<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
The Columbia Gas System, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1997
- --------------------------------------------------------------------------------
[LOGO]
You are cordially invited to attend the Annual Meeting of Stockholders of The
Columbia Gas System, Inc. (the "Corporation"), a Delaware corporation, which
will be held at The Westin William Penn Hotel, 530 William Penn Place,
Pittsburgh, Pennsylvania, on Wednesday, May 21, 1997, at 9:00 a.m. (EDT), to
consider and act upon the following proposals:
1. The election of four Directors, each to serve for a term of three years.
2. Approval of the selection of Arthur Andersen LLP as independent public
accountants.
3. The transaction of such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors fixed the close of business on March 24, 1997, as the
record date for determination of stockholders entitled to notice of and to vote
at the Annual Meeting or any adjournment thereof.
PLEASE VOTE, SIGN, DATE AND MAIL THE ENCLOSED PROXY EVEN IF YOU PRESENTLY INTEND
TO ATTEND THE ANNUAL MEETING. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES. ANY
STOCKHOLDER PRESENT AT THE ANNUAL MEETING MAY NEVERTHELESS VOTE PERSONALLY ON
ALL MATTERS WITH RESPECT TO WHICH SUCH STOCKHOLDER IS ENTITLED TO VOTE.
By order of the Board of Directors.
/s/ CAROLYN MCKINNEY AFSHAR
Carolyn McKinney Afshar
Secretary
Reston, Virginia
April 15, 1997
Office of the Secretary
The Columbia Gas System, Inc.
12355 Sunrise Valley Drive
Suite 300
Reston, Virginia 20191-3420
<PAGE> 3
PROXY STATEMENT
This statement is furnished in connection with the solicitation of proxies made
on behalf of the Board of Directors of The Columbia Gas System, Inc., a Delaware
corporation (the "Corporation"), to be used at the Annual Meeting of
Stockholders to be held on May 21, 1997. The approximate date that this Proxy
Statement and the enclosed form of proxy are first being sent to stockholders is
April 15, 1997.
The cost of preparing, assembling and mailing the proxy material and of
reimbursing brokers, nominees and fiduciaries for the out-of-pocket and clerical
expense of transmitting copies of the proxy material to the beneficial owners of
stock held in their names will be borne by the Corporation. In addition to the
solicitation by mail, proxies may be solicited in person or by telephone or
telegraph; such solicitation on behalf of the Board of Directors may be made by
Directors, officers and regular employees of the Corporation and by
representatives of Morrow & Company, a proxy solicitation firm. The Corporation
has agreed to pay Morrow & Company a fee of $8,500, plus reasonable expenses,
for its services in this regard. No additional consideration will be paid to
Directors, officers and regular employees for solicitation activities.
A stockholder signing and returning a proxy has the power to revoke it at any
time before the exercise thereof.
ANNUAL REPORT
An Annual Report for the year ended December 31, 1996, containing financial and
other information about the Corporation and its subsidiaries, has been mailed to
all stockholders of record.
VOTING SECURITIES OUTSTANDING
At the close of business on March 24, 1997, the record date for the Annual
Meeting, the Corporation had 55,349,562 outstanding shares of common stock, each
of which is entitled to one vote.
Presence at the Annual Meeting, in person or by proxy, of the holders of a
majority of the outstanding shares of the common stock of the Corporation as of
the record date shall constitute a quorum. Votes cast at the Annual Meeting will
be tabulated by inspectors of election appointed by the Corporation. Shares of
stock represented by a properly signed and returned proxy will be treated as
present at the Annual Meeting for purposes of determining a quorum, without
regard to whether the proxy is marked as casting a vote or abstaining. Likewise,
where the record holder has indicated on the proxy card or has otherwise
notified the Corporation that it does not have power to vote shares represented
by the proxy ("a broker non-vote"), the shares will be treated as present at the
Annual Meeting for purposes of determining a quorum.
Other than with respect to the election of Directors discussed below, all other
matters that come before the Annual Meeting require an approval of a majority of
the shares of stock present and entitled to vote thereon. Therefore, abstentions
as to particular proposals will have the same effect as votes against such
proposals. Broker non-votes will be treated as shares not entitled to vote and
will not be included in the calculation of the number of votes constituting a
majority of shares present and entitled to vote.
1. ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. Directors of only one
class are elected at each annual meeting. The regular term of only one class of
Directors will expire annually, and any particular Director stands for election
only once in each three-year period. In the event a vacancy occurs on the Board
of Directors, the remaining Directors are authorized to fill the vacancy for the
unexpired term.
To be elected, a nominee must receive the affirmative vote of a plurality of the
votes cast by the shares present and entitled to vote, in person or by proxy, at
the Annual Meeting. Accordingly, abstentions or broker non-votes as to the
election of Directors will not affect the election of the candidates receiving a
plurality of the votes.
Four Directors are to be elected at the 1997 Annual Meeting.
1
<PAGE> 4
CUMULATIVE VOTING FOR DIRECTORS entitles each stockholder to votes equal to the
number of shares of stock the stockholder owns multiplied by the number of
Directors to be elected--in this case four. All votes can be cast for one
nominee or divided among more than one. A vote marked "withheld" from a
nominee(s) on the proxy will not be treated as an indication of an intention to
vote cumulatively. To vote cumulatively, the stockholder should line through the
names of the nominees from whom votes are withheld and write "cumulate" or "vote
all shares for other nominees" on the proxy card. In a case where a proxy is
signed but not marked, the proxies will not be voted cumulatively; shares will
be voted for all nominees.
NOMINEES. It is the intention of the Proxies named in the enclosed form of proxy
to vote all duly-executed proxies at this meeting, unless authority is withheld,
for the election of the following four nominees: Wilson K. Cadman, James P.
Heffernan, J. Bennett Johnston and James R. Thomas, II. If, at the time of the
meeting, any of the nominees named is not available to serve as a Director, the
proxies may be voted for a substitute nominee designated by the Board, or the
Board may reduce the number of Directors as authorized under the By-Laws.
Ernesta G. Procope, who belonged to the class of Directors whose term expires in
1997, retired April 1, 1997, and thus has not been nominated to stand for
re-election.
INFORMATION REGARDING THE DIRECTORS
NAMES OF DIRECTORS, PRINCIPAL OCCUPATION AND OTHER INFORMATION:
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THE FOLLOWING NOMINEES.
NOMINEES FOR DIRECTOR FOR A NEW TERM TO EXPIRE IN 2000 ARE:
WILSON K. CADMAN
Director since 1993
Age 69. Private investor since 1992. Former Chairman, President and Chief
Executive Officer, Kansas Gas & Electric Company. Retired Vice Chairman of
Western Resources, Inc. Director, El Paso Electric Co., Inc. and Clark/Bardes
Companies.
J. BENNETT JOHNSTON
Director since February 1997
Age 64. Chief Executive Officer, Johnston and Associates, a government and
business consulting firm in Washington, D.C. Served in the United States Senate
for the past 24 years until he retired in January 1997. Former Chairman, U.S.
Senate Committee on Energy and Natural Resources; former member, U.S. Senate
committees on the budget, appropriations, defense, aging and intelligence.
Director, Chevron Corp. and Freeport McMoRan Copper & Gold.
JAMES P. HEFFERNAN
Director since 1993
Age 51. Investor and investment banker since 1996. Managing Director of Whitman
Heffernan Rhein & Co., Inc., investment advisory and merchant banking firm, 1987
to 1996; Chief Financial Officer and Director of Danielson Holding Corporation,
1990 to 1996, and Director of its subsidiary, Danielson Trust Company, 1993 to
1996; Chairman, Herman's Holdings, Inc., 1993 to 1996; and Chairman, 1995 to
1996, and Director of its subsidiary, Herman's Sporting Goods, Inc., 1993 to
1996.
JAMES R. THOMAS, II
Director since 1990
Age 71. Private investor since 1983. Retired President and Chief Executive
Officer of Carbon Industries, Inc. Director of One Valley Bank, N.A. and
Camcare, Inc.
2
<PAGE> 5
CURRENT DIRECTORS WHO ARE NOT STANDING FOR RE-ELECTION BECAUSE THEIR TERMS DO
NOT EXPIRE UNTIL 1998 ARE:
RICHARD F. ALBOSTA
Director since 1995
Age 59. Independent consultant since October 1994. Chairman, President and Chief
Executive Officer of Enserch Environmental Corporation, an environmental
services and remediation firm, January 1994 to October 1994. President and Chief
Executive Officer, 1986 to 1994 and Chairman, 1990 to 1994 of Ebasco Services,
Inc., an international consulting, engineering, construction and environmental
services firm.
MALCOLM JOZOFF
Director since 1995
Age 57. Chairman, President & Chief Executive Officer of The Dial Corporation
since May 1996. Chairman and Chief Executive Officer of Lenox, Inc., a
manufacturer of consumer durables, 1993 to 1995. Previously President, Health
Care Products and Corporate Group Vice President, The Procter and Gamble
Company, Inc. Director, Chemtrak, Inc.*
DOUGLAS E. OLESEN
Director since 1995
Age 58. President and Chief Executive Officer of Battelle Memorial Institute, an
international technology organization, since 1987. Director, The B. F. Goodrich
Company; Battelle Institute Limited; Scientific Advances, Inc.; and Survey
Research Associates, Inc. Member, Capital Club Board of Governors.
