Employment Agreement. The Retention Grant will cliff vest on December 15, 2020, subject to her employment by the Company on that date. |
| — | Ms. Kipp has been and will continue to be eligible to participate in all benefit plans available from time-to-time to senior executives of the Company, including but not limited to retirement plans, health and welfare benefit plans, disability and life insurance coverage and paid time off in accordance with the Company’s policies. |
| — | Ms. Kipp’s Employment Agreement also provides for a continuation of the Change of Control Agreement between her and the Company, which provides for severance and other termination benefits in the event of termination of employment in connection with a change in control (i.e., a “double-trigger”) and does not provide for any tax gross-up of termination benefits should they be found to trigger any excess parachute excise tax. |
| — | Ms. Kipp’s Change of Control Agreement provides for payments and benefits in the event of her termination by the Company without cause (or by Ms. Kipp under defined circumstances), in connection with a change of control of the Company, as further described below. In the event that she is terminated without cause or terminates her employment for good reason (such as if she is removed as President and CEO or has her duties materially reduced), in connection with a change of control of the Company, Ms. Kipp will receive severance benefits of up to 36 months base salary and bonus at Target level, a prorated bonus for the year in which termination occurs, and reimbursement of COBRA benefits for 12 months (or a cash payment in lieu of the COBRA benefits), and accelerated vesting of certain outstanding unvested equity awards as described below under “Change of Control Agreements and Other Termination Benefits.” |
| — | In determining that Ms. Kipp’s total compensation was reasonable and appropriate for the circumstances, the Compensation Committee reviewed with FW Cook the costs and benefits of her compensation arrangement compared to those provided to CEOs of our Compensation Comparator Group. FW Cook advised that the compensation arrangement for Ms. Kipp in her role as President and CEO was reasonable and well-aligned with competitive market practices. |
Historically, the accounting and tax treatment of compensation has not been a driving factor in determining the design or amounts of paycompensation at the Company. For example, the Company granted “full value” awards prior to its adoption of FASB ASC Topic 718 and continues to do so, although the Compensation Committee does review the expected accounting treatment of its equity grants.
Section 162(m) of the Code generally limits the tax deductibility to public companies for compensation in excess of $1 million per person per year, unlesswith respect to compensation paid to each covered employee. For 2017 and prior years, covered employees for this purpose included our President and CEO and our three other most highly compensated executive officers (other than our CFO) and compensation that met the requirements of qualified performance-based compensation is “performance-based” withinunder Section 162(m) was not subject to this deduction limitation. For awards made prior to 2018, our annual incentive cash bonuses and performance shares granted under the meaningLTIP generally were intended to meet the requirements of the tax regulations. The Compensation Committee considers itperformance-based compensation and thus avoid the limitations of Section 162(m) of the Code. Following the enactment of the Tax Cuts and Jobs Act, beginning with the 2018 calendar year, the $1 million annual deduction limitation under Section 162(m) applies to compensation paid to any individual who serves as the CEO or CFO or qualifies as one of the other three most highly
importantcompensated executive officers in 2017 or any later calendar year, and there is no longer any exception for qualified performance-based compensation. Although some outstanding performance shares will not result in a compensation deduction until after 2017, we believe the transition rules in effect for binding contracts in effect on November 2, 2017, should continue to retain flexibilityallow certain of these awards to design compensation programs, even where compensation payable under our programs may not be fully deductible, ifmaintain their exemption from the programs effectively recognize a full range of criteria important to the Company’s success. The Company retains the ability to grant equity awards$1 million annual deduction limitation for so long as such as restricted stock thatgrants are not eligible formaterially modified (“grandfathered amounts”). For periods after 2017, without the Section 162(m) performance-based compensation exception. Our Amended and Restated 2007 Long-Term Incentive Plan allowsexception, it is expected that any compensation deductions (other than grandfathered amounts) for any individual who is our CEO, CFO or one of our other three most highly compensated executive officers in 2017 or any later year will be subject to a $1 million annual deduction limitation. Although the deductibility of compensation is a consideration evaluated by the Compensation Committee, to approve awards that qualify as “performance-based” compensation for purposes of Section 162(m) to the extent the Compensation Committee deems appropriate.believes that the lost deduction on compensation payable in excess of the $1 million limitation for the named executive officers is not material relative to the benefit of being able to attract and retain talented management. Accordingly, the Compensation Committee will continue to retain the discretion to pay compensation that is subject to the $1 million deductibility limit.
| 1 | As previously disclosed in the Company’s Proxy Statement relating to the 2017 Annual Meeting of Shareholders, the Compensation Committee determined in November 2016 that the Performance Condition was previously satisfied based on the Company’s cumulative net income in the second and third quarters of 2016, so the only remaining vesting condition is the service period through December 15, 2020. |
28 | | El Paso Electric Company 2018 Proxy Statement |
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed this Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
THE COMPENSATION COMMITTEE
Charles A. Yamarone, Chairman
Paul M. Barbas
James W. Harris
Woodley L. Hunt
Eric B. Siegel
22 El Paso Electric Company 2015 Proxy Statement
El Paso Electric Company 2018 Proxy Statement | | 29 |
EXECUTIVE COMPENSATION COMMITTEE REPORTTABLES
The Summary Compensation Table sets forth the compensation for each individual who served as principal executive officer or principal financial officer during the fiscal year 2014,ended December 31, 2017, and each of the Company’s
other three most highly compensated executive officers for the fiscal year 2014.
Also included are Mr. Carpenter and Mr. Puente who served as Executive Vice Presidents during fiscal year 2014 and retired from the Company in January 2015.ended December 31, 2017. The persons named in the Summary Compensation Table are referred to collectively as the “Named Executive Officers” or “NEOs”.“NEOs.”
Name and Principal Position | Year | Salary ($) | Bonus ($)(f) | Stock Awards ($)(g) | Non-Equity Incentive Plan Compensation ($)(h) | Change in Pension Value and Non-qualified Deferred Compensation Earnings ($)(i) | All Other Compensation ($)(j) | Total ($) | ||||||||||||||||
Thomas V. Shockley, III Chief Executive Officer | 2014 | $669,231 | $250,000 | $399,965 | $498,912 | $111,839 | $55,929 | $1,985,876 | ||||||||||||||||
2013 | 622,115 | 350,000 | 499,967 | 223,522 | 176,594 | 35,619 | 1,907,817 | |||||||||||||||||
2012 | 530,769 | 150,000 | 632,265 | 342,388 | 34,434 | 1,689,856 | ||||||||||||||||||
Nathan T. Hirschi Senior Vice President- Chief Financial Officer(a) | 2014 | 298,269 | 206,835 | 129,822 | 69,807 | 27,479 | 732,212 | |||||||||||||||||
