<PAGE> 1 File Number 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM U-1
DECLARATION UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
By
CONSOLIDATED NATURAL GAS COMPANY
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
Names and addresses of agents for service:
S. E. WILLIAMS, Senior Vice President
and General Counsel
Consolidated Natural Gas Company
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
N. F. CHANDLER, General Attorney
Consolidated Natural Gas Service Company, Inc.
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
<PAGE> 2 File Number 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM U-1
DECLARATION UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Item 1. Description of Proposed Transaction
___________________________________
(a) Furnish a reasonably detailed and precise description of the
proposed transaction, including a statement of the reason why it is
desired to consummate the transaction and the anticipated effect
thereof. If the transaction is part of a general program, describe
the program and its relation to the proposed transaction.
INTRODUCTION
Consolidated Natural Gas Company (the "Company" or
"Consolidated"), is a public utility holding company registered under
the Public Utility Holding Company Act of 1935 ("Act"), and is in the
business of owning and holding all of the outstanding securities
(except for certain indebtedness of a distribution company acquired in
1990) of fifteen companies principally in the natural gas business.
The said subsidiary companies are engaged in natural gas exploration,
production, purchasing, gathering, transmission, storage, distribution
and by-product operations.
ADOPTION OF NON-EMPLOYEE DIRECTORS' STOCK PLAN
On September 14, 1993, the Board of Directors of Consolidated
adopted the Non-Employee Directors' Restricted Stock Plan ("Plan").
The Plan will be submitted for consideration and approval by the
holders of Consolidated's common stock at the annual meeting of
stockholders to be held on May 17, 1994; approval of the Plan requires
an affirmative vote by the holders of the majority of the outstanding
common stock. The purpose of the Plan is to
<PAGE> 3
assist Consolidated 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 copy of
the Plan is included as part of the proxy material filed as Exhibit
A-3.
DESCRIPTION OF PLAN
The aggregate number of shares which may be granted as restricted
stock ("Restricted Stock") under the Plan is 15,000 shares of common
stock, $2.75 par value per share, of Consolidated, subject to
adjustment as described below. Such shares may be authorized but
unissued shares or treasury shares of Consolidated. Any Restricted
Stock granted under the Plan which is forfeited pursuant to the terms
of the Plan is not available for further grants under the Plan.
The Plan provides for the automatic annual grant of 100 shares of
Restricted Stock to each non-employee director following the annual
shareholders meeting on the date of such meeting. Each non-employee
director granted Restricted Stock shall be entitled to receive
dividends on such Restricted Stock, to vote such Restricted Stock, and
shall have all other rights of a shareholder of Consolidated except
that until restrictions on such stock expire, the Restricted Stock
cannot be sold or otherwise transferred.
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 (i) the director's retirement at age 70, or (ii) the
director's ceasing to serve due to death or disability, whichever
first occurs. In the event of a "change of control" of Consolidated
as that term is defined in
<PAGE> 4
Consolidated's 1991 Stock Incentive Plan (1), all restrictions on
outstanding Restricted Stock will lapse and Consolidated will
repurchase all such shares which were awarded more than six months
prior to the change of control at the then fair market value.
The Plan shall be administered by the Compensation and Benefits
Committee of the Board of Directors of Consolidated. The Board may
amend, alter, suspend, discontinue or terminate the Plan unless such
action requires shareholder approval. The Board also has the right to
adjust the number of shares reserved under the Plan which may be
issued to directors as Restricted Stock in order to prevent dilution
or enlargement of participants' rights under the Plan in the event of
a stock split, reverse stock split, reorganization or similar event
with respect to which the Board determines that an equitable
adjustment is appropriate.
_______________
(1) 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 Consolidated becomes owned
by another person other than Consolidated 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 stockholders approve a merger, consolidation,
recapitalization or reorganization of Consolidated, reverse stock
split of voting securities, or an acquisition of securities by
Consolidated 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 Consolidated'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 Consolidated ("Subsidiary"), (ii) one or more employees
of Consolidated or of a Subsidiary, (iii) a fiduciary holding
securities under an employee benefit plan of Consolidated of a
Subsidiary, or (iv) a corporation owned by the stockholders of
Consolidated in substantially the same proportion as their ownership
of voting securities of Consolidated.
