<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 Logo]
Dear Series A Preferred Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of El Paso Tennessee Pipeline Co. (the "Company"), which will be held on
Tuesday, April 22, 1997, at 11:00 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,
William Wise Signature
WILLIAM A. WISE
Chairman of the Board, President
and Chief Executive Officer
Houston, Texas
March 17, 1997
<PAGE> 3
EL PASO TENNESSEE PIPELINE CO.
1001 LOUISIANA
HOUSTON, TEXAS 77002
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 22, 1997
The Annual Meeting of Stockholders of El Paso Tennessee Pipeline Co. (the
"Company") will be held on Tuesday, April 22, 1997, at 11:00 a.m. (central
daylight savings time), at The Adolphus Hotel, 1321 Commerce Street, Dallas,
Texas, for the following purposes:
1. To elect one director by holders of the Company's 8 1/4% Cumulative
Preferred Stock, Series A (the "Series A Preferred Stock");
2. To elect five directors by El Paso Energy Corporation, the sole holder
of the Company's Common Stock; and
3. To transact any other business which may be properly brought before the
Annual Meeting.
The holders of record of Series A Preferred Stock at the close of business
on March 10, 1997, 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
Stacy James Signature
STACY J. JAMES
Secretary
Houston, Texas
March 17, 1997
<PAGE> 4
EL PASO TENNESSEE PIPELINE CO.
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 holders of El Paso Tennessee
Pipeline Co.'s (the "Company") 8 1/4% Cumulative Preferred Stock, Series A, no
par value (the "Series A Preferred Stock") beginning on or about March 17, 1997.
The proxy is solicited by the Board of Directors of the Company for use at the
Annual Meeting of Stockholders (the "Annual Meeting") on Tuesday, April 22,
1997. 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 Ms. Stacy J. James, Secretary, El Paso Tennessee Pipeline Co.,
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.
The Company has two classes of voting securities. The close of business on
March 10, 1997 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 1,000 shares of the Company's common stock, $.01 par value (the "Common
Stock") outstanding, all of which are owned by El Paso Energy Corporation
("EPEC"), a wholly owned subsidiary of El Paso Natural Gas Company ("EPG"), and
6,000,000 shares of Series A Preferred Stock outstanding. 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. EPEC, as the owner of all of the outstanding Common Stock, has the
right to elect the remaining directors. For a period of at least 10 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 Adolphus Hotel,
1321 Commerce Street, Dallas, Texas.
Holders of Series A Preferred Stock will vote for 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. 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
The Company (formerly known as Tenneco Inc. and hereinafter referred to as
"Old Tenneco") was acquired by EPG when the Company and El Paso Merger Company
(an indirect wholly owned subsidiary of EPG) merged with and into the Company
(the "Merger"), with the Company as the surviving entity. The Merger, which was
effective December 12, 1996, was accomplished in accordance with the terms of an
Amended and Restated Plan and Agreement of Merger, dated as of June 19, 1996
(the "Merger
<PAGE> 5
Agreement"). All the members of the Board of Directors of El Paso Merger Company
became directors of the Company as a result of the Merger. The business and
affairs of the Company have been and are managed under the direction of the
Board of Directors. The Board of Directors has not met since December 12, 1996,
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.
The information in this Proxy Statement has been provided with respect to
the Company. Information concerning the Board of Directors and any committees of
Old Tenneco, including information concerning attendance by members of the Old
Tenneco board and its committees, and compensation paid to Old Tenneco
executives during 1996, is not reasonably available to the Company. Such
information is in the possession of an unaffiliated company and was not
available at the time this Proxy Statement was mailed to holders of Series A
Preferred Stock. Although the Company does not believe that such information is
relevant to holders of Series A Preferred Stock, the Company has included in
Exhibit A, which is incorporated by reference to this Proxy Statement,
information regarding compensation paid for fiscal years 1994 and 1995 to two
Old Tenneco officers (for whom executive compensation information would have
otherwise been required in this Proxy Statement, except for the fact that such
individuals were no longer employed by the Company at year end.)
The consideration paid by EPG in the Merger for the Company, pursuant to
the Merger Agreement, consisted of (1) the retention after the Merger of
approximately $2.6 billion of debt and Series A Preferred Stock, subject to
certain adjustments; (2) the issuance of 18.8 million shares of EPG common stock
to stockholders of Old Tenneco (other than the holders of the Series A Preferred
Stock) valued at approximately $914 million on December 9, 1996; and (3) the
retention of liabilities related to discontinued businesses of Old Tenneco which
EPG estimated to be approximately $600 million.
For further information regarding the Merger and related transactions, see
Exhibits B and C to this Proxy Statement, which are incorporated by reference
herein.
DIRECTOR COMPENSATION
Directors of the Company who are employees of EPG, or an affiliate of EPG,
in 1996, received no compensation for their services as directors of the Company
apart from the compensation they received 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 EPEC, the sole holder of the Company's Common Stock. EPEC 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...................... 51 Chairman of the Board, President and Chief
Executive Officer; Director
H. Brent Austin...................... 42 Senior Vice President and Chief Financial
Officer; Director
Joel Richards III.................... 50 Senior Vice President; Director
Britton White, Jr.................... 53 Senior Vice President and General Counsel;
Director
Jeffrey I. Beason.................... 48 Vice President and Controller; Director
</TABLE>
2
<PAGE> 6
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 of EPG since January 1994 and CEO of EPG
since January 1990. He is also Chairman of the Board, President and Chief
Executive Officer of EPEC. He was President of EPG from January 1990 until April
1996. He was President and Chief Operating Officer of EPG from April 1989 to
December 1989. From March 1987 until April 1989, Mr. Wise was an Executive Vice
President of EPG. From January 1984 to February 1987, he was a Senior Vice
President of EPG. He is a member of the Board of Directors of EPG and Battle
Mountain Gold Company.
