NORAM ENERGY CORP, DEF 14A, 1996-04-04

NORAM ENERGY CORP
DEF 14A, 1996-04-04
NATURAL GAS TRANSMISISON & DISTRIBUTION

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<PAGE> 1

SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12

NORAM ENERGY CORP.
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(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(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $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:

- --------------------------------------------------------------------------------
(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.:

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(3) Filing Party:

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(4) Date Filed:

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<PAGE> 2

NORAM ENERGY CORP.
P.O. BOX 2628
HOUSTON, TEXAS 77252

LOGO April 3, 1996

Dear Stockholder:

You are cordially invited to attend the 1996 Annual Meeting of Stockholders
of NorAm Energy Corp. to be held in the Grand Ballroom of the J. W. Marriott
Hotel, 5150 Westheimer, Houston, Texas on May 14, 1996, at 2:00 p.m., local
time.

The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the meeting. During the meeting there will
be a brief report on the operations of the Company. After the business of the
meeting has been concluded, stockholders will be given the opportunity to ask
questions.

It is important that your shares be represented at the meeting. Please
mark, sign, date and return promptly the enclosed proxy in the envelope
furnished for that purpose. If you are present at the meeting, you may, if you
wish, revoke your proxy and vote in person. I look forward to seeing you at the
Annual Meeting.

/s/ T. MILTON HONEA
T. MILTON HONEA
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 3

NORAM ENERGY CORP.
P.O. BOX 2628
HOUSTON, TEXAS 77252

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 14, 1996

TO THE STOCKHOLDERS:

Notice is hereby given that the Annual Meeting of Stockholders of NorAm
Energy Corp., (the "Company") a Delaware Corporation, will be held in the Grand
Ballroom of the J.W. Marriott Hotel, 5150 Westheimer, Houston, Texas, at 2:00
p.m., local time, on Tuesday, May 14, 1996.

This meeting is being held for the following purposes:

Proposals of the Board of Directors

(1) To elect a Board of 11 directors;

Other

(2) To transact any other business that properly comes before the
meeting.

Only stockholders of record at the close of business on March 15, 1996,
will be entitled to notice of or to vote at the meeting. Whether or not you plan
to be present at the meeting, please mark, sign and return the accompanying form
of proxy in the enclosed postage prepaid envelope at your earliest convenience.

By Order of the Board of Directors

HUBERT GENTRY, JR.
Secretary

Houston, Texas
April 3, 1996

IMPORTANT

WE HOPE THAT YOU CAN ATTEND THIS MEETING IN PERSON. WHETHER OR NOT YOU PLAN
TO BE PRESENT AT THE MEETING, PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED
PROXY. NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
<PAGE> 4

LOGO

NORAM ENERGY CORP.
P.O. BOX 2628
HOUSTON, TEXAS 77252

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS
MAY 14, 1996

This Proxy Statement is furnished to stockholders of NorAm Energy Corp.
(the "Company") in connection with the solicitation of proxies on behalf of the
Board of Directors for use at the Annual Meeting of Stockholders of the Company
to be held on May 14, 1996 (the "Annual Meeting"), for the purposes set forth in
the accompanying Notice of Annual Meeting. The approximate mailing date of this
Proxy Statement is April 2, 1996.

The cost of preparing, assembling and mailing the Notice of Annual Meeting,
this Proxy Statement and the accompanying proxy will be borne by the Company. To
assist in the solicitation of proxies, the Company has engaged Georgeson & Co.,
Inc. for a fee not to exceed $10,000, plus out-of-pocket expenses. Proxies may
also be solicited personally or by telephone by directors, officers and regular
employees of the Company, who will receive no additional compensation therefor.

The accompanying proxy, if properly executed by a stockholder entitled to
vote, will be voted at the Annual Meeting, but may be revoked at any time before
the vote is taken. A proxy may be revoked at any time before it is exercised by
notifying the Secretary of the Company in writing before the proxy is exercised,
or by delivering to the Secretary of the Company a proxy bearing a later date or
by attending the Annual Meeting and voting in person.

The close of business on March 15, 1996 has been fixed by the Board of
Directors as the record date for the determination of stockholders entitled to
notice of and to vote at the Annual Meeting. At such date the Company had
outstanding 125,180,609 shares of common stock, $0.625 par value per share (the
"Common Stock"). See "Voting."

The Company will provide upon request, without charge, to any stockholder
entitled to vote at the Annual Meeting, a copy of its Annual Report on Form 10-K
filed with the Securities and Exchange Commission (the "SEC") for its most
recent fiscal year. Such request should be made to the Secretary of the Company
at the address shown above. The Annual Report to Stockholders, including
financial statements, for the fiscal year ended December 31, 1995, has been
mailed with this Proxy Statement to all stockholders. The Annual Report is not a
part of the proxy solicitation materials.

VOTING

Each holder of record of Common Stock at the close of business on March 15,
1996, is entitled to one vote for each share of such Common Stock outstanding in
such holder's name on the books of the Company on such date; provided, however,
that in the election of directors, cumulative voting is permitted so that each
such holder, in person or by proxy, has a number of votes equal to the number of
shares of Common Stock standing in such holder's name on the record date
multiplied by the number of directors to be elected. A stockholder may cast all
such votes for a single nominee for director or may distribute them among any
two or more of them as such stockholder sees fit. A stockholder may, in the
manner set forth on the enclosed proxy, instruct the proxy holders not to vote
such stockholder's shares for one or more of the named nominees. Abstentions
from voting in the election of directors are not included in determining the
outcome. If a stockholder wishes to cast such cumulative votes other than pro
rata, such stockholder should clearly indicate
<PAGE> 5

on the proxy the number of votes such stockholder wishes to cast for each
nominee. By virtue of cumulative voting, the proxy holders will have 11 votes
for each share held by each stockholder granting his or her proxy (unless voting
authority is withheld) and proxy holders could likely offset a particular
stockholder's instruction not to vote for one or more of the nominees or his
exercise of cumulative voting by the use of votes granted in other proxies.
Pursuant to the Company's ByLaws, any stockholder entitled to vote in the
election of directors may nominate one or more persons for election as directors
at an annual meeting of stockholders if notice in writing of such stockholder's
intent has been delivered to or mailed and received at the office of the
Secretary of the Company no later than 90 days prior to the anniversary date of
the immediately preceding annual meeting of stockholders of the Company.

Shares represented by a properly signed and returned proxy will be voted as
specified by the stockholder. If a proxy is signed and returned, but no
specification is made, the shares represented by such proxy will be voted "FOR"
all the listed nominees for director.

The approval and adoption of Proposal No. 1 will require the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
entitled to vote thereon. Abstentions are not counted as votes "for" or
"against" a proposal, but are counted in determining the number of shares of
Common Stock present or represented by proxy at the meeting.

