<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
NATIONAL FUEL GAS COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
NATIONAL FUEL GAS COMPANY
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
FEBRUARY 18, 1999
<PAGE> 3
NATIONAL FUEL GAS COMPANY
10 LAFAYETTE SQUARE
BUFFALO, NEW YORK 14203
December 31, 1998
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. Central Time on Thursday, February 18, 1999, at the Omni Houston Hotel,
Four Riverway, Houston, Texas 77056.
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.
So 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 or vote your shares by
telephone as described on the proxy card. 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, or respond to the question if you vote by
telephone. Whether or not you plan to attend, please complete, sign, date and
promptly return your proxy card or vote your shares by telephone 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 and/or the
Trustees (as described on the first page of this Proxy Statement), and/or by
casting your ballot at the meeting.
Coffee will be served at 9:30 A.M. The other directors and I look forward
to meeting you at that time.
In the meantime, please review the proxy statement and take advantage of
your right to vote.
Sincerely yours,
BERNARD J. KENNEDY
Chairman of the Board of Directors,
Chief Executive Officer and President
<PAGE> 4
NATIONAL FUEL GAS COMPANY
10 LAFAYETTE SQUARE
BUFFALO, NEW YORK 14203
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 18, 1999
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. Central Time on Thursday, February
18, 1999, at the Omni Houston Hotel, Four Riverway, Houston, Texas 77056. At the
meeting, action will be taken with respect to:
(1) The election of directors;
(2) The appointment of independent accountants;
(3) Adoption of, if presented at the meeting, a shareholder proposal
which the Board of Directors OPPOSES;
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 21, 1998, will
be entitled to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
ANNA MARIE CELLINO
Secretary
December 31, 1998
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/VOTING INSTRUCTION CARD. PLEASE USE THE ACCOMPANYING ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. INSTEAD, YOU MAY VOTE YOUR
SHARES BY TELEPHONE AS DESCRIBED ON THE PROXY/VOTING INSTRUCTION CARD AND REDUCE
NATIONAL FUEL GAS COMPANY'S EXPENSE IN SOLICITING PROXIES.
<PAGE> 5
NATIONAL FUEL GAS COMPANY
10 LAFAYETTE SQUARE
BUFFALO, NEW YORK 14203
PROXY STATEMENT
This proxy statement is furnished to the holders of National Fuel Gas
Company ("Company") common stock ("Common Stock") in connection with the
solicitation of proxies on behalf of the Board of Directors of the Company for
use at the Annual Meeting of Stockholders to be held on February 18, 1999, or
any adjournment thereof. This proxy statement and the accompanying proxy/voting
instruction card are first being mailed to stockholders on or about December 31,
1998.
All costs of soliciting proxies will be borne by the Company. Morrow & Co.,
Inc., 445 Park 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
$6,000 plus reasonable out-of-pocket expenses. In addition to solicitation by
that firm and by mail, a number of regular employees of the Company and its
subsidiaries may solicit proxies in person, by telephone or by other methods.
Only stockholders of record at the close of business on December 21, 1998,
will be eligible to vote at this meeting. As of that date, 38,546,928 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.
If you are a participant in the Company's Employee Stock Ownership Plans,
Employees' Thrift Plan or Tax-Deferred Savings Plans, and the accounts are
registered in the same name, the proxy card will also serve as a voting
instruction for the Trustees of those Plans. Participants in the Plan(s) may
also provide those voting instructions by telephone. These instructions may be
revoked by written notice to The Chase Manhattan Bank, N.A., Trustee for the
Company's Employee Stock Ownership Plans and the Employees' Thrift Plan, or
Vanguard Fiduciary Trust Company, Trustee for the Company's Tax-Deferred Savings
Plans, on or before February 12, 1999. Addresses are as follows:
<TABLE>
<S> <C>
The Chase Manhattan Bank, N.A. Vanguard Fiduciary Trust Company
c/o National Fuel Gas Company c/o National Fuel Gas Company
Midtown Station Midtown Station
P.O. Box 865 P.O. Box 865
New York, NY 10138-0701 New York, NY 10138-0701
</TABLE>
Shares in these Plans are not voted unless voting instructions are
received.
Enclosed is a copy of the Company's Annual Report for the fiscal year ended
September 30, 1998, which includes financial statements.
<PAGE> 6
1. ELECTION OF DIRECTORS
Three directors are to be elected at this Annual Meeting, to serve for
terms of three years until the 2002 Annual Meeting, and until their successors
are duly elected and qualified. The nominees for the three directorships are:
Robert T. Brady, William J. Hill and Bernard J. Kennedy. All of the nominees are
currently directors of the Company.
It is intended that the Proxies will vote for the election of Messrs.
Brady, Hill and Kennedy 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. Brady, Hill and Kennedy 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 1999 Annual Meeting, including information with respect to their principal
occupations during the five years ended September 30, 1998, and certain other
positions held by them.
2
<PAGE> 7
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF
MESSRS. BRADY, HILL AND KENNEDY.
<TABLE>
<CAPTION>
NAME AND YEAR
BECAME A DIRECTOR
OF THE COMPANY AGE(1) PRINCIPAL OCCUPATION
----------------- ------ --------------------
<S> <C> <C>
NOMINEES FOR ELECTION AS DIRECTORS
FOR THREE-YEAR TERMS TO EXPIRE IN 2002
ROBERT T. BRADY........................ 58 Chairman of Moog Inc. since February 1996. President
1995 and Chief Executive Officer since 1988 and Director
since 1981 of Moog Inc., a manufacturer of motion
control systems and components. Director of Acme
Electric Corporation, Astronics Corporation, M&T Bank
Corporation and Seneca Foods Corporation.
WILLIAM J. HILL........................ 68 President of National Fuel Gas Distribution
1995 Corporation(2) from June 1989 until his retirement in
October 1995. Director of National Fuel Gas
Distribution Corporation(2) and Reed Manufacturing
Company.
BERNARD J. KENNEDY..................... 67 Chairman of the Board of Directors of the Company
1978 since March 1989, Chief Executive Officer since
August 1988, President since January 1987. Chairman
of the Board of Associated Electric & Gas Insurance
Services Limited. Director of American Precision
Industries Inc., Interstate Natural Gas Association
of America, Marine Midland Banks, Inc., and Merchants
Mutual Insurance Company.
</TABLE>
- ---------------
(1) As of February 18, 1999.
(2) Wholly owned subsidiary of the Company.
3
<PAGE> 8
<TABLE>
<CAPTION>
NAME AND YEAR
BECAME A DIRECTOR
OF THE COMPANY AGE(1) PRINCIPAL OCCUPATION
----------------- ------ --------------------
<S> <C> <C>
DIRECTORS WHOSE TERMS EXPIRE IN 2001
PHILIP C. ACKERMAN..................... 55 Senior Vice President of the Company since June 1989
1994 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 1996. President of Horizon
Energy Development, Inc.(2) since September 1995 and
certain other nonregulated subsidiaries of the
Company since prior to 1992.
JAMES V. GLYNN......................... 64 President since 1971 of Maid of the Mist Corporation,
1997 which offers scenic boat tours of the American and
Canadian Falls, Niagara Falls, New York. Director of
M&T Bank Corporation, M&T Bank, and Buffalo Niagara
Partnership; Vice Chairman of Niagara University
Board of Trustees.
