SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ( X )
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, for use of the Commission Only (as permitted by Rule
14a-4(e) (2))
( X ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-12
- - --------------------------------------------------------------------------------
NORTHWEST NATURAL GAS COMPANY
ONE PACIFIC SQUARE
220 N.W. SECOND AVENUE
PORTLAND, OREGON 97209
(503) 226-4211
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
Portland, Oregon, April 17, 1998
To the Shareholders:
The 1998 Annual Meeting of Shareholders of Northwest Natural Gas
Company will be held in the Lloyd Center Ballroom of the DoubleTree Hotel Lloyd
Center (formerly the Red Lion Inn), 1000 N. E. Multnomah Street, Portland,
Oregon, on Thursday, May 28, 1998, at 2:00 p.m., Pacific Daylight Time, for the
following purposes:
(1) to elect four Class II directors to a term of three years;
(2) to elect independent auditors for the year 1998; and
(3) to transact such other business as may properly come before the
meeting or any adjournment thereof.
Holders of Common Stock of record at the close of business on April 9,
1998 are entitled to vote upon all matters properly submitted to shareholder
vote at the meeting.
The Board of Directors of the Company is soliciting the proxies of all
holders of the Common Stock who may be unable to attend the meeting in person.
These proxies also will instruct the Administrator, or its agent, under the
Company's Dividend Reinvestment and Stock Purchase Plan to vote any shares held
for shareholders' benefit under this Plan, as indicated on the proxies. A proxy
and a stamped return envelope are enclosed herewith for your use. No postage is
needed if mailed in the United States.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING.
WE URGE YOU TO EXERCISE YOUR RIGHT TO VOTE BY PROMPTLY MARKING,
SIGNING, DATING AND RETURNING THE ENCLOSED PROXY CARD. THE PROMPT RETURN OF
YOUR PROXY WILL SAVE YOUR COMPANY THE ADDITIONAL EXPENSE OF FURTHER REQUESTS TO
ENSURE THE PRESENCE OF A QUORUM. YOU MAY VOTE IN PERSON AT THE MEETING WHETHER
OR NOT YOU PREVIOUSLY HAVE RETURNED YOUR PROXY.
By Order of the Board of Directors,
/s/ C. J. Rue
Secretary
NORTHWEST NATURAL GAS COMPANY
ONE PACIFIC SQUARE
220 N.W. SECOND AVENUE
PORTLAND, OREGON 97209
(503) 226-4211
1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 28, 1998
PROXY STATEMENT
The Board of Directors of Northwest Natural Gas Company is soliciting
the proxies of all holders of the Common Stock who may be unable to attend in
person the Annual Meeting of Shareholders to be held in the Lloyd Center
Ballroom of the DoubleTree Hotel Lloyd Center (formerly the Red Lion Inn), 1000
N.E. Multnomah Street, Portland, Oregon, on Thursday, May 28, 1998, at 2:00
p.m., Pacific Daylight Time. The Company requests that you sign and return the
enclosed proxy promptly.
The Company's Annual Report for the fiscal year ended December 31,
1997, including audited financial statements, has been mailed to all
shareholders. This proxy statement and the accompanying proxy card are being
mailed to shareholders commencing April 17, 1998.
All shares represented by proxies which have been properly executed and
returned to the management will be voted at the meeting. Where a shareholder
eligible to vote specifies a choice by means of the ballot space provided in the
proxy, the shares will be voted in accordance with the specification so made. If
no specification is made, such shares will be voted FOR Items 1 and 2, and may
be cumulatively voted for the election of directors. The proxy may be revoked by
you at any time before it is exercised by delivering to the Company a later
dated proxy, by giving written notice of revocation to the Secretary of the
Company at the address shown above, or by attending the meeting and voting your
shares in person.
The close of business on April 9, 1998 has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the meeting.
VOTING SECURITIES OF THE COMPANY
The 22,930,279 shares of Common Stock outstanding on
March 20, 1998 were held by about 9,900 shareholders residing in 50
states and a number of foreign countries.
Each holder of Common Stock of record at the close of business on
April 9, 1998 will be entitled to one vote for each share of Common Stock so
held on all matters properly submitted at the meeting. Such holder will be
entitled to cumulative voting for directors; that is, to cast as many votes for
one candidate as shall equal the number of shares held of record multiplied by
the number of directors to be elected, or to distribute such number of votes
among any number of the candidates.
A majority of the shares of Common Stock outstanding at the close of
business on April 9, 1998 must be represented at the meeting, in person or by
proxy, to constitute a quorum for the transaction of business.
The holders of Preferred Stock do not participate in the election of
directors unless Preferred dividends are in arrears (none are in arrears). The
holders of the Preference Stock do not participate in the election of directors.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. YOU ARE
URGED, REGARDLESS OF THE NUMBER OF SHARES HELD, TO SIGN AND RETURN YOUR PROXY.
ITEM 1 - ELECTION OF DIRECTORS
The Company's Restated Articles of Incorporation provide that the Board
of Directors be comprised of not less than nine nor more than thirteen
directors, with the exact number of directors to be determined by resolution
adopted by the Board. The Board has fixed the number of directors at twelve. The
Restated Articles also provide that the Board of Directors be divided into three
classes and that the number of directors in each class be as nearly equal in
number as possible.
Members of each class are elected to serve a three-year term with the
terms of office of each class ending in successive years. The term of Class II
directors expires with this Annual Meeting of Shareholders. Messrs. Tod R.
Hamachek, Wayne D. Kuni and Russell F. Tromley and Ms. Melody C. Teppola are
nominees for election to the Board as Class II directors to serve until the 2001
Annual Meeting or until their successors have been duly elected and qualified.
Each of the nominees was elected by the shareholders at the 1995 Annual Meeting.
In case any of the nominees should become unavailable for election for any
reason, the persons named in the proxy will have discretionary authority to vote
for a substitute. Management knows of no reason why any of the nominees would be
unable to serve if elected.
Under Oregon law, if a quorum of shareholders is present at the Annual
Meeting, the four nominees who receive the greatest number of votes cast at the
meeting shall be elected directors. Abstentions and broker non-votes are counted
for purposes of determining whether a quorum exists at the Annual Meeting but
are not counted and have no effect on the results of the vote for either
directors or proposal 2.
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF THE NOMINEES LISTED
BELOW.
INFORMATION CONCERNING NOMINEES AND CONTINUING DIRECTORS
NOMINEES FOR ELECTION TO BOARD OF DIRECTORS
CLASS II
(FOR A THREE-YEAR TERM ENDING 2001)
- - ---------------- TOD R. HAMACHEK
(Photo appears
here) Chairman and Chief Executive Officer, Penwest
- - ---------------- Pharmaceuticals Company
Patterson, New York
Age: 52
Director since: 1986
Board Committees: Pension, Retirement, Organization and
Executive Compensation (Chairman)
Since 1985, Mr. Hamachek has served as President and Chief Executive
Officer of Penford Corporation (formerly Penwest, Ltd.), a diversified producer
of specialty paper, food starches and pharmaceutical ingredients. In October
1997, Mr. Hamachek was appointed Chairman and Chief Executive Officer of Penwest
Pharmaceuticals Company which is engaged in the formulation and development of
oral controlled release pharmaceutical products using its proprietary delivery
technology. It is also engaged in the manufacture and distribution of
pharmaceutical excipients, the inactive ingredients in drug tablets, to major
pharmaceutical companies worldwide. He plans to resign his position with Penford
Corporation upon the completion of an initial public offering of Penwest
Pharmaceuticals Company's common stock. He is a director of Penwest
Pharmaceuticals, Penford, Dekalb Genetics Corporation, The Seattle Times Company
and The Blethen Corporation (the majority owner of The Seattle Times). Mr.
