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SCHEDULE 14C
INFORMATION REQUIRED IN INFORMATION STATEMENT, OFFICIAL TEXT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Check the appropriate box:
[ ] Preliminary Information Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14c-5(d)(2))
[X] Definitive Information Statement
OKLAHOMA GAS AND ELECTRIC COMPANY
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(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee Computed on table below per Exchange Act Rules 14c-5(g)and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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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:
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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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OKLAHOMA GAS AND ELECTRIC COMPANY
INFORMATION STATEMENT
AND
NOTICE OF ANNUAL MEETING
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MAY 15, 1997
OG&E
ELECTRIC SERVICES
[LOGO]
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CONTENTS
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Chairman's Letter 1 NOTICE OF ANNUAL MEETING
OF SHAREOWNERS
Notice of Annual Meeting 2 AND INFORMATION STATEMENT
Information Statement 3 THURSDAY, MAY 15, 1997, AT 10:00 a.m.
Proposal No. 1 - Election of Directors 4 OKLAHOMA CITY MARRIOTT HOTEL
Information about Directors 4 3233 NORTHWEST EXPRESSWAY
and Nominees OKLAHOMA CITY, OKLAHOMA
Information Concerning the 7
Board of Directors
Executive Officers' Remuneration 8
Report of Compensation 8
Committee on Executive
Compensation
Summary Compensation 11
Table
Pension Plan Table 12
Change of Control Arrangements 13
Company Stock Performance 14
Section 16(a) Beneficial 14
Ownership Reporting Compliance
Relationship with Independent 14
Public Accountants
Map 15
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OKLAHOMA GAS AND ELECTRIC COMPANY
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April 11, 1997
DEAR SHAREOWNER:
You are cordially invited to attend the annual meeting of Oklahoma Gas and
Electric Company at 10:00 a.m. on Thursday, May 15, 1997, at the Oklahoma City
Marriott Hotel, 3233 Northwest Expressway, Oklahoma City, Oklahoma.
Those arriving before the meeting will have the opportunity to visit
informally with the management of your Company. In addition to the business
portion of the meeting, there will be reports on the Company's current
operations and outlook.
Your continued interest in the Company is most encouraging and, on behalf
of the Board of Directors and employees of the Company, I want to express our
gratitude for your confidence and support.
Very truly yours,
Steven E. Moore
Chairman of the Board, President
and Chief Executive Officer
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NOTICE OF ANNUAL MEETING
OF SHAREOWNERS
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The Annual Meeting of Shareowners of Oklahoma Gas and Electric Company will
be held on Thursday, May 15, 1997, at 10:00 a.m. at the Oklahoma City Marriott
Hotel, 3233 Northwest Expressway, Oklahoma City, Oklahoma, for the following
purposes:
(1) To elect three directors to serve for a three-year term; and
(2) To transact such other business as may properly come before the meeting.
The map on page 15 will assist you in locating the Oklahoma City Marriott Hotel.
The Board of Directors has fixed the close of business on March 18, 1997,
as the record date for the determination of shareowners entitled to notice of
and to vote at this meeting or any adjournment of the meeting. A list of such
shareowners will be available, as required by law, at the principal offices of
the Company at 101 N. Robinson, Oklahoma City, Oklahoma 73102-3405.
Irma B. Elliott
Vice President and Secretary
Dated: April 11, 1997
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PROXIES WILL NOT BE SOLICITED FOR THIS MEETING AND YOU ARE REQUESTED NOT TO SEND
US A PROXY. SHAREOWNERS ARE WELCOME TO ATTEND THE MEETING IN PERSON AND CAST
THEIR VOTES BY BALLOT AT THE MEETING. IF YOUR SHARES ARE HELD IN THE NAME OF A
BROKER, TRUST, BANK OR OTHER NOMINEE AND YOU PLAN TO ATTEND THE MEETING AND VOTE
YOUR SHARES IN PERSON, YOU SHOULD BRING WITH YOU A LETTER FROM THE BROKER,
TRUSTEE, BANK OR NOMINEE CONFIRMING YOUR BENEFICIAL OWNERSHIP OF THE SHARES.
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INFORMATION STATEMENT
April 11, 1997
At the close of business on December 31, 1996, Oklahoma Gas and Electric
Company (the "Company") became a subsidiary of OGE Energy Corp. ("OGE Energy")
and, at that time, all outstanding shares of the Company's Common Stock were
exchanged for Common Stock of OGE Energy. As a result, OGE Energy owns all
40,378,745 outstanding shares of the Company's Common Stock. However, there
remains outstanding 831,363 shares of the Company's Cumulative Preferred Stock
as described below.
The Annual Meeting of Shareowners of the Company will be held at the
Oklahoma City Marriott Hotel, 3233 Northwest Expressway, Oklahoma City,
Oklahoma, on May 15, 1997, at 10:00 a.m. For the convenience of those
shareowners who may attend the meeting, a map is printed on page 15 that gives
directions to the Oklahoma City Marriott Hotel. At the meeting, it is intended
that the first item in the accompanying notice will be presented for action by
the owners of the Company's Common Stock and 4% Cumulative Preferred Stock.
Since OGE Energy's ownership represents approximately 92% of the total
votes that could be cast at the meeting, the Board of Directors of the Company
considered it inappropriate to solicit proxies for the Company's Annual Meeting
of Shareowners. Please be advised, therefore, that this is only an Information
Statement. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND
US A PROXY. However, if you wish to vote your shares of 4% Cumulative Preferred
Stock, you may do so by attending the meeting in person and casting your vote by
ballot which will be provided for that purpose. Shareowners whose shares are
held in the name of a broker, trust, bank or other nominee will be permitted to
vote their shares in person only upon presentation of a letter from the broker,
trustee, bank or nominee confirming their beneficial ownership.
On March 1, 1997, the Company had outstanding 40,378,745 shares of Common
Stock, par value $2.50 per share; 421,963 shares of 4% Cumulative Preferred
Stock, par value $20 per share; and the following shares of Cumulative Preferred
Stock, par value $100 per share; 49,950 shares of the 4.20% series, 75,000
shares of the 4.24% series, 63,500 shares of the 4.44% series, 70,950 shares of
the 4.80% series and 150,000 shares of the 5.34% series.
