<PAGE> 1
Consolidated Natural Gas Company Notice of Annual Meeting
CNG Tower and Proxy Statement
625 Liberty Avenue 1994
Pittsburgh, Pennsylvania 15222-3199 CNG
Consolidated Natural Gas Company
Gas Distribution
The East Ohio Gas Company
Cleveland, Ohio
The Peoples Natural Gas Company
Pittsburgh, Pennsylvania
Virginia Natural Gas, Inc.
Norfolk, Virginia
Hope Gas, Inc.
Clarksburg, West Virginia
West Ohio Gas Company
Lima, Ohio
The River Gas Company
Marietta, Ohio
Gas Transmission
CNG Transmission Corporation
Clarksburg, West Virginia
CNG Storage Service Company
Clarksburg, West Virginia
Exploration and Production
CNG Producing Company
New Orleans, Louisiana
Other
Consolidated Natural Gas Service
Company, Inc.
Pittsburgh, Pennsylvania
CNG Energy Company
Pittsburgh, Pennsylvania
CNG Gas Services Corporation
Pittsburgh, Pennsylvania
Consolidated System LNG Company
Clarksburg, West Virginia
CNG Research Company
Pittsburgh, Pennsylvania
CNG Coal Company
Pittsburgh, Pennsylvania
<PAGE> 2
1
CONSOLIDATED NATURAL GAS COMPANY
April 5, 1994
Dear Stockholder:
You are cordially invited to attend the 1994 Annual Meeting of Stockholders to
be held on Tuesday, May 17, 1994, at 2:00 p.m. Eastern Time at the Hotel
duPont, 11th and Market Streets, Wilmington, Delaware 19801 in the Gold
Ballroom.
The business items to be acted on during the Meeting are listed in the Notice
of Meeting and are described more fully in the Proxy Statement. The Board of
Directors has given careful consideration to these proposals and believes that
Proposals 1, 2 and 3 are in the best interests of the Company. The Board
recommends that you vote FOR Proposals 1, 2 and 3. Following the business
session, I will report on the Company's progress, plans and prospects, and the
Officers and Directors will be available to respond to questions and comments.
It is important that you be represented at the Annual Meeting in person or by
proxy. Whether or not you plan to attend, we urge you to mark, sign, date and
return the enclosed proxy card promptly in the postage paid envelope provided.
If you plan to attend, please check the appropriate box on the proxy card.
In accordance with the Company's usual practice, a summary of the proceedings
of the Annual Meeting will be mailed to all stockholders.
Thank you for your cooperation.
Sincerely,
GEORGE A. DAVIDSON, JR.
George A. Davidson, Jr.
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
2
CONSOLIDATED NATURAL GAS COMPANY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Consolidated Natural Gas Company will be held on
Tuesday, May 17, 1994, at 2:00 p.m. Eastern Time at the Hotel duPont, 11th and
Market Streets, Wilmington, Delaware 19801 in the Gold Ballroom.
Stockholders of record at the close of business on March 23, 1994, will be
entitled to vote at the Meeting and any adjournment thereof.
The agenda for the Meeting includes:
1. Election of two Directors.
2. Ratification of the appointment of Price Waterhouse as independent
accountants.
3. A proposal to approve the adoption of a Restricted Stock Plan for
non-employee Directors.
4. Transaction of any other business which may properly be brought
before the Meeting.
In the event you cannot be present in person, please sign and promptly return
the enclosed proxy card in the accompanying postage paid envelope so that your
shares will be represented at the Meeting. Prompt return of proxies will save
the Company the expense of further requests for proxies to insure a quorum.
By order of the Board of Directors,
LAURA J. MCKEOWN
Laura J. McKeown
Secretary
Pittsburgh, Pennsylvania
April 5, 1994
<PAGE> 4
3
CONSOLIDATED NATURAL GAS COMPANY
PROXY STATEMENT
This statement and proxy card, mailed to stockholders commencing on or about
April 8, 1994, are furnished in connection with the solicitation by the Board
of Directors of Consolidated Natural Gas Company of proxies to be voted at the
Annual Meeting of Stockholders, and any adjournment thereof, for the purposes
stated in the Notice of the Annual Meeting. Any stockholder who cannot attend
is requested to sign and return the accompanying proxy card promptly. The
proxy reflects the number of shares registered in a stockholder's name
directly and, for participants in the Company's Dividend Reinvestment Plan,
includes full shares credited to a participant's Dividend Reinvestment Plan
account. Proxies so given will be voted on all matters brought before the
Meeting and, as to the matters with respect to which a choice is specified,
will be voted as directed. The cost of solicitation will be paid by the
Company. In addition to the use of the mails, proxies may be solicited
personally, or by telephone or telecopy, by employees of the Company and its
subsidiaries with no special compensation to these employees. Kissel-Blake
Inc., 25 Broadway, New York, New York 10004, has been retained to assist in
the solicitation of proxies at an estimated cost of $10,000. The Company will
reimburse brokerage houses and other custodians, nominees, and fiduciaries for
expenses incurred in sending proxy material to their principals.
Any proxy given pursuant to this solicitation may be revoked at any time
prior to exercise by written notice to the Corporate Secretary, by filing a
later dated executed proxy, or by attending and voting at the Annual Meeting.
The address of the principal executive offices of the Company is Consolidated
Natural Gas Company, CNG Tower, 625 Liberty Avenue, Pittsburgh, Pennsylvania
15222-3199.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF. Holders of Common Stock,
$2.75 par value, of record on March 23, 1994, have one vote for each share
held. On March 23, 1994, 92,944,564 shares of Common Stock were outstanding.
A majority of the outstanding shares will constitute a quorum at the Meeting.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. Abstentions
are counted in tabulations of the votes cast on proposals presented to
stockholders. Broker non-votes are not counted for purposes of determining
whether a proposal has been approved.
The table indicates the beneficial ownership, as of January 31, 1994, of the
Company's Common Stock with respect to the only person known to the Company to
be the beneficial owner of more than 5 percent of such Common Stock. On
January 31, 1994, 92,938,540 shares of Common Stock were outstanding.
<PAGE> 5
Amount and Nature Percent
Name and Address of of Beneficial of Outstanding
Beneficial Owner Ownership Common Stock
_________________________________________________________________________
Trustees, Alternate Thrift Trust of
Employees Thrift Plans
CNG Tower, 625 Liberty Avenue
Pittsburgh, PA 15222-3199 11,078,125(1) 11.9%
____________________
(1) Such shares are beneficially owned in varying amounts by 7,238 employees,
no one of whom beneficially owned in excess of 14,000 shares in the Plans,
or 2/100ths of 1 percent of the shares outstanding. Such shares are voted
pursuant to confidential instructions of participating employees and in the
absence of instructions such shares are not voted. A Registration Statement
relating to various investment options available to participants in the
Plans has been made effective under the Securities Act of 1933 and is on
file with the Securities and Exchange Commission (SEC).
_________________________________________________________________________
4
The Board of Directors does not know of any other persons or groups who
beneficially own 5 percent or more of the outstanding shares of Common Stock.
ANNUAL REPORT. Commencing on or about March 15, 1994, the Company's Annual
Report for the year ended December 31, 1993, including financial statements,
was mailed to stockholders of record on March 1, 1994, and will be mailed to
any additional persons who were not stockholders on that date but are
stockholders of record on March 23, 1994. The Company will provide a copy of
the Annual Report to any stockholder of record after March 23, 1994, upon
request in writing to the Corporate Secretary, Consolidated Natural Gas
Company, CNG Tower, 625 Liberty Avenue, Pittsburgh, Pennsylvania 15222-3199.
<PAGE> 6
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors consists of ten members divided into three classes.
Each class has a three-year term, and only one class is elected each year.
There are no family relationships among any of the nominees, Continuing
Directors and Executive Officers of the Company nor any arrangement or
understanding between any Director or Executive Officer or any other person
pursuant to which any of the nominees has been nominated.
During 1993, each of the members of the Board of Directors attended more than
75 percent of the aggregate of the Board meetings and meetings held by all
committees of the Board on which the Director served during the periods that
the Director served.
On recommendation of the Nominating Committee of the Board of Directors, two
incumbent Class I Directors have been designated nominees for reelection; each
has consented to be a nominee and to serve if elected. The remaining Directors
will continue to serve in accordance with their previous elections. Mr.
Sommer, having reached the mandatory retirement age, will retire on the date of
the Annual Meeting, at which time the size of the Board shall be decreased from
ten to nine members. The names and other information concerning the two
persons nominated for a term of three years and the seven continuing Board
members are set forth by Class on pages 5 through 9 of this proxy statement.
