<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:
/X/ Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
ENRON OIL & GAS COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
ENRON OIL & GAS COMPANY
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
- ---------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
ENRON
Oil & Gas Company
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 3, 1994
TO THE SHAREHOLDERS:
Notice is hereby given that the annual meeting of shareholders of Enron Oil
& Gas Company (the "Company") will be held in the LaSalle Ballroom of the
Doubletree Hotel at Allen Center, 400 Dallas Street, Houston, Texas, at 3:00
p.m. Houston time on Tuesday, May 3, 1994, for the following purposes:
1. To elect five directors of the Company to hold office until the next
annual meeting of shareholders and until their respective successors are
duly elected and qualified;
2. To ratify the Board of Directors' appointment of Arthur Andersen & Co.,
independent public accountants, as auditors for the Company for the year
ending December 31, 1994;
3. To approve, contingent upon the Company declaring, on or before May 3,
1995, a stock split of either two-for-one or three-for-two, a proposed
amendment to the Restated Certificate of Incorporation of the Company to
increase the total number of authorized shares of Common Stock from
80,000,000 to 160,000,000 shares in the event of a two-for-one stock
split or to 120,000,000 shares in the event of a three-for-two stock
split; and
4. To transact such other business as may properly be brought before the
meeting or any adjournments thereof.
Holders of record of the Company's Common Stock at the close of business on
March 7, 1994, will be entitled to notice of and to vote at the meeting or any
adjournments thereof.
Shareholders who do not expect to attend the meeting are encouraged to sign
and return the enclosed proxy, for which purpose a postage-paid, return envelope
is enclosed. The proxy must be signed and returned in order to be counted.
By Order of the Board of Directors,
ANGUS H. DAVIS
Vice President, Communications and Corporate
Secretary
Houston, Texas
March , 1994
<PAGE> 3
ENRON
Oil & Gas Company
PROXY STATEMENT
The enclosed form of proxy is solicited by the Board of Directors of Enron
Oil & Gas Company (the "Company" or "EOG") to be used at the annual meeting of
shareholders to be held in the LaSalle Ballroom of the Doubletree Hotel at Allen
Center, 400 Dallas Street, Houston, Texas, at 3:00 p.m. Houston time on Tuesday,
May 3, 1994 (the "Annual Meeting"). The mailing address of the principal
executive offices of the Company is 1400 Smith St., Houston, Texas 77002. This
proxy statement and the related proxy are to be first sent or given to the
shareholders of the Company on approximately March , 1994. Any shareholder
giving a proxy may revoke it at any time provided written notice of such
revocation is received by the Vice President, Communications and Corporate
Secretary of the Company before such proxy is voted; otherwise, if received in
time, properly completed proxies will be voted at the Annual Meeting in
accordance with the instructions specified thereon. Shareholders attending the
Annual Meeting may revoke their proxies and vote in person.
Holders of record at the close of business on March 7, 1994, of the
Company's Common Stock, no par value (the "Common Stock"), will be entitled to
one vote per share on all matters submitted to the meeting. On March 7, 1994,
the record date, there were outstanding 79,920,000 shares of Common Stock. There
are no other voting securities outstanding.
The Company's summary annual report for the year ended December 31, 1993,
and Annual Report on Form 10-K for the year ended December 31, 1993, are being
mailed herewith to all shareholders entitled to vote at the Annual Meeting. The
summary annual report and Annual Report on Form 10-K do not constitute a part of
the proxy soliciting material.
All references in this proxy statement to Enron Corp. common stock reflect
the two-for-one stock split made on August 16, 1993.
ITEM 1.
ELECTION OF DIRECTORS
At the Annual Meeting, five directors are to be elected to hold office
until the next succeeding annual meeting of the shareholders and until their
respective successors have been elected and qualified. All of the nominees are
currently directors of the Company. Proxies cannot be voted for a greater number
of persons than the number of nominees named on the enclosed form of proxy. A
plurality of the votes cast in person or by proxy by the holders of Common Stock
is required to elect a director. Accordingly, under Delaware law, abstentions
and broker non-votes (which occur if a broker or other nominee does not have
discretionary authority and has not received instructions with respect to a
particular item) would not have the same effect as a vote against a particular
director. Shareholders may not cumulate their votes in the election of
directors.
It is the intention of the persons named in the enclosed proxy to vote such
proxy for the election of the nominees named herein. Should any nominee become
unavailable for election, discretionary authority is conferred to vote for a
substitute. The following information regarding the nominees, their principal
occupations, employment history and directorships in certain companies is as
reported by the respective nominees.
<PAGE> 4
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ------------------ FRED C. ACKMAN, 63
Director since 1989
Photo For over five years Mr. Ackman has been a consultant to the oil and gas
industry and has interests in ranching and investments.
- ------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ------------------ FORREST E. HOGLUND, 60
Director since 1987
Photo Mr. Hoglund joined the Company as Chairman of the Board and Chief
Executive Officer in September, 1987. Since May, 1990, he has also
served as President of the Company. Mr. Hoglund is also a director of
- ------------------ Texas Commerce Bancshares, Inc.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ------------------ RICHARD D. KINDER, 49
Director since 1985
Photo Since October, 1990, Mr. Kinder has been President and Chief Operating
Officer of Enron Corp. From December, 1988 until October, 1990, he
served Enron Corp. as Vice Chairman of the Board. For over five years
- ------------------ prior to his election as Vice Chairman, Mr. Kinder served in various
management and legal positions with Enron Corp. and its affiliates. Mr.
Kinder is also a director of Enron Corp., Enron Liquids Pipeline Company
(the general partner of Enron Liquids Pipeline, L.P.) and Baker Hughes
Incorporated.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ------------------ KENNETH L. LAY, 51
Director since 1985
Photo For over five years, Mr. Lay has been Chairman of the Board and Chief
Executive Officer of Enron Corp. From February, 1989 until October,
1990, he also served as President of Enron Corp. Mr. Lay is also a
- ------------------ director of Eli Lilly and Company, Compaq Computer Corporation, Trust
Company of the West and Enron Corp.
</TABLE>
- --------------------------------------------------------------------------------
2
<PAGE> 5
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ------------------ EDWARD RANDALL, III, 67
Director since 1990
Picture Mr. Randall's principal occupation is investments. From September, 1985,
to come until July, 1990, Mr. Randall was a partner with Duncan, Cook & Company,
a private investment banking firm. Mr. Randall is also a director of
- ------------------ American Oil and Gas Corporation and PaineWebber Group Inc.
- ------------------ ------------------------------------------------------------------------
</TABLE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The Company knows of no one who beneficially owns in excess of five percent
of the Common Stock of the Company except as set forth in the table below.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
TITLE BENEFICIAL
OF NAME AND ADDRESS OF OWNERSHIP AS OF PERCENT
CLASS BENEFICIAL OWNER JANUARY 31, 1994 OF CLASS
- ------- --------------------- ---------------- --------
<S> <C> <C> <C>
Common Enron Corp. 64,000,000 80.08%
1400 Smith Street
Houston, Texas 77002
</TABLE>
STOCK OWNERSHIP OF THE BOARD OF DIRECTORS AND MANAGEMENT
<TABLE>
<CAPTION>
ENRON OIL & GAS COMPANY
COMMON STOCK ENRON CORP. COMMON STOCK
--------------------------------- ---------------------------------
AMOUNT AMOUNT
AND NATURE AND NATURE
OF BENEFICIAL OF BENEFICIAL
OWNERSHIP AS OF PERCENT OWNERSHIP AS OF PERCENT
NAME JANUARY 31, 1994(1) OF CLASS JANUARY 31, 1994(1) OF CLASS
- ----------------------------------- ------------------- -------- ------------------- --------
<S> <C> <C> <C> <C>
Fred C. Ackman..................... 1,000 * --
Lewis P. Chandler.................. 18,125(2) * 26,752(5) *
Forrest E. Hoglund................. 1,320,000(2)(3) 1.63 576,138(4)(5)(6) *
Howard Karren...................... 46,875(2) * 51,674(5)(6) *
Richard D. Kinder.................. 19,619(7) * 806,952(5)(6) *
Kenneth L. Lay..................... 15,800(7)(8) * 1,250,601(5)(6)(8) *
Mark G. Papa....................... 71,454(2)(5) * 53,914(5)(6) *
Edward Randall, III................ 2,000 * 6,800(9) *
Dennis M. Ulak..................... 13,191(2)(5) * 11,661(5) *
George E. Uthlaut.................. 46,625(2) * 15,405(5) *
Walter C. Wilson................... 48,725(2) * 11,116(5) *
All directors and executive
officers as a group (12 in
number).......................... 1,612,289(2)(7) 2.02 2,817,022(5)(6) 1.123
</TABLE>
- ---------------
* Less than 1%.