H. BRENT AUSTIN -- Mr. Austin has been Senior Vice President and Chief
Financial Officer and a Director of the Company since December 12, 1996. He has
been Executive Vice President of EPG since May 1995 and Chief Financial Officer
of EPG since April 1992. He is also Executive Vice President and Chief Financial
Officer of EPEC. He was Senior Vice President of EPG from April 1992 to April
1995. 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.
JOEL RICHARDS III -- Mr. Richards has been Senior Vice President and a
Director of the Company since December 12, 1996. He has been Executive Vice
President of EPG since December 1996. He is also Executive Vice President of
EPEC. From January 1991 until December 1996, he was Senior Vice President of
EPG. He was Vice President of EPG from June 1990 to December 1990. He was Senior
Vice President, Finance and Human Resources of Meridian Minerals Company from
October 1988 to June 1990.
BRITTON WHITE, JR. -- Mr. White has been Senior Vice President and General
Counsel and a Director of the Company since December 12, 1996. He has been
Executive Vice President of EPG since December 1996 and General Counsel of EPG
since March 1991. He is also Executive Vice President and General Counsel of
EPEC. 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 is also Vice President and Controller of EPEC. 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:
3
<PAGE> 7
KENNETH L. SMALLEY, age 67, 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.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE HOLDERS OF SERIES A PREFERRED STOCK
VOTE "FOR" THE ELECTION OF THE NOMINEE NAMED ABOVE.
SECURITY OWNERSHIP OF A CERTAIN BENEFICIAL OWNER
The following information relates to the only person or entity known to the
Company to be the beneficial owner, as of January 31, 1997, 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)...................... 1,000 shares 100%
1001 Louisiana
Houston, Texas 77002
</TABLE>
- ---------------
(1) EPEC is a wholly owned subsidiary of EPG.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following information sets forth certain information as of January 31,
1997, regarding the beneficial ownership of the Company's Common Stock, the
Company's Series A Preferred Stock and EPG's common stock by (i) each director,
(ii) each of the Company's named executives (as hereinafter defined), (iii) the
nominees, (iv) all directors, executive officers, and nominees of the Company as
a group; and (v) each person known to EPG to be the beneficial owner of at least
5% of any class of EPG's voting securities. No family relationship exists
between any of the directors, executive officers, and nominees of the Company.
EL PASO TENNESSEE PIPELINE CO.
No Common Stock or Series A Preferred Stock is held by any director,
executive officer or nominee.
EL PASO NATURAL GAS 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 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 J. I. Beason..................... 35,462 60,866 96,328 *
Common stock J. Richards III.................. 86,089 66,066 152,155 *
Common stock K. L. Smalley.................... 6,928 5,000 11,928 *
Common stock B. White, Jr..................... 88,285 59,733 148,018 *
Common stock Directors, executive officers and
nominees as a group (6 persons
total, including those
individuals listed above)........ 865,997 779,306 1,645,303 2.88%
</TABLE>
- ---------------
* Less than 1%.
4
<PAGE> 8
(1) Directors and executive officers have sole voting and investment power of
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 2,000, 159 and 1,000
shares of EPG common stock, respectively. Some shares of EPG common stock
reflected in this column for certain individuals are subject to
restrictions. Goldman, Sachs & Co. and The Goldman Sachs Group, L.P. have
shared voting and dispositive power over 2,934,948 shares of EPG common
stock.
(2) Mr. Wise's beneficial ownership excludes 200 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 through the
exercise of stock options and/or tandem stock appreciation rights ("SARs").
RELATIONSHIPS WITH EL PASO ENERGY CORPORATION AND
EL PASO NATURAL GAS COMPANY
The Company is a direct subsidiary of EPEC, and an indirect subsidiary of
EPG. EPEC 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 either EPEC or EPG; however, the Company, EPEC and EPG share
certain office space, personnel and other administrative services. The costs of
such services are allocated by EPG to the respective companies.
5
<PAGE> 9
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 1996. None of these persons received any compensation from the
Company for their services as executive officers of the Company.
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 SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS PAYOUTS COMPENSATION
PRINCIPAL 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
H. Brent Austin 1996 $228,125 $ 450,000 $ 178 $ 149,987 60,000 $ 176,658 $22,855
Senior 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
Joel Richards III 1996 $183,958 $ 412,500 $ 223 $ 137,472 60,000 $ 133,145 $21,361
Senior Vice 1995 $168,333 $ 108,000 $ 80,841 $ 107,993 15,000 -- $27,313
President 1994 $166,667 $ 144,000 $ 8,688 -- 16,400 $ 264,819 $13,061
Britton White, Jr. 1996 $203,125 $ 412,500 $ 223 $ 137,472 60,000 $ 133,145 $20,550
Senior 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
</TABLE>
- ---------------
(1) Certain executive compensation information pertaining to two executive
officers who otherwise would have been identified as named executives,
except for the fact that they did not hold their positions at the end of
fiscal year 1996 has been included on Exhibit A, hereto. Such compensation
information relates to services performed for Old Tenneco prior to the
spin-off of certain companies and before the acquisition by EPEC and EPG of
the remaining businesses of Old Tenneco (which was renamed El Paso Tennessee
Pipeline Co.). The compensation information included on Exhibit A reflects
compensation paid by Old Tenneco pursuant to its plans and arrangements and
reflects the executive compensation philosophies of Old Tenneco and not
those of the Company, EPEC or EPG.
(2) Mr. Wise's base salary was eliminated and replaced with long-term awards of
EPG stock options and EPG 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 EPG's cost reduction initiatives and is intended to align Mr. Wise's
compensation more directly with EPG stockholder value.
