<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
NORAM ENERGY CORP.
P. O. BOX 2628
HOUSTON, TEXAS 77252
[NORAM ENERGY CORP. LOGO] April 9, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of NorAm Energy Corp. to be held in the Granger A Room of the Doubletree Hotel
at Allen Center, 400 Dallas Street, Houston, Texas on Tuesday, May 13, 1997, 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.
As you know, in August 1996, the Company signed an Agreement and Plan of
Merger with and among Houston Industries Incorporated, Houston Lighting & Power
Company and HI Merger, Inc. The Agreement and Plan of Merger is expected to
result in the merger of the Company into a wholly owned subsidiary of Houston
Industries Incorporated. If the consummation of the merger occurs prior to the
scheduled date of the Company's Annual Meeting, the Annual Meeting will not be
held since Company common stock will no longer be outstanding after the
effective time of the merger.
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 TUESDAY, MAY 13, 1997
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
Granger A Room of the Doubletree Hotel at Allen Center, 400 Dallas Street,
Houston, Texas, at 2:00 p.m., local time, on Tuesday, May 13, 1997.
This meeting is being held for the following purposes:
Proposals of the Board of Directors
(1) To elect a Board of 12 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 25, 1997,
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.
As you know, in August 1996, the Company signed an Agreement and Plan of
Merger with and among Houston Industries Incorporated, Houston Lighting & Power
Company and HI Merger, Inc. The Agreement and Plan of Merger is expected to
result in the merger of the Company into a wholly owned subsidiary of Houston
Industries Incorporated. If the consummation of the merger occurs prior to the
scheduled date of the Company's Annual Meeting, the Annual Meeting will not be
held since Company common stock will no longer be outstanding after the
effective time of the merger.
By Order of the Board of Directors
HUBERT GENTRY, JR.
Secretary
Houston, Texas
April 9, 1997
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
[NORAM ENERGY CORP. LOGO]
NORAM ENERGY CORP.
P.O. BOX 2628
HOUSTON, TEXAS 77252
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, MAY 13, 1997
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 13, 1997 (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 9, 1997.
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 25, 1997 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 137,995,823 shares of common stock, $0.625 par value per share (the
"Common Stock"). See "Voting."
The Company's Annual Report to Stockholders, including financial
statements, for the fiscal year ended December 31, 1996 and the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission (the
"SEC") for its most recent fiscal year have been mailed with this Proxy
Statement to all stockholders. The Annual Report to Stockholders and the Annual
Report on Form 10-K are not a part of the proxy solicitation materials.
VOTING
Each holder of record of Common Stock at the close of business on March 25,
1997, 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 outstanding 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 12 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 By-Laws, 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 25, 1996:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF PERCENTAGE OF
BENEFICIAL OWNER SHARES CLASS
------------------- ---------- -------------
<S> <C> <C>
Ryback Management Corporation.............................. 7,148,166 5.21%
7711 Carondelet Avenue
Box 16900
St. Louis, MO 63105
</TABLE>
The foregoing information relating to Ryback Management Corporation is
based upon a Schedule 13G filing for the year ended December 31, 1996 filed with
the SEC on January 27, 1997 by Ryback Management Corporation. According to the
Schedule 13G, Ryback Management Corporation has sole voting and dispositive
power of all 7,148,166 shares. The shares of Common Stock are held for the
accounts of clients.
2
<PAGE> 6
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 12 nominees who receive the most affirmative votes will be elected
directors of the Company.
NOMINEES
All of the nominees are members of the present Board of Directors, and,
except for Mr. Weldon Johnson, were elected by the stockholders at the 1996
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 record date for the annual
meeting, 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>
SHARES OF
COMMON
FIRST BECAME STOCK
NOMINEE AND A DIRECTOR BENEFICIALLY
BIOGRAPHICAL SUMMARY(1) AGE OF THE COMPANY OWNED(2)
----------------------- --- -------------- ------------
<S> <C> <C> <C>
Michael B. Bracy........................................ 55 1992 167,690
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, a division of the Company from December, 1989
until October, 1991. He is a director of Itron, Inc.
of Spokane, Washington.
