NATIONAL GAS & OIL COMPANY
Notice of Annual Meeting of Shareholders
To be Held May 23, 1996
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of
NATIONAL GAS & OIL COMPANY, an Ohio Corporation (hereinafter referred to as
"Company"), has been called and will be held in the General Offices of the
Company at 1500 Granville Road, Newark, Ohio on May 23, 1996, at 10:00 A.M.,
local time, for the following purposes:
(1) To elect three directors to serve for a period of three years or
until their respective successors are duly elected and qualified.
(2) To consider and act upon a proposal to amend the Code of Regulations
to provide an age limit on the tenure and election of Directors of
the Company.
(3) To ratify the appointment of Price Waterhouse LLP to audit the
financial statements of the Company and its subsidiaries for the
year ending December 31, 1996.
(4) To transact such other business as may properly come before the
meeting.
All of the above matters are more fully described in the accompanying
Proxy Statement.
The Board of Directors has fixed the close of business on April 1, 1996,
as the record date for determining the shareholders entitled to notice of and
to vote at the meeting and any adjournment thereof, and only holders of Common
Shares of the Company of record at the close of business on such date will be
entitled to notice thereof or to vote thereat.
If you cannot attend the meeting in person, please execute, date and
return the enclosed proxy in the envelope provided, with postage prepaid for
mailing within the United States.
By Order of the Board of Directors
John B. Denison
Secretary
Dated: April 1, 1996
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NATIONAL GAS & OIL COMPANY
PROXY STATEMENT
APRIL 1, 1996
For Annual Meeting of Shareholders
To Be Held May 23, 1996
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of the Company of proxies from holders of the
outstanding Common Shares of NATIONAL GAS & OIL COMPANY for the annual meeting
of shareholders of the Company to be held in the General Offices of the
Company at 1500 Granville Road, Newark, Ohio 43055, on May 23, 1996, at 10:00
A.M., local time, for the purposes set forth in the accompanying notice of the
meeting. The Company's telephone number is (614) 344-2102.
Any proxy delivered in the accompanying form may be revoked by the
person executing the same, in writing or in open meeting, at any time before
the authority hereby granted is exercised. Proxies received which are properly
executed will be voted at the meeting or any adjournment thereof as specified
therein by the shareholders, but if no specification is made, such proxies
will be voted for the election of the three nominees for Director named
herein, for the amendment of the Code of Regulations and for the ratification
of Price Waterhouse LLP as the Company's independent auditor.
If any other matters are properly brought before the meeting, or if a
nominee for election as a Director named in the proxy statement is unable to
serve or will not serve, the persons named in the proxy or their substitutes
will vote in accordance with their best judgment on such matters or for such
substitute nominee as the Directors may recommend.
The cost of solicitation of proxies will be borne by the Company. Such
solicitation will be made by mail and in addition may be made by Officers and
employees of the Company, personally or by telephone or telegram. Forms of
proxies and proxy materials may also be distributed through brokers,
custodians and other like parties to the beneficial owners of shares. Proxy
materials will be first sent to shareholders on or about April 17, 1996.
Only the holders of Common Shares of record at the close of business on
April 1, 1996, which is the record date for the annual meeting of shareholders
fixed by the Board of Directors, are entitled to notice of and to vote at the
meeting or any adjournment thereof. On April 1, 1996, the Company had
outstanding 6,860,589 Common Shares, each share having one vote.
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Under Ohio law and the Company's Code of Regulations, the three nominees
receiving the greatest number of votes shall be elected as directors. Shares
as to which the authority to vote is withheld and broker non-votes are not
counted toward the election of the individual nominees specified on the form
of proxy. For purposes of determining whether a majority vote has been
obtained for the proposed Amendment to the Code of Regulations or the
ratification of independent accountants, abstentions and broker non-votes will
have the same effect as votes against such proposals.
Under the applicable Ohio statute, if notice in writing is given by any
shareholder to the President, a Vice President, or Secretary of the Company
not less than forty-eight hours before the time fixed for holding a meeting
for the election of Directors that he desires the voting at such election to
be cumulative, and if an announcement of the giving of such notice is made
upon the convening of the meeting by the Chairman or Secretary or by or on
behalf of the shareholder giving such notice, then each shareholder would have
cumulative voting rights. If cumulative voting is requested as herein
described, each shareholder would have a number of votes equal to the number
of Directors to be elected (3) multiplied by the number of shares owned by him
and would be entitled to cast all his votes for any one or more candidates as
he sees fit.