(Notes continued on following page)
3
<PAGE> 6
(1) Except as otherwise explained in the footnotes set forth below, all shares
involve sole voting power and sole investment power.
(2) The number of shares of the Company's Common Stock subject to stock options
exercisable within 60 days after January 31, 1994, which number is included
in the number of shares shown as beneficially owned as of such date, is as
follows: Mr. Chandler 16,625 shares; Mr. Hoglund 910,000 shares; Mr. Karren
shares 46,875; Mr. Papa 66,375 shares; Mr. Uthlaut 43,625 shares; Mr. Ulak
11,500 shares; Mr. Wilson 47,625 shares; and all directors and executive
officers as a group, 1,151,500 shares.
(3) Includes 400,000 shares granted to Mr. Hoglund pursuant to his employment
agreement, in which shares Mr. Hoglund has sole voting power and limited
investment power.
(4) Includes 370,656 restricted shares of Enron Corp. Common Stock issued to Mr.
Hoglund pursuant to the 1992 amendment to his employment agreement, in
which shares Mr. Hoglund has sole voting power and limited investment
power. See "Compensation of Directors and Executive Officers -- Employment
Contracts."
(5) Includes shares held under the Enron Corp. Savings Plan and/or Employee
Stock Ownership Plan ("ESOP"). Participants in the Savings Plan have sole
voting power and limited investment power with respect to shares in the
Savings Plan. Participants in the ESOP have sole voting power and no
investment power prior to distribution of shares from the ESOP.
(6) The number of shares of Enron Corp. Common Stock subject to stock options
exercisable within 60 days after January 31, 1994, which number is included
in the number of shares shown as beneficially owned as of such date, is as
follows: Mr. Hoglund 34,660 shares; Mr. Karren 29,600 shares; Mr. Kinder
534,041 shares; Mr. Lay 450,100 shares; Mr. Papa 16,660 shares; and all
directors and executive officers as a group, 1,065,061 shares.
(7) Does not include 64,000,000 shares owned by Enron Corp. in which each of
Messrs. Lay and Kinder, in their capacities as Chairman of the Board and
President, respectively, of Enron Corp., has sole voting and investment
power pursuant to the provisions of Enron Corp.'s by-laws.
(8) Includes 800 shares with respect to the Company's Common Stock and 7,530
shares with respect to Enron Corp. Common Stock held by Mr. Lay's children
and step-children in which Mr. Lay has shared voting and investment powers.
(9) Does not include 75,260 shares of Enron Corp. Common Stock held by trusts of
which Mr. Randall is trustee and in which Mr. Randall disclaims beneficial
ownership.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held four regularly scheduled meetings and five
special meetings during the year ended December 31, 1993.
The Board of Directors uses working committees with functional
responsibility in the more complex recurring areas where disinterested oversight
is required. The Audit Committee was created in October, 1989, after the initial
public offering and sale of Common Stock, and is the communication link between
the Board and independent auditors of the Company. During the year ended
December 31, 1993, the Audit Committee met four times. The Audit Committee
recommends to the Board of Directors the appointment of independent public
accountants as auditors of the Company and reviews as deemed appropriate the
scope of the audit, the accounting policies and reporting practices, internal
4
<PAGE> 7
auditing plans and internal controls, compliance with policies regarding
business conduct and other matters. The Audit Committee is currently composed of
Messrs. Ackman (Chairman) and Randall.
In January, 1990, the Board of Directors created the Compensation
Committee, which is responsible for administration of the Enron Oil & Gas
Company 1992 Stock Plan and approval of compensation arrangements of senior
management. The Compensation Committee, which met four times during the year is
composed of Messrs. Randall (Chairman) and Ackman.
The Company does not have a standing nominating committee.
During the year ended December 31, 1993, each director attended at least
75% of the total number of meetings of the Board and the committees on which the
director served except Mr. Lay.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTOR COMPENSATION
During 1993 each director who was not an employee of the Company, Enron
Corp. or its affiliates, received an annual fee of $29,000 for serving as a
director and $5,000 annually for each committee of which such director is
Chairman. Total directors' fees earned in 1993 were $68,000.
The Company's directors may participate in a Deferral Plan maintained by
Enron Corp. under which fees can be deferred to a later specified date. Interest
is credited to all amounts deferred. Payments are made exclusively from the
general assets of Enron Corp., and Enron Corp. has elected to purchase life
insurance on the lives of some covered participants with Enron Corp. as the
owner and beneficiary. Currently, one director participates in the Plan. The
Company reimburses Enron Corp. for Deferral Plan costs attributable to the
Company's directors.
Nonemployee directors also participate in the 1993 Nonemployee Director
Stock Option Plan, which was approved by the Company's shareholders at the 1993
annual meeting. Under the terms of the Plan, each nonemployee director receives
on the date of each annual meeting during the term of the Plan an option to
purchase 3,000 shares of Common Stock at an exercise price equal to the fair
market value of the Common Stock on the date of grant. In addition, each
nonemployee director who is elected or appointed to the Board of Directors for
the first time after an annual meeting is granted on the date of such election
or appointment an option to purchase 3,000 shares of Common Stock at an exercise
price equal to the fair market value of the Common Stock on the date of grant.
Options granted under the Plan vest 50% after one year and are 100% vested after
two full years of service as a director following the date of grant. All options
expire ten years from the date of grant. During 1993, each nonemployee director
was granted a total of 3,000 options at an exercise price of $39.375.
REPORT FROM THE COMPENSATION COMMITTEE REGARDING EXECUTIVE COMPENSATION
Compensation for Company executives is administered by the Compensation
Committee (the "Committee") of the Board of Directors, which is composed
exclusively of outside directors. It is the responsibility of the Committee to
approve compensation philosophy and authorize executive salary increases,
incentive programs and awards consistent with this philosophy.
The Committee believes that appropriately balanced compensation elements
contribute to the success of the Company. Hay Management Consultants provides an
annual analysis of executive base
5
<PAGE> 8
salaries, annual bonuses and long-term incentives paid by the Company as
compared to those paid by a number of industry peer companies included in the
"Comparative Stock Performance" section. The Committee believes that the best
compensation philosophy is to put a substantial portion of the total
compensation package at risk and tied to both the financial results achieved and
the performance of the Common Stock of the Company, which means the Company does
not intend to lead the competition in base salary levels. Further, the Committee
believes that total compensation for the executives should exceed average
compensation levels of a peer group of companies only if the Company performs at
a level such that financial results achieved by the Company and shareholder
return on investments in the Company exceed the average achieved by that peer
group of companies over a reasonable period of time. To achieve this goal, the
Committee has authorized the following incentive plans which provide for
incentive compensation in the form of cash and stock options, to link executive
compensation with the performance and financial results of the Company.
KEY CONTRIBUTOR INCENTIVE PLAN. All of the Company's employees are
eligible for cash bonuses of up to 100% of base salary under this plan. The plan
authorizes the funding of a bonus pool to be approved by the Committee. The
bonus pool is not generally anticipated to exceed the lesser of (i) 5% of net
income or (ii) 5% of the net present value, discounted at 10%, of the net cash
flows anticipated to result from the Company's capital investment program. Each
year the Committee approves performance goals for the Company against which
actual results are measured to determine the level of funding of this plan. The
goals established for the Company cover factors such as net income, production
and reserve volume growth, finding costs per equivalent unit of reserves added
and rate of return on capital investments. These goals are designed to address
both current financial performance and the long-term development of the Company.
The Committee does not use a specific formula for weighting these individual
performance factors.
ENRON OIL & GAS COMPANY 1992 STOCK PLAN. This plan is the long-term
incentive plan of the Company for executive officers and other selected
employees. The purposes of this plan are to encourage employees who receive
grants to develop a proprietary interest in the performance of the Company, to
generate an increased incentive to contribute to the future success of the
Company, thus enhancing the value of the Company for the benefit of
shareholders, and to enhance the ability of the Company and its subsidiaries to
attract and retain individuals with qualifications essential to the progress,
growth and profitability of the Company.
This plan authorizes the Committee to award stock options to employees.
