<PAGE> 1
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.
- --------------------------------------------------------------------------------
(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)(l) 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:
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(4) Date Filed:
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<PAGE> 2
[El Paso Tennessee Pipeline Logo]
Dear Series A Preferred Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
(the "Annual Meeting") of El Paso Tennessee Pipeline Co. (the "Company"), which
will be held on Thursday, April 22, 1999, at 10:00 a.m. (central daylight time),
at The Windsor Court Hotel, 300 Gravier Street, New Orleans, Louisiana 70130.
The accompanying Notice of 1999 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 19, 1999
<PAGE> 3
EL PASO TENNESSEE PIPELINE CO.
1001 LOUISIANA STREET
HOUSTON, TEXAS 77002
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
APRIL 22, 1999
The 1999 Annual Meeting of Stockholders (the "Annual Meeting") of El Paso
Tennessee Pipeline Co. (the "Company") will be held on Thursday, April 22, 1999,
at 10:00 a.m. (central daylight time), at The Windsor Court Hotel, 300 Gravier
Street, New Orleans, Louisiana 70130, 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 February 24, 1999, 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 19, 1999
<PAGE> 4
EL PASO TENNESSEE PIPELINE CO.
1001 LOUISIANA STREET
HOUSTON, TEXAS 77002
PROXY STATEMENT
1999 ANNUAL MEETING OF STOCKHOLDERS -- APRIL 22, 1999
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 19, 1999.
The proxy is solicited by the Board of Directors of the Company for use at the
1999 Annual Meeting of Stockholders (the "Annual Meeting") to be held on
Thursday, April 22, 1999. 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
February 24, 1999, 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 1,783 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. As a result of a
holding company reorganization (the "Reorganization") effected on August 1,
1998, EPG succeeded El Paso Natural Gas Company ("EPNG") as the holding company
and publicly traded parent corporation. EPNG and its subsidiaries became direct
and indirect subsidiaries of EPG. 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 Windsor Court Hotel, 300
Gravier Street, New Orleans, Louisiana. References to "EPG" in this Proxy
Statement refer to El Paso Energy Corporation, as successor to EPNG after August
1, 1998, and unless otherwise indicated, to EPNG for information prior to August
1, 1998.
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, 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.
<PAGE> 5
INFORMATION ABOUT THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1998, 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:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William A. Wise............. 53 Chairman of the Board, President and Chief Executive
Officer; Director
H. Brent Austin............. 44 Executive Vice President and Chief Financial Officer;
Director
Joel Richards III........... 52 Executive Vice President; Director
Britton White Jr............ 55 Executive Vice President and General Counsel; Director
Jeffrey I. Beason........... 50 Vice President and Controller; Director
</TABLE>
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 12,
1996. He has been Chairman of the Board since January 1994 and CEO of EPG since
January 1990. Mr. Wise has been President of EPG from January 1990 to April 1996
and from July 1998 to present. He was President and Chief Operating Officer of
EPG from April 1989 to December 1989. Mr. Wise was an Executive Vice President
of EPG from March 1987 to April 1989. From January 1984 to February 1987, he was
a Senior Vice President of EPG. He is a member of the Board of Directors of EPG,
Battle Mountain Gold Company and Chairman of the Board of Leviathan Gas Pipeline
Company, as general partner of Leviathan Gas Pipeline Partners, L.P.
H. BRENT AUSTIN -- Mr. Austin has been Executive Vice President and Chief
Financial Officer since June 2, 1997. He has been a Director of the Company
since December 12, 1996. He was Senior Vice President and Chief Financial
Officer of the Company from December 12, 1996 to June 1, 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 Leviathan Gas Pipeline Company, as
general partner of Leviathan Gas Pipeline Partners, L.P. since August 1998.
JOEL RICHARDS III -- Mr. Richards has been Executive Vice President since
June 2, 1997. He has been a Director of the Company since December 12, 1996. He
was Senior Vice President of the Company from December 12, 1996 to June 1, 1997.
He has been Executive Vice President of EPG since December 1996. From January
1991 until December 1996, he was Senior Vice President of EPG. He was Vice
President of
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<PAGE> 6
EPG from June 1990 to December 1990. He was Senior Vice President, Finance and
Human Resources of Meridian Minerals Company from October 1988 to June 1990.
