<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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
NORTH CAROLINA NATURAL GAS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $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 (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
NCNG LOGO
150 Rowan Street/Post Office Box 909
Fayetteville, North Carolina 28302-0909
-----------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 14, 1997
-----------------------------------------------------------------------
December 6, 1996
Fayetteville, North Carolina
TO THE STOCKHOLDERS:
Notice is hereby given that in accordance with the By-Laws, the Annual
Meeting of the Stockholders of North Carolina Natural Gas Corporation (the
"Company") will be held at the Radisson Prince Charles Hotel, 450 Hay Street,
Fayetteville, North Carolina, at 10:00 A.M., on the 14th day of January 1997,
for the following purposes:
1. To elect three Directors to serve for a term of three years.
2. To consider approval of the Company's Long Term Incentive Plan.
3. To consider approval of the Company's Directors' Deferred Compensation
Stock Plan.
4. To consider approval of the Company's Directors' Retirement Compensation
Stock Plan.
5. To transact such other business as may properly come before the meeting.
Only stockholders of record on November 25, 1996 are entitled to vote at
the Annual Meeting and any adjournment thereof.
/s/ SALLY T. SOWERS
SALLY T. SOWERS,
Secretary
- --------------------------------------------------------------------------------
Each Stockholder Who Does Not Expect to Attend is Urged to Date and Sign the
Enclosed Proxy and Return it Promptly in the Enclosed Envelope Which Requires No
Postage if Mailed in the United States.
<PAGE> 3
NORTH CAROLINA NATURAL GAS CORPORATION
150 ROWAN STREET/POST OFFICE BOX 909
FAYETTEVILLE, NORTH CAROLINA 28302-0909
910-483-0315
DECEMBER 6, 1996
------------------------------------
Proxy Statement
------------------------------------
This proxy statement is furnished to Stockholders by the management of the
Company for solicitation of proxies for use at the Annual Meeting of
Stockholders on Tuesday, January 14, 1997, at 10:00 A.M. at the Radisson Prince
Charles Hotel, 450 Hay Street, Fayetteville, North Carolina, and at all
adjournments thereof, for the purposes set forth in the attached Notice of
Annual Meeting of Stockholders. The accompanying proxy is for use at the meeting
if a Stockholder either will be unable to attend in person or will attend but
wishes to vote by proxy. The proxy may be revoked by the Stockholder at any time
before it is exercised by filing with the Secretary of the Company an instrument
revoking it, filing a duly executed proxy bearing a later date or by attending
the meeting and electing to vote in person. All shares of the Company's Common
Stock represented by valid proxies received pursuant to this solicitation, and
not revoked before they are exercised, will be voted in the manner specified
therein. If no specification is made, the proxies will be voted in favor of: (1)
electing three Directors for three-year terms expiring in 2000; (2) approving
the Company's Long Term Incentive Plan; (3) approving the Company's Directors'
Deferred Compensation Stock Plan; and (4) approving the Company's Directors'
Retirement Compensation Stock Plan.
The Annual Report for the twelve-month period ended September 30, 1996, is
enclosed herewith.
This proxy is solicited on behalf of the Board of Directors of the Company
and the cost of solicitation has been or will be borne by the Company. The
approximate date this proxy material is first being sent to Stockholders of the
Company is December 6, 1996. The solicitation is being made by mail. In
addition, arrangements may be made with brokerage houses and other custodians,
nominees and fiduciaries to send proxies and proxy material to their principals
and the Company will reimburse them for their expense in so doing. It may be
that further solicitation of proxies will be made by telephone or oral
communication with some Stockholders of the Company following the original
solicitation. All such further solicitation will be made by officers and regular
clerical employees of the Company who will not be additionally compensated
therefor.
RECORD DATE AND VOTING SECURITIES
Only common Stockholders of record at the close of business on the 25th day
of November 1996, are entitled to vote at the Annual Meeting. On that date, the
Company had outstanding and entitled to vote 6,575,605 shares of common stock,
$2.50 par value ("Common Stock"). Each issued and outstanding share of Common
Stock entitles the record holder to one vote. No Stockholder has the right to
vote cumulatively for the election of directors. As of September 30, 1996, no
Stockholder, to the knowledge of the Company, is the beneficial owner of 5% or
more of the Company's Common Stock.
PROPOSAL ONE. ELECTION OF DIRECTORS
The Board of Directors of the Company consists of nine persons and is
divided into three classes, with the term of office of each class ending in
successive years. The terms of the Directors of Class III expire with this
Annual Meeting of Stockholders. Each of the three nominees for Class III, if
elected, will serve three years until the 2000 Annual Meeting and until their
successors have been elected and qualified. The current Directors of Classes I
and II will continue in office until the 1998 and 1999 Annual Meetings,
respectively.
The persons named in the enclosed form of proxy will vote for the election
of the three nominees named below unless authority so to vote is withheld. In
the event any of the nominees should become unable to serve
<PAGE> 4
as a Director, the proxy will be voted in accordance with the best judgment of
the person or persons acting under it. The election of each nominee requires the
affirmative vote of a majority of the shares of Common Stock cast in the
election of Directors. The proxies solicited hereby will be voted FOR the
election of three nominees listed below unless otherwise specified in the proxy.
All of the nominees are currently Directors of the Company and each has
served continuously as a Director of the Company since the year indicated. The
Company is not aware of any reason why any nominee would be unable to serve.
The following table sets forth the names and ages of the Nominees For
Election As Directors and Continuing Directors, their principal occupation
during the past five years and other data regarding them, including Company
securities beneficially owned at November 25, 1996, based on information
received from the respective Nominees and Continuing Directors.
INFORMATION CONCERNING DIRECTORS
<TABLE>
<CAPTION>
SHARES
DIRECTOR PRINCIPAL OCCUPATION AND DIRECTORSHIPS IN BENEFICIALLY
NAME AGE SINCE OTHER PUBLIC COMPANIES WHERE APPLICABLE OWNED(1)(2)
- ---------------------- --- -------- ------------------------------------------------------- -----------
<S> <C> <C> <C> <C>
NOMINEES FOR ELECTION AS DIRECTORS
James E.S. Hynes 56 1993 Chairman of the Board of Hynes Sales Co. Inc., 3,157
manufacturers representatives, Charlotte, North
Carolina. Directorship: Ruddick Corporation
Richard F. Waid 68 1981 Managing Director, The Robinson-Humphrey Company, 14,422
Investment Banking & Securities Broker/Dealer, Atlanta,
GA, 1992-date; Senior Vice President, Tucker Anthony,
Incorporated, Investment Banking & Securities
Broker/Dealer, Washington, D.C., 1990-1992.
Directorship: Iverson Technology Corp.
Calvin B. Wells 60 1981 Chairman, President and Chief Executive Officer of the 20,682
Company
CONTINUING DIRECTORS
George T. Clark, Jr. 68 1978 Attorney at Law, Wilmington, North Carolina 8,047
(Term Expires 1998)
Paul A. DelaCourt 62 1989 Chairman, The North Carolina Enterprise Corporation; 7,750
(Term Expires 1999) Vice Chairman, North Hills, Inc., Raleigh, North
Carolina. Directorships: Federal Reserve Bank of
Richmond and Golden Corral Corporation
Frank B. Holding, Jr. 35 1995 President of First Citizens BancShares, Inc. and First 1,500
(Term Expires 1999) Citizens Bank, Raleigh, North Carolina, 1994-date; Area
Executive, First Citizens Bank, Charlotte, North
Carolina, 1992-1994; City Executive, First Citizens
Bank, Fayetteville, North Carolina, 1989-1991.
Directorship: First Citizens BancShares, Inc.
Robert T. Johnson 60 1994 Retired Partner, Arthur Andersen LLP, Atlanta, Georgia 2,579
(Term Expires 1998)
John O. McNairy 48 1995 President and CEO of Tidewater Transit Co., Inc. and 41,171
(Term Expires 1999) Harvey Enterprises & Affiliates, Kinston, North
Carolina, 1981-date; Chairman of Board of Stackhouse,
Inc., Goldsboro, North Carolina, 1994-date.
Directorship: Wachovia Bank of N.C., N.A.
William H. Prestage 61 1988 President, Prestage Farms, Clinton, North Carolina. 11,965
(Term Expires 1998) Directorship: Smithfield Foods, Inc.
All Directors and Officers as a Group, 145,978
including those named above (23 persons)
</TABLE>
- ---------------
(1) As reported to the Company by the Directors and nominees and executive
officers (including shares held by spouses, minor children, affiliated
companies, partnerships and trusts over which the named person has
beneficial ownership). The percentage of outstanding shares owned
beneficially by each person named above is less than 1%. All Directors and
Officers as a group owned 2.2%.
(2) Includes full shares acquired through the Dividend Reinvestment Plan.
2
<PAGE> 5
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING ATTENDANCE
Meetings of the Board of Directors are held regularly each quarter,
including an organizational meeting following the conclusion of the Annual
Meeting of Stockholders. Special meetings of the Directors are called as
necessary. The Board of Directors held five meetings in fiscal year 1996.
The Company has two standing committees of the Board of Directors, an Audit
Committee and a Personnel and Compensation Committee. The Company does not have
a Nominating Committee.
The Audit Committee, which consists of Messrs. Holding, McNairy, Prestage
and Waid, is responsible for approval of the services performed by the Company's
independent accountants and for review of the objectivity of its financial
reporting. It meets with appropriate Company financial personnel and independent
public accountants in connection with its review of the financial statements to
be included in the Company's Annual Report to Stockholders. This Committee also
recommends to the Board the appointment of the independent public accountants to
serve as auditors for the following year in examining the accounts of the
Company. This Committee met one time during fiscal year 1996.
The Personnel and Compensation Committee, which consists of Messrs. Clark,
DelaCourt, Hynes, and Johnson, approves changes in the Company's pension plan
and makes recommendations to the Board with respect to compensation of the
officers of the Company. This Committee met four times during fiscal year 1996.
During the past fiscal year, no member of the Board of Directors attended
fewer than 75% of the Directors' meetings or 75% of the meetings of committees
of the Board of Directors on which they served.
DIRECTORS' COMPENSATION
The Company's standard arrangement for compensation of Directors is payment
of $1,250 per month as a Director's retainer fee and $600 for attendance at each
meeting of the Board or a committee. Salaried officers of the Company also
serving on the Board of Directors receive no additional compensation for their
services as members of the Board of Directors.
Under the Cash Retirement Plan for Directors adopted by the Board on
January 13, 1981, as amended, Directors of the Company, upon retirement from the
Board of Directors at age 75 and after serving as a Director for five years or
more, will be paid retirement compensation for life in an amount equal to the
annual Director's retainer fee. If a Director elects to retire before age 75,
the retirement compensation continues for the number of years he served on the
Board. In the event of a change in control of the Company, a Director who has
served not less than five years on the Board may elect to retire at such time
with retirement compensation for life. After retirement, each Director shall be
an Advisory Director available to the Board of Directors for consultation and
advice. The Company proposes to replace the Cash Retirement Plan for Directors
with the Directors' Retirement Compensation Stock Plan ("Stock Retirement
Plan"). (See Proposal Four and Exhibit "C".)
3
<PAGE> 6
EXECUTIVE COMPENSATION AND STOCK OPTION INFORMATION
The following table sets forth all compensation paid to the Company's chief
executive officer and the two other most highly compensated executive officers
of the Company whose total annual salary and bonuses exceeded $100,000 for the
fiscal years 1994, 1995 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------- ------------
OTHER RESTRICTED ALL
NAME AND ANNUAL STOCK OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMP.(1) AWARDS COMPENSATION
- ------------------------------------- ---- -------- ----- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Calvin B. Wells 1996 $255,358 $ 0 $ 0 $0 $0
Chairman, President and 1995 246,412 0 121,788 0 0
Chief Executive Officer 1994 225,608 0 0 0 0
Gerald A. Teele 1996 171,108 0 44,050 0 0
Senior Vice President, Treasurer 1995 165,064 0 28,417 0 0
and Chief Financial Officer 1994 153,858 0 0 0 0
Terrence D. Davis 1996 123,400 0 0 0 0
Vice President -- Operations 1995 118,331 0 0 0 0
and Industrial Sales 1994 108,650 0 0 0 0
</TABLE>
- ---------------
(1) Represents the difference between the price paid by the named executive
officers for Common Stock of the Company purchased from the Company upon
the exercise of stock options and the fair market value of such Common
Stock and cash paid for dividend equivalents accrued from the grant date to
the exercise date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table shows the aggregated stock options exercised in the
fiscal year ended September 30, 1996 and the stock option values for the named
executive officers at September 30, 1996.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END OPTIONS AT FY-END(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald A. Teele............. 2,800 $ 35,560 2,800 -- $44,660 --
Terrence D. Davis........... -- -- 5,700 -- $89,205 --
</TABLE>
- ---------------
(1) Represents the difference between the market value of the shares on the date
of exercise of the options and the exercise price.