Stock options are normally granted on an annual basis at an option price equal
to the fair market value of the Company's Common Stock on the date of grant,
have ten-year terms and vest over four years except in cases where they are
issued in lieu of a portion of a cash bonus, in which case they typically vest
in a shorter time period which for 1993 grants was one year following the date
of the grant. Committee approval is obtained for the number of options to be
granted. The awards are made at a level that is not anticipated to generate
significant benefits relative to the industry peer group, unless the Company's
Common Stock performs exceedingly well during the life of the grant. With the
success of the Company (and the resulting benefits to its shareholders), this
feature becomes a larger part of the total compensation package.
Based upon a thorough review and discussion of the Company's 1993 results,
several of which are highlighted below, the Committee approved funding the bonus
pool at 5% of 1993 net income. The Committee also reviewed and approved
individual bonuses, salary increases, and stock option grants recommended by the
CEO based upon his evaluation of each individual executive officer's perform-
6
<PAGE> 9
ance and contribution to the Company's overall success during 1993. Bonuses for
the Company's executive officers ranged from 50% to 85% of base salary and
option grants were awarded at a level expected to bring total compensation
opportunities in line with similar positions at peer companies.
The following achievements represent the significant factors considered by
the Company's CEO and Compensation Committee in assessing individual and
Company-wide performance during 1993: (i) after-tax net income exceeded the
Company's 1993 goal by 6% and exceeded 1992 after-tax net income by 41%; (ii)
discretionary cash flow from operations (cash flow available, after meeting all
nondiscretionary operational expenditure requirements, for reinvestment in
opportunities for further growth and development of, and selected at the
discretion of the Company) exceeded the Company's 1993 goal by 2% and exceeded
1992 discretionary cash flow by 52%; (iii) Internal Revenue Code Section 29
tight gas sand production exceeded the 1993 goal; (iv) achieved 138% replacement
of production on an "all sources" basis, including drilling additions,
revisions, and purchases net of divestitures, (150% from drilling additions
only) at approximately $.74 per thousand cubic feet direct finding cost; (v)
successfully started up a natural gas and crude oil development project off the
southeast coast of Trinidad with the first well completed and on production
within one year of signing agreements; (vi) increased natural gas deliveries
from 564 million cubic feet per day ("MMCFD") in 1992 to 709 MMCFD in 1993
(approximately 26% increase); and (vii) achieved an internal rate of return on
investment exceeding 20%.
CHIEF EXECUTIVE OFFICER COMPENSATION. Mr. Hoglund was recruited in 1987
(prior to the Company's initial public offering and sale of Common Stock in
October, 1989) as Chairman of the Board and Chief Executive Officer and entered
into an employment agreement with the Company for an initial term of five (5)
years effective September 1, 1987. In 1992, the Committee approved an extension
of Mr. Hoglund's employment agreement to September 1, 1995, based upon the
significant achievements realized by the Company since Mr. Hoglund assumed his
position in September 1987. Under the terms of this employment agreement, as
extended, Mr. Hoglund received grants of non-qualified Company stock options,
restricted and unrestricted shares of Enron Corp. common stock, split dollar
life insurance and a $20,000 annual salary increase. Under the terms of the
extension, Mr. Hoglund agreed not to receive any further annual bonus payments.
As a result, in 1993, Mr. Hoglund's salary was $570,000, and he received no
bonus. Substantially all of Mr. Hoglund's future compensation in excess of his
base salary is at risk and tied to the performance of the Company's Common
Stock. The Committee believes this is a very appropriate way to link executive
rewards to shareholders value.
The Internal Revenue Service (IRS) has issued proposed regulations
implementing Section 162(m) of the Internal Revenue Code of 1986, as amended,
relating to the limitation of the deductibility for federal income tax purposes
of certain executive compensation in excess of $1 million annually. Section
162(m) is applicable to such compensation paid after December 31, 1993. The
Committee has been advised that, pursuant to the transition rules contained in
these regulations, Section 162(m) does not apply to written binding contracts
existing on February 17, 1993 or to performance-based plans. The transition
rules also provide that plans approved before December 20, 1993 pursuant to Rule
16b-3 under the Securities Exchange Act of 1934 will be treated as performance-
based until the earliest of 1) the expiration or material modification of the
plan, 2) the issuance of all stock under the plan, or 3) the first shareholders
meeting to elect directors occurring after December 31, 1996. Accordingly, the
transition rules would treat the gain from exercised Company stock options as
performance-based compensation, which is excludable from the $1,000,000
limitation.
7
<PAGE> 10
During 1994, no executive of the Company will receive compensation in excess of
$1 million unless a significant number of vested stock options are exercised.
The Committee is not recommending changes or amendments to any executive
compensation plans of the Company during 1994.
Compensation Committee
Edward Randall, III -- Chairman
Fred C. Ackman
8
<PAGE> 11
COMPARATIVE STOCK PERFORMANCE
The performance graph shown below was prepared by Value Line, Inc., for use
in this proxy statement. As required by applicable rules of the Securities and
Exchange Commission (the "SEC"), the graph was prepared based upon the following
assumptions:
1. $100 was invested in Common Stock of EOG, the S&P 500 and a peer group
of independent exploration and production companies (the "Peers") on
October 4, 1989, the date of the initial public offering and sale of EOG
Common Stock.
2. Peers investment is weighted based on the market capitalization of each
individual company within the Peers at the beginning of each year.
3. Dividends are reinvested on the ex-dividend dates.
The companies that comprise the Peers are as follows: Apache Corp.,
Anadarko Petroleum Corp., Burlington Resources Inc., Louisiana Land and
Exploration Company, Maxus Energy, Mesa Inc., Noble Affiliates, Inc., Oryx
Energy Company and Union Texas Petroleum Holdings, Inc.
COMPARATIVE TOTAL RETURNS
EOG, S&P 500, PEERS
(PERFORMANCE RESULTS THROUGH DECEMBER 31, 1993)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) EOG S&P 500 PEERS
<S> <C> <C> <C>
OCT. 4, 1989 100 100 100
1989 134.67 102.06 104.52
1990 114.32 98.83 86.92
1991 106.01 129.02 79.38
1992 161.16 138.92 88.83
1993 215.33 152.92 101.17
</TABLE>
9
<PAGE> 12
EXECUTIVE COMPENSATION
The following table summarizes certain information regarding compensation
paid or accrued during each of the last three fiscal years to the Chief
Executive Officer, each of the four other most highly compensated executive
officers of the Company and two former executive officers of the Company who
have remained employees of the Company (the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- ------------------------------------------------- ALL OTHER
OTHER RESTRICTED COMPENSATION
ANNUAL STOCK OPTIONS/ LTIP ------------
NAME & PRINCIPAL SALARY BONUS COMPENSATION AWARDS SARS PAYOUTS
POSITION YEAR ($) ($) ($)(2)(3) ($)(4) (#) ($) ($)(3)(5)
- ----------------- ----- -------- -------- ------------ ---------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Forrest E.
Hoglund 1993 $570,000 $154,925 $ 212,063 66,650(7) $139,566(13)
Chairman of the
Board, 1992 $565,002 $160,468 $6,018,649(6)(10) 1,150,000(7)(8) $1,500,000(10) $124,989(13)
President and
Chief 1991 $550,008 $ 75,000 $ 16,560(6) 48,000(7)
Executive Officer
Mark G. Papa 1993 $235,000 $106,400 $ 12,132 $ 133,219 73,650(7) $ 38,559
Senior Vice 1992 $209,820 $100,000 $ 10,248 $ 0 82,500(8) $ 323,066(11)(12) $ 29,858
President-Operations 1991 $193,640 $ 75,000 12,500(9)
George E. Uthlaut 1993 $198,700 $ 69,600 $ 10,918 $ 0 18,500 $ 35,307
Senior Vice 1992 $189,000 $ 70,000 $ 8,820 $ 0 65,500(8) $ 323,066(11)(12) $ 29,419
President-Operations 1991 $185,000 $ 55,000 $ 0 9,000(9)
Howard Karren(1) 1993 $193,500 $ 56,000 $ 57,784 $ 0 10,500 $ 34,383
President, 1992 $186,000 $ 35,000 $ 37,387 $ 0 57,000(8) $ 323,066(11)(12) $ 25,217
Enron Exploration 1991 $185,000 $ 20,000 $ 0 10,000(9) $ 44,130(12)
Company
Lewis P.
