SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[x] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
NEW CENTURY ENERGIES, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction: 5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0- 11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement no.:
3) Filing Party:
4) Date Filed:
<PAGE>
[GRAPHIC OMITTED] New Century Energies, Inc.
1225 17th Street
P.O. Box 840
Denver, Colorado 80201-0840
(303) 571-7511 Telephone
March 29, 1999
Dear Shareholder:
You are invited to attend the Annual Meeting of Shareholders (the "Meeting")
of New Century Energies, Inc. The 1999 Meeting will be held:
DATE: May 11, 1999
TIME: 10:00 A.M., Central Daylight Time
PLACE: Ambassador Hotel
Rio Grande Ballroom
3100 I-40 West
Amarillo, Texas
The attached Notice of Annual Meeting of Shareholders and Proxy Statement
cover the formal business of the Meeting. The Meeting will consider the election
of four "Class II Directors," the approval of independent public accountants
and, if presented, one shareholder proposal and such other matters as may
properly come before the Meeting. The accompanying Proxy Statement contains a
discussion of the matters to be considered. At the Meeting, your management will
report on the operations of the Company and the Directors and Officers of the
Company will respond to questions that shareholders may have.
The Board of Directors encourages you to promptly vote, which indicates your
interest in the Company's affairs. This year most shareholders will have a
choice of voting by telephone using the instructions enclosed or by returning
the enclosed Proxy Card. Check your proxy card or the information forwarded by
your bank, broker or other holder of record to see if the telephone voting
option is available to you. A toll-free telephone number is provided for your
convenience on the instructions enclosed, if voting by telephone is available to
you. Otherwise, complete, date, sign and return your Proxy Card. Any shareholder
present at the Meeting may, nevertheless, vote personally on all matters with
respect to which such shareholder is entitled to vote.
Sincerely yours,
/s/ Bill D. Helton
-------------------
Chairman of the Board and
Chief Executive Officer
<PAGE>
NEW CENTURY ENERGIES, INC.
1225 17TH Street
P. O. Box 840
Denver, Colorado 80201-0840
Telephone number (303) 571-7511
------------------------------------
Notice of Annual Meeting of Shareholders
May 11, 1999
To the Shareholders of the Company:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of New Century Energies, Inc. will be held on the 11th day of May,
1999, at the Ambassador Hotel, Rio Grande Ballroom, 3100 I-40 West, Amarillo,
Texas, at 10:00 A.M., Central Daylight Time, for the purposes of (1) electing
four Class II Directors to the Board of Directors to serve for a three-year
term, (2) approving the appointment of Arthur Andersen LLP as independent public
accountants, (3) acting upon one shareholder proposal, if presented at the
Meeting, and (4) transacting such other business as may properly come before the
Meeting or any adjournment or adjournments thereof. If elected, the Class II
Directors will serve until the 2002 Annual Meeting of Shareholders and, if
appointed, Arthur Andersen LLP will serve until the 2000 Annual Meeting of
Shareholders.
The holders of record of Common Stock at the close of business on March
15, 1999, will be entitled to vote at the Meeting and at any adjournments
thereof. Proxy solicitation material is being mailed to shareholders commencing
on or about March 29, 1999.
By order of the Board of Directors.
Dated: March 29, 1999.
/s/ Cathy J. Hart
----------------------
CATHY J. HART
Secretary
Please vote now, by telephone (if that option is available to you) or by
returning the enclosed proxy card, even if you presently plan to attend the
Meeting. Telephone voting instructions are enclosed for those shareholders with
that option and who prefer the convenience. Otherwise, complete, date and sign
the enclosed proxy card now and mail it promptly in the self-addressed,
postage-paid envelope enclosed for that purpose. Any shareholder present at the
Meeting may, nevertheless, vote personally on all matters with respect to which
the shareholder is entitled to vote.
<PAGE>
PROXY STATEMENT
New Century Energies, Inc. ("NCE" or the "Company"), through its
subsidiaries, is principally engaged in the generation, purchase, transmission,
distribution and sale of electricity and in the purchase, transportation,
distribution and sale of natural gas. In addition, NCE has investments in a
number of diversified energy related businesses. The Company and its domestic
utility subsidiaries are subject to the regulatory provisions of the Public
Utility Holding Company Act of 1935. The utility subsidiaries are subject to
regulation by the Federal Energy Regulatory Commission and the state utility
commissions in the states in which each utility subsidiary operates. NCE, a
Delaware corporation, became the holding company of Public Service Company of
Colorado ("PSCo") and Southwestern Public Service Company ("SPS") in a tax-free
"merger of equals" (the "Merger") in which PSCo and SPS became wholly-owned
subsidiaries of NCE on August 1, 1997.
This Proxy Statement is being mailed on or about March 29, 1999, to the
holders of common stock of NCE in connection with the solicitation by and on
behalf of the Board of Directors (the "Board") of the Company, of proxies to be
voted at the Annual Meeting of Shareholders of the Company to be held on May 11,
1999, at the time and place and for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders and at any and all adjournments of such
meeting. The Company's Summary Annual Report to Shareholders and the 1998
Financial Report for the year ended December 31, 1998, accompany the mailing of
this Proxy Statement.
At March 15, 1999, NCE had outstanding 114,924,967 shares of Common Stock,
par value $1 per share, entitled to one vote per share. The Board has
established March 15, 1999, as the record date for the determination of
shareholders entitled to vote at the Meeting and at any and all adjournments
thereof.
In accordance with Delaware Law and the Bylaws of the Company, a majority
of the shares entitled to vote shall constitute a quorum at a meeting of
shareholders of the Company. Abstentions and broker non-votes will be counted as
shares present for the purpose of establishing a quorum. If a quorum is present,
approval of each of the items discussed herein to be voted on at the Meeting,
except for item 1, discussed below, will require the affirmative vote of a
majority of the shares represented at the Meeting and entitled to vote on the
matter. For purposes of determining whether items 2 and 3 have been approved by
shareholders, abstentions will have the same effect as a vote against items 2
and 3 while broker non-votes will be treated as shares not entitled to vote and,
therefore, will have no effect on the outcome of these items. As presented in
item 1, the Directors shall be elected by a plurality of the votes cast at the
Meeting. "Withheld" votes are not included in the total vote cast for a nominee
for purposes of determining whether a plurality was received and therefore will
have no negative effect on the outcome of item 1.
The entire cost of the solicitation of proxies will be borne by the
Company. The Company will make solicitations primarily by use of the mails.
Additional solicitation of proxies of brokers, banks, nominees and institutional
investors will be made pursuant to the special engagement of Beacon Hill
Partners, Inc., at a cost to the Company of approximately $4,000, plus
out-of-pocket expenses. If necessary to obtain reasonable representation of
shareholders at the Meeting, solicitations by the Company may also be made by
telephone, facsimile, or personal interview. The Company will request brokers,
banks or other persons holding stock in their names or in the names of their
nominees to forward proxy material to the beneficial owners of such stock or
request authority for the execution of the proxies and will reimburse such
brokers or other persons for their expenses in so doing.
A proxy card is enclosed for use at the Meeting. Any shareholder voting
via telephone or signing a proxy has the power to revoke the proxy at any time
before the authority granted therein is exercised.
The Board urges shareholders to vote promptly. Most shareholders have a
choice of voting by using a toll-free telephone number or by returning their
proxy card. Check your proxy card or the information forwarded by your bank,
broker or other holder of record to see which options are available to you.
1
<PAGE>
ELECTION OF DIRECTORS
ITEM 1 ON PROXY CARD
The Board is divided into three classes (Class I, Class II, and Class
III), with all classes as nearly equal in number as possible. One class of
directors is elected at each annual meeting of shareholders for a three-year
term. As listed below, four directors have been nominated by the Board for
election as Class II directors at the Annual Meeting for a term of three years.
In accordance with the age requirements contained in the Corporate Guidelines,
Will F. Nicholson, Jr., who becomes 70 years old in 1999, is retiring from the
Board after 18 years of distinguished service to PSCo and NCE.
UNLESS OTHERWISE DIERECTED, SHARES REPRESENTED BY AN EXECUTED PROXY, EITHER
BY TELEPHONE OR ON THE FORM ENCLOSED, WILL BE VOTED FOR THE NOMINEES NAMED
BELOW. If a nominee becomes unavailable for any reason or if a vacancy should
occur before the election, the shares will be voted for another person in the
discretion of the persons named in the proxy.
Certain information is set forth below concerning the nominees (Messrs.
Forbess, Helton, Moreno and Powers) and the ten directors whose terms of office
will continue after the Meeting.
<TABLE>
<CAPTION>
NOMINEES FOR
CLASS II DIRECTORS
(Terms Expire in year 2002)
First
Year
Served Principal Occupation and
as Business Experience;
Name and Age Director Other Directorships
- --------------------------------------------------------------------------------
<S> <C> <C>
Giles M. Forbess [a][c] 1997 Chairman (1970 to present) and President and
63 Chief Operating Officer (1970 to 1998),
Benton Oil Company, Lubbock, Texas;
Chairman (1970 to present) and President (1970
to 1997), Petroleum Transport, Inc.,
Lubbock, Texas;
Director, State National Bank of West Texas,
Lubbock, Texas, 1996 to present;
Director, Southwestern Public Service Company,
Amarillo, Texas, 1991 to 1997.
Bill D. Helton 1997 Chairman, Director and Chief Executive Officer,
60 New Century Energies, Inc., Denver, Colorado,
1997 to present;
Chairman and Director, Public Service Company
of Colorado, Denver, Colorado, 1997 to
present;
Chairman (1991 to present), Director (1990 to
present) and Chief Executive Officer (1990 to
1997), Southwestern Public Service Company,
Amarillo, Texas;
Chairman and Director, Cheyenne Light, Fuel and
Power Company, 1997 to present;
Chairman and Director, NC Enterprises, Inc. and
subsidiaries, 1997 to present;
Chairman and Director, New Century Services,
Inc., 1997 to present.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NOMINEES FOR
CLASS II DIRECTORS
(Terms Expire in year 2002)
First
Year
Served Principal Occupation and
as Business Experience;
Name and Age Director Other Directorships
- --------------------------------------------------------------------------------
<S> <C> <C>
Albert F. Moreno 1999 Senior Vice President and General Counsel (1996
55 to present), Chief Counsel (1994 to 1996) and
Deputy General Counsel (1985 to 1994), Levi
Strauss & Co., San Francisco, California.