The personal information has been furnished to the Company by the nominees and
other Directors. Unless you specify otherwise on your signed proxy card, your
shares will be voted FOR the election of the two persons named below to
three-year terms as Directors. In the event of an unexpected vacancy on the
slate of nominees, your shares will be voted for the election of a substitute
nominee if one shall be designated by the Board. If any nominee for election
as Director is unable to serve, which the Board of Directors does not
anticipate, the persons named in the proxy may vote for another person in
accordance with their judgment.
VOTE NEEDED FOR ELECTION OF DIRECTORS
Directors are elected by a plurality of the votes of the shares of Common Stock
present in person or represented by proxy and entitled to vote at the Annual
Meeting. Any shares not voted (whether by abstention, broker non-vote or votes
withheld) are not counted as votes cast for such individuals and will be
excluded from the vote.
<PAGE> 7
5
DIRECTORS NOMINATED FOR ELECTION TO THE BOARD WITH A TERM EXPIRING MAY 1997
(photo STEVEN A. MINTER Chair: Compensation and
omitted) Age 55 Benefits Committee
Director since 1988 Member: Ethics Committee
Nominating Committee
Mr. Minter has been the Executive Director and President of The
Cleveland Foundation, Cleveland, Ohio, since 1984, an organization
supporting health, human services, cultural and educational programs
in the greater Cleveland area. He had
been Associate Director and Program Officer of The Cleveland Foundation from
1975 to 1980 and from 1981 to 1983. He served as Undersecretary of the U.S.
Department of Education, Washington, D.C., from 1980 to 1981. He was the
Commissioner of Public Welfare for the Commonwealth of Massachusetts from 1970
to 1975. Mr. Minter is a Director of Goodyear Tire & Rubber Company,
Rubbermaid Inc. and KeyCorp. He is also a Trustee of the College of Wooster
and of The Foundation Center.
(photo LOIS WYSE Chair: Ethics Committee
omitted) Age 67 Member: Compensation and
Director since 1978 Benefits Committee
Nominating Committee
Ms. Wyse has been President of Wyse Advertising, Inc., a
Cleveland-based advertising agency with offices in New York, since
February 1979, and prior thereto had been an Executive Vice President
of the same firm since 1970. She is a
Contributing Editor of Good Housekeeping magazine, a syndicated columnist for
United Features Syndicate, and a widely published author. She is also a
Director of Catalyst and a Trustee of Beth Israel Medical Center.
<PAGE> 8
6
CONTINUING DIRECTORS WITH A TERM EXPIRING MAY 1995
(photo J. W. CONNOLLY Chair: Financial Policy Committee
omitted) Age 60 Member: Compensation and
Director since 1984 Benefits Committee
Executive Committee
Nominating Committee
Mr. Connolly served as Senior Vice President and Director of H. J.
Heinz Company, Pittsburgh, Pennsylvania, a processed food products
manufacturer, from 1985 to his retirement in December 1993. He
served as President and Chief Executive
Officer of Heinz U.S.A., a division of the H. J. Heinz Company, from 1980 to
1985, and served as Executive Vice President of that company from 1979 to 1980.
He was President and Chief Executive Officer of The Hubinger Company, an H. J.
Heinz Company subsidiary, from 1976 to 1979, Treasurer of H. J. Heinz Company
from 1973 to 1976, and a Vice President of Ore-Ida Foods, Inc., an H. J. Heinz
Company subsidiary, from 1967 to 1973. An attorney by profession, Mr. Connolly
joined the Law Department of the H. J. Heinz Company in 1961. He is a Director
of Mellon Bank, N.A., Mellon Bank Corporation, Presbyterian-University Health
System, and the University of Pittsburgh Medical Center System. He is also a
Trustee of the University of Pittsburgh.
(photo GEORGE A. DAVIDSON, JR. Chair: Executive Committee
omitted) Age 55 Member: Financial Policy Committee
Director since 1985 Nominating Committee
Mr. Davidson has served as Chairman of the Board and Chief Executive
Officer of the Company since May 1987, and has been employed by the
Consolidated system since 1966. He served as Vice Chairman and Chief
Operating Officer of the Company from
January 1987 to May 1987, and Vice Chairman from October 1985 to January 1987.
He served as President of CNG Transmission Corporation(1) from 1984 through
1985. He had been Vice President, System Gas Operations, for Consolidated
Natural Gas Service Company, Inc.,(1) from 1981 to 1984, and was Assistant Vice
President, Rates and Certificates, of that company from 1975 to 1981. Mr.
Davidson held various other positions in the Rates and Certificates Department
from 1966 to 1975. Mr. Davidson serves on the National Petroleum Council and
the Allegheny Conference on Community Development. He is a Director of the
American Gas Association, PNC Bank Corp. and B. F. Goodrich Company. He is
also a Trustee of the University of Pittsburgh.
(1)Wholly owned subsidiary of the Company.
<PAGE> 9
7
CONTINUING DIRECTORS WITH A TERM EXPIRING MAY 1995
(photo LESTER D. JOHNSON
omitted) Age 62
Director since 1992
Mr. Johnson has served as Executive Vice President and Chief
Financial Officer of the Company since March 1992 and Director since
May 1992, and has been employed by the Consolidated system since
1955. He served as Senior Vice
President and Chief Financial Officer from 1986 to 1992 and Vice President and
Chief Financial Officer from 1984 to 1986. He had been Vice President and
Treasurer from 1982 to 1984, Treasurer from 1979 to 1982 and Assistant
Treasurer from 1970 to 1979. He joined The Peoples Natural Gas Company (1) in
1955 and held a succession of financial posts. He is a member of the Finance
Committee of the American Gas Association and a member of the Management
Advisory Board of Duquesne University.
(photo RICHARD P. SIMMONS Member: Audit Committee
omitted) Age 62 Ethics Committee
Director since 1990 Executive Committee
Nominating Committee
Mr. Simmons has served as Chairman and Chairman of the Executive
Committee of Allegheny Ludlum Corporation, Pittsburgh, Pennsylvania,
a specialty steel manufacturer, since 1990. He served as Chairman
and Chief Executive
Officer from 1980 to 1990, and as a Director of that company since 1980. He
had been a Director of Allegheny Ludlum Industries from 1973 to 1980 and a
member of the Executive Office of that company from 1978 to 1980. Mr. Simmons
is a Director of PNC Bank Corp. and a Director of USAir Group, Inc. He is a
member of the Massachusetts Institute of Technology Corporation and Development
Committee, Director and Chairman of the Pittsburgh Symphony Society, a member
of the Executive Committee of the Allegheny Conference on Community Development
and Chairman of the Southwestern Pennsylvania United Way.
(1)Wholly owned subsidiary of the Company.
<PAGE> 10
8
CONTINUING DIRECTORS WITH A TERM EXPIRING MAY 1996
(photo PAUL E. LEGO Member: Compensation and Benefits
omitted) Age 63 Committee
Director since 1991 Executive Committee
Financial Policy Committee
Nominating Committee
Mr. Lego served as Chairman and Chief Executive Officer of
Westinghouse Electric Corporation, an electronic products and
services, environmental systems, equipment and broadcasting company,
Pittsburgh, Pennsylvania, from 1990 to his
retirement in January 1993. He served that company as President and Chief
Operating Officer from 1988 to 1990 and as a Director from 1988 to 1993. He
had been Senior Executive Vice President, Corporate Resources from 1985 to
1988, Executive Vice President, Westinghouse Industries & International Group
from 1983 to 1985 and Executive Vice President, Westinghouse Industry Products
from 1980 to 1983. Prior thereto, he served in various engineering and
management capacities with Westinghouse since 1956. Mr. Lego is a Director of
the Lincoln Electric Company and USX Corporation. He is a member of the
Business Council and a Trustee of the University of Pittsburgh.
(photo THEODORE LEVITT Chair: Nominating Committee
omitted) Age 69 Member: Audit Committee
Director since 1982 Financial Policy Committee
Professor Levitt is the Edward W. Carter Professor of Business
Administration, Emeritus, Harvard University Graduate School of
Business Administration. He served as Editor of the Harvard Business
Review from September 1985 to
December 1989, and became a member of the faculty of the Graduate School of
Business Administration, Harvard University in 1959, serving as head of its
marketing area for six years. He was a full-time economic and marketing
consultant to Standard Oil Company (Indiana) from 1955 to 1959, has been a
consultant to senior management of a large number of major corporations and
industries, and has authored numerous books on marketing theory and practice.
He is a Director of Landmark Graphics Corporation, Melville Corporation,
Sanford C. Bernstein Fund, Inc., Saatchi & Saatchi Company PLC and The Stride
Rite Corporation.
