<PAGE>
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:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Solicit Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Cornerstone Natural Gas, Inc.
(Name of Registrant as Specified In Its Charter)
Cornerstone Natural Gas, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a(6)(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(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:*
(4) Proposed maximum aggregate value of transaction:
- -----------
*Set forth the amount on which the filing is calculated and state how it was
determined.
[X] 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: $125
(2) Form, Schedule or Registration Statement No.: Preliminary Proxy
Statement
(3) Filing Party: Cornerstone Natural Gas, Inc.
(4) Dated Filed: March 24, 1994
<PAGE>
CORNERSTONE NATURAL GAS, INC.
8080 N. CENTRAL EXPRESSWAY, SUITE 1200
DALLAS, TEXAS 75206-1895
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 10, 1994
TO THE STOCKHOLDERS OF CORNERSTONE NATURAL GAS, INC.:
NOTICE IS HEREBY GIVEN that the annual meeting (the "Annual Meeting") of
the stockholders of Cornerstone Natural Gas, Inc. (formerly Endevco, Inc.), a
Delaware corporation (the "Company"), will be held on Tuesday, May 10, 1994, at
1:00 p.m., local time, at The Energy Club, 8080 North Central Expressway, Suite
1700, Dallas, Texas, for the following purposes:
1. To elect eight (8) directors to serve until the next Annual Meeting
or until their successors have been elected and qualified;
2. To approve the adoption of the Cornerstone Natural Gas, Inc. 1993 Long
Term Incentive Plan; and
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Only stockholders of record at the close of business on March 14, 1994, are
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof. The transfer books will not be closed.
All Stockholders are cordially invited to attend the Annual Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE
COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE. IF YOU DO ATTEND THE ANNUAL MEETING IN PERSON, YOU MAY WITHDRAW YOUR
PROXY AND VOTE IN PERSON.
By Order of the Board of Directors,
Kelly J. Jameson
Secretary
Dallas, Texas
April 8, 1994
<PAGE>
CORNERSTONE NATURAL GAS, INC.
8080 N. CENTRAL EXPRESSWAY, SUITE 1200
DALLAS, TEXAS 75206-1895
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 10, 1994
This Proxy Statement is furnished to the stockholders of Cornerstone Natural
Gas, Inc., (formerly Endevco, Inc.) a Delaware corporation (the "Company"), in
connection with the solicitation of proxies by the Board of Directors of the
Company to be used at the annual meeting of the stockholders of the Company (the
"Annual Meeting") to be held on Tuesday, May 10, 1994 at 1:00 P.M. local time,
and at any and all adjournments thereof.
When a properly executed proxy is received prior to the Annual Meeting, the
shares of common stock, $0.10 par value per share ("Common Stock"), of the
Company represented will be voted at the Annual Meeting in accordance with the
directions noted thereon. If no direction is given, the shares of Common Stock
will be voted FOR the election of the nominees listed herein as directors and
FOR the adoption and approval of the Company's 1993 Long Term Incentive Plan
(the "Plan"). A proxy may be revoked at any time before it is
exercised by submitting a written revocation or a later dated proxy to Kelly
Jameson, Secretary of the Company, or by attending the Annual Meeting in
person and so notifying the meeting judges.
The Board of Directors does not intend to present any business for a vote
at the Annual Meeting, other than the election of directors and the adoption and
approval of the Plan, and it has no information that others will do so. If
other matters requiring the vote of the stockholders properly come before the
Annual Meeting, it is the intention of the persons named in the attached proxy
card to vote such proxies held by them in accordance with their judgement on
such matters.
This proxy solicitation will be conducted principally by mail, and the
expenses of soliciting proxies will be borne by the Company. Proxies may also
be solicited personally or by telephone by officers and regular employees of the
Company, but such persons will not receive any special compensation for such
services. Arrangements will be made with brokerage houses, custodians,
nominees and other fiduciaries to send proxy materials to the beneficial owners
of shares of Common Stock held of record by such persons, and the Company may
reimburse such person or entities for their reasonable out-of-pocket expenses.
The date on which this Proxy Statement and Proxy were first given or sent to the
stockholders was April 8, 1994.
The Annual Report to the stockholders of the Company for its fiscal year
ended December 31, 1993, accompanies this Proxy Statement, however, the Annual
Report does not constitute a part of the proxy solicitation material.
-1-
<PAGE>
OUTSTANDING CAPITAL STOCK
The authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock and 5,000,000 shares of preferred stock, $0.10 par value per
share ("Preferred Stock"). The record date for the stockholders of the Company
entitled to vote at the Annual Meeting is March 14, 1994, (the "Record Date").
At the close of business on the Record Date, the Company had issued and
outstanding and entitled to vote at the Annual Meeting 12,515,959 shares of
Common Stock and no shares of Preferred Stock.
QUORUM AND VOTING
The presence, in person or by proxy, of holders of a majority of the
outstanding shares of Common Stock as of the Record Date is necessary to
constitute a quorum at the Annual Meeting. In deciding all questions, a holder
of shares of Common Stock is entitled to one vote, in person or by proxy, for
each share held in his or her name on the Record Date. No stockholder is
entitled to cumulative voting rights. Abstentions are counted in the number of
shares present in person or represented by proxy for purposes of determining
whether a quorum is present for a proposal to be approved, whereas broker non-
votes are not counted for those purposes.
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of Common Stock of
the Company as of March 17, 1994, by all persons known to the Company to be the
beneficial owners of more than 5% of the outstanding Company's Common Stock, by
the Company's directors, named executive officers and all the Company's
directors and executive officers as a group:
<TABLE>
<CAPTION>
NAME BENEFICIALLY OWNED(1) PERCENT OF CLASS
<S> <C> <C>
Endevco Investors
Joint Venture(2) 2,576,659 20.59
Ben H. Cook(3)(4) 2,131,433 16.36
Ray C. Davis(4)(5) 1,150,619 8.66
Kelcy L. Warren(4)(6) 1,153,046 8.68
James W. Bryant(7) 517,840 4.14
C. Robert Sledge(8) 6,800 *
David S. Hunt(9) 0 *
Ted Collins, Jr.(10) 228,832 1.83
Richard D. Brannon(11) 55,000 *
Named Executive Officers
- ------------------------
Robert L. Cavnar(12) 0 0
All Directors and Executive
Officers as a group
(9 persons) 5,243,570 36.00%
<FN>
- ------------------------------
*Less than one percent of the outstanding shares of common stock.
(1) Based on information provided as of March 17, 1994, by the executive
officers and directors of the Company.
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C>
(2) The address of Endevco Investors Joint Venture (the "Joint Venture") is c/o
Ray Davis, Trustee, 8080 North Central Expressway, Suite 1200, Dallas,
Texas 75206. Pursuant to the Joint Venture Agreement of the Joint
Venture, each partner of the Joint Venture has the right to vote its or his
pro rata share of the shares of Common Stock held by the Joint Venture.
(3) Includes 512,821 shares of Common Stock purchasable under warrants issued
in connection with the recapitalization of the Company (the "Warrants").
Each warrant has an exercise price of $0.78 per share. See "Certain
Relationships and Related Transactions." The address of Mr. Cook is 319 E.
Industrial Blvd., Longview, Texas 75602.
(4) Excludes shares of Common Stock held by the Joint Venture. Such
stockholder has disclaimed beneficial ownership of such securities.
(5) Includes 769,231 shares of Common Stock purchasable upon the exercise of
Warrants. See "Certain Relationships and Related Transactions." Mr.
Davis' address is 8080 North Central Expressway, Suite 1200, Dallas,
Texas 75206. Excludes 150,000 shares purchasable under options
issued under the Stock Option Plan. Such options are not currently
exercisable.
(6) Includes 769,231 shares of Common Stock purchasable upon the exercise of
the Warrants. See "Certain Relationships and Related Transactions." Mr.
Warren's address is 8080 North Central Expressway, Suite 1200, Dallas,
Texas 75206. Excludes 150,000 shares purchasable under options issued
under the Stock Option Plan. Such options are not currently exercisable.
(7) Mr. Bryant's address is 8080 North Central Expressway, Suite 1200, Dallas,
Texas 75206.
(8) Mr. Sledge's address is 2401 Tennessee Street, Longview, Texas 75601.
(9) Mr. Hunt is a beneficiary of the Lyda Hunt-Herbert Trust for David S. Hunt.
Excludes 76,277 shares of Common Stock held by the Joint Venture indirectly
owned by such trust. Mr. Hunt has disclaimed beneficial ownership of such
securities.
(10) Includes 228,832 shares of Common Stock held by a partner in the Joint
Venture over which this Stockholder has the right to vote. Mr. Collins'
address is 303 Wall Street, Midland, Texas 79701.
(11) Includes 50,000 shares of Common Stock held by a partner in the Joint
Venture over which this Stockholder has the right to vote. Mr. Brannon's
address is 2240A Forest Park Boulevard, Fort Worth, Texas 76110.
