<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
NATIONAL FUEL GAS COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
NATIONAL FUEL GAS COMPANY
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
FEBRUARY 20, 1997
<PAGE> 3
NATIONAL FUEL GAS COMPANY
10 LAFAYETTE SQUARE
BUFFALO, NEW YORK 14203
December 30, 1996
Dear Stockholder:
We are pleased to invite you to join us at the Annual Meeting of
Stockholders of National Fuel Gas Company. The meeting will be held at 10:00
A.M. Eastern Standard Time on Thursday, February 20, 1997, in Salon III of The
Ritz-Carlton, Palm Beach, 100 South Ocean Boulevard, Manalapan, Florida 33462.
The matters on the agenda for the meeting are outlined in the enclosed
Notice of Meeting and Proxy Statement. In addition, officers of the Company will
review the past year, report current developments and answer questions from the
floor.
In order that you may elect Company directors and secure the representation
of your interests at the Annual Meeting, we urge you to complete, sign and date
your proxy card, and mail it in the envelope provided. The Proxies are committed
by law to vote your proxy as you designate.
If you plan to be present at the Annual Meeting, please check the "WILL
ATTEND MEETING" box on the proxy card. Whether or not you plan to attend, please
complete, sign, date and promptly return your proxy card so that your vote may
be counted. If you do attend and wish to vote in person, you can revoke your
proxy by giving written notice to the Secretary of the meeting or by casting
your ballot.
Coffee will be served at 9:30 A.M. The other directors and I look forward
to meeting you at that time.
In the meantime, please review the proxy statement and take advantage of
your right to vote.
Sincerely yours,
BERNARD J. KENNEDY
Chairman of the Board of Directors,
Chief Executive Officer and President
<PAGE> 4
NATIONAL FUEL GAS COMPANY
10 LAFAYETTE SQUARE
BUFFALO, NEW YORK 14203
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 20, 1997
To the Stockholders of National Fuel Gas Company:
Notice is hereby given that the Annual Meeting of Stockholders of National
Fuel Gas Company will be held at 10:00 A.M. Eastern Standard Time on Thursday,
February 20, 1997, in Salon III of The Ritz-Carlton, Palm Beach, 100 South Ocean
Boulevard, Manalapan, Florida 33462. At the meeting, action will be taken with
respect to:
(1) The election of directors;
(2) The appointment of independent accountants;
(3) The approval of the 1997 Award and Option Plan;
(4) The approval of amendments to the 1984 Stock Plan and the 1993
Award and Option Plan;
(5) The approval of the Retainer Policy for Non-Employee Directors;
and such other business as may properly come before the meeting or any
adjournment thereof.
Stockholders of record at the close of business on December 23, 1996, will
be entitled to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
ANNA MARIE CELLINO
Secretary
December 30, 1996
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, AND WHATEVER THE NUMBER OF SHARES
YOU OWN, PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY
CARD. PLEASE USE THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES.
<PAGE> 5
NATIONAL FUEL GAS COMPANY
10 LAFAYETTE SQUARE
BUFFALO, NEW YORK 14203
PROXY STATEMENT
This proxy statement is furnished to the holders of National Fuel Gas
Company ("Company") common stock ("Common Stock") in connection with the
solicitation of proxies on behalf of the Board of Directors of the Company for
use at the Annual Meeting of Stockholders to be held on February 20, 1997, or
any adjournment thereof. This proxy statement and the accompanying proxy card
are first being mailed to stockholders on or about December 30, 1996.
All costs of soliciting proxies will be borne by the Company. Morrow & Co.,
Inc., 909 Third Avenue, New York, New York 10022, has been retained to assist in
the solicitation of proxies and will be compensated in the estimated amount of
$7,000 plus reasonable out-of-pocket expenses. In addition to solicitation by
that firm and by mail, a number of regular employees of the Company and its
subsidiaries may solicit proxies in person, by telephone or by other methods.
Only stockholders of record at the close of business on December 23, 1996,
will be eligible to vote at this meeting. As of that date, 38,018,032 shares of
Common Stock were issued and outstanding.
Each share of Common Stock entitles the holder thereof to one vote with
respect to each matter that is subject to a vote at the meeting. All shares that
are represented by effective proxies received by the Company in time to be voted
will be voted at the meeting or any adjournment thereof. Where stockholders
direct how their votes shall be cast, shares will be voted in accordance with
such directions. Proxies submitted with abstentions and broker non-votes will be
included in determining whether or not a quorum is present. Abstentions and
broker non-votes will not be counted in tabulating the number of votes cast on
proposals presented to stockholders.
The proxy also confers discretionary authority to vote on all matters that
may properly come before the Annual Meeting of Stockholders, or any adjournment
thereof, respecting matters of which the Board is not currently aware but that
may be presented at the meeting, and respecting all matters incident to the
conduct of the meeting.
Any stockholder giving a proxy may revoke it at any time prior to the
voting thereof by mailing a revocation or a subsequent proxy to Anna Marie
Cellino at the above address, by filing written revocation at the meeting with
Mrs. Cellino, Secretary of the meeting, or by casting a ballot.
Enclosed is a copy of the Company's Annual Report for the fiscal year ended
September 30, 1996, which includes financial statements.
<PAGE> 6
1. ELECTION OF DIRECTORS
Three directors are to be elected at this Annual Meeting. The nominees for
the three directorships are: Eugene T. Mann, George L. Mazanec and George H.
Schofield. Each of the nominees is currently a director of the Company.
After the election of directors at the 1996 Annual Meeting, the Board of
Directors consisted of ten directors. On August 7, 1996, David N. Campbell
resigned. On August 19, 1996, as permitted by the Company's Restated Certificate
of Incorporation, as amended ("Charter"), the number of directors was decreased
from ten to nine by resolution of the Executive Committee of the Board of
Directors.
Effective October 24, 1996, as permitted by the Company's Charter, the
Board again increased the number of directors from nine to ten, and elected
George L. Mazanec to the Board for a term to expire at the 1997 Annual Meeting.
The terms of four of the directors will expire at the 1997 Annual Meeting.
One of the directors, Leonard Rochwarger, will retire from the Board at the 1997
Annual Meeting and is not a candidate for reelection. Mr. Rochwarger has been a
director since 1975, except for a period from 1988 to 1989 when he served as a
United States Ambassador. The Board is deeply appreciative of his contributions
to the Company over the years.
On December 13, 1996, as permitted by the Company's Charter, the number of
directors was reduced to nine, effective as of the 1997 Annual Meeting.
It is intended that the Proxies will vote for the election of Messrs. Mann,
Mazanec and Schofield as directors, unless they are otherwise directed by the
stockholders. Although the Board of Directors has no reason to believe that any
of the nominees will be unavailable for election or service, stockholders'
proxies confer discretionary authority upon the Proxies to vote for the election
of another nominee for director in the event any nominee is unable to serve or
for good cause will not serve. Messrs. Mann, Mazanec and Schofield have
consented to being named in this proxy statement and to serve if elected.
The affirmative vote of a plurality of the votes cast by the holders of
shares of Common Stock entitled to vote is required to elect each of the
nominees for director.
Set forth below is certain information concerning the three nominees for
election and the six directors of the Company whose terms will continue after
the 1997 Annual Meeting, including information with respect to their principal
occupations during the five years ended September 30, 1996, and certain other
positions held by them.
2
<PAGE> 7
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF
MESSRS. MANN, MAZANEC AND SCHOFIELD.
<TABLE>
NOMINEES FOR ELECTION AS DIRECTORS
FOR THREE-YEAR TERMS TO EXPIRE IN 2000
NAME AND YEAR
BECAME A DIRECTOR
OF THE COMPANY
- ---------------------------------------
<S> <C> <C>
------ ---------------------------------------------
EUGENE T. MANN......................... 66 Executive Vice President from 1986 until his
1993 retirement in August 1990 of Fleet Financial
Group, a diversified financial services
company, Providence, Rhode Island.
GEORGE L. MAZANEC...................... 60 Advisor to the Chief Executive Officer of
1996 PanEnergy Corporation. Former Vice Chairman
of PanEnergy Corporation from 1989 until
October 1996; executive vice president of
PanEnergy Corporation and president and chief
executive officer of Texas Eastern
Transmission Corporation from 1991 to 1993;
previously group vice president in charge of
gas supply, regulatory, marketing and
transportation and exchange activities; and
senior vice president of Texas Eastern
Corporation and president of Texas Eastern
Transmission Corporation.
GEORGE H. SCHOFIELD.................... 67 Chairman of the Board of Directors from 1986
1990 until his retirement in March 1995, and Chief
Executive Officer from 1985 to October 1994,
of Zurn Industries, Inc., a provider of
products and services for waste-to-energy and
water quality control systems, Erie,
Pennsylvania. Director of The Goodyear Tire &
Rubber Company.
</TABLE>
- ---------------
<TABLE>
<CAPTION>
(1) As of February 20, 1997.
<S> <C> <C>
</TABLE>
3
<PAGE> 8
<TABLE>
<CAPTION>
NAME AND YEAR
BECAME A DIRECTOR
OF THE COMPANY AGE(1) PRINCIPAL OCCUPATION
- --------------------------------------- ------ ---------------------------------------------
<S> <C> <C>
DIRECTORS WHOSE TERMS EXPIRE IN 1998
PHILIP C. ACKERMAN..................... 53 Senior Vice President of the Company since
1994 June 1989 and Vice President from 1980 to
1989. President of National Fuel Gas
Distribution Corporation(2) since October
1995 and Executive Vice President from June
1989 to October 1995, Executive Vice
President of National Fuel Gas Supply
Corporation(2) since October 1994. President
of Seneca Resources Corporation(2) from June
1989 to October 1, 1996. President of Horizon
Energy Development, Inc. (2) since September
1995 and certain other nonregulated
subsidiaries of the Company since prior to
1990.
LUIZ F. KAHL........................... 60 President since April 1996 of The Vector
1992 Group, LLC, a newly formed company pursuing
investment opportunities. Former Chief
Executive of BP Advanced Materials and
Carborundum from January 1990 to February
1996. On the Advisory Board of LucasVarity
Plc. April 1996 appointed Commissioner of the
Niagara Frontier Transportation Authority.
BERNARD S. LEE, PH.D................... 62 President since prior to 1989 of the
1994 Institute of Gas Technology, a not-for-profit
research and educational institution, Des
Plaines, Illinois. Director of Energy
Biosystems Corporation, NUI Corporation and
Peerless Mfg. Co.
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
(1) As of February 20, 1997.
(2) Wholly owned subsidiary of the Company.
</TABLE>
4
<PAGE> 9
<TABLE>
<CAPTION>
NAME AND YEAR
BECAME A DIRECTOR
OF THE COMPANY AGE(1) PRINCIPAL OCCUPATION
- --------------------------------------- ------ ---------------------------------------------
<S> <C> <C>
DIRECTORS WHOSE TERMS EXPIRE IN 1999
ROBERT T. BRADY........................ 56 Chairman of Moog Inc. since February 1996.
1995 President, Chief Executive Officer and Direc-
tor since 1988 of Moog Inc., a manufacturer
of motion control systems and components.
Director of Acme Electric Corporation, As-
tronics Corporation, First Empire State Cor-
poration and Seneca Foods Corporation.
WILLIAM J. HILL........................ 66 President of National Fuel Gas Distribution
1995 Corporation(2) from June 1989 until his
retirement in October 1995. Director of Reed
Manufacturing Company.
BERNARD J. KENNEDY..................... 65 Chairman of the Board of Directors of the
1978 Company since March 1989, Chief Executive
Officer since August 1988, President since
January 1987. Chairman of the Board of
Associated Electric & Gas Insurance Services
Limited and the Institute of Gas Technology.
Director of Marine Midland Banks, Inc.,
Merchants Mutual Insurance Company, American
Precision Industries, Inc., American Gas
Association and Interstate Natural Gas
Association of America.
</TABLE>
- ---------------
(1) As of February 20, 1997.
(2) Wholly owned subsidiary of the Company.
5
<PAGE> 10
MEETINGS OF THE BOARD OF DIRECTORS AND STANDING COMMITTEES
During the Company's fiscal year ended September 30, 1996 ("fiscal 1996"),
there were five meetings of the Board of Directors. In addition, certain
directors attended meetings of standing or pro tempore committees. The entire
Board of Directors acts as a nominating committee. There are three standing
committees as described below.
Audit Committee. The Audit Committee held three meetings during fiscal
1996 in order to review the scope and results of the annual audit, to receive
reports of the Company's independent public accountants and chief internal
auditor, and to prepare a report of the committee's findings and recommendations
to the Board of Directors. The committee consists of Messrs. Hill, Lee and
Schofield.
Compensation Committee. The Compensation Committee, all of the members of
which are non-employee independent directors, held three meetings during fiscal
1996 in order to review and determine the compensation of Company officers, to
receive reports and to award stock options, stock appreciation rights,
restricted stock and At Risk Awards. The committee administers the Company's
1983 Incentive Stock Option Plan, 1984 Stock Plan, 1993 Award and Option Plan,
and Annual At Risk Compensation Incentive Program. The committee consists of
Messrs. Brady, Kahl, Mann, Mazanec (beginning October 24, 1996) and Rochwarger.
Executive Committee. The Executive Committee held two meetings during
fiscal 1996. The committee has and may exercise the authority of the full Board
except as prohibited by New Jersey corporate law (N.J.S.A. sec.14A:6-9). This
committee will also respond to questions of public policy. The committee
consists of Messrs. Brady, Hill, Kahl, Kennedy and Mann.
During fiscal 1996, all incumbent directors attended at least 75% of the
aggregate of meetings of the Board and of the committees of the Board on which
they served, except for Luiz F. Kahl who attended 70% of such meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no "Compensation Committee interlocks" or "insider participation"
which the Securities and Exchange Commission (SEC) regulations would require to
be disclosed in this proxy statement.
DIRECTORS' COMPENSATION
Directors who are not officers of the Company or its subsidiaries are paid
an annual retainer of $18,000 and a fee of $1,000 for each Board meeting and
$800 for each committee meeting attended ($500 if participating by telephone).
In addition, in fiscal 1996 Messrs. Brady, Brown, Hill and Rochwarger received
payments of $500, $1,000, $500 and $500, respectively, for additional
consultations. Directors who are not officers do not participate in any of the
Company's employee benefit or compensation plans. Directors who are officers
receive no compensation for serving as directors. Directors who are not and were
not officers are covered by the Directors' Retirement Plan. Under this plan, any
outside director who has completed five years of Board service or becomes
totally and permanently disabled would receive an annual retirement benefit
equal to 10% of the annual retainer in effect on the date of retirement
multiplied by the number of full years of Board service, but not to exceed 100%
of that annual retainer. The retirement benefit would begin upon the later of
the director's retirement or age 70, and continue until the earlier of 10 years
or the death of the director.
The Board of Directors has adopted resolutions to reduce the cash component
of the directors' compensation, freeze benefits under the Directors' Retirement
Plan, pay the directors partially with Company stock, and seek shareholder
approval of this policy. Approval of the new Retainer Policy for Non-Employee
Directors is the fifth item to be voted on at the 1997 Annual Meeting of
Stockholders, as described later in this proxy statement.
6
<PAGE> 11
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
To the best of the Company's knowledge, there are no beneficial owners of
5% or more of the Common Stock of the Company.
The following table sets forth for each current director, each nominee for
director and each of the executive officers named in the Summary Compensation
Table and for all directors and officers as a group, information concerning
beneficial ownership of Common Stock of the Company. Unless otherwise stated, to
the best of the Company's knowledge, each person has sole voting and investment
power with respect to the shares listed.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
BENEFICIALLY OWNED PERCENT OF
AS OF SEPTEMBER 30, COMMON STOCK
NAME 1996 OWNED
- --------------------------------------------------------- ------------------- ------------
<S> <C> <C>
Philip C. Ackerman(1)(2)(3)(4)........................... 267,250 *
James A. Beck(1)(2)(5)................................... 16,126 *
Robert T. Brady.......................................... 100 *
Richard Hare(1)(2)(3).................................... 188,729 *
William J. Hill(2)....................................... 199,823 *
Luiz F. Kahl(6).......................................... 796 *
Bernard J. Kennedy(2)(3)................................. 502,363 1.3
Bernard S. Lee........................................... 1,100 *
Eugene T. Mann........................................... 850 *
George L. Mazanec(7)..................................... 500 *
Joseph P. Pawlowski(1)(2)................................ 78,070 *
Leonard Rochwarger....................................... 1,380 *
George H. Schofield...................................... 2,436 *
Gerald T. Wehrlin(1)(2)(8)............................... 85,122 *
Directors and Officers as a Group
(18 individuals)(9)(10)................................ 1,518,342 4 %
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1% of issued and outstanding
Common Stock on September 30, 1996.
(1) Includes shares held in the Company's Thrift Plan, Employee Stock Ownership
Plan for Supervisory Employees ("ESOP") and Tax-Deferred Savings Plan for
Non-Union Employees ("TDSP"), respectively, as follows: Philip C. Ackerman,
3,466, 5,446 and 3,744 shares; Richard Hare, 0, 5,569 and 3,054 shares;
James A. Beck, 102, 0, and 924 shares; Joseph P. Pawlowski, 599, 4,225 and
2,701 shares; Gerald T. Wehrlin, 599, 4,009 and 2,575 shares; and all
current directors and officers as a group (18 individuals), 10,066, 28,342
and 23,482 shares. The beneficial owners of the shares have sole voting
power with respect to shares held in the Thrift Plan, ESOP and TDSP, but do
not have investment power respecting those shares until they are
distributed.
(2) Includes shares with respect to which each of the named individuals, and
all current directors and officers as a group (18 individuals), have the
right to acquire ownership within 60 days of September 30, 1996, through
the exercise of stock options granted under the 1983 Incentive Stock Option
Plan, the 1984 Stock Plan and the 1993 Award and Option Plan as follows:
313,100 shares for Mr. Kennedy, 184,500 shares for Mr. Ackerman, 112,500
shares for Mr. Hare, 15,000 shares for Mr. Beck, 154,500 shares for Mr.
Hill, 59,151 shares for Mr. Pawlowski, 60,801 shares for Mr. Wehrlin, and
999,502 shares for all current directors and officers as a group (18
individuals). Of the options for the 899,552 shares exercisable by
executive officers set forth above, none were exercisable at
7
<PAGE> 12
a price which was above the market value of the Company's Common Stock on
September 30, 1996.