(2) Represents the closing price for the Company's Common Stock on September 30,
1996 of $29.75 less the exercise price for all outstanding options to the
named individual.
ANNUAL INCENTIVE PLAN
The Annual Incentive Plan ("AIP") as adopted by the Board of Directors in
1996 became effective October 1, 1996 for the Company's 1997 Fiscal Year.
Officers and key employees who have the opportunity to make significant
contributions to the Company's performance are eligible to receive AIP incentive
awards based upon the financial performance of the Company, performance of the
individual participant and the base salary of each participant. The Board of
Directors has the right to suspend or terminate the AIP at any time.
4
<PAGE> 7
The AIP is administered by the Personnel and Compensation Committee of the
Board of Directors (the "Committee") which, with approval of the Board of
Directors, may amend or modify the AIP. The Company's Chief Executive Officer
("CEO") assists the Committee in administering the AIP, with the exception of
any decisions pertaining to the CEO's performance and compensation under the
AIP. Participants are approved by the Committee, based upon the CEO's
recommendations, and will be selected prior to each fiscal year by the
Committee. For Fiscal Year 1997, twenty key employees have been selected to
participate in the AIP. Participants selected by the Committee to participate in
the AIP are grouped into tiers based on the scope of their job responsibilities
with such tiers being used to determine target and maximum incentive award
levels. Target and maximum incentive award levels are established by the
Committee for each participant tier based on a percentage of the base salary for
each participant.
Under the AIP, annual incentive awards are granted upon the achievement of
a combination of Company and individual objectives as established by the
Committee. While all participants will have some portion of their incentives
tied to Company objectives, the weight placed on individual objectives will vary
based on each participant's job accountabilities and the degree to which
quantifiable individual objectives can be set and measured. An AIP incentive
award, if any, to be granted to the CEO for the 1997 Fiscal Year will be
determined by the Committee solely by reference to the Company objectives.
Company objectives are selected and weighted by the Committee based on their
importance to overall Company success and to provide a balance among operating
and financial priorities.
The Company and individual performance objectives are stated in terms of
minimum, target and stretch goals. Results that are at or below the performance
threshold for a performance measure earn no incentive award. Likewise, results
that are at or above the stretch performance level earn the maximum incentive
award. Where results fall between the threshold and target or target and stretch
performance levels, straight-line interpolation will be used to calculate actual
incentives earned.
At the conclusion of each plan year (fiscal year), reviews of each AIP
participant's actual performance versus individual objectives will be made by
the CEO or supervising personnel and results will be reported to the Committee.
The actual incentive award earned by a participant, if any, is the sum of the
incentives earned for actual performance against each Company and individual
objective, as the participant's incentive potential is allocated among
objectives based on their relative weights.
KEY EMPLOYEE STOCK OPTION PLAN
The Key Employee Stock Option Plan (the "Plan") was authorized by the Board
of Directors and Stockholders in 1990. Specified key employees of the Company
are eligible to receive an option to purchase shares of Common Stock of the
Company. The purpose of the Plan is to attract and retain individuals of
outstanding ability and to encourage such key employees to acquire an ownership
in the Company. If the Long Term Incentive Plan described in Proposal Two below
is approved by Stockholders, the Board of Directors will not grant additional
options under the Key Employee Stock Option Plan.
Under the Plan, options may be granted to all key employees as a group to
purchase up to a maximum of 150,000 shares of the Company's Common Stock as
adjusted for a stock split during 1992. The option price per share in each case
will be 90% of the "fair market value" of a share of the Company's Common Stock
on the date the option is granted as determined under the terms of the Plan.
Payment of the purchase price upon exercise of an option must be made in cash.
However, the Company shall pay to any employee exercising an option a sum equal
to 50% of the dividends which would have been payable on the shares of Common
Stock covered by the option during the period from the grant of the option to
the exercise date of the option. Proceeds received by the Company upon the
exercise of options will be used for general corporate purposes.
An option may not be exercised until five years following the date of grant
and shall then be exercisable only during the next two-year period (the "Option
Period"). An option will terminate upon the earliest to occur of: (i) expiration
of the Option Period; (ii) termination of the employee's employment during the
five-year period following the date of grant for any reason other than death,
disability or retirement under the Pension Plan; or (iii) three months following
termination of the employee's employment for any reason during the Option
Period. In the event of termination of employment during the five-year period
following the date of
5
<PAGE> 8
grant due to death, disability or retirement, the employee (or, in the event of
death, his beneficiary or estate) shall immediately become entitled to exercise
the option for a period of three months as to a portion of the shares equal to
the number of full calendar months between the date of grant and the date of
termination divided by sixty. The plan also provides for a forfeiture at the
discretion of the Committee of an employee's rights to purchase a portion of the
shares subject to an option in certain cases where the employee is demoted or
his responsibilities are reduced during the five years following the date of
grant, and allows the Committee to provide that any option granted will
otherwise expire or terminate prior to the expiration of the Option Period upon
the occurrence of other events specified by the Committee. Options may be
granted under the Plan on terms deemed appropriate by the Committee but which
differ from those provided in the Plan where such options are granted in
substitution for options held by employees of other corporations who become
employees of the Company or one of its subsidiaries as the result of a merger or
consolidation with the Company or the acquisition by the Company of such other
corporation.
EMPLOYEE STOCK PURCHASE PLAN
The Employee Stock Purchase Plan (the "ESPP") was adopted by the Board of
Directors and approved by Stockholders in 1990. The purpose of the ESPP is to
encourage employees of the Company to purchase Common Stock in the Company and
thereby increase employee interest in the successful operations of the Company
and allow the Company's employees to share in the economic growth and success of
the Company through stock ownership.
The ESPP is administered by a committee of four (4) or more individuals who
are Directors or employees of the Company. The ESPP provides for the reservation
of 300,000 shares, adjusted for the stock split, of the Company's Common Stock
available to all eligible employees of the Company.
Eligible employees of the Company are those employees who have completed
twelve (12) months of continuous service with the Company and meet the minimum
work hours per week. Such employees may authorize a payroll deduction of any
amount between 2% and 6% of their compensation, including bonuses and overtime,
for the purchase of the Company's Common Stock. Any payroll deduction designated
by an employee must be in whole multiples of 1% and any stock purchased from the
Company on behalf of an employee shall be purchased once a year at a price equal
to 90% of the lesser of the average of five (5) trading days ending on:
(a) the first day of the offering period, or
(b) the last day of the offering period.
The offering period shall be each twelve (12) month period commencing on January
1.
The Board of Directors has the right to amend or terminate the ESPP at any
time. The ESPP was originally scheduled to terminate January 1, 1994. However,
in September 1993, the Board of Directors amended the ESPP to extend the
termination date to the earlier of (a) January 1, 1999, or (b) the date on which
all or substantially all of the shares of Common Stock authorized for issuance
under the ESPP have been purchased.
EMPLOYEE RETIREMENT PLANS
The Company has a defined benefit retirement plan (the "Retirement Plan")
which covers all full time employees upon their attaining age 21 and completing
one year of service. The Company also has a pension restoration plan (the
"Restoration Plan") which provides certain employees with retirement benefits
they otherwise would have received under the Retirement Plan formula but which
may not be paid to them under the Retirement Plan due to limitations on benefits
imposed by the Internal Revenue Code. Collectively, these plans are referred to
herein as the "Retirement Plans".
The Retirement Plan is wholly paid for by the Company which has established
a trust with a bank as trustee to which contributions are made from time to time
by the Company and from which the benefits under
6
<PAGE> 9
the Retirement Plan are paid. The Restoration Plan is administered by the
Company and the benefits thereunder are payable from the Company's general
funds.
A participant in the Retirement Plans becomes fully vested prior to normal
retirement at age 65 upon the completion of five years of service. Benefits are
also provided under the Retirement Plans in the event of early retirement or
disability retirement at or after age 55 and the completion of at least 20 years
of service. Benefits under the Retirement Plans are based upon application of a
formula to the specified average compensation and years of credited service (up
to a maximum of 20 years) at normal retirement age. Compensation covered by the
Retirement Plans consists of W-2 wages plus certain deferred compensation, the
total of which approximates the total of amounts shown in the Summary
Compensation Table.
The table below illustrates the amount of annual, normal retirement
benefits payable under the Retirement Plans based upon application of the plan
formula to the specified average compensation and years of credited service at
normal retirement age, allowing for reasonable increases in existing
compensation levels. These amounts, which do not reflect reductions which would
result from joint and survivor elections, are in addition to Social Security
benefits or other amounts that would be paid at normal retirement age.
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
AVERAGE ---------------------------------
COMPENSATION 10 15 20
------------ ------- -------- --------
<S> <C> <C> <C>
$ 50,000 $12,500 $ 18,750 $ 25,000
60,000 15,000 22,500 30,000
70,000 17,500 25,250 35,000
80,000 20,000 30,000 40,000
90,000 22,500 33,750 45,000
100,000 25,000 37,500 50,000
110,000 27,500 41,250 55,000
125,000 31,250 46,675 62,500
140,000 35,000 52,500 70,000
150,000 37,500 56,250 75,000
175,000 43,750 65,625 87,500
200,000 50,000 75,000 100,000
225,000 56,250 84,375 112,500
250,000 62,500 93,750 125,000
275,000 68,750 103,125 137,500
</TABLE>
Anticipated years of credited service under the Retirement Plans for the
individuals named in the Summary Compensation Table are as follows: Calvin B.
Wells, 27 years; Gerald A. Teele, 31 years; and Terrence D. Davis, 19 years.
Benefit amounts are computed on a straight-line annuity basis.
EXECUTIVE EMPLOYMENT AGREEMENTS
IN THE EVENT OF CHANGE IN CONTROL
The Company has Employment Agreements ("Agreements") with ten (10) of its
executive officers holding the rank of corporate vice president or higher. The
purpose of such Agreements is to encourage retention of its present senior
executive officers and provide assurance that such officers are able to devote
their full attention and energies to the Company's business in the face of
potentially disruptive and distracting circumstances that may arise upon an
attempted or actual change in control or takeover of the Company. The Agreements
provide for the payment of certain severance benefits only in the event of a
termination of employment following a change in control of the Company. A
"Change in Control" is deemed to have occurred if (i) the Company consolidates
or merges into or with another corporation as a result of which the Company is
not the surviving corporation, or (ii) a majority of the outstanding shares of
the Company are acquired by any other corporation, person or group.
7
<PAGE> 10
Each officer is entitled to such benefits in the event his employment with
the Company or its successor is terminated within a period of three (3) years
following a Change in Control unless such termination is (i) due to his death or
retirement, (ii) by the Company for "cause" or due to his "disability", or (iii)
by the officer other than for "Good Reason". Such benefits consist of severance
pay in an amount equal to the executive's salary in effect at the time of Change
in Control for a maximum period of two (2) years and eleven (11) months plus
participation in any pension or retirement plans, life insurance, health and
accident insurance, and disability benefits normally due the employee provided
that if the terminated executive obtains employment with another employer, the
amount of compensation due the terminated employee by the Company or its
successor will be reduced by the salary paid by the other employer. With respect
to all individuals who have such Agreements, the average of their current annual
salaries is $115,760.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no executive officer-director interlocks where an executive of
the Company serves on the Compensation Committee of another company that has an
executive officer serving on the Company's Board of Directors. Messrs. George T.
