<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 NATURAL GAS COMPANY, doing business as El Paso Energy Corporation
- --------------------------------------------------------------------------------
(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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[EL PASO ENERGY LOGO]
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of El Paso Natural Gas Company, doing business as El Paso Energy Corporation
(the "Company"), which will be held on Tuesday, April 22, 1997, at 10:00 a.m.
(central daylight savings time), at The Adolphus Hotel, 1321 Commerce Street,
Dallas, Texas. The accompanying Notice of Annual Meeting of Stockholders and
Proxy Statement describe the business to be transacted at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, please complete,
date, sign and return the enclosed proxy card in the accompanying envelope as
promptly as possible to ensure that your shares are represented and voted in
accordance with your wishes. You can help the Company avoid the necessity and
expense of sending follow-up letters to ensure a quorum is represented by
promptly returning the enclosed proxy card in the accompanying envelope.
Sincerely,
/s/ WILLIAM A. WISE
WILLIAM A. WISE
Chairman of the Board
and Chief Executive Officer
Houston, Texas
March 14, 1997
<PAGE> 3
EL PASO NATURAL GAS COMPANY
1001 LOUISIANA
HOUSTON, TEXAS 77002
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 22, 1997
The Annual Meeting of Stockholders of El Paso Natural Gas Company, doing
business as El Paso Energy Corporation (the "Company"), will be held on Tuesday,
April 22, 1997, at 10:00 a.m. (central daylight savings time), at The Adolphus
Hotel, 1321 Commerce Street, Dallas, Texas, for the following purposes:
1. To elect eight Directors, each to hold office for a term of one year;
2. To ratify the appointment of Coopers & Lybrand L.L.P. as independent
certified public accountants to audit the Company's financial statements
for the fiscal year ending December 31, 1997; and
3. To transact any other business which may be properly brought before the
Annual Meeting.
Only stockholders of record at the close of business on February 24, 1997,
are 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/ STACY J. JAMES
STACY J. JAMES
Corporate Secretary
Houston, Texas
March 14, 1997
<PAGE> 4
EL PASO NATURAL GAS COMPANY
1001 LOUISIANA
HOUSTON, TEXAS 77002
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS -- APRIL 22, 1997
This Proxy Statement with the accompanying Notice of Annual Meeting of
Stockholders and proxy card are being mailed to stockholders beginning on or
about March 14, 1997. The proxy is solicited by the Board of Directors of El
Paso Natural Gas Company, doing business as El Paso Energy Corporation (the
"Company"), for use at the Annual Meeting of Stockholders (the "Annual Meeting")
on Tuesday, April 22, 1997. Shares of the Company's common stock, par value
$3.00 per share (the "Common 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 Ms. Stacy J. James, Corporate Secretary, El Paso Natural Gas Company, 1001
Louisiana, Houston, Texas 77002, by signing and delivering a subsequently dated
proxy or by attending the Annual Meeting in person and giving notice of
revocation to the Inspectors of Election.
February 24, 1997, was the record date for the determination of
stockholders entitled to notice of, and to vote at, the Annual Meeting. On that
date there were outstanding and entitled to vote 59,453,406 shares of Common
Stock, which is the Company's only class of voting securities. 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 during the ordinary business hours at The Adolphus Hotel, 1321
Commerce Street, Dallas, Texas.
Each stockholder is entitled to one vote on each proposal for each share of
Common Stock held as of the record date. Two Inspectors of Election, both from
The First National Bank of Boston 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 tallied as a vote "for" the management
proposal.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company held nine meetings during the fiscal
year ended December 31, 1996. The standing committees of the Board of Directors
are the Audit Committee and the Compensation Committee. The Board of Directors
does not have a nominating committee or any committee performing similar
functions, and all matters which would be considered by such committee are acted
upon by the full Board of Directors. Each Director has attended at least 75% of
the meetings of the Board of Directors and the committees on which he served
during the fiscal year 1996, except for Mr. Eugenio Garza Laguera.
THE AUDIT COMMITTEE
During fiscal year 1996, the Audit Committee held five meetings. The Audit
Committee currently consists of Kenneth L. Smalley (Chairman), Eugenio Garza
Laguera and Malcolm Wallop, each a non-employee Director. The Audit Committee
makes a recommendation to the Board of Directors for a firm of independent
certified public accountants to audit the Company's annual financial statements.
In addition, the Audit Committee reviews with management and the Company's
independent certified public accountants the Company's financial statements, the
adequacy of the Company's internal accounting controls, and the Company's basic
accounting and financial policies and practices.
<PAGE> 5
THE COMPENSATION COMMITTEE
During fiscal year 1996, the Compensation Committee held five meetings. The
Compensation Committee currently consists of Ben F. Love (Chairman), Byron
Allumbaugh and James F. Gibbons, each a non-employee Director. The Compensation
Committee currently administers the Company's executive stock option plan,
long-term incentive compensation plan, annual incentive compensation plan and
other executive compensation plans. In addition, the Compensation Committee
considers proposals with respect to the creation of and changes to executive
compensation plans and reviews appropriate criteria for establishing performance
targets and determining annual corporate and executive performance ratings. The
policies and mission of the Compensation Committee are set forth in the
"Compensation Committee Report on Executive Compensation," which begins on page
14 of this Proxy Statement.
DIRECTOR COMPENSATION
Each member of the Company's Board of Directors is reimbursed for the usual
and ordinary expenses of meeting attendance. Employee Directors receive no
additional compensation for serving on the Board of Directors or committees
thereof. Pursuant to the Company's 1995 Compensation Plan for Non-Employee
Directors, non-employee Directors receive an annual retainer of $50,000, which
may be paid in cash, deferred cash, deferred shares of Common Stock (plus a
conversion premium) or a combination thereof. No additional fees are currently
paid to non-employee Directors for serving on the Board of Directors or
committees thereof.
Each non-employee Director receives a stock option grant of 3,000 options
under the Company's Stock Option Plan for Non-Employee Directors upon his
initial election to the Board of Directors and an annual stock option grant of
1,000 options upon each re-election to the Board of Directors. Non-employee
Directors are also eligible to participate in the Company's Retirement Income
Plan for Non-Employee Directors (which provides for retirement benefits based
upon the number of years of service as a Director).
As part of its overall program to support charitable organizations, the
Company has a Director Charitable Award Plan. The plan provides for the
designation of up to four charitable organizations to receive a maximum of
$1,000,000 in the aggregate upon the death of each Director participant.
Pursuant to the plan, each Director of the Company is entitled to participate
upon the completion of two consecutive years of service on the Board of
Directors. Currently, all Directors other than Messrs. Flawn and Wallop are
eligible to participate in the plan.
PROPOSALS
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
In accordance with the By-laws of the Company, the Board of Directors has
fixed at eight the number of Directors constituting the full Board. The Company
proposes to elect eight Directors, each to hold office for a 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 stockholders,
the persons named on the enclosed proxy card will vote the shares of Common
Stock represented by such proxy for the election of the eight nominees named in
this Proxy Statement. However, if any of the named nominees should be
unavailable for election, the Board of Directors may substitute nominees, in
which event the shares of Common Stock represented by proxy will be voted for
such substitute nominees unless an instruction to the contrary is contained on
the proxy card. No circumstances are presently known which would render any
nominee named herein unavailable to serve as a member of the Board of Directors.
Pursuant to the Company's By-laws, the election of each Director requires an
affirmative vote of a plurality of the shares of the Company's Common Stock
represented at the Annual Meeting in person or by proxy and entitled to vote on
the proposal. Holders of Common Stock may not cumulate their votes for the
election of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE ELECTION
OF EACH OF THE NOMINEES NAMED BELOW.
2
<PAGE> 6
Each of the following nominees is currently a Director of the Company:
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION SERVED AS
AND SELECTED OTHER INFORMATION DIRECTOR
CONCERNING NOMINEES FOR DIRECTOR SINCE
-------------------------------- ---------
<S> <C>
BYRON ALLUMBAUGH 1992
Retired.