BRITTON WHITE JR. -- Mr. White has been Executive Vice President and
General Counsel since June 2, 1997. He has been a Director of the Company since
December 12, 1996. He was Senior Vice President and General Counsel and a
Director of the Company from December 12, 1996 to June 1, 1997. He has been
Executive Vice President of EPG since December 1996 and General Counsel of EPG
since March 1991. 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 Vice President and Controller and
a Director of the Company since December 12, 1996. He has been Vice President
and Controller of EPG since April 1996 and also was Treasurer of EPG from April
1996 until December 1996. 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 69, 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.
3
<PAGE> 7
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, 1999, of more than five percent of any
class of the Company's voting securities.
<TABLE>
<CAPTION>
TITLE OF AMOUNT AND NATURE OF PERCENT
CLASS NAME BENEFICIAL OWNERSHIP OF CLASS
-------- ---- -------------------- --------
<S> <C> <C> <C>
Common Stock El Paso Energy Corporation.................... 1,783 shares 100%
1001 Louisiana Street
Houston, Texas 77002
8 1/4% Cumulative Citigroup, Inc.(1)............................ 500,500 8.3%
Preferred 388 Greenwich Street
Stock,
Series A New York, New York 10013
</TABLE>
- ---------------
(1) This information is based on a Schedule 13G dated January 25, 1999, with
respect to beneficial ownership of the 8 1/4 Cumulative Preferred Stock,
Series A, as of December 31, 1998. 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,
1999, 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.
<TABLE>
<CAPTION>
TITLE OF BENEFICIAL OWNERSHIP STOCK PERCENT
CLASS NAME (EXCLUDING OPTIONS)(1) OPTIONS(3) TOTAL OF CLASS
-------- ---- ---------------------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Common Stock Morgan Stanley, Dean Witter,
Discover & Co.
1585 Broadway, 38th Floor
New York, NY 10036............ 8,196,634 0 8,196,634 6.71%
Common Stock K. L. Smalley................. 28,763 14,000 42,763 *
Common Stock W. A. Wise.................... 1,295,980(2) 1,275,356 2,571,336 2.08%
Common Stock H. B. Austin.................. 217,064 229,676 446,740 *
Common Stock B. White Jr. ................. 209,006 199,466 408,472 *
Common Stock J. Richards III............... 211,728 199,466 411,194 *
Common Stock J. I. Beason.................. 89,795 164,400 251,195 *
Common Directors and Executive
Stock..... Officers as a group(6)........ 2,049,336 2,082,364 4,131,700 3.32%
</TABLE>
- ---------------
* Less than 1%
(1) 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. As of December 31, 1998, Morgan Stanley, Dean Witter, Discover
& Co. had shared voting power over 8,155,681 shares of EPG common stock and
shared dispositive power over 8,196,634 shares of EPG common stock.
4
<PAGE> 8
(2) 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.
(3) 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,
1999, through the exercise of stock options and/or tandem stock appreciation
rights ("SARs").