Article Two, Section 2.03 of the Company's Code of Regulations
prescribes the method for a shareholder to nominate a candidate for election
to the Board of Directors. Generally, nominations, other than those made by or
on behalf of the existing Board of Directors of the Company, for election at
an annual meeting of shareholders must be made in writing, delivered or mailed
by first-class U.S. mail, postage prepaid, to the Secretary of the Company on
or before the later of (i) February 1 immediately preceding such annual
meeting or (ii) the sixtieth (60th) day prior to the first anniversary of the
most recent annual meeting of shareholders held for the election of Directors.
Such nomination must set forth (i) the name, age, business or residence
address of each nominee, (ii) the principal occupation or employment of each
nominee, and (iii) the number of Common Shares of the Company owned
beneficially and/or of record by each nominee and the length of time any such
Common Shares have been so owned. As of the date of this Proxy Statement, no
persons have been so nominated for election at this Annual Meeting.
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to those
persons known to the management of the Company to be the beneficial owners of
more than 5% of the outstanding Common Shares of the Company as of March 1,
1996.
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Amount and Nature of Beneficial Ownership
Name and Address of Sole Voting & Shared Voting & Percent
Beneficial Owner Investment Power Investment Power of Class
The Trust Company of
New Jersey, Jersey
City, New Jersey 653,503(1) -0- 9.53%
(1) Information provided to the Company by The Trust Company of New Jersey,
which holds the shares as Trustee for two pension plans. The Trust
Company of New Jersey certifies the shares were acquired in the ordinary
course of business and were not acquired for the purpose of and do not
have the effect of changing or influencing the control of the issuer.
Dimensional Fund
Advisors Inc.
Santa Monica, California 376,273(2) -0- 5.49%
(2) Information provided to the Company by Dimensional Fund Advisors Inc., on
Schedule 13G. Dimensional Fund Advisors Inc. ("Dimensional"), a
registered investment advisor, is deemed to have beneficial ownership of
376,276 shares of National Gas & Oil stock as of December 31, 1995, all
of which shares are held in portfolios of DFA Investment Dimensions Group
Inc., a registered open-end investment company, or in series of the DFA
Investment Trust Company, a Delaware business trust, or the DFA Group
Trust and DFA Participation Group Trust, investment vehicles for
qualified employee benefit plans, all of which Dimensional Fund Advisors
Inc. serves as investment manager. Dimensional disclaims beneficial
ownership of all such shares.
THE BOARD OF DIRECTORS
Under the Company's Code of Regulations, the Board of Directors is
divided into three classes consisting of not less than three nor more than
four Directors each. The class to be elected in 1996 consists of three
Directors.
The following nominees are proposed for election as Directors to serve
for a period of three years or until their successors are elected and
qualified: Alan A. Baker, Richard O. Johnson and Thomas E. Stewart. Messrs.
Baker and Johnson are incumbent Directors. Management does not contemplate
that any of the nominees named will be unable to serve.
In the event that one or more of the nominees named is unable or is
unwilling to accept, or is unavailable for, such election for any reason, the
persons named in the proxies received in the accompanying form or their
substitutes shall have authority, unless such authority is withheld, to vote
or refrain from voting according to their judgment for other individuals as
Directors in lieu thereof and in such cases, such proxies will be voted for
such substitute nominees as the Directors may recommend. If Directors are to
be elected by cumulative voting, the persons named in such proxies shall have
authority to distribute their votes among the nominees as they shall determine
in the exercise of their judgment.
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NOMINEES FOR ELECTION AS DIRECTORS
Alan A. Baker - Age 64
Mr. Baker is the retired chairman of Halliburton Energy Services,
Houston, Texas, having served with Halliburton for 41 years. Prior to being
named chairman in 1993, Mr. Baker was president and, in 1992, chairman and
chief executive officer of Halliburton Energy Services Group. Mr. Baker was
elected as a Director of the Company in August 1995 to fill an unexpired term.
Richard O. Johnson - Age 67
Mr. Johnson is the President and majority shareholder of J.J. Agro, Inc.,
which was formed on April 25, 1991 and is located in Zanesville, Ohio. Mr.
Johnson, in excess of five years, has been the President and majority
stockholder of Clay City Beverages, Inc., a Pepsi Cola bottler and distributor
in Zanesville, Ohio. The Pepsi Cola bottler and distributor assets were sold
by Clay City Beverages on April 25, 1991. J.J. Agro is invested in various
businesses, including restaurant, agriculture and oil and gas production and
development. Mr. Johnson is a Director of the First National Bank of
Zanesville, Ohio, and Muskingum Livestock Sales Company of Zanesville, Ohio.