(3) Pursuant to EPG's 1995 Incentive Compensation Plan, the named executives are
required to receive a substantial part of their annual bonus in shares of
EPG restricted common stock. The amounts reflected in this column for fiscal
years 1996 and 1995 represent a combination of the market value of EPG
restricted common stock and cash awarded under that plan. Dividends are paid
directly to the holder of the EPG restricted common stock during the
four-year vesting schedule. In addition, amounts reflected
6
<PAGE> 10
for 1996 include an additional one-time cash bonus awarded in recognition
of the extraordinary accomplishments and increases to EPG's stockholder
value achieved during 1996.
(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 EPG-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
provided by EPG) for Messrs. Austin, Richards 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 EPG's aircraft (which was
based on the thirteen-month period of December 1993 through December 1994
due to a change in the period EPG 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) 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 EPG restricted common stock. The amounts reflected in this
column include the market value of EPG 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 EPG restricted common
stock was made in January and June 1996. The total shares of EPG restricted
common stock held on December 31, 1996 by Messrs. Wise, Austin, Richards and
White was 476,294, 70,756, 66,884 and 67,648, respectively. The aggregate
dollar value on December 31, 1996, of all shares of EPG restricted common
stock held by Messrs. Wise, Austin, Richards and White was $24,052,847,
$3,573,178, $3,377,642 and $3,416,224, respectively. Dividends are paid
directly to the holder of the EPG 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 EPG for the specified time period and EPG's
stockholders realize the required total stockholder value during the
specified time period. For the CEO, 25% of his January 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
EPG restricted common stock grants as described for the CEO. See the
Restricted EPG Common Stock -- Long-Term Incentive Plans -- Awards in 1996
Table beginning on page 10 of this Proxy Statement for a description of the
EPG 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 EPG 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
for EPG common stock and/or cash paid as 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 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 EPG'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 EPG'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 EPG during
the fiscal year 1995.
7
<PAGE> 11
(8) The compensation reflected in this column for fiscal year 1996 is comprised
of EPG contributions to EPG's Retirement Savings Plan, supplemental EPG
contributions under the Supplemental Benefits Plan and the above-market
interest earned on deferred compensation. Specifically, these amounts for
fiscal year 1996 were $3,647, $56,270 and $9,814 for Mr. Wise; $7,031,
$13,641 and $2,183 for Mr. Austin; $7,272, $10,172 and $3,918 for Mr.
Richards; and $7,000, $9,591 and $3,959 for Mr. White, respectively.
EPG STOCK OPTION GRANTS
The following table sets forth the number of stock options granted by EPG
at the fair market value of EPG's common stock to the named executives during
fiscal year 1996. These options were granted to the executives in their
capacities as officers of EPG and represent options to acquire the common stock
of EPG, not any stock of the Company.
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. Readers of this Proxy Statement are
cautioned that this disclosure, which is required by SEC rules, should not be
read as implying that any stock price appreciation can or should be anticipated
by holders of Series A Preferred Stock. No gain to the named executives is
possible without an increase in EPG common stock price which will benefit all
EPG stockholders proportionately. Actual gains, if any, on EPG stock option
exercises and EPG common stock holdings are dependent on the future performance
of EPG'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.
EPG OPTION GRANTS BY EPG IN 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT ASSUMED
ANNUAL RATES OF STOCK
INDIVIDUAL GRANTS(1) PRICE APPRECIATION FOR OPTION TERM(2)
--------------------------------------------------- -------------------------------------
IF EPG STOCK IF EPG STOCK
NUMBER OF % OF TOTAL PRICE AT $51.11 PRICE AT $81.38
SECURITIES OPTIONS AND $56.60, AND $90.13,
UNDERLYING GRANTED TO RESPECTIVELY, RESPECTIVELY,
OPTIONS EMPLOYEES EXERCISE EXPIRATION IN 2006 IN 2006
NAME GRANTED(#) IN 1996 PRICE ($/SH) DATE 5% ($) 10% ($)
---- ---------- ---------- ------------ ---------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
ALL EPG 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
Joel Richards III..... 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 EPG 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 EPG 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 control"
of EPG (see page 14 of this Proxy Statement for a description of EPG's 1995
Omnibus Compensation Plan and the term "change in control," and page 14 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
EPG 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
8
<PAGE> 12
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 EPG common stock. Under the terms of EPG's
1995 Omnibus Compensation Plan and the El Paso Energy Corporation Strategic
Stock Plan, the Compensation Committee of EPG may, in its sole discretion
and at any time, change the vesting of the EPG stock options. Further, EPG
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 EPG stock options and SARs held by Mr. Wise vest immediately
according to his letter agreement dated January 13, 1995 (as described on
page 13 of this Proxy Statement).
(2) Readers are particularly cautioned that these "Potential Realizable Values"
relate to the value of EPG's common stock, not any stock (including the
Series A Preferred Stock) of the Company. This disclosure is in response to
SEC rules, which require such disclosure for illustration only. The values
disclosed are not intended to be and should not be interpreted by
stockholders as representations or projections of future value of EPG's
common stock or of its stock price. Holders of Series A Preferred Stock
realize no additional value from any price appreciation of EPG's common
stock.
N/A -- Not Applicable
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 1996
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
EPG UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES EPG OPTIONS/SARS EPG OPTIONS/SARS
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
Joel Richards III........... 25,000 $616,250 52,733 60,000 $ 1,036,577 $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 EPG stock option/SAR on the
date of exercise and its exercise price.
(2) The figures presented in this column have been calculated based upon the
difference between $50.6875, the fair market value of EPG common stock on
December 31, 1996 for each in-the-money EPG stock option/SAR, and its
exercise price. Mr. Wise has tandem SARs attached to some of his EPG stock
options. If his EPG stock options are exercised, the tandem SARs expire and
vice versa. The exercise of a tandem EPG SAR would have a market value
equivalent to the exercise of a stock option.
