<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
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
ENRON OIL & GAS COMPANY
--------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
--------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------------------
(4) Date Filed:
--------------------------------------------------------------------------------
<PAGE> 2
[ENRON OIL & GAS COMPANY LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 2, 1995
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 2, 1995, 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 LLP,
independent public accountants, as auditors for the Company for the year
ending December 31, 1995;
3. To approve the Company's Amended and Restated 1992 Stock Plan; 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 6, 1995, 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 27, 1995
<PAGE> 3
[ENRON OIL & GAS COMPANY LOGO]
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 2, 1995 (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 27, 1995. 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 6, 1995, of Common
Stock of the Company, par value $.01 per share (the "Common Stock"), will be
entitled to one vote per share on all matters submitted to the meeting. On March
6, 1995, the record date, there were outstanding 159,940,827 shares of Common
Stock. There are no other voting securities outstanding.
The Company's summary annual report for the year ended December 31, 1994,
and Annual Report on Form 10-K for the year ended December 31, 1994, 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 Common Stock (or phantom shares
relating to Common Stock) reflect the two-for-one stock split effective June 15,
1994. All references in this proxy statement to Enron Corp. common stock reflect
the two-for-one stock split effective 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>
------------------------------------------------------------------------------------------------------------------
[PHOTO] FRED C. ACKMAN, 64
Director since 1989
For over five years Mr. Ackman has been a consultant to the oil and gas industry and has
interests in ranching and investments.
------------------------------------------------------------------------------------------------------------------
[PHOTO] FORREST E. HOGLUND, 61
Director since 1987
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 an advisory director of Texas Commerce Bank National Association.
------------------------------------------------------------------------------------------------------------------
[PHOTO] RICHARD D. KINDER, 50
Director since 1985
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 Global Power & Pipelines L.L.C., EOTT Energy
Corp. (the general partner of EOTT Energy Partners, L.P.), Enron Liquids Pipeline Company
(the general partner of Enron Liquids Pipeline, L.P.), Sonat Offshore Drilling Inc. and
Baker Hughes Incorporated.
------------------------------------------------------------------------------------------------------------------
[PHOTO] KENNETH L. LAY, 52
Director since 1985
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, EOTT Energy Corp. (the general partner of EOTT Energy Partners,
L.P.), and Enron Corp.
------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C>
------------------------------------------------------------------------------------------------------------------
[PHOTO] EDWARD RANDALL, III, 68
Director since 1990
Mr. Randall's principal occupation is investments. Mr. Randall is also a director of KN
Energy, Inc. and Paine Webber Group Inc.
------------------------------------------------------------------------------------------------------------------
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ON JANUARY 31, 1995
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>
PERCENT
NAME AND ADDRESS AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP OF
TITLE OF CLASS OF BENEFICIAL OWNER SOLE VOTING AND INVESTMENT POWER CLASS
-------------- --------------------- ----------------------------------------- -------
<S> <C> <C> <C>
Common Enron Corp. 128,000,000 80.005
1400 Smith Street
Houston, Texas 77002
</TABLE>
SECURITY OWNERSHIP OF THE BOARD OF DIRECTORS AND MANAGEMENT ON JANUARY 31, 1995
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-----------------------------------------------
SOLE VOTING
SOLE VOTING SHARED VOTING AND LIMITED
AND AND OR NO
INVESTMENT INVESTMENT INVESTMENT PERCENT
TITLE OF CLASS NAME POWER(1)(2) POWER POWER(3) OF CLASS
--------------- -------------------------------- ----------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C>
Enron Oil & Fred C. Ackman.................. 5,000 -- -- *
Gas Company Forrest E. Hoglund.............. 1,385,127 320,000 -- 1.065
Common Stock Richard D. Kinder............... 13,738(4) 22,500(9) -- *
Kenneth L. Lay.................. --(4) 31,600(5) -- *
Edward Randall, III............. 7,000 -- -- *
Joe Mike McKinney............... 54,839 -- -- *
Mark G. Papa.................... 202,449 -- -- *
George E. Uthlaut............... 130,360 -- -- *
Walter C. Wilson................ 139,240 -- -- *
All directors and executive
officers as a group (11 in
number)....................... 2,033,522(4) 374,100 -- 1.501
Enron Corp. Forrest E. Hoglund.............. 114,038 152,664 397,884(6) *
Common Stock Richard D. Kinder............... 1,832,841 -- 57,410 *
Kenneth L. Lay.................. 1,861,920 738,951(5)(10) 84,632 1.062
Edward Randall, III............. 49,091(7) 32,969(8) -- *
Joe Mike McKinney............... 16,743 -- 9,247 *
Mark G. Papa.................... 31,943 -- 31,572 *
George E. Uthlaut............... 63 -- 16,250 *
Walter C. Wilson................ -- -- 11,833 *
All directors and executive
officers as a group (11 in
number)....................... 3,906,639 924,584 623,588 2.144
</TABLE>
(See notes on following page)
3
<PAGE> 6
---------------
* Less than 1 percent.
(1) The number of shares of Common Stock of the Company subject to stock
options exercisable within 60 days after January 31, 1995, is as follows:
Mr. Ackman 3,000 shares; Mr. Hoglund 50,000 shares; Mr. Randall 3,000
shares; Mr. McKinney 53,230 shares; Mr. Papa 184,640 shares; Mr. Uthlaut
124,360 shares; Mr. Wilson 137,040 shares; and all directors and executive
officers as a group, 638,350 shares.
(2) The number of shares of Enron Corp. Common Stock subject to stock options
exercisable within 60 days after January 31, 1995, is as follows: Mr.
Hoglund 65,590 shares; Mr. Kinder 1,614,939 shares; Mr. Lay 1,732,985
shares; Mr. McKinney 16,660 shares; Mr. Papa 24,990 shares; and all
directors and executive officers as a group, 3,455,164 shares.
(3) 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. Also
includes restricted shares of Common Stock of Enron Corp. held under Enron
Corp.'s 1991 Stock Plan for which participants have sole voting power and
no investment power until such shares vest in accordance with Plan
provisions. After vesting, the participant has sole investment and voting
powers.
(4) Does not include 128,000,000 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 bylaws.
(5) Includes 1,600 shares with respect to Company Common Stock and 7,530 shares
with respect to Enron Corp. Common Stock held by Mr. Lay's children and
step-children.
(6) 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."
(7) Includes 42,291 shares of Enron Corp. Common Stock held by trusts of which
Mr. Randall is trustee and in which Mr. Randall disclaims beneficial
ownership.
(8) Shares of Enron Corp. Common Stock held by trusts of which Mr. Randall is
trustee and in which Mr. Randall disclaims beneficial ownership.
(9) Shares held in a charitable foundation in which Mr. Kinder has no pecuniary
interest.
(10) Includes 100,000 shares held in a charitable foundation in which Mr. Lay
has no pecuniary interest.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held four regularly scheduled meetings and two
special meetings during the year ended December 31, 1994.
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, 1994, the Audit Committee met three times. The Audit Committee
recommends to the Board of Directors the appointment of
4
<PAGE> 7
independent public accountants as auditors for the Company and reviews as deemed
appropriate the scope of the audit, the accounting policies and reporting
practices, the system of 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 Company stock plans
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, 1994, each director attended at least
75% of the total number of meetings of the Board and the committees on which the
director served.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTOR COMPENSATION
During 1994, 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 1994 were $68,000.
The Company directors fees can be deferred to a later specified date under
the Enron Corp. 1985 Deferral Plan and 1994 Deferral Plan. Under the 1985
Deferral Plan, interest is credited on amounts deferred based on 150% of Moody's
seasoned corporate bond yield index, which for 1994 was 12%. Interest was
credited at 9% under the 1994 Deferral Plan. 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 1994 Deferral
Plan.
Nonemployee directors also participate in the 1993 Nonemployee Director
Stock Option Plan, which was approved by Company 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
6,000 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 6,000 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 100% 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 1994, each nonemployee director was granted a total of
6,000 options at an exercise price of $23.50.
REPORT FROM THE COMPENSATION COMMITTEE REGARDING EXECUTIVE COMPENSATION
Compensation for Company executives is administered by the Compensation
Committee of the Board of Directors, (the "Committee") which is composed
exclusively of outside directors. It is the responsibility of the Committee to
develop compensation philosophy and authorize salary increases for officers,
incentive programs and awards consistent with this philosophy.
5
<PAGE> 8
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 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 that 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 Company 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 investment program of the Company. Each year the
Committee approves performance goals for the Company against which actual
results are measured to determine the level of funding for 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
developed and rate of return on exploration and development expenditures. 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 Company 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 such cases, option grants may have a
shorter term and typically vest in a shorter time period, which for grants
during 1994 included a term of five years with 100% vesting upon grant, except
for those optionees who are subject to the short-swing profit provisions of
Section 16(b) of the Securities Exchange Act of 1934 ("the Exchange Act"), in
which case, the options vest 100% six months after the date of 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 Common Stock performs
correspondingly 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 1994 results of the
Company, several of which are highlighted in the following paragraph, the
Committee approved funding the bonus pool at 5% of 1994 net income. The
Committee also reviewed and approved individual officer bonuses, salary
increases, and stock
6
<PAGE> 9
option grants recommended by the Chief Executive Officer of the Company based
upon his evaluation of each individual officer's performance and contribution to
the overall success of the Company during 1994. Bonuses for executive officers
of the Company ranged from 45% to 85% of base salary and option grants were
awarded at levels expected to bring total compensation opportunities in line
with similar positions at peer companies.