(3) Includes shares of restricted stock awarded in fiscal 1994 under the 1993
Award and Option Plan, certain restrictions on which had not lapsed as of
September 30, 1996, as follows: 49,368 shares for Mr. Kennedy, 22,750
shares for Mr. Ackerman, 22,460 shares for Mr. Hare, and 126,578 shares for
all current directors and officers as a group (18 individuals). Owners of
restricted stock have power to vote the shares, but have no investment
power with respect to the shares until the restrictions lapse.
(4) Includes 500 shares held by Mr. Ackerman's wife in trust for her mother, as
to which shares Mr. Ackerman does not admit beneficial ownership, and 240
shares with respect to which Mr. Ackerman shares voting and investment
power with his wife.
(5) Includes 100 shares with respect to which Mr. Beck shares voting and
investment power with his wife.
(6) Mr. Kahl shares voting and investment power with his wife with respect to
all 796 shares.
(7) Includes 300 shares owned by Mr. Mazanec's wife as to which Mr. Mazanec
shares voting and investment power.
(8) Includes 2,600 shares owned by Mr. Wehrlin's wife as to which Mr. Wehrlin
shares voting and investment power.
(9) See notes (1) through (8) above.
(10) Includes 1,271 shares with respect to which one or another of the officers
of the Company, not including the executive officers named in the Summary
Compensation Table, shares voting and investment power with his wife.
8
<PAGE> 13
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
General
The Compensation Committee (the Committee) sets the base salaries of
the Company's executive officers, makes awards and sets goals for the Company's
executive officers and others under the Annual At Risk Compensation Incentive
Program (the "At Risk Program"), and makes awards to executive officers and
others under various compensation plans as described below. The Committee
consists exclusively of non-employee independent directors, appointed by
resolution of the entire Board of Directors. No member of the Committee is
permitted to receive any award under any plan administered by the Committee.
The Committee's objective is to set executive compensation at levels which
(i) are fair and reasonable to the stockholders, (ii) link executive
compensation to long-term and short-term interests of the stockholders, and
(iii) are sufficient to attract, motivate and retain outstanding individuals for
executive positions.
Fairness to the stockholders is balanced with the need to attract, retain
and motivate outstanding individuals by comparing the Company's executive
compensation with the compensation of executives at other companies in the
applicable labor market. The Committee sets the total direct compensation of the
executive officers at least annually with reference to an appropriate peer
group. The Committee's overall goal is to achieve above-average performance by
the Company and its executives by affording the executives the opportunity to
earn above-average direct compensation (base salary, annual at risk compensation
and long-term incentive compensation) for above-average performance. More
specifically, the various elements of direct compensation are intended to work
in concert so that each executive's compensation would be approximately at the
median (50th percentile) for median performance by the Company and the
executive, at the 75th percentile for 75th percentile-level performance by the
Company and the executive, and so forth. The actual amount of compensation
earned in a fiscal year depends on the performance of the Company and the
individual executive officer.
The peer group consists of publicly-traded companies (not including the
Company) which are engaged in one or more of the Company's primary lines of
business (natural gas distribution, transmission, storage and production). There
are currently 20 companies in the peer group, which is subject to change from
time to time at the discretion of the Committee. The total market capitalization
of 18 of the 20 peer group companies, as of September 30, 1996, ranged from 24%
to 298% of the Company's total market capitalization. The other two peer group
companies had total market capitalization between 500% and 650% of the Company's
market capitalization, but were included because of other similarities to the
Company.
The Committee believes that the Company's most direct competitors for
executive talent are not necessarily all of the companies that would be included
in a peer group established to compare stockholder returns. Thus, the companies
in the compensation peer group are not the same as the companies reflected in
the indices displayed in the Comparison of Five-Year Cumulative Total Returns
graph included in this proxy statement on page 17.
The executive officers' compensation is linked to the long-term interests
of the stockholders by making a significant part of each executive officer's
potential compensation depend on the price of the Company's Common Stock on the
open market. The Committee awards stock appreciation rights (SARs) and options
to buy Company Common Stock, both of which have value only to the extent the
market price of the Company's Common Stock increases after the date of an award.
The Committee also has awarded restricted stock, which increases or decreases in
value to the same extent as the Company's Common Stock. Dividends are paid on
restricted stock and on the shares held for employees (including executive
officers) in various employee benefit plans, so executive officers benefit
directly from dividends paid on the Company's Common Stock.
Linking the executive officers' compensation to the short-term interests of
the stockholders is done by making a significant part of each executive
officer's potential compensation for a fiscal
9
<PAGE> 14
year depend upon the achievement of specific goals during that fiscal year,
especially earnings per share. The At Risk Program is described in more detail
below. In addition to being fair to stockholders, linking the executive
officers' compensation to the success of the Company also serves to attract,
retain and motivate those officers, especially while the Company continues to be
successful.
The retention of officers is also accomplished by utilizing forms of
compensation which either increase in value, or only have value, if the
executive officer remains with the Company for specified periods of time. For
example, all options and SARs awarded to date remain exercisable for 10 years if
the executive officer remains with the Company. All restricted stock awards do
not completely vest in the executive officer unless he remains with the Company
for a specified number of years after the award. The Executive Retirement Plan
pays no benefits if the executive officer leaves the Company before age 55 and
has substantial reductions for retirement before age 65. An executive officer
also may forfeit a portion of the interest payable under the Deferred
Compensation Plan if he leaves the Company before age 55.
Specific components of executive officers' compensation earned or paid in
fiscal 1996 are discussed below. Messrs. Kennedy, Ackerman and Hare were
executive officers at all times relevant to the following discussion. The
Company's other executive officers were designated as such in March 1996. The
Company's six most highly compensated executive officers are identified on the
Summary Compensation Table on page 14, and are sometimes referred to as the
"named executive officers".
Base Salary and Annual At Risk Incentive
The fiscal 1996 base salaries of the named executive officers are shown on
the Summary Compensation Table on page 14 in the "Base Salary" column. Executive
officers' base salaries are set on a calendar year basis, based on (i) the
completed accounting on the fiscal year just completed for the Company and each
subsidiary; (ii) the target At Risk Program awards which are made on a fiscal
year basis at the same time as base salaries are set; and (iii) available data
on the Company's peer group. So the first three months of the executive
officers' fiscal 1996 base salaries were set in December 1994 with the target At
Risk Program awards for fiscal 1995, and the last nine months of their fiscal
1996 base salaries were set in December 1995 with the target At Risk Program
awards for fiscal 1996.
As of December 1994, the Company's return on equity and total return to
shareholders over the three most recently completed years (1991-93) were both at
approximately the 75th percentile of its peer group. The Committee set the
calendar 1995 salary of Mr. Kennedy at 4% over the 75th percentile for his peer
group. The Committee set the base salary of Mr. Ackerman at 86% of the 75th
percentile for his peer group (raised to 110% of the 75th percentile for his
peer group upon promotion to President of Distribution Corporation in October
1995) and the base salary of Mr. Hare at 89% of the 75th percentile for his peer
group.
As of December 1995, the Company's return on equity over the three most
recently completed years (1992-94) was at approximately the 70th percentile of
its peer group, and the Company's total return to shareholders was at
approximately the 50th percentile of the peer group. The Committee set the
calendar 1996 salary of Mr. Kennedy at 5% over the 75th percentile for his peer
group. The Committee set the base salary of Mr. Ackerman at 94% of the 75th
percentile for his peer group, and the base salary of Mr. Hare at 86% of the
75th percentile for his peer group. The Committee set the calendar 1996 base
salary plus target At Risk Program award of Mr. Kennedy at 69% of the 75th
percentile for his peer group, the calendar 1996 base salary plus target At Risk
Program award of Mr. Ackerman at 77% of the 75th percentile for his peer group,
and the calendar 1996 base salary plus target At Risk Program award of Mr. Hare
at 77% of the 75th percentile of his peer group.
The Summary Compensation Table on page 14 includes in the "LTIP [long-term
incentive plan] Payouts" column the amount earned by or paid to Messrs. Kennedy,
Ackerman and Hare in fiscal 1996 under the At Risk Program. These payments are
considered by the SEC to be "long-term" incentives because payments are based on
the rolling average of performance during the two fiscal years most recently
completed. The range of potential At Risk Program awards for fiscal 1996 for
Messrs. Kennedy, Ackerman and Hare is set out in the Long-Term Incentive Plan
Table on page 16.
10
<PAGE> 15
During the first quarter of fiscal 1996, the Committee set At Risk Program
goals and ranges of potential payments for Messrs. Kennedy, Ackerman and Hare
for fiscal 1996. These were intended, when taken together with base salaries, to
provide total direct cash compensation beginning at the median for median
performance and progressing upward from there so that, for example, 75th
percentile-level performance would generate 75th percentile-level compensation.
During the first quarter of fiscal 1997, the Committee (i) rated each of
these executive officer's fiscal 1996 performance against his fiscal 1996 At
Risk Program goals (principally earnings per share), and (ii) calculated the At
Risk Program payments to be made for fiscal 1996 to each executive officer. For
Messrs. Kennedy, Ackerman and Hare, the awards were based on the average of
their performance ratings for fiscal years 1995 and 1996.
Mr. Kennedy was given the opportunity in December 1995 to earn a fiscal
1996 At Risk Program payment equal to 22% of his calendar 1996 base salary for
achieving target goals, and up to 44% of his calendar 1996 base salary for
substantially exceeding those goals. Mr. Ackerman was given the opportunity in
December 1995 to earn a fiscal 1996 At Risk Program payment equal to 15% of his
calendar 1996 base salary for achieving target goals, and up to 30% of his
calendar 1996 base salary for substantially exceeding those goals. Mr. Hare was
given the opportunity in December 1995 to earn a fiscal 1996 At Risk Program
payment equal to 10% of his calendar 1996 base salary for achieving target
goals, and up to 20 % of his calendar 1996 base salary for substantially
exceeding those goals. At Risk Program goals for Messrs. Kennedy, Ackerman and
Hare were:
Mr. Kennedy, as Chief Executive Officer: a specified level of Company
earnings per share (weighted as 75% of the formula) and customer service/other
goals (weighted as 25% of the formula). Company earnings per share must reach
107% of the target to trigger the maximum annual incentive award to Mr. Kennedy
or any other executive officer. In addition, Mr. Kennedy's summary rating for
customer service/other goals would have to be "Substantially Exceeds
Expectations," to trigger the maximum award.
Mr. Ackerman, as President of the regulated utility business, President of
the non-regulated subsidiaries and chief financial officer: a specified level of
Company earnings per share (weighted as 45% of the formula), a specified level
of net income for his subsidiaries (weighted as 30% of the formula), and
customer service/other goals (weighted as 25% of the formula to reflect the
importance of utility ratepayer satisfaction). Mr. Ackerman's subsidiaries would
have to achieve 150% of the targeted net income, and his summary rating for
customer service/other goals would have to be "Substantially Exceeds
Expectations," to trigger the maximum award.
Mr. Hare, as President of the regulated interstate pipeline and storage
business: a specified level of Company earnings per share (weighted as 20% of
the formula), a specified level of net income for his subsidiary (weighted as
40% of the formula), and customer service/other goals (weighted as 40% of the
formula). Mr. Hare's subsidiary would have to achieve 115% of targeted net
income, and his summary rating for customer service/other goals would have to be
"Substantially Exceeds Expectations," to trigger the maximum award.
The fiscal 1996 base salaries of the other seven individuals who were
designated as executive officers in March 1996 were set by Messrs. Kennedy,
Ackerman and/or Hare on a calendar year basis in December 1994 and 1995. Base
salaries are intended to be competitive with salaries of comparable officers in
the Company's peer group.
Those same seven executive officers were paid amounts as At Risk Program
Awards in December 1995 (for performance in fiscal 1995) and December 1996 (for
performance in fiscal 1996). These awards were based on the performance of their
respective subsidiaries and their respective areas of responsibility. Messrs.
Kennedy, Ackerman and/or Hare set the amounts of these awards for fiscal 1995
and made recommendations for fiscal 1996 which were accepted by the Committee.
The Summary Compensation Table on page 14 shows At Risk Program awards
earned or paid in fiscal 1996 to the named executive officers. For performance
during fiscal years 1995 and 1996, Mr. Kennedy earned an incentive equal to 44%
of his calendar 1996 base salary, Mr. Ackerman earned an incentive equal to 30%
of his calendar 1996 base salary, and Mr. Hare
11
<PAGE> 16
earned an incentive equal to 17% of his calendar 1996 base salary. For
performance in fiscal 1996, Mr. Beck earned an incentive equal to 41% of his
calendar 1996 base salary, Mr. Pawlowski earned an incentive equal to 19% of his
calendar 1996 base salary, and Mr. Wehrlin earned an incentive equal to 19% of
his calendar 1996 base salary.
The Summary Compensation Table on page 14 includes in the "Bonus" column
the amount earned by or paid to Messrs. Beck, Pawlowski and Wehrlin in fiscal
1996 under the At Risk Program. These awards are considered by the SEC to be
bonuses because they are based on performance during a single fiscal year.
However, the amounts shown as bonuses in fiscal 1996 are inflated by the
inclusion (as required by SEC regulations) of both (i) the bonus earned in
fiscal 1995 but paid during fiscal 1996, and (ii) the bonus earned in fiscal
1996 but paid in fiscal 1997.
Stock Options, SARs and Restricted Stock
Stock options, stock appreciation rights (SARs) and restricted stock
represent the longer-term incentive and retention component of the executive
compensation package. One of the Committee's goals is to keep each executive
officer's total base salary, At Risk Program award and longer-term incentive at
approximately that percentile of the executive officer's peer group's
compensation which corresponds to the percentile of the Company's performance
versus its peer group.
The Company's total return to stockholders, with dividends reinvested in
stock, for the five-year period ended September 30, 1996 was at about the 67th
percentile of its peer group, about 16% above the average for the peer group.
For the one-year period ended September 30, 1996, the Company was at about the
75th percentile, about 43% above the average for the peer group.
Total direct compensation (base salary, At Risk Program award, options,
SARs and restricted stock) for the named executive officers was compared to the
total direct compensation of the equivalent officers in the peer group. The
fiscal 1996 total direct compensation of each of the Company's named executive
officers was at or below the average for the comparable executive officers in
the peer group, ranging from 1% to 44% below that average.
In deciding to award options, SARs or restricted stock, the Committee also
takes into account both subjective (non-quantifiable) factors and quantifiable
factors, such as the executive officer's performance of his assigned goals under
the At Risk Program. Options, SARs and restricted stock are each longer-term
incentives designed to create an identity of interest between executives and
stockholders and to orient executives to the long-term interests of the Company.
For several years, each executive officer has received regular awards under
these programs according to policies designed to provide long-term opportunities
which are in a consistent range as a percentage of cash compensation (base
salary plus At Risk Program payments) considering stock price, dividend yield
and market-to-book ratio.
During fiscal 1996, the Committee awarded to each executive officer options
to buy stock in the future at the market price on the award date. The Committee
also awarded to Messrs. Kennedy, Ackerman and Hare an equal number of SARs with
the same exercise price. None of the options or SARs awarded can be exercised
for one year after the award date, and all of them expire no later than 10 years
after the award date. Awards to the named executive officers are shown on the
Option/SAR Grants in Fiscal 1996 table on page 15.
Based on performance in fiscal 1996, the Committee in December 1996 awarded
4,150 shares of restricted stock to Mr. Kennedy, 1,150 shares of restricted
stock to Mr. Ackerman, and 1,000 shares of restricted stock to Mr. Beck. The
Summary Compensation Table on page 14 contains additional information on the
1994 restricted stock awards to those executive officers.
12
<PAGE> 17
Benefits Based on Retirement or Death, or Under Plans
Benefits payable under the Retirement Plan, the Executive Retirement Plan,
the split-dollar whole-life insurance program and the Deferred Compensation Plan
are based on retirement or death. Estimated benefits payable under the
Retirement Plan are shown in the pension plan table on page 19. Company payments
under the insurance programs are shown as part of "All Other Compensation" on
the Summary Compensation Table on page 14.
Other benefits available under established plans which apply to all
supervisory employees include the Company's contributions of Common Stock to the
Tax-Deferred Savings Plan (a 401(k) plan) to match a portion of each executive's
contributions, and the Company's payments related to the Employee Stock
Ownership Plan for Supervisory Employees, and the Deferred Compensation Plan.
Neither the Company nor the Committee made any material changes in any of these
plans, nor any material changes in any of the "miscellaneous minor perquisites
and personal benefits" discussed in footnote 1 of the Summary Compensation
Table.
Compensation of Chief Executive Officer
The bases for Mr. Kennedy's fiscal 1996 base salary and At Risk Program
award, including the Committee's goals and methodology, are discussed earlier in
this report under the heading Base Salary and Annual At Risk Incentive. The
bases for Mr. Kennedy's other fiscal 1996 long-term incentive awards are
discussed earlier in this report under the heading Stock Options, SARs and
Restricted Stock.
Specifically, the average total direct compensation of chief executive
officers of peer group companies was $1,983,911. Mr. Kennedy's actual 1996 total
direct compensation was 1% below the peer group average.
Policy With Respect to Qualifying Compensation Paid to Executive Officers For
Deductibility Under Section 162(m) of the Internal Revenue Code
The Committee intends that, whenever reasonably possible, compensation paid
to its managers, including its executive officers, should be deductible for
federal income tax purposes. Compensation paid under the At Risk Program
qualifies as performance-based compensation under Section 162(m) of the Internal
Revenue Code. All compensation paid to or earned by the executive officers in
fiscal 1996 was deductible for federal income tax purposes.