EPG LONG-TERM INCENTIVE AWARDS
Performance Units
The following table provides information concerning long-term incentive
awards of performance units ("PUs") under EPG's 1995 Omnibus Compensation Plan.
The units granted vest equally per year over the indicated maturation
performance period, at the end of which EPG'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 EPG's total stockholder return ranks in the
first, second, third or fourth quartiles, the value of each unit is $150, $100,
$50 and $0, respectively. The payouts will consist of EPG common stock and cash.
All the amounts shown are potential assumed amounts. While there can be no
assurance that EPG will achieve the results that would lead
9
<PAGE> 13
to final payments under that plan, see Note 7 to the Executive Compensation
Table for a discussion of the interim payment. These awards were established for
the named executives in their capacities as officers of EPG and its
subsidiaries. The Company has no long-term incentive plan or program.
EPG LONG-TERM INCENTIVE PLANS -- AWARDS IN 1996
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED EPG PLANS
PERIOD UNTIL ----------------------------------------------------
NUMBER OF MATURATION BELOW
NAME(1) UNITS(#)(2) OR PAYOUT THRESHOLD($) THRESHOLD($) TARGET($) MAXIMUM($)
------- ----------- ------------ ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Joel Richards III............ 1,450 2 years $0 $72,500 $145,000 $217,500
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 received a grant of EPG PUs during 1996.
(2) Each unit is assigned an initial value of $100, subject to adjustment based
upon EPG's relative total stockholder value to the other companies in the
Standard & Poor's Natural Gas Index group.
Restricted EPG Common Stock
The following table provides information concerning incentive awards of
restricted EPG common stock made under EPG's 1995 Omnibus Compensation Plan and
the EPEC 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 EPG
common stock will vest if, and only if, the named executive remains in the
employ of EPG or its subsidiaries during the specified time period and the
required increase in total EPG stockholder return is achieved during such time
periods. These awards were established for the named executives in their
capacities as officers of EPG and its subsidiaries. The Company has no long-term
incentive plan or program.
EPG LONG-TERM INCENTIVE PLANS -- AWARDS IN 1996(1)
<TABLE>
<CAPTION>
ESTIMATED FUTURE SHARES TO BE VESTED UNDER
PERFORMANCE OR EPG 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
Joel Richards III.... 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 EPG stockholder
value that must be achieved in order for the shares of EPG restricted common
stock to meet the performance based vesting criteria.
(2) Threshold 1 represents an increase in total EPG 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 EPG 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 EPG stockholder value of
$1,687,597,130 for the January grant and $1,458,322,288 for the June grant.
10
<PAGE> 14
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 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 EPG's 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:
EPG 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>
$ 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 EPG
restricted stock, as described on page 14 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, Richards and White are 30, 30,
27 and 25 (including 7 years of credited service pursuant to Mr. White's
employment agreement with EPG, which is described on page 13 of this Proxy
Statement), respectively.
11
<PAGE> 15
Effective January 1, 1997, EPG 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 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
Joel Richards III........................................... $155,714
Britton White, Jr........................................... $158,611
</TABLE>
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.
The Company (formerly known as Tenneco Inc.) was acquired by EPG when the
Company and El Paso Merger Company (an indirect wholly owned subsidiary of EPG)
merged, effective December 12, 1996, pursuant to an Amended Plan and Agreement
of Merger, dated as of June 19, 1996. Since December 12, 1996, the Company has
had its own Board of Directors, consisting of five directors appointed by EPEC,
the sole holder of the Company's Common Stock.
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
William A. Wise
H. Brent Austin
Joel Richards III
Britton White, Jr.
Jeffrey I. Beason
12
<PAGE> 16
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE IN CONTROL ARRANGEMENTS
EPG 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 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 EPG
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" of EPG (as defined in the EPG
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, 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 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 termination without cause or any
other voluntary termination for good reason, the restriction period for EPG
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 EPG restricted common stock), and unvested EPG
stock options shall become immediately exercisable, subject to applicable law,
for a period of thirty-six months, unless such EPG 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
EPG restricted common stock (the majority of which will not vest unless certain
performance measures are attained by EPG and, in that event, only after a
certain specified time) and a grant of EPG 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, effective February 1, 1996.
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 "EPG 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
(including the named executives of the Company) in an amount equal to three
times annual salary, including maximum bonus amounts as specified in the plan.
The EPG 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 EPG 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 EPG Severance Plan provides that
certain additional payments will be made to terminated
13
<PAGE> 17
participants following a "change in control" of EPG if the participant's
payments are subjected to a specified adverse excise tax. The EPG 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
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's 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) there occurs an unapproved change in the
constitution of the majority of the Board of Directors of EPG within a two-year
period. Notwithstanding the foregoing, a "change in control" of EPG 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 the company
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 EPG stock options, EPG
SARS, limited stock appreciation rights ("LSARs"), PUs and EPG restricted stock
may be granted to officers and key employees of EPG and its subsidiaries
(including the named executives of the Company). 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, EPG SARs
and LSARs become immediately exercisable, designated amounts of PUs become fully
vested and all restrictions placed on awards of restricted stock automatically
lapse. For purposes of the plan, the term "change in control" of EPG has the
same meaning given such term in the EPG Severance Plan.
EPG's Omnibus Compensation Plan, which is the predecessor plan to EPG's
1995 Omnibus Compensation Plan, provided for the grant of EPG stock options, EPG
SARS and LSARS, performance share units and EPG restricted stock to officers and
key employees of EPG and its subsidiaries (including the named executives of the
Company). Although this plan has been terminated with respect to any new grants,
certain EPG 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" of EPG has the same
meaning given such term in the EPG 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 EPG restricted common stock may be granted to eligible officers of EPG and
its subsidiaries (including the named executives of the Company). 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 EPG restricted common stock, but may elect to
receive the entire incentive award in shares of EPG restricted common stock. A
participant who receives any shares of EPG restricted common stock shall receive
additional shares of EPG 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 EPG 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" of EPG has the same meaning given such term in the EPG
Severance Plan.
