<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
EEX Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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:
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Notes:
<PAGE>
EEX CORPORATION
2500 CITYWEST BLVD.
HOUSTON, TEXAS 77042
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of the Shareholders of EEX Corporation (the "Company")
will be held at the Company's executive offices at 2500 CityWest Blvd.,
Houston, Texas, on Tuesday, May 12, 1998, at 10:00 a.m., for the following
purposes:
1. To elect five directors for terms expiring at the Annual Meetings held
in 1999 (one director), 2000 (two directors), and 2001 (two directors);
2. To approve the Board of Directors' appointment of Ernst & Young LLP as
independent auditors of the Company; and
3. To consider and act upon such other business as may be properly
presented to the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business March 13, 1998, as
the record date for the determination of the shareholders entitled to notice
of and to vote at the meeting or any adjournment thereof. Only shareholders of
record at the close of business on the record date are entitled to notice of
and to vote at such meeting. A list of such shareholders will be available at
the time and place of the meeting and during the ten days prior to the meeting
at the office of the Corporate Secretary of the Company at the address above.
Shareholders are cordially invited to attend the Annual Meeting. REGARDLESS
OF WHETHER YOU EXPECT TO ATTEND THE MEETING IN PERSON, WE URGE YOU TO READ THE
ATTACHED PROXY STATEMENT AND SIGN, DATE AND MAIL THE ACCOMPANYING PROXY CARD
IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. It is important that your shares are
represented at the meeting, and your promptness will assist us in making
necessary preparations for the meeting. If you receive more than one proxy
card because your shares are registered in different names or addresses, each
card should be completed and returned to assure that all your shares are
voted.
A form of Proxy, a Proxy Statement, and the Company's 1997 Annual Report to
Shareholders accompany this Notice of Annual Meeting.
By Order of the Board of Directors,
Janice K. Hartrick
Senior Vice President, General Counsel
and Corporate Secretary
Houston, Texas
March 31, 1998
<PAGE>
EEX CORPORATION
2500 CITYWEST BLVD.
HOUSTON, TEXAS 77042
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 1998
This Proxy Statement is being mailed on or about March 31, 1998, to
shareholders of EEX Corporation (the "Company") in connection with the
solicitation of proxies on behalf of the Board of Directors of the Company for
use at the Annual Meeting of Shareholders to be held on May 12, 1998, at 10:00
a.m., at the Company's offices at 2500 CityWest Blvd., Houston, Texas.
The purpose of the Annual Meeting is to consider and vote upon (i) the
election of five directors to serve for staggered terms expiring at the Annual
Meetings held in 1999 (one director), 2000 (two directors), and 2001 (two
directors), (ii) the approval of the appointment of Ernst & Young LLP as
independent auditors of the Company, and (iii) such other matters as may be
properly presented to the meeting or any adjournment thereof.
The enclosed proxy may be revoked at any time before it is exercised by
filing with the Corporate Secretary an instrument revoking it, by submitting a
subsequently dated proxy, or by appearing at the annual meeting and voting in
person. Unless revoked, a properly signed and dated proxy that is returned
will be voted in accordance with the directions thereon. If no instructions
are specified, the shares will be voted for the election of the nominees for
director and for the approval of the appointment of Ernst & Young LLP as
independent auditors. If other matters are properly presented before the
Annual meeting, the persons voting the proxies will vote them in accordance
with their best judgment.
Holders of record of the Company's common stock (the "Common Stock") at the
close of business on the record date, March 13, 1998, are entitled to vote at
the meeting. On March 13, 1998, the Company had outstanding 127,067,427 shares
of Common Stock. Each share of Common Stock is entitled to one vote at the
Annual Meeting.
The holders of a majority of the shares issued and outstanding and who are
entitled to vote, present in person or represented by proxy, will constitute a
quorum for the transaction of business at the Annual Meeting. A plurality of
the votes cast at this meeting is required for the election of directors and
the approval of the appointment of the independent auditors. The inspectors of
election appointed by the Company to tabulate the votes will treat shares
represented by proxies that reflect abstentions as shares that are present and
entitled to vote for purposes of determining the presence of a quorum but not
for the purposes of determining the outcome of any matter submitted to the
1
<PAGE>
shareholders for a vote. The inspectors of election will treat broker non-
votes on any matter as to which the broker has indicated on the proxy that it
does not have discretionary authority to vote as shares not entitled to vote
with respect to that matter; however, such shares will be considered present
and entitled to vote for quorum purposes so long as they are entitled to vote
on other matters.
INFORMATION ABOUT RECENT CHANGES IN THE COMPANY
On August 5, 1997, the Company merged with Enserch Exploration, Inc., a
Texas Corporation ("Old EEI"), and was the surviving company (the "Merger").
Old EEI was a public company prior to the Merger. ENSERCH Corporation
("ENSERCH") owned approximately 83% of Old EEI, with the remainder owned by
the public. In the Merger, the directors and officers of Old EEI became
directors and officers of the Company, and the Company changed its name to
Enserch Exploration, Inc. ("EEI"). Immediately following the Merger, ENSERCH
distributed to its shareholders all of its Common Stock in the Company. On
December 19, 1997, the Company changed its name to "EEX Corporation".
Information presented in this Proxy Statement reflects the activities of Old
EEI prior to the Merger and the Company after the Merger as a continuing
business, unless otherwise noted.
Enclosed with this Proxy Statement is a copy of the Company's 1997 Annual
Report to Shareholders which is not to be regarded as proxy soliciting
material or as a communication by means of which solicitation is made.
