<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 (S)240.14a-11(c) or (S)240.14a-12
HOUSTON INDUSTRIES INCORPORATED
--------------------------------------------------------------------------------
(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] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] 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:
---------------------------------------------------------------------------
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO OF HOUSTON INDUSTRIES APPEARS HERE]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 3, 1995
AND PROXY STATEMENT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Notice of Annual Meeting
Proxy Statement
Voting of Shares......................................................... 1
Election of Directors.................................................... 2
Nominees................................................................. 2
Continuing Directors..................................................... 3
Organization of the Board of Directors................................... 4
Compensation of Directors................................................ 5
Securities Ownership of Management....................................... 6
Securities Ownership of Certain Beneficial Owners........................ 7
Executive Compensation................................................... 8
Retirement Plans, Related Benefits and Other Agreements.................. 11
Report of the Personnel Committee on Executive Compensation.............. 14
Shareholder Return Performance Graph..................................... 19
Ratification of Appointment of Independent Accountants and Auditors...... 19
Other Matters............................................................ 20
Shareholder Proposals for 1996 Annual Meeting of Shareholders............ 20
Director Nominations for 1996 Annual Meeting of Shareholders............. 20
Annual Report to Shareholders............................................ 21
</TABLE>
<PAGE>
[LOGO OF HOUSTON INDUSTRIES APPEARS HERE]
5 Post Oak Park
4400 Post Oak Parkway, Houston, Texas 77027
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 3, 1995
AND PROXY STATEMENT
To the Shareholders:
The Annual Meeting of Shareholders of Houston Industries Incorporated will be
held in the TEXAS COMMERCE CENTER AUDITORIUM, 601 TRAVIS STREET, HOUSTON,
TEXAS, at 9:00 a.m., Central Daylight Time, on Wednesday, May 3, 1995, for the
following purposes:
1. To elect five directors to hold office in accordance with the Amended
and Restated Bylaws of the Company;
2. To ratify the appointment of Deloitte & Touche LLP as independent
accountants and auditors for the Company for 1995; and
3. To transact such other business that may properly come before the
meeting, or any adjournments thereof.
Only shareholders of record at the close of business on March 15, 1995 are
entitled to notice of, and to vote at, the meeting.
All shareholders are cordially invited and urged to attend the meeting. EVEN
IF YOU PLAN TO ATTEND THE MEETING, YOU ARE STILL REQUESTED TO SIGN, DATE AND
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ADDRESSED ENVELOPE. If you
attend, you may vote in person if you wish, even though you have sent in your
proxy.
By order of the Board of Directors,
/s/ Hugh Rice Kelly
Hugh Rice Kelly
Corporate Secretary
March 29, 1995
<PAGE>
HOUSTON INDUSTRIES INCORPORATED
5 Post Oak Park
4400 Post Oak Parkway, Houston, Texas 77027
(713) 629-3000
PROXY STATEMENT
On or about March 29, 1995, Houston Industries Incorporated (Company) began
mailing this proxy statement and the accompanying proxy card to shareholders
entitled to vote at the Company's annual meeting of shareholders to be held on
May 3, 1995 (Annual Meeting). The proxy statement and proxy card are being
furnished in connection with the solicitation of proxies by the Company's Board
of Directors for the Annual Meeting.
The expense of this solicitation will be borne by the Company. The Company
has engaged Morrow & Co. to assist in the solicitation of proxies at a fee of
approximately $9,500, plus expenses. The Company will also reimburse brokerage
firms, nominees, fiduciaries, custodians and other agents for their expenses in
distributing proxy material to the beneficial owners of the Company's common
stock, without par value (Common Stock), in accordance with Securities and
Exchange Commission (SEC) and New York Stock Exchange requirements. In
addition, certain of the Company's directors, officers and employees may
solicit proxies by telephone and personal contact.
VOTING OF SHARES
As of March 15, 1995, the record date fixed by the Board of Directors for the
determination of shareholders entitled to vote at the Annual Meeting, the
Company had outstanding 131,336,234 shares of Common Stock, which is the only
class of the Company's securities outstanding and entitled to vote at the
Annual Meeting. Each share of Common Stock is entitled to one vote.
Shares represented by properly executed proxies received prior to the Annual
Meeting will be voted as specified by the shareholders. If no specifications
have been given in a proxy, the shares represented thereby will be voted at the
Annual Meeting or any adjournments thereof FOR Item 1 (election of the nominees
for director), FOR Item 2 (ratification of the appointment of Deloitte & Touche
LLP as independent accountants and auditors of the Company for 1995) and, in
the discretion of the persons named in the proxy, on any other business that
may properly come before the meeting.
A proxy may be revoked by a shareholder at any time before it is voted at the
Annual Meeting by delivering written revocation to Mr. Robert E. Smith,
Assistant Corporate Secretary, at the Company's address shown above, by
submitting a subsequent proxy or by voting in person at the meeting.
Under Texas law and the Company's Amended and Restated Bylaws (Bylaws), the
vote required for Item 1 (election of the nominees for director) is a plurality
of the votes cast and the vote required for Item 2 (ratification of independent
accountants and auditors) is the affirmative vote of a majority of shares of
Common Stock entitled to vote and represented in person or by proxy at the
meeting. Abstentions and non-votes (shares held by brokers and other nominees
or fiduciaries that are present at the meeting but not voted on a particular
matter) have the same effect as a vote "against" the matter presented for
shareholder action for purposes of determining whether sufficient affirmative
votes have been cast.
1
<PAGE>
ELECTION OF DIRECTORS
The Company's Bylaws provide for a Board of Directors divided into three
classes having staggered terms with each class as nearly equal in size as
possible. By resolution of the Board of Directors, the number of directors has
been fixed at thirteen as of the date of the Annual Meeting. The current term
of office of the directors in Class II expires at the Annual Meeting. The terms
of office of directors in Class III and Class I will expire at the annual
meetings of shareholders to be held in 1996 and 1997, respectively. At each
annual meeting of shareholders, directors will be elected to succeed those
whose terms then expire, with each newly elected director to serve for a three-
year term. All members of the Board of Directors also serve as directors of the
Company's principal subsidiary, Houston Lighting & Power Company (HL&P), which
has publicly traded securities outstanding.
The Bylaws currently provide that no person is eligible to stand for re-
election to the Board of Directors at the annual meeting of shareholders on or
immediately following the tenth anniversary of such person's initial election
or appointment to the Board of Directors unless such person was serving as a
director of the Company as of April 1, 1992 or is an employee of the Company or
any of its corporate affiliates. The Bylaws also provide that no person is
eligible to serve as a director after the annual meeting of shareholders on or
after such person's seventieth birthday, except in the case of a director
having special technical expertise in the nuclear power field who, under
certain circumstances, may be authorized by the Board to be eligible to serve
for one additional year. The Bylaws specify that any vacancies created by such
term limitations are to be filled by the shareholders at the appropriate annual
meeting. In any case, each director will serve until his or her respective
successor shall have been duly elected and qualified unless he or she shall
resign, become disqualified, disabled or shall otherwise be removed. The Board
of Directors has authorized Dr. Hendrie, who has certain special technical
expertise in the nuclear power field and who had his seventieth birthday in
March 1995, to serve for one additional year and therefore continue to serve as
a director in Class III until the term for that class expires at the annual
meeting of shareholders in 1996. Mr. Sykora will not seek reelection to the
Board of Directors in 1995 and will retire from the Board at the Annual
Meeting, having served as a director of the Company and HL&P since 1982.
NOMINEES
Messrs. Carroll, Cater, Letbetter and Dr. Wolfe have been nominated for Class
II directors to serve a three-year term ending at the annual meeting in 1998
and Mr. Hogan has been nominated for Class I director to serve for the two-year
term remaining for that class ending at the annual meeting in 1997. It is
intended that the persons named in the accompanying proxy will vote shares
represented by properly executed proxies for the election of the listed
nominees as directors unless authority to vote is withheld. If any nominee
should become unavailable to serve on the Board of Directors, the persons named
in the proxy may act with discretionary authority to vote the proxy for such
other person, if any, as may be designated by the Board of Directors. The Board
of Directors is not aware of any circumstances likely to render any of the
nominees unavailable for election.
The following sets forth certain information with respect to the business
experience of each nominee during the past five years and certain other
directorships held by each nominee. Unless otherwise indicated, each person has
had the same principal occupation for at least five years.
CLASS II DIRECTORS--TERM EXPIRING 1998
MILTON CARROLL, age 44, has been a director since 1992. Mr. Carroll is
Chairman, President and Chief Executive Officer of Instrument Products Inc., an
oil field supply manufacturing company, in Houston, Texas. He is a director of
Panhandle Eastern Corporation and the Federal Reserve Bank of Dallas.
2
<PAGE>
CLASS II DIRECTORS--TERM EXPIRING 1998--(CONTINUED)
JOHN T. CATER, age 59, has been a director since 1983. Mr. Cater is Chairman,
Chief Executive Officer and a director of River Oaks Trust Company in Houston,
Texas. He also serves as President and a director of Compass Bank-Houston.
Until his retirement in 1990, Mr. Cater served as President, Chief Operating
Officer and a director of MCorp, a Texas bank holding company. He served as a
director of MCorp until July 1994.