The El Paso Energy Corporation Strategic Stock Plan provides that EPG stock
options, EPG SARS, LSARs and EPG restricted stock may be granted to officers and
key employees of EPG and its subsidiaries (including the named executives of the
Company) in connection with EPG's strategic acquisitions. The Plan
14
<PAGE> 18
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 EPG stock options
become fully exercisable, EPG SARs and LSARs become immediately exercisable and
all restrictions placed on awards of restricted stock automatically lapse. For
purposes of the plan, the term "change in control" of EPG has the same meaning
given such term in the EPG Severance Plan.
EPG's Supplemental Benefits Plan provides benefits to officers and key
employees of EPG and its subsidiaries (including the named executives of the
Company). 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 EPG 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 EPG's matching contribution to EPG'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 EPG Pension Plan
and/or EPG 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 control" of EPG, the supplemental pension benefits
become fully vested and nonforfeitable. For purposes of the plan, the term
"change in control" of EPG has the same meaning given such term in the EPG
Severance Plan.
EPG's Deferred Compensation Plan allows eligible executives and key
management employees of EPG and its subsidiaries (including the named executives
of the Company) 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 bear interest at a rate based on an index
specified by the Management Committee.
EPG has a Senior Executive Survivor Benefits Plan which provides certain
senior executives of EPG and its subsidiaries (including the named executives of
the Company), 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.
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P., 1100 Louisiana, 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 1997. Arthur Andersen L.L.P. has served as the
Company's and Old Tenneco's independent certified public accountants during
fiscal year 1996. A representative from each of Coopers & Lybrand and Arthur
Andersen will attend the Annual Meeting to respond to appropriate questions
raised during the Annual Meeting or submitted to Coopers & Lybrand or Arthur
Andersen in writing prior to the Annual Meeting, and to make a statement if they
desire to do so.
15
<PAGE> 19
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.
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. To the Company's knowledge, based solely on review of
copies of such reports furnished to the Company and representations that no
other reports were required, the Company believes that all filing requirements
were complied with during fiscal year 1996, except that the Form 3 filing for
each of Messrs. Wise, Austin, Richards, White and Beason was not filed until
after the expiration of the required time period following the close of the
acquisition of Old Tenneco by EPG. All such reports required to be filed by
these individuals in connection with EPG's securities have been timely filed
during 1996. All of the Company's Common Stock is owned by EPEC and, to the
Company's knowledge, none of such directors or executive officers currently
owns, or has ever owned, any shares of the Company's Series A Preferred Stock
(which is the only class of the Company's equity securities registered under
Section 12 of the Securities Exchange Act of 1934, as amended).
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 1998 Annual
Meeting of Stockholders must be mailed to the Secretary, El Paso Tennessee
Pipeline Co., 1001 Louisiana, Houston, Texas 77002, and must be received by the
Secretary on or before November 17, 1997. The Company will consider only
proposals meeting the requirements of applicable SEC rules.
16
<PAGE> 20
ANNUAL REPORT
A copy of the Company's 1996 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 Ms. Stacy J. James,
Secretary, El Paso Tennessee Pipeline Co., 1001 Louisiana, Houston, Texas 77002,
telephone (713) 757-2131.
By Order of the Board of Directors
Stacy James Signature
STACY J. JAMES
Secretary
Houston, Texas
March 17, 1997
17
<PAGE> 21
EXHIBIT A
This Exhibit A contains available executive compensation information
concerning two individuals for whom disclosure may be technically required by
Item 402 of Regulation S-K because the person was either the chief executive
officer of the Company during 1996 or an executive officer whose executive
compensation information would have otherwise been required, except for the fact
that such individual no longer was employed by the Company at the end of the
last completed fiscal year. Such individuals were executive officers of Old
Tenneco prior the acquisition in the Merger of Old Tenneco by EPG and EPEC on
December 12, 1996 (collectively referred in this Exhibit as the "Old Tenneco
Officers"). Because of the unavailability of information for fiscal year 1996,
the following executive compensation information pertains solely to fiscal years
1995 and 1994. The current Board of Directors and executive officers of the
Company, EPEC and EPG had no affiliation with and had no involvement in the
establishment or determination of Old Tenneco executive compensation plans,
programs or arrangements under which the Old Tenneco Officers were given awards.
The information provided in this Exhibit A is provided to the extent that
it was reasonably available to the Company. Any information otherwise required
to be provided by applicable SEC rules and regulations has not been included
because such information is in the possession of an unaffiliated company and was
not available to the Company at the time this Proxy Statement was mailed to
holders of Series A Preferred Stock. The following information has been provided
solely in an attempt to comply, to the extent reasonably practicable, with
applicable SEC rules and regulations and is based upon public filings made by
Old Tenneco prior to the acquisition of Old Tenneco in the Merger by EPEC and
EPG. The Company, its current directors and officers can provide no assurance as
to the accuracy or completeness of such information.
EXECUTIVE COMPENSATION
The following table sets forth the remuneration paid for fiscal years 1995
and 1994 by Old Tenneco and/or its direct and indirect subsidiaries to certain
of the Old Tenneco Officers. The remuneration paid in 1996 is not available for
inclusion herein.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------ -------------------
RESTRICTED
NAME AND OTHER ANNUAL STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY(A) BONUS COMPENSATION(B) AWARDS(C) OPTIONS COMPENSATION(D)
------------------ ---- --------- -------- --------------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dana G. Mead 1995 $957,375 $800,000 $143,970 -- 100,000(e) $149,972(f)
Former Chairman and Chief Executive 1994 $878,177 $900,000 $149,110 $647,256 100,000 $142,966
Officer
Theodore R. Tetzlaff 1995 $400,000 $350,000 $ 14,400 -- 18,000(e) --(f)
Former General Counsel 1994 $400,000 $300,000 $ 307 $539,380 16,000 --
</TABLE>
- ---------------
(a) Includes base salary plus amounts paid in lieu of Old Tenneco matching
contributions to the Old Tenneco Thrift Plan.