2
<PAGE>
ELECTION OF DIRECTORS
INFORMATION REGARDING NOMINEES
Five directors are to be elected at the Annual Meeting. The Company's
Bylaws, as amended by the Board of Directors on February 24, 1998, provide for
a classified Board in which the directors are divided into three classes. Such
classified Board will become effective immediately after the Annual Meeting
and thereafter, as follows: Class I directors will hold office initially for a
term expiring at the 1999 Annual Meeting; Class II directors will hold office
initially for a term expiring at the 2000 Annual Meeting; and, Class III
directors will hold office for a term expiring at the 2001 Annual Meeting. At
each Annual Meeting following the initial classification, the successors to
the class of directors whose terms expire at that meeting will be elected for
a term of office to expire at the third succeeding Annual Meeting after their
election, and until their successors have been duly elected and qualified. The
initial classification of the directors who have been nominated by the Board
of Directors upon recommendation of the Nominating and Governance Committee is
indicated below.
<TABLE>
<CAPTION>
CLASS I CLASS II CLASS III
(TERM EXPIRING (TERM EXPIRING IN (TERM EXPIRING IN
1999) 2000) 2001)
-------------- ---------------------- -----------------
<S> <C> <C>
Frederick S. Addy B. A. Bridgewater, Jr. Thomas M Hamilton
Michael P. Mallardi F. M. Lowther
</TABLE>
Certain information with respect to the nominees for election as directors is
set forth below:
THOMAS M HAMILTON
Mr. Hamilton, age 54, became a director and was elected Chairman, President
and Chief Executive Officer of the Company in January 1997. Previously Mr.
Hamilton served Pennzoil Company for five years where he was Executive Vice
President, and President of Pennzoil Exploration & Production Company, an
international oil and gas exploration and production company with interests in
refining, marketing and franchising.
FREDERICK S. ADDY
Mr. Addy, age 66, retired as Executive Vice President, Chief Financial
Officer, and Director of Amoco Corporation, an international integrated oil
and gas company, in 1994. Mr. Addy has been a Director of the Company since
January 1995. He also served the Company as interim Chairman and Chief
Executive Officer from September 1996 to January 1997 and as President from
October 1996 to January 1997. He is a Director of Baker, Fentress & Company
and The J. P. Morgan Funds.
3
<PAGE>
B. A. BRIDGEWATER, JR.
Mr. Bridgewater, age 64, is Chairman, President and Chief Executive Officer,
and Director of Brown Group, Inc., a wholesaler and retailer of footwear. He
has served in this position for the past five years. Mr. Bridgewater has been
a Director of the Company since January 1995. He is also a Director of
NationsBank Corporation and FMC Corporation.
MICHAEL P. MALLARDI
Mr. Mallardi, age 64, retired in 1996 as the Senior Vice President of
Capital Cities/ABC, Inc., and President of Capital Cities/ABC Broadcast Group,
a part of the Walt Disney Company. Mr. Mallardi has been a Director of the
Company since October 1996. He is also the trustee of a number of mutual funds
operated by J.P. Morgan and Chairman of the Tri-State Health System, Inc. Area
Board of the Franciscan Health System.
FREDERICK M. LOWTHER
Mr. Lowther, age 54, has been a partner in the law firm of Dickstein,
Shapiro, Morin & Oshinsky, LLP, Washington, D.C. since 1973. He has been a
member of such firm's Executive Committee and chairman of its Compensation
Committee since 1989. He has been a Director of the Company since August 1997.
He is also a Director of Yankee Energy System, Inc. and Poseidon Resources
Corporation, and is a member of the Advisory Board of Shell Technology
Ventures, Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION OF THE NOMINEES TO
THE BOARD OF DIRECTORS.
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<S> <C> <C>
T. M Hamilton.................. 54 Chairman, President and Chief Executive
Officer
D. R. Henderson................ 46 Executive Vice President and Chief Operating
Officer
R. S. Langdon.................. 47 Executive Vice President, Finance and
Administration, and Chief Financial Officer
J. K. Hartrick................. 45 Senior Vice President, General Counsel and
Corporate Secretary
</TABLE>
Mr. Hamilton was elected Chairman, President, and Chief Executive Officer in
January 1997. Previously, Mr. Hamilton served Pennzoil Company for five years
where he was Executive Vice President and President of Pennzoil Exploration &
Production Company.
Mr. Henderson was elected Executive Vice President and Chief Operating
Officer in March 1997. He was Executive Vice President, Worldwide Exploration,
of the Company from January 1997
4
<PAGE>
to March 1997. Previously he held the position of Senior Vice President of
Worldwide Exploration at Pennzoil Exploration & Production Company. Previously
he held various positions with Pennzoil Company and its subsidiaries,
including Senior Vice President--Exploration, Senior Vice President--
International, and Senior Vice President--Worldwide Exploration.
Mr. Langdon was elected Executive Vice President, Finance and Administration
and Chief Financial Officer in March 1997. Previously, he was an oil and gas
consultant from August 1996 to March 1997. Prior to that, he held various
positions with the Pennzoil Companies since 1991, including: Executive Vice
President--International Marketing--Pennzoil Products Company, from June 1996
to August 1996; Senior Vice President--Business Development & Shared
Services--Pennzoil Company from January 1996 to June 1996; and Senior Vice
President--Commercial & Control--Pennzoil Exploration & Production Company
from December 1991 to December 1995.
Ms. Hartrick was elected Senior Vice President, General Counsel and
Corporate Secretary in October 1997. Before joining EEX, she held various
positions with Seagull Energy Corporation for more than ten years, including
the office of Chief Counsel, Vice President--Environmental Affairs for more
than five years.