The following table sets forth certain information concerning each person
known to be a beneficial owner of more than 5% of the outstanding shares of the
Company's Common Stock as of March 15, 1996:

<TABLE>
<CAPTION>
PERCENTAGE
NAME AND ADDRESS OF NUMBER OF OF
BENEFICIAL OWNER SHARES CLASS
-------------------------------------------------------------- --------- ----------
<S> <C> <C>
Ryback Management Corporation................................. 7,294,300 5.87%
7711 Carondelet Avenue
Box 1900
St. Louis, MO 63105
American Express Company...................................... 6,286,821 5.05%
American Express Tower
World Financial Center
New York, NY 10285
American Express Financial Corporation
IDS Tower 10
Minneapolis, MN 55440
</TABLE>

The foregoing information relating to Ryback Management Corporation is
based upon a Schedule 13G filing for the year ended December 31, 1995 filed with
the SEC on January 25, 1996 by Ryback Management Corporation. According to the
Schedule 13G, Ryback Management Corporation has sole voting and dispositive
power of all 7,294,300 shares. The shares of Common Stock are held for the
accounts of clients. The information relating to the American Express entities
is based upon a joint Schedule 13G filing for the year ended December 31, 1995
filed with the SEC by the American Express entities listed above. According to
the joint Schedule 13G, American Express Company and American Express Financial
Corporation share voting and dispositive power of all 6,286,821 shares.

ELECTION OF DIRECTORS AND BENEFICIAL
OWNERSHIP OF COMMON STOCK FOR OFFICERS AND DIRECTORS

Unless otherwise indicated on the proxy, the proxyholders will vote the
shares represented by such proxy for the election of each of the nominees listed
below, to serve until the next annual meeting of the stockholders and until
their successors are elected and qualified. The form of proxy solicits and the
proxyholders reserve the right to vote such proxies cumulatively and for the
election of less than all of the nominees for director. If for any reason any
nominee shall be unavailable for election to the Board of Directors, the holders
of proxies will vote for a substitute.

The 11 nominees who receive the most affirmative votes will be elected
directors of the Company.

2
<PAGE> 6

NOMINEES

All of the nominees are members of the present Board of Directors, except
for Mr. Bruce W. Wilkinson, and were elected by the stockholders at the 1995
annual meeting.

The following table sets forth certain additional information regarding the
nominees including the amount and percent of equity securities of the Company
beneficially owned, directly or indirectly, as of the date of this proxy
statement, by the nominees, by the executive officers named in the Summary
Compensation Table (the "Named Executives", see "Executive Compensation"), as
well as by the directors and executive officers as a group. Unless otherwise
indicated, each nominee has held his or her current position for more than the
last five years.

<TABLE>
<CAPTION>
NOMINEE AND FIRST BECAME A DIRECTOR SHARES OF COMMON STOCK
BIOGRAPHICAL SUMMARY(1) AGE OF THE COMPANY BENEFICIALLY OWNED (2)
- ----------------------------------------------- --- ----------------------- ----------------------
<S> <C> <C> <C>
Michael B. Bracy............................... 54 1992 114,626
Mr. Bracy has been Executive Vice President &
Principal Financial Officer of the Company
since October, 1991. He was Executive Vice
President of the Company and Chief Executive
Officer of Arkla Pipeline Group ("APG"), a
division of the Company from December, 1989
until October, 1991. He was Executive Vice
President of the Company and President of APG
from April, 1988 until December, 1989. He is
a director of Itron, Inc. of Spokane,
Washington.
Joe E. Chenoweth............................... 60 1990 10,660
Mr. Chenoweth was Senior Corporate Vice
President, International, Honeywell Inc., a
multinational advanced technology Company,
Minneapolis, Minnesota, from December, 1990
until his retirement on December 31, 1992.
Prior to that, he served Honeywell Inc. in
other executive positions.
O. Holcombe Crosswell.......................... 55 1988 10,133(3)
Mr. Crosswell is President of Griggs
Corporation, a real estate and investment
Company in Houston, Texas.
Walter A. DeRoeck.............................. 53 1986 15,562
Mr. DeRoeck currently serves as Chairman of
the Board of DBJ Interests, Inc., a privately
held holding company. In addition, he serves
as principal in Westlake Capital Group, a
limited partnership focusing on acquisitions
and private placements to mid-market
companies. Mr. DeRoeck also has ownership in
a commercial real estate firm. From 1992 to
1995, he was Chairman of the Board of Susan
Crane, Inc., a privately held company which
manufactured gift wrapping and decorating
products. Prior to that, he was Chairman of
the Board and Chief Executive Officer for
Union National Bank of Texas, Austin, Texas
from February, 1991 until May, 1993. He
served as President of such bank from
February 1989 until February, 1991.
</TABLE>

3
<PAGE> 7

<TABLE>
<CAPTION>
NOMINEE AND FIRST BECAME A DIRECTOR SHARES OF COMMON STOCK
BIOGRAPHICAL SUMMARY(1) AGE OF THE COMPANY BENEFICIALLY OWNED (2)
- ----------------------------------------------- --- ----------------------- ----------------------
<S> <C> <C> <C>
Mickey P. Foret................................ 50 1995 3,398
Mr. Foret has been Executive Vice President
and Chief Financial Officer of Northwest
Airlines, Inc. since 1993. He was Senior Vice
President, Planning & Finance of Northwest
Airlines, Inc. from December 1992 to
September 1993. Prior to that, he was
President and Chief Executive Officer of KLH
Computers, Inc. from June 1992 to September
1992. Since October of 1990 he has also
served as the President of KLC, Inc., a
privately owned real estate development and
construction company.
Joseph M. Grant................................ 57 1995 6,398
Mr. Grant is the Senior Vice President and
Chief Financial Officer of Electronic Data
Systems Corporation ("EDS"), and has been
with EDS since December 1990. He is on the
Board of Directors of EDS, American Eagle
Group, Incorporated and Heritage Media
Corporation. Prior to December 1990, Mr.
Grant was Executive Vice President of
American General Corporation.
Robert C. Hanna................................ 67 1989 29,149(4)
Mr. Hanna is a director of Imperial Holly
Corporation, Sugar Land, Texas. He was
President and Chief Executive Officer of
Imperial Holly Corporation and Chairman of
Holly Sugar Corporation, Colorado Springs,
Colorado, prior to his retirement on
September 30, 1993. He is also currently
serving as Chairman of The George Foundation.
W. Jeffrey Hart................................ 54 1995 11,398
Mr. Hart has been President of MAPCO
Petroleum Inc. since November of 1986. MAPCO
Petroleum is a division of Mapco Inc. He is
also Senior Vice President of MAPCO Inc. Mr.
Hart is also a member of the Board of
Directors of the National Petroleum Refiners
Association and PacifiCare of Oklahoma.
T. Milton Honea................................ 63 1992 356,519
Mr. Honea has been Chairman of the Board and
Chief Executive Officer of the Company since
December 1992. He was Vice Chairman of the
Board from July 1992 through December 1992.
He was Executive Vice President of the
Company from October 1991 until July 1992. He
was President & Chief Operating Officer of
Arkansas Louisiana Gas Company, a division of
the Company from October, 1984 to October,
1991. He is a director of Boatman's Arkansas,
Inc., a subsidiary of Boatman's Bancshares,
Inc.
</TABLE>

4
<PAGE> 8

- ---------------

(1) All directors and executive officers of the Company may be reached through
the Company at NorAm Energy Corp., P.O. Box 2628, Houston, Texas 77252.