Joe E. Chenoweth........................................ 61 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. Mr. Chenoweth is a member
of the Board of Directors of Deaconess Billings Clinic
Health System, a non-profit organization.
O. Holcombe Crosswell................................... 56 1988 10,133(3)
Mr. Crosswell is President of Griggs Corporation, a
real estate and investment company in Houston, Texas.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
SHARES OF
COMMON
FIRST BECAME STOCK
NOMINEE AND A DIRECTOR BENEFICIALLY
BIOGRAPHICAL SUMMARY(1) AGE OF THE COMPANY OWNED(2)
----------------------- --- -------------- ------------
<S> <C> <C> <C>
Walter A. DeRoeck....................................... 54 1986 15,562
Mr. DeRoeck currently serves as President and CEO of
DBJ Interests, Inc., a private investment business. In
addition, he serves as principal in Westlake Capital
Group, a limited partnership focusing on acquisitions
and private placements in mid-market companies. 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. Mr.
DeRoeck is a member of the Board of St. Edward's
University, Austin, Texas.
Mickey P. Foret......................................... 51 1995 3,398
Mr. Foret has been the President and on the Board of
Directors of Atlas Air since 1996. Prior to that, he
was Executive Vice President and Chief Financial
Officer of Northwest Airlines, Inc. from September
1993 to 1996. 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......................................... 58 1995 6,398
Mr. Grant is the Executive 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
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......................................... 68 1989 31,848(4)
Mr. Hanna was President and Chief Executive Officer of
Imperial Holly Corporation, Sugar Land, Texas 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 and Chairman of the Memorial/Sisters
of Charity Health Network.
W. Jeffrey Hart......................................... 55 1995 11,615
Mr. Hart was President of MAPCO Petroleum Inc. from
November 1986 to November 1996. MAPCO Petroleum is a
division of Mapco Inc. He was also a Senior Vice
President of MAPCO Inc.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
SHARES OF
COMMON
FIRST BECAME STOCK
NOMINEE AND A DIRECTOR BENEFICIALLY
BIOGRAPHICAL SUMMARY(1) AGE OF THE COMPANY OWNED(2)
----------------------- --- -------------- ------------
<S> <C> <C> <C>
T. Milton Honea......................................... 64 1992 502,535
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.
Weldon H. Johnson....................................... 59 1996 676
Mr. Johnson was Senior Vice President of The Coca-Cola
Company from 1987 to 1996 and was President of their
Latin America Group. Mr. Johnson is a member of the
Board of Directors of Milton National Bank,
Panamerican Beverages, Coca-Cola Femsa and Grupo
Contal.
Myra Jones.............................................. 61 1981 9,458
Mrs. Jones is a Partner of Human Investment
Counselors, Little Rock, Arkansas, and the owner of
The Hunter, a personalized shopping service in Little
Rock, Arkansas.
Bruce W. Wilkinson...................................... 52 1996 3,127
Mr. Wilkinson is the former Chairman and Chief
Executive Officer of CRSS Incorporated, a
Houston-based, independent power and industrial energy
company and had been with CRSS since 1978. He served
as President and CEO from 1982 through 1989 and as
Chairman and CEO from 1989 through 1995. From July
1996 through December, 1996, Mr. Wilkinson served as a
Board Member and Interim President/CEO of Proler
International, Inc., a NYSE Company engaged in ferrous
and non-ferrous scrap recycling. Proler was acquired
in December, 1996 by Schnitzer Industries, Inc.
Named Executives who are not nominees
Hubert Gentry, Jr.................................. 71,938
William A. Kellstrom............................... 147,616
Charles M. Oglesby................................. 196,905
All directors and executive officers as a group (23
persons).............................................. 1,586,748(5)(6)
</TABLE>
- ---------------
(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 and for
each Named Executive.
(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 1,602 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) Represents approximately 1.15% of the shares outstanding as of March 25,
1997.