All officers of the Company are elected annually by the Board of Directors.
Officers may be removed by the Board of Directors whenever, in its judgement,
the best interest of the Company will be served thereby.
5
<PAGE>
Stock Ownership of Management and Certain Beneficial Owners of the Company
The following table sets forth certain information concerning the beneficial
ownership of the Company's Common Stock as of March 13, 1998, by (i) each
person who is known by the Company to own beneficially more than five percent
of the Company's Common Stock, (ii) each nominee for director, (iii) each
officer identified under "Executive Compensation" and (iv) all directors and
executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF PHANTOM
SHARES PERCENT STOCK
BENEFICIALLY OF UNITS
OWNED(1) CLASS OWNED(2)
------------ ------- ---------
<S> <C> <C> <C>
Wellington Management Company, LLP............. 9,160,297(3) 7.7 --
T. M Hamilton.................................. 140,975 * --
F. S. Addy..................................... 17,895 * 4,157
B. A. Bridgewater, Jr.......................... 16,000 * 4,157
F. M. Lowther.................................. 2,000 * 2,623
M. P. Mallardi................................. 10,000 * 4,157
D. R. Henderson................................ 85,589 * --
R. L. Langdon.................................. 25,000 * --
B. K. Irani.................................... 1,057 * --
M. A. McAdams.................................. 47,215(4) * --
All Directors and Executive Officers as a Group
(10 persons).................................. 370,742(4) * 15,094
</TABLE>
- ---------
* Less than 1%
(1) The number of shares owned includes shares held in the Company's Employee
Stock Purchase and Savings Plan and restricted shares awarded under the
Revised and Amended 1996 Stock Incentive Plan ("1996 Plan"), where
applicable.
(2) Phantom Stock Units are awarded under the Company's Phantom Stock Plan to
non-employee Directors. The Plan is described in "Compensation of
Directors".
(3) Based on information set forth in a Schedule 13G, dated January 13, 1998,
these shares were reported, as of December 31, 1998, by Wellington
Management Company, LLP, 75 State Street, Boston, MA 02109 as being owned
primarily by The Vanguard/Windsor Funds, Inc. of the Vanguard Group of
Investment Companies for whom Wellington Management serves as investment
adviser. Wellington Management reported beneficial ownership of 883,500
with shared voting power and 9,160,297 with shared dispositive power. The
shares beneficially owned by the Vanguard/Windsor Funds, Inc. include
8,176,797 shares with sole voting power and shared dispositive power.
(4) Includes shares of Common Stock of the Company subject to stock options
exercisable within 60 days after March 13, 1998, of the held by M.A.
McAdams for 40,000 shares; and all directors and executive officers as a
group for 40,000 shares.
6
<PAGE>
BOARD COMMITTEES
The standing committees of the Board of Directors are the Audit Committee,
the Compensation Committee and the Governance and Nominating Committee.
The Audit Committee meets periodically with the independent and internal
auditors; reviews annual financial statements and the independent auditors'
work and report thereon; reviews the independent auditors' report on internal
controls and related matters; selects and recommends to the Board of Directors
the appointment of the independent auditors; reviews the letter of engagement
and statement of fees which pertain to the scope of the annual audit and
certain special audit and non-audit work which may be required or suggested by
the independent auditors; receives and reviews information pertaining to
internal audits; directs and supervises special investigations; and performs
any other functions deemed appropriate by the Board of Directors. Members of
the Audit Committee are Messrs. Addy (Chairman), Bridgewater, Lowther and
Mallardi. The Audit Committee met five times during 1997.
The Compensation Committee establishes, approves, or recommends, to the
Board of Directors, in those instances where its approval is required, the
annual performance goals for and the compensation and major items related to
the compensation of the Chief Executive Officer, officers and other key
employees. The Committee also ensures that the Company implements plans for
Chief Executive Officer succession and executive succession and administers
the Company's 1996 Plan. Members of the Compensation Committee are Messrs.
Mallardi (Chairman), Addy, Lowther and Bridgewater. The Compensation Committee
met three times in 1997.
The Governance and Nominating Committee of the Board of Directors considers
and makes recommendations to the Board concerning the appropriate size and
needs of the Board, including the annual nomination of directors and names of
candidates to fill vacant Board positions. The Committee reviews and makes
recommendations concerning other policies related to the Board and directors,
including compensation, committee composition, structure and size, and
retirement and resignation policies. The Committee is responsible for the
periodic review of the Company's Corporate Governance Principles and other
corporate governance issues and trends. Members of the Governance and
Nominating Committee are Messrs. Bridgewater (Chairman), Addy, Lowther and
Mallardi. The Governance and Nominating Committee met three times in 1997. The
Governance and Nominating Committee will consider nominations made by
shareholders. Such nominations should be directed to the Corporate Secretary.