J. Michael Powers [c] 1997 President, Powers Masonry Supply, Cheyenne,
56 Wyoming and Fort Collins, Colorado, 1974 to
present;
President, Powers Products Company (a specialty
construction company), Cheyenne, Wyoming and
Denver, Colorado, 1974 to present;
Director, American National Bank, Cheyenne,
Wyoming, 1992 to present;
Commissioner, Wyoming Game and Fish Commission,
1997 to present;
Director, Public Service Company of Colorado,
Denver, Colorado, 1978 to 1997.
</TABLE>
<TABLE>
<CAPTION>
CONTINUING DIRCTORS
CLASS III DIRECTORS
(Terms Expire in year 2000)
First
Year
Served Principal Occupation and
as Business Experience;
Name and Age Director Other Directorships
- --------------------------------------------------------------------------------
<S> <C> <C>
R. R. Hemminghaus[f][g] 1997 Chairman (1987 to present) and Chief Executive
Officer (1987 to 1998), Ultramar Diamond
62 Shamrock Corporation, San Antonio, Texas;
Chairman, Federal Reserve Bank of Dallas,
Texas, 1994 to present;
Director, Luby's Cafeterias, Inc., San
Antonio, Texas, 1989 to present;
Director, Southwest Research Institute, San
Antonio, Texas, 1999 to present;
Director, Southwestern Public Service Company,
Amarillo, Texas, 1994 to 1997.
J. Howard Mock [a][g] 1997 Chairman and Chief Executive Officer, Jaynes
57 Corporation (general contracting firm),
Albuquerque, New Mexico, 1988 to present;
Chairman, Colorado Jaynes Construction
Company, Durango and Denver, Colorado, 1996
to present;
Advisory Director, Norwest Banks New Mexico,
Albuquerque, New Mexico, 1994 to present;
President, Associated General Contractors of
America, Washington D.C., 1997 to 1998;
Chairman, Banes General Contractors, El Paso,
Texas, 1988 to 1997;
Director, Southwestern Public Service Company,
Amarillo, Texas, 1992 to 1997.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
First
Year
Served Principal Occupation and
as Business Experience;
Name and Age Director Other Directorships
- --------------------------------------------------------------------------------
<S> <C> <C>
Rodney E. Slifer [a] 1997 Partner, Slifer, Smith & Frampton/Vail
64 Associates Real Estate, Vail, Colorado, 1994
to present;
Partner, Slifer, Smith & Frampton, Vail,
Colorado, 1989 to 1994;
Director, Alpine Banks of Colorado, 1983 to
present;
Director, Public Service Company of Colorado,
Denver, Colorado, 1988 to 1997.
W. Thomas Stephens 1997 President, Chief Executive Officer and
[e][h] Director, MacMillan Bloedel Ltd. (Canadian
56 manufacturer of building materials, paper
and packaging), 1997 to present;
Chairman (1990 to 1996), President and Chief
Executive Officer (1986 to 1996), Manville
Corporation, Denver, Colorado;
Director, Putnam Securities, 1997 to present;
Director, Qwest Communications International,
Inc., 1997 to present;
Director, Public Service Company of Colorado,
Denver, Colorado, 1989 to 1997.
Robert G. Tointon 1997 President, Phelps-Tointon, Inc. (specialty
[e][g] construction contractor and manufacturer),
65 Greeley, Colorado, 1989 to present;
Director, Writer Corporation, Denver,
Colorado, 1992 to present;
Director, Public Service Company of Colorado,
Denver, Colorado, 1988 to 1997.
</TABLE>
<TABLE>
<CAPTION>
CLASS I DIRECTORS
(Terms Expire in year 2001)
First
Year
Served Principal Occupation and
as Business Experience;
Name and Age Director Other Directorships
- --------------------------------------------------------------------------------
<S> <C> <C>
Wayne H. Brunetti 1997 Vice Chairman, President and Chief Operating
56 Officer, New Century Energies, Inc., Denver,
Colorado, 1997 to present;
Vice Chairman (1997 to present), President
(1994 to present), Chief Executive Officer
(1997 to present) and Director (1994 to
present), Public Service Company of Colorado
and subsidiaries, Denver, Colorado;
Vice Chairman, Chief Executive Officer and
Director, Southwestern Public Service
Company, Amarillo, Texas, 1997 to present;
Vice Chairman and Chief Executive Officer
(1997 to present), Chairman (1997) and
Director (1994 to present) Cheyenne Light,
Fuel and Power Company;
Vice Chairman, President, Chief Executive
Officer and Director, NC Enterprises, Inc.
and subsidiaries, 1997 to present;
Vice Chairman, President, Chief Executive
Officer and Director, New Century Services,
Inc., 1997 to present;
Chairman (1997 to present), President (1995 to
present) and Director (1994 to present),
WestGas InterState, Inc.;
President and Chief Executive Officer,
Management Systems International, Boca Raton,
Florida, 1991 to 1994.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
First
Year
Served Principal Occupation and
as Business Experience;
Name and Age Director Other Directorships
- --------------------------------------------------------------------------------
<S> <C> <C>
C. Coney Burgess [c][e] 1997 Chairman and President, Burgess-Herring Ranch
61 Company, Amarillo, Texas, 1974 to present;
Chairman and President, Chain-C, Inc.
(agricultural firm), Amarillo, Texas, 1968
to present;
Chairman, Herring Bancshares Inc. (a Delaware
Bank Holding Company), Altus, Oklahoma, 1992
to present;
Chairman, Herring Bancorp, Inc., Vernon,
Texas, 1991 to present;
Director, Herring National Bank, Clarendon,
Texas, 1993 to present;
Director, Herring National Bank, Vernon,
Texas, 1972 to present;
President and Director, Monarch Trust Company,
Amarillo, Texas, 1975 to present;
Director, Southwestern Public Service Company,
Amarillo, Texas, 1994 to 1997.
Danny H. Conklin [d][e] 1997 President (1999 to present) and Partner (1960
64 to 1998), Philcon Development Co. (oil and
gas production and exploration), Amarillo,
Texas;
Director, First National Bank of Amarillo,
Amarillo, Texas, 1997to present;
Chairman (1999 to present) and Director (1998
to present), The Don & Sybil Harrington
Foundation;
Director, Parallel Petroleum Corporation,
Midland, Texas, 1983 to 1999;
Director, Southwestern Public Service Company,
Amarillo, Texas, 1988 to 1997.
Gayle L. Greer [b] 1997 Co-Founder/Principal, GS2, Inc., Denver,
57 Colorado, 1998 to present;
Senior Vice President, Time Warner
Communications, Denver, Colorado, 1997 to
1998;
Senior Vice President (1996 to 1997) and Group
Vice President (1984 to 1996), Time Warner
Cable, Denver, Colorado;
Director, ING - North America, 1996 to present;
Director, Public Service Company of Colorado,
Denver, Colorado, 1986 to 1997.
A. Barry Hirschfeld [c] 1997 President, A. B. Hirschfeld Press, Inc.,
Denver, Colorado, 1984 to present;
56 Vice President, Colorado Carphone Corporation,
1983 to present;
Director, Public Service Company of Colorado,
Denver, Colorado, 1988 to 1997.
</TABLE>
5
<PAGE>
NOTES
The age of each Director was as of December 31, 1998.
(a) Member of Nominations and Civic Responsibility Committee.
(b) Chairperson of Nominations and Civic Responsibility Committee.
(c) Member of Audit Committee.
(d) Chairperson of Audit Committee.
(e) Member of Finance Committee.
(f) Chairperson of Finance Committee.
(g) Member of Compensation Committee.
(h) Chairperson of Compensation Committee.
The NCE Board of Directors held eight meetings in 1998. All of the above
Directors attended 75% or more of the aggregate of NCE meetings of the Board and
the committees on which they served in 1998. In accordance with the Bylaws of
the Company, the Board has standing committees, which facilitate the carrying
out of its responsibilities.
The Nominations and Civic Responsibility Committee, which held three
meetings in 1998, is responsible for nominating new members to the NCE Board of
Directors. This committee also oversees the Company's procedures for the
compliance with its legal obligations, its relationship with the communities in
which it operates and its corporate governance procedures. Shareholders wishing
to nominate candidate(s) for future consideration by the Nominations and Civic
Responsibility Committee may do so by writing to the Secretary of the Company,
at the address shown on the cover of this proxy, giving the candidate's name,
biographical data and qualifications, along with a statement acknowledging their
willingness to serve. Nominations must be received as described in the
Shareholder Proposals for 2000 Annual Meeting.
The Audit Committee held four meetings during 1998. The functions of the
Audit Committee are to select and recommend to the Board a firm of independent
public accountants to audit the books and records of NCE and its subsidiaries
annually; to review the scope of such audit; to receive and review the audit
reports and recommendations; to transmit such audit reports and recommendations
to the Board; to review the internal control procedures of NCE and its
subsidiaries and recommend to the Board any necessary changes in such
procedures. Additionally, the Audit Committee assists the Board in fulfilling
its responsibilities related to the accounting policies and reporting practices
of NCE and its subsidiaries and adequacy of disclosures to shareholders.