<PAGE> 5
AUTHORIZATIONS SOUGHT
Consolidated herein seeks authorization to do the following:
1. To solicit proxies in order to bring the Plan before the annual
meeting of holders of Consolidated common stock, which meeting is to
be held on May 17, 1994.
2. To implement the Plan upon receiving approval thereof by the
holders of its Common Stock; more specifically to be authorized to do
the following:
a. Issue up to 15,000 shares of Consolidated common stock,
$2.75 par value per share, permitted by the terms of the Plan to
be issued as Restricted Stock pursuant thereto (which shares may
be authorized but unissued shares, treasury shares, or a
combination thereof).
b. Acquire, through the forfeiture and repurchase provisions of
the Plan, shares of Restricted Stock which are the subject of a
previously granted award.
c. To adjust the number and par value (if appropriate) of
shares of Consolidated common stock that may be issued under the
Plan in the implementation of the antidilution or
anti-enlargement of rights provisions of the Plan.
In the event the Commission deems periodic reporting to be
appropriate with respect to the authorizations requested above, it is
further requested that Consolidated file Certificates of Notification
within thirty-five days after the end of each calendar quarter,
covering those transactions for which authority will have been
granted.
<PAGE> 6
(b) Describe briefly, and where practicable state the approximate
amount of, any material interest in the proposed transaction, direct
or indirect, of any associate company or affiliate of the applicant or
any affiliate of any such associate company.
None.
(c) If the proposed transaction involves the acquisition of
securities not issued by a registered holding company or a subsidiary
thereof, describe briefly the business and property, present or
proposed, of the issuer of such securities.
Not applicable.
(d) If the proposed transaction involves the acquisition or
disposition of assets, describe briefly such assets, setting forth
original cost, vendor's book cost (including the basis of
determination) and applicable valuation and qualifying reserves.
Not applicable.
Item 2. Fees, Commissions and Expenses
______________________________
(a) State (1) the fees, commissions and expenses paid or incurred,
or to be paid or incurred, directly or indirectly, in connection with
the proposed transaction by the applicant or declarant or any
associate company thereof, and (2) if the proposed transaction
involves the sale of securities at competitive bidding, the fees and
expenses to be paid to counsel selected by applicant or declarant to
act for the successful bidder.
It is estimated that the expenses to be incurred by the Company in
connection with the herein proposed transactions are as follows:
<PAGE> 7
Fees to the Commission for filing
this declaration under the Act
and proxy material under the
Security Exchange Act of 1934 $ 2,125
Printing and mailing of proxy material 62,500
Expenses associated with the annual
meeting of stockholders 20,000
Fees and expenses of Key Corp.,
Transfer Agent and Registrar 5,000
Kissel-Blake, Inc., proxy solicitation
services 10,000
Charges of Consolidated Natural Gas
Service Company, Inc. for services
in connection with the preparation
of this declaration, proxy material
and related documents and papers 18,000
Miscellaneous out-of-pocket expenses 2,375
________
$120,000
========
(b) If any person to whom fees or commissions have been or are
to be paid in connection with the proposed transaction is an associate
Company or an affiliate of the applicant or declarant, or is an
affiliate of an associate company, set forth the facts with respect
thereto.
The charges of Consolidated Natural Gas Service Company, Inc., a
Subsidiary service company, are for services on a cost basis
(including regularly employed counsel) in connection with the
preparation of this declaration on Form U-1, proxy material and other
related documents and papers required to consummate the proposed
transactions.
<PAGE> 8
Item 3. Applicable Statutory Provisions
_______________________________
(a) State the sections of the Act and the rules thereunder
believed to be applicable to the proposed transaction. If any section
or rule would be applicable in the absence of a specific exemption,
state the basis of exemption.
Sections 6(a), 7, 9(a), 10, 12(c) and 12(g) of the Act and Rules
42 and 43 under the Act are deemed to be applicable to the proposed
issuance and acquisition of shares of Restricted Stock under the Plan.