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 1998. None of these persons received any compensation from the
Company for their services as executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------------- ------------------------------------------
AWARDS PAYOUTS
------------------------- --------------
OTHER SECURITIES LONG-TERM
ANNUAL RESTRICTED UNDERLYING INCENTIVE PLAN ALL OTHER
NAME AND SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(2) ($)(3) ($)(4) (#) ($)(6) ($)(7)
------------------ ---- -------- ---------- ------------ ------------ ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William A. Wise 1998 -- $1,600,000 $152,939 $1,599,985 98,000 -- $105,227
Chairman, 1997 -- $1,105,000 $203,182 $1,104,971 -- -- $106,209
President & CEO, 1996 --(1) $1,275,000 $124,967 $3,537,481(5) 395,000 $740,000 $ 69,731
EPG
H. Brent Austin 1998 $305,417 $ 438,000 $ 201 $ 437,972 26,250 -- $ 32,410
Executive Vice 1997 $300,000 $ 330,000 $ 93,435 $ 329,970 -- -- $ 36,150
President & Chief 1996 $228,125 $ 450,000 $ 178 $ 149,987 60,000 $176,658 $ 22,855
Financial Officer,
EPG
Britton White Jr. 1998 $279,584 $ 396,000 $ 284 $ 395,987 26,250 -- $ 32,774
Executive Vice 1997 $275,000 $ 302,500 $ 34,899 $ 302,472 -- -- $ 35,219
President & General 1996 $203,125 $ 412,500 $ 223 $ 137,472 60,000 $133,145 $ 20,550
Counsel, EPG
Joel Richards III 1998 $279,584 $ 396,000 $ 221 $ 395,987 26,250 -- $ 32,579
Executive Vice 1997 $275,000 $ 302,500 $ 27,514 $ 302,472 -- -- $ 35,088
President, EPG 1996 $183,958 $ 412,500 $ 223 $ 137,472 60,000 $133,145 $ 21,361
</TABLE>
- ---------------
(1) Mr. Wise's base salary was eliminated in 1996 and replaced with long-term
awards of stock options and restricted stock, the majority of which vest
only after the expiration of specified time periods and only if
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<PAGE> 9
certain performance targets are met within those periods. This change was
consistent with EPG's cost reduction initiatives and was intended to align
Mr. Wise's compensation more directly with stockholder value.
(2) Except for a small amount of cash payable for a fractional share of EPG
common stock, the value reflected represents the value of restricted EPG
common stock awarded to each of the named executives for their incentive
bonus. Pursuant to EPG's 1995 Incentive Compensation Plan, the named
executives are required to receive a substantial part of their annual bonus
in restricted EPG common stock. The amounts reflected in this column
represent a combination of the market value of the restricted EPG common
stock and cash awarded under that plan. Dividends are paid directly to the
holders of the restricted EPG common stock during the four-year vesting
schedule. The amounts reflected for 1996 include an additional one-time cash
bonus awarded under EPG's 1995 Incentive Compensation Plan in recognition of
the extraordinary accomplishments achieved during 1996.
(3) 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 EPG'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 amount reflected for Mr. Wise for fiscal year 1996 includes a $48,000
perquisite and benefit allowance and a one-time living allowance in the
amount of $45,833 paid prior to the compensation changes discussed in Note 1
above. 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 1998, 1997 and 1996 have not
been reflected because the amounts were below the Securities and Exchange
Commission's (the "SEC") required reporting threshold.
(4) EPG's 1995 Incentive Compensation Plan provides for and encourages
participants to elect to take the cash portion of their annual bonus award
in shares of restricted EPG common stock. The amounts reflected in this
column include the market value of restricted EPG 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 such
restricted EPG common stock, including those shares reflected in this
column, held on December 31, 1998 by Messrs. Wise, Austin, White and
Richards was 978,876, 175,096, 166,080 and 164,552 respectively. The
aggregate dollar value on December 31, 1998, of all shares of restricted EPG
common stock held by Messrs. Wise, Austin, White and Richards was
$34,077,121, $6,095,530, $5,781,660 and $5,728,467, respectively. Dividends
are paid directly to the holders of the restricted EPG common stock. Most of
the foregoing values can be realized by the named executives if, and only
if, they remain employees of EPG's for the specified time period and EPG's
stockholders realize the required total stockholder value during the
specified time period.
(5) The amount reflected for Mr. Wise also includes the market value of a
one-time retention oriented restricted EPG common stock grant of 200,000
shares, which began vesting on January 19, 1997 at the rate of 20% per year
for five years.
(6) The amounts in this column for fiscal year 1996 represent the market value
of EPG common stock and/or cash paid as an interim payout of performance
units under EPG's 1995 Omnibus Compensation Plan. The interim payment was
made in recognition of EPG's total stockholder return in relation to that of
its peer group of companies during the first two years of the performance
period. 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 1998 is comprised
of EPG contributions to EPG's Retirement Savings Plan, supplemental EPG
contributions under EPG's Supplemental Benefits Plan and the above-market
interest earned on deferred compensation. Specifically, these amounts for
fiscal year 1998 were $0, $88,536 and $16,690 for Mr. Wise; $7,200, $21,392
and $3,818 for Mr. Austin; $7,200, $18,993 and $6,582 for Mr. White and
$7,200, $18,993 and $6,387 for Mr. Richards, respectively.