(2) Represents less than 1% of the shares outstanding for each nominee as well
as for all directors and executive officers as a group.

(3) Includes 4,600 shares owned by a corporation of which Mr. Crosswell is
president. Mr. Crosswell shares voting and investment power in these
shares.

(4) Includes 1,017 shares owned by his stepson, as to which Mr. Hanna does not
possess any voting or investment power and as to which he disclaims
beneficial ownership.

(5) Includes 324,056 shares of Common Stock for which certain executive officers
of the Company have the right to acquire beneficial ownership, within 60
days, by exercise of options granted under the Company's stock option plans
and Incentive Equity Plan.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

The Company has adopted procedures to assist its directors and officers in
complying with Section 16(a) of the Securities Exchange Act of 1934, including
assisting the officers and directors in preparing forms for filing. Through an
oversight, Mr. Michael Means, President of Arkla, was late in filing a report
disclosing one transaction in Company Common Stock.

ORGANIZATION OF THE BOARD OF DIRECTORS

During 1995, the Company's Board of Directors held a total of ten regularly
scheduled and special meetings. During 1995, directors who were not officers or
employees of the Company or a subsidiary received an annual retainer of $24,000,
$1,000 for each meeting of the Board attended, $500 for participation in
telephonic board meetings, $500 for attendance at meetings of committees of the
Board held on the same day as Board meetings and $1,000 per meeting for
committee meetings held on any other day. Committee Chairmen also received an
annual retainer of $2,000. One-half of the annual retainer that each nonemployee
director received and one-half of the retainer Committee Chairmen received was
paid in restricted Common Stock of the Company. This restricted stock vests
one-third each year over three years. Directors were reimbursed for
out-of-pocket expenses incurred in connection with attending Board meetings.
Officers and employees of the Company are not compensated for serving on the
Board of Directors or any of the Board committees.

5
<PAGE> 9

To encourage greater stock ownership by directors the Company maintains
stock ownership guidelines for its nonemployee directors. The guidelines suggest
that nonemployee directors should own Company Common Stock equal in value to
five times their annual retainer and that directors should strive to meet these
guidelines within five years of the inception of the guidelines, or for new
directors within five years of the time such directors join the board. These
guidelines were instituted in 1994.

The Company has a mandatory director retirement age qualification and a
retirement plan for nonemployee directors (the "Director Retirement Plan"). The
mandatory director retirement age qualification states that a director will not
be eligible to stand for election as a director at any annual or special meeting
of stockholders that occurs after such director's 70th birthday.

The Director Retirement Plan provides a retirement benefit to any
nonemployee director who has served as a nonemployee director for at least five
(5) years and who serves as a director on or after the effective date of the
Director Retirement Plan. The Director Retirement Plan will pay an annual
benefit equal to the annual cash retainer in effect at the time of the
director's retirement, provided such director retires from service as a director
no later than the next annual meeting of stockholders following his or her 70th
birthday. Payment of the benefit will commence on the first day of the month
following the later of the month in which the director attains age 65 or the
month of the director's retirement and will be paid annually to the director for
a number of years equal to the director's full years of service but in no event
for more than ten (10) years.

- Audit Committee. The Company has a standing Audit Committee which
currently consists of Mr. Crosswell, Mr. DeRoeck, Mr. Foret and Mr. Grant. The
functions of the Audit Committee include recommending each year to the Board of
Directors the engagement of a firm of independent accountants for the Company
and its subsidiaries; reviewing the proposed scope of the audit, the reports to
be rendered and the fees to be charged by the Company's independent accountants;
reviewing the annual financial statements and the results of the audit with
management and the independent accountants; reviewing with management and the
independent accountants the recommendations made, if any, by the independent
accountants with respect to significant changes in accounting policies,
procedures and internal controls; and holding themselves available to meet with
the independent accountants to resolve matters that arise in connection with the
audit if and when it should become necessary. During 1995 the Audit Committee
held four meetings.

- Compensation and Benefits Committee. The Company has a standing
Compensation and Benefits Committee which currently consists of Mr. Chenoweth,
Mr. DeRoeck, Mr. Hanna, Mr. Hart, and Mr. Larry Wallace. The Compensation and
Benefits Committee considers and recommends, to the Board of Directors, salary
schedules and other forms of compensation for the officers and directors of the
Company. During 1995 the Compensation and Benefits Committee held eight
meetings.

- Governance Committee. The Company has a standing Governance Committee
which currently consists of all the nonemployee directors. This Committee is
responsible for recommending to the Board of Directors nominees for election as
directors. During 1995 the Governance Committee held three meetings. This
committee also has responsibility for, among other things, Chief Executive
Officer evaluation, assessment of director performance and committee assignments
and formulating and maintaining the Corporate Governance Guidelines, which are
discussed more fully as follows.

- Environmental Committee. The Company has a standing Environmental
Committee which currently consists of Mr. Bracy, Mr. Chenoweth, Mr. Hart and Mr.
Wallace. The Environmental Committee is responsible for formulating and
monitoring the Company's environmental policies. During 1995 the Environmental
Committee held two meetings.

- Investment Committee. The Company has a standing Investment Committee
which currently consists of Mr. Bracy, Mr. Foret, Mr. Grant, Mr. John Gover and
Ms. Jones. The Investment Committee considers and recommends to the Board of
Directors actions with respect to the Company's Retirement and Pension Plans,
including recommendations regarding plan trustees and investment managers.
During 1995 the Investment Committee held five meetings.

6
<PAGE> 10

- --------------------------------------------------------------------------------

CORPORATE GOVERNANCE GUIDELINES

The NorAm Board has adopted Board Guidelines on Significant Corporate
Governance Issues, which are presented in abridged form below:

- Mission of the Board

The Board has the ultimate responsibility to the shareholders of the
corporation for the well-being of the enterprise.

- Selection of Chairman and Chief Executive Officers

The Board has as one of its key responsibilities the selection of a
Chairman and Chief Executive. The Board is free to make this choice in any
manner deemed in the best interests of the Company at any point in time.

- Number of Committees

The current committee structure of the Company is deemed to be appropriate
at this time. The five committees are Governance, Audit, Compensation &
Benefits, Investment and Environmental. The Governance Committee shall consist
of all non-employee Directors and also will function as the Nominating
Committee. The Nominating Committee shall be a subcommittee of the Governance
Committee. The Chair of the Governance Committee shall be the Lead Director.

The current Lead Director is Robert C. Hanna.

- Committee Agenda

The Chairman of the each committee, in consultation with the appropriate
members of Management and staff, will develop the Committee's agenda.

Each committee will establish goals for itself and will measure its
performance against these goals annually.

- Selection of Agenda Items for Board Meetings

The Chairman of the Board and the Chief Executive Officer (if the Chairman
is not the Chief Executive Officer), in consultation with the Chair of the
Governance Committee and appropriate members of management and staff, will
establish the agenda for each Board meeting.

Each Board member is free and encouraged to suggest the inclusion of
item(s) on the agenda.

- Board Materials Distributed in Advance

The information and data that are important to the Board's understanding of
the business will be distributed in writing to the Board before the Board meets.