Age -- 65
Member -- Compensation Committee
Mr. Allumbaugh has been retired since February 1, 1997. From February
1996 to February 1997, Mr. Allumbaugh was Chairman of the Board of
Ralphs Grocery Company. He served as Chief Executive Officer of Ralphs
Grocery Company from June 1995 until February 1996. From 1976 to 1995,
Mr. Allumbaugh served as Chairman of the Board and Chief Executive
Officer of Ralphs Grocery Company. Mr. Allumbaugh is a member of the
Board of Directors of H. F. Ahmanson & Company, CKE Restaurants, Inc.
and Ultramar Diamond Shamrock Inc.
PETER T. FLAWN, PH.D. 1997
Retired.
Age -- 71
Dr. Flawn has been retired since 1985. For more than five years prior
to that date, Dr. Flawn was President of The University of Texas at
Austin and currently holds the title of President Emeritus. He is a
member of the Board of Directors of Harte-Hanks Communications, Inc.,
Input/Output, Inc. and Tenneco Inc. Dr. Flawn also is currently a
member of the Board of Directors of Global Marine, Inc. and National
Instruments Corp., but will not stand for reelection in 1997.
EUGENIO GARZA LAGUERA 1993
Chairman of the Board of Directors,
Valores Industriales, S.A. ("VISA"),
Monterrey, Mexico -- Mexican Holding Company
principally involved in beer and
soft drink bottling and distribution;
Chairman of the Board of Directors, Fomento Economico
Mexicano,
S.A. de C.V. ("FEMSA"),
Monterrey, Mexico -- Beer and soft drink bottling and
distribution;
Chairman of the Board of Directors,
Grupo Financiero Bancomer, S.A. de C.V.,
Mexico City, Mexico -- Mexican Financial Services
Holding Company principally involved in commercial
banking;
Chairman of the Board of Directors,
BANCOMER,
Mexico City, Mexico --
Commercial Banking Institution;
Chairman of the Board of Regents,
Instituto Tecnologico Y de
Estudios Superiores de Monterrey, A.C.,
Monterrey, Mexico -- Higher Education.
Age -- 73
Member -- Audit Committee
Mr. Garza Laguera has served as Chairman of the Board of Directors of
VISA and FEMSA and Chairman of the Board of Regents of Instituto
Tecnologico Y de Estudios Superiores de Monterrey, A.C. for more than
five years. He has been Chairman of the Board of Directors of Grupo
Financiero Bancomer and BANCOMER since 1991.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION SERVED AS
AND SELECTED OTHER INFORMATION DIRECTOR
CONCERNING NOMINEES FOR DIRECTOR SINCE
-------------------------------- ---------
<S> <C>
JAMES F. GIBBONS, PH.D. 1994
Professor, Electrical Engineering,
Stanford University,
Stanford, California -- Higher Education.
Age -- 65
Member -- Compensation Committee
Dr. Gibbons has been on the faculty of Stanford University since 1957
and was Dean of the School of Engineering from September 1984 until
June 1996. He is now Professor of Electrical Engineering and special
counsel to the President for Industry Relations at Stanford University.
He is a member of the Board of Directors of Amati Communications Corp.,
Centigram Communications Corp., Cisco Systems, Inc., Lockheed Martin,
Inc. and Raychem Inc. He currently serves as Chairman of the Board of
Amati Communications Corp.
BEN F. LOVE 1992
Investor.
Age -- 71
Chairman -- Compensation Committee
Since December 1989, Mr. Love's principal occupation has been as shown
above. For more than five years prior to that date, Mr. Love was
Chairman of the Board and Chief Executive Officer of Texas Commerce
Bancshares, Inc. He is a member of the Board of Directors of Burlington
Northern Santa Fe Corporation and Mitchell Energy & Development Corp.
KENNETH L. SMALLEY 1995
Retired.
Age -- 67
Chairman -- Audit Committee
Mr. Smalley 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.
MALCOLM WALLOP 1995
President,
Frontiers of Freedom Foundation,
Arlington, Virginia -- Political Foundation.
Age -- 64
Member -- Audit Committee
Since January 1995, Mr. Wallop's principal occupation has been as shown
above. For eighteen years prior to that date, Mr. Wallop was a member
of the United States Senate. He is a member of the Board of Directors
of Hubbell Inc.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION SERVED AS
AND SELECTED OTHER INFORMATION DIRECTOR
CONCERNING NOMINEES FOR DIRECTOR SINCE
-------------------------------- ---------
<S> <C>
WILLIAM A. WISE 1984
Chairman of the Board and
Chief Executive Officer,
El Paso Natural Gas Company,
doing business as El Paso Energy Corporation
Houston, Texas -- Diversified Energy Company.
Age -- 51
Mr. Wise has been Chairman of the Board since January 1994 and Chief
Executive Officer (the "CEO") since January 1990. He was President of
the Company from January 1990 until April 1996. He was President and
Chief Operating Officer of the Company from April 1989 to December
1989. From March 1987 until April 1989, Mr. Wise was an Executive Vice
President of the Company. From January 1984 to February 1987, he was a
Senior Vice President of the Company. He is a member of the Board of
Directors of Battle Mountain Gold Company.
</TABLE>
SECURITY OWNERSHIP OF A BENEFICIAL OWNER AND MANAGEMENT
The following table sets forth certain information as of January 31, 1997,
regarding the beneficial ownership of the Company's Common Stock by (i) each
Director of the Company, (ii) each of the Company's named executives (as
hereinafter defined), (iii) all Directors and executive officers of the Company
as a group, and (iv) each person or entity known by the Company to own
beneficially more than 5% of its outstanding shares of Common Stock. No family
relationship exists between any of the Directors and executive officers of the
Company.
<TABLE>
<CAPTION>
TITLE OF BENEFICIAL OWNERSHIP STOCK PERCENT
CLASS (EXCLUDING OPTIONS)(1) OPTIONS(3) TOTAL OF CLASS
-------- NAME ---------------------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Common Stock Goldman, Sachs & Co. and The
Goldman Sachs Group, L.P. 85
Broad Street New York, NY
10004............................ 2,934,948 0 2,934,948 5.21%
Common Stock B. Allumbaugh.................... 5,045 7,000 12,045 *
Common Stock P. Flawn......................... 1,358 3,000 4,358 *
Common Stock E. Garza Laguera................. 0 6,000 6,000 *
Common Stock J. F. Gibbons.................... 1,964 6,000 7,964 *
Common Stock B.F. Love........................ 11,000 4,000 15,000 *
Common Stock K.L. Smalley..................... 6,928 5,000 11,928 *
Common Stock M. Wallop........................ 0 5,000 5,000 *
Common Stock W.A. Wise........................ 565,131(2) 482,592 1,047,723 1.86%
Common Stock H.B. Austin...................... 84,102 105,049 189,151 *
Common Stock R.O. Baish....................... 90,309 78,733 169,042 *
Common Stock J.W. Somerhalder II.............. 69,480 71,066 140,546 *
Common Stock B. White, Jr..................... 88,285 59,733 148,018 *
Common Stock Directors and executive officers
as a group (17 persons total,
including those individuals
listed above).................... 1,466,396 990,930 2,457,326 4.28%
</TABLE>
5
<PAGE> 9
- ---------------
* Less than 1%.
(1) Directors and executive officers have sole voting and investment power of
the shares of Common Stock reflected in the table above, except that each of
Messrs. Allumbaugh, Gibbons, Wise, Austin and White shares with one or more
other individuals voting and investment power with respect to 2,169, 1,000,
2,000, 159 and 1,000 shares of Common Stock, respectively. Some shares of
Common Stock reflected in this column for certain individuals are subject to
restrictions. Goldman, Sachs & Co. and The Goldman Sachs Group, L.P. has
shared voting and shared dispositive power over 2,934,948 shares of Common
Stock.