<PAGE> 11
9
CONTINUING DIRECTORS WITH A TERM EXPIRING MAY 1996
(photo WALTER R. PEIRSON Member: Audit Committee
omitted) Age 67 Financial Policy Committee
Director since 1989 Nominating Committee
Mr. Peirson served as a Director of Amoco Corporation, Chicago,
Illinois, an integrated oil company and producer of natural gas,
from 1976 to 1989, and as an Executive Vice President of that company
from 1978 until his retirement in
1989. Mr. Peirson served as President of Amoco Oil Company from 1974 to 1978,
Executive Vice President from 1971 to 1974 and Vice President-Marketing of that
company from 1968 to 1971. He was President of Toloma Gas Products Co.,
subsidiary of Standard Oil Company (Indiana), from 1964 to 1968. He served as
President of General Gas Corporation from 1962 to 1964 and Executive Vice
President of that company from 1961 to 1962. He was an attorney at Standard
Oil Company of Indiana from 1955 to 1961. He is a Director of American
National Bank & Trust Company of Chicago, American National Corporation and the
Federal Signal Corporation. He is also a Trustee of the Museum of Science and
Industry in Chicago.
DIRECTOR RETIRING IN MAY 1994
(photo A. A. SOMMER, JR. Chair: Audit Committee
omitted) Age 69 Member: Ethics Committee
Director since 1977 Executive Committee
Nominating Committee
Mr. Sommer has been a partner in the law firm of Morgan, Lewis &
Bockius, Washington, D.C., since 1979. He had been a partner in the
law firm of Wilmer, Cutler & Pickering, Washington, D.C., from 1977
to 1979, and a partner in the law
firm of Jones, Day, Reavis & Pogue from 1976 to 1977. He served as a
Commissioner of the Securities and Exchange Commission from 1973 to 1976. He
was a partner in the law firm of Calfee, Halter, Calfee, Griswold & Sommer,
Cleveland, Ohio, from 1960 to 1973. Mr. Sommer is a Director of Figgie
International Inc. and the National Association of Corporate Directors. He is
a member of the Board of Governors of the National Association of Security
Dealers, and is Chairman of The Public Oversight Board of the American
Institute of Certified Public Accountants.
<PAGE> 12
10
THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES THEREOF
BOARD OF DIRECTORS
The Company is managed under the direction of the Board of Directors, which
met eight times in 1993. To assist it in various areas of responsibility, the
Board has established several standing committees that are briefly described
below.
AUDIT COMMITTEE
The Audit Committee is composed of four non-employee Directors. Among its
functions are: reviewing the scope and effectiveness of audits by the
independent accountants and the Company's internal auditing staff; selecting
and recommending to the Board of Directors the employment of independent
accountants, subject to ratification by the stockholders; receiving and acting
on comments and suggestions by the independent accountants and by the internal
auditors with respect to their audit activities; approving fees charged by the
independent accountants; and reviewing the Company's annual financial
statements before their release.
The Committee met five times in 1993.
COMPENSATION AND BENEFITS COMMITTEE
The Compensation and Benefits Committee is composed of four non-employee
Directors. The Committee approves the salary budgets for all non-union
employees and fixes the salaries of the Officers and other personnel on the
executive payroll of the Company and its subsidiaries.
The Committee also has general supervision over the administration of all
non-union employee pension, compensation and benefit plans of the Company and
its subsidiaries; reviews proposals with respect to the creation of and
changes in such plans; and makes appropriate recommendations with respect
thereto to the Board of Directors. The Committee met seven times in 1993.
ETHICS COMMITTEE
The Ethics Committee consists of four non-employee Directors. Its function is
to review and act on all situations subject to the provisions and procedures
of the Company's Business Ethics Policy and to monitor the Company's
environmental compliance activities. The Committee met four times in 1993.
FINANCIAL POLICY COMMITTEE
The Financial Policy Committee consists of four non-employee Directors and the
Chairman of the Board. Its function is to oversee the short-term and
long-term financial activities and planning of the Company including dividend
actions. The Committee met three times in 1993.
<PAGE> 13
NOMINATING COMMITTEE
The Nominating Committee currently consists of eight non-employee Directors
and the Chairman of the Board. It reviews the qualifications of Director
candidates on the basis of recognized achievements and their ability to bring
skills and experience to the deliberations of the Board.
It also recommends qualified candidates to the Board, including the slate of
nominees submitted to the stockholders at the Annual Meeting; reviews the size
and composition of the Board; and monitors the Company's management succession
program. The Committee met four times in 1993.
Stockholders who wish to propose candidates to the Nominating Committee for
election to the Board at the 1995 Annual Meeting should write to the Corporate
Secretary, Consolidated Natural Gas Company, CNG Tower, 625 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3199, between March 17, 1995 and April 17,
1995, stating in detail the qualifications of such candidates for
consideration by the Committee. Any such recommendation should be accompanied
by a written statement from the candidate of his or her consent to be
considered as a candidate and, if nominated and elected, to serve as a
Director.
11
SECURITY OWNERSHIP OF MANAGEMENT
The following table lists the beneficial ownership, as of January 31, 1994, of
the Company's Common Stock by each current Director, named executive and all
current Directors and Officers as a group.
Number of Number of
Shares Shares Under Percent of
Name of Beneficially Exercisable Outstanding
Beneficial Owner Owned(1) Options(2) Common Stock
________________________________________________________________________
J. W. Connolly 700 .001
G. A. Davidson, Jr. 45,056 29,165 .080
D. P. Hunt 17,433 13,575 .033
L. D. Johnson 18,083 11,139 .031
P. E. Lego 500 .001
T. Levitt 800 .001
S. A. Minter 730 .001
W. R. Peirson 2,000 .002
R. P. Simmons 1,000 .001
A. A. Sommer, Jr. 2,200 (3) .002
<PAGE> 14
Number of Number of
Shares Shares Under Percent of
Name of Beneficially Exercisable Outstanding
Beneficial Owner Owned(1) Options(2) Common Stock
________________________________________________________________________
L. J. Timms, Jr. 23,038 9,948 .035
D. E. Weatherwax 8,603 5,608 .015
L. Wyse 400 --(4)
Directors and Officers of the
Company as a group
(18 persons) 150,424 88,426 .257
____________
(1) Includes shares owned by spouses and, in the case of employees,
shares beneficially owned under the Alternate Thrift Trust of the Employees
Thrift Plans, and the Employee Stock Ownership Plan. Unless otherwise noted,
the Directors and Officers have sole voting and investment power.
(2) Includes shares subject to options exercisable on January 31, 1994,
and options that will become exercisable within 60 days thereafter.
(3) Includes a family interest of 1,000 shares over which he has shared
voting and investment power.
(4) Less than .001 percent of outstanding shares.
________________________________________________________________________
<PAGE> 15
12
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation of the named Executive
Officers for the last three completed fiscal years of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
___________________________ ___________________
Other All
Annual Restricted Shares Other
Compen- Stock Under- Compen-
Name and Bonus sation Award(s) lying sation
Principal Position Year Salary (1) (2) (3) Options (4)
____________________ ____ ________ ________ ________ __________ _______ ________
<S> <C> <C> <C> <C> <C> <C> <C>
G. A. Davidson, Jr. 1993 $511,100 $280,400 $ 3,012 27,310 $38,654
(Chairman and 1992 483,400 219,103 3,000 35,013 36,364
Chief Executive 1991 464,800 203,891 $940,461 26,793
Officer, Director)
D. P. Hunt 1993 229,600 129,200 8,385 9,566 20,703
(President, 1992 216,000 61,819 10,889 8,430 16,414
CNG Producing) 1991 205,800 30,997 329,370 9,384
L. D. Johnson 1993 273,700 156,100 793 15,790 27,687
(Executive Vice 1992 255,400 165,755 762 12,262 25,495
President, Chief 1991 232,200 107,400 329,370 9,384
Financial Officer,
Director)
L. J. Timms, Jr. 1993 232,800 137,000 708 9,566 18,796
(President, CNG 1992 219,300 114,967 866 12,262 16,620
Transmission) 1991 205,800 124,830 329,370 9,384
D. E. Weatherwax 1993 227,300 121,000 999 9,566 23,052
(Senior Vice 1992 213,700 109,212 876 126,038 7,998 21,458
President, 1991 193,500 91,902 214,856 6,122
Administration)
____________________
</TABLE>
(1) The 1991 and 1992 bonuses were paid in cash and restricted stock. The
restrictions on the stock lapsed six months from the grant date. For 1991,
the amounts shown reflect cash and stock priced at $34.625 per share (closing
price on March 13, 1992, the grant date); for 1992, include cash and stock
priced at $47.00 per share (closing price on March 15, 1993, the grant date).
