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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
EL PASO TENNESSEE PIPELINE CO.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[El Paso Tennessee Pipeline Logo]
Dear Series A Preferred Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
(the "Annual Meeting") of El Paso Tennessee Pipeline Co. (the "Company"), which
will be held on Friday, April 28, 2000, at 8:30 a.m. (Pacific daylight savings
time), at the Four Seasons Hotel, 690 Newport Center Drive, Newport Beach,
California 92660. The accompanying Notice of Annual Meeting of Stockholders and
Proxy Statement describe the business to be transacted at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, please complete,
date, sign and return the enclosed proxy card in the accompanying envelope as
promptly as possible to ensure that your shares are represented and voted in
accordance with your wishes. You can help the Company avoid the necessity and
expense of sending follow-up letters to ensure a quorum is represented by
promptly returning the enclosed proxy card in the accompanying envelope.
Sincerely,
/s/ William A. Wise
William A. Wise
Chairman of the Board,
President
and Chief Executive Officer
Houston, Texas
March 17, 2000
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EL PASO TENNESSEE PIPELINE CO.
1001 LOUISIANA STREET
HOUSTON, TEXAS 77002
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
APRIL 28, 2000
The 2000 Annual Meeting of Stockholders (the "Annual Meeting") of El Paso
Tennessee Pipeline Co. (the "Company") will be held on Friday, April 28, 2000,
at 8:30 a.m. (Pacific daylight savings time), at the Four Seasons Hotel, 690
Newport Center Drive, Newport Beach, California, 92660, for the following
purposes:
1. To elect one director by holders of the Company's 8 1/4% Cumulative
Preferred Stock, Series A (the "Series A Preferred Stock");
2. To elect five directors by El Paso Energy Corporation, the sole holder
of the Company's Common Stock; and
3. To transact any other business which may be properly brought before the
Annual Meeting.
The holders of record of Series A Preferred Stock at the close of business
on March 1, 2000, are the only holders of Series A Preferred Stock entitled to
notice of, and to vote at, the Annual Meeting and any adjournment or
postponement thereof. Whether or not you plan to attend the Annual Meeting,
please complete, date, sign and return the enclosed proxy card in the
accompanying envelope as promptly as possible to ensure that your shares are
represented and voted in accordance with your wishes.
By Order of the Board of Directors
/s/ David L. Siddall
David L. Siddall
Corporate Secretary
Houston, Texas
March 17, 2000
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EL PASO TENNESSEE PIPELINE CO.
1001 LOUISIANA STREET
HOUSTON, TEXAS 77002
PROXY STATEMENT
2000 ANNUAL MEETING OF STOCKHOLDERS -- APRIL 28, 2000
This Proxy Statement with the accompanying Notice of Annual Meeting of
Stockholders and proxy card are being mailed to holders of El Paso Tennessee
Pipeline Co.'s (the "Company") 8 1/4% Cumulative Preferred Stock, Series A, no
par value (the "Series A Preferred Stock") beginning on or about March 17, 2000.
The proxy is solicited by the Board of Directors of the Company for use at the
2000 Annual Meeting of Stockholders (the "Annual Meeting") on Friday, April 28,
2000. Shares of Series A Preferred Stock, represented by a properly executed
proxy in the accompanying form, will be voted at the Annual Meeting. The proxy
may be revoked at any time before its exercise by sending written notice of
revocation to Mr. David L. Siddall, Corporate Secretary, El Paso Tennessee
Pipeline Co., 1001 Louisiana Street, Houston, Texas 77002, by signing and
delivering a subsequently dated proxy card or by attending the Annual Meeting in
person and giving notice of revocation to the Inspector of Election.
The Company has two classes of voting securities. The close of business on
March 1, 2000, was the record date for the determination of stockholders
entitled to notice of, and to vote at, the Annual Meeting. On such date, there
were 1,971 shares of the Company's common stock, $.01 par value (the "Common
Stock") outstanding, all of which are owned by El Paso Energy Corporation
("EPG"), and 6,000,000 shares of Series A Preferred Stock outstanding. EPG is a
Delaware corporation which was incorporated in April 1998. On August 1, 1998,
EPG succeeded El Paso Natural Gas Company ("EPNG") as a publicly traded parent
corporation in a holding company reorganization. On October 25, 1999, EPG
completed its merger with Sonat Inc. ("Sonat"), a diversified energy holding
company ("Merger"), with EPG remaining as the surviving entity.
Holders of record of the Series A Preferred Stock have the right, voting as
a single class, to elect a number of directors of the Company equal to one-sixth
of the directors of the Company. EPG, as the owner of all of the outstanding
Common Stock, has the right to elect the remaining directors. For a period of at
least ten days prior to the Annual Meeting, a complete list of stockholders
entitled to vote at the Annual Meeting will be available for examination by any
stockholder entitled to vote at the Annual Meeting during ordinary business
hours at the Four Seasons Hotel, 690 Newport Center Drive, Newport Beach,
California.
Holders of Series A Preferred Stock will vote for the directors on the
basis of one vote per share and not cumulatively, and the holder(s) of a
majority of the voting power of the outstanding shares of the Company entitled
to vote, present in person or by proxy, will constitute a quorum for the
election of directors by them, provided that where a separate vote by a class is
required, a majority of the outstanding shares of such class present in person
or by proxy, will constitute a quorum. The Company's Board of Directors has set
the number of directors at six. Accordingly, the number of directors to be
elected at the Annual Meeting by the holders of the Series A Preferred Stock is
one. One Inspector of Election, a representative from BankBoston, N.A. and
appointed by the Board of Directors, shall have authority to receive, inspect,
electronically tally and determine the validity of the proxies which are
received. In accordance with the Company's By-laws, in determining the number of
votes cast for or against a proposal, an abstention by a stockholder will be a
vote of abstention with respect to the proposal voted upon and will not be
treated as a vote "for" or "against" the proposal; however, an abstention and a
broker non-vote will be included when determining whether a quorum is present.