DONALD P. HODEL
Director since 1995
Age 61. Managing Director of Summit Group International, Ltd., an energy
consulting firm, since 1990. Secretary of the U.S. Department of the Interior,
1985 to 1989. Secretary of the U.S. Department of Energy, 1982 to 1985. Director
of MAPCO, Inc.; Energy Investors Acquisition Corporation; Taylor Energy Company;
Hart Publishing, Inc.; Eagle Publishing, Inc.; Conserve Resources, Inc.; and
Thermall Corporation.
GERALD E. MAYO
Director since 1994
Age 64. Private investor since 1995. Chairman of the Board, Midland Life
Insurance Company (formerly Midland Mutual Life Insurance Company) (Chairman and
President, 1980 to 1995); Chairman, Midland Financial Services (Chairman and
President, 1994 to 1995). Director, HBO & Co. of Atlanta and Borror Corporation.
3
<PAGE> 6
CURRENT DIRECTORS WHO ARE NOT STANDING FOR RE-ELECTION BECAUSE THEIR TERMS DO
NOT EXPIRE UNTIL 1999 ARE:
ROBERT H. BEEBY
Director since 1993
Age 65. Chairman of the Board of Service America Corporation, a vending and food
service company, 1992 to 1996; President and Chief Executive Officer of
Frito-Lay, Inc., 1989 to 1991 and Pepsi-Cola International, 1984 to 1988.
Director of Church & Dwight Co., Inc.; Marketing Corp. of America; Applied
Extrusion Technologies, Inc.; and A. C. Nielsen Co.**
MALCOLM T. HOPKINS
Director since 1982
Age 68. Private investor since 1984. Retired Vice Chairman, Chief Financial
Officer and Director of the former St. Regis Corporation. Director of
Metropolitan Series Fund, Inc.; State Street Research Portfolios, Inc.; MAPCO,
Inc.; EMCOR Group, Inc.; Phar-Mor, Inc.; and U.S. Home Corporation.
WILLIAM E. LAVERY
Director since 1985
Age 66. President Emeritus, Virginia Polytechnic Institute and State University;
President, 1975 to 1988. Director of First Union Bank of Virginia and Shenandoah
Life Insurance Company.
WILLIAM R. WILSON
Director since 1987
Age 69. Private investor since 1992. Retired Chairman of the Board and Chief
Executive Officer of Lukens, Inc., manufacturer of steel and industrial
products. Director of Acme Metals Incorporated; Provident Mutual Life Insurance
Company; and L.F. Driscoll Co.
OLIVER G. RICHARD III
Director since 1995
Age 44. Chairman, Chief Executive Officer and President of The Columbia Gas
System, Inc., since 1995. Chairman, New Jersey Resources Corporation, 1992 to
1995; President and Chief Executive Officer, 1991 to 1995. President and Chief
Executive Officer of Northern Natural Gas Company, 1989 to 1991. Executive Vice
President and Senior Vice President, Enron Gas Pipeline Group, 1987 to 1988.
Vice President and General Counsel of Tenngasco, a subsidiary of Tenneco
Corporation, 1985 to 1987. Federal Energy Regulatory Commission member, 1982 to
1985. Director and 2nd Vice Chairman, Interstate Natural Gas Association of
America; Director, American Gas Association and National Petroleum Council;
member, Virginia Business Council, Battelle Energy Industry Advisory Committee,
and President's Commission on Critical Infrastructure Protection.
*In 1993, in connection with a civil proceeding brought by the U.S. Securities
and Exchange Commission, Mr. Jozoff consented, without admitting or denying the
allegations, to the entry of an order enjoining him from violating Section 10(b)
of the Securities Exchange Act of 1934.
**In 1992, when Mr. Beeby had been with Service America Corporation for two
months, Service America Corporation filed a voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code.
4
<PAGE> 7
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The federal securities laws require the Corporation's Directors and certain
officers, and persons who own more than ten percent of a registered class of the
Corporation's equity securities, to file with the U.S. Securities and Exchange
Commission ("SEC") and The New York Stock Exchange initial reports of ownership
and reports of changes in ownership of any securities of the Corporation.
To the Corporation's knowledge, based solely on review of the copies of such
reports furnished to the Corporation and written representations that no other
reports were required, there are no greater-than-ten-percent beneficial owners,
and the Corporation's officers and Directors made all required filings during
the fiscal year ended December 31, 1996, on a timely basis, except that Dr.
Douglas E. Olesen inadvertently did not timely file two Form 4's Statement of
Changes in Beneficial Ownership. The filings were made on July 26, 1996, for the
months ending May 31, 1996, and June 30, 1996, 46 and 16 days late,
respectively. Also, Ms. Catherine G. Abbott inadvertently did not file a Form 4
Statement of Changes in Beneficial Ownership for the month ending July 31, 1996.
The information was filed on February 14, 1997, on a Form 5 Annual Statement of
Beneficial Ownership of Securities.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND MANAGEMENT
The following table sets forth the beneficial ownership of common stock by
stockholders who own greater than 5 percent of the outstanding shares as of
January 31, 1997, by Directors (including one who retired in 1997), by each of
the officers whose compensation is disclosed in the Summary Compensation Table,
and by all Directors and executive officers as a group. Except as otherwise
noted, the persons named in the table below have sole voting and investment
power with respect to all shares shown as beneficially owned by them.
5
<PAGE> 8
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Title of Class Name and Amount and Nature Percent
Address of Beneficial Ownership** of Class
- ---------------------------------------------------------------------------------------------------------------------------
Shared Sole Shared Sole
Voting Voting Investment Investment Total
Power Power Power Power Owned
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5% HOLDERS
Common Prudential Insurance 2,673,722 201,420 2,810,522 201,420 3,011,942 5.46
Company of America
Prudential Plaza
Newark, NJ 07102-3777
- ---------------------------------------------------------------------------------------------------------------------------
Common The Capital Group -0- 2,218,000 -0- 4,509,700 4,509,700 8.2
Companies, Inc.
333 South Hope Street
Los Angeles, CA 90071
- ---------------------------------------------------------------------------------------------------------------------------
Common Putnam Investments, Inc. 34,442 -0- 3,492,217 -0- 3,492,217 6.4
One Post Office Square
Boston, MA 02109
===========================================================================================================================
DIRECTORS
Common R. F. Albosta -0- *
- ---------------------------------------------------------------------------------------------------------------------------
Common R. H. Beeby 1,000 *
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Common W. K. Cadman -0- *
- ---------------------------------------------------------------------------------------------------------------------------
Common J. P. Heffernan 2,000 *
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Common D. P. Hodel 500 *
- ---------------------------------------------------------------------------------------------------------------------------
Common M. T. Hopkins 5,519 *
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Common J. B. Johnston -0- *
- ---------------------------------------------------------------------------------------------------------------------------
Common M. Jozoff 1,000 *
- ---------------------------------------------------------------------------------------------------------------------------
Common W. E. Lavery 1,100 *
- ---------------------------------------------------------------------------------------------------------------------------
Common G. E. Mayo 2,000 *
- ---------------------------------------------------------------------------------------------------------------------------
Common D. E. Olesen 835 *
- ---------------------------------------------------------------------------------------------------------------------------
Common E. G. Procope 1,175 *
- ---------------------------------------------------------------------------------------------------------------------------
Common O. G. Richard III 44,705 *
- ---------------------------------------------------------------------------------------------------------------------------
Common J. R. Thomas, II 1,500 *
- ---------------------------------------------------------------------------------------------------------------------------
Common W. R. Wilson 6,000 *
===========================================================================================================================
OFFICERS
Common C. G. Abbott 2,000*** *
- ---------------------------------------------------------------------------------------------------------------------------
Common S. J. Harvey -0- *
- ---------------------------------------------------------------------------------------------------------------------------
Common J. P. Holland 3,169 *
- ---------------------------------------------------------------------------------------------------------------------------
Common M. W. O'Donnell 3,951 *
- ---------------------------------------------------------------------------------------------------------------------------
Common P. M. Schwolsky 2,532 *
- ---------------------------------------------------------------------------------------------------------------------------
Common R. C. Skaggs, Jr. 2,272 *
- ---------------------------------------------------------------------------------------------------------------------------
Common C. R. Tilley 277 *
- ---------------------------------------------------------------------------------------------------------------------------
Common All Executive Officers & Directors 81,535 *
(22 Persons) as a Group****
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Aggregate stock ownership (including exercisable options) as a percentage
of class is less than 1 percent.
** Includes an allocation of shares held by the Trustee of the Employees'
Thrift Plan of Columbia Gas System. Does not include shares of common
stock covered by exercisable options. This information is shown on the
stock option table on page 15.
*** Includes 400 shares of common stock held by spouse as custodian for minor
children.
**** Includes holdings of R. C. Skaggs, Jr., even though he is not an executive
officer or director of the Corporation.