The owners of the 4% Cumulative Preferred Stock and Common Stock are
entitled to one vote on each matter presented for a vote at the meeting for each
$2.50 of par value (eight votes per share as to the 4% Cumulative Preferred
Stock, $20 par value, and one vote per share as to the Common Stock, $2.50 par
value) of stock held by such owners of record at the close of business on March
18, 1997. Owners of other Cumulative Preferred Stock are not entitled to vote.
All of the outstanding Company Common Stock is owned by OGE Energy. No
persons or group are known by management to be beneficial owners of more than
five percent of the Company's 4% Cumulative Preferred Stock. As of March 1,
1997, all directors, nominees for director and executive officers of the Company
as a group owned 53 shares of Cumulative Preferred Stock, which is less than
.01% of the total Cumulative Preferred Stock outstanding on that date.
The Company's 1996 Annual Report to its shareowners, which is included in
its 1996 Annual Report on Form 10-K filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934 and which includes
financial statements for the year 1996, was sent on or about April 11, 1997, to
all shareowners of the Company of record on March 18, 1997. Financial statements
of the Company also are on file with the Securities and Exchange Commission and
at the offices of the New York Stock Exchange and Pacific Exchange.
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PROPOSAL NO. 1 - ELECTION OF DIRECTORS
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The Board of Directors of the Company presently consists of nine members.
The directors are classified into three groups. One class of directors is
elected at each year's Annual Meeting for a three-year term and to continue in
office until their successors are elected and qualified. The following three
persons are the nominees of the Board to be elected for such three-year term at
the Annual Meeting to be held on May 15, 1997: Messrs. William E. Durrett, H. L.
Hembree, III and Steven E. Moore. Each of these individuals is currently a
director of the Company whose term as a director is scheduled to expire at the
Annual Meeting.
The Board of Directors does not know of any nominee who will be unable to
serve. No nominee or director owns any shares of any class of voting securities
of the Company.
For the nominees described herein to be elected as directors, they must
receive a plurality of the votes of shares of Common Stock and 4% Cumulative
Preferred Stock present in person or by proxy and entitled to vote. "Plurality"
means that the individuals who receive the largest number of votes are elected
as directors up to the maximum number of directors to be chosen at the meeting.
Consequently, any shares not voted (whether by withholding authority, broker
non-vote, or otherwise) have no impact on the election of directors, except to
the extent the failure to vote for an individual results in the individual
receiving fewer votes than another individual. OGE Energy will vote for the
three nominees for director listed below.
Each director of the Company is also a director of OGE Energy and became a
director of OGE Energy upon the effectiveness of the corporate reorganization on
December 31, 1996.
INFORMATION ABOUT DIRECTORS AND NOMINEES
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The following contains certain information as of March 1, 1997, concerning
the three nominees for directors, as well as the directors whose terms of office
do not expire at the Annual Meeting on May 15, 1997.
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NOMINEES FOR ELECTION FOR TERM EXPIRING AT 2000 ANNUAL MEETING OF SHAREOWNERS
WILLIAM E. DURRETT, 66, is Chairman of the Board, President
and Chief Executive Officer of American Fidelity Corporation, an
insurance holding company, and numerous other subsidiaries of
American Fidelity Corporation. He serves as Chairman of the Board [Photo]
and director of American Fidelity Assurance Company, an insurance
company wholly-owned by American Fidelity Corporation. He also
serves as a director of BOK Financial Corporation and INTEGRIS
Health. Mr. Durrett has been a director of the Company since
March 1991, and of OGE Energy since December 31, 1996, and is a
member of the audit and compensation committees of the Board.
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H. L. HEMBREE, III, 65, is Chairman of the Executive
Committee of Merchants National Bank, Fort Smith, Arkansas, a
subsidiary of Deposit Guaranty Corp., Jackson, Mississippi. Mr.
Hembree is approximately a 5% shareholder of Deposit Guaranty [Photo]
Corp. Prior to 1989, he was Chairman and Chief Executive Officer
of Arkansas Best Corporation, a diversified holding company
located in Fort Smith, Arkansas. He has been a director of the
Company since 1985, and of OGE Energy since December 31, 1996,
and is a member of the compensation committee of the Board.
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STEVEN E. MOORE, 50, is Chairman, President and Chief
Executive Officer of the Company and of OGE Energy, having been
appointed to such positions with OGE Energy effective December
31, 1996, and as President of the Company in August 1995, and as [Photo]
Chief Executive Officer and Chairman of the Company in May 1996.
Mr. Moore has been employed by the Company for more than 22
years, having previously served as Senior Vice President of Law
and Public Affairs. Mr. Moore has served on many industry-wide
committees in the electric utility industry. Mr. Moore has been a
director of the Company since October 1995, and of OGE Energy
since July 1996.
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DIRECTORS WHOSE TERMS EXPIRE AT 1999 ANNUAL MEETING OF SHAREOWNERS
HERBERT H. CHAMPLIN, 59, is President of Champlin
Exploration, Inc., an independent oil producer, and President of
Enid Data Systems, computer marketers, both located in Enid,
Oklahoma. Mr. Champlin has been a director of the Company since [Photo]
1982, and of OGE Energy since December 31, 1996, and is chairman
of the audit committee and a member of the nominating committee
of the Board. Mr. Champlin also was engaged separately during
1996 as a part of his principal business occupation in the
petroleum industry and had interests in oil and gas wells. During
1996, under terms of gas purchase contracts, the Company paid
$38,503 to him and his family business interests. The terms of
the contracts were no less favorable to the Company than the
terms that would have been obtained from other independent
producers.