BERNARD S. LEE, PH.D. ................. 64 President since prior to 1992 of the Institute of Gas
1994 Technology, a not-for-profit research and educational
institution, Des Plaines, Illinois. Director of NUI
Corporation and Peerless Manufacturing Company.
</TABLE>
- ---------------
(1) As of February 18, 1999.
(2) Wholly owned subsidiary of the Company.
4
<PAGE> 9
<TABLE>
<CAPTION>
NAME AND YEAR
BECAME A DIRECTOR
OF THE COMPANY AGE(1) PRINCIPAL OCCUPATION
----------------- ------ --------------------
<S> <C> <C>
DIRECTORS WHOSE TERMS EXPIRE IN 2000
EUGENE T. MANN......................... 68 Executive Vice President from 1986 until his
1993 retirement in August 1990 of Fleet Financial Group, a
diversified financial services company, Providence,
Rhode Island.
GEORGE L. MAZANEC...................... 62 Advisor to the Chief Operating Officer of Duke Energy
1996 Corporation, a diversified energy company, since
August 1997. Advisor to the Chief Executive Officer
of PanEnergy Corp. from October 1996 until August
1997; Vice Chairman of PanEnergy from 1989 until
October 1996; executive vice president of PanEnergy
and president and chief executive officer of Texas
Eastern Transmission Corporation from 1991 to 1993.
Director of the Northern Trust Bank of Texas, NA and
Westcoast Energy Inc. Chairman of the Management
Committee of Maritimes & Northeast Pipeline, L.L.C.
GEORGE H. SCHOFIELD.................... 69 Chairman of the Board of Directors from 1986 until
1990 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 water quality control systems, Erie,
Pennsylvania. Director of The Goodyear Tire & Rubber
Company.
</TABLE>
- ---------------
(1) As of February 18, 1999.
5
<PAGE> 10
MEETINGS OF THE BOARD OF DIRECTORS AND STANDING COMMITTEES
During the Company's fiscal year ended September 30, 1998 ("fiscal 1998"),
there were four 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
1998 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, Glynn, Lee
and Schofield.
Compensation Committee. The Compensation Committee, all of the members of
which are non-employee independent directors, held three meetings during fiscal
1998 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 Program awards. The committee administers the
Company's 1983 Incentive Stock Option Plan, 1984 Stock Plan, 1993 Award and
Option Plan, 1997 Award and Option Plan, and Annual At Risk Compensation
Incentive Program. The committee consists of Messrs. Brady, Mann, and Mazanec.
Executive Committee. The Executive Committee held one meeting during
fiscal 1998. The committee has and may exercise the authority of the full Board
except as prohibited by New Jersey corporate law (N.J.S.A. sec.14A:6-9). This
committee will also respond to questions of public policy. The committee
consists of Messrs. Brady, Hill, Kennedy, Mann and Mazanec.
During fiscal 1998, 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 George H. Schofield who attended 71% of such meetings.
Mr. Schofield was unable to attend the September Audit Committee and Board
meetings due to travel delays caused by weather conditions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no "Compensation Committee interlocks" or "insider participation"
which Securities and Exchange Commission (SEC) regulations would require to be
disclosed in this proxy statement.
DIRECTORS' COMPENSATION
The Retainer Policy for Non-Employee Directors (the "Retainer Policy")
which replaced the Board's preexisting retainer policy and the Retirement Plan
for Non-Employee Directors (the "Directors' Retirement Plan"), was approved at
the 1997 Annual Meeting of Stockholders. 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.
Non-employee directors are covered by the Retainer Policy.
Under the Retainer Policy, non-employee directors are paid an annual
retainer of $12,000 and 400 shares of Common Stock. 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.
Non-employee directors are paid a fee of $1,000 for each Board meeting and
$800 for each Committee meeting attended ($500 if participating by telephone).
Non-employee directors are paid $500 for each special consultation as a director
that is with or at the request of the Company's chief executive officer. In
addition, in fiscal 1998 additional sums were paid for special assignments as
follows: Mr. Brady, $1,600; Messrs. Glynn, Hill, Lee and Mann, $2,400 each; Mr.
Mazanec, $4,000; Mr. Schofield, $800.
Benefit accruals under the Directors' Retirement Plan ceased for each
current non-employee director on December 31, 1996. All such directors who were
eligible vested in their Directors' Retirement Plan benefits at that time, and
will receive their accrued Directors' Retirement Plan
6
<PAGE> 11
benefits under its terms (normally at age 70). People who first become directors
after February 1997 will not be eligible to receive benefits under the
Directors' Retirement Plan.
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.
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. Unless otherwise stated, to the best of
the Company's knowledge, each person has sole voting and investment power with
respect to the shares listed.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
BENEFICIALLY OWNED PERCENT OF
AS OF SEPTEMBER 30, COMMON STOCK
NAME 1998 OWNED
---- ------------------- ------------
<S> <C> <C>
Philip C. Ackerman(1)(2)(3)(4)........................... 321,780 *
Robert T. Brady.......................................... 800 *
James V. Glynn........................................... 523 *
Richard Hare(1)(2)(3).................................... 194,359 *
Bruce H. Hale (1)(2)(3).................................. 84,783 *
William J. Hill(2)....................................... 67,371 *
Bernard J. Kennedy(2)(3)(5).............................. 644,041 1.7%
Bernard S. Lee........................................... 1,900 *
Eugene T. Mann........................................... 1,550 *
George L. Mazanec(6)..................................... 1,200 *
George H. Schofield...................................... 3,136 *
Gerald T. Wehrlin(1)(2)(7)............................... 119,834 *
Directors and Officers as a Group
(17 individuals)(8)(9)................................. 1,829,162 4.75%
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1% of issued and outstanding
Common Stock on September 30, 1998.
(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,
3,741, 5,466 and 4,437 shares; Richard Hare, 0, 5,590 and 3,694 shares;
Gerald T. Wehrlin, 646, 4,026 and 3,173 shares; Bruce H. Hale, 1,544, 2,782
and 3,114 shares; and all current directors and officers as a group (17
individuals), 12,085, 26,346 and 26,964 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 (17 individuals), have the right
to acquire ownership within 60 days of September 30, 1998, through the
exercise of stock options granted under the 1983 Incentive Stock Option
Plan, the 1984 Stock Plan, the 1993 Award and Option Plan, and the 1997
Award and Option Plan as follows: 415,421 shares for Mr. Kennedy, 218,664
shares for Mr. Ackerman, 53,162 shares for Mr. Hare, 32,500 shares for Mr.
Hill, 89,588 shares for Mr. Wehrlin, 61,000 shares for Mr. Hale and
1,161,674 shares for all current directors and officers as a group (17
individuals). Of the options for the 870,335
7
<PAGE> 12
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, 1998.
(3) Includes shares of restricted stock, certain restrictions on which had not
lapsed as of September 30, 1998, as follows: 39,379 shares for Mr. Kennedy,
14,800 shares for Mr. Ackerman, 13,476 shares for Mr. Hare, 8,000 shares for
Mr. Hale, and 102,655 shares for all current directors and officers as a
group (17 individuals). Owners of restricted stock have power to vote the
shares, but have no investment power with respect to the shares until the
restrictions lapse.
(4) Includes 500 shares held by Mr. Ackerman's wife in trust for her mother, as
to which shares Mr. Ackerman does not admit beneficial ownership, and 240
shares with respect to which Mr. Ackerman shares voting and investment power
with his wife.
