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                                                      [REI -- EXHIBIT 10(aa)(3)]



                          FORM OF SEVERANCE AGREEMENT


                 THIS SEVERANCE AGREEMENT ("Agreement") is made and effective
as of the  3rd day of September, 1997, by and between HOUSTON INDUSTRIES
INCORPORATED, a Texas corporation having its principal place of business in
Houston, Harris County, Texas, and ___________________, an individual currently
residing in Harris County, Texas ("Executive").  All terms defined in Section 1
shall, throughout this Agreement, have the meanings given therein.

         1.      DEFINITIONS:

                 "AFFILIATE" means any company controlled by, controlling or
under common control with the Company within the meaning of Section 414 of the
Internal Revenue Code of 1986, as amended (the "Code").

                 "BOARD" means the board of directors of the Company.

                 "CAUSE"  means Executive's (a) gross negligence in the
performance of Executive's duties, (b) intentional and continued failure to
perform Executive's duties, (c) intentional engagement in conduct which is
materially injurious to the Company or its Affiliates (monetarily or otherwise)
or (d) conviction of a felony or a misdemeanor involving moral turpitude.  For
this purpose, an act or failure to act on the part of Executive will be deemed
"intentional" only if done or omitted to be done by Executive not in good faith
and without reasonable belief that his/her action or omission was in the best
interest of the Company, and no act or failure to act on the part of Executive
will be deemed "intentional" if it was due primarily to an error in judgment or
negligence.
                 "CHANGE IN EMPLOYMENT" shall mean any one or more of the
following:

                 (a)      a significant reduction in the duties or
         responsibilities of Executive from those applicable to him/her
         immediately prior to the date on which a Change of Control occurs (or,
         in the case of an Anticipatory Change in Employment, immediately prior
         to the date of the Binding CIC Agreement);

                 (b)      a reduction in Executive's total remuneration
         (including salary, bonus, qualified retirement benefits, nonqualified
         benefits, welfare benefits and any other employee benefits) from that
         provided to Executive immediately prior to the date on which a Change
         of Control occurs (or, in the case of an Anticipatory Change in
         Employment, immediately prior to the date of the Binding CIC
         Agreement); provided, however, that a contemporaneous diminution of or
         reduction in qualified retirement benefits and/or welfare benefits
         which is of general application and which uniformly and
         contemporaneously reduces or diminishes the benefits of all covered
         employees by the same percentage shall be ignored and not be
         considered a reduction in total remuneration for purposes of this
         paragraph (b);
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                 (c)      a change in the location of Executive's principal
         place of employment with the Company by more than 35 miles from the
         location where Executive was principally employed immediately prior to
         the date on which a Change of Control occurs (or, in the case of an
         Anticipatory Change in Employment, immediately prior to the date of
         the Binding CIC Agreement); or

                 (d)      a failure by the Company to provide directors and
         officers liability insurance covering Executive comparable to that
         provided to Executive  immediately prior to the date on which a Change
         of Control occurs (or, in the case of an Anticipatory Change in
         Employment, immediately prior to the date of the Binding CIC
         Agreement).

                 A "CHANGE OF CONTROL" or "CIC" shall be deemed to have
occurred upon the  occurrence of any of the following events:

                 (a)      30% OWNERSHIP CHANGE:  Any Person makes an
         acquisition of Outstanding Voting Stock and is, immediately
         thereafter, the beneficial owner of 30% or more of the then
         Outstanding Voting Stock, unless such acquisition is made directly
         from the Company in a transaction approved by a majority of the
         Incumbent Directors; or any group is formed that is the beneficial
         owner of 30% or more of the Outstanding Voting Stock; or

                 (b)      BOARD MAJORITY CHANGE:  Individuals who are Incumbent
         Directors cease for any reason to constitute a majority of the members
         of the Board; or