Section 12(e) of the Act and Rules 62 and 65 under the Act are
deemed applicable to the solicitation of proxies for the annual
meeting of stockholders.
To the extent that the proposed transactions are considered by
the Commission to require authorization, approval or exemption under
any section of the Act or provision of the rules or regulations other
than those specifically referred to herein, request for such
authorization, approval or exemption is hereby made.
(b) If an applicant is not a registered holding company or a
subsidiary thereof, state the name of each public utility company of
which it is an
affiliate, or of which it will become an affiliate as a result of the
proposed transactions, and the reasons why it is or will become such
an affiliate.
Not applicable.
Item 4. Regulatory Approval
___________________
(a) State the nature and extent of the jurisdiction of any State
commission or any Federal commission (other than the Securities and
Exchange Commission) over the proposed transaction.
No State commission and no other Federal commission has
jurisdiction over the proposed transactions.
<PAGE> 9
(b) Describe the action taken or proposed to be taken before any
commission named in answer to paragraph (a) of this item in connection
with the proposed transaction.
None.
Item 5. Procedure
_________
(a) State the date when Commission action is requested. If the date
is less than 40 days from the date of the original filing, set forth
the reasons for acceleration.
In order to allow the Company adequate time for the final
preparation, printing and mailing of the proxy material to its common
stockholders on
March 23, 1994, it is hereby requested that the Commission issue an
order authorizing the solicitation of proxies on or before March 18,
1994.
(b) State (i) whether there should be a recommended decision by a
hearing officer, (ii) whether there should be a recommended decision
by any other responsible officer of the Commission, (iii) whether the
Division of Corporate Regulation may assist in the preparation of the
Commission's decision, and (iv) whether there should be a 30-day
waiting period between the issuance of the Commission's order and the
date on which it is to become effective.
It is submitted that a recommended decision by a hearing or other
responsible officer of the Commission is not needed with respect to
the proposed transactions. The Office of Public Utility Regulation of
the Division of Investment Management may assist in the preparation of
the Commission's decision. There should be no waiting period between
the issuance of the Commission's order and the date on which it is to
become effective.
<PAGE> 10
Item 6. Exhibits and Financial Statements
_________________________________
The following exhibits are made a part of this statement:
(a) Exhibits
________
A-1 Certificate of Incorporation of Consolidated, as
restated.
(Incorporated by reference to Exhibit A-1 to Form U-1,
File No. 70-7811)
A-2 Composite copy of Bylaws of the Company, as amended
March 1,
1993.
(Incorporated by reference to Exhibit B to Form U5S,
File No. 30-203, for the year ended December 31, 1992)
A-3 Draft of Notice of Annual Meeting and Proxy Statement
proposed to be used in connection with the annual
meeting of
stockholders.
F-1 Opinion of counsel.
G Proposed notice pursuant to Rule 22(f)
(b) Financial Statements
____________________
Not applicable
Item 7. Information as to Environmental Effects
_______________________________________
(a) Describe briefly the environmental effects of the proposed
transaction in terms of the standards set forth in Section 102(2)(C)
of the National Environmental Policy Act (42 U.S.C. 4312(2)(C)). If
the response to this item is a negative statement as to the
applicability of Section 102(2)(C) in connection with the proposed
transaction, also briefly state the reasons for that response.
As more fully described in Item 1(a), the proposed transactions
subject to the jurisdiction of this Commission relate only to
solicitation of proxies pertaining to a proposed stock incentive plan
and involve no major federal action significantly affecting the human
environment.
<PAGE> 11
(b) State whether any other federal agency has prepared or is
preparing an environmental impact statement ("EIS") with respect to
the proposed
transaction. If any other Federal agency has prepared or is preparing
an EIS, state which agency or agencies and indicate the status of that
EIS preparation.
None.
SIGNATURES
__________
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned company has duly caused this
statement to be signed on its behalf by the undersigned thereunto duly
authorized.