The Company's By-laws also provide that a non-vote by a broker will be treated
as if the broker never voted, but a non-vote by a stockholder will be deemed as
a vote "for" the management proposal.
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INFORMATION ABOUT THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1999, the Board of Directors has
not met, but has taken actions by unanimous written consent in accordance with
procedures established by the Company's By-laws. The Board of Directors does not
have a nominating, compensation or audit committee or any other committees
performing similar functions, and all such matters which would be considered by
such committees are acted upon by the full Board of Directors.
DIRECTOR COMPENSATION
Directors of the Company who are employees of EPG, or an affiliate of EPG,
receive no compensation for their services as directors of the Company apart
from the compensation they receive as employees of EPG.
Directors of the Company who are not employees of EPG, or an affiliate of
EPG, receive an annual retainer fee of $10,000, and are reimbursed for the usual
and ordinary expenses of meeting attendance.
DIRECTORS ELECTED BY COMMON STOCKHOLDER
The following individuals are the nominees for directors of the Company to
be elected by EPG, currently the sole holder of the Company's Common Stock. EPG
has advised the Company that at the Annual Meeting it intends to elect the five
persons listed below as directors, to hold office for the term of one year and
until his successor has been duly elected and shall qualify:
NAME AGE POSITION
- ---- --- --------
William A. Wise...................... 54 Chairman of the Board, President and Chief
Executive Officer; Director
H. Brent Austin...................... 45 Executive Vice President and Chief Financial
Officer; Director
Joel Richards III.................... 53 Executive Vice President; Director
Britton White Jr. ................... 56 Executive Vice President and General Counsel;
Director
Jeffrey I. Beason.................... 51 Senior Vice President and Controller; Director
WILLIAM A. WISE -- Mr. Wise has been Chairman of the Board, President and
Chief Executive Officer ("CEO") and a Director of the Company since December
1996. He has been President and CEO of EPG since January 1990. Mr. Wise was
Chairman of the Board of EPG from January 1994 to October 1999. Mr. Wise served
as President and Chief Operating Officer of EPG from April 1989 to December
1989. From March 1987 to April 1989, Mr. Wise was an Executive Vice President of
EPG. From January 1984 to February 1987, he was a Senior Vice President of EPG.
He is a member of the Board of Directors of Battle Mountain Gold Company and is
Chairman of the Board of El Paso Energy Partners Company (f/k/a Leviathan Gas
Pipeline Company), the general partner of El Paso Energy Partners, L.P. (f/k/a
Leviathan Gas Pipeline Partners, L.P.).
H. BRENT AUSTIN -- Mr. Austin has held the positions identified above since
June 1997. He was Senior Vice President and Chief Financial Officer and a
Director of the Company from December 1996 to June 1997. He has been Executive
Vice President of EPG since May 1995 and Chief Financial Officer of EPG since
April 1992. He was Vice President, Planning and Treasurer of Burlington
Resources Inc. ("BR") from November 1990 to March 1992 and Assistant Vice
President, Planning of BR from January 1989 to October 1990. He has served as a
Director and Executive Vice President of El Paso Energy Partners Company (f/k/a
Leviathan Gas Pipeline Company), the general partner of El Paso Energy Partners,
L.P. (f/k/a Leviathan Gas Pipeline Partners, L.P.) since August 1998.
JOEL RICHARDS III -- Mr. Richards has held the positions identified above
since June 1997. He was Senior Vice President and a Director of the Company from
December 1996 to June 1997. He has been Executive Vice President of EPG since
December 1996. From January 1991 until December 1996, he was
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Senior Vice President of EPG. He was Vice President of EPG from June 1990 to
December 1990. He was Senior Vice President, Finance and Human Resources of
Meridian Minerals Company, a wholly owned subsidiary of BR, from October 1988 to
June 1990.
BRITTON WHITE JR. -- Mr. White has held the positions identified above
since June 1997. He was Senior Vice President and General Counsel and a Director
of the Company from December 1996 to June 1997. He has been Executive Vice
President of EPG since December 1996 and General Counsel of EPG since March
1991. He is also Executive Vice President and General Counsel of EPG. He was
Senior Vice President and General Counsel of EPG from March 1991 until December
1996. From March 1991 to April 1992, he was also Corporate Secretary of EPG. For
more than five years prior to that time, Mr. White was a partner in the law firm
of Holland & Hart.
JEFFREY I. BEASON -- Mr. Beason has been Senior Vice President and
Controller and a Director of the Company since October 1999. He has been Vice
President, Controller and a Director of the Company from December 1996 to
October 1999. He has been Vice President and Controller of EPG from April 1996
to October 1999, and also was Treasurer of EPG from April 1996 until December
1996. He is also Senior Vice President and Controller of EPG. He was Senior Vice
President of Administration for Mojave Pipeline Company, a subsidiary of EPG,
from September 1993 until April 1996. For more than five years prior to
September 1993, Mr. Beason was Director of Financial Reporting of EPG.
