File Number 70-8943
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM U-1/A
AMENDMENT NO. 2
DECLARATION UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
By
NATIONAL FUEL GAS COMPANY
10 Lafayette Square
Buffalo, New York 14203
(Registered Holding Company)
Names and addresses of agents for service:
Philip C. Ackerman, Senior Vice President
National Fuel Gas Company
10 Lafayette Square
Buffalo, New York 14203
Curtis W. Lee, Esq.
10 Lafayette Square
Buffalo, New York 14203
<PAGE>
File Number 70-8943
Add the following to the end of Item 1. PROPOSED TRANSACTIONS
Pursuant to authority granted in HCAR Release No. 35-26364; 70-8649
(the "Horizon U-1"), Horizon Energy Development, Inc. ("Horizon"), an affiliate
of National has committed approximately $15 million to date in a combination of
development cost expenditures, loans and guarantees to facilitate the
development of a 151 Megawatt power plant near Kabirwala, Pakistan (the
"Kabirwala Project") which is to be constructed and owned by Fauji Kabirwala
Power Company, Ltd. ("FKPCL"), a certified EWG. While Horizon has recently
announced a disinclination to make an equity investment in FKPCL, an
intermediate Company of National and/or Horizon owns 48.19% of the voting stock
of FKPCL. The Kabirwala Project is a "qualifying facility" under Section 32 of
the Act.
Approximately $15 million committed as aforesaid is well within the
$150 million Investment Limit authorized in HCAR No. 35-26364. None of the
proceeds from the transactions contemplated hereunder shall be invested in an
EWG or FUCO.
Item 6. Exhibits and Financial Statements
The following exhibits are included in this amendment:
(a) Exhibits
A-2 Bylaws of National, as amended through
September 19, 1996 (Incorporated by reference to
Exhibit 3.1, Form 10-K for fiscal year ended September
30, 1994 in File No. 1-3880; Exhibit C to Exhibit A-3
hereto, File No. 70-8943.).
A-3 Draft of Notice of Annual Meeting and Proxy Statement
proposed to be used in connection with the annual
meeting of Shareholders
.
F Opinion of counsel.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned company has duly caused this statement to be signed on
its behalf by the undersigned thereunto duly authorized.
NATIONAL FUEL GAS COMPANY
By: /s/Philip C. Ackerman
Philip C. Ackerman
Senior Vice President
Date: December 16, 1996
DRAFT 12/9/96 5:00 p.m.
dmz\proxy\1997\draft97.doc
NATIONAL FUEL GAS COMPANY
Notice of Annual Meeting and
Proxy Statement
Annual Meeting of Stockholders to be held on
February 20, 1997
<PAGE>
[LOGO]
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. Standard Time on Thursday, February 20, 1997, in the Colonnade Room 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>
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. Standard Time on Thursday,
February 20, 1997, in the Colonnade Room 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
<PAGE>
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>
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 [$5,500] 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,
________________________ 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.
A copy of the Company's Annual Report for the fiscal year ended
September 30, 1996, which includes financial statements, is enclosed.
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 U.S. 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.
<PAGE>
The Board of Directors Recommends a Vote FOR the Election of
Messrs. Mann, Mazanec and Schofield.
Name and Year
Became a Director
of the Company Age(1) Principal Occupation
- ---------------------- ------ --------------------------------------
Nominees for Election as Directors
for Three-Year Terms to Expire in 2000
EUGENE T. MANN........ 66 Executive Vice President from 1986
1993 until his 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
1996 of PanEnergy Corp. Former Vice Chairman of
PanEnergy Corp. from 1989 until October 1996;
executive vice president of PanEnergy Corp. 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
1990 1986 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
- -------------------
(1) As of February 20, 1997.
<PAGE>
Name and Year
Became a Director
of the Company Age(1) Principal Occupation
- ---------------------- ------ --------------------------------------
Directors Whose Terms Expire in 1998
PHILIP C. ACKERMAN....... 53 Senior Vice President of the Company
1994 since 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
1992 Vector 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.
- ---------------
(1) As of February 20, 1997.
(2) Wholly owned subsidiary of the Company.
<PAGE>
Name and Year
Became a Director
of the Company Age(1) Principal Occupation
- ---------------------- ------ --------------------------------------
Directors Whose Terms Expire in 1999
ROBERT T. BRADY........ 56 Chairman of Moog Inc. since February
1995 1996. President, Chief Executive
Officer and Director since 1988 of Moog
Inc., a manufacturer of motion
control systems and components.