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MARTHA W. GRIFFIN, 62, owner of Martha Griffin White
Enterprises, is presently engaged in the management of her
personal investments, the operation of a ranch and various civic
activities. Prior to September 30, 1994, she served as Chairman [Photo]
of the Board of Griffin Television, Inc., located in Oklahoma
City, Oklahoma, and Chairman of the Board of Griffin Food Company
(a subsidiary of Griffin Television, Inc.). Mrs. Griffin has been
a director of the Company since 1987, and of OGE Energy since
December 31, 1996, and is chairman of the nominating committee
and a member of the audit committee of the Board. During 1996,
Mrs. Griffin was also a major stockholder of television station
KWTV, Channel 9, Oklahoma City, Oklahoma. During 1996, the
Company paid an aggregate of approximately $158,300 to KWTV for
showing television commercials of the Company. This television
time was purchased by contract with the station, and the rate
paid was no less favorable to the Company than the rate that
would have been paid to similar stations in the Oklahoma City
area.
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RONALD H. WHITE, M.D., 60, is a practicing cardiologist and
is President and Chief Executive Officer of Cardiology, Inc. in
Oklahoma City. He serves as a member of the Board of Directors of
INTEGRIS Baptist Medical Center of Oklahoma City, and was a [Photo]
member of the Board of Regents of the University of Oklahoma for
14 years. Dr. White has been a director of the Company since
1989, and of OGE Energy since December 31, 1996, and is a member
of the nominating committee of the Board.
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DIRECTORS WHOSE TERMS EXPIRE AT 1998 ANNUAL MEETING OF SHAREOWNERS
LUKE R. CORBETT, 50, is Chairman and Chief Executive Officer
of Kerr-McGee Corporation. He has been employed by Kerr-McGee
Corporation for more than 12 years, having served as President
and Chief Operating Officer from 1995 to 1997; Group Vice [Photo]
President from 1992 to 1995; and Senior Vice President from 1991
to 1992. Mr. Corbett also serves as a member of the Board of
Directors of Devon Energy Corporation. Mr. Corbett has been a
Director of the Company since December 1, 1996, and of OGE Energy
since December 31, 1996.
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ROBERT KELLEY, 51, is Chairman, President and Chief
Executive Officer of Noble Affiliates, Inc., an independent
energy company with exploration and production operations in the
United States and international operations primarily in Canada, [Photo]
Tunisia and Equatorial Guinea. He also serves as President and
Chief Executive Officer of Samedan Oil Corporation and Chairman
and Chief Executive Officer of Noble Gas Marketing Inc., both
wholly-owned subsidiaries of Noble Affiliates, Inc. Mr. Kelley
has been a director of the Company since January 17, 1996, and of
OGE Energy since December 31, 1996, and is a member of the audit
committee of the Board. Mr. Kelley also serves as a director of
Exchange National Bank and Trust Company of Ardmore, Oklahoma and
of AmQuest Financial Corporation.
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BILL SWISHER, 66, is Chairman of the Board and Chief
Executive Officer of CMI Corporation, a manufacturer of road
construction equipment that is located in Oklahoma City,
Oklahoma. Mr. Swisher has been a director of the Company since [Photo]
1979, and of OGE Energy since December 31, 1996, and is chairman
of the compensation committee and a member of the audit committee
of the Board.
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INFORMATION CONCERNING THE BOARD OF DIRECTORS
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Each member of the Board of Directors of the Company is also a Director of
OGE Energy. The Board of Directors of the Company met on seven occasions during
1996 and the Board of Directors of OGE Energy met on three occasions during
1996. Each director attended at least 92% of the total number of meetings of the
Boards of Directors and the committees of the Boards on which he or she served.
COMMITTEES. The committees of the Company's Board of Directors include a
compensation committee, an audit committee and a nominating committee. The
Directors who are members of the various committees of the Company serve in the
same capacity for purposes of the OGE Energy Board. There were no committee
meetings of OGE Energy during 1996 and the following describes the actions of
the committees of the Company Board during 1996. Members of the compensation
committee are Bill Swisher, chairman, and Messrs. Durrett and Hembree. During
1996, the committee met on three occasions to review and make recommendations to
the Company's Board of Directors with respect to compensation of principal
officers, salary policy for the period, benefit programs for employees,
compensation for outside directors for service on the Board and the Board
committees, and future objectives and goals of the Company.
Members of the audit committee are Herbert H. Champlin, chairman, Mrs.
Griffin and Messrs. Corbett, Durrett, Kelley, and Swisher. During 1996, the
committee met on three occasions to review and make recommendations to the Board
of Directors with respect to internal audit procedures, engagement of
independent public accountants, their review with the independent accountants of
the results of the auditing engagement, and matters having a material effect
upon financial operations.
Members of the nominating committee are Martha W. Griffin, chairman, Mr.
Champlin and Dr. White. During 1996, the committee met on three occasions to
review and make recommendations to the Board of Directors with respect to
nominees for election as directors. Similarly, recommendations were made
concerning membership of the audit, compensation and nominating committees and
rotation of committee assignments among directors. It is expected that the
nominating committee will consider nominees recommended by shareowners in
accordance with the Company's By-laws. The Company's By-laws provide that a
shareowner intending to nominate director candidates for election at an Annual
Meeting of Shareowners must deliver written notice thereof to the Secretary of
the Company not later than 90 days in advance of the meeting. The notice must
set forth certain information concerning such shareowner and the nominee(s),
including each nominee's name and address, a representation that the shareowner
is entitled to vote at such meeting and intends to appear in person or by proxy
at the meeting to nominate the person or persons specified in the notice, a
description of all arrangements or understandings between the shareowner and
each nominee and any other person pursuant to which the nomination or
nominations are to be made by the shareowner, such other information as would be
required to be included in a proxy statement soliciting proxies for the election
of the nominee(s) of such shareowner and the consent of each nominee to serve as
a director of the Company if so elected. The chairman of the Annual Meeting may
refuse to acknowledge the nomination of any person not made in compliance with
the foregoing procedure.
DIRECTOR COMPENSATION. Compensation of non-officer directors of the Company
during 1996 consisted of an annual retainer fee of $27,500, of which $2,000 was
payable monthly in cash (the same amount that has been paid monthly since August
1994) and $3,500 was deposited in the director's Stock Account under the
Directors' Deferred Compensation Plan and converted to 85.106 common stock units
based on the closing price of the Company's Common Stock on November 29, 1996.
