<PAGE>
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 Section 240.14a-11(c) or Section 240.14a-12
NGC 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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
LOGO
[LOGO OF NGC CORPORATION APPEARS HERE]
NGC CORPORATION
1000 LOUISIANA, SUITE 5800
HOUSTON, TEXAS 77002
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, MAY 14, 1997
To the Stockholders:
The 1997 Annual Meeting of Stockholders (the "Annual Meeting") of NGC
Corporation (the "Company" or "NGC") will be held on Wednesday, May 14, 1997,
at 9:00 a.m., local time, at the Company's Headquarters, The First Interstate
Bank Building, 1000 Louisiana, 71st Floor, Houston, Texas 77002, for the
following purposes:
1. To elect thirteen directors to serve until the 1998 Annual Meeting
of Stockholders;
2. To ratify the selection of Arthur Andersen LLP as independent
auditors of the Company for the fiscal year ending December 31,
1997; and
3. To transact such other business as may properly come before such
meeting or any adjournment(s) or postponement(s) thereof.
The close of business on March 21, 1997, has been fixed as the record date
for the determination of stockholders entitled to receive notice of and to
vote at the Annual Meeting or any adjournment(s) or postponement(s) thereof.
You are cordially invited to attend the Annual Meeting. WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING, WE ASK THAT YOU SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A SELF-ADDRESSED, POSTPAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Directors,
/s/ KENNETH E. RANDOLPH
Kenneth E. Randolph
Secretary
March 31, 1997
<PAGE>
NGC CORPORATION
1000 LOUISIANA, SUITE 5800
HOUSTON, TEXAS 77002
(713) 507-6400
----------------
PROXY STATEMENT
----------------
GENERAL INFORMATION
The enclosed proxy is solicited by and on behalf of the Board of Directors
of the Company (the "Board of Directors" or the "Board") for use at the Annual
Meeting to be held on Wednesday, May 14, 1997, at 9:00 a.m., local time, at
the Company's Headquarters, The First Interstate Bank Building, 1000
Louisiana, 71st Floor, Houston, Texas 77002, or at any adjournment(s) or
postponement(s) thereof. This Proxy Statement, the Notice of Annual Meeting,
the proxy card and the Company's annual report to stockholders for the year
ended December 31, 1996, including financial statements, will be first sent or
given to the Company's stockholders on or about April 4, 1997. The annual
report does not constitute a part of the proxy soliciting material.
QUORUM AND VOTE REQUIRED
The presence of a majority of the shares of the common stock, par value
$0.01 per share, of the Company ("Common Stock"), represented in person or by
proxy at the Annual Meeting will constitute a quorum. Under Delaware law, the
total votes received, including abstentions, would be counted in determining
the number of shares present at a meeting. Thus, shares represented by proxies
that are marked "abstain" will be counted as shares present for purposes of
determining the presence of a quorum on all matters. Also, proxies relating to
"street name" shares that are voted by brokers on only one of the proposals
will nevertheless be treated as shares present for purposes of determining the
presence of a quorum on all matters. A "broker non-vote" occurs if a broker or
other nominee does not have discretionary authority and has not received
instructions with respect to a particular item.
Election of Directors. A plurality of votes cast in person or by proxy by
the holders of Common Stock is required to elect a director. Accordingly,
under Delaware law and the Company's Certificate of Incorporation and Bylaws,
abstentions and broker non-votes would have no effect on the election of
directors. Stockholders may not cumulate their votes in the election of
directors.
Ratification of Auditors. Ratification of the selection of auditors requires
the affirmative vote of a majority of the shares of Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting. Under
Delaware law, an abstention would have the same legal effect as a vote against
this proposal, but a broker non-vote would not be counted for purposes of
determining whether a majority had been achieved.
NO APPRAISAL RIGHTS
Under applicable Delaware law, none of the holders of Common Stock have
appraisal rights in connection with any proposal to be acted upon at the
Annual Meeting.
RECORD DATE AND OUTSTANDING SHARES
The Board of Directors has fixed the close of business on March 21, 1997 as
the record date ("Record Date") for determining holders of outstanding shares
of Common Stock entitled to notice of and to vote at the Annual Meeting or any
adjournment(s) or postponement(s) thereof. As of the Record Date, there were
<PAGE>
outstanding 150,358,638 shares of Common Stock, each share of which is
entitled to one vote. Common Stock is the only class of outstanding securities
of the Company entitled to notice of and to vote at the Annual Meeting.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. Proxies may be
solicited by mail, telecopy, telegraph or telex, or by directors, officers or
regular employees of the Company, in person or by telephone. The Company has
retained ChaseMellon Shareholder Services, L.L.C. to assist in the
solicitation of proxies for a fee of approximately $2,750. The Company will
reimburse brokerage houses and other custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses for forwarding solicitation material
to the beneficial owners of Common Stock.
Questions concerning the proposals to be acted upon at the Annual Meeting
should be directed to the Company's Secretary at (713) 507-6400. Additional
copies of this Proxy Statement or the proxy card may be obtained from the
Company's Secretary at its principal office. The mailing address of the
Company's principal executive office is 1000 Louisiana, Suite 5800, Houston,
Texas 77002.
REVOCATION OF PROXIES
The enclosed proxy, even though executed and returned, may be revoked at any
time prior to the voting of the proxy (a) by the execution and submission of a
revised proxy, (b) by written notice to the Secretary of the Company, or (c)
by voting in person at the Annual Meeting. In the absence of such revocation,
shares represented by proxies will be voted at the Annual Meeting.
VOTING OF PROXIES
The persons named as proxies on the proxy card accompanying this Proxy
Statement were designated by the Board of Directors. Any proxy given pursuant
to such solicitation and received in time for the Annual Meeting will be voted
as specified in such proxy. Unless otherwise instructed or unless authority to
vote is withheld, proxies will be voted FOR the election of the nominees to
the Board of Directors, FOR ratification of the engagement of Arthur Andersen
LLP, and in accordance with the judgment of the persons named in the proxy on
such other matters as may properly come before such meeting or any
adjournment(s) or postponement(s) thereof.
FORM 10-K
Stockholders may obtain without charge a copy of the Company's 1996 Annual
Report on Form 10-K as filed with the Securities and Exchange Commission. For
copies please contact the Investor Relations Department at the Company's
principal executive office address: NGC Corporation, 1000 Louisiana, Suite
5800, Houston, Texas 77002.
Dated: March 31, 1997.
2
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of March 21, 1997, by (i) each person who is
known by the Company to own beneficially 5% or more of the outstanding Common
Stock, (ii) each director or nominee for director of the Company, (iii) each
executive officer of the Company named in the Summary Compensation Table and
(iv) all directors and executive officers of the Company as a group. Share
amounts and percentages shown for each individual or group in the table are
adjusted to give effect to the exercise of all options and warrants
exercisable by such individual or group within 60 days of March 21, 1997.
<TABLE>
<CAPTION>
NUMBER OF SHARES(1) PERCENT OF CLASS(2)
------------------- ------------------
<S> <C> <C>
BG Holdings, Inc.(3)................... 38,789,876 25.8
7105 Business Park Drive
Houston, Texas 77040
BG plc(3)(4)........................... 38,789,876 25.8
100 Thames Valley Park Drive
Reading
Berkshire RG6 1PT
NOVA Gas Services (U.S.) Inc.(3)....... 38,789,876 25.8
690 Mechanic Street
Leominster, Massachusetts 01453
NOVA Corporation(3)(5)................. 38,789,876 25.8
801 Seventh Avenue S.W.
Calgary, Alberta T2P 2N6
Chevron U.S.A. Inc.(3)(6).............. 38,789,876 25.8
1301 McKinney
Houston, Texas 77010
Chevron Corporation(3)(6)(7)........... 38,789,876 25.8
575 Market Street
San Francisco, CA 94104
C. L. Watson(8)........................ 8,907,575 5.9
1000 Louisiana, Suite 5800
Houston, Texas 77002
Thomas M. Matthews(9).................. -- --
Stephen W. Bergstrom(10)............... 2,300,231 1.5
Kenneth E. Randolph(9)................. 1,157,227 *
H. Keith Kaelber(11)................... 381,545 *
Stephen A. Furbacher(9)................ -- --
Stephen J. Brandon..................... -- --
David R. Varney........................ -- --
P. Nicholas Woollacott................. -- --
C. Kent Jespersen...................... 3,462 *
Jeffrey M. Lipton(12).................. 6,189 *
Albert Terence Poole................... 1,172 *
Darald W. Callahan..................... -- --
Donald L. Paul......................... -- --
Peter J. Robertson..................... -- --
Daniel L. Dienstbier................... 5,168 *
J. Otis Winters(13).................... 12,606 *
Executive Officers and Directors of the
Company as a Group
(18 persons)(8)(9)(10)11)(12)(13)..... 12,777,175 8.4
</TABLE>
3
<PAGE>
- --------
* Less than 1%.
(1) Unless otherwise noted, each of the persons has sole voting and
investment power with respect to the shares reported.
(2) Based upon 150,358,638 shares of Common Stock actually outstanding at
March 21, 1997 (with respect to certain individuals who have the right to
acquire shares of Common Stock within 60 days of March 21, 1997 pursuant
to the exercise of options or warrants, the number of shares of Common
Stock not outstanding which are subject to such options or warrants have
been deemed to be outstanding for the purpose of computing the percentage
of outstanding shares of Common Stock owned by such individuals pursuant
to Rule 13d-3(d) of the Securities Exchange Act of 1934).
(3) BG Holdings, Inc. ("BG Holding"), NOVA Gas Services (U.S.) Inc. ("NOVA
Gas"), and Chevron U.S.A. Inc. ("Chevron") are parties to the NGC
Stockholders Agreement (defined herein) which provides that, among other
things, the parties thereto will vote their Common Stock, subject to
certain conditions, to elect as the thirteen directors of NGC three
designees of BG Holding, three designees of NOVA Gas, three designees of
Chevron, two officers of NGC designated by the Chief Executive Officer of
the Company, to the extent provided in his employment agreement, and two
independent directors. Approximately 116,369,628 shares of Common Stock,
or 77.4% of the outstanding shares of Common Stock, are subject to the
NGC Stockholders Agreement. See "Proposal 1--Election of Directors--
Stockholders Agreement."