(5) Includes 39,842 shares owned by Mr. Kennedy's wife as to which Mr. Kennedy
shares voting and investment power.
(6) Includes 300 shares owned by Mr. Mazanec's wife as to which Mr. Mazanec
shares voting and investment power.
(7) Includes 2,600 shares owned by Mr. Wehrlin's wife as to which Mr. Wehrlin
shares voting and investment power.
(8) See notes (1) through (7) above.
(9) Includes 8,594 shares with respect to which one or another of the officers
of the Company, not including the executive officers named in the Summary
Compensation Table, shares voting and investment power with his wife.
8
<PAGE> 13
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
General
The Compensation Committee (the Committee) sets the base salaries of the
Company's executive officers, makes awards and sets goals for the Company's
executive officers and others under the Annual At Risk Compensation Incentive
Program (the "At Risk Program"), and makes awards to executive officers and
others under various compensation plans as described below. The Committee
consists exclusively of non-employee independent directors, appointed by
resolution of the entire Board of Directors. No member of the Committee is
permitted to receive any award under any plan administered by the Committee.
The Committee's objective is to set executive compensation at levels which
(i) are fair and reasonable to the stockholders, (ii) link executive
compensation to long-term and short-term interests of the stockholders, and
(iii) are sufficient to attract, motivate and retain outstanding individuals for
executive positions.
Fairness to the stockholders is balanced with the need to attract, retain
and motivate outstanding individuals by comparing the Company's executive
compensation with the compensation of executives at other companies in the
applicable labor market. The Committee sets the total direct compensation of the
executive officers at least annually with reference to an appropriate peer
group. The Committee's overall goal is to achieve above-average performance by
the Company and its executives by affording the executives the opportunity to
earn above-average direct compensation (base salary, annual at risk compensation
and long-term incentive compensation) for above-average performance. More
specifically, the various elements of direct compensation are intended to work
in concert so that each executive's compensation would be approximately at the
median (50th percentile) for median performance by the Company and the
executive, at the 75th percentile for 75th percentile-level performance by the
Company and the executive, and so forth. The actual amount of compensation
earned in a fiscal year depends on the performance of the Company and the
individual executive officer.
The peer group consists of publicly-traded (or formerly publicly traded)
companies, not including the Company, which are or have been engaged in one or
more of the Company's primary lines of business (natural gas distribution,
transmission, storage and production). For fiscal 1998, there were seven
companies in the peer group, which is subject to change from time to time at the
discretion of the Committee. The total market capitalization of six of the
fiscal 1998 peer group companies, as of September 30, 1998, ranged from 52% to
366% of the Company's total market capitalization. The other peer group company
was acquired and was no longer publicly traded as of September 30, 1998.
The Committee believes that the Company's most direct competitors for
executive talent are not necessarily all of the companies that would be included
in a peer group established to compare stockholder returns. Thus, the companies
in the compensation peer group are not the same as the companies reflected in
the indices displayed in the Comparison of Five-Year Cumulative Total Returns
graph included in this proxy statement on page 17.
The executive officers' compensation is linked to the long-term interests
of the stockholders by making a significant part of each executive officer's
potential compensation depend on the price of the Company's Common Stock on the
open market. The Committee awards stock appreciation rights (SARs) and options
to buy Company Common Stock, both of which have value only to the extent the
market price of the Company's Common Stock increases after the date of an award.
The Committee also has in the past awarded restricted stock, which increases or
decreases in value to the same extent as the Company's Common Stock. Dividends
are paid on restricted stock and on the shares held for employees (including
executive officers) in various employee benefit plans, so executive officers
benefit directly from dividends paid on the Company's Common Stock.
Linking the executive officers' compensation to the short-term interests of
the stockholders is done by making a significant part of each executive
officer's potential compensation for a fiscal
9
<PAGE> 14
year depend upon the achievement of specific goals during that fiscal year,
especially earnings per share. The At Risk Program is described in more detail
below. In addition to being fair to stockholders, linking the executive
officers' compensation to the success of the Company also serves to attract,
retain and motivate those officers, especially while the Company continues to be
successful.
The retention of officers is also accomplished by utilizing forms of
compensation which either increase in value, or only have value, if the
executive officer remains with the Company for specified periods of time. For
example, all options and SARs awarded to date remain exercisable for 10 years if
the executive officer remains with the Company. Restricted stock awards do not
completely vest in the executive officer unless he remains with the Company for
a specified number of years after the award. The Executive Retirement Plan pays
no benefits if the executive officer leaves the Company before age 55 and has
substantial reductions for retirement before age 65. An executive officer also
may forfeit a portion of the interest payable under the Deferred Compensation
Plan or Tophat Plan if he leaves the Company before age 55.
Specific components of executive officers' compensation earned or paid in
fiscal 1998 are discussed below. The Company's five most highly compensated
executive officers are identified on the Summary Compensation Table on page 14,
and are sometimes referred to as the "named executive officers."
Base Salary, Annual At Risk Incentive and Bonus
The fiscal 1998 base salaries of the named executive officers are shown on
the Summary Compensation Table on page 14 in the "Base Salary" column. Executive
officers' base salaries are set on a calendar year basis. So the first three
months of the executive officers' fiscal 1998 base salaries were set in December
1996 with the target At Risk Program awards for fiscal 1997, and the last nine
months of their fiscal 1998 base salaries were set in December 1997 with the
target At Risk Program awards for fiscal 1998.
As of December 1996, the Company's return on equity over the three most
recently completed years (1993-95) was at approximately the 65th percentile of
its peer group, and the Company's total return to shareholders was at
approximately the 47th percentile of the peer group. The Committee decided to
freeze the calendar 1997 base salaries of Messrs. Kennedy, Ackerman and Hare at
calendar 1996 levels, and provide opportunities to earn a greater portion of
their compensation as At Risk Program awards. The Committee set the calendar
1997 base salary plus maximum At Risk Program award of Mr. Kennedy at 70% of the
75th percentile for his peer group, the calendar 1997 base salary plus maximum
At Risk Program award of Mr. Ackerman at 101% of the 75th percentile for his
peer group, the calendar 1997 base salary plus maximum At Risk Program award of
Mr. Hare at 89% of the 75th percentile of his peer group. The remaining named
executive officers were given the opportunity to earn At Risk Program Awards in
higher amounts than the previous year.
As of December 1997, the Company's return on equity over the three most
recently completed years (1994-96) was at approximately the 71st percentile of
its peer group, and the Company's total return to shareholders was at
approximately the 67th percentile of the peer group. The Committee continued to
freeze the calendar 1998 base salaries of Messrs. Kennedy, Ackerman and Hare at
calendar 1996 levels. The Committee set the calendar 1998 base salary plus
maximum At Risk Program award of Mr. Kennedy at a level which subsequently
worked out to be 86% of the range between the high and low of actual base salary
plus incentive compensation actually paid to his peer group for 1997. The
Committee set the calendar 1998 base salary plus maximum At Risk Program award
of Mr. Ackerman at a level which subsequently worked out to be 50% of that range
for his peer group. The Committee set the calendar 1998 base salary plus maximum
At Risk Program award of Mr. Hare at a level which subsequently worked out to be
20% of that range for his peer group.