COMPENSATION COMMITTEE
Leonard Rochwarger, Chairman
Robert T. Brady
Luiz F. Kahl
Eugene T. Mann
George L. Mazanec
13
<PAGE> 18
EXECUTIVE COMPENSATION SUMMARY TABLE
The following table sets forth information with respect to compensation
paid by the Company and its subsidiaries for services rendered during the last
three fiscal years to the Chief Executive Officer and each of the five other
most highly compensated executive officers for the fiscal year ended September
30, 1996 (the "named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
AWARDS
ANNUAL COMPENSATION -------------------------
---------------------------------- SECURITIES PAYOUTS ALL OTHER
OTHER ANNUAL RESTRICTED UNDERLYING ---------- COMPEN-
NAME AND PRINCIPAL FISCAL BASE COMPEN- STOCK OPTIONS/ LTIP SATION
POSITION YEAR SALARY BONUS SATION (1) AWARDS SARS (#) PAYOUTS (2)
- ------------------------- ------ --------- -------- ------------ ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bernard J. Kennedy....... 1996 $ 839,400 $ 0 0 $ 169,600(3) 150,000 $373,200 $ 206,106
Chairman of the Board 1995 788,150 0 0 0 150,000 315,000(5) 152,430
of Directors, Chief 1994 688,150 0 0 2,036,444(4) 90,000 276,000 173,903
Executive Officer
and President
Philip C. Ackerman....... 1996 470,000 0 0 47,000(3) 70,000 141,000 82,209
Senior Vice President of 1995 365,612 0 0 0 70,000 65,000(5) 77,680
the Company and 1994 348,050 0 0 938,438(4) 55,000 65,000 72,532
President of certain
subsidiaries
Richard Hare............. 1996 370,000 0 0 0 60,000 63,000 76,024
President of National 1995 365,612 0 0 0 60,000 63,000(5) 68,344
Fuel Gas Supply 1994 348,050 0 0 926,475(4) 55,000 60,000 70,577
Corporation
James A. Beck............ 1996 188,875 136,000(6) 0 40,875(3) 20,000 0 2,647
President of Seneca
Resources Corporation
Joseph P. Pawlowski...... 1996 212,000 62,000(7) 0 0 20,000 0 48,239
Treasurer of the Company
and Senior Vice President
of National Fuel Gas
Distribution Corporation
Gerald T. Wehrlin........ 1996 212,000 62,000(7) 0 0 20,000 0 44,177
Controller of the Company
and Senior Vice President
of National Fuel Gas
Distribution Corporation
</TABLE>
- ---------------
(1) Excludes perquisites or personal benefits because, for each executive
officer, the cost to the Company of all such items was less than $50,000 and
less than 10% of that executive's base salary and bonus, if any, for each
fiscal year listed.
(2) In fiscal 1996, the Company paid, contributed or accrued for Messrs.
Kennedy, Ackerman, Hare, Beck, Pawlowski and Wehrlin $0, $7,920, $7,760,
$2,111, $7,385 and $7,260 respectively, under the Tax-Deferred Savings Plan;
$71,506, $21,933, $19,148, $536, $6,558 and $6,931, respectively, under a
provision of the Deferred Compensation Plan and Board resolutions which pays
all participants a sum intended to replace amounts which they will not
receive as Company-matching contributions under the Tax-Deferred Savings
Plan as a result of tax law limits or other tax considerations; $6,086,
$8,485, $8,685, $0, $6,557 and $6,208, respectively, under a program that
passes through to employees the Company's tax savings associated with
payment of dividends on Employee Stock Ownership Plan shares; $26,814,
$10,293, $13,183, $0, $9,833 and $10,499, respectively, as above-market
interest under the Deferred Compensation Plan (which amount, in the case of
Messrs. Ackerman and Beck, could be forfeited); and $101,700, $33,578,
$27,248, $0, $17,906 and $13,279, respectively, as the dollar value of
split-dollar or other life insurance benefits paid for by the Company.
(3) Represents the market value as of the date of award (December 13, 1996) of
shares of restricted stock for performance in fiscal 1996. These shares were
not outstanding at fiscal year-end 1996, but the number of unvested shares
and fair market value at September 30, 1996 ($36.75 per share) would have
been: Mr. Kennedy, 4,150 shares, $152,512;
14
<PAGE> 19
Mr. Ackerman, 1,150 shares, $42,262; Mr. Beck, 1,000 shares, $36,750. The
award to Mr. Kennedy vests in the earlier of three years after the award or
six months after retirement; the award to Mr. Ackerman vests three years
after the award; the award to Mr. Beck vests seven years after the award.
Dividends are paid on all shares of restricted stock.
(4) As required by SEC regulations, the dollar value of the restricted stock
shown in the table as a 1994 award has been calculated as of the date of the
award ($34.375 per share), even though the executive officers could not
realize that value on that date. At September 30, 1996 (based on the closing
market stock price of $36.75), the number and market value of all unvested
shares of restricted stock held by each of the named executive officers were
as follows: for Mr. Kennedy, 49,368, $1,814,274; for Mr. Ackerman, 22,750,
$836,063; and for Mr. Hare, 22,460, $825,405. Dividends are paid on all
shares of restricted stock. As of January 2, 1997, some restrictions on
one-third of the shares of restricted stock held by each individual lapse as
follows: Mr. Kennedy, 19,748 shares; Mr. Ackerman, 9,110 shares; and Mr.
Hare, 8,984 shares. Some restrictions on the remaining shares of restricted
stock lapse in equal amounts (one-quarter of the unvested shares) on each of
the following dates: January 2, 1998, January 2, 1999, January 2, 2000 and
January 2, 2001. The only restriction which would not lapse as described
above is the requirement that restricted stock may not be transferred until
the earliest of (a) six years from the date the other restrictions lapse;
(b) the recipient's attainment of age 65; or (c) the recipient's death.
(5) Includes amounts awarded in April 1996 (after publication of the fiscal 1995
proxy statement) for performance in fiscal 1994-95 as follows: Mr. Kennedy,
$79,000; Mr. Ackerman, $16,000; Mr. Hare, $16,000.
(6) Includes both (i) bonus earned in fiscal 1995 but paid in fiscal 1996
($56,000) and (ii) bonus earned in fiscal 1996 but paid in fiscal 1997
($80,000).
(7) Includes both (i) bonus earned in fiscal 1995 but paid in fiscal 1996
($22,000) and (ii) bonus earned in fiscal 1996 but paid in fiscal 1997
($40,000).
STOCK OPTION GRANT TABLE
The following table sets forth information with respect to options to
purchase shares of Common Stock and stock appreciation rights (SARs) awarded
during fiscal 1996 to the named executive officers pursuant to plans approved by
the Company's stockholders.
OPTION/SAR GRANTS IN FISCAL 1996 (1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS/SARS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES OR BASE GRANT DATE
OPTIONS/SARS IN FISCAL PRICE PER EXPIRATION PRESENT
NAME GRANTED(#) YEAR SHARE($/SH) DATE VALUE($)(2)
- ------------------------------ -------------- ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Bernard J. Kennedy............ 75,000 options 15.4% $28.5625 10/2005 $ 288,500
75,000 SARs 15.4% 28.5625 10/2005 288,500
Philip C. Ackerman............ 35,000 options 7.2% 28.5625 10/2005 134,400
35,000 SARs 7.2% 28.5625 10/2005 134,400
Richard Hare.................. 30,000 options 6.2% 28.5625 10/2005 115,200
30,000 SARs 6.2% 28.5625 10/2005 115,200
James A. Beck................. 20,000 options 4.1% 36.8125 9/2006 125,600
Joseph P. Pawlowski........... 20,000 options 4.1% 36.8125 9/2006 125,600
Gerald T. Wehrlin............. 20,000 options 4.1% 36.8125 9/2006 125,600
</TABLE>
- ---------------
(1) The options and SARs shown on this table were granted under the 1993 Award
and Option Plan and can be exercised at any time during the nine years
preceding the expiration date if the holder remains with the Company. These
options and SARs terminate upon termination of employment, except that upon
termination of employment for any reason other than discharge for cause or
voluntary resignation prior to age 60, most of such options and SARs
15
<PAGE> 20
may be exercised within five years after termination of employment. Payment
of the exercise price may be in cash or by tendering shares of Company
Common Stock.
(2) This column shows the hypothetical value of these options and SARs according
to a binomial option pricing model which is a modification of the
Black-Scholes option pricing model. The weighted average of the assumptions
used in this model for the two sets of options granted in fiscal 1996 were:
quarterly dividend yield of 1.3348%, an annual expected return of 10.24%, an
annual standard deviation (volatility) of 15.44%, a risk-free rate of 6.08%,
and an expected term before exercise of 5.5 years. Whether the assumptions
used will prove accurate cannot be known at the date of grant. The model
produces a value based on freely tradable securities, which the options and
SARs are not. The holder can derive a benefit only to the extent the market
value of Company Common Stock is higher than the exercise price at the date
of actual exercise.
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUE TABLE
The following table sets forth as to each named executive officer
information with respect to stock option and SAR exercises during fiscal 1996
and the number and value of unexercised options and SARs at September 30, 1996.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1996
AND OPTION/SAR VALUES ON SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
UNDERLYING OPTIONS/SARS AT FY-END(#) AT FY-END($)(2)
OPTIONS/SARS VALUE --------------------------- ---------------------------
NAME EXERCISED(#) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bernard J. Kennedy............... 34,000 $ 451,250 483,200 150,000 $ 4,227,244 $ 1,228,125
Philip C. Ackerman............... 14,000 214,813 295,500 70,000 2,709,313 573,125
Richard Hare..................... 94,150 912,974 165,000 60,000 1,073,125 491,250
James A. Beck.................... 0 0 15,000 20,000 113,750 0
Joseph P. Pawlowski.............. 0 0 59,151 20,000 534,119 0
Gerald T. Wehrlin................ 8,775 119,248 60,801 20,000 555,363 0
</TABLE>
- ---------------
(1) Market value of stock at exercise less exercise price or base price.
(2) Market value of stock at fiscal year-end less exercise price or base price.
LONG-TERM INCENTIVE PLAN AWARD TABLE
The following table sets forth information with respect to long-term
incentive plan awards made during fiscal 1996 to the named executives pursuant
to the At Risk Program.
LONG-TERM INCENTIVE PLAN -- AWARDS IN FISCAL 1996
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS(1)
PERFORMANCE PERIOD -------------------------------
NAME UNTIL MATURATION THRESHOLD TARGET MAXIMUM
- ------------------------------------ --------------------- --------- -------- --------
<S> <C> <C> <C> <C>
Bernard J. Kennedy.................. 2 years ended 9/30/96 $ 0 $186,604 $373,208
Philip C. Ackerman.................. 2 years ended 9/30/96 0 70,500 141,000
Richard Hare........................ 2 years ended 9/30/96 0 37,000 74,000
</TABLE>
- ---------------
(1) This table describes the sole At Risk Program opportunity which was made to
executive officers in fiscal 1996 based on the rolling two-year average of
performance in fiscal 1995 and fiscal 1996. The actual amounts awarded and
paid for fiscal 1996 under the At Risk Program are shown in the Summary
Compensation Table on page 14 in the LTIP Payouts column.
16
<PAGE> 21
CORPORATE PERFORMANCE GRAPH
The following graph compares the yearly cumulative stockholder return on
the Company's Common Stock against the cumulative total return of the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500") and the Standard & Poor's
Utilities Index ("S&P Utilities") for a period of five years commencing
September 30, 1991, and ended September 30, 1996.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS*
FISCAL YEARS 1992 -- 1996
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) NATIONAL FUEL S&P 500 S&P UTILITIES
<S> <C> <C> <C>
1991 100 100 100
1992 114 111 114
1993 166 125 141
1994 143 130 122
1995 146 169 156
1996 195 203 168
</TABLE>
* Assumes $100.00 invested on September 30, 1991, and reinvestment of dividends.
EMPLOYMENT AND SEVERANCE AGREEMENTS
Mr. Kennedy entered into an employment agreement with the Company on
September 17, 1981, which was most recently extended as of September 19, 1996.
The agreement is effective until September 1, 1999, subject to earlier
termination in the event of his death or disability. The agreement preserves, as
a minimum level of compensation, monthly compensation levels as are in effect
from time to time.
Messrs. Ackerman, Hare, Pawlowski, Wehrlin entered into agreements with the
Company dated May 1, 1992, and Mr. Beck dated March 16, 1995, that are to become
effective in the event of a defined change of control of the Company. They
preserve as a minimum, for the three years following such 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 up to 2.99 times their
respective annual base
17
<PAGE> 22
salaries prior to termination, plus continuation of certain employee benefits
for three years or receipt of the value of such benefits, minus amounts earned
through other employment over such three-year period.
RETIREMENT BENEFITS
The Company's Retirement Plan is a noncontributory, defined-benefit pension
plan covering substantially all employees of the Company and its subsidiaries.
In general, the Retirement Plan provides a lifetime annuity at age 65 to a
retired employee in an annual amount equal to 1 1/4% of "final average salary"
up to $7,800 plus 1 1/2% of "final average salary" in excess of $7,800,
multiplied by years of service rendered after becoming covered by the Retirement
Plan, to a maximum of 40 years. For most employees, "final average salary" for
purposes of the Retirement Plan basically is the average of an employee's annual
base salary for the 60 highest consecutive months out of the last 120 months of
employment.
Normal retirement is at age 65. Early retirement with unreduced benefits is
available to all employees at age 60. Early retirement, possibly with reduced
benefits, is available at age 55 to all employees that have at least 10 years of
vesting service. Generally, retirement benefits under the Retirement Plan are
not subject to reduction for Social Security benefits or other offset amounts.
The Company's Executive Retirement Plan is a noncontributory,
defined-benefit pension plan that covers most executive officers and most other
officers of the Company and its subsidiaries. The Executive Retirement Plan
provides retirement benefits to eligible officers in the same form as, and in
addition to, basic retirement benefits provided them under the Retirement Plan.
It restores benefit reductions, if any, under the Retirement Plan caused by
participation in the Deferred Compensation Plan and provides retirement benefits
to such officers without regard to the Internal Revenue Code dollar ceilings and
other limits that reduce many officers' Retirement Plan benefits. In general,
the Executive Retirement Plan would provide supplemental benefits in the form of
a monthly 50% joint and survivor life annuity payment (i.e., a lifetime annuity)
beginning at age 65 to a retiring eligible officer and surviving spouse. (The
retiree may instead elect other forms of annuity, such as a single life annuity,
but the Company estimates that the executive officers will elect the 50% joint
and survivor annuity.) Based on that estimate, and assuming that the officer and
his spouse are the same age, such officer's annual annuity payment will be equal
to 87.3% of the sum of (a) 1.97% times the first 30 years of service, plus (b)
1.32% times the next 10 years of service, multiplied by (c) "final average
salary," as defined below; this product will then be offset by Retirement Plan
benefits and a portion of Social Security benefits to be received. A surviving
spouse of a retiree would receive 50% of the above-described annual annuity
payment under the Executive Retirement Plan, plus payments under the Retirement
Plan applicable to all employees. Reduced benefits are available for eligible
officers who retire prior to age 65 and as early as age 55, provided they have
at least five years of service. The Executive Retirement Plan also has a lump
sum payout provision. The only eligible people who retired in fiscal 1996
elected not to take this benefit in a lump sum.
"Final average salary" for purposes of the Executive Retirement Plan
basically is the average of an employee's annualized cash compensation for the
60 months during the 10 years prior to retirement which produces the highest
average. Under the Executive Retirement Plan, "annual cash compensation"
consists of base salary plus cash payments, if any, earned under the At Risk
Program.
The following table shows annual 50% joint and survivor life annuity total
benefits payable under the Retirement Plan plus the Executive Retirement Plan to
eligible officers retiring currently at the normal retirement age of 65 with a
spouse of the same age. Forms of benefit
18
<PAGE> 23
payment other than the 50% joint and survivor life annuity, or retirement prior
to age 65, would result in different annual benefits to eligible officers.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS
FIVE-YEAR FOR YEARS OF BENEFIT SERVICE CREDITED(1)
FINAL AVERAGE -----------------------------------------------
SALARY(2)(3) 25 30 35 40
- ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 300,000 $124,900 $149,880 $166,348 $182,817
600,000 253,886 304,663 338,417 372,170
900,000 382,872 459,446 510,485 561,524
1,200,000 511,857 614,229 682,553 750,878
1,500,000 640,843 769,012 854,622 940,231
</TABLE>
- ---------------
(1) The service credited for retirement benefit purposes to the officers named
in the Summary Compensation Table, as of September 30, 1996, is as follows:
Mr. Kennedy, 37 years, 1 month; Mr. Ackerman, 27 years, 2 months; Mr. Hare,
20 years; Mr. Beck, 6 years, 3 months; Mr. Pawlowski, 20 years, 1 month; Mr.
Wehrlin, 19 years, 1 month.
(2) Compensation covered for retirement benefit purposes is more than the
amounts appearing in the three "annual compensation" columns of the Summary
Compensation Table on page 14, because of the inclusion of At Risk Program
awards and some restricted stock. Accordingly, the covered current
compensation as of September 30, 1996, is as follows: Mr. Kennedy,
$1,382,200; Mr. Ackerman, $658,000; Mr. Hare, $433,000; Mr. Beck $188,875;
Mr. Pawlowski, $212,000; and Mr. Wehrlin $212,000.
(3) Benefits described in this table reflect the partial offset for Social
Security benefits described above.
2. APPOINTMENT OF INDEPENDENT ACCOUNTANTS
At the 1997 Annual Meeting, stockholders will be asked to appoint Price
Waterhouse LLP as independent accountants for the Company's fiscal year ending
September 30, 1997 ("fiscal 1997"). If appointed, Price Waterhouse LLP will
examine the financial statements of the Company and its subsidiaries and report
upon the annual consolidated financial statements for fiscal 1997.
Representatives of that firm have regularly attended the Company's annual
meetings and one is expected to attend this year. This representative shall have
the opportunity to make a statement, if he or she desires, and is expected to be
available to respond to questions.
The affirmative vote of a majority of the votes cast with respect to the
appointment of independent accountants by the holders of shares of Common Stock
entitled to vote is required for the appointment of Price Waterhouse LLP as
independent accountants. If the necessary votes are not received, or if Price
Waterhouse LLP declines to accept or otherwise becomes incapable of accepting or
exercising the appointment, or its services are otherwise discontinued, the
Board of Directors will appoint other independent accountants. Unless they are
otherwise directed by the stockholders, the Proxies intend to vote for the
appointment of Price Waterhouse LLP as independent accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS APPOINTMENT.
3. APPROVAL OF THE 1997 AWARD AND OPTION PLAN
On December 13, 1996, the Board of Directors adopted the National Fuel Gas
Company 1997 Award and Option Plan ("1997 Plan"), subject to approval by the
common stockholders at this Annual Meeting. The affirmative vote of a majority
of the votes cast with respect to this proposal by the holders of shares of
Common Stock entitled to vote is required for the adoption of the proposal. In
addition, adoption of the Plan is subject to the approval of the Securities and
Exchange Commission ("SEC") under the Public Utility Holding Company Act of 1935
("1935 Act"). All awards made prior to the receipt of both such approvals are
contingent upon such
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<PAGE> 24
approval. A copy of the 1997 Plan is attached to and incorporated in this Proxy
Statement as Exhibit A.