- Regular Attendance of Non-Directors at Board Meetings

The Board is comfortable with the regular attendance at each Board Meeting
of non-Board members who report directly to the Chief Executive Officer.

- Board Access to Senior Management

Board members have appropriate access to the members of NorAm's Management
who report directly to the chief Executive Officer.

7
<PAGE> 11

- Former Chief Executive Officer's Board Membership

When the Chief Executive Officer leaves that position, he/she should offer
his/her resignation from the Board at the same time. Whether the individual
continues to serve on the Board then becomes a matter for decision by the Board.
A former Chief Executive Officer who does serve as a member of the Board will
not serve on the Governance, Audit, or Compensation and Benefits Committees.

- Board Membership Criteria

The Governance Committee is responsible for reviewing on an annual basis
the appropriate skills and characteristics required of Board members. This
assessment should include issues of diversity, age, skills, ratio of active
versus retired members, understanding of the businesses in which the Company is
engaged, etc. -- all in the context of an assessment of the perceived needs of
the Board at that point in time versus the current composition of the Board.

- Selection of New Director Candidates

The Board itself shall be responsible for selection of its own members and
for the procedure for doing so. The Board delegates the screening process
involved to the Governance Committee (which may, in turn, designate two or more
of its members to perform this function) with the direct input from the Chairman
of the Board as well as the Chief Executive Officer.

During the past two years, the recruitment of new board members has been
governed by these guidelines. Additionally, the Governance Committee has engaged
a prominent executive search firm to identify candidates with the desired
characteristics. The Board believes that this process has been notably
successful, bringing highly qualified independent directors to the NorAm Board.

- Assessing the Board's Performance

The Governance Committee is responsible for conducting a Board performance
assessment annually and reporting the results to the full Board. This should be
done following the end of each fiscal year together with the report on Board
membership criteria.

This assessment should be of the Board's contribution as a whole. It should
specifically review areas in which the Board and/or the Management believes a
better contribution could be made. Its purpose is to increase the effectiveness
of the Board. A performance review of individual Board members may also be
conducted with or without the help of an outside consultant, utilizing peer
review and self review techniques.

- Directors Who Change Their Present Job Responsibility

Individual directors who experience a change in the position and
responsibility they held when they were elected to the Board should volunteer to
resign from the Board.

- Retirement Age

The Board believes that the current retirement age of 70 is appropriate.

- Formal Evaluation of the Chief Executive Officer

The Governance Committee will evaluate the performance of the CEO each
year, in part based on certain agreed-upon corporate and personal objectives.

The evaluation should be based on objective criteria such as performance of
the business, accomplishment of long-term strategic objectives, development of
Management, etc.

The evaluation will be used by the Compensation and Benefits Committee in
the course of its deliberations when considering the compensation of the Chief
Executive Officer.

8
<PAGE> 12

- Succession Planning

The Board has the responsibility for determining CEO succession, but there
should be an annual report by the Chief Executive Officer to the Board on
succession planning.

In addition to succession planning, the Board believes that one of its most
fundamental responsibilities is to actively oversee the development of, and to
approve the Company's strategic direction. Accordingly, in 1995, the Board
initiated the practice of holding an annual two-day meeting with senior
management and appropriate outside advisors focusing solely on strategic issues.
- --------------------------------------------------------------------------------

9
<PAGE> 13

1995 COMPENSATION AND BENEFITS COMMITTEE REPORT

The Compensation and Benefits Committee (the "Compensation Committee") of
the Board of Directors of the Company has prepared the following report
regarding 1995 executive compensation. The Compensation Committee, which is
composed entirely of non-employee directors, is responsible for all components
of the Company's officer compensation programs and some aspects of non-officer
compensation. This report describes the basis on which 1995 compensation
determinations were made by the Compensation Committee with respect to the
Company's executive officers, including the Named Executives. The Compensation
Committee works closely with the entire board in the execution of its duties.
This report is required by rules established by the SEC and provides specific
information regarding compensation for NorAm's Chairman and Chief Executive
Officer (sometimes hereinafter referred to as the "CEO") and for the four other
most highly compensated executive officers, as well as compensation information
about all executive officers of the Company.

EXECUTIVE COMPENSATION POLICY AND PHILOSOPHY

The Company's executive compensation programs are based on the following
guiding principles:

Pay-for-Performance -- To this end, the Company has placed
considerable emphasis on incentive compensation programs which reward
executives for the achievement of specific operating and financial
objectives and for total shareholder returns.

Pay Competitiveness -- The Company believes it must offer competitive
total compensation opportunities in order to attract, motivate, and retain
executive talent. The company's philosophy is to target the market median
(50th percentile) for all elements of executive compensation. The Company
determines competitive levels of compensation using published compensation
surveys, information obtained from independent compensation consultants,
and an analysis of compensation data contained in the proxy statements for
the 17 industry peer companies included in the Company's Total Shareholder
Return Graph. The information obtained from published surveys and
compensation consultants is distinct from the proxy peer group data, and
the companies included in these analyses are not explicitly included in the
Total Shareholder Return Graph. The published survey data and consultant
data reflect general industry companies with revenues comparable to the
Company and natural gas companies of all sizes.

Executive Stock Ownership -- The Company believes that a significant
portion of each executive's compensation and wealth accumulation
opportunities should be tied to the Company's stock price and dividend
performance. As a result, the Company has established stock ownership
guidelines for its officers. The Company also provides a significant
portion of its executive compensation in the form of stock-based
compensation.

DESCRIPTION OF THE CURRENT
EXECUTIVE COMPENSATION PROGRAM

This section describes each of the principal elements of the Company's
executive compensation program with specific reference to the objectives
discussed above.

BASE SALARY PROGRAM

The Company's base salary levels are determined based on market
compensation rates, each employee's performance over time and each individual's
role in the Company. Salaries for executives as a group are reviewed annually
considering a variety of factors, including individual performance, general
levels of market salary increases, and the Company's overall financial results
(as described in detail in the "Annual Incentive Plan" section of this report).
All salary increases are granted within a pay-for-performance framework, but
performance criteria vary significantly by person. Also, performance is assessed
qualitatively and no specific weighting is attached to performance factors
considered for each executive or the Company for base salary determinations.
Further, salary adjustments are not affected by any contractual requirements.
The Company's

10
<PAGE> 14

actual base salaries for executives are generally consistent with the Company's
philosophy of targeting the market median.

ANNUAL INCENTIVE PLAN

The Company's annual incentive plan is intended to (1) reward key employees
based on Company, business unit, and individual performance; (2) motivate key
employees; and (3) provide competitive cash compensation opportunities to plan
participants. As a pay-for-performance plan, incentive awards are paid annually
based on the achievement of performance objectives for the most recently
completed fiscal year. For 1995, corporate performance measures in the annual
incentive plan included earnings per share from continuing operations, return on
capital employed and net cash flow from continuing operations.