(2) Mr. Wise's beneficial ownership excludes 200 shares of 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
Common Stock reflected in this column within 60 days through the exercise of
stock options and/or tandem stock appreciation rights ("SARs").
6
<PAGE> 10
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning compensation awarded
to, earned by or paid to any person serving as the Company's CEO or acting in a
similar capacity during the last completed fiscal year, and the Company's four
other most highly compensated executive officers (collectively the "named
executives") for services rendered to the Company and its subsidiaries in all
capacities during each of the last three fiscal years. The table also identifies
the principal capacity in which each of the named executives served the Company
at the end of fiscal year 1996.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------- --------------------------------------
AWARDS PAYOUTS
------------------------- ----------
LONG-TERM
OTHER SECURITIES INCENTIVE
ANNUAL RESTRICTED UNDERLYING PLAN ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($) ($)(3) ($) (4) ($) (5) (#) ($) (7) ($) (8)
------------------ ---- -------- ---------- ------------ ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William A. Wise 1996 $ --(2) $1,275,000 $124,967 $3,537,481(6) 395,000 $ 740,000 $69,731
Chairman, 1995 $535,417 $ 412,500 $229,943 $ 412,487 62,000 -- $93,457
President & CEO 1994 $525,096 $ 550,000 $126,025 -- 83,000 $1,348,390 $42,008
El Paso Energy
Corporation
H. Brent Austin 1996 $228,125 $ 450,000 $ 178 $ 149,987 60,000 $ 176,658 $22,855
Executive Vice 1995 $213,750 $ 168,750 $ 80,738 $ 168,735 15,000 -- $24,059
President and Chief 1994 $193,333 $ 168,000 $ 8,542 -- 16,400 $ 264,819 $11,595
Financial Officer
El Paso Energy
Corporation
Richard Owen Baish 1996 $228,125 $ 450,000 -- $ 149,987 60,000 $ 176,658 $29,826
President 1995 $225,000 $ 168,750 $ 76,999 $ 168,735 15,000 -- $39,685
El Paso Natural 1994 $201,667 $ 180,000 $ 1,883 -- 16,400 $ 264,819 $16,133
Gas Company
John W. Somerhalder II 1996 $206,458 $ 450,000 -- $ 149,987 60,000 $ 154,927 $19,664
President 1995 $173,333 $ 111,000 $ 76,999 $ 110,973 15,000 -- $25,953
Tennessee Gas
Pipeline 1994 $171,667 $ 148,000 $ 9,273 -- 16,400 $ 264,819 $13,733
Company
Britton White, Jr. 1996 $203,125 $ 412,500 $ 223 $ 137,472 60,000 $ 133,145 $20,550
Executive Vice 1995 $185,417 $ 120,000 $ 80,841 $ 119,978 15,000 -- $25,405
President & 1994 $183,333 $ 160,000 $ 7,608 -- 16,400 $ 264,819 $11,000
General Counsel
El Paso Energy
Corporation
</TABLE>
- ---------------
(1) The Company did not have any executive officer terminate employment during
fiscal year 1996 who would otherwise have been included as a named executive
in this table.
(2) Mr. Wise's base salary was eliminated 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 certain performance
targets are met within those periods. This change is consistent with
Company-wide cost reduction initiatives and is intended to align Mr. Wise's
compensation more directly with stockholder value.
(3) Pursuant to the Company's 1995 Incentive Compensation Plan, the named
executives are required to receive a substantial part of their annual bonus
in restricted Common Stock. The amounts reflected in this column for fiscal
years 1996 and 1995 represent a combination of the market value of the
restricted Common Stock and cash awarded under that plan. Dividends are paid
directly to the holder of the restricted Common Stock during the four-year
vesting schedule. In addition, amounts reflected for 1996
7
<PAGE> 11
include an additional one-time cash bonus awarded under the Company's 1995
Incentive Compensation Plan in recognition of the extraordinary
accomplishments and increases in stockholder value achieved during 1996.
See the Compensation Committee Report on Executive Compensation beginning
on page 14 of this Proxy Statement for a discussion of the specific
accomplishments and other factors.
(4) The amount reflected for Mr. Wise in fiscal year 1996 includes $48,000 for a
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 2
above. The amounts reflected in this column for fiscal year 1995 include a
one-time automobile transfer to compensate the named executive for the
termination of the Company-provided automobile program and an allowance
compensating for the discontinuation of other perquisites and benefits
previously provided. For fiscal year 1995 these amounts were $40,999
(representing termination of the automobile program) and $36,000
(representing termination of other executive perquisites and benefits) for
Messrs. Austin, Baish, Somerhalder and White. For Mr. Wise, the value
representing the termination of the automobile program was $105,000 in
fiscal year 1995. The amount reflected for Mr. Wise in fiscal year 1994
includes $46,102 in value attributed to the use of the Company's aircraft
(which was based on the thirteen-month period of December 1993 through
December 1994 due to a change in the period the Company uses to report
aircraft usage -- all other amounts for all fiscal years reflected are based
upon 12-month fiscal years). The aggregate value of the perquisites and
other personal benefits received by the other named executives in fiscal
years 1996 and 1994 have not been reflected, because the amount was below
the Securities and Exchange Commission's (the "SEC") required reporting
threshold.
(5) The Company'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 Common Stock. The amounts reflected in this column
include the market value of restricted Common Stock, subject to a four-year
vesting schedule, received by each of the named executives pursuant to such
election. In addition, a grant of restricted Common Stock was made in
January and June 1996. The total shares of restricted Common Stock held on
December 31, 1996 by Messrs. Wise, Austin, Baish, Somerhalder and White was
476,294, 70,756, 70,756, 67,074 and 67,648, respectively. The aggregate
dollar value on December 31, 1996, of all shares of restricted Common Stock
held by Messrs. Wise, Austin, Baish, Somerhalder and White was $24,052,847,
$3,573,178, $3,573,178, $3,387,237 and $3,416,224, respectively. Dividends
are paid directly to the holder of the restricted Common Stock. Most of the
foregoing values can be realized by the named executives if, and only if,
they remain in the employ of the Company for the specified time period and
the Company's stockholders realize the required total stockholder value
during the specified time period. For the CEO, 25% of his January 1996 grant
vests if, and only if, from the date of the grant total stockholder value
increases by $405,672,387; an additional 35% vests if stockholders realize a
total increase in value of $1,054,748,206; and the remaining 40% vests if
stockholders realize a total increase in value of $1,687,597,130. For the
CEO, 25% of his June 1996 grant vests if, and only if, from the date of the
grant total stockholder value increases by $388,885,943; an additional 35%
vests if stockholders realize a total increase in value of $972,214,859; and
the remaining 40% vests if stockholders realize a total increase in value of
$1,458,322,288. The other named executives realize similar vesting of their
restricted Common Stock grants as described for the CEO. See the "Restricted
Common Stock Long-Term Incentive Plans -- Awards in 1996" beginning on page
11 of this Proxy Statement for a description of the restricted Common Stock
awards and the vesting requirements.
(6) The amount reflected for Mr. Wise also includes the market value of a
one-time retention oriented restricted Common Stock grant of 100,000 shares,
which began vesting on January 19, 1997 at the rate of 20% per year for five
years.
(7) The amounts in this column for fiscal year 1996 represent the market value
of Common Stock and/or cash paid as interim payout of performance units
under the Company's 1995 Omnibus Compensation Plan. The interim payment was
made in recognition of the Company's total stockholder return in relation to
the that of its peer group of companies during the first two years of the
performance period. The amounts in this column for fiscal year 1994 are
payouts made with respect to performance share units granted under the
Company's Omnibus Compensation Plan as a result of the early termination of
the applicable performance cycle during fiscal year 1994 as a result of the
termination of that Plan and the
8
<PAGE> 12
Company's desire to preserve its deduction for such compensation in light
of Section 162(m) of the Internal Revenue Code (the "IRC"). No named
executive received a long-term incentive plan payout from the Company
during the fiscal year 1995.