Hamachek is a trustee and/or director of Williams College and The Seattle
Foundation. He is a graduate of Williams College and the Harvard Business
School.
- - ---------------- WAYNE D. KUNI
(Photo appears
here) Chairman and Chief Executive Officer, Kuni Enterprises,
- - --------------- Beaverton, Oregon
Age: 67
Director since: 1980
Board Committees: Executive, Audit (Chairman), Finance,
Organization and Executive Compensation
Mr. Kuni is the founder, Chairman, CEO and principal shareholder of
Kuni Enterprises, which owns Cadillac, Lexus, BMW and other automobile
dealerships in Oregon, Colorado and California. He is past president of the
Oregon Automobile Dealers Association, the Portland Chamber of Commerce and the
Arlington Club. He is a member of the Boards of Trustees of Linfield College and
the Oregon Health Sciences Foundation, and serves on the Board of Keller
Enterprises. He is Chairman Emeritus of the Board of Governors of the Portland
Shriners Hospital. Mr. Kuni is a graduate in business administration from the
General Motors Institute, Flint, Michigan.
- - --------------- MELODY C. TEPPOLA
(Photo appears
here) Managing Partner, National Builders Hardware Company,
- - --------------- Portland
Age: 55
Director since: 1987
Board Committees: Executive, Pension, Retirement,
Environmental Policy
Ms. Teppola has been associated with National Builders Hardware
Company, a regional and national distributor of builders hardware, woodworking
machinery and decorative plumbing, since 1965. Her community activities have
focused on art, education and advocacy for women and children. She is a member
of the Marquam Hill Steering Committee of the Oregon Health Sciences University,
the Public Art Advisory Committee of the Regional Arts and Cultural Council, and
the advisory board of the Port of Portland Mentor Program. Ms. Teppola is a
Mills College graduate.
- - --------------- RUSSELL F. TROMLEY
(Photo appears
here) President and Chief Executive Officer, Tromley Industrial
- - --------------- Holdings, Inc., Tualatin, Oregon
Age: 58
Director since: 1994
Board Committees: Audit, Finance
Mr. Tromley has served as President and Chief Executive Officer of
Tromley Industrial Holdings, Inc., since its formation in 1990. Tromley
Industrial Holdings is involved in nonferrous metals alloying and distribution,
the manufacture and sale of equipment for the foundry and steel industry,
industrial equipment leasing and industrial and retail business property
investments. Mr. Tromley is a past president of the Casting Industry Suppliers
Association and of the Arlington Club, and is a non-lawyer arbitrator for the
Oregon State Bar Association. He is a founding director of The Bank of the
Northwest, and also serves as a director of the Evans Scholars Foundation and
the Western Golf Association. Mr. Tromley attended the University of Washington
and the Harvard Business School.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
CLASS I
(TERM ENDING 2000)
- - --------------- RICHARD B. KELLER
(Photo appears
here) President and Chief Executive Officer, Keller Enterprises
- - --------------- Inc., Portland
Age: 69
Director since: 1983
Board Committees: Executive, Pension (Chairman), Retirement
(Chairman), Organization and Executive Compensation
Since 1975, Mr. Keller has served as the President and CEO of Keller
Enterprises Inc., a holding company. He is also the President of High Point
Management, Inc., the General Partner of High Point Keller Limited Partnership,
which invests in telecommunications. He is a member of the Board of Crown
Pacific Management L.P., the Managing General Partner of Crown Pacific Partners,
L.P., and a life trustee of the Oregon Graduate Institute and Lewis & Clark
College. Mr. Keller is a graduate of the United States Military Academy and the
Harvard Business School.
- - --------------- RANDALL C. PAPE
(Photo appears
here) President and Chief Executive Officer, The Pape Group, Inc.,
- - --------------- Eugene, Oregon
Age: 47
Director since: 1996
Board Committees: Audit, Environmental Policy, Finance
Since 1981, Mr. Pape has served as President, Chief Executive Officer,
and director of The Pape Group, Inc., a holding company for Pape Bros., Inc.,
Flightcraft, Inc., Hyster Sales Company, Industrial Finance Corporation and Pape
Properties, Inc. He also serves as President, CEO and director of Liberty
Financial Group, a holding company for Liberty Federal Bank SB, EcoSort LLC, and
Sanipac, Inc. He is also a partner in Pape Investment Company. Mr. Pape serves
as a director of Mt. Bachelor, Inc. and Obie Media Corporation, and as a trustee
of the University of Oregon Foundation and The Nature Conservancy of Oregon. He
currently serves as President of the Oregon Trail Council of the Boy Scouts of
America and is a member of the Valley Leadership Council for the Oregon
Community Foundation. He is a graduate of the University of Oregon.
- - --------------- ROBERT L. RIDGLEY
(Photo appears
here) Chairman of the Board of the Company, Portland
- - --------------- Age: 64
Director since: 1984
Board Committee: Executive
Mr. Ridgley served as President and Chief Executive Officer of the
Company from January 1, 1985 until March 1, 1996 when he became Chairman of the
Board and CEO. He retired as CEO on December 31, 1996, but continues to serve as
Chairman of the Board. He is a director of Kaiser Foundation Hospitals and the
Kaiser Foundation Health Plan, and is a past Chairman of the Oregon Business
Council, the American Gas Association, the Pacific Coast Gas Association and the
Portland Area Chamber of Commerce. Mr. Ridgley serves as a director of
Associated Oregon Industries and the Oregon Independent College Foundation, as
Chairman of the Oregon Chapter of The Nature Conservancy and as a trustee of the
Oregon Health Sciences Foundation. He is a graduate of Cornell University and
the Harvard Law School.
- - --------------- DWIGHT A. SANGREY
(Photo appears
here) President and Chief Executive Officer, Santa Fe
- - --------------- Technologies, Inc., Vancouver, Washington
Age: 57
Director since: 1992
Board Committees: Environmental Policy (Chairman), Pension,
Retirement
In 1997, Mr. Sangrey was appointed President and Chief Executive
Officer of Santa Fe Technologies, Inc., an international company offering
information technology products and services for the transportation industry.
From 1995 until he assumed his present position, he served as President and CEO
of Fraction Biologics, LLC, an advanced biotechnology firm which produces and
markets pharmaceutical products. From 1988 until 1994, he was President of the
Oregon Graduate Institute of Science & Technology (OGI), and was Professor of
Environmental Science and Engineering at OGI until 1995. He is a board member of
Northwest NeuroLogic, Inc., Pacific University and Saturday Academy and also
serves on several national education and science policy committees. Mr. Sangrey
is a graduate of Lafayette College, the University of Massachusetts and Cornell
University.