(12) Excludes 150,000 shares purchasable under options issued under the Plan.
Such options are not currently exercisable.
</TABLE>
DIRECTORS
The Bylaws of the Company provide for a Board of Directors of no greater
than nine (9) and no less than seven (7). The Company is electing eight (8)
directors at this time. A brief description of each person nominated to become
a director of the Company is provided below. Each nominee is a current director
of the Company. The terms of office of each person elected as a director will
continue until the next Annual Meeting of stockholders or until the successor
has been elected and qualified. An affirmative vote of a majority of those
shares of common stock represented and entitled to vote at the Annual Meeting,
where a quorum is present, is required to elect directors.
-3-
<PAGE>
RICHARD D. BRANNON, age 35, has worked for Brannon Oil and Gas, Inc. (Oil
and Gas Exploration and Investments) since 1983 and currently serves as
President. Mr. Brannon has been a director of the Company since November 2,
1993, and is a member of the Compensation and Audit Committees.
JAMES W. BRYANT, age 60, has served as consultant to the Company since
November 2, 1993. Mr. Bryant founded the Company in 1977 and was Chairman of the
Board and Chief Executive Officer from 1977 to 1993. From 1980 to 1990, Mr.
Bryant served as President of the Company. Mr. Bryant has been a director since
1977 and is currently a member of the Executive Committee.
TED COLLINS, JR., age 55, has served as President of Collins and Ware, Inc.
(Oil and Gas Exploration and Production and Investments) since 1988.
Mr. Collins has been a director since November 2, 1993, and is currently
Chairman of the Audit Committee.
BEN H. COOK, age 68, is a private investor. Prior to 1989, Mr. Cook was
Executive Vice President of Operations of Colt Industries, Inc., now Coltec,
Inc. From 1989 to 1991, Mr. Cook was an employee of Colt Industries, Inc. and
retired in March of 1991. Mr. Cook has been a director since November 2, 1993,
and is currently Chairman of the Executive and Compensation Committees.
RAY C. DAVIS, age 52, has served as Chairman of the Board and Chief
Executive Officer since June 1993. Mr. Davis has also served as Director and
General Partner of Hydro Environmental Services, Inc. from 1989 to 1992. He
served as Chief Executive Officer of Healthco International, Inc., from June
1991 to August 1992. Mr. Davis also served as Chairman of the Board of HPSC,
Inc. a dental equipment leasing company listed on the over the counter market of
NASDAQ, from July 1991 to October 1992. On June 9, 1993, Healthco
International, Inc. filed for protection under Chapter 11 of the U.S. Bankruptcy
court in the Western District of Massachusetts, Western Division, Case No.
93-41604-JFQ.
DAVID S. HUNT, age 32, has been Administrative Assistant at Petro-Hunt
Corporation (Oil and Gas and Investments) since 1989. Mr. Hunt has served as a
director since January 1, 1994, and is currently a member of the Audit
Committee.
C. ROBERT SLEDGE, age 62, was a partner of Benjamin Jacobson & Sons (a
member of the New York Stock Exchange) from 1984 to 1992. Mr. Sledge is
currently engaged in investments. Mr. Sledge has been a director since 1983 and
is a member of the Audit Committee.
KELCY L. WARREN, age 38, is President, Chief Operating Officer and a
director of the Company. Mr. Warren has been a director of the Company since
1985, and President and Chief Operating Officer from August 1990 to December
1992. From 1989 to 1990, Mr. Warren was an executive vice president.
Mr. Warren resumed his duties as President and Chief Operating Officer on
June 4, 1993.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held 17 meetings during the 1993 fiscal year. No
incumbent director attended fewer than 75 percent of the aggregate total number
of meetings of the Board and all Committees of the Board which the director
served. Board Committees include an Audit Committee, Compensation Committee and
Executive Committee. All of the members of the Audit, Compensation and
Executive Committees are Directors independent of management.
-4-
<PAGE>
The Audit Committee held one meeting in 1993 and is currently comprised of
Messrs. Collins (Chairman), Brannon, Sledge and Hunt. The Audit Committee
reviews the scope and procedures of internal auditing work, the results of
independent audits, and the accounting policies of management, and it recommends
to the Board the appointment of the Company's outside auditors.
The Compensation Committee held five meetings in 1993 and is currently
comprised of Messrs. Cook (Chairman) and Brannon. Functions of the Compensation
Committee include reviewing and making recommendations to the Board of Directors
regarding compensation for officers of the Company during the ensuing year. In
addition to compensation matters, the committee determines, develops, and makes
recommendations to the Board regarding benefit packages, special bonuses or
stock plans, and employment agreements.
The Executive Committee held no meetings in 1993 and is currently comprised
of Messrs. Cook (Chairman) and Bryant. The Executive Committee has the authority
to act for the Board on most matters during intervals between Board meetings.
Directors who are not employees of the Company receive a fee of $500.00 for
each Board and Board Committee meeting attended, except committee chairmen
receive a fee of $750.00 for each committee meeting attended. Directors are
also reimbursed for costs incurred by them in attending meetings of the Board.
The Company has entered into a three year consulting agreement with Mr. Bryant
which expires November 1, 1996. (See "Certain Relationships and Related
Transactions".)
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and long
term compensation paid on or to be paid to those persons who were, at December
31, 1993, (i) chief executive officer and (ii) the other four most highly
compensated executive officers of the Company (the "Named Executives") for
services rendered in all capacities to the Company for the 1993, 1992 and 1991
fiscal years.
-5-
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
----------------------- -------------------------------------
Other Securities All
Annual Restricted Under- Other
Compen- Stock lying LTIP Compen-
Name and sation Award(s) Options/ Payouts sation
Principal Position Year Salary Bonus ($) ($)(1) ($) SARS (#) ($) ($)(2)
- ----------------- ----- ------------ --------- ----- ------- ---------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ray C. Davis 1993 117,923 0 0 0 150,000 0 0
Chairman and Chief
Executive Officer(3)
Kelcy L. Warren 1993 188,063(5) 0 4,500 0 150,000 0 3,265
President and Chief 1992 144,375 0 0 0 0 7,219
Operating Officer(4) 1991 153,642 0 0 36,000(10) 0 7,655
Robert L. Cavnar 1993 70,654 0 27,949 0 150,000 0 0
Senior Vice President,
Chief Financial Officer(6)
Jack W. Young 1993 126,875 0 0 0 0 0 5,382
Vice President 1992 126,875 0 0 0 0 2,928
1991 133,267(9) 0 0 18,000(10) 0 2,825
James W. Bryant 1993 188,233(7) 0 0 0 0 0 7,868
Former Chairman, President 1992 184,764 0 0 0 0 8,728
and Chief Executive 1991 194,711 0 0 41,000(10) 0 8,475
Officer(8)
Notes to Summary Compensation
<FN>
(1) "Other Annual Compensation" includes compensation for fiscal year 1993
only, and perquisites and other personal benefits, only if the aggregate
amount of such compensation exceeds 10% of the total annual salary and
bonus reported for the named officer. Includes $4,500 in directors fees
paid to Mr. Warren and $27,949 of moving expenses paid by the Company in
relocating Mr. Cavnar to Dallas, Texas.
(2) Represents matching contributions made by the Company pursuant to the
Company's 401(k) Plan.
(3) Mr. Davis was employed by the Company on June 4, 1993.
(4) Mr. Warren resigned the offices of President and Chief Operating Officer of
the Company on December 31, 1992, and resumed those offices on June 4,
1993.
(5) Comprised of $61,666 paid to Mr. Warren for consulting services rendered
between January 1, 1993 and June 3, 1993, and $126,397 in salary paid
between June 4, 1993, and December 31, 1993.
(6) Mr. Cavnar was employed by the Company on June 21, 1993.
(7) Comprised of $159,771 paid to Mr. Bryant in salary from January 1, 1993, to
November 2, 1993 and $28,462 for consulting services rendered between
November 2, 1993, and December 31, 1993.
(8) Mr. Bryant resigned as President, Chairman of the Board and Chief Operating
Officer on June 4, 1993 and became a consultant to the Company, on
November 2, 1993.
(9) Includes deferred compensation of $9,760 for 1991 that was deferred to
1992.
(10) Terminated pursuant to plan of reorganization.