                 (c)      MAJOR MERGERS AND ACQUISITIONS:  Consummation of a
         Business Combination unless, immediately following such Business
         Combination, (i) all or substantially all of the individuals and
         entities that were the beneficial owners of the Outstanding Voting
         Stock immediately prior to such Business Combination beneficially own,
         directly or indirectly, more than 70% of the then outstanding shares
         of voting stock of the parent corporation resulting from such Business
         Combination in substantially the same relative proportions as their
         ownership, immediately prior to such Business Combination, of the
         Outstanding Voting Stock, (ii) if the Business Combination involves
         the issuance or payment by the Company of consideration to another
         entity or its shareholders, the total fair market value of such
         consideration plus the principal amount of the consolidated long-term
         debt of the entity or business being acquired (in each case,
         determined as of the date of consummation of such Business Combination
         by a majority of the Incumbent Directors) does not exceed 50% of the
         sum of the fair market value of the Outstanding Voting Stock plus the
         principal amount of the Company's consolidated long-term debt (in each
         case, determined  immediately prior to such consummation by a majority
         of the Incumbent Directors), (iii) no Person (other than any
         corporation resulting from such Business Combination) beneficially
         owns, directly or indirectly, 30% or more of the then outstanding
         shares of voting stock of the parent corporation resulting from such
         Business Combination and (iv) a majority of the members of the board
         of directors of the parent corporation resulting from such Business
         Combination were Incumbent




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         Directors of the Company immediately prior to consummation of such
         Business Combination; or

                 (d)      MAJOR ASSET DISPOSITIONS:  Consummation of a Major
         Asset Disposition unless, immediately following such Major Asset
         Disposition, (i) individuals and entities that were beneficial owners
         of the Outstanding Voting Stock immediately prior to such Major Asset
         Disposition beneficially own, directly or indirectly, more than 70% of
         the then outstanding shares of voting stock of the Company (if it
         continues to exist) and of the entity that acquires the largest
         portion of such assets (or the entity, if any, that owns a majority of
         the outstanding voting stock of such acquiring entity) and (ii) a
         majority of the members of the board of directors of the Company (if
         it continues to exist) and of the entity that acquires the largest
         portion of such assets (or the entity, if any, that owns a majority of
         the outstanding voting stock of such acquiring entity) were Incumbent
         Directors of the Company immediately prior to consummation of such
         Major Asset Disposition.

For purposes of the foregoing,

                 (1)      the term "Person" means an individual, entity or
         group;

                 (2)      the term "group" is used as it is defined for
         purposes of Section 13(d)(3) of the Securities Exchange Act of 1934
         (the "Exchange Act");

                 (3)      the term "beneficial owner" is used as it is defined
         for purposes of Rule 13d-3 under the Exchange Act;

                 (4)      the term "Outstanding Voting Stock" means outstanding
         voting securities of the Company entitled to vote generally in the
         election of directors; and any specified percentage or portion of the
         Outstanding Voting Stock (or of other voting stock) shall be
         determined based on the combined voting power of such securities;

                 (5)      the term "Incumbent Director" means a director of the
         Company (x) who was a director of the Company on September 1, 1997 or
         (y) who becomes a director subsequent to such date and whose election,
         or nomination for election by the Company's shareholders, was approved
         by a vote of a majority of the Incumbent Directors at the time of such
         election or nomination, except that any such director shall not be
         deemed an Incumbent Director if his or her initial assumption of
         office occurs as a result of an actual or threatened election contest
         or other actual or threatened solicitation of proxies by or on behalf
         of a Person other than the Board;

                 (6)      the term "election contest" is used as it is defined
         for purposes of Rule 14a-11 under the Exchange Act;





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                 (7)      the term "Business Combination" means (x) a merger or
         consolidation involving the Company or its stock or (y) an acquisition
         by the Company, directly or through one or more subsidiaries, of
         another entity or its stock or assets;

                 (8)      the term "parent corporation resulting from a
         Business Combination" means the Company if its stock is not acquired
         or converted in the Business Combination and otherwise means the
         entity which as a result of such Business Combination owns the Company
         or all or substantially all the Company's assets either directly or
         through one or more subsidiaries; and

                 (9)      the term "Major Asset Disposition" means the sale or
         other disposition in one transaction or a series of related
         transactions of 70% or more of the assets of the Company and its
         subsidiaries on a consolidated basis; and any specified percentage or
         portion of the assets of the Company shall be based on fair market
         value, as determined by a majority of the Incumbent Directors.

                 "COMPANY" means Houston Industries Incorporated and any
successor thereto.

                 "COMPENSATION" means the sum of Executive's annual salary plus
Target Bonus plus Restricted Stock Award, determined immediately prior to (a)
the date on which a Change of Control occurs (or, in the case of an
Anticipatory Change in Employment, immediately prior to the date of the Binding
CIC Agreement) or (b) the time of his Covered Termination, whichever is
greater.