Mr. Johnson has served as a Director of the Company since 1984.
Thomas E. Stewart - Age 45
Mr. Stewart is the Executive Vice President of the Ohio Oil and Gas
Association, a state-wide trade association serving the oil and gas industry,
a position he has held since September 1991. Mr. Stewart is a Registered
Legislative Agent representing the oil and gas industry before the state and
federal government and their respective agencies. Since 1985 Mr. Stewart has
also been President of Stewart Drilling Co., Inc., Mt. Vernon, Illinois, a
family owned holding company for company held oil and gas working interests.
Mr. Stewart is standing for election for the first time at the 1996 Annual
Meeting.
DIRECTORS CONTINUING IN OFFICE
James H. Cameron - Age 59
Mr. Cameron is President of Cameron Drilling Co., Inc. an operating
company and producers of oil and gas, a position he has held in excess of five
years. Mr. Cameron has served as Director of the Company or its predecessor
since 1978 and his term as a Director of the Company expires in 1997.
David C. Easley - Age 53
Mr. Easley was elected President of the Precise Corporation, Racine,
Wisconsin, a manufacturer of high speed precision spindles for milling,
drilling and grinding in 1994. Previously, Mr. Easley was Executive Vice
President, a position he held in excess of five years. Mr. Easley is also a
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Director of the Bank of Elmwood, Racine, Wisconsin and the Bardon Rubber
Products Co., Union Grove, Wisconsin. Mr. Easley has served as a Director of
the Company since 1986 and his term as a Director expires in 1998.
Patrick J. McGonagle - Age 41
Mr. McGonagle is President and Chief Executive Officer of National Gas &
Oil Company and its operating subsidiaries, positions he has held since
February 19, 1993. Previously, Mr. McGonagle was Vice President and General
Counsel for a period in excess of five years. Mr. McGonagle has served as a
Director of the Company since 1995 and his term as a Director expires in 1998.
M. Howard Petricoff - Age 46
Mr. Petricoff is a partner in the law firm of Vorys, Sater, Seymour and
Pease, Columbus, Ohio, a position he has held in excess of five years. Mr.
Petricoff represents the Ohio Oil and Gas Association, oil and gas producers,
industrial firms and serves an appointment as Special Assistant Ohio Attorney
General for energy matters. Mr. Petricoff was elected as a Director of the
Company in August 1995 to fill an unexpired term and his term as a Director
expires in 1997.
Graham R. Robb - Age 66
Mr. Robb is the Vice President and a Director of The Oxford Oil Company,
Zanesville, Ohio, producers of oil and gas. Mr. Robb is a Past President of
the Ohio Oil and Gas Association, a statewide association serving the oil and
gas industry. Mr. Robb has served as a Director of the Company since 1992 and
his term as Director expires in 1998.
William H. Sullivan, Jr. - Age 57
Mr. Sullivan was elected Chairman of the Board of National Gas & Oil
Company in May 1995. Additionally, Mr. Sullivan is the Senior Partner of
Waterland Operating Company, Rowayton, Connecticut, a real estate investment
company, and is Senior Partner of Monmouth Ocean Realty Trust, a R.E.I.T.
located in Rowayton, Connecticut, positions he has held in excess of five
years. Mr. Sullivan has served as a Director of the Company or its predecessor
since 1978 and his term as a Director of the Company expires in 1997.
RETIRING DIRECTOR
Edwin L. Heminger - Age 69
Mr. Heminger is Chairman of the Board of Directors of The Findlay
Publishing Company, Findlay, Ohio, a newspaper publishing company owned by the
Heminger family, and Chairman of the Board of the White River Broadcasting
Company, Inc. of Columbus, Indiana, a wholly owned subsidiary of The Findlay
Publishing Company. Mr. Heminger has held his current positions for periods in
excess of five years. Mr. Heminger is a Director of the Miami River
Broadcasting Co., the Blanchard River Broadcasting Co., and the Celina
Financial Corporation and its affiliated companies, Celina, Ohio. Mr. Heminger
has served as a Director of the Company since 1984 and his present term
expires in 1996. Mr. Heminger has elected to retire from the Board at the
Annual Meeting.
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CERTAIN RELATED PARTY TRANSACTIONS
Mr. J.W. Straker, retired chairman of the Board of Directors, served as a
Director until his retirement on May 18, 1995. The related party information
with respect to Mr. Straker and members of his family, his brother, Charles E.