(4) BG plc ("BG plc"), through subsidiaries, indirectly owns 100% of the
capital stock of BG Holding. Consequently, BG plc may be deemed to
beneficially own all of the shares of Common Stock owned of record by BG
Holding.
(5) NOVA Corporation ("NOVA"), through subsidiaries, indirectly owns 100% of
the capital stock of NOVA Gas. Consequently, NOVA may be deemed to
beneficially own all of the shares of Common Stock owned of record by
NOVA Gas.
(6) Excludes 7,815,363 shares of NGC Series A Participating Preferred Stock
("Preferred Stock") held of record by Chevron. Each share of Preferred
Stock may be converted into one share of Common Stock at the option of
Chevron upon the occurrence of certain events or automatically upon the
sale by Chevron to a non-affiliate.
(7) Chevron Corporation beneficially owns 100% of the capital stock of
Chevron. Consequently, Chevron Corporation may be deemed to beneficially
own all of the shares of Common Stock and Preferred Stock owned of record
by Chevron.
(8) Includes 2,954,362 shares of Common Stock that are owned by trusts
established by Mr. Watson for the benefit of his wife, his three minor
children and himself. Mr. Watson is the sole trustee of these trusts. Mr.
Watson may be deemed to beneficially own all of the shares of Common
Stock held by such trusts. Also includes 1,738,718 shares of Common Stock
issuable upon the exercise of employee stock options held by Mr. Watson
that are exercisable within 60 days of March 21, 1997. The number of
shares does not include approximately 1,692 shares of Common Stock held
by the Trustee of the NGC Corporation Profit Sharing/401(k) Savings Plan
(the "401(k) Plan") as of January 28, 1997, for the account of Mr.
Watson. Participants in the 401(k) Plan have no voting or investment
power with respect to such shares until their distribution to such
participants upon termination of their employment. In addition,
participants may elect to take cash in lieu of shares of Common Stock
upon termination of their employment.
(9) The number of shares does not include approximately 215, 1,710 and 741
shares, respectively, of Common Stock held by the Trustee of the 401(k)
Plan as of January 28, 1997, for the accounts of Messrs. Matthews,
Randolph and Furbacher, respectively. Participants in the 401(k) Plan
have no voting or investment power with respect to such shares until
their distribution to such participants upon termination of their
employment. In addition, participants may elect to take cash in lieu of
shares of Common Stock upon termination of their employment.
(10) Includes 580,563 shares of Common Stock that are owned by trusts
established by Mr. Bergstrom, for the benefit of his two minor children.
Mr. Bergstrom's father is the sole trustee of such trusts. Mr. Bergstrom
disclaims beneficial ownership of all of the shares of Common Stock held
by such trusts. The number of shares does not include approximately 1,904
shares of Common Stock held by the Trustee of the Company's 401(k) Plan
as of January 28, 1997, for the account of Mr. Bergstrom. Participants in
the 401(k) Plan have no voting or investment power with respect to such
shares until their distribution to such participants upon termination of
their employment. In addition, participants may elect to take cash in
lieu of shares of Common Stock upon their termination of employment.
(11) Mr. Kaelber retired from the Company January 31, 1997. The number of
shares of Common Stock shown as beneficially owned by Mr. Kaelber is as
of January 31, 1997, as reflected in his latest filing on Form 4. The
number of shares does not include 1,978 shares of Common Stock held by
the Trustee of the 401(k) Plan as of January 28, 1997, which may be
distributed to Mr. Kaelber following his retirement. As a former
participant in the 401(k) Plan, Mr. Kaelber may elect to take cash in
lieu of shares of Common Stock following his termination of employment.
(12)Includes 800 shares of Common Stock owned by Mr. Lipton's wife.
(13) Includes 6,378 shares of Common Stock held by Mr. Winters and 6,228
shares issuable to Mr. Winters upon the exercise of an immediately
exercisable warrant.
PROPOSAL 1--ELECTION OF DIRECTORS
Thirteen directors are to be elected at the Annual Meeting. A plurality of
the votes cast in person or by proxy by the holders of Common Stock is
required to elect a director. Accordingly, under Delaware law and the
Company's Certificate of Incorporation and Bylaws, abstentions and broker non-
votes would have no effect on the election of directors. Stockholders may not
cumulate their votes in the election of directors.
4
<PAGE>
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted FOR the election of the nominees listed below.
Although the Board of Directors does not contemplate that any of the nominees
will be unable to serve, if such a situation arises prior to the Annual
Meeting, the persons named in the enclosed proxy will vote for the election of
such other person(s) as may be nominated by the Board of Directors.
Certain stockholders of the Company are parties to a stockholders agreement
entered into in connection with the Chevron Combination (defined herein) that
contains certain provisions with respect to the designation and election of
directors. See "--Stockholders Agreement."
Twelve of the thirteen nominees for director are currently directors of the
Company. The following table sets forth information regarding the names, ages
and principal occupations of the current directors and/or nominees, other
directorships held by them in certain companies and, if applicable, the length
of their continuous service as a director of the Company:
<TABLE>
<CAPTION>
AGE AS
DIRECTORS AND/OR OF DIRECTOR
NOMINEES PRINCIPAL OCCUPATION AND DIRECTORSHIPS 4/1/97 SINCE
---------------- -------------------------------------- ------ --------
<S> <C> <C> <C>
C. L. Watson............ Chairman of the Board and Chief Executive 47 1995
Officer of NGC
Thomas M. Matthews...... President of NGC 53 --
Stephen W. Bergstrom(1). Senior Vice President of NGC and President of 39 1995
Natural Gas Clearinghouse
Stephen J. Brandon...... Executive Director of BG plc 49 1996
David R. Varney......... Chief Executive of BG plc 50 1996
P. Nicholas Woollacott.. Managing Director, Downstream Investment, of BG 49 1996
plc
C. Kent Jespersen....... Senior Vice President of NOVA and President of 51 1995
NOVA Gas International Ltd.
Jeffrey M. Lipton....... President of NOVA; Director of NOVA, NOVA Gas 54 1995
Transmission, Ltd. and Methanex Corporation
Albert Terence Poole.... Senior Vice President and Chief Financial 54 1996
Officer of NOVA; Director of Methanex
Corporation
Darald W. Callahan...... Senior Vice President of Chevron Chemical 54 1996
Company
Donald L. Paul.......... Vice President, Technology & Environmental 50 1996
Affairs of Chevron Corporation
Peter J. Robertson...... Vice President of Chevron Corporation and 50 1996
President of Chevron U.S.A. Production Company
Daniel L. Dienstbier.... Private Investments 56 1995
J. Otis Winters......... Chairman, Pate, Winters & Stone, Inc. 64 1993
(consulting firm); Director of Liberty Bancorp,
Inc., Walden Residential Properties, Inc. and
AMX Corporation
</TABLE>
- --------
(1) Mr. Bergstrom is not standing for re-election as a Director at the Annual
Meeting. The Company's Bylaws provide for an Advisory Director who is
entitled to attend all meetings of the Board but may not vote on any
matters before the Board. Mr. Bergstrom has been designated as an Advisory
Director, effective as of the date of the Annual Meeting, following the
election of Directors by the Stockholders.
In addition to the principal occupations and directorships of the non-
employee directors described above, certain of the named nominees were engaged
or are engaged (as applicable) in the past five years in the principal
occupations set forth below.
C. L. WATSON serves as Chairman of the Board, Chief Executive Officer and a
Director of NGC. He also served as President of NGC from March 1995 to
December 1996. Mr. Watson served as Chairman and as a member of the Natural
Gas Clearinghouse ("Clearinghouse") Management Committee from May 1989 through
5
<PAGE>
March 1995, and as Chief Executive Officer and President of Clearinghouse from
September 1985 through March 1995.
THOMAS M. MATTHEWS joined the Company in December 1996 as President of NGC.
Prior to his employment with NGC, Mr. Matthews was President and Chief
Executive Officer of Texaco Natural Gas from January 1996 through November
1996 and a vice president of Texaco, Inc. from November 1993 through November
1996. Mr. Matthews also served as President of Texaco Refining and Marketing,
Inc. from December 1993 through December 1995. He joined Texaco U.S.A. as Vice
President-Gas in 1989. Prior to joining Texaco, Mr. Matthews spent 8 years
with Tenneco as President of Tennessee Gas Pipeline Company and Executive Vice
President of Tenneco Gas and also 16 years with Exxon in various domestic and
international engineering, management and executive positions, having last
served as Vice President--Exxon Gas.
STEPHEN W. BERGSTROM serves as Senior Vice President and a Director of NGC
and as President of Clearinghouse. He served as Executive Vice President of
Clearinghouse and a member of the Clearinghouse Management Committee from May
1989 through March 1995. In addition, Mr. Bergstrom served as Senior Vice
President--Gas Marketing and Supply of Clearinghouse from May 1987 through May
1990 and as Vice President--Gas Supply of Clearinghouse from July 1986 through
May 1987. Prior to his employment with Clearinghouse, Mr. Bergstrom served as
Vice President--Gas Supply of Enron Gas Marketing, a subsidiary of Enron
Corporation.
STEPHEN J. BRANDON has served as Executive Director of BG plc responsible
for British Gas International Downstream since February 17, 1997. He served as
Executive Director (Commercial) of British Gas plc from August 1995 to
February 17, 1997. From 1987 through July 1995, Mr. Brandon was employed by
General Electric Company where he served as Vice President responsible for
Southeast Asian operations from 1993 through July 1995.
DAVID R. VARNEY has served as Chief Executive of BG plc since February 17,
1997. He served as Executive Director of British Gas plc from June 1996 to
February 17, 1997. From January 1996 to May 1996, Mr. Varney served as a
Director of Shell International Petroleum Company. From December 1991 to
December 1995, he served as Managing Director on the Board of Shell UK Ltd.
During 1990 and until December 1991, Mr. Varney served as Head of Marketing,
Branding and Product Development for Shell International Petroleum Company,
Ltd.