</TABLE>
-6-
<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR 1993
There were a total of 450,000 options granted by the Company to its executive
officers during the 1993 fiscal year, but such options are subject to the
stockholder approval of the Cornerstone Natural Gas, Inc. 1993 Long Term
Incentive Plan.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
------------------------------------------------------------- ----------------------------
NUMBER OF %OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SAR EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- ---- ------------ ------------- ------------- ----------- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Ray C. Davis 150,000 20.62 1.125 12-15-03 106,126 268,944
Kelcy L. Warren 150,000 20.62 1.125 12-15-03 106,126 268,944
Robert L. Cavnar 150,000 20.62 1.125 12-15-03 106,126 268,944
James W. Bryant N/A N/A N/A N/A N/A N/A
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTIONS/SAR
VALUES
During the 1993 fiscal year, there were no exercises of options or SARs by any
executive officer of the Company.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
AT FY-END FY-END
SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Ray C. Davis 0 0 0/150,000 0/56,250
Kelcy L. Warren 0 0 0/150,000 0/56,250
Robert L. Cavnar 0 0 0/150,000 0/56,250
James W. Bryant 0 0 0 0
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 28, 1993, the Company entered into that First Amended Stock Purchase
Agreement (the "Stock Purchase Agreement") with Ray Davis, Trustee. Under the
Stock Purchase Agreement, Ray C. Davis, Trustee agreed to purchase 4,576,659
shares of Common Stock and warrants to acquire 2,564,103 shares of Common Stock
(with an exercise price of $.78 per share) for $3,000,000. On June 4, 1993, in
connection with the Company filing a pre-packaged plan under Chapter 11 of the
Federal Bankruptcy code, Ray C. Davis became the Chairman of the Board of
Directors and the Chief Executive Officer of the Company. At the same time,
Mr. Kelcy L. Warren returned to the Company in
-7-
<PAGE>
his prior role of President and Chief Operating Officer. The Company felt it
was important this management team was in place in order for the Company to
complete its reorganization and recapitalization.
In connection with the Company's emergence from bankruptcy on November 2,
1993, Mr. Davis purchased 381,388 shares of Common Stock, Mr. Ben H. Cook
purchased 1,618,612 shares of Common Stock and Endevco Investors Joint Venture
(the "Joint Venture") purchased 2,576,659 shares of Common Stock. Mr. Davis is
the managing partner of the Joint Venture and Messrs. Cook and Warren each have
an interest in the Joint Venture. Pursuant to the Stock Purchase Agreement, a
warrant to purchase 769,231 shares of Common Stock was issued to Mr. Davis, a
warrant to purchase 512,821 shares of Common Stock was issued to Mr. Cook and a
warrant to purchase 769,231 shares of Common Stock was issued to Mr. Warren.
Each of the warrants entitle the holder to purchase shares of Common Stock for
$.78 per share.
At the same time the Company elected Mr. Ben Cook, Mr. Ted Collins, Jr. and
Mr. Richard D. Brannon to the Board of Directors, pursuant to the terms of the
Stock Purchase Agreement. In December of 1993, the Board of Directors accepted
the resignation of Bobby L. Short and elected Mr. David S. Hunt as a director.
Mr. Hunt is a beneficiary of a trust that is a partner in the Joint Venture.
Affiliates of Mr. Collins and Mr. Brannon (directors of the Company) are
each indirectly partners in the Joint Venture. Messrs. Cook, Davis and Warren
are also partners in the Joint Venture. The shares of Common Stock held by the
Joint Venture are to be voted by Mr. Davis pro rata based on the instructions of
the partners of the Joint Venture.
The Company is a party to an agreement with Energy Transfer I, Ltd.
("Energy Transfer"). Mr. Warren is the sole shareholder of the general partner
of Energy Transfer, and Messrs. Davis, Warren and Cook are indirect limited
partners in Energy Transfer. Under such agreement, the Company markets natural
gas and operates a natural gas pipeline for Energy Transfer for a fixed fee.
The Company received $35,000 from Energy Transfer for the year ended December
31, 1993.
Mr. Davis is the Chief Executive Officer of the Company and is employed at
$210,000 per year. Mr. Davis has been awarded options to purchase 150,000 of
Common Stock at $1.125 per share pursuant to the Company's 1993 Stock Option
Plan. Mr. Davis is not a party to an employment agreement.
Mr. Warren is the President and Chief Operating Officer of the Company and
receives a salary of $205,000 per year. Mr. Warren has been awarded options to
purchase 150,000 shares of Common Stock at $1.125 per share pursuant to the
Company's 1993 stock Option Plan. Mr. Warren is not a party to an employment
agreement with the Company.
Mr. Bryant is a party to a consulting agreement with the Company. The
Consulting agreement is for a term of three years. Under the Consulting
Agreement, Mr. Bryant is to receive no less than $200,000 per year. Mr. Bryant
is obligated under the consulting agreement to present certain projects to the
Company which has a right of first refusal. If the Company elects to pursue a
project originated by Mr. Bryant, then he is entitled to additional
compensation.
The Company is also a party to a joint venture agreement with an affiliate
of Mr. Collins (a director of the Company). Under such joint venture agreement,
the Company and the affiliate of Mr. Collins each bear a portion of the costs
for developing projects in the natural gas business and have a right of first
refusal on such projects.
-8-
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
BACKGROUND
The Compensation Committee of the Board of Directors of the Company (the
"Committee") is comprised of two outside Board Members, Mr. Ben H. Cook
(Chairman) and Mr. Richard D. Brannon. The Committee was formed upon the
Company successfully completing its Plan of Reorganization under Chapter 11
Bankruptcy protection in November 1993 after filing for protection in June 1993.
EXECUTIVE COMPENSATION PHILOSOPHY
The Committee generally believes that the majority of the value delivered by the
Company's compensation program should be directly related to the performance of
the Company on a short-term and long-term basis and on individual performance of
executives in their respective business units. As such, the Committee has
adopted the following philosophy and strategy regarding the compensation of the
Company's executives:
BASE SALARY
Since the Committee expects most of the value of executives' pay will be
delivered from performance-based programs, the Committee believes that base
salaries should be fairly conservative. In general, base pay should be of a
sufficient competitive level to attract and retain key executive talent. To
achieve this objective, the Committee intends to target executive base salaries
between the 25th and 50th percentiles of the market. The Committee tends to
regard other energy companies of similar size and structure as its competitive
market for industry specific positions. Since the Company does not participate
in any industry salary surveys, the Committee relies on the services of outside
compensation consultants to provide competitive compensation data for these
comparisons.
ANNUAL INCENTIVES
In December, the Committee approved the implementation of a new annual incentive
plan (the "Plan") for officers and other key employees of the Company. The Plan
is designed to generate an annual incentive that is predetermined by the
Committee based on the financial performance of the Company as measured by the
achievement of earnings before interest, taxes, depreciation and amortization
("EBITDA"). Target awards for full attainment of the EBITDA objective range from
20% to 50% of executives' base salaries. If the Company greatly exceeds its
financial performance target, the Plan will generate awards up to one and
one-half times the executive's target award. In addition, the Plan has a
minimum or threshold EBITDA figure that must be achieved before any incentives
will be considered. If the Company achieves only this threshold level of
performance, executives will earn one-fifth of their target incentive awards.
Furthermore, certain executives have a portion of this annual incentive award
based on the achievement of divisional and/or individual performance objectives.
Management has discretion in determining the criteria for the divisional/
individual portion of the annual incentive award.
Target award levels were determined such that at target award levels,
executives' total cash compensation (base salary plus annual incentive) would be
comparable to the 50th percentile total cash compensation of the competitive
market as discussed earlier. Since this plan has been newly implemented for the
1994 fiscal year, the Committee does not expect any awards to be generated under
this plan until the first quarter of 1995.
-9-
<PAGE>
LONG-TERM INCENTIVES
The Committee believes that stock-based incentives provide the strongest link
between the rewards earned by executives and the return generated for
stockholders. The Committee also believes that providing the potential for
significant share ownership helps focus executive behavior on the long-term
growth and strength of the organization. As the Company emerged from its
reorganization in late 1993, the Committee felt it was particularly important to
grant a similar stock incentive. Thus, the Committee granted incentive stock
options ("ISOs"), subject to Stockholder's approval, to 12 employees. These
options will become exercisable in equal installments of 20% over the next 5
years. The number of options granted was based on competitive market data for
all industries combined as presented in Towers Perrin's Long Term Incentive Plan
Survey. Option grant values as determined by the Black-Scholes option pricing
model generally correspond to the 50th percentile of the market for all key
executives except Mr. Davis and Mr. Warren, who in order to conserve the number
of shares available for future grants to other executives, received option
grants which correspond to the 25th percentile of the market.
COMPENSATION FOR MR. DAVIS
Mr. Davis currently has a base salary of $210,000 per annum. The Committee
believes that although his base salary is considerably below that of other chief
executive officers in this industry and in other companies of similar size and
complexity, it is appropriate given his ownership interest in the Company. The
Committee intends to deliver most of Mr. Davis' compensation in the form of
annual cash-based incentives and long-term stock-based incentives that will
deliver significant value to Mr. Davis if and only if the Company achieves its
performance targets.