In addition, all non-officer directors received $1,000 for each Board meeting
and $1,000 for each committee meeting attended. OGE Energy assumed the
Directors' Deferred Compensation Plan of the Company as part of the corporate
reorganization. Under the Directors' Deferred Compensation Plan, non-officer
directors also may defer payment of all or part of their attendance fees and the
cash portion of their annual retainer fee, which deferred amounts are, at the
election of the director, credited to a Dollar Account or a Stock Account or a
combination of both, on the date the deferred amounts otherwise would have been
paid.
Amounts credited to the Dollar Account accrue interest approximately equal
to the commercial paper rate for established companies. Amounts credited to the
Stock Account are converted into common stock units equal in number to the
number of shares of OGE Energy's Common Stock which the amounts would purchase
based on the fair market value of OGE Energy's Common Stock on the date the
amounts would otherwise be paid. The Stock Account is credited on each dividend
payment date for OGE Energy's Common Stock with additional common stock units by
dividing the aggregate cash dividend which would have been paid if existing
common stock units were actual shares of OGE Energy's Common Stock by the fair
market value of OGE Energy's Common Stock as of the dividend payment date.
When an individual ceases to be a director of the Company, all amounts
credited under the Plan are paid in cash in a lump sum or installments, with the
value of
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common stock units based on the fair market value of OGE Energy's Common Stock at the time
of payment. In addition, amounts that are credited to the Stock Account are automatically
transferred to a Dollar Account upon the occurrence of certain mergers and related
transactions in which OGE Energy is not the survivor. As an alternative to the foregoing
investment options, the Plan permits a non-officer director to have all or any deferred
portion of the attendance fees and the cash portion of the annual retainer fee applied to
purchase life insurance for the director.
In addition, for those directors who have retired from the Board of Directors after
10 years or more of service, the Company has historically continued to pay their annual
retainer until their death.
EXECUTIVE OFFICERS' REMUNERATION
- --------------------------------------------------------------------------------
The Company's executive compensation program is administered by the Compensation
Committee of the Board of Directors of the Company (the "Committee"). Set forth below is
the Committee's report on compensation paid to executive officers by the Company during
1996.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
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GENERAL. The primary goals of the Committee in setting executive compensation in 1996
were: (i) to provide a total compensation package that would enable the Company to attract
and retain key executives and (ii) to align the executives' interests with those of
shareowners and with performance by the Company and its subsidiaries.
Compensation of the Company's executive officers in 1996 was comprised primarily of
salary, awards under the Company's Annual Incentive Compensation Plan, awards under the
Company's Restricted Stock Plan, and benefits under the Company's Employees' Retirement
Savings Plan and pension plan. Virtually all employees, including executive officers, are
eligible to participate in the Retirement Savings Plan and pension plan. Both the
Retirement Savings Plan and pension plan have a supplemental restoration plan that enables
executive officers to receive the same benefits that they would have received in the
absence of limitations imposed by the federal tax laws on contributions or payouts.(1) In
addition, a Supplemental Executive Retirement Plan (the "SERP"), which was adopted in
1993, offers attractive pension benefits to lateral hires. The only participant in the
SERP to date has been James G. Harlow, Jr., the former Chief Executive Officer of the
Company. The SERP is not expected to benefit present executive officers generally who
remain employed by the Company or OGE Energy until age 65. In reviewing the benefits under
the SERP, Retirement Savings Plan, pension plan and related restoration plans, the
Committee sought in 1996 to provide participants with benefits generally commensurate with
those offered by other utilities of comparable size. The restoration plans for the
Retirement Savings Plan and pension plan contain provisions requiring their immediate
funding in the event of certain mergers, consolidations or tender offers involving OGE
Energy.
The target level of total compensation of the Company's executives in 1996 was set
generally at approximately the average of the compensation paid to similar executives
within the approximately 120 electric utilities included in the Edison Electric Institute
Survey (the "Survey Group")(2). In recent years, the Committee has significantly altered
the structure of the executive compensation system and the composition of the individual
compensation packages, shifting from a compensation system based in large part on
individual performance and continued employment to a compensation system that places a
significant portion of compensation at risk dependent on the performance of the Company
and its subsidiaries.
The first step in the process of switching to a more incentive-based system for
executive officers occurred in 1992 with awards of Restricted Stock tied not only to
continued employment, but also to the achievement of specified performance targets over a
three-year period. The remaining step occurred in 1993 when the Committee froze the
salaries of senior executives and implemented the Annual Incentive Compensation Plan. The
implementation of the Annual Incentive Compensation Plan was a result of a study by Towers
Perrin, at the Committee's request, of the Survey Group that indicated that although the
total compensation of the Company's executive officers was commensurate with the total
compensation of similar officers within the Survey Group, the Company's executive officers
received a greater proportion of their compensation in salary and a lesser proportion in
incentive-based awards. Accordingly, in an
- -----------
(1) Effective December 31, 1996, the Annual Incentive Compensation Plan, Employees'
Retirement Savings Plan (and related supplemental restoration plan) and Restricted
Stock Plan were assumed by OGE Energy and the pension plan (and related supplemental
restoration plan) were amended to permit participation by employees of OGE Energy.
(2) While similar, the utilities in the Survey Group are not the same utilities in the
Dow Jones Electric Utilities Index utilized in the Stock Performance Graph on page
14. The Survey Group was selected by Towers Perrin and, in the judgment of the
Committee, is an appropriate peer group to use for compensation purposes.
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effort to bring the Company's compensation system more in line with the Survey Group, the
salaries of senior executives generally were frozen during 1993 and 1994 at 1992 levels,
and executives received increased incentive-based awards. This process continued in 1995
and 1996 for several executive officers (including Mr. Harlow, the Chief Executive
Officer) as their 1995 and 1996 salaries remained frozen at 1992 levels. As a result of
this process, the potential total cash compensation of the Company's executives, as well
as the makeup of that compensation, became generally consistent with the average
compensation paid to similar executives by corporations in the Survey Group.