The 1993 bonus was paid entirely in cash.
<PAGE> 16
(2) Includes tax reimbursements only for the fiscal years ended
December 31, 1992, and December 31, 1993. No amounts are included in this
column for the Executive Split Dollar Life Insurance Plan because the
executives' contributions to this plan are greater than or equal to the term
life insurance costs that apply to the underlying life insurance policies.
No amounts are included for perquisites or personal benefits because, for
each Executive Officer, the aggregate amount of such compensation was less
than $50,000 and less than 10% of that executive's base salary and bonus for
1992 and 1993.
(3) Restricted Stock Award Grants are reported at aggregate market value at
the date of grant. The 1991 Restricted Stock Awards shown were granted on
January 2, 1991. The market value on that date was $43.875 per share. The
number of shares granted in 1991 for the named Executive Officers was: Mr.
Davidson, 21,435; Mr. Hunt, 7,507; Mr. Johnson, 7,507; Mr. Timms, 7,507; and
Mr. Weatherwax, 4,897. Mr. Weatherwax was granted an award on March 16,
1992, of 3,627 shares with a market value on the date of $34.75 per share.
Restrictions on the awards lapse in 25% increments, beginning with the first
anniversary and on each of the next three anniversaries of the grant date.
Dividends are paid on the shares from the date of grant. Restricted Stock
Award Grants are based on the individual's level of performance and
responsibility. At December 31, 1993, the number of Restricted Stock
holdings for each of the named Executive Officers was: Mr. Davidson, 10,374;
Mr. Hunt, 3,486; Mr. Johnson, 3,582; Mr. Timms, 3,372; and Mr. Weatherwax,
5,429. The aggregate value of such holdings at December 31, 1993, at the
year-end closing price of $47.00 per share, for each of the named Executive
Officers was: Mr. Davidson, $487,578; Mr. Hunt, $163,842; Mr. Johnson,
$168,354; Mr. Timms, $158,484; and Mr. Weatherwax, $255,163.
(4) Comprised of annual employer matching thrift plan contributions and ESOP
allocations only for the fiscal years ending December 31, 1992, and December
31, 1993.
13
The following table contains information concerning the grant of stock options
under the Company's 1991 Stock Incentive Plan to the named Executive Officers
as of the end of the last fiscal year of the Company. No SARs (stock
appreciation rights) have been granted.
<PAGE> 17
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
__________________________________
% of
Number Total Potential
of Options Realizable Value at
Shares Granted Exercise Assumed Annual
Under- to Em- or Rates of Stock
lying ployees Base Price Appreciation
Options in Price Expir- for Option Term (2)
Granted Fiscal Per ation ___________________________________
Name (1) Yr. Share Date 0% 5% 10%
___________________ _______ _______ ________ ______ ___ ______________ ______________
<S> <C> <C> <C> <C> <C> <C> <C>
G. A. Davidson, Jr. 27,310 4.95% $ 46.00 2003 0 $ 790,055 $ 2,002,155
D. P. Hunt 9,566 1.73 46.00 2003 0 276,736 701,304
L. D. Johnson 15,790 2.86 46.00 2003 0 456,791 1,157,599
L. J. Timms, Jr. 9,566 1.73 46.00 2003 0 276,736 701,304
D. E. Weatherwax 9,566 1.73 46.00 2003 0 276,736 701,304
____________________________________________________________________________________________
All Shareholders N/A N/A N/A N/A 0 $2,688,633,228 $6,813,524,479
____________________________________________________________________________________________
All Optionees 552,211 100.00 $44.875- 2003 0 $ 15,974,996 $ 40,483,777
$ 55.00
____________________________________________________________________________________________
Optionee Gain as %
of All
Shareholder Gain N/A N/A N/A N/A N/A .6% .6%
____________________________________________________________________________________________
</TABLE>
(1) All material terms of the Non-Qualified Stock Options granted in 1993 are
as follows. Non-Qualified Stock Options are granted at the fair market value
of a share on the date of grant of the option. The option expires on the
tenth anniversary of the grant date and is exercisable in installments of up
to 25% of the shares on or after the second, third, fourth and fifth
anniversaries of the grant. If the employee retires from CNG, his or her
options expire the earlier of the option expiration date or three years after
he or she retires. If an employee otherwise leaves CNG, his or her options
expire the earlier of the option expiration date or three months after he or
she ceases to be employed by CNG. Subject to the vesting schedule, options
are exercisable from time to time up to the expiration date. Non-Qualified
Stock Option Award grants are based on the individual's level of performance
and responsibility.
<PAGE> 18
(2) Based on actual option term (10-year) and annual compounding at rates
shown. The dollar amounts under these columns are the result of calculations
at 0% and at the 5% and 10% rates set by the Securities and Exchange
Commission and therefore are not intended to forecast possible future
appreciation, if any, of the Company's stock price. No gain to the optionees
is possible without stock price appreciation, which will benefit all
shareholders commensurately. A zero percent gain in stock price appreciation
will result in zero dollars for the optionees. The Company did not use an
alternative formula for a grant date valuation, as the Company is not aware
of any formula which will determine with reasonable accuracy a present value
based on future unknown or volatile factors.
14
The following table sets forth information with respect to the named
executives concerning the exercise of options during the last fiscal year of
the Company and unexercised options held as of the end of the fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND DECEMBER 31, 1993, YEAR-END OPTION VALUES
Number of Value of
Shares Underlying Unexercised,
Unexercised Options In-the-Money Options
Held at Year-End at Year-End (2)
Shares ___________________ ____________________
Acquired Value
On Realized Exercis- Unexercis- Exercis- Unexercis-
Name Exercise (1) able able able able
___________________ ________ ________ ________ __________ ________ _________
G. A. Davidson, Jr. 18,399 $187,067 6,542 92,859 $ 0 $546,313
D. P. Hunt 4,985 87,238 7,241 28,021 27,344 141,498
L. D. Johnson 6,432 66,067 2,910 39,362 0 197,527
L. J. Timms, Jr. 6,865 75,431 2,020 32,392 0 192,311
D. E. Weatherwax 4,553 32,142 0 25,175 0 129,826
__________________
(1) Market value of underlying shares at time of exercise minus the exercise
price.
(2) Market value of underlying shares at year-end market price of $47.00 per
share minus the exercise price.
<PAGE> 19
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
No Restricted Stock Awards were made to the named executives under the
Long-Term Incentive Plan in 1993.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AGREEMENTS
Messrs. Davidson, Hunt, Johnson, Timms and Weatherwax entered into agreements
with the Company dated November 14, 1989, that have provisions which become
operative upon a defined change of control of the Company. Such agreements
preserve for three years following a change of control the annual salary
levels and employee benefits as are then in effect for these executives and
provide that, in the event of certain terminations of employment, these
executives shall receive severance payments equal to up to 2.99 times their
respective annual compensation prior to severance.
COMPENSATION AND BENEFITS COMMITTEE REPORT
The Company's executive compensation programs are administered by the
Compensation and Benefits Committee of the Board of Directors (the
"Committee"), which is composed of four non-employee Directors. The Committee
reviews and approves all issues pertaining to executive compensation. Total
compensation is designed in relationship to compensation paid by competitor
organizations. Base salary and long-term incentive compensation are targeted
to median market levels and short-term incentive compensation is goal based
and structured to be comparable to that paid by competitor organizations. The
objective of the Company's three compensation programs (base salary,
short-term incentive and long-term incentive) is to provide a total
compensation package that will enable the Company to attract, motivate and
retain outstanding individuals and align their success with that of the
Company's shareholders.
Competitor organizations are defined annually as part of the compensation
administration process and include fully integrated natural gas companies as
well as broader industry
15
comparatives, e.g., comparably-sized general industrial companies and, where
appropriate, specific energy companies.
The level of base salary paid to executives for 1993 was determined on the
basis of performance and experience. The Company measures or identifies its
base salary structure by range midpoints in comparison to base salaries
offered by competitors. Salary levels are targeted to, and in 1993 correspond
to, the median range of compensation paid by competitor organizations. These
are not the same companies that comprise the American Gas Association
Diversified Gas Index shown on the shareholder return performance
presentation. The specific competitive marketplace which the Company and its
subsidiaries use in the base salary analysis is determined based on the nature
and level of the positions being analyzed and the labor markets from which
individuals would be recruited. The Committee also considered the
competitiveness of the entire compensation package in its determination of
salary levels.