Chandler, Jr.(1) 1993 $179,340 $ 77,500 $ 5,400 $ 0 16,000 $ 31,867
Senior Vice 1992 $173,220 $ 81,000 $ 5,100 $ 0 49,750(8) $ 84,376(11) $ 26,963
President-Law 1991 $169,600 $ 55,000 $ 0 10,000(9)
Walter C. Wilson 1993 $174,040 $ 84,000 $ 17,475 $ 0 21,000 $ 29,859
Senior Vice
President 1992 $159,540 $ 90,000 $ 5,100 $ 0 54,375(8) $ 156,563(11) $ 15,354
and Chief
Financial
Officer 1991 $153,840 $ 55,000 $ 0 7,500(9)
Dennis M. Ulak 1993 $139,850 $ 56,000 $ 4,000 $ 0 14,000 $ 24,850
Vice President, 1992 $127,640 $ 50,000 $ 0 14,000(8) $ 22,500(11) $ 12,466
General Counsel
and 1991 $113,380 $ 15,000 $ 0 2,000(9)
Assistant
Secretary
</TABLE>
- ---------------
(1) Messrs. Chandler and Karren served as executive officers during 1991, 1992
and a portion of 1993.
(2) No Named Officer had "perquisites and other personal benefits" with a value
greater than the lesser of $50,000 or 10% of reported salary and bonus.
Enron Corp. maintains two deferral plans for key employees of Enron Corp.
and its subsidiaries, including the Company, under which payment of base
salary, annual bonus and long-term incentive awards may be deferred to a
later specified date. Under the 1985 Deferral Plan, interest is credited on
amounts deferred based on 150% of Moody's seasoned corporate bond yield
index, which for 1992 was 13.845% and for 1993 was 12.825%. Interest in
excess of 120% of the December, 1992 long-term Applicable Federal Rate
(Notes continued on following page)
10
<PAGE> 13
(8.5%) has been reported as other annual compensation for 1993 and interest
in excess of 120% of the December, 1991 long-term Applicable Federal Rate
(9.5%) has been reported as other annual compensation for 1992. No interest
has been reported as other annual compensation under the 1992 Deferral
Plan, which credits interest at Enron Corp.'s mid-term borrowing rate,
since the crediting rate for 1993 of 7.06% did not exceed 120% of the
Applicable Federal Rate. Other annual compensation also includes
miscellaneous cash payments for items such as cash perquisite allowances
and lost benefits due to statutory earnings limits.
(3) Only 1992 and 1993 data is provided, since the rules adopted by the SEC
allow a three-year phase-in for this category.
(4) At the end of 1993, Mr. Hoglund had an aggregate of 7,800 shares of
restricted stock valued at $226,200, and Mr. Papa had an aggregate of 4,900
shares of restricted stock valued at $142,100, all of which were awarded
pursuant to the Enron Corp. 1991 Stock Plan.
(5) Includes the value as of December 31, 1992 and December 31, 1993 of Enron
Corp. Common Stock allocated during the year to employees' savings accounts
under the ESOP.
(6) 1,280 restricted shares of Enron Corp. Common Stock granted to Mr. Hoglund
on January 3, 1991 vested 33% on January 3, 1992 and 67% on December 14,
1992; and 1,040 restricted shares of Enron Corp. Common Stock granted to
Mr. Hoglund on January 2, 1992 vested 100% on December 14, 1992.
(7) Includes options for Mr. Hoglund to purchase 66,650 shares of Enron Corp.
Common Stock with respect to 1993, 40,000 shares of Enron Corp. Common
Stock with respect to 1992 and 48,000 shares of Enron Corp. Common Stock
with respect to 1991. Includes an option for Mr. Papa to purchase 41,650
shares of Enron Corp. Common Stock with respect to 1993.
(8) Includes stock options granted following cancellation of SAR units
originally granted in 1989, 1990 and 1991 that were waived and cancelled
during 1992.
(9) Represents SAR units granted in 1991 that were waived and cancelled during
1992. An equivalent number of stock options subsequently granted are
included in the number of options reflected as granted in 1992.
(10) Includes compensation for imbedded gain in SAR units cancelled for which
Mr. Hoglund was issued a total of 463,320 shares of Enron Corp. Common
Stock as discussed below under "Employment Contracts". In conjunction
therewith, he made a section 83(b) election under the Internal Revenue Code
of 1986, as amended, which required him to report as income the total value
of the stock even though only 92,664 shares were unrestricted in 1992. The
remaining 370,656 shares of Enron Corp. Common Stock carry a vesting
schedule as discussed below under "Employment Contracts".
(11) Includes compensation for imbedded gain in SAR units cancelled during 1992
in the following amounts: Mr. Papa, $225,000; Mr. Uthlaut, $225,000; Mr.
Chandler, $84,376; Mr. Karren, $225,000; Mr. Ulak, $22,500; and Mr. Wilson,
$156,563.
(12) Includes payouts of performance units under Enron Corp.'s Long-Term
Incentive Plan in the following amounts: Mr. Papa, $98,066; Mr. Uthlaut,
$98,066; and Mr. Karren, $98,066 in 1992 and $44,130 in 1991. No
performance units have been granted to officers of the Company since 1988,
and no future grants are expected. The Company reimburses Enron Corp. for
long-term incentive plan costs attributable to executives of the Company.
(13) Includes $89,365 in 1992 and $97,659 in 1993 for "split dollar" life
insurance premiums provided in accordance with Mr. Hoglund's employment
agreement, as amended and extended.
11
<PAGE> 14
STOCK OPTION GRANTS DURING 1993
The following table sets forth information with respect to grants of stock
options pursuant to the Company's and Enron Corp.'s stock option plans to the
Named Officers reflected in the Summary Compensation Table on page 10 and all
employee optionees as a group. No SAR units were granted during 1993, and none
are outstanding.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
% OF TOTAL ASSUMED ANNUAL RATES OF
OPTIONS/SARS STOCK PRICE APPRECIATION
GRANTED TO EXERCISE OR FOR OPTION TERM(1)
OPTIONS/SARS EMPLOYEES IN BASE EXPIRATION --------------------------------------
NAME GRANTED(#)(3) FISCAL YEAR PRICE($/SH) DATE 0%(2) 5% 10%
- ------------------------------- ------------ ------------ ----------- ---- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mr. Hoglund....... 66,650(6) 1.57% $27.1875 09-Feb-2003 $ 0 $ 1,139,587 $ 2,887,936
- ----------------------------------------------------------------------------------------------------------------
Mr. Papa.......... 20,000(4) 4.3% $37.5000 05-Mar-2003 $ 0 $ 471,671 $ 1,195,307
12,000(5) 2.6% $37.5000 05-Mar-2003 $ 0 $ 283,003 $ 717,184
41,650(6) 1.0% $27.1875 09-Feb-2003 $ 0 $ 712,135 $ 1,804,689
- ----------------------------------------------------------------------------------------------------------------
Mr. Uthlaut....... 12,500(4) 2.7% $37.5000 05-Mar-2003 $ 0 $ 294,794 $ 747,067
6,000(5) 1.3% $37.5000 05-Mar-2003 $ 0 $ 141,501 $ 358,592
- ----------------------------------------------------------------------------------------------------------------
Mr. Karren........ 7,500(4) 1.6% $37.5000 05-Mar-2003 $ 0 $ 176,877 $ 448,240
3,000(5) 0.6% $37.5000 05-Mar-2003 $ 0 $ 70,751 $ 179,296
- ----------------------------------------------------------------------------------------------------------------
Mr. Chandler...... 10,000(4) 2.1% $37.5000 05-Mar-2003 $ 0 $ 235,835 $ 597,653
6,000(5) 1.3% $37.5000 05-Mar-2003 $ 0 $ 141,501 $ 358,592
- ----------------------------------------------------------------------------------------------------------------
Mr. Wilson........ 15,000(4) 3.2% $37.5000 05-Mar-2003 $ 0 $ 353,753 $ 896,480
6,000(5) 1.3% $37.5000 05-Mar-2003 $ 0 $ 141,501 $ 358,592
- ----------------------------------------------------------------------------------------------------------------
Mr. Ulak.......... 10,000(4) 2.1% $37.5000 05-Mar-2003 $ 0 $ 235,835 $ 597,653
4,000(5) 0.9% $37.5000 05-Mar-2003 $ 0 $ 94,334 $ 239,061
- ----------------------------------------------------------------------------------------------------------------
All Optionees..... 460,300 100.0% $37.0612(7) 2003 $ 0 $ 10,728,483 $ 27,188,084
- ----------------------------------------------------------------------------------------------------------------
All
Shareholders.... N/A N/A N/A N/A $ 0 $1,862,742,556(8) $4,720,555,364(8)
- ----------------------------------------------------------------------------------------------------------------
Optionee Gain as %
of All
Shareholders
Gain............ N/A N/A N/A N/A N/A 0.58% 0.58%
</TABLE>
- ---------------
(1) The dollar amounts under these columns represent the potential realizable
value of each grant of options assuming that the market price of the
underlying security appreciates in value from the date of grant at the 5%
and 10% annual rates prescribed by the SEC. These calculations are not
intended to forecast possible future appreciation, if any, of the price of
Company Common Stock or Enron Corp. Common Stock.