(8) The compensation reflected in this column for fiscal year 1996 is comprised
of Company contributions to the Company's Retirement Savings Plan,
supplemental Company contributions under the Supplemental Benefits Plan and
the above-market interest earned on deferred compensation. Specifically,
these amounts for fiscal year 1996 were $3,647, $56,270 and $9,814 for Mr.
Wise; $7,031, $13,641 and $2,183 for Mr. Austin; $7,406, $17,016 and $5,404
for Mr. Baish; $7,290, $11,468 and $906 for Mr. Somerhalder; and $7,000,
$9,591 and $3,959 for Mr. White, respectively.
STOCK OPTION GRANTS
The following table sets forth the number of stock options granted at fair
market value to each of the named executives during the fiscal year 1996. In
satisfaction of applicable SEC regulations, the table further sets forth the
potential realizable value of such stock options in the year 2006 (the
expiration date of the stock options) at arbitrarily assumed annualized rates of
stock price appreciation of five and ten percent over the full ten-year term of
the stock options. As the table indicates, the annualized stock price
appreciation of five and ten percent will result in stock prices in the year
2006 of approximately $51.11 and $81.38, respectively, for the January 1996
grant and approximately $56.60 and $90.13 for the June 1996 grant. The amounts
shown in the table as potential realizable values for all stockholders' stock
(approximately $1.1 billion and $2.8 billion for the January 1996 grant and
approximately $1.2 billion and $3.1 billion for the June 1996 grant) represent
the corresponding increases in the market value of 55,954,812 shares of the
Company's Common Stock outstanding as of December 31, 1996. No gain to the named
executives is possible. without an increase in stock price which will benefit
all stockholders proportionately. Actual gains, if any, on stock option
exercises and Common Stock holdings are dependent on the future performance of
the Company's Common Stock and overall stock market conditions. There can be no
assurance that the potential realizable values shown in this table will be
achieved.
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION TERM
INDIVIDUAL GRANTS(1) -------------------------------------
---------------------------------------------------
IF STOCK PRICE IF STOCK PRICE
NUMBER OF % OF TOTAL AT $51.11 AND AT $81.38 AND
SECURITIES OPTIONS $56.60, $90.13,
UNDERLYING GRANTED TO RESPECTIVELY, RESPECTIVELY,
OPTIONS EMPLOYEES EXERCISE EXPIRATION IN 2006 IN 2006
NAME GRANTED(#) IN 1996 PRICE ($/SH) DATE 5% ($) 10% ($)
---- ---------- ---------- ------------ ---------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
ALL STOCKHOLDERS'
STOCK
APPRECIATION........ N/A N/A N/A N/A $1,104,076,229 $2,797,945,937
$1,222,841,401 $3,098,920,201
William A. Wise....... 270,000 14.38% $31.3750 01/19/06 $ 5,327,524 $ 13,500,991
125,000 21.44% $34.7500 06/19/06 $ 2,731,761 $ 6,922,819
H. Brent Austin....... 40,000 2.13% $31.3750 01/19/06 $ 789,263 $ 2,000,147
20,000 3.43% $34.7500 06/19/06 $ 437,082 $ 1,107,651
Richard Owen Baish.... 40,000 2.13% $31.3750 01/19/06 $ 789,263 $ 2,000,147
20,000 3.43% $34.7500 06/19/06 $ 437,082 $ 1,107,651
John W. Somerhalder
II.................. 40,000 2.13% $31.3750 01/19/06 $ 789,263 $ 2,000,147
20,000 3.43% $34.7500 06/19/06 $ 437,082 $ 1,107,651
Britton White, Jr..... 40,000 2.13% $31.3750 01/19/06 $ 789,263 $ 2,000,147
20,000 3.43% $34.7500 06/19/06 $ 437,082 $ 1,107,651
</TABLE>
- ---------------
(1) The first grant of stock options was made on January 19, 1996 at the fair
market value on that date and will become exercisable at a rate of 20% (for
the CEO) and 33 1/3% (for the other named executives) per year on the five-
or three-year anniversaries of the grants, respectively. The second grant of
stock options was made on June 19, 1996 at the fair market value on that
date and will become exercisable at a rate of 20% on June 12, 1997, and 20%
on June 19 of 1998, 1999, 2000, and 2001 for the CEO and 33 1/3% on June 12,
1997, and 33 1/3% on June 19 of 1998 and 1999 for the other named
executives. There were no SARs granted in 1996. Any unvested stock options
become fully exercisable in the event of a "change in
9
<PAGE> 13
control" (see page 18 of this Proxy Statement for a description of the
Company's 1995 Omnibus Compensation Plan and the term "change in control,"
and page 18 of this Proxy Statement for a description of the El Paso Energy
Corporation Strategic Stock Plan and the term "change of control"). In the
event total stockholder return equals or exceeds 130% for the first grant
and 105% for the second grant of the indicated exercise price during a five
year period or four and one-half year period, respectively, the named
executives may exchange up to one-half for the CEO (with a maximum of
100,000 shares with respect to the first grant) and up to one-quarter for
the other named executives of their options for an equivalent number of
shares of Common Stock. Under the terms of the Company's 1995 Omnibus
Compensation Plan and the El Paso Energy Corporation Strategic Stock Plan,
the Compensation Committee may, in its sole discretion and at any time,
change the vesting of the stock options. 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 17 of this Proxy
Statement).
N/A -- Not Applicable
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table sets forth information concerning option exercises and
the fiscal year-end values of the unexercised stock options (and tandem SARS),
provided on an aggregate basis, for each of the named executives.
AGGREGATED OPTION/SAR EXERCISES IN 1996
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES ACQUIRED VALUE AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(2)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME # ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William A. Wise.......... 0 $ 0 428,592 395,000 $10,498,634 $7,206,563
H. Brent Austin.......... 15,106 $201,825 91,716 60,000 $ 2,271,851 $1,091,250
Richard Owen Baish....... 24,441 $548,882 65,400 60,000 $ 1,437,963 $1,091,250
John W. Somerhalder II... 11,334 $372,605 57,733 60,000 $ 1,195,014 $1,091,250
Britton White, Jr. ...... 22,667 $467,507 46,400 60,000 $ 835,900 $1,091,250
</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 $50.6875, the fair market value of the Common Stock on
December 31, 1996 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.
LONG-TERM INCENTIVE AWARDS
Performance Units
The table on the following page provides information concerning long-term
incentive awards of performance units ("PUs") under the Company's 1995 Omnibus
Compensation Plan. The units granted vest equally per year over the indicated
maturation performance period, at the end of which (or at an interim time) the
Company's total stockholder return is compared to that of its peer group
(comprised of those companies in the Standard & Poor's Natural Gas Index). If
the Company's total stockholder return ranks in the first, second, third or
fourth quartiles, the value of each unit is $150, $100, $50 and $0,
respectively. The payouts will consist of Common Stock and cash. All the amounts
shown are potential assumed amounts. While there
10
<PAGE> 14
can be no assurance that the Company will achieve the results that would lead to
final payments under that plan, see Note 7 to the Executive Compensation Table
for a discussion of the interim payment.
LONG-TERM INCENTIVE PLANS -- AWARDS IN 1996
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS
PERIOD UNTIL -----------------------------------------------------
NUMBER OF MATURATION BELOW
NAME(1) UNITS(#)(2) OR PAYOUT THRESHOLD($) THRESHOLD($) TARGET($) MAXIMUM($)
------- ----------- ------------ ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John W. Somerhalder II...... 2,175 3 years $0 $ 108,750 $ 217,500 $ 326,250
Britton White, Jr. ......... 1,450 2 years $0 $ 72,500 $ 145,000 $ 217,500
</TABLE>
- ---------------
(1) These grants were made to the specified named executives as additional
incentive consistent with their increased job responsibilities. No other
named executive officer received a grant of PUs during 1996.
