SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant []
Check the appropriate box:
[x] Preliminary Proxy Statement (Revised)
[] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[] Definitive Proxy Statement
[] Definitive Additional Materials
[] Soliciting Materials Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Questar 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), 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:
[x] 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>
QUESTAR CORPORATION SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
180 East First South ANNUAL MEETING, MAY 21, 1996
P. O. Box 45433
Salt Lake City, Utah 84145-0433
PROXY The undersigned stockholder of QUESTAR CORPORATION does hereby
constitute and appoint R. D. CASH and JAMES A. HARMON, or either of them, the
true and lawful attorney-in-fact and proxy with all the powers that the
undersigned would possess, if personally present, to vote the stock of the
undersigned at the Annual Meeting of Stockholders of the Company to be held at
the office of Mountain Fuel Supply Company, 1140 West Second South, Salt Lake
City, Utah, on Tuesday, May 21, 1996, at 10:00 a.m., local time, and at any
adjournments thereof, upon the matters described in the Notice of Annual
Meeting and Proxy Statement, dated April 8, 1996, receipt of which is hereby
acknowledged, and upon any other business that may come before the meeting or
any adjournments or postponements.
Dated: ,1996
(Signature)
(Signature)
Please date and sign exactly as name appears hereon.
When signing as Attorney, Executor, Administrator,
Trustee, Guardian, etc., give full title. If stock is
held jointly, each joint owner should sign. If stock is
owned by a corporation, please sign full corporate name
(Please turn over) by duly authorized officer.
This proxy, when properly executed will be voted in the manner directed
by the stockholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES, FOR PROPOSAL NO. 1, 2, AND 3, AND AGAINST PROPOSAL NOS 4 AND 5.
The Board recommends a vote FOR the election of directors and for Proposals 1,
2, and 3.
To elect four directors of the Company. Nominees: Patrick J. Early,
Dixie L. Leavitt, Mary Mead, and D. N. Rose
[] VOTE FOR all nominees listed above, except as marked to the
contrary above (if any). To withhold your vote for any individual
nominee, strike a line through his name in the list above.
[] VOTE WITHHELD from all nominees.
Proposal No. 1: To consider and approve amendments to the Company's
Long-Term Stock Incentive Plan.
[] FOR [] AGAINST [] ABSTAIN
Proposal No. 2: To consider and approve amendments to the Company's
Stock Option Plan for Directors.
[] FOR [] AGAINST [] ABSTAIN
Proposal No. 3 To consider and approve a new Directors' Stock Plan.
[] FOR [] AGAINST [] ABSTAIN
THE BOARD RECOMMENDS A VOTE AGAINST THE TWO STOCKHOLDER PROPOSALS.
Proposal 4: To adopt a resolution recommending confidential
voting.
[] FOR [] AGAINST [] ABSTAIN
Proposal 5: To adopt a resolution recommending a revision to the
Company's Executive Severance Compensation Plan.
[] FOR [] AGAINST [] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting, or any adjournments or
postponements of such meeting.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
Please mark if your address has changed and correct your address on the
reverse side. []
<PAGE>
(Logo)
QUESTAR CORPORATION
180 East First South Street
P. O. Box 45433
Salt Lake City, Utah 84145-0433
______________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on May 21, 1996
_______________________________________
The Annual Meeting of Stockholders of Questar Corporation, a Utah
corporation (the "Company"), will be held at 1140 West Second South, Salt Lake
City, Utah, on Tuesday, May 21, 1996, at 10:00 a.m., local time, for the
following purposes:
1. To elect four directors to hold office for three years;
2. To consider and approve amendments to the Company's Long-Term
Stock Incentive Plan that would permit the plan to qualify as a
performance-based plan under applicable tax regulations, enlarge
the group of eligible participants, and extend the exercise term
after retirement;
3. To consider and approve amendments to the Company's Stock Option
Plan for Directors that would extend the term and reserve
additional shares;
4. To consider and approve a new Directors' Stock Plan that would
permit directors to be paid with shares of the Company's common
stock;
5. To consider and act on a stockholder proposal opposed by the Board
of Directors recommending that the Company adopt confidential
voting;
6. To consider an act on a stockholder proposal opposed by the Board
of Directors recommending a revision to the Company's Executive
Severance Compensation Plan (Proposal No. 5); and
7. To transact such other business as may properly come before the
meeting.