6
<PAGE> 9
STANDING COMMITTEES OF THE BOARD
AUDIT COMMITTEE - The Audit Committee recommends to the Board of Directors the
independent public accountants who are to examine the financial statements for
the ensuing year; meets periodically with the independent public accountants to
review the scope of their audits, the internal accounting controls, the
operation of the internal Audit Department and significant financial reporting
matters; reviews management's plans for engaging the Corporation's independent
public accountants for management advisory services; meets periodically with the
Vice President and General Auditor of the Columbia Gas System Service
Corporation to review the internal Audit Department charter, the annual program
of audits and the Corporation's internal controls; and reviews issues with the
independent public accountants, management and/or the Vice President and General
Auditor which could have material impacts on the Corporation's financial
position.
COMPENSATION COMMITTEE - The Compensation Committee periodically
reviews and approves a general compensation policy and salary structure for
management and professional personnel; approves all changes in base salaries of
officers of the Corporation and its subsidiaries who are in a position to
exercise discretionary judgment which can substantively influence the affairs of
the Corporation; oversees and administers incentive compensation programs in a
manner consistent with the terms of such plans as approved by the Board of
Directors; reviews and makes recommendations on changes in major benefit
programs of the Corporation's subsidiaries; consults with and advises senior
management on major policies affecting human resources; and monitors plans for
management development and succession planning for the Corporation and its
subsidiaries.
EXECUTIVE COMMITTEE - The Executive Committee has the authority to act in the
intervals between the meetings of the Board of Directors upon most matters
requiring Board approval.
FINANCE COMMITTEE - The Finance Committee reviews and monitors the annual
capital expenditure program, reviews financial plans and dividend policy, and
reviews the management of investments of the Corporation's benefit plans.
CORPORATE GOVERNANCE COMMITTEE - The Corporate Governance Committee was
established by the Board in June 1993 to provide counsel to the Board in regard
to Board organization, membership and function. The Committee is responsible to
the Board for the review and recommendation of Director candidates; the
recommendation of a class of Directors for election at the Annual Meeting of
Stockholders; recommendations regarding Director retirement age, tenure and
removal for cause; review of all Board committee charters and recommendations
regarding their number, structure, membership and function; and evaluation of
the Chief Executive Officer. Stockholders wishing to submit names of Director
candidates for consideration by the Committee should contact Carolyn McKinney
Afshar, Secretary, for a copy of the procedures to be followed.
7
<PAGE> 10
<TABLE>
<CAPTION>
BOARD AND BOARD COMMITTEES MEMBERSHIP AND MEETINGS HELD
Board Audit Compensation Executive Finance Corporate
Governance
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Meetings Held 9 4 5 2 3 4
- -------------------------------------------------------------------------------
R. F. Albosta X X* X
- -------------------------------------------------------------------------------
R. H. Beeby X X X X
- -------------------------------------------------------------------------------
W. K. Cadman X X X X
- -------------------------------------------------------------------------------
J. P. Heffernan X X X*
- -------------------------------------------------------------------------------
D. P. Hodel X X X
- -------------------------------------------------------------------------------
M. T. Hopkins X X X X X
- -------------------------------------------------------------------------------
M. Jozoff X X X X
- -------------------------------------------------------------------------------
W. E. Lavery X X X X X
- -------------------------------------------------------------------------------
G. E. Mayo X X* X X
- -------------------------------------------------------------------------------
D. E. Olesen X X X
- -------------------------------------------------------------------------------
E. G. Procope X X X X
- -------------------------------------------------------------------------------
O. G. Richard III X* X*
- -------------------------------------------------------------------------------
J. R. Thomas, II X X X*
- -------------------------------------------------------------------------------
W. R. Wilson X X X X X
- -------------------------------------------------------------------------------
</TABLE>
* Denotes Chairperson
Each incumbent Director attended at least 75 percent of the total number of
meetings of the Board and Board committees on which he or she served during the
period of his/her service.
STANDARD DIRECTORS' COMPENSATION*
1996 Directors' Compensation for Board and Committee Meetings:
<TABLE>
<CAPTION>
Retainer Meeting Fee Chairman's Fee
($) ($) ($)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Board 27,250 1,250 --
- -----------------------------------------------------------------------------
Audit -- 1,250 3,000
- -----------------------------------------------------------------------------
Compensation -- 1,250 3,000
- -----------------------------------------------------------------------------
Executive 6,000 800 --
- -----------------------------------------------------------------------------
Finance -- 1,250 3,000
- -----------------------------------------------------------------------------
Corporate Governance -- 1,250 3,000
- -----------------------------------------------------------------------------
</TABLE>
* The nonemployee Directors are also eligible to receive nonqualified stock
options pursuant to the Corporation's Long-Term Incentive Plan (described
in the Executive Compensation Report of this proxy statement). If the
Corporation's Total Shareholder Return performance, compared with its
peers, is at the third quartile, then nonemployee directors receive options
for 3,000 shares of common stock; at the fourth quartile, options for 6,000
shares. For 1996 performance, the directors received options for 6,000
shares, granted and priced as of March 31, 1997.
No officer received any compensation for services as a Director while
also serving as an officer of the Corporation.
The Corporation offers medical coverage to nonemployee Directors and pays the
premium associated with their participation. The Corporation also reimburses
them for the cost of Medicare Part B, if applicable. In addition, nonemployee
Directors may elect to defer compensation for distribution at a later date.
Deferred amounts will accrue interest at the prime rate and may be paid in a
lump sum or in annual installments over ten years, or may be deferred into the
Phantom Stock Plan for Outside Directors. Deferred amounts will be automatically
paid in a lump sum following certain specified changes in control of the
Corporation.
8
<PAGE> 11
Following its approval by the stockholders at the 1996 Annual Meeting, the
Phantom Stock Plan for Outside Directors was established. All of the Directors
except two (one of whom has since retired) elected to participate in the plan in
lieu of participating in the Retirement Plan for Outside Directors.
Participating directors received phantom shares of equivalent actuarial value
under the Phantom Stock Plan for Outside Directors. The Retirement Plan for
Outside Directors is not available for nonemployee Directors assuming office
after April 1996; rather, they will participate in the Phantom Stock Plan for
Outside Directors, under which they receive 3,000 phantom shares upon being
elected to the Board. Payment of benefits will commence upon termination of
Board service or upon specified changes in control of the Corporation.
For the Directors remaining in the Retirement Plan, each nonemployee Director
with a minimum of five years' service on the Board who retires after attaining
age 65 or becoming disabled could receive annual retirement payments equal to
the amount of the annual retainer for Board service at the time of retirement.
Payments under the Retirement Plan will cease at the death of the Director
unless the Director elected an actuarial equivalent option or, if death occurs
before retirement but after eligibility is established, at the death of the
surviving spouse. In the event of certain specified changes in control of the
Corporation, a Director (regardless of years of service on the Board) could
elect a lump sum payment equal to the present value of the retainer at the time
of the election times the number of years of Board service, with a minimum of
ten years.
1996 EXECUTIVE COMPENSATION PLAN
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
EXECUTIVE COMPENSATION REPORT TO STOCKHOLDERS
GENERAL - As reported in the Proxy Statement prepared for last year's Annual
Meeting of Stockholders, the Compensation Committee (the "Committee") of the
Corporation's Board of Directors approved a new total compensation program for
the executive group, effective in 1996. Through the Committee, the Board of
Directors has developed an aggressive "PAY FOR PERFORMANCE" executive
compensation philosophy and programs to implement that philosophy. These
programs combine to form the basis of the total compensation plan for senior
management of the Corporation and its subsidiaries (the "System"), which is
designed to focus management's attention on the Corporation's strategic business
initiatives and financial performance objectives. The Committee believes that
the design and execution of the executive compensation program implemented in
1996 is critical to the Corporation's future success by FOCUSING MANAGEMENT'S
ATTENTION on the new competitive business environment through compensation
awards largely based on COLUMBIA VALUE ADDED ("CVA") FINANCIAL PERFORMANCE
MEASURES and SHAREHOLDER RETURN. CVA performance measures determine the real
value of particular investments by the extent the return on that investment
exceeds the cost of the investment, including the cost of capital.
COMPENSATION PHILOSOPHY - The Board of Directors believes that total
compensation is not only payment for services rendered to the System, but also a
means to provide a strong motivational vehicle for the achievement of key
financial and strategic goals. The System provides executives with the
opportunity to increase their total compensation above base salary through
annual and longer-term incentive compensation programs. Goals and objectives
within the executive compensation program are established such that their
achievement will result in added value to the System over appropriate periods of
time. This is how compensation is linked to corporate performance. To implement
the pay for performance philosophy that the System instituted in 1996, its
executive compensation program is designed to:
- PLACE AT RISK significant amounts of the executives' total compensation.
- Base greater amounts of the executives' total compensation upon CREATING
LONG-TERM VALUE FOR THE STOCKHOLDERS.
- TIE COMPENSATION MORE CLOSELY TO THE FORTUNES OF THE STOCKHOLDERS through
the use of a combination of cash and STOCK-BASED INCENTIVE COMPENSATION
PLANS.