Director of Acme Electric
Corporation, Astronics Corporation, First
Empire State Corporation 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 Co.
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.
- ---------------
(1) As of February 20, 1997.
(2) Wholly owned subsidiary of the Company.
<PAGE>
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 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.
<PAGE>
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 Company is proposing to reduce the cash component of the directors'
compensation, freeze benefits under the Directors' Retirement Plan, and pay the
directors partially with Company stock. 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.
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.
Number of Shares
of Common Stock
Beneficially Owned Percent of
as of September 30, Common Stock
Name 1996 Owned
- ----------------------------- ------------------- -----------
Philip C. Ackerman(1)(2)(3)(4)..... 267,250 *
Robert T. Brady.................... 100 *
Richard Hare(1)(2)(3)........... 188,729 *
William J. Hill(2)................. 199,823 *
Luiz F. Kahl(5).................... 796 *
Bernard J. Kennedy(2)(3)........... 502,363 1.3
Bernard S. Lee..................... 1,100 *
Eugene T. Mann..................... 850 *
George L. Mazanec(6)............... 500 *
Joseph P. Pawlowski(1)(2)(7)....... 78,050 *
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)........ ..1,518,322 4%
- ---------------
* 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; 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, 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 (8
individuals). Of the options for the 884,552 shares exercisable by
executive officers set forth above, none were exercisable at 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, 0
shares for Mr. Pawlowski, 0 shares for Mr. Wehrlin and 126,578 shares
for all current directors and officers as a group (8 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) Mr. Kahl shares voting and investment power with his wife with respect
to all 796 shares.
(6) Includes 300 shares owned by Mr. Mazanec's wife as to which Mr. Mazanec
shares voting and investment power.
(7) Includes 4,200 shares with respect to which Mr. Pawlowski shares voting
and investment power with his wife.
(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 1,371 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.
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, 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 this 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, 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 [19].
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 year depend upon the
achievement of specific goals during that fiscal year, especially earnings per
share. The Annual At Risk Compensation Incentive Program (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 forfeits 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.
Base Salary and Annual At Risk Incentive
The Summary Compensation Table on page [15] includes in the "Base
Salary" column each executive officer's base salary earned during fiscal 1996
(which began on October 1, 1995). 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 date 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 plus target At Risk Program award of Mr. Kennedy (the CEO)
at ___% of the 75th percentile for his peer group. The Committee set the base
salaries and target At Risk Program awards of the other executive officers at
the following percentages of the 75th percentile for their respective peer
groups: Mr. Ackerman, __%; and Mr. Hare, __%. As of December 1994, Mssrs.
Pawlowski and Wehrlin were not executive officers.
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 plus target At Risk Program award of Mr. Kennedy (the CEO)
at __% of the 75th percentile for his peer group. The Committee set the base
salaries plus target At Risk Program awards of the other executive officers at
the following percentages of the 75th percentile for their respective peer
groups: Mr. Ackerman, __%; and Mr. Hare, __%. As of December 1995, Mssrs.
Pawlowski and Wehrlin were not executive officers.
The Summary Compensation Table on page [15] includes in the "LTIP
[long-term incentive plan] Payouts" column the amount earned by or paid to
Mssrs. 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 Mssrs. Kennedy, Ackerman and Hare is set out in the Long-Term
Incentive Plan Table on page [18].
The Summary Compensation Table on page [15] includes in the "Bonus"
column the amount earned by or paid to Mssrs. 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 exaggerated by the
inclusion (as required by SEC regulations) 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.
During the first quarter of fiscal 1996, the Committee set At Risk
Program goals and ranges of potential payments for each executive officer 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
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 his
performance ratings for fiscal years 1995 and 1996. For Messrs. Pawlowski and
Wehrlin, the awards were based on performance in fiscal 1996.
Mr. Kennedy was given the opportunity in December 1995 to earn a fiscal
1996 At Risk Program payment equal to 22% of his fiscal 1996 base salary for
achieving target goals, and up to 44% of his fiscal 1996 base salary for
substantially exceeding those goals.
Messrs. Ackerman and Hare were each given the opportunity in December
1995 to earn a fiscal 1996 At Risk Program payment equal to 10% of his fiscal
1996 base salary for achieving target goals, and up to 20% of his fiscal 1996
base salary for substantially exceeding those goals.