In 1993, a new Federal tax law was passed which limits the deductibility of executive
compensation in excess of $1,000,000 unless certain exceptions are met. This new law is
not expected to impact the Company or OGE Energy with respect to executive compensation
paid in 1997. The Committee continues to review the new law and associated regulations, as
well as the structure of its salary and various compensation programs, and its present
intent is to take appropriate steps to ensure the continued deductibility of its executive
compensation.
BASE SALARY. The base salaries for the Company's executive officers in 1996 were
designed to be competitive with the Survey Group and generally approximated the salary at
the 50th percentile of the range for comparable executives employed by companies in the
Survey Group. Actual base salaries were determined based on individual performance and
experience. The salaries of executive officers generally are determined in January of each
year with an effective date of March 1, and are subject to adjustment during a year when
an individual's duties and responsibilities are changed. For this reason, the salary of
Mr. Moore was increased on August 1, 1995, upon his appointment as President and Chief
Operating Officer of the Company and on May 16, 1996, upon his appointment as President
and Chief Executive Officer following the resignation of Mr. Harlow as Chief Executive
Officer due to illness.
ANNUAL INCENTIVE COMPENSATION PLAN. The Annual Incentive Compensation Plan was
adopted in late 1992. The plan is designed to provide key management personnel with annual
incentive awards, the payment of which is tied to the achievement of specified Company
objectives relating to profitability. Awards with respect to 1996 performance were made
under the Plan to 11 employees, including all executive officers, and specified corporate
and individual performance goals were established in January 1996. Payouts of the awards
are in cash and are dependent primarily on the achievement of such specified performance
goals. In 1996, the corporate goals were based 50% on earnings per share, as compared to
earnings goals set by the Committee, and 50% on operating and maintenance expense per
kilowatt-hour, as compared to approximately 25 electric utilities. The amount of the award
for each executive officer was expressed as a percentage of base salary (the "targeted
amount"), with the officer having the ability, depending upon achievement of corporate
goals, to receive from 0% to 150% of such targeted amounts. For 1996, the targeted amounts
ranged from 20% to 30% of base salary and approximated the 50th percentile of the level of
such awards granted to comparable executives employed by companies in the Survey Group.
The percentage of the targeted amount that an officer ultimately receives is subject
to being increased or decreased by up to 20% at the discretion of the Committee, depending
on the individual's achievement of pre-established personal goals approved by the
Committee. In no event, however, will any payouts be made unless the specified minimum
corporate performance goals are satisfied. For 1996, OGE Energy's earnings per share
($3.25) exceeded the target levels and the operating and maintenance expenses were less
than the target levels. Corporate performance in 1996 and performance by individuals of
their pre-established personal goals resulted in payouts ranging from 141% to 151% of
their target amounts and from 24% to 45% of base salary earned in 1996.
RESTRICTED STOCK AWARDS. Another significant component of executive compensation in
1996 was awards under the Company's Restricted Stock Plan. The Plan empowers the Committee
to make contingent awards of Common Stock ("Restricted Stock") to key employees. Each
share of Restricted Stock is subject to a Restricted Period of three or four years during
which the share is subject to forfeiture if the recipient of the share ceases to render
substantial services to OGE Energy or a subsidiary for any reason (other than death,
disability or normal retirement) and during which the share may not be transferred. The
Committee has the power in the event of certain mergers, consolidations or tender offers
involving OGE Energy to lapse all restrictions on shares of Restricted Stock.
Awards under the Restricted Stock Plan were made at the end of 1996 and were based,
as required by the Plan, on the individual's performance during 1996. In evaluating an
individual's performance, the Committee considered individual job performance, experience
and individual characteristics such as leadership and dedication, with no particular
weight given to one factor over another. The Committee also considered the long-term
incentives provided to executives in the Survey Group and the amount of the 1996 awards
made for each executive officer generally represented the long-term incentives awarded to
similar executives by corporations in approximately the 50th percentile of the Survey
Group. For 1996, awards of Restricted Stock ranged from 4% to 30% of an executive's base
salary. As in
</TABLE>
9
<PAGE>
prior years, each share of Restricted Stock awarded in 1996 is subject to
forfeiture during a Restricted Period. Moreover, as in prior years, the shares
awarded in 1996 to nine key officers contained a significant additional
condition. Such officers generally will be entitled at the end of the Restricted
Period of three years to keep the full amount of the shares awarded to them only
if OGE Energy during such period meets or exceeds a specific return on equity
target as compared to the return on average equity for the approximately 90
electric and combination utility companies (including utility holding companies)
shown in the Merrill Lynch & Co., Inc. Data Sheet-Electric and Combination
Utility Companies (the "Merrill Lynch Index") with the officer receiving fewer
shares and possibly no shares depending on OGE Energy's performance relative to
the performance of the companies in the Merrill Lynch Index. The Committee's
rationale for this additional condition was to continue to reward past service
and to align the officers' interests with those of shareowners and, at the same
time, to tie the Restricted Stock awards directly to long-term corporate
performance. The amount of shares awarded in 1996 that an officer will
ultimately receive will not be determined until the end of 1999. Prior awards of
Restricted Stock were not considered by the Committee in making awards in 1996.
CEO COMPENSATION. Mr. Moore became President and Chief Executive Officer
following Mr. Harlow's resignation as Chief Executive Officer due to illness on
May 16, 1996, and assumed the additional role of Chairman upon Mr. Harlow's
death. Prior to that time, Mr. Moore served as President and Chief Operating
Officer. The 1996 compensation for Mr. Moore consisted of the same components as
the compensation for other executive officers. Mr. Moore's 1996 salary was
increased from $270,000 to $280,000, effective March 1, 1996, and his 1996
targeted award under the Annual Incentive Plan was initially set at 25% of his
base salary so that his total potential cash compensation and the components of
such compensation would approximate the average cash compensation for chief
operating officers of the companies in the Survey Group. Following his
apppointment as Chief Executive Officer on May 16, 1996, Mr. Moore's salary and
target incentive award for the balance of 1996 were increased to $375,000 and
30%, respectively, which the Compensation Committee believed were appropriate
levels based on his prior experience. As a result of 1996 performance as
described above, he received a payout of $146,072 under the Annual Incentive
Plan, representing 151% of his composite targeted award, of which 131% was
attributable to corporate performance and 20% was attributable to his individual
performance. Mr. Moore's Restricted Stock award was based on his performance in
1996 and a comparison of his award to the long-term compensation of other chief
executive officers in the Survey Group. Consideration also was given to Mr.