Clark, Jr., Paul A. DelaCourt, James E.S. Hynes and Robert T. Johnson serve as
the Directors' Personnel and Compensation Committee.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
The Company's directors and executive officers, and persons who own more
than 10% of the Company's Common Stock, are required under the Securities
Exchange Act of 1934 to file reports of ownership and changes in ownership of
Company Common Stock with the Securities and Exchange Commission and the New
York Stock Exchange.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's Directors and executive
officers, the Company believes that during the 1996 fiscal year, its Directors
and executive officers complied with all applicable Section 16(a) filing
requirements, except for Mr. McNairy who inadvertently failed to specify on Form
3 all shares of the Company's Common Stock owned by privately held companies in
which he was an officer, director or stockholder. Since the filing of such Form
3, neither Mr. McNairy nor such companies have had any transactions in the
Company's Common Stock and Mr. McNairy has filed Form 5 correctly specifying all
other shares of Common Stock beneficially owned by him which were inadvertently
omitted from his initial Form 3 filing.
REPORT OF PERSONNEL AND COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Personnel and Compensation Committee is responsible for recommending to
the Board of Directors the compensation level of the Chief Executive and other
officers of the Company. This Committee is comprised of four independent outside
directors who are not eligible to participate in any compensation program
available to officers or employees of the Company.
The Committee's compensation philosophy is based on the following
principles:
(1) Compensation of the Company's executives is to be motivational and
emphasize the key financial and operating objectives that have the ultimate goal
of enhancing Stockholder value while fulfilling the Company's responsibilities
as a regulated North Carolina utility;
(2) The levels of compensation shall reflect consideration of the level of
job responsibility, Company and individual performance, experience and industry
peer comparisons;
(3) Executive compensation is to be competitive in order to attract and
retain qualified employees. In addition to monetary payments, the Company shall
award stock ownership to executives based on performance in order to better
align the interests of executives with those of Stockholders;
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<PAGE> 11
(4) The Committee shall set compensation for its executives outside the
presence of the executives concerned.
The compensation of executive officers consists primarily of a base salary,
the Key Employee Stock Option Plan previously described and the Annual Incentive
Plan effective October 1, 1996. As previously noted in this Proxy Statement, the
Board of Directors will not grant additional options under the Key Employee
Stock Option Plan if the Long Term Incentive Plan described in Proposal Two of
this Proxy Statement is approved. The Long-Term Incentive Plan as described in
Proposal Two herein is designed to focus the participants' attention on the long
term creation of Stockholder value that exceeds the Company's industry peers
while promoting ownership of the Company's Common Stock among the Company's
senior officers, thereby increasing management's linkage to Stockholder
interests. The Annual Incentive Plan is designed to attract and retain capable
individuals to serve as officers and key employees of the Company, and to
motivate these employees to achieve operating results exceeding industry peers
and to control operating expenses while producing above average returns for
Stockholders.
On recommendation of the Personnel and Compensation Committee and approval
of the Board of Directors, Mr. Wells' salary was set at a level of $257,000 at
the January 1996 meeting of the Board of Directors. This compensation level was
set based on the factors indicated above, including compensation of individuals
holding similar positions in other gas distribution companies, return on equity,
other financial and operating performance indicators and certain qualitative
factors. The performance of the Company's Common Stock and total return for the
most recent five-year period of his leadership as Chief Executive Officer is
shown on the performance graph below.
This report is submitted by members of the Personnel and Compensation
Committee: Paul A. DelaCourt, Chairman; George T. Clark, Jr.; James E.S. Hynes;
and Robert T. Johnson.
PERFORMANCE GRAPH
The graph below compares the yearly change in the cumulative total
Stockholder return for NCNG Common Stock as compared with the S&P Utilities and
a peer group of companies. This graph assumes investment of $100 in Common Stock
in each of the indices on September 30, 1991 and reinvestment of all subsequent
dividends.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) NCNG S&P Utilities Peer Group
<S> <C> <C> <C>
1991 100 100 100
1992 148 114 109
1993 200 142 139
1994 173 124 121
1995 176 158 138
1996 247 169 168
</TABLE>
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<PAGE> 12
The members of the peer group referred to in the performance graph above
are AGL Resources, Atmos Energy Corp., Bay State Gas, Berkshire Gas Co.,
Brooklyn Union Gas Co., Cascade Natural Gas Corp., Colonial Gas Co., Connecticut
Energy Corp., Connecticut Natural Gas Corp., Delta Natural Gas Co. Inc., Energy
West Inc., Energynorth Inc., Essex County Gas Co., Indiana Energy Inc., Laclede
Gas Co., Mobile Gas Service Corp., New Jersey Resources, Nicor Inc., Northwest
Natural Gas Co., NUI Corp., Pacific Enterprises, Peoples Energy Corp., Piedmont
Natural Gas Co., Providence Energy Corp., Public Service Co. of NC, Southern
Union, United Cities Gas Co., Washington Energy Co., Washington Gas Light Co.,
and Yankee Energy System, Inc.
PROPOSAL TWO. APPROVAL OF NORTH CAROLINA NATURAL GAS CORPORATION LONG TERM
INCENTIVE PLAN
GENERAL
The Board of Directors is submitting to the Stockholders for approval the
North Carolina Natural Gas Corporation Long Term Incentive Plan ("LTIP"). The
Board of Directors has adopted the LTIP which, subject to Stockholder approval,
would become effective as of October 1, 1996. The purposes of the LTIP are to
(i) focus participants' attention on the long-term creation of Stockholder value
that exceeds the performance of the Company's industry peers; (ii) provide a
competitive form of long-term incentive compensation that attracts and retains
qualified management talent and motivates their performance; (iii) promote
ownership of stock among senior officers of the Company, thereby increasing
management's linkage to Stockholder interests; and (iv) provide variability in
compensation to senior officers that is closely linked to long-term financial
and market performance of the Company.
Under the LTIP, incentive awards would be made to selected senior officers
of the Company who have the opportunity to make a significant contribution to
long-term Company performance. There are currently ten persons within this class
of senior officers. The LTIP is wholly performance-based, and utilizes
measurement criteria which would directly link a portion of participating
management's remuneration to the Company's financial performance and Stockholder
return. The discussion which follows describes the material features of the
LTIP. The discussion is subject, in all respects, to the terms of the LTIP
attached to this Proxy Statement as Exhibit "A".
ADMINISTRATION AND TERMINATION
The LTIP shall be administered by the Personnel and Compensation Committee
("Committee") of the Board of Directors of the Company which has authority to
determine the senior officers of the Company to whom awards shall be granted,
performance measures and performance ranges applicable to the measures, the
amount of LTIP award to be paid, and the other terms and conditions of each LTIP
award. The Committee consists of two or more persons who are "disinterested"
persons within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934.
The Committee, subject to approval by the Board of Directors, shall have
the right at any time to amend or modify the LTIP as to future plan cycles,
other than with respect to the number of shares of the Company's $2.50 per share
par value Common Stock ("Common Stock") that may be issued under the LTIP.
The LTIP is anticipated to continue in effect for a period of ten years
through September 30, 2006; however, the Committee, subject to approval of the
Board of Directors, shall have the right to terminate the LTIP at any time.
DESCRIPTION OF THE LTIP
The LTIP is a performance share plan, using shares of Common Stock and cash
awards equivalent to the accrued dividends on earned shares of Common Stock as
the form of the incentive award. Performance shares and dividend equivalents may
only be earned for accomplishment of specific Company performance measures
established for each plan cycle during the term of the LTIP.
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<PAGE> 13
Under the LTIP, the Committee, at the beginning of each plan year (which is
a fiscal year commencing October 1), shall select the senior officers of the
Company having the opportunity to make a significant contribution to the
Company's long-term performance who are eligible to participate in the LTIP for
the plan cycle. The plan cycle is the period over which the Company's
performance shall be measured to determine whether any LTIP award shall be paid
and in what amount. The plan cycle shall typically be five plan years,
commencing with the first day of the first fiscal year (October 1, 1996), with
the exception of two special plan cycles which shall cover the periods of Fiscal
Year 1997 through 1999 and Fiscal Year 1997 through 2000.
The Committee shall establish target awards for each LTIP participant,
stated as a percentage of the participant's salary. Those target awards shall be
converted into a target number of "performance shares" for each LTIP participant
by dividing the participant's target award by the average price of one share of
Common Stock for the twelve months preceding the plan cycle. The maximum number
of performance shares that may be earned by a participant is equal to two times
the participant's target number of performance shares.
The actual number of performance shares earned by participants depends upon
the Company's actual results during the plan cycle versus established
performance measures. The Committee shall select performance measures based upon
their relevance in measuring the Company's financial and market performance
versus that of the Company's industry peers. For each plan cycle, the Committee
shall select performance measures and assign weights on the basis of each
performance measure's importance to the long-term success of the Company. For
plan cycles represented by Fiscal Years 1997 through 1999, 1997 through 2000 and
1997 through 2001, the following performance measures and weights to be used
are: (i) total Stockholder return (the annualized rate of return for the plan
cycle reflecting stock price appreciation plus the reinvestment of dividends and
the compounding effect of dividends paid on reinvested dividends) for the
Company over the period of each plan cycle as compared to the results achieved
by the Committee-selected group of peer gas distribution companies for the same
period (50% weight); and (ii) average return on equity (the average percentage
return on equity for all years in the plan cycle. Return on equity for a
particular year is net income divided by the average of common equity at the
beginning and end of the fiscal year) for the Company over the period of each
plan cycle as compared to the results achieved by the same group of peer gas
distribution companies for the same period (50% weight).
The Committee shall also establish for each plan cycle the performance
range applicable to each performance measure and the amount of incentive
compensation that shall be paid at various levels of achievement of the
performance measures. For each performance measure, the Committee shall
establish a performance range which includes three specific performance levels:
threshold, target and stretch. No payout of a LTIP award shall be made unless
"threshold" performance for one or more of the selected performance measures is
attained by the Company for the plan cycle. Company results that are at or above
the stretch performance range earn the maximum number of performance shares by
participants. Where results fall between threshold and target or target and
stretch range for a performance measure, straight-line interpolation shall be
used to calculate actual performance shares earned with performance shares being
rounded off to the nearest whole number of shares.
If a LTIP participant remains employed by the Company from the first day
until the last day of the plan cycle, he shall be entitled to receive his LTIP
award based upon the levels of attainment by the Company of the performance
targets applicable to each performance measure for the plan cycle. If a
participant terminates employment with the Company prior to the end of the plan
cycle, he shall forfeit his right to any payment of the LTIP award, unless his
termination results from death, disability or retirement. In these latter
events, the participant (or in the event of death, his beneficiary or estate)
shall be entitled to receive a pro-rata portion of his LTIP award based on the
number of complete years and months in which he participated in each active but
uncompleted plan cycle with such pro-rata portion subject to being increased in
the discretion of the Committee not to exceed the maximum target award of the
participant.
Performance shares and cash awards earned by participants shall be paid to
participants following the completion of the plan cycle. The Company may
withhold a portion of the participant's distribution to pay any tax withholding
obligation relating to the payment. At their option, participants may elect to
receive all of their
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<PAGE> 14
earned shares, provided that they make payment to the Company for their
withholding amount prior to receipt of the shares of Common Stock and any
accrued dividend cash award.
A participant shall also be entitled to receive payment of a LTIP award if
a Change in Control of the Company occurs during a plan cycle. A Change in
Control is defined as (i) the consolidation or merger of the Company into or
with another corporation as a result of which the Company is not the surviving
corporation or (ii) a majority of the outstanding shares of the Company are
acquired by another corporation, person or group. Should a Change in Control
event occur, a pro-rata portion of target performance shares and related cash
awards for all active but uncompleted plan cycles shall be immediately payable
to participants.
The amount of the performance share awards to be received under the LTIP
are not determinable at this time due to the uncertainty as to the future value
of the Company's Common Stock and as to the future performance of the Company
upon which incentive awards shall be based. The aggregate number of shares of
Common Stock reserved for issuance under the LTIP is 150,000, subject to
adjustment for stock dividends and splits (representing 2.28% of the Company's
issued and outstanding Common Stock).