Straker and son-in-law, J.S. Henderson, reflects only those transactions that
took place while Mr. Straker was a Director. The information with respect to
Mr. Straker's son, John W. Straker, Jr. reflects the full year of 1995 because
of the Directorship of Mr. Graham R. Robb. Mr. Straker does not maintain any
financial interest or operational involvement in any Company owned or operated
by other family members.
Mr. Straker's brother, C.E. Straker, is President of Buckeye Supply
Company, Zanesville, Ohio ("Buckeye Supply"). Through May 1995, Buckeye Supply
received $2,697 from National Gas & Oil Corporation ("National Gas"), a
subsidiary of the Company, for pipe, materials and supplies used in National
Gas' construction, operation and maintenance activities. NGO Development
Corporation ("NGO Development"), a subsidiary of the Company, purchased pipe,
material and supplies for $80,214 from Buckeye Supply.
In 1995, The Oxford Oil Company ("Oxford Oil"), which is owned by Mr.
Straker's son, John W. Straker, and which Mr. Robb serves as Vice President
and a Director, received $2,107,459 for 1,059,154 Mcf for gas purchased by
Producers Gas Sales, Inc. ("Producers Gas"), a subsidiary of the Company, as
agent for end use natural gas customers. Mr. Straker's son-in-law, J.S.
Henderson, is the President and owner of Hopewell Oil and Gas Development
Company ("Hopewell"), a producer of oil and gas. Through May 1995, Hopewell
received $646,861 for 342,170 Mcf for gas purchased by Producers Gas as agent
for end use natural gas customers. During 1995, Cameron Brothers and Cameron
Drilling Co., Inc. ("Cameron Brothers"), in which Mr. Cameron is a partner and
President, received $264,551 for 131,236 Mcf for gas purchased by Producers
Gas as agent for end use natural gas customers. The Company's purchased gas
terms are approved by the Executive Committee and Board of Directors and are
consistent for all like gas producers.
During 1995, Oxford Oil received $161,693 from NGO Development for joint
venture drilling programs and received $32,631 from NGO Development for joint
venture drilling program operating expenses. Oxford also received $24,535 for
13,583 Mcf for gas purchased by NGO Development.
All of the purchases and sales by the Company's subsidiaries were made on
terms as favorable as those available from independent third parties.
M. Howard Petricoff, who became a Director on August 24, 1995, is a
Partner of Vorys, Sater, Seymour and Pease, which rendered legal services to
the Company during the last fiscal year and continues to do so.
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THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held four (4) regular meetings during 1995. Each
member of the Board of Directors who is not an Officer of the Company receives
$1,500 for each meeting attended. Directors who are also Officers of the
Company do not receive any fee for services performed as Directors or as
members of the Committees of the Board. All Directors are reimbursed expenses
for attended meetings. Mr. William H. Sullivan, Jr., Chairman of the Board and
Executive Committee, is compensated at an annual rate of $40,000 for his
services as Chairman of the Board and Executive Committee.
The Company maintains an Executive Committee which acts for and on
behalf of the Board of Directors in the management, business and affairs of
the Company during intervals between meetings of the Board of Directors. The
Executive Committee, elected annually, is also responsible for capital
expenditure, business development and nominating activities of the Board. The
Executive Committee is comprised of three (3) Directors: William H. Sullivan,
Jr., Chairman, James H. Cameron, and Graham R. Robb. The Committee held two
(2) meetings during 1995. Non-officer members of the Executive Committee
receive $500 per meeting attended for their services on the Executive
Committee.
The Audit Committee, comprised of outside Directors elected annually,
met four (4) times with representatives of Price Waterhouse LLP to review
accounting and auditing matters. The Committee has the responsibilities of
recommending the selection of the independent auditors for each year;
consulting with the independent auditors regarding the scope and plan of
audit, adequacy of internal controls, fees, non-audit services performed and
reporting such findings to the Board of Directors. Members are David C.
Easley, Chairman, Alan A. Baker and Edwin L. Heminger, each of whom is
compensated at the rate of $800 per meeting attended.
The Employees' Retirement Plan, Salary Deferral Plan and Group Medical
and Dental Welfare Plan are administered by the Retirement/Employee Benefits
Committee comprised of three (3) Directors: James H. Cameron, Chairman, David
C. Easley and Richard O. Johnson, who are elected annually by the Board. The
Retirement/Employee Benefits Committee held one (1) meeting in 1994. Non-
officer members are compensated at the rate of $500 per meeting attended.