Messrs. Pawlowski and Wehrlin were each given the opportunity in
December 1995 to earn a fiscal 1996 At Risk Program payment equal to __% of his
fiscal 1996 base salary for achieving target goals, and up to __% of his fiscal
1996 base salary for substantially exceeding those goals.
For fiscal 1996, the Committee developed and adopted specific At Risk
Program target goals for each executive officer. Goals for fiscal 1996 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.
Mr. Pawlowski, as Treasurer of the Company, and Senior Vice President
of the regulated utility business and Treasurer of the pipeline and storage
business: a specified level of Company earnings per share (weighted as [10%] of
the formula), a specified level of net income for the regulated utility
(weighted as __% of the formula), and customer service/other goals (weighted as
__% of the formula). The regulated utility would have to achieve [115%] 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. Wehrlin, as Controller of the Company and Senior Vice President of
the regulated utility business: a specified level of Company earnings per share
(weighted as [10%] of the formula), a specified level of net income for his
subsidiary (weighted as 30% of the formula), and customer service/other goals
(weighted as __% of the formula). Mr. Wehrlin's subsidiary would have to achieve
[115%] 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.
The Summary Compensation Table on page [15] shows each executive
officer's At Risk Program award earned for fiscal 1996, based on the Committee's
evaluations finalized after the close of the fiscal year. For performance during
fiscal years 1995 and 1996, Mr. Kennedy earned an incentive equal to [__]% of
his fiscal 1996 base salary, Mr. Ackerman earned an incentive equal to [__]% of
his fiscal 1996 base salary, Mr. Hare earned an incentive equal to [__]% of his
fiscal 1996 base salary. For performance in fiscal 1996, Mr. Pawlowski earned an
incentive equal to [__]% of his fiscal 1996 base salary, and Mr. Wehrlin earned
an incentive equal to [__]% of his fiscal 1996 base salary.
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 31, 1996, the Company was at
about the 75th percentile, about 43% above the average for the peer group.
Each of the Company's executive officer's total direct compensation
(base salary, At Risk Program award and other long-term incentive compensation)
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
executive officers was substantially below the average for the comparable
executive officers in the peer group, ranging from [8%] to [45%] 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 Mssrs. 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. The Option/SAR Grants in Fiscal 1996 table
on page [16] shows the terms of each award.
None of the executive officers were awarded restricted stock in fiscal
1996. The awards of restricted stock made to Mssrs. Kennedy, Ackerman and Hare
in fiscal 1994 will "vest" in increments of one-sixth of that award each January
2 from 1996 through 2001. The Summary Compensation Table on page [15] contains
additional information on the 1994 restricted stock awards to those executive
officers.
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 [21].
Company payments under the insurance programs are shown as part of "All Other
Compensation" on the Summary Compensation Table on page [15].
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 the 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 (2) 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 annual compensation of chief
executive officers of peer group companies based on one-year total returns to
stockholders was $2,107,663. Mr. Kennedy's actual 1996 total direct compensation
was [13%] 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
<PAGE>
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 other four
executive officers for the fiscal year ended September 30, 1996 (the "named
executive officers").
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
------------------------------ -----------------------------------
Awards Payouts
-----------------------------------
Securities All Other
Other Annual Restricted Underlying Compen-
Name and Principal Fiscal Base Compen- Stock Options/ LTIP sation
Position Year Salary Bonus sation (1) Awards (2) SARS (#) Payouts (3)
- -------------------------- ------ --------- --------- ------------ ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bernard J. Kennedy........ 1996 $839,400 0 0 0 150,000 $ (4) $206,106
Chairman of the Board of.. 1995 788,150 $ 0 0 $ 0 150,000 236,000 152,430
Directors, Chief Executive 1994 688,150 0 0 2,036,444 90,000 276,000 173,903
Officer and President
Philip C. Ackerman........ 1996 $470,000 0 0 0 70,000 (4) $82,209
Senior Vice President of.. 1995 365,612 0 0 0 70,000 49,000 77,680
the Company and........... 1994 348,050 0 0 938,438 55,000 65,000 72,532
President of certain
subsidiaries
Richard Hare.............. 1996 $370,000 0 0 60,000 (4) $56,876
President of National..... 1995 365,612 0 0 0 60,000 47,000 68,344
Fuel Gas Supply........... 1994 348,050 0 0 926,475 55,000 60,000 70,577
Corporation
Joseph P. Pawlowski....... 1996 $212,000 $ (5) 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 $ (5) 0 20,000 0 $25,686
Controller of the Company
and Senior Vice President
of National Fuel Gas
Distribution Corporation
- ---------------
</TABLE>
<PAGE>
(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) As required by SEC regulations, the dollar value of the restricted
stock shown in the table 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 had lapsed, 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.