                 "COVERED TERMINATION" means any termination of Executive's
employment with the Company or any Affiliate thereof, within three years after
the date upon which a Change of Control occurs, which:

                 (a)      results from a resignation by Executive during a
         Covered Termination Window; or

                 (b)      does not result from any of (i) death, (ii)
         disability entitling Executive to benefits under the Company's
         long-term disability plan, (iii) termination on or after age 65, (iv)
         termination for Cause or (v) resignation by Executive (except as
         described in (a) above).

For this purpose, should a Change in Employment occur (x) after the execution
of a binding agreement to effect a Change of Control (a "Binding CIC
Agreement") and (y) in preparation for or in contemplation of the Change of
Control (an "Anticipatory Change in Employment"), the Change in Employment
shall be treated as if it occurred immediately after the Change of Control.
Any Change in Employment occurring as described in part (x) of the preceding
sentence shall be presumed to satisfy part (y) and be an Anticipatory Change in
Employment unless the Company shall disprove such presumption through clear and
convincing evidence.

                 "COVERED TERMINATION WINDOW" means the 61-day period
commencing on the date the Executive is subjected to a Change in Employment or,
if later, the date that the Executive becomes aware that he/she has been
subjected to a Change in Employment.





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                 "RESTRICTED STOCK AWARD" means a cash amount equal to the
maximum amount (stated as a percentage of salary) granted to Executive as a
Restricted Stock Award under the Company's Long Term Incentive Compensation
Plan (or any successor plan) in the applicable calendar year.

                 "SEVERANCE AMOUNT" means an amount equal to Executive's
Compensation multiplied by 3.

                 "TARGET BONUS" means Executive's target incentive opportunity
under the Houston Industries Incorporated Executive Incentive Compensation Plan
(or any successor plan) in effect for the year with respect to which the Target
Bonus is being determined or, if no such plan is then in effect, for the last
year in which such a plan was in effect, expressed as a dollar amount based
upon Executive's annual salary for the year of such determination.

                 "WAIVER AND RELEASE" means a legal document, in the form
attached hereto as Exhibit A or such other form as may be prescribed by the
Company, but which form may not be altered, amended or modified after execution
of a Binding CIC Agreement without the consent of the Executive, in which
Executive, in exchange for severance benefits described in Section 2, among
other things, releases the Company, the Affiliates, their directors, officers,
employees and agents, their employee benefit plans and the fiduciaries and
agents of said plans from liability and damages in any way related to
Executive's employment with or separation from the Company or any of its
Affiliates.

                 "WELFARE BENEFIT COVERAGE" shall mean each of life insurance,
medical, dental and vision benefits.

         2.      SEVERANCE BENEFITS:  If Executive (a) experiences a Covered
Termination, (b) executes and returns to the Company a Waiver and Release
within a time period prescribed by the Company following the date of
Executive's Covered Termination, and (c) does not revoke such Waiver and
Release within seven days after the date of execution, then Executive shall be
entitled to receive, as additional compensation for services rendered to the
Company (including its Affiliates), the following severance benefits:

                 (a)      CASH LUMP SUM:  A lump-sum cash payment in an amount
         equal to Executive's Severance Amount, which shall be made within 15
         days after expiration of the seven-day Waiver and Release revocation
         period.

                 (b)      WELFARE BENEFIT COVERAGES:  If, at any time during
         the 36-month period following the date of Covered Termination,
         Executive is not eligible as a retiree of the Company or its
         Affiliates for any Welfare Benefit Coverage, Executive shall be
         entitled to obtain such Welfare Benefit Coverage for himself/herself
         and, where applicable, his/her eligible dependents, while ineligible
         during such period, provided that Executive pays the premiums required
         of active employees from time to time for such Welfare Benefit
         Coverage.  Such entitlement shall apply only to those Welfare Benefit
         Coverages that the Company has in effect from time to time for active
         employees.  Notwithstanding the foregoing, if any Welfare Benefit
         Coverage to which the Executive is entitled under this paragraph
         cannot be continued during a period





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         when Executive is not an employee of the Company, the Company shall
         pay to Executive a lump-sum cash payment in an amount equal to the
         economic value of such benefit as determined by Deloitte & Touche.
         Executive's right to any Welfare Benefit Coverage as a retiree shall
         be governed by the applicable plan document in effect from time to
         time and shall not be affected by this Agreement.

                 (c)      OUTPLACEMENT:  Reimbursement for fees, up to a
         maximum amount equal to 15% of Executive's annual base salary as of
         the date of his Covered Termination, incurred for outplacement
         services within twelve months of the date of Executive's Covered
         Termination in connection with Executive's efforts to obtain new
         employment.