CONSOLIDATED NATURAL GAS COMPANY
By N. F. Chandler
Assistant Secretary and
Its Attorney
Date: March 7, 1994
<PAGE> 1 Exhibit A-3
DRAFT OF NOTICE OF
ANNUAL MEETING AND
PROXY STATEMENT
<PAGE> 2
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> 3
1
CONSOLIDATED NATURAL GAS COMPANY
March 23, 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.
Chairman of the Board and
Chief Executive Officer
<PAGE> 4
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
Secretary
Pittsburgh, Pennsylvania
March 23, 1994
<PAGE> 5
3
CONSOLIDATED NATURAL GAS COMPANY
PROXY STATEMENT
This statement and proxy card, mailed to stockholders commencing
April 1, 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 11, 1994, XXX 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> 6
Amount and Nature Percent
Name and Address of of Beneficial of Outstanding
Beneficial Owner Ownership Common Stock
_______________________________________________________________________
__
Trustees, Alternate Thrift Trust of 11,078,125(1) 11.9%
Employees Thrift Plans
CNG Tower
625 Liberty Avenue
Pittsburgh, PA 15222-3199
(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> 7
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> 8
5
DIRECTORS NOMINATED FOR ELECTION TO THE BOARD WITH A TERM EXPIRING MAY
1997
Steven A. Minter Chair: Compensation and
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 Key Corp. He is also a
Trustee of the College of Wooster and of The Foundation Center.
Lois Wyse Chair: Ethics Committee
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> 9
6
CONTINUING DIRECTORS WITH A TERM EXPIRING MAY 1995
J. W. Connolly Chair: Financial Policy Committee
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, a 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., a 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.,
Melllon Bank Corporation, Presbyterian-University Health System, and the
University of Pittsburgh Medical Center System. He is also a Trustee of
the University of Pittsburgh.
George A. Davidson, Jr. Chair: Executive Committee
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> 10
7
CONTINUING DIRECTORS WITH A TERM EXPIRING MAY 1995
Lester D. Johnson
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.
Richard P. Simmons Member: Audit Committee
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 U.S. Air
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> 11
8
CONTINUING DIRECTORS WITH A TERM EXPIRING MAY 1996
Paul E. Lego Member: Compensation and Benefits
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.
Theodore Levitt Chair: Nominating Committee
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 consultant to
senior management of a large variety 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> 12
9
CONTINUING DIRECTORS WITH A TERM EXPIRING MAY 1996
Walter R. Peirson Member: Audit Committee
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, Illinois.
DIRECTOR RETIRING IN MAY 1994
A. A. Sommer, Jr. Chair: Audit Committee
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> 13
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,
which are briefly described below.
Audit Committee
The Audit Committee is composed of four non-employee Directors.
Among its functions are: review the scope and effectiveness of audits
by the independent accountants and the Company's internal auditing
staff; select and recommend to the Board of Directors the employment of
independent accountants, subject to ratification by the stockholders;
receive and act on comments and suggestions by the independent
accountants and by the internal auditors with respect to their audit
activities; approve fees charged by the independent accountants; and
review 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> 14
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> 15
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 ( persons)
____________
(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 which 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> 16
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
___________________________ _______________________
______
Awards Payouts
___________________ _______
_ All
Other Restricted Shares
Other
Annual Stock Under- Compen-
Name and Bonus Compen- Award(s) lying LTIP sation
Principal Position Year Salary (1) sation (3) Options
Payouts (4)
____________________ ____ ________ ________ _______
_ __________ _______ ________ _______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
G. A. Davidson, Jr. 1993 $511,100 $ $ 27,31
0 412,586 $38,654
(Chairman and 1992 483,400 234,097 3,000 35,013
36,364
Chief Executive 1991 464,800 245,733 $940,461 26,79
3
Officer, Director)
D. P. Hunt 1993 229,600 9,566 128,785
20,703
(President, 1992 216,000 66,050 10,889 8,430
16,414
CNG Producing) 1991 205,800 37,349 329,370 9,384
L. D. Johnson 1993 273,700 15,790 121,559
27,687
(Executive Vice 1992 255,400 177,099 762 12,262
25,495
President, Chief 1991 232,200 129,400
329,370 9,384
Financial Officer,
Director)
L. J. Timms, Jr. 1993 232,800 9,566 116,690
18,796
(President, CNG 1992 219,300 126,598 866 12,262
16,620
Transmission) 1991 205,800 162,588 329,370
9,384
D. E. Weatherwax 1993 227,300 9,566 149,254
23,052
(Senior Vice 1992 213,700 116,687 876 126,038
7,998 21,458
President, 1991 193,500 110,725 214,856
6,122
Administration
____________________
</TABLE>
(1) Amounts shown for 1991 bonus include cash bonus and Restricted
Stock bonus priced at $48.375 per share (closing price on September
16, 1992, the date restrictions lapsed on those shares); for 1992
bonus include cash bonus and 1992 restricted stock bonus priced at
$53.25 per share (the average of the high and low prices on September
15, 1993, the date restrictions lapsed on those shares); and for 1993
bonus is the cash bonus amount.