(6) Includes 581,058 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.
5
<PAGE> 9
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company has 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. Mr. Honea
made two gifts of Company common stock and in one instance inherited Company
common stock, but did not report the transactions timely. Mr. Rick Spurlock,
Senior Vice President, Human Resources, of the Company purchased common stock
during 1995 through the Company's Dividend Reinvestment Plan but did not report
the purchases timely. Mr. Rollie Bohall, Senior Vice President of NorAm Energy
Management, Inc., had one transaction in the Company's Employee Savings and
Investment Plan that was not reported timely.
ORGANIZATION OF THE BOARD OF DIRECTORS
During 1996, the Company's Board of Directors held a total of eight
regularly scheduled and special meetings. Messrs. Grant and Johnson attended
fewer than 75% of the aggregate of (1) the total number of meetings of the Board
of Directors held during 1996 while they were a member, and (2) the total number
of meetings held by all committees of the Board on which each served (during the
period each served). During 1996, 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 except for the Chairman of the Governance Committee, Mr. Hanna, who in
July began receiving a monthly retainer of $1,000 for serving as Chairman of
such committee. 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.
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, Mr. Grant
and Ms. Jones. 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
6
<PAGE> 10
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
auditors to resolve matters that arise in connection with the audit if
and when it should become necessary. During 1996 the Audit Committee held
three meetings.
- Compensation and Benefits Committee. The Company has a standing
Compensation and Benefits Committee which currently consists of Mr.
Chenoweth, Mr. Crosswell, Mr. DeRoeck, Mr. Hanna and Mr. Hart. 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 1996 the Compensation
and Benefits Committee held seven 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 1996 the Governance Committee held four
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.
- Environmental Committee. The Company has a standing Environmental
Committee which currently consists of Mr. Hart, Mr. Hanna, Mr. Johnson
and Mr. Wilkinson. The Environmental Committee is responsible for
formulating and monitoring the Company's environmental policies. During
1996 the Environmental Committee held one meeting.
- Investment Committee. The Company has a standing Investment Committee
which currently consists of Mr. Chenoweth, Mr. Foret, Mr. Grant, Mr.
Johnson 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 1996 the Investment Committee
held two meetings.
1996 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 1996 executive compensation. The Compensation Committee, which is
composed entirely of nonemployee 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 1996 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 and for the four other most highly compensated executive officers, as
well as compensation information about all executive officers of the Company.
7
<PAGE> 11
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. Under these guidelines, executives are given
5 years to meet certain stock ownership levels. 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. 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 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 1996, 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 in 1996 included (in
addition to the measures cited above) expense management,
8
<PAGE> 12
operating income, net cash flow (before dividends) and return on capital
employed. 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 made using a subjective review
of performance by the Chief Executive Officer, considering but not limited to
such factors as teamwork and cooperation.
For corporate positions below the senior executive level, the size of the
annual incentive funding pool is determined based 100% on corporate financial
performance (using the measures cited above). 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 a
result of the pending merger with Houston Industries, the Committee revised its
usual practice regarding the payout of annual incentive awards using a
combination of cash and stock, to one that provides for 1996 awards to be paid
in all cash.
Annual incentive opportunities are targeted at the market median. For 1996,
annual incentive awards actually earned were generally at opportunity levels for
corporate positions since the Company performed at an outstanding level on the
measures described above. For business unit positions, actual awards ranged from
above target to opportunity levels depending on the business unit, since these
business units varied in their performance against the goals cited above.
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 based on stock
price performance, 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.
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 1996 were granted at 100% of
fair market value and vest at a rate of one-third per year over 3 years.
The performance based restricted stock grants made in 1996 (as in prior
years) provide compensation based on both the performance of the Company and the
continued employment of the officer. This means that shares of restricted stock
are earned (or vested) by the officer when the Company achieves certain
performance objectives (at least at a threshold level) which are set by the
Committee. Also, the officer must generally remain in the employ of the Company
for the specified period of time. Grants made under the plan in 1996 were (at
the time of grant) designed to 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 target restricted shares that ultimately vest.