The Board of Directors believes that it is in the Company's best interests
to adopt the Plan for two reasons. First, a competitive stock option plan is
essential to attract and retain outstanding individuals in today's market.
Second, it is expected that all 1,600,000 shares of the 1,600,000 shares
issuable upon the exercise of options and shares of restricted stock under the
1993 Award and Option Plan ("1993 Plan") will have been granted and that such
amount will be insufficient to satisfy the proposed option awards for fiscal
1997 and all future awards.
ADMINISTRATION
The 1997 Plan provides for administration by the Compensation Committee of
the Board or another committee designated by the Board ("Committee"). The
Committee is composed entirely of "Disinterested Board Members" who are not
present or former employees or officers of the Company. No member of the
Committee is eligible to be selected to participate in the 1997 Plan. Among the
powers granted to the Committee are the authority to interpret the 1997 Plan,
establish rules and regulations for its administration, select key employees of
the Company and its subsidiaries to receive awards, determine the form and
amount and other terms and conditions of an award, grant waivers of 1997 Plan
terms and conditions, accelerate the vesting, exercise or payment of an award
and take all action it deems advisble for the proper administration of the 1997
Plan. The 1997 Plan authorizes the Committee to delegate its authority and
duties under the 1997 Plan, in certain circumstances, to the Chief Executive
Officer and other senior officers of the Company.
ELIGIBILITY FOR PARTICIPATION
All key employees of the Company or any of its 80-percent-or-more owned
subsidiaries are eligible to be selected to participate in the 1997 Plan. The
selection of Participants from among key employees is within the discretion of
the Committee.
AMENDMENT OF PLAN
The Board may suspend or terminate the 1997 Plan at any time, and may also
amend the 1997 Plan at any time but, any such amendment may be subject to
stockholder approval (i) at the discretion of the Board; and (ii) to the extent
stockholder approval may be required by law, including, but not limited to, the
requirements of Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
SHARES AVAILABLE FOR GRANT
The 1997 Plan authorizes the Committee to grant awards during the period
from December 13, 1996 through December 12, 2006. Subject to equitable
adjustment, 1,900,000 shares of Common Stock of the Company are available for
grant under the 1997 Plan. Shares of Common Stock related to awards which
terminate by expiration, forfeiture, cancellation or otherwise without the
issuance of shares, or are settled in cash in lieu of Common Stock, will again
be available for grant under the 1997 Plan. Similarly, shares of Common Stock
used by a Participant with the Committee's consent to pay in full or in part the
purchase price of shares of Common Stock upon exercise of a stock option will
again be available for grant under the 1997 Plan.
No one Participant in the 1997 Plan may receive awards covering more than
300,000 shares of Common Stock of the Company in any fiscal year, subject to
equitable adjustment.
TYPES OF AWARDS
The 1997 Plan provides for the grant of any or all of the following types
of awards: (1) stock options, including incentive stock options; (2) stock
appreciation rights ("SARs"),
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<PAGE> 25
which may be granted singly, in combination with stock options or in the
alternative; (3) Common Stock of the Company, including restricted Common Stock;
(4) performance units; (5) performance shares; (6) Common Stock units; and (7)
any other award established by the Committee which is consistent with the 1997
Plan's purposes. Such awards may be granted singly, in combination or in the
alternative, as determined by the Committee.
STOCK OPTIONS
Under the 1997 Plan, the Committee may grant awards in the form of stock
options to purchase shares of the Company's Common Stock. Unless the award
notice provides otherwise, each option shall be exercisable in whole or in part.
The Committee will, with regard to each stock option, determine the number of
shares subject to the option, the manner and time of the option's exercise, and
the exercise price per share of Common Stock subject to the option. In no event,
however, may the exercise price of a stock option be less than the fair market
value of the Company's Common Stock on the date of the stock option's grant.
Unless the award notice provides otherwise, each incentive stock option shall
first become exercisable on the first anniversary of its date of grant. Unless
the award notice provides for a shorter period, each incentive stock option
shall expire on the tenth anniversary of its date of grant. Unless the award
notice provides otherwise, each non-qualified stock option shall expire on the
day after the tenth anniversary of its date of grant, and incentive stock
options and nonqualified stock options granted in combination may be exercised
separately. Any stock option grant in the form of an incentive stock option will
satisfy the applicable requirements of Section 422 of the Internal Revenue Code
of 1986, as amended, (the "Code"). See Federal Income Tax Treatment beginning at
page 25 for a discussion of the differing federal tax treatment afforded to
incentive and non-qualified stock options.
Unless the award notice provides otherwise, any incentive stock option
which has not theretofore expired shall terminate upon termination of the
Participant's employment with the Company whether by death or otherwise, and no
shares of Common Stock may thereafter be purchased pursuant to such incentive
stock option, except that upon termination of employment (other than by death),
a Participant may, within three months after the date of termination of
employment, purchase all or part of any shares of Common Stock which the
Participant was entitled to purchase under such incentive stock option on the
date of termination of employment. Also, upon the death of any Participant while
employed with the Company or within the three-month period after the date of
termination of a Participant's employment, the Participant's estate or the
person to whom the Participant's rights under the incentive stock option are
transferred by will or the laws of descent and distribution may, within one year
after the date of the Participant's death, purchase all or part of any shares of
Common Stock which the Participant was entitled to purchase under such incentive
stock option on the date of death.
Notwithstanding the above, the Committee may at any time within the
three-month period after the date of termination of a Participant's employment,
with the consent of the Participant, the Participant's estate or the person to
whom the Participant's rights under the incentive stock options are transferred
by will or the laws of descent and distribution, extend the period for exercise
of the Participant's incentive stock options to any date not later than the date
on which such incentive stock options would have otherwise expired absent such
termination of employment. In no event shall an incentive stock option be
exercisable after the expiration of the exercise period therein provided, nor
later than ten years after the date of grant.
Unless the award notice provides otherwise, any non-qualified stock option
which has not theretofore expired shall terminate upon termination of the
Participant's employment with the Company, and no shares of Common Stock may
thereafter be purchased pursuant to such non-qualified stock option, except that
upon termination of employment for any reason other than death, discharge by the
Company for cause, or voluntary resignation of the Participant prior to age 60,
a Participant may, within five years after the date of termination of
employment, or any such greater period of time as the Committee, in its sole
discretion, deems appropriate, exercise all or part of the non-qualified stock
option which the Participant was entitled to exercise on the date of termination
of employment or subsequently becomes eligible to exercise as described below
with respect to death and voluntary resignation after age 60. Notwithstanding
the
21
<PAGE> 26
foregoing, if the Committee determines that a Participant is employed by an
employer or engaged in a business that competes with the business of the
Company, the Participant shall thereafter lose his or her rights to exercise any
non-qualified stock options.
Upon the death of a Participant while employed with the Company or within
the period referred to below, the Participant's estate or the person to whom the
Participant's rights under the non-qualified stock option are transferred by
will or the laws of descent and distribution may, within five years after the
date of the Participant's death while employed, or within the period referred to
below, exercise all or part of the non-qualified stock option which the
Participant was entitled to exercise on the date of death.
Unless the award notice provides otherwise, each non-qualified option shall
first become exercisable on the first anniversary of its date of grant, or if
earlier (i) on the date of the Participant's death occurring after the date of
grant; (ii) six months after the date of grant, if the Participant has
voluntarily resigned on or after his or her 60th birthday, after the date of
grant, and before such six months; or (iii) on the date of the Participant's
voluntary resignation on or after his or her 60th birthday and at least six
months after the date of grant.
In no event shall a non-qualified stock option be exercisable later than
the exercise period set forth in the award notice.
Upon exercise, the exercise price may, at the discretion of the Committee,
be paid by a Participant in cash, shares of Common Stock, shares of restricted
stock, a combination thereof, or such other consideration as the Committee may
deem appropriate. An award may provide that a Participant who pays the option
exercise price with previously-owned shares of the Company's Common Stock shall
automatically be awarded a new stock option to purchase additional shares of
Common Stock equal to the number of shares used to pay the exercise price. The
1997 Plan also allows for the so-called "cashless exercise" of options by
payment of the exercise price using a portion of the shares otherwise receivable
upon exercise of the option.
STOCK APPRECIATION RIGHTS
The 1997 Plan authorizes the Committee to grant SARs either singly
("Independent SARs"), in combination with all or a portion of a related stock
option ("Combination SARs") or in the alternative ("Alternative SARs"). A SAR is
a right to receive a payment equal to the appreciation in fair market value of a
stated number of shares of Common Stock from the SAR's exercise price to the
fair market value on the date of its exercise.
A Combination or Alternative SAR may be granted either at the time of the
grant of the related stock option or at any time thereafter during the term of
the stock option. Combination SARs may be exercised either together with the
related stock option or separately. The exercise price of a Combination SAR
shall be the exercise price of the related stock option, and a Combination SAR
shall be exercisable only to the extent that the related stock option is
exercisable. If a Participant exercises a Combination SAR or a related stock
option, but not both, the other shall remain outstanding and exercisable.
An Alternative SAR shall be exercisable to the extent its related stock
option is exercisable, and the exercise price of an Alternative SAR shall be the
same as the exercise price of its related stock option. Upon the exercise of a
stock option as to some or all of the shares covered by the award, the related
Alternative SAR shall be canceled automatically to the extent of the number of
shares covered by the stock option exercise. Upon exercise of an Alternative
SAR, the related stock option shall be automatically canceled to the extent of
such exercise. Unless an award notice provides otherwise, SARs granted in
conjunction with stock options shall be Combination SARs.
The Committee will, with regard to an Independent SAR, determine the number
of shares subject to the SAR, the manner and time of the SAR's exercise, and the
exercise price of the SAR. However, the exercise price of an Independent SAR
will in no event be less than the fair market value of the Common Stock on the
date of the grant of the Independent SAR.
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<PAGE> 27
STOCK AWARDS
The 1997 Plan authorizes the Committee to grant awards in the form of
shares of Common Stock, restricted shares of Common stock, and Common Stock
units. Such awards will be subject to such terms and conditions as the Committee
deems appropriate, including restrictions on transferability and continued
employment. During any restricted period, the Committee may grant to the
Participant all or any rights of a stockholder with respect to such shares,
including the rights to vote and to receive dividends. The 1997 Plan gives the
Committee the discretion to accelerate the delivery of shares of such awards.
PERFORMANCE SHARES
The 1997 Plan allows for the grant of "performance shares". For purposes of
the 1997 Plan, "performance shares" means either shares of Common Stock of the
Company or units which are expressed in terms of Common Stock of the Company.
Such awards will be contingent upon the attainment over a period to be
determined by the Committee ("Performance Period") of certain performance or
service objectives. Such objectives may be revised by the Committee during the
Performance Period to take into account unforeseen events or changed
circumstances. The performance or service objectives to be achieved during a
Performance Period and the measure of whether and to what degree such objectives
have been attained will also be determined by the Committee.
PERFORMANCE UNITS
Awards may also be granted in the form of performance units, which are
units valued by reference to criteria chosen by the Committee, other than by
reference to the Company's Common Stock. Performance units are similar to
performance shares in that they are contingently awarded based on the attainment
over a Performance Period of certain performance. Such objectives may be revised
by the Committee during the Performance Period to take into account unforeseen
events or changed circumstances. The length of the Performance Period, the
performance objectives to be achieved during the Performance Period, and the
measure of whether and to what degree such objectives have been achieved will be
determined by the Committee.
OTHER TERMS OF AWARDS
Awards may be paid in cash, Common Stock, a combination of cash and Common
Stock, or any other form of property, and in a lump sum or in installments, as
the Committee shall determine. If an award is granted in the form of a stock
award, stock option, or performance share, or in the form of any other
stock-based grant, the Committee may include as part of such award an
entitlement to receive dividends or dividend equivalents. Dividends or dividend
equivalents which are not currently paid may, in the Committee's discretion,
accrue interest, be reinvested in additional shares of Common Stock, or be
credited as additional performance shares and paid to the Participant if and
when, and to the extent that, payment is made pursuant to such award. At the
discretion of the Committee, receipt of payment of a stock-based award,
performance unit, dividend or dividend equivalent may be deferred by a
Participant by the delivery of an irrevocable election prior to the time payment
would otherwise be made.
The 1997 Plan provides for the forfeiture of awards in the event of
termination of employment for a reason other than death, disability, retirement,
or any approved reason, unless the award provides otherwise. The 1997 Plan
authorizes the Committee to promulgate administrative guidelines for the purpose
of determining what treatment will be afforded to a Participant under the 1997
Plan in the event of his or her death, disability, retirement, or termination of
employment for an approved reason. Forfeiture is also required if, in the
opinion of the Committee, the Participant competes with the Company without its
written consent, or if he or she acts in a manner inimical to the Company's best
interests.
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<PAGE> 28
Upon grant of any award, the Committee may, by way of an award notice or
otherwise, establish such other items and conditions governing the grant of such
award as are not inconsistent with the 1997 Plan. The Committee may unilaterally
amend any award if such amendment is not adverse to the Participant. The Company
may deduct from any payment under the 1997 Plan the amount of any applicable
income and employment taxes, or may require the Participant to pay such taxes as
a condition to making such payment. A Participant may pay the amount of such
taxes required to be withheld from an award, in whole or in part, by requesting
that the Company withhold from any payment of Common Stock due as a result of
such award, or by delivering to the Company, shares of Common Stock with a fair
market value less than or equal to the amount of the applicable withholding
taxes.
NONASSIGNABILITY
All awards under the 1997 Plan may not be transferred (except by will or
the laws of descent and distribution or pursuant to a qualified domestic
relations order), and during a Participant's lifetime may be exercised only by
the Participant except that, unless the Committee specifies otherwise, all
awards of nonqualified stock options or SARs will be transferable, subject to
all the terms and conditions to which such nonqualified stock options or SARs
are otherwise subject, to (i) members of a Participant's immediate family as
defined in Rule 16a-1 of the Exchange Act or any successor rule or regulation,
(ii) trusts for the exclusive benefit of the Participant or such immediate
family members or (iii) entities which are wholly-owned by the Participant or
such immediate family members, provided that (a) there is no consideration for
such transfer and (b) subsequent transfers of transferred options are prohibited
(except by will or the laws of descent and distribution). Following transfer,
any such options continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer and, except for events related to the
termination of employment of the Participant, the term "Participant" will refer
to the transferee.
CHANGE IN CONTROL/CHANGE IN OWNERSHIP
In the event of a Change in Control (as defined in the 1997 Plan), a
Participant whose employment is terminated within two years of the date of such
event, for a reason other than death, disability, Cause (as defined in the 1997
Plan), voluntary resignations or other Good Reason (as defined in the 1997 Plan)
or retirement, would be entitled to the following treatment under the 1997 Plan:
(i) all of the terms and conditions in effect on any of the Participant's
outstanding awards would immediately lapse; (ii) all of the Participant's
outstanding awards would automatically become one hundred percent vested; (iii)
all of the Participant's outstanding stock options, SARs, performance units,
performance shares, and other stock-based awards would be immediately cashed out
on the basis of the Change in Control Price (as defined in the Plan); and (iv)
all of the Participant's outstanding performance units would be cashed out on
the same basis and under the assumption that all performance criteria applicable
to Performance Periods completed or partially completed had been satisfied. Such
payments would be made as soon as possible, but no later than the 90th day
following such event.
The 1997 Plan also provides that upon a Change In Ownership (as defined in
the 1997 Plan), all Participants, regardless of whether their employment is
terminated, would automatically receive the same treatment afforded to a
terminated Participant under the Plan in the event of a Change in Control. The
1997 Plan defines a Change in Ownership as a change which results in the
Company's Common Stock ceasing to be actively traded on the New York Stock
Exchange, another national stock exchange or the National Association of
Securities Dealers Automated Quotation System.
ADJUSTMENT OF SHARES AVAILABLE
In the event of changes in the Common Stock by reason of a Common Stock
dividend, stock split, reverse stock split or other combination, appropriate
adjustment will be made by the Committee in the aggregate number of shares of
Common Stock available under the 1997 Plan,
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<PAGE> 29
the number of shares of Common Stock with respect to which awards may be granted
to any Participant in any fiscal year, and the number of shares of Common Stock,
SARs, performance shares, Common Stock units and other stock-based interests
subject to outstanding awards, without, in the case of stock options, causing a
change in the aggregate purchase price to be paid for such shares of Common
Stock.
The 1997 Plan also provides that in the event of a merger, consolidation,
reorganization of the Company with another corporation, a reclassification of
the Common Stock, a spin-off of a significant asset, or other changes in the
capitalization of the Company, appropriate provision will be made for the
protection and continuation of outstanding awards by either (i) the substitution
of appropriate stock or other securities, or (ii) by appropriate adjustments,
each as set forth under the Plan and as deemed appropriate by the Committee.
FEDERAL INCOME TAX TREATMENT
The following is a brief summary of the federal income tax aspects of the
1997 Plan, based on existing law and regulations which are subject to change.
The application of state and local income taxes and other federal taxes is not
discussed.
A Participant who is granted an incentive stock option is not required to
recognize taxable income at the time of the grant or at the time of exercise.
Under certain circumstances, however, a Participant may be subject to the
alternative minimum tax with respect to the exercise of his incentive stock
options. The Company is not entitled to a deduction at the time of grant or at
the time of exercise of an incentive stock option. If a Participant does not
dispose of the shares acquired pursuant to the exercise of an incentive stock
option before the later of two years from the date of grant of the option and
one year from the transfer of the shares to him, any gain or loss realized on a
subsequent disposition of the shares will be treated as long-term capital gain
or loss. Under such circumstances, the Company will not be entitled to any
deduction for federal income tax purposes.
If a Participant disposes of the shares received upon the exercise of any
incentive stock option either (1) within one year of the transfer of the shares
to him or her or (2) within two years after the incentive stock option was
granted, the Participant will generally recognize ordinary compensation income
equal to the lesser of (a) the excess of the fair market value of the shares on
the date the incentive stock option was exercised over the purchase price paid
for the shares upon exercise, and (b) the amount of gain realized on the sale.