(2) Each unit is assigned an initial value of $100, subject to adjustment based
upon the Company's relative total stockholder value to the other companies
in the Standard & Poor's Natural Gas Index group.
Restricted Common Stock
The following table provides information concerning incentive awards of
restricted Common Stock made under the Company's 1995 Omnibus Compensation Plan
and the El Paso Energy Corporation Strategic Stock Plan during 1996. The first
grant reflected for each of the named executives was made in January and the
second grant reflected for each of the named executives was made in June. The
number of shares of restricted Common Stock will vest if, and only if, the named
executive remains in the employ of the Company for the specified time period and
the required increase in total stockholder return is achieved during such time
periods.
LONG-TERM INCENTIVE PLANS -- AWARDS IN 1996(1)
<TABLE>
<CAPTION>
ESTIMATED FUTURE SHARES TO BE VESTED UNDER
PERFORMANCE OR RESTRICTED STOCK GRANTS
OTHER PERIOD --------------------------------------------------------------
NUMBER OF UNTIL BELOW THRESHOLD 1(2) THRESHOLD 2(3) MAXIMUM(4)
NAME SHARES(#) MATURATION THRESHOLD(#) (#) (#) (#)
---- --------- -------------- --------------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
William A. Wise.......... 200,000 5 years 0 50,000 120,000 200,000
150,000 4.5 years 0 37,500 90,000 150,000
H. Brent Austin.......... 45,000 5 years 0 18,000 31,500 45,000
15,000 4.5 years 0 6,000 10,500 15,000
Richard Owen Baish....... 45,000 5 years 0 18,000 31,500 45,000
15,000 4.5 years 0 6,000 10,500 15,000
John W. Somerhalder II... 45,000 5 years 0 18,000 31,500 45,000
15,000 4.5 years 0 6,000 10,500 15,000
Britton White, Jr. ...... 45,000 5 years 0 18,000 31,500 45,000
15,000 4.5 years 0 6,000 10,500 15,000
</TABLE>
- ---------------
(1) The thresholds in this table refer to the increase in total stockholder
value that must be achieved in order for the shares of restricted Common
Stock to meet the performance based vesting criteria.
(2) Threshold 1 represents an increase in total stockholder value of
$405,672,387 for the January grant and $388,885,943 for the June grant.
(3) Threshold 2 represents an increase in total stockholder value of
$1,054,748,206 for the January grant and $972,214,859 for the June grant.
(4) Maximum represents an increase in total stockholder value of $1,687,597,130
for the January grant and $1,458,322,288 for the June grant.
11
<PAGE> 15
PENSION PLAN
Set forth below is a table describing the Company's Pension Plan in which
the named executives, as well as other Company employees, may be entitled to
participate. The following table lists current annual retirement benefits under
the Pension Plan and the Company's Supplemental Benefits Plan (collectively, the
"Plans") for the 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 IRC provisions, compensation in excess of $150,000 cannot be
taken into account and the maximum payable benefit in 1996 is $120,000. 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 as follows:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE AT NORMAL RETIREMENT AGE
FINAL AVERAGE ----------------------------------------------------
PENSION EARNINGS 15 20 25 30
- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 200,000........................................... $ 46,365 $ 61,820 $ 77,275 $ 92,730
$ 400,000........................................... $ 94,365 $125,820 $157,275 $188,730
$ 600,000........................................... $142,365 $189,820 $237,275 $284,730
$ 800,000........................................... $190,365 $253,820 $317,275 $380,730
$1,000,000........................................... $238,365 $317,820 $397,275 $476,730
$1,200,000........................................... $286,365 $381,820 $477,275 $572,730
$1,400,000........................................... $334,365 $445,820 $557,275 $668,730
$1,600,000........................................... $382,365 $509,820 $637,275 $764,730
$1,800,000........................................... $430,365 $573,820 $717,275 $860,730
</TABLE>
Benefits which accrue under the Plans are based upon the gross salary
amount, 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 18 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 .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, Baish, Somerhalder and White
are 30, 30, 30, 30 and 25 (including 7 years of credited service pursuant to Mr.
White's employment agreement, which is described on page 17 of this Proxy
Statement), respectively.
Effective January 1, 1997, the Company amended its noncontributory defined
benefit pension plan to provide benefits determined by a cash balance formula.
Participants were credited with an initial cash balance equivalent to accrued
benefits on December 31, 1996. Cash balances are credited quarterly with a
percentage of pay and interest earned on such balances. Participants receive the
greater of the cash balance benefits or prior plan benefits (described above)
accrued through December 31, 2001. Estimated annual benefits payable upon
retirement at the normal retirement age for each of the named executives is
reflected below (based on
12
<PAGE> 16
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............................................. $812,730
H. Brent Austin............................................. $159,561
Richard Owen Baish.......................................... $262,585
John W. Somerhalder II...................................... $223,038
Britton White, Jr........................................... $158,611
</TABLE>
CUMULATIVE TOTAL STOCKHOLDER VALUE
The following graph shows the changes in the value of $100 invested since
March 12, 1992 (the date on which the Common Stock was initially offered to the
public) for the Common Stock and since February 29, 1992 (the month-end date
closest to the March 12, 1992 initial public offering date of the Common Stock)
for the Standard & Poor's Natural Gas Index and the Standard & Poor's 500 Stock
Index.
COMPARISON OF ANNUAL CUMULATIVE TOTAL VALUES IN 1992, 1993, 1994,
1995 AND 1996 FOR THE COMPANY, THE S&P NATURAL GAS INDEX
AND THE S&P 500 STOCK INDEX.
<TABLE>
<CAPTION>
ANNUAL CUMULATIVE TOTAL VALUES ($)
CALENDAR YEAR ---------------------------------------------------------------------------------------
ENDED THE COMPANY S&P NATURAL GAS INDEX
------------- ------------------------------------------- -------------------------------------------
<S> <C> <C>
1992:
December $ 167.6 $ 122.6
1993:
December $ 200.4 $ 145.6
1994:
December $ 176.1 $ 138.9
1995:
December $ 173.9 $ 196.4
1996:
December $ 315.7 $ 261.0
<CAPTION>
ANNUAL CUMULATIVE TOTAL VALUES ($)
CALENDAR YEAR -------------------------------------------
ENDED S&P 500 STOCK INDEX
------------- -------------------------------------------
<S> <C>
1992:
December $ 108.3
1993:
December $ 119.2
1994:
December $ 120.7
1995:
December $ 166.1
1996:
December $ 204.3
</TABLE>
The annual values of each investment are based on the share price
appreciation and assumes cash dividend reinvestment. The calculations exclude
any applicable brokerage commissions and taxes. Cumulative total stockholder
return from each investment can be calculated from the annual values given
above.
13
<PAGE> 17
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive officer compensation program is administered and
reviewed by the Compensation Committee. The Compensation Committee consists of
Messrs. Allumbaugh, Gibbons and Love. The Compensation Committee has neither
interlocks nor insider participation.
POLICIES AND MISSION
The Compensation Committee has determined that the compensation program of
executive officers should not only be adequate to attract, motivate and retain
competent executive personnel, but should also be directly and materially
related to the short-term and long-term operating performance and objectives of
the Company. To achieve these ends, executive compensation (including base
salary, year-end bonus, restricted stock awards, stock option grants and other
long-term incentive awards) is, to a significant extent, dependent upon the
Company's financial performance and the return on its Common Stock. However, to
ensure that the Company is strategically and competitively positioned for the
future, the Compensation Committee also has the discretion to attribute
significant weight to other factors in determining executive compensation, such
as maintaining competitiveness, implementing capital improvements, expanding
markets, pursuing growth opportunities and achieving other long-range business
and operating objectives.