CLASS III
(TERM ENDING 1999)
- - --------------- MARY ARNSTAD
(Photo appears
here) President and Chief Executive Officer, Broken Top, Inc.,
- - --------------- Bend, Oregon
Age: 49
Director since: 1992
Board Committees: Audit, Environmental Policy
In January 1998, Ms. Arnstad was named President and CEO of Broken Top,
Inc., a golf club and residential community development located in Bend, Oregon.
In 1997, she established Arnstad Accommodations, Inc., a hospitality company
based in Portland, to undertake hotel projects in the Pacific Northwest. From
1992 through February 1997, she served as President of The Heathman Management
Group, Inc., which owns and operates The Heathman Hotel and the B.
Moloch/Heathman Bakery and Pub, both located in Portland, and The Greenwood Inn
in Beaverton, Oregon. Ms. Arnstad formerly served as Vice Chairman of the Board
of Directors of Preferred Hotels and Resorts Worldwide, and is on the governing
boards of the Portland Oregon Sports Authority and the Northwest Business
Committee for the Arts. In 1996, Ms. Arnstad was appointed Oregon Tourism
Commissioner. She is a graduate of Wittenberg University.
- - --------------- THOMAS E. DEWEY, JR.
(Photo appears
here) General Partner, McFarland Dewey & Co., New York, New York
- - --------------- Age: 65
Director since: 1986
Board Committees: Finance (Chairman), Audit
Since 1989, Mr. Dewey has been a general partner in the investment
banking firm of McFarland Dewey & Co., which provides clients with independent
financial advice, including advice on corporate financial strategies and
recapitalization proposals. He is also Chairman Emeritus of Lenox Hill Hospital,
and formerly served as a member of the Board and as Vice Chairman of New York
City Housing Development Corporation. Mr. Dewey is a graduate of Princeton
University and the Harvard Business School.
- - --------------- RICHARD G. REITEN
(Photo appears
here) President and Chief Executive Officer of the Company,
- - --------------- Portland
Age: 58
Director since: 1996
Board Committee: Executive
Mr. Reiten joined the Company as President and Chief Operating Officer
and was elected to the Board effective March 1, 1996. He was elected President
and Chief Executive Officer effective January 1, 1997. From August 1992 through
December 1995, Mr. Reiten served as President and Chief Operating Officer of
Portland General Electric Company (PGE) after having served as President of
PGE's parent company, Portland General Corporation (PGC), from January 1989
through 1992. He also served as a director of PGC from 1983 to 1987 and from
1990 to 1995 when he retired from PGE. He is a director of Regence BlueCross and
BlueShield of Oregon, The Regence Group and Aegis Insurance Services. He serves
on the boards of the American Gas Association and the Pacific Coast Gas
Association. He is currently general chairman of the United Way campaign for
Portland and is a past chairman of both the Portland Metropolitan Chamber of
Commerce and the Association for Portland Progress. Mr. Reiten is a graduate of
the University of Washington and of the executive and board of directors
programs at the Stanford Business School.
- - --------------- BENJAMIN R. WHITELEY
(Photo appears
here) Chairman and CEO, Retired, Standard Insurance Company, and
- - --------------- Lead Director of the Company,
Portland
Age: 68
Director since: 1989
Board Committees: Executive (Chairman), Organization and
Executive Compensation
Mr. Whiteley was appointed Chairman of the Board and Chief Executive
Officer of Standard Insurance Company effective January 1, 1993, after having
served as President and Chief Executive Officer since 1983. He retired as Chief
Executive Officer of Standard in August 1994 and as Chairman of the Board in
April 1998. He is also a director of Standard Insurance Company, Gunderson,
Inc., U. S. Bancorp, The Greenbrier Companies, and Willamette Industries, Inc.
He has served as Lead Director of the Company's Board of Directors since
September 1994. Mr. Whiteley has been active in numerous civic organizations
and currently serves on the boards of Pacific University, the Oregon State
University Foundation, the Oregon Business Council, the Oregon Health Sciences
Foundation and the St. Vincent Medical Foundation. He is a graduate of Oregon
State University, the University of Michigan, and the advanced management
program at the Harvard Business School.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES:
There are seven standing committees of the Board: the Audit,
Retirement, Pension, Organization and Executive Compensation, Environmental
Policy, Finance and Executive Committees.
The Audit Committee is comprised of directors Arnstad, Dewey, Kuni,
Pape and Tromley, each of whom is an outside director. The Committee approves
the work program of the Company's internal audit staff and reviews the corporate
audit and other internal accounting control matters with the independent
certified public accountants elected by the shareholders. It reports regularly
to the Board. The Committee held four meetings during 1997.
The Retirement Committee and the Pension Committee oversee the
administration of the Company's two defined benefit plans, its Retirement Plan
for Non-Bargaining Unit Employees and its Retirement Plan for Bargaining Unit
Employees. The Retirement Committee consists of directors Hamachek, Keller,
Sangrey and Teppola. These directors, together with a representative chosen by
the bargaining unit members, also constitute the Pension Committee. The two
Committees met four times during 1997.
The Organization and Executive Compensation Committee, which is
comprised of directors Hamachek, Keller, Kuni and Whiteley, each of whom is an
outside director, reviews the performance of executive officers, considers
executive compensation survey data in making recommendations to the Board
relating to the Company's executive compensation program and benefit plans, and
administers the 1985 Stock Option Plan. This Committee also makes
recommendations to the Board on organization and executive succession matters.
Three meetings of this Committee were held during 1997.
The Environmental Policy Committee develops and recommends to the Board
appropriate environmental policies and advises the Board concerning the status
of the Company's compliance with environmental regulations. The Committee is
comprised of directors Arnstad, Pape, Sangrey and Teppola. This Committee held
three meetings in 1997.
The Finance Committee is responsible for reviewing strategies and
making recommendations to the Board with respect to the Company's financing
programs, financial policy matters and material regulatory issues. The Committee
consists of directors Dewey, Kuni, Pape and Tromley. The Committee held three
meetings in 1997.
The Executive Committee is empowered, during intervals between Board
meetings, to exercise all of the authority of the Board in the management of the
Company, except as otherwise may be provided by law. This Committee has been
assigned the responsibility of recommending to the Board of Directors nominees
for election as directors. Shareholders' suggestions for director-nominees may
be submitted to the Secretary of the Company for consideration by the Executive
Committee. The Company's Restated Articles of Incorporation provide that no
person, except those nominated by the Board, shall be eligible for election as a
director at any annual or special meeting of shareholders unless a written
request that his or her name be placed in nomination, together with the written
consent of the nominee, shall be received from a shareholder of record entitled
to vote at such election by the Secretary of the Company on or before the later
of (a) the thirtieth day prior to the date fixed for the meeting, or (b) the
tenth day after the mailing of the notice of that meeting. This Committee, which
is comprised of directors Keller, Kuni, Reiten, Ridgley, Teppola and Whiteley,
held two meetings during 1997.
In 1994, the Board created the position of Lead Director and elected
Mr. Whiteley to the position. The Lead Director consults with the Chairman of
the Board and with the Chief Executive Officer on Board organization matters,
including the selection of committee members and chairs. The Lead Director also
chairs meetings of the Executive Committee and regularly scheduled meetings of
outside directors, which are held at least twice each year, and coordinates the
periodic evaluation by outside directors of the Board's performance.