Dividend payments on earned performance based restricted stock are intended to
reward executives for maximizing total shareholder returns.
Under the terms of the Restricted Stock and Stock Option Agreements, the
merger agreement between the Company and Houston Industries resulted in a change
in control for all officers of the Company other than officers who have entered
into an individual severance agreement with the Company. Because of the change
in control, all vesting restrictions in place for Cycle VII (which concluded at
the end of 1996), Cycle VIII and Cycle IX expired in 1996, and awards were paid
for these Cycles at the opportunity level, in accordance with the officers'
restricted stock agreements. In addition, all previously unvested stock options
awarded to the officers for such Cycles became immediately exercisable. For
those officers of the Company with individual severance agreements, Cycle VII
restricted stock awards were paid in 1997 at the opportunity level based on
9
<PAGE> 13
the actual performance of the Company. Upon final regulatory approval of the
pending merger with Houston Industries, the vesting restrictions for Cycles VIII
and IX will expire for these officers, and awards will be paid at the
opportunity level, pursuant to the terms of their severance agreements. All
previously unvested stock options awarded to these officers for such Cycles will
also become immediately exercisable upon such final regulatory approval.
STOCK OWNERSHIP GUIDELINES
In order to encourage greater executive stock ownership, the Company has
maintained stock ownership guidelines for its officers. These guidelines were
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 were 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.
1996 CEO COMPENSATION
In 1996, the Committee attempted to target the CEO's total direct
compensation at the market 50th percentile for general industry and pipeline
companies in the energy industry that are comparable in size to the Company,
with size measured by revenues. The Committee continued to focus much of the
CEO's compensation on stock-based compensation.
To this end, the CEO's compensation program was structured as follows in
1996:
- Base Salary -- The CEO's 1996 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 (the
"Withholding Amount"). It should be noted that the salary figures shown in
the Summary Compensation Table for 1996 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 1996 in lieu of a
portion of his base salary 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 with reference to
market data on CEO's salaries within the industry, market data on CEO
salaries in general 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). These
performance criteria were not weighted by the Committee. Mr. Honea's
actual base salary (including the Withholding Amount and the time vested
restricted stock grants) is consistent with 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
(as mentioned above) the CEO received a grant of restricted stock covering
the January through December 1996 period. The structure of the CEO's
compensation program in 1996 provided for the CEO to receive, in lieu of a
portion of his base salary, a grant of 10,014 shares of time vested
restricted stock on the first day of each 1996 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. In addition
to the number of restricted shares granted in lieu of base salary, the
Committee also chose to provide the CEO with additional grants of 6,650
and 6,700 restricted shares vesting at a rate of one-third per year over 3
years. These additional share grants were intended to enhance the
competitiveness of the CEO's total pay package and to position his
targeted total direct pay closer to the market median for pipeline and
general industry companies. Accumulated dividends were paid on restricted
stock for the CEO after 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
(Withholding Amount plus time vested restricted stock) was
10
<PAGE> 14
above targeted market median levels (which is aligned with the increase in
share price enjoyed by shareholders).
Because of the pending merger with Houston Industries, the Committee
elected to discontinue the method of paying the CEO's base salary using
time-vested restricted stock. Instead, Mr. Honea's 1997 base salary will
be paid in cash.
- Annual Incentive -- The CEO's actual annual incentive for the 1996
performance year was $725,000. All of this annual incentive was paid in
cash in light of the pending merger with Houston Industries. The value of
this award was at opportunity level since the Company's performance, based
on the corporate performance objectives discussed under the annual
incentive plan above, was outstanding for the year.