R. STEVE LETBETTER, age 46, has not previously served as a director. Mr.
Letbetter is Vice President of the Company and President and Chief Operating
Officer of HL&P, having served in those capacities since 1993. He has served in
various officer positions with HL&P since 1978, most recently as Group Vice
President--Finance and Regulatory Relations since 1988. Mr. Letbetter is a
director of Charter Bancshares Inc., a Texas bank holding company.
BERTRAM WOLFE, Ph.D., age 67, has been a director since 1993. Dr. Wolfe is on
the Nuclear Advisory Committee of Pennsylvania Power and Light and is a member
of the International Advisory Committee of Concord Industries. Prior to his
retirement in 1992, he was Vice President and General Manager of General
Electric Company's nuclear energy business in San Jose, California.
CLASS I DIRECTOR--TERM EXPIRING 1997
LEE W. HOGAN, age 50, has not previously served as a director. Mr. Hogan is
Vice President of the Company and President and Chief Operating Officer of
Houston Industries Energy, Inc., the nonregulated power business subsidiary of
the Company, having served in those capacities since 1993. From 1990 to 1993 he
served as Group Vice President--External Affairs for HL&P.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES FOR DIRECTOR.
CONTINUING DIRECTORS
The following sets forth certain information with respect to the members of
the Company's Board of Directors whose current terms will continue after the
Annual Meeting. Information is provided concerning the business experience of
each continuing director during the past five years and certain other
directorships held by each continuing director. Unless otherwise indicated,
each person has had the same principal occupation for at least five years.
CLASS I DIRECTORS--TERM EXPIRING 1997
ROBERT J. CRUIKSHANK, age 64, has been a director since 1993. Mr. Cruikshank
is primarily engaged in managing his personal investments in Houston, Texas.
Prior to his retirement in 1993, he was a Senior Partner in the accounting firm
of Deloitte & Touche. Mr. Cruikshank is Vice-Chairman of the Board of Regents
of The University of Texas System and serves as a director of MAXXAM Inc.,
Kaiser Aluminum Corporation, Compass Bank and Texas Biotechnology Corporation.
LINNET F. DEILY, age 49, has been a director since 1993. Ms. Deily is
Chairman, Chief Executive Officer and President of First Interstate Bank of
Texas, N.A. She has served as Chairman since 1992, Chief Executive Officer
since 1991 and President of First Interstate Bank of Texas since 1988. (1)
ALEXANDER F. SCHILT, Ph.D., age 54, has been a director since 1992. Dr.
Schilt is Chancellor of the University of Houston System. Prior to 1990, he was
President of Eastern Washington University in Cheney and Spokane, Washington.
--------
(1) First Interstate Bank of Texas, N.A., and certain of its affiliates
participate in various credit facilities with the Company, certain of its
subsidiaries and other entities in which the Company has an ownership
interest. Under these agreements, First Interstate and certain of its
affiliates have maximum aggregate loans and loan commitments of
approximately $79.3 million as of December 31, 1994.
3
<PAGE>
CLASS I DIRECTORS--TERM EXPIRING 1997--(CONTINUED)
JACK T. TROTTER, age 68, has been a director since 1985. Mr. Trotter is
primarily engaged in managing his personal investments in Houston, Texas. He
also serves as a director of First Interstate Bank of Texas, N.A., Howell
Corporation and Weingarten Realty Investors.
CLASS III DIRECTORS--TERM EXPIRING 1996
JOSEPH M. HENDRIE, Ph.D., age 70, has been a director since 1985. Dr. Hendrie
is a Consulting Engineer in Bellport, New York and a Senior Scientist at the
Brookhaven National Laboratory in Upton, New York, having previously served as
Chairman and Commissioner of the U.S. Nuclear Regulatory Commission and as
President of the American Nuclear Society. He is also a director of Entergy
Operations, Inc. of Jackson, Mississippi.
HOWARD W. HORNE, age 68, has been a director since 1978. Mr. Horne is Vice-
Chairman of Cushman & Wakefield of Texas, Inc., a subsidiary of a national real
estate brokerage firm. Until 1990, he was Chairman of the Board of The Horne
Company, a Houston realty firm.
DON D. JORDAN, age 62, has been a director of the Company since 1977 and of
HL&P since 1974. Mr. Jordan is Chairman and Chief Executive Officer of the
Company and Chairman and Chief Executive Officer of HL&P. He also serves as a
director of Texas Commerce Bancshares, Inc. and BJ Services Company, Inc.
KENNETH L. SCHNITZER, SR., age 65, has been a director since 1983. Mr.
Schnitzer is Chairman of the Board of Schnitzer Enterprises Inc., a Houston
commercial real estate development company, having previously served as a
director of American Building Maintenance Industries Incorporated and
Weingarten Realty, Inc. (1)
--------
(1) Certain of the Company's subsidiaries currently lease office space in
buildings owned or controlled by affiliates of Mr. Schnitzer. The Company's
subsidiaries paid a total of approximately $5.6 million to affiliates of
Mr. Schnitzer during 1994, and it is expected that approximately $3.7
million will be paid in 1995. The Company believes such payments are
comparable to those that would have been made to other non-affiliated firms
for comparable facilities and services. During 1994, Mr. Schnitzer
consented to the entry of an order by the Office of Thrift Supervision
(OTS) whereunder he may not hold office in, or participate in the conduct
of the affairs of, any federally regulated depository institution without
the prior approval of the OTS and, if applicable, any other appropriate
federal banking agency. The order arose out of Mr. Schnitzer's prior
service as a director of BancPLUS Savings and Loan Association, a Houston,
Texas-based thrift that was taken over by federal regulators in 1989. Mr.
Schnitzer consented to the order to avoid the time and expense of defending
an OTS administrative proceeding, without admitting whether there were any
grounds for such a proceeding.
ORGANIZATION OF THE BOARD OF DIRECTORS
The business of the Company is managed under the direction of the Board of
Directors. The Board of Directors has established several committees to oversee
specific matters affecting the Company, including an Executive and Nominating
Committee, an Audit Committee, a Finance Committee, a Personnel Committee, a
Nuclear Committee and other committees.
The Executive and Nominating Committee, currently composed of Messrs. Cater,
Horne, Jordan, Schnitzer, Trotter and Dr. Hendrie, reviews management
recommendations for organizational changes, provides consultation regarding
duties of executive officers and recommends potential candidates for election
to the Board of Directors. See "Director Nominations for 1996 Annual Meeting of
Shareholders."
The Audit Committee is composed entirely of non-employee directors, currently
Messrs. Carroll, Cruikshank, Schnitzer and Dr. Schilt. The Audit Committee
reviews the Company's accounting and financial practices and advises the Board
of Directors of any needed changes in such practices,
4
<PAGE>
recommends to the Board of Directors the firm of independent public accountants
to be engaged to examine the financial statements of the Company and its
subsidiaries, reviews and approves the plan and scope of the independent public
accountants' audit, non-audit services and related fees, reviews the Company's
internal accounting controls, and has general responsibility for related
matters.
The Finance Committee, currently composed of Messrs. Cater, Horne, Jordan,
Sykora, Trotter and Ms. Deily, reviews management forecasts of the Company's
financial needs and policies, acts on management recommendations concerning the
Company's capital structure, amounts and sources of permanent financing, lines
of credit, loan agreements and dividend policies and approves terms relevant to
specific debt and equity offerings of the Company.
The Personnel Committee is composed entirely of non-employee directors,
currently Messrs. Carroll, Cater, Cruikshank and Trotter. The Personnel
Committee approves and, in certain cases, makes recommendations to the Board of
Directors concerning compensation and benefits for officers of the Company,
reviews human resource programs regarding manpower forecasts and training and
monitors employee benefit plans and the administration of those plans.
The Nuclear Committee is currently composed entirely of non-employee
directors, Drs. Hendrie, Schilt, Wolfe and Mr. Schnitzer. The Nuclear Committee
reviews the activities of the Company and HL&P in all areas of nuclear
development and operations, and reports to and makes recommendations to the
Board of Directors on such matters as nuclear regulatory reports and licensing
requirements, management evaluations of nuclear engineering, construction and
operations progress and performance and monitoring of budgetary requirements.
The Board of Directors of the Company and HL&P held seven and twelve
meetings, respectively, during 1994. During 1994 the Executive and Nominating
Committee met one time, the Audit Committee met three times, the Finance
Committee met two times, the Personnel Committee met six times, the Nuclear
Committee met ten times and other committees met an aggregate of four times.
Each director attended at least seventy-five percent of the aggregate number of
meetings of the Boards of Directors and of committees of such boards on which
he or she served, except for Mr. Trotter who attended sixty-one percent of such
meetings.
COMPENSATION OF DIRECTORS
Each non-employee director receives an annual retainer fee of $20,000, a fee
of $1,000 for each board meeting attended and a fee of $700 for each committee
meeting attended. Directors may defer all or part of their annual retainer fees
(minimum deferral $2,000) and meeting fees under the Company's deferred
compensation plan.
Non-employee directors participate in a director benefits plan pursuant to
which a director who serves at least one full year will receive an annual
benefit in cash equal to the annual retainer payable in the year the director
terminates service. Benefits under this plan will be payable to a director,
commencing the January following the later of the director's termination of
service or attainment of age 65, for a period equal to the number of full years
of service of the director.