The Compensation Committee, which met four times during 1998, reviews the
performance of and recommends salaries and other forms of compensation for all
executive officers. The Compensation Committee annually reviews the process of
establishing salaries and wages of Company employees; reviews the process of
management development and long-range planning for Company development; and
reviews and makes recommendations regarding fees and other compensation for
outside Directors of the Board. In addition, the Compensation Committee is
responsible for the oversight of the retirement, savings and welfare plans
(except for the Finance Committee responsibilities described below), the NCE
Omnibus Incentive Plan, the appointment of executive officers responsible for
the day-to-day management of such plan, and the approval of the guidelines for
the granting of awards under the NCE Omnibus Incentive Plan.
The Finance Committee, which held five meetings in 1998, reviews
management's strategic financial plans for the Company, makes recommendations
regarding that strategy to the Board and reviews and approves strategic
financial goals, including new business opportunities for NCE. It also oversees
the financial management of funds of the retirement, savings and welfare plans
for employees and executive officers, which includes: selection of investment
objectives, monitoring of investments, establishing policy guidelines, and
selection and evaluation of trustees and investment managers for these plans.
The Committee receives regular reports on the status of these plans and reports,
at least annually, to the Board.
6
<PAGE>
Security Ownership of Management and Directors
as of January 29, 1999 (a)
Title of Class Name of Beneficial Owner Amount and % of
(b) nature of Class
beneficial (f)
ownership
(c)(d)
- --------------------------------------------------------------------------------
Common Stock Wayne H. Brunetti (1) 372,343 (e)
Common Stock C. Coney Burgess (2) 3,003
Common Stock Danny H. Conklin (3) 6,291
Common Stock Giles M. Forbess 2,412
Common Stock Gayle L. Greer 1,100
Common Stock Bill D. Helton (4) 326,760 (e)
Common Stock R. R. Hemminghaus 866
Common Stock A. Barry Hirschfeld 4,820
Common Stock J. Howard Mock 1,361
Common Stock Albert F. Moreno (elected 0
January 1, 1999)
Common Stock Will F. Nicholson, Jr. (5) 4,022
Common Stock J. Michael Powers 6,012
Common Stock Rodney E. Slifer 7,846
Common Stock W. Thomas Stephens 5,383
Common Stock Robert G. Tointon (6) 6,265
Common Stock Richard C. Kelly (7) 110,556 (e)
Common Stock Paul J. Bonavia 88,400 (e)
Common Stock David M. Wilks (8) 100,027 (e)
Common Stock All the above and other 1,241,297 (e) 1.07%
Executive Officers as a Group
(23 persons)
Notes
- -----
(a) As of January 29, 1999, the Company is not aware of any persons who
beneficially own more than 5% of the Company's Common Stock.
(b) Common Stock listed in the table represents the Company's Common Stock, $1
par value.
(c) The common shares represented above include those shares, if any, held under
the NCE Employees' Savings and Stock Ownership Plan.
(d) Excludes share equivalents held by Ms. Greer (973), Mr. Hemminghaus
(2,194), Mr. Mock (2,738), Mr. Powers (926), Mr. Slifer (1,853), Mr.
Stephens (1,946) and Mr. Tointon (587) pursuant to the NCE Directors'
Voluntary Deferral Plan. These share equivalents have no voting or
investment powers.
(e) The number of shares includes those which the following have the right to
acquire as of January 29, 1999, through the exercise of options, currently
exercisable or exercisable within 60 days, granted under the NCE Omnibus
Incentive Plan and the predecessor PSCo Omnibus Incentive Plan and the SPS
1989 Stock Incentive Plan: Mr. Helton, 296,000 shares; Mr. Brunetti, 348,334
shares; Mr. Kelly, 100,000 shares; Mr. Bonavia, 88,000 shares; Mr. Wilks,
87,543 shares, and all executive officers as a group, 1,095,492 shares.
7
<PAGE>
(f) As of January 29, 1999, the percentage of shares beneficially owned by any
Director or Named Executive Officer does not exceed one percent of the
Company's Common Stock.
Unless otherwise specified, each Director and Named Executive Officer has sole
voting and investment power with respect to the shares indicated.
(1) Includes 23,534 shares which Mr. Brunetti and his wife share voting and
investment powers.
(2) Includes 1,783 shares held by Herring Bancorp, Inc., of which Mr. Burgess
is the majority shareholder.
(3) Includes 100 shares owned by Mr. Conklin's wife, 443 shares held by Philcon
Development Co. Retirement Plan and Trust, and 475 shares held in a trust
of which Mr. Conklin is trustee and his sons are beneficiaries.
(4) Includes 716 shares held in trusts for the benefit of Mr. Helton's
grandchildren. Mr. Helton's wife retains the right to the corpus of the
trusts upon their termination. Mr. Helton disclaims beneficial ownership of
the shares held in the trusts. Includes 23,243 shares which Mr. Helton and
his wife share voting and investment powers.
(5) Mr. Nicholson's wife owns 500 of these shares; Mr. Nicholson disclaims
beneficial ownership of those shares.
(6) Includes 5,000 shares which Mr. Tointon shares voting and investment power
with Phelps-Tointon, Inc., of which Mr. Tointon is President and Chief
Executive Officer.
(7) Mr. Kelly's wife owns 263 of these shares; Mr. Kelly disclaims beneficial
ownership of those shares.
(8) Includes 9,294 shares which Mr. Wilks shares voting and investment power
with his wife or mother.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3, 4 and 5 and written representations
furnished to the Company, the Company believes that all Directors and Officers
filed in a timely manner their 1998 reports required under Section 16(a) of the
Securities Exchange Act of 1934, as amended.
8
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Report of the Compensation Committee on Executive Compensation
The executive compensation and benefit programs of the Company are
administered by the Compensation Committee of the Board of Directors (the
"Committee"). The Committee is composed of W. Thomas Stephens (Chairperson), R.
R. Hemminghaus, Robert G. Tointon, Will F. Nicholson, Jr., and J. Howard Mock,
all of whom are independent, "non-employee directors" of the Company as defined
by Section 16(b) of the Securities Exchange Act of 1934 (the "1934 Act"), and
"outside directors" as defined within the meaning of Section 162(m) of the
Internal Revenue Code of 1986. The Board has delegated to the Committee the
responsibility of establishing the Company's compensation philosophy, as well as
the compensation package for the Chairman and Chief Executive Officer and the
other named executives of the Company. This includes establishing and
administering the Company's base salary program, executive annual and long-term
incentive programs, and executive benefit programs. The Committee also
recommends and administers compensation and benefit programs for all Company
executives and key talent.
Compensation Philosophy
The Committee has goals of attracting, retaining, and motivating the
outstanding executive talent needed to deliver superior returns to shareholders
and provide the highest quality of service to customers.
The Company's executive compensation philosophy uses a combination of
salary and performance-based (incentive) compensation, delivered through annual
and long-term incentives, to align management's interests with those of
shareholders. This philosophy results in a compensation mix for senior officers
in which annual and long-term incentives account for more than 50 percent of the
executives' annual compensation. In addition, the Company's compensation program
helps to reinforce management's link to shareholders by establishing plans that
compensate executives based on corporate, business unit, and individual
performance goals. Finally, significant use of equity-based incentives
encourages management to respond to business challenges and opportunities as
owners as well as employees.
In establishing a compensation strategy for the Company, the Committee
worked with an independent, nationally recognized compensation and benefits
consulting firm and took into account several factors:
- The need to attract talent from broader markets as the utility industry
changes, to retain individuals of outstanding ability and to motivate such
individuals to achieve superior performance.
- The desire to strongly link management pay to both annual and long-term
Company performance.
- The desire to align management interests with those of shareholders.
As a result, the Committee has approved a compensation strategy designed
to meet these objectives and encourage executives to achieve in a rapidly
evolving competitive environment. Base salaries are set to the median of utility
industry levels, while annual and long-term incentive opportunities are targeted
to broader market (i.e., general industry) levels to provide an incentive for
executives to optimize the Company's performance. In addition, stock-based
compensation will become a more significant portion of overall executive pay.
Base salaries are to be reviewed annually, with increases tied to such factors
as individual performance, the executive's duties and responsibilities,
financial results, and changes in the marketplace. However, the overall
opportunity for pay increases through base salary will be de-emphasized, so that
the majority of each executive's opportunity for increased compensation will be
delivered through incentive-based pay.
The Company's incentive compensation program, as administered under the
New Century Energies, Inc. Omnibus Incentive Plan, which was approved by
shareholders in 1998, includes an annual incentive program and a long-term
incentive program. The annual incentive program is based on corporate, business
unit and individual performance. The long-term incentive program is comprised of
two parts that are structured to align with shareholder interests: a) options to
purchase common stock ("Stock Options") and b) a performance-based cash
9
<PAGE>
plan. The performance-based cash plan portion of the long-term incentive program
is based on total shareholder return relative to all major publicly traded
United States utility companies.
The 1993 Omnibus Budget Reconciliation Act ("OBRA") included several
provisions applicable to executive compensation earned during 1994 and later.
One of OBRA's provisions resulted in the enactment of Section 162(m) of the
Internal Revenue Code of 1986, as amended. This section generally limits the
income tax deductions of publicly traded companies to the extent that the total
compensation for any officer named in the proxy statement exceeds $1 million in
any year, unless such compensation is performance-based. The Committee has
conducted a review of these provisions of OBRA and the potential impact on the
Company in 1999. Aggregate compensation levels did not exceed $1 million for any
of the Named Executive Officers in 1998. For future years, the Committee intends
to continue to base its executive compensation decisions principally on
corporate, business unit and individual performance, with some subjective
evaluations and to award compensation that meets the requirements of
excludability under OBRA.
Base Salaries
Base salaries for executives are reviewed annually by the Committee. In
general, salaries are targeted at the median (50th percentile) of similarly
sized companies in the utility industry. The Committee believes that this
strategy, along with incentives at or slightly below general industry levels,
currently allows the Company to attract and retain top quality executive talent.
However, the Committee will continue to monitor this strategy in the near future
as the market for executive talent in the industry intensifies along with
competition. As mentioned above, in determining base salary increases, the
Committee will take into account such factors as individual and Company
performance, executive responsibilities and market characteristics.