(3) In fiscal 1996, the Company paid, contributed or accrued for Messrs.
Kennedy, Ackerman, Hare, Pawlowski and Wehrlin $0, $7,920, $7,760,
$7,385 and $7,260 respectively, under the Tax-Deferred Savings Plan;
$71,506, $21,933, $0, $6,558 and $0, respectively, under a provision of
the Deferred Compensation Plan 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, $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, $9,833 and $10,499, respectively, as above-market interest
under the Deferred Compensation Plan (which amount, in the case of Mr.
Ackerman, could be forfeited); and $101,700, $33,578, $27,248, $17,906
and $1,719, respectively, as the dollar value of split-dollar or other
life insurance benefits paid for by the Company.
(4) Includes both (i) bonus earned in fiscal 1995 but paid in fiscal 1996
($22,000) and (ii) bonus earned in fiscal 1996 but paid in fiscal 1997
($_____).
(5) Includes both (i) additional award earned in fiscal 1995 but paid in
fiscal 1996 (Mr. Kennedy $79,000, Mr. Ackerman $16,000, and Mr. Hare
$16,000), and (ii) award earned in fiscal 1996 but paid in fiscal 1997
(Mr. Kennedy $___________, Mr. Ackerman $________, and Mr. Hare
$__________).
Stock Option Grant Table
The following table sets forth information with respect to options to
purchase shares of Common Stock and stock appreciation rights (SARs) awarded
during fiscal 1996 to the named executive officers pursuant to plans approved by
the Company's stockholders.
<PAGE>
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN FISCAL 1996 (1)
Individual Grants
------------------------------------------------------------------
% of Total
Number of Options/SARs
Securities Granted to Exercise
Underlying Employees or Base Grant Date
Options/SARs in Fiscal Price Per Expiration Present
Name Granted(#) Year Share($/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
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 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 1.3563%, an annual
expected return of 9.76%, an annual standard deviation (volatility) of
15.40%, a risk-free rate of 6.05%, 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
<PAGE>
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Number of Underlying Unexercised In-the-Money
Securities Options/SARs at Options/SARs at
Underlying FY-End(#) 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
Joseph P. Pawlowski. 0 0 59,151 20,000 534,120 (1,250)
Gerald T. Wehrlin... 4,576 63,349 60,801 20,000 555,363 (1,250)
</TABLE>
<PAGE>
- ---------------
(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.
<PAGE>
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.
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLAN -- AWARDS IN FISCAL 1996
Estimated Future Payouts Under
Performance Non-Stock Price-Based Plans(1)
Period Until -------------------------------
Name Maturation Threshold Target Maximum
- ------------------------------- ---------------------- --------- -------- -------
<S> <C> <C> <C> <C>
Bernard J. Kennedy............. 2 years ended 9/30/96 $ 0 $173,393 $346,786
Philip C. Ackerman............. 2 years ended 9/30/96 0 36,561 73,122
Richard Hare................... 2 years ended 9/30/96 0 36,561 73,122
</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 [15] in the LTIP Payouts
column.
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.
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS*
Fiscal Years 1992 -- 1996
[GRAPH]
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
NATIONAL FUEL $100 $114 $166 $143 $146 $185
S&P 500 $100 $111 $125 $130 $169 $203
S&P UTILITIES $100 $114 $141 $122 $156 $168
* Assumes $100.00 invested on September 30, 1991, and reinvestment of dividends.
<PAGE>
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 and Wehrlin entered into agreements
with the Company dated May 1, 1992, 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
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 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 all 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
benefits payable under the Retirement Plan and Executive Retirement Plan
together to eligible officers retiring currently at the normal retirement age of
65 with a spouse of the same age. Forms of benefit 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.
Estimated Annual Retirement Benefits
Five-Year For Years of Benefit Service Credited(1)
Final Average ----------------------------------------------
Salary(2)(3) 25 30 35 40
- ------------- -------- -------- -------- --------
$ 300,000 $124,900 $149,880 $166,348 $182,817
600,000 253,886 304,663 338,417 372,170
900,000 382,872 459,446 510,485 561,524
1,200,000 511,857 614,229 682,553 750,878
1,500,000 640,843 769,012 854,622 940,231
- ---------------
<PAGE>
(1) The service credited for retirement benefit purposes to the
officers named in the Summary Compensation Table, as of September 30,
1996, is as follows: Mr. Kennedy, 38 years, 1 month; Mr. Ackerman, 28
years, 2 months; Mr. Hare, 21 years; Mr. Pawlowski, 21 years, 1 month;
Mr. Wehrlin, 20 years, 1 month.