PROPOSAL NO. 1 -- NOMINEE FOR ELECTION OF DIRECTOR BY SERIES A PREFERRED
STOCKHOLDERS
The number of directors to be elected by the holders of Series A Preferred
Stock is one. If elected, the nominee will hold office for the term of one year
and until his successor has been duly elected and shall qualify. With the
exception of broker non-votes and unless otherwise instructed by holders of
Series A Preferred Stock, the persons named on the enclosed proxy card will vote
the shares of Series A Preferred Stock represented by such proxy "for" the
election of the one nominee named in this Proxy Statement. However, if the named
nominee should be unavailable for election, the Board of Directors may
substitute a nominee, in which event the shares of Series A Preferred Stock
represented by proxy will be voted "for" the substitute nominee unless an
instruction to the contrary is contained on the proxy card. No circumstances are
presently known which would render the nominee named herein unavailable to serve
as a member of the Company's Board of Directors. Pursuant to the Company's
Certificate of Incorporation and By-laws, the election of each director requires
an affirmative vote of a plurality of the shares of Series A Preferred Stock
represented at the Annual Meeting in person or by proxy and entitled to vote on
the proposal. Holders of Series A Preferred Stock may not cumulate their votes
for the election of the director. The following provides information about the
nominee:
KENNETH L. SMALLEY, age 70, has been retired since February 1992.
For more than five years prior to that date, Mr. Smalley was a Senior
Vice President of Phillips Petroleum Company and President of Phillips
66 Natural Gas Company, a Phillips Petroleum Company subsidiary. Mr.
Smalley has been a member of the Board of Directors of EPG since 1992
and a director of the Company since April 1997.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE HOLDERS OF SERIES A PREFERRED STOCK
VOTE "FOR" THE ELECTION OF THE NOMINEE NAMED ABOVE.
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SECURITY OWNERSHIP OF BENEFICIAL
OWNERS AND MANAGEMENT OF THE COMPANY
No Common Stock or Series A Preferred Stock is held by any director,
executive officer or nominee. No family relationship exists between any of the
directors, executive officers, and nominee of the Company. The following
information relates to the only persons or entities known to the Company to be
the beneficial owners, as of February 1, 2000, of more than five percent of any
class of the Company's voting securities.
TITLE OF AMOUNT AND NATURE OF PERCENT
CLASS NAME BENEFICIAL OWNERSHIP OF CLASS
-------- ---- -------------------- --------
Common Stock El Paso Energy Corporation................... 1,971 shares 100%
1001 Louisiana Street
Houston, Texas 77002
8 1/4% Citigroup, Inc. (1).......................... 500,500 8.3%
Cumulative 153 East 53rd Street
Preferred New York, New York 10043
Stock Series
A
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(1) This information is based on a Schedule 13G dated February 3, 2000, with
respect to beneficial ownership of the 8 1/4 Cumulative Preferred Stock,
Series A, as of December 31, 1999. The indicated shares are held by
Citigroup, Inc. and subsidiaries thereof, which have shared voting and
dispositive power with respect to such shares.
SECURITY OWNERSHIP OF A BENEFICIAL
OWNER AND MANAGEMENT OF EPG
The following information sets forth certain information as of February 1,
2000, regarding the beneficial ownership of EPG's common stock by (i) each
director, (ii) each of the Company's named executives (as hereinafter defined),
(iii) the nominee, (iv) all directors, executive officers, and nominee of the
Company as a group, and (v) each person known to EPG to be the beneficial owner
of at least 5% of any class of EPG's voting securities. No family relationship
exists between any of EPG's directors and executive officers.
BENEFICIAL OWNERSHIP STOCK PERCENT
TITLE OF CLASS NAME (EXCLUDING OPTIONS)(2) OPTIONS (4) TOTAL OF CLASS
- -------------- ---- ---------------------- ----------- ---------- --------
Common Stock S.K. Zilkha(1)................ 14,011,261 3,000 14,014,261 5.93%
750 Lausanne Road
Los Angeles, California 90077
Common Stock K.L. Smalley.................. 32,787 16,000 48,787 *
Common Stock W.A. Wise..................... 1,845,857(3) 1,394,646 3,240,503 1.36%
Common Stock H.B. Austin................... 340,034 209,260 549,294 *
Common Stock B. White Jr. ................. 326,549 179,050 505,599 *
Common Stock J. Richards III............... 326,652 179,050 505,702 *
Common Stock J. I. Beason.................. 133,623 163,900 297,523 *
Common Stock Directors and Executive 2,141,906 5,147,408 2.16%
Officers as a group(6)........ 3,005,502
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* Less than 1%
(1) Mr. Zilkha is a director of EPG.
(2) Directors and executive officers have sole voting and investment power over
the shares of EPG common stock reflected in the table above, except that
each of Messrs. Wise, Austin and White shares with one or more other
individuals voting and investment power with respect to 11,694, 318 and
2,000 shares of EPG common stock, respectively. Some shares of EPG common
stock reflected in this column for certain individuals are subject to
restrictions. In addition, shares of EPG common stock (as of December 31,
1999) reflected for Messrs. Wise (1,357,656), Austin (258,169), White
(246,745), Richards (245,239) and Beason (101,983) include shares held in
the EPG Benefits Protection Trust as a result of deferral elections made
pursuant to applicable EPG plans.
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(3) Mr. Wise's beneficial ownership excludes 400 shares of EPG common stock
owned by his children under the Uniform Gifts to Minors Act, of which Mr.
Wise disclaims beneficial ownership.
(4) The Directors and executive officers have the right to acquire the shares of
EPG common stock reflected in this column within 60 days of February 1,
2000, through the exercise of stock options.
RELATIONSHIP WITH EL PASO ENERGY CORPORATION
The Company is currently a wholly owned direct subsidiary of EPG. Prior to
the reorganization, the Company was a wholly owned indirect subsidiary of EPNG.