The Committee will base Mr. Davis' annual 1994 incentive award (to be paid in
the first quarter of 1995) on the Company's EBITDA performance as discussed
earlier. If the Company meets its earnings target, Mr. Davis will earn 50% of
his base salary as a bonus. If the Company achieves up to a predetermined
maximum performance level, Mr. Davis has the ability to earn up to 75% of his
base salary as a bonus. At the threshold performance level, Mr. Davis will earn
a bonus equal to 10% of his base salary. As with the entire executive team, the
Company must achieve a predetermined minimum earnings target before any
incentive award will be considered for Mr. Davis. The Committee believes that
the minimum, target and award levels are consistent with other companies in this
industry.
The Committee granted 150,000 stock options to Mr. Davis in December, subject to
Stockholder's approval. The Committee feels that Mr. Davis has a significant
portion of his personal wealth invested in the Company and that he is well
motivated to increase the overall value of the Company and to generate returns
on behalf of all stockholders.
OTHER COMPENSATION MATTERS
The Company has addressed the potential impact of the $1 million dollar
deduction limitation on executive pay for the top five executives which was
implemented as part of the Omnibus Budget Reconciliation Act of 1993. The
proposed long-term incentive plan includes a maximum limit on the number of
shares which can be granted to an individual under each year and over all years
in aggregate over the life of the plan. The Committee does not believe that
cash compensation from either the base salary or annual incentive programs will
be subject to the deduction limitation and feels that further action is not
necessary regarding the new legislation. The Committee will evaluate the
Company's potential exposure to the deduction limitation on an annual basis and
will address the issue in the future if necessary.
-10-
<PAGE>
In conclusion, the Committee feels that all pay programs are reasonable and
appropriate given the Company's industry, size and organizational structure.
Base salary and incentive programs are conservative yet provide attractive
features to motivate executives to enhance the performance of the Company from
year to year. The stock option grants provide a significant incentive to
executives to undertake policies and actions to enhance the overall value of the
organization well into the future.
THE COMPENSATION COMMITTEE
BEN H. COOK, CHAIRMAN
RICHARD D. BRANNON
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Mr. Ben H. Cook and
Mr. Richard D. Brannon. None of the members of the Committee were, during the
1993 fiscal year, an officer or employee of the Company or any of its
subsidiaries, nor has any member been an officer or employee of the Company or
any of its subsidiaries.
STOCK PERFORMANCE GRAPH
The following graph compares the yearly change in the cumulative total
stockholder return on the Company's Common Stock during the five fiscal years
ended December 31, 1993, with the cumulative total return on the S & P 500 Index
and the Peer Group Index. The Peer Group Index used by the Company is the S&P
Natural Gas Distributors Pipeline Index. Such compilation was utilized to
achieve a comparison with a group of companies which together have similar
operations to that of the Company. The comparison assumes $100 was invested on
December 31, 1988, in the Company's Common Stock in each of the indexes.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG CORNERSTONE NATURAL GAS, INC., THE S&P 500 INDEX
AND THE S&P NATURAL GAS DISTRIBUTORS PIPELINE INDEX
(Performance Graph appears here)
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cornerstone Natural Gas 100.00 80.36 44.64 25.00 10.71 21.43
S&P 500 Index 100.00 131.59 127.49 166.17 178.81 196.75
S&P Natural Gas Dist. Pipeline Index 100.00 155.23 135.90 118.33 130.69 155.06
</TABLE>
Data Source: S&P Compustat Services
-11-
<PAGE>
STOCK OPTION PLAN
PROPOSAL TO APPROVE THE COMPANY'S 1993 LONG TERM INCENTIVE PLAN
The Board of Directors has determined that it is in the best interest of
the Company to make stock options available to those employees responsible for
the continued growth and profitability of the Company's business. The Board
believes that providing key employees with an opportunity to acquire Common
Stock aligns the interest of management with the interest of the Company's
stockholders on a long-term basis. Accordingly, the Board of Directors, upon
recommendation of the Compensation Committee on December 16, 1993, adopted the
Cornerstone Natural Gas, Inc. 1993 Long Term Incentive Plan (the "Plan") and
directed that it be submitted for stockholder consideration and approval.
Approval of the Plan requires an affirmative vote of a majority of the shares of
Common Stock represented, in person or by proxy, at the Annual Meeting.
THE FOLLOWING IS A BRIEF SUMMARY OF THE PLAN. THE COMPLETE TEXT IS ATTACHED AS
EXHIBIT A TO THIS PROXY STATEMENT AND REFERENCE IS MADE TO EXHIBIT A FOR A
COMPLETE STATEMENT OF THE PROVISIONS OF THE PLAN.
LONG-TERM INCENTIVE PLAN FEATURES
The Plan provides for the grant of options to purchase up to 1,250,000
shares of the Company Common Stock (approximately 10% of the shares outstanding
on March 14, 1994). The Plan is administered by the Compensation Committee
comprised of non-employee directors appointed by the Board. Participants under
the Plan are selected by the Committee upon recommendation of management. At
December 16, 1993, 12 persons had been selected for participation in the Plan.
The Committee determines the number of shares to be awarded to each individual
under the Plan and the eligibility of employees and non-employee consultants and
advisors.
Options, stock appreciation rights, restricted stock, performance shares or
units, limited stock appreciation rights and other Stock Unit awards expires no
more than 10 years from date of grant.
OPTIONS
Options become exercisable at such time as determined by the Committee. No
participant may receive an award in any calendar year more than 25% of all
shares issued for awards in that same year, nor may any participant receive
awards in the aggregate equal to more than 25% of all shares issued over the
life of the Plan.
INCENTIVE STOCK OPTIONS
The Committee may grant "Incentive Stock Options" within the meaning of the
Internal Revenue Code of 1986, as amended (the "Code"), which are subject to
additional restrictions. Incentive stock options allow participants, except
those possessing 10% or more of the total combined voting power of all classes
of the Company's stock, to purchase Common Stock at an exercise price which
cannot be less than 100% of the fair market value of the Common Stock on the
date of the grant. Such options shall be exercisable for a period of not more
than 10 years ( 5 years for 10% owners) from the date of grant, and shall
satisfy other requirements of the Code.
STOCK APPRECIATION RIGHTS
-12-
<PAGE>
Each stock appreciation right which may be granted under the Plan will
provide the grantee, upon exercise, a benefit equal to the excess of fair market
value of a share of Common Stock over the grant price. Stock appreciation
rights shall not be exercisable earlier than six months after the grant or
exercisable 10 years after the date of grant and shall have an exercise price of
not less than 100% of the fair market value of the Common Stock on the date of
grant. Each stock appreciation right will be exercisable at such time as
determined by the Committee. Benefits upon exercise of the stock appreciation
right will be payable in cash unless the Committee determines that benefits be
paid wholly or in partly in Common Stock.
PERFORMANCE SHARES
Performance Shares may be granted under the Plan to provide a benefit if
performance goals determined by the Committee are achieved during an Performance
award cycle. An award cycle is determined by the Committee as the Committee may
select from time to time. As soon as practicable after each applicable award
cycle, the Committee shall determine the number of performance shares which have
been earned and shall pay each participant the value of such shares in cash or,
at the discretion of the Committee, wholly or partly in Common Stock. The value
of the amount payable to the participant shall be the fair market value of the
Common Stock on the date of the Committee's determination.
RESTRICTED STOCK OR UNITS
Shares of Common Stock may be granted under the Plan subject to such
restrictions ("restricted stock") as may be determined from time to time by the
Committee. Restricted stock will be subject to forfeiture if conditions
established by the Committee are not satisfied. Shares of restricted stock are
nontransferable until they become nonforfeitable. The Committee may, in its
discretion, accelerate the time at which any or all of the restrictions lapse
prior to the expiration of the restrictions or remove any or all of the
restrictions.
STOCK UNIT AWARDS
In addition to granting Options, Stock Appreciation Rights, Performance
Shares or Restricted Stock, the Committee may grant Stock Units in the form of
Common Stock or Units. The value of such award shall be based in whole or in
part on the value of the Common Stock. The Committee may in its sole discretion
at the time of grant determine the rules of such award as to the terms,
conditions, restrictions, vesting requirements and payment of each grant. Stock
Unit Awards may not be assigned, sold, transferred, pledged or encumbered prior
to the date on which the shares are issued or date set by the Committee. If any
Common Stock is to be purchased in connection with the Stock Unit award, then
the purchase price shall be at least 50% of the fair market value of such Common
Stock on the date such award is granted. These awards may be in whole or in
part performance related as established by the Committee.
FEDERAL INCOME TAX CONSEQUENCES
The following general description of federal income tax consequences is
based upon current statutes, regulations and interpretations. This description
is not intended to address specific tax consequences applicable to an individual
grantee who receives awards.
Upon the grant of an incentive stock option, no taxable income will be
realized by a participant and the Company will not be entitled to any deduction.