Any gain realized in excess of the compensation income recognized, and any loss
realized, will be long-term or short-term capital gain or loss, depending upon
the length of the period the Participant held the shares. If a Participant is
required to recognize ordinary compensation income as a result of the
disposition of shares acquired on the exercise of any incentive stock option,
the Company, subject to general rules relating to the reasonableness of the
Participant's compensation and the $1 million cap on deductions for compensation
paid to certain employees under Section 162(m) of the Code, will be entitled to
a deduction for an equivalent amount.
A Participant who is granted a non-qualified stock option does not have
taxable income at the time of grant, but does have taxable income at the time of
exercise equal to the difference between the exercise price of the shares and
the market value of the shares on the date of exercise. Subject to general rules
relating to the reasonableness of the Participant's compensation and the $1
million cap on deductions for compensation paid to certain employees under
Section 162(m) of the Code, the Company is entitled to a corresponding deduction
for the same amount.
The grant of an SAR will produce no federal tax consequences for the
Participant or the Company. The exercise of an SAR results in taxable income to
the Participant, equal to the difference between the exercise price of the SAR
and the fair market value of a share on the date of exercise, and, subject to
general rules relating to the reasonableness of the Participant's compensation
and the $1 million cap on deductions for compensation paid to certain employees
under Section 162(m) of the Code, a corresponding deduction to the Company.
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<PAGE> 30
A Participant who has been granted either performance units or performance
shares expressed in the form of units of Common Stock generally will not be
required to recognize taxable income at the time of the grant, and the Company
will not be entitled to a deduction at such time. A Participant will be required
to recognize ordinary income either at the time the award vests or is paid,
depending upon the terms and conditions of the award, and, subject to general
rules relating to the reasonableness of the Participant's compensation and the
$1 million cap on deductions for compensation paid to certain employees under
Section 162(m) of the Code, the Company will have a corresponding deduction.
A Participant who has been granted shares of restricted stock will not be
required to recognize taxable income at the time of the grant, and the Company
will not be entitled to a deduction at the time of the grant, assuming that the
restrictions constitute a substantial risk of forfeiture for federal income tax
purposes. When such restrictions lapse, the Participant will recognize taxable
income in an amount equal to the excess of the fair market value of the shares
at such time over the amount, if any, paid for such shares. The Company will be
entitled to a corresponding deduction.
The award of an outright grant of Common Stock to a Participant will
produce immediate tax consequences for both the Participant and the Company. The
Participant will be treated as having received taxable compensation in an amount
equal to the then fair market value of the Common Stock distributed to him.
Subject to general rules relating to the reasonableness of the Participant's
compensation and the $1 million cap on deductions for compensation paid to
certain employees under Section 162(m) of the Code, the Company will receive a
corresponding deduction for the same amount.
MARKET PRICE OF THE COMMON STOCK
The closing price of the Company's Common Stock reported on the New York
Stock Exchange for December 20, 1996 was $42.375 per share. As of such date the
aggregate market value of the shares of Common Stock underlying the options
available for issuance under the 1997 Plan was $80,512,500.
NEW PLAN BENEFITS TABLE
For each of the named executive officers and the various indicated groups,
the following table shows (i) the number of options, and shares of Common Stock
underlying such options, which would have been granted if the 1997 Plan had been
adopted and approved as of October 1, 1996 or are expected to be granted under
the 1997 Plan in fiscal 1997; (ii) the number of options and SARs which have
been awarded in fiscal 1997 under the 1993 Plan; and (iii) the number of shares
of Common Stock which are expected to be awarded in fiscal 1997 under the
Retainer Policy for Non-Employee Directors.
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<PAGE> 31
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS NUMBER OF
WHICH ARE DIRECTORS'
EXPECTED TO BE SHARES WHICH
AWARDED IN 1997 AWARDS IN WILL BE
DOLLAR UNDER 1997 1997 UNDER AWARDED
NAME AND POSITION VALUE PLAN (2)(3) 1993 PLAN (4) IN 1997
- ---------------------------- -------- ---------------- -------------------------- ------------
<S> <C> <C> <C> <C>
Bernard J. Kennedy (1) 0 150,000 options 0
Chairman of the Board, (1) 0 150,000 SARs
Chief Executive $169,600 4,150 restricted stock
Officer and President
Philip C. Ackerman (1) 0 80,000 options 0
Senior Vice President of (1) 0 80,000 SARs
the Company and President $ 47,000 1,150 restricted stock
of certain subsidiaries
Richard Hare (1) 0 50,000 options 0
President of National (1) 0 50,000 SARs
Fuel Gas Supply
Corporation
James A. Beck (1) 20,000 options 0
President of Seneca $ 40,875 1,000 restricted stock
Resources Corporation
Joseph P. Pawlowski (1) 20,000 options 0 0
Treasurer of the Company
and Senior Vice President
of National Fuel Gas
Distribution Corporation
Gerald T. Wehrlin (1) 20,000 options 0 0
Controller of the Company
and Senior Vice President
of National Fuel Gas
Distribution Corporation
All current executive (1) 140,000 options 0 0
officers as a group
(10 persons)
All non-employee directors (1) 0 0 2,800
as a group (8 persons) as shares
of December 30, 1996
All employees, including all (1) 250,000 options 0
current officers who are
not executive officers, as
a group
</TABLE>
- ---------------
(1) The exercise or base price of each stock option or SAR will be determined by
the Committee, but will not be less than the fair market value per share of
the Company's Common Stock on the date the option or SAR is granted. The
value of each share of stock issued under the Retainer Policy for Non-
Employee Directors will be the fair market value per share of the Company's
Common Stock on the date the stock is issued at the beginning of each
quarter. The value of a share of restricted stock is shown as the market
value of the Company's Common Stock on the date of the award, even though
the restricted stock could not be transferred on that date.
(2) Each Option entitles the holder to purchase one share of Company Common
Stock subject to the provisions of the 1997 Plan.
(3) As of the Record Date, no grants have been made under the 1997 Plan. It is
not determinable at this time what benefits, if any, each of the persons or
groups listed above will receive under the 1997 Plan because awards to key
employees under the 1997 Plan are at the discretion of the Committee. The
amounts shown in this table represent the Committee's sense, as of October
1996, of the awards that
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<PAGE> 32
may be made in fiscal 1997, but the actual awards to be made have not been
determined and, when made in fiscal 1997, may vary from the awards shown.
(4) Each option entitles the holder to purchase one share of Company Common
Stock subject to the provisions of the 1993 Plan. Each SAR entitles the
holder to receive a payment equal to the appreciation in fair market value
of a share of Company Common Stock from the SAR's base price to the fair
market value on the date of its exercise. Additional information is
contained in the Summary Compensation Table and footnote (3) to that table.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
4. APPROVAL OF CERTAIN AMENDMENTS TO THE 1984 STOCK PLAN
AND THE 1993 AWARD AND OPTION PLAN
On September 19, 1996, in connection with recent amendments to Rule 16b-3,
promulgated under Section 16 of the Exchange Act by the SEC to modify rules
concerning transactions by a company's "insiders" in its equity securities, and
the requirement of the SEC to implement such modifications on or before November
1, 1996, the Board of Directors also adopted, subject to shareholder approval at
this Annual Meeting, certain amendments to the Company's 1984 Stock Plan ("1984
Plan") and the 1993 Award and Option Plan ("1993 Plan", and together with the
1984 Plan, "Stock Plans"). The affirmative vote of a majority of the votes cast
with respect to this proposal by the holders of shares of Common Stock entitled
to vote is required for the adoption of this proposal. A copy of the proposed
amendments to the Stock Plans accompanies this proxy statement as Exhibit B and
the following summary of the proposed amendments is qualified in its entirety by
reference thereto. Two of the proposed amendments are substantially similar for
each of the Stock Plans and the 1993 Plan would be amended in two additional
respects, as described below.
First, the Stock Plans would be amended to provide for transferability of
all awards of nonqualified stock options or SARs, as applicable, and would
function in the same manner as the similar provision included in the Plan and
described in this proxy statement under Nonassignability. Prior to these
amendments, (i) the 1984 Plan did not include any right to transfer options and
(ii) the 1993 Plan provided (a) limited rights to transfer nonqualified stock
options or SARs for awards made after August 29, 1995 to certain executive
officers of the Company and (b) provided for transferability of such
nonqualified stock options and SARs if and when the SEC amended Rule 16b-3 under
the Exchange Act and to the maximum extent permitted by such amendment to Rule
16b-3, if any.
Second, the Stock Plans' existing provisions regarding withholding taxes
would be amended to allow the Participant to elect to pay applicable taxes by
withholding Common Stock otherwise issuable, or remitting shares of Common Stock
to the Company to pay applicable withholding taxes, in substantially similar
fashion to the 1997 Plan. See the description under Other Terms of Awards
beginning at page 23. Prior to these amendments, the Stock Plans provided for
Committee discretion in this regard.
The third and fourth proposed amendments would affect only the 1993 Plan.
The 1993 Plan would be amended to allow the Board of Directors to amend the Plan
from time to time provided, however, that such amendment may be subject to
stockholder approval (i) at the discretion of the Board of Directors; and (ii)
to the extent that stockholders' approval may be required by law including, but
not limited to, the requirements of Section 16b-3 under the Exchange Act, or any
successor rule or regulation. Prior to this amendment the 1993 Plan provided for
the Board of Directors to amend the 1993 Plan from time to time, but required
stockholder approval for any amendment which, with respect to Participants under
the 1993 Plan, would materially increase benefits, materially modify the
requirements as to eligibility for participation or materially increase the
number of shares of Common Stock which could be issued under the 1993 Plan. The
1993 Plan's change in control provision would also be amended to eliminate a
subsection that was previously required by Section 16 of the Exchange Act,
whereby any Participant who on the Acceleration Date was required to report
under Section 16 of the Exchange Act was also required to hold any stock
options, SARs, Restricted Stock, Performance Shares or other derivative
securities for at least six months in order to be eligible for payment under
such change in control and change in ownership provisions.
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The purpose of each of the Stock Plans is to provide incentives to key
employees whose contributions are important to the continued success of the
Company and to enhance the Company's ability to attract and retain highly
qualified persons for the successful conduct of its business. All key employees
of the Company or any of its 80-percent-or-more owned subsidiaries are eligible
to participate in the Stock Plans. The selection of Participants from among key
employees is within the discretion of the Committee.
Please refer to the item entitled "Executive Compensation" for information
concerning the 1993 Plan under which the Company awarded stock options and SARs
during the most recent fiscal year. The Company did not make any awards under
the 1984 Plan during the most recent fiscal year.
The Board of Directors believes these proposed amendments to the Stock
Plans are in the best interests of the Company primarily because they would
eliminate restrictions required under Rule 16b-3 prior to the recent amendments
by the SEC as discussed above.
Adoption of the proposed amendments will facilitate the administration of
the Plan and the Stock Plans by conforming the Stock Plans and the 1997 Plan to
the extent approved by the Board of Directors. In light of the proposed adoption
of the Plan, the proposed amendments represent limited and appropriate
enhancements to the existing terms of the Stock Plans.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
5. APPROVAL OF THE RETAINER POLICY FOR NON-EMPLOYEE DIRECTORS
The Retainer Policy for Non-Employee Directors (the "Retainer Policy", copy
attached as Exhibit C) was adopted by the directors on September 19, 1996,
subject to approval by the stockholders. The Retainer Policy would replace the
Company's current method of compensating non-employee directors, which is
described beginning at page 6 of this proxy statement. The Board's compensation
has not been increased since July 1, 1994, despite intervening increases in the
cost of living and the continued success of the Company.
Essentially, the Retainer Policy would reduce the fixed cash compensation
and eliminate the retirement benefits of non-employee directors, and instead pay
the non-employee directors a reduced cash amount plus shares of Company Common
Stock. This is intended to align the financial interests of directors more
directly with the financial interests of the Company's shareholders.
In the last two years, directors' pension plans have come under increased
criticism from certain shareholder activists, institutional investors and other
shareholders generally. Stockholder proposals requesting the termination of such
plans at other companies have received substantial support. A commission formed
by the National Association of Corporate Directors has recently recommended the
cessation of directors' pension plans. Consequently, more than thirty major
companies have eliminated such plans, in some fashion, during that time period.
These same persons and institutions, including the National Association of
Corporate Directors' commission, have advocated that members of boards of
directors should own larger stakes in their companies, and that, in furtherance
of this goal, a large portion of the compensation of a company's directors
should be in the form of a company's equity securities. Advocates of increased
stockholdings by directors claim that they result in a better alignment of
directors' interests with those of stockholders, and put more of directors'
compensation at risk. Most major American companies now pay directors, in part,
in company equity securities.
Accordingly, the Retainer Policy would:
(1) Freeze benefits under the National Fuel Gas Company Retirement Plan for
Non-Employee Directors ("Directors' Retirement Plan"), so that benefit
accruals would cease on December 31, 1996. All eligible non-employee
directors would vest in their Directors' Retirement Plan benefits at such
time, and receive their accrued Directors' Retirement Plan benefits under
its current terms (normally beginning at age 70), and new directors would
not be eligible to receive benefits under that plan. However, since Mr.
Rochwarger will retire
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effective February 20, 1997, his plan benefit accruals would continue until
that date and would be based upon the Company's current retainer policy for
non-employee directors.
(2) Provide that non-employee directors should be paid $500 for each special
consultation as a director that is with or at the request of the Company's
chief executive officer.
(3) Eliminate the current Board guideline that directors should purchase 100
shares of Company Common Stock, or Company Common Stock costing at least
$3,000, whichever is greater, per calendar year.
(4) Except in the case of Mr. Rochwarger, who will continue to be paid under the
Company's current retainer policy until his retirement from the Board,
substitute a new retainer policy, which will be effective January 1, 1997,
and will apply to all current and subsequently elected directors of the
Company. Under this new policy, non-employee directors of the Company would
receive a quarterly retainer of 100 shares of Company Common Stock (subject
to adjustment in light of existing circumstances, including but not limited
to the market value of the stock), plus $3,000 payable by check.
The securities which would be issued under the Retainer Policy would be
shares of the Company's Common Stock. The Company is reserving 100,000 shares of
Common Stock for this purpose, but the Retainer Policy does not set a ceiling on
the number of shares which might be issued over time.
Common Stock issued to non-employee directors under the Retainer Policy
will be nontransferable until the later of two years from issuance or six months
after the recipient's cessation of service as a director of the Company.
The consideration to be received by the Company is the services of the
non-employee directors. The market value of the Company's Common Stock as of
close of business December 20, 1996 was $42.375 per share. If the number of
non-employee directors remains at seven, the Company would issue 2,800 shares of
Company Common Stock per year under the Retainer Policy, with a total market
value at December 20, 1996 of $118,650.
The number of shares of stock to be received pursuant to the Retainer
Policy by various groups of persons are shown on the table on page 27 of this
proxy statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE
ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and the New York Stock Exchange. Directors, officers and
greater-than-10% stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on review
of information furnished to the Company, reports filed through the Company and
written representations that no Forms 5 were required, the Company believes that
all Section 16(a) filing requirements applicable to its directors, officers and
greater-than-10% beneficial owners were complied with during fiscal 1996.
OTHER BUSINESS
The Board of Directors does not know of any business that will be presented
for consideration at the meeting except as set forth above. However, if any
other business is properly brought before the meeting, or any adjournment
thereof, the Proxies will vote in regard thereto according to their discretion.
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PROPOSALS OF SECURITY HOLDERS
Proposals that security holders intend to present at the 1998 Annual
Meeting of Stockholders must be received at the principal offices of the Company
no later than September 1, 1997, in order to be considered for inclusion in the
Company's proxy statement and proxy for that meeting.
BY ORDER OF THE BOARD OF DIRECTORS
ANNA MARIE CELLINO
Secretary
December 30, 1996
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EXHIBIT A
NATIONAL FUEL GAS COMPANY
1997 AWARD AND OPTION PLAN
1. PURPOSE
The purpose of the Plan is to advance the interests of the Company and its
stockholders, by providing a long-term incentive compensation program that will
be an incentive to the Key Employees of the Company and its Subsidiaries whose
contributions are important to the continued success of the Company and its
Subsidiaries, and by enhancing their ability to attract and retain in their
employ highly qualified persons for the successful conduct of their businesses.
2. DEFINITIONS
2.1 "Acceleration Date" means (i) in the event of a Change in Ownership,
the date on which such change occurs, or (ii) with respect to a Participant who
is eligible for treatment under paragraph 25 hereof on account of the
termination of his employment following a Change in Control, the date on which
such termination occurs.
2.2 "Award" means any form of stock option, stock appreciation right,
Restricted Stock, performance unit, performance share or other incentive award
granted by the Committee to a Participant under the Plan pursuant to such terms
and conditions as the Committee may establish. An Award may be granted singly,
in combination or in the alternative.
2.3 "Award Notice" means a written notice from the Company to a
Participant that sets forth the terms and conditions of an Award in addition to
those established by this Plan and by the Committee's exercise of its
administrative powers.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Cause" means (i) the willful and continued failure by a Key Employee
to substantially perform his duties with his employer after written warnings
specifically identifying the lack of substantial performance are delivered to
him by his employer, or (ii) the willful engaging by a Key Employee in illegal
conduct which is materially and demonstrably injurious to the Company or a
Subsidiary.
2.6 "Change in Control" shall be deemed to have occurred at such time as
(i) any "person" within the meaning of Section 14(d) of the Exchange Act, other
than the Company, a Subsidiary, or any employee benefit plan or plans sponsored
by the Company or any Subsidiary, is or has become the "beneficial owner," as
defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of twenty
percent (20%) or more of the combined voting power of the outstanding securities
of the Company ordinarily having the right to vote at the election of directors,
or (ii) approval by the stockholders of the Company of (a) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of stock of the Company would be
converted into cash, securities or other property, other than a consolidation or
merger of the Company in which the common stockholders of the Company
immediately prior to the consolidation or merger have substantially the same
proportionate ownership of common stock of the surviving corporation immediately
after the consolidation or merger as immediately before, or (b) any
consolidation or merger in which the Company is the continuing or surviving
corporation but in which the common stockholders of the Company immediately
prior to the consolidation or merger do not hold at least a majority of the
outstanding common stock of the continuing or surviving corporation (except
where such holders of Common Stock hold at least a majority of the common stock
of the corporation which owns all of the Common Stock of the Company), or (c)
any sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all the assets of the Company, or
(iii) individuals who constitute the Board on January 1, 1997 (the "Incumbent
Board") have ceased for any reason to constitute at least a majority thereof,
provided that any person becoming a director subsequent to January 1, 1997 whose
election, or nomination for election by the Company's
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stockholders, was approved by a vote of at least three-quarters ( 3/4) of the
directors comprising the Incumbent Board (either by specific vote or by approval
of the proxy statement of the Company in which such person is named as nominee
for director without objection to such nomination) shall be, for purposes of
this Plan, considered as though such person were a member of the Incumbent
Board.