Moore's prior experience with the Company, his demonstrated leadership skills
and his positive reputation within the community and utility industry. Based on
these factors, the Committee determined to grant Mr. Moore a Restricted Stock
award having an approximate value at the date of its grant of 43% of his
composite base salary for 1996. As was the case with respect to awards of
Restricted Stock to other key officers, Mr. Moore's ultimate receipt of the
shares awarded to him will be dependent upon OGE Energy's achievement of
specified return on equity targets during 1997, 1998 and 1999.
Prior to May 16, 1996, Mr. Harlow served as Chairman and Chief Executive
Officer. Initially, his salary for 1996 remained frozen at the 1992 level
($500,000) and his targeted award under the Annual Incentive Plan remained at
30% (i.e., $150,000) so that his total potential cash compensation and the
components of such compensation would appproximate the average cash compensation
for chief executive officers of the companies in the Survey Group. On May 16,
1996, Mr. Harlow resigned due to illness as Chief Executive Officer and
continued as Chairman at a reduced annual salary of $350,000 prior to his death
on June 1, 1996. In accordance with the terms of the Annual Incentive Plan, Mr.
Harlow received a prorated payout of $90,699 under the Plan based on the period
of time he was employed by the Company during 1996, of which 131% was
attributable to corporate performance and 20% was attributable to individual
performance. At the time Mr. Harlow resigned as Chief Executive Officer, he
entered into an employment and consulting agreement with the Company, the terms
of which are summarized in the footnotes to the Compensation Table on page 11.
CONCLUSION. The Committee believes that the Company's current executive
compensation system serves the interests of the Company and its shareowners
effectively. The Committee takes very seriously its responsibilities with
respect to the Company's executive compensation system. To this end, the
Committee will continue to monitor and revise the compensation policies as
necessary to ensure that the Company's compensation system continues to meet the
needs of the Company and its shareowners.
Compensation Committee
Bill Swisher, Chairman
Hugh L. Hembree, III, member
William E. Durrett, member
10
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
The following table provides information regarding compensation to the Company's Chief Executive Officers and four
other most highly compensated executive officers for the past three years. To the extent the table shows zeros for other
annual compensation, stock options, stock appreciation rights or payouts under long-term incentive plans for a
particular year, no amounts were required to be reported in such year or, in the case of other annual compensation, the
amounts were below the threshold required for disclosure under the SEC's rules.
Long Term Compensation
--------------------------------
Annual Compensation Awards Payouts
------------------------------ ----------------------- -------
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Principal Salary Bonus(1) Compensation Awards(2) Options/ Payouts Compensation(3)
Position Year ($) ($) ($) ($) SAR(#) ($) ($)
- ------------------ ---- ------ -------- ------------- ---------- ---------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
S.E. Moore, (4) Chairman, 1996 337,708 146,072 0 101,291 0 0 28,489
President and 1995 212,000 58,591 0 52,974 0 0 17,726
Chief Executive Officer 1994 162,917 41,920 0 32,579 0 0 15,334
P.J. Ryan (5) 1996 295,000 83,190 0 0 0 0 26,405
Vice Chairman 1995 295,000 63,130 0 58,968 0 0 25,804
1994 295,000 92,925 0 73,739 0 0 27,982
A.M. Strecker 1996 206,667 62,816 0 51,653 0 0 19,242
Senior Vice President 1995 200,000 46,800 0 39,974 0 0 19,059
Finance and Administration 1994 197,083 51,090 0 39,384 0 0 19,557
J.T. Coffman 1996 134,167 39,420 0 26,814 0 0 14,913
Vice President Power Supply 1995 127,500 31,720 0 25,475 0 0 6,039
1994 112,249 12,075 0 22,158 0 0 12,387
J.R. Hatfield (6) 1996 132,083 40,166 0 26,402 0 0 9,089
Treasurer 1995 127,500 29,835 0 25,475 0 0 2,350
1994 47,813 13,919 0 9,534 0 0 5,730
J.G. Harlow, Jr. (7) 1996 200,737 90,699 0 0 0 0 37,800
Chairman and 1995 500,000 183,000 0 149,972 0 0 52,145
Chief Executive Officer 1994 500,000 131,000 0 149,976 0 0 52,934
</TABLE>
- ----------
<TABLE>
<S> <C>
(1) As explained on page 9, amounts in this column reflect payouts under the Company's Annual Incentive Compensation
Plan.
(2) Amounts in this column reflect the market value of the shares of Restricted Stock awarded under the Restricted
Stock Plan, based on the closing price of OGE Energy's Common Stock on the date the award was made. The number of
shares awarded in 1996, 1995 and 1994 was as follows: (i) Mr. Moore, 2,463 shares, 1,308 shares and 991 shares,
respectively; (ii) Mr. Ryan, zero shares, 1,456 shares and 2,243 shares, respectively; (iii) Mr. Strecker, 1,256
shares, 987 shares and 1,198 shares, respectively; (iv) Mr. Coffman, 652 shares, 629 shares and 674 shares,
respectively; (v) Mr. Hatfield, 642 shares, 629 shares and 290 shares, respectively; and (vi) Mr. Harlow, zero
shares, 3,703 shares and 4,562 shares. In the absence of death, disability or normal retirement, the shares awarded
to these individuals in 1996, 1995 and 1994 are subject to forfeiture for three years with the amount the recipient
ultimately receives dependent on OGE Energy performance. The total number of shares and market value of Restricted
Stock held by each of the named individuals as of December 31, 1996, were as follows: Mr. Moore, 5,650 shares,
$235,888; Mr. Ryan, 5,747 shares, $239,937; Mr. Strecker, 4,524 shares, $188,877; Mr. Coffman, 2,067 shares,
$86,297; Mr. Hatfield, 1,561 shares, $65,172; and Mr. Harlow, none. Dividends are paid to these individuals on the
shares of Restricted Stock owned by them.