Over the course of a plan cycle, the Company shall accrue a charge to
earnings in accordance with accepted accounting principals, generally equal to
its estimate of the value of performance shares and cash awards to be earned at
the end of the plan cycle.
INCOME TAX CONSEQUENCES
The following summary briefly describes the principal federal income tax
consequences of LTIP award payments. This summary is not intended to cover all
tax consequences that may apply to a particular participant or to the Company.
Under current federal tax law, a senior officer of the Company receiving a
LTIP award shall not realize any income during the plan cycle. The LTIP
participant shall instead recognize ordinary income equal to the fair market
value of the shares of Common Stock and cash he receives (and any amount
withheld for tax purposes) when he actually receives his LTIP award payment.
Subject to the restrictions of Section 162(m) of the Internal Revenue Code, the
Company shall be entitled to take the amount of the award as an income tax
deduction at the time the participant recognizes the award as income.
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD WITH RESPECT TO PROPOSAL TWO
To comply with the requirements of Rule 16b-3 of the Securities and
Exchange Commission Rules and Regulations and Section 162(m) of the Internal
Revenue Code, the LTIP, as adopted by the Board of Directors, is being submitted
to Stockholders for approval in order to secure the benefit of the short swing
profit liability exemption which is provided under Rule 16b-3 with respect to
certain stock transactions effected by the Company's insiders participating in
the LTIP. A majority of the shares of Common Stock which are represented in
person or by proxy and entitled to vote at the Annual Meeting must be voted in
favor of the LTIP to implement the LTIP as discussed above. Shares of Common
Stock that are voted as an abstention shall be treated as voting against
Proposal Two and broker nonvotes shall have no effect on the outcome of the vote
on Proposal Two.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" PROPOSAL
TWO.
PROPOSAL THREE. APPROVAL OF THE NORTH CAROLINA NATURAL GAS CORPORATION
DIRECTORS' DEFERRED COMPENSATION STOCK PLAN
GENERAL
The Board of Directors is submitting to the Stockholders for approval the
North Carolina Natural Gas Corporation Directors' Deferred Compensation Stock
Plan (the "Deferred Compensation Stock Plan"). The Board of Directors has
adopted the Deferred Compensation Stock Plan which, subject to Stockholder
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<PAGE> 15
approval, would become effective January 1, 1997. The purposes of the Deferred
Compensation Stock Plan are to: (i) provide a stock-based deferred compensation
arrangement for nonemployee directors ("Eligible Directors") of the Company who
elect to participate in the Deferred Compensation Stock Plan with respect to
payments of Directors' Fees; (ii) encourage close identity of interest between
Stockholders and Directors; (iii) assist the Company in continuing to attract
and retain quality members of the Board of Directors by offering Eligible
Directors the opportunity to defer payment of their annual Directors' Fees and;
(iv) permit Directors to receive such deferred payment in shares of the
Company's $2.50 per share par value common stock ("Common Stock") rather than in
cash. By electing to participate in the Deferred Compensation Stock Plan, an
Eligible Director will be indirectly investing in the Company's Common Stock
because the value of his payment of deferred Directors' Fees depends on the
market price of the Company's Common Stock on the Payment Date.
If the Deferred Compensation Stock Plan is approved by the Stockholders,
Eligible Directors shall have the right to elect to receive payment of deferred
Directors' Fees in shares of the Company's Common Stock. Each $1.00 of
Directors' Fees which a Director elects to defer pursuant to the Deferred
Compensation Stock Plan will create a credit of common stock units equal to
$1.15 worth of the Company's Common Stock. All such deferred amounts of
Directors Fees under the Deferred Compensation Stock Plan will be treated as if
they had been invested in shares of the Company's Common Stock by converting the
Directors' Fees to common stock units for credit to the Director's memorandum
account. The value of the payment made to a Participating Director when the
deferral period ends shall depend on the market price of the Company's Common
Stock at that time.
The discussion which follows describes the material features of the
Deferred Compensation Stock Plan. The discussion is subject, in all respects, to
the terms of the Deferred Compensation Stock Plan attached to this Proxy
Statement as Exhibit "B".
ADMINISTRATION
The Deferred Compensation Stock Plan shall be administered by the Board of
Directors which has the authority to amend, interpret or rescind any provision
of the Deferred Compensation Stock Plan with the exception that Stockholder
approval is required to (i) adjust or amend the common stock unit credit formula
as hereinafter specified; (ii) adjust or amend any provision of the Deferred
Compensation Stock Plan which materially alters the benefits accruing to
Directors participating under the Deferred Compensation Stock Plan
("Participating Directors"); (iii) adjust or amend the number of shares of
Common Stock distributed under the Deferred Compensation Stock Plan except as
provided by such Deferred Compensation Stock Plan; or (iv) modify requirements
as to Director eligibility under the Deferred Compensation Stock Plan.
DESCRIPTION OF THE PLAN
Under the Deferred Compensation Stock Plan, each Eligible Director has the
opportunity, on an annual basis, to elect to defer receipt of all or any portion
of his Directors' Fees, including the annual retainer fee together with fees for
attendance at Board of Directors and Committee meetings. A memorandum account
shall be maintained for bookkeeping purposes for each Participating Director. As
of January 1 of each year, "common stock units" equal to $1.15 worth of the
Company's Common Stock for each $1.00 of Directors' Fees elected to be deferred
by the Participating Director during the previous calendar year shall be
credited to the Participating Director's memorandum account. For the purpose of
computing such common stock units, the value of one share of Common Stock shall
be computed by using the average high and low stock prices quoted on the New
York Stock Exchange for the previous four quarters. In addition, a Participating
Director's memorandum account shall also be credited with dividend equivalents
as and to the same extent that dividends are declared on the Company's Common
Stock, with such dividend equivalents being converted into additional common
stock units. The balance as of December 31, 1996 of all Directors' Fees which
have previously been deferred in cash pursuant to the Company's Directors'
Income Deferral Agreement (which for the two Eligible Directors who previously
elected to defer Directors' Fees in cash equals approximately $75,000) shall be
converted to common stock units and credited to the respective Director's
memorandum account as hereinabove provided. In the event of any change in the
outstanding shares of Common Stock by
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<PAGE> 16
reason of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, reorganization, a combination or exchange of shares or other similar
corporate change, the Board of Directors shall adjust the number of common stock
units in the Participating Director's memorandum account for each such change.
The Deferred Compensation Stock Plan is intended to be, for the purpose of
Titles I and IV of the Employee Retirement Income Security Act of 1974, as
amended, an unfunded plan for the benefit of Participating Directors and a
Participating Director shall have no rights as a Stockholder of Common Stock
with respect to the common stock units credited to his memorandum account until
a certificate for shares of Common Stock is issued to the Participating Director
pursuant to the Deferred Compensation Stock Plan.
The annual retainer fee which is authorized to be paid to a Participating
Director shall be prorated, as appropriate, for any calendar year during which
the Participating Director serves less than the full calendar year on the Board
of Directors of the Company.
The Deferred Compensation Stock Plan provides that on the date of (i) the
Participating Director's Retirement as defined by the Deferred Compensation
Stock Plan or the date specified in the Participating Director's Election
Agreement whereby the Participating Director elects to participate under the
Deferred Compensation Stock Plan; or (ii) the Participating Director's death; or
(iii) the Participating Director's total disability as determined by the Board
of Directors, whichever is first to occur, the Company shall deliver to the
Participating Director (or in the event of death, his beneficiary or
beneficiaries as specified in the beneficiary form on file with the Board of
Directors, or, to his estate if no beneficiary is specified therein), a
certificate for the number of shares of Common Stock equal to the whole number
of the accrued common stock units in the Director's memorandum account, plus
cash for any accrued fractional common stock unit determined at the fair market
price of one share of Common Stock on such date.
In the event of a Change in Control of the Company, a Participating
Director's common stock units shall be paid to the Participating Director or, at
the request of the Participating Director, exchanged for shares in the acquiring
company if the acquiring company acquires control of the Company by means of a
stock-for-stock exchange. A Change in Control, for purposes of the Deferred
Compensation Stock Plan, means (i) the Company consolidates or merges into or
with another company as a result of which the Company is not the surviving
company; or (ii) a majority of the outstanding shares of the Company's Common
Stock are acquired by any other company, person or group.
The aggregate number of shares of Common Stock reserved for issuance under
the Deferred Compensation Stock Plan is 75,000, subject to adjustment for any
change in the outstanding shares of Common Stock by reason of any stock dividend
or split, recapitalization, merger, consolidation, spin-off, reorganization,
combination or exchange of shares or other similar corporate change
(representing 1.1% of the Company's issued and outstanding Common Stock).
The benefits to be received by a Participating Director in the future under
the Deferred Compensation Stock Plan are not determinable at this time due to
the uncertainty as to the future value of the Company's Common Stock and as to
the amount of Directors' Fees which a Participating Director elects to defer
under the Deferred Compensation Stock Plan.
INCOME TAX CONSEQUENCES
The following summary briefly describes the principal federal income tax
consequences of payments under the Deferred Compensation Stock Plan. This
summary is not intended to cover all tax consequences that may apply to a
particular participant or to the Company.
Under current tax law, no income shall be recognized by the Director in the
year Directors' Fees (which are deferred) are earned. Any Participating Director
shall recognize ordinary income in the year he receives any full or partial
payout of his memorandum account balance. The Company is entitled to an income
tax deduction at the time of any full or partial payout of amounts deferred
under the Deferred Compensation Stock Plan. Based upon payout in stock, the
amount of the deduction shall be equal to the fair market value of the Common
Stock at the date of payment, but no deduction is allowable at the time the fees
are credited to the Participating Director's memorandum account.
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<PAGE> 17
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD WITH RESPECT TO PROPOSAL THREE
To comply with the requirements of Rule 16b-3 of the Securities and
Exchange Commission Rules and Regulations and Section 162(m) of the Internal
Revenue Code, the Deferred Compensation Stock Plan, as approved by the Board of
Directors, is being submitted to Stockholders for approval in order to secure
the benefit of the short swing profit liability exemption which is provided
under Rule 16b-3 with respect to certain stock transactions effected by the
Company's insiders participating in the Deferred Compensation Stock Plan. A
majority of the shares of Common Stock which are represented in person or by
proxy and entitled to vote at the Annual Meeting must be voted in favor of the
Deferred Compensation Stock Plan to implement the Deferred Compensation Stock
Plan as discussed above. Shares of Common Stock that are voted as an abstention
shall be treated as voting against Proposal Three and broker nonvotes shall have
no effect on the outcome of the vote on Proposal Three.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" PROPOSAL
THREE.
PROPOSAL FOUR. APPROVAL OF THE NORTH CAROLINA NATURAL GAS CORPORATION
DIRECTORS' RETIREMENT COMPENSATION STOCK PLAN
GENERAL
The Board of Directors is submitting to the Stockholders for approval the
North Carolina Natural Gas Corporation Directors' Retirement Compensation Stock
Plan (the "Stock Retirement Plan"). The Board of Directors has adopted the Stock
Retirement Plan which, subject to Stockholder approval, would become effective
January 1, 1997. The purpose of the Stock Retirement Plan is to provide a
stock-based retirement plan for the Company's Directors who are serving on the
Board of Directors on the date the Stock Retirement Plan is adopted ("Eligible
Directors") so that payments by the Company of its $2.50 per share par value
common stock ("Common Stock") shall be made to retired Eligible Directors in
lieu of retirement income in the form of cash from the existing Cash Retirement
Plan For Directors (see page 3).
If the Company's Stock Retirement Plan is approved by the Company's
Stockholders, which is unanimously recommended by the Board of Directors, the
Board of Directors will immediately terminate the Company's Cash Retirement Plan
for Directors. If the Company's Stock Retirement Plan is not approved by the
Company's Stockholders, the Company's Cash Retirement Plan for Directors will
continue in effect. The discussion which follows describes the material features
of the Stock Retirement Plan. The discussion is subject, in all respects, to the
terms of the Stock Retirement Plan attached to this Proxy Statement as Exhibit
"C".