Directors who are not employees of the Company receive an annual
retainer of $10,000, a fee of $1,000 for each Board meeting attended and a fee
of $800 for each Committee meeting attended. In addition, a $3,000 annual
retainer is paid to each Committee chair, except the chair of the Executive
Committee/Lead Director who is paid $2,000 per month for his services in these
capacities. Non-employee directors who also serve as directors of Canor Energy
Ltd., a subsidiary of the Company, receive an additional fee of $700 for each
board meeting of Canor Energy Ltd. attended and an annual retainer of $3,000.
Non-employee directors who serve as directors of NNG Financial Corporation, also
a subsidiary of the Company, also receive a fee of $250 for each Board meeting
of NNG Financial Corporation attended.
Under an agreement entered into in September 1994, Mr. Ridgley,
formerly President and CEO of the Company, was paid $10,000 per month for his
services as Chairman of the Board and consultant commencing March 1, 1997. Such
payments will continue to be paid through February 1999 and would be paid to Mr.
Ridgley's wife in the event of his death or disability prior to that time. The
Company also provided Mr. Ridgley the continued use of a Company automobile and
reimbursed him for the payment of certain business-related club dues and
assessments.
During 1997, there were seven meetings of the Company's Board, an
aggregate of six meetings of the Boards of the above-mentioned subsidiaries, and
a total of 19 committee meetings. No director attended fewer than 75 percent of
the total meetings of the Board, subsidiary Boards, and committees on which he
or she served, except Mr. Pape who was unable to attend a number of meetings due
to an illness.
DIRECTORS DEFERRED COMPENSATION PLAN
Directors may elect to defer the receipt of all or a part of their
directors' fees under the Company's Directors Deferred Compensation Plan. At the
director's election, deferred amounts may be credited to either a "cash account"
or a Company "stock account." If deferred amounts are credited to stock
accounts, such accounts are credited with a number of shares based on the
purchase price of Common Stock on the next purchase date under the Company's
Dividend Reinvestment and Stock Purchase Plan, and such accounts are credited
with additional shares based on the deemed reinvestment of dividends. Cash
accounts are credited with interest quarterly at a rate equal to the annual rate
of interest paid on 30-year U.S. Treasury securities plus three percentage
points, subject to a six percent minimum rate. The rate is adjusted quarterly.
Deferred balances in stock and/or cash accounts are payable after termination of
Board service in a lump sum, in installments over a period not to exceed ten
years, or in a combination of lump sum and installments, at the election of the
participant.
The Company's obligations under the Plan are unfunded and benefits will
be paid either from the general funds of the Company or from the Umbrella Trust
for Directors which has been established for this Plan. With respect to the cash
accounts, the Company has purchased life insurance policies on the lives of the
participants, the proceeds from which will be used to reimburse the Company for
the payment of cash benefits from the Plan. This insurance is designed so that,
if the assumptions made as to mortality experience, policy dividends and other
factors are realized, insurance policy proceeds paid to the Company will be at
least equal to all the premium payments and cash benefits paid under the Plan.
The cost of any one individual participant cannot be properly allocated or
determined because of overall Plan assumptions. In addition, the Company has
contributed cash and Common Stock to the trustee of the Umbrella Trust such that
the Umbrella Trust holds the number of shares of Common Stock equal to the
number of shares credited to all directors' stock accounts. Shares so held will
be used to fund the Company's obligation to pay out the stock accounts.
The Company may from time to time transfer other assets to the trustee
of the Umbrella Trust to hold in trust for the benefit of Plan participants. The
Company's obligations under the Plan are not limited to trust assets, and Plan
participants will have a claim against the Company for any payments not made by
the trustee. The Company instructs the trustee as to the investment of the
trust's assets and the trustee's fees and expenses are paid by the Company.
Upon the occurrence of certain events, such as a change in control of
the Company, termination of the Plan or the failure by the Company to provide
the trust with adequate funds to pay current benefits, the Company may be
required under the terms of the trust to contribute to the trust the amount by
which the present value of all benefits payable under the Plan exceeds the value
of the trust's assets.
NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN
Non-employee directors of the Company are awarded approximately $50,000
worth of the Company's Common Stock upon joining the Board pursuant to the
Company's Non-Employee Directors Stock Compensation Plan. These initial awards
vest in monthly installments over the five calendar years following the award.
On January 1 of each year thereafter, non-employee directors are awarded an
additional $10,000 of Common Stock which vests in monthly installments in the
fifth year following the award (after the previous award has fully vested). All
awards vest immediately upon a change in control of the Company. Unvested shares
are forfeited if the recipient ceases to be a director. The shares awarded are
purchased in the open market by the Company at the time of award. Directors may
elect to defer unvested shares into their stock accounts under the Directors
Deferred Compensation Plan. Certificates representing a director's vested shares
are not delivered to the director until after the director leaves the Board.
TERMINATION OF DIRECTORS RETIREMENT BENEFIT
In the past, directors who retired from the Board at the mandatory
retirement age of 72 after serving at least 10 years on the Board, were paid an
annual lifetime benefit equal to the annual retainer paid to active directors.
Effective January 1, 1998, this benefit was terminated for all current
directors, but will continue for directors who retired before that date. In lieu
of this benefit, a buy-out amount was determined for each current director equal
to the present value of the director's lifetime benefit using a 7% discount
rate, certain actuarial mortality assumptions and other assumptions that
included no change in the annual retainer and retirement from the Board at age
72. The amount determined in this manner for each current director was credited
to a stock account under the Directors Deferred Compensation Plan, with the
number of shares credited based on a current market price of the Company's
Common Stock. If a director retires from the Board at age 72 with 10 years of
service or if there is an earlier change in control of the Company, the Company
is obligated to deliver to the director the number of shares credited to the
account, plus an additional number of shares based on reinvested dividends
credited to the account over time. Concurrently with the creation of the stock
accounts, the Company contributed to the Umbrella Trust for Directors shares of
the Company's Common Stock with a market value equal to the aggregate of the
buy-out amounts for all directors. Such stock is held in the Umbrella Trust and
will be used to fund the Company's obligation to pay out the stock accounts. The
number of shares of Common Stock credited to the stock account of each current
director was: Mary Arnstad, 479; Thomas E. Dewey, Jr., 1,544; Tod R. Hamachek,
592; Richard B. Keller, 2,138; Wayne D. Kuni, 1,811; Randall C. Pape, 447;
Richard G. Reiten, 981; Robert L. Ridgley, 1,428; Dwight A. Sangrey, 911; Melody
C. Teppola, 733; Russell F. Tromley, 911; and Benjamin R. Whiteley, 1,966.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers to file reports of ownership and
changes in ownership of Company Common Stock with the Securities and Exchange
Commission. The Company is required to disclose in this proxy statement any late
filings of those reports made by its directors and executive officers during
1997. Based solely upon a review of the copies of such reports furnished to it
and written representations that no other such reports were required, the
Company believes that during 1997 all directors and executive officers, other
than Vice President Diana J. Johnston, timely filed all such required reports.
Ms. Johnston filed a late report for the year 1997 relating to the exercise of
an option on 500 shares of Company stock in March 1997.