During 1994, the Company realized its best year ever in terms of
operational performance, financial results and enhancement of the base upon
which to build in future years in spite of a dramatic downturn in the wellhead
commodity price environment. When these price changes began during the ending
months of 1993, Company management substantially restructured plans for the year
1994. Otherwise the impacts of lower prices could have reduced estimated net
income to less than $100 million. These early aggressive planning changes and
subsequent actions resulted in net income of $148 million, up 7% or $10 million
versus $138 million in 1993. This earnings growth is even more significant when
considering that before tax earnings were up by 37% to $153 million despite
average wellhead prices realized by the Company being down for natural gas by
$.30/Mcf and crude oil and condensate by $.75/Bbl. versus 1993. This achievement
more than offset reduced U.S. federal income tax credit benefits available to
the Company which were down almost $29 million associated with the normal
decline being experienced in tight gas sand credit qualified volumes owned by
the Company. Operationally, the Company realized its best ever replacement of
production with new reserves ratio at 177% from all sources including revisions
and acquisitions net of dispositions, and 151% from drilling results alone, the
seventh straight year during which drilling results alone replaced more than
100% of production. In setting up future operations the Company signed
agreements covering and became operator of three oil and gas exploitation field
areas offshore the Western coast of India, acquired fee mineral interests under
approximately 640,000 acres in the San Joaquin and Sacramento Basins in
California, added significant acreage in the Gulf of Mexico offshore Texas and
Louisiana and in multiple onshore areas within North America, and acquired
significant new volumes of both 2-D and 3-D seismic information both onshore and
offshore North America. These achievements were all realized while keeping the
debt to total capital ratio for the Company at 15.4%, resulting in its retaining
the strongest financial structure of any member of its peer group of companies.
Chief Executive Officer Compensation. Mr. Hoglund entered into an
employment agreement with the Company as Chairman of the Board and Chief
Executive Officer of the Company for an initial term of five years effective
September 1, 1987. In 1992, the Committee approved an extension to September 1,
1995, of the employment agreement with Mr. Hoglund 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
waived all rights to 2,000,000 remaining phantom SARs and agreed not to receive
any further annual bonus payments. As a result, Mr. Hoglund's annual salary is
$570,000, and he receives no bonus.
On December 14, 1994, the employment agreement with Mr. Hoglund was
extended to September 1, 1998, and he received a grant of 1,820,000 stock
options at market value on that date, subject to approval of the Amended and
Restated 1992 Stock Plan by the shareholders at the Annual Meeting. See "Item 3.
Approval of the Amended and Restated 1992 Stock Plan." These options have a five
year term.
Substantially all of Mr. Hoglund's future compensation in excess of his
base salary is at risk and tied to the performance of Company Common Stock. The
Committee believes this is the most effective way to link executive rewards to
shareholder value.
7
<PAGE> 10
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1 million
paid to the Chief Executive Officer and four other most highly compensated
executive officers of a company, as reported in that company's proxy statement.
Qualifying performance-based compensation is not subject to the deduction limit
if certain requirements are met. The Company has structured its long-term
incentives in the form of stock option grants and certain restricted stock
grants in a manner that complies with the statute. Accordingly, an amended and
restated 1992 Stock Plan is being submitted to the shareholders for approval at
the Annual Meeting. See "Item 3. Approval of the Amended and Restated 1992 Stock
Plan."
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. $100 was invested in Common Stock of EOG, the S&P 500 and a peer group
of independent exploration and production companies (the "Peers") on
December 31, 1989.
2. The investment in the Peers is weighted based on the market
capitalization of each individual company within the Peers at the
beginning of each year.
3. Dividends are reinvested on the ex-dividend dates.
The companies that comprise the Peers are as follows: Anadarko Petroleum
Corp., Apache Corp., Burlington Resources Inc., Louisiana Land and Exploration
Company, Maxus Energy, Mesa Inc., Noble Affiliates, Inc., Oryx Energy Company
and Union Texas Petroleum Holdings, Inc.
COMPARATIVE TOTAL RETURNS
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
EOG, S&P 500 AND PEERS
(Performance Results Through December 31, 1994)
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) EOG S&P 500 Peers
<S> <C> <C> <C>
1989 100 100 100
1990 84.87 96.83 82.57
1991 78.68 126.41 75.28
1992 119.56 136.25 84.70
1993 159.72 150.00 96.47
1994 154.42 151.73 84.16
</TABLE>
9
<PAGE> 12
EXECUTIVE COMPENSATION
The following table summarizes certain information regarding compensation
paid or accrued during each of the last three fiscal years to the Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company (the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- ---------------------------------------------
OTHER RESTRICTED SECURITIES ALL OTHER
ANNUAL STOCK UNDERLYING LTIP COMPENSATION
NAME & PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS/ PAYOUTS ------------
POSITION YEAR ($) ($) ($)(2) ($)(3) SARS (#) ($) ($)(4)
----------------------- ---- -------- -------- ------------ ------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Forrest E. Hoglund........ 1994 $570,000 $140,004 $ 23,450 1,846,310 $ 31,130
Chairman of the Board, 1993 $570,000 $154,925 $ 212,063 66,650(5) $ 41,907
President and Chief 1992 $565,002 $160,468 $ 6,018,649(7) 2,260,000(5)(6) $1,500,000(7) $ 35,624
Executive Officer
Mark G. Papa.............. 1994 $247,850 $123,500 $ 15,648 $ 5,695 74,380 $ 31,130
President North 1993 $235,000 $106,400 $ 12,132 $ 133,219 105,650(5) $ 38,559
American Operations 1992 $209,820 $100,000 $ 10,248 165,000(6) $ 323,066(8)(9) $ 29,858
Joe Mike McKinney(1)...... 1994 $225,000 $117,000 $ 9,096 $ 5,360 59,615 $ 31,130
President -- International
Operations
George E. Uthlaut......... 1994 $200,040 $ 65,000 $ 12,282 $ 4,188 44,345 $ 31,130
Senior Vice President -- 1993 $198,700 $ 69,600 $ 10,918 37,000 $ 35,307
Operations 1992 $189,000 $ 70,000 $ 8,820 131,000(6) $ 323,066(8)(9) $ 29,419
Walter C. Wilson.......... 1994 $176,040 $ 97,500 $ 10,572 51,165 $ 31,130
Sr. Vice President and 1993 $174,040 $ 84,000 $ 17,475 42,000 $ 29,859
Chief Financial Officer 1992 $159,540 $ 90,000 $ 5,100 108,750(6) $ 156,563(8) $ 15,354
</TABLE>
---------------
(1) Mr. McKinney became an executive officer during 1994.
(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 three 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 with a minimum rate of 12%, which for 1992 was 13.845%, for 1993 was
12.825%, and for 1994 was the minimum of 12%. Interest in excess of 120% of
the December, 1993 long-term Applicable Federal Rate ("AFR") (7.29%) has
been reported as Other Annual Compensation for 1994, interest in excess of
120% of the December 1992 long-term AFR (8.5%) has been reported as Other
Annual Compensation for 1993, and interest in excess of 120% of the
December, 1991 long-term AFR (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 the
Enron Corp. mid-term borrowing rate, since crediting rates for 1992, 1993
and 1994 for 7.5%, 7.06% and 6.0%, respectively, did not exceed 120% of the
AFR. No interest has been reported as Other Annual Compensation under the
1994 Deferral Plan, because none of the Named Officers participates in this
plan. Other Annual Compensation also includes miscellaneous cash payments
for items such as cash perquisite allowances and lost benefits due to
statutory earnings limits.
(Notes continued on following page)
10
<PAGE> 13
(3) The Enron Corp. restricted stock granted to Mr. Hoglund in January 1992
vested 100% on December 14, 1992. Vesting of all unvested restricted stock
granted before December, 1992 was accelerated to December, 1992. Restricted
stock awards to the Named Officers on February 7, 1994, were provided to
compensate for lost benefits due to statutory earnings limits and became 50%
vested on August 7, 1994, and 100% vested on February 7, 1995. The following
is the aggregate number of shares in unreleased restricted stock holdings of
Enron Corp. Common Stock and their value as of December 31, 1994, for each
of the Named Officers: Mr. Hoglund, 377,246 shares valued at $11,506,003;
Mr. Papa, 4,005 shares valued at $122,153; Mr. McKinney, 4,000 shares valued
at $122,000; Mr. Uthlaut, 62 shares valued at $1,891. Dividend equivalents
accrue from the date of grant and are payable on the vesting date of the
shares, with the exception of 370,656 shares included for Mr. Hoglund. (See
footnote 7 below for additional information with respect to such shares).