The Summary Compensation Table on page 14 includes in the "LTIP [long-term
incentive plan] Payouts" column the amount earned by or paid to Messrs. Kennedy,
Ackerman and Hare in fiscal 1998 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
10
<PAGE> 15
fiscal 1998 for Messrs. Kennedy, Ackerman and Hare is set out in the Long-Term
Incentive Plan Table on page 16.
During the first quarter of fiscal 1998, the Committee set At Risk Program
goals and ranges of potential payments for Messrs. Kennedy, Ackerman and Hare
for fiscal 1998. During the first quarter of fiscal 1999, the Committee (i)
rated each of these executive officer's fiscal 1998 performance against his
fiscal 1998 At Risk Program goals, and (ii) calculated an At Risk Program
payment to be made for fiscal 1998 to each such executive officer. The awards
were based on the average of their performance ratings for fiscal years 1997 and
1998.
Messrs. Kennedy and Ackerman were each given in December 1997 the
opportunity to earn a fiscal 1998 At Risk Program payment equal to 50% of his
calendar 1998 base salary for achieving target goals. Mr. Hare was given the
opportunity to earn a fiscal 1998 At Risk Program payment equal to 20% of his
calendar 1998 base salary for substantially exceeding target goals. At Risk
Program goals for Messrs. Kennedy, Ackerman and Hare were:
Mr. Kennedy, as Chief Executive Officer: a specified level of Company
earnings per share (weighted as 75% of the formula) and customer service/other
goals (weighted as 25% of the formula). Company earnings per share (exclusive of
non-cash asset write downs, non-cash cumulative effect of changes in accounting
methods, and certain other special items) must reach a pre-determined 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 "Meets Expectations," to trigger the maximum award.
Mr. Ackerman, as President of the regulated utility business 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 100% of the targeted net
income, and his summary rating for customer service/other goals would have to be
"Meets Expectations," to trigger the maximum award.
Mr. Hare, as President of the regulated interstate pipeline and storage
business: a specified level of Company earnings per share (weighted as 20% of
the formula), a specified level of net income for his subsidiary (weighted as
40% of the formula), and customer service/other goals (weighted as 40% of the
formula). Mr. Hare's subsidiary would have to achieve 115% of targeted net
income, and his summary rating for customer service/other goals would have to be
"Substantially Exceeds Expectations," to trigger the maximum award.
The fiscal 1998 base salaries of Messrs. Wehrlin and Hale were set by the
Committee, based on recommendations by Messrs. Kennedy, Ackerman and/or Hare, on
a calendar year basis in December 1996 and 1997. Base salaries are intended to
be competitive with salaries of comparable officers in the Company's peer group.
Messrs. Wehrlin and Hale were paid amounts as bonuses in July and December
1998 (for performance in fiscal 1998). These awards were based on the
performance of their respective subsidiaries and their respective areas of
responsibility. Messrs. Kennedy, Ackerman and/or Hare made recommendations for
fiscal 1998 which were accepted by the Committee.
The Summary Compensation Table on page 14 shows At Risk Program awards and
bonuses earned or paid in fiscal 1998 to the named executive officers. For
performance during fiscal years 1997 and 1998, Mr. Kennedy earned an At Risk
Program award equal to about 50% of his calendar 1998 base salary, Mr. Ackerman
earned an At Risk Program award equal to about 48% of his calendar 1998 base
salary, and Mr. Hare earned an At Risk Program award equal to about 18% of his
calendar 1998 base salary.
11
<PAGE> 16
The Summary Compensation Table on page 14 includes in the "Bonus" column
the amount earned by Messrs. Wehrlin and Hale in fiscal 1998 as incentives.
These awards are considered by the SEC to be bonuses because they are based on
performance during a single fiscal year. For performance in fiscal 1998, Mr.
Wehrlin earned bonuses equal to about 39% of his calendar 1998 base salary, and
Mr. Hale earned bonuses of about 41% of his calendar 1998 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, 1998, was at about the 100th
percentile (at the top) of its peer group. For the one-year period ended
September 30, 1998, the Company was also at about the 100th percentile.
Total direct compensation (base salary, At Risk Program award, options,
SARs and restricted stock) for each named executive officer was compared to the
range of total direct compensation of the equivalent officers in the Company's
peer group. The fiscal 1998 total direct compensation for Mr. Kennedy was at the
81st percentile; for Mr. Ackerman, at the 66th percentile; for Mr. Hare, at the
35th percentile; for Mr. Wehrlin, at the 16th percentile; and for Mr. Hale, at
the 15th percentile.
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 1998, the Committee awarded to each executive officer options
to buy stock in the future at the market price on the award date. The Committee
also awarded to Messrs. Kennedy, Ackerman and Hare an equal number of SARs with
the same exercise price. The Committee also awarded 4,580 shares of restricted
stock to Mr. Kennedy, because the combination of his base salary (frozen at the
1996 level) and maximum At Risk Award (limited to 50% of his base salary) would
have left him undercompensated compared to his peers. None of the options or
SARs awarded can be exercised for one year after the award date, and all of them
expire no later than 10 years after the award date. Awards to the named
executive officers are shown on the Option/SAR Grants in Fiscal 1998 table on
page 15.
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 and Executive Retirement Plan are shown in the Pension Plan
Table on page 19. Company payments under the insurance programs are shown as
part of "All Other Compensation" on the Summary Compensation Table on page 14.
Other benefits available under established plans which apply to all
supervisory employees include the Company's contributions of Common Stock to the
Tax-Deferred Savings Plan (a 401(k) plan) to match a portion of each executive's
contributions, and the Company's payments related to the Employee Stock
Ownership Plan for Supervisory Employees, the Deferred Compensation Plan and the
Tophat Plan. Neither the Company nor the Committee made any
12
<PAGE> 17
material changes in any of the plans described in this paragraph or in the
preceding paragraph, nor any material changes in any of the "miscellaneous minor
perquisites and personal benefits" discussed in footnote (1) of the Summary
Compensation Table on page 14.
Compensation of Chief Executive Officer
The bases for Mr. Kennedy's fiscal 1998 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, Annual At Risk Incentive and Bonus.
The bases for Mr. Kennedy's other fiscal 1998 longer-term incentive awards are
discussed earlier in this report under the heading Stock Options, SARs and
Restricted Stock.
The Company's total return to stockholders, with dividends reinvested in
stock, for the five-year and one-year periods ended September 30, 1998, was at
the 100th percentile (at the top) of its peer group. The total direct
compensation (salary, incentive, options/SARs and restricted stock) of Mr.
Kennedy for fiscal 1998 worked out to be 81% of the range between the high and
low of total direct compensation actually paid to his peer group for 1997.
Policy With Respect to Qualifying Compensation Paid to Executive Officers For
DeductibilityUnder 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. The Committee may vote to award compensation, especially to a
chief executive officer, that is not fully deductible, if the Committee
determines that such award is consistent with its philosophy and in the best
interests of the Company and its stockholders.
COMPENSATION COMMITTEE
George L. Mazanec, Chairman
Robert T. Brady
Eugene T. Mann
13
<PAGE> 18
EXECUTIVE COMPENSATION SUMMARY TABLE
The following table sets forth information with respect to compensation
paid by the Company and its subsidiaries for services rendered during the last
three fiscal years to the Chief Executive Officer and each of the four other
most highly compensated executive officers for the fiscal year ended September
30, 1998 (the "named executive officers").