P. NICHOLAS WOOLLACOTT has served as Managing Director, Investment
Downstream, of BG plc since February 17, 1997. He served as Managing Director
(Power Generation and Investment) of British Gas plc from October 1994 to
February 17, 1997. From January 1992 through September 1994, Mr. Woollacott
was employed by Southern Electric plc where he served as Chief Executive
Officer of Southern Electric Power Generation.
C. KENT JESPERSEN has served as Senior Vice President of NOVA since
September 1993. From June 1992 to September 1993, he served as Senior Vice
President (Corporate Development) of NOVA's predecessor, NOVA Corporation of
Alberta ("NOVA Alberta"). From 1989 to June 1992, Mr. Jespersen served as
President of Foothills Pipe Lines Ltd. ("Foothills Pipe Lines"). He also
served as Vice Chairman of Clearinghouse and as a member of the Clearinghouse
Management Committee from January 1994 through March 1995.
JEFFREY M. LIPTON has served as President of NOVA from September 1994 to the
present, as Senior Vice President and Chief Financial Officer of NOVA from
February 1994 to September 1994 and as Senior Vice President of Novacor
Chemicals Inc., an indirect subsidiary of NOVA, from December 1993 to February
1994. Prior to joining NOVA in December 1993, Mr. Lipton served as Vice
President (Corporate Plans) of E.I. du Pont de Nemours & Co. ("du Pont") from
January 1993 to December 1993, and Vice President (Corporate Marketing and
Continuous Improvement) of du Pont from October 1990 to January 1993. He also
served as a member of the Clearinghouse Management Committee from January 1994
through March 1995.
ALBERT TERENCE POOLE has served as Senior Vice President and Chief Financial
Officer of NOVA since September 1994. Mr. Poole served as Senior Vice
President, Corporate Development and Controller of NOVA
6
<PAGE>
from March 1994 through August 1994, and, from September 1993 to March 1994,
Mr. Poole held the same position at NOVA Alberta. From 1988 to August 1993,
Mr. Poole served as Vice President and Controller of NOVA Alberta.
DARALD W. CALLAHAN has served as Senior Vice President of Chevron Chemical
Company since October 1991 and served as President of Warren Petroleum
Company, an unincorporated division of Chevron ("Warren"), from December 1987
through September 1991. Mr. Callahan has been employed by Chevron Corporation
and its affiliates since 1964.
DONALD L. PAUL has served as Vice President, Technology & Environmental
Affairs of Chevron Corporation since September 1996. He served as President of
Chevron Canada Resources from November 1994 through August 1996 and as
President of Chevron Petroleum Technology Co. from August 1992 through October
1994. Prior thereto, he served as Vice President--Exploration Research and
Development of Chevron Oil Field Research Company from September 1990 through
July 1992. Mr. Paul has been employed by Chevron Corporation and its
affiliates since 1975.
PETER J. ROBERTSON has served as a Vice President of Chevron Corporation
since September 1994 and as President of Chevron U.S.A. Production Company
since March 1997. He served as Vice President, Strategic Planning and Quality
of Chevron Corporation from October 1994 through September 1996. Mr. Robertson
served as President of Warren from October 1991 through September 1994. Prior
thereto, he served as Vice President--Finance of Chevron U.S.A. Production
Company from October 1989 through September 1991. Mr. Robertson has been
employed by Chevron Corporation and its affiliates since 1973.
DANIEL L. DIENSTBIER has nearly 30 years of experience in the oil and gas
industry. He served as President and Chief Operating Officer of American Oil &
Gas Corp. from October 1993 through July 1994, President and Chief Operating
Officer of Arkla, Inc. from July 1992 through October 1993 and President of
Jule, Inc., a private company involved in energy consulting and joint venture
investments in the pipeline, gathering and exploration and production
industries, from February 1991 through June 1992. Prior thereto, Mr.
Dienstbier served as President and Chief Executive Officer of Dyco Petroleum
Corp. and Executive Vice President of Diversified Energy from February 1989
through February 1991. In addition, he served as President of the Gas Pipeline
Group of Enron Corp. from July 1985 through July 1988. Presently, Mr.
Dienstbier is pursuing private investments. In the past, Mr. Dienstbier has
served as a member on the board of directors of several public companies,
including American Oil & Gas Corp., Arkla, Inc., Enron Corp. and Midwest
Resources.
J. OTIS WINTERS is a co-founder and the Chairman of Pate, Winters & Stone,
Inc., a consulting firm, and has served in such position since 1990. Mr.
Winters was formerly Executive Vice President and Director of the Williams
Companies and Executive Vice President and Director of the First National Bank
of Tulsa. He has also served as a member of the Board of Directors of several
public companies.
The Board of Directors recommends that stockholders vote "FOR" the election
of the nominees to the Board of Directors.
STOCKHOLDERS AGREEMENT
On August 31, 1996, NGC and Chevron consummated a strategic combination of
NGC with substantially all of Chevron's midstream assets and entered into
certain strategic alliances (the "Chevron Combination"). In connection with
the Chevron Combination, BG Holding, NOVA Gas and Chevron entered into a
Stockholders Agreement dated as of May 22, 1996, but effective August 31, 1996
(the "NGC Stockholders Agreement"). The parties to the NGC Stockholders
Agreement have agreed to vote their Common Stock, subject to certain
conditions, to cause the Board of Directors to consist of 13 directors to be
nominated as follows: (i) each of the BG Group, NOVA Group and Chevron Group
(as such terms are defined in the NGC Stockholders Agreement) may nominate (A)
three directors as long as it remains a Class A Group (as defined below); (B)
two directors as long as it remains a Class B Group (as defined below); and
(c) one director as long as it remains a Class C
7
<PAGE>
Group (as defined below); (ii) two members shall be officers of NGC, the
nomination of whom shall be as follows: (A) so long as his employment
agreement so provides, the Chief Executive Officer of NGC (1) shall be a
member of the NGC Board of Directors and (2) shall nominate another officer of
NGC; (B) if the Chief Executive Officer is no longer required to be a member
of the Board of Directors pursuant to his employment agreement, then two
officers of NGC shall be nominated by the Board of Directors; (iii) two
members shall be independent directors nominated by the Board of Directors;
and (iv) all other members, if any, shall be nominated and elected in
accordance with applicable law.
Pursuant to the NGC Stockholders Agreement (i) a "Class A Group" is defined
as a Group (as defined in the NGC Stockholders Agreement) that owns
collectively at least 34,760,890 shares of Common Stock; (ii) a "Class B
Group" is defined as a Group that owns collectively at least 23,173,926 shares
of Common Stock but less than 34,760,890 shares of Common Stock, and (iii) a
"Class C Group" is defined as a Group that owns collectively at least
11,586,963 shares of Common Stock but less than 23,173,926 shares of Common
Stock. Currently, each of the BG Group, NOVA Group and Chevron Group is a
Class A Group under the NGC Stockholders Agreement and therefore entitled to
designate three directors to serve on the Board of Directors based on its
ownership of Common Stock. The BG Group has designated Messrs. Stephen J.
Brandon, David R. Varney and P. Nicholas Woollacott as directors of the
Company. The NOVA Group has designated Messrs. C. Kent Jespersen, Jeffrey M.
Lipton and Albert Terence Poole as directors of the Company. The Chevron Group
has designated Messrs. Darald W. Callahan, Donald L. Paul and Peter J.
Robertson as directors of the Company. The Chief Executive Officer of NGC has
designated Messrs. C. L. Watson and Thomas M. Matthews as directors of the
Company.
DIRECTORS' MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1996, the Company's Board of Directors held four meetings. Each
director other than Mr. Varney attended at least 75% of the aggregate of the
total number of meetings of the NGC Board of Directors (held during the period
for which he has been a director) and the total number of meetings held by all
committees of the Board on which he served (during the periods that he
served). The Company's Board of Directors currently has the following standing
audit and compensation committees, and committees that perform similar
functions as the foregoing:
EXECUTIVE COMMITTEE. The Executive Committee, which is currently comprised
of Messrs. Watson, Brandon, Jespersen and Robertson, met three times during
1996. The Executive Committee has been delegated the authority to approve any
actions that the Board of Directors could approve, except to the extent
restricted by law, the NGC Bylaws or the NGC Certificate of Incorporation.
AUDIT COMMITTEE. The Audit Committee, which is currently comprised of
Messrs. Dienstbier and Winters, met four times during 1996. The Audit
Committee is responsible for meeting with the auditors, internal auditors and
senior executives of the Company to review and inquire into matters affecting
the financial reporting of the Company and recommending to the Board of
Directors the auditors to be recommended for appointment at the annual
stockholders meeting.
COMPENSATION, CORPORATE GOVERNANCE AND HUMAN RESOURCES COMMITTEE. The
Compensation, Corporate Governance and Human Resources Committee (the
"Compensation Committee"), which is currently comprised of Messrs. Dienstbier,
Brandon, Callahan, Lipton and Winters, met four times during 1996. The
Compensation Committee reviews recommendations for the appointment of persons
to senior executive positions, determines terms of employment and compensation
and is responsible for the proper and orderly administration of the Company's
retirement and savings plan (other than matters relating to the funding and
investment of the plan's trust funds). This committee is also responsible for
the compensation and governance of the Board of Directors and, subject to the
rights of the parties to the NGC Stockholders Agreement and the Chief
Executive Officer of NGC pursuant to the terms of his employment agreement,
recommending to the Board of Directors nominees for election or appointment to
the Board of Directors, as the case may be. In addition, this
8
<PAGE>
committee is responsible for maintaining an effective working relationship
between the Board of Directors and management of the Company. During 1996, the
Compensation Committee was responsible for recommending awards under the NGC
Corporation Employee Equity Option Plan and the NGC Corporation Amended and
Restated 1991 Stock Option Plan.
OPTIONS COMMITTEE. In November 1996, the Board of Directors appointed an
Options Committee, which is currently comprised of Messrs. Dienstbier and
Winters. Beginning in 1997, the Options Committee will be responsible for
recommending awards under the NGC Corporation Employee Equity Option Plan and
the NGC Corporation Amended and Restated 1991 Stock Option Plan.