EPG owns 100% of the Company's outstanding Common Stock and has the right to
elect five-sixths of the Company's directors. Until December 12, 1996, the
Company's Common Stock was publicly held. The Company has no formal business
relationships with EPG; however, the Company and EPG share certain office space,
personnel and other administrative services. The costs of such services are
allocated by EPG to the Company and other affiliates.
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning compensation paid by
EPG to the person serving as the Company's CEO or acting in a similar capacity
during the last completed fiscal year, and the Company's three other most highly
compensated executive officers (collectively, the "named executives") for
services rendered to EPG and its subsidiaries in all capacities during each of
the last three fiscal years. The Company does not have any executive officers
other than the named executives. The table also identifies the principal
capacity in which each of the named executives served the Company at the end of
fiscal year 1999. None of these persons received any compensation from the
Company for their services as executive officers of the Company.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------ ---------------------------------------
AWARDS PAYOUTS
------------------------- -----------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($) ($)(2) ($)(3) ($)(4) (#)(5) ($)(6) ($)(7)
------------------ ---- -------- ---------- ------------ ------------ ---------- ----------- ------------
William A. Wise........ 1999 $275,001(1) $3,800,000 $139,006 $2,199,966 500,000 $29,254,410 $148,368
President & CEO, EPG 1998 -- $1,600,000 $152,939 $1,599,985 98,000 -- $105,227
1997 -- $1,105,000 $203,182 $1,104,971 -- -- $106,209
H. Brent Austin........ 1999 $386,253 $1,113,000 -- $ 674,994 125,000 $ 5,531,256 $ 42,628
Executive Vice 1998 $305,417 $ 438,000 $ 201 $ 437,972 26,250 -- $ 32,410
President & Chief 1997 $300,000 $ 330,000 $ 93,435 $ 329,970 -- -- $ 36,150
Financial Officer,
EPG
Joel Richards III...... 1999 $347,502 $ 956,000 $ 6,440 $ 559,999 125,000 $ 5,458,756 $ 42,254
Executive Vice 1998 $279,584 $ 396,000 $ 221 $ 395,987 26,250 -- $ 32,579
President, EPG 1997 $275,000 $ 302,500 $ 27,514 $ 302,472 -- -- $ 35,088
Britton White Jr....... 1999 $347,502 $ 956,000 -- $ 559,999 125,000 $ 5,458,756 $ 53,202
Executive Vice 1998 $279,584 $ 396,000 $ 284 $ 395,987 26,250 -- $ 32,774
President & 1997 $275,000 $ 302,500 $ 34,899 $ 302,472 -- -- $ 35,219
General Counsel, EPG
- ---------------
(1) The Compensation Committee determined that Mr. Wise's base salary, which was
eliminated in 1996, should be reinstated in connection with Merger with
Sonat. The amount reflected is for a partial year.
(2) The value reflected represents the value of restricted Common Stock and/or
cash awarded to each of the named executives for their incentive bonus.
Pursuant to EPG's 1995 Incentive Compensation Plan and 1999 Omnibus
Incentive Compensation Plan, the named executives are required to receive a
substantial part of their annual bonus in restricted Common Stock. The
amounts reflected in this column represent a
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combination of the market value of the restricted Common Stock and cash awarded
under the applicable plan. Dividends are paid directly to the holders of the
restricted Common Stock during the four-year vesting schedule. In addition, as a
result of the stockholders' approval of the Merger with Sonat, that
transaction constituted a change in control under EPG's benefit plans and
resulted in the automatic cash payment equal to the maximum bonus
opportunity for each of the named executives.
(3) The amount reflected for Mr. Wise in fiscal year 1999 includes, among other
things, $90,000 for a perquisite and benefit allowance. The amount reflected
for Mr. Wise in fiscal year 1998 includes, among other things, $90,000 for a
perquisite and benefit allowance and $36,088 in value attributed to use of
the Company's aircraft. In fiscal year 1997, the amount for Mr. Wise
includes, among other things, a tax gross-up associated with his relocation
to Houston and $85,167 for a perquisite and benefit allowance. The amounts
reflected for fiscal year 1997 for the other named executives are tax
gross-ups associated with their relocation to Houston. The aggregate value
of the perquisites and other personal benefits received by the other named
executives in fiscal years 1999, 1998 and 1997 have not been reflected
because the amounts were below the Securities and Exchange Commission's (the
"SEC") required reporting threshold.
(4) EPG's 1999 Omnibus Incentive Compensation Plan and 1995 Incentive
Compensation Plan provide for and encourage participants to elect to take
the cash portion of their annual bonus award in shares of EPG restricted
common stock. The amounts reflected in this column include the market value
of EPG restricted common stock on the date of grant, subject to a four-year
vesting schedule, received by each of the named executives pursuant to such
election. The total shares of EPG restricted common stock, including those
shares reflected in this column, held on December 31, 1999 by Messrs. Wise,
Austin, Richards and White was 150,000, 30,000, 30,000, and 30,000,
respectively. These shares of restricted stock are subject to performance
vesting, in addition to time vesting. If the required performance targets
are not achieved within the required time period, all unvested shares will
be forfeited. The aggregate dollar value on December 31, 1999, of all shares
of restricted Common Stock held by Messrs. Wise, Austin, Richards and White
was $5,821,875, $1,164,375, $1,164,375 and $1,164,375, respectively.
Dividends are paid directly to the holders of the EPG restricted common
stock. The foregoing values can be realized by the named executives if, and
only if, they remain employees of EPG for the specified time period and
EPG's stockholders realize the required total stockholder value during the
specified time period.
(5) The number of stock options granted in 1999 are intended as a three-year
grant, designed to provide an incentive for successful integration of the
Sonat organization following the Merger and will provide compensation only
if all stockholders benefit from stock price appreciation.