<PAGE> 20
Short-term incentive compensation plans are used at both corporate and
subsidiary levels. The appropriateness of applying an incentive compensation
arrangement to any given position is determined based on the nature of the
position, its potential for contribution and the then-current competitive
environment. Short-term incentive opportunity is structured so that awards
are competitive at a level commensurate with the performance level achieved by
the employee with consideration for the employee's level of responsibility.
The short-term incentive plan has threshold, target and maximum bonus levels
for the various executive levels based on competitive data. For the named
Executive Officers, the threshold bonus level is 18% to 20% of base pay, the
target bonus level is 45% to 50% of base pay, and the maximum bonus level is
63% to 70% of base pay. At the corporate level, the primary form of
short-term incentive compensation is a cash or stock bonus pool arrangement,
for which all employees on the Company's System executive payroll are
eligible. The bonus pool is established as a percentage of corporate net
income based on a weighted differential between established goals and actual
performance; the pool is then, in turn, allocated to individual participants
based on the achievement of their individual and respective company goals. At
85% of goal achievement, the threshold bonus pool is created; at 100% of goal,
the target bonus pool is achieved; at 115% or greater of goal achievement, the
maximum bonus pool is achieved. At less than the threshold level, there is no
bonus pool. The performance measures (weighted as indicated) are based on the
Company's fixed charge coverage ratio (20%), return on equity (40%), net
income (20%) and cash flow (20%), with performance goals established based on
the Company's annual long-range forecast, actual prior year performance and
business plan reviews. Performance targets are set to meet or exceed the
performance of peer companies. For the last fiscal year, the overall goal
achievement was 107% with return on equity achieving 115% of goal, fixed
charge coverage ratio achieving 115% of goal, net income achieving 98% of
goal, and cash flow achieving 94% of goal.
Long-term incentive compensation plans are limited to only those employees
who are in positions which can affect the long-term success of the Company,
including both the establishment and execution of the Company's business
strategies. The 1991 Stock Incentive Plan is the principal method for
long-term incentive compensation, and compensation thereunder principally
takes the form of Non-Qualified Stock Option grants and Restricted Stock
Awards. The purposes of long-term incentive compensation are to: (i) focus
key executives' efforts on performance which will increase the value of the
Company to its shareholders; (ii) align the interests of management with those
of the shareholders; (iii) provide a competitive long-term incentive and
capital accumulation opportunity; and (iv) provide a retention incentive for
selected key executives. Performance criteria
16
used in long-term incentives are tied directly to the individual participant's
performance over time and his or her impact on increasing the economic
performance of the Company. Previous awards of options or restricted stock
are not considered in the determination of an award. Executive performance
against stated position responsibilities and goals is evaluated annually.
Such performance rating is used with the level of responsibility in
determining the amount of the award. At expected levels of performance, the
long-term incentive award is structured at the median range; at levels of
performance that exceed expectations, the
<PAGE> 21
grant is structured at the 75th percentile; if performance is outstanding, the
grant is structured at the 90th percentile.
The Committee utilizes the services of an independent compensation consultant
to assess market relativity of executive compensation ranges. Consistent with
the Company's compensation philosophy, adjustments are made to any executive
compensation ranges necessary to achieve levels of compensation at the median
market position.
Effective for the tax year ended December 31, 1994, the Revenue
Reconciliation Act of 1993 placed certain limits on the deductibility of
non-performance based executive compensation. Current and anticipated levels
of executive compensation do not subject the Company to these limitations. At
such time that executive compensation levels subject the Company to
deductibility limits, the Committee will consider the Company's alternatives
with respect to qualifying executive compensation for deductibility.
Mr. Davidson's compensation for 1993 was determined in the general context of
the programs described above. In particular, Mr. Davidson's 1993 incentive
compensation was based on the following measures of the Company's performance
(weighted as shown): net income (10%), cash flow (defined as net income plus
depreciation plus deferred taxes minus dividends) (5%), return on equity
(compared to peer companies) (10%), credit rating of the Company's long-term
debt (10%), price to earnings ratio (compared to published summary data)
(10%), and the attainment of prescribed levels of gas and oil reserve
additions and finding and development costs (15%). In addition, Mr.
Davidson's 1993 incentive compensation was based upon providing direction for
changes in System marketing efforts and business information systems
necessitated by the Federal Energy Regulatory Commission's natural gas
industry deregulation on the Company's core business segments (20%) and
discretion of the Committee (20%). Mr. Davidson's threshold bonus level is
20% of base pay, his target bonus level is 50% of base pay and his maximum
bonus level is 70% of base pay. Mr. Davidson's overall weighted goal
achievement was 101% of established performance goals. Based on this level of
achievement, the Committee established Mr. Davidson's incentive compensation
at $280,400.
S. A. Minter, Chair
J. W. Connolly
P. E. Lego
L. Wyse
17
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly cumulative total
shareholder return on CNG's Common Stock against the cumulative total return
of the S&P 500 Stock Index and the American Gas Association (AGA) Diversified
Gas Index for the period of five years commencing December 31, 1988, and ended
December 31, 1993.
<PAGE> 22
The AGA is the primary trade association for the natural gas industry. The
AGA's Diversified Gas Index is published in the AGA Financial Quarterly
Review. This publication is sent to industry executives and security analysts
and is provided to anyone who requests a copy. The index was prepared in
January 1994, under the direction of the AGA Finance Committee. All companies
contained in the index are members of the AGA. Those companies are: Arkla,
Inc., Chesapeake Utilities Corp., Columbia Gas System, Inc., Consolidated
Natural Gas Company, Eastern Enterprises, Energen Corporation, ENSERCH
Corporation, Equitable Resources, K N Energy, Inc., NICOR Inc., ONEOK Inc.,
Pacific Enterprises, Pennsylvania Enterprises, Inc., Questar Corporation,
South Jersey Industries, Inc., Southwest Gas Corporation, Southwestern Energy,
UGI Corporation, Valley Resources, Inc., Washington Energy Company and WICOR,
Inc.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
1988 1989 1990 1991 1992 1993
_______________________________________________________
CNG $100 $129 $118 $120 $132 $142
S&P 500 100 132 128 166 179 197
AGA 100 140 124 108 114 130
_______________________________________________________
*Assumes $100 investment on December 31, 1988, and
reinvestment of dividends.
18
NON-EMPLOYEE DIRECTORS' COMPENSATION
Non-employee Directors are currently paid a $24,000 annual retainer, a $2,000
per diem fee for attending each Board meeting including all Board Committee
meetings held in conjunction with such Board meeting, and a $1,000 per diem
fee for participating in telephonic Board or Board Committee meetings.
Committee Chairpersons receive an additional annual fee of $3,000. Such
Directors may elect to defer receipt of these payments until after retirement
from the Board. Such payments are deferred in the form of cash credits or
Consolidated Natural Gas Company Common Stock credits. Such stock credits are
valued as Common Stock
<PAGE> 23
equivalents equal to the number of shares that could have been purchased at
the closing price on the date the compensation was earned. As of the date any
dividend is paid on the Company's Common Stock, a credit is made to each
participant's deferred account equal to the number of shares of Common Stock
that could have been purchased on such date with the dividend paid. Amounts
deferred in the form of cash credits earn interest, compounded quarterly, at a
rate equal to the closing prime commercial rate at The Chase Manhattan Bank
N.A. on the last day of each quarter. The annual retainer paid to
non-employee Directors, as set by the Board of Directors from time to time,
shall continue to be paid for life to each non-employee Director retired at
age 70, or at an earlier age due to disability, provided the non-employee
Director served a minimum of four years and agrees to be generally available
as a consultant. Employee Directors do not receive any compensation for
service as Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1993, the following Directors served as members of the Compensation and
Benefits Committee: S. A. Minter, Chair, J. W. Connolly, P. E. Lego and L.
Wyse.
The Company has Credit Agreements totalling $300 million with a group of
banks. Each participating bank is compensated with a commitment fee of 1/8 of
1 percent on its respective commitment amounts. The Company also maintains
commercial paper back-up lines with various banks that total $475 million.
Each commercial paper back-up line bank receives a commitment fee of 1/10 of 1
percent on its line amount.
Currently, PNC Bank, Pittsburgh, Pennsylvania, the subsidiary of PNC Bank
Corp., of which Messrs. Davidson and Simmons are Directors, provides a
commitment of $30 million under the Credit Agreement and a commercial paper
back-up line of $130 million. Mellon Bank, N.A., Pittsburgh, Pennsylvania, of
which Mr. Connolly is a Director, provides a commitment of $40 million under
the Credit Agreement and a commercial paper back-up line of $130 million.