(4) Includes the value as of December 31, 1992, 1993 and 1994 of Enron Corp.
Common Stock allocated during 1992, 1993 and 1994 to employees' savings
subaccounts under the Enron Corp. Employee Stock Ownership Plan ("ESOP").
Included in 1994 is a special allocation made in February, 1994 to
employees' savings subaccounts under the ESOP and a special allocation made
in December, 1994 to a special allocation subaccount.
(5) Includes options for Mr. Hoglund to purchase 66,650 shares of Enron Corp.
Common Stock with respect to 1993, and 40,000 shares of Enron Corp. Common
Stock with respect to 1992. Includes options for Mr. Papa to purchase 41,650
shares of Enron Corp. Common Stock with respect to 1993.
(6) Includes stock options granted following cancellation of phantom SAR units
originally granted in 1989, 1990 and 1991 that were waived and canceled
during 1992.
(7) Includes compensation for imbedded gain in phantom SAR units canceled for
which Mr. Hoglund was issued a total of 463,320 shares of Enron Corp. Common
Stock (including dividends) 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".
(8) Includes compensation for imbedded gain in phantom SAR units canceled during
1992 in the following amounts: Mr. Papa -- $225,000; Mr.
Uthlaut -- $225,000; and Mr. Wilson -- $156,563.
(9) Includes payouts of performance units under Enron Corp.'s Performance Unit
Plan in the following amounts: Mr. Papa -- $98,066; and Mr.
Uthlaut -- $98,066. No performance units have been granted to officers of
the Company since 1988, and no future grants are expected. The Company
reimbursed Enron Corp. for Performance Unit Plan costs attributable to
executives of the Company.
11
<PAGE> 14
STOCK OPTION GRANTS DURING 1994
The following table sets forth information with respect to grants, pursuant
to Company and Enron Corp. stock option plans, of stock options to the Named
Officers reflected in the Summary Compensation Table on page 10 and all employee
optionees as a group. No SAR units were granted during 1994, and none are
outstanding.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES POTENTIAL REALIZABLE VALUE AT
UNDERLYING % OF TOTAL ASSUMED ANNUAL RATES OF
OPTIONS/ OPTIONS/SARS EXERCISE STOCK PRICE APPRECIATION
SARS GRANTED TO OR BASE FOR OPTION TERM(1)
GRANTED EMPLOYEES IN PRICE EXPIRATION -------------------------------------------
NAME/GROUP (#)(2) FISCAL YEAR ($/SH) DATE 0%(3) 5% 10%
---------------------- ----------- ------------ -------- ---------- ------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
NAMED OFFICERS
Mr. Hoglund........... 1,820,000(4) 35.6% $19.7500 12/14/99 $ 0 $ 9,930,941 $ 21,944,782
26,310(7) 0.5% $18.7500 12/30/04 $ 0 $ 310,242 $ 786,213
-----------------------------------------------------------------------------------------------------------------------------
Mr. Papa.............. 22,840(5) 0.4% $22.9375 02/08/99 $ 0 $ 144,742 $ 319,842
40,000(6) 0.8% $22.9375 02/08/04 $ 0 $ 577,011 $ 1,462,259
11,540(7) 0.2% $18.7500 12/30/04 $ 0 $ 136,077 $ 344,846
-----------------------------------------------------------------------------------------------------------------------------
Mr. McKinney.......... 19,230(5) 0.4% $22.9375 02/08/99 $ 0 $ 121,865 $ 269,289
30,000(6) 0.6% $22.9375 02/08/04 $ 0 $ 432,758 $ 1,096,694
10,385(7) 0.2% $18.7500 12/30/04 $ 0 $ 122,458 $ 310,332
-----------------------------------------------------------------------------------------------------------------------------
Mr. Uthlaut........... 15,110(5) 0.3% $22.9375 02/08/99 $ 0 $ 95,755 $ 211,594
20,000(6) 0.4% $22.9375 02/08/04 $ 0 $ 288,505 $ 731,129
9,235(7) 0.2% $18.7500 12/30/04 $ 0 $ 108,897 $ 275,966
-----------------------------------------------------------------------------------------------------------------------------
Mr. Wilson............ 18,040(5) 0.4% $22.9375 02/08/99 $ 0 $ 114,323 $ 252,624
25,000(6) 0.5% $22.9375 02/08/04 $ 0 $ 360,632 $ 913,912
8,125(7) 0.2% $18.7500 12/30/04 $ 0 $ 95,808 $ 242,797
-----------------------------------------------------------------------------------------------------------------------------
All Shareholders...... N/A N/A N/A N/A $ 0 $2,035,509,548(9) $5,158,380,841(9)
-----------------------------------------------------------------------------------------------------------------------------
All Optionees......... 5,116,095(10) 100.0% $20.2302(8) 1999-2004 $ 0 $ 65,090,358(9) $ 164,951,747(9)
-----------------------------------------------------------------------------------------------------------------------------
Optionees' Gain As %
Of All Shareholders'
Gain................ N/A N/A N/A N/A N/A 3.20% 3.20%
</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.
(2) If a "change of control" (as defined in the Company 1992 Stock Plan) were
to occur before the options become exercisable and are exercised, the
vesting described below will be accelerated and all such outstanding
options will be surrendered and the optionee will receive a cash payment
from the company that issued the option in an amount equal to the value of
the surrendered options (as defined in the Company 1992 Stock Plan).
(3) 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 would render the option without value to the optionees.
(4) In connection with the extension of Mr. Hoglund's employment agreement to
September 1, 1998, Mr. Hoglund received a grant of 1,820,000 stock options
at market value, subject to approval of the
(Notes continued on following page)
12
<PAGE> 15
amendment and restatement of the 1992 Stock Plan at the Annual Meeting. See
"Item 3. Approval of the Amended and Restated 1992 Stock Plan." These
options vest 100% six months after the date of grant.
(5) Represents stock options granted in lieu of cash bonus with 100% vesting
upon grant except for those optionees who are subject to the short-swing
profit provisions of Section 16(b) of the Exchange Act, in which case, the
options vest 100% six months after the date of grant.
(6) Represents stock options that vest at the cumulative rate of 25% per year,
commencing on the first anniversary of the date of grant.
(7) Represents stock options granted pursuant to the Enron Oil & Gas Company
All Employee Stock Option Program.
(8) Weighted average grant price for all stock options for the purchase of
Company Common Stock granted to employees in 1994.
(9) Appreciation for All Optionees is calculated using the maximum allowable
option term of 10 years, even though in some cases the actual option term
is less than 10 years. Appreciation for All Shareholders is calculated
using an assumed ten-year option term, the weighted average exercise price
for All Optionees ($20.2302) and the number of shares of Company Common
Stock issued and outstanding on December 31, 1994 (159,990,827).
(10) Includes options issued on December 30, 1994 under the All Employee Stock
Option Program of the Company, which replaced allocations to the Enron
Corp. Employee Stock Ownership Plan savings subaccount for eligible
employees for years 1995 through 2000. Eligible employees are defined as
regular full-time employees and regular part-time employees who have worked
1,000 hours who are on the U.S. or Canadian payroll.
AGGREGATED STOCK OPTION/SAR EXERCISES DURING 1994 AND STOCK OPTION/SAR VALUES AS
OF DECEMBER 31, 1994
The following table sets forth information with respect to the Named
Officers concerning the exercise of options during the last fiscal year and
unexercised options and SAR units held as of the end of the fiscal year:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING
UNEXERCISED OPTIONS/SARS
SHARES AT DECEMBER 31, 1994(1)
ACQUIRED ON VALUE -------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE
-------------------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Mr. Hoglund......... EOG 1,820,000 $19,110,000 0 1,946,310
Enron Corp. 0 $ 0 44,260 65,590
-----------
Subtotal $19,110,000
Mr. Papa............ EOG 7,200 $ 84,600 148,390 107,790
Enron Corp. 0 $ 0 16,660 24,990
-----------
Subtotal $ 84,600
Mr. McKinney........ EOG 0 $ 0 38,230 65,385
Enron Corp. 0 $ 0 16,660 24,990
-----------
Subtotal $ 0
Mr. Uthlaut......... EOG 0 $ 0 102,360 64,985
Mr. Wilson.......... EOG 0 $ 0 113,290 71,875
</TABLE>
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS/
SARS AT DECEMBER 31, 1994
--------------------------------
NAME EXERCISABLE UNEXERCISABLE
-------------------- ----------- -------------
<S> <C> <C>
Mr. Hoglund......... $ 0 $ 950,000
$368,211 $ 532,367
-------- ----------
$368,211 $1,482,367
Mr. Papa............ $810,428 $ 239,609
$ 55,186 $ 82,779
-------- ----------
$865,614 $ 322,388
Mr. McKinney........ $ 70,625 $ 21,875
$ 33,320 $ 49,980
-------- ----------
$103,945 $ 71,855
Mr. Uthlaut......... $610,406 $ 154,469
Mr. Wilson.......... $679,547 $ 148,516
</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. Accrual of benefits under the Retirement Plan was temporarily
suspended effective December 31, 1994 in connection with Enron Corp.'s intent to
convert the plan benefit formula from a final average pay formula (the "Pre-1995
Formula") to a career average pay, cash balance formula (the "Post-1994
Formula").