(6) The amounts in this column for fiscal year 1999 represent the market value
of EPG common stock and/or cash payout of performance units ("PUs") for the
four-year cycle ended on December 31, 1998. In addition, as a result of the
stockholders' approval of the Merger with Sonat, that transaction
constituted a change in control under EPG's benefit plans and resulted in
the automatic cash payment of 25% of the PUs outstanding, and the remaining
PUs were cancelled. The amount reflected also includes the value of
performance-based EPG restricted common stock, which was granted in 1996 and
which had achieved all performance targets. No named executive received a
long-term incentive plan payout from EPG during fiscal years 1997 and 1998.
(7) The compensation reflected in this column for fiscal year 1999 is comprised
of EPG contributions to EPG's Retirement Savings Plan, supplemental EPG
contributions under the Supplemental Benefits Plan and the above-market
interest earned on deferred compensation. Specifically, these amounts for
fiscal year 1999 were $0, $123,749 and $24,618 for Mr. Wise; $7,200, $29,890
and $5,538 for Mr. Austin; $7,200, $26,819 and $2,966 for Mr. Richards and
$7,200, $26,257 and $19,745 for Mr. White, respectively.
STOCK OPTION GRANTS
No stock options were granted by the Company to Messrs. Wise, Austin,
Richards and White during the fiscal year 1999. The Company has no stock option
plan or program, and there are no options outstanding in
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respect of any class of the Company's equity securities, including the Series A
Preferred Stock. The stock options reflected in the following table were granted
at fair market value by EPG to Messrs. Wise, Austin, Richards and White during
the fiscal year 1999. In satisfaction of applicable SEC regulations, the table
further sets forth the potential realizable value of such stock options in the
year 2009 (the expiration date of the stock options) at arbitrarily assumed
annualized rates of stock price appreciation of 5% and 10% over the full
ten-year term of the stock options. As the table indicates, the annualized stock
price appreciation of 5% and 10% will result in stock prices in the year 2009 of
approximately $68.62 and $109.26, respectively. The amounts shown in the table
as potential realizable values for all stockholders' stock (approximately $5.2
billion and $13.2 billion), represent the corresponding increases in the market
value of 235,440,039 shares of EPG's common stock outstanding as of December 31,
1999. No gain to the named executives is possible without an increase in stock
price which would benefit all stockholders proportionately. Actual gains, if
any, on stock option exercises and EPG common stock holdings are dependent on
the future performance of the common stock and overall stock market conditions.
There can be no assurances that the potential realizable values shown in this
table will be achieved.
EPG OPTION GRANTS IN 1999
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS(1) APPRECIATION FOR OPTION TERM
------------------------------------------------ ---------------------------------------
IF STOCK PRICE AT IF STOCK PRICE AT
NUMBER OF % OF TOTAL $68.62 $109.26
SECURITIES OPTIONS IN 2009 IN 2009
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION
NAME GRANTED(#) IN 1999 ($/SHARE) DATE 5%($) 10%($)
- ---- ---------- ---------- --------- ---------- ------------------ ------------------
ALL STOCKHOLDERS'
STOCK APPRECIATION.... N/A N/A N/A N/A $5,242,496,350 $13,285,515,051
William A. Wise......... 500,000 5.19% $42.125 10/25/09 $ 13,246,093 $ 33,568,201
H. Brent Austin......... 125,000 1.30% $42.125 10/25/09 $ 3,311,523 $ 8,392,050
Joel Richards III....... 125,000 1.30% $42.125 10/25/09 $ 3,311,523 $ 8,392,050
Britton White Jr. ...... 125,000 1.30% $42.125 10/25/09 $ 3,311,523 $ 8,392,050
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(1) The stock options granted in 1999 by EPG to the named executives vest
one-third on each of the first three anniversaries of the grant date. There
were no stock appreciation rights ("SARs") granted in 1999. Any unvested
stock options become fully exercisable in the event of a "change in control"
of EPG as defined in EPG's 1999 Omnibus Incentive Compensation Plan. Under
the terms of EPG's 1999 Omnibus Incentive Compensation Plan, the
Compensation Committee may, in its sole discretion and at any time, change
the vesting of the stock options. Certain non-qualified stock options may be
transferred to immediate family members, directly or indirectly or by means
of a trust, corporate entity or partnership. Further, stock options are
subject to forfeiture and/or time limitations in the event of a termination
of employment. Certain of these stock options are automatically converted
into shares of EPG restricted common stock if certain performance targets
are achieved.
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EPG OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table sets forth information concerning the number of shares
of EPG's common stock that were acquired through option exercises of EPG common
stock options and the fiscal year-end values of the unexercised EPG stock
options (and tandem SARs), provided on an aggregate basis, for each of the named
executives. The options held by the named executives were granted pursuant to
EPG benefit plans, and are not options to acquire any stock of the Company. The
Company has no stock option plan or program.
AGGREGATED EPG OPTION/SAR EXERCISES IN 1999
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING IN-THE-MONEY
ACQUIRED UNEXERCISED OPTIONS/SARS OPTIONS/SARS AT
ON VALUE AT FISCAL YEAR-END(#) FISCAL YEAR-END($)(2)
EXERCISE REALIZED --------------------------- ---------------------------
NAME # ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ----------- ----------- ------------- ----------- -------------
William A. Wise...... 305,828 $11,154,601 1,439,356 500,000 $33,464,855 $0
H. Brent Austin...... 60,000 $ 2,203,128 209,260 125,000 $ 4,440,652 $0
Joel Richards III.... 60,000 $ 2,203,128 179,050 125,000 $ 3,551,345 $0
Britton White Jr. ... 60,000 $ 2,203,128 179,050 125,000 $ 3,551,345 $0
- ---------------
(1) The figures presented in this column have been calculated based upon the
difference between the fair market value of the securities underlying each
stock option/SAR on the date of exercise and its exercise price. In
addition, as a result of the EPG stockholders' approval of the Merger with
Sonat, that transaction constituted a change in control under the EPG
benefit plans and resulted in the automatic conversion of certain stock
options into shares of EPG common stock, without cost to the named executive
officer. The value of that conversion is reflected in this column.