2013 | 242,993 | 132,403 | 39,228 | 19,055 | 22,999 | 456,678 | ||||||||||||||||||
Hector R. Puente Former Executive Vice President(b) | 2014 | 324,062 | 43,385 | 120,227 | 332,624 | 671,529 | 1,491,827 | |||||||||||||||||
2013 | 311,495 | 224,085 | 59,255 | 118,510 | 16,153 | 729,498 | ||||||||||||||||||
2012 | 283,572 | 203,261 | 167,059 | 259,124 | 15,278 | 928,924 | ||||||||||||||||||
David G. Carpenter Former Executive Vice President(c) | 2014 | 370,302 | 71,026 | 144,788 | 188,849 | 388,758 | 1,163,723 | |||||||||||||||||
2013 | 358,852 | 366,695 | 68,264 | 74,380 | 19,830 | 888,021 | ||||||||||||||||||
2012 | 348,350 | 336,427 | 205,222 | 114,421 | 19,495 | 1,023,915 | ||||||||||||||||||
William A. Stiller Senior Vice President- Human Resources and Customer Care(d) | 2014 | 282,077 | 244,738 | 110,292 | 71,321(i | ) | 135,429 | 843,857 | ||||||||||||||||
Mary E. Kipp President(e) | 2014 | 344,423 | 206,835 | 149,910 | 143,416 | 20,190 | 864,774 | |||||||||||||||||
2013 | 307,928 | 219,017 | 58,576 | 40,309 | 15,556 | 641,386 | ||||||||||||||||||
2012 | 290,651 | 185,734 | 171,230 | 61,342 | 22,760 | 731,717 | ||||||||||||||||||
Rocky R. Miracle Senior Vice President- Corporate Planning & Development and Chief Compliance Officer | 2014 | 293,385 | 165,447 | 114,713 | 121,897 | 26,753 | 722,195 | |||||||||||||||||
2013 | 280,192 | 188,433 | 53,300 | 64,261 | 27,606 | 613,792 | ||||||||||||||||||
2012 | 272,687 | 185,734 | 160,647 | 61,281 | 26,168 | 706,517 | ||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(b) | Non-Equity Incentive Plan Compensation ($)(c) | Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)(d) | All Other Compensation ($)(e) | Total ($) | ||||||||||||||||
Mary E. Kipp President and Chief Executive Officer | 2017 | $ | 674,039 | $ | $ | 1,297,723 | $ | 669,000 | $ | 446,190 | $ | 98,966 | $ | 3,185,918 | ||||||||||
2016 | 625,000 | 1,348,093 | 800,000 | 209,895 | 81,463 | 3,064,451 | ||||||||||||||||||
2015 | 471,154 | 1,243,927 | 350,432 | 81,858 | 39,086 | 2,186,457 | ||||||||||||||||||
Nathan T. Hirschi Senior Vice President- Chief Financial Officer | 2017 | 364,712 | 288,383 | 219,000 | 147,820 | 36,039 | 1,055,954 | |||||||||||||||||
2016 | 348,077 | 299,563 | 270,000 | 86,909 | 34,149 | 1,038,698 | ||||||||||||||||||
2015 | 334,615 | 302,506 | 200,652 | 41,784 | 31,806 | 911,363 | ||||||||||||||||||
Steven T. Buraczyk Senior Vice President- Operations | 2017 | 334,808 | 288,383 | 182,000 | 445,840 | 20,754 | 1,271,785 | |||||||||||||||||
2016 | 323,462 | 299,563 | 213,500 | 287,550 | 18,602 | 1,142,677 | ||||||||||||||||||
2015 | 314,192 | 201,684 | 167,999 | 67,638 | 20,373 | 771,886 | ||||||||||||||||||
Rocky R. Miracle Senior Vice President- Corporate Development and Chief Compliance Officer | 2017 | 324,808 | 292,204 | 158,000 | 157,122 | 22,196 | 954,330 | |||||||||||||||||
2016 | 314,231 | 199,722 | 207,000 | 108,274 | 34,134 | 863,361 | ||||||||||||||||||
2015 | 315,577 | 201,684 | 168,739 | 49,313 | 21,161 | 756,474 | ||||||||||||||||||
William A. Stiller Senior Vice President of Public & Customer Affairs and Chief Human Resources Officer (a) | 2017 | 314,750 | 168,202 | 153,000 | 45,576 | 28,091 | 709,619 | |||||||||||||||||
2015 | 300,346 | 176,430 | 160,595 | 27,561 | 36,957 | 701,889 | ||||||||||||||||||
| (a) | Mr. |
| (b) |
| This column represents the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718 for the restricted stock and performance shares granted in the applicable fiscal year. Restricted stock awards are valued at the closing |
| This column represents performance-based bonuses earned under the Annual Cash Bonus |
| This column represents the change in pension value between the accumulated pension benefit for each NEO as of December 31 of the applicable year as compared to December 31 of the prior year. |
| See the following table regarding each component of amounts for |
El Paso Electric Company 2015 Proxy Statement 23
30 | | El Paso Electric Company 2018 Proxy Statement |
EXECUTIVE COMPENSATION TABLES
Name and Principal Position | Year | Accrued PTO Sellback ($)(a) | Group Term Life Insurance ($) | Company Contributions To Retirement and 401(k) Plans ($) | Personal Use of Company Car/Parking ($) | Financial Planning/ Legal Fees and Other ($) | Dividends Paid on Unvested Awards ($)(b) | Separation Benefit ($)(c) | Executive Relocation ($) | Total ($) | |||||||||||||||||||||||||||||||||||||||||
Thomas V. Shockley, III | 2014 | $ | $4,686 | $15,600 | $3,000 | $10,404 | $22,239 | $ | $ | $55,929 | |||||||||||||||||||||||||||||||||||||||||
Name | Accrued PTO Sellback ($)(a) | Group Term Life Insurance ($) | Company Contributions To Retirement and 401(k) Plans ($) | Vehicle Allowance ($) | Financial Planning/ Legal Fees and Other ($) | Dividends Paid on Unvested Awards ($)(b) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||||
Mary E. Kipp | $ | $ | 1,380 | $ | 8,100 | $ | 3,000 | $ | 17,007 | $ | 69,479 | $ | 98,966 | ||||||||||||||||||||||||||||||||||||||
Nathan T. Hirschi | 2014 | 11,538 | 685 | 7,800 | 3,000 | 1,457 | 2,999 | 27,479 | 14,038 | 866 | 8,100 | 3,000 | 250 | 9,785 | 36,039 | ||||||||||||||||||||||||||||||||||||
Hector R. Puente | 2014 | 1,415 | 15,600 | 3,000 | 60 | 2,454 | 649,000 | 671,529 | |||||||||||||||||||||||||||||||||||||||||||
David G. Carpenter | 2014 | 1,652 | 7,800 | 3,000 | 1,456 | 4,050 | 370,800 | 388,758 | |||||||||||||||||||||||||||||||||||||||||||
Steven T. Buraczyk | 784 | 8,100 | 3,000 | 230 | 8,640 | 20,754 | |||||||||||||||||||||||||||||||||||||||||||||
Rocky R. Miracle | 2,172 | 8,100 | 3,000 | 528 | 8,396 | 22,196 | |||||||||||||||||||||||||||||||||||||||||||||
William A. Stiller | 2014 | 1,838 | 15,476 | 6,000 | 1,737 | 8,408 | 101,970 | 135,429 | 2,349 | 16,200 | 3,000 | 835 | 5,707 | 28,091 | |||||||||||||||||||||||||||||||||||||
Mary E. Kipp | 2014 | 533 | 7,800 | 3,000 | 5,010 | 3,847 | 20,190 | ||||||||||||||||||||||||||||||||||||||||||||
Rocky R. Miracle | 2014 | 10,212 | 1,928 | 7,800 | 3,000 | 450 | 3,363 | 26,753 | |||||||||||||||||||||||||||||||||||||||||||
| (a) | This column represents payments for accrued and unused vacation and personal holiday time pursuant to Company policy. |
| (b) |
CEO Pay Ratio. As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules of the SEC, we are providing the ratio of the total annual compensation of our President and CEO, Mary E. Kipp, to that of the median employee for 2017. Ms. Kipp’s total annual compensation for 2017, as reported in the Summary Compensation Table, was $3,185,918. The total annual compensation of the employee identified as our median employee (excluding our President and CEO) for 2017 was $99,026. The ratio of our President and CEO’s total compensation for 2017 to the total compensation of our identified median employee was approximately 32 to 1.
To identify our median employee for purposes of this pay ratio disclosure, we first determined that as of December 24, 2017, the last pay period of the year, we had 1,120 full-time, part-time and temporary employees other than Ms. Kipp. We ranked the annual compensation of this employee population on the basis of compensation reportable on IRS Form W-2. We annualized the compensation of individuals who were employed for less
than the full year. After identifying the median employee from this ranking, we calculated annual total compensation for such employee using the same methodology we use for our President and CEO as set forth in the Summary Compensation Table above.
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on his or her annual total compensation allow companies to use a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio we report above, as other companies may have different employment and compensation practices and may use different methodologies, exclusions, estimates and assumptions to calculate their own pay ratios.