In order to determine appropriate levels of executive compensation, the
Compensation Committee periodically conducts a thorough competitive evaluation,
reviews proprietary and proxy information, and consults with and receives advice
from an independent compensation consulting firm. The Compensation Committee
also considers relevant industry and market changes when evaluating the
Company's performance and each individual executive's performance. The
independent consulting firm provides data and information that compares the
Company with a peer group of companies. Such peer group consists of most of
those companies included in the S&P Natural Gas Index (reflected in the
Performance Graph found on page 13 of this Proxy Statement) and certain
additional companies which the consulting firm and the Compensation Committee
believe represent the Company's most direct competition for executive talent.
A primary mission of the Compensation Committee is to ensure that each
executive officer's compensation is directly related to the performance of the
Company and its Common Stock and the performance of the individual executive
officer. Toward that end, the Compensation Committee has established an
executive compensation program with a strong performance-based orientation. In
particular, the Compensation Committee has determined, in consultation with the
independent consulting firm, that the long-term incentive awards for executive
officers, including the CEO, should be targeted in the top one-half of the peer
group, tied directly to the performance of the Company's Common Stock and should
consist of approximately 50% in stock options and 50% in PUs. With respect to
cash compensation, the base salary of executive officers is targeted at or near
the 50th percentile of the peer group (described above). Total cash compensation
under the Company's current plans can reach approximately the 90th percentile of
such peer group with year-end incentive bonuses ranging from 0% to 100% of base
salary for the CEO and the other named executive officers. The Compensation
Committee determines what percentage bonus will be awarded based upon both the
Company's and the individual executive's performance vis-a-vis objectives
established each year. Mr. Wise's employment agreement, as described on page 17
of this Proxy Statement, does not affect the amount of his compensation. Mr.
Wise's compensation and benefits are determined under Company plans and programs
in effect from time to time in accordance with the policies described above.
However, the Company entered into a letter agreement with Mr. Wise in January
1995 as a result of the CEO's election to have all incentive awards payable in
shares of restricted Common Stock. As a result of the stock-based compensation
plan discussed below, Mr. Wise's employment agreement was amended to establish
an illustrative base salary for certain of the Company's benefits and welfare
plans. See page 17 of this Proxy Statement for a description of the letter
agreement and the employment agreement with Mr. Wise. None of the other named
executives received compensation governed or affected by employment agreements.
Section 162(m) of the IRC ("Section 162(m)") was enacted in 1993 and
generally affects the Company's federal income tax deduction for compensation
paid to the Company's CEO and four other highest paid executive officers. To the
extent compensation is "performance-based" within the meaning of Sec-
14
<PAGE> 18
tion 162(m), the Section's limitations will not apply. In 1995, the Board of
Directors adopted, and the stockholders approved, certain Company compensation
plans which were structured to qualify as performance-based compensation under
Section 162(m). In addition to requiring and encouraging stock ownership by
Company executives, these plans are designed to allow the Compensation Committee
to provide appropriate compensation when certain performance goals have been
achieved. The Compensation Committee awards under these plans during 1996 are
intended to qualify as with the performance-based compensation under by Section
162(m).
On January 19, 1996, the Compensation Committee, based upon the
recommendation of the Company's independent executive compensation consultant,
among other things, decided that it was in the best interest of the Company to
revise the executive compensation arrangements for the CEO to completely align
his compensation with the interests of the Company's stockholders by replacing
his salary with a long-term incentive in the form of restricted 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, the CEO's base salary is eliminated for five years
starting February 1, 1996 and his 1996 annual bonus was reduced by one-half.
COMPANY PERFORMANCE AND CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee reviewed the Company's 1996 financial
performance targets (consisting of income, earnings, return, cash flow and cost
reduction objectives) and the Company's 1996 non-financial goals consisting of
regulatory matters (primarily Federal Energy Regulatory Commission and other
regulatory filings, approvals and settlements); operating matters (primarily
safety goals); growth opportunities (primarily the acquisition of Tenneco Inc.
and Cornerstone Natural Gas, Inc. and the exploration of acquisition
opportunities in non-regulated areas, achievement of substantial progress
towards construction of Samalayuca and Aguaytia projects, and attainment of
targeted gas sales volumes), and organizational matters (strategic
implementation of the Company wide reengineering plan), and this Committee
hereby certifies that this Company has attained the necessary performance goals
for the 1996 performance period to make incentive awards under the Company's
1995 Incentive Compensation Plan. Although the attainment of all performance
targets is not required, all such performance is evaluated to determine the
maximum incentive award opportunity in a given year and the incentive awards
actually made. The Compensation Committee does not assign relative weights to
each of the factors and criteria used in determining executive compensation.
Moreover, publication of sensitive and proprietary quantifiable targets and
other specific goals for the Company and CEO established and applied each year
could adversely affect the Company.
The Compensation Committee, in consultation with the independent consulting
firm, applied the information and performance factors for 1996 to determine the
appropriate compensation for the CEO. The CEO's accomplishments during 1996
resulted in one of the most successful years in the Company's history.
Specifically, the reengineering program commenced in late 1995 and completed in
the spring of 1996 resulted in very substantial annualized cost reductions.
These savings, coupled with an innovative rate case settlement negotiated with
the Company's customers, resolved the potentially material negative impact of
future transportation contract expirations and provided stability for the
Company's future earnings. This stability and the resulting substantial increase
in the value of the Company's stock, enabled the Company to make the successful
bid to acquire Tenneco Inc. Immediately following execution of definitive merger
agreements but before closing, the CEO initiated programs to resolve major,
long-standing issues that had negatively impacted the value of Tenneco Inc.,
including litigation involving obligations to sell gas in excess of market
prices and on-going disagreements between Tennessee Gas Pipeline Company and its
customers over the recoverability of such over-market gas purchase costs. By
immediately addressing and substantially resolving such issues, the CEO created
even greater stockholder value, reflected in the record high prices for the
Common Stock at the end of 1996.
In 1996, the CEO provided exceptional leadership for the Company through
the completion of the Tenneco Inc. and Cornerstone Natural Gas, Inc.
acquisitions. The importance of the CEO's ability to fulfill this strategic role
is reflected in part through significant appreciation in stockholder value.
Having reviewed the contribution that the CEO made to the Company's performance
in 1996, the Compensation Committee
15
<PAGE> 19
believed that he continues to demonstrate the motivational, planning and
leadership qualities that the executive compensation program was designed to
foster and reward.
In recognition of the CEO's overall performance and his responsibility for
the Company's truly exceptional successes during 1996, the Compensation
Committee determined that he should receive the highest rating available, and
awarded him the maximum incentive bonus available under the incentive award
opportunity discussed above (100% of illustrative base salary, but reduced as
discussed above). In addition, the Compensation Committee awarded the CEO a
special one-time cash incentive (equal to 100% of illustrative base salary) in
recognition of his personal contribution to the outstanding increase in stock
value that benefited all stockholders during 1996.
In support of the Compensation Committee's long-term mission to provide
competitive compensation incentives to retain and motivate executive officers,
in recognition of his relinquishment of his base salary in January 1996, and in
recognition of the substantial accomplishments discussed above, the CEO was
granted 270,000 stock options and 300,000 shares of restricted Common Stock (the
majority of such restricted Common Stock vests only upon the attainment of
certain performance goals, and upon the expiration of five years from the date
of grant). In addition, the CEO was granted 125,000 stock options and 150,000
shares of restricted Common Stock (which vests upon the attainment of certain
performance goals, and upon the expiration of four and one-half years from the
date of grant) in recognition of the execution of definitive merger agreements,
and subject to the successful acquisition of Tenneco Inc. The number of options
and shares of restricted Common Stock granted to the CEO and other executives
during 1996 was determined in accordance with the targets and formulas
recommended by the Company's independent consulting firm, as described in more
detail above. As a result of the CEO's increased responsibilities for a
significantly larger Company, the Compensation Committee adjusted the CEO's
illustrative base salary to $850,000 effective at the time of the merger (though
not paid to the CEO, the illustrative salary is used to determine other Company
benefits), determined in consultation with the independent consulting firm. In
accordance with the Company's 1995 Omnibus Compensation Plan and the 1995 grant
of Performance Units thereunder, the Compensation Committee determined that the
Company's relative ranking position compared to the other companies in the peer
group was in the second quartile, and accordingly authorized the interim payment
of one-half of vested PUs for the CEO.