The Incentive/Compensation Committee administers the salary
administration program, management and employee incentive programs and the
Company Contribution Plan. (See "Executive Compensation" below.) The
Committee, comprised of three (3) outside Directors: Richard O. Johnson,
Chairman, Edwin L. Heminger and Graham R. Robb, is elected annually by the
Board. The Incentive/Compensation Committee met two (2) times in 1995. Non-
officer members are compensated at the rate of $500 per meeting attended.
The Finance Committee is comprised of three (3) Directors: William H.
Sullivan, Jr., Chairman, Alan A. Baker and David C. Easley. The Committee,
elected annually, is responsible for the Company's Investment Program
administration, investment of Company assets and the funding of business
development activities and did not meet in 1995. Investment considerations
during 1995 were considered by the full Board of Directors at their regular
meetings and through phone conversations with committee members. Non- officer
members are compensated at the rate of $500 per meeting attended.
During 1995, each Director attended at least 75% of the total of the
meetings of the Board of Directors and any committee on which such Director
served, with the exception of Mr. Heminger who attended 70% and Mr. Mason B.
Starring, III who attended 71% prior to his resignation from the Board on
August 24, 1995.
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SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
Company shares beneficially owned by the Directors of the Company and by all
Directors, nominees for election as Directors and Executive Officers as a
group as of March 1, 1996:
<TABLE>
Amount and Nature of Beneficial Ownership
-----------------------------------------
Sole Voting & Shared Voting & Percent
Name Investment Power Investment Power of Class
<S> <C> <C> <C>
Alan A. Baker 342 1,030 (1)
James H. Cameron 145,347 94,791 (2) 3.50%
David C. Easley 6,209 (3) -0- (1)
Edwin L. Heminger 9,658 -0- (1)
Richard O. Johnson 156,831 -0- 2.29%
Patrick J. McGonagle 2,039 (4) 40 (5) (1)
M. Howard Petricoff 927 1,776 (1)
Graham R. Robb 3,573 -0- (1)
Thomas E. Stewart 1,000 -0- (1)
William H. Sullivan, Jr. 99,968 (6) 24,695 (7) 1.82%
All Directors, nominees
and Executive Officers
as a group (14 persons) 434,577 (8) 124,134 (9) 8.15%
</TABLE>
____________________
(1) Less than 0.2%
(2) Owned by Mr. Cameron's wife or in a family partnership.
(3) Does not include 316,210 shares as to which Mr. Easley holds a proxy to
vote, which shares are beneficially owned by a family partnership in
which Mr. Easley's wife is a partner.
(4) Includes 1,597 shares held in trust under the Company's Salary Deferral
Plan.
(5) Shares held in trust under the Company's Salary Deferral Plan.
(6) Includes shares held by Mr. Sullivan as Guardian for his brother.
(7) Includes shares held by Mr. Sullivan as Trustee for various members of
his family, or Mr. Sullivan's wife.
(8) Includes 1,601 shares held in trust under the Company's Salary Deferral
Plan.
(9) Includes 1,802 shares held in trust under the Company's Salary Deferral
Plan.
____________________
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the three years ended December 31,
1995, compensation paid by the Company to Patrick J. McGonagle, President and
Chief Executive Officer of the Company. No other Executive Officer of the
Company earned compensation in excess of $100,000 in 1995.
SUMMARY COMPENSATION TABLE
----------------------------
Annual Compensation
-------------------
All Other
Name and Compensation
Principal Position Year Salary($) Bonus($)(2) ($)(3)
- ------------------ ---- --------- ----------- --------
Patrick J. McGonagle 1995 111,666 15,077 266
President & CEO(1) 1994 105,903 21,100 244
1993 79,951 100 126
(1) Mr. McGonagle became President and CEO of the Company effective February
19, 1993. Previously, Mr. McGonagle was Vice President and General
Counsel.
(2) Cash bonuses paid under the Management Incentive Plan and Company
Contribution Plan are calculated and paid in the year immediately
following the year in which such bonuses are earned. Bonuses are included
in the table for the year in which they are earned. Each year's bonus
includes a $100 bonus paid to all employees of the Company. Distribution
of a bonus to Mr. McGonagle was from the Management Incentive Plan in
1995 and 1994. (See "Compensation Committee Report on Executive
Compensation").
(3) The amount reported represents the premiums paid by the Company during
1995, 1994 and 1993, respectively, with respect to term life insurance
for the benefit of Mr. McGonagle.