The Pre-1995 Formula is designed to provide monthly retirement income for
each covered employee 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 sixty consecutive months that occurs 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.
Subject to adoption of an amendment to the Retirement Plan by the Enron
Corp. Board of Directors, Enron Corp. intends to change the Plan benefit accrual
formula to the Post-1994 Formula, under which covered employees will accrue an
annual benefit equal to an account balance of 5% of base pay. Each employee's
accrued benefit will be credited with interest based on 10-year Treasury Bond
yields. Benefit accrual under the Post-1994 Formula will commence in Plan year
1996.
Directors who are not employees of the Company or Enron Corp. are not
eligible to participate in the Retirement Plan.
Benefits accrued under the Retirement Plan after 1986 and before 1995 are
offset by the value of Common Stock allocated to employee retirement subaccounts
in the Enron Corp. Employee Stock Ownership Plan. In addition, Enron Corp. has a
Supplemental Retirement Plan that is designed to assure payments to certain
employees of that retirement income that 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 that provides supplemental retirement benefits equal to any
reduction in benefits due to deferral of salary into the Enron Corp. Deferral
Plans.
14
<PAGE> 17
The following table sets forth the estimated annual benefits payable under
normal retirement at age 65, assuming current remuneration levels without any
projected salary increase and participation until normal retirement at age 65,
with respect to the Named Officers under the provisions of the foregoing
retirement plan:
<TABLE>
<CAPTION>
ESTIMATED
CURRENT CREDITED CURRENT ESTIMATED
CREDITED YEARS OF COMPENSATION ANNUAL BENEFIT
YEARS OF SERVICE COVERED PAYABLE UPON
SERVICE AT AGE 65 BY PLANS RETIREMENT
-------- --------- ----------- --------------
<S> <C> <C> <C> <C>
Mr. Hoglund........................... 7.3 10.8 $ 570,000 $115,095
Mr. Papa.............................. 13.6 30.3 $ 259,020 $108,062
Mr. McKinney.......................... 3.1 13.0 $ 237,000 $ 30,843
Mr. Uthlaut........................... 7.1 10.4 $ 200,040 $ 37,729
Mr. Wilson............................ 7.1 19.8 $ 185,040 $ 43,821
</TABLE>
NOTE: The estimated annual benefits payable are based on the straight life
annuity form without adjustment for any offset applicable to a
participant's retirement subaccount in the Enron Corp. Employee Stock
Ownership Plan.
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
equal to two weeks of base pay multiplied by the number of full or partial years
of service, plus one month of base pay for each $10,000 (or portion of $10,000)
included in the employee's annual base pay, plus one month of base pay for each
five percent of annual incentive award opportunity under any approved plan. The
maximum an employee can receive is 2.99 times the employee's average annual base
pay over the past five years. The Company reimburses Enron Corp. for severance
plan costs attributable to Company employees.
Messrs. Hoglund, Papa, Uthlaut 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).
EMPLOYMENT CONTRACTS
Effective September 1, 1987, Mr. Hoglund entered into an employment
agreement with the Company under which he serves as Chairman of the Board,
President and Chief Executive Officer of the Company. On December 14, 1994, the
employment agreement was amended to extend the term to September 1, 1998.
Thereafter, the term may be extended as may be agreed by Mr. Hoglund and the
Company. Pursuant to the
15
<PAGE> 18
terms of the employment agreement, as amended, Mr. Hoglund's annual base salary
during the remaining term shall be not less than $570,000.
In 1989, Mr. Hoglund was granted, pursuant to the terms of his employment
agreement, 800,000 shares of Common Stock, which were subject to a Stock
Transfer Rights Agreement, which was terminated in 1994.
Under the terms of his employment agreement, Mr. Hoglund also received in
1989 a grant of 2,200,000 phantom 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 $5.50 per
unit for each SAR unit. The phantom 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 200,000 of his phantom 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
2,000,000 phantom SAR units and agreed that he would not be entitled to receive
any annual bonus payments. Mr. Hoglund also received (i) a grant of 2,200,000
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.
In connection with the extension of Mr. Hoglund's employment agreement to
September 1, 1998 described above, Mr. Hoglund received a grant of 1,820,000
stock options at market value, subject to approval of the amendment and
restatement of the 1992 Stock Plan at the Annual Meeting. See "Item 3. Approval
of the Amended and Restated 1992 Stock Plan."
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.
CERTAIN TRANSACTIONS
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. Effective January, 1994, the Company entered into a new agreement with
Enron Corp., with an initial term of five years through December, 1998,
providing for services substantially identical in nature and quality to those
services previously provided and for allocated indirect costs incurred in
rendering such services up to a maximum of $6.7 million for 1994, such cap to be
increased in subsequent years for inflation and certain changes in the Company's
allocation bases with any increase not to exceed 7.5% per year.
16
<PAGE> 19
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 1994, Enron Corp. and its affiliates paid the Company
approximately $297 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 Exchange Act 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 1994, its officers, directors and greater than
10% shareholders complied with all applicable filing requirements.
17
<PAGE> 20
ITEM 2.
APPOINTMENT OF AUDITORS
Pursuant to the recommendation of the Audit Committee, the Board of
Directors appointed Arthur Andersen LLP, independent public accountants, to
audit the consolidated financial statements of the Company for the year ending
December 31, 1995.
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 bylaws 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 LLP 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.
APPROVAL OF THE AMENDED AND RESTATED 1992 STOCK PLAN
GENERAL
The shareholders approved the Enron Oil & Gas Company 1992 Stock Plan (the
"1992 Stock Plan") at the 1992 Annual Meeting. The 1992 Stock Plan is intended
to provide individual participants with an opportunity to acquire a proprietary
interest in the Company and give them an additional incentive to use their best
efforts for the Company's long-term success. The 1992 Stock Plan permits the
granting of (i) stock options, including incentive stock options meeting the
requirements of Section 422 of the Internal Revenue Code and stock options with
a grant price that is discounted from the fair market value to be used only in
lieu of cash bonus payments, (ii) stock appreciation rights ("SAR's") and (iii)
restricted stock, any of which may be granted separately or together. Grants may
be made to any employee, officer or employee-director of the Company or its
affiliates as well as to individuals who are non-employee directors of the
Company or an affiliate. The 1992 Stock Plan is administered by the Compensation
Committee of the Board of Directors, which has the authority to establish
administrative rules, to designate individuals to receive awards and the size of
such awards, and to set the terms and conditions of awards.
Stock options permit the recipient to purchase shares of Common Stock,
commonly referred to as exercising their option, at a fixed price, determined on
the date of grant, regardless of the fair market value on the date of exercise.
The holder of an SAR is entitled to receive the excess of the fair market value
on the date of exercise over the grant price of the SAR. Restricted stock may
provide the recipient all of the rights of a shareholder of the Company,
including the right to vote the shares and receive any dividends, however the
stock may not be transferred by the recipient until certain restrictions, such
as time, lapse.
The Board of Directors of the Company desires to amend and restate the 1992
Stock Plan to increase the number of shares authorized for granting awards under
the plan, which requires shareholder approval. Amendment of several provisions
is also required so that certain awards under the plan will qualify as
18
<PAGE> 21
performance-based compensation under Section 162(m) of the Internal Revenue
Code. The following summary description of the proposed Amended and Restated
1992 Stock Plan (the "Amended and Restated Plan") is qualified in its entirety
by reference to the full text of the plan which is attached to this Proxy
Statement as Exhibit A.
CHANGES TO THE 1992 STOCK PLAN
Among the changes effected by the Amended and Restated Plan is an increase
in the number of shares of Common Stock available for granting awards. The
number of shares authorized for granting awards when the 1992 Stock Plan was
first approved in 1992 was 6,000,000 shares (3,000,000 shares adjusted for a
stock split in June, 1994), with no more than 25% being granted as restricted
stock. Less than 745,000 shares remain available for grant. The Amended and
Restated Plan will increase the total shares available for grant to 9,000,000
shares of Common Stock, with no more than 25% being granted as restricted stock.
The Amended and Restated Plan places a limit of 2,000,000 shares on the
number of options and a limit of 100,000 shares on the number of stock
appreciation rights that can be granted to any individual in a calendar year.
The grant price of an option or SAR will not be less than the fair market value
of a share on the date of grant. Discounted options in lieu of cash bonus
payments will no longer be permitted, and provisions of the 1992 Stock Plan
pertaining to discounted options or SARs are being deleted. The Amended and
Restated Plan would also permit grants of performance-based restricted stock
which is either issued or becomes vested based on the attainment of
pre-established net income and/or cash flow criteria or is issued in lieu of
cash payments under the Company's Key Contributor Incentive Plan, based on
attainment of the performance criteria established under that plan. A maximum of
25,000 shares of performance-based restricted stock can be granted to any
individual in a calendar year.