Non-employee directors may also participate in the Company's executive life
insurance plan described under "Retirement Plans, Related Benefits and Other
Agreements," providing split-dollar life insurance with a death benefit equal
to six times the director's annual retainer with coverage continuing after
termination of service as a director. This plan also permits the Company to
provide for a tax reimbursement payment to make the directors whole for any
imputed income recognized with respect to the term portion of the annual
insurance premiums. Upon death, the Company will receive the balance of the
insurance proceeds payable in excess of the specified death benefit which, by
design, is expected to be at least sufficient to cover the Company's cumulative
outlays to pay premiums and the
5
<PAGE>
after-tax cost to the Company of the tax reimbursement payments. Mr. Trotter,
who does not participate in this plan, has a separate agreement with the
Company providing for payment in the event of his death in a lump sum amount
equal to eight times his final annual retainer, which, because it is subject to
taxation at distribution, approximates, on an after-tax basis, the amount of
the death benefit that would have been payable had he participated in the
executive life insurance plan.
SECURITIES OWNERSHIP OF MANAGEMENT
The following table sets forth information as of March 15, 1995, with respect
to the beneficial ownership of the Company's Common Stock by each current
director and nominee, the chief executive officer and the other four most
highly compensated executive officers of the Company and, as a group, by such
persons and other executive officers. No person or member of the group listed
owns any equity securities of HL&P or any other subsidiary of the Company.
Unless otherwise indicated, each person or member of the group listed has sole
voting and sole investment power with respect to the shares of Common Stock
listed. No ownership shown in the table represents 1% or more of the
outstanding shares of Common Stock.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
NAME BENEFICIALLY OWNED
---- ------------------
<S> <C>
Milton Carroll........................................... 1,200
John T. Cater............................................ 1,000(1)
Robert J. Cruikshank..................................... 1,000
Linnet F. Deily.......................................... 1,000(2)
Joseph M. Hendrie........................................ 451(2)(3)
Lee W. Hogan............................................. 11,332(3)(4)(5)
Howard W. Horne.......................................... 6,339(3)
Don D. Jordan............................................ 85,750(4)(5)(6)
Hugh Rice Kelly.......................................... 20,931(3)(4)(5)
R. Steve Letbetter....................................... 16,361(4)(5)
Alexander F. Schilt...................................... 400
Kenneth L. Schnitzer, Sr................................. 4,650
Don D. Sykora............................................ 41,154(3)(4)(5)
Jack T. Trotter.......................................... 1,000
Bertram Wolfe............................................ 110
All of the above and other executive officers as a group
(25 persons)............................................. 274,529(3)(4)(5)
</TABLE>
--------
(1) Mr. Cater disclaims beneficial ownership of these shares, which are owned
by his adult children.
(2) Voting power and investment power with respect to the shares listed for Ms.
Deily and for Dr. Hendrie are shared with the individual's spouse.
(3) Includes shares held under the Company's dividend reinvestment plan as of
December 31, 1994.
(4) Includes shares held under the Company's savings plan, as to which the
participant has sole voting power (subject to such power being exercised by
the plan's trustees in the same proportion as directed shares in the
savings plan are voted in the event the participant does not exercise
voting power). The shares held under the plan are reported as of December
31, 1994, except in the case of two executive officers whose individual
savings plan accounts include shares allocated during 1995 as a result of
rollovers from individual retirement accounts.
(5) The ownership shown in the table includes shares which may be acquired
within 60 days on exercise of outstanding stock options granted under the
Company's long-term incentive compensation plan by each of the persons and
group, as follows: Mr. Jordan--26,454 shares; Mr. Sykora--14,160 shares;
Mr. Kelly--5,326 shares; Mr. Letbetter--4,641 shares; Mr. Hogan--3,200
shares; and the group--72,306 shares.
(6) Voting power and investment power with respect to 576 of the shares listed
are shared with Mr. Jordan's spouse.
6
<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Shares of Common Stock are held in trust under the Company's savings plan and
the employee stock ownership plan (ESOP) component of that plan. A total of
7,551,125 shares are held in the savings trust and related custody account for
which Texas Commerce Bank National Association, Houston, Texas serves as
trustee and custodian, and 9,477,137 shares are held in the ESOP trust for
which State Street Bank and Trust Company (State Street) of Boston,
Massachusetts serves as trustee, representing 5.8% and 7.2%, respectively, of
the outstanding shares of Common Stock as of December 31, 1994. The terms of
the trust agreements between the Company and the trustees provide for directed
pass-through voting by the participants in the savings plan.
In addition, the table below sets forth certain information regarding each
person (including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934) who is known by the Company (based on February
1995 Schedule 13G filings made with the SEC) to beneficially own more than 5%
of the Company's Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
------------------------------------ ---------- -------
<S> <C> <C>
State Street Bank and Trust Company.................... 10,644,638(1) 8.6%
P. O. Box 1389
Boston, MA 02104
The Capital Group Companies, Inc. and Capital Research
and
Management Company.................................... 7,985,000(2) 6.08%
333 South Hope Street
Los Angeles, CA 90071
Bankers Trust New York Corporation, Bankers Trust
Company and Bankers Trust International PLC........... 6,787,320(3) 5.2%
280 Park Avenue
New York, New York 10017
</TABLE>
--------
(1) State Street has reported that for these shares, as to all of which
beneficial ownership is disclaimed, it has sole voting power for 946,692
shares, shared voting power for 9,497,292 shares, sole dispositive power
for 1,134,769 shares and shared dispositive power for 9,497,869 shares, in
all cases in State Street's capacity as a trustee for (i) the Company's
savings plan, (ii) various collective investment funds for employee
benefits and other index accounts, and (iii) various personal trust
accounts.
(2) Capital Research and Management Company, a registered investment adviser,
and its parent holding company, The Capital Group Companies, Inc.
(together, Capital), have reported that for these shares, as to all of
which beneficial ownership is disclaimed, Capital has sole dispositive
power and no sole or shared voting power. The shares are owned by various
institutional investors.
(3) Bankers Trust New York Corporation (BTNY), as parent holding company, and
its wholly-owned subsidiaries Bankers Trust Company (BTC) and Bankers Trust
International PLC (BTI) (together, Bankers Trust), have reported that
Bankers Trust has sole voting power for 5,629,387 shares, shared voting
power for 12,700 shares, sole dispositive power for 6,774,620 shares and
shared dispositive power for 12,700 shares, in the case of BTNY and BTC as
(i) trustee for various trusts and employee benefit plans and (ii)
investment advisor.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows, for the years ended December 31, 1992, 1993 and
1994, the annual, long-term and certain other compensation of the chief
executive officer and the other four most highly compensated executive
officers of the Company (Named Officers).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------- ---------- ----------
SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING LTIP ALL OTHER
POSITION YEAR SALARY(1) BONUS(1) COMPENSATION OPTIONS(#) PAYOUTS(2) COMPENSATION(3)
------------------ ---- --------- -------- ------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Don D. Jordan........... 1994 $859,500 $734,873 $114,648 13,863 $550,567 $717,261
Chairman and Chief 1993 829,500 386,775 0 12,965 762,962 647,491
Executive Officer 1992 785,125 531,268 0 13,190 32,000 543,204
of the Company;
Chairman and Chief
Executive Officer of
HL&P
Don D. Sykora........... 1994 601,667 497,681 89,200 7,548 371,716 468,302
President and Chief 1993 559,000 241,313 0 6,915 510,000 410,061
Operating Officer of 1992 523,417 352,513 0 7,034 20,938 351,022
the Company
Hugh Rice Kelly......... 1994 323,500 190,820 42,147 2,735 145,107 50,546
Senior Vice President, 1993 310,500 94,446 0 2,621 285,078 58,218
General Counsel and 1992 297,583 155,439 0 2,667 13,188 65,266
Corporate Secretary of
the Company; Senior
Vice President, General
Counsel and Corporate
Secretary of HL&P
R. Steve Letbetter...... 1994 321,000 246,525 31,133 3,183 117,607 43,818
Vice President of the 1993 271,000 109,335 0 2,128 212,362 42,562
Company; President and 1992 241,417 125,952 0 2,161 10,125 44,813
Chief Operating Officer
of HL&P
Lee W. Hogan............ 1994 239,400 311,250 21,104 0 102,074 14,434
Vice President of the 1993 224,400 85,800 0 1,903 139,702 14,165
Company; President and 1992 215,833 112,860 0 1,931 0 11,931
Chief Operating Officer
of Houston Industries
Energy, Inc.
</TABLE>
-------
(1) The amounts shown include salary and bonus earned as well as earned but
deferred by the Named Officers.
(2) The amounts shown for 1994 represent the dollar value of shares of the
Company's Common Stock paid out in 1994 under the Company's long-term
incentive compensation plan based on the achievement of certain
performance goals for the 1992-1993 performance cycle, plus dividend
equivalent accruals during the performance period.