(3) Amounts in this column for 1996 reflect: (i) for Mr. Moore, $15,197 (Retirement Savings Plan and Retirement Savings
Restoration Plan) and $13,292 (insurance premiums); (ii) for Mr. Ryan, $13,275 (Retirement Savings Plan and
Retirement Savings Restoration Plan) and $13,130 (insurance premiums); (iii) for Mr. Strecker, $9,300 (Retirement
Savings Plan and Retirement Savings Restoration Plan) and $9,942 (insurance premiums); (iv) for Mr. Coffman, $6,037
(Retirement Savings Plan and Retirement Savings Restoration Plan) and $8,876 (insurance premiums); (v) for Mr.
Hatfield, $3,963 (Retirement Savings Plan and Retirement Savings Restoration Plan) and $5,126 (insurance premiums);
and (vi) for Mr. Harlow, $9,033 (Retirement Savings Plan and Retirement Savings Restoration Plan), $3,767
(insurance premiums), and $25,000 (consulting fees). A significant portion of the insurance premiums reported for
each of these individuals is for life insurance policies and such premiums are recovered by the Company from the
proceeds of the policies.
(4) Mr. Moore was appointed President in August 1995, Chief Executive Officer in May 1996, and Chairman in June 1996.
(5) Mr. Ryan resigned as Vice Chairman, effective January 3, 1997. Prior to his retirement, Mr. Ryan entered into an
agreement with the Company, whereby he is to render consulting services to the Company in 1997 and 1998 and is to
be paid $6,500 per month for such services plus a lump sum payment of $25,000. Under such agreement, Mr. Ryan also
will receive the same benefits provided for executive
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
officers who accepted the Company's early retirement offer in June 1994. These benefits include
(i) $500 per month until the earlier of Mr. Ryan's death or his attainment of age 62; (ii)
continued coverage for Mr. Ryan and his spouse under the Company's medical plans; (iii) an
enhanced pension benefit computed as if Mr. Ryan had three additional years of service with the
Company and was five years older at the date of his retirement (the approximate cost to the
Company of providing this benefit to Mr. Ryan was $248,369). The Company also agreed to
reimburse Mr. Ryan for the costs of accounting services in connection with his personal,
financial and tax planning during 1997 and for his 1997 tax returns.
(6) Mr. Hatfield was not employed by the Company or its subsidiaries prior to August 18, 1994.
(7) Mr. Harlow served as Chairman and Chief Executive Officer of the Company until May 16, 1996 at
which time he resigned as Chief Executive Officer due to illness. Following his resignation and
in accordance with an employment and consulting agreement with the Company, Mr. Harlow received
$13,287 for acting as Chairman and $25,000 in consulting fees prior to his death. Also, as part
of such agreement, Mr. Harlow received a country club membership (approximate cost $30,000) and
continued coverage (or coverage comparable to that provided) under the Company's medical plans
for Mr. Harlow and his spouse.
</TABLE>
<TABLE>
<CAPTION>
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
<S> <C>
The Company and OGE Energy maintain a qualified non-contributory Retirement Plan covering all
employees of the Company who have completed one year's service. Subject to limitations imposed by
the Employee Retirement Income Security Act of 1974 ("ERISA"), benefits under the Retirement Plan
are based upon the five highest consecutive years of cash compensation (which for the executives
named in the Summary Compensation Table prior to 1993 has consisted solely of salaries and for 1993,
1994, 1995 and 1996 consists of salary and bonus) during an employee's last ten years prior to
retirement and length of service. Social Security benefits are deducted in determining benefits
payable under the Plan. Remuneration covered by the Plan includes salaries, bonuses and overtime
pay. Retirement benefits are payable to participants upon normal retirement (at or after age 65) or
early retirement (at or after attaining age 55 and completing five or more years of service), to
former employees after reaching retirement age who have completed five or more years of service
before terminating their employment and to participants after reaching retirement age upon total and
permanent disability. As indicated above, the benefits payable under the Plan are subject to maximum
limitations under ERISA. Should benefits at the time of retirement exceed the then permissible
limits of ERISA, the Retirement Restoration Plan will provide benefits through a lump-sum
distribution actuarially equivalent to the amounts that would have been payable annually under the
Retirement Plan but for the ERISA limits. The Company and OGE Energy fund the estimated benefits
payable under the Retirement Restoration Plan through contributions to a trust for the benefit of
those employees who will be entitled to receive payments under the Retirement Restoration Plan.
The following table sets forth the estimated annual benefits payable upon normal retirement
under the Retirement Plan and Retirement Restoration Plan to persons in the remuneration
classification specified.