Retirement Plans
During 1995, the Company maintained several qualified and non-qualified
defined contribution and defined benefit plans for the benefit of employees of
the Company and its operating subsidiaries. The plans are open to all
eligible, full-time employees who are at least 21 years of age and have
completed one (1) year of service.
Employees' Retirement Plan - The Company through its subsidiaries
maintains a Retirement Plan for all eligible, full-time employees. The
Retirement Plan is a defined benefit plan based on the total compensation paid
to an employee throughout his employment as a participant of the Plan.
Retirement benefits are accrued on an annual basis for all participating
employees at a rate of 1.90% of total compensation. For Mr. McGonagle,
retirement benefits are accrued based upon salary and bonus paid each year.
The sum of annual accruals represents the employee's annual normal retirement
(age 65) benefit. Mr. McGonagle has ten years of service credited to him under
the Retirement Plan.
The following table shows the estimated annual straight life benefit
payable at normal retirement based on an average annual compensation over a
certain number of years of service. The amounts listed in the table are not
subject to any reduction for Social Security benefits.
<PAGE>
AVERAGE ANNUAL YEARS OF SERVICE
COMPENSATION 20 25 30 35 40
- -----------------------------------------------------------------------
$ 25,000 $ 9,500 $11,875 $14,250 $16,625 $ 19,000
$ 50,000 $19,000 $23,750 $28,500 $33,250 $ 38,000
$ 75,000 $28,500 $35,625 $42,750 $49,875 $ 57,000
$100,000 $38,000 $47,500 $57,000 $66,500 $ 76,000
$125,000 $47,500 $59,375 $71,250 $83,125 $ 95,000
$150,000 $57,000 $71,250 $85,500 $99,750 $114,000
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, this Report and
the graph set forth on page 14 shall not be incorporated by reference into any
such filings.
Compensation Philosophy and Components of Compensation
The Company's compensation program is administered by the
Incentive/Compensation Committee (the "Committee") of the Board of Directors.
The Committee, which is comprised of three (3) non-employee directors,
generally makes all decisions on compensation paid to the Company's employees,
including the executive officers. All decisions by the Committee relating to
the compensation of the Company's executive officers are reviewed and given
final approval by the full Board of Directors. During 1995, no decisions of
the Committee were modified or rejected in any material way by the full Board.
The goal of the Committee in establishing the compensation of the
Company's executive officers is to reward individual contributions and
achievements and above-average Company performance. In so doing, the Committee
believes that the Company will be able to attract and retain exceptional
executive talent and create a performance-oriented environment that will
motivate executives to achieve Company and individual goals.
In 1992, the Company retained an independent compensation consultant to
assess the Company's compensation program and to compare the Company's
compensation against that of other companies in the natural gas industry. The
independent consultant recommended, and the Board of Directors approved, a
compensation program comprised of base salary and incentive compensation.
Beginning in 1992, the base salary component of any executive's compensation,
including Mr. McGonagle's compensation, is determined in accordance with a
Salary Administration Plan which categorizes employees, including executive
officers, into relative job positions. The category into which any particular
job position is classified is determined based upon competitive levels,
organizational structure and reporting relationships, the nature of each
position and the perceived internal value of each position. Each category is
assigned a salary range containing a minimum, midpoint and maximum salary
figure. It is anticipated that the minimum, midpoint and maximum salary
figures will be adjusted periodically to reflect, for example, competitive
trends in the industry, changes in the Company's organization and Company
fiscal performance. The level of compensation earned by each employee within
the range of that employee's job category will vary depending upon the level
of experience and individual performance of the employee.
In 1992, the incentive component of compensation was determined under a
Management Incentive Plan (the "Incentive Plan") pursuant to which managers
and executive officers received bonuses based upon the Company's return on
assets ("ROA") and return on equity ("ROE"). Beginning in 1993, only the ROE
component will be used in the determination of the bonus amount. Objectives of
the Incentive Plan include providing Company shareholders with a reasonable
return on their investment, tying remuneration more closely to Company
performance and enhancing overall competitiveness of compensation at the
Company in a variable instead of fixed manner. Participation in the Incentive
Plan is limited to those individuals who significantly affect the operating
results of the Company, as recommended by the CEO.