BENEFICIAL OWNERSHIP OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information with respect to beneficial
ownership of the Company's Common Stock as of February 28, 1998 (except as
otherwise noted) by all directors and nominees, each of the executive officers
named in the Summary Compensation Table on page 14 and all directors and
executive officers as a group.
PERCENT OF OUTSTANDING
NAME OF BENEFICIAL OWNER NUMBER OF SHARES(1) COMMON STOCK
- - ------------------------ ---------------- ---------------------
Mary Arnstad 3,498 (2) *
Bruce R. DeBolt 21,615 (3) *
Thomas E. Dewey, Jr. 5,279 (4) *
Dwayne L. Foley 26,840 (5) *
Tod R. Hamachek 5,055 (6) *
Richard B. Keller 18,124 (7) *
Wayne D. Kuni 9,758 (8) *
Michael S. McCoy 24,155 (9) *
Randall C. Pape 3,320 (10) *
Richard G. Reiten 69,792 (11) *
Robert L. Ridgley 29,966 (12) *
Bruce B. Samson 19,915 (13) *
Dwight A. Sangrey 3,909 (14) *
Melody C. Teppola 5,285 (15) *
Russell F. Tromley 6,436 (16) *
Benjamin R. Whiteley 7,243 (17) *
All directors and officers 309,371 (18) 1.3
as a group (22 in number)
* The total for each individual is less than 1.0 percent and the total for all
directors and executive officers as a group is 1.3 percent of the shares of
Common Stock outstanding.
(1) Unless otherwise indicated, beneficial ownership includes both sole
voting power and sole investment power.
(2) Includes 1, 749 shares subject to forfeiture under the Non-Employee
Directors Stock Compensation Plan (NEDSCP) and 863 shares credited to a
stock account under the Directors Deferred Compensation Plan (DDCP).
(3) Includes 2,916 shares held jointly with wife and 7,991 shares which Mr.
DeBolt has the right to acquire within 60 days through the exercise of
options under the 1985 Stock Option Plan (1985 SOP).
(4) Includes 1,696 shares subject to forfeiture under the NEDSCP and 1,962
shares credited to a stock account under the DDCP.
(5) Consists of 11,465 shares held jointly with wife and 15,375 shares
which Mr. Foley has the right to acquire within 60 days through the
exercise of options under the 1985 SOP.
(6) Includes 1,696 shares subject to forfeiture under the NEDSCP and 1,146
shares credited to a stock account under the DDCP.
(7) Includes 1,156 shares subject to forfeiture under the NEDSCP, 9,000 shares
held by Keller Enterprises, and 2,562 shares credited to a stock account
under the DDCP.
(8) Includes 1,696 shares subject to forfeiture under the NEDSCP, 4,383 shares
held in trust, and 2,350 shares credited to a stock account under the DDCP.
(9) Consists of 9,530 shares held jointly with wife and 14,625 shares which
Mr. McCoy has the right to acquire within 60 days through the exercise
of options under the 1985 SOP.
(10) Includes 1,821 shares subject to forfeiture under the NEDSCP and 543 shares
credited to a stock account under the DDCP.
(11) Includes 12,078 shares held indirectly by Mr. Reiten under the Retirement
K Savings Plan (RKSP) at December 31, 1997, 52,500 shares which Mr. Reiten
has the right to acquire within 60 days through the exercise of options
under the 1985 SOP, and 992 shares credited to a stock account under the
DDCP.
(12) Includes 1,836 shares subject to forfeiture under the NEDSCP and 1,836
shares credited to a stock account under the DDCP.
(13) Consists of 7,205 shares held jointly with wife, 3,128 shares held
indirectly by Mr. Samson under the RKSP at December 31, 1997 and 9,582
shares which Mr. Samson has the right to acquire within 60 days through
the exercise of options under the 1985 SOP.
(14) Includes 1,749 shares subject to forfeiture under the NEDSCP and 1,288
shares credited to a stock account under the DDCP.
(15) Includes 1,696 shares subject to forfeiture under the NEDSCP, 1,930 shares
held in trust, and 1,142 shares credited to a stock account under the DDCP.
(16) Includes 1,696 shares subject to forfeiture under the NEDSCP and 1,322
shares credited to a stock account under the DDCP.
(17) Includes 1,556 shares subject to forfeiture under the NEDSCP and 2,495
shares credited to a stock account under the DDCP.
(18) Includes 49,174 shares of which 15,149 shares are held jointly with
spouses, 4,668 shares held indirectly under the RKSP at December 31,
1997, and 26,288 shares which the executive officers not named above
have the right to acquire within 60 days through the exercise of
options under the 1985 SOP.
EXECUTIVE COMPENSATION
Shown below is information concerning the annual and other compensation
for services in all capacities to the Company for the years ended December 31,
1997, 1996 and 1995, of those persons who were, during 1997 and at December 31,
1997 (i) the chief executive officer and (ii) the other four most highly
compensated executive officers of the Company (the Named Executive Officers):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------- ------------
OTHER SECURITIES
NAME AND PRINCIPAL ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS(2) COMPENSATION(3)
- - ------------------------- ---- ------ ----- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Richard G. Reiten 1997 $367,500 $115,200 $ 0 0 $ 14,188
President and Chief 1996 275,000 181,900 10,716 52,500 110,500
Executive Officer 1995 0 0 0 0 0
(became an officer on
3/1/96)
Bruce R. DeBolt 1997 194,500 53,300 0 0 8,608
Senior Vice President 1996 187,950 75,900 0 7,500 7,887
and Chief Financial 1995 181,900 56,400 0 0 7,203
Officer
Dwayne L. Foley 1997 188,084 47,200 0 0 4,468
Senior Vice President 1996 184,617 70,700 0 7,500 4,051
1995 181,900 52,600 0 0 4,076
Michael S. McCoy 1997 174,254 51,700 0 0 4,236
Senior Vice President 1996 169,020 68,000 0 7,500 4,107
1995 160,917 53,400 0 0 4,323
Bruce B. Samson 1997 174,254 51,700 0 0 6,685
Senior Vice President 1996 169,186 67,000 0 7,500 6,384
and General Counsel 1995 164,017 52,500 0 0 5,641
(retired 3/1/98)
</TABLE>
(1) The amount shown for Mr. Reiten for 1996 represents the amount paid to
him by the Company, pursuant to the Employment Agreement between the
Company and Mr. Reiten dated November 2, 1995, to reimburse him for the
payment of certain federal and state income taxes.
(2) The numbers of options shown have been adjusted to reflect the
three-for-two split of the Company's Common Stock, effective September 6,
1996.
(3) Amounts for the year 1997 include Company matching amounts contributed
or accrued for the year 1997 for the Named Executive Officers under the
Company's Executive Deferred Compensation Plan ( $10,988 for Mr.
Reiten, $5,408 for Mr. DeBolt, $4,468 for Mr. Foley, $4,236 for Mr.
McCoy and $3,485 for Mr. Samson) and its Retirement K Savings Plan
($3,200 each for Messrs. Reiten, DeBolt and Samson, and $0 each for
Messrs. Foley and McCoy).
OPTION GRANTS IN LAST FISCAL YEAR
No stock options were granted to the Named Executive Officers during
1997.