The following table sets forth information concerning equity and cash awards to the NEOs during the fiscal year ended December 31, 2014:2017:
Name | Grant and Approval Date | Estimated Future Payouts Under Non-Equity Plan Awards(d) | Estimated Future Payouts Under Equity Incentive Plan Awards(e) | All Other Stock Awards: Number of Shares of Stock or Units (#)(f) | Grant Date Fair Value of Stock and Option Awards ($)(g) | Grant and Approval Date | Estimated Future Payouts Under Non-Equity Plan Awards(a) | Estimated Future Payouts Under Equity Incentive Plan Awards(b) | All Other Stock Awards: Number of Shares of Stock or Units(#)(c) | Grant Date Fair Value of Stock and Option Awards ($)(d) | ||||||||||||||||||||||||||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||
Thomas V. Shockley, III(a) | 01/31/14 | $158,942 | $535,385 | $1,044,000 | 10,979 | $399,965 | ||||||||||||||||||||||||||||||||||||||||||||||||
Mary E. Kipp | 01/25/17 | $ | 151,659 | $ | 572,933 | $ | 1,145,865 | 5,967 | 19,890 | 39,780 | 9,945 | $ | 1,297,723 | |||||||||||||||||||||||||||||||||||||||||
Nathan T. Hirschi | 03/12/14 | 28,336 | 149,135 | 262,477 | 1,643 | 5,476 | 10,952 | 1,825 | 206,835 | 01/25/17 | 32,824 | 200,591 | 364,712 | 1,326 | 4,420 | 8,840 | 2,210 | 288,383 | ||||||||||||||||||||||||||||||||||||
Hector R. Puente(b) | 01/01/15 | 30,786 | 145,828 | 253,578 | 1,083 | 43,385 | ||||||||||||||||||||||||||||||||||||||||||||||||
David G. Carpenter(c) | 01/01/15 | 35,179 | 166,636 | 289,761 | 1,773 | 71,026 | ||||||||||||||||||||||||||||||||||||||||||||||||
Steven T. Buraczyk | 01/25/17 | 30,133 | 167,404 | 301,327 | 1,326 | 4,420 | 8,840 | 2,210 | 288,383 | |||||||||||||||||||||||||||||||||||||||||||||
Rocky R. Miracle | 01/25/17 | 29,233 | 146,163 | 259,846 | 884 | 2,947 | 5,894 | 1,473 | 192,254 | |||||||||||||||||||||||||||||||||||||||||||||
05/25/17 | 1,863 | 99,950 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
William A. Stiller | 02/18/14 | 2,761 | 99,976 | 01/25/17 | 28,327 | 141,637 | 251,800 | 773 | 2,578 | 5,156 | 1,289 | 168,202 | ||||||||||||||||||||||||||||||||||||||||||
03/12/14 | 26,797 | 126,935 | 220,725 | 1,150 | 3,833 | 7,666 | 1,277 | 144,762 | ||||||||||||||||||||||||||||||||||||||||||||||
Mary E. Kipp | 03/12/14 | 32,720 | 172,212 | 303,092 | 1,643 | 5,476 | 10,952 | 1,825 | 206,835 | |||||||||||||||||||||||||||||||||||||||||||||
Rocky R. Miracle | 03/12/14 | 27,872 | 132,023 | 229,573 | 1,314 | 4,380 | 8,760 | 1,460 | 165,447 | |||||||||||||||||||||||||||||||||||||||||||||
| (a) |
| Each NEO and executive officer has a target incentive opportunity, payable in cash, if the Company achieves specific annual goals that are established in advance by the Compensation Committee and the Board. In |
| Amounts shown represent the performance shares available under the incentive plan, which provides market-based, long-term incentive award opportunities to the NEOs and the other executive officers. Performance shares are based on the total shareholder return compared to the |
El Paso Electric Company 2018 Proxy Statement | | 31 |
| Restricted |
| This column reflects the grant date fair value of restricted stock awards and performance shares under FASB ASC Topic 718. With respect to restricted stock, |
24 El Paso Electric Company 2015 Proxy Statement
COMPENSATION COMMITTEE REPORT
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth information concerning outstanding stock awards held by the NEOs at December 31, 2014 except for the performance shares that vested in January 2015. The performance goals for these shares were not met and no shares were paid out.2017. There were no option awards held by the NEOs at December 31, 2014.2017.
Name | Stock Awards | |||||||||||
Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||
Thomas V. Shockley, III(1) | 25,350 | $1,015,521 | $ | |||||||||
Nathan T. Hirschi(2)(5) | 960 | 38,458 | 864 | 34,612 | ||||||||
Nathan T. Hirschi(4)(6) | 1,825 | 73,110 | 1,643 | 65,819 | ||||||||
Hector R. Puente(7) | 1,083 | 43,385 | ||||||||||
David G. Carpenter(7) | 1,773 | 71,026 | ||||||||||
William A. Stiller(3)(6) | 6,154 | 246,529 | 1,150 | 46,069 | ||||||||
William A. Stiller(2) | 2,761 | 110,606 | ||||||||||
William A. Stiller(4) | 1,277 | 51,157 | ||||||||||
Mary E. Kipp(2)(5) | 1,588 | 63,615 | 1,429 | 57,246 | ||||||||
Mary E. Kipp(4)(6) | 1,825 | 73,110 | 1,643 | 65,819 | ||||||||
Rocky R. Miracle(2)(5) | 1,366 | 54,722 | 1,230 | 49,274 | ||||||||
Rocky R. Miracle(4)(6) | 1,460 | 58,488 | 1,314 | 52,639 | ||||||||
Stock Awards | ||||||||||||
Name | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||
Mary E. Kipp (1)(4) | 11,783 | 652,189 | 12,377 | 685,067 | ||||||||
Mary E. Kipp (2)(5) | 9,945 | 550,456 | 7,069 | 391,269 | ||||||||
Mary E. Kipp (3)(6) | 27,624 | 1,528,988 | 5,967 | 330,273 | ||||||||
Nathan T. Hirschi (1)(4) | 2,618 | 144,906 | 9,283 | 513,814 | ||||||||
Nathan T. Hirschi (2)(5) | 2,210 | 122,324 | 1,571 | 86,955 | ||||||||
Nathan T. Hirschi (6) | 1,326 | 73,394 | ||||||||||
Steven T. Buraczyk (1)(4) | 2,618 | 144,906 | 6,189 | 342,561 | ||||||||
Steven T. Buraczyk (2)(5) | 2,210 | 122,324 | 1,571 | 86,955 | ||||||||
Steven T. Buraczyk (6) | 1,326 | 73,394 | ||||||||||
Rocky R. Miracle (1)(4) | 1,746 | 96,641 | 6,189 | 342,561 | ||||||||
Rocky R. Miracle (2)(5) | 3,336 | 184,648 | 1,047 | 57,951 | ||||||||
Rocky R. Miracle (6) | 884 | 48,929 | ||||||||||
William A. Stiller (1)(4) | 1,527 | 84,519 | 5,414 | 299,665 | ||||||||
William A. Stiller (2)(5) | 1,289 | 71,346 | 916 | 50,701 | ||||||||
William A. Stiller (6) | 773 | 42,786 | ||||||||||
| (1) | Unvested restricted stock vests on December |
| (2) | Unvested restricted stock vests on December 31, |
| (3) |
| (4) |
| (5) | Unearned performance |
| (6) | Unearned performance |
El Paso Electric Company 2015 Proxy Statement 25
The following table provides additional information regarding the acquisition of shares on vesting of stock awards and the value realized during 2014.the fiscal year ended
December 31, 2017. There were no options exercised during 2014the fiscal year ended December 31, 2017 by any of the NEOs.
Name | Stock Awards | |||||
Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | |||||
Thomas V. Shockley, III | 5,000 | $190,550 | ||||
Nathan T. Hirschi | 850 | 34,051 | ||||
Hector R. Puente | 1,083 | 43,385 | ||||
David G. Carpenter | 1,773 | 71,026 | ||||
William A. Stiller | - | - | ||||
Mary E. Kipp | 1,250 | 50,075 | ||||
Rocky R. Miracle | 1,250 | 50,075 | ||||
Stock Awards | ||||||
Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||
Mary E. Kipp | 5,236 | $ | 272,117 | |||
Nathan T. Hirschi | 4,365 | 223,908 | ||||
Steven T. Buraczyk | 3,143 | 159,815 | ||||
Rocky R. Miracle | 3,143 | 159,815 | ||||
William A. Stiller | 2,750 | 139,830 | ||||
32 | | El Paso Electric Company 2018 Proxy Statement |
EXECUTIVE COMPENSATION TABLES
The Company established the Retirement Income Plan for Employees of El Paso Electric Company (the “Pension Plan”) as of July 1, 1945. Over the years, the Pension Plan has been amended and/or restated manyseveral times. Although the Pension Plan has traditionally provided final average pay benefits, it was amended in 2014 to provide cash balance benefits for all employees hired on or after January 1, 2014, and for all employees hired before 2014 who chose to have their future service benefits provided as cash balance benefits effective April 1, 2014. Employees in the latter group have both a frozen final average pay benefit and accrue an ongoing cash balance benefit.