- Emphasize the achievement of both short- and longer-term internal VALUE
ADDED PERFORMANCE MEASURES as well as STOCKHOLDER RETURN EXPECTATIONS in
relationship to peer companies.
- Provide total compensation rewards to executives in relation to the overall
financial performance of the Corporation.
9
<PAGE> 12
As a general matter, the executive compensation program is designed to provide
base salary compensation and benefit levels that target the median of the
marketplace in similar-sized utility and industrial companies; maintain
equitable relationships among the compensation levels established for jobs
within the System; provide for the recognition of performance delivered
year-to-year and over the long term; and ensure that appropriate controls are in
place for compensation to be fully earned. Because of the System's size and
integrated nature, a number of well-known utility and industrial executive
compensation surveys are utilized to determine competitive remuneration for
executives. Most of the companies in the S&P Natural Gas Utility Index are
included in one or more of these surveys. However, no single authoritative
executive compensation survey currently covers all of the companies in the S&P
Natural Gas Utility Index.
IMPLEMENTATION OF PHILOSOPHY - The System's executive compensation program is
administered by the Committee. The Committee is composed of six independent,
non-employee Directors. As of December 31, 1996, the System's executive total
compensation program consisted of the following:
1. Base Salary Program
2. Annual Incentive Compensation Plan
3. Long-Term Incentive Plan
4. Benefit Plans
5. Other Arrangements
1. Base Salary Program - A base salary range is established for each executive
position based on a comparison of compensation levels of similar positions
in the external market. Competitive base salary levels are needed to
attract and retain competent executives. Based on the utility and
industrial compensation surveys referred to above, the base salary levels
for the approximately 150 individuals comprising the executive and key
employee group approximate the median for similar groups with corporations
of similar size and complexity. Historically, individual performance
reviews were conducted at least annually and were used, along with the
relative position of the individual's salary within the salary range, to
determine if any increase to base salary was warranted based on individual
performance. A range of merit opportunities was preestablished on a uniform
basis and the level of an increase within that range was based on an
assessment of an individual's management skills and achievement against a
variety of preestablished corporate and operating company goals. Throughout
1996, these goals included organizational goals pertaining to an
executive's individual business unit as well as, in certain cases,
financial goals. In keeping with the philosophy of placing more
compensation at risk, in November 1996 the Committee decided to delay base
salary increases for all participants in the executive compensation program
for a period of one to two years, except in cases of promotions or
marketplace equity adjustments.
2. Annual Incentive Compensation Plan - This plan, which was amended,
restated and re-implemented effective January 1, 1996, provides the
opportunity for payment of cash awards to key employees for attainment of
specific goals which contributed directly to the present and future
financial health of the System. Awards for 1996 performance, granted in
1997 after financial results for 1996 were final, are reflected in the
Summary Compensation Table and in the Executive Compensation Report
subsection entitled "1996 Chief Executive Officer's Pay." The award
opportunities for 1996 ranged from zero to 75 percent of an individual's
annual salary for meeting threshold targets, depending upon the achievement
of CVA financial targets as well as the individual's level of
responsibility within the organization and ability to contribute directly
to the financial performance of the company. Additional amounts could be
awarded for financial performance above the threshold target and, in
certain circumstances, for individual performance. Prior to the
effectiveness of the amended and restated Annual Incentive Compensation
Plan on January 1, 1996, an Interim Cash Performance Award Program was
authorized by the Committee. Eligibility for consideration in the Interim
Cash Performance Award Program was based on the individual's level of
responsibility within the organization and ability to contribute to the
financial performance of the company. The award opportunities for 1995
ranged from zero to 35 percent of an individual's annual salary based on
performance against pre-set goals. The higher the achievement and
contribution to the Corporation, the larger the potential award could be.
Performance measures included specific Return on Invested Capital financial
targets as reflected in the Corporation's strategic business plan and other
organizational goals which could contribute to the success of the company.
The award for 1995 performance was made in March 1996 and, for the
executive officers named in the Summary Compensation Table, is shown in
that table. The interim program ended with the implementation of the
revised Annual Incentive Compensation Plan referred to above, effective
January 1, 1996.
10
<PAGE> 13
3. Long-Term Incentive Plan - The executive compensation program also includes
a component to bring special attention to the important area of stockholder
return. The Long-Term Incentive Plan adopted in 1996 provides long-term
incentives to officers and other key employees of System companies through
the granting of incentive stock options, non-qualified stock options, stock
appreciation rights, contingent stock awards, restricted stock awards,
and/or any award in other forms that the Committee may deem appropriate,
consistent with the plan's purpose. For option awards, generally the
Corporation's Total Shareholder Return performance (stock price
appreciation plus dividend accruals) will be compared to the S&P Natural
Gas Utility Index as included elsewhere in this Annual Proxy Statement.
Presently, it is the intent of the Committee to provide awards of options
primarily when the Corporation's Total Shareholder Return exceeds the
median of companies which comprise this peer group. With respect to
options, generally the amount of awards to each participant will be based
upon the evaluation of a key employee's position, individual performance,
and the Corporation's Total Shareholder Return, though option awards to key
employees may be made for reasons other than Total Shareholder Return,
subject to the discretion of the Committee. The purchase price per share of
stock deliverable upon the exercise of a nonqualified stock option will be
100 percent of the fair market value of the stock on the day of grant. The
price of options issued under the plan will be credited with dividend
equivalents. Such credits may be made directly through a reduction in the
purchase price of stock subject to options. Alternatively, at the
discretion of the Committee, dividend equivalent credits may be provided
indirectly, for example through the establishment of an unsecured, unfunded
bookkeeping "account" that would track dividends declared on the stock
subject to options and that would be paid in cash to an optionee upon the
exercise of an option or, in certain circumstances, upon expiration of the
option. Contingent or restricted stock may also be awarded in very limited
applications. The 1996 Long-Term Incentive Plan was approved by the
stockholders of the Corporation on April 26, 1996, and the plan became
effective as of February 21, 1996. Awards made in 1997 for 1996 performance
are reflected in the Options Table elsewhere in this Proxy Statement as
well as the subsection of this report entitled "1996 Chief Executive
Officer's Pay."
4. Benefit Plans - The System maintains savings, retirement, medical, dental,
long-term disability, life insurance and other benefit plans of general
applicability. Federal regulations establish limits on the benefits which
may be paid under savings and retirement plans qualified under the Internal
Revenue Code ("IRC"). To maintain compliance, the System caps benefits
under the qualified plans at the required levels. To provide comparable
benefits to more highly compensated employees, the System has established a
Thrift Restoration Plan and a Pension Restoration Plan, both of which are
non-qualified and unfunded. However, the Pension Restoration Plan may be
funded through a trust arrangement at the election of the beneficiary once
a threshold liability of $100,000 has been reached. The Committee views
these supplemental plans as part of the total compensation program for
executives.
5. Other Arrangements - Mr. Richard, the Chairman, CEO, and President of the
Corporation, Mr. Schwolsky, Senior Vice President and Chief Legal Officer
of the Corporation, and Ms. Abbott, Chief Executive Officer and President
of Columbia Gas Transmission Corporation and Chief Executive Officer of
Columbia Gulf Transmission Company, were granted employment agreements upon
hire. For a more detailed description of the agreements, please see
"Employment Agreements" elsewhere in this Proxy Statement. When
circumstances warrant, the Corporation and other companies in the System
can enter into agreements seeking to retain the services of experienced
management during periods of financial uncertainty. As a result of the
Chapter 11 reorganization petition that the Corporation and its subsidiary,
Columbia Gas Transmission Corporation, filed under the U.S. Bankruptcy
Code, employment and retention agreements were entered into in July 1991
and expired in 1993. In order to retain experienced management, the
Committee authorized the execution of new agreements upon approval by the
Bankruptcy Court. Following the Corporation's emergence from bankruptcy in
1995, these employment and retention agreements have been terminated and
are no longer in effect; however, payments were made pursuant to these
agreements in 1996 as shown on the Summary Compensation Table.
DEDUCTIBILITY OF COMPENSATION - The Committee has reviewed the potential impact
on the System of Section 162(m) of the IRC, which imposes a limit on tax
deductions that the System may claim for annual compensation in excess of one
million dollars paid to any of the CEO and the four other most highly
compensated executive officers. The Committee has determined that under current
compensation arrangements, the impact of Section 162(m) on the System would be
limited and, therefore, has decided not to take any action at this time to meet
the requirements for a deduction for the Annual Incentive Compensation Plan.
11
<PAGE> 14
EVALUATION PROCESS - Each year, the Board of Directors of the Corporation
reviews and approves strategic business and financial plans for the Corporation
and each of its subsidiaries. In addition to various business strategies, these
plans include specific financial targets such as CVA or other measures to
evaluate whether stockholder value has increased.
The goals set forth in these strategic plans are the bases for evaluating the
performance of the CEO of the Corporation and other senior executives whose
compensation falls under the direct purview of the Committee. Attainment of
meaningful strategic objectives over reasonable time periods increases value to
stockholders, and the increased compensation opportunities for executives are
directly linked to the attainment of these objectives.