(2) Compensation covered for retirement benefit purposes is more than the
amounts appearing in the three "annual compensation" columns of the
Summary Compensation Table on page 15, because of the inclusion of At
Risk Program awards which are considered "long-term compensation".
Accordingly, the covered current compensation as of September 30, 1996,
is as follows: Mr. Kennedy, ($_________); Mr. Ackerman, ($_______); Mr.
Hare, ($_______); Mr. Pawlowski, $_________; and Mr. Wehrlin
$__________.
(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, 1996 ("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 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 ("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") and all awards made prior to such approval are contingent upon such
approval. A copy of the Plan is attached to this Proxy Statement as Exhibit A.
The Board of Directors believes that it is in the Company's best
interests to adopt the Plan because upon the proposed option awards for fiscal
1997, 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. The purpose of the Plan 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. A copy of the Plan accompanies this
proxy statement in its entirety by reference thereto.
Administration
The Plan provides for administration by the Compensation Committee of
the Board or another committee designated by the Board ("Committee"). No member
of the Committee is eligible to be selected to participate in the Plan. Among
the powers granted to the Committee are the authority to interpret the 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 Plan terms
and conditions, accelerate the vesting, exercise or payment of an award and take
all action it deems for the proper administration of the Plan. The Plan
authorizes the Committee to delegate its authority and duties under the 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 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 Plan at any time, and may also
amend the 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 Plan authorizes the Committee to grant awards during the period
from December 2, 1996 through December 1, 2006. subject to equitable adjustment,
1,800,000 shares of Common Stork of the Company are available for grant under
the 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 Plan. Similarly, shares of Common Stork 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 Plan.
No one Participant in the Plan may receive awards covering more than
300,000 shares of Common Stock of the Company in any fiscal year.
Types of Awards
The 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"), 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 Plan's purposes. Such awards may be granted singly, in
combination or in the alternative, as determined by the Committee.
Stock Options
Under the 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 non-qualified 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 ___ 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 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 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 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.
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 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 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.
Stock Awards
The 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 Plan gives the Committee the discretion to
accelerate the delivery of shares of such awards.
Performance Shares
The Plan allows for the grant of "performance shares". For purposes of
the 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 maybe 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 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 Plan authorizes
the Committee to promulgate administrative guidelines for the purpose of
determining what treatment will be afforded to a Participant under the Plan in
the event of his 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 acts in a manner inimical to the Company's best interests.
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 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 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 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 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
Plan), voluntary resignations or other Good Reason (as defined in the Plan) or
retirement, would be entitled to the following treatment under the 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 Plan also provides that upon a Change In Ownership (as defined in
the 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
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 Plan, 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 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 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 (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.
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 ____, 1996 was $____ 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 $___________.
New Plan Benefits
For each of the executive officers named in the Summary Compensation
Table and the various indicated groups, the table below 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.
<TABLE>
<CAPTION>
Number of Options
Which Are Number of Number of
Expected to Be Options and Director's
Awarded in 1997 SARs Awarded Shares Which
Dollar Under 1997 in 1997 Under Will Be
Name and Position Value Plan (2)(3) 1993 Plan (4) Awarded
----------------- ----- ----------- ------------- -------
<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
Officer and President
Philip C. Ackerman (1) 0 80,000 options 0
[titles] (1) 0 80,000 SARs
Richard Hare (1) 0 50,000 options 0
President of National (1) 0 50,000 SARs
Fuel Gas Supply Corporation
Joseph P. Pawlowski (1) 20,000 options 0 0
[titles]
Gerald T. Wehrlin (1) 20,000 options 0 0
[titles]
All current executive (1) 420,000 options 0 0
officers as a group 280,000 SARs
(10 persons)
All non-employee directors (1) 0 0 2,800
as a group (8 persons) shares
All employees, including (1) 233,250 options 0
all current officers who
are not executive officers,
as a group
</TABLE>
(1) The exercise 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.
(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 what awards would be made in fiscal 1997, but the actual awards could vary
somewhat.
(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 exercise price to the fair market value
on the date of its exercise.