(2) The figures presented in these columns have been calculated based upon the
difference between $38.9375, the fair market value of EPG common stock on
December 31, 1999, for each in-the-money stock option/SAR, and its exercise
price. No cash is realized until the shares received upon exercise of an
option are sold. Mr. Wise has tandem SARs attached to some of his stock
options. If his stock options are exercised, the tandem SARs expire and vice
versa. The exercise of a tandem SAR would have a market value equivalent to
the exercise of a stock option.
LONG-TERM INCENTIVE AWARDS
Restricted Stock
The following table provides information concerning incentive awards of EPG
restricted common stock made under EPG's 1999 Omnibus Incentive Compensation
Plan. The number of shares of restricted EPG common stock will vest if, and only
if, the named executive remains in the employ of EPG for the specified time
period and the required increase in total stockholder return is achieved during
such time period.
LONG-TERM INCENTIVE PLANS -- AWARDS IN 1999
RESTRICTED STOCK
ESTIMATED NUMBER OF SHARES TO BE VESTED UNDER THE
PERFORMANCE OR RESTRICTED STOCK GRANT(1)
OTHER PERIOD --------------------------------------------------
NUMBER UNTIL BELOW THRESHOLD THRESHOLD TARGET MAXIMUM
NAME OF SHARES MATURATION (#) (#) (#) (#)
- ---- --------- -------------- ---------------- ---------- ------- --------
William A. Wise............ 150,000 4 years 0 45,000 90,000 150,000
H. Brent Austin............ 30,000 4 years 0 9,000 18,000 30,000
Joel Richards III.......... 30,000 4 years 0 9,000 18,000 30,000
Britton White Jr. ......... 30,000 4 years 0 9,000 18,000 30,000
- ---------------
(1) The indicated number of shares of EPG restricted common stock vesting at the
Threshold, Target and Maximum levels vest only if total shareholder return
equals or exceeds 15%, 40% and 65%, respectively, within the indicated
performance period.
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Performance Units
The following table provides information concerning long-term incentive
awards of performance units ("PUs") under EPG's 1995 Omnibus Incentive
Compensation Plan and the EPG 1999 Omnibus Incentive Compensation Plan. The
first grant reflected vests equally per year over the indicated maturation
performance period, at the end of which (or at an interim time) EPG's total
stockholder return is compared to that of its peer group. The second grant
reflected for each of the named executives vests at the end of the performance
period, at the end of which EPG's total stockholder return is compared to that
of its peer group. With respect to each grant, if EPG's total stockholder return
ranks in the first, second, third or fourth quartiles, the value of each unit is
$150, $100, $50 and $0 respectively. The payouts will consist of EPG common
stock and cash, as determined by the Compensation Committee. All the amounts
shown are potential assumed amounts. There can be no assurance that EPG will
achieve the results that would lead to final payments under the plans.
LONG-TERM INCENTIVE PLANS -- AWARDS IN 1999
PERFORMANCE UNITS
ESTIMATED FURTHER PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS
NUMBER PERIOD UNTIL --------------------------------------------------------------
OF UNITS MATURATION BELOW THRESHOLD THRESHOLD TARGET MAXIMUM
NAME (#)(1) OR PAYOUT ($) ($) ($) ($)
- ---- -------- ------------ ----------------- ------------ ------------ ------------
William A. Wise....... 35,500 4 years $0 $1,775,000 $3,550,000 $5,325,000
35,500 4 years $0 $1,775,000 $3,550,000 $5,325,000
H. Brent Austin....... 10,000 4 years $0 $ 500,000 $1,000,000 $1,500,000
15,000 4 years $0 $ 750,000 $1,500,000 $2,250,000
Joel Richards III..... 10,000 4 years $0 $ 500,000 $1,000,000 $1,500,000
12,000 4 years $0 $ 600,000 $1,200,000 $1,800,000
Britton White Jr. .... 10,000 4 years $0 $ 500,000 $1,000,000 $1,500,000
12,000 4 years $0 $ 600,000 $1,200,000 $1,800,000
- ---------------
(1) The first grant reflected was for a four-year performance cycle beginning
January 1, 1999. However, as a result of the Merger with Sonat, that
transaction resulted in the automatic cash payout of 25% of the units
reflected for that grant. All remaining performance units associated with
the January grant were cancelled. The second grant is for a four-year
performance cycle which began on July 1, 1999 and will end on June 30, 2003.
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EPG PENSION PLAN
Set forth below is a table describing EPG's Pension Plan in which the named
executives, as well as other employees of EPG and its subsidiaries may be
entitled to participate. The following table lists current annual retirement
benefits payable under the Pension Plan and EPG's Supplemental Benefits Plan
(collectively, the "Plans") for the assumed average annual earnings and years of
credited service shown for a participant retiring at the normal retirement age
of 65. Under the Pension Plan and applicable Internal Revenue Code ("IRC")
provisions, compensation in excess of $160,000 cannot be taken into account and
the maximum payable benefit in 1999 is $130,000. Any excess benefits otherwise
accruing under the Pension Plan are payable under the Supplemental Benefits
Plan.