2.7 "Change in Control Price" means, in respect of a Change in Control,
the highest closing price per share paid for the purchase of Common Stock on the
New York Stock Exchange, another national stock exchange or the National
Association of Securities Dealers Automated Quotation System during the ninety
(90) day period ending on the date the Change in Control occurs, and in respect
of a Change in Ownership, the highest closing price per share paid for the
purchase of Common Stock on the New York Stock Exchange, another national stock
exchange or the National Association of Securities Dealers Automated Quotation
System during the ninety (90) day period ending on the date the Change in
Ownership occurs.
2.8 "Change in Ownership" means a change which results directly or
indirectly in the Company's Common Stock ceasing to be actively traded on a
national securities exchange or the National Association of Securities Dealers
Automated Quotation System.
2.9 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
2.10 "Committee" means the Compensation Committee of the Board, or such
other committee designated by the Board, authorized to administer the Plan. The
Committee shall consist of not less than two (2) members of the Board, each of
whom shall be a Disinterested Board Member. A "Disinterested Board Member" means
a member who (a) is not a current employee of the Company or a Subsidiary, (b)
is not a former employee of the Company or a Subsidiary who receives
compensation for prior services (other than benefits under a tax-qualified
retirement plan) during the taxable year, (c) has not been an officer of the
Company (d) does not receive remuneration from the Company or a Subsidiary,
either directly or indirectly, in any capacity other than as a director and (e)
does not possess an interest in any other transaction, and is not engaged in a
business relationship, for which disclosure would be required pursuant to Item
404(a) or (b) of Regulation S-K under the Securities Act of 1933, as amended.
The term Disinterested Board Member shall be interpreted in such manner as shall
be necessary to conform to the requirements of Section 162(m) of the Code and
Rule 16b-3 promulgated under the Exchange Act.
2.11 "Common Stock" means the common stock of the Company.
2.12 "Company" means National Fuel Gas Company.
2.13 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
2.14 "Fair Market Value" of a share of Common Stock on any date means the
average of the high and low sales prices of a share of Common Stock as reflected
in the report of consolidated trading of New York Stock Exchange-listed
securities for that date (or, if no such shares were publicly traded on that
date, the next preceding date that such shares were so traded) published in The
Wall Street Journal or in any other publication selected by the Committee;
provided, however, that if shares of Common Stock shall not have been publicly
traded for more than ten (10) days immediately preceding such date, then the
Fair Market Value of a share of Common Stock shall be determined by the
Committee in such manner as it may deem appropriate.
2.15 "Good Reason" means a good faith determination made by a Participant
that there has been any (i) material change by the Company of the Participant's
functions, duties or responsibilities which change could cause the Participant's
position with the Company to become of less dignity, responsibility, importance,
prestige or scope, including, without limitation, the assignment to the
Participant of duties and responsibilities inconsistent with his positions, (ii)
assignment or reassignment by the Company of the Participant without the
Participant's consent, to another place of employment more than 30 miles from
the Participant's current place of employment, or (iii) reduction in the
Participant's total compensation or benefits or any component thereof, provided
in each case that the Participant shall specify the
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event relied upon for such determination by written notice to the Board at any
time within six months after the occurrence of such event.
2.16 "Key Employee" means an officer or other key employee of the Company
or a Subsidiary as determined by the Committee.
2.17 "Participant" means any individual to whom an Award has been granted
by the Committee under this Plan.
2.18 "Plan" means the National Fuel Gas Company 1997 Award and Option
Plan.
2.19 "Restricted Stock" means an Award granted pursuant to paragraph 10
hereof.
2.20 "Subsidiary" means a corporation or other business entity in which
the Company directly or indirectly has an ownership interest of eighty percent
(80%) or more.
2.21 "Unit" means a bookkeeping entry used by the Company to record and
account for the grant of the following Awards until such time as the Award is
paid, cancelled, forfeited or terminated, as the case may be: Units of Common
Stock, performance units, and performance shares which are expressed in terms of
Units of Common Stock.
3. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall have
the authority to: (a) interpret the Plan; (b) establish such rules and
regulations as it deems necessary for the proper administration of the Plan; (c)
select Key Employees to receive Awards under the Plan; (d) determine the form of
an Award, whether a stock option, stock appreciation right, Restricted Stock,
performance unit, performance share, or other incentive award established by the
Committee in accordance with (h) below, the number of shares or Units subject to
the Award, all the terms and conditions of an Award, including the time and
conditions of exercise or vesting; (e) determine whether Awards would be granted
singly, in combination or in the alternative; (f) grant waivers of Plan terms
and conditions, provided that any such waiver granted to an executive officer of
the Company shall not be inconsistent with Section 16 of the Exchange Act and
the rules promulgated thereunder; (g) accelerate the vesting, exercise or
payment of any Award or the performance period of an Award when any such action
would be in the best interest of the Company; (h) establish such other types of
Awards, besides those specifically enumerated in paragraph 2.2 hereof, which the
Committee determines are consistent with the Plan's purposes; and (i) take any
and all other action it deems advisable for the proper administration of the
Plan. The Committee shall also have the authority to grant Awards in replacement
of Awards previously granted under this Plan or any other executive compensation
or stock option plan of the Company or a Subsidiary. All determinations of the
Committee shall be made by a majority of its members, and its determinations
shall be final, binding and conclusive. The Committee, in its discretion, may
delegate its authority and duties under the Plan to the Chief Executive Officer
or to other senior officers of the Company to the extent permitted by Section 16
of the Exchange Act and notwithstanding any other provision of this Plan or an
Award Notice, under such conditions as the Committee may establish; provided,
however, that only the Committee may select and grant Awards and render other
decisions as to the timing, pricing and amount of Awards to Participants who are
subject to Section 16 of the Exchange Act.
4. ELIGIBILITY
Any Key Employee is eligible to become a Participant of the Plan.
5. SHARES AVAILABLE
(a) The maximum number of shares of Common Stock, $1.00 par value, of the
Company which shall be available for grant of Awards under the Plan (including
incentive stock options) during its term shall not exceed 1,900,000; subject to
adjustment as provided in paragraph 18. Awards covering no more than 300,000
shares of Common Stock of the Company may be granted to any Participant in any
fiscal year subject to adjustment as provided in paragraph 18.
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(b) Any shares of Common Stock related to Awards which terminate by
expiration, forfeiture, cancellation or otherwise without the issuance of such
shares, are settled in cash in lieu of Common Stock, or are exchanged with the
Committee's permission for Awards not involving Common Stock, shall be available
again for grant under the Plan, provided, however, that if dividends or dividend
equivalents pursuant to paragraph 14, or other benefits of share ownership (not
including the right to vote the shares) have been received by the Participant in
respect of an Award prior to such termination, settlement or exchange, the
shares which were the subject of the Award shall not again be available for
grant under the Plan. Further, any shares of Common Stock which are used by a
Participant for the full or partial payment to the Company of the purchase price
of shares of Common Stock upon exercise of a stock option, or for any
withholding taxes due as a result of such exercise, shall again be available for
Awards under the Plan. Similarly, shares of Common Stock with respect to which
an Alternative SAR has been exercised and paid in cash shall again be available
for grant under the Plan. Shares to which independent or combination SARs relate
shall not count against the 1,900,000 share limit set forth in this paragraph 5.
(c) The shares of Common Stock available for issuance under the Plan may be
authorized and unissued shares or treasury shares.
6. TERM
The Plan shall become effective as of December 13, 1996 subject to its
approval by the Company's stockholders at the 1997 Annual Meeting of
Stockholders and subject to the approval of the Securities and Exchange
Commission under the Public Utility Holding Company Act of 1935, as amended. No
Awards shall be exercisable or payable before these approvals of the Plan have
been obtained and all Awards made prior to approval of the Plan by the Company's
stockholders and approval of the Plan by the Securities and Exchange Commission
under the Public Utility Holding Company Act of 1935, as amended, are contingent
upon such approval. Awards shall not be granted pursuant to the Plan after
December 12, 2006.
7. PARTICIPATION
The Committee shall select Participants, determine the type of Awards to be
made, and establish in the related Award Notices the applicable terms and
conditions of the Awards in addition to those set forth in this Plan and the
administrative rules issued by the Committee.
8. STOCK OPTIONS
(a) Grants. Awards may be granted in the form of stock options. These
stock options may be incentive stock options within the meaning of Section 422
of the Code or non-qualified stock options (i.e., stock options which are not
incentive stock options), or a combination of both.
(b) Terms and Conditions of Options. Unless the Award Notice provides
otherwise, an option shall be exercisable in whole or in part. The price at
which Common Stock may be purchased upon exercise of a stock option shall be
established by the Committee, but such price shall not be less than the Fair
Market Value of the Common Stock on the date of the stock option's grant. An
Award Notice evidencing a stock option may, in the discretion of the Committee,
provide that a Participant who pays the option price of a stock option by an
exchange of shares of Common Stock previously owned by the Participant shall
automatically be issued a new stock option to purchase additional shares of
Common Stock equal to the number of shares of Common Stock so exchanged. Such
new stock option shall have an option price equal to the Fair Market Value of
the Common Stock on the date such new stock option is issued and shall be
subject to such other terms and conditions as the Committee deems appropriate.
Unless the Award Notice provides otherwise, each incentive stock option shall
first become exercisable on the first anniversary of its date of grant, and each
non-qualified stock option shall first become exercisable on the first
anniversary of its date of grant, or, if earlier (i) on the date of the
Participant's death occurring after the date of grant, (ii) six months after the
date of grant, if the Participant has voluntarily resigned on or after his 60th
birthday, after the date of grant, and before such six months, or (iii) on the
date of the Participant's voluntary resignation on or after his 60th birthday
and at least six months after the date of grant. Unless
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the Award Notice provides otherwise, each non-qualified stock option shall
expire on the day after the tenth anniversary of its date of grant, and
incentive stock options and non-qualified stock options granted in combination
may be exercised separately.
(c) Restrictions Relating to Incentive Stock Options. Stock options issued
in the form of incentive stock options shall, in addition to being subject to
all applicable terms and conditions established by the Committee, comply with
Section 422 of the Code. Accordingly, the aggregate Fair Market Value
(determined at the time the option was granted) of the Common Stock with respect
to which incentive stock options are exercisable for the first time by a
Participant during any calendar year (under this Plan or any other plan of the
Company or any of its Subsidiaries) shall not exceed $100,000 (or such other
limit as may be required by the Code). Unless the Award Notice provides a
shorter period, each incentive stock option shall expire on the tenth
anniversary of its date of grant. The number of shares of Common Stock that
shall be available for incentive stock options granted under the Plan is
1,900,000.
(d) Exercise of Option. Upon exercise, the option price of a stock option
may be paid in cash, shares of Common Stock, shares of Restricted Stock, a
combination of the foregoing, or such other consideration as the Committee may
deem appropriate. The Committee shall establish appropriate methods for
accepting Common Stock, whether restricted or unrestricted, and may impose such
conditions as it deems appropriate on the use of such Common Stock to exercise a
stock option. The Committee, in its sole discretion, may establish procedures
whereby a Participant to the extent permitted by and subject to the requirements
of Rule 16b-3 under the Exchange Act, Regulation T issued by the Board of
Governors of the Federal Reserve System pursuant to the Exchange Act, federal
income tax laws, and other federal, state and local tax and securities laws, can
exercise an option or a portion thereof without making a direct payment of the
option price to the Company. If the Committee so elects to establish a cashless
exercise program, the Committee shall determine, in its sole discretion and from
time to time, such administrative procedures and policies as it deems
appropriate. Such procedures and policies shall be binding on any Participant
wishing to utilize the cashless exercise program.
9. STOCK APPRECIATION RIGHTS
(a) Grants and Valuation. Awards may be granted in the form of stock
appreciation rights ("SARs"). SARs may be granted singly ("Independent SARs"),
in combination with all or a portion of a related stock option under the Plan
("Combination SARs"), or in the alternative ("Alternative SARs"). Combination or
Alternative SARs may be granted either at the time of the grant of related stock
options or at any time thereafter during the term of the stock options.
Combination SARs shall be subject to paragraph 9(b) hereof. Alternative SARs
shall be subject to paragraph 9(c) hereof. Independent SARs shall be subject to
paragraph 9(d) hereof. Unless this Plan or the Award Notice provides otherwise,
SARs shall entitle the recipient to receive a payment equal to the appreciation
in the Fair Market Value of a stated number of shares of Common Stock from the
award date to the date of exercise. In the case of SARs granted in combination
with, or in the alternative to, stock options, the appreciation in value is from
the option price of such related stock option to the Fair Market Value on the
date of exercise of such SARs. Unless this Plan or the Award Notice provides
otherwise, SARs granted in conjunction with stock options shall be Combination
SARs, and all SARs shall be exercisable between one year and ten years and one
day after the date of their award.
(b) Terms and Conditions of Combination SARs. Both the stock options
granted in conjunction with Combination SARs and the Combination SARs may be
exercised. Combination SARs shall be exercisable only to the extent the related
stock option is exercisable, and the base from which the value of the
Combination SARs is measured at its exercise shall be the option price of the
related stock option. Combination SARs may be exercised either together with the
related stock option or separately. If a Participant exercises a Combination SAR
or related stock option, but not both, the other shall remain outstanding and
shall remain exercisable during the entire exercise period.
(c) Terms and Conditions of Alternative SARs. Either the stock options
granted in the alternative to Alternative SARs or the Alternative SARs may be
exercised, but not both. Alternative SARs shall be exercisable only to the
extent that the related stock option is
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exercisable, and the base from which the value of the Alternative SARs is
measured at its exercise shall be the option price of the related stock option.
If related stock options are exercised as to some or all of the shares covered
by the Award, the related Alternative SARs shall be cancelled automatically to
the extent of the number of shares covered by the stock option exercise. Upon
exercise of Alternative SARs as to some or all of the shares covered by the
Award, the related stock option shall be cancelled automatically to the extent
of the number of shares covered by such exercise, and such shares shall again be
eligible for grant in accordance with paragraph 5 hereof.
(d) Terms and Conditions of Independent SARs. Independent SARs shall be
exercisable in whole or in such installments and at such time as may be
determined by the Committee. The base price from which the value of an
Independent SAR is measured shall also be determined by the Committee; provided,
however, that such price shall not be less than the Fair Market Value of the
Common Stock on the date of the grant of the Independent SAR.
(e) Deemed Exercise. The Committee may provide that a SAR shall be deemed
to be exercised at the close of business on the scheduled expiration date of
such SAR, if at such time the SAR by its terms remains exercisable and, if so
exercised, would result in a payment to the holder of such SAR.
10. RESTRICTED STOCK
(a) Grants. Awards may be granted in the form of Restricted Stock. Shares
of Restricted Stock shall be awarded in such amounts and at such times during
the term of the Plan as the Committee shall determine.
(b) Award Restrictions. Restricted Stock shall be subject to such terms
and conditions as the Committee deems appropriate, including restrictions on
transferability and continued employment. The Committee may modify or accelerate
the delivery of shares of Restricted Stock under such circumstances as it deems
appropriate.
(c) Rights as Stockholders. During the period in which any shares of
Restricted Stock are subject to the restrictions imposed under paragraph 10(b),
the Committee may, in its discretion, grant to the Participant to whom shares of
Restricted Stock have been awarded all or any of the rights of a stockholder
with respect to such shares, including, but not by way of limitation, the right
to vote such shares and to receive dividends.
(d) Evidence of Award. Any shares of Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee deems appropriate,
including, without limitation, book-entry registration or issuance of a stock
certificate or certificates.
11. PERFORMANCE UNITS
(a) Grants. Awards may be granted in the form of performance units.
Performance units shall refer to the Units valued by reference to designated
criteria established by the Committee, other than Units which are expressed in
terms of Common Stock.
(b) Performance or Service Criteria. Performance units shall be contingent
on the attainment during a performance period of certain performance and/or
service objectives. The length of the performance period, the performance or
service objectives to be achieved, and the extent to which such objectives have
been attained shall be conclusively determined by the Committee in the exercise
of its absolute discretion. Performance and service objectives may be revised by
the Committee during the performance period, in order to take into consideration
any unforeseen events or changes in circumstances.
12. PERFORMANCE SHARES
(a) Grants. Awards may be granted in the form of performance shares.
Performance shares shall refer to shares of Common Stock or Units which are
expressed in terms of Common Stock, including shares of phantom stock.
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(b) Performance or Service Criteria. Performance shares shall be
contingent upon the attainment during a performance period of certain
performance or service objectives. The length of the performance period, the
performance or service objectives to be achieved, and the extent to which such
objectives have been attained shall be conclusively determined by the Committee
in the exercise of its absolute discretion. Performance and service objectives
may be revised by the Committee during the performance period, in order to take
into consideration any unforeseen events or changes in circumstances.
13. PAYMENT OF AWARDS
At the discretion of the Committee, payment of Awards may be made in cash,
Common Stock, a combination of cash and Common Stock, or any other form of
property as the Committee shall determine.
14. DIVIDENDS AND DIVIDEND EQUIVALENTS
If an Award is granted in the form of Restricted Stock, stock options, or
performance shares, or in the form of any other stock-based grant, the Committee
may, at any time up to the time of payment, include as part of an Award an
entitlement to receive dividends or dividend equivalents, subject to such terms
and conditions as the Committee may establish. Dividends and dividend
equivalents shall be paid in such form and manner (i.e., lump sum or
installments), and at such time as the Committee shall determine. All dividends
or dividend equivalents which are not paid currently may, at the Committee's
discretion, accrue interest, be reinvested into additional shares of Common
Stock or, in the case of dividends or dividend equivalents credited in
connection with performance shares, be credited as additional performance shares
and paid to the Participant if and when, and to the extent that, payment is made
pursuant to such Award.
15. DEFERRAL OF AWARDS
At the discretion of the Committee, the receipt of the payment of shares of
Restricted Stock, performance shares, performance units, dividends, dividend
equivalents, or any portion thereof, may be deferred by a Participant until such
time as the Committee may establish. All such deferrals shall be accomplished by
the delivery of a written, irrevocable election by the Participant prior to such
time payment would otherwise be made, on a form provided by the Company.