- Long-Term Incentives -- In 1996, 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 combined
stock option award, performance-based restricted stock award and
time-vested restricted stock award (described in "Other Stock Based
Compensation") are targeted at the market median for general industry and
pipeline companies of comparable size, as measured by revenues. 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 (the "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. 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. O. Holcombe Crosswell
Mr. Robert C. Hanna
Mr. W. Jeffrey Hart
11
<PAGE> 15
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 1996 as to whom the total annual salary and bonus
for 1996 exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- -------------------------------------------------
AWARDS PAYOUTS
OTHER --------------------- ----------
ANNUAL RESTRICTED
COMPEN- STOCK OPTIONS/ LONG-TERM ALL OTHER
NAME AND SALARY BONUS SATION AWARDS SARS INCENTIVE COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($)(3) (#) PAYOUTS($) ($)(4)
------------------ ---- ------- ------- ------- ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
T. Milton Honea................... 1996 194,577(5) 725,000 12,568 602,233(6) 80,000 197,685 50,700
Chairman & CEO,................... 1995 195,196 345,000 1,373 387,843 80,000 0 48,000
NorAm Energy Corp. ............... 1994 198,909 300,000 4,361 222,577 54,100 0 48,000
Charles M. Oglesby................ 1996 375,000 285,000 0 0 34,000 17,748 32,100
President......................... 1995 281,250(7) 160,000 0 134,375 73,700 0 11,250
NorAm Trading & Transp. Group
Michael B. Bracy.................. 1996 330,000 262,500 0 0 44,000 73,602 28,200
EVP & CFO,........................ 1995 300,000 140,000 700 0 28,200 0 24,420
NorAm Energy Corp................. 1994 300,000 107,000 2,534 0 25,600 0 25,140
William A. Kellstrom.............. 1996 275,004 191,500 0 0 27,000 43,065 23,400
SVP, Corp. Business Development... 1995 275,004 115,000 350 0 13,900 0 26,640
NorAm Energy Corp. ............... 1994 275,004 96,000 1,029 0 13,200 0 22,590
Hubert Gentry, Jr................. 1996 270,577 193,500 0 0 21,000 36,801 22,535
SVP, General Counsel and.......... 1995 262,500 105,000 350 0 11,800 0 23,250
Secretary, NorAm Energy Corp...... 1994 262,500 125,000 1,260 0 11,200 0 21,150
</TABLE>
- ---------------
(1) Annual incentives for 1996 were paid 100% in cash. For 1995 and 1994, 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) 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 1996 represent accumulated
dividend payments on stock which became unrestricted during 1996.
(3) As of the end of Fiscal 1996, the aggregate restricted stock holdings of
each Named Executive were as shown in the following table, using the
12/31/96 closing stock price of $15.50 and noting that these target grants
are fully at risk and any payout will be earned over three-year performance
cycles based on Company performance as previously described (except as
described below):
<TABLE>
<CAPTION>
SHARES VALUE $
------- ----------
<S> <C> <C>
Honea.................................................. 166,012 $2,573,186
Oglesby................................................ 73,450 1,138,475
Bracy.................................................. 55,301 857,166
Kellstrom.............................................. 30,300 469,650
Gentry................................................. 24,575 380,913
</TABLE>
The shares and value for Mr. Honea include 20,028 restricted shares
received in lieu of a portion of his base salary and 17,783 restricted
shares received as competitive adjustment grants. Of the shares received in
lieu of salary, 10,014 vested on January 1, 1997 and 10,014 vested on April
1, 1997. Of the competitive adjustment shares, 6,668 will vest during 1997,
6,666 will vest during 1998 and 4,449 will vest during 1999. The shares and
value for Mr. Oglesby include 25,000 shares received as an employment
incentive. These shares will vest on April 1, 1998. However, upon receipt
of final regulatory approval for the
12
<PAGE> 16
proposed merger between NorAm Energy Corp. and Houston Industries, all the
restricted shares shown above will vest and become unrestricted.
(4) Amount represents ESIP and ESIP Restoration Plan Company contributions.
(5) Represents withholding equal to the estimated tax and benefit liability for
Mr. Honea's stock for salary arrangement.
(6) Represents value of shares received by Mr. Honea in lieu of a portion of his
base salary and additional grants of 6,650 and 6,700 shares given to
enhance the competitiveness of Mr. Honea's pay package. The shares received
in lieu of a portion of base salary contain transferability restrictions
lapsing 6 months following the grant date, and the two additional grants
vest at a rate of one-third per year over three years.