Estimated annual benefit levels under the Plans, based on earnings and
years of credited service at the normal retirement age, is reflected in the
following table:
PENSION PLAN TABLE
YEARS OF SERVICE AT NORMAL RETIREMENT AGE
FINAL AVERAGE ---------------------------------------------
PENSION EARNINGS 15 20 25 30
- ---------------- -------- -------- ---------- ----------
$ 400,000.............................. $ 94,095 $125,460 $ 156,825 $ 188,190
$ 800,000.............................. 190,095 253,460 316,825 380,190
$1,200,000.............................. 286,095 381,460 476,825 572,190
$1,600,000.............................. 382,095 509,460 636,825 764,190
$1,900,000.............................. 454,095 605,460 756,825 908,190
$2,100,000.............................. 502,095 669,460 836,825 1,004,190
$2,500,000.............................. 598,095 797,460 996,825 1,196,190
$2,800,000.............................. 670,095 893,460 1,116,825 1,340,190
$3,100,000.............................. 742,095 989,460 1,236,825 1,484,190
Benefits which accrue under the Plans are based upon the gross salary
amount of each individual, including base incentive bonus amounts, but excluding
all commissions and other compensation or benefits of any kind. For the named
executives, the amounts reflected in the Salary and Bonus columns of the
"Summary Compensation Table" are generally considered to calculate benefits
under the Plans. The Pension Plan formula for retirement at age 65 is 1.1% of
the highest five-year average earnings, plus 0.5% of the highest five-year
average earnings in excess of one-third of the FICA taxable wage base in effect
during the year of termination, times the number of years of credited service up
to a maximum of 30 years. There is no deduction for Social Security amounts
paid; however, an early retirement supplement equal to 1% of the highest
five-year average earnings up to one-third of the FICA taxable wage base in
effect in the year of termination, times the number of years of credited service
up to a maximum of 30 years, is payable from retirement until age 62. Both the
basic benefit and the early retirement supplement are reduced by 2% for each
year the participant's actual retirement date precedes the date the participant
would have attained age 65, or the date the participant could have retired after
attaining age 60 with 30 years of service, if earlier. Years of credited service
under the Pension Plan at age 65 for Messrs. Wise, Austin, Richards and White
are 30, 30, 28 and 25 (including 7 years of credited service pursuant to Mr.
White's employment agreement), respectively.
Effective January 1, 1997, EPG amended its noncontributory defined Pension
Plan to determine benefits by a cash balance formula in which the named
executives, as well as other Company employees, may be entitled to participate.
During a five-year transition period, ending December 31, 2001, eligible
participants will continue to accrue a minimum benefit under the previous
formula, as described above. On December 31, 2001, this benefit will be frozen.
The actual benefit paid to participants with a minimum benefit will be the
greater of the minimum benefit and the cash balance benefit. Under the cash
balance formula, each
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participant has a cash account which is credited quarterly with a percentage of
earnings. The annual percentage is based on a combination of age and service as
shown below:
IF AGE PLUS PAY CREDIT SERVICE ON THE THE APPLICABLE ANNUAL %
PRECEDING DECEMBER 31 IS: OF EARNINGS IS:
------------------------------------- -----------------------
Under 35.................................................... 4%
35 through 49............................................... 5%
50 through 64............................................... 6%
65 and over................................................. 7%
Estimated annual benefits payable under the cash balance pension plan and
Supplemental Benefits Plan upon retirement at age 65 for Messrs. Wise, Austin,
Richards and White are $1,337,390, $266,256, $231,012, and $233,703,
respectively (based on assumptions that each named executive receives no pay
increases, receives maximum bonuses and cash balances are credited with interest
at a rate of 3% per annum).
BOARD REPORT ON EXECUTIVE COMPENSATION
Because the Company does not have a compensation committee or another
committee performing similar functions, this report is presented by the full
Board of Directors.
All of the executive officers of the Company are employees of EPG and EPG
determines the compensation of all of its employees in accordance with its own
policies and plans. The Company does not have any role in setting those policies
and plans or in determining compensation levels for EPG employees. The
Compensation Committee of the Board of Directors of EPG establishes compensation
policies, programs and plans for EPG and its subsidiaries, which are designed to
attract, motivate and retain competent executive personnel for EPG and its
subsidiaries.
In making its decision with respect to executive compensation, the
Compensation Committee of EPG considers the provisions of Section 162(m) of the
IRC which generally affects EPG's federal income tax deduction for compensation
paid to its chief executive officer and four other highest paid executive
officers.
The Compensation Committee of EPG has neither interlocks nor insider
participation. The Board of Directors of the Company believes that all
stockholders of the Company have an opportunity to benefit from the application
of the policies and plans of EPG.
Members of the Board of Directors of the Company
H. Brent Austin
Jeffrey I. Beason
Joel Richards III
Kenneth L. Smalley
Britton White Jr.
William A. Wise
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EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE IN CONTROL ARRANGEMENTS
Certain of the named executives in the preceding tables have employment
agreements with the Company's parent corporation, EPG. In addition, EPG
maintains compensatory plans or arrangements in which such named executives
participate pursuant to which such persons would be entitled to payment from EPG
upon the termination of such person's employment with EPG under specified
circumstances or from a "change of control" of EPG (as defined in such plan or
arrangement). Neither the Company nor its subsidiaries is a party to any of such
employment agreements or compensatory plans or arrangements. For a description
of such employment contracts or compensatory plans or arrangements, you are
urged to review the section entitled "Employment Contract, Termination of
Employment and Change in Control Arrangements" in EPG's proxy statement for its
2000 Annual Meeting of Stockholders.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP, 1100 Louisiana Street, Suite 4100, Houston,
Texas 77002, has served as independent certified public accountants of EPG since
1983 and has been designated to serve as the Company's independent certified
public accountants for fiscal year 2000. A representative from
PricewaterhouseCoopers LLP will attend the Annual Meeting to respond to
appropriate questions raised during the Annual Meeting or submitted to
PricewaterhouseCoopers LLP in writing prior to the Annual Meeting, and to make a
statement if he or she desires to do so.