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<PAGE> 10
STOCK OPTION GRANTS
No stock options were granted by the Company to Messrs. Wise, Austin,
Richards and White during the fiscal year 1998. The Company has no stock option
plan or program, and there are no options outstanding in respect of any class of
the Company's equity securities, including the Series A Preferred Stock. The
following table reflects stock options granted at fair market value by EPG to
Messrs. Wise, Austin, Richards and White during the fiscal year 1998. In
satisfaction of applicable SEC regulations, the table further sets forth the
potential realizable value of such stock options in the year 2008 (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 2008 of approximately $57.67 and
$91.83, respectively. The amounts shown in the table as potential realizable
values for all stockholders' stock (approximately $2.7 billion and $6.8
billion), represent the corresponding increases in the market value of
121,645,011 shares of EPG's common stock outstanding as of December 31, 1998. 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 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES
OF STOCK PRICE
INDIVIDUAL GRANTS(1) APPRECIATION FOR OPTION TERM
------------------------------------------------ -------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS IF STOCK PRICE IF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE AT $57.67 AT $91.83
OPTIONS EMPLOYEES PRICE EXPIRATION IN 2008 IN 2008
NAME GRANTED(#) IN 1998 ($/SHARE) DATE 5% ($) 10% ($)
---- ---------- ---------- --------- ---------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
ALL STOCKHOLDERS'
STOCK
APPRECIATION........ N/A N/A N/A N/A $2,708,645,177 $6,864,238,688
William A. Wise....... 98,000 4.23% $35.40625 7/24/08 $ 2,182,146 $ 5,529,988
H. Brent Austin....... 26,250 1.13% $35.40625 7/24/08 $ 584,504 $ 1,481,247
Britton White Jr...... 26,250 1.13% $35.40625 7/24/08 $ 584,504 $ 1,481,247
Joel Richards III..... 26,250 1.13% $35.40625 7/24/08 $ 584,504 $ 1,481,247
</TABLE>
- ---------------
(1) The stock options granted in 1998 by EPG to the named executives are not
immediately exercisable. Each grant will become exercisable on the first
anniversary of the date of grant thereof. There were no SARs granted in
1998. Any unvested stock options become fully exercisable in the event of a
"change in control" (see page 11 of this Proxy Statement for a description
of EPG's 1995 Omnibus Compensation Plan and the term "change in control.")
Under the terms of EPG's 1995 Omnibus 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. Upon termination of employment for certain reasons, all stock
options and SARs held by Mr. Wise vest immediately according to his letter
agreement dated January 13, 1995 (as described on page 10 of this Proxy
Statement).
7
<PAGE> 11
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 1998
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
OPTIONS/SARS AT FISCAL AT
SHARES ACQUIRED VALUE YEAR-END(#) FISCAL YEAR-END ($)(2)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME # ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William A. Wise........... 0 $0 1,173,184 572,000 $23,719,943 $8,501,063
H. Brent Austin........... 0 $0 203,010 66,250 $ 3,831,066 $ 716,249
Britton White Jr.......... 0 $0 172,800 66,250 $ 3,086,201 $ 716,249
Joel Richards III......... 0 $0 172,800 66,250 $ 3,086,201 $ 716,249
</TABLE>
- ---------------
(1) The figures presented in this column have been calculated based upon the
difference between the fair market value of each stock option/SAR on the
date of exercise and its exercise price.
(2) The figures presented in these columns have been calculated based upon the
difference between $34.15625, the fair market value of the EPG common stock
on December 31, 1998, for each in-the-money stock option/SAR, and its
exercise price. 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.