If a participant exercises an option, without having ceased to be an employee of
the Company or any of its subsidiaries at any time during the
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<PAGE>
period from the grant of the option until ninety days before its exercise, then
generally, no taxable income will result at the time of the exercise of such
option. If no"disqualifying disposition" of the stock transferred to a
participant upon exercise of the option is made by him or her (i.e., a
disposition within the period that ends on the last to occur of one year after
such stock is so transferred and two years after the grant of the option), any
profit (or loss) realized by a participant from a sale or exchange of such stock
will be treated as long-term capital gain (or capital loss), and no deduction
will be allowable to the Company with respect thereto. When a participant
exercises an incentive stock option, he or she will realize an item of "tax
preference" for purposes of the "alternative minimum tax" equal to the amount by
which the fair market value of the Common Stock at the time of exercise exceeds
the option exercise price. If a disqualifying disposition of such stock is made
by a participant, the disposition generally will result in ordinary income at
the time of the disposition in an amount equal to the lesser of (1) the gain on
the sale or (2) the bargain element. If the gain exceeds the bargain element,
the excess is a short-term or long-term capital loss, again depending upon how
long the shares are held prior to the sale, equal to the difference between the
exercise price and the sale price.
Upon the exercise of a Nonstatutory Stock Option the grantee will be deemed
to have received ordinary income in an amount equal to the difference between
the exercise price and the market price of the shares on the exercise date. The
Company will generally be allowed an income tax deduction in this amount
The grant of a Stock Appreciation Right ("SAR") will produce no tax
consequences for the grantee or the Company. The exercise of an SAR results in
taxable income to the grantee, equal to the difference between exercise price of
the shares and the market price of the share on the date of exercise, and
generally, a corresponding tax deduction to the Company.
The grant of restricted shares of the Common Stock will not realize taxable
income at the time of the grant, and the Company will not be entitled to a tax
deduction at the time of the grant, unless the grantee makes an election to be
taxed at the time of the grant. When the restriction lapses, the grantee will
recognize taxable income in an amount equal to excess of fair market value of
the shares at such time over the amount, if any, paid for the shares. The
Company will be entitled to a corresponding tax deduction.
A grantee who had been granted performance shares will not realize taxable
income at the time of the grant, and the Company will not be entitled to a tax
deduction at such time. A grantee will realize ordinary income at the time the
award is paid equal to the amount of cash paid or the value of shares delivered,
and the Company will have a corresponding tax deduction.
THE SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR GENERAL
INFORMATIONAL PURPOSES ONLY AND MAY NOT BE APPLICABLE TO ALL INDIVIDUALS.
PARTICIPANTS SHOULD CONSULT THEIR OWN TAX ADVISORS FOR A DETERMINATION AS TO THE
SPECIFIC TAX CONSEQUENCES APPLICABLE TO THEM.
AMENDMENT AND TERMINATION
The Board may suspend, terminate or amend the Plan at its discretion. The
Board will not be required to obtain stockholder approval of any amendment to
the Plan except for increases in total shares under the Plan, or where such
approval is necessary to assure the Plan's continued qualification under Rule
16b-3 of the Securities Exchange Act of 1934, as amended or compliance with
American Stock Exchange rules or the Code.
-14-
<PAGE>
The Plan will terminate on December 16, 2003, or such earlier date
determined by the Board. Any termination of the Plan will not affect
outstanding options, shares of restricted stock, stock appreciation rights,
performance shares or units, or other Stock Awards under the Plan.
During fiscal 1993 the Board authorized the issuance of options to acquire
727,500 shares of Common Stock under the Plan at exercise prices of $1.125 per
share subject to obtaining approval of the Plan by the stockholders. The number
of options issued to the Chief Executive Officer, the four most highly paid
compensated Executives, to all other executive offices as a group, and to all
other eligible employees as a group are set forth below.
-15-
<PAGE>
<TABLE>
<CAPTION>
Number of
Name and Position Options Granted(1)
----------------- ------------------
<S> <C>
Ray C. Davis 150,000
Chairman of the Board and
Chief Executive Officer
Kelcy L. Warren 150,000
President & Chief Operating Officer
Robert L. Cavnar 150,000
Senior Vice President and
Chief Financial Officer
All executive officers as a group 450,000
(3 persons)
All other eligible participants 277,500
including officers who are not
deemed executive officers.
(9 persons)
<FN>
(1) Additional information about the terms and conditions of the options is set
forth under the heading "Options/SAR Grants in the Last Fiscal Year 1993."
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION
AND ADOPTION OF THE COMPANY'S 1993 LONG TERM INCENTIVE PLAN.
INDEPENDENT AUDITORS
Ernst & Young served as the independent auditors and accountants of the
Company for the 1993 fiscal year.
Representatives of Ernst & Young plan to attend the annual meeting and will
be available to answer appropriate questions.
SECTION 16(a) COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires each director and executive officer of the Company, and each person who
owns more than 10% of a registered class of the Company's equity securities to
file by specific dates with the Securities and Exchange Commission (the "SEC").
To the Company's knowledge, during the fiscal year which ended December 31,
1993, each of Messrs. Davis, Warren, Cook, Brannon, Collins, Cavnar and Piacenti
did not timely file with the SEC. However, each has subsequently filed such
required forms. All other required reports with the SEC under Section 16 of
the Securities Exchange Act of 1934, as amended, were timely filed.
-16-
<PAGE>
STOCKHOLDER PROPOSAL
Any proposals that stockholders of the Company intend to present at the
1995 Annual Meeting must be submitted in accordance with the rules of the
Securities and Exchange Commission and must be received by the Secretary of the
Company no later than December 30, 1994.
FORM 10-K
The Company will provide without charge to any stockholder who was
a beneficial holder on the Record Date upon written request, a copy of the
Company's Annual Report on Form 10-K, for the year ended December 31, 1993,
without exhibits, as filed with the Securities and Exchange Commission.
By Order of the Board of Directors,
Kelly J. Jameson
Secretary
Dallas, Texas
April 8, 1994
-17-
<PAGE>
EXHIBIT "A"
CORNERSTONE NATURAL GAS, INC.
1993 LONG-TERM INCENTIVE PLAN
Section 1. Purpose
The purposes of the Cornerstone Natural Gas, Inc. 1993 Long-Term Incentive Plan
(the "Plan") are to promote the interests of the Company and its stockholders
by (i) attracting and retaining executive personnel and other key employees of
outstanding ability; (ii) motivating executive personnel and other key
employees, by means of performance-related incentives, to achieve longer-range
performance goals; and (iii) enabling such employees to participate in the
long-term growth and financial success of the Company.
Section 2. Definitions
"Act" shall mean the Securities Exchange Act of 1934, as amended.
"Affiliates" shall mean (a) any corporation, other than the Company, in an
unbroken chain of corporations ending with the Company if each of the
corporations, other than the Company, owns stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain and (b) any corporation, other
than the Company, in an unbroken chain of corporations beginning with the
Company if each of the corporations, other than the last corporation in the
unbroken chain, owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain
"Agreement" shall mean the written agreement between the Company and a
Participant evidencing the Option granted by the Company and the understanding
of the parties with respect thereto.
"Award" shall mean a grant or award under Sections 6 through 10, inclusive of
the Plan, as evidenced in a written document delivered to a Participant as
provided in Section 11(b).
"Board of Directors" shall mean the Board of Directors of the Company.
"Change in Control" shall be deemed to have occurred if (i) any person(s) (as
such term is used in Sections 13(d) and 14(d)2 of the Act) or parties other
than the current stockholders as, of the date the Plan is approved becomes the
beneficial owner (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding securities; or (ii)
the stockholders of the Company approve a merger, consolidation, sale or
disposition of all or substantially all of the Company's assets or plan of
liquidation.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Compensation Committee of the Board of Directors.
The committee shall be made up of at least two outside directors, and only
outside directors may serve on the Committee. The outside director cannot be
a former officer of the Company or a former employee receiving deferred
compensation. The director cannot be an employee or 5% stockholder of another
company who receives more than 5% of its gross receipts or $60,000 worth of
business from the Company, whichever is less.
"Common Stock" or "Stock" shall mean the common stock $0.10 par value per
share of the Company.
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<PAGE>
"Company" shall mean Cornerstone Natural Gas, Inc., a Delaware corporation.
"Designated Beneficiary" shall mean the beneficiary designated by the
Participant, in a manner determined by the Committee, to receive amounts due
the Participant in the event of the Participant's death. In the absence of an
effective designation by the Participant, Designated Beneficiary shall mean
the Participant's estate.