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------- ----------------------------------
AWARDS PAYOUTS
----------------------- --------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL FISCAL BASE COMPEN- STOCK OPTIONS/ LTIP COMPEN-
POSITION YEAR SALARY BONUS SATION(1) AWARDS(2) SARS (#) PAYOUTS SATION(3)
- ------------------ ------ ------ ------- ------------ ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bernard J. Kennedy.......... 1998 $848,150 $ 0 0 $210,966(4) 300,000 $424,000 $248,284
Chairman of the Board 1997 848,150 0 0 251,003(5) 300,000 424,000 232,289(6)
of Directors, Chief 1996 839,400 0 0 169,600(7) 150,000 373,200 206,106
Executive Officer
and President
Philip C. Ackerman.......... 1998 470,000 0 0 0 200,000 225,000 105,849
Senior Vice President of 1997 470,000 0 0 0 160,000 225,000 88,497(8)
the Company and 1996 470,000 0 0 47,000(7) 70,000 141,000 82,209
President of certain
subsidiaries
Richard Hare................ 1998 370,000 0 0 0 60,000 67,500 73,865
President of National 1997 370,000 0 0 0 100,000 70,000 70,655(8)
Fuel Gas Supply 1996 370,000 0 0 0 60,000 63,000 76,024
Corporation
Gerald T. Wehrlin........... 1998 229,000 90,000 0 0 25,000 0 50,116
Controller of the 1997 220,750 50,000 0 0 22,000 0 43,067(8)
Company, Senior Vice 1996 212,000 62,000(9) 0 0 20,000 0 44,177
President of National
Fuel Gas Distribution
Corporation, and Vice
President of Horizon
Energy Development, Inc.
Bruce H. Hale............... 1998 218,500 90,000 0 0 25,000 0 60,007
Senior Vice President 1997 208,250 50,000 0 0 22,000 0 55,071
of National Fuel Gas 1996 197,750 62,000(9) 0 0 20,000 0 20,071
Supply Corporation and
Vice President of
Horizon Energy
Development, Inc.
</TABLE>
- ---------------
(1) Excludes perquisites or personal benefits because, for each executive
officer, the cost to the Company of all such items was less than $50,000 and
less than 10% of that executive's base salary and bonus, if any, for each
fiscal year listed.
(2) At September 30, 1998 (based on the closing market stock price of $47.00),
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,
39,379 shares, $1,850,813; for Mr. Ackerman, 14,800 shares, $695,600; for
Mr. Hare, 13,476 shares, $633,372; and for Mr. Hale, 8,000 shares, $376,000.
Dividends are paid on all shares of restricted stock. On each of January 2,
1999, 2000 and 2001, some restrictions on some of the shares of restricted
stock held by each individual lapse as follows: Mr. Kennedy, 9,784 shares;
Mr. Ackerman, 4,550 shares; and Mr. Hare, 4,492 shares. Some restrictions on
4,150 shares of Mr. Kennedy's restricted stock expire on the earlier of six
months after retirement or December 13, 1999. Some restrictions on 5,609
shares of Mr. Kennedy's restricted stock expire on the earlier of December
11, 2000, or his death, but do not expire if he terminates his services as
director prior to December 11, 2000, for reasons other than death. Some
restrictions on 1,150 shares of Mr. Ackerman's restricted stock expire
December 13, 1999. Some restrictions on Mr. Hale's restricted stock expire
as follows: January 2, 1999, 500 shares; January 2, 2000, 1000 shares;
January 2, 2001, 1,500 shares; January 2, 2002, 2,000 shares; January 2,
2003, 1,500 shares; January 2, 2004, 1,000 shares; and January 2, 2005, 500
shares. 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.
14
<PAGE> 19
(3) In fiscal 1998, the Company paid, contributed or accrued for Messrs.
Kennedy, Ackerman, Hare, Wehrlin and Hale $0, $8,193, $8,193, $8,193 and
$8,193, respectively, under the Tax-Deferred Savings Plan; $84,832, $30,814,
$19,437, $10,354 and $8,560, respectively, under the Tophat 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; $0, $4,918,
$5,033, $3,598 and $2,480, 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; $35,099, $13,380, $12,015, $13,510
and $5,720, respectively, as above-market interest under the Deferred
Compensation Plan (which amount, in the case of Mr. Hale, could be
forfeited); and $128,353, $48,544, $29,187, $14,461 and $35,054,
respectively, as the dollar value of split-dollar or other life insurance
benefits paid for by the Company.
(4) Represents the market value as of the date of award (December 10, 1998) of
shares of restricted stock for performance in fiscal 1998. These shares were
not outstanding at fiscal year-end 1998, but the number of unvested shares
and fair market value at September 30, 1998 ($47.00 per share) would have
been 4,580 shares totaling $215,260.
(5) Represents the market value as of the date of award (December 11, 1997) of
shares of restricted stock for performance in fiscal 1997.
(6) This amount is $10,380 higher than disclosed in last year's proxy statement
for fiscal 1997 because the amount accrued for Mr. Kennedy under the Tophat
Plan for 1997 was revised in August 1998 to correct a miscalculation.
(7) Represents the market value as of the date of award (December 13, 1996) of
shares of restricted stock for performance in fiscal 1996.
(8) This amount is lower than disclosed in last year's proxy statement by
amounts ranging from $2,961 to $4,142 because the amounts paid under a
program that passes through to employees the Company's tax savings
associated with dividends on Employee Stock Ownership Plan shares for 1997
was revised in 1998 to correct a miscalculation.
(9) Includes both (i) bonus earned in fiscal 1995 but paid in fiscal 1996
($22,000) and (ii) bonus earned in fiscal 1996 but paid in fiscal 1997
($40,000).
STOCK OPTION GRANT TABLE
The following table sets forth information with respect to options to
purchase shares of Common Stock and stock appreciation rights (SARs) awarded
during fiscal 1998 to the named executive officers pursuant to plans approved by
the Company's stockholders.
OPTION/SAR GRANTS IN FISCAL 1998 (1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------
PERCENT OF TOTAL
NUMBER OF OPTIONS/SARS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES OR BASE GRANT DATE
OPTIONS/SARS IN FISCAL PRICE PER EXPIRATION PRESENT
NAME GRANTED(#) YEAR SHARE($/SH) DATE VALUE($)(2)
---- ------------ ---------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Bernard J. Kennedy......... 150,000 options 19.5% $44.875 12/2007 $1,207,500
150,000 SARs 19.5% 44.875 12/2007 1,207,500
Philip C. Ackerman......... 100,000 options 13.0% 44.875 12/2007 805,000
100,000 SARs 13.0% 44.875 12/2007 805,000
Richard Hare............... 30,000 options 3.9% 44.875 12/2007 241,500
30,000 SARs 3.9% 44.875 12/2007 241,500
Gerald T. Wehrlin.......... 25,000 options 3.2% 44.875 12/2007 201,250
Bruce H. Hale.............. 25,000 options 3.2% 44.875 12/2007 201,250
</TABLE>
- ---------------
(1) The options and SARs shown on this table were granted under the 1997 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
15
<PAGE> 20
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 assumptions used in this model for
the options granted in fiscal 1998 were: quarterly dividend yield of
0.9693%, an annual expected return of 17.32%, an annual standard deviation
(volatility) of 16.50%, a risk-free rate of 5.80%, 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 1998
and the number and value of unexercised options and SARs at September 30, 1998.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1998
AND OPTION/SAR VALUES ON SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NUMBER OF UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SECURITIES OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
UNDERLYING FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(2)
OPTIONS/SARS VALUE --------------------------- ---------------------------
NAME EXERCISED(#) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bernard J. Kennedy.............. 35,579 $1,160,558 838,421 300,000 $12,833,900 $637,500
Philip C. Ackerman.............. 53,836 1,348,222 461,164 200,000 7,174,062 425,000
Richard Hare.................... 114,338 2,088,884 155,662 60,000 1,883,928 127,500
Gerald T. Wehrlin............... 6,412 134,390 87,000 25,000 1,134,813 53,125
Bruce H. Hale................... 6,000 176,188 61,000 25,000 762,000 53,125
</TABLE>
- ---------------
(1) Market value of stock at exercise less exercise price or base price.