These measures are weighted equally for the corporate component of the
annual incentive. Business unit performance measures varied by unit but included
(in addition to the measures cited above) expense management, operating income,
net cash flow (before dividends), customer satisfaction and pre-tax return on
rate base. These measures are weighted equally for the business unit component
of the annual incentive. Further, for senior corporate executives (including the
Named Executives) the executive's contribution to overall corporate success is
assessed as part of the plan. This assessment is handled using a subjective
review by the Chief Executive Officer of performance (considering such factors
as teamwork and cooperation) rather than focusing on specific measures.

For corporate headquarters staff positions below the senior executive
level, the size of the annual incentive funding pool is determined based 50% on
corporate financial performance (using the measures cited above) and 50% on
controllable general & administrative expense and the average of the business
units performance with each weighted equally. For business unit positions below
the senior executive level, 50% of the annual incentive funding pool is based on
corporate performance and 50% is based on business unit performance. For both
corporate positions and business unit positions, individual performance factors
are used to allocate the fund pools among participants in a non-formula fashion
without any specific goal weightings. For senior executives, corporate
performance is weighted 40%, business unit performance is weighted 40%, and
overall corporate contributions made by the individual are weighted 20%.

As in 1994, the Compensation Committee requires that for awards earned in
1995 (and paid in 1996) 50% of such awards will be paid in the form of Company
stock. This program is intended to support the philosophy of encouraging greater
executive officer stock ownership and to assist executive officers in achieving
the stock ownership guidelines discussed below.

Annual incentive opportunities are targeted at the market median. For 1995,
annual incentive awards actually earned were generally above targeted levels for
corporate positions since the Company generally performed above targeted levels
on the measures described above. For business unit positions, actual awards were
generally above target, since these business units generally performed above
targeted levels.

LONG-TERM INCENTIVES

The Company believes that its executives should have an ongoing stake in
the success of the business. The Company also believes these key employees
should have a considerable portion of their total compensation paid in the form
of stock, since stock related compensation is directly tied to stockholder
value.

Long-term incentive award opportunities are provided in 2 forms: stock
options and performance based restricted stock. Award opportunities under these
two programs, combined, are targeted at the market median. In 1995, one-half of
the expected value for long-term incentive awards was allocated to stock option
grants and one-half to performance based restricted stock grants. Actual payouts
have been below target in recent years because of performance on plan measures
falling below target, however, 1995 performance was above target.

Stock options provide a strong tie between pay and performance, since
executives only realize value from stock options if the Company's share price
rises after the date of grant. All stock options in 1995 were granted at 100% of
fair market value and vest at a rate of one-third per year over 3 years.

11
<PAGE> 15

The performance based restricted stock grants made in 1995 (as in prior
years) are fully at risk based on both the performance of the Company and the
continued employment of the officer. This means that shares of restricted stock
that are granted may never be earned (or vested) by the officer unless the
Company achieves certain pre-set performance objectives (at least at a threshold
level) which are set by the Committee and unless the officer remains in the
employ of the Company for the specified period of time. Grants made under the
plan in 1995 will vest based on the Company's earnings per share performance
relative to a 3-year strategic plan. This measure was selected to increase
executive focus on the need to improve the level of earnings in order to build
shareholder value. Dividend payments on performance based restricted stock are
also paid on those restricted shares that ultimately vest based on performance.
Dividend payments on earned performance based restricted stock are intended to
reward executives for maximizing total shareholder returns.

STOCK OWNERSHIP GUIDELINES

In order to encourage greater executive stock ownership, the Company
maintains stock ownership guidelines for its officers. These guidelines are
intended to strengthen the link between executive and stockholder interests. The
level of ownership specified under the guidelines ranges from about 75% to 150%
of historic base salary depending on the level of the officer. It should be
noted that these guidelines have been established as a fixed number of shares
based on a November 1993 share price and that it is suggested that officers meet
these ownership guidelines within five years.

1995 CEO COMPENSATION

The Committee has attempted to target the CEO's total compensation package
at approximately the median of the marketplace for the 17 peer companies shown
in the performance graph. However, the Committee, considering the strongly
expressed views of the CEO, decided to continue to focus as much of the CEO's
compensation on stock-based compensation as possible in 1995 in order to place
significant emphasis on returns to shareholders.

To this end, the CEO's compensation program is structured as follows:

Base Salary -- The CEO's 1995 base salary was provided in 2 forms: (1)
a time vested restricted stock grant and (2) an amount equal to the
estimated tax and benefit liability for the CEO on the restricted stock
grant with such amount being withheld to satisfy such liabilities
("Withholding Amount"). It should be noted that the salary figures shown in
the Summary Compensation Table for 1995 are reflective of just the
Withholding Amount portion of base salary. The value, at the date of grant,
of the restricted stock granted to Mr. Honea in 1995 in lieu of the portion
of his base salary remaining after deduction of the Withholding Amount, is
disclosed under the Restricted Stock Award column of the Summary
Compensation Table (and is described in greater detail below). The CEO's
base salary was determined solely with reference to median market data on
CEO's salaries within the industry and a review of Mr. Honea's performance
(which was conducted subjectively based on progress in implementing the
company's strategic plan and various operating initiatives). Mr. Honea's
actual base salary (including the cash payment and the time-vested
restricted stock grant) is consistent with the market median for this peer
group but is below the market median for general industry and pipeline
industry companies with similar revenues.

Other Stock Based Compensation -- In lieu of a portion of his base
salary remaining after deduction of the Withholding Amount, the CEO
received a grant of restricted stock covering the January through December
1995 period. The structure of the CEO's compensation program in 1995
provided for the CEO to receive, in lieu of a portion of his base salary, a
grant of 13,047 shares of time vested restricted stock on the first day of
each 1995 fiscal year quarter, with the transferability restrictions
lapsing 6 months following the grant date. During this restriction period,
the value of the CEO's restricted stock varied based on the Company's stock
price performance. Dividends were paid on restricted stock for the CEO
during the transferability restriction period in order to reward the CEO
based on total shareholder return performance. Also, since the price of the
Company's stock rose subsequent to the date the number of shares of
restricted stock was determined, the CEO's actual base salary (cash plus
time vested restricted

12
<PAGE> 16

stock) was above targeted market median levels (which is aligned with the
increase in share price enjoyed by shareholders).

The Committee, considering the strong preferences of the CEO, elected
to continue the current method of paying the CEO's base salary in
time-vested restricted stock and withholding an amount equal to the tax and
benefit obligations. Also, the targeted level of base salary for 1996 was
not increased over 1995 levels.

Annual Incentive -- The CEO's actual annual incentive for the 1995
performance year was $345,000. All of this annual incentive was paid in
shares of Company common stock, reduced by the estimated tax and benefit
liability for the CEO on this annual incentive payment. The value of this
award was above target because the Company's performance, based on the
corporate performance objectives discussed under the annual incentive plan
above, was above target. Since the CEO's annual incentive award
opportunities are targeted at the market median for peer companies, his
actual incentive award was above industry target levels as well.