<PAGE> 17
(2) Includes only tax reimbursements 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.
(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. Based on the market value at
grant date, the aggregate values of such holdings at December 31,
1993, 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 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> 18
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% 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) Year 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 (3) $ 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 (3) $ 40,483,777 (3)
$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 three years after
he or she retires. If an employee otherwise leaves CNG, his or her
options expire 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> 19
(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.
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.
(3) 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.
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
Shares Underlying Value of Unexercised,
Unexercised Options In the Money Options
Held at Year-End at Year-End (2)
Shares ___________________ ____________________
Acquired Value
On Realized Exercis- Unexercis- Exercis- Unexercis-
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> 20
LONG-TERM INCENTIVE PLAN AWARDS IN THE LAST FISCAL YEAR
No 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. 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.
The programs provide, at expected levels of performance, base salary
and short-term incentive compensation levels that are comparable with
those offered by competing labor markets. Through the long-term
incentive program, emphasis is placed upon rewarding key individuals,
commensurate with increasing shareholder value.
Competitor organizations are defined annually as part of the
compensation administration process and include fully integrated
natural gas companies as well as broader industry comparatives, e.g.,
comparably-sized general industrial companies and, where appropriate,
specific energy companies.
15
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
a comparison group. 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> 21
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. 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, which includes performance
measures (weighted as indicated) 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
return on equity and fixed charge coverage ratio goals were exceeded
and the net income and cash flow goals were not met.
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 Nonqualified 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 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 are not considered in the
determination of an award.
The Committee has utilized the services of an independent compensation
consultant in determining adjustments to certain executive compensation
ranges.
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.
<PAGE> 22
16
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 in part on the following measures
of the Company's performance: net income, cash flow (defined as net
income plus depreciation plus deferred taxes minus dividends), return
on equity (compared to peer companies), credit rating of the Company's
long-term debt, price to earnings ratio (compared to published summary
data), and the attainment of prescribed levels of gas and oil reserve
additions and finding and development costs. 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.
S. A. Minter, Chair
J. W. Connolly
P. E. Lego
L. Wyse
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.
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,
Columbia Gas System, Consolidated Natural Gas Company, Eastern
Enterprises, Energen Corporation, ENSERCH Corporation, Equitable
Resources, K N Energy, Inc., NICOR Inc., ONEOK Inc., Pacific
Enterprises, Pennsylvania Enterprises, Questar Corporation, South
Jersey Industries, Southwest Gas Corporation, Southwestern Energy, UGI
Corporation, Valley Resources, Inc., Washington Energy, and WICOR, Inc.
<PAGE> 22
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.
17
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 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
<PAGE> 23
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.
TRANSACTIONS WITH ASSOCIATES OF DIRECTORS AND EXECUTIVE OFFICERS
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 Key Corp. (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 $XXX 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 nonaffiliated 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
commission rates and billing practices which are comparable to such
rates
18
and practices charged by nonaffiliated firms. During 1993, the Company
paid aggregate commissions of $364,372 to Wyse Advertising.
<PAGE> 24
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. Assumptions made as to mortality experience,
policy dividends, and other factors indicate that the Company will more
than recover its costs of implementing and maintaining the program.