(2) Market value of stock at fiscal year-end less exercise price or base price.
LONG-TERM INCENTIVE PLAN AWARD TABLE
The following table sets forth information with respect to long-term
incentive plan awards made during fiscal 1998 to the named executive officers
pursuant to the At Risk Program.
LONG-TERM INCENTIVE PLAN -- AWARDS IN FISCAL 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS(1)
PERFORMANCE PERIOD -------------------------------
NAME UNTIL MATURATION THRESHOLD TARGET MAXIMUM
---- --------------------- --------- -------- --------
<S> <C> <C> <C> <C>
Bernard J. Kennedy.................. 2 years ended 9/30/98 $0 $424,000 $424,000
Philip C. Ackerman.................. 2 years ended 9/30/98 0 235,000 235,000
Richard Hare........................ 2 years ended 9/30/98 0 37,000 74,000
</TABLE>
- ---------------
(1) This table describes the sole At Risk Program opportunity which was made to
executive officers in fiscal 1998 based on the rolling two-year average of
performance in fiscal 1997 and fiscal 1998. The actual amounts awarded and
paid for fiscal 1998 under the At Risk Program are shown in the Summary
Compensation Table on page 14 in the LTIP Payouts column.
16
<PAGE> 21
CORPORATE PERFORMANCE GRAPH
The following graph compares the yearly cumulative stockholder return on
the Company's Common Stock against the cumulative total return of the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500") and the Standard & Poor's
Utilities Index ("S&P Utilities") for a period of five years commencing
September 30, 1993, and ended September 30, 1998.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS*
FISCAL YEARS 1994 -- 1998
[FIVE-YEAR CUMULATIVE TOTAL RETURN CHART]
<TABLE>
<CAPTION>
NATIONAL FUEL S&P 500 S&P UTILITIES
<S> <C> <C> <C>
1993 100 100 100
1994 86 104 86
1995 88 135 111
1996 118 162 119
1997 147 227 136
1998 163 248 177
</TABLE>
* Assumes $100.00 invested on September 30, 1993, and reinvestment of dividends.
EMPLOYMENT AND SEVERANCE AGREEMENTS
Mr. Kennedy entered into an employment agreement with the Company on
September 17, 1981, which was most recently extended as of September 19, 1996.
The agreement is effective until September 1, 1999, subject to earlier
termination in the event of his death or disability. The agreement preserves, as
a minimum level of compensation, monthly compensation levels as are in effect
from time to time.
Messrs. Ackerman, Hare, Wehrlin and Hale 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 who had 10 years of service with the
17
<PAGE> 22
Company 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
(plus performance-based lump sum compensation) 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, and to employees at age 55 whose age and
years of service total 90. Early retirement, in many cases with reduced
benefits, is available at age 55. 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 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, as well as under the Retirement
Plan. 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. In February 1997, the Board resolved that, upon Mr. Kennedy's
retirement (or, in the event of his death while employed by the Company, for the
benefit of his wife), Mr. Kennedy shall receive an actuarial increase (based
upon the most recently published actuarial table that is generally accepted by
American actuaries and generally applicable to the Executive Retirement Plan and
the Retirement Plan, and a 6% rate of interest) in the benefits that he had
accrued under the Executive Retirement Plan and the Retirement Plan at September
1, 1996. This adjustment was made to actuarially correct for his continued
service after age 65, because such late retirement reduces the period of time
over which his retirement benefits will actually be paid. The figures in the
Pension Plan Table on page 19 apply this actuarial adjustment as if Mr. Kennedy
had retired at the end of fiscal 1998 (which he did not). The Executive
Retirement Plan also has a lump sum payout provision. Any eligible people who
retired in fiscal 1998 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 performance-based lump sum compensation, including
amounts paid under the At Risk Program.
The following table shows annual 50% joint and survivor life annuity total
benefits payable under the Retirement Plan plus the Executive Retirement Plan to
eligible officers retiring currently at the normal retirement age of 65 with a
spouse of the same age. Forms of benefit
18
<PAGE> 23
payment other than the 50% joint and survivor life annuity, or retirement at
other than age 65, would result in different annual benefits to eligible
officers.
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS
FIVE-YEAR FOR YEARS OF BENEFIT SERVICE CREDITED(1)
FINAL AVERAGE ---------------------------------------------
SALARY(2)(3) 25 30 35 40
- ------------- -- -- -- --
<S> <C> <C> <C> <C>
$ 300,000 $125,030 $150,036 $ 166,530 $ 183,024
700,000 297,011 356,413 395,955 435,496
1,100,000 468,992 562,790 625,379 687,968
1,500,000 640,973 769,168 854,803 940,439
1,900,000 812,954 975,545 1,084,228 1,323,547
</TABLE>
- ---------------
(1) The service credited for retirement benefit purposes to the officers named
in the Summary Compensation Table, as of September 30, 1998, is as follows:
Mr. Kennedy, 40 years; Mr. Ackerman, 30 years, 2 months; Mr. Hare, 23 years;
Mr. Wehrlin, 22 years, 1 month; Mr. Hale, 27 years, 3 months.
(2) Compensation covered for retirement benefit purposes is more than the
amounts appearing in the three "annual compensation" columns of the Summary
Compensation Table on page 14, because of the inclusion of At Risk Program
awards, some restricted stock and other lump sum compensation payments.
Accordingly, the covered current compensation as of September 30, 1998, is
as follows: Mr. Kennedy, $1,483,116; Mr. Ackerman, $695,000; Mr. Hare,
$437,500; Mr. Wehrlin, $319,000; and Mr. Hale, $308,500.
(3) Benefits described in this table reflect the partial offset for Social
Security benefits described above.
2. APPOINTMENT OF INDEPENDENT ACCOUNTANTS
At the 1999 Annual Meeting, stockholders will be asked to appoint
PricewaterhouseCoopers LLP independent accountants for the Company's fiscal year
ending September 30, 1999 ("fiscal 1999"). If appointed, PricewaterhouseCoopers
LLP will examine the financial statements of the Company and its subsidiaries
and report upon the annual consolidated financial statements for fiscal 1999.
Representatives of that firm have regularly attended the Company's annual
meetings and one is expected to attend this year. This representative shall have
the opportunity to make a statement, if he or she desires, and is expected to be
available to respond to questions.
The affirmative vote of a majority of the votes cast with respect to the
appointment of independent accountants by the holders of shares of Common Stock
entitled to vote is required for the appointment of PricewaterhouseCoopers LLP
as independent accountants.
If the necessary votes are not received, or if PricewaterhouseCoopers 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
PricewaterhouseCoopers LLP as independent accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS APPOINTMENT.