Long-Term Incentives -- In 1995, the CEO received a grant of
performance-based restricted stock under the Incentive Equity Plan. The
performance sensitivity of this program is tied to corporate performance on
the 3 year earnings per share objective described in the long-term
incentive section above. He also received an award of 80,000 stock options.
These stock options were granted at 100% of fair market value on the grant
date and vest at a rate of one-third per year over 3 years. The performance
sensitivity of the stock options is reflected in the fact that options only
produce income for the recipient if the Company's share price rises above
the price of the stock on the date of grant. The CEO also received a grant
of 6,650 time-vested restricted shares in addition to his ongoing long-term
incentive grant. This award was intended to enhance the competitiveness of
the CEO's compensation package. The combined stock option,
performance-based restricted stock and time-vested restricted stock awards
are targeted at slightly above the market median for industry peers shown
in the Performance Graph. However, the CEO's targeted total direct
compensation (including base salary, target annual incentives, and
long-term incentives) is consistent with the median for the industry peers.

SECTION 162(M)

Section 162(m) of the Internal Revenue Code prevents publicly traded
companies from receiving a tax deduction on nonperformance based compensation to
executive officers in excess of $1 million. Under the Company's Incentive Equity
Plan approved in 1994, all stock option awards have been structured to qualify
as performance-based compensation which will not be subject to the $1 million
limit.

The Company's cash compensation levels for the proxy named officers do not
exceed the $1 million pay limit and will most likely not be affected by the
regulations in the near future. As such, no further actions have been taken with
regard to Section 162(m) at this time.

The Compensation and Benefits Committee

Mr. Walter A. DeRoeck, Chairman
Mr. Joe E. Chenoweth
Mr. Robert C. Hanna
Mr. W. Jeffrey Hart
Mr. Larry C. Wallace

13
<PAGE> 17

EXECUTIVE COMPENSATION

The following table sets forth information with respect to the Chief
Executive Officer and the four other most highly compensated executive officers
of the Company at the end of 1995 as to whom the total annual salary and bonus
for 1995 exceeded $100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
AWARDS
ANNUAL COMPENSATION ---------------------- PAYOUTS
OTHER RESTRICTED ----------
------------------- ANNUAL STOCK OPTIONS/ LONG-TERM ALL OTHER
NAME AND SALARY BONUS COMPEN- AWARD(S) SARS INCENTIVE COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(1) SATION($) ($)(2) ($) PAYOUTS($) ($)(3)
- --------------------------- ---- ------- ------- ------- ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
T. Milton Honea, Jr........ 1995 195,196(4) 345,000 1,373(5) 387,843(6) 80,000 0 48,000
Chairman & CEO, 1994 198,909(4) 300,000 4,361 222,577 54,100 0 48,000
NorAm Energy Corp. 1993 346,593 131,557 5,976 249,795 0 0 26,000
Charles M. Oglesby......... 1995 281,250(7) 160,000 0 134,375(8) 73,700 0 11,250
President
NorAm Trading & Transp.
Group
Michael B. Bracy........... 1995 300,000 140,000 700(5) 0 28,200 0 24,420
EVP & CFO, 1994 300,000 107,000 2,534 0 25,600 0 25,140
NorAm Energy Corp. 1993 300,000 119,000 3,668 0 0 0 18,000
William A. Kellstrom....... 1995 275,004 115,000 350(5) 0 13,900 0 26,640
President, NorAm 1994 275,004 96,000 1,029 0 13,200 0 22,590
Energy Services 1993 275,004 184,000 679 0 0 0 22,647
Hubert Gentry, Jr.......... 1995 262,500 105,000 350(5) 0 11,800 0 23,250
SVP, General Counsel and 1994 262,500 125,000 1,260 0 11,200 0 21,150
Secretary NorAm Energy 1993 252,090 90,000 1,820 0 0 0 15,101
Corp.
</TABLE>

- ---------------

(1) Mr. Honea received 100% of his annual incentive in shares of Company common
stock net of the estimated tax and benefit liability, and the other named
executives received 50% of their annual incentive in shares of Company
common stock.

(2) As of the end of Fiscal 1995, the aggregate restricted stock holdings of
each named executive were as follows (using the 12/31/95 closing stock price
of $8.875, and noting that these target grants are fully at risk and any
payout will be earned over established performance cycles (generally three
years) based on Company performance as previously described, except as noted
in the following sentences):

<TABLE>
<CAPTION>
SHARES VALUE ($)
------ ---------
<S> <C> <C>
Honea.................................................... 91,711 813,935
Oglesby.................................................. 46,933 416,530
Bracy.................................................... 26,067 231,345
Kellstrom................................................ 13,550 120,256
Gentry................................................... 11,483 101,912
</TABLE>

The shares and value for Mr. Honea include 27,094 restricted shares
received in lieu of a portion of his base salary and 6,650 restricted
shares received as a competitive adjustment. Of the shares received in lieu
of salary, 13,547 vested on January 1, 1996 and 13,547 vested on April 1,
1996. Of the competitive adjustment shares, 2,216 will vest on May 8, 1996,
2,217 will vest on May 8, 1997 and 2,217 will vest on May 8, 1998. The
shares and value for Mr. Oglesby include 25,000 shares received as an
employment incentive. These shares will vest on April 1, 1998.

(3) Amount represents ESIP and ESIP Restoration Plan Company contributions.

(4) Represents withholding equal to the estimated tax and benefit liability for
Mr. Honea's stock for salary arrangement.

14
<PAGE> 18

(5) The total value of executive perquisites and benefits did not exceed the
lesser of $50,000 or 10% of the total of annual salary and bonus reported
for any Named Executive. The amounts shown for 1995 represent dividends
paid on restricted stock awarded for Cycle V.

(6) Represents value of shares received by Mr. Honea in lieu of the portion of
his base salary remaining after deduction of the Withholding Amount, and an
additional grant of 6,650 restricted shares given to enhance the
competitiveness of Mr. Honea's pay package.

(7) Represents salary paid since Mr. Oglesby's hire date of April 1, 1995.

(8) Represents value of shares received by Mr. Oglesby as an employment
incentive.

EMPLOYMENT AGREEMENTS

Since March of 1993, it has been the philosophy of the Company and the
board that employment agreements for officers are not generally essential to the
employment and retention of management. However, the Company recognizes that
special circumstances may exist that call for detailed agreements describing
certain objectives that the Company wishes to achieve during a specified period
of time. The following employment agreements were in effect for all or part of
1995 for the Named Executives:

Mr. Kellstrom had an employment agreement with the Company which expired on
September 30, 1995. Mr. Kellstrom continues in his present capacity as Senior
Vice President, without an employment agreement as do all the Company's other
executive officers.

INCENTIVE EQUITY PLAN

The Company currently maintains an Incentive Equity Plan (the "IEP") for
key employees as determined by the Compensation Committee of the Board of
Directors, including the Named Executives who are still employed by the Company.
The IEP superseded and replaced the Company's Long Term Incentive Compensation
Plan with respect to performance cycles beginning after December 31, 1993. The
IEP provides for options to purchase shares of common stock, stock appreciation
rights, restricted stock, opportunity shares, performance units and annual
incentive awards.

15
<PAGE> 19

The following table shows, as to the Named Executives, information about
restricted stock awards granted in the last fiscal year. As previously
described, these grants are fully at risk and any payment will be earned over
three-year performance cycles based on Company performance.