(b) Includes amounts attributable to (i) the value of personal benefits provided
by Old Tenneco to its executive officers, which have an aggregate value in
excess of $50,000, such as the personal use of Old Tenneco owned property,
membership dues, and assistance provided by such person with regard to
financial, tax and estate planning, (ii) reimbursement for taxes and (iii)
amounts paid as dividend equivalents on performance share equivalent units
("Dividend Equivalents"). The amount of such personal benefit that exceeds
25% of the estimated value of the total personal benefits provided by Old
Tenneco, reimbursement for taxes and amounts paid as Dividend Equivalents to
the individuals named in the table was as follows: During 1995: $38,984 for
use of Old Tenneco owned property, $29,750 for financial planning services,
$28,706 for reimbursement for taxes, and $40,000 in Dividend Equivalents
paid to Mr. Mead; and $14,400 in Dividend Equivalents paid to Mr. Tetzlaff;
During 1994: $57,540 for
A-1
<PAGE> 22
use of Old Tenneco owned property and $50,606 for reimbursement for taxes
for Mr. Mead; and $307 for reimbursement for taxes for Mr. Tetzlaff.
(c) Includes the dollar value of grants of restricted stock made pursuant to Old
Tenneco's restricted stock plans based on the price of Old Tenneco common
stock on the date of grant. As a result of the acquisition of Old Tenneco by
EPG and EPEC, at December 31, 1996 all of the Company's Common Stock was
held by EPEC. Messrs. Mead and Tetzlaff held no shares of restricted Common
Stock on such date.
(d) Includes amounts attributable to benefit plans of Old Tenneco as follows:
(i) The amounts contributed pursuant to the Old Tenneco Thrift Plan.
(ii) The amounts accrued under the Old Tenneco Inc. Deferred Compensation
Plan, together with adjustments based upon changes in the Consumer
Price Index for All Urban Households, as computed by the Bureau of
Labor Statistics.
(iii) Amounts imputed as income for federal income tax purposes under Old
Tenneco's group life insurance plan.
(e) In addition to the options granted by Old Tenneco in 1995, Messrs. Mead and
Tetzlaff, each in his capacity as a director of Case Corporation (an
affiliate of Old Tenneco during 1995) ("Case"), was granted an option by
Case to acquire 1,000 shares of Case common stock.
(f) As directors of Case, Messrs. Mead and Tetzlaff each received a director's
fee of $20,000 and meeting attendance fees of $4,000. In addition, Mr.
Tetzlaff received from Case an additional $3,000 for attendance at the Case
Compensation Committee meetings. Messrs. Mead and Tetzlaff elected to
receive their director fees in common stock of Case. The amounts in the
above table do not include the payments from Case.
OPTION GRANTS IN 1996
Although Old Tenneco may have made grants of options to Old Tenneco
Officers during 1996, such information was not available to the Company at the
time this Proxy Statement was mailed to the holders of Series A Preferred Stock
because such information is in the possession of an unaffiliated company. The
Company also believes that such information is also no longer relevant because
all such options were either canceled or converted into options of certain other
Old Tenneco companies prior to the Merger.
1996 OPTION EXERCISES AND 1996 YEAR-END VALUES
Information regarding the exercise of options of Old Tenneco granted to Old
Tenneco Officers was not available to the Company at the time this Proxy
Statement was mailed to the holders of Series A Preferred Stock because such
information is in the possession of an unaffiliated company. Inasmuch as all
such options were canceled or otherwise converted into options of certain other
Old Tenneco companies prior to the Merger, there were no options to value at
year end 1996.
LONG-TERM INCENTIVE PLAN -- AWARDS IN 1996
Information concerning long-term incentive awards made to the Old Tenneco
Officers during fiscal year 1996 was not available to the Company at the time
this Proxy Statement was mailed to the holders of Series A Preferred Stock
because such information is in the possession of an unaffiliated company.
A-2
<PAGE> 23
PENSION PLAN
The following table sets forth the aggregate estimated annual benefits as
of the end of 1995 payable upon normal retirement pursuant to the Old Tenneco
Retirement Plan, the Old Tenneco Inc. Benefit Equalization Plan (the "Old
Tenneco Benefit Equalization Plan"), and the Old Tenneco Inc. Supplemental
Executive Retirement Plan (the "Old Tenneco Supplemental Executive Retirement
Plan") to persons in specified remuneration and years of credited participation
classifications. The Company provides no pension plan benefits to Messrs. Mead
and Tetzlaff.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED PARTICIPATION
--------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ -------- -------- -------- ---------- ----------
<C> <C> <C> <C> <C> <C>
$ 700,000 $165,000 $220,000 $275,000 $ 330,000 $ 385,000
750,000 176,800 235,700 294,600 353,600 412,500
800,000 188,600 251,400 314,300 377,100 440,000
850,000 200,400 267,100 333,900 400,700 467,500
900,000 212,100 282,900 353,600 424,300 495,000
950,000 223,900 298,600 373,200 447,900 522,500
1,000,000 235,700 314,300 392,900 471,400 550,000
1,100,000 259,300 345,700 432,100 518,600 605,000
1,200,000 282,900 377,100 471,400 565,700 660,000
1,300,000 306,400 408,600 510,700 612,900 715,000
1,400,000 330,000 440,000 550,000 660,000 770,000
1,500,000 353,600 471,400 589,300 707,100 825,000
1,600,000 377,100 502,900 628,600 754,300 880,000
1,700,000 400,700 534,300 667,900 801,400 935,000
1,800,000 424,300 565,700 707,100 848,600 990,000
1,900,000 447,900 597,100 746,400 895,700 1,045,000
2,000,000 471,400 628,600 785,700 942,900 1,100,000
2,100,000 495,000 660,000 825,000 990,000 1,155,000
2,200,000 518,600 691,400 864,300 1,037,100 1,210,000
</TABLE>
The 1995 benefits set forth above are computed as a straight life annuity
and are based on years of credited participation in the Old Tenneco Retirement
Plan and the employee's average base salary during the final five years of
credited participation in the Old Tenneco Retirement Plan; such benefits are not
subject to any deduction for Social Security or other offset amounts. As of
December 31, 1995, the years of credited participation under the Old Tenneco
Retirement Plan (or any supplemental plan) for Mr. Mead was 3. (See the
paragraph below for additional information relating to Mr. Mead and the "Summary
Compensation Table" in this Exhibit A for salary and bonus information for Mr.