During 1997, the Board of Directors met twelve times. No director attended
fewer than 75 percent of the aggregate of the total number of Board meetings
and the meetings of a committee on which he served.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides information as to annual, long-term
compensation and other compensation paid by the Company and its subsidiaries
for services rendered during the periods shown for each individual serving as
the chief executive officer, each of the other most highly compensated
executive officers in 1997 who were serving at the end of the year whose
salary and bonus exceeded $100,000 and one additional person who was an
executive officer during, but not at the end of, 1997 (the "named executive
officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION(1)
----------------------------------------------
ANNUAL COMPENSATION(1) AWARDS PAYOUTS
------------------------------- --------------------- ------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LONG-TERM ALL OTHER
NAME AND PRINCIPAL COMPEN- AWARDS OPTIONS/ INCENTIVE COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) SATION ($) ($)(2) SARS (#) PAYOUTS ($) ($)(3)
------------------ ---- ---------- --------- ---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
T. M Hamilton........... 1997 484,848 300,000 -- (4) 1,000,000 -- 901
Chairman, President and 1996 -- -- -- -- -- -- --
Chief Executive Officer 1995 -- -- -- -- -- -- --
D. R. Henderson......... 1997 242,424 150,000 -- (4) 440,000 -- 2,000
Executive Vice 1996 -- -- -- -- -- -- --
President 1995 -- -- -- -- -- -- --
and Chief Operating
Officer
R. S. Langdon........... 1997 188,461(5) 150,000 -- (4) 400,000 -- --
Executive Vice 1996 -- -- -- -- -- -- --
President 1995 -- -- -- -- -- -- --
Finance and
Administration and
Chief
Financial Officer
B. K. Irani(6).......... 1997 178,750 -- -- (4) 100,000 -- 1,571,394
Executive Vice 1996 210,000 100,000 -- -- 105,000 -- 4,950
President 1995 191,042 81,755 -- -- 10,000 -- 3,125
Chief Technology
Officer
M. A. McAdams(6)........ 1997 129,015 -- -- (4) 21,000 -- 562,381
Senior Vice President 1996 211,042 60,000 -- -- 70,000 -- 3,110
Human Resources and 1995 113,750 57,642 -- -- -- -- 1,125
Administration
F. S. Addy (7).......... 1997 -- -- 58,375 932 2,065 -- --
Chairman and President, 1996 -- -- 25,275 92,500 2,092 -- --
Chief Executive Officer 1995 -- -- -- -- -- -- --
</TABLE>
- --------
(1) The information presented for 1995 and 1996 reflects compensation paid by
Old EEI. Information presented for 1997 reflects compensation paid by Old
EEI through August 5, 1997 and by the Company from August 6, 1997 to
December 31, 1997.
(2) As of December 31, 1997, Mr. Addy held 10,932 shares of restricted stock,
having an aggregate value on that date of $99,071, which were issued
pursuant to an agreement relating to his service as interim Chairman and
President, Chief Executive Officer of old EEI. At December 31, 1997, the
number and value of the aggregate restricted stock holdings under the 1996
Plan for named executives with performance based stock were as follows: T.
M Hamilton 100,000 shares, $906,250; D. R. Henderson 85,000 shares,
$770,312; and R. S. Langdon 25,000 shares, $226,562. Dividends are payable
on restricted shares at the same rate as would be paid to all
shareholders.
8
<PAGE>
(3) Includes matching contributions to the Company's Employee Stock Purchase
and Savings Plan as follows: T. M Hamilton $901; D. R. Henderson $2,000;
R. S. Langdon $0; B. K. Irani $1,000; and M. A. McAdams $2,210. Also
includes amounts paid at severance of employment: to Mr. Irani under Bonus
Employment Agreement ($210,000) and Change in Control Agreement
($1,360,394, including $113,359 for the value of certain unexercised stock
options); and to Mr. McAdams under Change in Control Agreement ($560,171).
(4) Performance-based restricted stock awards to named executive officers
under the 1996 Plan are subject to performance based criteria.
Performance-based restricted stock awards in 1997 to the named executive
officers are reported under the "Long-Term Incentive Plan Awards" table,
and reference is made to such table for information on the number of
restricted shares awarded in 1996.
(5) Excludes $103,219 paid as fees and expenses in 1997 for consulting
services to the Company which were rendered prior to Mr. Langdon's
employment by the Company.
(6) Messrs. Irani and McAdams resigned on September 30, 1997 and December 31,
1997, respectively.
(7) Compensation in 1997 includes 932 shares issued under an agreement for his
services as interim Chairman and President and $58,375 in directors' fees
and 2,065 phantom stock units awarded under the Phantom Stock Plan for
Non-employee Directors, for services rendered by Mr. Addy as a Director
subsequent to his resignation as the interim Chairman and Chief Executive
Officer on January 13, 1997.
OPTION GRANTS TABLE
The table below shows, for each of the named executive officers, certain
information with respect to options granted in 1997 under the 1996 plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF TOTAL
SECURITIES OPTIONS/SAR'S EXERCISE GRANT
UNDERLYING GRANTED TO PRICE PER DATE
OPTIONS/SAR'S EMPLOYEES IN SHARE EXPIRATION PRESENT
NAME GRANTED (#) FISCAL YEAR ($/SH)(1) DATE VALUE(2)
---- ------------- ------------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
T. M Hamilton...... 1,000,000(3) 27.8% $11.875 01/13/07 4,500,000
D. R. Henderson.... 350,000(3) 9.7% 11.875 01/13/07 1,575,000
40,000(3) 1.1% 9.00 03/31/07 138,400
50,000(4) 1.4% 9.00 12/09/07 241,500
R. S. Langdon...... 350,000(3) 9.7% 9.00 03/31/07 1,211,000
50,000(4) 1.4% 9.00 12/09/07 241,500
B. K. Irani........ 100,000(5) 2.8% 9.875 02/11/07 420,000
M. A. McAdams...... 21,000(6) 0.6% 9.875 02/11/07 88,200
F. S. Addy......... 2,092(7) -- -- -- --
</TABLE>
- ---------
(1) Fair market value on the date of grant.