LONG-TERM INCENTIVE PLAN AWARDS TABLE

LONG-TERM INCENTIVE PLANS -- IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF PERFORMANCE OR NON-STOCK PRICE BASED PLANS
SHARES, OTHER PERIOD ----------------------------------
UNITS OR UNTIL MAXIMUM
OTHER MATURATION THRESHOLD TARGET ($ OR
NAME RIGHTS($)(1) OR PAYOUT ($ OR #) ($ OR #) #)
- ---------------------------------- ------------ -------------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
T. Milton Honea, Jr............... 30,000 01/01/95- 15,000 30,000 45,000
12/31/97
Charles M. Oglesby................ 16,200 01/01/95- 8,100 16,200 24,300
12/31/97
4,600 01/01/95- 2,300 4,600 6,900
12/31/96
1,133 01/01/95- 567 1,133 1,700
12/31/95
Michael B. Bracy.................. 13,300 01/01/95- 6,650 13,300 19,950
12/31/97
William A. Kellstrom.............. 6,600 01/01/95- 3,300 6,600 9,900
12/31/97
Hubert Gentry, Jr................. 5,600 01/01/95- 2,800 5,600 8,400
12/31/97
</TABLE>

- ---------------

(1) Under the Incentive Equity Plan, shares vest on the achievement of
cumulative earnings per share over the performance cycle compared to a
pre-set objective. Below the threshold performance level, 0% of the target
shares are earned. No minimum payment is guaranteed. At threshold
performance levels, 50% of the target shares are earned. At maximum
performance levels, 150% of the target shares are earned.

16
<PAGE> 20

STOCK OPTIONS/STOCK APPRECIATION RIGHTS

As indicated above, the Incentive Equity Plan provides for grants of stock
options, and/or stock appreciation rights. The following table summarizes option
grants during 1995 for the Named Executives.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE
---------------------------------------------------------- AT ASSUMED ANNUAL RATES
% OF TOTAL OF
NUMBER OF OPTIONS STOCK PRICE APPRECIATION
SECURITIES GRANTED TO FOR OPTION TERM(1)
UNDERLYING EMPLOYEES EXERCISE PRICE EXPIRATION -------------------------
NAME OPTIONS GRANTED IN 1995 PER SHARE($) DATE 5% 10%
- ----------------------- --------------- ---------- -------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
T. Milt Honea, Jr...... 70,000 13.6% $ 5.25 01/09/05 $231,525.00 $584,325.00
10,000 1.9% $6.375 05/07/05 $ 40,162.50 $101,362.50
------ ----------- -----------
80,000 15.5% $271,687.50 $685,687.50
====== =========== ===========
Charles M. Oglesby..... 73,700 14.3% $5.375 03/31/05 $249,566.63 $629,858.63
Michael B. Bracy....... 28,200 5.5% $ 5.25 01/09/05 $ 93,271.50 $235,399.50
William A. Kellstrom... 13,900 2.7% $ 5.25 01/09/05 $ 45,974.25 $116,030.25
Hubert Gentry, Jr...... 11,800 2.3% $ 5.25 01/09/05 $ 39,028.50 $ 98,500.50
</TABLE>

- ---------------

(1) Calculation based on the stock option exercise price over a ten-year period
assuming annual compounding. The columns present an estimate of potential
values based on certain mathematical assumptions. The actual value, if any,
an executive may realize is dependent upon the market price.

The following table shows aggregate option and/or stock appreciation rights
exercised in the last fiscal year and fiscal year-end option and/or stock
appreciation rights "in the money" values for the Named Executives.

OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUE

<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTION/SARS OPTION/SARS
SHARES AT FY-END(#) AT FY-END($)
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED($) UNEXERCISABLE UNEXERCISABLE
- --------------------------------------- ----------- ----------- -------------- -----------------
<S> <C> <C> <C> <C>
T. Milton Honea, Jr.................... 0 0 18,033/116,067 $42,828/$364,409
Charles M. Oglesby..................... 0 0 0/73,700 $0/257,950
Michael B. Bracy....................... 0 0 8,533/45,267 $20,266/$142,759
William A. Kellstrom................... 0 0 79,400/22,700 $10,450/71,288
Hubert Gentry, Jr...................... 0 0 3,733/19,267 $8,866/$60,509
</TABLE>

RETIREMENT PLANS

The Company has a defined benefit retirement plan (the "Retirement Plan"),
covering all full time employees of the Company (except employees of the
Minnegasco Division of the Company). A participant becomes fully vested after
completing five years of active service with the Company, and the Retirement
Plan also provides disability and spousal death benefits. Benefits are based on
final average monthly compensation and the participant's years of service. The
formula uses final average monthly compensation based on the highest monthly
compensation during a 36 consecutive calendar month period within the last 120
calendar

17
<PAGE> 21

months. When an employee is paid on other than a monthly basis, pay for the
appropriate number of pay periods is used to reflect 36, 60 or 120 months as
applicable.

The following table shows the estimated maximum annual benefits payable
upon retirement to persons in specified salary and bonus levels and years of
credited service classifications:

ESTIMATED ANNUAL RETIREMENT BENEFITS

<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE
PLAN ---------------------------------------------------------------
COMPENSATION 10 15 20 25 30 35
--------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
100,000........................... $ 21,250 $ 31,875 $ 42,500 $ 43,015 $ 51,318 $ 60,221
200,000........................... 46,250 69,375 92,500 92,500 108,618 126,721
300,000........................... 71,250 106,875 142,500 142,500 165,618 193,221
400,000........................... 96,250 144,375 192,500 192,500 222,618 259,721
500,000........................... 121,250 181,875 242,500 241,500 279,618 326,221
600,000........................... 146,250 219,375 292,500 292,500 336,618 392,721
700,000........................... 171,250 256,875 342,500 342,500 393,618 459,221
800,000........................... 196,250 294,375 392,500 392,500 450,618 525,721
</TABLE>

The compensation covered by the Retirement Plan consists of salaries and
bonuses paid to Retirement Plan participants, including salaries and bonuses set
forth in the Summary Compensation Table. The Named Executives have credited
years of service under the Retirement Plan as follows: Mr. Honea 11, Mr. Bracy,
11, Mr. Gentry, 17, Mr. Kellstrom, 3 and Mr. Oglesby, 1. All amounts shown in
the table reflect the general method of payment of benefits, which is a straight
life annuity. The benefits shown reflect reductions, where applicable, for
Social Security benefits or other offsetting amounts.

Currently, Code Sections 401(a)(17) and 415 contain rules that limit the
amounts payable from the Retirement Plan. The Company maintains an unfunded
non-qualified retirement income plan (the "Retirement Restoration Plan") to
offset these limitations. The Retirement Restoration Plan provides that the
Company will pay a participant in the Retirement Plan the difference between the
amount paid and that which would have been paid to the participant under the
Retirement Plan if the Code limitations had not been applicable.