In determining executive salary levels, data was collected primarily from
Edison Electric Institute's annual Executive Compensation Survey. This survey
contains data from almost all of the companies included in the Standard and
Poor's Electric Utilities Index, which is used in the Cumulative Total Return
graph. Survey data has been size-adjusted based on NCE's company and business
unit sales volumes using regression analysis, and reflects both domestic
operations as well as the Company's 50 percent ownership of Yorkshire Power
Group Ltd.
Messrs. Helton, Brunetti and Bonavia have employment agreements with the
Company that provide for minimum base salaries during 1998, of $635,000,
$540,000 and $270,000, respectively, as described later in "Employment
Agreements and Change in Control Agreements." None of the Named Executive
Officers received an increase in base salary in 1998.
Annual Incentives
Executives and key employees have the opportunity to earn annual incentive
awards under the Company's annual incentive program. These awards are based on
the achievement of corporate financial, business unit operational and individual
goals, which are designed to benefit shareholders and customers, focus employee
attention on pre-established objectives, and recognize individual performance
while fostering team performance. In 1998, awards were based on corporate,
business unit and individual performance. Business unit goals were unique to
each unit and were designed to encourage the achievement of objectives, such as
customer service, service reliability, budget compliance and revenue growth.
Target annual incentive awards as a percent of base salary were set for all
Company officers, and range from 60 percent of salary for the Chairman and Chief
Executive Officer and Vice Chairman, President and Chief Operating Officer to 35
percent of salary for other Company officers. These levels are in line with the
median of general industry. Maximum awards may be up to two times the target
awards, resulting in awards ranging from 120 percent of base salary for the
Chairman and Chief Executive Officer and Vice Chairman, President and Chief
Operating Officer to 70 percent of salary for other executives.
The annual incentive formula is calculated based on pre-determined
performance measures. For Messrs. Helton and Brunetti, the formula is weighted
100% to the attainment of corporate financial goals. For the other Named
Executives, the formula is weighted 67% to the attainment of corporate financial
goals and 33% to the
10
<PAGE>
attainment of business unit operational goals. With the approval of the
Committee, an award may be multiplied by a Leadership Rating factor from zero to
two.
In 1998, for all executives, the corporate financial measure was basic
earnings per share (EPS). Target EPS for the Company was $3.14, the achievement
of which would have resulted in target awards under the corporate financial
portion of the plan. EPS of $2.83 was established as a threshold below which no
awards would be paid. The Company's actual EPS for 1998 was $3.06. Therefore,
all Named Executive Officers earned 87.6% of the target award for corporate
financial goals, before any applicable weighting.
Messrs. Helton and Brunetti's awards are weighted 100% to the attainment
of corporate financial goals, which earned them 87.6% of their target awards for
this plan, adjusted for their individual Leadership Rating factor. The other
Named Executive Officers earned awards under the business unit operational goals
ranging from 80.8% to 100%. When weighted at 33% and combined with the corporate
financial goal achievement, the other Named Executive Officers earned awards
ranging from 91.7% to 93.9% of target, adjusted for their individual Leadership
Rating factor. The annual incentive compensation is disclosed in the Summary
Compensation Table.
Executives may elect to receive annual incentive awards in shares of
Common Stock of the Company, in order to meet the Company's defined share
ownership guidelines, discussed below, or to increase ownership levels in the
Company.
Long-term Incentives
The long-term incentive program is designed to align management's
interests with those of shareholders and to ensure that a significant percentage
of executive compensation is performance-based. The long-term incentive program
utilizes two components: a) Stock Options and b) a performance-based cash plan,
called the Value Creation Plan ("VCP"). Approximately two-thirds of each
executive's long-term incentive opportunity are to be delivered through Stock
Options, with one-third of the long-term incentive program opportunity being
delivered through the VCP. The annualized value of the long-term incentive
opportunity is targeted to provide total long-term incentive compensation at
approximately the second quartile (25th to 50th percentile) of general industry.
Total executive long-term incentive opportunities ranged from 105 percent of
salary for the Chairman and Chief Executive Officer and Vice Chairman, President
and Chief Operating Officer to 35 percent of salary for other executives.
Stock Options
The first component of the Company's long-term incentive program is Stock
Options, which seek to link the interests of executives with improvements in
long-term shareholder value creation. Stock Options vest one year after the date
of grant. Once vested, they may be exercised at any time during a ten-year
period following the date of grant. The actual number of Stock Options and the
grant price of the Stock Options granted to executives is based on the fair
market value of NCE Common Stock on the date of grant, competitive practices,
and individual contributions and position. No stock options were granted in 1998
under the long-term incentive program.
VCP
The VCP provides executives with the potential to earn awards based upon
Company performance relative to peer companies on a single performance measure:
Total Shareholder Return ("TSR"). TSR will typically be measured cumulatively
over a three-year period using overlapping cycles. Company TSR will be measured
against all major publicly traded United States utility companies. At the end of
each three-year performance period, executives will receive an award that
correlates the extent to which the Company's TSR outperforms or underperforms
the peer group. Target awards will be provided for performance at the 50th
percentile of the peer group. Awards for performance above the 50th percentile
would be adjusted to double the target award for 75th percentile performance,
and could be up to three times target award depending on the
11
<PAGE>
degree to which superior returns are delivered to shareholders. Smaller awards
may occur for performance below the 50th percentile, with no awards for
performance below the 40th percentile.
No VCP payments were made during 1998. On January 1, 1998, the Named
Executive Officers, together with other executives, were awarded VCP incentive
opportunities, which will be measured over the three-year period ending December
31, 2000.
Chief Executive Officer Compensation
Bill D. Helton currently serves as Chairman of the Board and Chief
Executive Officer of New Century Energies, Inc. Mr. Helton's base salary of
$635,000 annually was determined in accordance with the Company's base salary
philosophy, as described above, and his employment agreement. For 1998, Mr.
Helton received an annual incentive award in the amount of $333,756 in
accordance with the Company's incentive compensation philosophy, as described
above. No stock options were granted to Mr. Helton during 1998 and no VCP
payments were made under the plan described above. Mr. Helton was awarded, on
January 1, 1998, a VCP incentive opportunity, which will be measured over the
three-year period ending December 31, 2000 (see "Long-Term Incentive Plans -
Awards in Last Fiscal Year" ).
Stock Ownership Guidelines
The Committee believes that it is essential to align management's
interests with those of shareholders. In order to emphasize this belief, NCE
adopted stock ownership guidelines for executives who participate in the
Company's long-term incentive program. The Committee believes that linking a
significant portion of an executive's current and potential future net worth to
the Company's success, as reflected in stock price, ensures that executives have
a stake similar to that of Company shareholders. Such guidelines also encourage
the long-term management of the Company for the benefit of shareholders.
The share ownership guideline for each executive is directly related to
the executive's corporate position, with the most significant ownership
guidelines applying to the top two officers -- the Chairman of the Board and
Chief Executive Officer, and the Vice Chairman, President and Chief Operating
Officer. The target for these top two positions is three times base salary. The
guideline for Executive Vice Presidents and Senior Vice Presidents, which
include Messrs. Kelly, Bonavia and Wilks, is two times base salary. All other
executives have share ownership guidelines of one and one-half times base
salary. Each executive is expected to achieve the ownership guidelines within a
period of five years commencing on August 1, 1997, the effective date of the
Merger. Any shares that the executive is able to vote are included toward
compliance with the ownership guidelines.
W. Thomas Stephens, Chairperson
R. R. Hemminghaus
J. Howard Mock
Will F. Nicholson, Jr.
Robert G. Tointon
12
<PAGE>
The following tables set forth information concerning the total
compensation paid or awarded for 1998 to the Company's Chief Executive Officer
and each of the four most highly compensated executive officers serving as such
on December 31, 1998 (collectively, the "Named Executive Officers"). As set
forth in the footnotes, the data presented in this table and the tables that
follow include amounts paid to the Named Executive Officers in 1997 by NCE, as
well as PSCo and SPS for the period prior to the Merger:
<TABLE>
<CAPTION>
=============================================================================
Summary Compensation Table
=============================================================================
Name and Principal Year Annual Compensation Long-Term Compensation (c) All Other
Position Compensation
($) (e)
----------------------- --------------------------
Awards Payouts
------ -------
Salary($) Bonus($) Other Securities LTIP
(a) Annual Underlying Payouts
Compen- Options/ ($)
sation($) SAR's (#) (d)
(b) (c)
- -------------------------------------------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bill D. Helton 1998 635,003 333,756 24,875 0 0 25,881
Chairman of the 1997 455,837 78,363 271,092 300,000 0 27,524
Board and
Chief Executive
Officer
Wayne H. Brunetti 1998 540,002 283,824 9,000 0 0 35,939
Vice Chairman, 1997 435,853 104,994 3,750 314,400 231,726 27,304
President and
Chief Operating
Officer
Richard C. Kelly 1998 305,000 125,847 9,000 0 0 16,247
Executive Vice 1997 254,382 48,997 3,750 107,100 120,484 16,089
President and
Chief Financial
Officer
Paul J. Bonavia 1998 270,000 111,406 34,762 0 0 13,789
Senior Vice 1997 11,250 20,000 375 88,000 0 0
President and
General Counsel
David M. Wilks 1998 265,000 111,966 9,000 0 0 14,445
President and 1997 238,958 41,285 24,809 87,000 0 9,618
Chief Operating
Officer of SPS and
Executive Vice
President of PSCo
and New Century
Services, Inc.
</TABLE>
(a) The amounts in this column for 1998 were earned under the annual incentive
program described under "Annual Incentives."
The amounts for 1997 for Messrs. Helton and Wilks were based on the average of
their two highest bonuses paid by SPS in fiscal years 1993, 1994 and 1995, in
accordance with their employment agreements. The amounts paid to Messrs.