The Company does not have a standing Nominating Committee.
COMPENSATION OF DIRECTORS
Each non-employee director of NGC is paid an annual retainer of $22,000 plus
$1,250 per board or committee meeting attended. In addition, each such
director is entitled to reimbursement for his reasonable out-of-pocket
expenses incurred in connection with travel to and from, and attendance at,
meetings of the NGC Board of Directors or committees thereof. Each non-
employee director also has the option to receive shares of Common Stock, in
lieu of cash, in payment of their annual retainer and meeting fees pursuant to
the terms of the NGC Corporation Non-Employee Director Compensation Plan. Each
director or nominee for director of NGC, other than Messrs. Watson, Matthews
and Bergstrom, is a non-employee director for purposes of such plan. The
annual retainer and meeting fees payable to the BG Holding and Chevron
representatives on the NGC Board of Directors are currently paid directly to
BG Holding and Chevron, respectively.
Effective January 1, 1997, the Chairman of the Audit Committee and the
Chairman of the Compensation Committee will each be paid an annual retainer of
$16,000 as well as a committee meeting fee of $3,000 for each meeting of the
Audit Committee and Compensation Committee that they chair. Such amounts are
in addition to the annual retainer and board or committee fees described
above. Messrs. Winters and Dienstbier are currently the respective chairmen of
the Audit Committee and Compensation Committee.
CERTAIN TRANSACTIONS AND OTHER MATTERS
For a description of certain transactions with management and others,
certain business relationships, indebtedness of management and compliance with
Section 16(a) of the Securities Exchange Act of 1934, see "Executive
Compensation--Employment Agreements," "--Certain Relationships and Related
Transactions," "--Indebtedness of Management," and "--Section 16(a) Beneficial
Ownership Reporting Compliance."
9
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
compensation earned by the individual who serves as NGC's Chief Executive
Officer and the four most highly compensated persons of NGC at the end of 1996
(the "Named Executive Officers") in combined salary and bonus earned in 1996,
as well as amounts earned by or awarded to such individuals for services
rendered in all capacities to NGC or Clearinghouse, as the case may be, during
1995 and 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------------- ------------
SHARES
UNDERLYING
FISCAL OTHER ANNUAL STOCK ALL OTHER
NAME AND POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION(2)
----------------- ------ -------- ---------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Charles L. Watson...... 1996 $609,612 $2,518,018(3) -- 456,748(3) $68,461
Chairman of the Board and Chief 1995 $600,600 $1,993,600(4) -- -- $69,620
Executive Officer of NGC Corporation $ 116,703(5)
1994 $581,400 $1,993,600(4) -- -- $70,022
$1,076,000(6)
Stephen W. Bergstrom... 1996 $304,812 $ 509,009(3) -- 185,749(3) $37,981
Senior Vice President of NGC 1995 $300,312 $ 483,400(4) -- -- $31,763
Corporation and President of $ 76,000(5)
Clearinghouse 1994 $288,850 $ 483,000(4) -- -- $33,484
$ 253,000(6)
Kenneth E. Randolph.... 1996 $242,904 $ 267,074(4) -- 27,090 $31,790
Senior Vice President, General 1995 $227,100 $ 104,200(4) -- 26,620 $23,543
Counsel and Secretary of NGC Corporation 1994 $209,478 $ 81,600(4) -- -- $23,670
$ 75,000(6)
H. Keith Kaelber....... 1996 $236,004 $ 216,660(4) -- -- $22,500
Senior Vice President and Chief 1995 $212,004 $ 118,000(4) -- 25,062 $25,140
Financial Officer of NGC Corporation 1994 $194,065 $ 97,992(4) -- -- $26,829
$ 75,000(6)
Stephen A. Furbacher... 1996 $151,447(7) $ 127,000(4)(7) -- 62,090 $42,231
Senior Vice President of NGC 1995 -- -- -- -- --
Corporation and President of Warren 1994 -- -- -- -- --
Petroleum Company, Limited Partnership
Thomas M. Matthews..... 1996 $ 50,000(8) --(8) -- 59,802 $ 7,500
President of NGC Corporation 1995 -- -- -- -- --
1994 -- -- -- -- --
</TABLE>
- --------
(1) No Named Executive Officer received perquisites that exceeded the lesser
of either $50,000, or 10% of total annual salary and bonus.
(2) During 1996, 1995 and 1994, respectively, Messrs. Watson, Bergstrom,
Randolph, Kaelber, Furbacher and Matthews received company contributions
to their respective savings plan accounts of $22,500,$22,500, $22,500,
$22,500, $22,292 and $7,500, respectively, $20,490, $20,490, $17,760,
$20,490, $0 and $0, respectively, and $13,765, $18,542, $15,945, $20,490,
$0 and $0, respectively. During 1996, 1995 and 1994 respectively, Messrs.
Watson, Bergstrom, Randolph, Kaelber, Furbacher and Matthews received
excess savings plan payments of $45,961, $15,481, $9,290, $0, $0 and $0,
respectively, $33,795, $11,273, $5,783, $4,650, $0 and $0, respectively,
and $31,950, $10,414, $4,461, $3,305, $0 and $0, respectively. During
1994, Messrs. Watson, Bergstrom, Randolph and Kaelber received service
premiums of $8,972, $4,528, $3,264 and $3,034, respectively. No service
premiums were paid in 1996 or 1995. A life insurance premium of $15,335
was paid by Clearinghouse, or NGC, as the case may be, on Mr. Watson's
behalf in each of 1995 and 1994. No life insurance premium was paid on Mr.
Watson's behalf in 1996. In 1996, relocation expenses in the amount of
$19,939 were paid on Mr. Furbacher's behalf.
(3) Messrs. Watson and Bergstrom's respective employment agreements entitle
them to certain guaranteed bonus amounts under the Company's Above Base
Incentive Compensation Plan (the "ABIC Plan") based on the operating
profits of the Company. See "--Employment Agreements" for a description of
Messrs. Watson and Bergstrom's employment agreements. Messrs. Watson and
Bergstrom's bonus awards for 1996, as determined under their respective
employment agreements and the ABIC Plan, were $6,927,000 and $1,716,750,
respectively. Of such bonus amounts, Mr. Watson elected to receive
$2,500,000 in cash and $4,427,000 in the form of 220,008 stock options
with an exercise price of $2.028 per share, and Mr. Bergstrom elected to
receive $500,000 in cash and $1,216,750
(Footnotes continued on following page)
10
<PAGE>
in the form of 60,469 stock options with an exercise price of $2.028 per
share. The number of stock options awarded to Messrs. Watson and Bergstrom
in lieu of a portion of their December 1996 bonus awards was determined
based on a fair market value of $22.15 per share, which was equal to the
average closing price of the Company's Common Stock for the month of
December 1996. See "--Stock Option Grants" and "--Compensation Committee
Report on Executive Compensation." Bonus amounts also include a mid-year
bonus equal to 3% of the Named Executive Officer's base salary at July 1,
1996, which was also paid to all employees of NGC. Messrs. Watson and
Bergstrom's July 1996 bonus amounts were $18,018 and $9,009, respectively.
(4) Bonus awards were based on the provisions of the ABIC Plan. Mr.
Furbacher's 1996 bonus was also subject to the guaranteed bonus provision
of Mr. Furbacher's employment agreement. See "--Employment Agreements" for
a description of Mr. Furbacher's employment agreement. Bonus amounts for
1996 also include a mid-year bonus equal to 3% of the Named Executive
Officer's base salary at July 1, 1996, which was also paid to all
employees of NGC. Messrs. Randolph, Kaelber and Furbacher's July 1996
bonus amounts were $7,074, $6,660 and $0, respectively. Bonuses shown for
1996 for Messrs. Randolph, Kaelber and Furbacher also include bonus
amounts of $35,000, $35,000 and $10,000, respectively, that relate to
bonuses that were approved by the Board of Directors to be paid in 1996 to
certain employees, including such Named Executive Officers, who were
involved with the Chevron Combination.
(5) Bonus awarded in 1995, paid in 1996.
(6) Bonus awarded in 1994 to be paid in equal installments in 1995 and 1996.
(7) Mr. Furbacher's employment agreement entitles him to a base salary of
$250,000 per year and a minimum guaranteed bonus of $100,000 per year. Mr.
Furbacher became employed by the Company on May 22, 1996. See "--
Employment Agreements."
(8) Mr. Matthews' employment agreement entitles him to receive a base salary
of $600,000 per year and a minimum guaranteed bonus of $300,000 per year.
Mr. Matthews became employed by the Company on December 1, 1996. See "--
Employment Agreements."
STOCK OPTION GRANTS
The following table sets forth certain information with respect to stock
option grants made to the Named Executive Officers during 1996 under the NGC
Corporation Employee Equity Option Plan (the "EEP") and/or the NGC Corporation
Amended and Restated 1991 Stock Option Plan (the "Stock Option Plan").