                 (d)      COMPANY VEHICLE:  The option to purchase Executive's
         company vehicle, within 30 days following Executive's Covered
         Termination, for an amount equal to its depreciated book value as of
         the date of Executive's Covered Termination.

                 (e)      BENEFITS RESTORATION PLAN:  Benefits (including
         "Retirement Plan Restoration Benefits" and "Supplemental Retirement
         Benefits"), pursuant to the Benefit Restoration Plan(s) sponsored by
         the Company in which Executive is a participant, in an amount not less
         than the amount that Executive would have been entitled to receive
         pursuant to the underlying qualified retirement plan (a) if Executive
         were fully vested in the underlying qualified retirement plan benefits
         and (b) had Executive remained in the service of the Company or its
         Affiliates throughout the three-year period following the Change of
         Control.  The Company agrees to amend the Benefit Restoration Plan(s)
         to the extent necessary to provide for the payment of these benefits,
         which shall be offset by, and not in addition to, any benefit actually
         payable pursuant to the qualified retirement plan.

                 (f)      FINANCIAL PLANNING:  Continued access, for the
         remainder of the calendar year in which the Covered Termination occurs
         or for 60 days (if greater), to the financial planning services
         available to executive employees at the time of the Change of Control
         to which the Covered Termination relates.

         3.      DEFERRED COMPENSATION PLAN ADMINISTRATION:  Notwithstanding
any provision herein or any provision of any Deferred Compensation Plan of the
Company to the contrary, the Company and the Board hereby agree to amend the
Company's Deferred Compensation Plans upon the occurrence of a Change of
Control so that any and all amounts of salary and/or bonus deferred by
Executive and held under the Deferred Compensation Plans shall, upon a Covered
Termination, remain in said plans earning interest at the rate prescribed
therein until paid to or for the benefit of the Executive at such time and in
such form as was irrevocably elected in writing by Executive.

         4.      CERTAIN ADDITIONAL PAYMENTS:  Anything in this Agreement to
the contrary notwithstanding, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of Executive
(whether paid or payable or distributed or distributable pursuant to





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the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 4 (a "Payment")) would be
subject to the excise tax imposed by Section 4999 of the Code or any interest
or penalties incurred by Executive with respect to such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then Executive shall be entitled
to receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment (whether through withholding at the source or otherwise) by
Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and
any interest and penalties imposed with respect thereto), employment taxes and
Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

                 Subject to the provisions of this Section 4, all
determinations required to be made under this Section 4, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by Deloitte & Touche (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and Executive within 15 business
days of the receipt of notice from Executive that there has been a Payment, or
such earlier time as is requested by the Company.  In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder).  All fees and expenses of the Accounting Firm shall be borne
solely by the Company.  Any Gross-Up Payment, as determined pursuant to this
Section 4, shall be paid by the Company to Executive within five days of the
receipt of the Accounting Firm's determination.  If the Accounting Firm
determines that no Excise Tax is payable by Executive, it shall furnish
Executive with a written opinion that failure to report the Excise Tax on
Executive's applicable federal income tax return would not result in the
imposition of negligence or similar penalty.  Any determination by the
Accounting Firm shall be binding upon the Company and Executive.  As a result
of the uncertainty in the application of Section 4999 of the Code at the time
of the initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the Company should have
been made ("Underpayment"), consistent with the calculations required to be
made hereunder.  In the event that the Company exhausts its remedies pursuant
to the following provisions of this Section 4 and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Executive.

                 Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment.  Such notification shall be given as soon
as practicable but no later than ten business days after  Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid.  Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is
due).  If the Company notifies Executive in writing prior to the expiration of
such period that it desires to contest such claim, Executive shall:





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                 (a)      give the Company any information reasonably requested
         by the Company relating to such claim;

                 (b)      take such action in connection with contesting such
         claim as the Company shall reasonably request in writing from time to
         time, including, without limitation, accepting legal representation
         with respect to such claim by an attorney reasonably selected by the
         Company;

                 (c)      cooperate with the Company in good faith in order to
         effectively contest such claim; and

                 (d)      permit the Company to participate in any proceedings
         relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax, employment tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses.  Without limitation of the
foregoing provisions of this Section 4, the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to Executive, on an interest-free basis and shall
indemnify and hold Executive harmless, on an after-tax basis, from any Excise
Tax, employment tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any extension of
the statute of limitations relating to payment of taxes for the taxable year of
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount.  Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

                 If, after the receipt by Executive of an amount advanced by
the Company pursuant to the foregoing provisions of this Section 4, Executive
becomes entitled to receive any refund with respect to such claim, Executive
shall (subject to the Company complying with the requirements of this Section
4) promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto).  If, after
the receipt by Executive of an amount advanced by the Company pursuant to the
foregoing provisions of this Section 4, a determination is made that Executive
shall not be entitled to any refund with respect to such claim and the Company
does not notify Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such determination, then such
advance shall be forgiven and





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shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.