Mead for 1994 and 1995.)
Pursuant to an employment agreement with Mr. Mead, Old Tenneco agreed to
pay Mr. Mead such supplemental payments (in addition to any benefits payable
under Old Tenneco's qualified and non-qualified pension plans) as may be
necessary to make each person's total payments equal to the amount each would
have received had he continued to be covered under pension plans maintained by
his former employer (based on his credited service with Old Tenneco plus 14.6
years of credited service with his former employer, and on the compensation
received from Old Tenneco as salary and bonuses).
During 1995, Old Tenneco provided Mr. Tetzlaff with an individual pension
benefit. The benefit was based on Mr. Tetzlaff's salary and bonus and also
provides for guaranteed graduated minimum annual benefits of $100,000 beginning
in 1998, $200,000 per year beginning in 2003 and $300,000 per year beginning in
2008 (See "Summary Compensation Table" in this Exhibit A for salary and bonus
information on Mr. Tetzlaff).
A-3
<PAGE> 24
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
While it is the Company's understanding that Old Tenneco had an employment
agreement with Mr. Mead and certain plans or programs under which a termination
of employment or a change-in-control may have provided for certain payments to
Old Tenneco Officers, the Company has no such arrangements in place with Old
Tenneco Officers. Information regarding the existence of any current employment
agreements, termination of employment and change-in-control arrangements for
Messrs. Mead and Tetzlaff was not available to the Company at the time this
Proxy Statement was mailed to the holders of Series A Preferred Stock because
such information is in the possession of an unaffiliated company.
A-4
<PAGE> 25
EXHIBIT B
The approximately 18.8 million shares of EPG's common stock issued in the
Merger to stockholders of Old Tenneco was determined pursuant to formulas set
forth in the Merger Agreement. In the Merger, (i) a holder of Old Tenneco's
common stock received .093 of a share of EPG's common stock for each share of
Old Tenneco common stock, (ii) a holder of Old Tenneco's $7.40 Cumulative
Preferred Stock received 2.365 shares of EPG's common stock for each such share
of $7.40 Cumulative Preferred Stock, and (iii) a holder of Old Tenneco's $4.50
Cumulative Preferred Stock received 2.365 shares of EPG's common stock for each
such share of $4.50 Cumulative Preferred Stock.
As a result of the Merger, EPG indirectly owns 100% of the common equity
and approximately 75% of the combined equity value of the Company as of the
effective time of the Merger.
Prior to the Merger, Old Tenneco and its subsidiaries effected various
intercompany transfers and distributions which restructured, divided and
separated their businesses, assets and liabilities so that all the assets,
liabilities and operations related to their automotive parts, packaging and
administrative services businesses (collectively, the "Industrial Business") and
their shipbuilding business (the "Shipbuilding Business") were spun-off to Old
Tenneco's then existing common stockholders (the "Distributions"). The
Distributions were effected on December 11, 1996 pursuant to the Distribution
Agreement dated as of November 1, 1996 (as amended, the "Distribution
Agreement"), among Old Tenneco, New Tenneco and Newport News Shipbuilding Inc.
("Newport News"). Following the Distributions, the remaining operations of Old
Tenneco consisted primarily of those operations related to the transmission and
marketing of natural gas.
In connection with the Distributions, Old Tenneco's Board of Directors
declared a special distribution consisting of all of the capital stock of (i)
New Tenneco (now known as Tenneco Inc.), a newly formed, wholly owned subsidiary
of Old Tenneco which held the Industrial Business, and (ii) Newport News, a
newly formed, wholly owned subsidiary of Old Tenneco which held the Shipbuilding
Business.
The shares of common stock of New Tenneco and Newport News were distributed
to holders of record of Old Tenneco's common stock on the distribution record
date, December 11, 1996, without any consideration being paid by such holders,
on the basis of (i) one share of common stock of New Tenneco for every share of
common stock of Old Tenneco and (ii) one share of common stock of Newport News
for every five share of common stock of Old Tenneco. No certificates of scrip
representing fractional shares of Newport News common stock were issued in the
Distributions. Holders of Old Tenneco common stock who would be entitled to
receive fractional shares of common stock of Newport news received cash in the
Distributions, in lieu of such fractional shares, derived from the sale of such
fractional shares on the open market.
The reorganization of Old Tenneco, including the Merger and the
Distributions, was approved by the stockholders of Old Tenneco at a special
meeting of stockholders on December 10, 1996. The issuance of common stock of
EPG in the Merger was approved by the stockholders of EPG at a special meeting
of stockholders on December 9, 1996.