ADMINISTRATION
The Stock Retirement Plan shall be administered by the Board of Directors
of the Company which has the power to interpret the Stock Retirement Plan
provisions, amend, interpret or rescind any provision of the Stock Retirement
Plan, with the exception that Stockholder approval is required to (i) adjust or
amend the common stock unit credit formula as hereinafter specified; (ii) adjust
or amend any provision of the Stock Retirement Plan which materially alters the
benefits accruing to Eligible Directors under the Stock Retirement Plan; (iii)
increase the number of shares distributed under the Stock Retirement Plan except
as provided for by such Plan; or (iv) modify the requirements as to director
eligibility under the Stock Retirement Plan.
DESCRIPTION OF THE PLAN
The Cash Retirement Plan for Directors currently in effect for the benefit
of the Board of Directors which would be replaced by the Stock Retirement Plan
if approved by the Stockholders, provides that upon retirement from the Board of
Directors at age 75 and after serving as a Director for 5 years or more, the
Company will pay such Director retirement compensation for life in an amount
equal to the annual Director's
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<PAGE> 18
retainer fee and if the Director elects to retire before age 75, the retirement
compensation continues for the number of years served on the Board.
Under the Stock Retirement Plan, a memorandum account for each Eligible
Director shall be maintained for bookkeeping purposes by the Company and shall
initially be credited with a number of common stock units calculated by dividing
the present value of the Director's future "Retirement Fees" amount (using a 7%
discount rate) by the average daily closing price on the New York Stock Exchange
of the Company's Common Stock during the period October 1, 1996 through December
31, 1996. For the purpose of this calculation, the Eligible Director's future
Retirement Fees amount means those fees representing the present value of the
cash retirement benefit of existing Eligible Directors equal to the current
annual retainer of $15,000 to be paid beginning at age 75 and continuing for the
greater of ten years or the number of full years served on the Company's Board
of Directors as of December 31, 1996. In addition, an Eligible Directors'
memorandum account shall be credited with dividend equivalents as and to the
same extent that dividends are declared on the Company's Common Stock, with such
dividend equivalents being converted into additional common stock units. In the
event of any change in the outstanding shares of the Company's Common Stock by
reason of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, reorganization, combination of shares or other similar corporate
change, the number of common stock units in the Eligible Director's memorandum
account shall be adjusted for each such change. The Stock Retirement Plan is
intended to be, for the purposes of Title I and IV of the Employee Retirement
Income Security Act of 1974, as amended, a nonfunded plan for the benefit of
Eligible Directors and no Eligible Director shall have any property interest
whatsoever in any specific assets of the Company by virtue of the common stock
units credited to his memorandum account under the Stock Retirement Plan.
The Eligible Director's interest in the memorandum account shall become
fully vested upon his completion of ten years of service on the Board of
Directors of the Company. Any Eligible Director who ceases service on the Board
of Directors after five years but before completion of ten years of service will
have the number of common stock units in his memorandum account reduced on a pro
rata basis to reflect the number of years actually served. Any Eligible Director
who ceases to serve on the Board of Directors prior to the completion of five
years of service shall forfeit any common stock units credited to his memorandum
account.
On the Payment Date which is the earliest of the date of (i) the Eligible
Director's retirement; (ii) a Change in Control of the Company, or (iii) the
Eligible Director's death, a certificate for the number of shares of Common
Stock equal to the whole number of accrued common stock units in the Eligible
Director's memorandum account as of such Payment Date, plus cash for any accrued
fractional unit determined on the basis of the fair market price of one share of
Common Stock on such Payment Date, shall be delivered to the Eligible Director
(or, in the event of death, his beneficiary or beneficiaries as specified in the
beneficiary form on file with the Board of Directors or to his estate if no
beneficiary is specified). The Eligible Director may elect to receive
distribution of shares of Common Stock under the Stock Retirement Plan over a
period not to exceed ten years. Other than cash paid on such Payment Date for
any common stock fractional unit in the Eligible Director's memorandum account,
no cash payment will be made to the Director or his beneficiary or
beneficiaries.
Under the Stock Retirement Plan, the Company may withhold, deduct and
adjust an Eligible Director's memorandum account for all required amounts
necessary to satisfy federal, state or other governmental withholding taxes
arising in connection with the Stock Retirement Plan.
In the event of a Change in Control of the Company, an Eligible Director
may elect to receive one share of the Company's Common Stock for each common
stock unit in his memorandum account or to have such shares exchanged for shares
in the acquiring company if the acquiring company acquires control of the
Company by means of a stock-for-stock exchange. A Change in Control, for
purposes of the Stock Retirement Plan, means (i) the Company consolidates or
merges into or with another company as a result of which the Company is not the
surviving company; or (ii) a majority of the outstanding shares of the Company's
Common Stock are acquired by any other company, person or group.
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The aggregate number of shares of Common Stock reserved for issuance under
the Stock Retirement Plan is 35,000, subject to adjustment for any change in the
outstanding shares of Common Stock by reason of any stock dividend or split,
recapitalization, merger, consolidation, spin-off, reorganization, combination
or exchange of shares or other similar corporate change (representing .5% of the
Company's issued and outstanding Common Stock).
The benefits to be received by an Eligible Director in the future under the
Stock Retirement Plan are not determinable at this time, due to the uncertainty
as to the future value of the Company's Common Stock and as to an Eligible
Director's future length of service on the Company's Board of Directors.
INCOME TAX CONSEQUENCES
The following summary briefly describes the principal federal income tax
consequences of payments under the Stock Retirement Plan. This summary is not
intended to cover all tax consequences that may apply to a particular
participant or to the Company.
Under current tax law, no income shall be recognized by the Director in the
year common stock units are earned and credited to his memorandum account. Any
Eligible Director shall recognize ordinary income in the year he receives any
full or partial payout of his memorandum account balance. The Company is
entitled to an income tax deduction at the time of any full or partial payout of
amounts under the Stock Retirement Plan. Based upon payout in stock, the amount
of the deduction shall be equal to the fair market value of the Common Stock at
the date of payment, but no deduction is allowable at the time the fees are
credited to the Eligible Director's memorandum account.
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD WITH RESPECT TO PROPOSAL FOUR
To comply with the requirements of Rule 16b-3 of the Securities and
Exchange Commission Rules and Regulations and Section 162(m) of the Internal
Revenue Code, the Stock Retirement Plan, as approved by the Board of Directors,
is being submitted to Stockholders for approval in order to secure the benefit
of the short swing profit liability exemption which is provided under Rule 16b-3
with respect to certain stock transactions effected by the Company's insiders
participating in the Stock Retirement Plan. A majority of the shares of Common
Stock which are represented in person or by proxy and entitled to vote at the
Annual Meeting must be voted in favor of the Stock Retirement Plan to implement
the Stock Retirement Plan as discussed above. Shares of Common Stock that are
voted as an abstention shall be treated as voting against Proposal Four and
broker nonvotes shall have no effect on the outcome of the vote on Proposal
Four.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" PROPOSAL
FOUR.
INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected the firm of Arthur
Andersen LLP to continue as independent accountants for the Company and its
wholly-owned subsidiaries, NCNG Exploration Corporation, NCNG Energy Corporation
and Cape Fear Energy Corporation, for the fiscal year beginning October 1, 1996.
Arthur Andersen LLP has acted for the Company in such capacity since 1959.
Before each professional service was rendered by Arthur Andersen LLP, it
was approved by, and the possible effect on the independence of the accountants
was considered by, the Audit Committee of the Board of Directors. An invitation
has been extended to the firm of Arthur Andersen LLP to attend the Annual
Meeting of Stockholders with the opportunity to make a statement and to answer
appropriate questions. A representative of the firm has indicated he will attend
the meeting.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1998 Annual Meeting
and included in the proxy statement and form of proxy relating to that meeting
must be received by the Company at its principal executive offices not later
than August 1, 1997.
17
<PAGE> 20
ANNUAL REPORT
Pursuant to regulations of the Securities and Exchange Commission (SEC),
the Company is required to file with the SEC an Annual Report on Form 10-K
within 90 days of the end of each fiscal year. ON OR AFTER DECEMBER 31, 1996,
UPON WRITTEN REQUEST ADDRESSED TO SALLY T. SOWERS, SECRETARY OF NORTH CAROLINA
NATURAL GAS CORPORATION, POST OFFICE BOX 909, 150 ROWAN STREET, FAYETTEVILLE,
NORTH CAROLINA 28302-0909, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996, INCLUDING FINANCIAL STATEMENTS AND
SCHEDULES THERETO, WILL BE FORWARDED WITHOUT CHARGE TO THE STOCKHOLDER MAKING
SUCH REQUEST.
OTHER MATTERS
The management of the Company knows of no other matters which may come
before the meeting. However, if any matters other than those referred to above
should properly come before the meeting, it is the intention of the persons
named in the enclosed proxy to vote such proxy in accordance with their best
judgment.
By order of the Board of Directors this 6th day of December 1996.
Sally T. Sowers, Secretary
18
<PAGE> 21
EXHIBIT "A"
NORTH CAROLINA NATURAL GAS CORPORATION
LONG TERM INCENTIVE PLAN
ESTABLISHMENT OF THE PLAN
North Carolina Natural Gas Corporation (the "Company") establishes this
incentive program as the Long Term Incentive Plan (the "LTIP").
PURPOSE OF THE PLAN
The purpose of the LTIP is to assist the Company in accomplishing the
following objectives:
- focus participants' attention on the long-term creation of stockholder
value that exceeds the performance of its industry peers.
- provide a competitive form of long-term incentive compensation that
attracts and retains qualified management talent and motivates their
performance.
- promote ownership of stock among senior officers of the Company, thereby
increasing the linkage to stockholder interests.
- provide variability in compensation that is closely linked to long-term
financial and market performance of the Company.
ADMINISTRATION OF THE PLAN
The LTIP is to be administered by the Personnel and Compensation Committee
of the Board of Directors (the "Committee"). Subject to the provisions of the
LTIP and any right of the Board of Directors of the Company to ratify Committee
actions, the Committee will have the authority to:
- select the employees to participate in the LTIP for each plan cycle;
- perform all other functions required to administer and to operate the
LTIP, including the adoption of such rules and regulations as may be
necessary to carry out its functions; make all other determinations
necessary or desirable in administering the LTIP, including the
discretionary power to interpret the provisions of the LTIP;
- the Committee shall have the exclusive discretionary right to construe
and to interpret the LTIP, to determine the eligibility for benefits and
the amount of such benefits and its decisions on such matters are final
and conclusive on all parties.
EFFECTIVE DATE AND TERM OF THE PLAN
The LTIP is effective as of October 1, 1996, subject to approval by all
regulatory authorities, the New York Stock Exchange and a majority of
stockholders. The term of the LTIP is for ten years, ending on September 30,
2006, unless extended by the Board of Directors with the approval of a majority
of stockholders, all regulatory authorities and the New York Stock Exchange.
TYPE OF PLAN AND STRUCTURE OF AWARDS
The LTIP is a performance share plan, using shares of the Company's $2.50
par value per share common stock ("Common Stock") and cash awards equivalent to
the accrued dividends on earned shares as the form of award. Performance shares
and dividend equivalents may only be earned for accomplishment of specific
Company performance measures established for each plan cycle during the term of
the LTIP.
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<PAGE> 22
PARTICIPATION GUIDELINES
Senior officers of the Company who have the opportunity to make a
significant contribution to long-term Company performance are eligible for
participation. At the beginning of each plan cycle, participants are selected
from among eligible employees. The Chief Executive Officer of the Company
("CEO") will prepare and present a list of recommended participants to the
Committee for its approval. In turn, the Committee determines final
participation, including the participation eligibility of the CEO.
Participants are to be grouped into one or more tiers based on the scope of
their job responsibilities. The Committee determines the tier assignments for
all participants, requesting recommendations from the CEO where appropriate. At
its discretion, the Committee may change the number of tiers and/or tier
assignments at the beginning of each plan cycle.
Selection for participation in the LTIP for a particular plan cycle
provides no guarantee of future participation or tier assignment level, nor does
it guarantee continued employment.