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------- ---------------------------------
NUMBER OF % TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES GRANTED TO MARKET ASSUMED ANNUAL RATE OF STOCK
UNDERLYING EMPLOYEES EXERCISE PRICE ON PRICE APPRECIATION FOR OPTION
OPTIONS IN FISCAL PRICE DATE EXPIRATION TERM
NAME GRANTED 1996 $/SHARE OF GRANT DATE 0% 5% 10%
---- ---------- ---------- -------- -------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles L. Watson....... 125,000 7.2% $2.028 $ 16.25 07/19/06 $1,777,750 $3,055,192 $ 5,015,039
220,008(1) 12.8% $2.028 $ 22.15(1) 11/19/06 $4,427,000 $7,491,716 $12,193,590
111,740 6.5% $18.75 $ 18.75 11/19/06 -- $1,317,613 $ 3,339,090
Stephen W. Bergstrom.... 75,000 4.4% $ 2.13 $ 18.75 11/19/06 $1,246,500 $2,130,883 $ 3,487,700
60,469(1) 3.5% $2.028 $ 22.15(1) 11/19/06 $1,216,757 $2,059,091 $ 3,351,397
50,280 2.9% $18.75 $ 18.75 11/19/06 -- $ 592,890 $ 1,502,501
Kenneth E. Randolph..... 27,090 1.6% $18.75 $ 18.75 11/19/06 -- $ 319,439 $ 809,522
H. Keith Kaelber........ -- -- -- -- -- -- -- --
Stephen A. Furbacher.... 27,090 1.6% $18.75 $ 18.75 11/19/06 -- $ 319,439 $ 809,522
35,000 2.0% $ 2.13 $15.875 05/23/06 $ 481,075 $ 830,505 $ 1,366,598
Thomas M. Matthews...... 59,802 3.5% $2.028 $ 18.75 12/01/06 $1,000,009 $1,705,181 $ 2,787,053
</TABLE>
- --------
(1) Options awarded to Messrs. Watson and Bergstrom, at their election, in
lieu of a portion of their December 1996 bonus. The number of options
awarded to Messrs. Watson and Bergstrom was determined based on a fair
market value of $22.15 per share, which was equal to the average closing
price of the Company's Common Stock for the month of December 1996. See
"Executive Compensation--Summary Compensation Table" and "--Compensation
Committee Report on Executive Compensation."
11
<PAGE>
OPTION EXERCISES AND YEAR END VALUE TABLE
The following table sets forth for the Named Executive Officers information
regarding options held by them at December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
STOCK OPTIONS OR IN-THE-MONEY
SHARES EQUITY OPTIONS AT STOCK OPTIONS AT
ACQUIRED DECEMBER 31, 1996 DECEMBER 31, 1996(1)
ON EXERCISE VALUE ------------------------- -------------------------
OF OPTIONS REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles L. Watson....... -- -- -- 2,195,466 -- $44,723,663
Stephen W. Bergstrom.... -- -- -- 185,749 -- $ 3,093,533
Kenneth E. Randolph..... -- -- 8,873 44,837 $123,113 $ 368,145
H. Keith Kaelber........ -- -- 8,354 306,5832 $115,912 $ 6,383,551(2)
Stephen A. Furbacher.... -- -- -- 62,090 -- $ 861,105
Thomas M. Matthews...... -- -- -- 59,802 -- $ 1,269,118
</TABLE>
- --------
(1) Value based on the closing price of $23.25 on the New York Stock
Exchange--Composite Tape for NGC Common Stock on December 31, 1996.
(2) Mr. Kaelber retired on January 31, 1997. On such date, he exercised the
8,354 stock options that were then exercisable. Based upon the closing
price of $21.50 on the New York Stock Exchange Composite Tape on January
31, 1997, Mr. Kaelber realized $101,292 upon the exercise of such stock
options. The remainder of Mr. Kaelber's stock options were forfeited in
accordance with the terms of the respective stock option plans under which
they were granted.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's executive officers and directors, and persons who own
more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "SEC") and the New York Stock
Exchange. Executive officers, directors and greater than ten-percent
stockholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based solely upon review of the
copies of such forms furnished to the Company, or upon written representations
that no Form 5's were required, the Company believes that all persons subject
to these reporting requirements filed the required reports on a timely basis,
except that Mr. Lipton's August 1996 Form 4 filing, which reported shares of
Common Stock acquired by Mr. Lipton's wife prior to their August 1996
marriage, was filed in March 1997, and BG Holding's November 1996 Form 4
filing, which reported a November 1996 private purchase of Common Stock, was
filed in January 1997. Such filings were not made on a timely basis.
INDEBTEDNESS OF MANAGEMENT
NGC entered into an employment and non-competition agreement with Mark L.
Hazelwood, dated as of March 15, 1996, but effective for all purposes as of
April 15, 1996. Pursuant to this agreement, NGC agreed to employ Mr. Hazelwood
as a Senior Vice President of NGC and President of NGC Global Energy Services,
Inc. In connection with Mr. Hazelwood's relocation and the purchase of a home
in Houston, NGC loaned Mr. Hazelwood $167,000 at 6% interest. The largest
aggregate amount of such indebtedness outstanding during 1996, including
interest, was $167,771, all of which had been repaid by Mr. Hazelwood as of
December 31, 1996. Mr. Hazelwood resigned from the Company in September 1996.
NGC entered into an employment and non-competition agreement with Stephen A.
Furbacher, dated as of April 2, 1996, but effective for all purposes as of May
22, 1996. Pursuant to this agreement, NGC agreed to employ Mr. Furbacher as a
Senior Vice President of NGC and as President of Warren Petroleum Company,
Limited Partnership. In connection with Mr. Furbacher's relocation and the
purchase of a home in Houston, NGC loaned Mr. Furbacher $100,000 at 6%
interest, to be repaid on the earlier to occur of the sale of his Tulsa home
or March 31, 1997. The largest aggregate amount of such indebtedness
outstanding during 1996, including interest, was $102,250, all of which had
been repaid by Mr. Furbacher as of December 31, 1996. See "-- Employment
Agreements."
12
<PAGE>
Other than Messrs. Hazelwood and Furbacher, no director, executive officer,
nominee for election as a director or five percent stockholder was indebted to
NGC for an amount exceeding $60,000 during 1996.
EMPLOYMENT AGREEMENTS
C. L. WATSON EMPLOYMENT AGREEMENT. Clearinghouse entered into an employment
and non-competition agreement with C. L. Watson, dated as of May 19, 1992,
pursuant to which Clearinghouse agreed to employ Mr. Watson as Chairman, Chief
Executive Officer and President of Clearinghouse. Mr. Watson is currently
employed as Chairman and Chief Executive Officer of the Company. Mr. Watson's
agreement provides for (i) a five-year primary term expiring on May 19, 1997
and (ii) a non-compete term of two years beyond the termination of the
agreement prohibiting Mr. Watson from engaging in any business in competition
with the Company. The agreement also places certain restrictions upon Mr.
Watson's ability to communicate confidential information concerning the
Company to third parties.
Mr. Watson's employment agreement entitles him to receive a base salary of
$456,790, subject to increase as determined by the Compensation Committee. As
of December 31, 1996, Mr. Watson's annual base salary was $618,618. Mr. Watson
is also entitled to certain guaranteed bonus amounts under the NGC Corporation
Above Base Incentive Compensation Plan (the "ABIC Plan") based on the
operating profits of the Company. Upon termination of the ABIC Plan in May
1997, Mr. Watson's bonus amounts will be determined under the NGC Corporation
Incentive Compensation Plan (the "Incentive Compensation Plan"), which will
become effective in fiscal 1997. In addition, Mr. Watson is entitled to
participate in the NGC Corporation Deferred Compensation Plan (the "Deferred
Compensation Plan"), the EEP and the Stock Option Plan. Mr. Watson also has
certain rights to participate (up to 10%) in investment opportunities of the
Company on such terms as Mr. Watson and the Company shall agree upon. If Mr.
Watson is terminated without cause prior to May 19, 1997, he is entitled to
receive 2.99 times the average of his annual base salary and ABIC Plan bonus
over the three calendar years preceding the calendar year in which he is
terminated.
Mr. Watson and the Company are currently negotiating a new five-year
employment agreement.
STEPHEN W. BERGSTROM EMPLOYMENT AGREEMENT. Clearinghouse entered into an
employment and non-competition agreement with Stephen W. Bergstrom, dated as
of May 19, 1992, pursuant to which Clearinghouse agreed to employ Mr.
Bergstrom as Executive Vice President of Clearinghouse. Mr. Bergstrom is
currently employed as Senior Vice President of the Company and President of
Clearinghouse. Mr. Bergstrom's employment agreement provides for (i) a five-
year primary term expiring on May 19, 1997 and (ii) a non-compete term of two
years beyond the termination of the agreement prohibiting him from engaging in
any business in competition with the Company. The agreement also places
certain restrictions upon Mr. Bergstrom's ability to communicate confidential
information concerning NGC to third parties.
Mr. Bergstrom's employment agreement entitles him to receive a base salary
of $248,620, subject to increase as determined by the Compensation Committee.
As of December 31, 1996, Mr. Bergstrom's annual base salary was $309,309. Mr.
Bergstrom is also entitled to certain guaranteed bonus amounts under the ABIC
Plan based on the operating profits of the Company. Upon termination of the
ABIC Plan in May 1997, Mr. Bergstrom's bonus amounts will be determined under
the Incentive Compensation Plan. In addition, Mr. Bergstrom is entitled to
participate in the Deferred Compensation Plan, the EEP and the Stock Option
Plan. If Mr. Bergstrom is terminated without cause prior to May 19, 1997, he
is entitled to receive 2.99 times the average of his annual base salary and
ABIC Plan bonus over the three calendar years preceding the calendar year in
which he is terminated.
Mr. Bergstrom and the Company are currently negotiating a new three-year
employment agreement.
STEPHEN A. FURBACHER EMPLOYMENT AGREEMENT. NGC entered into an employment
and non-competition agreement with Stephen A. Furbacher, dated as of April 2,
1996, but effective for all purposes as of May 22, 1996 (the date of signing
of the Combination Agreement and Plan of Merger relating to the Chevron
13
<PAGE>
Combination). Pursuant to his employment agreement, NGC agreed to employ Mr.
Furbacher as a Senior Vice President of NGC, and, upon consummation of the
Chevron Combination, as President of Warren Petroleum. Mr. Furbacher's
agreement provides for (i) a five year primary term expiring on May 22, 2001
and (ii) a non-compete term of two years beyond the termination of the
agreement prohibiting Mr. Furbacher from engaging in any business in
competition with NGC. The agreement also places certain restrictions upon Mr.
Furbacher's ability to communicate confidential information concerning NGC to
third parties.
Mr. Furbacher's employment agreement entitles him to receives a base salary
of $250,000, subject to increase as determined by the Compensation Committee.
Mr. Furbacher is also entitled to a certain guaranteed bonus of $100,000 per
annum during the five year primary term of his employment agreement.