In connection with the Merger and the Distributions, Old Tenneco entered
into a Revolving Credit and Competitive Advance Facility Agreement dated as of
November 4, 1996 (the "Credit Agreement"), under which a syndicate of banks and
other financial institutions (the "Lenders") committed to provide up to $3
billion of financing to Old Tenneco on an unsecured basis. Chase Securities Inc.
arranged the Credit Agreement and The Chase Manhattan Bank is acting as agent
for the Lenders. A List of the Lenders is set forth on Exhibit C which is
incorporated herein by reference. The Credit Agreement consists of a 364-day
revolving credit facility, with a two-year term thereafter, the proceeds of
which were used to effect the Debt Realignment (as defined and as described in
the Merger Agreement) and for other general corporate purposes, and is
guaranteed by EPG. The borrowings under the Credit Agreement will mature in
November
B-1
<PAGE> 26
1999. Borrowings under the Credit Agreement bear interest at a rate per annum
equal to, at the borrowers' option, either
(a) the highest of (i) the rate from time to time publicly announced
by The Chase Manhattan Bank in New York City as its prime rate, and (ii)
the federal funds effective rate from time to time plus 1/2 of 1%, or
(b) the average of the rates at which eurodollar deposits for one,
two, three or six months or, subject to availability to each lender, nine
or 12 months (as selected by the borrowers) are offered in the interbank
eurodollar market in the approximate amount of the relevant loan, plus the
Applicable Margin.
The "Applicable Margin" will be based on EPG's senior long-term debt rating, as
determined from time to time, or if EPG's debt is not rated, each rating agency
will be assumed to have assigned its lowest rating. At March 14, 1997, the
outstanding loans under the Credit Agreement bore an average interest rate of
5.79% per annum. As of March 14, 1997, there was $517 million outstanding under
the Credit Agreement and the aggregate amount that could be borrowed thereunder
was $520 million.
The Credit Agreement requires that EPG's ratio of total indebtedness to
total indebtedness plus net worth not exceed 70%. Failure to satisfy the
foregoing minimum requirement will be a default under the Credit Agreement that
will enable the Lenders to refuse to loan funds to the Company and to accelerate
the indebtedness thereunder. The Credit Agreement also imposes prohibitions or
limitations on liens (other than agreed permitted liens), subsidiary
indebtedness and guarantee obligations, and asset dispositions (with certain
permitted exceptions), among others. The Credit Agreement contains certain
default provisions, including, among other things, (i) nonpayment of any amount
due to the lenders under the Credit Agreement, (ii) material breach of
representations and warranties, (iii) default in the performance of covenants,
(iv) bankruptcy or insolvency, (v) cross-default with respect to indebtedness
for borrowed money and related guaranty obligations in excess of $100 million,
and (vi) a judgment suffered by EPG in excess of $50 million not covered by
insurance and which judgment shall not have been vacated, discharged, stayed or
bonded pending appeal within 60 days.
B-2
<PAGE> 27
EXHIBIT C
LENDERS UNDER THE CREDIT AGREEMENT
<TABLE>
<S> <C>
1. The Chase Manhattan Bank
2. ABN AMRO Bank, N.V. -- Houston Agency
3. Australia and New Zealand Banking Group Limited
4. Bank of America Illinois
5. Bank of Montreal
6. The Bank of New York
7. The Bank of Nova Scotia, Atlanta Agency
8. The Bank of Tokyo-Mitsubishi, Ltd.
9. Banque Nationale de Paris, Houston Agency
10. Barclays Bank PLC
11. Bayerische Vereinsbank AG, Los Angeles Agency
12. Caisse Nationale de Credit Agricole
13. CIBC Inc.
14. Citibank, N.A.
15. Commerzbank Aktiengesellschaft, Atlanta Agency
16. Credit Lyonais New York Branch
17. Credit Suisse
18. The Dia-Ichi Kangyto Bank, Ltd.
19. Deutsche Bank AG New York and/or Cayman Islands Branches
20. Dresdner Bank AG, New York Branch
21. First National Bank of Boston
22. The First National Bank of Chicago
23. The Fuji Bank, Limited-Houston Agency
24. The Industrial Bank of Japan Trust Company
25. Kredietbank N.V., Grand Cayman Branch
26. The Long-term Credit Bank of Japan, Ltd.
27. Mellon Bank, N.A.
28. Morgan Guaranty Trust Company of New York
29. National Westminster Bank Plc
30. NationsBank of Texas, N.A.
31. Norinchukin Bank, New York Branch
32. PNC Bank, National Association
33. Royal Bank of Canada
34. The Sakura Bank, Limited -- New York Branch
35. The Sanwa Bank Limited, Dallas Agency
36. Societe Generale
37. The Sumitomo Bank, Limited, Houston Agency
38. The Tokai Bank, Limited, New York Branch
39. Toronto Dominion (Texas), Inc.
40. Union Bank of Switzerland, Houston Agency
41. The Yasuda Trust & Banking Co., Ltd.
</TABLE>
C-1
<PAGE> 28
PROXY DETACH HERE
SOLICITED BY THE BOARD OF DIRECTORS
EL PASO TENNESSEE PIPELINE CO.
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 8 1/4% Cumulative Preferred Stock, Series A, of El Paso Tennessee
Pipeline Co., held of record by the undersigned on March 10, 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
proposal 1.
-----------
SEE REVERSE
(IMPORTANT - TO BE SIGNED AND DATED ON REVERSE SIDE) SIDE
-----------
<PAGE> 29
DETACH HERE
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
1. Election of Director
Nominee: Kenneth L. Smalley
FOR WITHHOLD
THE NOMINEE [ ] [ ] AUTHORITY TO VOTE
LISTED ABOVE FOR THE NOMINEE
LISTED ABOVE
[ ]
-------------------------------------------
For nominee written above
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: Signature: Date:
-------------- ---------- -------------- ---------