AGGREGATED OPTION EXERCISES IN 1997 AND YEAR-END OPTION VALUES
Shown below is information with respect to options to purchase shares
of the Company's Common Stock exercised in 1997 and unexercised options granted
under the 1985 Stock Option Plan to the Named Executive Officers and held by
them at December 31, 1997.
<TABLE>
<CAPTION>
NO. OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
NO. OF SHARES DECEMBER 31, 1997 AT DECEMBER 31, 1997
ACQUIRED ON VALUE -------------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE(1) UNEXERCISABLE(2) EXERCISABLE(3) UNEXERCISABLE(2)
- - ---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard G. Reiten 0 $ 0 52,500 0 $529,200 0
Bruce R. DeBolt 9,605 65,571 7,991 0 79,037 0
Dwayne L. Foley 0 0 20,247 0 200,931 0
Michael S. McCoy 1,198 10,674 14,625 0 125,475 0
Bruce B. Samson 7,009 95,950 9,582 0 90,174 0
</TABLE>
(1) As adjusted to reflect the three-for-two split of the Company's Common
Stock, effective September 6, 1996.
(2) Unexercisable options are those options which cannot be exercised due
to the restriction that options are not exercisable during the first
year following the date they are granted.
(3) Represents the difference between the option exercise prices and the
closing price of $31.00 for the Company's Common Stock as quoted on the
Nasdaq Stock Market on December 31, 1997 times the number of options.
REPORT OF THE ORGANIZATION AND EXECUTIVE COMPENSATION COMMITTEE
ON
EXECUTIVE MANAGEMENT COMPENSATION
EXECUTIVE COMPENSATION PRINCIPLES
The Company's executive compensation program is administered by the
Organization and Executive Compensation Committee of the Board of Directors (the
Committee) which is comprised of directors Hamachek, Keller, Kuni and Whiteley,
each of whom is an outside director. The program is designed to attract,
motivate and retain talented executives critical to the achievement of the
Company's long-term business strategy, its annual goals and objectives, the
enhancement of shareholder value, and the implementation of corporate values.
The program seeks to do this by:
- Tieing a portion of each executive's total compensation to the
achievement of previously-established annual performance goals.
- Aligning executives' long-term interests with those of the Company's
shareholders by encouraging ownership of the Company's Common Stock.
- Providing total compensation, including base salary and incentive
compensation, which is competitive with that of other utilities and
service and industrial companies of comparable size and
circumstances.
In establishing executive compensation levels, the Committee also takes
into consideration reductions in the total number of executive officers and
reassignments of the responsibilities of officers who have retired. Through
these actions, the number of officers has been reduced by four, from a high of
14 to the present 10 executive officers, producing a flatter, more efficient
executive structure.
EXECUTIVE COMPENSATION COMPONENTS
There are three primary components of the Company's executive
compensation program - annual base salary, annual incentive cash bonuses and
long-term stock options.
BASE SALARIES
Base salaries paid to executives are established by the Board of
Directors upon the recommendation of the Committee based, in part, on market
salary analyses prepared by the Company's independent compensation consultant.
This same methodology is used for all non-bargaining unit employees. These
analyses include salary data for comparable executive positions of electric and
gas utilities as well as service and industrial companies of approximately the
same size in terms of total revenues located throughout the United States. The
gas utility portion of the analysis includes data from the American Gas
Association executive compensation survey, which includes substantially the same
companies that comprise the EdwardJones Natural Gas Distribution Index appearing
on the performance graph (page 20). The Committee uses this information as a
guide to establish base salaries that are competitive with those paid to
executives in similar positions in comparable companies. Generally, it is the
Committee's policy to target executives' base salaries at a level equivalent to
the 50th percentile for base salaries for comparable positions included in the
consultant's analyses. Each executive's targeted salary level may be adjusted,
at the discretion of the Committee, on the basis of such executive's performance
and potential, as well as changes in duties and responsibilities. Executives'
salaries are reviewed by the Committee annually.
EXECUTIVE ANNUAL INCENTIVE PLAN
The Company's Executive Annual Incentive Plan is intended to advance
the interests of the Company and its shareholders by means of an incentive cash
bonus program which will motivate key executives to achieve
previously-established annual performance goals. The amounts to be paid if these
goals should be achieved, when added to base salaries, are intended to place the
Company's executives' compensation at between the 50th and 75th percentiles of
total cash compensation for comparable positions included in the consultant's
analyses.
Participation in the Plan currently is limited to 10 executive officers
designated by the Board. The payment of awards under this Plan is contingent
upon meeting predetermined individual and Company performance goals.
At the beginning of each year, weighted performance goals are
established. At year-end, performance is measured against these goals. The
results are considered by the Committee in determining the amounts, if any, to
be awarded.
The amounts of these awards are based on a formula which reflects an
allocation between Company and individual performance criteria. The allocation
depends upon each executive's ability to influence corporate performance.
Depending upon position, performance and the other factors considered by the
Committee, an executive can earn from 20% to 40% of base salary if the
prescribed Company and individual performance goals are met, or up to 30% to 60%
of base salary if these goals are exceeded.
Performance goals established for 1997 focused on strengthening the
Company's financial position. These included the achievement of: (1) net income
in an amount which the Committee determined would demonstrate above average
performance; (2) a weighted average ranking for return on equity over a two-year
period which would exceed a base level among a peer group of other gas
utilities; and (3) several operating goals related to return on new residential
customers, customer satisfaction improvement, market share and productivity in
serving customers. In combination, these goals measured the Company's
performance in terms of its overall profitability, its financial performance,
the reduction of costs and the achievement of greater efficiency. In determining
the awards, the Committee used a performance matrix which accorded 50% to net
income and 25% to each of the other two goals. The grant of any award for 1997
was conditioned upon the Company's 1997 net income exceeding a percentage of the
target designated in advance by the Board and being sufficient to cover the
payment of all dividends.
1985 STOCK OPTION PLAN
The long-term component of the Company's executive compensation program
consists of the 1985 Stock Option Plan. Stock options enable executives to
benefit from increases in the price of the Company's Common Stock, thereby
aligning their interests with those of the other common shareholders.
The Company has not made grants under the Plan on an annual basis and
no options were granted to the Named Executive Officers in 1997. When grants are
made, the number of options granted is not based upon a predetermined formula,
but rather upon the Committee's judgment as to how many options will provide
meaningful incentives to executives. The number of options to be granted is
based on a consideration of factors that include the number of shares available
for grant under the Plan, the number of options previously granted, and the
number of shares then owned by each Named Executive Officer in relation to a
targeted objective for stock ownership by executives.
CEO COMPENSATION
Compensation paid to Richard G. Reiten for the year 1997, as President
and Chief Executive Officer, consisted of his base salary and an incentive
bonus. Mr. Reiten's compensation reflects a 13.6% increase in base salary,
effective March 1, 1997, which was deemed by the Committee and the Board to be
appropriate to reflect the additional responsibilities assumed by Mr. Reiten on
his appointment as CEO effective January 1, 1997 and to maintain the
competitiveness of his base salary. His compensation also reflects a cash bonus
of $115,200 under the Executive Annual Incentive Plan. The award of the bonus
for 1997, which is equal to 30.7% of Mr. Reiten's 1997 base salary, was based on
the Committee's evaluation of Mr. Reiten's performance in relation to the
achievement of the 1997 financial goals and the partial achievement of the
operating goals described above. For 1997, the Company reported earnings of
$1.78 per share, the second highest in the Company's history, and net income
applicable to common stock of $40.4 million. These 1997 results exceeded the
financial performance goals established for the year. For 1997, the Company's
return on equity of 11.3% ranked 19th among 30 comparable companies. Combined
with the return on equity in 1996, the Company's weighted two-year ranking for
return on equity was 17th within this group. The Committee determined that the
achievements made with respect to these performance goals, together with the
partial achievement of the operating goals discussed above, warranted the bonus
awarded to Mr. Reiten for 1997.
DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986 (the Code) limits
to $1 million per person the amount that the Company may deduct for compensation
paid in any year to any of its five highest-paid executive officers. Certain
exceptions to this limitation apply to so-called "performance-based
compensation." The Company does not expect the sum of the base salary, annual
cash incentive bonus and other relevant compensation paid to any executive
officer to exceed $1 million in any year. In the event that in the future the
Company determines that an executive's annual compensation may approach or
exceed this limitation, it will consider the use of this exception to the
limitation under Code Section 162(m) as it has in the case of stock options as
described below.
It is the Company's policy generally to grant options that meet the
requirements of Internal Revenue Service regulations so that any such
compensation recognized by an optionee will be fully deductible. In May 1995,
the shareholders approved an amendment to the 1985 Stock Option Plan to comply
with the requirements of Code Section 162(m) so that compensation received on
the exercise of options granted under this Plan would not be subject to the $1
million limitation. In February 1996, the Committee determined that option
grants would henceforth generally be Non-Statutory Stock Options for which the
Company will receive a tax deduction upon exercise.
Tod R. Hamachek, Chair
Richard B. Keller
Wayne D. Kuni
Benjamin R. Whiteley
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the annual percentage change
in the cumulative total shareholder return on the Company's Common Stock against
the cumulative total return of the S&P SmallCap 600 Index (S&P 600), the S&P
Composite - 500 Stock Index (S&P 500) and the EdwardJones Natural Gas
Distribution Index (NGDI) for the period of five years commencing December 31,
1992 and ended December 31, 1997. In future proxy statements, the S&P 600 (which
includes the Company) will be used in place of the S&P 500 because the S&P 600
consists of companies that are generally comparable in size of market
capitalization to the Company, and therefore provides a more appropriate basis
of comparison than does the S&P 500.
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE
TOTAL RETURN*
(Based on $100 invested on 12/31/92)
(Performance line graph depicting five-year cumulative total return information
for the Company, EdwardJones NGDI**, S&P 500 and S&P Small Cap 600 based on $100
invested on December 31, 1992. Data points for the Company, the EdwardJones
NGDI**, S&P 500 and S&P Small Cap 600 are shown below.)
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NW NATURAL $100.00 $126.60 $115.08 $136.14 $156.42 $211.95
EdwardJones NGDI** $100.00 $118.20 $106.26 $139.84 $156.06 $202.72
S&P 500 $100.00 $110.03 $111.53 $153.29 $188.39 $251.18
S&P Small Cap 600 $100.00 $118.76 $113.11 $146.94 $178.21 $223.76
</TABLE>
* Total return assumes reinvestment of dividends at the end of the month
during which they were paid.
** EdwardJones Natural Gas Distribution Index is comprised of the following
companies:
AGL Resources Inc., Atmos Energy Corp., Bay State Gas, Berkshire Gas Co.,
Cascade Natural Gas Corp., Colonial Gas Co., Connecticut Energy Corp.,
Corning Natural Gas Corp., CTG Resources Inc., Delta Natural Gas Co. Inc.,
Energy West Inc., EnergyNorth Inc., Essex County Gas Co., Fall River Gas
Co., Indiana Energy Inc., Keyspan Energy Corp., Laclede Gas Co., Mobile Gas
Service Corp., New Jersey Resources, North Carolina Natural Gas, Northwest
Natural Gas Co., NUI Corp., Pacific Enterprises, Pennsylvania Enterprises
Inc., Peoples Energy Corp., Piedmont Natural Gas Co., Providence Energy
Corp., Public Service Co. of N.C., Roanoke Gas Co., South Jersey
Industries, Southern Union Co., Washington Gas Light Co., Yankee Energy
Systems Inc.
RETIREMENT PLANS
The following table shows the estimated annual retirement benefit
payable as a straight life annuity (net of Social Security offset) for
participants (consisting of all executive officers) in the Company's
Executive Supplemental Retirement Income Plan (ESRIP) from all Company
defined benefit plans: the qualified Retirement Plan for Non-Bargaining Unit
Employees, the Executive Deferred Compensation Plan supplemental benefit
and the ESRIP. Optional forms of payment, including joint and survivor forms,
are available, subject to an actuarial adjustment in the amount of payment.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
Years of Service
--------- --------- --------- -------- ---------
Compensation 15 20 25 30 35
- - ------------ --------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
$ 150,000 $ 81,400 $ 81,400 $ 88,900 $ 88,900 $ 88,900
200,000 113,900 113,900 123,900 123,900 123,900
225,000 130,100 130,100 141,400 141,400 141,400
250,000 146,400 146,400 158,900 158,900 158,900
300,000 178,900 178,900 193,900 193,900 193,900
350,000 211,400 211,400 228,900 228,900 228,900
400,000 243,900 243,900 263,900 263,900 263,900
450,000 276,400 276,400 298,900 298,900 298,900
500,000 308,900 308,900 333,900 333,900 333,900
550,000 341,400 341,400 368,900 368,900 368,900
600,000 373,900 373,900 403,900 403,900 403,900
650,000 406,400 406,400 438,900 438,900 438,900
</TABLE>
For purposes of the ESRIP, "compensation" consists of the annual
salary of the plan participant last approved by the Organization and Executive
Compensation Committee of the Board of Directors and being paid by the
Company at the date of retirement plus the average of the last three bonus
awards (if any) paid prior to retirement.
The credited years of service under the ESRIP for Messrs. Reiten,
DeBolt, Foley, McCoy and Samson are 10 years, 18 years, 30 years, 28 years and
15 years, respectively. For purposes of the ESRIP, Messrs. Reiten and
Samson were granted an additional 8 years and 7 years, respectively, of past
service credit which are included in years of service shown.
Item 2 - Election of Auditors
The Audit Committee of the Board of Directors has recommended that
Price Waterhouse LLP, independent certified public accountants, be retained as
independent auditors of the Company for the year 1998, and that this firm be
elected by the shareholders at the Annual Meeting. A representative of Price
Waterhouse LLP will be present at the Annual Meeting of Shareholders and will
be provided with the opportunity to make a statement and to respond to
appropriate questions. In case Price Waterhouse LLP is not elected, the Board
of Directors will select another independent certified public accounting firm
to serve as independent auditors of the Company.
The Board of Directors recommends that the shareholders vote FOR the
election of Price Waterhouse LLP as independent auditors for the year 1998.
OTHER MATTERS
The management does not know of any other matters to be presented at
the Annual Meeting. If other matters should be properly presented at the
meeting, the persons named in the accompanying proxy will vote the shares
represented by such proxy with respect to such matters in accordance with their
best judgment.