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 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 1998 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, are reflected on the
following table:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE AT NORMAL RETIREMENT AGE
FINAL AVERAGE -------------------------------------------
PENSION EARNINGS 15 20 25 30
---------------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
$ 400,000.................................... 94,185 125,580 156,975 188,370
$ 800,000.................................... 190,185 253,580 316,975 380,370
$1,200,000................................... 286,185 381,580 476,975 572,370
$1,600,000................................... 382,185 509,580 636,975 764,370
$1,900,000................................... 454,185 605,580 756,975 908,370
$2,100,000................................... 502,185 669,580 836,975 1,004,370
$2,300,000................................... 550,185 733,580 916,975 1,100,370
$2,500,000................................... 598,185 797,580 996,975 1,196,370
</TABLE>
8
<PAGE> 12
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 (including risk
premium restricted stock, as described on page 12 of this Proxy Statement). For
the named executives, the amounts reflected in the Salary and Bonus columns of
the "Summary Compensation Table" are 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 credited service, if earlier. Years of credited service under the
Pension Plan at age 65 for Messrs. Wise, Austin, White and Richards are 30, 30,
30, 25 (including 7 years of credited service pursuant to Mr. White's employment
agreement, which is described on page 11 of this Proxy Statement), and 30
respectively.
Effective January 1, 1997, EPG amended its noncontributory defined benefit
Pension Plan to determine benefits by a cash balance formula in which the named
executives, as well as other EPG 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 or the cash balance benefit. Under the cash
balance formula, participants each have 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:
<TABLE>
<CAPTION>
IF AGE PLUS PAY CREDIT SERVICE ON THE APPLICABLE ANNUAL %
THE PRECEDING DECEMBER 31 IS: OF EARNINGS IS:
- --------------------------------------------------------- -----------------------
<S> <C>
Under 35........................................... 4%
35 through 49...................................... 5%
50 through 64...................................... 6%
65 or over......................................... 7%
</TABLE>
At the end of each quarter, accounts are also credited with interest
applied to the beginning quarter balance. Participants, who were participants on
December 31, 1996 and eligible employees on January 1, 1997, were credited with
an initial cash balance equivalent to accrued benefits on December 31, 1996.
Estimated annual benefits payable upon retirement at the normal retirement
age for each of the named executives is reflected below (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):
<TABLE>
<CAPTION>
ESTIMATED
ANNUAL
BENEFIT
----------
<S> <C>
William A. Wise............................................. $1,144,769
H. Brent Austin............................................. $ 202,191
Britton White Jr............................................ $ 196,562
Joel Richards III........................................... $ 195,548
</TABLE>
9
<PAGE> 13
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
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE IN CONTROL ARRANGEMENTS
EPG entered into an employment agreement with Mr. Wise effective July 31,
1992. The term of the agreement is three years from its initial effective date
and is automatically renewed at the end of every month (re-establishing a
three-year term on the first of each month), unless either party notifies the
other that it elects not to extend the term of the agreement. Mr. Wise's
compensation and benefits are determined under EPG plans and programs in effect
from time to time. If Mr. Wise's employment is terminated involuntarily, without
cause, or is voluntarily terminated by Mr. Wise for "good reason" (as defined in
the Severance Plan, which is discussed below), Mr. Wise will receive his salary,
bonus (equal to fifty percent of the maximum bonus opportunity in effect at the
time of termination, but not less than fifty percent of annual salary) and
benefits through the end of the term of the employment agreement. Unless
termination follows a "change in control" (as defined in the Severance Plan),
any continued salary, bonus or benefits (not including defined benefit pension
plan payments) will be reduced by comparable compensation from subsequent
employment. If Mr. Wise's employment is terminated because of death, involuntary
termination for cause or is voluntarily terminated by Mr. Wise other than for
"good reason," Mr. Wise's right to receive his salary shall terminate on the
date of termination of his employment and his right to receive benefits will be
determined according to the terms of EPG's applicable plans. Mr. Wise will also
be entitled to pension benefits under the terms of EPG's Supplemental Benefits
Plan, however such pension benefits will be based on one additional year of
"age" and "service" credit for each year of the term. Upon termination of his
employment, this benefit will be funded through a trust. If Mr. Wise's
employment is terminated prior to the end of the term, other than as a result of
either a "change in control" of EPG or his voluntary termination of the
agreement for "good reason" pursuant to six months prior written notice to EPG
of such termination, Mr. Wise will be subject to a noncompetition provision
through the end of the term. Any compensation and benefits received by Mr. Wise
under the Severance Plan will offset obligations of a similar nature under Mr.