1996 CHIEF EXECUTIVE OFFICER'S PAY
BASE SALARY - When Mr. Richard was hired as CEO in 1995, the Corporation entered
into an employment agreement with Mr. Richard that provides a base salary of
$750,000 per year, subject to such increases as may be approved by the Board. On
March 19, 1996 the Committee approved a five percent increase, to $787,500 per
year, in Mr. Richard's base salary in recognition of his exceptional performance
since his employment in April 1995. The increase also reflected his leadership
in restructuring the System and other contributions viewed favorably among
investors, resulting in an increase in the price of the Corporation's common
stock since April 1995. As noted above, in November 1996 the Committee decided
to freeze the base salary of all members of the executive group except in cases
of promotions or marketplace equity adjustments.
ANNUAL INCENTIVE PLAN - Under the provisions of the Interim Cash Performance
Award Program as described above, on March 19, 1996, the Committee approved a
cash award for Mr. Richard of $262,500 to recognize his exceptional performance
and other contributions, as indicated above, in 1995. On February 18, 1997, in
accordance with the Corporation's "pay for performance" compensation philosophy,
the Committee approved a cash award for Mr. Richard of $710,000 under the
amended and restated Annual Incentive Compensation Plan in recognition of the
Corporation's exceeding threshold CVA goals and financial performance compared
to peer companies, and of Mr. Richard's achieving his individual performance
goals for 1996.
LONG-TERM INCENTIVE PLAN - Mr. Richard's employment agreement provides for
contingent stock grants, including 5,000 shares per year on December 31 of each
of the years 1995, 1996 and 1997, if he is employed by the Corporation on those
dates. As Mr. Richard was employed by the Corporation on December 31, 1996, he
received a grant for the equivalent of 5,000 shares of common stock (2,340
shares were withheld to pay taxes on the grant). In addition, subject to the
receipt of necessary approvals, on the thirtieth day after the Corporation's
discharge from bankruptcy, Mr. Richard's employment agreement provides that he
was to receive a grant of options to purchase, at the then prevailing market
price, 100,000 shares of the Corporation's common stock. Since the options could
not be issued as of the thirtieth day following the Corporation's discharge from
bankruptcy because the 1986 Long-Term Incentive Plan was no longer in effect and
the 1996 Long-Term Incentive Plan had not yet been approved by the stockholders,
the day after the options were issued (May 20, 1996), Mr. Richard received a
cash payment of $481,250, less taxes, equal to the excess of the actual grant
price over the fair market value of the shares on the thirtieth day following
discharge from bankruptcy, as authorized by the Committee. On January 17, 1996,
Mr. Richard's employment agreement was amended to provide for the issuance of
restricted stock as compensation for performance, based upon his contributions
and the increase in stock price from April 28, 1995, to December 28, 1995, the
thirtieth day after the Corporation's emergence from bankruptcy. On May 20,
1996, Mr. Richard received a grant of 29,785 shares of restricted stock under
such provisions of his employment agreement. To provide an additional incentive
to Mr. Richard to continue his employment with the Corporation, the amended
employment agreement provides that only 20 percent of such restricted stock
vests each year, with the first 20 percent being vested on January 2, 1997, and
an additional 20 percent being vested on the first business day of each of the
four succeeding calendar years. In addition, on February 18, 1997, the Committee
awarded Mr. Richard, under the 1996 Long-Term Incentive Plan, a grant of
nonqualified stock options to purchase 60,000 shares of common stock at a price
of $63.6875 per share, with one-third vested at the date of grant and
exercisable six months therefrom, one-third on the first anniversary of grant,
and one-third on the second anniversary of grant. The award is included in the
Options Table.
BY THE COMPENSATION COMMITTEE:
Gerald E. Mayo, Chairman James P. Heffernan
Robert H. Beeby Malcolm T. Hopkins
Wilson K. Cadman James R. Thomas, II
12
<PAGE> 15
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee, listed above, all served on the
Committee for the entire 1996 fiscal year, except Mr. Hopkins, who was appointed
to the Committee effective April 26, 1996. Mr. Wilson and Dr. Lavery served on
the Compensation Committee from January 1, 1996, until April 26, 1996. None of
the members of the Compensation Committee has served as an officer or employee
of the Corporation or any of its subsidiaries.
EMPLOYMENT AGREEMENTS
As discussed in the Executive Compensation Report of the Compensation Committee
elsewhere in this Proxy, in order to secure his services, the Corporation
entered into an employment agreement with Mr. Richard for the position of
Chairman, Chief Executive Officer and President of the Corporation. In addition
to salary, options, bonus, restricted stock and other matters discussed in the
Executive Compensation Report of the Compensation Committee and in last year's
proxy statement, Mr. Richard's employment agreement provides for severance
benefits to be paid to Mr. Richard in the event his employment is terminated
without cause. The severance benefits would include payment of Mr. Richard's
annual base salary, incentive compensation and fringe benefits for a period of
24 months. If Mr. Richard's employment is terminated due to a change in control
of the Corporation (as defined in the agreement), the period of severance
benefits is extended from 24 to 36 months, but the amount that may be paid to
Mr. Richard, which would constitute "parachute payments" under the IRC, will be
limited to the extent necessary to avoid the imposition of an excise tax under
the IRC.
As discussed in last year's proxy statement, the Corporation has also entered
into an employment agreement with Mr. Schwolsky to secure his services as Senior
Vice President and Chief Legal Officer of the Corporation. In addition to
stock-based grants that were disclosed in last year's proxy statement, the
employment agreement with Mr. Schwolsky provides a base salary of $285,000 per
year, subject to such increases as may be approved by the Board. Besides being
eligible to participate in all incentive compensation plans and employee benefit
programs provided to other senior executives of the System, upon retirement Mr.
Schwolsky may receive supplemental pension payments to make up the difference,
if any, between the System's pension benefits and those Mr. Schwolsky would have
received from his previous employer. The employment agreement further provides
for severance benefits to be paid to Mr. Schwolsky in the event his employment
is terminated without cause. The severance benefits would include payment of Mr.
Schwolsky's annual base salary, incentive compensation and fringe benefits for a
period of 24 months. If Mr. Schwolsky's employment is terminated due to a change
in control of the Corporation (as defined in the agreement), the period of
severance benefits is extended from 24 to 36 months, but the amount that may be
paid to Mr. Schwolsky, which would constitute "parachute payments" under the
IRC, will be limited to the extent necessary to avoid the imposition of an
excise tax under the IRC.
On January 17, 1996, the Corporation entered into an employment agreement with
Ms. Abbott to secure her services as Chief Executive Officer of its transmission
subsidiaries. The agreement provides for a base salary of $325,000 per year,
subject to such increases as may be approved by the Board. The agreement also
provides that Ms. Abbott is eligible to participate in all employee benefit
programs provided to other transmission company executives and in all incentive
compensation programs of the transmission companies appropriate for her status.
In addition, the agreement provides for a contingent stock award for 1,500
shares of the Corporation's common stock. Following the approval of the
Corporation's Long-Term Incentive Plan by the stockholders at the 1996 Annual
Meeting, the contingencies were satisfied, and Ms. Abbott received 1,500 shares
of common stock. The employment agreement further provides for severance
benefits to be paid to Ms. Abbott in the event her employment is terminated
without cause. The severance benefits would include payment of Ms. Abbott's
annual base salary, incentive compensation and fringe benefits for a period of
24 months. If Ms. Abbott's employment is terminated due to a change in control
of the Corporation (as defined in the agreement), the period of severance
benefits is extended from 24 to 36 months, but the amount that may be paid to
Ms. Abbott, which would constitute "parachute payments" under the IRC, will be
limited to the extent necessary to avoid the imposition of an excise tax under
the IRC.
13
<PAGE> 16
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants Potential Realizable Value at
Assumed Annual Rates
of Stock Price
Appreciation for Option Term
- ------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
- ------------------------------------------------------------------------------------------------------------------
Name Number of % of Total Exercise or Expiration 5% 10%
Securities Options/SARs Base Price Date ($) ($)
Underlying Granted to ($/Sh)
Options/SARs Employees in
Granted (#) Fiscal Year
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
O. G. Richard III 100,000 100.0 48.6875* 5/20/06 3,061,931** 7,759,534**
Chairman, CEO
& President
- ------------------------------------------------------------------------------------------------------------------
M. W. O'Donnell -0- 0.0 N/A N/A N/A N/A
Senior Vice President &
Chief Financial Officer
- ------------------------------------------------------------------------------------------------------------------
P. M. Schwolsky -0- 0.0 N/A N/A N/A N/A
Senior Vice President
& Chief Legal Officer
- ------------------------------------------------------------------------------------------------------------------
C. G. Abbott -0- 0.0 N/A N/A N/A N/A
CEO of Corporation's Gas
Transmission Segment
- ------------------------------------------------------------------------------------------------------------------
R. C. Skaggs, Jr.*** -0- 0.0 N/A N/A N/A N/A
CEO & President of
Columbia Gas of Ohio and
Columbia Gas of Kentucky
- ------------------------------------------------------------------------------------------------------------------
S. J. Harvey -0- 0.0 N/A N/A N/A N/A
Vice President
Columbia Gas System
Service Corporation
- ------------------------------------------------------------------------------------------------------------------
J. P. Holland -0- 0.0 N/A N/A N/A N/A
former Chairman & CEO
of Corporation's Gas
Transmission Segment
- ------------------------------------------------------------------------------------------------------------------
C. R. Tilley -0- 0.0 N/A N/A N/A N/A
former Chairman & CEO
of Corporation's Gas
Distribution Segment
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* Exercise price shall be reduced by amounts paid as dividends on shares of
stock as long as the option is outstanding and not exercised as to any
shares of such stock, but in no event shall the exercise price be less than
the par value of such stock.