Stockholders of record as of March 22, 1996, are entitled to receive
notice of and to vote at the Annual Meeting. If you have your shares
registered in the name of a brokerage firm or trustee and plan to attend the
meeting, please obtain a letter, account statement, or other evidence of your
beneficial ownership of shares to facilitate your admittance to the meeting.
By Order of the
Board of Directors
Connie C. Holbrook
Vice President and Secretary
Salt Lake City, Utah
April 8, 1996
YOUR VOTE IS IMPORTANT.
It is important that as many shares as possible be represented at the
Annual Meeting. Please date, sign, and promptly return your white proxy card
in the enclosed envelope (which requires no postage if mailed within the
United States). Your proxy may be revoked by you at any time before it is
voted.
The address noted above for the Company's Annual Meeting is
Mountain Fuel Supply Company's Operations Center in Salt Lake City, Utah.
Free parking is available at the building.
<PAGE>
QUESTAR CORPORATION
PROXY STATEMENT
May 21, 1996
This Proxy Statement is being furnished to stockholders of Questar
Corporation, a Utah corporation, in connection with the solicitation of
proxies by the Board of Directors of the Company for use at the Annual Meeting
of Stockholders to be held on Tuesday, May 21, 1996, at 10:00 a.m., local
time, and any adjournment or adjournments of such meeting. At the Annual
Meeting, holders of common stock will elect four directors of the Company,
each for a three-year term, and act upon a proposal to amend the Company's
Long-Term Stock Incentive Plan, a proposal to amend the Company's Stock Option
Plan for Directors, a proposal to adopt a new Directors' Stock Plan, and, if
properly brought before the meeting, a stockholder proposal set forth in this
Proxy Statement.
Record Date; Vote Required
Only stockholders of record at the close of business on March 22, 1996,
will be entitled to notice of and to vote at the Annual Meeting. At such
date, 40,759,238 shares of common stock were outstanding. Each share of
common stock will be entitled to one vote on each matter coming before the
meeting. In order to elect the four directors, the affirmative vote of the
holders of a plurality of the shares of common stock present and entitled to
vote at the Annual Meeting, provided a quorum is present, is required. Any
proposals, to be approved, require the receipt of more affirmative votes than
negative votes cast for shares represented at the meeting, assuming a quorum
is present. The Company's Bylaws provide that votes "withheld" from director
nominees will not be counted for purposes of determining whether such
individuals receive a plurality of votes. Shares registered in the names of
brokers or other "street name" nominees for which proxies are voted for some
but not all matters (broker nonvotes) will be considered as voted only as to
those matters actually voted.
Proxies and Solicitation
Shares of common stock represented by properly executed proxies received
at or prior to the Annual Meeting will be voted in accordance with specified
instructions. If no instructions are indicated, proxies representing shares
of common stock will be voted for the Board of Directors' nominees for
director, for the proposals recommended by the Board of Directors, and against
the stockholder proposal. Execution of a proxy will not prevent a stockholder
from attending the Annual Meeting and voting in person. Any stockholder
giving a proxy may revoke it at any time before it is voted by delivering to
the Secretary of the Company written notice of revocation bearing a later date
than the proxy, by delivering a later-dated proxy, or by voting in person at
the Annual Meeting. Attendance at the Annual Meeting, in and of itself, will
not constitute revocation of a proxy.