Wise's employment agreement. EPG entered into a letter agreement with Mr. Wise
dated January 13, 1995, which provides that in the event of termination of Mr.
Wise's employment due to death, retirement, permanent disability, any other
involuntary
10
<PAGE> 14
termination without cause or any other voluntary termination for "good reason,"
the restriction period for restricted EPG common stock held by Mr. Wise shall
lapse and all restrictions thereon shall end (but only to the extent the
performance targets have been achieved on the performance based restricted EPG
common stock), and unvested stock options shall become immediately exercisable,
subject to applicable law, for a period of thirty-six months, unless such stock
options expire sooner in accordance with their terms. In order to squarely align
Mr. Wise's compensation with the interests of EPG's stockholders, the
Compensation Committee of EPG replaced his salary with a long-term incentive in
the form of restricted EPG common stock (the majority of which will not vest
unless certain performance measures are attained and, in that event, only after
a certain specified time) and a grant of stock options. As a result, Mr. Wise's
employment agreement was amended to establish an illustrative base salary for
certain of EPG's benefits and welfare plans during 1996. During 1997, EPG loaned
Mr. Wise $1,564,000 for the purchase of his residence in Houston in connection
with EPG's relocation. The loan and interest (at 6.8%) thereon is payable at the
end of ten years, or at the time of Mr. Wise's retirement from EPG, whichever is
earlier. The loan is secured by Mr. Wise's Houston residence. In the event of a
"change in control" (as defined in the Severance Plan) and Mr. Wise meets all
the requirements for a severance benefit under the Severance Plan, he will not
be required to repay the loan and accrued interest and he may be entitled to a
payment to cover any adverse tax consequences (as provided in the Severance
Plan).
EPG entered into a letter agreement with Mr. White dated February 22, 1991,
which provides that Mr. White is entitled to additional years of credited
service with respect to pension benefits which are payable under EPG's
Supplemental Benefits Plan if he remains employed with EPG until the specified
age set forth in his letter agreement.
EPG has a Key Executive Severance Protection Plan (the "Severance Plan")
which provides severance benefits following a "change in control" (as defined
below) of EPG for all officers of EPG and certain of its subsidiaries in an
amount equal to three times annual salary, including maximum bonus amounts as
specified in the plan. The Severance Plan also provides for the continuation of
life and health insurance for a period of 18 months subsequent to a
participant's termination of employment following a "change in control" of EPG,
as well as a supplemental pension payable under EPG's Supplemental Benefits Plan
calculated by adding three years of additional credited pension service and
certain other benefits. Benefits are payable under the Severance Plan for any
termination of employment within two years of the date of a "change in control"
of EPG, except where termination is by reason of death, disability, for cause or
instituted by the employee for other than "good reason." The Severance Plan
provides that certain additional payments will be made to terminated
participants following a "change in control" of EPG if the participant's
payments are subjected to a specified adverse excise tax. The Severance Plan
also provides that EPG will pay legal fees and expenses incurred by a
participant to enforce rights or benefits under the plan. For purposes of the
Severance Plan, a "change in control" of EPG is deemed to occur if (a) any
person or entity becomes the beneficial owner of 20% or more of EPG's
outstanding voting securities, (b) any person or entity purchases EPG common
stock pursuant to a tender offer or exchange offer, other than a tender offer or
exchange offer made by EPG, (c) the stockholders of EPG approve a merger or
consolidation, a sale or disposition of all or substantially all of EPG's assets
or a plan of liquidation or dissolution of EPG, or (d) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors cease for any reason to constitute at least a majority
thereof. Notwithstanding the foregoing, a "change in control" will not be deemed
to have occurred if EPG is involved in a merger, consolidation or sale of assets
which is in connection with a corporate restructuring wherein stockholders of
EPG immediately before such transaction own at least 80% of the combined voting
power of all outstanding classes of securities of EPG resulting from such
transaction in substantially the same proportion as their ownership in EPG
immediately prior to such transaction.