Society National Bank, Cleveland, Ohio, the subsidiary of KeyCorp (formerly
Society Corporation), of which Mr. Minter is a Director, provides a commitment
of $40 million under the Credit Agreement and a commercial paper back-up line
of $50 million. There were no amounts outstanding from either PNC Bank,
Mellon Bank, N.A., or Society National Bank during 1993 under the Credit
Agreements or the commercial paper back-up line arrangement.
Since 1967, Morgan, Lewis & Bockius has performed legal services for the
Company and certain of its subsidiaries. During 1993, this firm was paid
aggregate fees of $65,996 for such services. Mr. Sommer has been a partner of
that law firm since August 1979. The Company retains numerous non-affiliated
law firms that provide similar services, and the rates that Morgan, Lewis &
Bockius charges are comparable to those charged by the non-affiliated firms.
The Company expects to continue receiving services from this firm in 1994.
The Company has, since 1977, retained Wyse Advertising, Inc., of which Ms.
Wyse is the President and a principal stockholder. Wyse Advertising plans,
creates, writes and designs media communications at
<PAGE> 24
commission rates and billing practices which are comparable to such rates
and
19
practices charged by non-affiliated firms. During 1993, the Company paid
aggregate commissions of $364,372 to Wyse Advertising.
LIFE INSURANCE AND RELATED BENEFIT PLANS
The Company maintains a program composed of Split Dollar Life Insurance Plans
and Supplemental Death Benefit Plans for employees on the executive payroll of
the Company and its subsidiaries, as well as non-employee Directors, which
provides death benefits to beneficiaries of those individuals. There were 161
eligible employees on December 31, 1993, and 122 were participating. Five
non-employee Directors were also participating. The Plans are under the
general supervision of the Compensation and Benefits Committee of the Board.
Continuation of the Plans beyond retirement requires the Committee's approval.
The costs for the Split Dollar Life Insurance Plans are shared by the Company
and the participants. Each year an employee participant pays a premium based
on age and amount of individual coverage, which is approximately twice annual
salary. Each year Director participants pay a premium based on age and amount
of individual coverage. The Company pays all additional premiums and expects
to receive proceeds approximately equal to its investment in the policy
through the total coverage exceeding the participant's individual coverage.
The Supplemental Death Benefit Plans provide for payments to a deceased
participant's beneficiaries over a period of years.
RETIREMENT PROGRAMS
A non-contributory Pension Plan is maintained for employees who are not
represented by a recognized union, including Officers of the Company and its
subsidiaries. On December 31, 1993, all 3,415 eligible employees of the
Company and its subsidiary companies were participating in the Pension Plan.
The Company also maintains an unfunded Short Service Supplemental Retirement
Plan for certain management employees whose commencement of service with the
Company occurred after the employee had acquired experience of considerable
value to the Company and who will have less than 32 years of service at normal
retirement.
The following table illustrates maximum annual benefits -- including any
supplemental payment described above but before being reduced by a required
offset -- at normal retirement date (age 65) on the individual life annuity
basis for the indicated levels of final average annual salary and various
periods of service.
<PAGE> 25
PENSION PLAN TABLE
_______________________________________________________________________
Annual Pension Benefit
for Years of Service Indicated
_________________________________________________________
Average
Annual Salary 15 20 25 35 40
_______________________________________________________________________
$100,000 . . $ 34,000 $ 45,300 $ 55,000 $ 59,500 $ 68,000
150,000 . . 51,000 68,000 82,500 89,300 102,000
200,000 . . 68,000 90,700 110,000 119,000 136,000
250,000 . . 85,000 113,300 137,500 148,800 170,000
300,000 . . 102,000 136,000 165,000 178,500 204,000
350,000 . . 119,000 158,700 192,500 208,300 238,000
400,000 . . 136,000 181,300 220,000 238,000 272,000
450,000 . . 153,000 204,000 247,500 267,800 306,000
500,000 . . 170,000 226,700 275,000 297,500 340,000
550,000 . . 187,000 249,300 302,500 327,300 374,000
20
The 1993 salaries, projected service to age 65, and estimated annual
retirement benefits on the individual life form of annuity, assuming
continuation of their December 1993 salaries until age 65 for each of the
individuals in the Summary Compensation table, are as follows:
ESTIMATED ANNUAL RETIREMENT BENEFITS
Years of
Service at Years of Estimated Annual
1993 Year-End Service Retirement Benefits
Name Salary 1993 at Age 65 at Age 65
__________________________________________________________________________
G. A. Davidson, Jr. . $511,100 27 37 $340,416
D. P. Hunt . . . . . . 229,600 30 43 182,607
L. D. Johnson . . . . 273,700 35 39 182,491
L. J. Timms, Jr. . . . 232,800 30 38 161,265
D. E. Weatherwax . . . 227,300 37 38 139,448
__________________________________________________________________________
The Company also maintains a Supplemental Retirement Benefit Plan under
which payments may be made, at the sole discretion of the Compensation and
Benefits Committee of the Board, to individuals comprising the executive
payroll. As of December 31, 1993, there were 161 potentially eligible
employees. The decision to grant a Supplemental Retirement Benefit is based
on a review of the retiring employee's total available benefits. Payments
under such Plan during 1993 amounted to $291,000. The maximum annual
supplemental annuity under this Plan is 10 percent of an individual's final
average annual salary. Assuming continuation of their December 1993 salaries
until age 65, the five individuals named in the Summary Compensation table
would be eligible to receive the following maximum annual supplemental
retirement benefits: Mr. Davidson, $54,620; Mr. Hunt, $25,660; Mr. Johnson,
$28,192; Mr. Timms, $25,660; Mr. Weatherwax, $21,904.
<PAGE> 26
The benefits described above have not been reduced by the limitations
imposed on qualified plans by the Internal Revenue Code. As permitted by the
Code, the Board of Directors has adopted a policy whereby supplemental
payments may be made, as necessary, to maintain the benefit levels earned
under the benefit plans.
21
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse has audited the accounts of the Company and its subsidiaries
since 1943. On recommendation of the Audit Committee, the Board of Directors
has, subject to ratification by the stockholders, appointed Price Waterhouse
to audit the accounts of the Company and its subsidiaries for the fiscal year
1994. Audit fees to Price Waterhouse in 1993 incurred by the Company and its
subsidiaries were approximately $1,034,300. Representatives of Price
Waterhouse will be present at the Meeting to respond to appropriate questions
and will have an opportunity to make a statement if they desire to do so.
Accordingly, the following resolutions will be offered at the Meeting:
RESOLVED, That the appointment, by the Board of Directors of the Company, of
Price Waterhouse to audit the accounts of the Company and its subsidiary
companies for the fiscal year 1994, effective upon ratification by the
stockholders be, and it hereby is, ratified; and
FURTHER RESOLVED, That a representative of Price Waterhouse shall attend the
next Annual Meeting and any special meetings of stockholders that may be held
in the interim.
An affirmative vote of the holders of a majority of the Company's Common
Stock, represented in person or by proxy and entitled to vote at the Meeting,
is necessary for ratification. If the stockholders do not ratify the
appointment of Price Waterhouse, the selection of independent accountants will
be reconsidered by the Audit Committee and the Board of Directors.
BOARD RECOMMENDATION
The Board recommends that stockholders vote FOR Proposal 2, and the
accompanying proxy will be so voted, unless a contrary specification is made.
<PAGE> 27
PROPOSAL 3
NON-EMPLOYEE DIRECTORS' RESTRICTED STOCK PLAN
INTRODUCTION
On September 14, 1993, the Board of Directors of the Company adopted the
Non-Employee Directors' Restricted Stock Plan (the "Plan") subject to
shareholder approval. The purpose of this Plan is to assist the Company in
retaining highly qualified persons to serve as non-employee Directors by
enabling such Directors to acquire a proprietary interest in the Company, and
by providing to such Directors an incentive to continue to serve the Company.
A full copy of the Plan is attached as Exhibit A to the Proxy Statement. The
major features of the Plan are summarized below and such summary is qualified
in its entirety by reference to the Plan.
SUMMARY OF AWARDS UNDER THE PLAN
The number of shares of Common Stock available for issuance under the Plan is
15,000 shares. The Plan provides for the automatic annual grant to each
non-employee Director of 100 shares of the Company's Common Stock, subject to
restrictions, following the Annual Shareholders' Meeting on the date of the
Annual Shareholders' Meeting. Each non-employee Director granted Restricted
Stock under the Plan shall be entitled to receive dividends on such Restricted
Stock when dividends are declared and paid on the Company's Common Stock;
shall be entitled to vote Restricted Stock on any matter submitted to a vote
of holders of Common Stock; and shall have all rights of a shareholder of the
Company, except that until restrictions on such stock expire, shall
22
have no right to sell, transfer, give, assign, pledge or otherwise encumber or
dispose of such Restricted Stock.