Further, all deferrals shall be made in accordance with administrative
guidelines established by the Committee to ensure that such deferrals comply
with all applicable requirements of the Code and its regulations. Deferred
payments shall be paid in a lump sum or installments, as determined by the
Committee. The Committee may also credit interest, at such rates to be
determined by the Committee, on cash payments that are deferred and credit
dividends or dividend equivalents on deferred payments denominated in the form
of Common Stock.
16. TERMINATION OF EMPLOYMENT
(a) General Rule. Subject to paragraph 20, if a Participant's employment
with the Company or a Subsidiary terminates for a reason other than death,
disability, retirement, or any approved reason, all unexercised, unearned or
unpaid Awards shall be cancelled or forfeited as the case may be, unless
otherwise provided in this paragraph or in the Participant's Award Notice. The
Committee shall have the authority to promulgate rules and regulations to (i)
determine what events constitute disability, retirement, or termination for an
approved reason for purposes of the Plan, and (ii) determine the treatment of a
Participant under the Plan in the event of his death, disability, retirement, or
termination for an approved reason.
(b) Incentive Stock Options. Unless the Award Notice provides otherwise,
any incentive stock option which has not theretofore expired, shall terminate
upon termination of the Participant's employment with the Company whether by
death or otherwise, and no shares of
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Common Stock may thereafter be purchased pursuant to such incentive stock
option, except that:
(i) Upon termination of employment (other than by death), a
Participant may, within three months after the date of termination of
employment, purchase all or part of any shares of Common Stock which the
Participant was entitled to purchase under such incentive stock option on
the date of termination of employment.
(ii) Upon the death of any Participant while employed with the Company
or within the three-month period referred to in paragraph 16(b)(i) above,
the Participant's estate or the person to whom the Participant's rights
under the incentive stock option are transferred by will or the laws of
descent and distribution may, within one year after the date of the
Participant's death, purchase all or part of any shares of Common Stock
which the Participant was entitled to purchase under such incentive stock
option on the date of death.
Notwithstanding anything in this paragraph 16(b) to the contrary, the
Committee may at any time within the three-month period after the date of
termination of a Participant's employment, with the consent of the Participant,
the Participant's estate or the person to whom the Participant's rights under
the incentive stock options are transferred by will or the laws of descent and
distribution, extend the period for exercise of the Participant's incentive
stock options to any date not later than the date on which such incentive stock
options would have otherwise expired absent such termination of employment.
Nothing in this paragraph 16(b) shall authorize the exercise of an incentive
stock option after the expiration of the exercise period therein provided, nor
later than ten years after the date of grant.
(c) Non-Qualified Stock Options. Unless the Award Notice provides
otherwise, any nonqualified stock option which has not theretofore expired shall
terminate upon termination of the Participant's employment with the Company, and
no shares of Common Stock may thereafter be purchased pursuant to such
non-qualified stock option, except that:
(i) Upon termination of employment for any reason other than death,
discharge by the Company for cause, or voluntary resignation of the
Participant prior to age 60, a Participant may, within five years after the
date of termination of employment, or any such greater period of time as
the Committee, in its sole discretion, deems appropriate, exercise all or
part of the non-qualified stock option which the Participant was entitled
to exercise on the date of termination of employment or subsequently
becomes eligible to exercise pursuant to paragraph 8(b) above.
(ii) Upon the death of a Participant while employed with the Company
or within the period referred to in paragraph 16(c)(i) above, the
Participant's estate or the person to whom the Participant's rights under
the non-qualified stock option are transferred by will or the laws of
descent and distribution may, within five years after the date of the
Participant's death while employed, or within the period referred to in
paragraph 16(c)(i) above, exercise all or part of the non-qualified stock
option which the Participant was entitled to exercise on the date of death.
Nothing in this paragraph 16(c) shall authorize the exercise of a
non-qualified stock option later than the exercise period set forth in the Award
Notice.
17. NONASSIGNABILITY
No Award under the Plan shall be subject in any manner to alienation,
anticipation, sale, transfer (except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order), assignment,
pledge, or encumbrance, except that, unless the Committee specifies otherwise,
all awards of non-qualified stock options or SARs shall be transferable without
consideration, subject to all the terms and conditions to which such
non-qualified stock options or SARs are otherwise subject, to (i) members of a
Participant's immediate family as defined in Rule 16a-1 promulgated under the
Exchange Act, or any successor rule or regulation, (ii) trusts for the exclusive
benefit of the Participant or such immediate family members or (iii) entities
which are wholly-owned by the Participant or such immediate family members,
provided that (x) there may be no consideration for any such transfer, and (y)
subsequent
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transfers of transferred options shall be prohibited except those by will or the
laws of descent and distribution. Following transfer, any such options shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, and except as provided in the next sentence, the
term "Participant" shall be deemed to refer to the transferee. The events of
termination of employment of Section 16(c) hereof shall continue to be applied
with reference to the original Participant and following the termination of
employment of the original Participant, the options shall be exercisable by the
transferee only to the extent, and for the periods specified in Section 16(c),
that the original Participant could have exercised such option. Except as
expressly permitted by this paragraph, an Award shall be exercisable during the
Participant's lifetime only by him.
18. ADJUSTMENT OF SHARES AVAILABLE
(a) Changes in Stock. In the event of changes in the Common Stock by
reason of a Common Stock dividend, stock split, reverse stock-split or other
combination, appropriate adjustment shall be made by the Committee in the
aggregate number of shares available under the Plan, the number of shares with
respect to which Awards may be granted to any Participant in any fiscal year,
and the number of shares, SARs, performance shares, Common Stock units and other
stock-based interests subject to outstanding Awards, without, in the case of
stock options, causing a change in the aggregate purchase price to be paid
therefor. Such proper adjustment as may be deemed equitable may be made by the
Committee in its discretion to give effect to any other change affecting the
Common Stock.
(b) Changes in Capitalization. In case of a merger or consolidation of the
Company with another corporation, a reorganization of the Company, a
reclassification of the Common Stock of the Company, a spinoff of a significant
asset, or other changes in the capitalization of the Company, appropriate
provision shall be made for the protection and continuation of any outstanding
Awards by either (i) the substitution, on an equitable basis, of appropriate
stock or other securities or other consideration to which holders of Common
Stock of the Company will be entitled pursuant to such transaction or succession
of transactions, or (ii) by appropriate adjustment in the number of shares
issuable pursuant to the Plan, the number of shares covered by outstanding
Awards, the option price of outstanding stock options, the exercise price of
outstanding SARs, the performance or service criteria or performance period of
outstanding performance units, and the performance or service criteria or
performance period of outstanding performance shares, as deemed appropriate by
the Committee.
19. WITHHOLDING TAXES
The Company shall be entitled to deduct from any payment under the Plan,
regardless of the form of such payment, the amount of all applicable income and
employment taxes required by law to be withheld with respect to such payment or
may require the participant to pay to it such tax prior to and as a condition of
the making of such payment. Subject to the administrative guidelines established
by the Committee, a Participant may pay the amount of taxes required by law to
be withheld from an Award, in whole or in part, by requesting that the Company
withhold from any payment of Common Stock due as a result of such Award, or by
delivering to the Company, shares of Common Stock having a Fair Market Value
less than or equal to the amount of such required withholding taxes.
20. NONCOMPETITION PROVISION
Notwithstanding anything contained in this Plan to the contrary, unless the
Award Notice specifies otherwise, a Participant shall forfeit all unexercised,
unearned, and/or unpaid Awards, including Awards earned but not yet paid, all
unpaid dividends and dividend equivalents, and all interest, if any, accrued on
the foregoing if, (i) in the opinion of the Committee, the Participant, without
the written consent of the Company, engages directly or indirectly in any manner
or capacity as principal, agent, partner, officer, director, employee, or
otherwise, in any business or activity competitive with the business conducted
by the Company or any Subsidiary; or (ii) the Participant performs any act or
engages in any activity which in the opinion of the Committee is inimical to the
best interests of the Company. In addition, the
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Committee may, in its discretion, condition the deferral of any Award, dividend,
or dividend equivalent under paragraph 15 hereof on a Participant's compliance
with the terms of this paragraph 20, and cause such a Participant to forfeit any
payment which is so deferred if the Participant fails to comply with the terms
hereof.
21. AMENDMENTS TO AWARDS
The Committee may at any time unilaterally amend any unexercised, unearned,
or unpaid Award, including Awards earned but not yet paid, to the extent it
deems appropriate; provided, however, that any such amendment which is adverse
to the Participant shall require the Participant's consent.
22. REGULATORY APPROVALS AND LISTINGS
Notwithstanding anything contained in this Plan to the contrary, the
Company shall have no obligation to issue or deliver certificates of Common
Stock evidencing Awards resulting in the payment of Common Stock prior to (a)
the obtaining of any approval from any governmental agency which the Company
shall, in its sole discretion, determine to be necessary or advisable, (b) the
admission of such shares to listing on the stock exchange on which the Common
Stock may be listed, and (c) the completion of any registration or other
qualification of said shares under any state or federal law or ruling of any
governmental body which the Company shall, in its sole discretion, determine to
be necessary or advisable.
23. NO RIGHT TO CONTINUED EMPLOYMENT OR GRANTS
Participation in the Plan shall not give any Key Employee any right to
remain in the employ of the Company or any Subsidiary. The Company or, in the
case of employment with a Subsidiary, the Subsidiary, reserves the right to
terminate any Key Employee at any time. Further, the adoption of this Plan shall
not be deemed to give any person any right to be selected as a Participant or to
be granted an Award.
24. AMENDMENT
The Board may suspend or terminate the Plan at any time. In addition, the
Board may, from time to time, amend the Plan in any manner, provided however,
that any such amendment may be subject to stockholder approval (i) at the
discretion of the Board and (ii) to the extent that shareholder approval may be
required by law, including, but not limited to, the requirements of Rule 16b-3
under the Exchange Act, or any successor rule or regulation.
25. CHANGE IN CONTROL AND CHANGE IN OWNERSHIP
(a) Background. All Participants shall be eligible for the treatment
afforded by this paragraph 25 if there is a Change in Ownership or if their
employment terminates within two years following a Change in Control, unless the
termination is due to (i) death; (ii) disability entitling the Participant to
benefits under his employer's long-term disability plan; (iii) Cause; (iv)
resignation by the Participant other than for Good Reason; or (v) retirement
entitling the Participant to benefits under his employer's retirement plan.
(b) Vesting and Lapse of Restrictions. If a Participant is eligible for
treatment under this paragraph 25, (i) all of the terms and conditions in effect
on any unexercised, unearned, unpaid or deferred Awards shall immediately lapse
as of the Acceleration Date; (ii) no other terms or conditions shall be imposed
upon any Awards on or after such date, and in no event shall any Award be
forfeited on or after such date; and (iii) all of his unexercised, unvested,
unearned and/or unpaid Awards or any other outstanding Awards shall
automatically become one hundred percent (100%) vested immediately upon such
date.
(c) Dividends and Dividend Equivalents. If a Participant is eligible for
treatment under this paragraph 25, all unpaid dividends and dividend equivalents
and all interest accrued thereon, if any, shall be treated and paid under this
paragraph 25 in the identical manner and time as the Award under which such
dividends or dividend equivalents have been credited. For
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example, if upon a Change in Ownership, an Award under this paragraph 25 is to
be paid in a prorated fashion, all unpaid dividends and dividend equivalents
with respect to such Award shall be paid according to the same formula used to
determine the amount of such prorated Award.
(d) Treatment of Performance Units and Performance Shares. If a
Participant holding either performance units or performance shares is eligible
for treatment under this paragraph 25, the provisions of this paragraph (d)
shall determine the manner in which such performance units and/or performance
shares shall be paid to him. For purposes of making such payment, each "current
performance period" (defined to mean a performance period or term of a
performance unit or performance share which period or term has commenced but not
yet ended), shall be treated as terminating upon the Acceleration Date, and for
each such "current performance period" and each "completed performance period"
(defined to mean a performance period or term of a performance unit or
performance share which has ended but for which the Committee has not, on the
Acceleration Date, made a determination as to whether and to what degree the
performance or service objectives for such period have been attained), it shall
be assumed that the performance or service objectives have been attained at a
level of one hundred percent (100%) or the equivalent thereof. If the
Participant is participating in one or more "current performance periods," he
shall be considered to have earned and, therefore, to be entitled to receive, a
prorated portion of the Awards previously granted to him for each such
performance period. Such prorated portion shall be determined by multiplying the
number of performance shares or performance units, as the case may be, granted
to the Participant by a fraction, the numerator of which is the total number of
whole and partial years (with each partial year being treated as a whole year)
that have elapsed since the beginning of the performance period, and the
denominator of which is the total number of years in such performance period. A
Participant in one or more "completed performance periods" shall be considered
to have earned and, therefore, be entitled to receive all the performance shares
and performance units previously granted to him during each performance period.
(e) Valuation of Awards. If a Participant is eligible for treatment under
this paragraph 25, his Awards (including those earned as a result of the
application of paragraph 25(d) above) shall be valued and cashed out on the
basis of the Change in Control Price.
(f) Payment of Awards. If a Participant is eligible for treatment under
this paragraph 25, whether or not he is still employed by the Company or a
Subsidiary, he shall be paid, in a single lump sum cash payment, as soon as
practicable but in no event later than 90 days after the Acceleration Date, for
all outstanding Units of Common Stock, Independent and Combination SARs, stock
options (including incentive stock options), performance units (including those
earned as a result of the application of paragraph 25(d) above), and performance
shares (including those earned as a result of paragraph 25(d) above), and all
other outstanding Awards, including those granted by the Committee pursuant to
its authority under paragraph 3(h) hereof.
(g) Deferred Awards. If a Participant is eligible for treatment under this
paragraph 25, all deferred Awards for which payment has not been received as of
the Acceleration Date shall be paid in a single lump sum cash payment as soon as
practicable, but in no event later than 90 days after such date. For purposes of
making such payment, the value of all Awards which are stock-based shall be
determined by the Change in Control Price.
(h) Miscellaneous. Upon a Change in Control or a Change in Ownership, (i)
the provisions of paragraphs 16, 20 and 21 hereof shall become null and void and
of no force and effect insofar as they apply to a Participant who has been
terminated under the conditions described in (a) above; and (ii) no action shall
be taken which would affect the rights of any Participant or the operation of
the Plan with respect to any Award to which the Participant may have become
entitled hereunder on or prior to the date of the Change in Control or Change in
Ownership or to which he may become entitled as a result of such Change in
Control or Change in Ownership.
(i) Legal Fees. The Company shall pay all legal fees and related expenses
incurred by a Participant in seeking to obtain or enforce any payment, benefit
or right he may be entitled to
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under the Plan after a Change in Control or Change in Ownership; provided,
however, the Participant shall be required to repay any such amounts to the
Company to the extent a court of competent jurisdiction issues a final and
non-appealable order setting forth the determination that the position taken by
the Participant was frivolous or advanced in bad faith.
26. NO RIGHT, TITLE OR INTEREST IN COMPANY ASSETS
No Participant shall have any rights as a stockholder as a result of
participation in the Plan until the date of issuance of a stock certificate in
his name, and, in the case of Restricted Stock, stock options, performance
shares or any other stock-based grant, such rights are granted to the
Participant under paragraph 10(c) hereof. To the extent any person acquires a
right to receive payments from the Company under this Plan, such rights shall be
no greater than the rights of an unsecured creditor of the Company.
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EXHIBIT B
PROPOSED AMENDMENTS TO NATIONAL FUEL GAS COMPANY
1993 AWARD AND OPTION PLAN (THE "1993 PLAN")
1. Section 17, is hereby amended (which amendment also applies to all
outstanding nonqualified stock options and SARs under the Plan as approved by
the Committee on September 19, 1996) to read as follows:
"No Award under the Plan shall be subject in any manner to alienation,
anticipation, sale, transfer (except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order),
assignment, pledge or encumbrance except that, all awards of nonqualified
stock options or SAR's shall be transferable without consideration, subject
to all the terms and conditions to which such nonqualified stock options or
SARs are otherwise subject, to (i) members of a Participant's immediate
family as defined in Rule 16a-1 promulgated under the Exchange Act, or any
successor rule or regulation, (ii) trusts for the exclusive benefit of the
Participant or such immediate family members or (iii) entities which are
wholly-owned by the Participant or such immediate family members, provided
that (x) there may be no consideration for any such transfer, and (y)
subsequent transfers of transferred options shall be prohibited except
those by will or the laws of descent and distribution. Following transfer,
any such options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, and except as
provided in the next sentence, the term "Participant" shall be deemed to
refer to the transferee. The events of termination of employment under
Section 16(c) hereof shall continue to be applied with reference to the
original Participant and following the termination of employment of the
original Participant, the options shall be exercisable by the transferee
only to the extent, and for the periods specified in Section 16(c) that the
original Participant could have exercised such option. Except as expressly
permitted by this paragraph, an Award shall be exercisable during the
Participant's lifetime only by him."
2. Section 19 is hereby amended (which amendment also applies to all
outstanding Awards as approved by the Committee on September 19, 1996) to read
as follows:
"The Company shall be entitled to deduct from any payment under the
Plan, regardless of the form of such payment, the amount of all applicable
income and employment taxes required by law to be withheld with respect to
such payment or may require the participant to pay to it such tax prior to
and as a condition of the making of such payment. A Participant may pay the
amount of taxes required by law to be withheld from an Award by requesting
that the Company withhold from any payment of Common Stock due as a result
of such Award, or by delivering to the Company, shares of Common Stock
having a Fair Market Value equal to the amount of such required withholding
taxes."
3. Section 24 is hereby amended to read as follows:
"The Board may suspend or terminate the Plan at any time. In addition,
the Board may, from time to time, amend the Plan in any manner, provided,
however, that any such amendment may be subject to stockholder approval (i)
at the discretion of the Board and (ii) to the extend that shareholder
approval may be required by law, including, but not limited to, the
requirements of Rule 16b-3 under the Exchange Act, or any successor rule or
regulation.
4. Section 25(h) is deleted, Section 25(i) is renumbered as Section 25(h)
and 25(j) is renumbered as 25(i).