The Amended and Restated Plan authorizes the Board of Directors of the
Company to amend the Amended and Restated Plan, without shareholder approval, to
authorize additional shares of Common Stock for granting awards in lieu of other
compensation or benefits, such as cash bonus payments, to persons who are not
subject to the short-swing profit recovery provisions of Section 16(b) of the
Exchange Act. The Board of Directors cannot authorize additional shares for
granting awards to persons who are subject to Section 16 of the Exchange Act,
increase the maximum number of options, SARs or restricted stock that may be
granted to any individual in any calendar year or modify the material terms of
the Amended and Restated Plan, without obtaining shareholder approval.
Approximately 800 employees are eligible to receive awards under the Amended and
Restated Plan. The closing price of the Common Stock on the New York Stock
Exchange Composite Tape on March 22, 1995 was $21 1/4 per share.
Approval of the Amended and Restated Plan by the shareholders of the
Company is required in order for the Amended and Restated Plan to continue to
comply with Rule 16b-3 under the Exchange Act. Rule 16b-3 provides an exemption
from the operation of the "short-swing profit" recovery provisions of Section
16(b) of the Exchange Act, with respect to acquisition of stock options,
transactions relating to certain stock appreciation rights, restricted stock
grants, and the use of already owned shares as payment for the exercise price of
stock options. Shareholder approval of the Amended and Restated Plan is also
required so that certain awards under the plan will qualify as performance-based
compensation under Section 162(m) of the Internal Revenue Code.
AWARDS UNDER THE PROPOSED AMENDMENT
Except as described below, benefits payable or amounts that will be granted
after the effective date of the Amended and Restated Plan are not determinable
at this time. As described above, on December 14, 1994,
19
<PAGE> 22
Mr. Hoglund received a grant of 1,820,000 stock options at $19.75 per share, the
market value on the date of grant, in connection with the extension of Mr.
Hoglund's employment agreement from an expiration date of September 1, 1995 to
September 1, 1998. Such grant is subject to the approval of the Amended and
Restated Plan by the shareholders. These options expire on December 14, 1999.
REQUIRED VOTE AND RECOMMENDATION
The approval of the Amended and Restated Plan 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.
Under Delaware law, an abstention 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.
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 the Amended and Restated Plan.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THIS PROPOSAL.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Shareholders may propose matters to be presented at shareholder meetings
and may also nominate persons to be Directors. Formal procedures have been
established for those proposals and nominations.
PROPOSALS FOR 1996 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 1996 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 28,
1995, to be included in the Company proxy statement and form of proxy relating
to that meeting.
In addition to the SEC rules described in the preceding paragraph, the
Company bylaws 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 2, 1996. 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 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
20
<PAGE> 23
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 bylaw provisions, a shareholder must also comply with all
applicable requirements of the Exchange Act, and the rules and regulations
thereunder with respect to the matters set forth in the foregoing bylaw
provisions. Notwithstanding anything in the Company bylaws to the contrary, no
business shall be conducted at the annual meeting except in accordance with the
procedures outlined above.
PROPOSALS FOR 1995 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 1995
Annual Meeting of Shareholders of the Company was February 2, 1995. The Company
has not received any notices from its shareholders regarding business to be
brought before the 1995 Annual Meeting of Shareholders.
NOMINATIONS FOR 1996 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
2, 1996, 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 Exchange Act (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 of Directors
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 1995 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 1995 Annual Meeting of Shareholders of the Company
21
<PAGE> 24
was February 2, 1995. The Company has not received any notices from its
shareholders regarding nominations for directors to be elected at the 1995
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 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 27, 1995
22
<PAGE> 25
EXHIBIT A
ENRON OIL & GAS COMPANY 1992 STOCK PLAN
(AS AMENDED AND RESTATED EFFECTIVE DECEMBER 14, 1994)
SECTION 1. PURPOSE
The purposes of this Enron Oil & Gas Company 1992 Stock Plan (the "Plan")
are to encourage selected persons employed by Enron Oil & Gas Company together
with any successor thereto (the "Company") and its subsidiaries and other
eligible Persons to develop a proprietary interest in the growth and performance
of the Company, to generate an increased incentive to contribute to the
Company's future success and prosperity, thus enhancing the value of the Company
for the benefit of its stockholders, and to enhance the ability of the Company
and its subsidiaries to attract and retain key individuals who are essential to
the progress, growth and profitability of the Company.
SECTION 2. ADMINISTRATION
2.1 The Plan shall be administered by the Committee. A majority of the
Committee shall constitute a quorum, and the acts of a majority of the members
present at any meeting at which a quorum is present, or acts approved in writing
by all members of the Committee, shall be deemed the acts of the Committee.
2.2 Subject to the terms of the Plan and applicable law, the Committee
shall have sole power, authority and discretion to: (i) designate Participants;
(ii) determine the types of Awards to be granted to a Participant under the
Plan; (iii) determine the number of Shares to be covered by or with respect to
which payments, rights or other matters are to be calculated in connection with
Awards; (iv) determine the terms and conditions of any Award; (v) determine
whether, to what extent, under what circumstances and how Awards may be settled
or exercised in cash, Shares, other securities, other Awards, or other property,
or may be canceled, forfeited, or suspended; (vi) determine whether, to what
extent, and under what circumstances cash, Shares, other securities, other
Awards, other property, and other amounts payable with respect to an Award under
the Plan shall be deferred either automatically or at the election of the holder
thereof or of the Committee; (vii) interpret, construe and administer the Plan
and any instrument or agreement relating to an Award made under the Plan; (viii)
establish, amend, suspend, or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan;
(ix) make a determination as to the right of any person to receive payment of an
Award or other benefit; and (x) make any other determination and take any other
action that the Committee deems necessary or desirable for the administration of
the Plan.
2.3 Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions with respect to the Plan or
any Award shall be within the sole discretion of the Committee, may be made at
any time, and shall be final, conclusive, and binding upon all Persons,
including the Company, any subsidiary, any Participant, any holder or
beneficiary of any Award, any stockholder, and any Employee.
SECTION 3. SHARES AVAILABLE FOR AWARDS
3.1 Shares Available.
(i) Calculation of Number of Shares Available. Effective December 14,
1994, nine million (9,000,000) Shares, subject to adjustment as provided in
Section 3.2, shall be available for granting Awards under the Plan.
A-1
<PAGE> 26
(ii) Accounting for Awards. For purposes of this Section 3, if an
Award is denominated in Shares, the number of Shares covered by such Award,
or to which such Award relates, shall be counted on the date of grant of
such Award against the aggregate number of Shares available for granting
Awards under the Plan; provided, however, that Awards that operate in
tandem with (whether granted simultaneously with or at a different time
from) other Awards may be counted or not counted under procedures adopted
by the Committee in order to avoid double counting.
(iii) Sources of Shares Deliverable Under Awards. Any Shares
delivered pursuant to an Award may consist, in whole or in part, of
authorized and unissued Shares or of treasury Shares.
3.2 Adjustments.
(i) In the event that the Committee shall determine that any dividend
or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company (or other similar corporate transaction or event)
affects the Shares such that an adjustment is determined by the Committee
to be appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the
Plan, then the Committee may, subject to Section 3.2(ii), in such manner as
it may deem equitable, adjust any or all of (a) the number and type of
Shares (or other securities or property) which thereafter may be made the
subject of Awards, (b) the number and type of Shares (or other securities
or property) subject to outstanding Awards, and (c) the grant, purchase, or
exercise price with respect to any Award, or, if deemed appropriate, make
provision for a cash payment to the holder of an outstanding Award;
provided, however, that with respect to Awards of Incentive Stock Options,
no such adjustment shall be authorized to the extent that such adjustment
would cause the Plan to violate Section 422(b)(1) of the Code or any
successor provision thereto; and provided further, that the number of
Shares subject to any Award denominated in Shares shall always be a whole
number.
(ii) If, and whenever, prior to the expiration of a grant theretofore
made, the Company shall effect a subdivision or consolidation of Shares or
the payment of a stock dividend on Shares without receipt of consideration
by the Company, the number of Shares with respect to which such grant may
thereafter be vested or exercised (a) in the event of an increase in the
number of outstanding Shares shall be proportionately increased, and if the
grant is an Option, the purchase price per Share shall be proportionately
reduced, and (b) in the event of a reduction in the number of outstanding
Shares shall be proportionately reduced, and if the grant is an Option, the
purchase price per Share shall be proportionately increased.
SECTION 4. ELIGIBILITY
4.1 Any Employee, including any officer or employee-director of the Company
or of any subsidiary, who is not a member of the Committee, shall be eligible to
be designated a Participant. No grant of an Award will be made to a Director of
the Company who is not an Employee. Further, the only class of Employees who
shall be eligible to receive grants of Incentive Stock Options under the Plan
shall be those Employees who are Employees of the Company or of an entity which
is a subsidiary corporation of the Company within the meaning of Section 424(e)
or (f) of the Code. Grants may be made to the same individual on more than one
occasion.