(2) Represents the hypothetical present value of the option determined by
using the Black-Scholes Option Valuation Method based upon the terms of
the option grant and the Company's stock prices as of the date of the
grant. The actual value, if any, an executive may realize will depend on
the excess of the stock price on the date the option is exercised, and
there is no assurance that the value ultimately realized will be at or
near the value estimated by the Black-Scholes
9
<PAGE>
Option Valuation Method. The assumptions used to arrive at the values shown
are as follows: Risk Free Interest Rate of 6.31% (1/13/97 awards); 6.15%
(2/11/97 awards); 6.70% (3/31/97 awards); and 5.88% (12/9/97 awards), based
on the ten-year Treasury strip rate on the date of the grant, Stock Price
Volatility of 37% based on the historical return volatility using weekly
stock prices over the prior three years, no dividend yield.
(3) Options are exercisable three years after date of grant.
(4) Options are exercisable seven years after date of grant, provided that
vesting of 25% of options will accelerate each year the Company's total
shareholder return places in the top 25% of a peer group.
(5) Following severance, these options expired on December 30, 1997.
(6) Following severance, these options will expire on March 31, 1998.
(7) Reflects Phantom Stock Units granted under the Phantom Stock Plan for non-
employee Directors. For a discussion of the Phantom Stock Plan, see
"Compensation of Directors".
AGGREGATED OPTION EXERCISE TABLE
The table below shows, for each of the named executive officers, the
information specified with respect to exercised, exercisable and unexercisable
options under all existing stock option plans.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT IN-THE-MONEY OPTIONS AT
ON VALUE DECEMBER 31, 1997 (#) DECEMBER 31, 1997 ($)
EXERCISE REALIZED ------------------------- -------------------------
(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
T. M Hamilton........... -- -- -- 1,000,000 -- --
D. R. Henderson......... -- -- -- 440,000 -- 5,625
R. S. Langdon........... -- -- -- 400,000 -- 25,000
B. K. Irani(1).......... -- -- -- -- -- --
M. A. McAdams........... -- -- 26,250 -- -- --
F. S. Addy.............. -- -- -- -- -- --
</TABLE>
- --------
(1) Mr. Irani exercised options to acquire ENSERCH Corporation common stock
and realized a value of $117,325.
10
<PAGE>
LONG-TERM INCENTIVE PLAN ("LTIP") AWARDS TABLE
The table below shows for each of the named executive officers, certain
information with respect to awards of performance-based restricted stock made
pursuant to the 1996 Plan.
LONG-TERM INCENTIVE PLANS--AWARD IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE
PERIOD PAYOUTS UNDER
NUMBER UNTIL NON-STOCK PRICE
OF MATURATION BASED PLANS
NAME SHARES OR PAYOUT TARGET (#)
---- ------- ----------- ----------------
<S> <C> <C> <C>
T. M Hamilton............................. 100,000 3 Years(1) 100,000(2)
D. R. Henderson........................... 25,000 3 Years(1) 25,000(2)
25,000 3 Years(1) 25,000(2)
50,000 3 Years(1) 50,000(2)
R. S. Langdon............................. 25,000 3 Years(1) 25,000(2)
B. K. Irani............................... 12,500 (3) --
M. A. McAdams............................. 5,000 (3) --
F. S. Addy................................ -- -- --
</TABLE>
- ---------
(1) Performance-based restricted shares have been awarded and will be earned
after a Performance Term of three fiscal years ended December 31, 1999.
Performance is based upon the Company's Reserve Finding Effectiveness (as
defined) compared with the Reserve Finding Effectiveness reported by John
S. Herold, Inc. (the "Benchmark Amount"). Reserve Finding Effectiveness
for purposes of comparison to the Benchmark Amount is the per barrel of
oil equivalent value for any calendar year during the performance term as
reported by John S. Herold, Inc.
(2) All shares are earned if at the end of the performance term the Company's
Reserve Finding Effectiveness during any one calendar year during the
Performance Term as reported by John S. Herold, Inc. is more favorable to
the Company than the Benchmark Amounts. Shares earned at the end of the
three-year performance period are also subject to continued employment
during such three-year period.
(3) Shares were relinquished at termination of employment of Mr. Irani on
September 30, 1997 and Mr. McAdams on December 31, 1997.
11
<PAGE>
PENSION PLAN TABLE
Employees of the Company participate in the Retirement Plan of EEX
Corporation (the "Plan") and the Retirement Income Restoration Plan of EEX
Corporation (the "Restoration Plan"). The table below illustrates the amount
of annual benefit payable on a normal retirement basis beginning at normal
retirement age to a person in specified average salary and years-of-service
classifications under the Plan and the Restoration Plan.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------
REMUNERATION(1) 15 20 25 30 35
- --------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
200,000............................ $ 49,203 $ 65,604 $ 82,006 $ 98,407 $114,808
275,000............................ 68,891 91,854 114,818 137,782 160,745
350,000............................ 88,578 118,104 147,631 177,157 206,683
425,000............................ 108,266 144,354 180,443 216,532 252,620
500,000............................ 127,953 170,604 213,256 255,907 298,558
575,000............................ 147,641 196,854 246,068 295,282 344,495
650,000............................ 167,328 223,104 278,881 334,657 390,433
725,000............................ 187,016 249,354 311,693 374,032 436,370
800,000............................ 206,703 275,604 344,506 413,407 482,308
</TABLE>
- ---------
(1) Highest average covered compensation over any consecutive five-year period
Covered compensation under the Program includes base wages and annual
performance-based bonuses. The credited years of service under the Program, as
of February 28, 1998 for Messrs. Hamilton, Henderson, Langdon, Irani and
McAdams are 1.1, 1.1, 0, 24.2 and 30.4 years, respectively, and the highest
average covered compensation during any consecutive five-year period for each
of them is $500,000, $250,000, $0, $236,434 and $130,754, respectively. Mr.