        If the Company is obligated to provide the Executive with one or more
Welfare Benefit Coverages (or a payment in lieu thereof) pursuant to Section
2(b), and the amount of such benefits or the value of such benefit coverage (or
the payment in lieu thereof) (including without limitation any insurance
premiums paid by the Company to provide such benefits) is subject to any
income, employment or similar tax imposed by federal, state or local law, or
any interest or penalties with respect to such tax (such tax or taxes, together
with any such interest and penalties, being hereafter collectively referred to
as the "Income Tax") because such benefits cannot be provided under a
nondiscriminatory health plan described in Section 105 of the Code or for any
other reason, the Company will pay to the Executive an additional payment or
payments (collectively, an "Income Tax Payment").  The Income Tax Payment will
be in an amount such that, after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes), the
Executive retains an amount of the Income Tax Payment equal to the Income Tax
imposed with respect to such welfare benefits or such welfare benefit coverage.

         5.      LEGAL FEES AND EXPENSES:  It is the intent of the Company that
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's
rights under this Agreement by litigation or otherwise because the cost and
expense thereof would detract from the benefits intended to be extended to
Executive hereunder.  Accordingly, if it should appear to Executive that the
Company has failed to comply with any of its obligations under this Agreement
or in the event that the Company or any other person takes or threatens to take
any action to declare this Agreement void or unenforceable, or institutes any
litigation or other action or proceeding designed to deny, or to recover from,
the Executive the benefits provided or intended to be provided to Executive
hereunder, the Company irrevocably authorizes the Executive from time to time
to retain counsel of Executive's choice, at the expense of the Company as
hereafter provided, to advise and represent Executive in connection with any
such interpretation, enforcement or defense, including without limitation the
initiation or defense of any litigation or other legal action, whether by or
against the Company or any director, officer, stockholder or other person
affiliated with the Company, in any jurisdiction.  Notwithstanding any existing
or prior attorney-client relationship between the Company and such counsel, the
Company irrevocably consents to Executive entering into an attorney-client
relationship with such counsel, and in that connection the Company and
Executive agree that a confidential relationship will exist between Executive
and such counsel.  Without respect to whether Executive prevails, in whole or
in part, in connection with any of the foregoing, the Company will pay and be
solely financially responsible for any and all attorneys' fees and related
expenses incurred by Executive in connection with any of the foregoing except
to the extent that a final judgment no longer subject to appeal finds that a
claim or defense asserted by Executive was frivolous.  In such a case, the
portion of such fees and expenses incurred by Executive as a result of such
frivolous claim or defense shall become Executive's sole responsibility and any
funds advanced by the Company or by a Trust created to secure such payment
shall be repaid.

                 In the event a Change of Control occurs, the performance of
the Company's obligations under this Section 5 will be funded by amounts
deposited or to be deposited in trust pursuant to certain trust agreements to
which the Company will be a party providing that the fees and





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<PAGE>   10
expenses of counsel selected from time to time by Executive pursuant to this
Section 5 will be paid, or reimbursed to Executive if paid by Executive, either
in accordance with the terms of such trust agreements, or, if not so provided,
on a regular, periodic basis upon presentation by Executive to the trustee of a
statement or statements prepared by such counsel in accordance with its
customary practices.  In order to be eligible for payment of expenses directly
from the Company, Executive must first exhaust all rights to payment under the
trust agreements contemplated immediately above.  The pendency of a claim by
the Company that a claim or defense of Executive is frivolous or otherwise
lacking merit shall not excuse the Company (or the trustee of a Trust
contemplated by this Section 5)  from making periodic payments of legal fees
and expenses until a final judgment is rendered as hereinabove provided.  Any
failure by the Company to satisfy any of its obligations under this Section 5
will not limit the rights of Executive hereunder.  Subject to the foregoing,
Executive will have the status of a general unsecured creditor of the Company
and will have no right to, or security interest in, any assets of the Company
or any Affiliate.