"Eligible Individuals" shall mean (a) key employees, including officers and
directors who are also employees of the Company or of any of its Affiliates,
(b) non-employee directors or officers of the Company or of any of its
Affiliates and (c) non-employee consultants and advisors who, in the opinion
of the Committee, have the capacity for contributing in a substantial measure
to the successful performance of the Company. Notwithstanding the foregoing
provisions of this paragraph, to ensure that the requirements of Section
3(a)(i) are satisfied, the Board of Directors may from time to time specify
individuals who shall not be eligible for the grant of options or stock
appreciation rights or allocations of stock under any plan of the Company or
its Affiliates (as such terms are used in subsection (d)(3) of Rule 16b-3
promulgated under the Act); provided, however, the Board of Directors may at
any time determine that any individual who has been so excluded from
eligibility shall become eligible for grants of Options and grants of such
options or stock appreciation rights or allocations of stock under any plans
of the Company and its Affiliates.
"Employee" shall mean any key employee of the Employer.
"Employer" shall mean the Company and any Subsidiary or Affiliate.
"Fair Market Value" shall mean the closing price of the Common Stock on the
date in question, or, if the Common Stock has not been traded on such date,
the closing price on the first day prior thereto on which the Common Stock was
so traded.
"Fiscal Year" shall mean the fiscal year of the Company.
"Incentive Stock Option" shall mean a stock option granted under Section 6
which is intended to meet the requirements of Section 422 of the Code.
"Non-Stock Based Incentive Compensation" refers to incentive compensation
whose value is not based in whole or in part on the value of Common Stock.
"Nonqualified Stock Option" shall mean a stock option granted under Section 6
which is not intended to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Nonqualified Stock Option.
"Participant" shall mean an individual who is selected by the Committee to
receive an Award under the Plan.
"Payment Value" shall mean the dollar amount assigned to a Performance Share
which shall be equal to the Fair Market Value of the Common Stock on the day
of the Committee's determination under Section 8 (c)(1) with respect to the
applicable Performance Cycle.
"Performance Cycle" or "Cycle" shall mean the period of years selected by the
Committee during which the performance is measured for the purpose of
determining the extent to which an award of Performance Shares has been
earned.
"Performance Goals" shall mean the objectives established by the Committee for
a Performance Cycle, for the purpose of determining the extent to which
Performance Shares which have been contingently
A2
<PAGE>
awarded for such Cycle are earned.
"Performance Share" shall mean an award granted pursuant to Section 8 of the
Plan expressed as a share of Common Stock.
"Restricted Period" shall mean the period of years selected by the Committee
during which a grant of Restricted Stock or Restricted Stock Units may be
forfeited to the Company.
"Restricted Stock" shall mean shares of Common Stock contingently granted to a
Participant under Section 9 of the Plan.
"Restricted Stock Unit" shall mean a fixed or variable dollar denominated unit
contingently awarded under Section 9 of the Plan.
"Stock Appreciation Right" shall mean a right granted under Section 7.
"Stock Unit Award" shall mean an award of Common Stock or units granted under
Section 10.
"Subsidiary" shall mean any business entity in which the Company possesses
directly or indirectly fifty percent (50%) or more of the total combined
voting power.
Section 3. Administration
(a) Committee
The Plan shall be administered by the Committee. The Committee shall consist
of not less than two individuals. All members of the Committee shall be
(1) directors of the Company; and
(2) "disinterested persons," as defined in Rule 16b-3(c)(2)(i)
promulgated under the Act; and in such event members of the
Committee shall not be eligible to receive Options or any equity
securities under any plan of the Company or its Affiliates (except
as specifically allowed by Rules 16(b)-3(c)(2)(i)(A)-(D)
promulgated under the Act) within one (1) year prior to their
appointment to the Committee or while they are serving as members
of the Committee; provided, however, that this subparagraph
incorporates and its restrictions shall be deemed to be modified
according to any changes to Rule 16b-3 promulgated under the Act.
(b) Duration, Removal, Etc.
The members of the Committee shall serve at the pleasure of the Board of
Directors, which shall have the power, at any time and from time to time, to
remove members from the Committee or to add members thereto. Vacancies on the
Committee, however caused, shall be filled by action of the Board of
Directors.
(c) Meetings and Actions of Committee
The Committee shall elect one of its members as its Chairman and shall hold
its meetings at such times and places as it may determine. All decisions and
determinations of the Committee shall be made by the majority vote or decision
of all of its members present at a meeting; provided, however, that any
decision or determination reduced to writing and signed by all of the members
of the Committee shall be as fully effective as if it had been made at a
meeting duly called and held. The Committee may make any rules and
regulations for the conduct of its business that are not inconsistent with the
provisions hereof and with the Bylaws of the Company as it may deem advisable.
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<PAGE>
(d) Committee's Powers
Subject to the express provisions hereof, the Committee shall have the
authority, in its sole and absolute discretion, (1) to adopt, amend, and
rescind administrative and interpretive rules and regulations relating to the
Plan; (2) to determine the terms and provisions of the respective Agreements
and Awards (which need not be identical), including provisions defining or
otherwise relating to (i) subject to Section 6 of the Plan, the term and the
period or periods and extent of exercisability of the Options, (ii) the extent
to which the transferability of shares of Common Stock issued upon exercise of
Options is restricted, (iii) the effect of termination of employment upon the
exercisability of the Options, and (iv) the effect of approved leaves of
absence (consistent with any applicable regulations of the Internal Revenue
Service); (3) to accelerate the time of exercisability of any Option that has
been granted; (4) to construe the terms of any Agreement and Award and the
Plan; and (5) to make all other determinations and perform all other acts
necessary or advisable for administering the Plan, including the delegation of
such ministerial acts and responsibilities as the Committee deems appropriate.
The Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Agreement or Award in the manner and to
the extent it shall deem expedient to carry it into effect, and it shall be
the sole and final judge of such expediency. The Committee shall have full
discretion to make all determinations on the matters referred to in this
Paragraph 3(d); such determinations shall be final, binding and conclusive.
(e) No Liability for Good Faith Determinations
Neither the members of the Board of Directors nor any member of the Committee
shall be liable for any act, omission, or determination taken or made in good
faith with respect to the Plan or any Option granted under it, and members of
the Board of Directors and the Committee shall be entitled to indemnification
and reimbursement by the Company in respect of any claim, loss, damage, or
expense (including attorneys' fees, the costs of settling any suit, provided
such settlement is approved by independent legal counsel selected by the
Company, and amounts paid in satisfaction of a judgment, except a judgment
based on a finding of bad faith) arising therefrom to the full extent
permitted by law and under any directors and officers liability or similar
insurance coverage that may from time to time be in effect.
Section 4. Eligibility
All Eligible Individuals are eligible to be Participants in the Plan.
Notwithstanding any provision contained herein to the contrary, a person shall
not be eligible to receive an Incentive Stock Option hereunder unless he is an
employee of the Company or an Affiliate, nor shall a person be eligible to
receive an Incentive Stock Option hereunder if he, at the time such Option is
granted, would own (within the meaning of Sections 422 and 424 of the Code)
stock possessing more than ten percent (10%) of the total combined voting
power or value of all classes of stock of the Company or of an Affiliate
unless at the time such Incentive Stock Option is granted the exercise price
per share of Stock is at least one hundred and ten percent (110%) of the Fair
Market Value of each share of Stock to which the Incentive Stock Option
relates and the Incentive Stock Option is not exercisable after the expiration
of five (5) years from the date it is granted.
Section 5. Maximum Amount Available for Awards
(a) The maximum number of shares of Stock in respect of which Awards may be
made under the Plan shall be a total of 1,250,000 shares of Common Stock. In
addition, no Employee may receive an Award of Options, Restricted Stock or
other Award in any calendar year which combined would equal more than 25% of
all shares issued for Awards in that same year. Also, no Employee may receive
Awards that in aggregate equal more than 25% of all shares issued over the
life of this Plan. Shares of Common Stock may be made available from the
authorized but unissued shares of the Company or from shares reacquired by the
Company, including shares purchased in the open market. In the event that (i)
an Option or Stock Appreciation Right is settled for cash or expires or is
terminated unexercised
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<PAGE>
as to any shares of Common Stock covered thereby, or (ii) any Award in respect
of shares is cancelled or forfeited for any reason under the Plan without the
delivery of shares of Common Stock, such shares shall thereafter be again
available for award pursuant to the Plan. In the event that any Option or
other Award granted hereunder is exercised through the delivery of shares of
Common Stock, the number of shares of Common Stock available for Awards under
the Plan shall be increased by the number of shares so surrendered, to the
extent permissible under Rule 16b-3, as promulgated under the Act and as
interpreted from time to time by the Securities and Exchange Commission or its
staff.
(b) In the event the Committee shall determine any stock dividend,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares, warrants
or rights offering to purchase Common Stock at a price substantially below
fair market value, or other similar corporate event affects the Common Stock
such that an adjustment is required in order to preserve the benefits or
potential benefits intended to be made available under this Plan, then the
Committee shall, in its sole discretion, and in such manner as the Committee
may deem equitable, adjust any or all of (1) the number and kind of shares
which thereafter may be awarded or optioned and sold or made the subject of
Stock Appreciation Rights under the Plan, (2) the number and kind of shares
subject of Stock Options and other Awards, and (3) the grant, exercise or
conversion price with respect to any of the foregoing and/or, if deemed
appropriate, make provision for cash payment to a Participant or a person who
has an outstanding Option or other Award provided, however, that the number of
shares subject to any Option or other Award shall always be a whole number.