Addy waived participation in the retirement plan. The normal retirement
benefit is in the form of a benefit guaranteed for ten years and life
thereafter and is not subject to any deduction for Social Security or other
offset amounts.
COMPENSATION OF DIRECTORS
Directors are compensated by an annual retainer fee of $25,000 plus $1,250
for each board or committee meeting attended by the director. In addition, a
$2,500 per annum fee is paid for services on a Board Committee, with an
additional $1,000 per annum paid to the Chairman of a Board Committee.
Directors who are also officers of the Company do not receive Compensation for
serving as a director.
12
<PAGE>
Effective August 5, 1997, the Company adopted the Phantom Stock Plan
("Director Plan") for non-employee directors, which had originally been
adopted by old EEI in 1996. The purpose of the Director Plan is to align the
economic interests of the Company's directors with those of shareholders by
linking part of the compensation of directors to increases in the value of the
Company's Common Stock and to provide a financial incentive that will help
attract and retain directors of outstanding competence. Phantom stock units
were awarded to each non-employee director (which by the terms of the Plan
also included Mr. Addy during his service as Interim Chairman and President,
Chief Executive Officer of the Company) who was serving at the time the
Director Plan first became effective. Awards will be made to each non-employee
director at the time he or she is first elected to the Board of Directors.
Thereafter, awards will be made to each non-employee director elected to the
Board at the Company's annual meeting of shareholders. Each award consists of
phantom stock units ("Units"), the number of which is determined by dividing
$20,000 by the value of the Company's Common Stock on the date of the grant. A
Unit account, which is maintained for each director, is adjusted to reflect
changes in corporate capitalization, a stock split, a transaction which may
involve the merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, a corporate reorganization
or any partial or complete liquidation of the Company. Units are fully vested
at the earlier of the director's retirement from the Board, his death or a
change in control of the Company, as defined in the Director Plan. The
aggregate value payable on an account when it is closed is determined by
multiplying the value of one share of the Company's Common Stock by the number
of Units in the account. The sum paid out is payable in cash or in the
Company's Common Stock, at the director's election, and may be deferred for up
to ten years with interest to accrue on the account balance at the prime rate
as published in The Wall Street Journal. In 1997, awards valued at $20,000
each resulted in the credit of 2,092 Units to each of the following non-
employee directors: F. S. Addy, B. A. Bridgewater, Jr., and M. P. Mallardi;
and an award of 2,063 units to Mr. F. M. Lowther.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS
Messrs. Hamilton, Henderson and Langdon have entered into employment
contracts with the Company providing for the employment of: Mr. Hamilton as
Chairman and President, Chief Executive Officer; Mr. Henderson as Executive
Vice President, and Chief Operating Officer; and Mr. Langdon as Executive Vice
President Finance, Administration and Chief Financial Officer. Each of the
contracts is for a term of three years, and is automatically extended after
three years for an additional one-year term on a continuing basis. The
contracts provided for a minimum annual salary of $500,000 for Mr. Hamilton,
$250,000 for Mr. Henderson and $250,000 for Mr. Langdon, plus annual incentive
bonuses reasonably expected to equal 60%, 50% and 50%, respectively of the
minimum annual salaries of Messrs. Hamilton, Henderson and Langdon. The
contracts also contain provisions relating to the grant of stock options and
the award of performance restricted stock.
Messrs. Hamilton, Henderson and Langdon have executed change in control
agreements ("Agreements") with the Company that provide certain benefits in
the event their employment is
13
<PAGE>
terminated subsequent to a change in control of the Company (as defined in the
Agreements). The Agreements are for continuous three-year terms until
terminated by the Company upon specified notice and continue for three years
following a change in control of the Company. The Agreements provide that if
the officer is terminated or if the officer elects to terminate employment
under certain circumstances, within three years following a change in control
of the Company, the officer shall be entitled to a lump-sum severance payment
of three times the sum of the officers base salary and target bonus, a
prorated bonus in the year of termination, the value over exercise price of
certain unexercised stock options, a three-year continuation of employee
benefits, the equivalent of two years of service credit under the retirement
program, and reimbursement of certain legal fees, expenses, and any excise
taxes.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for oversight and administration
of the Company's compensation policies and programs and specific salary,
incentive, stock option and long term incentive awards to senior executive
officers, including the Chief Executive Officer and the other four officers
named in the Summary Compensation Table. The Compensation Committee is
composed entirely of outside Directors, and since July 1997 has been advised
by Towers Perrin, a nationally-recognized independent consulting firm, on
competitive pay levels and practices.
Compensation Policies and Objectives. The Board Compensation Committee
develops and oversees compensation programs it believes are needed to enhance
shareholder value. The Committee has been guided by two primary objectives:
. Offer incentive for business success by putting a significant portion of
each executive's total pay at risk, based on company performance.
. Attract and keep outstanding executives by providing compensation
opportunities consistent with or superior to those in the Company's
industry for similar positions.
The Company's compensation programs for executives are composed of the
following elements:
Base Salary Program. The Committee believes it is important to attract and
retain high-caliber executives and employees, and that in order to do this,
the Company should attempt to pay fully competitive base salaries. The
Committee has determined that base salaries, as a matter of policy, should be
targeted at the 50th percentile of competitive levels for similarly qualified
executives and employees in independent oil and gas companies. Additional pay,
if any, should be through bonuses based on annual operating performance or
through stock programs, reflecting Total Shareholder Return.