Thereafter, there is no guaranteed bonus amount. In addition, Mr. Furbacher is
entitled to $1,500,000 as additional compensation in the form of equity or
cash during the term of the agreement reduced by any base salary or bonus
received in excess of the base salary and guaranteed bonus. Upon termination
of the ABIC Plan in May 1997, Mr. Furbacher's bonus amounts will be determined
under the Incentive Compensation Plan. Mr. Furbacher is also entitled to
participate in the Deferred Compensation Plan, the EEP and the Stock Option
Plan. If Mr. Furbacher is terminated without cause prior to May 22, 2001, he
is entitled to receive his base salary and guaranteed bonus for the remainder
of the primary term or two years from the date of termination, whichever is
shorter.
Mr. Furbacher's employment agreement also provides that NGC shall pay Mr.
Furbacher the difference between the purchase price of his Houston home and
the net proceeds to him from the sale of his Tulsa home, with the amount of
such payment not to exceed $50,000. In addition, NGC agreed to provide Mr.
Furbacher with a bridge loan of up to $100,000, to be repaid with interest
computed at 6% per annum on the earlier to occur of the sale of his Tulsa home
or March 31, 1997. See "--Indebtedness of Management."
THOMAS M. MATTHEWS EMPLOYMENT AGREEMENT. NGC entered into an employment and
non-competition agreement with Thomas M. Matthews, dated November 15, 1996,
but effective for all purposes as of December 1, 1996, pursuant to which NGC
agreed to employ Mr. Matthews as President of NGC Corporation. Mr. Matthews'
employment agreement provides for (i) a five-year primary term expiring on
December 1, 2001 and (ii) a non-compete term of two years beyond the
termination of the agreement prohibiting Mr. Matthews from engaging in any
business in competition with NGC. The agreement also places certain
restrictions upon Mr. Matthews' ability to communicate confidential
information concerning NGC to third parties.
Mr. Matthews' employment agreement entitles him to receive a base salary of
$600,000, subject to increase as determined by the Compensation Committee. Mr.
Matthews is also entitled to receive a guaranteed bonus of at least $300,000
per annum during the five year primary term of his employment agreement.
Beginning in 1997, Mr. Matthews' bonus amounts will be determined under the
Incentive Compensation Plan. In addition, Mr. Matthews is entitled to
participate in the Deferred Compensation Plan, the EEP and Stock Option Plan.
The Company also agreed to pay an additional $5,000 on Mr. Matthews' behalf to
provide him with additional life insurance and disability coverage in excess
of that provided under NGC's standard benefit plans. If Mr. Matthews is
terminated due to "constructive termination" (as defined in his employment
agreement) or for any other reason other than his voluntary resignation or
discharge for cause prior to December 1, 2001, (i) he is entitled to receive
his base salary and guaranteed bonus for the remainder of the primary term, or
two years from the date of termination, whichever is later, and (ii) any
employee stock options granted to him during the term of his employment
agreement shall become vested as of the date of such termination, but only up
to the percentage that would have been vested as of the end of the term of his
agreement.
Mr. Matthews' employment agreement also provides for an initial grant of
discounted stock options under the EEP with an immediate in-the-money value of
$1,000,000. Mr. Matthews received options to purchase 59,802 Common Stock with
an exercise price of $2.028 per share on December 1, 1996. See "--Stock Option
Grants." In addition, Mr. Matthews' employment agreement provides that he is
to receive market value stock option grants under the Stock Option Plan during
each year of his employment agreement with a projected value of $1,000,000
(assuming a 15% annual growth rate in the price of NGC's Common Stock).
14
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Compensation
decisions for executive officers of the Company in 1996 were made by the
Compensation Committee of NGC. The base compensation of each of Messrs.
Watson, Bergstrom, Furbacher and Matthews was established pursuant to the
terms of their respective employment agreements. See "--Employment
Agreements."
During 1996, the NGC Compensation Committee was comprised of Messrs.
Brandon, Callahan, Cottrell, Dienstbier, Lipton and Winters. Messrs. Brandon,
Callahan, Cottrell, Dienstbier, Lipton and Winters have never been officers or
employees of the Company. Mr. Lipton serves as President of NOVA, Mr. Brandon
serves as Executive Director of BG plc and Mr. Callahan serves as Senior Vice
President of Chevron Chemical Company. During his tenure on the Compensation
Committee, Mr. Cottrell served as Managing Director (Global Gas) of British
Gas plc. Affiliates of each of NOVA and BG plc, and Chevron, are the three
largest stockholders of NGC. NGC has engaged in various transactions with
NOVA, BG plc and Chevron and their respective affiliates as described below.
BUSINESS RELATIONSHIPS WITH NOVA; NOVA'S OTHER GAS SERVICE BUSINESSES.
Various business relationships between NOVA and NGC, together with NOVA's
operations as a major natural gas services company, may present conflicts of
interest as NOVA and NGC each pursue business opportunities.
JOINT VENTURE. In February 1994, Clearinghouse, through its wholly owned
subsidiary NGC Canada, Inc. ("NGC Canada"), and NOVA Gas International Ltd.
("NOVA Gas Ltd.") formed Novagas Clearinghouse Ltd. ("NCL") to market,
exchange, gather, process, purchase, sell, transport and store natural gas and
natural gas liquids ("NGLs") in Canada. NCL's gas sales currently exceed 3.5
billion cubic feet per day ("MMcfd").
NOVA Gas Ltd. owns an approximate 50.02% equity interest in NCL. NOVA Gas
Ltd. is a limited partner of NCL, directly owning a 49% limited partnership
interest, and also owns 51% of the voting stock of NCL's general partner,
Novagas Clearinghouse Ltd. (The "NCL general partner"), which owns a 2%
general partnership interest in NCL and is responsible for the management and
control of partnership interests in NCL. The Company and NOVA Gas Ltd. have
equal control over the management of the NCL general partner.
In June 1995, NCL acquired Pan-Alberta Gas Ltd. ("Pan-Alberta"), which, in
recent years, had been a significant supplier of natural gas to the Company.
The Company and Pan-Alberta have entered into an agreement pursuant to which
the Company markets certain volumes of gas sourced by Pan-Alberta into West
Coast markets. The Company shares in the proceeds of such sales above certain
benchmarks.
During 1995, a subsidiary of the Company entered into an agreement with NCL
pursuant to which the Company provides NCL and its affiliates natural gas
marketing and risk management services. The Company receives a fee per MMBtu
if certain benchmarks are met. The Company received no fees under this
agreement in 1996.
During the fiscal year ended December 31, 1996, neither the Company nor NOVA
Gas Ltd. invested additional funds in NCL. Although the Company and NOVA Gas
Ltd. have no legal commitments to provide future funding to NCL, NCL is
pursuing other investment opportunities, some of which may result in the
Company and NOVA Gas Ltd. making additional contributions. For the year ended
December 31, 1996, NCL generated net income (net to the Company's equity
interest) of approximately $3.6 million.
NCL has entered into service agreements with each of the Company, NOVA and
subsidiaries of NOVA under which each will provide administrative services to
NCL on an arm's-length fee or on a cost recovery basis. NCL sells
approximately 183,000 MMBtu of gas per day to the Company at market responsive
prices.
In October 1996, the Company and NOVA announced their intention to
restructure the companies' Canadian natural gas operations. Under the
agreement, NGC will assume full control of NCL's gas and gas liquids marketing
business. NGC and NOVA will pursue separate midstream asset businesses in
Canada, with
15
<PAGE>
NOVA assuming full ownership of NCL's existing gathering and processing
business. This restructuring may also result in amendments to or termination
of various agreements between NCL and the Company or NOVA, including their
respective affiliates. NOVA will also own 100 percent of Pan-Alberta, which is
currently a subsidiary of NCL. NGC will operate its Canadian operations under
the name of NGC Canada, Inc. The transaction is expected to close by April 30,
1997.
OTHER NOVA BUSINESSES. NOVA, through its subsidiaries, joint ventures and
other affiliates, is a major international gas services company that engages
in the transmission, gathering, processing, storage and marketing of natural
gas, together with related activities. NOVA's natural gas transportation
operations currently include its 13,500-mile Alberta pipeline system, which
collects and transports gas for use in Alberta and for delivery to connecting
pipeline systems for export to eastern Canada and the United States. In 1996,
this system transported 4.4 trillion cubic feet of natural gas. NOVA also owns
50% of the Foothills pipeline system which transports up to 2.6 billion cubic
feet per day of Western Canadian natural gas to major markets in the United
States. NOVA also produces and markets various petrochemicals in Canada and
the United States. NOVA purchases large amounts of petroleum products, natural
gas and NGLs as fuel or feedstock for its petrochemical operations. Further,
NOVA engages in NGL extraction, transportation, storage, marketing and related
activities.
These operations and NOVA's pursuit of additional gas services opportunities
overlap with the Company's operations and strategy. There are no contractual
limits on NOVA's ability to compete with the Company. Under the terms of the
NGC Stockholders Agreement, BG Holding, NOVA Gas and Chevron agreed that each
of them may have interests in other business ventures that are or may be
competitive with the activities of NGC and that, to the fullest extent
permitted by law, nothing in the NGC Stockholders Agreement will limit the
current or future business activities of the parties thereto or their
affiliates, whether or not such activities are competitive with those of NGC.
Accordingly, conflicts of interest may arise between NOVA and NGC as they each
pursue natural gas services business opportunities. These conflicts may be
resolved in favor of NOVA.
BUSINESS RELATIONSHIPS WITH BG PLC; CENTRICA PLC; OTHER BG PLC, CENTRICA PLC
GAS SERVICE BUSINESSES. On February 17, 1997, British Gas plc ("British Gas")
completed a restructuring with Centrica plc ("Centrica") being demerged from
British Gas, the latter being renamed BG plc ("BG"). BG is the parent
corporation of BG Holding, which is the record holder of NGC Common Stock.
Centrica owns British Gas's former interests in the Accord Energy Limited
joint venture with NGC. Various business relationships between BG, Centrica
and the Company, together with BG's and Centrica's operations as major natural
gas service companies, may present conflicts of interest as BG, Centrica and
NGC each separately pursues business opportunities.