The purpose of the Pension Plan is to reward eligible employees for long service by providing them with retirement benefits. The Pension Plan is maintained for the exclusive
benefit of eligible employees and their beneficiaries. To the extent, they meet the eligibility requirements,requirements; each of the NEOs participates in the Pension Plan.
The Pension Plan is qualified under the Internal Revenue Code as a defined benefit plan, which is a plan that provides definitely determinable benefits. These benefits are generally payable over a participant’s lifetime and, if elected, over the lifetime of a surviving spouse or beneficiary. Participants earning cash balance benefits also have an option to take their entire pension benefit as a lump sum.
Final Average Pay Benefits. For employees who chose to continue earning final average pay benefits, retirement benefits are calculated using the formula:
1.25% X average monthly earnings X years of service
Average monthly earnings under the Pension Plan is the employee’s annualized rate of basic compensation (excluding bonus, overtime pay, expense allowances, profit sharing and any other compensation) for the five-year period ending on a particular date, divided by 60 months. The maximum benefit payable under the Pension Plan only considers compensation up to the IRS limit, which was $260,000$270,000 in 2014.2017. A year of service is provided for any year during which the employee works at least 1,000 hours. Final average pay participants are eligible to participate in the Pension Plan on
the first day of the
month coinciding with or immediately following completion of one year of service during which the employee completes 1,000 hours of service. An employee is vested after completing five years of service.
Benefits from the Pension Plan are generally payable at age 65. However, a participant may retire and begin to receive a monthly benefit from the Pension Plan upon attaining age 55 and five years of vesting service. Benefits paid before age 65 are reduced in accordance with the following table:
Age At Benefit Commencement | Percent of Accrued Benefit | ||
65 | 100.00 | % | |
64 | 93.33 | ||
63 | 86.67 | ||
62 | 80.00 | ||
61 | 73.33 | ||
60 | 66.67 | ||
59 | 63.33 | ||
58 | 60.00 | ||
57 | 56.67 | ||
56 | 53.33 | ||
55 | 50.00 | ||
26 El Paso Electric Company 2015 Proxy Statement
COMPENSATION COMMITTEE REPORT
In addition, unreduced pension benefits are provided to participants who retire after age 62 with 20 years of service or after a participant’s age and service exceed 85.
Cash Balance Benefits. Cash balance benefits are expressed as a lump sum cash balance account. Cash
balance accounts grow each year with pay credits and interest credits. Pay credits are provided as of the last day of each year based on the following schedule and the participant’s age and years of service as of the end of the plan year.
Pay Credit Chart | |||
Cash Balance Member’s Age Plus Years of Vesting Service | Percentage of Cash Balance Member’s Base Pay for the Plan Year | ||
Less than 30 | 3 | % | |
30 – 39 | 4 | % | |
40 – 49 | 5 | % | |
50 – 59 | 6 | % | |
7 | % | ||
8 | % | ||
80+ | 9 | % | |
El Paso Electric Company 2018 Proxy Statement | | 33 |
The pay credit is based on the participant’s base pay, excluding bonuses, overtime pay, expense allowances, profit sharing and any other extra compensation. Effective January 1, 2017, the annual pay credit is determined by multiplying the Cash Balance Member’s monthly basic compensation for each month during which the member was employed during the plan year by the applicable pay credit percentage, and then adding the results of these separate calculations for each of the calendar months. The monthly basic compensation is determined by dividing the annual basic compensation in effect as of the last day of each calendar month by 12. A cash balance member who terminates employment prior to the last day of the year will receive a pay credit as of the last day of the month coinciding with or immediately following the termination date, based on the sum of the participant’s attained age plus years of service as of the termination date. The pay credit is based on the participant’s base pay actually paid during the year, excluding bonuses, overtime pay, expense allowances, profit sharing and any other extra compensation.
Interest credits are provided on the last day of each month based on the participant’s cash balance account balance as of the end of the prior month. Interest credits will continue until benefit commencement and are based on the yield on the thirty-year Treasury Bond for the August of the preceding plan year, but at least 3.8% per annum.
Cash balance participants are eligible to participate in the Pension Plan immediately upon employment or re-employment. Participants with cash balance benefits vest after 3three years of service for all of their pension benefits (including
(including the frozen final average pay portion of the pension benefit, if applicable). Benefits are payable at any time following termination of service. The full cash balance account is available as a lump sum without reduction.
Form of Payment. Final average pay benefits are calculated as a straight life annuity that provides a monthly benefit for the participant’s lifetime. Optional forms of benefit are also available including:
| — | A joint & survivor annuity providing a reduced monthly benefit for the life of the participant followed by a specified percentage to a named beneficiary for the beneficiary’s lifetime following the death of the participant. |
| — | A reduced annuity providing a monthly benefit for the life of the participant, with a guarantee that 120 monthly payments will be paid in the event of the early death of the participant. |
Cash balance benefits are calculated as a lump sum and may be paid as a lump sum. Forms of payment available to final average pay participants are also available to cash balance participants.
For a valuation method and all material assumptions, please see the Retirement Plan’s section under Note M-Employee Benefits of Notes to the Financial Statements in the Company’s 20142017 Annual Report on Form 10-K.
The El Paso Electric Company Excess Benefit Plan (“Excess Benefit Plan”) was established by the Company effective January 1, 2004, as a non-qualified deferred compensation plan that provides supplemental retirement benefits to certain employees of the Company. The purpose of the Excess Benefit Plan is to provide participants with benefits that would otherwise be payable from the qualified plan except for IRS limitations and to provide retirement plan benefits under the qualified plan formula based on short-term incentive compensation. The Excess Benefit Plan was amended in 2014, consistent with the amendment to the qualified retirement plan, to provide excess cash balance benefits with respect to qualified plan cash balance benefits and to continue to provide excess final average pay benefits with respect to qualified plan final average pay benefits.
All employees holding the office of Vice President or an office above Vice President are eligible to participate as of
the employee’s date of hire as a Vice President or above or the employee’s date of promotion to Vice President or above. In addition, the Company may select any other employee of the Company who is in a select group of management or highly compensated employees to participate in the Excess Benefit Plan.
For Excess Benefit Plan participants hired prior to April 1, 2014, all Excess Benefit Plan benefits, whether final average pay or cash balance, will be paid in the form of an annuity beginning at the later of separation from service or attainment of early retirement age. Excess Benefit Plan participants hired after April 1, 2014, will only have excess
benefits based on the cash balance plan and will have their Excess Benefit Plan benefits paid as a lump sum paid on the first day of the second month following separation from service.
El Paso Electric Company 2015 Proxy Statement 27
Benefits payable from the Excess Benefit Plan are subject to the same vesting schedule, age/service requirements and annuity payment options (for pre Aprilpre-April 1, 2014, participants) as under the qualified pension plan.Pension Plan.
The amount of the total excess benefit for each participant will be the sum of their final average pay excess benefit and their cash balance excess benefit, if applicable. Participants hired after April 1, 2014, will only have cash balance excess benefits. Participants hired before 2014 who chose to continue earning final average pay benefits will only have final average pay excess benefits.
A participant’s final average pay excess benefit is calculated as the monthly pension benefit to which the employee would have been entitled under the qualified planPension Plan if the benefit were calculated including annual bonus actually paid in the definition of average monthly compensation and without regard to IRS limitations, minus the monthly amount of the Pension Plan benefit actually payable to the employee under the Pension Plan.