Specific awards under the Incentive Plan are calculated by means of a
formula which targets consolidated ROE. The target for ROE is recommended to
the Committee by the CEO, taking into account the fiscal structure of the
Company, economic and industry conditions, anticipated performance,
shareholder value and competitive industry practices. Actual ROE is to be
determined by the Company's independent auditors. No incentive compensation
will be awarded unless the ROE target has been satisfied, which was the case
in 1993.
The formula established from the target is then applied to each
participant's base salary. Officers, including Mr. McGonagle, are eligible to
receive a maximum incentive award of twenty percent (20%) of base salary,
depending on organizational performance. Other participants generally are
eligible to receive a maximum incentive award of ten percent (10%) or five
percent (5%) of base salary contingent on organizational performance.
The Company also has in effect a Company Contribution Plan ("Contribution
Plan") designed to recognize overall performance of all eligible, full-time
employees of the Company and its operating subsidiaries. The Contribution Plan
is administered by the Committee, the members of which, with the Board of
Directors, determine annually the amount of the total cash contribution to be
distributed to eligible employees in the following year. The amount to be
distributed each year is based upon corporate performance and is at the sole
discretion of the Board of Directors. It is the intention of the Committee
that no employee receive in any one year awards under both the Incentive Plan
and the Contribution Plan. Therefore, any individual who is a participant in
both plans will receive an award under the plan that provides for the greater
award to that individual in that year.
COMPENSATION COMMITTEE
Richard O. Johnson, Chairman, Edwin L. Heminger, Graham R. Robb
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Robb serves as Vice President and a Director of The Oxford Oil
Company. The Oxford Oil Company received $2,107,459 for 1,059,154 Mcf for gas
purchased by Producers Gas Sales, Inc., a subsidiary of the Company, as agent
for end use natural gas customers. In addition, Oxford Oil received $161,693
from NGO Development for a joint venture drilling program and received $32,631
from NGO Development for joint venture drilling program operating expenses.
PROPOSAL TO AMEND REGULATIONS
Introduction to Amendment
The Board of Directors is requesting, and recommends, that the
shareholders approve an amendment to the Code of Regulations of the Company
fixing an age limit for the election of Directors. The amendment is permitted
under Ohio law. The proposal is presented by the incumbent Directors and is
not in response to any recommendation from outside the Board of Directors.
Shareholders are urged to read carefully the following description of the
proposed amendment.
Existing Provisions of the Code of Regulations
The Code of Regulations presently sets an age limit on the tenure and
election of a Director at age 73. The Directors believe that age 70 is a more
appropriate age for the tenure and reelection of Directors in light of the
current composition, ages and tenure of the current Directors.
If adopted, proposed Section 2.03(D) of Article Two would establish the
age limit on the tenure and election of a Director at age 70. The proposed
resolution, including the text of the proposed new Section 2.03(D), which the
Directors recommend the Shareholders adopt, is attached as Exhibit A. The
proposal is not in response to any recommendation by any person or persons
outside the incumbent Board of Directors. THE AFFIRMATIVE VOTE OF THE HOLDERS
OF AT LEAST A MAJORITY OF THE OUTSTANDING SHARES IS REQUIRED TO APPROVE THIS
PROPOSAL.
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, S&P 500, AND
NATURAL GAS (DIVERSIFIED) INDUSTRY INDEX
The following graph sets forth a comparison of five year cumulative total
return among the common shares of the Company, the S&P 500 Index and the
Edward D. Jones & Co. Natural Gas (Diversified) Industry Index (the "Natural
Gas Index") for the fiscal years indicated. Information reflected on the graph
assumes an investment of $100 on December 31, 1990, in each of the common
shares of the Company, the S&P 500 and the Natural Gas Index. Cumulative total
return assumes reinvestment of dividends. The Natural Gas Index represents
stock price performance of 23 natural gas companies chosen by Edward D. Jones
& Co. having at least thirty percent but not more than ninety percent of their
operating revenues from the distribution of natural gas. The Company is among
the 23 companies included in the Natural Gas Index.
CUMULATIVE TOTAL RETURN
-------------------------------
The Natural S&P
Company Gas Index 500
----------------------------------------------------
1990 $100 $100 $100
1991 $107 $103 $130
1992 $129 $120 $140
1993 $171 $138 $154
1994 $183 $125 $156
1995 $150 $162 $215
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Price Waterhouse LLP served as the Company's independent certified public
accountants for the fiscal year ended December 31, 1995. Its representatives
are expected to be present at the Annual Meeting and will have an opportunity
to make a formal statement and be available to respond to appropriate
questions.