Brunetti and Kelly represented 7/12 of the target award earned under the PSCo
Omnibus Incentive Plan, which were paid in accordance with their Change in
Control agreements.
Mr. Bonavia was hired December 15, 1997. The amount for 1997 represents an
amount paid in accordance with his Employment Agreement, described later in
"Employment Agreements and Change in Control Agreements."
(b) The amounts shown in this column for 1998 include relocation benefits of
$25,762 for Mr. Bonavia and the reimbursement of certain taxes related to the
exercise of NCE stock options of $15,875 for Mr. Helton. Also, the amounts shown
in this column for Messrs. Helton, Brunetti, Kelly, Bonavia and Wilks include
flexible perquisite allowance benefits of $9,000 each.
The amounts shown for 1997 include relocation benefits of $238,125 for Mr.
Helton and the reimbursement of certain taxes related to the exercise of SPS
stock options for Messrs. Helton and Wilks ($24,639 and $16,042, respectively).
Also, the amounts for Messrs. Helton, Brunetti, Kelly, Bonavia and Wilks include
flexible perquisite or automobile allowances ($8,328, $3,750, $3,750, $375 and
$8,767, respectively).
13
<PAGE>
(c) During 1998, no stock option awards were made to any of the Named Executive
Officers.
The amounts shown for 1997 include stock option awards made to the Named
Executive Officers under the NCE Omnibus Incentive Plan. These awards
represented three-year front-loaded grants, such that three year's worth of
annual stock option grants were awarded to each executive with no option grants
expected to be awarded to executives in 1998 and 1999. Additionally, the amounts
include stock option awards made under the PSCo Omnibus Incentive Plan for
Messrs. Brunetti and Kelly (14,400 and 7,100, respectively).
(d) No performance cash awards under the VCP were paid during 1998.
The amounts shown for 1997 for Messrs. Brunetti and Kelly represent dividend
equivalent payments made under the PSCo Omnibus Incentive Plan, which vested in
connection with the Merger.
(e) The amounts represented in the "All Other Compensation" column reflect the
total of employer matching contributions made under the Company's employee
savings plans and non-qualified savings plans and taxable insurance premiums
paid by the Company:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Name Year Contributions Contributions Insurance Total
to the to the Premiums ($)
Employee Non-Qualified ($)
Savings Plans Savings Plans
($) ($)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bill D. Helton 1998 6,227 5,125 14,529 25,881
Wayne H. Brunetti 1998 7,400 15,550 12,989 35,939
Richard C. Kelly 1998 7,287 5,674 3,286 16,247
Paul J. Bonavia 1998 7,025 5,125 1,639 13,789
David M. Wilks 1998 4,982 5,425 4,038 14,445
</TABLE>
14
<PAGE>
============================================================================
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
============================================================================
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options/SARs at
Options/SARs FY-End ($) (a)
at FY-End (#)
--------------------------------
Name Shares Value Exercisable/ Exercisable/
Acquired Realized ($) Unexercisable Unexercisable
on
Exercise
(#)
============================================================================
Bill D. Helton 4,890 30,396 296,000/ 2,109,000/
2,671 43,580
Wayne H. Brunetti 4,000 80,250 348,334/ 2,850,365/
0 0
Richard C. Kelly 41,050 539,079 100,000/ 712,500/
0 0
Paul J. Bonavia 0 0 88,000/ 176,000/
0 0
David M. Wilks 0 0 87,543/ 628,734/
1,429 23,315
============================================================================
(a) Option values were calculated based on a $48.75 closing price of NCE Common
Stock, as reported on the New York Stock Exchange at December 31, 1998.
15
<PAGE>
================================================================================
Long-Term Incentive Plans - Awards in Last Fiscal Year (a)
================================================================================
Name Year Number Performance Estimated Future Payouts Under
of or Other Non-Stock Price-Based Plans
Shares, Period Until
Units Maturation or
or Payout
Other
Rights
================================
Threshold Target Maximum
($) (b) ($) ($)
- --------------------------------------------------------------------------------
Bill D. Helton 1998 222,250 1/1/98-12/31/00 0 222,250 666,750
1997 179,035 8/1/97-12/31/99 0 179,035 537,105
Wayne H. 1998 189,000 1/1/98-12/31/00 0 189,000 567,000
Brunetti 1997 152,250 8/1/97-12/31/99 0 152,250 456,750
Richard C. Kelly 1998 66,083 1/1/98-12/31/00 0 66,083 198,249
1997 53,234 8/1/97-12/31/99 0 53,234 159,702
Paul J. Bonavia 1998 58,500 1/1/98-12/31/00 0 58,500 175,500
1997 40,625 12/15/97-12/31/99 0 40,625 121,875
David M. Wilks 1998 57,417 1/1/98-12/31/00 0 57,417 172,251
1997 46,253 8/1/97-12/31/99 0 46,253 138,759
- --------------------------------------------------------------------------------
(a) The amounts in this table represent awards made under the VCP described
under "Long-term Incentives" in the Report of the Compensation Committee on
Executive Compensation.
(b) If the threshold or the 40th percentile is achieved, the payout could range
between zero and the target amount.
16
<PAGE>
The following table shows estimated aggregate pension benefits payable to
a covered participant from the qualified defined benefit plans maintained by NCE
and its subsidiaries and the NCE Supplemental Executive Retirement Plan (the
"SERP"). The Named Executive Officers are all participants of the SERP, and
participate in qualified defined benefit plans sponsored by the Company.
===========================================================================
Pension Plan Table
===========================================================================
Remuneration Years of Service
10 15 20 or more years
- ---------------------------------------------------------------------------
$125,000 $34,375 $51,563 $68,750
150,000 41,250 61,875 82,500
175,000 48,125 72,188 96,250
200,000 55,000 82,500 110,000
225,000 61,875 92,813 123,750
250,000 68,750 103,125 137,500
275,000 75,625 113,438 151,250
300,000 82,500 123,750 165,000
350,000 96,250 144,375 192,500
400,000 110,000 165,000 220,000
450,000 123,750 185,625 247,500
500,000 137,500 206,250 275,000
600,000 165,000 247,500 330,000
700,000 192,500 288,750 385,000
800,000 220,000 330,000 440,000
900,000 247,500 371,250 495,000
1,000,000 275,000 412,500 550,000
===========================================================================
The benefits listed in the Pension Plan Table are not subject to any
deduction or offset. The compensation used to calculate SERP benefits is base
salary plus annual incentive. Such covered compensation is reflected in the
Salary and Bonus columns of the Summary Compensation Table for 1998.
The SERP benefit accrues over 20 years and is equal to (a) 55% of the
highest three years covered compensation of the five years preceding retirement
or termination minus (b) the qualified plan benefit. The SERP benefit is payable
as an annuity for 20 years, or as a single lump-sum amount equal to the
actuarial equivalent present value of the 20-year annuity. Benefits are payable
at age 62, or as early as age 55 reduced 5% for each year that the benefit
commencement date preceeds age 62.
The estimated credited years of service under the SERP as of December 31,
1998, were as follows:
Mr. Helton 34
Mr. Brunetti 11
Mr. Kelly 31
Mr. Bonavia 1
Mr. Wilks 21
Notwithstanding any special provisions related to pension benefits
described under "Employment Agreements and Change in Control Agreements," the
Company has granted additional credited years of service to Mr. Brunetti for
purposes of SERP accrual. The additional credited years of service
(approximately seven) are included in the above table. Additionally, the Company
has agreed to grant full accrual of SERP benefits to Messrs. Brunetti and
Bonavia at ages 62 and 57 and 8 months, respectively, in the event they continue
to be employed by the Company until such age.
17
<PAGE>
Compensation of Directors
Each Director who is not an employee is paid a retainer of $60,000 per
annum. Committee Chairpersons are paid an additional retainer of $3,000 per
annum. For each Board meeting in excess of twelve per year, each non-employee
Director is paid an additional attendance fee of $1,000 per meeting. Directors
will have 50% or, at their election, more than 50% of retainer(s) and fees paid
in NCE Common Stock and the balance paid in cash. Directors may defer receipt of
all or a portion of such fees on a pre-tax basis under the "Directors' Voluntary
Deferral Plan" portion of the NCE Outside Directors Compensation Plan. Messrs.
Slifer, Stephens, Powers, Mock, Hemminghaus, and Ms. Greer elected to
participate in the Directors' Voluntary Deferral Plan, a non-qualified plan,
during 1998.
18
<PAGE>
Employment Agreements and Change in Control Agreements
The Company has entered into employment agreements with Messrs. Helton,
Brunetti and Bonavia. Messrs. Helton's and Brunetti's employment agreements
specify each will serve the Company for an initial period (the "Initial Period")
and for a further period (the "Secondary Period") (jointly referred to as the
"Employment Period"). The Initial Period began August 1, 1997 and ends January
31, 2000. The Secondary Period shall begin February 1, 2000 and end on May 31,
2001.
During the Initial Period, Mr. Helton serves as Chairman of the Board of
Directors and as Chief Executive Officer of the Company. During the Secondary
Period, Mr. Helton shall serve as Chairman of the Board. For the performance of
his duties and responsibilities for the positions detailed above, during the
Employment Period, Mr. Helton is entitled to a compensation package comprised of
a base salary, incentive compensation of both an annual and a long-term nature,
and various other benefits including participation in a supplemental executive
retirement plan, life insurance coverage providing a death benefit of not less
than two times his annual base salary and participation in all applicable
incentive, savings and retirement plans, practices, policies and programs of the
Company to the same extent as other senior executives of the Company. In all
instances, the compensation awarded Mr. Helton shall be at least equal to what
he would have received under similar plans and programs in effect at
Southwestern Public Service Company. If Mr. Helton's employment is terminated
during the Employment Period by the Company for reasons other than cause or
disability (as defined in the agreement) or if Mr. Helton terminates his
employment with the Company for good reason (as defined in the agreement) (i)
Mr. Helton shall receive his base salary, incentive compensation and certain
other benefits including continued accruals under the supplemental executive
retirement plan and life and medical benefits through the Employment Period;
(ii) restrictions on restricted stock shall lapse and all options shall be
vested; and (iii) if applicable, Mr. Helton shall receive a tax-free
reimbursement of any excise tax imposed under Code Section 4999. The Board of
Directors, upon the recommendation of the Compensation Committee of the Board,
is responsible for administering Mr. Helton's compensation.