(7) Represents salary paid since Mr. Oglesby's hire date of April 1, 1995.
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.
SEVERANCE AGREEMENTS AND OTHER ARRANGEMENTS
On July 10, 1996, the Company's Board of Directors authorized severance
agreements with 15 executive officers and other key executives of the Company,
including the Named Executives.
The severance agreements provide that on the date of the last regulatory
approval of a change in control (the NorAm/HI merger will constitute a change in
control) all outstanding options will become immediately exercisable in full,
restrictions on restricted shares will lapse and all opportunity shares granted
for outstanding restricted stock performance cycles will be issued. The
agreements further provide for the payment of certain benefits to the executive
if a so-called "double trigger" exists, that is, that a change in control has
occurred and, within three years following a change in control, the executive's
employment is terminated, except in the case of termination by (i) death, (ii)
permanent disability, (iii) NorAm or its successor company for cause (as defined
in the agreements) or (iv) the executive for any reason other than those
expressly set forth in the severance agreement (generally including an adverse
change in the executive's status, authority or position; a reduction in the
executive's aggregate pay or benefits; failure by a successor company to assume
the obligations under the severance agreement; relocation of NorAm's principal
executive offices or the executive's principal location of work by more than 25
miles; or the requirement that the executive travel away from his office 20%
more than was required of the executive in any of the three full years
immediately prior to the change in control).
The benefits payable by NorAm or its successor under each severance
agreement in the event of a qualifying termination following a change of control
include (i) a lump-sum cash amount equal to 2.99 (2.00 in the case of Mr. Honea
and one other executive) multiplied by the sum of (a) the executive's base
salary (the highest rate in effect for any period prior to the termination date)
plus (b) the annual bonus that would have been paid for the year in which the
change in control occurred if the performance goals had been achieved at the
maximum level, (ii) outplacement services, (iii) welfare benefits for a period
of 36 months following termination of employment substantially similar to the
benefits previously applicable to the executive, (iv) 36 months of additional
service credit, treatment of the lump-sum severance payment as wages, and three
additional years of deemed age for purposes of benefit accrual and eligibility
for benefits under all benefit plans applicable to the executive, and (v)
retiree welfare benefits for the executive's lifetime.
The severance agreements provide for a "gross-up" payment if the executive
is subject to excise taxes under Section 4999 of the Code (which relates to
excess parachute payments under Section 280G of the Code). In addition, the
severance agreements provide for the payment of accounting expenses related to
any tax or severance agreement benefits for the executive and payment of legal
fees incurred by the executive, if
13
<PAGE> 17
needed, to enforce his rights under the agreement. Performance of NorAm's
obligation to pay legal fees under the severance agreements will be secured by a
trust previously established by NorAm.
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.
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>
NUMBER OF ESTIMATED FUTURE PAYOUTS
SHARES, PERFORMANCE OR UNDER NON-STOCK PRICE BASED PLANS
UNITS OTHER PERIOD ----------------------------------
OR OTHER UNTIL MATURA- THRESHOLD TARGET MAXIMUM
NAME RIGHTS(#)(1) TION OR PAYOUT (#) (#) (#)
---- ------------ -------------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
T. Milton Honea....................... 38,000 01/01/96- 19,000 38,000 57,000
12/31/98
Charles M. Oglesby.................... 11,500 01/01/96- 5,750 11,500 17,250
12/31/98
Michael B. Bracy...................... 15,500 01/01/96- 7,750 15,500 23,250
12/31/98
William A. Kellstrom.................. 9,400 01/01/96- 4,700 9,400 14,100
12/31/98
Hubert Gentry, Jr..................... 7,250 01/01/96- 3,625 7,250 10,875
12/31/98
</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. In the event of a
change of control, 150% of the target shares are earned.