(2) An appreciation in stock price, which will benefit all shareholders, is
required for optionees to receive any gain. A stock price appreciation of
zero percent or less would render the option without value to the optionees.
(3) If a "change of control" (as defined in the Enron Corp. 1991 Stock Plan and
the Enron Oil & Gas Company 1992 Stock Plan) were to occur before the
options become exercisable and are exercised, such vesting shall be
accelerated and all such outstanding options shall be surrendered and the
optionee shall receive a cash payment by the company that issued the option
in an amount equal to the value of the surrendered options (as defined in
the Enron Corp. 1991 Stock Plan and the Enron Oil & Gas Company 1992 Stock
Plan).
(Notes continued on following page)
12
<PAGE> 15
(4) Represents stock options that vest at the cumulative rate of 25% per year,
commencing on the first anniversary date of grant.
(5) Represents stock options that vest in full one year from date of grant.
(6) Represents options to purchase Enron Corp. Common Stock.
(7) Weighted average grant price of all stock options for the purchase of the
Company's Common Stock granted to employees in 1993.
(8) Appreciation for all shareholders is calculated using the average exercise
price for All Employee Optionees ($37.0612) and using the number of shares
of the Company's Common Stock issued and outstanding on December 31, 1993.
AGGREGATED STOCK OPTION/SAR EXERCISES DURING 1993 AND STOCK OPTION/SAR VALUES AS
OF DECEMBER 31, 1993(1)
The following table sets forth information with respect to the Named
Officers concerning the exercise of options during the last fiscal year and
unexercised options and SAR units held as of the end of the fiscal year:
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTION/SARS IN-THE-MONEY OPTIONS/
SHARES AT DECEMBER 31, 1993 SARS AT DECEMBER 31, 1993
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mr. Hoglund.......... EOG 150,000 $3,330,000 885,000 75,000 $18,142,500 $ 1,537,500
Enron Corp. 25,600 $ 559,000 13,330 96,520 $ 24,161 $ 711,643
----------- ----------- -------------
Subtotal $3,889,000 $18,166,661 $ 2,249,143
----------- ----------- -------------
Mr. Papa............. EOG 20,000 $ 567,500 38,750 55,750 $ 752,344 $ 507,844
Enron Corp. 5,600 $ 108,150 8,330 33,320 $ 15,098 $ 60,393
----------- ----------- -------------
Subtotal $ 675,650 $ 767,442 $ 568,237
Mr. Uthlaut.......... EOG 22,500 $ 372,188 27,125 34,375 $ 524,000 $ 333,125
Mr. Karren........... EOG 10,000 $ 207,500 35,750 21,750 694,750 $ 223,250
Enron Corp. 0 0 29,600 0 $ 571,450 0
----------- ----------- -------------
Subtotal $ 207,500 $1,266,200 $ 223,250
Mr. Chandler......... EOG 19,750 $ 281,953 0 32,875 $ 0 $ 346,813
Mr. Wilson........... EOG 6,375 $ 139,500 31,000 36,000 $ 606,906 $ 321,656
Mr. Ulak............. EOG 6,000 $ 177,375 2,750 19,250 $ 48,750 $ 124,000
</TABLE>
- ---------------
(1) There are no SAR units applicable to the Named Officers.
13
<PAGE> 16
RETIREMENT AND SEVERANCE PLANS
For many years, Enron Corp. has maintained a Retirement Plan to provide
retirement income for employees of Enron Corp. and its subsidiaries, including
the Company. The Retirement Plan is designed to provide monthly retirement
income for each employee of Enron Corp. and its participating subsidiaries in an
amount equal to 1.45% of an employee's final average pay multiplied by such
employee's years of accrual service not in excess of 25 years, plus .45% of
final average pay multiplied by accrual service in excess of 25 years up to a
maximum of 10 years, plus .45% of final average pay in excess of the integration
level multiplied by accrual service not in excess of 35 years plus 1% of final
average pay multiplied by accrual service in excess of 35 years. Final average
pay is the average of an employee's monthly compensation either for any period
of 60 consecutive months occurring during the last 120 months of vesting service
and for which such employee's average monthly compensation is the highest or for
the period of such employee's vesting service if less than 60 months. The
integration level is the lesser of 125% of compensation covered by Social
Security for an employee attaining the Social Security retirement age, or the
FICA taxable wage base in effect, in the Plan year in which the employee
terminates employment. Nonemployee Directors are not eligible to participate in
the Plan. Benefits accrued after 1986 are offset by the respective value of
Enron Corp. Common Stock allocated to the employee retirement account in the
Enron Corp. Employee Stock Ownership Plan. In addition, Enron Corp. has a
Supplemental Retirement Plan which is designed to assure payments to certain
employees of that retirement income which would be provided under the Retirement
Plan except for the dollar limitation on accrued benefits imposed by the
Internal Revenue Code of 1986, as amended, and a Pension Program for Deferral
Plan Participants which provides supplemental retirement benefits equal to any
reduction in benefits due to deferral of salary into either of the Enron Corp.
Deferral Plan. The Company reimburses Enron Corp. for Retirement Plan costs
attributable to Company employees.
Estimated annual retirement benefits based on continued participation in
the Enron Retirement Plan and Supplemental Retirement Plan are as follows:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFIT
--------------------------------------------------------------------
YEARS OF CREDITED SERVICE AT AGE 65
--------------------------------------------------------------------
REMUNERATION 10 15 20 25 30 35
- ------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$100,000 17,722 26,584 35,445 44,306 48,167 52,028
$300,000 55,722 83,584 111,445 139,306 152,167 165,028
$500,000 93,722 140,584 187,445 234,306 256,167 278,028
$700,000 131,722 197,584 263,445 329,306 360,167 391,028
</TABLE>
NOTE: The benefit amounts are based on the straight single life
annuity form without adjustment for any offset applicable to
a participant's retirement account in the ESOP.
14
<PAGE> 17
The following table sets forth the estimated annual benefits payable under
normal retirement at age 65, assuming current remuneration levels and
participation until normal retirement at age 65, with respect to the Named
Officers under the provisions of the foregoing retirement plans:
<TABLE>
<CAPTION>
CURRENT ESTIMATED CURRENT ESTIMATED
CREDITED CREDITED COMPENSATION ANNUAL BENEFIT
YEARS YEARS OF SERVICE COVERED PAYABLE UPON
NAME OF SERVICE AT AGE 65 BY PLANS RETIREMENT
- ------------------------------------------- ---------- ---------------- ------------ --------------
<S> <C> <C> <C> <C>
Mr. Hoglund................................ 6 11 $570,008 $115,484
Mr. Papa................................... 12 31 237,000 116,245
Mr. Uthlaut................................ 6 11 200,040 38,210
Mr. Karren................................. 9 12 190,650 38,254
Mr. Chandler............................... 20 32 180,000 88,647
Mr. Ulak................................... 14 39 142,020 77,586
Mr. Wilson................................. 6 20 176,040 59,930
</TABLE>
The Enron Corp. Severance Pay Plan, as amended, provides for the payment of
benefits to employees of Enron Corp. and its subsidiaries, including the
Company, who are terminated for failing to meet performance objectives or
standards, or who are terminated due to reorganization or economic factors. The
amount of benefits payable for performance related terminations is based on
length of service and may not exceed six weeks pay. For those terminated as the
result of reorganization or economic circumstances, the benefit is based on
length of service and amount of pay, up to a maximum payment of 26 weeks of base
pay. If the employee signs a Waiver and Release of Claims Agreement, the
severance pay benefits are doubled. In the event of an unapproved change of
control of Enron Corp., any employee who is involuntarily terminated within two
years following the change of control will be eligible for severance benefits
which will be determined according to a formula including factors for length of
service, amount of base pay and annual incentive award opportunity under the
Annual Incentive Plan or the Company's Key Employee Annual Incentive Plan. The
Company reimburses Enron Corp. for severance plan costs attributable to Company
employees.