** The potential realizable value shall increase as dividends are paid on
stock subject to options.
*** Information regarding Mr. Skaggs, although not required because he is not
an "executive officer" as defined in the SEC's rules and regulations, is
provided due to the level of his compensation.
14
<PAGE> 17
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
- ---------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying In-the-Money
Unexercised Options/SARs
Options/SARs at Year-End ($)
at Year-End (#)
- ---------------------------------------------------------------------------------------------------------------
Name Shares Acquired Value Realized Exercisable/ Exercisable/
on Exercise (#) ($)* Unexercisable Unexercisable*
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
O. G. Richard III -0- -0- 50,000/50,000 746,875/746,875
- ---------------------------------------------------------------------------------------------------------------
M. W. O'Donnell -0- -0- 11,440/0 289,396/0
P. M. Schwolsky -0- -0- 5,000/0 162,875/0
C. G. Abbott -0- -0- 0/0 -0-
R. C. Skaggs, Jr.** 1,490 15,008 6,585/0 131,988/0
- ---------------------------------------------------------------------------------------------------------------
S. J. Harvey -0- -0- 0/0 -0-
- ---------------------------------------------------------------------------------------------------------------
J. P. Holland 15,960 176,240 0/0 -0-
C. R. Tilley 21,500 254,924 0/0 -0-
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Market value of underlying securities at exercise or FY-end, minus the
exercise or base price.
** Information regarding Mr. Skaggs, although not required because he is not
an "executive officer" as defined in the SEC's rules and regulations, is
provided due to the level of his compensation.
RELATED PARTY TRANSACTIONS
Until January 17, 1996, the date of her employment with the Corporation and its
subsidiaries, Ms. Abbott was Chairman of the Board and a shareholder of Gem
Energy Consulting, Inc. Until January 22, 1996, the date of his employment with
the Corporation's subsidiary, Columbia Gas System Service Corporation, Mr.
Harvey was a director, the secretary and a shareholder of Gem Energy Consulting,
Inc. Gem Energy Consulting, Inc. had a consulting agreement with a subsidiary of
the Corporation under which the consulting firm received $364,000 in 1996.
15
<PAGE> 18
The compensation for services in all capacities payable to or earned by the
executive officers of the Corporation and its subsidiaries during the year 1996
was as follows:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
- ---------------------------------------------------------------------------------------------------------------------------
Awards Payouts
- ---------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (f) (g) (h) (i)
- ---------------------------------------------------------------------------------------------------------------------------
Name and Year Salary Bonus Restricted Securities LTIP All Other
Principal Stock Underlying Payouts Comp.(2)
Position(1) Awards Options - SARs
- ---------------------------------------------------------------------------------------------------------------------------
($) ($) ($) (#) ($) ($)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
O. G. RICHARD III 1996 778,125 710,000(4)(5) 2,215,384 160,000 -0- 746,596
Chairman, CEO & President (14)(15) (11)(12) (13)(23)(24)(2)
-------------------------------------------------------------------------------------------------
1995 528,125(3) 262,500(6) 516,875(15) -0- -0- 75,673(28)
-------------------------------------------------------------------------------------------------
1994 N/A
- ---------------------------------------------------------------------------------------------------------------------------
M. W. O'DONNELL 1996 322,575 210,000(4)(5) -0- 25,000(11) -0- 84,233(23)(2)
Senior Vice President -------------------------------------------------------------------------------------------------
& Chief Financial Officer 1995 310,150 247,000(6)(8) -0- 5,000(9) -0- 13,879
1994 286,025 132,336(7)(19) -0- -0- -0- 12,741
- ---------------------------------------------------------------------------------------------------------------------------
P. M. SCHWOLSKY 1996 321,250 234,000(4)(5) -0- 25,000(11) -0- 130,804(23)(2)
Senior Vice President -------------------------------------------------------------------------------------------------
& Chief Legal Officer 1995 164,091(3) 115,000(6)(8)91,400(17) 5,000(10) -0- 13,503(29)
-------------------------------------------------------------------------------------------------
1994 N/A
- ---------------------------------------------------------------------------------------------------------------------------
C. G. ABBOTT 1996 310,870(3) 234,000(4)(5)73,219(16) 25,000(11) -0- 88,689(23)(25)
CEO of Corporation's -------------------------------------------------------------------------------------------------
Gas Transmission Segment 1995 N/A
-------------------------------------------------------------------------------------------------
1994 N/A
- ---------------------------------------------------------------------------------------------------------------------------
R. C. SKAGGS JR.(33) 1996 258,891 171,600(4)(5) -0- 25,000(11) 15,008(18) 13,801(26)(2)
CEO & President of -------------------------------------------------------------------------------------------------
Columbia Gas Of Ohio and 1995 222,300 75,000(6) -0- 3,000(9) 36,405(18) 12,252(30)(2)
Columbia Gas of Kentucky -------------------------------------------------------------------------------------------------
1994 206,113 40,300(7) -0- -0- -0- 8,382(32)(2)
- ---------------------------------------------------------------------------------------------------------------------------
S. J. HARVEY 1996 212,772(3) 101,300(5) -0- 12,000(11) -0- 76,623(23)
Vice President -------------------------------------------------------------------------------------------------
Columbia Gas System 1995 N/A
Service Corporation -------------------------------------------------------------------------------------------------
1994 N/A
- ---------------------------------------------------------------------------------------------------------------------------
J. P. HOLLAND 1996 27,208(3) -0- -0- -0- 176,240(18)313,985(21)(2)
former Chairman & CEO -------------------------------------------------------------------------------------------------
of Corporation's 1995 320,450 50,000(6) -0- 5,000(9) -0- 340,829(20)
Gas Transmission Segment -------------------------------------------------------------------------------------------------
1994 295,020 54,414(7) -0- -0- -0- 13,167
- ---------------------------------------------------------------------------------------------------------------------------
C. R. TILLEY 1996 61,183(3) -0- -0- -0- 254,924(18) 569,775
former Chairman & CEO (21)(22)(27)(2)
of Corporation's -------------------------------------------------------------------------------------------------
Gas Distribution Segment 1995 362,725 100,000(6) -0- 5,000(9) -0- 42,548(31)
-------------------------------------------------------------------------------------------------
1994 345,175 49,340(7) -0- -0- -0- 370,222(20)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes Chief Executive Officer and four other most highly-compensated
executive officers whose salary and bonus exceed $100,000 and two who would
have been among the most highly-compensated had they been employed at
year-end.
(2) Reflects employer contributions to the Employees' Thrift Plan of Columbia
Gas System, which is qualified under the Internal Revenue Code, and the
Thrift Restoration Plan, a nonqualified plan. Mr. Richard and Mr. Schwolsky
were not yet participants in the Employees' Thrift Plan or Thrift
Restoration Plan as of December 31, 1995. Ms. Abbott was not yet a
participant in either plan as of December 31, 1996.
(3) Partial year salary.
16
<PAGE> 19
(4) The Compensation Committee required that fifty (50) percent of the 1996
Annual Incentive Program bonus to have been paid in 1997 be deferred for at
least one year from the date it otherwise would have been paid.
(5) Reflects bonus paid in 1997 with respect to 1996 performance under the
Annual Incentive Compensation Plan.
(6) Reflects bonus paid in 1996 with respect to 1995 performance under the
Interim Cash Performance Award Program.
(7) Reflects bonus paid in 1995 with respect to 1994 performance under the
Interim Cash Performance Award Program.
(8) Reflects payment for recognition of contributions during bankruptcy
proceedings to Mr. O'Donnell for $163,000 and Mr. Schwolsky for $65,000.
(9) Options to purchase shares granted to top 31 executives on May 17, 1995, at
a price of $28.99 per share, which vested 100% six months from the date of
grant, on November 17, 1995.
(10) Options to purchase shares granted to Mr. Schwolsky upon his employment on
June 5, 1995, at a price of $31.05 per share, which vested 100% six months
from the date of grant, on December 5, 1995.
(11) Options to purchase shares granted to executive group on February 18, 1997,
at a price of $63.6875 per share, which options vested one-third upon
grant, exercisable in six months; one-third upon the first anniversary of
grant; and one-third upon the second anniversary. Mr. Richard received
options for 60,000 shares of common stock; Messrs. O'Donnell, Schwolsky and
Skaggs and Ms. Abbott, options for 25,000 shares each; and Mr. Harvey,
options for 12,000 shares.