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 3,413
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
the 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
19
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 Estimated Annual
1993 Service Retirement Benefits
Name Salary at Age 65 at Age 65
_______________________________________________________________________
___
G. A. Davidson, Jr. . . . . . . $511,100 37
$340,416
D. P. Hunt . . . . . . . . . . . 229,600 43
182,607
L. D. Johnson . . . . . . . . . 273,700 39
182,491
L. J. Timms, Jr. . . . . . . . . 232,800 38
161,265
D. E. Weatherwax . . . . . . . . 227,300 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.
20
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
21
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
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
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 Consolidated becomes owned by another
person other than Consolidated 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)
<PAGE> 28
the stockholders of Consolidated approve a merger, consolidation,
recapitalization or reorganization of Consolidated, reverse stock split
of voting securities, or an acquisition of securities by Consolidated
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 Consolidated'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 Consolidated
("Subsidiary"), (ii) one or more employees of Consolidated or of a
Subsidiary, (iii) a fiduciary holding securities under an employee
benefit plan of Consolidated or a Subsidiary, or (iv) a corporation
owned by the stockholders of Consolidated in substantially the same
proportion as their ownership of voting securities of Consolidated.
22
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.
Vote Needed for Approval of the Proposal
Approval of this proposal requires an affirmative vote by the holders
of the majority of the outstanding stock. 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, Pennsylvania 15222-3199, prior to December XXX, 1994. All
such proposals are subject to the applicable rules and requirements of
the Securities and Exchange Commission.
<PAGE> 29
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
Secretary
March 23, 1994
NOTE: YOUR SHARES CANNOT BE VOTED UNLESS YOU SIGN AND RETURN
YOUR PROXY CARD, OR ATTEND THE MEETING AND VOTE IN PERSON.
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> 30
23
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.
24
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
25
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 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 determines that obtaining such
shareholder approval is for any reason advisable;
26
(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.
<PAGE 1>
EXHIBIT
F-1
March 7, 1994
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: Consolidated Natural Gas Company
Dear Sirs:
This opinion is furnished in connection with the Declaration on
Form U-1 filed herewith pursuant to the Public Utility Holding Company
Act of 1935 by Consolidated Natural Gas Company (herein called
"Consolidated"), relative to the solicitation of proxies pertaining to
the approval of Consolidated's Non-Employee Directors' Restricted
Stock Plan ("Plan") to be considered at the Annual Meeting of
Stockholders to be held on May 17, 1994 and the implementation of the
Plan (collectively "Proposed Transactions"). The Plan allows for the
granting of shares of Consolidated's common stock, $2.75 par value per
share ("Common Stock") as restricted stock awards to non-employee
directors of Consolidated.
The maximum number of shares of Common Stock in respect for which
awards may be granted under the Plan is 15,000 shares. The Plan
provides for the automatic annual grant of 100 shares of Restricted
Stock to each non-employee director following the annual shareholders
meeting on the date of such meeting. 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 (i) the director's
retirement at age 70, or (ii) the director's ceasing to serve due to
death or disability, whichever first occurs. In the event of a
"change of control" of Consolidated as that term is defined in
Consolidated's 1991 Stock Incentive Plan, all restrictions on
outstanding Restricted Stock will lapse and Consolidated will
repurchase all such shares which were awarded more than six months
prior to the change of control at the then fair market value. Any
Restricted Stock granted under the Plan which is forfeited pursuant to
the terms of the Plan is not available for further grants under the
Plan. The number of shares of Common Stock so available may be
adjusted pursuant to the Plan to prevent dilution or enlargement of
rights due to stock rights, merger, and the like.
As counsel for Consolidated and at its request, I have reviewed
the said Declaration, Consolidated's Certificate of Incorporation and
By-Laws, as restated and amended to date, respectively, the corporate
proceedings relative to the Proposed Transactions and such other
documents as I have deemed necessary for the purposes of this opinion.
In my opinion, in the event the Proposed Transactions are
consummated in accordance with the Declaration, then:
(i) all State laws applicable to the Proposed Transactions will have
been complied with;
<PAGE 2>
(ii) Consolidated is validly organized and duly existing;
(iii) the shares of Common Stock when issued pursuant to the Plan
will be validly issued, fully paid and nonassessable, and the holders
of such shares will be entitled to the rights and privileges
appertaining thereto set forth in the certificate of incorporation of
Consolidated.