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PROPOSED AMENDMENT TO THE NATIONAL FUEL GAS COMPANY
1984 STOCK PLAN (THE "1984 PLAN")
1. Section 5(c)(v) of the 1984 Plan is hereby amended (which amendment
also applies to all outstanding nonqualified stock options or SARs under the
Plan as approved by the Committee on September 19, 1996) to read as follows:
"No Option under the Plan shall be subject in any manner to
alienation, anticipation, sale, transfer (except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations
order), assignment, pledge or encumbrance, except that all awards of
nonqualified stock options or SARs shall be transferable without
consideration, subject to all the terms and conditions to which such
nonqualified stock options or SARs are otherwise subject, to (i) members of
a Key Employee's immediate family as defined in Rule 16a-1 promulgated
under the Exchange Act, or any successor rule or regulation, (ii) trusts
for the exclusive benefit of the Key Employee or such immediate family
members or (iii) entities which are wholly-owned by the Key Employee or
such immediate family members, provided that (x) there may be no
consideration for any such transfer, and (y) subsequent transfers of
transferred Options shall be prohibited except those by will or the laws of
descent and distribution. Following transfer, any such Options shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, and except as provided in the next sentence,
the term "Key Employee" shall be deemed to refer to the transferee. The
events of termination of employment under Section 6 hereof shall continue
to be applied with reference to the original Key Employee and following the
termination of employment of the original Key Employee, the Options shall
be exercisable by the transferee only to the extent, and for the periods,
specified in Section 6 that the original Key Employee could have exercised
such Option. Except as expressly permitted by this paragraph, an Option
shall be exercisable during the Key Employee's lifetime only by him."
2. Section 15 is hereby amended (which amendment also applies to all
outstanding Awards under the Plan as approved by the Committee on September 19,
1996) to read as follows:
"At the time a Key Employee is taxable with respect to Options, SARs
or Restricted Stock granted hereunder, or the exercise or surrender of the
same, the Company shall have the right to withhold from amounts payable to
the Key Employee under the Plan or from other compensation payable to the
Key Employee in its sole discretion, or require the Key Employee to pay to
it, an amount sufficient to satisfy all federal, state and/or local
withholding tax requirements. A Key Employee may pay, in whole or in part,
such tax withholding amounts by requesting that the Company withhold such
amounts of taxes from the amounts owed to the Key Employee or by delivering
as payment to the Company, shares of Common Stock having a Fair Market
Value less than or equal to the amount of such required withholding taxes.
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EXHIBIT C
(RESOLUTIONS ADOPTED AT THE 9/96 BOARD MEETING)
Whereupon, after discussion, upon motion duly made by Mr. Ackerman and
seconded by Mr. Mann, the following resolutions were unanimously adopted:
RESOLVED: That, with respect to the National Fuel Gas Company
Retirement Plan for Non-Employee Directors ("Directors'
Retirement Plan"), which was previously adopted by this
Board on December 5, 1991 (i) all accruals of benefits
thereunder shall cease as of December 31, 1996, or as of
February 20, 1997 in the case of Mr. Rochwarger; (ii)
all current Company directors who are not vested under
the Directors' Retirement Plan shall become immediately
vested;(iii) all current directors who subsequently
retire shall receive benefits under the Directors'
Retirement Plan, based upon their accrued benefits, and
payable in accordance with the current terms thereof;
and (iv) all persons who become directors of the Company
on or after September 19, 1996 shall be ineligible for
any benefits under the Directors Retirement Plan; and it
is
FURTHER RESOLVED: That non-employee directors shall be paid $500 for each
special consultation as a director that is with or at
the request of the Company's chief executive officer;
and it is
FURTHER RESOLVED: That the Board's current guidelines, whereby directors
should purchase the greater of 100 shares of Company
stock or Company stock costing at least $3,000 per
calendar year, are hereby revoked, and that any past
failures to comply with these guidelines are hereby
excused; and it is
FURTHER RESOLVED: That, effective January 1, 1997, the Board retainer policy
for non-employees directors (except Mr. Rochwarger, who
shall continue to receive a retainer pursuant to current
policy, until he retires from the Board) shall be as
follows: (i) such directors shall receive a quarterly
retainer, payable as of the first business day of each
calendar quarter, of $3,000, payable by check, plus 100
shares of Company common stock; (ii) the first payment
of stock shall be delayed in the unlikely event that the
regulatory approvals (as described below) are delayed;
(iii) the payments described above shall, to the extent
practicable, be prorated for a quarter during which a
non-employee director has only partial service; and (iv)
the shares of Company common stock thereby issued to
non-employee directors shall not be transferable by
directors until the later of two years after the
issuance of the shares or six months after the
director's cessation of service as a director; and it is
FURTHER RESOLVED: That the stock certificates representing such shares shall
bear thereon a legend that shall read substantially as
follows: "Transfer of the shares of common stock
represented by this certificate cannot occur until the
later of two years from the date of the certificate or
six months after the owner ceases to serve as a director
of National Fuel Gas Company."; and it is
FURTHER RESOLVED: That 100,000 shares of common stock, either original issue
shares or treasury shares, be, and hereby are, reserved
for issuance to non-employee Company directors pursuant
to the amended retainer policy for such directors as
heretofore approved by these resolutions; and it is
C-1
<PAGE> 51
FURTHER RESOLVED: That the Board shall, on an annual basis, monitor the
Company common stock component of the amended retainer
policy for non-employee Company directors approved by
these resolutions, and shall make such adjustments, if
any, therein as the Board, in its discretion, may deem
appropriate in light of then existing circumstances
(including, but not limited to, the then existing market
value of the Company common stock); and it is
FURTHER RESOLVED: That the officers and counsel of the Company be, and
hereby are, authorized and empowered to prepare and file
all documents and take all other actions as they may
deem necessary or appropriate to accomplish the intents
and purposes of the foregoing resolutions, including the
filing of an application or declaration on Form U-1 with
the Securities and Exchange Commission, and a listing
application with the New York Stock Exchange, under
which filings 100,000 shares shall be allocated for the
provision of Company common stock to non-employee
directors, and all documents necessary concerning
stockholder approval of the issuance of Company common
stock to such directors, and that they shall be
authorized to make such modifications to the share
allocations as they shall deem appropriate, and to the
policy as set forth in the foregoing resolutions as may
be necessitated by such bodies; and it is
FURTHER RESOLVED: That, effective January 1, 1997, Article II, Paragraph 9
of the By-Laws of the Company be amended to read as
follows:
A. Except with respect to directors whose service as
such ceases on or before February 20, 1997, who will
continue to receive the previously-effective Director
compensation until such time, each Director who is
not a regular full-time employee of the Corporation
or one or more of its subsidiaries, shall be paid an
annual fee of $12,000 in cash and 400 shares of the
common stock of the Corporation, payable in equal
quarterly increments, in advance (i.e., as of the
first business day of the quarter). There will be a
proration of payments during quarters in which such
Director has only partial service. Each such Company
stock certificate will be nontransferable until the
later of two years from issuance or six months after
such Directors' cessation of service.
B. Each Director of the Corporation who is not a regular
full-time employee of the Corporation or one or more
of its subsidiaries shall also receive a fee of
$1,000 for attendance at any meeting of the Board of
Directors and a fee of $800 for attendance at any
meeting of any committee of the Board of Directors,
except that if a Director participates in a committee
meeting by telephone, the fee shall be $500. Each
Director shall be reimbursed for the travel expenses
incurred by him or her in attending any meeting of
the Board of Directors or any committee of the Board
of Directors.
C-2
<PAGE> 52
NATIONAL FUEL GAS COMPANY PROXY
THIS PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
OF STOCKHOLDERS, FEBRUARY 20, 1997
PROXY: B.J. Kennedy, P.C. Ackerman, and A.M. Cellino, and each or any of them,
with full power of substitution and revocation in each, are hereby appointed by
the undersigned as Proxies to vote all the shares of Common Stock held of record
by the undersigned on December 23, 1996, at the Annual Meeting of Stockholders
of National Fuel Gas Company or at any adjournment of the meeting, on each of
the Items below and in accordance with the directions given there, and, in
their discretion, on all other matters that may properly come before the Annual
Meeting or any adjournment thereof.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3, 4 AND 5.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Item 1--Election of the following nominees as Directors: Item 2--Appointment of independent accountants
For three-year terms which expire in 2000 -- E.T. Mann, G.L. Mazanec and For Against Abstain
G.H. Schofield
/ / / / / /
FOR all nominees WITHHOLD WITHHOLD for the following only.
(except as marked for all nominees Write name(s) below.
to the right)
/ / / / ---------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Item 3--Adopt 1997 Award and Option Plan Item 4--Amend 1984 Stock Plan and Item 5--Approval or Retainer Policy for
1993 Award and Option Plan Non-Employee Directors
For Against Abstain For Against Abstain For Against Abstain
/ / / / / / / / / / / / / / / / / /
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(Please date and sign on reverse side and return promptly)
<PAGE> 53
(Continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO SUCH DIRECTIONS ARE GIVEN WITH RESPECT TO
ALL OR SOME ITEMS, AS TO SUCH ITEMS, THE SHARES REPRESENTED BY THIS PROXY WILL
BE VOTED FOR ITEMS 1, 2, 3, 4 AND 5. FAILURE TO WITHHOLD AUTHORITY TO VOTE FOR
THE ELECTION OF ANY NOMINEE FOR DIRECTOR SHALL CONFER ON THE PROXIES AUTHORITY
TO VOTE FOR SUCH NOMINEE'S ELECTION. FAILURE TO VOTE ON ANY OTHER MATTER SHALL
CENTER ON THE PROXIES AUTHORITY TO VOTE WITH RESPECT TO EACH SUCH MATTER.
THIS PROXY MAY BE REVOKED BY GIVING THE SECRETARY OF THE
MEETING WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENT
PROXY AT ANY TIME BEFORE THE VOTING OF THE SHARES
REPRESENTED BY THIS PROXY, OR BY CASTING A BALLOT.
__________________________________
Signature
__________________________________
Signature
Date______________________________
Please sign your name as it appears
on this proxy, and return the
completed proxy in the enclosed
envelope. When signing as an
attorney, executor, administrator,
trustee, guardian or other
representative, please give title as
such. If signer is a corporation,
please sign full corporate name by
duly authorized officer and attach
corporate seal. For joint accounts,
each joint owner should sign.
<PAGE> 54
NATIONAL FUEL GAS COMPANY PROXY
THIS PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL
MEETING OF STOCKHOLDERS, FEBRUARY 20, 1997
PROXY: B.J. Kennedy, P.C. Ackerman, and A.M. Cellino, and each or any of them,
with full power of substitution and revocation in each, are hereby appointed by
the undersigned as Proxies to vote all the shares of Common Stock held of
record by the undersigned on December 23, 1996, at the Annual Meeting of
Stockholders of National Fuel Gas Company or at any adjournment of the meeting,
on each of the items below and in accordance with the directions given there,
and, in their discretion, on all other matters that may properly come before
the Annual Meeting or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3, 4 AND 5.
Item 1 -- Election of the following nominees as Directors:
For three-year terms, which expire in 2000 -- E.T. Mann, G.L. Mazanec and
G.H. Schofield
FOR all nominees WITHHOLD WITHHOLD for the following only.
(except as marked for all nominees Write name(s) below.
to the right)
/ / / / -------------------------------------
Item 2 -- Appointment of independent accountants
For Against Abstain
/ / / / / /
- -------------------------------------------------------------------------------
Item 3 -- Adopt 1997 Award and Option Plan
For Against Abstain
/ / / / / /
Item 4 -- Amend 1984 Stock Plan and 1993 Award and Option Plan
For Against Abstain
/ / / / / /
Item 5 -- Approval of Retainer Policy for Non-Employee Directors
For Against Abstain
/ / / / / /
(Please date and sign on reverse side and return promptly.)
<PAGE> 55
(Continued from other side)
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no such directions are given with respect to
all or some items, as to such items, the shares represented by this proxy will
be voted FOR Items 1, 2, 3, 4 and 5. Failure to withhold authority to vote for
the election of any nominee for director shall confer on the Proxies authority
to vote for such nominee's election. Failure to vote on any other matter shall
confer on the Proxies authority to vote with respect to each such matter.
THIS PROXY MAY BE REVOKED BY GIVING THE
SECRETARY OF THE MEETING WRITTEN NOTICE OF
REVOCATION OR A SUBSEQUENT PROXY AT ANY TIME
BEFORE THE VOTING OF THE SHARES REPRESENTED BY
THIS PROXY, OR BY CASTING A BALLOT.
---------------------------------------
Signature
---------------------------------------
Signature
Date
----------------------------------
Please sign your name as it appears on
this proxy, and return the completed
proxy in the enclosed envelope. When
signing as an attorney, executor,
administrator, trustee, guardian or
other representative, please give title
as such. If signer is a corporation,
please sign full corporate name by duly
authorized officer and attach corporate
seal. For joint accounts, each joint
owner should sign.
<PAGE> 56
NATIONAL FUEL GAS COMPANY EMPLOYEE BENEFIT PLANS
Administrative Committee
P. C. Ackerman
A. M. Cellino 10 Lafayette Square
J. P. Pawlowski Buffalo, New York 14203
D. J. Seeley
December 30, 1996
TO ALL PARTICIPANTS IN EMPLOYEE BENEFIT PLANS:
The Annual Meeting of Stockholders of National Fuel Gas Company will be
held on February 20, 1997. The enclosed Notice of Annual Meeting of
Stockholders, Proxy Statement and 1996 Annual Report are being distributed to
all stockholders of record as of December 23, 1996.
The Trustees of National Fuel's Thrift Plan, five Employee Stock Ownership
Plans and two Tax-Deferred Savings Plans hold shares of Company Common Stock
that are allocated to participants' accounts in those plans. Therefore, we have
enclosed a voting instruction card that you may use to instruct the Trustees how
to vote the shares held in your accounts in those plans. Each plan provides that
each participant shall have the right to give voting instructions to the Trustee
of the plan with respect to the number of shares of Company Common Stock held on
his or her behalf by the Trustee on the voting record date.
YOUR INSTRUCTIONS TO CHASEMELLON SHAREHOLDER SERVICES, TRUSTEE OF THE
NATIONAL FUEL GAS COMPANY EMPLOYEES' THRIFT PLAN AND THE NATIONAL FUEL GAS
COMPANY EMPLOYEE STOCK OWNERSHIP PLANS, AND VANGUARD FIDUCIARY TRUST COMPANY,
TRUSTEE OF THE NATIONAL FUEL GAS COMPANY TAX-DEFERRED SAVINGS PLANS, ARE
CONFIDENTIAL. THE TRUSTEES MAY NOT VOTE THE SHARES HELD FOR YOUR ACCOUNT OR
ACCOUNTS IF YOU DO NOT PROVIDE VOTING INSTRUCTIONS.
This letter and the enclosed voting instruction card relate only to shares
of Common Stock of National Fuel Gas Company held on your behalf by the Trustees
under the terms of the employee benefit plans mentioned above, and do not affect
any National Fuel Gas Company Common Stock that you may own in your own name.
You will receive a proxy for those shares in a separate mailing.
To be sure that shares held on your behalf will be voted, please complete,
sign and date the enclosed card and return it in the envelope provided no later
than February 12, 1997.
Very truly yours,
/s/ ANNA MARIE CELLINO
-----------------------
Chairman
<PAGE> 57
VOTING INSTRUCTION CARD
NATIONAL FUEL GAS COMPANY EMPLOYEE BENEFIT PLANS
THIS VOTING INSTRUCTION CARD SOLICITED BY THE BOARD OF DIRECTORS FOR USE
AT THE ANNUAL MEETING OF STOCKHOLDERS, FEBRUARY 20, 1997
I have received the letter dated December 30, 1996, from the Administrative
Committee of National Fuel Gas Company's employee benefit plans, with
enclosures, concerning the Annual Meeting of Stockholders of National Fuel Gas
Company to be held on February 20, 1997. The enclosures include a copy of the
Company's 1996 Annual Report.
I hereby instruct ChaseMellon Shareholder Services, as Trustee of the National
Fuel Gas Company Employee Stock Ownership Plans and the National Fuel Gas
Company Employees' Thrift Plan, and Vanguard Fiduciary Trust Company, as
Trustee of the National Fuel Gas Company Tax-Deferred Savings Plans, at such
Annual Meeting, or at any adjournment thereof, to vote the Common Stock of the
Company held on my behalf by you in said employee benefit plans as I have
directed, on each of the items on the reverse side of this voting instruction
card.
THESE INSTRUCTIONS MAY BE REVOKED BY WRITTEN NOTICE TO THE RESPECTIVE TRUSTEES
AT THE ADDRESSES LISTED BELOW RECEIVED ON OR BEFORE FEBRUARY 18, 1997.
ChaseMellon Shareholder Services, L.L.C. Vanguard Fiduciary Trust Company
National Fuel Gas Company P.O. Box 2600
Midtown Station Valley Forge, PA 19482
P.O. Box 865
New York, NY 10138-0701
THIS VOTING INSTRUCTION CARD IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
- --------------------------------------------------------------------------------
-FOLD AND DETACH HERE-
<PAGE> 58
<TABLE>
<CAPTION>
THIS VOTING INSTRUCTION CARD INSTRUCTS THE TRUSTEES HOW TO VOTE SHARES HELD BY YOU IN NATIONAL FUEL GAS
COMPANY'S EMPLOYEE BENEFIT PLANS. IF NO INSTRUCTIONS ARE GIVEN, THE SHARES MAY NOT BE VOTED.
P /X/ PLEASE MARK
YOUR CHOICE
LIKE THIS
- -----------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3, 4, AND 5.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Item 1--Election of the following nominees as Directors. FOR AGAINST ABSTAIN
For three-year terms which FOR all nominees WITHHOLD Item 2--Appointment of independent
expire in 2000 - (except as marked for all accountants / / / / / /
E.T. Mann, G.L. Mazanec and to the left) nominees
G.H. Schofield Item 3--Adopt 1997 Award and / / / / / /
/ / / / Option Plan
WITHHOLD for the following only. Write name(s) below. Item 4--Amend 1984 Stock Plan / / / / / /
and 1993 Award and
Option Plan
- -----------------------------------------------------
Item 5--Approval of Retainer / / / / / /
Policy for Non-Employee
Directors
(SIGNATURE OF STOCKHOLDER(S)) Dated: , 1997
---------------------------------------------- ----------------------------
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS CARD AND RETURN THE CARD IN THE ENCLOSED ENVELOPE ON OR BEFORE
FEBRUARY 12, 1997.
- ------------------------------------------------------------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
</TABLE>