14
<PAGE> 18
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 1996 for the Named Executives.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO PRICE TERM (1)
OPTIONS EMPLOYEES PER EXPIRATION -----------------------------
NAME GRANTED IN 1996 SHARE ($) DATE 5% 10%
---- ---------- ---------- --------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
T. Milton Honea......... 80,000 13.8% $8.625 01/09/06 $434,700.00 $1,097,100.00
Charles M. Oglesby...... 34,000 5.9% $8.625 01/09/06 $184,747.50 $ 466,267.50
Michael B. Bracy........ 44,000 7.6% $8.625 01/09/06 $239,085.00 $ 603,405.00
William A. Kellstrom.... 27,000 4.7% $8.625 01/09/06 $146,711.25 $ 370,271.25
Hubert Gentry, Jr. ..... 21,000 3.6% $8.625 01/09/06 $114,108.75 $ 287,988.75
</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>
NUMBER OF VALUE 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> <C> <C>
T. Milton Honea..................... 0 0 60,731/ 153,369 $576,161/ $1,269,489
Charles M. Oglesby.................. 0 0 26,983/ 80,717 $273,203/ $ 706,760
Michael B. Bracy.................... 0 0 26,466/ 71,334 $249,944/ $ 572,006
William A. Kellstrom................ 0 0 88,433/ 40,667 $384,188/ $ 320,212
Hubert Gentry, Jr................... 0 0 11,399/ 32,601 $107,507/ $ 258,618
</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 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.
15
<PAGE> 19
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...................... $21,025 $ 31,538 $ 42,050 $ 42,925 $ 51,510 $ 60,095
200,000...................... 46,025 69,038 92,050 92,050 108,267 126,312
300,000...................... 71,025 106,538 142,050 142,050 165,267 192,812
400,000...................... 96,025 144,038 192,050 192,050 222,267 259,312
500,000...................... 121,025 181,538 242,050 242,050 279,267 325,812
600,000...................... 146,025 219,038 292,050 292,050 336,267 392,312
700,000...................... 171,025 256,538 342,050 342,050 393,267 458,812
800,000...................... 196,025 294,038 392,050 392,050 450,267 525,312
</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 12, Mr. Bracy,
12, Mr. Gentry, 18, Mr. Kellstrom, 4 and Mr. Oglesby, 2. 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
$108,250 and $115,467 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.
16
<PAGE> 20
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
(FISCAL YEAR COVERED) CORP. S&P 500 INDEX PEER GROUP
<S> <C> <C> <C>
1991 100 100 100
1992 71.45 107.62 113.99
1993 68.35 118.46 141.16
1994 48.67 120.03 138.11
1995 83.77 165.13 193.32
1996 149.79 203.05 253.17
</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: AGL Resources Inc.
(formerly 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, Pan Energy
(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.
17
<PAGE> 21
COMPARISON OF TWO YEAR CUMULATIVE TOTAL RETURNS*
AMONG NORAM ENERGY CORP., S&P 500 INDEX AND A COMPOSITE PEER GROUP**
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NORAM ENERGY
(FISCAL YEAR COVERED) CORP. S&P 500 INDEX PEER GROUP
<S> <C> <C> <C>
12/31/94 100 100 100
12/31/95 172 138 140
12/31/96 308 169 183
</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.
** The peer group includes the following companies: AGL Resources Inc.
(formerly 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, Pan Energy
(formerly Panhandle Eastern Corp.), Peoples Energy Corp., Sonat Inc.,
Washington Gas Light Co., and Williams Cos. Inc. Note that Transco Energy is
not included in the composite peer group since the company was acquired in
1995.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P., independent public accountants, were the
principal accountants for the Company for 1996. 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.
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 10, 1997, for
inclusion in the proxy materials relating to the 1998 annual meeting of
stockholders.
18
<PAGE> 22
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 9, 1997
19
<PAGE> 23
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 25,
1997, at the Annual Meeting of Stockholders to be held in Houston, Texas on
Tuesday, May 13, 1997 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
<PAGE> 24
[X] 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,
Weldon H. Johnson, 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.
--------------------------------------
--------------------------------------
Signature(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.