(3) The amounts shown include (i) Company contributions to the Company's
savings plan and accruals under its savings restoration plan for the years
shown on behalf of the Named Officers, as follows: Mr. Jordan 1992--
$41,348; 1993--$57,152; and 1994--$52,344; Mr. Sykora 1992--$31,743;
1993--$38,284; and 1994--$35,405; Mr. Kelly 1992--$26,141; 1993--$19,569;
and 1994--$17,554; Mr. Letbetter 1992--$20,225; 1993--$16,672; and 1994--
$18,074; and Mr. Hogan 1992--$11,931; 1993--$14,165; and 1994--$12,938;
(ii) the term portion of the premiums paid by the Company in 1994 under
split-dollar life insurance policies purchased in connection with the
Company's executive life insurance plan, as follows: Mr. Jordan--$4,800;
Mr. Sykora--$21,250; Mr. Kelly--$801; Mr. Letbetter--$218; and
8
<PAGE>
Mr. Hogan--$1,038; and (iii) the portion of accrued interest on amounts of
compensation deferred under the Company's deferred compensation plan and
executive incentive compensation plan that exceeds 120% of the applicable
federal long-term rate provided under Section 1274(d) of the Internal
Revenue Code, as follows: Mr. Jordan 1992--$501,856; 1993--$590,339; and
1994--$660,117; Mr. Sykora 1992--$319,279; 1993--$371,777; and 1994--
$411,647; Mr. Kelly 1992--$39,125; 1993--$38,649; and 1994--$32,191; Mr.
Letbetter 1992--$24,588; 1993--$25,890; and 1994--$25,526; and Mr. Hogan
1994--$458. With respect to the accrued interest on deferred amounts
referenced in (iii) of this footnote the Company owns and is the beneficiary
under certain life insurance policies, with respect to which it is currently
anticipated that the benefits associated with these policies will be
sufficient to cover such accumulated interest.
STOCK OPTION GRANTS
The following table contains information concerning grants during 1994 of
stock options under the Company's long-term incentive compensation plan to the
Named Officers, except for Mr. Hogan, who participates in a different incentive
compensation plan which does not provide for option grants.
OPTION GRANTS IN 1994
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS VALUE
------------------------------------------------ --------
NUMBER OF % OF
SECURITIES TOTAL OPTIONS EXERCISE GRANT
UNDERLYING GRANTED TO OR BASE DATE
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION PRESENT
NAME GRANTED(#)(1) FISCAL YEAR SHARE DATE VALUE(2)
---- ------------- ------------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Don D. Jordan........ 13,863 21.1% $46.50 01/04/04 $49,491
Don D. Sykora........ 7,548 11.5% 46.50 01/04/04 26,946
Hugh Rice Kelly...... 2,735 4.2% 46.50 01/04/04 9,764
R. Steve Letbetter... 3,183 4.8% 46.50 01/04/04 11,363
</TABLE>
--------
(1) The nonstatutory options for shares of Common Stock included in the table
were granted on January 5, 1994, have a ten-year term and generally become
exercisable annually in one-third increments commencing one year after date
of grant, so long as employment with the Company or its subsidiaries
continues. A change in control of the Company would result in all options
becoming immediately exercisable. For the purposes of the Company's long-
term incentive compensation plan, a "change in control" generally is deemed
to have occurred if (i) any person or group becomes the direct or indirect
beneficial owner of 30% or more of the Company's outstanding voting
securities; (ii) the majority of the Board changes as a result of, or in
connection with, certain transactions; (iii) as a result of the Company
merging or consolidating with another corporation, less than 70% of the
surviving corporation's outstanding voting securities is owned by the
former shareholders of the Company (excluding any party to such a
transaction or any affiliates of any such party); (iv) a tender offer or
exchange offer is made and consummated for the ownership of 30% or more of
the Company's outstanding voting securities; or (v) the Company transfers
all or substantially all of its assets to another corporation that is not
wholly-owned by the Company.
(2) The values are based on the Black-Scholes option pricing model adjusted for
the payment of dividends. The calculations were made based on the following
assumptions: volatility equal to historical volatility of the Common Stock
for the one-year period prior to grant date; risk-free interest rate equal
to the interest rate on a U.S. Treasury security with a maturity date
corresponding to that of the option term; option strike price equal to
current stock price on the date of grant ($46.50); current dividend rate of
$3 per share per year; and option term equal to the full ten-year period
until the stated expiration date. No reduction has been made in the
valuations on account of non-transferability of the options or vesting or
forfeiture provisions. Valuations would change if different assumptions
were made. Option values are dependent on general market conditions and the
performance of the Common Stock. There can be no assurance that the values
in this table will be realized.
9
<PAGE>
STOCK OPTION VALUES
The following table sets forth information on the unexercised options to
purchase Common Stock previously granted to each of the Named Officers under
the Company's long-term incentive compensation plan and held as of December 31,
1994. None of the options are in-the-money, having been granted at exercise
prices that are higher than the market value of the option shares on December
31, 1994. No options were exercised by the Named Officers during 1994.
1994 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS AT
AT DECEMBER 31, 1994 DECEMBER 31, 1994
------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------
<S> <C> <C>
Don D. Jordan............... 13,115/26,903 $0.0/$0.0
Don D. Sykora............... 6,994/14,503 0.0/ 0.0
Hugh Rice Kelly............. 2,652/ 5,371 0.0/ 0.0
R. Steve Letbetter.......... 2,150/ 5,322 0.0/ 0.0
Lee W. Hogan................ 1,921/ 1,913 0.0/ 0.0
</TABLE>
LONG-TERM INCENTIVE COMPENSATION
The following table sets forth information concerning awards made during 1994
for the 1994-1996 performance cycle under the Company's long-term incentive
compensation plan to each of the Named Officers, except for Mr. Hogan. Mr.
Hogan participates in a different incentive compensation plan which did not
award performance shares during 1994. The table represents potential payouts of
awards for shares of Common Stock based on the achievement of certain
performance goals over a three-year performance cycle. The performance goals
include Company consolidated and subsidiary or business unit goals, weighted
25% on consolidated performance and 75% on subsidiary or business unit
performance. The performance goals are generally based on financial objectives.
The Company consolidated goal applicable to each of the Named Officers shown
below is achieving a certain level of total shareholder return in relation to a
group of other companies. The subsidiary or business unit goals applicable to
each of the Named Officers shown below are maintaining certain base electric
rates and achieving certain cash flow performance in relation to a group of
other companies. An additional subsidiary or business unit goal applicable to
Messrs. Jordan, Sykora and Kelly is achieving certain increases in cable
television operating profits. If a change in control of the Company occurs
before the end of a performance cycle, the payouts of awards for performance
shares will occur without regard to achievement of the performance goals. See
Note 1 to the Option Grants in 1994 table for information regarding the
definition of a change in control under the Company's long-term incentive
compensation plan.
LONG-TERM INCENTIVE PLAN AWARDS IN 1994
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE-
BASED PLANS(1)
------------------------
PERFORMANCE
OR OTHER
PERIOD TARGET MAXIMUM
NUMBER UNTIL THRESHOLD NUMBER NUMBER
OF MATURITY OR NUMBER OF OF OF
NAME SHARES PAYOUT SHARES SHARES SHARES
---- ------ ----------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Don D. Jordan....................... 12,165 12/31/96 6,083 12,165 18,248
Don D. Sykora....................... 7,643 12/31/96 3,822 7,643 11,465
Hugh Rice Kelly..................... 2,770 12/31/96 1,385 2,770 4,155
R. Steve Letbetter.................. 3,223 12/31/96 1,612 3,223 4,835
</TABLE>
--------
(1) The table does not reflect dividend equivalent accruals during the
performance period.
10
<PAGE>
RETIREMENT PLANS, RELATED BENEFITS AND OTHER AGREEMENTS
The following table shows the estimated annual benefit payable under the
Company's retirement plan, benefit restoration plan and, in certain cases,
supplemental agreements, to officers in various compensation classifications
upon retirement at age 65 after the indicated periods of service, determined on
a single-life annuity basis. The amounts in the table are not subject to any
deduction for Social Security or other offsetting amounts.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
FINAL
AVERAGE ESTIMATED ANNUAL PENSION BASED ON YEARS OF SERVICE
ANNUAL -------------------------------------------------------------------------
COMPENSATION 35 OR
AT AGE 65 15 YEARS 20 YEARS 25 YEARS 30 YEARS MORE YEARS
------------ -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
$ 300,000 $ 85,901 $114,535 $143,169 $171,803 $ 200,436
400,000 115,001 153,335 191,669 230,003 268,336
500,000 144,101 192,135 240,169 288,203 336,236
600,000 173,201 230,935 288,669 346,403 404,136
700,000 202,301 269,735 337,169 404,603 472,036
800,000 231,401 308,535 385,669 462,803 539,936
900,000 260,501 347,335 434,169 521,003 607,836
1,000,000 289,601 386,135 482,669 579,203 675,736
1,200,000 347,801 463,735 579,669 695,603 811,536
1,400,000 406,001 541,335 676,669 812,003 947,336
1,500,000 435,101 580,135 725,169 870,203 1,015,236
1,600,000 464,201 618,935 773,669 928,403 1,083,136
1,700,000 493,301 657,735 822,169 986,603 1,151,036
</TABLE>
--------
Note: The qualified pension plan limits compensation in accordance with Section
401(a)(17) of the Internal Revenue Code and also limits benefits in
accordance with Section 415 of the Internal Revenue Code. Pension
benefits based on compensation above the qualified plan limit or in
excess of the limit on annual benefits are provided through the benefit
restoration plan.