COMPENSATION OF OTHER EXECUTIVE OFFICERS
The Compensation Committee, in consultation with the independent consulting
firm, applied the information and performance factors outlined above in
reviewing and approving the compensation of the Company's other executive
officers. This process resulted in a determination that, based upon individual
performance and their significant individual contributions to overall Company
performance during the fiscal year 1996, each executive officer should be
awarded the maximum incentive bonus available under the incentive award
opportunity discussed above (100% of base salary for the other executive
officers). In addition, the Compensation Committee awarded the other named
executives a special one-time cash bonus (equal to 100% of base salary) in
recognition of the exceptional accomplishments made during 1996, as described
above. Stock options and shares of restricted Common Stock were granted in 1996
to certain executive officers to provide continuing incentives for future
performance. The number of options and shares of restricted Common Stock granted
to such executives was determined in accordance with the targets and formulas
recommended by the Company's independent consulting firm, as described in more
detail above. In addition, a grant of stock options and restricted Common Stock
was made as an incentive for, and subject to, the successful acquisition of
Tenneco Inc. Base salaries were adjusted, effective at the time of the merger,
to reflect the increased responsibilities of the other executive officers as a
result of the Company's increased size. In accordance with the Company's 1995
grant of PUs (discussed above), the other executive officers received an interim
payment, consisting of part Common Stock and part cash.
THE 1996 COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Byron Allumbaugh James F. Gibbons Ben F. Love
(Member) (Member) (Chairman)
16
<PAGE> 20
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE IN CONTROL ARRANGEMENTS
The Company entered into an employment agreement with Mr. Wise. The term of
the agreement is three years from its initial effective date (July 31, 1992) 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 Company 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 the Company's applicable plans. Mr. Wise
will also be entitled to pension benefits under the terms of the Company's
Supplemental Benefits Plan, but 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 the Company or his voluntary termination of the agreement
for "good reason" pursuant to six months prior written notice to the Company 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. The Company 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 termination without cause or any other voluntary termination for
good reason, the restriction period for restricted 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
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
the CEO's compensation with the interests of the Company's stockholders, the
Compensation Committee replaced his salary with a long-term incentive in the
form of restricted 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 the Company's benefits and welfare plans, effective February 1, 1996.
The Company 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 the
Company's Supplemental Benefits Plan if he remains employed with the Company
until the specified age set forth in his letter agreement.
The Company has a Key Executive Severance Protection Plan (the "Severance
Plan") which provides severance benefits following a "change in control" (as
defined below) of the Company for all officers of the Company 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
the Company, as well as a supplemental pension payable under the Company'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 the Company, 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 the
17
<PAGE> 21
Company if the participant's payments are subjected to a specified adverse
excise tax. The Severance Plan also provides that the Company will pay legal
fees and expenses incurred by a participant to enforce rights or benefits under
the plan. For purposes of the plan, a "change in control" of the Company is
deemed to occur if (a) any person or entity becomes the beneficial owner of 20%
or more of the Company's outstanding voting securities, (b) any person or entity
purchases the Common Stock pursuant to a tender offer or exchange offer, other
than a tender offer or exchange offer made by the Company, (c) the stockholders
of the Company approve a merger or consolidation, a sale or disposition of all
or substantially all of the Company's assets or a plan of liquidation or
dissolution of the Company, or (d) there occurs an unapproved change in the
constitution of the majority of the Board of Directors of the Company within a
two-year period. Notwithstanding the foregoing, a "change in control" will not
be deemed to have occurred if the Company is involved in a merger, consolidation
or sale of assets which is in connection with a corporate restructuring wherein
stockholders of the Company immediately before such transaction own at least 80%
of the combined voting power of all outstanding classes of securities of the
company resulting from such transaction in substantially the same proportion as
their ownership in the Company immediately prior to such transaction.
The Company'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 the Company 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 the Company occurs, all outstanding stock
options become fully exercisable, SARs and LSARs become immediately exercisable,
designated amounts of PUs become fully vested and all restrictions placed on
awards of restricted 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.
The Company's Omnibus Compensation Plan, which is the predecessor plan to
the Company's 1995 Omnibus Compensation Plan, provided for the grant of stock
options, SARS, LSARS, performance share units and restricted Common Stock to
officers and key employees of the Company 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 the Company 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 the Company in
connection with a corporate restructuring of the Company.
Under the Company's 1995 Incentive Compensation Plan, awards of cash and/or
shares of restricted Common Stock may be granted to eligible officers of the
Company 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
Common Stock, but may elect to receive the entire incentive award in shares of
restricted Common Stock. A participant who receives any shares of restricted
Common Stock shall receive additional shares of restricted 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 the Company occurs, the current year's
maximum incentive award for each officer (with a maximum of 100% of the
participant's annual salary) 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.
The El Paso Energy Corporation Strategic Stock Plan provides that stock
options, SARS, LSARs and shares of restricted Common Stock may be granted to
officers and key employees of the Company and its subsidiaries in connection
with the Company'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
18
<PAGE> 22
in control" of the Company occurs, all outstanding stock options become fully
exercisable, SARs and LSARs become immediately exercisable and all restrictions
placed on awards of restricted 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.
The Company's Supplemental Benefits Plan provides benefits to officers and
key employees of the Company and its subsidiaries. The benefits equal the amount
that a participant failed to receive under the Company's Pension Plan because
the Pension Plan does not consider deferred compensation (whether in deferred
cash or deferred restricted Common Stock) for purposes of calculating benefits
and is subject to IRS 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
the Company's matching contribution to the Company's Retirement Savings Plan
that cannot be made because of deferred compensation and IRS 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 the
Company'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 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.
The Company's Deferred Compensation Plan allows eligible executives and key
management employees of the Company and its subsidiaries to defer all or a
portion of their base salaries and any other deferrals made in accordance with
certain of the Company'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 bear
interest at a rate based on an index specified by the Management Committee.
The Company has a Senior Executive Survivor Benefits Plan which provides
certain senior executives of the Company 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
the Company'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.
PROPOSAL NO. 2 -- RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors desires to obtain stockholder ratification of the
resolution appointing Coopers & Lybrand L.L.P., 1100 Louisiana, Suite 4100,
Houston, Texas 77002, as independent certified public accountants for the
Company for the fiscal year 1997. Coopers & Lybrand has served continuously in
such capacity for the Company since 1983.
If the appointment is not ratified, the adverse vote will be considered as
an indication to the Board of Directors that it should select other independent
certified public accountants for the following fiscal year. Given the difficulty
and expense of making any substitution of accountants after the beginning of the
current fiscal year, it is contemplated that the appointment for the fiscal year
1997 will be permitted to stand unless the Board of Directors finds other good
reason for making a change.
A representative from Coopers & Lybrand will attend the Annual Meeting to
respond to appropriate questions raised during the Annual Meeting or submitted
to Coopers & Lybrand in writing prior to the Annual Meeting, and to make a
statement if he or she desires to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS FOR THE COMPANY FOR THE FISCAL YEAR 1997.
19
<PAGE> 23
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 $10,000, 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 Common 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 Common Stock.
OTHER MATTERS
The Board of Directors knows of no other matters which will be brought
before the Annual Meeting. If, however, any other matters should come before the
Annual Meeting all proxies which have been signed and returned without further
instruction will give the persons designated thereon discretionary authority to
vote according to their best judgment.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Directors, certain officers and persons holding 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, certain officers and greater than 10% stockholders 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
provided to it, the Company believes that all filing requirements were complied
with during the fiscal year ended December 31, 1996, except for one transaction
on a Form 4 which was filed late by Mr. Thomas E. Ricks, a former vice president
of the Company.
SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholder proposals submitted for inclusion in the Proxy Statement to be
issued in connection with the Company's 1998 Annual Meeting of Stockholders must
be mailed to the Corporate Secretary, El Paso Natural Gas Company, 1001
Louisiana, Houston, Texas 77002, and must be received by the Corporate Secretary
on or before November 14, 1997. The Company will consider only proposals meeting
the requirements of applicable SEC rules.
20
<PAGE> 24
ANNUAL REPORT
A copy of the Company's 1996 Annual Report to Stockholders is being mailed
with this Proxy Statement to each stockholder entitled to vote at the Annual
Meeting. Stockholders not receiving a copy of such Annual Report may obtain one
by writing or calling Ms. Stacy J. James, Corporate Secretary, El Paso Natural
Gas Company, 1001 Louisiana, Houston, Texas 77002, telephone (713) 757-4561.
By Order of the Board of Directors
/s/ STACY J. JAMES
STACY J. JAMES
Corporate Secretary
Houston, Texas
March 14, 1997
21
<PAGE> 25
SOLICITED BY THE BOARD OF DIRECTORS
EL PASO NATURAL GAS COMPANY,
DOING BUSINESS AS EL PASO ENERGY CORPORATION,
ANNUAL MEETING OF STOCKHOLDERS
APRIL 22, 1997
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
stock of El Paso Natural Gas Company, doing business as El Paso Energy
Corporation, held of record by the undersigned on February 24, 1997, at the
Annual Meeting of Stockholders to be held at The Adolphus Hotel, 1321 Commerce
Street, Dallas, Texas on April 22, 1997, and at any adjournment or postponement
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 any of the named
nominees 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
proposals 1 and 2.
SEE REVERSE
(IMPORTANT - TO BE SIGNED AND DATED ON REVERSE SIDE) SIDE
<PAGE> 26
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
1. Election of Directors.
NOMINEES: Bryon Allumbaugh, Peter T. Flawn, Eugenio Garza Laguera,
James F. Gibbons, Ben F. Love, Kenneth L. Smalley,
Malcolm Wallop, William A. Wise.
FOR WITHHOLD
ALL NOMINEES [ ] [ ] AUTHORITY TO VOTE
LISTED ABOVE FOR ALL NOMINEES
LISTED ABOVE
[ ] ___________________________________
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. Ratification of the appointment of Coopers & [ ] [ ] [ ]
Lybrand L.L.P. as Independent Certified Public
Accountants of the Company for fiscal year 1997.
MARK HERE MARK
FOR ADDRESS HERE FOR
CHANGE AND [ ] COMMENTS [ ]
NOTE AT LEFT
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as your name appears. If acting as attorney, executor,
trustee or in other representative capacity, sign name and title. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person. If held jointly, both parties must sign and date.
Signature: Date:
-------------------------------------------------- -------------
<PAGE> 27
CONFIDENTIAL VOTING INSTRUCTIONS
EL PASO NATURAL GAS COMPANY,
doing business as EL PASO ENERGY CORPORATION,
ANNUAL MEETING OF STOCKHOLDERS - APRIL 22, 1997
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
TO: BANKERS TRUST COMPANY, TRUSTEE UNDER EL PASO
NATURAL GAS COMPANY BENEFITS PROTECTION TRUST
The undersigned hereby directs the Trustee to vote, in person or by proxy, the
full and fractional shares of Common Stock of El Paso Natural Gas Company,
doing business as El Paso Energy Corporation, credited to my account under the
referenced Plan at the close of business on February 24, 1997, the record date,
at the Annual Meeting of Stockholders to be held at The Adolphus Hotel, 1321
Commerce Street, Dallas, Texas, on April 22, 1997, and at any adjournment or
postponement 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 meeting, including substitute nominees if any of the
named nominees for Director should be unavailable to serve, in accordance with
and as described in the Notice of Annual Meeting of Stockholders and Proxy
Statement.
If this proxy is completed, dated, signed and returned in the accompanying
envelope to the trustee by April 14, 1997, the shares of stock represented by
this proxy will be voted in the manner directed herein by the undersigned. If
this proxy is returned to the trustee without direction being given, this proxy
will be voted FOR Proposals 1 and 2.
<PAGE> 28
1. Election of Directors. PLEASE MARK YOUR CHOICE LIKE THIS [X]
IN DARK INK AND SIGN AND DATE BELOW
[ ] VOTE FOR ALL [ ] WITHHOLD FROM
(except as marked [X] to the VOTING FOR ALL
contrary below)
[ ] Byron Allumbaugh [ ] James F. Gibbons [ ] Kenneth L. Smalley
[ ] Peter T. Flawn [ ] Ben F. Love [ ] Malcolm Wallop
[ ] Eugenio Garza Laguera [ ] William A. Wise
2. Ratification of the appointment of For Against Abstain
Coopers & Lybrand L.L.P. as Independent [ ] [ ] [ ]
Certified Public Accountants of the
Company for fiscal year 1997.
If acting as attorney,
executor, trustee or in other
representative capacity, sign
name and title. If a
corporation, please sign in
full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership name
by authorized person.
IMPORTANT: Please mark, sign,
date, and return this proxy
card promptly using the
enclosed envelope.
Shares held as of
January 31, 1997. ------------------------------
SIGNATURE
------------------------------
DATE
<PAGE> 29
CONFIDENTIAL VOTING INSTRUCTIONS
EL PASO NATURAL GAS COMPANY,
DOING BUSINESS AS EL PASO ENERGY CORPORATION
ANNUAL MEETING OF STOCKHOLDERS - APRIL 22, 1997
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
TO: BANKERS TRUST COMPANY, TRUSTEE UNDER EL PASO ENERGY CORPORATION RETIREMENT
SAVINGS PLAN
The undersigned hereby directs the Trustee to vote, in person or by proxy, the
full and fractional shares of Common Stock of El Paso Natural Gas Company,
doing business as El Paso Energy Corporation, credited to my account under the
referenced Plan at the close of business on February 24, 1997, the record date,
at the Annual Meeting of Stockholders to be held at The Adolphus Hotel, 1321
Commerce Street, Dallas, Texas on April 22, 1997, and at any adjournment or
postponement 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 meeting, including substitute nominees if any of the
named nominees for Director should be unavailable to serve, in accordance with
and as described in the Notice of Annual Meeting of Stockholders and Proxy
Statement.
If this proxy is completed, dated, signed and returned in the accompanying
envelope to the trustee by April 14, 1997, the shares of stock represented by
this proxy will be voted in the manner directed herein by the undersigned. If
this proxy is returned to the trustee without direction being given, this proxy
will be voted FOR Proposals 1 and 2.
<PAGE> 30
1. Election of Directors. PLEASE MARK YOUR CHOICE LIKE THIS [X]
IN DARK INK AND SIGN AND DATE BELOW
[ ] VOTE FOR ALL [ ] WITHHOLD FROM
(except as marked [X] to the VOTING FOR ALL
contrary below)
[ ] Byron Allumbaugh [ ] James F. Gibbons [ ] Kenneth L. Smalley
[ ] Peter T. Flawn [ ] Ben F. Love [ ] Malcolm Wallop
[ ] Eugenio Garza Laguera [ ] William A. Wise
2. Ratification of the appointment of For Against Abstain
Coopers & Lybrand L.L.P. as Independent [ ] [ ] [ ]
Certified Public Accountants of the
Company for fiscal year 1997.
If acting as attorney,
executor, trustee or in other
representative capacity, sign
name and title. If a
corporation, please sign in
full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership name
by authorized person.
IMPORTANT: Please mark, sign,
date, and return this proxy
card promptly using the
enclosed envelope.
Shares held as of January 31, 1997. ------------------------------
SIGNATURE
------------------------------
DATE