(12) Pursuant to Mr. Richard's employment agreement dated March 15, 1995, and
amended January 17, 1996, on May 20, 1996, Mr. Richard was granted a
nonqualified stock option for 100,000 shares of common stock, 50,000 of
which were vested on November 28, 1996, and the remaining 50,000 to vest on
November 28, 1997. Dividends are associated with this award, with the
exercise price being reduced by amounts paid as dividends on shares of
common stock, as long as the option is outstanding and not exercised as to
any shares of such common stock. In no event may the exercise price be less
than the par value of such common stock.
(13) Pursuant to Mr. Richard's employment agreement dated March 15, 1995, and
amended January 17, 1996, on May 21, 1996, Mr. Richard received a $481,250
cash payment, less taxes, representing the excess of the grant price of the
options for 100,000 shares of common stock issued the previous date over
the fair market value of the shares on the date the options would have been
issued had the Corporation been able to issue the options following the
discharge from bankruptcy. The common stock increased in value during this
period from $43.875 to $48.6875 per share.
(14) Pursuant to Mr. Richard's employment agreement dated March 15, 1995, and
amended January 17, 1996, on May 20, 1996, Mr. Richard was granted a
restricted stock award for 29,785 shares of common stock. Mr. Richard
receives dividends on the restricted stock as dividends are declared on
shares of common stock. The restrictions are to be satisfied if Mr. Richard
remains employed by the Corporation as follows: for 5,957 shares on each of
the dates of January 2, 1997, January 2, 1998, January 4, 1999, January 3,
2000, and January 2, 2001. At Fiscal Year end the stock price was $63.625,
for a total value of $1,895,071 for the restricted stock. On January 2,
1997, 5,957 shares were releasable to Mr. Richard at a value of $62.5625
per share, for a total value of $372,685. The actual amount of unrestricted
shares issued was net of amounts withheld to pay taxes, or 3,170 shares.
(15) Pursuant to Mr. Richard's employment agreement dated March 15, 1995, and
amended January 17, 1996, on April 28, 1995, Mr. Richard was granted a
contingent stock award for 25,000 shares of common stock. The 25,000 shares
vest as follows: 10,000 on May 1, 1995, and 5,000 per year on, and
contingent upon his continued employment through, December 31, 1995,
December 31, 1996, and December 31, 1997, respectively. On May 1, 1995,
10,000 shares were issued to Mr. Richard at a value of $29.75 per share,
and on December 31, 1995, 5,000 shares were issued to him at a value of
$43.875 per share, for a total value of $516,875. On December 31, 1996,
5,000 shares were issued to him at a value of $64.0625 per share, for a
total value of $320,313. The actual amount of shares issued was net of
amounts withheld to pay taxes, or 2,660 shares. No dividends are associated
with this award.
(16) Pursuant to Ms. Abbott's employment agreement dated January 17, 1996, on
January 17, 1996, Ms. Abbott was granted a contingent stock award for 1,500
shares of Common Stock to be issued to her upon approval of the Long-Term
Incentive Plan by the stockholders of the Corporation, contingent upon her
continued employment until that date. On May 17, 1996, 1,500 shares were
issued to Ms. Abbott with a value of $48.8125 per share.
(17) On June 5, 1995, Mr. Schwolsky was granted 2,500 shares of Common Stock to
be issued to him on September 5, 1995, contingent upon his employment
through that date. On September 5, 1995, Mr. Schwolsky received 2,500
shares with a value of $36.56 per share.
17
<PAGE> 20
(18) Exercised options under the Long-Term Incentive Program. In 1996, exercised
option shares were 1,490 for Mr. Skaggs, 15,960 for Mr. Holland and 21,500
for Mr. Tilley. In 1995, exercised option shares were 3,000 for Mr. Skaggs.
(19) Payment provided pursuant to now expired Retention Agreement.
(20) Payment provided pursuant to now expired employment agreement in the amount
of $349,600 for Mr. Tilley and $326,500 for Mr. Holland.
(21) Includes payments upon termination totalling $299,292 for Mr. Holland and
$500,000 for Mr. Tilley.
(22) Includes payment of $49,417 for accrued vacation received upon retirement.
(23) Includes transfer expenses associated with the move of the corporate office
from Delaware to Northern Virginia totalling $235,738 for Mr. Richard,
$66,090 for Mr. O'Donnell, $126,304 for Mr. Schwolsky, $87,014 for Ms.
Abbott, and $76,623 for Mr. Harvey.
(24) Includes perquisites consisting of personal use of company aircraft and
financial planning aggregating $14,233.
(25) Includes perquisite consisting of personal use of company aircraft
aggregating $1,675.
(26) Includes perquisites consisting of country club dues and financial planning
aggregating $2,356.
(27) Includes perquisites consisting of country club dues and financial planning
aggregating $16,687.
(28) Transfer expenses and compensation for benefits forfeited upon termination
of prior employment.
(29) Transfer expenses.
(30) Includes perquisites consisting of country club dues aggregating $5,502.
(31) Includes perquisites consisting of personal use of company aircraft,
country club dues and financial planning aggregating $11,416.
(32) Includes perquisites consisting of country club dues aggregating $1,479.
(33) Information regarding Mr. Skaggs, although not required because he is not
an "executive officer" as defined in the SEC's rules and regulations, is
provided due to the level of his compensation.
18
<PAGE> 21
RETIREMENT INCOME PLAN
A noncontributory defined benefit pension plan is maintained for all employees
of the Corporation's participating subsidiaries who are at least 21 years of
age. The annual benefit under the pension plan is based upon final average
annual compensation and years of credited service. Final average annual
compensation is calculated using base compensation (shown in the "Summary
Compensation Table" as "Salary") paid to the employee for the highest 36 months
of the last 60 months prior to retirement.
Estimated annual benefits payable upon retirement are as follows with respect to
the specified remuneration and years of credited service.
ESTIMATED ANNUAL BENEFITS AS OF JANUARY 1, 1997, FROM RETIREMENT INCOME PLAN*
<TABLE>
<CAPTION>
Final Average Representative Years of Credited Service**
Annual Compensation -------------------------------------------------------------------------------------
15 20 25 30 40 45
- ------------------------------------------------------------------------------------------------------------
$ $ $ $ $ $ $
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
250,000 54,533 72,711 90,889 109,067 115,317 121,567
300,000 65,783 87,711 109,639 131,567 139,067 146,567
400,000 88,283 117,711 147,139 176,567 186,567 196,567
500,000 110,783 147,711 184,639 221,567 234,067 246,567
600,000 133,283 177,711 222,139 266,567 281,567 296,567
800,000 178,283 237,711 297,139 356,567 376,567 396,567
1,000,000 223,283 297,711 372,139 446,567 471,567 496,567
1,200,000 268,283 357,711 447,139 536,567 566,567 596,567
</TABLE>
* Estimates are based upon a straight-life annuity and the assumptions that
(a) the Corporation's present retirement plan will be maintained and (b)
retirement will not occur before age 65. These benefits are not subject to
deduction for social security or other charges. Should an annual benefit
exceed limitations imposed by federal law, the excess will be paid by the
participating subsidiary as a supplemental pension under the Pension
Restoration Plan. If the supplemental pension liability exceeds $100,000,
then this liability may be funded through a trust arrangement at the option
of the individual. The following former executive officers elected to have
their accrued supplemental pension funded through a trust arrangement, and
contributions made in 1996 were as follows: Mr. Tilley, $125,500; and Mr.
Holland, $100,000. The liabilities of Messrs. Richard, Schwolsky and
O'Donnell have reached $100,000, but to date they have not elected to fund
their accrued pension. The liabilities of Mr. Skaggs, Ms. Abbott and Mr.
Harvey had not yet reached $100,000, so no contributions were made in 1996
on their behalf. Such supplemental pensions are not available to these
executives until retirement or termination of employment. Upon his
retirement in 1996, Mr. Tilley received all his accrued retirement
benefits.
** As of January 1, 1997 (or upon termination of employment), the credited
years of service for retirement benefits for the individuals named in the
Summary Compensation Table were as follows: Mr. Richard, 5 years; Mr.
Holland, 21 years; Mr. O'Donnell, 26 years; Mr. Schwolsky, 5 years; Mr.
Tilley, 39 years; Ms. Abbott, 0 years; Mr. Skaggs, 15 years; and Mr.
Harvey, 0 years.
19
<PAGE> 22
[PERFORMANCE GRAPH]
FIVE-YEAR COMPARISON OF CUMULATIVE TOTAL RETURN*
<TABLE>
<CAPTION>
Columbia Gas ($) S&P 500 Index ($) S&P Natural Gas Utility Index ($)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
DEC 91 100.00 100.00 100.00
- --------------------------------------------------------------------------------
Mar 92 102.90 97.47 91.38
- --------------------------------------------------------------------------------
Jun 92 98.55 99.33 101.69
Sep 92 115.94 102.46 115.47
DEC 92 110.87 107.62 110.47
Mar 93 128.99 112.32 132.90
Jun 93 143.48 112.86 142.76
Sep 93 151.45 115.78 149.29
DEC 93 129.71 118.46 131.15
Mar 94 151.45 113.97 127.30
Jun 94 156.52 114.45 130.22
Sep 94 155.80 120.05 132.68
- --------------------------------------------------------------------------------
DEC 94 136.23 120.03 125.12
- --------------------------------------------------------------------------------
Mar 95 171.74 131.72 140.39
Jun 95 184.06 144.29 149.83
Sep 95 223.91 155.76 159.16
DEC 95 254.34 165.13 176.97
Mar 96 266.85 174.00 182.27
Jun 96 302.68 181.81 202.89
Sep 96 327.62 187.43 211.33
DEC 96 373.09 203.05 235.18
- --------------------------------------------------------------------------------
</TABLE>
* Assumes $100 invested on December 31, 1991, and reinvestment of dividends.