Messrs. Hoglund, Papa, Karren, Uthlaut, Chandler and Wilson participate in
the Enron Corp. Executive Supplemental Survivor Benefits Plan. In the event of
death after retirement, the Plan provides an annual benefit to the participant's
beneficiary equal to 50% of the participant's annual base salary at retirement,
paid for 10 years. The Plan also provides that in the event of death before
retirement, the participant's beneficiary receives an annual benefit equal to
30% of the participant's annual base salary at death, paid for the life of the
participant's spouse (but for no more than 20 years in some cases). Mr. Karren
has also entered into an agreement with Enron Corp. which supplements benefits
under the Enron Corp. retirement plans and provides him, if he retires after
reaching age 60, with annual benefit increases of 5% for up to 13 years or until
the total retirement benefit, as supplemented, equals 60% of his annual base
salary at retirement.
EMPLOYMENT CONTRACTS
Effective September 1, 1987, Mr. Hoglund entered into an employment
agreement with the Company under which, as amended, he serves as Chairman of the
Board, President and Chief Executive Officer of the Company through September 1,
1995, and thereafter as may be agreed by Mr. Hoglund and the Company. Pursuant
to the terms of the employment agreement, as amended, Mr. Hoglund's annual base
salary during the remaining term shall be not less than $570,000.
15
<PAGE> 18
In 1989, Mr. Hoglund was granted, pursuant to the terms of his employment
agreement, 400,000 shares of Common Stock, which are subject to a Stock Transfer
Rights Agreement and a Registration Rights Agreement. Any sale of such shares
must be made pursuant to an effective registration statement or in a transaction
which is exempt from registration under applicable federal and state law. If Mr.
Hoglund desires to make a permitted sale or transfer of any such shares, he must
first give the Company and Enron Corp. an option to purchase. Pursuant to a
Registration Rights Agreement, the Company has granted to Mr. Hoglund certain
piggy-back and demand registration rights under which, if the Company proposes
to file a registration statement, he may request his shares to be included, or
if the Company is eligible to file a short form registration statement, he may
demand that such registration statement be filed on his behalf, in either case
at the expense of the Company.
Under the terms of his employment agreement, Mr. Hoglund also received in
1989 a grant of 1,100,000 SAR units under the Enron Oil & Gas Company Executive
Compensation Plan which entitled Mr. Hoglund to receive the appreciation in the
value of Common Stock relative to and in excess of $11.00 per unit for each SAR
unit. The SAR units vested or were scheduled to vest at the cumulative rate of
20% on each September 1, 1989, 1990 and 1991, with the remaining 40% vesting on
September 1, 1992. Prior to December 31, 1991, Mr. Hoglund exercised 100,000 of
his SAR units.
During 1992, Mr. Hoglund's agreement was extended to September 1, 1995.
Under the terms of the extension, Mr. Hoglund waived all rights to his remaining
1,000,000 SAR units and agreed that he would not be entitled to receive any
annual bonus payments. Mr. Hoglund also received (i) a grant of 1,100,000
non-qualified stock options pursuant to the Enron Oil & Gas Company 1992 Stock
Plan; (ii) 370,656 restricted shares of Enron Corp. Common Stock (including
dividends); (iii) 92,664 unrestricted shares of Enron Corp. Common Stock; (iv) a
split dollar life insurance policy in the amount of $5 million; and (v) a salary
increase of $20,000 per year. The restricted shares are scheduled to vest five
years from the date of issuance subject to the earlier occurrence of death,
disability or retirement in which case complete vesting would occur. The split
dollar life insurance policy is assigned to the Company through a collateral
assignment so that upon payment of the insurance proceeds, the Company will
recover all but a small portion of its share of the premium payments.
Mr. Hoglund's employment agreement also provides that if any corporation or
other entity acquires or succeeds to all or substantially all of the business or
assets of the Company, by purchase, consolidation or otherwise, Mr. Hoglund's
stock options and restricted shares of Enron Corp. Common Stock shall vest and
shall automatically be advanced to maturity as if the initial term under his
employment agreement had expired.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1993, the Compensation Committee was composed of Messrs. Randall
(Chairman) and Ackman.
Messrs. Lay and Kinder are executive officers of Enron Corp. The Company
has significant business relationships with Enron Corp.
Effective January 1, 1989, the Company entered into a Services Agreement
with Enron Corp. pursuant to which Enron Corp. provided various services, such
as maintenance of certain employee benefit plans, provision of
telecommunications and computer services, lease of office space and other
services. The Company agreed to pay a fixed rate for the rental of office space
and to reimburse Enron Corp. for all other direct costs incurred in rendering
such services to the Company under such agreement and to pay Enron Corp. for
allocated indirect costs incurred in rendering such services, up
16
<PAGE> 19
to an annual maximum of $8,000,000, such cap to be increased for inflation and
certain changes in the allocation bases of the Company with the increase limited
to a maximum of 10% per year. The Services Agreement was for an initial term of
five years to be continued thereafter until terminated by either party.
Effective January 1, 1994, the Company entered into a new Services Agreement
with Enron Corp. pursuant to which Enron Corp. will provide services similar to
those provided under the terms of the previous agreement. The Company has agreed
to pay and to reimburse Enron Corp. on bases essentially consistent with those
included in the previous agreement except that allocated indirect costs are
subject to an annual maximum of $6,700,000 with the increase in such cap limited
to a maximum of 7.5% per year. The new Services Agreement is for an initial term
of five years and will continue thereafter until terminated by either party.
The Company and its subsidiaries have also entered into a Tax Allocation
Agreement with Enron Corp. relating to payment for federal income taxes and tax
benefits. Under the terms of the agreement, either Enron Corp. will pay to the
Company and each of its subsidiaries an amount equal to the tax benefit realized
in the Enron Corp. consolidated federal income tax return resulting from
utilization of net operating losses and tax credits of the Company and each of
its subsidiaries, or the Company and each of its subsidiaries will pay to Enron
Corp. an amount equal to the federal income tax computed on its separate taxable
income less any net operating losses or tax credits generated by the Company or
each of its subsidiaries which are utilized in the Enron Corp. consolidated
return. Enron Corp. will pay the Company and each of its subsidiaries for the
tax benefits associated with their net operating losses and tax credits utilized
in the Enron Corp. consolidated return, provided that a tax benefit was realized
(except as discussed in the following summarization of two modifications to the
Tax Allocation Agreement), even if such credits could not have been used by the
Company or the subsidiary on a separately filed tax return. In 1991, the Company
and Enron Corp. modified the Tax Allocation Agreement to provide that, through
1992, the Company will realize the benefit of certain tight gas sand federal
income tax credits available to the Company on a stand alone basis. The Company
has also entered into an agreement with Enron Corp. providing for the Company to
be paid for all realizable benefits associated with tight gas sand federal
income tax credits concurrent with tax reporting and settlement for the periods
in which they are generated. The Tax Allocation Agreement applies to the Company
and each of its subsidiaries for all years in which the Company and each of its
subsidiaries are or were included in the Enron Corp. consolidated return.
Pursuant to the terms of a Stock Restriction and Registration Agreement
with Enron Corp., the Company has agreed that upon the request of Enron Corp.,
the Company will register under the Securities Act of 1933, as amended, and
applicable state securities laws the sale of the Common Stock owned by Enron
Corp. which Enron Corp. has requested to be registered. The obligation of the
Company is subject to certain limitations relating to a minimum amount of Common
Stock required for registration, the timing of registration and other similar
matters. The Company is obligated to pay all expenses incident to such
registration, excluding underwriters' discounts and commissions and certain
legal fees and expenses.
In addition, the Company and Enron Corp. have in the past entered into
significant intercompany transactions and agreements incidental to their
respective businesses, and the Company and Enron Corp. may be expected to enter
into material transactions and agreements from time to time in the future. Such
transactions and agreements have related to, among other things, the purchase
and sale of natural gas and crude oil, the financing of exploration and
development efforts by the Company and the provision of certain corporate
services. During 1993, Enron Corp. and its affiliates paid the
17
<PAGE> 20
Company approximately $302 million as a net result of the foregoing described
transactions and agreements. The Company intends that the terms of any future
transactions and agreements between the Company and Enron Corp. will be at least
as favorable to the Company as could be obtained from third parties.