For the purpose of the pension table above, final average annual compensation
means the average of covered compensation for 36 consecutive months out of the
120 consecutive months immediately preceding retirement in which the
participant's covered compensation was the highest. Covered compensation
includes only the amounts shown in the "Salary" and "Bonus" columns of the
Summary Compensation Table. At December 31, 1994, the credited years of service
for the following persons are: 35 years for each of Messrs. Jordan and Sykora;
20 years for Mr. Kelly, 10 of which result from a supplemental agreement; 21
years for Mr. Letbetter; and 4 years for Mr. Hogan.
The Company maintains an executive benefits plan that provides certain salary
continuation, disability and death benefits to key officers of the Company and
certain of its subsidiaries. The Named Officers participate in this plan
pursuant to individual agreements that generally provide for (i) a salary
continuation benefit of 100% of the officer's current salary for twelve months
after his death during active employment and then 50% of his salary for nine
years or until the deceased officer would have attained age 65, if later, and
(ii) if the officer retires after attainment of age 65, an annual post-
retirement death benefit of 50% of the officer's preretirement annual salary
payable for six years.
The Company has established an executive life insurance plan providing split-
dollar life insurance in the form of a death benefit for certain officers and
members of the Board of Directors. The death benefit coverage for each of the
Named Officers and members of the Board of Directors varies but in each case is
based on coverage (either single life or second to die) that is available for
the same amount of premium that could purchase coverage equal to two times
current salary for Mr. Kelly; four
11
<PAGE>
times current salary for Messrs. Letbetter and Hogan; five million dollars for
Mr. Sykora; ten million dollars for Mr. Jordan; and six times the annual
retainer for the Company's non-employee directors (except in the case of Mr.
Trotter who has a separate agreement providing for similar coverage, as
described under "Compensation of Directors"). The plan also provides that the
Company may make payments to the covered individuals designed to compensate for
tax consequences with respect to imputed income that they must recognize for
federal income tax purposes based on the term portion of the annual premiums.
If a covered executive retires at age 65 or at an earlier age under
circumstances approved for this purpose by the Board of Directors, rights under
the plan vest so that coverage is continued based on the same death benefit in
effect at the time of retirement. Upon death, the Company will receive the
balance of the insurance proceeds payable in excess of the specified death
benefit which by design is expected to be at least sufficient to cover the
Company's cumulative outlays to pay premiums and the after-tax cost to the
Company of the tax reimbursement payments. There is no arrangement or
understanding under which any covered individuals will receive or be allocated
any interest in any cash surrender value under the policy.
In accordance with the indemnification provisions of the Company's Bylaws and
Texas law, the Company paid approximately $21,000 in 1994 to cover legal fees
and expenses incurred on behalf of the Company's directors in connection with
the defense of a shareholder derivative suit and class action filed in April
1994 by two former employees of HL&P.
The Company has entered into employment agreements with each of Mr. Jordan
and Mr. Sykora which provide for benefits in the event of termination of
employment following a change in control of the Company. For the purposes of
these agreements, the meaning of a change in control is generally the same as
provided in the Company's long-term incentive compensation plan as described in
Note 1 to the Option Grants in 1994 table. The agreements provide for
employment of Mr. Jordan and Mr. Sykora in substantially their present
positions with the Company during a period commencing upon a change in control
of the Company and ending after five years in the case of Mr. Jordan or after
three years in the case of Mr. Sykora or, if earlier, the date on which the
executive reaches age 67 (Employment Period). During the Employment Period,
each executive would receive benefits including (i) base salary at a level
based on that in effect prior to the change in control with 5% annual
increases; (ii) annual bonus awards based on amounts payable under the
Company's executive incentive compensation plan and long-term incentive
compensation plan as administered prior to the change in control assuming
performance objectives are met at "target" level; and (iii) participation in
other employee benefit plans and programs. Each agreement provides that if the
executive's employment is terminated during the Employment Period by the
Company, other than for cause, or by the executive following certain changes in
job responsibilities, job location or compensation and benefits (or otherwise
with the consent of the Company), then the Company will provide benefits
including (i) a lump sum payment equal to salary and bonuses payable with
respect to the remainder of the Employment Period; (ii) additional payments to
compensate for loss of benefits under the retirement plan, benefit restoration
plan and savings plan resulting from termination prior to the end of the
Employment Period; and (iii) continued deferral of payments under the Company's
deferred compensation plan until the end of the Employment Period, with
payments made over a fifteen year period if the executive so elected. The
employment agreements provide for additional payments to make the executive
whole, on an after-tax basis, in case any payments by the Company to the
executive are subject to the federal excise tax applicable to "excess parachute
payments" as defined in Section 280G in the Internal Revenue Code. The benefits
(excluding tax reimbursement payments) that would have been payable under the
change in control provisions of the employment agreements with respect to
salary, bonus, retirement plan, benefit restoration plan and savings plan
benefits, assuming a covered termination of employment had occurred as of May
3, 1995, would be approximately $9.1 million for Mr. Jordan and $4.4 million
for Mr. Sykora, which amounts would decrease proportionally (approximately 25%
per year for Mr. Jordan and 44% per year for Mr. Sykora), assuming salary and
bonus remain constant and termination of employment occurs after May 3, 1995
and during the Employment Period.
12
<PAGE>
The employment agreements with Mr. Jordan and Mr. Sykora further provide that
if a change in control does not occur and the executive is employed by the
Company on the date that such executive reaches age 65, the executive's
employment will be extended until the executive reaches age 67 with the base
salary during the extended employment period determined by the Board of
Directors. If the Company terminates the employment of the executive during
this two-year term of extended employment, other than for cause or disability,
the agreements provide that the Company will (i) pay to the executive a lump
sum equal to salary and any bonuses payable with respect to the remainder of
the extended employment term and (ii) provide a supplemental retirement payment
similar to that applicable under the change in control provisions described
above. Certain of the supplemental retirement, death, disability and life
insurance benefits under the extended employment provision are to be calculable
or made available based on compensation levels in effect prior to the
commencement of the extended employment period. The agreements also provide
that the salary and bonus deferred under the Company's deferred compensation
plan will commence as provided in the plan and shall, if the executive had
previously elected, be paid out in fifteen annual installments rather than in a
lump sum. Similarly, the agreements provide that benefits under the Company's
benefit restoration plan will be paid in installments rather than a lump sum.
The Company has entered into severance agreements with certain of its
executive officers, including Messrs. Kelly, Letbetter, and Hogan. Each of the
severance agreements provides for the payment of certain benefits if, within
three years following a change in control of the Company, the officer's
employment is terminated for reasons other than cause or disability or by the
officer following certain changes in job responsibilities, job location or
compensation and benefits. For the purpose of these agreements, the meaning of
a change in control is generally the same as provided in the Company's long-
term incentive compensation plan as described in Note 1 to the Option Grants in
1994 table. In the event of a covered termination following a change in
control, the officer would be entitled to receive a payment equal to 2.99 times
his average annual gross compensation from the Company and its affiliates
included in gross income for the five taxable years preceding the date on which
the change in control occurs. Any payment to such officer is subject, however,
to the limitation that payments under his severance agreement will be reduced
to the extent necessary to avoid an excise tax on such officer's income or the
disallowance of a deduction to the Company for such payments under the
provisions of Section 280G of the Internal Revenue Code. The severance
agreements also provide for the continuation of certain medical benefits
following the termination of employment. The amounts that would have been
payable under the agreements if a covered termination of employment had
occurred as of May 3, 1995, would be approximately $1.9 million for Mr. Kelly,
$1.5 million for Mr. Letbetter and $0.9 million for Mr. Hogan.
13
<PAGE>
REPORT OF THE PERSONNEL COMMITTEE
ON EXECUTIVE COMPENSATION
The Personnel Committee (Committee) is composed entirely of directors who are
not officers or employees of the Company and who are not eligible to
participate in any of the compensation programs that the Committee administers.
The Committee reviews and makes recommendations to the Board concerning all
executive officer salary arrangements, other non-incentive based compensation
for executives, and the design of the Company's incentive compensation plans.
The Committee also oversees and administers the Company's incentive
compensation programs including the determination of the annual and long-term
incentive awards that cover the Company's executive officers. In conducting its
review and making its recommendations or determinations on executive officer
compensation, the Committee uses comparative data provided by independent
consulting firms as discussed below and its own subjective evaluation of
executive officer performance. Except in the case of the Chief Executive
Officer, Mr. Jordan, the Committee's recommendations take into account
management's evaluation of executive officer performance.
COMPENSATION POLICY
The Company's executive compensation policy is to have compensation programs
that
. strengthen the relationship between pay and performance by emphasizing
variable at-risk performance-based compensation;
. attract, retain, and encourage the development of highly qualified and
experienced executives;
. promote overall corporate performance; and
. provide compensation that is competitive externally and equitable
internally.
The Company retains independent consulting firms to provide, at least
biennially, data on the executive compensation practices of peer groups of
companies that are considered comparable to the Company in terms of size,
performance, position and compensation philosophy (Reference Group). Because
the Company's executive officers include officers having executive officer
responsibilities in the operation of the Company's subsidiaries, peer group
data includes, in addition to the Reference Group, data concerning groups of
companies in the utility industry, the cable television industry, the
nonregulated power industry and other industries.