         6.      NOTICES:  For purposes of this Agreement, notices and all
other communications provided for herein shall be in writing and shall be
deemed to have been duly given when personally delivered or when mailed by
United States registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:

                 If to Company:             Houston Industries Incorporated
                                            P.O. Box 4567
                                            Houston, Texas  77210
                                            ATTENTION:  Chairman of the Board
                                            
                 If to Executive:      
                                            --------------------------
                                            --------------------------
                                            --------------------------

or to such other address as either party may furnish to the other in writing
in accordance herewith, except that notices of changes of address shall be
effective only upon receipt.

         7.      APPLICABLE LAW:  The validity, interpretation, construction
and performance of this Agreement will be governed by and construed in
accordance with the substantive laws of the State of Texas, including the Texas
statute of limitations, but without giving effect to the principles of conflict
of laws of such State.

         8.      SEVERABILITY:  If a court of competent jurisdiction determines
that any provision of this Agreement is invalid or unenforceable, then the
invalidity or unenforceability of that provision shall not affect the validity
or enforceability of any other provision of this Agreement and all other
provisions shall remain in full force and effect.

         9.      WITHHOLDING OF TAXES:  The Company may withhold from any
benefits payable under this Agreement all federal, state, city or other taxes
as may be required pursuant to any law or governmental regulation or ruling.





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         10.     NO EMPLOYMENT AGREEMENT:  Nothing in this Agreement shall give
Executive any rights to (or impose any obligations for) continued employment by
the Company or any Affiliate thereof or successor thereto, nor shall it give
the Company any rights (or impose any obligations) with respect to continued
performance of duties by Executive for the Company or any Affiliate thereof or
successor thereto.

         11.     NO ASSIGNMENT; SUCCESSORS:  Executive's right to receive
payments or benefits hereunder shall not be assignable or transferable, whether
by pledge, creation or a security interest or otherwise, whether voluntary,
involuntary, by operation of law or otherwise, other than a transfer by will or
by the laws of descent or distribution, and in the event of any attempted
assignment or transfer contrary to this Section 11 the Company shall have no
liability to pay any amount so attempted to be assigned or transferred.  This
Agreement shall inure to the benefit of and be enforceable by Executive's
personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees.

                 This Agreement shall be binding upon and inure to the benefit
of the Company, its successors and assigns (including, without limitation, any
company into or with which the Company may merge or consolidate).  The Company
agrees that it will not effect the sale or other disposition of all or
substantially all of its assets unless either (a) the person or entity
acquiring such assets or a substantial portion thereof shall expressly assume
by an instrument in writing all duties and obligations of the Company hereunder
or (b) the Company shall provide, through the establishment of a separate
reserve therefor, for the payment in full of all amounts which are or may
reasonably be expected to become payable to Executive hereunder.

         12.     PAYMENT OBLIGATIONS ABSOLUTE:  Except for the requirement of
the Executive to execute and return to the Company a Waiver and Release in
accordance with Section 2, the Company's obligation to pay (or cause one of its
Affiliates to pay) Executive the amounts and to make the arrangements provided
herein shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counter-claim,
recoupment, defense or other right which the Company (including its Affiliates)
may have against him/her or anyone else.  All amounts payable by the Company
(including its Affiliates hereunder) shall be paid without notice or demand.
Executive shall not be obligated to sign an agreement not to compete with the
Company or to seek other employment in mitigation of the amounts payable or
arrangements made under any provision of this Agreement, and the obtaining of
any other employment shall in no event effect any reduction of the Company's
obligations to make (or cause to be made) the payments and arrangements
required to be made under this Agreement.

         13.     NUMBER AND GENDER:  Wherever appropriate herein, words used in
the singular shall include the plural and the plural shall include the
singular.  The masculine gender where appearing herein shall be deemed to
include the feminine gender.

         14.     TERM: The effective date of the Agreement is September 3,
1997.  The term of this Agreement shall be for a period of three years after
such effective date.

         15.     EXTENSION:  The Board or the Executive Committee of the
Company may, at any time prior to the expiration hereof, extend the term hereof
for a period of up to three years from the





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<PAGE>   12
date on which such extension is approved, without any further action on the
part of Executive or the Company.

                 IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered this _____ day of November, 1997, but effective as of
the day and year first above written.

                                        HOUSTON INDUSTRIES INCORPORATED



                                        By______________________________________
                                           Don D. Jordan,
                                           Chairman and Chief Executive Officer


                                        EXECUTIVE



                                        ________________________________________





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