A participant’s cash balance excess benefit is calculated as the cash balance account to which the employee would have been entitled under the qualified planPension Plan if the benefit
34 | | El Paso Electric Company 2018 Proxy Statement |
EXECUTIVE COMPENSATION TABLES
were calculated including annual bonus actually paid in the definition of pay for determining pay credits and without regard to IRS limitations, minus the actual cash balance account under the Pension Plan.
The Excess Benefit Plan is subject to the rulesSection 409A of the Internal Revenue Code, Section 409A, which requires that for certain specified employees of a publicly-traded corporation, benefits payable following separation from service cannot be paid until six months following separation from service except following the death of the participant. Any payment that would have been distributed to the participant during the six month period following separation from service, will be accumulated and paid to the participant in a single lump sum as soon as administratively practicable following the end of the six
month period. For pre-April 1, 2014 participants, who are not specified employees (under the rulesSection 409A of the Internal Revenue Code Section 409A),Code) who separate from employment and have attained age 55, benefits are payable on the 1st of the month following separation from service or if under age 55 at the time of separation of employment, as of the 1st of the month following attainment of age 55. For post-April 1, 2014 participants, who are not specified employees, benefits are payable as of the 1st of the month following separation of employment.
The Excess Benefit Plan is entirely unfunded. Employees who participate in the Excess Benefit Plan have only the rights of general unsecured creditors of the Company with respect to any rights under the Excess Benefit Plan.
The following table describes pension benefits to the NEOs under the Company’s Pension Plan and itsthe Excess Benefit Plan as of December 31, 2014.2017.
Name | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit ($)(1) | Payments During Last Fiscal Year ($) | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit ($)(1) | Payments During Last Fiscal Year ($) | ||||||||||||
Thomas V. Shockley, III | Pension Plan | 3 | $91,827 | |||||||||||||||||
Mary E. Kipp | Pension Plan | 10 | $ | 336,082 | ||||||||||||||||
Excess Benefit Plan | 3 | 196,606 | Excess Benefit Plan | 10 | 728,319 | |||||||||||||||
Nathan T. Hirschi | Pension Plan | 5 | 117,632 | Pension Plan | 8 | 242,235 | ||||||||||||||
Excess Benefit Plan | 5 | 40,114 | Excess Benefit Plan | 8 | 192,024 | |||||||||||||||
Hector R. Puente(3) | Pension Plan | 35 | 1,631,319 | |||||||||||||||||
Steven T. Buraczyk | Pension Plan | 24 | 1,090,355 | |||||||||||||||||
Excess Benefit Plan | 35 | 1,008,481 | Excess Benefit Plan | 24 | 686,423 | |||||||||||||||
David G. Carpenter(3) | Pension Plan | 9 | 314,448 | |||||||||||||||||
Rocky R. Miracle | Pension Plan | 9 | 403,165 | |||||||||||||||||
Excess Benefit Plan | 9 | 336,956 | Excess Benefit Plan | 9 | 278,027 | |||||||||||||||
William A. Stiller | Pension Plan | 2 | 64,049 | Pension Plan | 5 | 128,731 | ||||||||||||||
Excess Benefit Plan | 2 | 7,272 | Excess Benefit Plan | 5 | 52,982 | |||||||||||||||
Mary E. Kipp | Pension Plan | 7 | 195,098 | |||||||||||||||||
Excess Benefit Plan | 7 | 131,360 | ||||||||||||||||||
Rocky R. Miracle | Pension Plan | 6 | 229,721 | |||||||||||||||||
Excess Benefit Plan | 6 | 136,762 | ||||||||||||||||||
| (1) | As of December 31, |
28 El Paso Electric Company 2015 Proxy Statement
El Paso Electric Company 2018 Proxy Statement | | 35 |
COMPENSATION COMMITTEE REPORT
Change of Control Agreements and OtherCHANGE OF CONTROL AGREEMENTS AND OTHER TERMINATION Termination BenefitsBENEFITS
The Company has entered into Change of Control Agreements with each NEO other than Mr. Shockley.NEO. In the event the covered NEO is terminated without cause or resigns for good reason (including a material reduction in duties and responsibilities, a reduction in pay or a relocation of more than 50 miles) during the two-year period following a change of control, he or she will receive the following benefits under the Change of Control Agreements:
| — | A pro rata payment of the executive officer’s |
| — | A lump sum payment equal to the executive officer’s annual base salary plus |
| — | If the NEO is a final average pay participant under the Pension |
| — | If the NEO is a cash balance participant under the Pension |
| — | Continuation of health and other welfare benefits for two years, including service credit for those two years for purposes of eligibility |
| — | Outplacement services for one year. |
The Change of Control Agreements do not provide any tax gross-up payment in the event the payments become subject to the federal “change in control” excise tax and instead provide that either (i) the executive officer will be responsible for paying the excise tax or (ii) payments under the agreements will be reduced to an amount that would result in no such excise tax, whichever would result in the executive officer retaining the higher after-tax amount.
A “change in control” is defined in the Change of Control Agreements and generally includes the acquisition by any person of 30% or more of the Common Stock or voting power of the Company, or the consummation of a reorganization, merger or consolidation or other disposition of all or substantially all of the assets of the Company which results in at least a 40% change in ownership.
Under our shareholder-approved equity incentive plan,the LTIP, upon a change in control, unvested restricted stock awards become fully vested, while unearned performance share awards become vested on a prorated basis to the extent performance is achieved through a shortened performance period ending before the change in control.
Under Mr. Shockley’s employment agreement dated June 1, 2012, and as amended on May 2, 2013 and November 20, 2013 which hasIn addition, Ms. Kipp is a term until December 15, 2015, if he is terminatedparty to an Employment Agreement that provides for pro rata accelerated vesting of her Retention Grant upon a termination without cause or resigns due to a material reduction in responsibilities or position, or if a change in control occurs and he is terminated, he will receive a cash payment equal to his annual base salary (or, if less, salary through the remaining term of the employment agreement if termination of employment occurs prior to a change in control), a prorated annual cash bonus, up to 12 monthsChange of health benefits,Control. Please see “President and accelerated vesting of his restricted shares.CEO Compensation”above.
El Paso Electric Company 2015 Proxy Statement 29
36 | | El Paso Electric Company 2018 Proxy Statement |
EXECUTIVE COMPENSATION TABLES
The following table quantifies potential payments or benefits to our NEOs under our equity incentive plans upon a change in control or under the Change of Control Agreements upon a termination without cause or resignation for good reason following a change in control as described above, in any case based on assumptions as if the change in control or
termination had occurred on December 31, 2014.2017. These amounts do not include benefits under ourthe Pension Plan and the Excess Benefit Plan that would be paid in connection with any retirement event, as described under the “Pension Benefits Table” above.