The companies in the Reference Group used for compensation purposes generally
are not the same companies which comprise the Dow Jones Utilities Average index
in the Performance Graph included in this proxy statement. The Committee
believes that the Company's most direct competitors for executive talent are
not necessarily all of the companies included in the published index used for
comparing shareholder returns. The Committee uses companies in the Reference
Group to establish ranges for base salary, and various opportunity levels for
annual and long-term incentive awards. However, the actual performance measures
governing the payment of incentive compensation are based in part on
comparisons with other groups of companies more closely identified with
individual subsidiaries or business units. Thus, for example, one of the
subsidiary or business unit performance goals involves achieving a certain
ranking in cash flow performance and uses a comparison group of large electric
utility companies that are directly comparable to the Company's electric
utility subsidiary in terms of size and percentage of revenues attributable to
sales of electricity.
The Committee has reviewed the Company's executive compensation programs in
light of the provisions of the Internal Revenue Code relating to the
disallowance of deductions for compensation in excess of $1 million for certain
executive officers. The Committee does not anticipate any payment of
compensation in 1995 or 1996 in excess of that which is deductible under those
rules, taking into account expected deferrals of compensation by affected
executive officers. The Committee will continue to evaluate the effect of the
tax provisions and the exception to the deductibility limit for certain
14
<PAGE>
shareholder-approved, performance-based compensation. The Committee may
consider in the future whether or not to submit for shareholder approval the
performance goals applicable to the annual incentive awards or the long-term
incentive awards established for the Company's nonregulated power business, or
make any adjustments to the performance goals for those incentive awards that
would be necessary in order to qualify for the performance-based exception of
the tax provisions. Except for the long-term performance incentive awards
established for the Company's nonregulated power business, the performance
goals for awards under the Company's long-term incentive awards program meet
the requirements of the tax provisions.
COMPONENTS OF COMPENSATION
The key elements of the Company's executive compensation program are base
salary, annual incentive awards, and long-term incentive awards. In determining
each component of compensation, the Committee considers all elements of an
executive's total compensation package which, compared to companies in the
Reference Group, may vary from low to high depending on an executive officer's
tenure, experience, leadership and level of responsibility. Because a
significant portion of an executive officer's compensation includes at-risk
components based on business performance, if the performance exceeds that of
the peer group, compensation should be above the targeted levels; likewise, if
performance falls below that of the peer group, compensation should be below
the targeted level.
BASE SALARIES
The Committee annually reviews each executive officer's base salary and
recommends specific salary amounts to the Board for its approval. Increases in
base salary are determined by the Committee's analysis of salary levels for
comparable executive officer positions at companies in the Reference Group, its
subjective evaluation and, except in the case of Mr. Jordan, management's
evaluation of each executive officer's individual performance and level of
responsibility.
ANNUAL INCENTIVE COMPENSATION
The annual incentive awards program provides executive officers with direct
financial incentives generally in the form of annual cash bonuses based on the
achievement of Committee-approved performance goals that are a blend of Company
consolidated goals, subsidiary or business unit goals, and individual goals.
The Committee-approved performance goals are determined each year, generally
are based upon financial objectives of the Company and its various subsidiaries
or business units and are designed to encourage improved operating results and
foster achievement of particular strategic objectives. The performance goals
for 1994 were as follows: for the Company consolidated goal, achieving a
certain level of net income; for the various subsidiary or business unit goals,
in the electric utility operations, achieving certain levels of cash flow and
certain ratings in a customer value index; in the cable television operations,
increasing operating profits and subscribers and achieving certain quality
service standards; and in the nonregulated power business operations,
conducting new business in accordance with a particular business plan.
Individual goals for certain executive officers were designed to improve the
productivity and the quality of work within particular departments and included
for 1994 such matters as maximizing cash flow after investment activities,
developing a particular strategic plan, increasing annual base revenues,
completing analysis of particular staffing needs and otherwise optimizing
department operations. Generally, 25% of the annual bonus is based on the
Company consolidated goal, up to 75% is based on the achievement of subsidiary
or business unit goals, and up to 25% for certain executive officers is based
on individual goals. In the case of one executive officer, however, annual
bonus awards are made under incentive compensation plans established for the
Company's new nonregulated power business. Those awards, which may be made in
the form of cash and shares of the Company's Common Stock, are based entirely
on subsidiary or business unit goals.
Computation of the annual incentive awards for executive officers is based on
target awards that range from 30% to 60% of base salary depending on the
executive officer's level of responsibility. A
15
<PAGE>
threshold level of performance results in an award that is 50% of target, and a
maximum level of performance results in an award that is 50% over the target
level, except in the case of the nonregulated power business where a maximum
level of performance results in an award that is 100% over the target level.
The actual annual incentive award is computed based on the performance levels
achieved in relation to the established performance goals. However, an
executive officer's subsidiary or business unit goals must be met at least at
the threshold level in order for that officer to receive an annual incentive
award. The aggregate amount of the awards cannot exceed 2.5% of the Company's
net income for the year. For 1994, the Company's consolidated goal was met at
the maximum level. The various subsidiary or business unit goals were met at
levels ranging from target to 50% over target. The individual goals, where
applicable, were met at levels ranging from 0% to 50% over target.
LONG-TERM INCENTIVE COMPENSATION
Under the long-term incentive awards program, the Company may provide long-
term incentive compensation for executive officers in the form of grants of
performance shares, stock options, stock appreciation rights and, in some
instances under a particular plan, share equivalent or contingent share units.
Each form of these stock-based incentives reflects the stock price of the
Company's Common Stock. In addition, the Committee has adopted a stock
ownership guideline applicable to the Company's executive officers that
establishes a goal of ownership of the Company's Common Stock representing a
value of at least two times the officer's base salary.
Annual grants of performance shares have been based on long-term performance
goals that include Company consolidated and subsidiary or business unit goals,
weighted 25% and 75% of the total, respectively. Those goals are generally
based on financial objectives measurable over a two- or three-year performance
cycle. For the performance cycle that ended in 1993, under which payments were
made in 1994, the Company's consolidated goal was to achieve a certain level of
total shareholder return as compared to a group of approximately 75 other
electric utilities and utility holding companies. The same Company consolidated
goal applies to the performance cycle that commenced in 1994.
The subsidiary or business unit goals for the performance cycle that ended in
1993, under which payments were made in 1994, were based on the following
financial objectives: for the electric utility operations, maintaining certain
base electric rates and achieving certain cash flow performance in relation to
a group of 20 other electric utility companies; and for the cable television
operations, achieving certain increases in operating profit. The same
subsidiary or business unit goals apply to the performance cycle that commenced
in 1994.
The target number of performance shares granted is based on a percentage of
base salary and the average market price of Common Stock at the beginning of
the performance cycle. In determining the size of the grant, the Committee
reviews comparative data for the companies in the Reference Group and considers
the level of responsibility of each of the Company's executive officers, then
makes a subjective determination that targets the award percentages ranging
from 30% to 65% of base salary, depending on the executive's position.
Achievement of the performance goals at the target level will result in the
award of 100% of the performance shares for both the performance cycle that
paid out in 1994 and the performance cycle that commenced in 1994. For both of
these performance cycles, attainment of the threshold level of performance
results in 50% of the target number of shares being awarded and the attainment
of the maximum level results in up to 50% over the target number of shares
being awarded.
For the performance cycle concluding in 1993 (under which payments were made
in 1994), the Company's consolidated goal of total return to shareholders was
attained at 70% of the target level. The subsidiary or business unit goals for
the electric utility and cable television operations were met at 7% over target
and 57% of target, respectively.
16
<PAGE>
Annual stock option grants have been made at an option price not less than
the fair market value of the Common Stock on the date of grant. Accordingly,
stock options have value only if the Company's Common Stock price appreciates
from the option grant date. This design focuses executive officers on the
creation of shareholder value over the long-term and encourages equity
ownership in the Company.
In determining the size of stock option grants to executive officers, the
Committee reviews comparative data for the companies in the Reference Group as
well as any prior stock option grants to those officers. Because the policies
of Reference Group companies with respect to stock options vary widely, the
Committee's objective of delivering a competitive award opportunity based on
the dollar value of the award granted necessarily involves a subjective
determination by the Committee. As a result, the number of shares underlying
stock option awards varies and is dependent on the stock price on the date of
grant. For 1994 grants, the percentages of grant date option value to base
salary ranged from 30% to 75% depending on the executive officer's position.
The Committee may grant stock appreciation rights in connection with stock
options, however, none have been granted to date.
The Committee may also grant long-term awards under a long-term incentive
plan established for the Company's new nonregulated power business. One
executive officer of the Company participates in that plan. Those awards may be
allocated in the form of cash or contingent share units which are valued based
on the market price of the Company's Common Stock. Those awards have a four-
year performance cycle and are based on performance in relation to Committee-
approved performance goals. For the cycle that commenced in 1994, those goals
are based on closing transactions for particular projects or acquiring
properties in the nonregulated power business that result in achievement of
specified internal rates of return above the cost of capital. However, no long-
term awards were made under that plan during 1994.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee applies the executive compensation policies and programs
described above in determining Mr. Jordan's total compensation. At its May 1994
meeting to consider executive salaries effective in July 1994, the Committee
reviewed Mr. Jordan's base salary, comparing it to the base salary of chief
executive officers in the Reference Group of companies, and determined that his
relative position should be the upper end of the range for those companies. The
Committee recommended to the Board that Mr. Jordan's base salary continue at
its current level. In evaluating Mr. Jordan's total compensation, the Committee
considered his contributions to the overall success of the Company through his
individual performance and his experience level with the Company as well as his
significant leadership in the electric utility industry as a whole. In the case
of Mr. Jordan's total compensation paid in 1994, the at-risk portion
represented by the annual incentive awards and long-term award payouts was 60%.