COST OF SOLICITATION
The cost of preparing, printing and mailing this Proxy Statement and the
accompanying proxy card, and the cost of solicitation of proxies on behalf of
the Company's Board of Directors will be borne by the Company. The Company has
retained Georgeson Shareholder Communications Inc. to assist in the solicitation
of proxies from stockholders at an estimated fee of $6,500, plus reimbursement
of out-of-pocket expenses. In addition to the use of the mail, proxies may be
solicited personally or by telephone by regular employees of the Company without
additional compensation, as well as by Georgeson Shareholder Communications Inc.
Brokerage houses and other custodians and nominees will be asked whether other
persons are beneficial owners of the shares of Series A Preferred Stock which
they hold of record and, if so, they will be supplied with additional copies of
the proxy materials for distribution to such beneficial owners. The Company will
reimburse banks, nominees, fiduciaries, brokers and other custodians for their
costs of sending the proxy materials to the beneficial owners of Series A
Preferred Stock.
OTHER MATTERS
The Board of Directors knows of no other matters which will be brought
before the Annual Meeting. If, however, any other matters should come before the
Annual Meeting all proxies which have been signed and returned without further
instruction will give the persons designated thereon discretionary authority to
vote according to their best judgment.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Directors, certain officers and beneficial owners of more than 10%
of a registered class of the Company's equity securities to file reports of
ownership and reports of changes in ownership with the SEC and the New York
Stock Exchange. Directors, officers and beneficial owners of more than 10% of
the Company's equity securities are also required by SEC regulations to furnish
the Company with copies of all such reports that they file. Based on the
Company's review of copies of such forms and amendments provided to it, the
Company believes that all filing requirements were complied with during the
fiscal year ended December 31, 1999.
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SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholder proposals submitted for inclusion in the Proxy Statement for
the Company's 2001 Annual Meeting of Stockholders must be mailed to the
Corporate Secretary, El Paso Tennessee Pipeline Co., 1001 Louisiana Street,
Houston, Texas 77002, telephone (713) 420-6195, facsimile (713) 420-4099, and
must be received by the Corporate Secretary on or before November 17, 2000. The
Company will consider only proposals meeting the requirements of applicable SEC
rules.
ANNUAL REPORT
A copy of the Company's 1999 Annual Report on Form 10-K is being mailed
with this Proxy Statement to each stockholder entitled to vote at the Annual
Meeting. Holders of Series A Preferred Stock not receiving a copy of such Annual
Report on Form 10-K may obtain one by writing or calling Mr. David L. Siddall,
Corporate Secretary, El Paso Tennessee Pipeline Co., 1001 Louisiana Street,
Houston, Texas 77002, telephone (713) 420-6195 or sending a facsimile to (713)
420-4099.
By Order of the Board of Directors
/s/ David L. Siddall
David L. Siddall
Corporate Secretary
Houston, Texas
March 17, 2000
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SKU # 1107-EPTPS-00
18
DETACH HERE
SOLICITED BY THE BOARD OF DIRECTORS
EL PASO TENNESSEE PIPELINE CO.
ANNUAL MEETING OF STOCKHOLDERS
APRIL 28, 2000
The undersigned hereby appoints William A. Wise and Britton White Jr., and
each or any of them, with power of substitution, proxies for the undersigned
and authorizes them to represent and vote, as designated, all of the shares of
8 1/4% Cumulative Preferred Stock, Series A, of El Paso Tennessee Pipeline Co.,
held of record by the undersigned on March 1, 2000 at the Annual Meeting of
Stockholders to be held at the Four Seasons Hotel, 690 Newport Center Drive,
Newport Beach, California 92660 on April 28, 2000, and at any adjournment(s) or
postponements(s) of such meeting for the purposes identified on the reverse
side of this proxy and with discretionary authority as to any other matters
that may properly come before the Annual Meeting, including substitute nominees
if the named nominee for Director should be unavailable to serve for election,
in accordance with and as described in the Notice of Annual Meeting of
Stockholders and Proxy Statement. THIS PROXY WHEN PROPERLY EXECUTED WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF THIS
PROXY IS RETURNED WITHOUT DIRECTION BEING GIVEN, THIS PROXY WILL BE VOTED FOR
PROPOSAL 1.
- ------------ -------------
SEE REVERSE SEE REVERSE
SIDE (IMPORTANT - TO BE SIGNED AND DATED ON REVERSE SIDE) SIDE
- ------------ -------------
19
EL PASO TENNESSEE PIPELINE CO.
c/o EquiServe
P.O. Box 8040
Boston, MA 02266-8040
DETACH HERE
PLEASE MARK
VOTES AS IN
[X] THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
1. Election of Director.
NOMINEE: Kenneth L. Smalley
WITHHOLD
FOR AUTHORITY TO VOTE
THE NOMINEE FOR THE NOMINEE
LISTED ABOVE [ ] [ ] LISTED ABOVE
MARK HERE FOR COMMENTS [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Please sign exactly as your name(s) appear(s)
hereon. All holders must sign. When signing in a
fiduciary capacity, please indicate full title
as such. If a corporation or partnership, please
sign in full corporate or partnership name by
authorized person.
Signature: Date: Signature: Date:
------------------- -------- ------------------- --------