Salary levels for the executive officers are based upon assessment of each
individual's performance, experience and value in attaining corporate
financial and strategic objectives. The
14
<PAGE>
Committee compares the Company's annual cash payments (both salary and annual
incentive) for named executive officers to recognized annual surveys of
practice in its industry. Industry practice is observed both from surveys
conducted by independent consulting firms and peer group data provided by
Towers Perrin.
In connection with Mr. Hamilton's employment as Chief Executive Officer, the
Committee authorized a base salary of $500,000 per year. This amount was
deemed necessary to attract and retain an executive of Mr. Hamilton's caliber.
He received no salary increase during 1997.
Incentive Compensation. It is the practice of the Committee to encourage
positive annual operating results by offering annual incentive opportunities
that put a significant portion of total pay at risk. The portion of
compensation at risk is intentionally greater at higher executive levels in
the Company. Because 1997 was a year of transition to new management, a new
headquarters location, fully independent ownership, and asset restructuring,
no formal pre-established incentive plan was implemented for 1997. Rather,
bonuses for 1997 were based on the Committee's overall evaluation of
performance of each of the executives named in the Summary Compensation Table,
and bonuses paid to lower level managers and professionals were based on the
CEO's and other senior executives' evaluation of their overall contributions
to the Company which were reviewed with the Committee.
The Committee reviewed Mr. Hamilton's performance during 1997 and noted the
successful restructuring of assets, securing exploration joint venture
partners, recruiting of highly-qualified staff, and management of the
relocation to Houston, and awarded him a bonus of $300,000 or 60% of salary,
which was the target bonus established in connection with his joining the
Company.
During 1997, the Committee worked with its consultant in a series of
meetings and with management to develop a formal, goal-based incentive plan,
which was approved in December 1997, and will provide the basis for incentive
compensation payments in 1998.
Stock Incentive Plans. The Committee believes that stock-based compensation
programs are the single most important compensation vehicle available for
encouraging senior executives to maximize Total Shareholder Return, and that
stock compensation can be an important part of the pay package for lower-level
employees as well. In January 1997, the Committee awarded options on 1,000,000
shares to Mr. Hamilton in connection with his accepting the position of CEO of
the Company. Significant option grants were also made to Messrs. Henderson and
Langdon in connection with their accepting senior executive positions as well.
Normal annual grants of options were made to Messrs. Henderson, Langdon, and
other officers and employees during the course of the year. These grants will
only reward the holders if the Company's share price appreciates because the
exercise price equaled the value of the shares on the date the options were
granted.
In addition, as an inducement to Mr. Hamilton to become Chief Executive
Officer of the Company, the Committee awarded him 100,000 restricted shares
which vest solely based on the
15
<PAGE>
Company's achieving Total Shareholder Return objectives relative to its peer
group, as outlined in the Long Term Incentive Plan "LTIP" Awards Table on page
11. Similar awards were also made to Messrs. Henderson and Langdon in
connection with their initial employment to induce them to join the Company.
In December 1997, based on recommendation of its outside compensation
consultant, and in recognition of the highly-competitive employment market for
exploration professionals, the Committee authorized a special grant of options
and restricted stock to certain key employees. Senior executives (including
the Chief Executive Officer and other senior officers) did not receive any
special restricted stock grants at this time in view of their having received
restricted stock upon their initial employment. Restricted stock grants
authorized in December 1997 vest after five years subject to possible
acceleration based on the Company's achieving Total Shareholder Return in the
top quartile of its peer group. The special grants of stock options do not
vest for seven years, subject to partial acceleration if the Company is in the
top quartile of its peer group in Total Shareholder Return in future years.
Mr. Hamilton's grant was deferred until early 1998. The exercise price equaled
the value of the shares on the date the options were granted so executives who
received the options will only be rewarded for share appreciation.
Section 162(m). No formal policy has been adopted by the Company with
respect to qualifying compensation paid to its executive officers for
deductibility under Section 162(m) of the Internal Revenue Code. The Committee
intends to consider tax deductibility as one relevant factor in making future
awards to executives but may decide that other factors outweigh deductibility.
Dated: March 26, 1998 Compensation Committee
M.P. Mallardi, Chairman
F. S. Addy
B.A. Bridgewater, Jr.
F.M. Lowther
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Mr. Addy, a member of the Compensation Committee served as interim Chairman
and Chief Executive Officer from September 10, 1996 to January 13, 1997, and
as President from October 30, 1996 to January 13, 1997.
16
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the percentage change in the
cumulative total shareholders return on the Company's Common Stock against the
cumulative total return of the S&P 500 Composite Stock Index and the Dow Jones
Oil-Secondary Index since the Company's stock first began trading. The graph
assumes that the value of the investment in the Company's Common Stock and each
index was $100 at January 3, 1995, the date the Company's stock first began
trading, and that all dividends are reinvested.
LOGO
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
1/3/95 12/31/95 12/31/96 12/31/97
------ -------- -------- --------
<S> <C> <C> <C> <C>
EEX Corporation............................... 100 115 116 90
Dow Jones--Oil Secondary Index................ 100 115 142 151
S&P 500 Composite Stock Index................. 100 138 169 226
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the officers
and directors of the Company and persons who own more than 10% of a registered
class of the equity securities of the Company to file reports of beneficial
ownership and changes in beneficial ownership with the SEC
17
<PAGE>
and the New York Stock Exchange. Based solely on its review of the copies of
such reports received by it, or written representations from certain reporting
persons that no Forms 5 were required for those persons, the Company believes
that during 1997 its officers, directors and shareholders holding greater than
10% of the Company's Common Stock complied with all applicable filing
requirements.
APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
On the recommendation of the Audit Committee, the Board of Directors has,
subject to ratification by the shareholders, appointed Ernst & Young LLP as
independent Certified Public Accountants of the Company for the year 1998.
Neither the firm nor any of its members has any direct financial interest or
any material indirect financial interest in the Company or any of its
affiliates. A representative of Ernst & Young LLP is expected to be present at
the Annual Meeting and will be provided the opportunity to make a statement
and will be available to respond to appropriate questions.
In September 1997, the Company dismissed Deloitte & Touche LLP as the
Company's independent auditors and engaged Ernst & Young LLP as its
independent auditors. The decision to change the Company's independent
auditors was recommended by the Company's Audit Committee and approved by its
Board of Directors.
In the prior two fiscal years, the reports of Deloitte & Touche LLP on the
Company's Consolidated Financial Statements did not contain an adverse opinion
or disclaimer of opinion, nor were such reports qualified or modified as to
uncertainty, audit scope, or accounting principles. The Company had no
disagreements with Deloitte & Touche LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreement(s) if not resolved to the satisfaction of
Deloitte & Touche LLP would have caused it to make a reference to such
disagreement(s) in connection with its reports and there were no "reportable
events" (as defined under SEC rules) requiring further disclosure.
Prior to its engagement of Ernst & Young LLP, neither the Company nor anyone
on its behalf consulted Ernst & Young LLP regarding the application of
accounting principles to any specific transaction, or the type of audit
opinion that might be rendered on the Company's consolidated financial
statements, nor has Ernst & Young LLP provided the Company a written report or
oral advice regarding such principles or audit opinion.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
18
<PAGE>
SOLICITATION OF PROXIES
This solicitation is being made by the Company. The cost of preparing,
assembling and mailing the Notice of Annual Meeting, Proxy Statement, and
Proxy, and the cost of further solicitation are to be borne by the Company.
Solicitations may further be made by directors, officers, and regular
employees of the Company, use of the mails, telephone, facsimile transmission,
or personal interview. No additional compensation will be paid for such
solicitation. The Company will reimburse brokerage firms and others for their
reasonable expenses in forwarding solicitation materials to beneficial owners
of the Company's Common Stock. The Company has retained W. F. Doring & Co. at
a cost of approximately $3,000 to assist in the solicitation of proxies.
SHAREHOLDER PROPOSALS
In order to be considered for inclusion in the Company's proxy statement
relating to its 1999 Annual Meeting, a shareholder proposal must be received
by the Company no later than December 1, 1998. Such proposals should be
addressed to the Corporate Secretary.
The Company's Bylaws provide that in addition to any other applicable
requirements, in order for a shareholder to properly bring business before an
annual meeting or nominate a person for election to the Board, the shareholder
must give timely written notice to the Corporate Secretary and provide certain
specified information. Details regarding the procedural requirements for
presenting a matter before a shareholders meeting are available upon written
request to the Corporate Secretary.
OTHER MATTERS
The Board of Directors does not intend to bring any other business before
the meeting and has no reason to believe any will be presented to the meeting.
If, however any other business should be properly presented at the meeting,
the proxies named in the enclosed form of proxy will vote the proxy in
accordance with their best judgment.
AVAILABILITY OF FORM 10-K
SHAREHOLDERS MAY OBTAIN WITHOUT CHARGE ANOTHER COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K (EXCLUDING CERTAIN OF THE EXHIBITS THERETO) FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1997, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, BY WRITING TO THE CORPORATE SECRETARY, EEX CORPORATION, 2500 CITY
WEST BLVD., SUITE 1400, HOUSTON, TX 77042.
By order of the Board of Directors
Janice K. Hartick
Senior Vice President, General
Counsel, and
Corporate Secretary
Houston, Texas
March 31, 1998
19
<PAGE>
PROXY EEX CORPORATION PROXY
Proxy Solicited on Behalf of the Board of Directors of
the Corporation for Annual Meeting May 12, 1998
The undersigned hereby appoints T.M Hamilton and J.K. Hartrick, or
either of them, the attorneys and proxies of the undersigned, each with full
power of substitution, to vote on behalf of the undersigned at the Annual
Meeting of Shareholders of EEX Corporation, to be held at 2500 CityWest Blvd.,
Houston, Texas, on Tuesday, May 12, 1998, at 10:00 a.m., and at any adjournments
of said meeting, all the shares of Common Stock of said Corporation in the name
of the undersigned or which the undersigned may be entitled to vote; hereby
revoking any proxy or proxies heretofore given by the undersigned.
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. It is revocable at any time before it is
exercised.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------
<PAGE>
EEX CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. []
[ ]
1. Election of Directors --
Class I-Term Expiring 1999-- For Withheld For All
Nominees: Frederick S. Addy All All Execpt*
[ ] [ ] [ ]
Class II-Term Expiring 2000--
Nominees: B.A. Bridgewater, Jr. and
Michael P. Mallardi
Class III-Term Expiring 2001--
Nominees: Thomas M Hamilton and
Frederick M. Lowther
-----------------------------------------
*Nominee Exception (print above)
For Against Abstain
2. Approval of Ernst & Young as independent [ ] [ ] [ ]
auditors.
3. In their discretion, upon such other matters as may properly come before the
meeting.
Dated:______________________________, 1998
Signature(s)______________________________
__________________________________________
This proxy must be signed exactly as name
appears hereon. Executors, administrators,
trustees, etc., should give full title as
such. If the signer is a corporation, please
sign full corporate name by duly authorized
officer.
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