Accord. Centrica owns 51% of Accord Energy Limited ("Accord") and the
Company owns 49%, although the Company has equal control over the management
of Accord. In the near term, Accord's primary focus is marketing gas in the
short-term market (less than three years) in the United Kingdom. Accord
currently purchases a portion of Centrica's exploration and production
division's equity crude oil. In the medium-to-longer term, Accord's business
plan calls for it to be a competitive multi-fuel entity, marketing and trading
energy products, including natural gas, liquefied natural gas, NGLs, crude
oil, fuel oil, electricity and liquefied petroleum gases, all supported
through utilizing financial instruments, to customers in the United Kingdom
and Europe.
Effective March 2, 1997, Centrica and the Company signed an agreement in
which they stated their intent to restructure Accord by converting certain
common stock interests in Accord to participating preferred stock interests.
After closing, which is expected to occur in the second quarter of 1997,
Centrica and the Company will own 75% and 25%, respectively, of the
participating preferred stock of Accord. The participating preferred stock
will have (a) the right to receive cumulative dividends on a priority to other
corporate distributions by Accord, and (b) limited voting rights. In addition,
Centrica will have the option to purchase the Company's participating
preferred stock at any time after July 1, 2000, and the Company will have the
right to acquire Centrica's participating preferred stock during the period
January 1, 2001 through March 1, 2001, at a formula based price as described
in the agreement. The restructuring is contingent upon certain U.K. regulatory
approval.
16
<PAGE>
Although the Company and Centrica have no legal commitments to provide
future funding to Accord, Accord is pursuing other investment opportunities
some of which may result in the Company and Centrica making additional
contributions. For the year ended December 31, 1996, Accord generated net
income (net to the Company's equity interest) of approximately $17.1 million.
Other BG, Centrica Businesses. BG through its subsidiaries and affiliates,
is a major international gas services company that engages in energy-related
activities, including the transmission, gathering, processing, storing and
marketing of natural gas and related activities. Centrica markets gas in the
United Kingdom. These operations and BG's and Centrica's pursuit of additional
opportunities overlap with the Company's operations and strategy. There are no
contractual limits on BG's or Centrica's ability to compete with the Company.
Under the terms of the NGC Stockholders Agreement, BG Holding, NOVA Gas and
Chevron agreed that each of them may have interests in other business ventures
that may be competitive with the activities of NGC and that, to the fullest
extent permitted by law, nothing in the NGC Stockholders Agreement shall limit
the current or future business activities of the parties thereto or their
affiliates, whether or not such activities are competitive with those of NGC.
Accordingly, conflicts of interest may arise between BG, Centrica and NGC as
they each pursue business opportunities. These conflicts may be resolved in
favor of BG or Centrica.
Business Relationships with Chevron; Chevron's Other Businesses. Various
business relationships between Chevron and NGC, together with Chevron's
operations as a major vertically integrated energy company, may present
conflicts of interest as Chevron and NGC each pursue business opportunities.
These conflicts may be resolved in favor of Chevron.
Ancillary Agreements and Strategic Alliances Contemplated by the
Combination. In connection with the Chevron Combination, NGC and Chevron, or
affiliates thereof, entered into certain supply, sales and service agreements
pursuant to which, among other things, NGC has the right to (i) purchase
and/or market substantially all natural gas and natural gas liquids produced
or controlled by Chevron in the United States (except Alaska) and to supply
natural gas and feedstock to Chevron refineries and Chevron Chemical plants in
the United States and (ii) participate in existing and future opportunities to
provide electricity to United States facilities of Chevron and Chevron
Chemical, as well as to purchase or market excess electricity generated by
such facilities. From September 1, 1996 through December 31, 1996, NGC
purchased $956.3 million of natural gas and natural gas liquids produced or
controlled by Chevron and sold $283.4 million of natural gas and natural gas
liquids to Chevron refineries and Chevron Chemical plants in the United
States.
In December 1996, NGC, through its wholly owned subsidiary Warren Petroleum
Company, Limited Partnership ("Warren"), entered into a partnership agreement
with Chevron and an affiliate of Chevron to own, operate and expand a gas
processing, fractionation and gas gathering system situated near Venice,
Louisiana. Warren owns a 37% partnership interest in such system.
Other Chevron Business. Chevron Corporation, the parent company of Chevron,
is a major vertically integrated oil and gas company and is the sixth largest
oil and gas company (by revenues) in the world. Chevron Corporation, through
its subsidiaries, affiliates and joint ventures, is involved in exploration
and production of oil and gas, gas gathering, gas and NGL transportation, and
storage, refining and distribution (wholesale and retail).
Accordingly, Chevron Corporation's present operation and its pursuit of
additional gas services opportunities overlap with NGC's operations and
strategy. There are no contractual limits on Chevron Corporation's ability to
compete with NGC. Under the terms of the NGC Stockholders Agreement, BG
Holding, NOVA Gas and Chevron agreed that each of them may have interests in
other business ventures that are or may be competitive with the activities of
NGC and that, to the fullest extent permitted by law, nothing in the NGC
Stockholders Agreement shall limit the current or future business activities
of the parties thereto or their affiliates, whether or not such activities are
competitive with those of NGC. Accordingly, conflicts of interest may arise
between Chevron Corporation and its affiliates and NGC as they each pursue
nature gas services business opportunities. These conflicts may be resolved in
favor of Chevron Corporation.
17
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
NGC's executive compensation program was designed to help NGC attract,
motivate and retain the executive resources that NGC needs in order to
maximize its return to stockholders. NGC attempts to provide its executives
with a total compensation package that at expected levels of performance is
competitive with those provided to executives who hold comparable positions or
have similar qualifications in other organizations of NGC's size. To meet this
overall objective, NGC's executive compensation program was structured and
implemented by the Compensation Committee to provide competitive compensation
opportunities and various incentive award payments based on company and
personal performance. The fundamental philosophy is to relate the amount of
compensation "at risk" for an executive directly to his or her contributions
to the Company's success in achieving superior performance objectives.
During 1996, NGC's executive compensation program consisted of three main
components: 1) base salary; 2) potential for an annual bonus based on overall
company performance as well as individual performance; and 3) the opportunity
to earn stock-based incentives which were intended to encourage the
achievement of superior results over time and to align executive officer and
shareholder interests. The second and third elements constitute the "at risk"
portion of the compensation program. Mr. Watson's employment agreement
contains a provision for incentive compensation payments through Mr. Watson's
participation in the Company's ABIC Plan. Such payments are based on the
Company's profitability. Accordingly, Mr. Watson's annual bonus opportunity is
"at risk."
Base Salary. The amount of each NGC executive officer's base salary was a
function of such executive officer's position and individual experience and
performance. Each executive officer's individual performance was measured
against expectations related to such executive officer's attainment of
predetermined goals. With respect to base salary, the Compensation Committee's
philosophy was to link merit increases to achievement of the Company's
business goals and to measure such merit increases against that of a broad
group of energy industry companies of similar size.
Each year, the Compensation Committee meets to review and discuss industry
survey data regarding general merit increases in order to determine base
salary increases for the Company's executive officers. In order to determine
merit increases in 1996, the Compensation Committee used national data for
executives and exempt personnel. For fiscal year 1996, the Compensation
Committee approved merit increases of 3% for executive officers, which
approximated the merit increases for the Company's compensation peer group as
reflected in the national data reviewed by the Compensation Committee. The
Compensation Committee also approved additional competitive adjustments to the
base salaries of certain executive officers based upon the national data
reviewed.
Bonus Payments. During 1996, the Company's mechanism for awarding annual
bonuses was the ABIC Plan, which provides for incentive payments to all
employees of the Company, the amounts of which are determined in the
discretion of the President of the Company, subject to the prior approval of
the NGC Compensation Committee. Under the ABIC Plan, incentive bonuses are
granted for each of the calendar years 1994 through 1996 and for the period
commencing on January 1, 1997 and ending on May 18, 1997. Each of such four
periods is an "Incentive Period." For each Incentive Period, the "Incentive
Pool" out of which payments are made is, in general, an amount equal to the
"Applicable Percentage" (which ranges from 10% to 15% as defined in the ABIC
Plan) of the Operating Profit (as defined in the ABIC Plan) for such Incentive
Period, subject to adjustment. The NGC Compensation Committee determines the
amount of the Incentive Pool relating to a particular Incentive Period. A
portion of the projected Incentive Pool for an Incentive Period may be
distributed during that Incentive Period under the terms of the plan. As soon
as administratively feasible after the amount of the Incentive Pool for an
Incentive Period has been finally determined, the Company distributes the
difference, if any, between such amount and the sum of the payments that have
already been made during, and with respect to, that Incentive Period. A
participant in the Deferred Compensation Plan may elect pursuant to such plan
to defer all or a portion of his allocation of his incentive payments made
under the ABIC Plan. In such case, any amount so deferred is held and paid in
accordance with the terms and provisions of the Deferred Compensation Plan.
The ABIC Plan will terminate after the Incentive Period ending on May 18,
1997. Beginning in 1997,
18
<PAGE>
incentive payments for all employees of NGC will be determined under the
Incentive Compensation Plan, which was adopted by the NGC Board of Directors
in November 1996.
Stock Option Grants. The Company has the EEP and the Stock Option Plan for
certain key employees, including executive officers. The purpose of these
plans is to assist in securing and retaining employees of ability by making it
possible to offer them an incentive, in the form of a proprietary interest in
the Company, to join or continue in the service of the Company and to increase
their efforts on the Company's behalf. Levels for stock option grants are
established based on an employee's position and performance. During 1996,
stock option grants were awarded to Messrs. Watson, Bergstrom, Randolph,
Furbacher and Matthews. See "Executive Compensation--Stock Option Grants."
Compensation of Chief Executive Officer; Employment Agreement. Mr. Watson
entered into an employment agreement with Clearinghouse in 1992, providing Mr.
Watson an initial annual base salary of $456,790, subject to increase. Under
the terms of his employment agreement, Mr. Watson's base salary is increased
at such times and in such amounts, if any, as may be determined by the
Compensation Committee. During 1996, Mr. Watson received a base salary
increase of 3%. As of December 31, 1996, Mr. Watson's base salary was
$618,618. See "--Employment Agreements."