On the recommendation of the Audit Committee and ratification by the
shareholders, the Company's Board of Directors appointed Price Waterhouse LLP
as auditors for the fiscal year ended December 31, 1995, and audit and
non-audit services during the year were approved by the Audit Committee, which
considered the effect of the performance of such services on the independence
of said firm.
The Company's Board of Directors has proposed that the ratification of
the appointment of the independent certified public accountants for the
current fiscal year be submitted to the shareholders. On the recommendation of
the Company's Audit Committee, the Board of Directors appointed Price
Waterhouse LLP as independent certified public accountants for the fiscal year
ending December 31, 1996, and recommends that the appointment of Price
Waterhouse be ratified by the shareholders.
<PAGE>
SHAREHOLDERS PROPOSALS
Proposals submitted by shareholders for inclusion in the 1997 proxy
materials must be received by the Company not later than December 18, 1996.
1995 ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended December 31,
1995, has been sent to shareholders; said Annual Report and the financial
statements contained therein are not, and are not in any respect intended to
be, part of the proxy soliciting material.
THE COMPANY WILL ALSO PROVIDE WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT
ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO, TO EACH
SHAREHOLDER WHOSE PROXY IS SOLICITED HEREBY, UPON WRITTEN REQUEST OF SUCH
SHAREHOLDER TO JOHN B. DENISON, SECRETARY, AT NATIONAL GAS & OIL COMPANY, 1500
GRANVILLE ROAD, P. O. BOX 4970, NEWARK, OHIO 43058-4970.
JOHN B. DENISON
Secretary
__________________________
EXHIBIT A
RESOLVED, That the Code of Regulations of National Gas & Oil Company be,
and the same hereby is, amended by adding under Section 2.03 of Article Two
the following:
Section 2.03(D) No person shall be eligible to stand for election, who is 70
years of age or older on the date of the election or the appointment.
<PAGE>
PROXY
NATIONAL GAS & OIL COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints James H. Cameron, David C. Easley and
William H. Sullivan, Jr., or any of them with full power of substitution in
each, proxies to vote (including authority to vote cumulatively) and act with
respect to all Common Shares of the undersigned in NATIONAL GAS & OIL COMPANY,
an Ohio Corporation, at the Annual Meeting of its shareholders to be held in
the General Offices of the Company at 1500 Granville Road, Newark, Ohio, on
May 23, 1996, at 10:00 A.M., local time, and at any and all adjournments
thereof in accordance with the following instructions:
1. THE ELECTION OF _____ FOR all nominees _____ WITHHOLD AUTHORITY
DIRECTORS listed below (except as to vote for all nominees
marked to the contrary listed below.
below).
For a term of three years:
ALAN A. BAKER, RICHARD O. JOHNSON and THOMAS E. STEWART.
INSTRUCTION: To withhold authority to vote for any individual nominee print
that nominees's name below.)
________________________________________________________________________________
2. PROPOSAL to amend the Code of Regulations to set the age limit on the
tenure and election of Directors of the Company to age 70.
_____ FOR _____ AGAINST _____ ABSTAIN
3. PROPOSAL for the ratification of the appointment of Price Waterhouse LLP
to audit the financial statements of the Company and its subsidiaries for
the year ending December 31, 1996.
_____ FOR _____ AGAINST _____ ABSTAIN
(Please date and sign on reverse side)
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<PAGE>
MANAGEMENT RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2 AND 3. THIS PROXY, IF
RECEIVED PRIOR TO THE MEETING PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED.
IF NOT OTHERWISE SPECIFIED, THE PROXY WILL BE VOTED "FOR" PROPOSALS 1, 2 AND
3. IF ANY OTHER MATTERS ARE BROUGHT BEFORE THE MEETING, OR IF A NOMINEE FOR
ELECTION AS A DIRECTOR NAMED IN THE PROXY STATEMENT IS UNABLE TO SERVE OR FOR
GOOD CAUSE WILL NOT SERVE, THE PERSONS NAMED IN THIS PROXY OR THEIR
SUBSTITUTES WILL VOTE IN ACCORDANCE WITH THEIR BEST JUDGMENT ON SUCH MATTERS
OR FOR SUCH SUBSTITUTE NOMINEE AS THE DIRECTORS MAY RECOMMEND.
IMPORTANT: Please sign exactly as your names appear on this Proxy. Where
shares are held jointly, both holders should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
If signer is a corporation, execute in full corporate name by authorized
officer.
Date: _________________________ 1996
____________________________________
(Signature of Stockholder)
____________________________________
(Signature of Stockholder)
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