The restrictions on a Director's Restricted Stock shall lapse in 25%
installments on the anniversary date of each grant or shall lapse in total
upon the Director's retirement at age 70 or the Director's ceasing to serve
due to death or disability, whichever first occurs.
AMENDMENT TO AND TERMINATION OF THE PLAN
The Board may amend, alter, suspend, discontinue, or terminate the Plan unless
such action requires shareholder approval.
CHANGE OF CONTROL
In the event of a "Change of Control" of the Company as that term is defined
in the Company's 1991 Stock Incentive Plan, all restrictions on all
outstanding Restricted Stock will lapse and the Company will repurchase all
such shares which were awarded more than six months prior to the change of
control at the then fair market value.
A "Change of Control" under the 1991 Stock Incentive Plan is deemed to have
generally occurred when (i) 20% or more of the voting power of outstanding
voting securities of the Company becomes owned by another person other than
the Company or a Related Party, (ii) the majority of the Board of Directors
ceases to be comprised of Directors whose nomination or election was approved
by Directors already in office, (iii) the
<PAGE> 28
stockholders of the Company approve a merger, consolidation, recapitalization
or reorganization of the Company, reverse stock split of voting securities, or
an acquisition of securities by the Company unless there is a continuation of
at least 75% in voting power interest or a Related Party owns more than 50% of
the surviving entity's voting securities, or (iv) the stockholders approve a
liquidation or sale of all or substantially all of the Company's assets other
than when a Related Party would end up owning more than 50% of such assets. A
"Related Party" is (i) a majority-owned subsidiary of the Company
("Subsidiary"), (ii) one or more employees of the Company or of a Subsidiary,
(iii) a fiduciary holding securities under an employee benefit plan of the
Company or a Subsidiary, or (iv) a corporation owned by the stockholders of
the Company in substantially the same proportion as their ownership of voting
securities of the Company.
TAX IMPLICATIONS OF THE PLAN
The awards granted under the Plan in shares of Restricted Stock will be
recognized as ordinary income to the participant, equal to the cash or the
fair market value of the freely transferable and non-forfeitable stock
received, upon the lapsing of restrictions on such award. The Company will be
entitled to a deduction for the amount recognized as ordinary income by the
participant.
NEW PLAN BENEFITS
NON-EMPLOYEE DIRECTORS' RESTRICTED STOCK
Position Dollar Value (1) Number of Shares
_________________________________________________________________________
Non-Employee Directors as
a group (7 persons) $28,088 700
(1) If approved, it is expected that 700 shares will be granted on the
date of the Annual Shareholders' Meeting. This value is an estimate
based on the March 30, 1994, closing price of the Company's Common
Stock of $40.125 per share.
23
VOTE NEEDED FOR APPROVAL OF THE PROPOSAL
Approval of this proposal requires an affirmative vote by the holders of the
majority of the shares present in person or represented by proxy and entitled
to vote. An abstention, broker non-vote or vote withheld will have the same
effect as a vote against this proposal.
BOARD RECOMMENDATION
The Board of Directors recommends a vote for approval and adoption of the
Non-Employee Directors' Restricted Stock Plan and the accompanying proxy will
be so voted, unless a contrary specification is made.
PROCEDURE FOR SUBMISSION OF 1995 STOCKHOLDER PROPOSALS
Proposals by stockholders for inclusion in the 1995 Annual Meeting Proxy
Statement must be received by the Corporate Secretary, Consolidated
Natural Gas Company, CNG Tower, 625 Liberty Avenue, Pittsburgh,
<PAGE> 29
Pennsylvania 15222-3199, prior to December 3, 1994. All such proposals are
subject to the applicable rules and requirements of the Securities and
Exchange Commission.
OTHER BUSINESS
The Board of Directors does not intend to bring any business before the
Meeting other than that listed in the foregoing Notice and is not aware of any
business intended to be presented to the Meeting by any other person. Should
other matters properly come before the Meeting, the persons named in the
accompanying proxy will vote said proxy in such manner as they may, in their
discretion, determine.
LAURA J. MCKEOWN
Laura J. McKeown
Secretary
April 5, 1994
NOTE: YOUR SHARES CANNOT BE VOTED UNLESS YOU SIGN AND RETURN
YOUR PROXY CARD, OR ATTEND THE MEETING AND VOTE IN PERSON.
<PAGE> 30
24
EXHIBIT A
CONSOLIDATED NATURAL GAS COMPANY
NON-EMPLOYEE DIRECTORS' RESTRICTED STOCK PLAN
The purpose of this Non-Employee Directors' Restricted Stock Plan (the
"Plan") is to assist Consolidated Natural Gas Company, a Delaware
corporation (the "Company"), in retaining and attracting highly
qualified persons to serve as non-employee Directors by enabling such
Directors to acquire a proprietary interest in the Company, and by
providing to such Directors an incentive to continue to serve the
Company. The Plan provides for the automatic annual grant to each
non-employee Director of 100 shares of the Company's Common Stock, par
value $2.75 per share ("Common Stock"), subject to restrictions (the
"Restricted Stock").
1. AMOUNT AND SOURCE OF STOCK
The aggregate number and class of shares which may be granted as
Restricted Stock under the Plan is 15,000 shares of Common Stock,
subject to adjustment as provided in Section 7. Such shares may be
authorized but unissued shares of Common Stock of the Company or may be
shares held in or acquired for the treasury of the Company. Any
Restricted Stock granted hereunder which is forfeited pursuant to the
terms of the Plan shall not be available for grants under the Plan.
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Compensation and Benefits
Committee of the Board of Directors of the Company (the "Committee").
In addition to any other powers granted to the Committee, it shall have
the following powers, subject to the express provisions of the Plan:
a) to construe and interpret the Plan;
b) to make all determinations and take all other actions
necessary or advisable for the administration of the Plan, except that
the persons entitled to receive Restricted Stock and the dates and
amounts of such awards shall be determined as provided in Articles 4, 5
and 6, and the Committee shall have no discretion as to such matters;
and
c) to delegate to Officers or managers of the Company the
authority to perform administrative functions under the Plan.
Any determinations or actions made or taken by the Committee
pursuant to this Article shall be binding and final.
<PAGE> 31
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall be effective on September 14, 1993, the date on which it
was adopted by the Board, subject to subsequent approval by shareholders
of the Company holding not less than a majority of the shares present
and voting at a meeting of its shareholders (provided a quorum is
present). Unless earlier terminated by the Board, the Plan shall
terminate at such time that no further Common Stock is available for
grants under the Plan.
25
4. ELIGIBILITY
Each Director of the Company who is not then, and has not been at any
time during the previous year, an employee of the Company or any parent
or subsidiary of the Company shall be eligible to receive Restricted
Stock under the Plan. Notwithstanding the foregoing, no Director who is
serving on the Board as a result of a nomination or appointment pursuant
to the terms of any debt instrument, preferred stock, underwriting
agreement or other contract entered into by the Company shall be
eligible to participate in the Plan. No person other than those
specified in this Section 4 shall participate in the Plan.
5. GRANTS OF RESTRICTED STOCK
Each person who is an eligible Director of the Company immediately
following the Annual Shareholders' Meeting shall receive an annual grant
of 100 shares of Restricted Stock on the date of the Annual
Shareholders' Meeting.
6. TERMS OF RESTRICTED STOCK
Except as hereinafter provided, all Restricted Stock shall be subject to
the following terms and conditions:
(a) Rights and Restrictions. A participant granted
Restricted Stock shall be entitled to receive dividends on such
Restricted Stock when, as and if dividends are declared and paid on
Common Stock, such participant shall be entitled to vote Restricted
Stock on any matter submitted to a vote of holders of Common Stock,
and such participant shall have all other rights of a shareholder
of the Company except as otherwise expressly provided under this
Section 6. Until restrictions on Restricted Stock expire in
accordance with Section 6(b), a participant shall have no right to
sell, transfer, give, assign, pledge or otherwise encumber or
dispose of such Restricted Stock (except for transfers and
forfeitures to the Company). Restricted Stock shall be granted
under the Plan for no consideration other than the services of the
Director to be performed during the period the restrictions set
forth in this Section 6 (the "Restrictions") are in effect.