A-2
<PAGE> 27
4.2 No individual who is subject to any written agreement with the Company
that generally restricts the acquisition of Shares shall be eligible for any
grant of an Award while such agreement is in effect.
SECTION 5. AWARDS
5.1 Options. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such additional
terms and conditions, which are not inconsistent with the provisions of the
Plan, as the Committee shall determine:
(i) Exercise Price. The per Share purchase price of an Option shall
be determined by the Committee; provided, however, that (a) except as
provided for in subsection (v) below, such purchase price shall not be less
than the Fair Market Value of a Share on the date of grant of such Option
and in no event less than the par value of a Share, and (b) for 1992,
subject to receiving a favorable ruling with respect thereto from the
Internal Revenue Service ("IRS"), the Committee shall have the discretion
to grant Options pursuant to this Section 5.1 (other than an option granted
pursuant to subsections (iii) or (v) below) and establish as the purchase
price, the fair market value of a Share on February 11, 1992.
(ii) Time and Method of Exercise. The Committee shall determine the
time at which an Option may be exercised in whole or in part, and the
method by which (and the form, including without limitation, cash, Shares,
other Awards, or other property, or any combination thereof, having a Fair
Market Value on the exercise date equal to the relevant exercise price, in
which) payment of the exercise price with respect thereto may be made or
deemed to have been made.
(iii) Incentive Stock Options. The terms of any Incentive Stock
Option granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code, or any successor provision thereto,
and any regulations promulgated thereunder.
(iv) Option Agreement. Each Option granted shall be evidenced by an
Award Agreement. An Award Agreement shall contain provisions for the timing
of settlement of an exercise of an Option, including, but not limited to,
the ability of the Company to purchase Shares in the open market to settle
the exercise, and a provision that the Committee, in its sole discretion,
may make a cash payment for the settlement, in whole or in part, of the
exercise of an Option.
(v) Limit on Size of Option Grants. No individual shall be granted
Options totalling more than two million (2,000,000) Shares in any single
calendar year.
5.2 Stock Appreciation Rights. Except as provided by Section 6, the
Committee is hereby authorized to grant Stock Appreciation Rights to
participants, which Stock Appreciation Rights shall be evidenced by Award
Agreements. Subject to the terms of the Plan, a Stock Appreciation Right granted
under the Plan shall confer on the holder thereof a right to receive, upon
exercise thereof, the excess of (i) the Fair Market Value of one (1) Share on
the date of exercise over (ii) the grant price of the right as specified by the
Compensation Committee, which shall not be less than the Fair Market Value of
one (1) Share on the day of the grant of the Stock Appreciation Right and in no
event less than the par value of one (1) Share. The Compensation Committee may
impose such conditions or restrictions on the exercise of any Stock Appreciation
Right as it may deem appropriate; provided that the Compensation Committee shall
retain final authority to determine whether (a) the Participant shall be
permitted, or (b) to approve an election by Participant, to receive cash in full
or partial settlement of Stock Appreciation Rights. No individual shall be
granted Stock Appreciation Rights totalling more than one hundred thousand
(100,000) Shares in any single calendar year.
A-3
<PAGE> 28
5.3 Restricted Stock.
(i) Issuance. The Committee is hereby authorized to grant Awards of
Restricted Stock to Participants, which Awards shall be evidenced by Award
Agreements.
(ii) Restrictions. Shares of Restricted Stock shall be subject to
such restrictions as the Committee may impose (including, without
limitation, any limitation on the right to vote a Share of Restricted
Stock), which restrictions may lapse separately or in combination at such
time or times, in such installments or otherwise as the Committee may deem
appropriate. Notwithstanding the foregoing, the number of Shares of
Restricted Stock which may be granted shall be limited to not more than
twenty-five percent (25%) of the total number of Shares available for grant
under the Plan.
(iii) Certificates and Dividends. All dividends and distributions, or
the cash equivalent thereof (whether cash, stock or otherwise), on unvested
Shares of Restricted Stock shall not be paid to the respective Participant
but the value thereof shall be credited by the Company for the account of
the Participant. At such time as a Participant becomes vested in a portion
of the Award of Restricted Stock Shares, the restrictions thereon imposed
by this Section 5.3(iii) shall lapse and certificates representing such
vested shares shall be delivered to the Participant along with all
accumulated credits for the value of dividends and distributions, or the
cash equivalent thereof attributable to such vested shares. Interest shall
not be paid on any such credits for dividends or distributions or the cash
equivalent thereof, made by the Company for the account of a Participant.
The Company shall have the option of paying such credits for accumulated
dividends or distributions or the cash equivalent thereof, in Shares of the
Company rather than in cash or other medium. (If payment is made in Shares,
the conversion to Shares shall be at the average Fair Market Value for the
five (5) trading days preceding the date of payment.) Credits for the value
of dividends and distributions, or the cash equivalent thereof made by the
Company on non-vested Restricted Stock shall be forfeited in the same
manner and at the same time as the respective shares of Restricted Stock to
which they are attributable are forfeited, except that such forfeited
credits for the value of dividends and distributions or the cash equivalent
thereof shall be canceled and shall not be available for future
distribution under this Plan.
(iv) Payment. A Participant shall not be required to make any payment
for Awards of Restricted Stock, except to the extent otherwise required by
law.
(v) Forfeiture. Unless the Committee decides otherwise, Shares of
non-vested Restricted Stock awarded to a Participant will be forfeited if
the Participant terminates employment or service for any reason other than
death, Disability, Retirement or Involuntary Termination. At the time and
on the date of a Participant's death, Disability, Retirement or Involuntary
Termination during the Participant's employment or service, prior to the
date the Participant otherwise becomes fully vested in all the Restricted
Stock awarded to the Participant, all restrictions placed on each share of
Restricted Stock awarded to the Participant shall lapse and the non-vested
Restricted Stock will become fully vested Released Securities. From and
after such date the Participant or the Participant's estate, personal
representative or beneficiary, as the case may be, shall have full rights
of transfer or resale with respect to such Restricted Stock subject to
applicable state and federal regulations.
(vi) Performance-Based Restricted Stock. The Committee is hereby
authorized to grant Awards of Restricted Stock which qualify as
performance-based compensation under Code Section 162(m), such that (a) the
issuance is contingent upon attainment of pre-established performance
criteria, (b) restrictions lapse contingent upon attainment of
pre-established performance criteria, or (c) the issuance is in lieu of
cash payments under the Key Contributor Incentive Plan, based upon
attainment of
A-4
<PAGE> 29
the performance criteria established under the terms of the Key Contributor
Incentive Plan. The performance criteria to be used with such Awards shall
be after-tax net income and/or cash flow, at the Company level, as
determined at the sole discretion of the Compensation Committee.
Performance criteria will be established by the Committee prior to the
beginning of each performance period, defined as January 1 of each year, or
such later date as permitted under the Code, or applicable Treasury
Regulations. Notwithstanding any other provision of the Plan, no individual
shall be granted Awards of Restricted Stock under this Section 5.3(vi)
totalling more than twenty-five thousand (25,000) Shares in any single
calendar year.
5.4 General.
(i) No Cash Consideration for Awards. Except as otherwise provided in
the Plan, awards shall be granted for no cash consideration or for such
minimal cash consideration as may be required by applicable law.
(ii) Awards May Be Granted Separately or Together. Awards, in the
discretion of the Committee, may be granted either alone or in addition to,
or in tandem with any other Award or any award granted under any other plan
of the Company or any subsidiary. Awards granted in addition to or in
tandem with other Awards, or in addition to or in tandem with awards
granted under any other plan of the Company or any subsidiary, may be
granted either at the same time as or at a different time from the grant of
such other Award or Awards.
(iii) Limits on Transfer of Awards. No Award (other than Released
Securities) and no right under any such Award, shall be assignable,
alienable, saleable or transferable by a Participant otherwise than by will
or by the laws of descent and distribution or, in the case of an Award of
Restricted Stock by assignment to the Company; provided, however, if so
determined by the Committee, a Participant may, in the manner established
by the Committee, designate a beneficiary or beneficiaries to exercise the
rights of the Participant and to receive any property distributable with
respect to any Award upon the death of the Participant. Each Award and each
right under any Award shall be exercisable during the Participant's
lifetime only by the Participant or, if permissible under applicable law,
by the Participant's guardian or legal representative. No Award (other than
Released Securities) and no right under any such Award may be pledged,
alienated, attached, or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and
unenforceable against the Company or any subsidiary.
(iv) Term of Awards. The term of each Award shall be for such period
as may be determined by the Committee; provided, however, that in no event
shall the term of any Option or Stock Appreciation Right exceed a period of
ten (10) years from the date of its grant.
(v) Rule 16b-3. It is intended that the Plan and any Award made to a
Person subject to Section 16 of the Securities Exchange Act of 1934, as
amended, meet all of the requirements of Rule 16b-3. If any provision of
the Plan or any such Award would disqualify the Plan or such Award under,
or would otherwise not comply with, Rule 16b-3, such provision or Award
shall be construed or deemed amended to conform to Rule 16b-3.