SECTION 16 MATTERS
Section 16(a) of the Securities Exchange Act of 1934 requires the officers
and directors of the Company, and persons who own more than 10% of a registered
class of the equity securities of the Company, to file reports of ownership and
changes in ownership with the SEC and the New York Stock Exchange. Based solely
on its review of the copies of such reports received by it, or written
representations from certain reporting persons that no Forms 5 were required for
those persons, the Company believes that during 1993, its officers, directors
and greater than 10% shareholders complied with all applicable filing
requirements.
ITEM 2.
APPOINTMENT OF AUDITORS
Pursuant to the recommendation of the Audit Committee, the Board of
Directors appointed Arthur Andersen & Co., independent public accountants, to
audit the consolidated financial statements of the Company for the year ending
December 31, 1994.
Ratification of this appointment shall be effective upon receiving the
affirmative vote of the holders of a majority of the Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting. Accordingly,
under Delaware law and the Restated Certificate of Incorporation and by-laws of
the Company, abstentions would have the same legal effect as a vote against this
proposal, but a broker non-vote would not be counted for purposes of determining
whether a majority had been achieved.
In the event the appointment is not ratified, the Board of Directors will
consider the appointment of other independent auditors. A representative of
Arthur Andersen & Co. is expected to be present at the Annual Meeting and will
be offered the opportunity to make a statement if such representative desires to
do so, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS RATIFICATION BY THE SHAREHOLDERS OF THIS
APPOINTMENT.
ITEM 3.
AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED
NUMBER OF SHARES OF COMMON STOCK
The Board of Directors of EOG is considering the possibility of declaring a
stock split of the Common Stock. At the 1994 Annual Meeting of Shareholders,
there will be submitted for shareholder approval the resolutions described below
that would, contingent upon a stock split of either two-for-one or three-for-two
being declared on or before May 3, 1995, amend the Company's Restated
Certificate of Incorporation to increase the authorized number of shares of
Common Stock that EOG has authority to issue from 80 million shares to (i) 160
million shares in the event of a stock split of two-for-one, or (ii) 120 million
in the event of a stock split of three-for-two (the "Charter Amendment").
18
<PAGE> 21
Shareholder approval of the following resolutions is necessary in order to
effect the Charter Amendment:
RESOLVED, that in the event of a stock split of two-for-one being
declared by the Board of Directors on or before May 3, 1995, the restated
Certificate of Incorporation of the Company is hereby amended by deleting
paragraph A of the Fourth Article thereof in its entirety and substituting
the following therefor:
"FOURTH: A. The total number of shares of all classes of stock that
the Corporation shall have authority to issue is 160 million
(160,000,000) shares of Common Stock, without par value.";
FURTHER RESOLVED, that in the event of a stock split of three-for-two
being declared by the Board of Directors on or before May 3, 1995, the
restated Certificate of Incorporation of the Company is hereby amended by
deleting paragraph A of the Fourth Article thereof in its entirety and
substituting the following therefor:
"FOURTH: A. The total number of shares of all classes of stock that
the Corporation shall have authority to issue is 120 million
(120,000,000) shares of Common Stock, without par value.";
FURTHER RESOLVED, that the officers of the Company are hereby
authorized, notwithstanding the authorization of the foregoing amendments
by the shareholders of the Company, to file with the Secretary of State of
Delaware the Certificate of Amendment relating to such proposed amendment
only if on or before May 3, 1995, the Board of Directors of the Company
shall declare either a two-for-one stock split effected as a dividend of
two shares of Common Stock for each one outstanding share of Common Stock
or a three-for-two stock split effected as a dividend of three shares of
Common Stock for each two outstanding shares of Common Stock.
If the Charter Amendment is adopted by the required vote of shareholders,
it will become effective when the appropriate Certificate of Amendment to the
Company's Restated Certificate of Incorporation is filed with the Secretary of
State of Delaware. However, no Certificate of Amendment will be filed unless on
or prior to May 3, 1995, the Board of Directors declares either a two-for-one
stock split effected as a dividend or a three-for-two stock split effected as a
dividend. The terms of the Charter Amendment are such that, if such stock split
is a two-for-one split, the number of shares of authorized Common Stock that the
Company will have authority to issue will be limited to 160 million
(160,000,000), whereas if such stock split is a three-for-two split, the number
of shares of authorized Common Stock that the Company will have authority to
issue will be limited to 120 million (120,000,000).
If such a stock split is effected, each holder of record of Common Stock on
the record date established by the Board of Directors will be entitled to
receive a certificate representing the additional shares of Common Stock
issuable pursuant to the stock split, and the Common Stock certificates
outstanding prior to the stock split will remain outstanding, without any need
for shareholders to return certificates to the Company or to the transfer agent.
The Company has been advised by tax counsel that a stock split effected as
a dividend on the Common Stock would result in no gain or loss or realization of
taxable income to holders of Common Stock under existing federal income tax
laws. Each shareholder's basis would be allocated on a pro rata basis among the
shares held on the record date for the stock split and the new shares issued in
the
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<PAGE> 22
stock split, and the holding period for the new shares would be deemed to be the
same as the holding period for the shares held on the record date. The Company
shareholders subject to taxation in jurisdictions other than the United States
should consult their tax advisers regarding the tax treatment of stock splits in
such jurisdictions.
In accordance with the terms of the Company's various stock option and
incentive plans, in the event of a stock split appropriate adjustments will be
made in the number of shares of Common Stock issuable and any applicable
exercise price.
REASON FOR THE INCREASE IN NUMBER OF AUTHORIZED SHARES
The Company is currently authorized to issue 80,000,000 shares of Common
Stock, of which 79,920,000 were issued and outstanding at the close of business
on March 7, 1994. As a result, if the Board of Directors were to declare a
two-for-one or three-for-two stock split effected as a dividend, the Company
would not have a sufficient number of authorized and unissued shares of Common
Stock to effect any such stock split, unless the Charter Amendment is first
implemented. The Board of Directors has not yet determined whether to declare a
stock split (or whether any such stock split would be two-for-one or
three-for-two), and a stock split would not necessarily be declared even if the
Charter Amendments are approved by the shareholders. However, the Board believes
that under appropriate circumstances a stock split would be beneficial to the
Company and its shareholders by increasing the number of shares comprising the
trading "float" for the Common Sock. In addition, a stock split would also
decrease the purchase price for a round lot of shares, which will permit certain
investors to purchase shares more efficiently.
The Charter Amendment will increase the total number of authorized shares
of Common Stock by an amount exactly equal to that necessary to effect either a
two-for-one or three-for-two stock split, as the case may be.
REQUIRED VOTE AND RECOMMENDATION
The approval and adoption of the Charter Amendment requires the affirmative
vote of the holders of record at the close of business on March 7, 1994 of at
least a majority of the voting power of the outstanding Voting Stock.
Accordingly, under Delaware law and the Company's Restated Certificate of
Incorporation and by-laws, abstentions and broker non-votes would have the same
legal effect as a vote against this proposal, even though this may not be the
intent of the person voting or giving the proxy.
The shares represented by the proxies solicited by the Board of Directors
will be voted as directed on the form of proxy or, if no direction is indicated,
will be voted "FOR" the approval of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THIS PROPOSAL.
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<PAGE> 23
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Shareholders may propose matters to be presented at shareholders' meetings
and may also nominate persons to be Directors. Formal procedures have been
established for those proposals and nominations.
PROPOSALS FOR 1995 ANNUAL MEETING
Pursuant to various rules promulgated by the SEC, any proposals of holders
of Common Stock of the Company intended to be presented at the Annual Meeting of
Shareholders of the Company to be held in 1995 must be received by the Company,
addressed to Angus H. Davis, Vice President, Communications and Corporate
Secretary, 1400 Smith Street, Houston, Texas 77002, no later than November 23,
1994, to be included in the Company's proxy statement and form of proxy relating
to that meeting.