Section 6. Stock Options
(a) Grant.
Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to determine the Eligible Individuals to whom Options shall
be granted, the number of shares to be covered by each Option, the option
price therefor and the conditions and limitations applicable to the exercise
of the Option. The Committee shall have the authority to grant Incentive
Stock Options, or to grant Nonstatutory Stock Options, or to grant both types
of options. In the case of Incentive Stock Options, the terms and conditions
of such grants shall be subject to and comply with such rules as may be
prescribed by Section 422 of the Code, as from time to time amended, and any
implementing regulations.
(b) Option Price.
The Committee shall establish the option price at the time each Option is
granted, which price shall not be less than 100% of the Fair Market Value of
the Common Stock on the date of grant.
(c) Exercise.
(1) Each Option shall be exercisable at such times and subject to such terms
and conditions as the Committee may, in its sole discretion, specify in the
applicable Award or thereafter, provided, however, that in no event may any
Option granted hereunder be exercisable after the expiration of ten years from
the date of such grant. The Committee may impose such conditions with respect
to the exercise of Options, including without limitation, any relating to the
application of federal or state securities laws, as it may deem necessary or
advisable.
(2) No shares shall be delivered pursuant to any exercise of an Option until
payment in full of the option price has been received by the Company. Such
payment may be made in cash, or its equivalent, or, if and to the extent
permitted by the Committee, by exchanging shares of Common Stock owned by the
optionee (which are not the subject of any pledge or other security interest),
or by a combination of the foregoing, provided that the combined value of all
cash and cash equivalents and the Fair Market Value of any such Common Stock
so tendered to the Company, valued as of the date of such tender,
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is at least equal to such option price.
Section 7. Stock Appreciation Rights
(a) The Committee may, with sole and complete authority, grant Stock
Appreciation Rights ("SARs") in tandem with an Option, in addition to an
Option, or freestanding and unrelated to an Option. Stock Appreciation Rights
granted in tandem with or in addition to an Option may be granted either at
the same time as the Option or at a later time. Stock Appreciation Rights
shall not be exercisable earlier than six months after grant, or be
exercisable after the expiration of ten years from the date of grant and shall
have an exercise price of not less than 100% of the Fair Market Value of the
Common Stock on the date of grant.
(b) An SAR shall entitle the Participant to receive from the Company the
difference between the Fair Market Value of one share of Common Stock on the
date of the exercise of the SAR and (i) in the case of a SAR identified with a
share of stock subject to an option, the option price of such option, unless
the Committee in the grant specifies a higher price or (ii) in the case of any
SAR, the Fair Market Value of one share of Common Stock on the grant date.
SARs that are not subject to an option and can only be exercised during
limited periods of time in order to comply with certain Securities and
Exchange Rules, the Committee may determine at its discretion, that the
exercise of the SAR during such limited period, shall be deemed to occur on
the day which the Fair Market Value of the Common Stock is the highest during
the limited period. Any such determination by the Committee may be changed by
the Committee from time to time and may govern the exercise of Stock
Appreciation Rights granted prior to such determination as well as Stock
Appreciation Rights thereafter granted. The Committee shall determine upon the
exercise of a Stock Appreciation Right whether such Stock Appreciation Right
shall be settled in cash, shares of Common Stock, Stock Options, or a
combination thereof.
(c) A Limited SAR related to an Option which can only be exercised during
limited periods following a Change in Control of the Company, may entitle the
Participant to receive an amount based upon the highest price paid or offered
for Common Stock in any transaction relating to the Change in Control or paid
during the thirty-day period immediately preceding the occurrence of the
Change in Control in any transaction reported on the American Stock Exchange.
Section 8. Performance Shares
(a) The Committee shall have sole and complete authority to determine the
Employees who shall receive Performance Shares and the number of such shares
for each Performance Cycle, and to determine the duration of each Performance
Cycle and the value of each Performance Share. There may be more than one
Performance Cycle in existence at any one time, and the duration of
Performance Cycle may differ from each other.
(b) The Committee shall establish Performance Goals for each Cycle on the
basis of such criteria and to accomplish such objectives as the Committee may
from time to time select. During any Cycle, the Committee may adjust the
Performance Goals for such Cycle as it deems equitable in recognition of
unusual or non-recurring events affecting the Company, changes in applicable
tax laws or accounting principles, or such other factors as the Committee may
determine.
(c) (1) As soon as practicable after the end of a Performance Cycle, the
Committee shall determine the number of Performance Shares which have been
earned on the basis of performance in relation to the established Performance
Goals.
(2) Payment Values of earned Performance Shares shall be distributed to the
Participant or, if the Participant has died, to the Participant's Designated
Beneficiary, as soon as practicable after the expiration of the Performance
Cycle and the Committee's determination under paragraph (1), above. The
Committee shall determine whether Payment Values are to be distributed in the
form of cash or shares of Common Stock.
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Section 9. Restricted Stock and Restricted Stock Units
(a) Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to determine the Employees to whom shares of Restricted
Stock and Restricted Stock Units shall be granted, the number of shares of
Restricted Stock and the number of Restricted Stock Units to be granted to
each Participant, the duration of the Restricted Period during which, and the
conditions under which, the Restricted Stock and Restricted Stock Units may be
forfeited to the Company, and the other terms and conditions of such awards.
The Restricted Period may be shortened, lengthened or waived by the Committee
at any time in its discretion with respect to one or more Participants or
Awards outstanding.
(b) Shares of Restricted Stock and Restricted Stock Units may not be sold,
assigned, transferred, pledged or otherwise encumbered, except as herein
provided, during the Restricted Period. Certificates issued in respect of
shares of Restricted Stock shall be registered in the name of the Participant
and deposited by such Participant, together with a stock power endorsed in
blank, with the Company. At the expiration of the Restricted Period, the
Company shall deliver such certificates to the Participant or the
Participant's legal representative. Payment for Restricted Stock Units shall
be made to the Company in cash/or shares of Common Stock, as determined at the
sole discretion of the Committee.
Section 10. Other Stock Based Awards
(a) In addition to granting Options, Stock Appreciation Rights, Performance
Shares, Restricted Stock and Restricted Stock Units, the Committee shall have
authority to grant to Participants Stock Unit Awards which can be in the form
of Common Stock or units, the value of which is based, in whole or in part, on
the value of Common Stock. Subject to the provisions of the Plan, including
Section 11 (b) below, Stock Unit Awards shall be subject to such terms,
restrictions, conditions, vesting requirements and payment rules (all of which
are sometimes hereinafter collectively referred to as "rules") as the
Committee may determine in its sole and complete discretion at the time of
grant. The rules need not be identical for each Stock Unit Award.
(b) In the sole and complete discretion of the Committee, a Stock Unit Award
may be granted subject to the following rules:
(1) Any shares of Common Stock which are part of a Stock Unit Award may not
be assigned, sold, transferred, pledged or otherwise encumbered prior to the
date on which the shares are issued or, if later, the date provided by the
Committee at the time of grant of the Stock Unit Award.
(2) Stock Unit Awards may provide for the payment of cash consideration by
the person to whom such Award is granted or provide that the Award, and any
Common Stock to be issued in connection therewith, if applicable, shall be
delivered without the payment of cash consideration, provided that for any
Common Stock to be purchased in connection with a Stock Unit Award the
purchase price shall be at least 50% of the Fair Market Value of such Common
Stock on the date such Award is granted.
(3) Stock Unit Awards may relate in whole or in part to certain performance
criteria established by the Committee at the time of grant.
(4) Stock Unit Awards may provide for deferred payment schedules and/or
vesting over a specified period of employment.
(5) In such circumstances as the Committee may deem advisable, the Committee
may waive or otherwise remove, in whole or in part, any restriction or
limitation to which a Stock Unit Award was made subject at the time of grant.
(c) In the sole and complete discretion of the Committee, an Award, whether
made as a Stock Unit Award under this Section 10 or as an Award granted
pursuant to Sections 6 through 9, may provide
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the Participant with (i) dividends or dividend equivalents (payable on a
current or deferred basis) and (ii) cash payments in lieu of or in addition to
an Award.
Section 11. General Provisions
(a) Withholding.
The Employer shall have the right to deduct from all amounts paid to a
Participant in cash (whether under this Plan or otherwise) any taxes required
by law to be withheld in respect of Awards under this Plan. In the case of
payments of incentive awards in the form of Common Stock, at the Committee's
discretion the Participant may be required to pay to the Employer the amount
of any taxes required to be withheld with respect to such Common Stock, or, in
lieu thereof, the Employer shall have the right to retain (or the Participant
may be offered the opportunity to elect to tender) the number of shares of
Common Stock whose Fair Market Value equals the amount required to be
withheld.