3. SHAREHOLDER PROPOSAL
A shareholder has indicated that he will present the proposal set forth
below for consideration by the shareholders at the Annual Meeting. The name,
address and stock ownership of the shareholder will be provided by the Company's
Secretary to any shareholder promptly upon receipt of any oral or written
request.
"The Stockholders recommend that that Company's Board amend all existing
Stock plans to eliminate future awards of stock appreciation rights ("SARs") and
incentive stock options
19
<PAGE> 24
("ISOs") and limit annual dilution to 1.5% (options) and 0.1% (restricted
stock), and incorporate such policies into future Stock plans."
SHAREHOLDER'S SUPPORTING STATEMENT:
"This proposal is not intended to interfere in the ordinary business of, or
micromanage, the Company, but to modify executive compensation policy and
thereby improve Stockholder returns.
All figures quoted use a recent Stock price of $44 per share.
WHY ELIMINATE SARS. The Board's Compensation Committee has awarded SARs to
6 Company executives over 13 years. Each SAR allows the awardee to receive cash
equal to the Stock's price appreciation between SAR award and exercise date. The
awardee profits if the Stock price rises, even if this is attributable to market
frothiness or declines in interest rates, factors that have predominated since
the first Stock plan was adopted.
Indeed, the Stock has underperformed the Standard and Poors 500 stock index
over the last 10 years. Nevertheless, since 1985, SAR awardees have realized
cash profits of more than $6,300,000, and have unrealized profits in excess of
$9,000,000.
SARs and stock options have equal value to awardees. However, SARs hurt the
Company because awardees receive cash, not Stock, and Company earnings are
affected. Earnings declined by 13 cents per share in fiscal 1997, and declined
in prior years. This earnings effect, which is volatile, harms other
Stockholders.
WHY ELIMINATE ISOs. Persons receiving ISOs, versus nonqualified stock
options ("NSOs"), have obtain advantages, which are more than offset by the
Company's losses. When an NSO is exercised, the Company obtains a tax deduction
equal to the option's bargain element, which it loses when an ISO is exercised.
Since 1983, the Company has lost and will lose more than $6,000,000 in tax
deductions by using ISOs instead of NSOs.
WHY LIMIT DILUTION. In fiscal 1998, awards of Stock options, SARs and
Restricted Stock related to 2.7% of outstanding Stock. Restricted Stock is the
more dilutive of all; it has substantial value even if the Stock price declines!
This represents excessive compensation and dilution, compared to levels
prevailing at other integrated gas companies, and at other low-technology
industries.
Currently, there are 2,741,384 unexercised Stock options, a dilutive
overhang equal to 7% of outstanding shares.
Commentators have criticized SARs, Restricted Stock, Stock options and
similar devices, including Warren Buffett. They assert, correctly, that these
devices have high, hidden costs, are highly dilutive of stockholders, and
mortgage future earnings. Consequently, these devices engender increased
shareholder opposition.
To date, these devices have diluted or will dilute Stockholders by more
than $30 million, one half of which benefits Messrs. Kennedy, Ackerman and
Hare."
STATEMENT OF THE BOARD IN OPPOSITION TO THE SHAREHOLDER PROPOSAL:
The Board is responsible for compensating Company executives in a manner
that provides incentives for quality performance in achieving Company goals,
while holding total compensation to reasonable levels reflecting the
responsibilities, risks and competitive market for the executives' services.
The price of Company stock at the end of fiscal 1998 was about 580% of the
stock price at the beginning of fiscal 1984, the year in which the Company began
incentive compensation (after adjustment for two stock splits and a stock
dividend). This is in sharp contrast to the preceding 15-year period in which
the stock price at the end was only about 130% of the stock price at the
beginning.
20
<PAGE> 25
The Board is mindful that all forms of compensation have tax and accounting
consequences and costs to the other shareholders, but achieving the Company's
goals benefits all shareholders, permitting the Company to continue its practice
of appropriate annual dividend increases intended to keep shareholders' total
return ahead of the impact of inflation. The Board, with the aid of independent
experts, reviews compensation levels annually to assure that they are consistent
with industry levels. The Company's plan for executive compensation is described
in the Report of the Compensation Committee beginning at page 9 of this Proxy
Statement.
Each of the forms of compensation questioned is in widespread use, and each
serves a specific purpose in creating a total compensation package. The Board
fully understands the implications and advantages of each of the different
methods of providing incentive compensation and believes that the shareholders'
interests are best served by having a number of these methods available to
choose from in determining specific compensation arrangements.
The shareholder proposal seeks to limit the current variety of compensation
methods, and thus limit the Board's existing flexibility to design executive
compensation in a manner best suited to the efficient and cost-effective
achievement of the Company's goals. Specifically, the shareholder's proposal, if
adopted, would be a non-binding recommendation that the Board amend the existing
stock plans, all of which were originally adopted at annual meetings by the
affirmative vote of the holders of at least 84% of the shares voting on each
plan. The shareholder's proposal, if adopted, would also be a non-binding
recommendation that the Board incorporate his proposed policies into future
stock plans.
The Board is able to design executive compensation through the use of a
variety of methods, including such stock-related methods as stock appreciation
rights, incentive stock options and non-qualified stock options. All existing
stock option plans have been approved by the shareholders, and any new proposed
plans will be presented to the shareholders for approval prior to their
effectiveness. The Board believes that the previously approved stock plans
should remain in effect, and that the Board should have the flexibility in the
future to present similar plans for shareholder approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and the New York Stock Exchange. Directors, officers and
greater-than-10% stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on review
of information furnished to the Company, reports filed through the Company and
written representations that no Forms 5 were required, the Company believes that
all Section 16(a) filing requirements applicable to its directors, officers and
greater-than-10% beneficial owners were complied with during fiscal 1998.
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.
21
<PAGE> 26
PROPOSALS OF SECURITY HOLDERS
Proposals that security holders intend to present at the 2000 Annual
Meeting of Stockholders must be received at the principal offices of the Company
no later than September 2, 1999, in order to be considered for inclusion in the
Company's proxy statement and proxy for that meeting.
BY ORDER OF THE BOARD OF DIRECTORS
ANNA MARIE CELLINO
Secretary
December 31, 1998
22
<PAGE> 27
PROXY
NATIONAL FUEL GAS COMPANY
Proxy/Voting Instruction Card Solicited by the Board of Directors for Use
at the Annual Meeting of Stockholders, February 18, 1999
PLACE: OMNI HOUSTON HOTEL, HOUSTON, TEXAS
The undersigned hereby appoints B.J. Kennedy, P.C. Ackerman, and A.M. Cellino,
and each or any of them, Proxies with full power of substitution and revocation
in each, to vote all the shares of Common Stock held of record by the
Undersigned on December 21, 1998, at the Annual Meeting of Stockholders of
National Fuel Gas Company or at any adjournment of the meeting, on each of the
items on the reverse side and in accordance with the directions given there,
and, in their discretion, on all other matters that may properly come before the
Annual Meeting or any adjournment thereof. Failure to withhold authority to vote
for the election of any nominee for director shall confer on the Proxies
authority to vote for such nominee's election. Failure to vote on any other
matter shall confer on the Proxies authority to vote with respect to each such
matter. This proxy may be revoked with the Secretary of the meeting as described
on the first page of the enclosed Proxy Statement.