In addition to the SEC rules described in the preceding paragraph, the
Company's by-laws provide that for business to be properly brought before the
Annual Meeting of Shareholders, it must be either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, (b) otherwise brought before the meeting by or at the direction of
the Board of Directors, or (c) otherwise properly brought before the meeting by
a shareholder of the Company who is a shareholder of record at the time of
giving of notice hereinafter provided for, who shall be entitled to vote at such
meeting and who complies with the following notice procedures. In addition to
any other applicable requirements for business to be brought before an annual
meeting by a shareholder of the Company, the shareholder must have given timely
notice in writing of the business to be brought before an Annual Meeting of
Shareholders of the Company to the Secretary of the Company. TO BE TIMELY,
NOTICE GIVEN BY A SHAREHOLDER MUST BE DELIVERED TO OR MAILED AND RECEIVED AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY, 1400 SMITH STREET, HOUSTON, TEXAS
77002, NO LATER THAN FEBRUARY , 1995. The notice shall set forth as to each
matter the shareholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the Company's books, of the shareholder proposing
such business, (iii) the acquisition date, the class and the number of shares of
voting stock of the Company which are owned beneficially by the shareholder,
(iv) any material interest of the shareholder in such business, and (v) a
representation that the shareholder intends to appear in person or by proxy at
the meeting to bring the proposed business before the meeting. Notwithstanding
the foregoing by-law provisions, a shareholder must also comply with all
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder with respect to the matters set forth in
the foregoing by-law provisions. Notwithstanding anything in the Company's
by-laws to the contrary, no business shall be conducted at the annual meeting
except in accordance with the procedures outlined above.
PROPOSALS FOR 1994 ANNUAL MEETING
The date of delivery to, or receipt by, the Company of any notice from
shareholders of the Company regarding business to be brought before the 1994
Annual Meeting of Shareholders of the Company was February 3, 1994. The Company
has not received any notices from its shareholders regarding business to be
brought before the 1994 Annual Meeting of Shareholders.
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<PAGE> 24
NOMINATIONS FOR 1995 ANNUAL MEETING AND FOR ANY SPECIAL MEETINGS
Only persons who are nominated in accordance with the following procedures
shall be eligible for election as directors. Nominations of persons for election
to the Company's Board of Directors may be made at a meeting of shareholders (a)
by or at the direction of the Board of Directors or (b) by any shareholder of
the Company who is a shareholder of record at the time of giving of notice
hereinafter provided for, who shall be entitled to vote for the election of
directors at the meeting and who complies with the following notice procedures.
Such nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Company. TO BE TIMELY, NOTICE GIVEN BY A SHAREHOLDER SHALL BE DELIVERED
TO OR MAILED AND RECEIVED AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY,
1400 SMITH STREET, HOUSTON, TEXAS 77002, (I) WITH RESPECT TO AN ELECTION TO BE
HELD AT THE ANNUAL MEETING OF SHAREHOLDERS OF THE COMPANY ON OR BEFORE FEBRUARY
, 1995, AND (II) WITH RESPECT TO AN ELECTION TO BE HELD AT A SPECIAL MEETING
OF SHAREHOLDERS OF THE COMPANY FOR THE ELECTION OF DIRECTORS, NOT LATER THAN THE
CLOSE OF BUSINESS ON THE 10TH DAY FOLLOWING THE DAY ON WHICH SUCH NOTICE OF THE
DATE OF THE MEETING WAS MAILED OR PUBLIC DISCLOSURE OF THE DATE OF MEETING WAS
MADE, WHICHEVER FIRST OCCURS. Such notice shall set forth (a) as to each person
whom the shareholder proposes to nominate for election or re-election as a
director, all information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors, or is
otherwise required, pursuant to Regulation 14A under the Securities Exchange Act
of 1934, as amended (including the written consent of such person to be named in
the proxy statement as a nominee and to serve as a director if elected); and (b)
as to the shareholder giving the notice (i) the name and address, as they appear
of record on the Company's books, of such shareholders, and (ii) the class and
number of shares of capital stock of the Company which are beneficially owned by
the shareholder. In the event a person is validly designated as nominee to the
Board and shall thereafter become unable or unwilling to stand for election to
the Board of Directors, the Board of Directors or the shareholder who proposed
such nominee, as the case may be, may designate a substitute nominee.
Notwithstanding the foregoing bylaw provisions, a shareholder shall also comply
with all applicable requirements of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder with respect to the matters
set forth in the foregoing bylaw provisions.
NOMINATIONS FOR 1994 ANNUAL MEETING
The date for delivery to, or receipt by, the Company of any notice from a
shareholder of the Company regarding nominations for directors to be elected at
the 1994 Annual Meeting of Shareholders of the Company was February 3, 1994. The
Company has not received any notices from its shareholders regarding nominations
for directors to be elected at the 1994 Annual Meeting of Shareholders.
GENERAL
As of the date of this proxy statement, the management of the Company has
no knowledge of any business to be presented for consideration at the meeting
other than that described above. If any other business should properly come
before the meeting, it is intended that the shares represented by proxies will
be voted with respect thereto in accordance with the judgment of the persons
named in such proxies.
The cost of any solicitation of proxies will be borne by the Company. In
addition to solicitation by use of the mails, certain officers and regular
employees of the Company may solicit the return of
22
<PAGE> 25
proxies by telephone, telegraph or personal interview. Arrangements may also be
made with brokerage firms and other custodians, nominees and fiduciaries for the
forwarding of material to and solicitation of proxies from the beneficial owners
of Common Stock held of record by such persons, and the Company will reimburse
such brokerage firms, custodians, nominees and fiduciaries for reasonable out of
pocket expenses incurred by them in connection therewith.
By Order of the Board of Directors,
ANGUS H. DAVIS
Vice President, Communications and Corporate
Secretary
Houston, Texas
March , 1994
23
<PAGE> 26
[ENRON]
<PAGE> 27
Proxy Solicited on Behalf of the Board of Directors of Enron Oil & Gas
Company for Annual Meeting on May 3, 1994
THE UNDERSIGNED hereby appoints Forrest E. Hoglund, Dennis M. Ulak and
P Angus H. Davis, or any of them, and any substitute or substitutes, to be the
attorneys and proxies of the undersigned at the Annual Meeting of
R Shareholders of Enron Oil & Gas Company ("EOG") to be held at 3:00 p.m.
Houston, time on Tuesday, May 3, 1994, in the LaSalle Ballroom of the
O Doubletree Hotel at Allen Center, 400 Dallas St., Houston, Texas or at
any adjournment thereof, and to vote at such meeting the shares of stock of
X EOG the undersigned held of record on the books of EOG on the record date
for the meeting.
Y
ELECTION OF DIRECTORS, NOMINEES: (change of address/comments)
Fred C. Ackman, Forrest E. Hoglund, _________________________________
Richard D. Kinder, Kenneth L. Lay, _________________________________
Edward Randall, III _________________________________
_________________________________
(if you have written in the above
space, please mark the
corresponding box on the reverse
side of this card)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT
VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
SEE REVERSE SIDE
<PAGE> 28
/X/ Please mark your votes as in this example.
This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR proposals 1, 2 and 3.
The Board of Directors recommends a vote FOR proposals 1, 2, and 3.
FOR WITHHELD
1. Election of Directors. / / / /
(see reverse)
For, except vote withheld from the following nominee(s):
2. Ratification of appointment of independent accountants.
FOR AGAINST ABSTAIN
/ / / / / /
3. Amendment of Restated Certificate of Incorporation.
FOR AGAINST ABSTAIN
/ / / / / /
Change of Address/Comments on Reverse Side / /
4. In the discretion of the Proxies named herein, the Proxies are
authorized to vote upon other matters as are properly brought before the
meeting.
All as more particularly described in the Proxy Statement relating to
such meeting, receipt of which is hereby acknowledged.
Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
________________________________
________________________________
SIGNATURE(S) DATE
FOLD AND DETACH HERE
[Logo]
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
NEED SHAREHOLDER ASSISTANCE?
# DIRECT DEPOSIT - HAVE YOUR ENRON OIL & GAS COMPANY QUARTERLY DIVIDENDS
ELECTRONICALLY DEPOSITED INTO YOUR CHECKING OR SAVINGS ACCOUNT ON DIVIDEND
PAYMENT DATE. (No more worries about late or lost dividend checks.)
# CONSOLIDATION OF ACCOUNTS - ELIMINATE MULTIPLE ACCOUNTS FOR ONE HOLDER AND
CERTAIN DUPLICATE SHAREHOLDER MAILINGS GOING TO ONE ADDRESS. (Dividend checks,
annual reports and proxy materials would continue to be mailed to each
shareholder.)
JUST CONTACT ENRON OIL & GAS COMPANY'S TRANSFER AGENT:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
P.O. BOX 2500
JERSEY CITY, NJ 07303-2500
(201) 324-0498 or (800) 446-2617