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
1983 Incentive Stock Option Plan ("1983 Plan"), 1984 Stock Plan ("1984 Plan")
and the 1993 Award and Option Plan ("1993 Plan", and together with the 1983 Plan
and 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. In
addition, adoption of the amendments to the Stock Plans is subject to the
approval of the SEC under the 1935 Act. 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.
[The Stock Plans as they existed prior to these amendments are
described in this proxy statement under 1984 Stock Plan and the 1993 Award and
Option Plan beginning on page ___.] 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 1983 Plan and 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 Plan. See the description under Other Terms of Awards
beginning at page ___. 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. Third, 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. Fourth, the 1993 Plan would amend the change in control
provision 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.
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 __ 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 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 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 stock, or Company stock costing at least
$3000, 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, plus $3000 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
December __, 1996 was $____ per share.
The number of shares of stock to be received pursuant to the Retainer
Policy by various groups of persons are shown on the table under the heading
"Plan Benefits" on page __ of this proxy statement. For so long as there
continue to be seven non-employee directors after the 1997 Annual Meeting, there
will be 2,800 shares of Common Stock issued each year under the Retainer Policy.
The Board of Directors Recommends a vote FOR this proposal.
<PAGE>
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.
<PAGE>
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
not later than September 1, 1997, in order to be considered for inclusion in the
Company's proxy statement and form of proxy for that meeting.
BY ORDER OF THE BOARD OF DIRECTORS
ANNA MARIE CELLINO
Secretary
December 30, 1996
<PAGE>
EXHIBIT A
NATIONAL FUEL GAS COMPANY
1997 AWARD AND OPTION PLAN
<PAGE>
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
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 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
1,800,000; 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.
(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 1,800,000 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 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
1,800,000.
(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 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.
(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
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
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:
(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 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 spin-off 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 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 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 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.
11/18/96
97AWOPLN.DOC
<PAGE>
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).
<PAGE>
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 of 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.
<PAGE>
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
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.
Exhibit F
December 16, 1996
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: National Fuel Gas Company
Declaration on Form U-1/A (File No. 70-8943)
Ladies and Gentlemen:
This opinion relates to the above-referenced Declaration, as amended by
Amendment No. 1 thereto (as amended, the "Declaration"), filed by National Fuel
Gas Company ("National") under the Public Utility Holding Company Act of 1935,
as amended. The Declaration seeks the following authorization:
(i) To adopt and implement the Shares Payment Policy of National (the
"Policy") and, pursuant thereto, to issue up to 100,000 shares of Common Stock,
$1.00 par value per share (the "Common Stock"), of National to outside
(non-employee) directors of National in partial payment of their annual retainer
fees; and
(ii) To solicit proxies from the holders of shares of Common Stock of
National in connection with the foregoing.
In this connection, we have examined the Restated Certificate of
Incorporation and By-Laws of National, each as amended, the resolutions adopted
by the National Board of Directors authorizing and approving the Policy, the
description of the Policy in the Declaration, and such other documents,
certificates and corporate records and such questions of law as we have deemed
necessary for the purposes of this opinion.
<PAGE>
Based upon the foregoing, we are of the opinion that:
1. National is a corporation duly organized and validly
existing under the laws of the State of New Jersey.
2. If (i) the proposed transactions are consummated in accordance with
the Declaration and the order or orders of the Securities and Exchange
Commission thereon, (ii) the holders of the outstanding shares of Common Stock
of National shall have approved the Policy, and (iii) the certificates
representing any shares of Common Stock issued pursuant to the Policy shall have
been duly executed, countersigned, registered and delivered pursuant to the
terms and subject to the conditions set forth in the Policy:
A. All laws of the State of New Jersey that we
consider applicable to the proposed transactions will have been complied with;
B. Shares of Common Stock issued pursuant to and
subject to the terms and conditions of the Policy will be validly issued, fully
paid and non-assessable;
C. Subject to the terms of the Policy, the holders
of shares of Common Stock so issued will be entitled to the rights and
privileges pertaining thereto, as set forth in the Restated Certificate of
Incorporation of National, as amended; and
D. The legal rights of the holders of any securities
issued by National will not have been violated.
We have not been requested to and, therefore, express no opinion herein
concerning the applicability of federal or state securities or "blue sky" laws
(including, without limitation, the New Jersey Uniform Securities Law, as
amended) to the issuance of Common Stock pursuant to the terms of the Policy.
We consent to the use of this opinion as an exhibit to the Declaration.
Very truly yours,
/s/Stryker, Tams & DIll
STRYKER, TAMS & DILL