(vi) Share Certificates. All certificates for Shares or other
securities delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the
rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares
A-5
<PAGE> 30
or other securities are then listed any applicable Federal or state
securities laws, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such
restrictions.
(vii) Limitation on Shares. Notwithstanding any other provision of
the Plan, no Shares shall be issued under the Plan that would cause Enron
Corp., as a result thereof, to own less than eighty percent (80%) of the
total voting power of all classes of stock of the Company, or cause Enron
Corp., with respect to its ownership of Shares, to fail to meet the eighty
percent (80%) voting and value test described in Section 1504(a)(2) of the
Code.
SECTION 6. AMENDMENT AND TERMINATION
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
6.1 Amendments to the Plan. The Board of Directors in its discretion may
terminate the Plan at any time with respect to any Shares for which a grant has
not theretofore been made. The Board of Directors shall have the right to alter
or amend the Plan or any part thereof from time to time, including amending the
Plan for the purpose of making additional shares available under the Plan for
granting Awards in lieu of other compensation or benefits, such as cash bonus
payments; provided, that the provisions of Section 5 of this Plan shall not be
amended more than once every six (6) months, other than to comport with changes
in the Code, the Employee Retirement Income Security Act, or the rules and
regulations thereunder; provided further, that no change in any grant
theretofore made may be made which would impair the rights of the recipient of a
grant without the consent of such recipient; and provided further, that
notwithstanding any other provision of the Plan or any Award Agreement, without
the approval of the stockholders of the Company no such amendment or alteration
shall be made that would:
(i) increase the total number of Shares available for Awards under the
Plan to persons who are subject to Section 16 of the Securities Exchange
Act of 1934, as amended, except as provided in Section 3 hereof;
(ii) change the minimum Option price;
(iii) extend the maximum period during which Awards may be granted
under the Plan;
(iv) increase the maximum number of Options that may be granted under
Section 5.1, Stock Appreciation Rights that may be granted under Section
5.2, or Shares of performance-based Restricted Stock that may be granted
under Section 5.3(vi) to any individual in any calendar year; or
(v) otherwise modify the material terms of the Plan.
6.2 Adjustments of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events.
A. If a transaction occurs which is not approved, recommended or
supported by a majority of the Board of Directors of the Company in actions
taken prior to, and with respect to, such transaction in which either (i)
the Company merges or consolidates with any other corporation (other than
one of the Company's wholly-owned subsidiaries) and is not the surviving
corporation (or survives only as the subsidiary of another corporation),
(ii) the Company sells all or substantially all of its assets to any other
person or entity, or (iii) the Company is dissolved, or (iv) if any third
person or entity (other than the trustee or committee of any qualified
employee benefit plan of the Company), together with its subsidiaries and
Associates shall be, directly or indirectly, the Beneficial Owner of at
least thirty percent
A-6
<PAGE> 31
(30%) of the Voting Stock of the Company, or (v) the individuals who
constitute the members of the Company's Board of Directors on the date
hereof (the "Incumbent Board") cease for any reason to constitute at least
a majority thereof, provided that any person becoming a Director subsequent
to the date hereof whose election or nomination for election by the
Company's stockholders was approved by a vote of at least eighty percent
(80%) of the Directors comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for Director, without objection to such
nomination) shall be, for purposes of this clause (v), considered as though
such person were a member of the Incumbent Board, then within (a) ten (10)
days of the approval by the stockholders of the Company of such merger,
consolidation, sale of assets or dissolution as described in clause (i),
(ii) or (iii) of this Section 6.2A., or (b) thirty (30) days of the
occurrence of such change of Beneficial Ownership or Directors as described
in clause (iv) or (v) of this Section 6.2A., then with respect to
outstanding grants of Restricted Stock made under Section 5.3, each
recipient thereof shall have a fully vested right in all Restricted Stock
granted to the recipient and then outstanding, and with respect to
outstanding grants of Options and Stock Appreciation Rights made under
Section 5.1 or Section 5.2, respectively, all such outstanding Options and
Stock Appreciation Rights, irrespective of whether they are then
exercisable, shall be surrendered (at such time as may be necessary to
comply with Rule 16b-3) to the Company by each grantee thereof and such
Options and Stock Appreciation Rights shall thereupon be canceled by the
Company, and the grantee shall receive a cash payment by the Company in an
amount equal to the number of Shares subject to the Options and/or Stock
Appreciation Rights held by such grantee multiplied by the difference
between (x) and (y) where (y) equals, in the case of Options, the purchase
price per Share covered by the Option or, in the case of Stock Appreciation
Rights, the grant price of the Stock Appreciation Rights, and (x) equals
(1) the per share price offered to stockholders of the Company in any such
merger, consolidation, sale of assets, or dissolution transaction, (2) the
per share price offered to stockholders of the Company in any tender offer
or exchange offer whereby any such change of Beneficial Ownership or
Directors takes place, or (3) the Fair Market Value of a Share on the date
determined by the Committee (as constituted prior to any change described
in clause (iv) or (v)) to be the date of cancellation and surrender of such
Options and/or Stock Appreciation Rights if any such change of Beneficial
Ownership or Directors occurs other than pursuant to a tender or exchange
offer, whichever is appropriate. In the event that the consideration
offered to stockholders of the Company in any transaction described in this
Section 6.2A. consists of anything other than cash, the Committee (as
constituted prior to such transaction) shall determine the fair cash
equivalent of the portion of the consideration offered which is other than
cash.
B. Except as otherwise expressly provided herein, the issuance by the
Company of shares of stock of any class or securities convertible into
shares of stock of any class, for cash, property, labor, or services, upon
direct sale, upon the exercise of rights or warrants to subscribe therefor,
or upon conversion of shares or obligations of the Company convertible into
such shares or other securities, and in any case whether or not for fair
value, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number of Shares subject to Restricted Stock, Stock
Appreciation Rights or Options theretofore granted or the purchase price or
grant price per share, if applicable.
C. Any adjustment provided for in Section 3.2 or Section 6.2 shall be
subject to any required stockholder action.
6.3 Correction of Defects, Omissions, and Inconsistencies. The Committee
may correct any defect, supply any omission, or reconcile any inconsistency in
the Plan or any Award in the manner and to the extent it shall deem desirable in
the establishment or administration of the Plan.
A-7
<PAGE> 32
SECTION 7. GENERAL PROVISIONS
7.1 No Rights to Awards. No Employee, Participant, or other Person shall
have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Employees, Participants, or holders or
beneficiaries of Awards under the Plan. The terms and conditions of Awards need
not be the same with respect to each Participant.
7.2 Withholding. The Company or any subsidiary is authorized (i) to
withhold from any Award granted or any payment due or any transfer made under
any Award or under the Plan the amount (in cash, Shares, other securities, other
Awards, or other property) of withholding taxes due in respect of an Award, its
exercise, or any payment or transfer under such Award or under the Plan, and
(ii) to take such other action as may be necessary in the option of the Company
or subsidiary to satisfy all obligations for the payment of such taxes.
7.3 No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any subsidiary from adopting or continuing in
effect other or additional compensation arrangements and such arrangements may
be either generally applicable or applicable only in specific cases.
7.4 No Right to Employment. The grant of an Award shall not be construed
as giving a Participant the right to be retained in the employ of the Company or
any subsidiary. Further, the Company or any subsidiary may at any time dismiss a
Participant from employment, free from any liability or any claim under the Plan
unless otherwise expressly provided in the Plan or in any Award Agreement.
7.5 Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with applicable federal law, and to the extent not preempted thereby, with the
laws of the State of Texas.
7.6 Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction, or as
to any person or Award, or would disqualify the Plan or any Award under any law
deemed applicable by the Committee, such provision shall be construed or deemed
amended to conform to applicable laws. If it cannot be so construed or deemed
amended without, in the determination of the Committee, materially altering the
intent of the Plan or the Award, such provision shall be stricken as to such
jurisdiction, Person, or Award and the remainder of the Plan and any such Award
shall remain in full force and effect.
7.7 No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any subsidiary and a Participant or any
other Person. To the extent that any Person acquires a right to receive payments
from the Company or any subsidiary pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
subsidiary.
7.8 No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash, other securities, or other property shall be paid or transferred
in lieu of any fractional Shares, or whether such fractional Shares or any
rights thereto shall be canceled, terminated or otherwise eliminated.
7.9 Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
A-8
<PAGE> 33
7.10 No Limitation. The existence of the Plan and the grants of Awards
made hereunder shall not affect in any way the right or power of the Board of
Directors or the stockholders of the Company (or stockholders of any subsidiary,
as applicable) to make or authorize any adjustment, recapitalization,
reorganization or other change in the capital structure or business of the
Company or any subsidiary, any merger or consolidation of the Company or any
subsidiary, any issue of debt or equity securities ahead of or affecting Shares
or the rights thereof or pertaining thereto, the dissolution or liquidation of
the Company or any subsidiary or any sale or transfer of all or any part of the
Company or any subsidiary's assets or business, or any other corporate act or
proceeding.