RESERVE OF COMMON SHARES FOR USE IN THE PLAN
For the ten-year term of the LTIP, a total of 150,000 shares of Common
Stock are reserved for use in the LTIP. In the event of a stock split or stock
dividend, the number of shares reserved under the LTIP shall be adjusted so that
they maintain the same ratio to total Common Stock shares outstanding as existed
prior to the stock split or dividend.
Any shares which are forfeited or unearned by participants in any plan
cycle may be reused in future plan cycles, providing that total performance
share awards during the term of the LTIP do not exceed the number of shares
reserved.
PLAN CYCLES
Except as otherwise provided herein, each plan cycle covers a five-year
period commencing on the first day of the first fiscal year and ending on the
last day of the fifth fiscal year following the beginning of the cycle. A new
five-year plan cycle starts at the beginning of each fiscal year, so that plan
cycles overlap. The plan cycles for the ten-year term of the LTIP will be:
- Fiscal Year 1997 - Fiscal Year 2001
- Fiscal Year 1998 - Fiscal Year 2002
- Fiscal Year 1999 - Fiscal Year 2003
- Fiscal Year 2000 - Fiscal Year 2004
- Fiscal Year 2001 - Fiscal Year 2005
- Fiscal Year 2002 - Fiscal Year 2006
In addition, two special plan cycles will be utilized so that the first
LTIP incentive awards may be earned as early as the end of Fiscal Year 1999.
These two special plan cycles will cover the periods of Fiscal Year 1997-1999
and Fiscal Year 1997-2000.
TARGET AND MAXIMUM INCENTIVE AWARD LEVELS
Target award opportunity is established for each participant tier and
stated as a percent of base salary. Target incentive opportunity is converted
into a target number of performance shares using the following procedure:
- Target award percentage is multiplied by the participant's salary as of
the beginning of the plan cycle.
- A beginning Common Stock price is calculated by taking the average of the
monthly closing stock price for the twelve months preceding the beginning
of a plan cycle.
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<PAGE> 23
- The dollar amount calculated in the first step is divided by the stock
price calculated in the second step. The result of this calculation,
rounded to the nearest whole share, represents the target performance
share award for each participant for the plan cycle.
The maximum number of performance shares that may be earned by a
participant is equal to two times the target number of shares.
Target and maximum performance share levels are subject to change from one
plan cycle to another as participants' salaries and the Company's Common Stock
price also change.
PERFORMANCE MEASURES
The actual number of performance shares earned by participants depends upon
actual results during the plan cycle versus established performance measures.
Performance measures are selected by the Committee for their relevance in
measuring the Company's financial and market performance versus its industry
peers. For each plan cycle, the Committee selects performance measures and
assigns weights to indicate each performance measure's relative importance to
long-term Company success. Weights that add up to 100% are to be assigned by the
Committee to performance measures.
For each performance measure, the Committee will establish a performance
range which includes three specific performance levels: threshold, target and
stretch. Results that are at or below the performance threshold for a
performance measure earn no performance shares. Likewise, results that are at or
above the stretch performance level earn the maximum number of performance
shares but no more.
For the plan cycles represented by Fiscal Years 1997-1999, 1997-2000 and
1997-2001, the following performance measures and weights will be used:
- Total stockholder return (the annualized rate of return for the plan
cycle reflecting stock price appreciation plus the reinvestment of
dividends and the compounding effect of dividends paid on reinvested
dividends) for the Company over the period of each plan cycle is compared
to results achieved by a select group of peer gas distribution companies
for the same period. The Committee will select the group of peer gas
distribution companies to be used. The weight given this performance
measure is 50%.
- Average return on equity (the average percentage return on equity for all
years in the plan cycle. Return on equity for a particular year is net
income divided by the average of common equity at the beginning and end of
that fiscal year.) for the Company over the period of each plan cycle is
compared to results achieved by the same group of peer gas distribution
companies for the same period. The weight given this performance measure
is 50%.
Performance measures, performance ranges and weights are subject to change
by the Committee for any plan cycle at the beginning of the cycle.
DETERMINING ACTUAL INCENTIVE AWARDS
The total number of performance shares earned at the end of a plan cycle is
dependent upon performance compared to each individual performance measure.
Where results fall between threshold and target or target and stretch levels for
a performance measure, straight-line interpolation will be used to calculate
actual performance shares earned. Shares earned are always rounded off to the
nearest whole number of shares. Total shares earned is the sum of shares earned
for results achieved for each performance measure. In addition, each participant
earns a cash award equal to the total number of performance shares earned
multiplied by the dollar value of the dividends paid out on a share of Common
Stock during the plan cycle. During the plan cycle, performance is monitored by
the CEO and designated personnel and progress is reported to participants and to
the Committee. At the end of the plan cycle, the Committee, assisted by the CEO,
will estimate performance and performance shares earned based on the most recent
reports of peer group performance. Estimates will be reviewed by the Company's
external auditors and approved by the Committee. Once audited financial
statements and other appropriate data are available, the CEO, assisted by the
Director of Statistical Services, determines final performance, compares the
Company's performance to performance ranges and calculates the
A-3
<PAGE> 24
actual number of performance shares and cash awards earned by each participant.
The Company's auditors will verify all calculations and prepare a report for
approval by the Committee.
TIMING OF AND ELIGIBILITY FOR LTIP AWARD PAYOUTS
Actual performance share and cash awards are disbursed in two segments.
Within 75 days after the end of a plan cycle, an amount up to, but not
exceeding, fifty percent of estimated performance shares and cash awards will be
disbursed to participants. Within 30 days of the Committee approval of the
outside auditors' report on final performance results, performance share and
cash award levels, the difference between these amounts and the amounts of the
first payout are disbursed.
Applicable withholding for federal and state taxes will be made in
accordance with existing payroll guidelines for the year in which payment is
received. Withholding will be accomplished by retaining that number of
performance shares earned, equal to the calculated withholding amount. At their
option, participants may elect to receive all of their earned shares, provided
that they make payment to the Company, including cash awards, for their
withholding amount prior to receipt of the shares.
Over the course of a plan cycle, the Company will accrue a charge to
earnings in accordance with accepted accounting principles, generally equal to
its estimate of the value of performance shares and cash awards to be earned at
the end of the plan cycle.
A participant must be employed on the first and last day of a plan cycle
and experience no break in service to receive any award payment under the LTIP,
except as described in the section entitled Changes in Participant Status.
EFFECT ON EMPLOYEE BENEFIT PLANS
The impact, if any, on calculations made under existing pension and
retirement plans will be determined in accordance with the policies and
procedures of such plans.
CHANGES IN PARTICIPANT STATUS
It is anticipated that from time to time, the status of participants may
change as a result of job or employment changes. The nature of the status change
will determine the impact on incentive earnings.
In the event a participant terminates his employment or is terminated
(except for death, disability or retirement) by the Company, no LTIP incentive
awards for any active but uncompleted plan cycles will be paid.
In the event a participant's job changes which further results in a change
in tier, an adjustment will be made in his target and maximum incentive
potential based on the effective date of the job change. A new prorated target
and maximum number of performance shares for each active but uncompleted plan
cycle will be determined (based on this effective date) and such changes will be
reported to the participant.
An employee hired or promoted into a senior officer position is first
eligible to participate in the LTIP at the beginning of the next plan cycle.
The CEO may recommend to the Committee that a participant be removed during
a plan cycle based on a job reassignment or assessment of individual performance
and if the removal is approved by the Committee, the employee's eligibility for
that plan cycle is eliminated.
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<PAGE> 25
In the event of a participant's death, disability or retirement, the
participant, his designated beneficiary or his estate will receive a prorata
portion of his target incentive based on the number of complete years and months
in which he participated in each active but uncompleted plan cycle. For example,
if a participant retires at the end of fiscal year 2001, he would receive an
award equal to the following:
<TABLE>
<CAPTION>
CASH EQUAL TO NUMBER OF EARNED SHARES
FOR THE PLAN CYCLE MULTIPLIED BY
PERCENT OF DIVIDENDS PAID ON A SHARE OF STOCK
PLAN CYCLE TARGET SHARES DURING THE FOLLOWING FISCAL YEARS
------------------------------- ------------- ----------------------------------------
<S> <C> <C>
FY 1998 - 2002................. 80% FY 1998 - 2001
FY 1999 - 2003................. 60 FY 1999 - 2001
FY 2000 - 2004................. 40 FY 2000 - 2001
FY 2001 - 2005................. 20 FY 2001
FY 2002 - 2006................. 0 None
</TABLE>
At its discretion, the Committee may choose to make awards of a greater
amount than described above. However, in no instance will such discretionary
awards exceed the maximum incentive opportunity of the participant.
BENEFICIARY DESIGNATION
A participant may designate a beneficiary who upon his death is to receive
any LTIP award determined as due to him. All beneficiary designations will be in
writing and on a form approved by the Company. Such a designation will be
effective only if and when it is delivered to the Committee. In the event there
is no designated beneficiary on file for a participant, the beneficiary shall be
deemed to be the participant's surviving spouse, or if there is no such spouse,
the participant's estate.
CHANGE IN CONTROL
A Change in Control is defined as when (a) the Company consolidates or
merges into or with another corporation as a result of which the Company is not
the surviving corporation or (b) a majority of the outstanding shares of the
Company are acquired by any other corporation, person or group.
Should a Change in Control event occur, a prorata portion of target
performance shares and related cash awards for all active but uncompleted plan
cycles will be immediately payable to participants. To accomplish this
calculation, the following procedures are followed:
- For each participant, target performance shares for each active but
uncompleted plan cycle are adjusted based on the ratio of full months
completed to the total months in the plan cycle.
- For the two most recent completed plan cycles, an average is taken of
the percent of target performance shares earned. This average percent is
multiplied by the adjusted target performance shares for each active and
uncompleted plan cycle and summed. Performance shares are converted into a
cash equivalent amount by multiplying the number of shares earned by the
closing stock price on the day the Change in Control event occurs.
- Cash awards are calculated by multiplying the number of performance
shares earned for each plan cycle times the dividends paid on a share of
Common Stock during the months completed in each plan cycle.
As soon as these calculations are made, the Company makes award
disbursements in check form equal to the amounts calculated for the value of
performance shares plus cash awards. The Company withholds applicable federal
and state taxes in accordance with existing payroll guidelines.
NO ASSIGNMENT
No right or benefit under this LTIP may be sold, assigned, transferred,
pledged, hypothecated or otherwise disposed of in any way by a participant and
any attempt by a participant to sell, assign, transfer,
A-5
<PAGE> 26
pledge, hypothecate or dispose of his or her interests shall be null and void
and shall not be recognized by the Committee. Notwithstanding the foregoing, any
business entity succeeding substantially all of the business of the Company by
purchase, merger, consolidation, sale of assets or otherwise shall be bound by
and shall adopt and assume the Company's obligations under the LTIP and the
Company shall obtain the assumption of such obligations by such successor.
AMENDMENT OF THE PLAN
The Committee, with Board approval, may amend or modify this LTIP at any
time, for any reason and in any manner, other than with respect to the number of
shares that may be issued under the LTIP. Such amendments shall pertain to all
future plan cycles, but not to completed or active but uncompleted plan cycles.
These actions by the Committee are binding on all participants. Notice of any
such amendment will be made in writing to all participants.
TERMINATION OF THE PLAN
The Company expects to continue this LTIP until September 30, 2006 but does
not obligate itself to do so. The Committee, subject to ratification by the
Board of Directors of the Company, reserves the right to discontinue and
terminate the LTIP at any time, for any reason (including a change or an
impending change in the tax laws of the United States or any State). Termination
of the LTIP shall be binding on all participants but in no event may such
termination reduce or cancel an outstanding participant's award already earned
by a participant under the LTIP. If the LTIP is terminated, the Committee shall
determine the rights of the participants under outstanding awards and the time
and manner of payment of the awards, if any, due the participant.
STATUS UNDER ERISA
This LTIP is not maintained as and is not intended to be an "employee
benefit plan" under the Employee Retirement Income Security Act of 1974, as
amended.