(iv) Consolidated will legally acquire shares of Common stock if
any are reacquired by it pursuant to the forfeiture, repurchase or
anti-enlargement of rights provisions of the Plan.
(v) the consummation of the Proposed Transactions will not violate
the legal rights of the holders of any securities issued by
Consolidated or any associate company thereof.
I hereby consent that this opinion shall be filed as an exhibit
to said Declaration.
Very truly yours,
N. F. Chandler
<PAGE 1>
EXHIBIT
G
Consolidated Natural Gas Company (70- )
________________________________
Notice of Proposal to Adopt Non-Employee Stock Directors' Restricted
Stock
Plan; Order Authorizing Proxy Solicitation.
Consolidated Natural Gas Company ("Consolidated"), CNG Tower, 625
Liberty Avenue, Pittsburgh, Pennsylvania 15222-3199, a registered
holding company, has filed a declaration pursuant to Sections 6(a), 7,
9(a), 10, 12(c), and 12(g) of the Act and Rules 42, 43, 62, and 63
thereunder.
On September 14, 1993, the Board of Directors of Consolidated
adopted the Non-Employee Directors' Restricted Stock Plan ("Plan").
The purpose of the Plan is to assist Consolidated 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.
The aggregate number of shares which may be granted as restricted
stock ("Restricted Stock") under the Plan is 15,000 shares of common
stock, $2.75 par value per share, of Consolidated, subject to
adjustment as described below. Such shares may be authorized but
unissued shares or treasury shares of Consolidated. Any Restricted
Stock granted under the Plan which is forfeited pursuant to the terms
of the Plan is not available for further grants under the Plan.
<PAGE 2>
The Plan provides for the automatic annual grant of 100 shares of
Restricted Stock to each non-employee director following the annual
shareholders meeting on the date of such meeting. Each non-employee
director granted Restricted Stock shall be entitled to receive
dividends on such Restricted Stock, to vote such Restricted Stock, and
shall have all other rights of a shareholder of Consolidated except
that until restrictions on such stock expire, the Restricted Stock
cannot be sold or otherwise transferred.
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 (i) the director's retirement at age 70, or (ii) the
director's ceasing to serve due to death or disability, whichever
first occurs. In the event of a "change of control" of Consolidated
as that term is defined in Consolidated's 1991 Stock Incentive Plan,
all restrictions on outstanding Restricted Stock will lapse and
Consolidated will repurchase all such shares which were awarded more
than six months prior to the change of control at the then fair market
value.
The Plan shall be administered by the Compensation and Benefits
Committee of the Board of Directors of Consolidated. The Board may
amend, alter, suspend, discontinue or terminate the Plan unless such
action requires shareholder approval. The Board also has the right to
adjust the number of shares reserved under the Plan which may be
issued to directors as Restricted Stock in order to prevent dilution
or enlargement of participants' rights under the Plan in the event of
a stock split, reverse stock split, reorganization or similar event
with respect to which the Board determines that an equitable
adjustment is appropriate.
Consolidated requests authority to solicit proxies from its
stockholders
for approval of the Plan at the annual meeting to be held on May 17,
1994.
Consolidated has filed its proxy solicitation material and requests
that
<PAGE 3>
that the effectiveness of its declaration with respect to the
solicitation of proxies for voting by its stockholders to approve the
new
stock incentive plan be permitted to become effective as provided in
Rule 62(d).
It appearing to the Commission that Consolidated's declaration
regarding
the proposed solicitation of proxies should be permitted to become
effective
forthwith, pursuant to Rule 62:
IT IS ORDERED, that the declaration regarding the proposed
solicitation
of proxies, be, and it hereby is, permitted to become effective
forthwith,
under Rule 62, and subject to the terms and conditions prescribed in
Rule 24
under the Act.
___________________________________
For the Commission, by the Division of Investment
Management,
pursuant to delegated authority.
Jonathan G. Katz
Secretary