(b) Awards.
Each Award hereunder shall be evidenced in writing, delivered to the
Participant and shall specify the terms and conditions thereof and any rules
applicable thereto, including but not limited to the effect on such Award of
the death, retirement or other termination of employment of the Participant
and the effect thereon, if any, of a Change in Control of the Company.
(c) Nontransferability.
No Award shall be assignable or transferable except by Will or the laws of
descent and distribution, and no right or interest of any Participant shall be
subject to any lien, obligation or liability of the Participant.
Notwithstanding the above, in the discretion of the Committee, awards may be
transferable pursuant to a Qualified Domestic Relations Order ("QDRO"), as
determined by the Committee or its designee.
(d) No Right to Employment.
No person shall have any claim or right to be granted an Award, and the grant
of an Award shall not be construed as giving a Participant the right to be
retained in the employ of the Employer. Further, the Employer expressly
reserves the right at any time to dismiss a Participant free from any
liability, or any claim under the Plan, except as provided herein or in any
agreement entered into with respect to an Award.
(e) No Rights as Stockholder.
Subject to the provisions of the applicable Award, no Participant or
Designated Beneficiary shall have any rights as a stockholder with respect to
any shares of Common Stock to be distributed under the Plan until he or she
has become the holder thereof. Notwithstanding the foregoing, in connection
with each grant of Restricted Stock hereunder, the applicable Award shall
specify if, and to what extent, the Participant shall not be entitled to the
rights of a stockholder in respect of such Restricted Stock.
(f) Construction of the Plan.
The validity, construction, interpretation, administration and effect of the
Plan and of its rules and regulations, and rights relating to the Plan, shall
be determined solely in accordance with the laws of Delaware.
(g) Effective Date.
Subject to the approval of the stockholders of the Company, the Plan shall be
effective on December 16, 1993. No Options or Awards may be granted under the
Plan after December 15, 2003; however,
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all previous awards made that have not expired under their original terms at
the time the Plan expires will remain outstanding.
(h) Amendment of Plan.
The Board may suspend, terminate or amend the Plan at it's discretion. The
Board will not be required to obtain stockholder approval of any amendment
to the Plan except for increases in total shares under the Plan, or where such
approval is necessary to assure the Plan's continued qualification under Rule
16b-3 of the Act, or compliance with the American Stock Exchange rules or the
Code.
(i) Amendment of Award.
The Committee may amend, modify or terminate any outstanding Award without the
Participant's consent at any time prior to payment or exercise in any manner
not inconsistent with the terms of the Plan, including without limitation, (i)
to change the date or dates as of which (A) an Option or Stock Appreciation
Right becomes exercisable; (B) a Performance Share is deemed earned; (C)
Restricted Stock becomes nonforfeitable; or (ii) to cancel and reissue an
Award under such different terms and conditions as it determines appropriate.
(j) Change in Control
In order to preserve a Participant's rights under an Award in the event of a
Change in Control of the Company, the Committee in its discretion may, at the
time an Award is made or any time thereafter, take one or more of the
following actions: (i) provide for the acceleration of any time period
relating to the exercise of the Award, (ii) provide for the purchase of the
Award upon the Participant's request for an amount of cash or other property
that could have been received upon the exercise or realization of the Award
had the Award been currently exercisable or payable, (iii) adjust the terms of
the Award in a manner determined by the Committee to reflect the Change in
Control, (iv) cause the Award to be assumed, or new rights substituted
therefor, by another entity, or (v) make such other provision as the Committee
may consider equitable and in the best interests of the Company.
(k) Information Confidential
As partial consideration for the granting of each Option hereunder, the Award
may, in the Committee's sole and absolute discretion, provide that the
Participant shall agree with the Company that he will keep confidential all
information and knowledge that he or she has relating to the manner and amount
of his or her participation in the Plan; provided, however, that such
information may be disclosed as required by law and may be given in confidence
to the Participant's spouse, tax and financial advisors, or to a financial
institution to the extent that such information is necessary to secure a loan.
In the event any breach of this promise comes to the attention of the
Committee, it shall take into consideration such breach, in determining
whether to recommend the grant of any future Option to such Participant, as a
factor militating against the advisability of granting any such future Option
to such individual.
(l) Other Benefits
Participation in the Plan shall not preclude the Participant from eligibility
in any other stock option plan of the Company or any Affiliate or any old age
benefit, insurance, pension, profit sharing, retirement, bonus, or other extra
compensation plans which the Company or any Affiliate has adopted, or may, at
any time, adopt for the benefit of its employees.
(m) Execution of Receipts and Releases
Any payment of cash or any issuance or transfer of shares of Stock to a
Participant, or to his legal representative, heir, legatee, or distributee, in
accordance with the provisions hereof, shall, to the
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extent thereof, be in full satisfaction of all claims of such persons
hereunder. The Committee may require any Participant, legal representative,
heir, legatee, or distributee, as a condition precedent to such payment, to
execute a release and receipt therefor in such form as it shall determine.
(n) Severability
If any provision of this Plan is held to be illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining provisions
hereof, but such provision shall be fully severable and the Plan shall be
construed and enforced as if the illegal or invalid provision had never been
included herein.
(o) Notices
Whenever any notice is required or permitted hereunder, such notice must be in
writing and personally delivered or sent by mail or by a nationally recognized
courier service. Any notice required or permitted to be delivered hereunder
shall be deemed to be delivered on the date on which it is personally
delivered, or, if mailed, whether actually received or not, on the third
business day after it is deposited in the United States mail, certified or
registered, postage prepaid, addressed to the person who is to receive it at
the address which such person has previously specified by written notice
delivered in accordance herewith or, if by courier, 24 hours after it is sent,
addressed as described in this Section, or, if by facsimile machine, the time
mechanically recorded on the document by the facsimile process. The Company
or a Participant may change, at any time and from time to time, by written
notice to the other, the address which it or he had previously specified for
receiving notices. Until changed in accordance herewith, the Company and each
Participant shall specify as its and his address for receiving notices the
address set forth in the Agreement or Award pertaining to the shares to which
such notice relates.
(p) Waiver of Notice
Any person entitled to notice hereunder may waive such notice.
(q) Successors
The Plan shall be binding upon each Participant, his legal representatives,
heirs, legatees, and distributees, upon the Company, its successors, and
assigns, and upon the Committee and its successors.
(r) Headings
The titles and headings of Sections and Paragraphs are included for
convenience of reference only and are not to be considered in construction of
the provisions hereof.
Section 12. Adoption of Plan
This Plan shall become effective on the date on which it is approved by the
stockholders of the Company.
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CORNERSTONE NATURAL GAS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Ray C. Davis and Kelcy L. Warren, and each
of them, proxies with power of substitution in each, and hereby authorizes
either of them to represent and to vote, as designated below, all shares of
common stock of CORNERSTONE NATURAL GAS, INC. (the "Company"), par value $0.10
per share ("Common Stock"), standing in the name of the undersigned at the close
of business on March 14, 1994, at the annual meeting of stockholders to be held
on May 10, 1994, in Dallas, Texas, and at any adjournment thereof and especially
to vote on the items of business specified below, as more fully described in the
notice of the meeting dated April 8, 1994, and the proxy statement
accompanying the same, the receipt of which is hereby acknowledged.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS FOR all nominees listed below (except WITHOLD authority to vote for all
as marked to the contrary below) / / nominees listed below / /
</TABLE>
Richard D. Brannon, James W. Bryant, Ted Collins, Jr., Ben H. Cook,
Ray C. Davis, David S. Hunt, C. Robert Sledge, Kelcy L. Warren
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
- ------------------------------------------------------------------------------
2. Ratification and approval of the Company's 1993 Long Term Incentive
Compensation Plan.
FOR / / AGAINST / / ABSTAIN / /
3. In their discretion, the proxies are authorized to vote upon such other
business or matters as may properly come before the meeting or any
adjournment thereof.
(Continued and to be signed on reverse side)
<PAGE>
This proxy when duly executed will be voted in the manner directed herein
by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES FOR DIRECTOR NAMED ABOVE AND FOR PROPOSAL 2.
The undersigned hereby revokes any proxy or proxies heretofore given to
represent or vote such Common Stock and hereby ratifies and confirms all action
that said proxies, their substitutes, or any of them, might lawfully take in
accordance with the terms hereof.
Dated---------------------------------, 1994
--------------------------------------------
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Signature(s) of Stockholders(s)
This proxy should be signed exactly as your
name appears hereon. Joint owners should
both sign. If signed as attorney, executor,
guardian, or in some other representative
capacity, or as an officer of a corporation,
please indicate your capacity or title.
Please complete, date and sign this proxy and
return it in the enclosed envelope, which
requires no postage if mailed in the United
States.