EPG's 1995 Omnibus Compensation Plan provides that stock options, SARs,
limited stock appreciation rights ("LSARs"), PUs and restricted stock may be
granted to officers and key employees of EPG and its subsidiaries. The Plan
Administrator (as defined in the plan) determines which employees are eligible
to participate, the amount of any grant and the terms and conditions (not
otherwise specified in the plan) of such grant. Pursuant to the terms of the
plan, if a "change in control" of EPG occurs, all outstanding stock options
become fully-exercisable, SARs and LSARs become immediately exercisable,
designated amounts of PUs
11
<PAGE> 15
become fully vested and all restrictions placed on awards of restricted EPG
common stock automatically lapse. For purposes of the plan, the term "change in
control," has the same meaning given such term in the Severance Plan. This plan
will be terminated, except with respect to outstanding stock options, SARs,
LSARs, PUs and restricted stock, if EPG stockholders approve the 1999 Omnibus
Incentive Compensation Plan pursuant to Proposal No. 2 described in EPG's 1999
Proxy Statement.
EPG's Omnibus Compensation Plan, which is the predecessor plan to EPG's
1995 Omnibus
Compensation Plan, provided for the grant of stock options, SARs, LSARs,
performance share units and restricted EPG common stock to officers and key
employees of EPG and its subsidiaries. Although this plan has been terminated
with respect to any new grants, certain stock options and SARs remain
outstanding thereunder. Pursuant to the terms of the plan, if a "change in
control" of EPG occurs, all outstanding stock options become fully exercisable
and SARs become immediately exercisable. For purposes of the plan, the term
"change in control" has the same meaning given such term in the Severance Plan,
except that the definition does not include the exclusion dealing with mergers,
consolidations or sales of assets of EPG in connection with a corporate
restructuring of EPG.
Under EPG's 1995 Incentive Compensation Plan, awards of cash and/or shares
of restricted EPG common stock may be granted to eligible officers of EPG and
its subsidiaries. The amount of awards available (subject to a plan maximum and
as established by the Plan Administrator (as defined in the plan) per
participant annually) and the performance goals upon which the awards are
contingent are determined by the Plan Administrator. Depending upon the
participant's position and the terms of the grant, each participant is required
to take between 25% and 100% of the incentive award in shares of restricted EPG
common stock, but any participant may elect to receive the entire incentive
award in shares of restricted EPG common stock. A participant who receives any
shares of restricted EPG common stock shall receive additional shares of
restricted EPG common stock of an equal amount because the participant bears the
risk of forfeiture, price fluctuation and other attendant risks during the
period in which the restrictions apply ("risk premium restricted stock").
Pursuant to the terms of the plan, if a "change in control" of EPG occurs, the
current year's maximum incentive award for each officer becomes fully payable
within 30 days following such "change in control." For purposes of the plan, the
term "change in control" has the same meaning given such term in the Severance
Plan. This plan will be terminated, except with respect to outstanding incentive
awards and EPG stock options, SARs, LSARs, PUs and restricted stock, if
stockholders approve the 1999 Omnibus Incentive Compensation Plan pursuant to
Proposal No. 2 described in EPG's 1999 Proxy Statement.
The El Paso Energy Corporation Strategic Stock Plan provides that stock
options, SARs, LSARs and shares of restricted EPG common stock may be granted to
officers and key employees of EPG and its subsidiaries in connection with EPG's
strategic acquisitions. The Plan Administrator (as defined in the plan)
determines which employees are eligible to participate, the amount of any grant
and the terms and conditions (not otherwise specified in the plan) of such
grant. Pursuant to the terms of the plan, if a "change in control" of EPG
occurs, all outstanding stock options become fully exercisable, SARs and LSARs
become immediately exercisable and all restrictions placed on awards of
restricted EPG common stock automatically lapse. For purposes of the plan, the
term "change in control" has the same meaning given such term in the Severance
Plan.