During the Initial Period, Mr. Brunetti serves as Vice Chairman of the
Board of Directors and as President and Chief Operating Officer of the Company.
During the Secondary Period, Mr. Brunetti shall serve as Vice Chairman of the
Board and as President and Chief Executive Officer of the Company. For the
performance of his duties and responsibilities for the positions detailed above,
during the Employment Period, Mr. Brunetti is entitled to a compensation package
comprised of a base salary, incentive compensation of both an annual and a
long-term nature and various other benefits including participation in a
supplemental executive retirement plan, life insurance coverage providing a
death benefit of not less than two times his annual base salary and shall be
entitled to participate in all applicable incentive, savings and retirement
plans, practices, policies and programs of the Company to the same extent as
other senior executives of the Company. In all instances, the compensation
awarded Mr. Brunetti shall be at least equal to what he would have received
under similar plans and programs in effect at Public Service Company of
Colorado. If Mr. Brunetti's employment is terminated during the Employment
Period by the Company for reasons other than cause or disability (as defined in
the agreement) or if Mr. Brunetti terminates his employment with the Company for
good reason (as defined in the agreement) (i) Mr. Brunetti shall receive his
base salary, incentive compensation and certain other benefits including
continued accruals under the supplemental executive retirement plan and life and
medical benefits through the Employment Period; (ii) restrictions on restricted
stock shall lapse and all options shall be vested; and (iii) if applicable, Mr.
Brunetti shall receive a tax-free reimbursement of any excise tax imposed under
Code Section 4999. The Board of Directors, upon the recommendation of the
Compensation Committee of the Board, is responsible for administering Mr.
Brunetti's compensation.
The Company has entered into an employment agreement with Mr. Bonavia for
a term beginning December 15, 1997 and ending December 14, 2000. During the
employment period, Mr. Bonavia is entitled to a compensation package comprised
of a base salary, incentive compensation of both an annual and a long-term
nature, and various other benefits including participation in supplemental
executive retirement plans, life insurance coverage providing a death benefit of
not less than two times his annual base salary and shall be entitled to
participate in all applicable incentive, savings and retirement plans,
practices, policies and programs of the Company to the same extent as other
senior executives of the Company. If Mr. Bonavia's employment is
19
<PAGE>
terminated during the period of his employment agreement by the Company for
reasons other than cause or disability (as defined in the agreement) or if Mr.
Bonavia terminates his employment with the Company for good reason (as defined
in the agreement) (i) Mr. Bonavia shall receive his base salary, incentive
compensation and certain other benefits including continued accruals under the
supplemental executive retirement plans and life and medical benefits through
the period of his employment agreement; (ii) restrictions on restricted stock
shall lapse and all options shall be vested; and (iii) if applicable, Mr.
Bonavia shall receive a tax-free reimbursement of any excise tax imposed under
Code Section 4999. The Board of Directors, upon the recommendation of the
Compensation Committee of the Board, is responsible for administering Mr.
Bonavia's compensation.
The Company has entered into Change in Control Agreements with Messrs.
Helton and Brunetti. These Change in Control Agreements provide that if the
covered executive's employment is terminated during the term of the agreement by
the Company for any reason other than cause (as defined in that agreement) or
death or the Executive terminates employment for good reason (as defined in that
agreement) following, or in anticipation of, a Change in Control (as defined in
that agreement), (i) the Executive will receive a lump sum equal to three times
his base salary and annual and long-term bonus, (ii) stock options become vested
and restrictions on restricted shares lapse, (iii) welfare benefits will be
continued for the 36 months following termination of employment, (iv) the
Executive will receive a payment equal to the present value of the benefits he
would have received under the existing qualified retirement plans had he
received credit for 36 additional months, and (v) the Executive will receive a
tax-free reimbursement of any excise taxes imposed under Code Section 4999. The
Change in Control Agreements specifically provide that such agreements supersede
all prior agreements relating to separation payments following a Change in
Control.
Additionally, the Company has entered into Change in Control Agreements
with Messrs. Kelly, Wilks and Bonavia. These Change in Control Agreements
provide that if the covered Executive's employment is terminated during the term
of the agreement by the Company for any reason other than cause (as defined in
that agreement) or death or the Executive terminates employment for good reason
(as defined in that agreement) following, or in anticipation of a Change in
Control (as defined in that agreement), (i) the Executive will receive a lump
sum equal to two and 1/2 times his base salary and annual and long-term bonus;
(ii) stock options become vested and restrictions on restricted shares lapse;
(iii) welfare benefits will be continued for the 30 months following termination
of employment; (iv) the Executive will receive a payment equal to the present
value of the benefits he would have received under the existing qualified
retirement plans had he received credit for 30 additional months; and (v) the
Executive will receive a tax-free reimbursement of any excise taxes imposed
under Code Section 4999. The Change in Control Agreements specifically provide
that such agreements supersede all prior agreements relating to separation
payments following a Change in Control.
Compensation Committee Interlocks and Insider Participation
During 1998, the following Directors served on the NCE Compensation
Committee: W. Thomas Stephens (Chairperson), R. R. Hemminghaus, J. Howard Mock,
Will F. Nicholson, Jr. and Robert G. Tointon. None of these Directors are or
have been an officer or employee of the Company or any of its subsidiaries.
20
<PAGE>
Performance Graph
The following line graph compares the cumulative total shareholder return
of the Company's Common Stock with the cumulative total returns during the same
time period of the S&P Electric Utilities Index and the S&P 500. The graph
tracks performance from August 4, 1997 (the initial trading date of the
Company's Common Stock) through December 31, 1998, and assumes a $100 investment
on August 4, 1997 and dividend reinvestment.
Total Return Graph represented here
CUMULATIVE TOTAL RETURN
ON A DIVIDEND REINVESTED BASIS
<TABLE>
<CAPTION>
August 4, 1997 December 31, 1997 December 31, 1998
--------------- ------------------- -------------------
<S> <C> <C> <C>
NCE $100.00 $116.80 $124.83
S&P Electric Utilities Index $100.00 $121.19 $139.93
S&P 500 $100.00 $102.43 $131.70
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
To the best of the Company's knowledge, there are no relationships or
certain related transactions to be reported in accordance with Regulation 14A of
the Securities Exchange Act of 1934.
21
<PAGE>
APPROVAL OF INDEPENDENT PUBLIC ACCOUNTANTS
ITEM 2 ON PROXY CARD
Arthur Andersen LLP audited the accounts of the Company and its
consolidated subsidiaries for the 1998 calendar year.
Subject to approval by the holders of Common Stock at the Meeting, the
Board of Directors has appointed Arthur Andersen LLP as the independent public
accountants to audit the accounts of the Company and its consolidated
subsidiaries for the 1999 calendar year. A representative of Arthur Andersen LLP
is expected to be present at the Meeting, will be provided the opportunity to
make a statement if such representative desires to do so, and is expected to be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
1999 CALENDAR YEAR.
UNLESS OTHERWISE DIRECTED, SHARES REPRESENTED BY AN EXECUTED PROXY, EITHER
BY TELEPHONE OR ON THE FORM ENCLOSED, WILL BE VOTED FOR THE APPOINTMENT OF
---
ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
22
<PAGE>
SHAREHOLDER PROPOSAL
ITEM 3 ON PROXY CARD
Gerald R. Armstrong, 910 Fifteenth Street, No.754, Denver, CO 80202-2924,
who owns a total of 40 shares of the Company's common stock, has informed
management that he will propose the resolution set forth below at the Annual
Meeting. An affirmative vote of the holders of a majority of the Company's
Common Stock, represented in person or by proxy and entitled to vote at the
Meeting, is necessary for approval.
RESOLVED: "That the shareholders of New Century Energies, Inc., assembled
in person and by proxy in an annual meeting, request that the Board of Directors
take those steps necessary to cause annual elections for all directors by
providing that at future elections in annual meetings, all directors be elected
annually and not by classes as is now provided and that on the expiration of the
present terms their subsequent elections shall also be on an annual basis."
REASONS: "Last year, 35,515,796 shares or 42% of the shares
represented in the annual meeting voted in favor of this proposal.
As "black-outs," "brown-outs" and construction completion delays are
becoming part of our corporate style, costly impacts could be felt by
shareholders.
Anti-takeover provisions are present which negate any need for three
year terms for directors. Public Service Company of Colorado always had
one year terms for its directors. Although Southwestern Public Service
Company had three year terms for its directors, it never found its
presence needed to deter any unwanted offer.
Ameritech, Time-Warner, Lockheed-Martin, Campbell Soups, Atlantic
Richfield, Pacific Enterprises, Westinghouse and other corporations have
replaced three year terms with the annual election of all directors.
---
Occidental Petroleum Corporation stated in its 1997 proxy statement
in support of replacing three year terms with one year terms for its
directors:
"the current Board of Directors....does recognize that under
current views of corporate governance a classified board is believed
to offer less protection against unfriendly takeover attempts than
previously assumed while frustrating stockholders in their exercise
of oversight of the board. The Board of Directors believes that the
best interests of the stockholders are not currently served by
maintaining a classified board...."
These actions have increased shareholder voting rights by 300% --
-----------------------------------------------------------------
and, at no cost to the shareholders.
It remains unknown if our directors can perform in the
newly-established competitive climate. Accordingly, it is essential that
shareholders have the greatest accountability possible. The proponent
believes that the current system produces only a facade of continuity
which should be displaced; and, accountability and performance be
substituted as the basis for re-election to our board of directors."