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Average Years of Service at Retirement
Compensation --------------------------------------------------------------------------------
5 Highest Years 10 15 20 25 30 35 40 45
===============================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 13,411 $ 20,117 $ 26,822 $ 33,528 $ 40,234 $ 46,939 $ 53,645 $ 60,350
125,000 17,161 25,742 34,322 42,903 51,484 60,064 68,645 77,225
150,000 20,911 31,367 41,822 52,278 62,734 73,189 83,645 94,100
175,000 24,661 36,992 49,322 61,653 73,984 86,314 98,645 110,975
200,000 28,411 42,617 56,822 71,028 85,234 99,439 113,645 127,850
225,000 32,161 48,242 64,322 80,403 96,484 112,564 128,645 144,725
250,000 35,911 53,867 71,822 89,778 107,734 125,689 143,645 161,600
300,000 43,411 65,117 86,822 108,528 130,234 151,939 173,645 195,350
350,000 50,911 76,367 101,822 127,278 152,734 178,189 203,645 229,100
400,000 58,411 87,617 116,822 146,028 175,234 204,439 233,645 262,850
450,000 65,911 98,867 131,822 164,778 197,734 230,689 263,645 296,600
500,000 73,411 110,117 146,822 183,528 220,234 256,939 293,645 330,350
550,000 80,911 121,367 161,822 202,278 242,734 283,189 323,645 364,100
600,000 88,411 132,617 176,822 221,028 265,234 309,439 353,645 397,850
650,000 95,911 143,867 191,822 239,778 287,734 335,689 383,645 431,600
700,000 103,411 155,117 206,822 258,528 310,234 361,939 413,645 465,350
750,000 110,911 166,367 221,822 277,278 332,734 388,189 443,645 499,100
- -----------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
As of December 31, 1996, the credited years of service for the individuals
listed in the remuneration table on page 11 are as follows: S. E. Moore - 22
years; P. J. Ryan - 35 years; A. M. Strecker - 25 years; J. T. Coffman - 26
years; and J. R. Hatfield - 2 years. At the time of his retirement, Mr. Harlow
had 35 credited years of service.
In 1993, the Company adopted a Supplemental Executive Retirement Plan (the
"SERP"). The SERP is an unfunded supplemental plan that is not subject to the
benefits limit imposed by ERISA. The plan generally provides for an annual
retirement benefit at age 65 equal to 65% of the participant's average cash
compensation during his or her final 36 months of employment, reduced by Social
Security benefits, by amounts payable under the Company's Retirement and
Restoration Plans described above and by amounts received under pension plans
from other employers. For a participant in the SERP who retires before age 65,
the 65% benefit is reduced, with the reduction being 1% per year for ages 62
through 64, an additional 2% per year for ages 60 through 61, an additional 4%
per year for ages 58 through 59 and an additional 6% per year for ages 55
through 57, so that a participant retiring at age 55 would receive 32% of his
average cash compensation during his final 36 months, reduced by the deductions
set forth above. With the exception of Mr. Harlow, who retired at age 62, none
of the individuals listed in the remuneration table on page 11 has received or
is expected to receive benefits under the SERP at normal retirement as the
benefits payable to such individuals under the Company's Retirement and
Restoration Plans are expected to exceed the benefits payable under the SERP.
CHANGE OF CONTROL ARRANGEMENTS
- --------------------------------------------------------------------------------
On November 20, 1996, the Company and OGE Energy entered into employment
agreements with each officer of the Company. Pursuant to such agreements, each
such officer is to remain an employee for a three-year period following a change
of control of OGE Energy (the "Employment Period"). During the Employment
Period, the officer is entitled to (i) an annual base salary in an amount at
least equal to his or her base salary prior to the change of control, (ii) an
annual bonus in an amount at least equal to his or her highest bonus in the
three years prior to the change of control, and (iii) continued participation in
the incentive, savings, retirement and welfare benefit plans. The officer also
is entitled to payment of expenses and provision of fringe benefits to the
extent paid or provided to (a) such officer prior to the change of control or
(b) other peer executives of OGE Energy.
If, during the Employment Period, the officer's employment is terminated by
the employer for reasons other than cause or disability or by such officer due
to a change in employment responsibilities, the officer shall be entitled to the
following payments: (i) all accrued and unpaid compensation and (ii) a severance
payment equal to 2.99 times the sum of such officer's (a) annual base salary and
(b) highest recent annual bonus. The officer shall also be entitled to continued
welfare benefits for three years and outplacement services. If the payment of
the foregoing benefits, when taken together with any other payments to the
officer, would result in the imposition of the excise tax on excess parachute
payments under Section 4999 of the Internal Revenue Code of 1986, as amended,
then the severance benefits will be reduced if such reduction results in a
greater after-tax payment to the officer. The officer is entitled to receive
such amounts in a lump-sum payment within 30 days of termination. A change of
control encompasses certain mergers and acquisitions, changes in Board
membership and acquisition of securities of OGE Energy.
13
<PAGE>
COMPANY STOCK PERFORMANCE
- --------------------------------------------------------------------------------
The following graph shows a five-year comparison of cumulative total
returns for the Company's Common Stock, the Dow Jones Equity Market Index and
the Dow Jones Electric Utilities Index. The graph assumes that the value of the
investment in the Company's Common Stock and each index was 100 at December 31,
1991, and that all dividends were reinvested.
[GRAPH]
<TABLE>
<CAPTION>
Dow Jones Dow Jones
Measurement Period Equity Market Electric
(Fiscal Year Covered) OG&E Index Utilities Index
- --------------------- ---- ----- ---------------
<S> <C> <C> <C> <C>
12/31/91 100 100 100
12/31/92 83 109 107
12/31/93 97 119 119
12/30/94 94 120 105
12/29/95 132 166 138
12/31/96 137 206 139
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
- --------------------------------------------------------------------------------
Under federal securities laws, the Company's and OGE Energy's directors and
executive officers are required to report, within specified monthly and annual
due dates, their initial ownership in OGE Energy's and the Company's common and
preferred stocks and subsequent acquisitions, dispositions or other transfers of
interest in such securities. The Company is required to disclose whether it has
knowledge that any person required to file such a report may have failed to do
so in a timely manner. To the Company's knowledge, all of the Company's
directors and officers subject to such reporting obligations have satisfied
their reporting obligations in full.
RELATIONSHIP WITH INDEPENDENT
PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
During 1996, the Company engaged Arthur Andersen LLP as its independent
public accountants. The Board of Directors has appointed Arthur Andersen LLP as
the independent public accountants for the Company and OGE Energy for 1997.
Representatives of Arthur Andersen LLP will be present at the Annual Meeting of
Shareowners and will have the opportunity to make a statement if they so desire.
Such representatives will be available to respond to appropriate questions from
shareowners at the meeting.
14
<PAGE>
LOCATION OF OKLAHOMA CITY MARRIOTT HOTEL
- --------------------------------------------------------------------------------
[MAP]
15