Name | Benefit | Change in Control Without Termination | Qualifying Termination Following a Change in Control | Qualifying Termination Before Change in Control | Benefit | Change in Control Without Termination | Qualifying Termination Following a Change in Control | Qualifying Termination Before Change in Control | ||||||||||||
Thomas V. Shockley, III | Severance | $ | $1,215,000 | $675,000 | ||||||||||||||||
Mary E. Kipp | Severance | $ | $ | 3,645,000 | $ | |||||||||||||||
Settlement of Unvested Equity Award (1)(3) | 3,968,816 | n/a | 625,153 | |||||||||||||||||
Settlement of Unvested Equity Award(1) | 1,015,521 | n/a | 1,015,521 | Lump Sum Equivalent for Pension Service | 1,176,855 | 1,064,401 | ||||||||||||||
Lump Sum Equivalent for Pension Service | 288,433 | 288,433 | Welfare Benefit Continuation | 27,577 | ||||||||||||||||
Pro-Rated Bonus | 498,912 | Outplacement | 25,000 | |||||||||||||||||
Welfare Benefit Continuation | 15,341 | 15,341 | Total | 3,968,816 | 4,874,432 | 1,689,554 | ||||||||||||||
Nathan T. Hirschi | Severance | 1,350,000 | Severance | 1,642,500 | ||||||||||||||||
Settlement of Unvested Equity Award(1) | 261,272 | n/a | Settlement of Unvested Equity Award (1) | 542,098 | n/a | |||||||||||||||
Lump Sum Equivalent for Pension Service | 249,607 | 157,746 | Lump Sum Equivalent for Pension Service | 533,962 | 434,259 | |||||||||||||||
Welfare Benefit Continuation | 41,813 | Welfare Benefit Continuation | 43,074 | |||||||||||||||||
Outplacement | 25,000 | Outplacement | 25,000 | |||||||||||||||||
Hector R. Puente | Severance | 1,411,575 | 649,000 | (2) | ||||||||||||||||
Total | 542,098 | 2,244,536 | 434,259 | |||||||||||||||||
Rocky R. Miracle | Severance | 1,413,750 | ||||||||||||||||||
Settlement of Unvested Equity Award(1) | 195,933 | n/a | 43,385 | (2) | Settlement of Unvested Equity Award (1)(2) | 464,497 | n/a | 183,208 | ||||||||||||
Lump Sum Equivalent for Pension Service | 2,962,323 | 2,639,800 | (2) | Lump Sum Equivalent for Pension Service | 829,887 | 681,192 | ||||||||||||||
Pro-Rated Bonus | 120,227 | (2) | Welfare Benefit Continuation | 31,780 | ||||||||||||||||
Welfare Benefit Continuation | 30,682 | Outplacement | 25,000 | |||||||||||||||||
Outplacement | 25,000 | Total | 464,497 | 2,300,417 | 864,400 | |||||||||||||||
David G. Carpenter | Severance | 1,612,980 | 370,800 | (2) | ||||||||||||||||
Steven T. Buraczyk | Severance | 1,457,250 | ||||||||||||||||||
Settlement of Unvested Equity Award(1) | 320,601 | n/a | 71,026 | (2) | Settlement of Unvested Equity Award (1) | 542,098 | n/a | |||||||||||||
Lump Sum Equivalent for Pension Service | 771,252 | 651,404 | (2) | Lump Sum Equivalent for Pension Service | 1,945,721 | 1,776,778 | ||||||||||||||
Pro-Rated Bonus | 144,788 | (2) | Welfare Benefit Continuation | 43,074 | ||||||||||||||||
Welfare Benefit Continuation | 28,376 | Outplacement | 25,000 | |||||||||||||||||
Outplacement | 25,000 | Total | 542,098 | 3,471,045 | 1,776,778 | |||||||||||||||
William A. Stiller | Severance | 1,231,050 | Severance | 1,370,250 | ||||||||||||||||
Settlement of Unvested Equity Award(1) | 458,968 | n/a | Settlement of Unvested Equity Award (1)(2) | 316,159 | n/a | 160,294 | ||||||||||||||
Lump Sum Equivalent for Pension Service | Lump Sum Equivalent for Pension Service | 246,513 | 181,713 | |||||||||||||||||
Pro-Rated Bonus | Welfare Benefit Continuation | 31,780 | ||||||||||||||||||
Welfare Benefit Continuation | 28,376 | Outplacement | 25,000 | |||||||||||||||||
Outplacement | 25,000 | Total | 316,159 | 1,673,543 | 342,007 | |||||||||||||||
Mary E. Kipp | Severance | 1,912,500 | ||||||||||||||||||
Settlement of Unvested Equity Award(1) | 336,985 | n/a | ||||||||||||||||||
Lump Sum Equivalent for Pension Service | 420,064 | 326,458 | ||||||||||||||||||
Welfare Benefit Continuation | 38,707 | |||||||||||||||||||
Outplacement | 25,000 | |||||||||||||||||||
Rocky R. Miracle | Severance | 1,283,250 | ||||||||||||||||||
Settlement of Unvested Equity Award(1) | 281,101 | n/a | ||||||||||||||||||
Lump Sum Equivalent for Pension Service | 493,699 | 366,483 | ||||||||||||||||||
Welfare Benefit Continuation | 28,092 | |||||||||||||||||||
Outplacement | 25,000 | |||||||||||||||||||
| (1) | Represents the value of all unvested restricted stock and a prorated portion of performance shares at |
| (2) | Represents the value of |
| (3) | Represents the value of a pro rata vesting of Ms. Kipp’s Retention Grant pursuant to her Employment |
30 El Paso Electric Company 2015 Proxy Statement
El Paso Electric Company 2018 Proxy Statement | | 37 |
CERTAIN RELATIONSHIPS AND
RELATED PARTY TRANSACTIONS
Compensation Committee Interlocks andCOMPENSATION COMMITTEE INTERLOCKS AND INSIDER Insider ParticipationPARTICIPATION
During 2014,2017, none of the Company’s executive officers served as a member of another entity’s compensation committee or committee performing equivalent functions, and thereforefunctions. Therefore, no member of the Board or their immediate family members is or has been, within the last three years, employed as an executive officer of another company where one of the Company’s executive officers served as a director or a member of that company’s compensation committee.
In 2012, theThe Board formally adopted a policy with respect to Related Person Transactions to document procedures pursuant to which such transactions are reviewed, approved or ratified. This policy superseded a general grant of authority to review and approve such transactions that had been a part of the Nominating and Corporate Governance Committee Chartercharter for several years. The policy applies to any transaction in which (i) the Company is a participant, (ii) any related person has a direct or indirect material interest and (iii) the amount involved exceeds $120,000, but generally excludes any transaction that would not require disclosure under Item 404(a) of Regulation S-K. The Nominating and Corporate Governance Committee is responsible for reviewing, approving and ratifying any related party transaction.transaction in accordance with the Company’s Related Person Transaction policy. The Nominating and Corporate Governance Committee intends to approve only those related person transactions that are in, or are not inconsistent with, the best interests of the Company and its stockholders.shareholders. A copy of the policy is available at www.epelectric.com under the “Investor Relations/Corporate Governance” section..
Each year, the Company submits and requires the directors and executive officers to complete director and officer questionnaires identifying transactions with the Company in which the director or executive officer or their family members have an interest. In addition, the Company has implemented an enhanced system so that proposed transactions of this nature are identified and reviewed in advance. The Company reviews these transactions due to the potential for a conflict of interest. A conflict of interest occurs when an individual’s private interest interferes, or appears to interfere, in any way with the Company’s interests. The Company’s Code of Ethics requires all directors, executive officers and employees who may have a potential or apparent conflict of interest to immediately notify our Senior Vice President, Corporate Development & Planning and Chief Compliance Officer.
Directors, executive officers and employees of the Company are expected to act and make decisions that are in the best interests of the Company. Directors, executive officers and employees are prohibited from taking any action that may make it difficult for them to perform their duties, responsibilities and services for the Company in an objective and fair manner. In addition, the Company prohibits personal loans to, or guaranteeing the personal obligations of, any director or executive officer.
A copy of the Company’s Code of Ethics is available at www.epelectric.com.