Mr. Jordan's target annual incentive award for 1994 was 60% of his base salary,
with the Company's consolidated goal accounting for 25% of that award and the
subsidiary or business unit goals for the electric utility operations, the
cable television operations and the nonregulated power business operations
(50%, 20% and 5%, respectively) comprising the remaining 75% of the award. The
1994 annual incentive award payment (reflected in the Summary Compensation
Table in this proxy statement) was based on achievement of the composite goals
at 42.5% over the target level. In the case of long-term incentive awards, the
target number of performance shares was 65% of his base salary for both the
performance cycle that paid out in 1994 and the performance cycle that
commenced in 1994. Mr. Jordan's performance share awards for both cycles are
based 25% on achievement of the Company's consolidated goal and 75% on
achievement of the subsidiary or business unit goals for the electric utility
operations and the cable television operations (70% and 30%, respectively).
Long-term incentive awards paid out in 1994 are reported in the Summary
Compensation Table in this proxy statement and represent a composite
achievement of 86.5% of the target level of performance. Long-term incentive
awards for the cycle begun in 1994 are reflected in the Long-Term Incentive
Plan Awards
17
<PAGE>
in 1994 table in this proxy statement. In 1994 Mr. Jordan was granted options
to purchase 13,863 shares of the Company's Common Stock at an exercise price of
$46.50 per share, as shown in the Option Grants in 1994 table in this proxy
statement. This represents a grant date option value of approximately 75% of
Mr. Jordan's 1993 year-end base salary.
In May 1994 the Committee also recommended that the Company enter into an
employment agreement with Mr. Jordan. That agreement provides for benefits in
the event of termination of employment following a change in control of the
Company and for a two-year extension of the employment term if Mr. Jordan is
employed by the Company at age 65 without there having occurred a change in
control. Details with respect to that agreement are provided under "Retirement
Plans, Related Benefits and Other Agreements" in this proxy statement.
Milton Carroll
John T. Cater
Robert J. Cruikshank
Jack T. Trotter
18
<PAGE>
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in the
cumulative total shareholder return on the Common Stock with the cumulative
total return of the Standard & Poor's (S&P) 500 Index and the Dow Jones
Utilities Average for the period commencing January 1, 1990 and ending December
31, 1994.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
HOUSTON INDUSTRIES INCORPORATED, S&P 500 INDEX AND
DOW JONES UTILITIES AVERAGE (1)(2) FOR FISCAL YEAR ENDED DECEMBER 31
[PASTEUP GRAPH]
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Houston Industries Incorporated................ $100 $115 $149 $166 $183 $149
-------------------------------------------------------------------------------
S&P 500 Index.................................. 100 97 126 136 150 152
-------------------------------------------------------------------------------
Dow Jones Utilities Average.................... 100 95 110 114 125 106
</TABLE>
(1) Assumes that the value of the investment in Common Stock and each index was
$100 on December 31, 1989 and that all dividends were reinvested.
(2) Historical stock price performance is not necessarily indicative of future
price performance.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS AND AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed Deloitte & Touche LLP as independent accountants and auditors to
conduct the annual audit of the Company's accounts for the year 1995. Deloitte
& Touche LLP (and their predecessors) have served as independent accountants
and auditors for the Company and HL&P since 1932. Approval of Item 2 requires
the affirmative vote of a majority of shares entitled to vote and represented
in person or by proxy at the Annual Meeting. If ratification of the appointment
is not approved, the Board will reconsider the appointment.
19
<PAGE>
Representatives of Deloitte & Touche LLP will be present at the Annual
Meeting and will have an opportunity to make a statement if they desire. They
will be available to respond to appropriate questions from shareholders at the
Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT ACCOUNTANTS AND AUDITORS.
OTHER MATTERS
The Board of Directors does not intend to bring any other matters before the
Annual Meeting and has not been informed that any other matters are to be
properly presented to the Annual Meeting by others. In the event that other
matters properly come before the Annual Meeting or any adjournments thereof, it
is intended that the persons named in the accompanying proxy will vote pursuant
to the proxy in accordance with their best judgment on such matters.
SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING OF SHAREHOLDERS
Any shareholder who intends to present a proposal at the 1996 annual meeting
of shareholders must file such proposal with the Company by November 30, 1995
for possible inclusion in the Company's proxy statement and form of proxy
relating to that meeting.
DIRECTOR NOMINATIONS FOR 1996 ANNUAL MEETING OF SHAREHOLDERS
The Company's Bylaws provide for shareholder nominations for the election of
directors, subject to certain procedural requirements. The requirements
include, among other things, the timely delivery to the Company's Corporate
Secretary of (i) notice of the nomination; (ii) evidence of the shareholder's
status as such and the number of shares beneficially owned; and (iii) a list of
the persons (if any) with whom the shareholder is acting in concert and the
number of shares such persons beneficially own. The Bylaws also provide that to
be timely in connection with an annual meeting of shareholders, a shareholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Company not less than 90 days nor more than 180 days prior to
the date on which the immediately preceding year's annual meeting of
shareholders was held. For the 1996 annual meeting, therefore, nominations must
be received no later than February 3, 1996 nor earlier than November 5, 1995.
The Bylaws further provide that when nominating directors, the shareholder must
also submit such information with respect to the nominee as would be required
by a proxy statement. The Bylaws provide that failure to follow the required
procedures renders the person ineligible for nomination at the meeting at which
such person is proposed to be nominated. Compliance with the procedures does
not require the Company to include the proposed nominee in the Company's proxy
solicitation material. A copy of the Bylaws setting forth the requirements for
the nomination of director candidates by shareholders may be obtained by
writing Mr. Hugh Rice Kelly, Corporate Secretary, at the Company's address
shown above.
20
<PAGE>
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report to Shareholders, including the Company's consolidated
financial statements, for the year ended December 31, 1994 accompanies the
proxy material being mailed to all shareholders. The Annual Report is not a
part of the proxy solicitation material.
By Order of the Board of Directors,
/s/ Don D. Jordan
DON D. JORDAN
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
March 29, 1995
21
<PAGE>
[LOGO OF HOUSTON INDUSTRIES APPEARS HERE]
<PAGE>
HOUSTON INDUSTRIES INCORPORATED
PROXY - COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints D.D. Jordan, D.D. Sykora and H.W. Horne, and
each of them as proxies, with full power of substitution, to vote as designated
on the reverse side, all shares of common stock held by the undersigned at the
annual meeting of shareholders of Houston Industries Incorporated to be held May
3, 1995, at 9 AM (CDT) in the Texas Commerce Center Auditorium, 601 Travis
Street, Houston, Texas, or any adjournments thereof, and with discretionary
authority to vote on all other matters that may properly come before the
meeting.
IF YOU WISH TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF
THE BOARD OF DIRECTORS, YOU MAY JUST SIGN AND DATE BELOW AND
MAIL IN THE POSTAGE-PAID ENVELOPE PROVIDED. SPECIFIC CHOICES
MAY BE MADE ON THE REVERSE SIDE. IN THE ABSENCE OF
INSTRUCTIONS TO THE CONTRARY, THE SHARES REPRESENTED WILL BE
VOTED IN ACCORDANCE WITH THE BOARD'S RECOMMENDATION.
DATED:________________________________________________ , 1995
SIGNATURE:___________________________________________________
SIGNATURE:___________________________________________________
(NOTE: PLEASE SIGN EXACTLY AS NAME(S) APPEARS HEREON. JOINT
OWNERS SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE.)
DO YOU PLAN TO ATTEND THE ANNUAL MEETING? _________________ .
<PAGE>
HOUSTON INDUSTRIES INCORPORATED
PROXY (CONTINUED)
ANNUAL MEETING OF SHAREHOLDERS
The nominee for Class I Director is Lee W. Hogan, whose term will expire in
1997; the nominees for Class II Directors are Milton Carroll, John T. Cater, R.
Steve Letbetter and Bertram Wolfe, whose terms will expire in 1998. Your Board
of Directors recommends that you vote FOR all nominees for Director and FOR the
ratification of Deloitte & Touche as independent accountants and auditors for
1995. To withhold authority to vote for any individual nominee, please write
that nominee's name in the space provided below.
WITH- FOR ALL
FOR HOLD EXCEPT
1. Election of nominees [ ] [ ] [ ]
for Director in Class I
and Class II
Exceptions: ________________________________________________
____________________________________________________________
____________________________________________________________
FOR AGAINST ABSTAIN
2. Ratification of Deloitte [ ] [ ] [ ]
& Touche as independent
accountants and auditors
for 1995
<PAGE>
HOUSTON INDUSTRIES INCORPORATED
PROXY - COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints D.D. Jordan, D.D. Sykora and H.W. Horne, and
each of them as proxies, with full power of substitution, to vote as designated
on the reverse side, all shares of common stock held by the undersigned at the
annual meeting of shareholders of Houston Industries Incorporated to be held May
3, 1995, at 9 AM (CDT) in the Texas Commerce Center Auditorium, 601 Travis
Street, Houston, Texas, or any adjournments thereof, and with discretionary
authority to vote on all other matters that may properly come before the
meeting.