The Company also maintains a Non-qualified Unfunded Executive Supplemental
Income Retirement Plan for certain key employees as designated by the Board of
Directors. Participation in this plan was frozen on May 11, 1985 to employees
participating as of April 11, 1985. The annual base salary amount used to
determine the benefit payable from this plan was frozen as of May 11, 1985, or
the date the participating individual's agreement was signed, whichever was
later. A participant whose employment is terminated at age 65 or thereafter,
with a minimum 10 years of service will receive benefits equal to five times his
final annual compensation at May 11, 1985, plus interest. A participant whose
employment is terminated prior to age 65, but after 10 years of service, is
entitled to receive reduced benefits which are payable beginning not earlier
than age 55. This plan also provides for payment of similar benefits to the
participant's beneficiaries in event of the participant's death. The estimated
annual benefit payable upon retirement at normal retirement age for Mr. Honea is
$109,036 and $116,305 for Mr. Bracy. This benefit is paid for the ten year
period following retirement. The other Named Executives do not participate in
this plan.

The Minnegasco Division and certain subsidiaries of the Company related to
Minnegasco operations, maintain a defined benefit pension plan for eligible
employees. None of the Named Executives are covered by the Minnegasco Pension
Plan. Benefits under this plan are determined on the basis of an employee's
years of service, highest average compensation paid during a 60-month period
prior to retirement and other factors. Compensation used for the benefit
determination does not include incentive compensation payments or deferrals to
non-qualified plans.

18
<PAGE> 22

PERFORMANCE GRAPH

In accordance with the requirements of the SEC, the following line graph
presents a comparison of the cumulative five-year stockholder returns (including
the reinvestment of dividends) for the Company, the Standard and Poor's 500
Stock Index and an index of peer companies selected by the Company. These peer
companies are identified below.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS*
AMONG NORAM ENERGY CORP., S&P 500 INDEX AND A COMPOSITE PEER GROUP**

<TABLE>
<CAPTION>
MEASUREMENT PERIOD NORAM ENERGY S&P 500
(FISCAL YEAR COVERED) CORP. INDEX PEER GROUP
<S> <C> <C> <C>
1990 100 100 100
1991 67 130 94
1992 48 140 107
1993 45 156 132
1994 32 157 129
1995 56 215 181
</TABLE>

* Assumes $100 invested on December 31, 1990 in the common stock of the
Company, the S&P 500 Index and the Composite Peer Group. Investment is
weighted on the basis of market capitalization. Total Return data assumes the
reinvestment of dividends and was prepared by Standard & Poor's Compustat
Services.

** The peer group includes the following companies: Atlanta Gas Light Co.,
Brooklyn Union Gas Co., Coastal Corp., Columbia Gas System, Energen Corp.,
Enron Corp., Enserch Corp., KN Energy Inc., MCN Corp., Nicor Inc., Oneok
Inc., Pacific Enterprises, PanEnergy (formerly Panhandle Eastern Corp.),
Peoples Energy Corp., Sonat Inc., Transco Energy Co., Washington Gas Light
Co., and Williams Cos. Inc. Note that Transco Energy was only included in the
composite peer group index returns through calendar year 1994 since the
company was acquired in 1995.

19
<PAGE> 23

COMPARISON OF ONE YEAR CUMULATIVE TOTAL RETURNS*
AMONG NORAM ENERGY CORP., S&P 500 INDEX AND A COMPOSITE PEER GROUP**

<TABLE>
<CAPTION>
MEASUREMENT PERIOD NORAM ENERGY S&P 500
(FISCAL YEAR COVERED) CORP. INDEX PEER GROUP
<S> <C> <C> <C>
1994 100 100 100
1995 172 138 140
</TABLE>

* Assumes $100 invested on December 31, 1994 in the common stock of the
Company, the S&P 500 Index and the Composite Peer Group. Investment is
weighted on the basis of market capitalization. Total Return data assumes the
reinvestment of dividends and was prepared by Standard & Poor's Compustat
Services.

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

Coopers & Lybrand L.L.P., independent public accountants, were the
principal accountants for the Company for 1995. Representatives of Coopers &
Lybrand L.L.P. are expected to be present at the Annual Meeting, with the
opportunity to make a statement if they desire to do so and to respond to
appropriate questions. As in prior years, the Company will select the principal
accountant for the current fiscal year in September of 1996 based upon the
recommendation of the Audit Committee.

SUBMISSION OF STOCKHOLDER PROPOSALS

Stockholder proposals must be received at the Company's principal executive
offices, P.O. Box 2628, Houston, Texas 77252, by December 2, 1996, for inclusion
in the proxy materials relating to the 1997 annual meeting of stockholders.

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OTHER MATTERS

Management does not know of any other matters to come before the Annual
Meeting. If any other matters do properly come before the meeting, it is the
intention of the persons appointed in the enclosed form of proxy to vote the
proxy in accordance with their judgment on such matters unless such authority is
specifically withheld.

By Order of the Board of Directors

HUBERT GENTRY, JR.
Secretary

Houston, Texas
April 3, 1996

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NORAM ENERGY CORP.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints T. Milton Honea, Michael B. Bracy and Hubert
Gentry, Jr., and each of them, Proxies with power of substitution, and hereby
authorizes them to represent and to vote, as designated below, all of the
shares of stock of NorAm Energy Corp., held of record by the undersigned on
March 15, 1996, at the Annual Meeting of Stockholders to be held in Houston,
Texas on Tuesday, May 14, 1996 and at all adjournments thereof, with all powers
the undersigned would possess if personally present. IF NO DIRECTION IS MADE AS
TO VOTING, THE PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS. This card
also constitutes voting instructions for all shares (if any) votable by the
undersigned as a participant in the Minnegasco Employee Retirement Savings Plan
and the NorAm Employee Savings and Investment Plan and held of record by the
trustees of each plan and as a participant in the NorAm Direct Stock Purchase
and Dividend Reinvestment Plan and held of record by the administrator of the
plan. In their discretion, the proxies are authorized to vote upon such other
business that may properly come before the meeting.

FOLD AND DETACH HERE
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/ / VOTE AS IN THIS |__
EXAMPLE.

This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted FOR all nominees listed (including, if necessary, cumulative voting).

FOR WITHHELD
1. ELECTION OF / / / / Michael B. Bracy, Joe E. Chenoweth,
DIRECTORS O. Holcombe Crosswell, Walter A. DeRoeck,
Mickey P. Foret, Joseph M. Grant, Robert C.
Hanna, W. Jeffrey Hart, T. Milton Honea,
Myra Jones, Bruce W. Wilkinson

INSTRUCTION: To withhold authority to vote for any individual nominee
strike a line through the nominee's name in the box above.

Please sign exactly as name appears
hereon. When shares are held by Joint
Tenants, both should sign, and when
signing as attorney, as executor, as
administrator, trustee, or guardian,
please give full title as such. If held
by a corporation, please sign in the
full corporate name by the President or
other authorized officer. If held by a
partnership, please sign in the
partnership name by an authorized
person.

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Signatures(s) Date

FOLD AND DETACH HERE

The above proxy card represents votable shares held of record and registered
directly to the above named Stockholder and all votable shares, if any, owned
beneficially by the above named Stockholder as a participant in the NorAm
Direct Stock Purchase and Dividend Reinvestment Plan, the Minnegasco Employee
Retirement Savings Plan and/or the NorAm Employee Savings and Investment Plan.