El Paso Electric Company 2015 Proxy Statement 31
38 | | El Paso Electric Company 2018 Proxy Statement |
The following table sets forth, as of March 30, 201526, 2018 (except as indicated in the footnote to the table), certain information regarding ownership of Common Stock by (i) each person known to the Company to own beneficially more than 5% of its Common Stock; (ii) each of the current directors, including
including those who have been nominated to serve as Class III Directors of the Company; (iii) the Named Executive Officers (“NEOs”); andNEOs; (iv) all directors and executive officers of the Company as a group (21 persons).group; and (v) Percent of Class which is reflective of Schedule 13D and Schedule 13G filings.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership*** | Percent of Class | Amount and Nature of Beneficial Ownership*** | Percent of Class | ||||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10022 | 4,075,969 | (1) | 10.11 | %* | ||||||
GAMCO Investors, Inc. One Corporate Center Rye, NY 10580-1435 | 4,001,143 | (2) | 9.94 | %* | ||||||
T. Rowe Price Associates, Inc. 100 E. Pratt Street Baltimore, MD 21202 | 3,788,500 | (3) | 9.39 | %* | ||||||
BlackRock Inc. 55 East 52nd Street New York, NY 10055 | 5,426,849 | (1) | 13.40%* | |||||||
The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355 | 2,897,259 | (4) | 7.17 | %* | 4,044,786 | (2) | 9.96%* | |||
GAMCO Investors, Inc. One Corporate Center Rye, NY 10580 | 3,620,821 | (3) | 8.94%* | |||||||
Allen, Catherine A. | 24,255 | (5) | ** | 37,357 | (4) | ** | ||||
Brown, John Robert | 38,500 | (6) | ** | |||||||
Barbas, Paul M. | 3,500 | (5) | ** | |||||||
Cicconi, James W. | 56,779 | (7) | ** | 67,279 | (6) | ** | ||||
Escudero, Edward | 10,624 | (8) | ** | 25,252 | (7) | ** | ||||
Harris, James W. | 49,132 | (9) | ** | 59,632 | (8) | ** | ||||
Holland-Branch, Patricia Z. | 22,217 | (10) | ** | |||||||
Hunt, Woodley, L. | 12,857 | (11) | ** | 27,572 | (9) | ** | ||||
Parks, Michael K. | 55,334 | (12) | ** | |||||||
Palacios, Raymond Jr. | 3,720 | (10) | ** | |||||||
Siegel, Eric B. | 53,071 | (13) | ** | 63,025 | (11) | ** | ||||
Wertheimer, Stephen N. | 40,923 | (14) | ** | 42,927 | (12) | ** | ||||
Yamarone, Charles A. | 8,500 | (15) | ** | 10,000 | (13) | ** | ||||
Shockley, Thomas V., III | 53,379 | (16) | ** | |||||||
Kipp, Mary E. | 14,355 | (17) | ** | 76,118 | (14) | ** | ||||
Hirschi, Nathan T. | 12,389 | (18) | ** | 25,822 | (15) | ** | ||||
Buraczyk, Steven T. | 18,545 | (19) | ** | 29,657 | (16) | ** | ||||
Miracle, Rocky R. | 22,598 | (20) | ** | 33,225 | (17) | ** | ||||
Stiller, William A. | 9,931 | (21) | ** | 17,177 | (18) | ** | ||||
Boomer, John R. | 4,467 | (22) | ** | |||||||
Gibson, Russell G. | 3,595 | (23) | ** | |||||||
Carpenter, David G. | 23,782 | (24) | ** | |||||||
Puente, Hector R. | 18,572 | (25) | ** | |||||||
Other Officers | 98,656 | (26) | ** | 10,211 | (19) | ** | ||||
All Directors and executive officers as a group (21 persons) | 652,461 | (27) | 1.62 | % | ||||||
All Directors and executive officers as a group | 532,474 | (20) | 1.31% | |||||||
| * | Actual percentage may differ due to stock transactions made subsequent to beneficial owner’s filing date. |
| ** | Less than 1%. |
| *** | For purposes of this disclosure, restricted stock is assumed to have voting power but no investment power. |
32 El Paso Electric Company 2015 Proxy Statement
El Paso Electric Company 2018 Proxy Statement | | 39 |
SECURITY OWNERSHIPTHE FOLLOWING FOOTNOTES RELATE TO THE SECURITIES EXCHANGE ACT OF CERTAIN BENEFICIAL OWNERS1934, AS AMENDED (THE “SEC ACT”), AND MANAGEMENT
The following footnotes relate to the Securities Exchange Act of 1934 andthe Investment Advisers Act ofTHE INVESTMENT ADVISERS ACT OF 1940, which will be referred to as (“SEC Act”AS AMENDED (THE “ADVISERS ACT”) and(“Advisers Act”), respectively..
| (1) | Information regarding ownership of Common Stock by BlackRock, Inc. ("BlackRock"), is included herein in reliance on information set forth in |
| (2) | Information regarding ownership of Common Stock by The Vanguard Group, Inc. (“Vanguard”), Vanguard Fiduciary Trust Company (“VFTC”) and Vanguard Investments Australia, LTD. (“VIA”) is included herein in reliance on information set forth in Amendment No. 7 to Schedule 13G/A filed with the SEC on February 7, 2018, reflecting ownership as of December 31, 2017. Vanguard is a Pennsylvania parent company of VFTC and VIA is classified as an Investment Advisor in accordance with Rule 13d-1(b)(1)(ii)(E) as defined in Section 240 of the SEC Act. According to the filing, Vanguard beneficially owns 4,044,786 shares (9.96%) of the Common Stock with sole dispositive power over 3,987,877 shares, shared dispositive power over 56,909 shares and sole voting power over 50,903 shares of Common Stock. VFTC, a wholly-owned subsidiary of Vanguard, is the beneficial owner of 41,544 shares (0.10%) of Common Stock. VIA, a wholly-owned subsidiary of Vanguard, is the beneficial owner of 24,724 shares (0.06%) of Common Stock. |
| (3) | Information regarding ownership of Common Stock by GGCP, Inc. ("GGCP"), GGCP Holdings LLC (“GGCP Holdings”), GAMCO Investors, Inc. ("GBL"), Associated Capital Group, Inc. (“AC”), Gabelli Funds, LLC ("Gabelli Funds"), GAMCO Asset Management Inc. ("GAMCO"), Teton Advisors, Inc. ("Teton Advisors"), Gabelli Securities, Inc. ("GSI"), Gabelli & Company, Inc. |
manager to limited partnerships and offshore investment companies and other accounts. GAMCO, Gabelli Funds, and Teton Advisors are each investment advisors, and each of these entities is registered under the Investment Advisers Act of 1940. G.research is a broker-dealer registered under the Securities Exchange Act of 1934. MJG Associates provides advisory services to private investment partnerships and offshore funds. The Foundation is a private foundation. LICT is a holding company with operating subsidiaries engaged primarily in the rural telephone industry. ICTC is a holding company with subsidiaries in voice, broadband and other telecommunications services, primarily in the rural telephone industry. Mario J. Gabelli is the controlling stockholder and Chief Executive Officer and director of GGCP. Mario J. Gabelli is also the Chairman and Chief Executive Officer of GBL. Mario J. Gabelli is the Executive Chairman and Chief Executive Officer of AC. Mario J. Gabelli is also a member of GGCP Holdings. Mario J. Gabelli is also the controlling shareholder of Teton Advisors. The Gabelli Reporting Parties do not admit that they constitute a group.
According to theAmendment No. 6 to Schedule 13D filing,filed with the SEC on May 5, 2016, Gabelli Funds beneficially owns 1,919,2801,888,000 shares of Common stock (4.77%Stock (4.66%) and has sole voting and dispositive power over the shares, while GAMCO beneficially owns 2,069,8631,723,821 shares (5.14%(4.26%) and maintains sole dispositive power
over 2,069,8631,723,821 shares, but only has the power to vote 1,942,8631,551,321 shares of Common Stock. MJG-IV beneficially owns 4,0003,000 shares (0.01%) and has sole voting and dispositive power over the shares, and Mario J. Gabelli beneficially owns 8,0006,000 shares (0.02%(0.01%) and has sole voting and dispositive power over the shares. According to the filing, the aggregate amount beneficially owned by the Gabelli Reporting Parties is 4,001,1433,620,821 shares (9.94%(8.94%) as of November 14, 2011. According to updated 13F filings dated February 5, 2015, the Gabelli Reporting Parties owned 3,875,763 shares (9.60%) of Common Stock as of December 31, 2014.May 3, 2016.