In addition to his base salary, Mr. Watson's employment agreement also
provides for incentive compensation payments through Mr. Watson's
participation in the Company's ABIC Plan. Such payments are based on the
profitability of the Company. In December 1996, Mr. Watson received a bonus of
$6,927,000, which was determined in accordance with the terms of Mr. Watson's
employment agreement and the ABIC Plan. Of such amount, Mr. Watson elected to
receive $2,500,000 in cash and $4,427,000 in the form of 220,008 stock options
with an exercise price of $2.028 per share. The number of stock options
awarded to Mr. Watson in lieu of a portion of his December 1996 bonus award
was determined based on a fair market value of $22.15 per share, which was
equal to the average closing price of the Company's Common Stock for the month
of December 1996. In July 1996, all employees of NGC, including Mr. Watson,
received a bonus equal to 3% of their base salary. Mr. Watson's July 1996
bonus was $18,018. During 1996 Mr. Watson also received stock options grants
with respect to 236,740 shares of Common Stock in addition to the 220,008
stock options that Mr. Watson elected to receive in lieu of a portion of his
December bonus. See "Executive Compensation--Summary Compensation Table" and
"--Stock Option Grants."
Compliance With Internal Revenue Code Section 162(m). Section 162(m) of the
Internal Revenue Code, enacted in 1993, generally disallows a tax deduction to
public companies for certain compensation over $1 million paid to the
Company's Chief Executive Officer and four other most highly compensated
executive officers, as reported in this Proxy Statement. The Company is
studying the deduction cap (including the applicability of certain transition
rules to the EEP, Stock Option Plan and other compensatory arrangements) and
intends to take the necessary steps to effectively deal with this cap. During
1996, Mr. Watson received compensation in excess of $1 million. Mr. Watson's
compensation for 1996, however, is not subject to Section 162(m) as his
compensation for 1996 was determined in accordance with the terms of his
employment agreement, which was negotiated in 1992. The rules and regulations
implementing Section 162(m) provide that compensation payments made pursuant
to arrangements entered into prior to the enactment of Section 162(m) are not
subject to the $1 million limitation.
19
<PAGE>
All amounts paid or accrued during fiscal year 1996 under the above-
described plans and programs are included in the preceding tables. No member
of the NGC Compensation Committee was an officer or employee of NGC or any of
its subsidiaries during 1996.
COMPENSATION, CORPORATE GOVERNANCE
AND HUMAN RESOURCES COMMITTEE
Daniel L. Dienstbier, Chairman
Stephen J. Brandon
Darald W. Callahan
Jeffrey M. Lipton
J. Otis Winters
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The performance graph shown on the following page was prepared by Standard &
Poors Compustat, a Division of McGraw-Hill, Inc., using data from the Standard
& Poor's Compustat Database for use in this Proxy Statement./(2)/ As required
by applicable rules of the SEC, the graph was prepared based upon the
following assumptions:
1. $100 was invested in Common Stock, the S&P 500 and the Peer Group (as
defined below) on November 10, 1993.
2. The returns of each component company in the Peer Group are weighted
based on the market capitalization of such company at the beginning of the
measurement period.
3. Dividends are reinvested on the ex-dividend dates.
The companies that comprise the Company's Peer Group are as follows: Aquila
Gas Pipeline Corporation, Delhi Gas Pipeline (USX-Delhi Group), Tejas Gas
Corporation, Western Gas Resources Inc. and KN Energy Inc.
- --------
/(2)/ The Company was formed through a strategic business combination (the
"Trident Combination"), consummated on March 14, 1995, between
Clearinghouse and Trident NGL Holding, Inc. ("Trident"), under which
Trident was renamed NGC Corporation. The Performance Graph reflects
Trident's stockholder return performance for the period commencing
November 10, 1993, the date of Trident's initial public offering and sale
of common stock, and ending March 14, 1995, the closing date of the
Trident Combination, and the Company's stockholder return performance for
the period commencing March 14, 1995 through December 31, 1996.
20
<PAGE>
PERFORMANCE GRAPH
[GRAPH APPEARS HERE]
PREPARED BY STANDARD & POOR'S COMPUSTAT--CUSTOM BUSINESS UNIT--2/20/96
<TABLE>
<CAPTION>
Indexed Returns Years Ending
Base Period -----------------------------------
Company/Index 11/10/93 12/31/93 12/31/94 12/31/95 12/31/96
------------- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NGC Corp. 100 90.38 81.18 68.98 181.28
S&P 500 Index 100 101.26 102.60 141.15 173.56
Peer Group 100 94.80 72.73 86.26 114.70
</TABLE>
The closing price of the Company's Common Stock on December 31, 1996 was
$23.25 per share as reported on the New York Stock Exchange Composite Tape.
21
<PAGE>
PROPOSAL 2--RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Arthur Andersen LLP as
independent auditors of the Company for the fiscal year ending December 31,
1997, and recommends ratification by the stockholders of such appointment.
Such ratification requires the affirmative vote of a majority of the shares of
Common Stock present or represented by proxy and entitled to vote at the
Annual Meeting. Under Delaware law, an abstention would have the same legal
effect as a vote against this proposal, but a broker non-vote would not be
counted for purposes of determining whether a majority has been achieved. The
persons named in the accompanying proxy intend to vote for ratification of
such appointment unless instructed otherwise on the proxy.
In the event the appointment is not ratified, the Board of Directors will
consider the appointment of other independent auditors. The Board of Directors
may terminate the appointment of Arthur Andersen LLP as the Company's
independent auditors without the approval of the stockholders of the Company
whenever the Board of Directors deems such termination necessary or
appropriate. A representative of Arthur Andersen LLP is expected to attend the
Annual Meeting and will have the opportunity to make a statement, if such
representative desires to do so, and will be available to respond to
appropriate questions.
The Board of Directors recommends that stockholders vote "FOR" ratification
of the appointment of Arthur Andersen LLP as independent auditors.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal for inclusion in the proxy
material and for presentation at the Company's 1998 Annual Meeting of
Stockholders must forward such proposal to the Secretary of the Company at the
address indicated on the first page of this Proxy Statement, so that the
Secretary receives it no later than December 1, 1997.
RECENT DEVELOPMENTS
On February 18, 1997, the Company announced that it had entered into (i) an
Agreement and Plan of Merger with Destec Energy, Inc., an independent power
producer ("Destec"), and The Dow Chemical Company, which owns 80% of the
outstanding common stock of Destec, and (ii) an Asset Purchase Agreement with
The AES Corporation ("AES") concerning a transaction pursuant to which NGC
will simultaneously acquire Destec for a cash purchase price of $21.65 per
share of Destec common stock, or an aggregate $1.27 billion, and sell Destec's
international facilities and operations to AES for $407 million, inclusive of
cash and monetizable assets. The transaction is expected to close by the end
of the second quarter of 1997. Upon consummation of the transaction, Destec
will operate as a wholly-owned subsidiary of the Company.
22
<PAGE>
OTHER MATTERS
The Board of Directors does not know of any other matters that are to be
presented for action at the Annual Meeting. However, if any other matters
properly come before the Annual Meeting or any adjournment(s) or
postponement(s) thereof, it is intended that the enclosed proxy will be voted
in accordance with the judgment of the persons named in the proxy.
By Order of the Board of Directors,
/s/ KENNETH E. RANDOLPH
Kenneth E. Randolph
Secretary
March 31, 1997
23
<PAGE>
PROXY NGC CORPORATION PROXY
1000 LOUISIANA, SUITE 5800
HOUSTON, TX 77002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF NGC CORPORATION
The undersigned hereby appoints C.L. Watson, Thomas M. Matthews and Kenneth
E. Randolph, and each of them, as proxies, each with the power to appoint his
substitute, and hereby authorizes each of them, to represent and to vote, as
designated on the reverse side, all the shares of Common Stock of NGC Corpora-
tion held of record by the undersigned on March 21, 1997 at the Annual Meeting
of Stockholders to be held at the Company's Headquarters, The First Interstate
Bank Building, 1000 Louisiana, 71st Floor, Houston, Texas, 77002 at 9:00 A.M.
on Wednesday May 14, 1997, or any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" PROPOSALS 1 AND 2. THE INDIVIDUALS NAMED ABOVE ARE AUTHORIZED TO
VOTE IN THEIR DISCRETION ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE
MEETING.
(CONTINUED ON REVERSE SIDE)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
* FOLD AND DETACH HERE *
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE PLEASE MARK
FOR PROPOSALS 1 AND 2. YOUR VOTES /X/
AS INDICATED IN
THIS EXAMPLE
WITHHELD
FOR FOR ALL
Item 1-ELECTION OF DIRECTORS / / / / Item 3-IN THEIR DISCRETION, THE PROXIES FOR ABSTAIN ABSTAIN
ARE AUTHORIZED TO VOTE UPON SUCH OTHER / / / / / /
C.L. Watson, Thomas M. Matthews, BUSINESS AS MAY PROPERLY COME BEFORE THE
Stephen J. Brandon, David R. Varney, MEETING OR ANY ADJOURNMENT THEREOF.
P. Nicholas Woollacatt,
C. Kent Jespersen, Jeffery M. Lipton,
Albert Terence Poole,
Darald W. Callahan, Donald L. Paul,
Peter J. Robertson,
Daniel L. Dienstbier, J. Otis Winters. Check if you plan to attend / /
the Annual Meeting
(INSTRUCTION: TO WITHHOLD AUTHORITY TO
VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE
LIST ABOVE.)
Item 2-PROPOSAL TO RATIFY THE APPOINTMENT FOR ABSTAIN ABSTAIN
OF ARTHUR ANDERSEN LLP AS INDEPENDENT / / / / / /
AUDITORS FOR THE COMPANY FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1997.
_________________ Please sign exactly as name appears hereon.
| When shares are held by joint tenants, both should sign.
| When signing as attorney, trustee or guardian, please give
| full title as such. If a corporation, please sign full
corporate name by president or other authorized officer.
If a partnership, please sign in partnership name by
authorized person.
Signature(s) _______________________________________________________________________________ Date _______________________
</TABLE>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
* FOLD AND DETACH HERE *