20
<PAGE> 23
2. APPROVAL OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF THE SELECTION OF
ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
At the Annual Meeting, approval of the selection of the independent public
accountants to examine the financial statements of the Corporation and its
subsidiaries, which will be included in the Annual Report to Stockholders for
the year 1997, will also be voted upon. Arthur Andersen LLP has been recommended
as such independent public accountants by the Board of Directors of the
Corporation.
Representatives of Arthur Andersen LLP will be present at the Annual Meeting.
They will have an opportunity to make a statement if they desire and be
available to respond to appropriate questions by stockholders.
UNLESS THEY ARE DIRECTED OTHERWISE BY STOCKHOLDERS, THE PROXIES INTEND TO VOTE
FOR PROPOSAL TWO.
3. OTHER MATTERS
The Board of Directors knows of no business constituting a proper subject for
action by the stockholders that will be presented for consideration at the
meeting other than that shown above. However, if any other business shall come
before the meeting, the persons named in the enclosed form of proxy or their
substitutes will vote said proxy with respect to any such business in accordance
with their best judgment.
PROPOSALS OF STOCKHOLDERS FOR THE 1998 ANNUAL MEETING
Proposals of stockholders of record to be presented for a vote at the 1998
Annual Meeting of Stockholders must be received at the Corporation's Virginia
address, 12355 Sunrise Valley Drive, Suite 300, Reston, Virginia 20191 on or
before December 17, 1997.
/s/ CAROLYN MCKINNEY AFSHAR
Carolyn McKinney Afshar
Secretary
<PAGE> 24
Please mark vote in oval in the following manner using dark ink only.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ALL PROPOSALS.
<TABLE>
<CAPTION>
For Withhold For All
All For All Except For Against Abstain
<S> <C> <C> <C> <C> <C> <C> <C>
1. ELECTION OF DIRECTORS: 2. SELECTION OF ARTHUR ANDERSEN LLP
/ / / / / / AS INDEPENDENT PUBLIC / / / / / /
William K. Cadman; James P. Heffernan; ACCOUNTANTS
J. Bennett Johnston; James R. Thomas, II
THE PROXIES ARE AUTHORIZED TO
(NOTE: IF THIRD OVAL IS MARKED, CROSS VOTE IN THEIR DISCRETION UPON
THROUGH NAME(S) FOR WHOM VOTES ARE WITHHELD.) SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE
MEETING.
</TABLE>
Signed
--------------------------------
--------------------------------
The Columbia Gas System, Inc. Dated: , 1997
-------------------------
- -------------------------------------------------------------------------------
Detach Here
TO COLUMBIA GAS STOCKHOLDERS:
Columbia's Annual Meeting of Stockholders will be held at 9:00 a.m.
(EDT) on Wednesday, May 21, 1997, at the Westin William Penn Hotel, [LOGO]
530 William Penn Place, Pittsburgh, Pennsylvania.
Attached is your proxy card. Please read both sides and then mark,
sign and date it. Please detach and return the card promptly in the
enclosed business reply envelope. No postage is required if it is
mailed in the United States.
Thank you for voting on these very important proxy issues.
Carolyn McKinney Afshar
Secretary
The Columbia Gas System, Inc.
- --------------------------------------------------------------------------------
Return to the Columbia Gas System, Inc., c/o Harris Trust Company of New York,
P.O. Box 7051, Rockford, IL 61125-9945
<PAGE> 25
CONFIDENTIAL VOTING INSTRUCTIONS
TO: FIDELITY MANAGEMENT TRUST COMPANY, N.A., TRUSTEE UNDER THE EMPLOYEES'
THRIFT PLAN OF COLUMBIA GAS SYSTEM
- --------------------------------------------------------------------------------
PROXY FOR MAY 21, 1997, ANNUAL MEETING OF STOCKHOLDERS
- --------------------------------------------------------------------------------
(THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS)
Fidelity Management Trust Company is hereby instructed to vote the equivalent
number of shares of common stock of The Columbia Gas System, Inc., represented
by my units, as indicated on the reverse side of this card, in the Columbia Gas
System Stock Fund of the Employees' Thrift Plan at the Annual Meeting of
Stockholders of The Columbia Gas System, Inc., to be held at the Westin William
Penn Hotel in Pittsburgh, Pa., on May 21, 1997, at 9:00 a.m. (EDT) and at any
adjournment thereof or on any business that may properly come before the
meeting.
EVERY PROPERLY SIGNED VOTING INSTRUCTIONS FORM WILL BE VOTED IN ACCORDANCE WITH
THE SPECIFICATIONS MADE ON THE REVERSE SIDE OF THE CARD. IF NOT OTHERWISE
SPECIFIED, THIS VOTING INSTRUCTIONS FORM WILL BE VOTED FOR ALL NOMINEES FOR
ELECTION AS DIRECTOR; FOR THE SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS; AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES AS TO
ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING.
If you receive more than one proxy card, please vote, sign and return all cards
in the enclosed envelopes. Executors, administrators, trustees, etc., should
give full title. For joint accounts, each joint owner should sign. Corporations
should sign full corporation name by duly authorized officer with the signature
attested by Corporate Secretary.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN AND DATE ON REVERSE SIDE AND RETURN PROMPTLY
USING THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
Detach Here
<PAGE> 26
Please mark vote in oval in the following manner using dark ink only.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ALL PROPOSALS.
<TABLE>
<CAPTION>
For Withhold For All
All For All Except For Against Abstain
<S> <C> <C> <C> <C> <C> <C> <C>
1. ELECTION OF DIRECTORS: 2. SELECTION OF ARTHUR ANDERSEN LLP
/ / / / / / AS INDEPENDENT PUBLIC / / / / / /
Wilson K. Cadman; James P. Heffernan; ACCOUNTANTS
J. Bennett Johnston; James R. Thomas, II
THE PROXIES ARE AUTHORIZED TO
(NOTE: IF THIRD OVAL IS MARKED, CROSS VOTE IN THEIR DISCRETION UPON
THROUGH NAME(S) FOR WHOM VOTES ARE WITHHELD.) SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE
MEETING.
</TABLE>
Signed
--------------------------------
--------------------------------
The Columbia Gas System, Inc. Dated: , 1997
-------------------------
- -------------------------------------------------------------------------------
Detach Here
TO COLUMBIA GAS STOCKHOLDERS:
Columbia's Annual Meeting of Stockholders will be held at 9:00 a.m.
(EDT) on Wednesday, May 21, 1997, at the Westin William Penn Hotel, [LOGO]
530 William Penn Place, Pittsburgh, Pennsylvania.
Attached is your proxy card. Please read both sides and then mark,
sign and date it. Please detach and return the card promptly in the
enclosed business reply envelope. No postage is required if it is
mailed in the United States.
Thank you for voting on these very important proxy issues.
Carolyn McKinney Afshar
Secretary
The Columbia Gas System, Inc.
- --------------------------------------------------------------------------------
Return to the Columbia Gas System, Inc., c/o Harris Trust Company of New York,
P.O. Box 7051, Rockford, IL 61125-9945
<PAGE> 27
THE COLUMBIA GAS SYSTEM, INC.
- --------------------------------------------------------------------------------
PROXY FOR MAY 21, 1997, ANNUAL MEETING OF STOCKHOLDERS
- --------------------------------------------------------------------------------
(THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS)
The undersigned hereby appoints Malcolm Jozoff, Douglas E. Olesen and Oliver G.
Richard III and any of them, Proxies, with full power of substitution, to vote
on behalf of the undersigned at the Annual Meeting of Stockholders of The
Columbia Gas System, Inc., to be held at the Westin William Penn Hotel in
Pittsburgh, Pa., on May 21, 1997, at 9:00 a.m. (EDT) and at any adjournment
thereof or on any business that may properly come before the meeting.
THE SHARES REPRESENTED HEREBY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS ON THE REVERSE SIDE OF THIS CARD. WHERE A VOTE IS NOT SPECIFIED,
THE PROXIES WILL VOTE THE SHARES REPRESENTED BY THIS PROXY FOR ALL NOMINEES FOR
ELECTION AS DIRECTORS; FOR THE SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS; AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES AS TO
ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING.
If you receive more than one proxy card, please vote, sign and return all cards
in the enclosed envelopes. Executors, administrators, trustees, etc., should
give full title. For joint accounts, each joint owner should sign. Corporations
should sign full corporation name by duly authorized officer with the signature
attested by Corporate Secretary.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN AND DATE ON REVERSE SIDE AND RETURN PROMPTLY
USING THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
Detach Here