EPG's Supplemental Benefits Plan provides benefits to officers and key
management employees of EPG and its subsidiaries. The benefits equal the amount
that a participant failed to receive under EPG's Pension Plan because the
Pension Plan does not consider deferred compensation (whether in deferred cash
or deferred restricted EPG common stock) for purposes of calculating benefits
and is subject to IRC limitations on the amount of compensation to be considered
when calculating benefits and on the amount of benefits that can be paid to a
participant. The plan also provides an additional benefit equal to the amount of
EPG's matching contribution to EPG's Retirement Savings Plan that cannot be made
because of deferred compensation and IRC limitations. The plan may not be
terminated so long as the Pension Plan and/or Retirement Savings Plan remain in
effect. The Management Committee (as defined in the plan) designates who may
participate and administers the plan. Benefits under EPG's Supplemental Benefits
Plan are paid upon termination of employment in a lump-sum payment, in annuity
or in periodic installments. In the event of a "change in
12
<PAGE> 16
control," the supplemental pension benefits become fully vested and
nonforfeitable. For purposes of the plan, the term "change in control" has the
same meaning given such term in the Severance Plan.
EPG's Deferred Compensation Plan allows eligible executives and key
management employees of EPG and its subsidiaries to defer all or a portion of
their base salaries and any other deferrals made in accordance with certain of
EPG's compensation plans. The Management Committee (as defined in the plan)
designates the executives and key management employees who may participate.
Amounts deferred are payable upon termination of employment in a lump-sum
payment or in periodic installments, except that the Management Committee may,
in its discretion, accelerate payments. Any amounts deferred shall be credited
with interest, gains/losses based on investments or other indices specified by
the Management Committee.
EPG has a Senior Executive Survivor Benefits Plan which provides certain
senior executives of EPG and its subsidiaries, who are designated by the
Management Committee (as defined in the plan), with survivor benefit coverage in
lieu of the coverage provided generally for employees under EPG's group life
insurance plan. The amount of benefits provided, on an after-tax basis, is two
and one half times the executive's annual salary. Benefits are payable in
installments over 30 months beginning within 31 days after the executive's
death, except that the Management Committee may, in its discretion, accelerate
payments.
EPG had a Domestic Relocation Plan, under which EPG is obligated, upon the
termination of employment (as a result of death, retirement, permanent
disability or in the event of a change in control, as defined in the Severance
Plan described above) of the named executives, to purchase their residences in
Houston which they acquired during EPG's relocation from El Paso to Houston in
1997.
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 1999. 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 & Company Inc. to assist in the solicitation of proxies from
stockholders at an estimated fee of $6,000, 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 & Company 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.
13
<PAGE> 17
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, 1998.
SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals submitted by holders of Series A Preferred Stock for inclusion in
the Proxy Statement to be issued in connection with the Company's 1999 Annual
Meeting of Stockholders must be mailed to the Corporate Secretary, El Paso
Tennessee Pipeline Co., 1001 Louisiana Street, Houston, Texas 77002, and must be
received by the Corporate Secretary on or before November 19, 1999. The Company
will consider only proposals meeting the requirements of applicable SEC rules.
ANNUAL REPORT
A copy of the Company's 1998 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.
By Order of the Board of Directors
/s/ David L. Siddall
DAVID L. SIDDALL
Corporate Secretary
Houston, Texas
March 19, 1999
14
<PAGE> 18
SOLICITED BY THE BOARD OF DIRECTORS
EL PASO TENNESSEE PIPELINE CO.
ANNUAL MEETING OF STOCKHOLDERS
APRIL 22, 1999
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 February 24, 1999 at the Annual Meeting of
Stockholders to be held at The Windsor Court Hotel, 300 Gravier Street, New
Orleans, Louisiana on April 22, 1999, and at any adjournment(s) or
postponement(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.
(IMPORTANT - TO BE SIGNED AND DATED ON REVERSE SIDE)
[SEE REVERSE SIDE] [SEE REVERSE SIDE]
<PAGE> 19
EL PASO TENNESSEE PIPELINE CO.
c/o EquiServe
P.O. Box 8040
Boston, MA 02266-8040
<TABLE>
[1107 - EL PASO TENNESSEE PIPELINE CO.] [FILE NAME: EPT29A.FLX] [VERSION - 1] [2/5/99]
DETACH HERE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
1. Election of Directors.
Nominee: Kenneth L. Smalley
FOR WITHHOLD
THE NOMINEE [ ] [ ] AUTHORITY TO VOTE
LISTED ABOVE FOR THE NOMINEE
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: ________
</TABLE>
<PAGE> 20
SKU # 1107-EPTPS-99