"If you agree, please vote FOR this proposal. If your proxy card is
unmarked, your shares will be automatically voted "against" it."
23
<PAGE>
RESPONSE OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS CONSIDERED ITEM 3 AND RECOMMENDS A VOTE
"AGAINST" THIS RESOLUTION.
Under the Restated Certificate of Incorporation and the Corporate Bylaws
of New Century Energies, Inc., upon the effective date of the Merger, the Board
of Directors was divided into three classes of directors of approximately equal
numbers and staggered three-year terms. Approximately one-third of the directors
stand for election each year and the entire Board can be replaced in the course
of three annual meetings, all held within approximately two years. In separate
PSCo and SPS shareholder meetings held on January 31, 1996, the three classes of
directors and staggered terms of the Board were approved by approximately 72%
and 74% of the PSCo and SPS shareholders, respectively. In addition, in 1998, a
similar shareholder proposal was defeated by the NCE shareholders by a vote of
49,647,986 shares against and 35,515,796 shares for.
Board classification ensures continuity and experience of the directors in
the business and the affairs of the Company. Such a board is best situated to
maximize long-term shareholder value. For instance, the Board believes that a
board with a historical perspective of the Company provides stability during a
time in which fundamental changes continue to occur in the electric utility
industry and is able to make decisions that are best for the Company: decisions
on strategic acquisitions or dispositions, significant capital commitments and
utilization of financial and other resources. Moreover, continuity on the Board
is integral to developing, refining, and executing a long-term strategic plan, a
process that often takes years.
The Board believes that an abrupt change of control could disrupt the
Company in achieving its long-term strategic goals. The classified system
affords the directors a greater opportunity to respond deliberately to any
coercive proposal and to secure the full value of the shareholders' investment.
At the same time, a classified Board remains fully accountable to its
shareholders. Shareholders have the power to propose alternative nominees for
the class of directors to be elected each year. They have the power to review
Board performance and elect directors of their choosing. Five directors stood
for reelection at the last annual meeting; each was elected by more than 97% of
the vote. This suggests that adequate accountability and satisfactory
performance are achieved with the current system.
If approved by the shareholders, the proposal would not result in an
immediate change to declassify the Board. Instead, it would serve as a
recommendation to the Board to take the necessary steps to end the staggered
system of electing directors. To declassify the Board, it would be necessary to
amend the relevant provisions of the Company's Restated Certificate of
Incorporation and Corporate Bylaws. The affirmative vote of 80% of the
outstanding shares of the Company's common stock would be required to approve
those amendments.
UNLESS OTHERWISE DIRECTED, SHARES REPRESENTED BY AN EXECUTED PROXY, EITHER
BY TELEPHONE OR ON THE FORM ENCLOSED, WILL BE VOTED AGAINST THE SHAREHOLDER
-------
PROPOSAL REGARDING THE ELIMINATION OF A CLASSIFIED BOARD OF DIRECTORS.
TRANSACTION OF OTHER BUSINESS
The Board of Directors does not intend to bring before the Meeting any
matters other than (1) the election of Directors and (2) the appointment of the
Company's independent public accountants; however, management has knowledge of
one shareholder proposal that may be brought before such Meeting as described in
this proxy statement. Additionally, if any other matter properly comes before
the Meeting, it is the intention of the persons named in the proxy card to vote
the proxies in accordance with their judgment on such matter.
24
<PAGE>
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Rule 14a-4 of the Securities and Exchange Commission's proxy rules allows
the Company to use discretionary voting authority to vote on matters coming
before an annual meeting of shareholders, if the Company does not have notice of
the matter at least 45 days before the date corresponding to the date on which
the Company first mailed its proxy materials for the prior year's annual meeting
of shareholders or the date specified by an overriding advance notice provisions
in the Company's Restated Certificate of Incorporation or Bylaws. The Company's
Restated Certificate of Incorporation contains such an advance notice provision.
According to the Company's Restated Certificate of Incorporation, in order
for business to be brought before a meeting of shareholders, that business must
be (a) specified in the notice of the meeting given by or at the direction of
the Board of Directors, (b) otherwise properly brought before the meeting by or
at the direction of the Board of Directors or (c) otherwise properly brought
before the meeting by a shareholder. The shareholder must give notice in writing
(containing certain information specified in the Restated Certificate of
Incorporation), which must be received by the Secretary of the Company not less
than 60 days nor more than 90 days prior to the first anniversary of the
preceding year's annual meeting. In the event that the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60 days from
such anniversary, notice by the shareholder to be timely must be received not
earlier than the 90th day prior to such Annual Meeting and not later than the
close of business on the later of (a) the 60th day prior to such Annual Meeting
or (b) the 10th day following the date on which notice of the date of the Annual
Meeting was mailed or public disclosure thereof was made, whichever first
occurs. The Restated Certificate of Incorporation also provides that nominations
for Director at an Annual Meeting may be made only by the Board or the
Nominating and Civic Responsibility Committee, or by a shareholder entitled to
vote in the election of directors generally from whom the Secretary of the
Company has received written notice (containing certain information specified in
the Restated Certificate of Incorporation) in accordance with the timetable set
forth above. For the Company's 2000 Annual Meeting of Shareholders, which is not
expected to be advanced or delayed, the Secretary of the Company must have
received notice from any shareholder who intends to bring business before the
meeting or who wishes to nominate a person or persons for election as directors
no earlier than February 11, 2000 and no later than the close of business on
March 13, 2000.
This requirement is separate and apart from the Securities and Exchange
Commission's requirements that a shareholder must meet in order to have a
shareholder proposal included in the Company's proxy statement under Rule 14a-8.
For the Company's 2000 Annual Meeting of Shareholders, any shareholder who
wishes to submit a proposal for inclusion in the Company's proxy materials
pursuant to Rule 14a-8 must submit such proposal to the Secretary of the Company
on or before November 30, 1999.
By order of the Board of Directors.
Dated: March 29, 1999.
/s/ Cathy J.Hart
CATHY J. HART
Secretary
ALL SHAREHOLDERS ARE REQUESTED TO VOTE PROMPTLY. SHAREHOLDERS CAN VOTE
THEIR SHARES BY A) TELEPHONE USING THE INSTRUCTIONS ENCLOSED (IF THIS OPTION IS
AVAILABLE), OR B) COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
IN THE SELF-ADDRESSED, POSTAGE-PAID ENVELOPE, WHETHER OR NOT THEY PLAN TO ATTEND
THE MEETING.
25
<PAGE>
NEW CENTURY
ENERGIES
{Graphic Omitted)
New Century Energies is pleased to introduce telephone proxy voting.
Telephone voting is an efficient way for shareholders to vote and is economical
when compared to voting by mail. Consider voting your proxy utilizing a touch
tone phone as follows:
- Obtain the control number found on the enclosed proxy card.
- Use a touch tone phone to dial 1-800-480-0407.
- Enter your control number at the prompts then follow the step by step
instructions.
Your telephone vote authorizes the named proxies to vote your shares in the
same manner as if you signed and returned the proxy card by mail. If you vote
your proxy by telephone, there is no need to return your proxy card by mail.
Thank you for your continued support of New Century Energies.
<PAGE>
VOTE BY TELEPHONE
24 HOURS A DAY, 7 DAYS A WEEK
UNTIL 10 A.M. CDT ON
MAY 11, 1999
TELEPHONE MAIL
1-800-480-0407
Use any touch-tone telephone to vote Mark, sign and date your proxy card
your proxy. Have your proxy card in and return it in the postage-paid
hand when you call. You will be envelope we have provided.
prompted to enter your control
number, located in the box below,
and then follow the simple directions.
Your telephone vote authorizes the named If you have submitted your proxy by
proxies to vote your shares in the same telephone there is no need for you
manner as if you marked, signed and to mail back your proxy.
returned the proxy card.
THE OPPOSOSITE SIDE OF THIS FORM CAN BE UTILIZED AS
YOU ANNUAL MEETING ADMISSION TICKET
Call Toll-Free To Vote - It's Fast And Convenient CONTROL NUMBER FOR
1-800-480-0407 TELEPHONING VOTING
DETACH PROXY CARD HERE IF YOU ARE NOT
VOTING BY TELEPHONE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The Board of Directors recommends that you vote "FOR" Items 1 and 2. The Board of Directors recommends that you vote
"AGAINST" Item 3.
<S> <C> <C> <C> <C> <C> <C> <C>
1. ELECTION OF DIRECTORS: Election of Class II Directors: 01 - Giles M. Forbess, 3. Shareholder proposal regarding elimination
02 - Bill D. Helton, 03 - Albert F. Moreno, 04 - J. Michael Powers of a classified Board of Directors, if
presented.
FOR all (X) WITHHOLD AUTHORITY (X) *EXCEPTIONS (X)
nominees to vote for all nominees FOR (X) AGAINST (X) ABSTAIN (X)
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark In their discretion, the proxy holders are
the "Exceptions" box and write that nominee's name on the line below.) authorized to vote upon such other business
*Exceptions ________________________________________________________________ as may properly come before the Annual
2. Approval of the appointment of Arthur Andersen LLP as independent public Meeting or any adjournment thereof.
accountants.
Mark here if you plan
FOR (X) AGAINST (X) ABSTAIN (X) to attend the meeting. (X)
Change of Address and
or Comments Mark Here (X)
The shareholder hereby acknowledges receipt
of the Notice of Annual Meeting of
Shareholders and the Proxy Statement attached
thereto, the 1998 Summary Annual Report and
the 1998 Financial Report. PLEASE DATE AND
SIGN exactly as name appears on this card
indicating, where proper, official position
or representation capacity. For joint
accounts, each joint owner must sign.
Dated: ------------------------------ , 1999
--------------------------------------------
Signature of Shareholder
--------------------------------------------
Signature of Shareholder
Sign, Date and Return this Card Promptly Using the Enclosed Envelope. Votes MUST be indicated (x)
in black or blue ink.