Mario Gabelli is deemed to have beneficial ownership of the Common Stock owned by each of the Reporting Parties. GSI is deemed to have beneficial ownership of the Common Stock owned by Gabelli & Company. GBL and GGCP are deemed to have beneficial ownership of the Common Stock owned beneficially by each of the foregoing persons other than Mario Gabelli and the Foundation.
| (4) |
El Paso Electric Company 2015 Proxy Statement 33
Vanguard is the beneficial owner of 55,100 shares (0.13%) of Common Stock. VIA, a wholly-owned subsidiary of Vanguard is the beneficial owner of 5,900 shares (0.01%) of Common Stock.
| Includes (i) |
| Includes (i) |
40 | | El Paso Electric Company 2018 Proxy Statement |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
| Includes (i) |
| Includes (i) |
| Includes (i) |
| Includes (i) |
| Includes |
| Includes (i) |
| Includes (i) |
| Includes (i) |
| Includes (i) |
| (15) | Includes (i) 18,759 shares of Common Stock over which Mr. |
| Includes (i) |
| (17) | Includes (i) 26,706 shares of Common Stock over which Mr. Miracle has sole voting and investment power; and (ii) 6,519 shares of restricted Common Stock over which he has voting power but no investment power. |
| (18) | Includes (i) |
| (19) | Includes (i) |
| Includes (i) |
34 El Paso Electric Company 2015 Proxy Statement
El Paso Electric Company 2018 Proxy Statement | | 41 |
The Audit Committee assists the Board in reviewing the Company’s financial reporting process. In fulfilling its responsibilities in 2014, the Audit Committee, among other things, (i) reviewed and discussed the interim financial information contained in each quarterly earnings announcement with the Company’s CFO and independent auditors prior to public release; (ii) reviewed and discussed the audited financial information contained in the Annual Report with the Company’s management, including the CFO, and independent auditors prior to public release; (iii) obtained from the independent auditors a formal written statement describing all relationships between the auditors and the Company that might bear on the auditors’ independence consistent with Independence Standards Board, Standard No. 1, “Independence Discussions with Audit Committees”; (iv) discussed with the auditors any relationships that may impact their objectivity and independence, and satisfied itself as to the auditors’ independence; (v) discussed with management, the internal auditors and the independent auditors the quality and adequacy of the Company’s internal controls and the internal audit function’s organization, responsibilities, budget and staffing; and (vi) reviewed with both the independent and the internal auditors their audit plans, audit scope, and identification of audit risks.
In addition, the Audit Committee discussed and reviewed with the independent auditors all communications required by generally accepted accounting standards, including those described in the Statement on Auditing Standards No. 16, as amended, “Communication with Audit Committees” and, with and without management present, discussed and reviewed the results of the independent auditors’ examination of the financial statements. The Audit Committee also reviewed the results of the internal audit examinations.
The Audit Committee reviewed with management and the independent auditors the audited financial statements of the Company as of and for the fiscal year ended December 31, 2014. Management is responsible for the preparation of the Company’s financial statements and the independent auditors are responsible for the examination of those statements.
Based on the above-mentioned review and discussions with management and the independent auditors, the Audit Committee recommended to the Board that the Company’s audited financial statements be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2014, for filing with the SEC. The Audit Committee also recommended the reappointment of KPMG LLP as the Company’s registered independent public accounting firm for the fiscal year ended December 31, 2015, and the Board concurred in such recommendation.
THE AUDIT COMMITTEE
Edward Escudero, ChairmanJohn Robert BrownJames W. CicconiEric B. SiegelStephen N. WertheimerCharles A. Yamarone
El Paso Electric Company 2015 Proxy Statement 35
Section 16(a) of the SEC Act requires the Company’s directors, executive officers and holders of more than 10% of the Company’s Common Stock to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company.
The Company believes that, during and for the fiscal year ended December 31, 2014,2017, its directors, executive officers and holders of more than 10% of the Company’s outstanding shares of
Common Stock complied with all Section 16(a) filing requirements.requirements except that due to a clerical oversight, a Form 4 reporting the annual grant of 3,500 restricted stock for each of Messrs. Barbas and Palacios was filed late on June 5, 2017. In addition, a Form 4 was filed late on June 5, 2017, on behalf of Mr. Adrian J. Rodriguez, upon his promotion to Vice President and General Counsel.
Under certain circumstances, shareholders are entitled to present proposals at shareholders meetings. To be eligible for inclusion in the Proxy Statement for the Company’s 20162019 Annual Meeting of Shareholders, a shareholder proposal must be received at the Company’s principal executive offices on or prior to December 19, 2015.14, 2018. The Company will consider only those proposals, which meet the requirements of applicable SEC rules. Under the Company’s Bylaws, in order for a shareholder proposal that is not included in the Proxy Statement to be properly brought before the annual meeting of shareholders, notice of the proposal must be received at the Company’s principal executive offices at least 80 days prior to the
scheduled date of the annual
meeting. A shareholder’s notice should list each proposal and a brief description of the business to be brought before the annual meeting; the name and address of the shareholder proposing such business; the class and number of shares held by the shareholder; and any material interest of the shareholder in the business. If a shareholder wishes to nominate a director, the shareholder must provide the nomination to the Nominating and Corporate Governance Committee in advance in writing at the Company’s principal offices pursuant to the notice provisions provided in the Company’s Bylaws. For more details, see “Evaluation of Director Nominees” above.
The Board knows of no business, other than as stated in the Notice of Annual Meeting of Shareholders whichthat will be presented for consideration at the Annual Meeting. If, however, other matters are properly brought before the Annual Meeting, it is the intention of the persons named in
the accompanying form of proxy to vote the shares of Common Stock represented thereby on such matters in accordance with their discretion and judgment as to the best interests of the Company.Company and its shareholders.
The Company’s 20142017 Annual Report, which includes financial statements, but which does not constitute a part of the proxy
the proxy solicitation material, accompanies this Proxy Statement.
36 El Paso Electric Company 2015 Proxy Statement
42 | | El Paso Electric Company 2018 Proxy Statement |
On February 27, 2015, the Company filed with the SEC, as an exhibit to its Annual Report on Form 10-K, the Sarbanes-
Oxley Act Section 302 certification regarding the quality of the Company’s public disclosure.
Pursuant to the rules adopted by the SEC, the Company has elected to provide access to the proxy materials over the Internet. Accordingly, the Company sent a Notice of Internet Availability of Proxy Materials (the “Notice”) to shareholders of record and beneficial owners. All shareholders will have the ability to access the proxy materials on the website referred to in the Notice or may request to receive a printed set of the proxy materials. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found on the Notice. In addition, shareholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.
EL PASO ELECTRIC COMPANY
By Order of the Board of Directors
Jessica Goldman
Corporate Secretary
Dated: April 17, 201513, 2018
El Paso Electric Company 2015 Proxy Statement 37
El Paso Electric Company 2018 Proxy Statement | | 43 |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0000374228_1 R1.0.1.17 EL PASO ELECTRIC COMPANY 100 N. STANTON P.O. BOX 982 EL PASO, TX 79901 VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on May 23, 2018. Have your proxy card in hand when you access the web-site and follow the instructions to obtain your records and create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by El Paso Electric Company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in the future. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on May 23, 2018. Have your proxy card in hand when you call and follow the instructions provided by the recorded message. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. The Board of Directors recommends you vote FOR the following nominees: 1. Election of Directors Nominees For Against Abstain 01) RAYMOND PALACIOS, JR. 02) STEPHEN N. WERTHEIMER 03) CHARLES A. YAMARONE The Board of Directors recommends you vote FOR the following proposals: For Against Abstain 2. Ratify the selection of KPMG LLP as the Company's Independent Registered Public Accounting Firm for the fiscal year ending December 31, 2018. 3. Approve the advisory resolution on executive compensation. NOTE: The shares represented by this proxy when properly executed will be voted in the manner directed herein by the undersigned Shareholder(s). If no direction is made, this proxy will be voted as recommended by the Board of Directors as indicated above. If any other routine matters properly come before the meeting, or if cumulative voting is required, the person named in this proxy will vote in their discretion. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. For address change/comments, mark here. (see reverse for instructions)
0000374228_2 R1.0.1.17 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report on Form 10-K are available at www.proxyvote.com . EL PASO ELECTRIC COMPANY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS Annual Meeting of Shareholders May 24, 2018 The undersigned hereby nominate(s), constitute(s) and appoint(s) Mary E. Kipp, Nathan T. Hirschi, Adrian J. Rodriguez, and Russell G. Gibson, jointly and severally, as attorneys, agents and proxies, with full powers of substitution and discretionary authority, to attend and act as proxy or proxies of the undersigned at the Annual Meeting of Shareholders (the "Annual Meeting") of El Paso Electric Company (the "Company") to be held at the Stanton Tower, 100 N. Stanton Street, El Paso, Texas 79901, on Thursday, May 24, 2018 at 10:00 a.m., MDT, or at any adjournments thereof, and vote as specified herein the number of shares of Company common stock that the undersigned, if personally present, would be entitled to vote at the Annual Meeting. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE SHAREHOLDER(S). IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE NOMINEES FOR DIRECTORS AND FOR PROPOSALS 2 AND 3. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE. (If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.) Address change/comments: CONTINUED AND TO BE SIGNED ON REVERSE SIDE