This card also provides confidential voting instructions for shares held in the
National Fuel Gas Company Employee Stock Ownership Plans, the National Fuel Gas
Company Employees' Thrift Plan, and the National Fuel Gas Company Tax-Deferred
Savings Plans. If you are a participant in any of these plans and have shares of
the Common Stock of the Company allocated to your account under these plans,
please read the following authorization to the Trustees of those plans as to the
voting of such shares.
Trustee's Authorization. The undersigned authorizes The Chase Manhattan Bank,
N.A. as Trustee of the National Fuel Gas Company Employee Stock Ownership Plans
and the National Fuel Gas Company Employees' Thrift Plan and/or authorizes
Vanguard Fiduciary Trust Company as Trustee of the National Fuel Gas Company
Tax-Deferred Savings Plans to vote all shares of the Common Stock of the Company
allocated to the undersigned's account under such plan(s) (as shown on the
reverse side) at the Annual Meeting, or at any adjournment thereof, in
accordance with the instructions on the reverse side.
The Trustee(s) may not vote the shares held for your account(s) if you do not
provide voting instructions. Employee participants in the Plan(s) may give
voting instructions by telephone as described on the reverse side of this voting
instruction card. Your directions to vote shares held in the Plan(s) will be
kept confidential. You may revoke your instructions by notice to the Trustee(s)
as described on the first page of the enclosed Proxy Statement.
THIS PROXY/VOTING INSTRUCTION CARD IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
- -------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF TWO WAYS:
1. Mark, sign and date your proxy/card and return it promptly in the
enclosed envelope.
or
2. Call toll free 1-800-840-1208 on a Touch Tone telephone and follow the
instructions found on the reverse side.
PLEASE VOTE
<PAGE> 28
This proxy, when properly executed, will be voted as Please mark
directed by the stockholder. If no direction is your votes as /X/
given, the shares represented by this proxy will be voted indicated in
FOR Items 1 and 2 and AGAINST Item 3. this example.
If you are a National Fuel Gas Company Employee Benefit Plan participant, this
voting instruction card instructs the Trustee(s) how to vote your shares within
the Benefit Plans. If no instructions are given, your shares may not be voted.
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2. THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEM 3.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Item 1 - Election of the following FOR all
nominees as Directors: nominees WITHHOLD
For three-year terms (except as for all Item 3 - Adoption of, if FOR AGAINST ABSTAIN
which expire in 2002- marked to the nominees presented at the / / / / / /
01) R.T. Brady left) meeting, a
02) W.J. Hill / / / / shareholder proposal.
03) B.J. Kennedy
WITHHOLD for the following only. Write name(s) below.
- -----------------------------------------------------
Item 2 - Appointment of independent FOR AGAINST ABSTAIN
accountants. / / / / / /
WILL ATTEND
MEETING / /
***IF YOU WISH TO VOTE BY TELEPHONE,
PLEASE READ THE INSTRUCTIONS BELOW***
(Signature of Stockholder(s))________________________________________________________________________Dated:_________________, 1999
Please sign your name as it appears on this proxy/voting instruction card and return the completed card in the enclosed
envelope. When signing as an attorney, executor, administrator, trustee, guardian or other representative, please give
title as such. If signer is a corporation, please sign full corporate name by duly authorized officer and attach corporate seal.
For joint accounts, each joint owner should sign.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(up arrow) PLEASE FOLD AND DETACH HERE AND READ THE REVERSE SIDE (up arrow)
HELP US SAVE MONEY -- VOTE BY TELEPHONE
Your telephone vote authorizes the named proxies/trustees to vote your shares in
the same manner as if you marked, signed and returned your proxy card.
- - You will be asked to enter a Control Number, which is located in the box in
the lower right hand corner of this form.
OPTION #1: To vote as the Board of Directors recommends on ALL proposals: Press
1 now if you wish to vote on each proposal separately. press 0 now.
When you press 1, your votes will be confirmed and cast as you directed. END OF
CALL.
OPTION #2: If you choose to vote on each proposal separately, press 0 now and
you will hear these instructions.
Proposal 1: To vote FOR ALL nominees, press 1; To WITHHOLD FOR ALL
nominees, press 9;
TO WITHHOLD FOR AN INDIVIDUAL nominee, press 0.
If you press 0, enter the two digit number that precedes the
nominee(s) for whom you withhold your vote; then press 0.
Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
Proposal 3: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
Your votes will be confirmed and cast as you directed. END OF CALL.
If you vote by telephone, there is no need to mail back your proxy/voting
instruction card.
THANK YOU FOR VOTING.
Call ** Toll Free ** On a Touch Tone Telephone
1-800-840-1208 - ANYTIME
There is NO CHARGE to you for this call.
<PAGE> 29
PROXY
NATIONAL FUEL GAS COMPANY
This Proxy Solicited by the Board of Directors for Use
at the Annual Meeting of Stockholders, February 18, 1999
PROXY: B.J. Kennedy, P.C. Ackerman, and A.M. Cellino, and each or any of them,
with full power of substitution and revocation in each, are hereby appointed by
the undersigned as Proxies to vote all the shares of Common Stock held of
record by the undersigned on December 21, 1998, at the Annual Meeting of
Stockholders of National Fuel Gas Company or at any adjournment of the meeting,
on each of the items below and in accordance with the directions given there,
and, in their discretion, on all other matters that may properly come before
the Annual Meeting or any adjournment thereof.
- -------------------------------------------------------------------------------
The Board of Directors Recommends a Vote FOR Items 1 and 2.
- -------------------------------------------------------------------------------
Item 1-Election of the following nominees as Directors:
For three-year terms which expire in 2002 -
R.T. Brady, W.J. Hill, B.J. Kennedy
FOR all nominees WITHHOLD WITHHOLD for the following only.
(except as marked for all nominees Write name(s) below.
to the right)
/ / / / ---------------------------------------
Item 2-Appointment of independent accountants.
For Against Abstain
/ / / / / /
- -------------------------------------------------------------------------------
The Board of Directors Recommends a Vote AGAINST Item 3.
- -------------------------------------------------------------------------------
Item 3-Adoption of, if presented at the meeting, a shareholder proposal.
For Against Abstain
/ / / / / /
- -------------------------------------------------------------------------------
(Please date and sign on reverse side and return promptly.)
<PAGE> 30
(Continued from other side)
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no such directions are given with respect to
all or some items, as to such items, the shares represented by this proxy will
be voted FOR items 1 and 2 and AGAINST item 3. Failure to withhold authority to
vote for the election of any nominee for director shall confer on the Proxies
authority to vote for such nominee's election. Failure to vote on any other
matter shall confer on the Proxies authority to vote with respect to each such
matter.
THIS PROXY MAY BE REVOKED BY GIVING THE SECRETARY OF THE
MEETING WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENT PROXY
AT ANY TIME BEFORE THE VOTING OF THE SHARES REPRESENTED BY
THIS PROXY, OR BY CASTING A BALLOT.
----------------------------------
Signature
----------------------------------
Signature
Date
------------------------------
Please sign your name as it appears
on this proxy, and return the
completed proxy in the enclosed
envelope. When signing as an
attorney, executor, administrator,
trustee, guardian or other
representative, please give title as
such. If signer is a corporation,
please sign full corporate name by
duly authorized officer and attach
corporate seal. For joint accounts,
each joint owner should sign.