7.11 Securities Laws. Each Award granted under the Plan shall be subject
to the requirement that if at any time the Board of Directors shall determine,
in its discretion, that the listing, registration, or qualification of the
shares subject to such grant upon any securities exchange or under any state or
federal law, or that the consent or approval of any government regulatory body,
is necessary or desirable as a condition of, or in connection with, such grant
or the issue or purchase of shares thereunder, such grant shall be subject to
the condition that such listing, registration, qualification, consent, or
approval shall have been effected or obtained free of any conditions not
acceptable to the Board of Directors.
SECTION 8. EFFECTIVE DATE OF THE PLAN
Upon approval by the stockholders of the Company, represented in person or
by proxy, at the Company's 1995 Annual Meeting, the Plan shall be considered
effective as of December 14, 1994. Further, the rights of any Participant to
receive payments under the Plan are subject to such stockholder approval at the
Company's 1995 Annual Meeting.
SECTION 9. TERM OF THE PLAN
No Award shall be granted under the Plan after the earlier of (i) ten (10)
years from the date of adoption of the Plan by the Board of Directors of the
Company pursuant to Section 8, or (ii) termination of the Plan pursuant to
Section 6.1. However, unless otherwise expressly provided in the Plan or in an
applicable Award Agreement, any Award theretofore granted may extend beyond such
date, and any authority of the Committee to amend, alter, suspend, discontinue,
or terminate any such Award, or to waive any conditions or rights under any such
Award, and the authority of the Board of Directors of the Company to amend the
Plan, shall extend beyond such date.
SECTION 10. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Associate" is used to indicate a relationship with a specified
Person and shall mean (i) any corporation, partnership, or other
organization of which such specified Person is an officer or partner or is,
directly or indirectly, the Beneficial Owner of ten percent (10%) or more
of any class of equity securities, (ii) any trust or other estate in which
such specified Person has a substantial beneficial interest or as to which
such specified Person serves as trustee or in a similar fiduciary capacity,
(iii) any relative or spouse of such specified Person, or any relative of
such spouse, who has the same home as such specified Person or who is a
director or officer of the Company or any of its parents or subsidiaries,
and (iv) any person who is a director or officer of such specified Person
or any of its parents or subsidiaries (other than the Company or any
wholly-owned subsidiary of the Company).
A-9
<PAGE> 34
(b) "Award" shall mean any Option, Stock Appreciation Right, or
Restricted Stock granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract, or
other instrument or document evidencing any Award granted under the Plan.
(d) "Beneficial Owner" shall be defined by reference to Rule 13d-3
under the Securities Exchange Act of 1934, as amended, or any successor
rule or regulation; provided, however, and without limitation, any
individual, corporation, partnership, group, association, or other person
or entity which has the right to acquire any Voting Stock at any time in
the future, whether such right is contingent or absolute, pursuant to any
agreement, arrangement, or understanding or upon exercise of conversion
rights, warrants, or options, or otherwise, shall be the Beneficial Owner
of such Voting Stock.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Committee" shall mean a committee of the Board of Directors of
the Company designated by such Board to administer the Plan and composed of
not less than two (2) directors, each of whom is a "disinterested person"
within the meaning of Rule 16b-3.
(g) "Disability" shall mean, with respect to an Employee of the
Company or one of its subsidiaries, such total and permanent disability as
qualifies the Employee for benefits under the long-term or extended
disability plan of the Company or subsidiary covering the Employee at the
time.
(h) "Employee" shall mean any person employed by the Company or any
subsidiary.
(i) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the value
of such property determined by such methods or procedures as shall be
established from time to time by the Committee; provided, that so long as
the closing price of Shares as reported in the "NYSE-Composite
Transactions" section of the Midwest edition of The Wall Street Journal is
reported, Fair Market Value with respect to Shares on a particular date
shall mean such closing price of Shares as so reported for such date (or,
if no prices are quoted for that date, as so quoted for the last preceding
date for which such prices were so quoted).
(j) "Incentive Stock Option" shall mean an option granted under
Section 5.1 of the Plan that is intended to meet the requirements of
Section 422 of the Code, or any successor provision thereto.
(k) "Involuntary Termination" shall mean termination of a
Participant's employment with the Company or a subsidiary at the election
of the Company or subsidiary, provided such termination is not Termination
for Cause. Involuntary Termination shall not include transfer of assignment
or location of a Participant where the Participant is employed by the
Company, a subsidiary of the Company, Enron Corp., or one of its
subsidiaries or affiliated companies, both before and after the transfer,
or continued employment with a successor employer immediately following a
corporate reorganization or divestiture of assets or stock of the Company
or a subsidiary.
(l) "Non-Qualified Stock Option" shall mean an option granted under
Section 5.1 of the Plan that is not intended to be an Incentive Stock
Option.
(m) "Option" shall mean an Incentive Stock Option or Non-Qualified
Stock Option.
(n) "Participant" shall mean an Employee or other individual described
in Sections 4.1 and 4.2 designated to be granted an Award under the Plan.
A-10
<PAGE> 35
(o) "Person" shall mean an individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization or
government or political subdivision thereof.
(p) "Released Securities" shall mean securities that were Restricted
Stock with respect to which all applicable restrictions have expired,
lapsed, or been waived.
(q) "Restricted Stock" shall mean any Shares granted under Section 5.3
of the Plan.
(r) "Retirement" shall mean, with respect to an Employee of the
Company or one of its subsidiaries, the commencement on or after an
Employee's Normal Retirement Date of retirement benefits to such Employee
under the Enron Corp. Retirement Plan.
(s) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as
amended.
(t) "Shares" shall mean the shares of Common Stock of the Company, and
such other securities or property as may become the subject of Awards
pursuant to an adjustment made under Section 3.2 of the Plan.
(u) "Stock Appreciation Right" shall mean any right granted under
Section 5.2 of the Plan.
(v) "Termination for Cause" shall mean termination at the election of
the Company or a subsidiary because of the Participant's (i) conviction of
a felony (which, through lapse of time or otherwise, is not subject to
appeal); or (ii) willful refusal without proper legal cause to perform the
Participant's duties and responsibilities; or (iii) willfully engaging in
conduct which the Participant has, or in the opinion of the Committee
should have, reason to know is materially injurious to the Company or a
subsidiary. Such termination shall be effected by notice thereof delivered
by the Company or a subsidiary to the Participant and shall be effective as
of the date stated in such notice; provided, however, that if (a) such
termination is because of the Participant's willful refusal without proper
cause to perform any one or more duties and responsibilities and (b) within
seven (7) days following the date of such notice the Participant shall
cease such refusal and shall use all reasonable efforts to perform such
obligations, the termination, if made, shall not be for cause.
(w) "Voting Stock" shall mean all outstanding shares of capital stock
of the Company entitled to vote generally in elections for directors,
considered as one class; provided, however, that if the Company has shares
of Voting Stock entitled to more or less than one vote for any such share,
each reference to a proportion of shares of Voting Stock shall be deemed to
refer to such proportion of the votes entitled to be cast by such shares.
(x) Any terms or provisions used herein which are defined in Sections
83, 421, 422, or 424 of the Code or the regulations thereunder shall have
the meanings as therein defined.
A-11
<PAGE> 36
/X/ PLEASE MARK YOUR VOTES AS IN THIS 7437
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.
--------------------------------------------------------------------------------
1. Election of Directors. (see reverse) FOR / / WITHHELD / /
For, except vote withheld from the following
nominee(s):
--------------------------------------------------------------------------------
2. Ratification of appointment of
independent accountants. FOR / / AGAINST / / ABSTAIN / /
3. Approval of the Amended and FOR / / AGAINST / / ABSTAIN / /
Restated 1992 Stock Plan
4. In the discretion of the proxies named FOR / / AGAINST / / ABSTAIN / /
herein, the proxies are authorized to
vote upon other matters as are
properly brought before the meeting.
Change of Address/Comments on Reverse Side / /
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
--------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
[ENRON OIL & GAS COMPANY LOGO] THIS IS YOUR PROXY
YOUR VOTE IS IMPORTANT.
NEED ASSISTANCE IN ANY OF THE FOLLOWING AREAS:
o DIVIDEND CHECKS - ADDRESS CHANGES - LEGAL TRANSFERS
o 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.)
o 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 CALL OUR TRANSFER AGENT'S TELEPHONE RESPONSE CENTER:
(800) 446-2617 OR (201) 324-0498
OR WRITE TO:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
P. O. BOX 2500
JERSEY CITY, NJ 07303-2500
<PAGE> 37
PROXY
[ENRON OIL & GAS COMPANY LOGO]
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ENRON OIL & GAS COMPANY FOR ANNUAL MEETING ON MAY 2, 1995
The Undersigned hereby appoints Forrest E. Hoglund, Dennis M. Ulak and
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 Shareholders
of Enron Oil & Gas Company ("Enron Oil & Gas") to be held at 3:00 p.m. Houston
time on Tuesday, May 2, 1995, in the LaSalle Ballroom of the 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 Enron Oil & Gas the
undersigned held of record on the books of Enron Oil & Gas on the record date
for the meeting.
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
___________