</TABLE>
Please Detach Here
You Must Detach This Portion of the Proxy Card
Before Returning it in the Enclosed Envelope
<PAGE>
NEW CENTURY
ENERGIES
[Graphic Omitted]
ADMITTANCE TICKET
Annual Meeting of Shareholders
May 11, 1999
10:00 AM
Ambassador Hotel
Rio Grande Ballroom
3100 I-40 West
Amarillo, Texas
PRINT NAME: ___________________________________
Detach Proxy Card Here
- --------------------------------------------------------------------------------
NEW CENTURY ENERGIES, INC.
The undersigned, a holder of common stock of New Century Energies, Inc.
(the"Company") hereby appoints Bill D. Helton, W. Thomas Stephens, Danny H.
Conklin, R. R. Hemminghaus and Gayle L. Greer, or any one or more of them, as
proxies, each with full power of substitution, to represent the undersigned at
the Annual Meeting of Shareholders of the Company to be held on May 11, 1999 and
any adjournment or adjournments thereof, and to vote as designated hereon and in
their discretion with respect to any other business properly brought before the
annual meeting all shares of the common stock of the Company which the
undersigned would be entitled to vote if personally present at such meeting,
except for shares of common stock held of record in the undersigned's account
with the Plans (defined below), the voting instructions for which are explained
below.
THIS CARD ALSO CONSTIUTES YOUR VOITNG INSTRUCTIONS FOR SHARES HELD OF
RECORD IN THE NEW CENTURY ENERGIES,INC. EMPLOYEES' SAVINGS AND STOCK OWNERSHIP
PLAN FOR NON-BARGAINING UNIT EMPLOYEES, the NEW CENTURY ENERGIES, inc. EMPLOYEE
INVESTMENT PLAN FOR BARGAINING UNIT EMPLOYEES AND FORMER NON-BARGAINING UNIT
EMPLOYEES AND THE NEW CENTURY ENERGIES, INC. EMPLOYEES' SAVINGS AND STOCK
OWNERSHIP PLAN FOR BARGAINING UNIT EMPLOYEES AND FORMER NON-BARGAINING UNIT
EMPLOYEES AND PARTICIPATING SUBSIDIARY COMPANIES ("PLANS") AND THE UNDERSIGNED
HEREBY AUTHORIZES THE TURSTEES OF THESE PLANS TO VOTE THE UNDERSIGNED SHARES
HELD IN ITS ACCOUNTS.
This proxy when properly executed will be voted in the manner designated
hereon and in the discretion of the proxies with respect to any other matters
properly brought before the meeting. If no direction
is made, this proxy will be voted FOR Items 1 and 2
and AGAINST Item 3.
NEW CENTURY ENERGIES, INC.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE P.O. BOX 11012
NEW YORK, N.Y. 10203-0012
Address Change/Comments _______________________________________________________
<PAGE>
SUPPLEMENT TO NEW CENTURY ENERGIES, INC. PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 11, 1999
On March 25, 1999, New Century Energies, Inc. (the "Company") and
Northern States Power Company ("NSP") announced that they plan to merge (the
"Merger"). On March 24, 1999, the Company entered into a new employment
agreement with Mr. Brunetti and established the NCE 1999 Senior Executive
Severance Policy, as discussed below.
The Company and NSP have entered into a new employment agreement with
Mr. Brunetti which will become effective if the Merger is consummated. If the
new employment agreement becomes effective, it will supersede Mr. Brunetti's
current employment agreement. The new employment agreement specifies that Mr.
Brunetti will serve the surviving company in the Merger (the "Surviving
Company") for an initial period (the "New Initial Period") and for a secondary
period (the "New Secondary Period") (jointly referred to as the "New Employment
Period"). The New Initial Period would begin at the effective time of the Merger
(the "Effective Time") and end on the first anniversary of the Effective Time.
The New Secondary Period would begin on the first day after the end of the New
Initial Period and end on the third anniversary of such day; provided, that on
each anniversary of such day, the New Secondary Period will be automatically
extended by an additional year unless either the Surviving Company or Mr.
Brunetti gives notice that the period shall not be so extended.
Under Mr. Brunetti's new employment agreement, during the New Initial
Period, Mr. Brunetti would serve as Chief Executive Officer and President of the
Surviving Company. During the New Secondary Period, Mr. Brunetti would serve as
Chief Executive Officer and Chairman of the Board of the Surviving Company. For
the performance of his duties and responsibilities for the positions detailed
above, during the New Employment Period, Mr. Brunetti would be entitled to a
compensation package comprised of a base salary, incentive compensation of both
an annual and a long-term nature and various other benefits including
participation in a supplemental executive retirement plan, life insurance
coverage providing a death benefit of not less than four times his annual base
salary if death occurs during the New Employment Period or two times his annual
base salary if death occurs after the New Employment Period, and would be
entitled to participate in all applicable incentive, savings and retirement
plans, practices, policies and programs in effect at the Surviving Company to
the same extent as other senior executives of the Surviving Company. In all
instances, the compensation awarded Mr. Brunetti would be at least equal to what
he would have received under similar plans and programs in effect at the
Company. If Mr. Brunetti's employment is terminated during the New Employment
Period by the Surviving Company for reasons other than cause or disability (as
defined in the agreement) or if Mr. Brunetti terminates his employment with the
Surviving Company for good reason (as defined in the agreement) (i) Mr. Brunetti
would receive his base salary, incentive compensation and certain other benefits
including continued accruals under the supplemental executive retirement plan
and welfare benefits through the New Employment Period; (ii) restrictions on
restricted stock shall lapse and all options shall be vested; and (iii) if
applicable, Mr. Brunetti shall receive a tax-free reimbursement of any excise
tax imposed under Code Section 4999. These provisions under termination are
equal to what he would receive under his current employment agreement with the
Company. The new employment agreement has been reviewed by the Company's
compensation
<PAGE>
consultant which has represented that such benefits provided under this
agreement are commercially reasonable.
The Company also established the NCE 1999 Senior Executive Severance
Policy, in which Messrs. Kelly, Wilks and Bonavia are participants. The policy
became effective on March 24, 1999 and will continue in effect until the fifth
anniversary of such date, unless extended for additional periods by the Board of
Directors. The severance policy provides that if at any time before the third
anniversary of the Effective Time a participant's employment is terminated by
the Company for any reason other than cause (as defined in the policy), death,
disability (as defined in the policy), retirement (as defined in the policy) or
a qualified sale of business (as defined in the policy) or by the participant
for good reason (as defined in the policy), and provided the participant enters
into a release, confidentiality and non-solicitation agreement, the participant
will receive the following separation payments and benefits: (i) a cash amount
equal to aggregate of (a) a multiple of (which in the case of Messrs. Kelly,
Wilks, and Bonavia is two and one-half times) the participant's annual base
salary and short and long-term incentive compensation, (b) the additional
retirement benefits and/or contributions and accruals the executive would have
received under applicable pension, supplemental executive retirement plans and
retirement savings plans had he remained employed through the "Severance Period"
(which is the participant's multiple expressed in years), and (c) prorated
incentive compensation for the year of termination; and (ii) continuation of (a)
welfare benefits and a perquisite allowance through the Severance Period, (b)
out placement services (not to exceed $30,000), and (c) financial planning
through the second anniversary of the date of termination. In addition, the
participant will receive a tax-free reimbursement of any excise taxes imposed
under Code Section 4999, unless the separation payments and benefits do not
exceed by more than 10% the amount which would not give rise to excise taxes, in
which case payments and benefits are reduced so that no excise taxes are
imposed. The policy specifically provides that any cash separation payments that
a participant becomes entitled to receive under the policy will be reduced by
the aggregate amount of cash severance, separation or similar benefits that the
participant may be entitled to receive under any other agreement between the
participant and his employer, except to the extent the participant waives his
rights to such payments. The 1999 Senior Executive Severance Policy has been
reviewed by the Company's compensation consultant which has represented that
such benefits provided under the plan are commercially reasonable.
MARCH 29, 1999
<PAGE>
March 29, 1999
Dear New Century Energies Shareholder:
On MArch 25, 1999, New Century Energies and Northern States Power entered into a
definitive merger agreement. The merged company will streatch from Mexico to the
Canadian border, with operations on both coasts and the United Kingdom, Central
Europe, Australia and South America.
The merger is expected to be a tax-free stock-for-stock exchange for
shareholders of both companies, and to be accounted for as a pooling of
interests. NCE and NSP anticipate that the merger will be accretive in the first
full year and thereafter to both sets of shareholders. Upon completion, holders
of New Century energies stock will receive 1.55 shares of the merged company
stock for each share of NCE stock. Each share of Northern States Power stock
will continue as one share of combined company.
It is anticipated that the merged company will continue the current equivalent
NCE dividend payment level. Based on the fact that you will receive 1.55 shares
of stock in the merged company divided level. The board of directors of the new
holding company will determine the dividend declarations.
The merged company will be headquarted in Mnneapolis, but key business units or
operations will be located in Denver and Amarillo. The merged company will serve
three million electricity customers and approximately 1.5 million natural gas
customers in 12 states.
The merger is expected to take 12 to 18 months to complete and requires approval
by the shareholders of the two existing holding companies, as well as approval
or regulatory review by numerous state and federal agencies. After a record date
is established for the meeting of shareholders, shareholders of record will
receive a detailed proxy statement/prospectus describing the proposed
transaction.. It is essential that shareholders take the time to review and
consider the critical disclosure document before making a decision on the
transaction.
Thank you in advance for your attention to this matter, and we will keep you
apprised of developments throughout the merger process.
Sincerely,
/s/ Bill D. Helton /s/Wayne H. Brunetti
Bill D. Helton Wayne H. Brunetti
Chairman of the Board and CEO Vice Chairman, President and COO
This letter is not a offer of securities for sale, which offering will be made
only by means of a prospectus.