UNFUNDED PLAN
The benefits provided by this LTIP are unfunded. All amounts payable under
this LTIP to participants shall be paid from the general assets of the Company
and nothing contained in this LTIP shall require the Company to set aside or
hold in trust any amounts or assets for the purpose of paying awards to
participants. This LTIP is only a contractual obligation on the part of the
Company and the participants. Participants shall have the status of general
unsecured creditors of the Company under the LTIP with respect to amounts
payable to them.
RECEIPT OR RELEASE
Any accepted payment to a participant under the LTIP shall, to the extent
thereof, be in full satisfaction of all claims against the Committee, the Board
of Directors and the Company. The Committee may require any participant as a
condition precedent to such payment to execute a receipt and release to such
effect.
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<PAGE> 27
CONTROLLING LAW
This LTIP shall be construed and enforced according to the laws of the
State of North Carolina.
IN WITNESS WHEREOF, the Company has caused this LTIP to be signed and
adopted the day of , 1996.
NORTH CAROLINA NATURAL GAS
CORPORATION
By:
----------------------------------------
President
ATTEST:
- ---------------------------------------------------
Secretary
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<PAGE> 28
EXHIBIT "B"
NORTH CAROLINA NATURAL GAS CORPORATION
DIRECTORS' DEFERRED COMPENSATION STOCK PLAN
1. ESTABLISHMENT: North Carolina Natural Gas Corporation ("NCNG" or the
"Corporation") hereby establishes the NCNG "Directors' Deferred Compensation
Stock Plan" for Eligible Directors.
2. PURPOSE OF PLAN: The purpose of the Plan is to provide a stock-based,
deferred compensation arrangement for Eligible Directors of NCNG who elect to
participate in the Plan with respect to payments of Director Fees. The objective
in electing to participate in this Plan is to ensure that the Participating
Director will be taxed only when the payment of deferred Director Fees, in the
form of NCNG's Common Stock ("Common Stock"), are received by him under the
terms of this Plan.
3. EFFECTIVE DATE: This Plan is effective as of January 1, 1997, subject
to approval of the Plan (a) by all regulatory agencies as required by applicable
law and (b) by the stockholders of the Corporation at the 1997 Annual Meeting of
Stockholders as required by the regulations and bylaws of the New York Stock
Exchange and as otherwise required by applicable law.
4. ADMINISTRATION OF THE PLAN: The Plan will be administered by the Board
of Directors of NCNG (the "Board"). The Board shall have the power to interpret
any Plan provision; to prescribe, amend and rescind any provision related
thereto; and to make all other determinations that are deemed necessary or
advisable to administer the Plan; provided, however, the Board shall have no
right, without approval of NCNG's stockholders, to adjust or amend the Common
Share unit credit formula set forth in Section 7 or any other provision of the
Plan which will materially alter the benefits accruing to Participating
Directors, the number of shares of Common Stock distributed under the Plan,
except as provided herein, or modify the requirements as to director eligibility
under the Plan.
5. DEFINITIONS:
(a) CHANGE IN CONTROL means (a) the Corporation consolidates or merges
into or with another company as a result of which the Corporation is not
the surviving company or (b) a majority of the outstanding shares of the
Corporation's Common Stock is acquired by any other company, person or
group.
(b) COMMON STOCK UNIT means a unit representing one share of the $2.50
par value per share Common Stock of the Corporation or any substituted
class of common stock provided such stock is the primary publicly traded
equity issue of the Corporation.
(c) DIRECTOR FEES means the annual retainer fee and board and
committee attendance fees which are authorized to be paid from time to time
to an Eligible Director by the Board of Directors.
(d) ELIGIBLE DIRECTOR means any present or future elected director of
the Corporation who is not an employee thereof.
(e) ELECTION AGREEMENT means that written agreement between the
Corporation and an Eligible Director that defines the percentage of the
retainer fee and/or meeting fees elected to be deferred by a Participating
Director. Such written election agreement shall be executed by December 31,
1996 with respect to any deferred cash fees held under Income Deferral
Agreements as of that date and thereafter on an annual basis prior to the
beginning of the calendar year to which the Eligible Director's deferral of
the retainer and/or meeting fees relates.
(f) FAIR MARKET PRICE means the closing price for a share of Common
Stock as quoted by the New York Stock Exchange on the day of the required
calculation, or, if there were no Common Stock transactions on such day, on
the next preceding day for which there were Common Stock transactions.
(g) MEMORANDUM ACCOUNT means an account established for each
Participating Director that will be credited with Common Stock Units.
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<PAGE> 29
(h) PARTICIPATING DIRECTOR means an Eligible Director who has timely
completed, executed and delivered an Election Agreement to the Corporation
as required by the terms of this Plan.
(i) PAYMENT DATE means the earliest to occur of the following dates:
(i) the Participating Director's Retirement or the date specified in the
Participating Director's Election Agreement; or (ii) the Participating
Director's death; or (iii) the Participating Director's Total Disability as
determined by the Board. "Total Disability" as used herein means an
inability by reason of illness or accident to perform substantially the
duties and responsibilities required of a director generally.
(j) PLAN means the NCNG Directors' Deferred Compensation Stock Plan,
as amended from time to time.
(k) RETIREMENT means the resignation of a director from the Board of
Directors of NCNG for any reason; the removal of a director with or without
cause by the NCNG Board or by any regulatory agency; or, the conclusion of
a director's term of office where the director is not reelected to a
succeeding term by the stockholders of the Corporation.
6. ELECTION TO DEFER: Each Eligible Director shall, pursuant to the terms
of this Plan and on an annual basis, be given the opportunity by the Corporation
to defer receipt of all or any portion of the Directors' Fees which such
Eligible Director will earn during the next succeeding calendar year for
services rendered as a director of the Corporation. In order to participate in
the Plan, an Eligible Director must elect in writing to participate in the Plan
by (i) properly completing and executing an Election Agreement in the form
provided in connection with this Plan, and (ii) timely delivering the Election
Agreement to the Corporation before the beginning of the calendar year to which
the Eligible Director's deferral election relates. Delivery of an Election
Agreement is complete only upon the Corporation's actual receipt thereof.
7. BOOKKEEPING OF MEMORANDUM ACCOUNT: A Memorandum Account for each
Participating Director will be credited with Common Stock Units stated to three
(3) decimal places.
(a) Pursuant to a Participating Director's election, the Corporation
shall credit to the Participating Director's Memorandum Account as of
January 1 of each year $1.15 worth of NCNG Common Stock for each $1.00 of
the NCNG monthly retainer fee or meeting fees elected to be deferred by a
Participating Director. The number of shares of NCNG Common Stock to be
credited to the Participating Director shall be computed by using the
average high and low stock prices quoted on the New York Stock Exchange for
the previous four (4) quarters. The number calculated will be stated to
three (3) decimal places of Common Stock Units. The annual retainer fee
which is authorized to be paid to a Participating Director will be
prorated, as appropriate, for any calendar year during which the
Participating Director serves less than the full calendar year on the Board
of Directors of the Corporation. The balance as of December 31, 1996 of all
Directors' Fees which have previously been deferred in cash pursuant to the
Company's Directors' Income Deferral Agreement (which for the two Eligible
Directors who previously elected to defer Directors' Fees in cash equals
approximately $75,000) shall be converted to common stock units and
credited to the respective Director's memorandum account as hereinabove
provided.
(b) Until fully paid out in accordance with Section 8 below, the
Corporation shall credit to the Participating Director's Memorandum
Account, on each day that the Corporation pays a declared cash dividend to
the stockholders of its Common Stock, a number (stated to three decimal
places) of Common Stock Units that is equal to the total number of Common
Stock Units in the Participating Director's Memorandum Account on the
record date established for such dividend, multiplied by the cash dividend
per share of Common Stock, and divided by the Fair Market Price on the
record date.
(c) In the event of any change in the outstanding shares of Common
Stock by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares
or other similar corporate change, the Board will adjust the number of
shares in the Participating Director's Memorandum Account for each such
change.
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<PAGE> 30
(d) A Participating Director shall have no rights as a stockholder of
Common Stock with respect to the Common Stock Units credited to his
Memorandum Account unless and until a certificate for shares of Common
Stock is issued to the Participating Director by the Corporation pursuant
to the terms of the Plan.
8. PAYOUT OF MEMORANDUM ACCOUNT: Following the Effective Date of this
Plan, the Corporation shall, on the Payment Date, cause to be delivered to the
Participating Director (or, in the event of death, his beneficiary or
beneficiaries as specified in the Beneficiary Form on file with the Board, or,
to his estate if no beneficiary is specified therein), a certificate for the
number of shares of Common Stock equal to the whole number of accrued Common
Stock Units in the Memorandum Account as of the Payment Date, plus cash for any
accrued fractional unit determined at the Fair Market Price on the Payment Date.
Other than cash paid on the Payment Date for any fractional Common Stock Unit in
the Participating Director's Memorandum Account, no cash payment will be made to
the Director or his beneficiary or beneficiaries.
9. CHANGE IN CONTROL: In the event of a Change in Control of the
Corporation as defined above, a Director's Common Stock Units will be paid to
the Participating Director or, at the request of the Participating Director,
exchanged for shares in the acquiring company if the acquiring company acquires
control of the Corporation by means of a stock-for-stock exchange.
10. UNFUNDED PLAN: This Plan is intended to be, for purposes of Titles I
and IV of the Employee Retirement Income Security Act of 1974, as amended, an
unfunded plan for the benefit of Eligible Directors. No Eligible or
Participating Director shall have any property interest whatsoever in any
specific assets of the Corporation. The Memorandum Account is not intended to be
a trust account or escrow account for the benefit of a Participating Director or
any other person. The sole right of a Participating Director, or his personal
representatives, is a right as an unsecured general creditor of the Corporation.
No later than January of each year, the Corporation shall provide each
Participating Director with an annual report of his or her Memorandum Account
balance as of December 31 of the preceding year.
11. ASSIGNMENT/ALIENATION: The rights and benefits of Participating
Directors under this Plan are personal to each director, and neither the
director nor his or her designated beneficiaries shall have the power or right
to transfer, assign, anticipate, mortgage, or otherwise encumber any payout to
be made under this Plan.
12. STOCK SUBJECT TO PLAN: The maximum number of shares of Common Stock
that shall be reserved for issuance under this Plan shall be 75,000 shares,
subject to adjustment upon changes in the capitalization of the Corporation as
provided in Section 7(c) of the Plan.
13. FUTURE DIRECTOR TERMS: Nothing in this Plan shall obligate an Eligible
Director or Participating Director to continue as such or to accept any
nomination for a future term as a director of the Corporation.
14. WITHHOLDING/EMPLOYMENT TAXES: As required by applicable tax law, the
Corporation may withhold, deduct and adjust a Participating Director's
Memorandum Account for all required amounts necessary to satisfy any federal,
state or other governmental withholding taxes arising directly or indirectly in
connection with the Plan or any Election Agreement whether under current or
future tax laws. Notwithstanding the foregoing, the withholding obligations of
the Corporation, upon payout in Common Stock of any Participating Director's
Memorandum Account is limited by such applicable tax law as mentioned above and
the Participating Director is solely responsible for the payment of all income
or other taxes that may be related to such Memorandum Account payout.
15. DELIVERY OF SHARES: Upon Retirement and delivery of any shares of
Common Stock to a Participating Director, such retired director will agree by
his Election Agreement to hold such shares for a period of one year. However,
should such director die during the first year following his Retirement, his
personal representative may sell such shares.
16. RETAINER REPLACEMENT PERCENTAGE: A Participating Director may change
the retainer replacement of Common Stock for cash at the beginning of each
calendar year by completing a written Election Agreement on or before the first
day of January of each calendar year.
B-3
<PAGE> 31
IN WITNESS WHEREOF, the Corporation has caused this Plan to be signed and
adopted the day of , 1996.