IF YOU WISH TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF
THE BOARD OF DIRECTORS, YOU MAY JUST SIGN AND DATE BELOW AND
MAIL IN THE POSTAGE-PAID ENVELOPE PROVIDED. SPECIFIC CHOICES
MAY BE MADE ON THE REVERSE SIDE. IN THE ABSENCE OF INSTRUCTIONS
TO THE CONTRARY, THE SHARES REPRESENTED WILL BE VOTED IN
ACCORDANCE WITH THE BOARD'S RECOMMENDATION.
DATED:__________________________________________________ , 1995
SIGNATURE:_____________________________________________________
SIGNATURE:_____________________________________________________
(NOTE: PLEASE SIGN EXACTLY AS NAME(S) APPEARS HEREON. JOINT
OWNERS SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE.)
DO YOU PLAN TO ATTEND THE ANNUAL MEETING? ____________________
Fellow Shareholder:
Enclosed is the Houston Industries Annual Report to Shareholders and Notice
of the Annual Meeting, together with your proxy on which you are asked to vote
for five director nominees, ratification of Deloitte & Touche as independent
accountants and auditors for 1995 and any other business that may properly come
before the meeting. I urge you to make your vote count by signing and returning
the proxy card as soon as possible.
The meeting is being held in the Texas Commerce Center Auditorium, 601
Travis Street in downtown Houston this year. I hope you will join me and the
other directors and officers at the meeting. If you cannot attend in person,
please be sure that your vote is counted by signing and returning the attached
proxy as soon as possible.
Don D. Jordan
/s/ Don D. Jordan
Chairman and
Chief Executive Officer
<PAGE>
HOUSTON INDUSTRIES INCORPORATED
PROXY (CONTINUED)
ANNUAL MEETING OF SHAREHOLDERS
The nominee for Class I Director is Lee W. Hogan, whose term will expire in
1997; the nominees for Class II Directors are Milton Carroll, John T. Cater, R.
Steve Letbetter and Bertram Wolfe, whose terms will expire in 1998. Your Board
of Directors recommends that you vote FOR all nominees for Director and FOR the
ratification of Deloitte & Touche as independent accountants and auditors for
1995. To withhold authority to vote for any individual nominee, please write
that nominee's name in the space provided below.
WITH- FOR ALL
FOR HOLD EXCEPT
1. Election of nominees [ ] [ ] [ ]
for Director in Class I
and Class II
Exceptions: ________________________________________________
____________________________________________________________
____________________________________________________________
FOR AGAINST ABSTAIN
2. Ratification of Deloitte [ ] [ ] [ ]
& Touche as independent
accountants and auditors
for 1995
DETACH AND MAIL CARD
<PAGE>
HOUSTON INDUSTRIES INCORPORATED
VOTING DIRECTIONS TO TRUSTEES - COMMON STOCK
THIS CARD RELATES TO THE SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby directs the Trustees of the Houston Industries
Incorporated Savings Plan to vote as designated on the reverse side, all shares
of common stock attributable to the account of the undersigned at the annual
meeting of shareholders of Houston Industries Incorporated to be held May 3,
1995, at 9 AM (CDT) in the Texas Commerce Center Auditorium, 601 Travis Street,
Houston, Texas, or any adjournments thereof, and with discretionary authority to
vote on all other matters that may properly come before the meeting.
IF YOU WISH TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF
THE BOARD OF DIRECTORS, YOU MAY JUST SIGN AND DATE BELOW AND
MAIL IN THE POSTAGE-PAID ENVELOPE PROVIDED. SPECIFIC CHOICES
MAY BE MADE ON THE REVERSE SIDE. IN THE ABSENCE OF INSTRUCTIONS
TO THE CONTRARY, THE SHARES REPRESENTED WILL BE VOTED IN
ACCORDANCE WITH THE BOARD'S RECOMMENDATION.
DATED:__________________________________________________ , 1995
SIGNATURE:_____________________________________________________
SIGNATURE:_____________________________________________________
(NOTE: PLEASE SIGN EXACTLY AS NAME(S) APPEARS HEREON. JOINT
OWNERS SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE.)
DO YOU PLAN TO ATTEND THE ANNUAL MEETING? ____________________
Fellow Shareholder:
Enclosed is the Houston Industries Annual Report to Shareholders and Notice
of the Annual Meeting, together with your proxy on which you are asked to vote
for five director nominees, ratification of Deloitte & Touche as independent
accountants and auditors for 1995 and any other business that may properly come
before the meeting. I urge you to make your vote count by signing and returning
the proxy card as soon as possible.
The meeting is being held in the Texas Commerce Center Auditorium, 601
Travis Street in downtown Houston this year. I hope you will join me and the
other directors and officers at the meeting. If you cannot attend in person,
please be sure that your vote is counted by signing and returning the attached
proxy as soon as possible.
Don D. Jordan
/s/ Don D. Jordan
Chairman and
Chief Executive Officer
<PAGE>
HOUSTON INDUSTRIES INCORPORATED
PROXY (CONTINUED)
ANNUAL MEETING OF SHAREHOLDERS
The nominee for Class I Director is Lee W. Hogan, whose term will expire in
1997; the nominees for Class II Directors are Milton Carroll, John T. Cater, R.
Steve Letbetter and Bertram Wolfe, whose terms will expire in 1998. Your Board
of Directors recommends that you vote FOR all nominees for Director and FOR the
ratification of Deloitte & Touche as independent accountants and auditors for
1995. To withhold authority to vote for any individual nominee, please write
that nominee's name in the space provided below.
WITH- FOR ALL
FOR HOLD EXCEPT
1. Election of nominees [ ] [ ] [ ]
for Director in Class I
and Class II
Exceptions: ________________________________________________
____________________________________________________________
____________________________________________________________
FOR AGAINST ABSTAIN
2. Ratification of Deloitte [ ] [ ] [ ]
& Touche as independent
accountants and auditors
for 1995
DETACH AND MAIL CARD
<PAGE>
HOUSTON INDUSTRIES INCORPORATED
CONFIDENTIAL VOTING DIRECTIONS TO TRUSTEE - COMMON STOCK
THIS CARD RELATES TO THE SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby directs the Trustee of Paragon Communications Employee
Stock Savings Plan to vote as designated on the reverse side, all shares of
common stock attributable to the account of the undersigned at the annual
meeting of shareholders of Houston Industries Incorporated to be held May 3,
1995, at 9 AM (CDT) in the Texas Commerce Center Auditorium, 601 Travis Street,
Houston, Texas, or any adjournments thereof, and with discretionary authority to
vote on all other matters that may properly come before the meeting.
IF YOU WISH TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF
THE BOARD OF DIRECTORS, YOU MAY JUST SIGN AND DATE BELOW AND
MAIL IN THE POSTAGE-PAID ENVELOPE PROVIDED. SPECIFIC CHOICES
MAY BE MADE ON THE REVERSE SIDE. IN THE ABSENCE OF INSTRUCTIONS
TO THE CONTRARY, THE SHARES REPRESENTED WILL BE VOTED IN
ACCORDANCE WITH THE BOARD'S RECOMMENDATION.
DATED:__________________________________________________ , 1995
SIGNATURE:_____________________________________________________
SIGNATURE:_____________________________________________________
(NOTE: PLEASE SIGN EXACTLY AS NAME(S) APPEARS HEREON. JOINT
OWNERS SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE.)
DO YOU PLAN TO ATTEND THE ANNUAL MEETING? ____________________
Fellow Shareholder:
Enclosed is the Houston Industries Annual Report to Shareholders and Notice
of the Annual Meeting, together with your proxy on which you are asked to vote
for five director nominees, ratification of Deloitte & Touche as independent
accountants and auditors for 1995 and any other business that may properly come
before the meeting. I urge you to make your vote count by signing and returning
the proxy card as soon as possible.
The meeting is being held in the Texas Commerce Center Auditorium, 601
Travis Street in downtown Houston this year. I hope you will join me and the
other directors and officers at the meeting. If you cannot attend in person,
please be sure that your vote is counted by signing and returning the attached
proxy as soon as possible.
Don D. Jordan
/s/ Don D. Jordan
Chairman and
Chief Executive Officer
<PAGE>
HOUSTON INDUSTRIES INCORPORATED
PROXY (CONTINUED)
ANNUAL MEETING OF SHAREHOLDERS
The nominee for Class I Director is Lee W. Hogan, whose term will expire in
1997; the nominees for Class II Directors are Milton Carroll, John T. Cater, R.
Steve Letbetter and Bertram Wolfe, whose terms will expire in 1998. Your Board
of Directors recommends that you vote FOR all nominees for Director and FOR the
ratification of Deloitte & Touche as independent accountants and auditors for
1995. To withhold authority to vote for any individual nominee, please write
that nominee's name in the space provided below.
WITH- FOR ALL
FOR HOLD EXCEPT
1. Election of nominees [ ] [ ] [ ]
for Director in Class I
and Class II
Exceptions: ________________________________________________
____________________________________________________________
____________________________________________________________
FOR AGAINST ABSTAIN
2. Ratification of Deloitte [ ] [ ] [ ]
& Touche as independent
accountants and auditors
for 1995
DETACH AND MAIL CARD