Executive Severance Agreements
The Board of Directors has approved the Company's entry into severance
agreements with each executive officer of the Company, including all of the
Named Executive Officers other than Mr. Reiten. These agreements generally
provide for the payment, upon the termination of the employee's employment by
the Company without cause or by the employee for "good reason" (as defined in
the severance agreement) within two years following a change of control of the
Company, of an amount equal to the maximum amount payable without causing any
portion to constitute a "parachute payment" subject to excise tax. This amount
will generally equal three times the employee's average taxable compensation
over the prior five years. Each employee is obligated under the severance
agreement to remain in the employ of the Company for a period of 270 days
following a "potential change in control" (as defined in the severance
agreements). All of the executive officers have executed the severance
agreements.
Employment Agreements
On November 2, 1995, the Company entered into an employment
agreement with Mr. Reiten for a term extending until February 28, 2003.
Under this agreement, the Company recognized eight years of past service for
purposes of the ESRIP. Accordingly, Mr. Reiten is treated under the ESRIP as
if he had commenced employment with the Company on February 28, 1988 and will
be vested and eligible for supplemental retirement benefits upon retirement on
or after February 28, 2003. The agreement also provides that Mr. Reiten will
be vested in the ESRIP with 15 years of service credit if he dies or becomes
disabled, and that Mr. Reiten will be vested in ESRIP with at least 15 years of
service credit and no reduction in benefits based on early retirement if he is
terminated other than for cause or he becomes entitled to the severance payment
described in the next sentence. If a change in control of the Company occurs
and Mr. Reiten subsequently resigns as a result of a change in his duties or
compensation, the agreement provides that he will receive a severance payment
equal to 2.99 times his average taxable compensation over the prior five years,
reduced by the value of any other benefits he receives such as ESRIP
acceleration that constitute "parachute payments" subject to excise tax.
Under an agreement with Mr. Samson dated November 27, 1989, the Company
agreed to recognize seven years of past service for purposes of the ESRIP.
Mr. Samson retired on March 1, 1998 with eligibility for benefits under this
Plan determined as if he had commenced employment with the Company on
March 1, 1983.
1999 ANNUAL MEETING OF SHAREHOLDERS
The 1999 Annual Meeting of Shareholders is scheduled to be held in
Portland on Thursday, May 27, 1999. Specific proposals of common shareholders
intended to be presented at this meeting must comply with the requirements
of the Securities Exchange Act of 1934 and be received by the Secretary of the
Company for inclusion in its 1999 proxy materials by December 18, 1998.
GENERAL
Proxies may be solicited on behalf of the Board of Directors by regular
employees in person or by mail, telephone or facsimile transmission. The
Company will reimburse brokers or other persons holding stock in their names or
in the names of their nominees for their reasonable expenses incurred in
forwarding proxies and proxy materials to the beneficial owners of such shares.
All solicitation costs will be borne by the Company. The Company has retained
Beacon Hill Partners Inc. to assist in the solicitation of proxies from banks,
brokers and nominees at a fee of $2,000 plus reasonable out-of-pocket expenses.
If you are unable to be present at the Annual Meeting in person, please mark,
date, sign and mail the enclosed proxy so that the business of the meeting can
be transacted.
By Order of the Board of Directors,
Portland, Oregon C. J. Rue
April 17, 1998 Secretary
NW NATURAL
220 N.W. SECOND AVENUE o PORTLAND, OR 97209-3991
April 17, 1998
Dear Shareholder:
We cordially invite you to attend the 1998 Annual Meeting of Shareholders of
Northwest Natural Gas Company (the Company), which will be held in the Lloyd
Center Ballroom of the DoubleTree Hotel Lloyd Center (formerly The Red Lion
Inn), 1000 N.E. Multnomah Street, Portland, Oregon, on Thursday, May 28, 1998,
commencing at 2:00 p.m. Pacific Daylight Time. We look forward to greeting as
many of our shareholders as are able to be with us.
At the meeting you will be asked to consider and vote upon (1) the election of
four directors and (2) the election of independent auditors. Your Board of
Directors unanimously recommends that you vote FOR proposals 1 and 2.
WHETHER OR NOT YOU EXPECT TO ATTEND, TO ASSURE YOUR REPRESENTATION AT THE
MEETING AND THE PRESENCE OF A QUORUM, PLEASE COMPLETE, DATE, SIGN AND MAIL
PROMPTLY THE ENCLOSED PROXY, for which a return envelope is provided.
Sincerely,
Robert L. Ridgley
Chairman of the Board
- - -------------------------------------------------------------------------------
PROXY FORM NW NATURAL PROXY FORM
- - -------------------------------------------------------------------------------
This proxy when properly executed will be voted in the manner directed herein by
the shareholder whose signature appears below. IF NO DIRECTION IS MADE, THE
PROXY WILL BE VOTED FOR ITEMS 1 AND 2.
When signing as attorney-in-fact, executor, administrator, trustee, guardian or
officer of a corporation, please give full title as such. On joint accounts,
each owner should sign.
- - --------------------------------------------------------------------------------
ITEM 1. Election of Directors: Class II Nominees: Tod R. Hamachek, Wayne D.
Kuni, Melody C. Teppola, Russell F. Tromley
VOTE FOR ( ) VOTE WITHHELD ( )
all nominees listed above (INSTRUCTIONS: To withhold authority to vote
(except as marked to the for any individual nominee write that
contrary to the right) nominee's name in the space provided below.)
---------------------------------------------
FOR AGAINST ABSTAIN
ITEM 2. Election of Price Waterhouse ( ) ( ) ( )
LLP as Auditors for 1998.
Please mark this box if you have any comments or changes to names
or addresses. ( )
Please mark this box if you plan to attend the Annual Meeting. ( )
- - --------------------------------------------------------------------------------
PLEASE MARK ALL CHOICES LIKE THIS (X)
SIGNATURE _________________________________ DATE _____________
SIGNATURE _________________________________ DATE _____________
- - --------------------------------------------------------------------------------
PROXY FORM NW NATURAL PROXY FORM
- - --------------------------------------------------------------------------------
PLEASE DATE AND SIGN THIS PROXY ON THE REVERSE SIDE AND MAIL WITHOUT
DELAY IN THE ENCLOSED ENVELOPE.
NORTHWEST NATURAL GAS COMPANY
PROXY FOR 1998 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Wayne D. Kuni, Richard G. Reiten and Robert
L. Ridgley and each or any of them, the proxy or proxies, with power of
substitution and with authorization to vote all of the common shares of the
undersigned at the annual meeting of shareholders of Northwest Natural Gas
Company to be held on Thursday, May 28, 1998, and at all adjournments thereof,
(i) as designated on the reverse of this card and, (ii) at their discretion,
upon any and all other matters which properly may be brought before such meeting
or any adjournment thereof.
The Administrator, or its agent, under the Company's Dividend Reinvestment and
Stock Purchase Plan hereby is instructed to execute a proxy with identical
instructions to vote those shares of the undersigned, if any, held under the
Plan.
THE COMPANY WILL PROVIDE REASONABLE ACCOMMODATION FOR A DISABILITY. IF YOU
NEED AN ACCOMMODATION, PLEASE CONTACT THE COMPANY AT (503) 226-4211 EXT. 3411
AT LEAST 72 HOURS BEFORE THE MEETING.