<PAGE> 32
(b) Expiration of Restrictions. The Restrictions on a
Director's Restricted Stock shall lapse in 25% installments on the
anniversary date of each grant or shall lapse in total upon the
participant Director's retirement at age 70, the Director's ceasing
to serve due to death or disability, whichever first occurs. In
the event of a "Change of Control" of the Company as that term is
defined in the Company's 1991 Stock Incentive Plan, all
Restrictions on all outstanding Restricted Stock will lapse and the
Company will repurchase all such shares which were awarded more
than six months prior to the Change of Control at the then fair
market value.
(c) Forfeiture. A participant who ceases to serve the
Company as a Director shall, at the time he or she ceases to hold
office, forfeit any Restricted Stock as to which the Restrictions
have not theretofore expired, unless the participant ceases to
serve as a Director as a result of the death or following the
disability of the Director; for this purpose, "disability" shall
have the meaning as established in the Company's long-term
disability plan provided, however, that, if a participant ceases to
serve as a Director and immediately thereafter he or she becomes
employed by the Company or any subsidiary of the Company, then,
solely for purposes of the
26
Plan, such participant shall not be treated as having ceased
service as a Director, and employment by the Company or any
subsidiary of the Company shall be treated, for purposes of the
Plan, as if such employment were service as a Director (solely so
that Restrictions on such participant's Restricted Stock shall
continue in effect until lapsed in accordance with Section 6).
(d) Certificates for Shares of Restricted Stock. Restricted
Stock granted under the Plan to a Director shall be evidenced by
issuance of one or more certificates in the name of the Director,
bearing an appropriate legend referring to the terms, conditions
and Restrictions applicable to Restricted Stock, and shall remain
in the physical custody of the Secretary of the Company until such
time as the Restrictions on such shares have expired. In addition,
Restricted Stock shall be subject to such stop-transfer orders and
other Restrictions as the General Counsel of the Company shall deem
advisable under federal or state securities laws, rules and
regulations thereunder or the rules of any national quotation
system or any national securities exchange on which Common Stock is
quoted or listed, and the General Counsel may cause a legend or
legends to be placed on any such certificates to make appropriate
reference to such Restrictions.
<PAGE> 33
(e) Restricted Stock Agreement; Stock Powers. The Company
and each Director to whom Restricted Stock is granted hereunder
shall enter into a Restricted Stock Agreement in the form as the
Board may approve, to evidence the grant of Restricted Stock
hereunder. In addition, each Director to whom Restricted Stock is
granted shall execute one or more stock powers, in such form as may
be specified by the General Counsel, authorizing the transfer of
the Restricted Stock to the Company, in order to give effect to the
forfeiture provisions of Section 6(c).
7. ADJUSTMENT PROVISIONS
In the event of any recapitalization, reorganization, merger,
consolidation, spin-off, combination, repurchase, exchange of shares or
other securities of the Company, stock split or reverse split,
liquidation, dissolution or other similar corporate transaction or event
which affects Common Stock such that an adjustment is determined by the
Board to be appropriate in order to prevent dilution or enlargement of
participants' rights under the Plan, then the Board shall, in such
manner as it may deem equitable, (i) adjust any or all of the number and
kind of shares reserved under the Plan and the number and kind of shares
which may thereafter be issued to Directors as Restricted Stock and
(ii), if participants holding Restricted Stock would not be affected by
the event in substantially the same way as other holders of Common
Stock, adjust the number and kind of shares outstanding as Restricted
Stock.
8. AMENDMENT TO THE PLAN
The Board may amend, alter, suspend, discontinue, or terminate the Plan
at any time without the approval or consent of the Company shareholders
or Plan participant, provided that (i) without the approval of the
Company shareholders, no amendment, alteration, suspension,
discontinuation, or termination of the Plan shall be made if shareholder
approval is required by any federal or state law or regulation, or any
applicable listing requirement or rule of a securities trading system or
stock exchange on which the Common Stock is then quoted or listed, or
the Board in its discretion
27
determines that obtaining such shareholder approval is for any reason
advisable; (ii) without the consent of any affected Plan participant, no
amendment, alteration, suspension, discontinuation, or termination of
the Plan may impair the rights of such participant relating to any
Restricted Stock theretofore granted to him or her; and (iii) any Plan
provision that specifies the Directors who may receive Restricted Stock,
the amount of Restricted Stock, and the timing of grants to Directors,
or is otherwise a "plan provision" within the meaning of Rule 16b-
<PAGE> 34
3(c)(2)(ii) under the Exchange Act (as initially adopted in SEC Release
No. 34-28869, February 8, 1991) or any successor provision thereto,
shall not be amended more than once every six months, other than to
comport with changes in the Internal Revenue Code of 1986, as amended,
the Employee Retirement Income Security Act of 1974, as amended, or the
rules thereunder.
9. GENERAL PROVISIONS
(a) Compliance with Securities Laws and NASDAQ Requirements. No
Restricted Stock shall be granted and no shares shall be distributed in
a transaction subject to the registration requirements of the Securities
Act of 1933, as amended, or any state securities law or subject to any
requirement of the National Association of Securities Dealers, Inc. (the
"NASD") as a condition to the quotation of the shares on any national
quotation system or under any listing agreement between the Company and
any national securities exchange, and no grant of Restricted Stock will
confer upon any participant rights to such distribution, until such laws
and other obligations of the Company have been complied with in full.
(b) No Right to Continue as a Director. Nothing contained in the
Plan or any Restricted Stock Agreement shall confer upon any Director
any right to continue to serve as a Director of the Company.
(c) Governing Law. The validity, construction and effect of the
Plan and any Restricted Stock Agreement shall be determined in
accordance with the laws of the State of Delaware, without giving effect
to principles of conflicts of laws.
ATTENTION: Stockholders Participating in the Dividend Reinvestment Plan
The accompanying proxy card reflects the total shares of Common Stock
registered in your name directly, as well as any full shares credited to your
Dividend Reinvestment Plan account.
<PAGE> 35
(FORM OF PROXY - SIDE 1)
CNG CONSOLIDATED NATURAL GAS COMPANY
PROXY SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE ANNUAL MEETING OF STOCKHOLDERS MAY 17, 1994.
P The undersigned hereby appoints G.A. Davidson, Jr., L.D. Johnson and
L. Wyse, and each or any of them, proxies with full power of substitution
R to vote the stock of the undersigned, as directed hereon, at the Annual
Meeting of Stockholders of CONSOLIDATED NATURAL GAS COMPANY to be held at
O the Hotel duPont, 11th and Market Streets, Wilmington, Delaware 19801 in
the Gold Ballroom, on Tuesday, May 17, 1994, at 2:00 p.m. (EDT), and at
X any adjournment thereof, and, in their discretion, on any other matters
that may properly come before the Meeting.
Y
(change of address)
ELECTION OF DIRECTORS, _______________________________________
Nominees: S.A. Minter and L. Wyse
_______________________________________
_______________________________________
_______________________________________
(If you have written in the above
space, please mark the corresponding
box on the reverse side of this card.)
PLEASE SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, SEE REVERSE
SIDE. WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
YOUR INSTRUCTIONS, OR, IF YOU GIVE NO INSTRUCTIONS, THIS PROXY WILL BE
VOTED FOR ITEMS 1, 2 AND 3.
- - - - - - - -
/ SEE REVERSE /
/ SIDE /
- - - - - - - -
<PAGE> 36
(FORM OF PROXY - SIDE 2)
Please mark your SHARES IN YOUR NAME REINVESTMENT SHARES
/x/ votes as in this
example.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of 2. Ratification
Directors / / / / of Price / / / / / /
(see reverse) Waterhouse
as indepen-
dent account-
ants.
For, except vote withheld
from the following nominee(s):
______________________________
FOR AGAINST ABSTAIN
3. Adoption of a
Restricted Stock / / / / / /
Plan for non-
employee Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR ITEMS 1, 2 AND 3.
Change
of / /
Address
Attend
Meeting / /
(no ticket
required)
SIGNATURE(S) ______________________________________ DATE _______________
SIGNATURE(S) ______________________________________ DATE _______________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If signing on behalf of a corporation, please
sign the full corporate name by authorized officer.
<PAGE> 37
Appendix to
Consolidated Natural Gas Company
1994 Annual Meeting Proxy Statement and Form of Proxy
Pursuant to Rules 12b-37(d) and 499(d)(3)
Narrative Description of Graphic and Image Material
___________________________________________________
(1) Pages 5 through 9 of the circulated document contain a 1-1/4" x 1-5/8"
black and white photograph of each Director in the rectangular space to the
left of each section of text describing the Director's name, age, committee
membership, business experience and related matters.
(2) Page 17 of the circulated document contains a line graph presenting
shareholder return performance. A narrative description and graphic data
points are described in the body of the electronic filing.