NORTH CAROLINA NATURAL GAS
CORPORATION
By:
----------------------------------------
President
ATTEST:
- ---------------------------------------------------
Secretary
B-4
<PAGE> 32
EXHIBIT "C"
NORTH CAROLINA NATURAL GAS CORPORATION
DIRECTORS' RETIREMENT COMPENSATION STOCK PLAN
1. ESTABLISHMENT: North Carolina Natural Gas Corporation ("NCNG" or
"Corporation") hereby establishes the North Carolina Natural Gas Corporation
"Directors' Retirement Compensation Stock Plan."
2. PURPOSE OF THE PLAN: The purpose of the Plan is to provide a
stock-based retirement compensation plan for Eligible Directors of NCNG so that
payments by NCNG of its Common Stock will be made to retired Eligible Directors
in lieu of retirement income from the existing Cash Retirement Plan for
Directors. Under this Plan, Directors will receive NCNG Common Stock ("Common
Stock") rather than cash upon their retirement.
3. EFFECTIVE DATE: This Plan is effective as of January 1, 1997, subject
to approval of the Plan (a) by all regulatory agencies as required by applicable
law and (b) by the stockholders of the Corporation at the 1997 Annual Meeting of
Stockholders as required by the regulations and bylaws of the New York Stock
Exchange and as otherwise required by applicable law.
4. ADMINISTRATION OF THE PLAN: The Plan will be administered by the Board
of Directors of NCNG (the "Board"). The Board shall have the power to interpret
any Plan provision; to prescribe, amend and rescind any provision relating
thereto; and to make all other determinations that are deemed necessary or
advisable to administer the Plan; provided however, the Board shall have no
right, without approval of the Corporation's stockholders, to adjust or amend
the Common Stock unit credit formula set forth in Section 6 or any other
provision of the Plan which will materially alter the benefits accruing to
Eligible Directors, increase the number of shares of Common Stock to be
distributed under the Plan, except as provided herein, or modify the
requirements as to director eligibility under the Plan.
5. DEFINITIONS:
(a) CHANGE IN CONTROL means (i) the Corporation consolidates or merges
into or with another company as a result of which the Corporation is not
the surviving company or (ii) a majority of the outstanding shares of the
Corporation's Common Stock is acquired by any other company, person or
group.
(b) COMMON STOCK UNIT means a unit representing one share of the $2.50
par value per share Common Stock of the Corporation or any substituted
class of common stock provided such stock is the primary publicly traded
equity issue of the Corporation.
(c) DIRECTORS' RETIREMENT FEES means those fees representing the
present value of the cash retirement benefit of existing Eligible Directors
equal to the current annual retainer of $15,000 to be paid beginning at age
75 and continuing for the greater of ten (10) years or the number of full
years served on the NCNG Board of Directors as of December 31, 1996.
(d) ELIGIBLE DIRECTOR means any present NCNG Director who is serving
on the Corporation's Board of Directors on the date this Plan is adopted.
However, any Director who ceases to serve on the Board prior to the
completion of five (5) years' service will forfeit any Common Stock Units
credited to his Memorandum Account.
(e) FAIR MARKET PRICE means the closing price for a share of Common
Stock as quoted by the New York Stock Exchange on the day of the required
calculation, or, if there were no Common Stock transactions on such day, on
the next preceding day for which there were Common Stock transactions.
(f) MEMORANDUM ACCOUNT means an account established for each Eligible
Director that will be credited with Common Stock Units.
(g) PAYMENT DATE means the earliest to occur of the following dates:
(i) the Eligible Director's Retirement, (ii) a Change in Control of the
Corporation, or (iii) the Eligible Director's death.
C-1
<PAGE> 33
(h) PLAN means the NCNG Directors' Retirement Compensation Stock Plan.
(i) RETIREMENT means the resignation of a Director from the Board for
any reason, the removal of a Director with or without cause by the Board of
Directors of NCNG or by any regulatory agency; or, the conclusion of a
Director's term of office by reason of not being reelected to a succeeding
term by the stockholders of the Corporation.
6. BOOKKEEPING OF MEMORANDUM ACCOUNT: A Memorandum Account for each
Eligible Director will be credited by Common Stock Units stated to three (3)
decimal places.
(a) The number of Common Stock Units initially credited to the
Memorandum Account of an Eligible Director shall be calculated by dividing
the present value of the future Director's Retirement Fees amount (using a
7% discount rate) by the average daily closing price on the New York Stock
Exchange of the Corporation's Common Stock during the period October 1,
1996 through December 31, 1996.
(b) Until fully paid out in accordance with Section 7 below, the
Corporation shall credit to the Eligible Director's Memorandum Account, on
each day that the Corporation pays a declared cash dividend to the
stockholders of its Common Stock, a number (stated to three decimal places)
of Common Stock Units that is equal to the total number of Common Stock
Units in the Eligible Director's Memorandum Account on the record date
established for such dividend, multiplied by the cash dividend per share of
Common Stock and divided by the published closing price of the Common Stock
on the record date.
(c) In the event of any change in the outstanding shares of the
Corporation's Common Stock by reason of any stock dividend or split,
recapitalization, merger, consolidation spin-off, reorganization,
combination of shares or other similar corporate change, the Board will
adjust the number of shares in the Eligible Director's Memorandum Account
for each such change.
(d) An Eligible Director shall have no rights as a stockholder of
Common Stock with respect to the Common Stock Units credited to his
Memorandum Account unless and until a certificate for shares of Common
Stock is issued to the Eligible Director by the Corporation pursuant to the
terms of the Plan.
7. PAYOUT OF MEMORANDUM ACCOUNT: Following the effective date of this
Plan, the Corporation shall cause to be delivered to the Eligible Director (or,
in the event of death, his beneficiary or beneficiaries as specified in the
Beneficiary Form on file with the Board or to his estate if no beneficiary is
specified therein) on the Payment Date a certificate for the number of shares of
Common Stock equal to the whole number of accrued Common Stock Units in his
Memorandum Account as of the Payment Date plus cash for any accrued fractional
unit determined at Fair Market Price on the Payment Date. Other than cash paid
on the Payment Date for any fractional unit of Common Stock in the Eligible
Director's Memorandum Account, no cash payment will be made to the Director or
his beneficiary or beneficiaries.
(a) Prior to January 1, 1997, and subsequently at any time prior to
twelve (12) months before the Retirement date, each Eligible Director may
make an election of the period over which such shares of Common Stock are
to be distributed by the Corporation. Such period may not exceed ten (10)
years. Each Eligible Director must complete and deliver to the Corporation
a written form which will state the number of years during which he wishes
his Common Stock to be paid out.
(b) In the event of a Change in Control of the Corporation, an
Eligible Director may elect to receive one share of the Corporation's
Common Stock for each Common Stock Unit in his Memorandum Account or to
have such shares exchanged for shares in the acquiring company if the
acquiring company acquires control of the Corporation by means of a
stock-for-stock exchange.
(c) In the event of the death of an Eligible Director prior to
retirement from the Board, one share of Common Stock for each Common Stock
Unit credited to the Director's Memorandum Account, adjusted if necessary
to reflect service of less than ten (10) years, will be issued to the
Director's designated beneficiary or to his estate if no specific
beneficiary is designated in accordance with the vesting schedule described
in Section 8 below.
C-2
<PAGE> 34
8. VESTING: The Eligible Director's interest in the Memorandum Account
shall become fully vested upon his completion of ten (10) years of service on
the Board of Directors of the Corporation. Any Eligible Director who ceases
service on the Board after five (5) years but before completion of ten (10)
years of service will have the number of Common Stock Units in his Memorandum
Account reduced on a pro rata basis to reflect the number of years actually
served.
9. UNFUNDED PLAN: This Plan is intended to be, for the purposes of Title I
and IV of the Employee Retirement Income Security Act of 1974, as amended, a
nonfunded Plan for the benefit of Eligible Directors. No Eligible Director shall
have any property interest whatsoever in any specific assets of the Corporation.
The Memorandum Account is not intended to be a trust account or escrow account
for the benefit of an Eligible Director or any other person. The sole right of
an Eligible Director or his personal representative is a right as an unsecured
general creditor of the Corporation. No later than January of each year, the
Corporation shall provide each Eligible Director with an annual report of his
Memorandum Account balance as of December 31 of the preceding year.
10. ASSIGNMENT AND ALIENATION: The rights and benefits of Eligible
Directors under this Plan are personal to each Director and neither the Director
nor his or her designated beneficiary shall have the power or right to transfer,
assign, anticipate, mortgage or otherwise encumber any Memorandum Account to be
made under this Plan.
11. STOCK SUBJECT TO PLAN: The maximum number of shares of Common Stock
that shall be reserved for issuance under this Plan shall be 35,000 shares,
subject to adjustment upon changes in the capitalization of the Corporation as
provided in Section 6(c) above.
12. FUTURE DIRECTOR TERM OBLIGATIONS: Nothing in this Plan shall obligate
an Eligible Director to continue as such or accept any nomination for a future
term as a director of the Corporation.
13. WITHHOLDING/EMPLOYMENT TAXES: As required by applicable tax law, the
Corporation may withhold, deduct and adjust an Eligible Director's Memorandum
Account for all required amounts necessary to satisfy any federal, state or
other governmental withholding taxes arising directly or indirectly in
connection with the Plan or any election agreement whether under current or
future tax laws. Notwithstanding the foregoing, the withholding obligations of
the Corporation upon payout in Common Stock of any Eligible Director's
Memorandum Account is limited by such applicable tax law as mentioned above, and
the Eligible Director is solely responsible for the payment of all income or
other taxes that may be related to such Memorandum Account payout.
IN WITNESS WHEREOF, the Corporation has caused this Plan to be signed and
adopted the day of , 1996.
NORTH CAROLINA NATURAL GAS
CORPORATION
By:
----------------------------------------
President
ATTEST:
- ---------------------------------------------------
Secretary
C-3
<PAGE> 35
APPENDIX A
PROXY PROXY
NORTH CAROLINA NATURAL GAS CORPORATION
Proxy for Annual Meeting of Stockholders
This Proxy is Solicited on Behalf of the Board of Directors of the Corporation
The signatory stockholder hereby appoints Calvin B. Wells and Sally T. Sowers,
or either of them, with full power of substitution as attorneys and proxies to
vote all of the shares of COMMON STOCK of North Carolina Natural Gas
Corporation held or owned by said stockholder at the Annual Meeting of
Stockholders on January 14, 1997, and at any adjournments thereof, as follows
on the reverse.
THE SHARES OF COMMON STOCK REPRESENTED BY THIS PROXY WILL BE VOTED AS
SPECIFIED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR PROPOSALS
ONE, TWO, THREE AND FOUR.
Stockholders should sign exactly as name appears on the reverse. Any person
signing in a fiduciary capacity will please enclose proof of his appointment
unless such proof has already been furnished. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
HAS YOUR ADDRESS CHANGED?
- ------------------------------------
- ------------------------------------
- ------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 36
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
NORTH CAROLINA NATURAL GAS CORPORATION
RECORD DATE SHARES:
_____________
1. Election of Directors.
[ ] FOR [ ] WITHHOLD [ ] FOR ALL EXCEPT
James E.S. Hynes, Richard F. Waid, and Calvin B. Wells
(Instruction: To withhold authority to vote for any nominee, mark the "For
All Except" box and strike a line through the nominee's name in the list
provided above.)
2. Approval of the North Carolina Natural Gas Corporation Long Term Incentive
Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the North Carolina Natural Gas Corporation Directors' Deferred
Compensation Stock Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approval of the North Carolina Natural Gas Corporation Directors' Retirement
Compensation Stock Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, upon any other business which may properly come before
the meeting or any adjournment thereof.
Mark box at right if address change has been noted on the reverse side of
this card. [ ]
PLEASE BE SURE TO SIGN AND DATE THIS PROXY.
__________________________________________
Date
__________________________________________
Stockholder sign here
__________________________________________
Co-owner sign here
- ------------------------------------------------------------------------------
DETACH CARD
NORTH CAROLINA NATURAL GAS CORPORATION
Dear Stockholder:
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Company that require your immediate attention and approval. These are
discussed in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on the proxy card to indicate how your shares shall be
voted. Then sign and date the card, detach it and return your proxy vote in the
enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders,
January 14, 1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
North Carolina Natural Gas Corporation