This solicitation is made on behalf of the Board of Directors, and all
expenses of this solicitation will be paid by the Company. Any costs incurred
to mail solicitation materials for the stockholder proposal will be paid by
the stockholder. In addition to solicitation of proxies by use of mail, the
directors, officers, and regular employees of the Company may solicit proxies.
Such persons will receive no additional compensation for such services. The
Company has requested that brokerage houses, and other custodians, nominees,
and fiduciaries forward solicitation materials to the beneficial owners of
shares of common stock held of record by such persons. The Company will
reimburse such brokers and other fiduciaries for their reasonable
out-of-pocket expenses incurred in connection with such request. The Company
has hired Kissel-Blake, Inc., 110 Wall Street, New York, NY 10005, to assist
in the solicitation of proxies for which the Company will pay a fee of
approximately $7,500 plus expenses.
ELECTION OF DIRECTORS
The Company's Restated Articles of Incorporation provide for a board of
13 directors, divided into three classes, approximately equal in number,
elected to serve three-year terms.
The Board of Directors of the Company has selected Patrick J. Early,
Dixie L. Leavitt, Mary Mead, and D. N. Rose as the nominees for whom shares of
common stock represented by the enclosed proxy will be voted, unless otherwise
specified on the proxy. All of the nominees currently serve as directors of
the Company.
The Board of Directors has no reason to believe that any nominee will be
unwilling or unable to serve as a director. However, in the event that any
nominee is unwilling or unable to serve as a director, the proxy holders named
in the enclosed proxy may vote, in their discretion, for any other person.
The directors elected at the Annual Meeting will serve three-year terms.
Information concerning the nominees for election as directors and the
current directors of the Company whose terms will continue after the Annual
Meeting is set forth below. Unless otherwise indicated, the nominees have
been engaged in the same principal occupation for the past five years. Ages
are correct as of the date of the Proxy Statement. Share information is
correct as of March 1, 1996.
Nominees
[Picture] Mr. Patrick J. Early, age 63, served as Vice Chairman
of Amoco Corporation from July of 1992 until his retirement
in April of 1995. He was also a director of Amoco
Corporation from 1989 to his retirement. Prior to service
as Vice Chairman, Mr. Early served as President of Amoco
Production Company from September 1987 to July of 1992. He
was appointed to serve as a director of the Company,
effective August 1, 1995, to fill a vacancy. He is a member
of the Board of Trustees of the Museum of Science and
Industry in Chicago and a member of the Board of Advisors of
Catholic Charities in Chicago. Mr. Early owns 1,000 shares
of the Company's common stock.
[Picture] Mr. Dixie L. Leavitt is the founder and Chairman of
the Board of the Leavitt Insurance Group (a group of
approximately 54 independent insurance agencies located in
seven western states). Mr. Leavitt, age 66, is also
President and Chairman of entities engaged in dairy, cattle,
agriculture, and real estate operations in Utah and southern
Nevada. He has been a director of the Company since 1987
and also serves as a director of Zions First National Bank.
Mr. Leavitt is the beneficial holder of 18,863 shares of the
Company's common stock, including 7,000 shares under vested
stock options.
[Picture] Mrs. Mary Mead is a rancher in Jackson, Wyoming. Mrs.
Mead, age 60, has served as a director of the Company since
1990 and also serves as a director of Jackson State Bank.
She is the beneficial holder of 12,800 shares of the
Company's common stock, including 3,500 shares under vested
stock options.
[Picture] Mr. D. N. Rose serves the Company as Executive Vice
President, a position to which he was appointed February 13,
1996. He is also President and Chief Executive Officer of
Mountain Fuel Supply Company (a subsidiary of the Company
engaged in retail natural gas distribution). He has served
in this position and as a director of the Company since
1984. Mr. Rose, age 51, is also a trustee of Westminster
College and a director of Key Bank of Utah. He is the
beneficial holder of 65,886 shares of the Company's common
stock, including 28,500 shares under vested stock options.
Continuing Directors (Present Term Expires in 1997)
[Picture] Mr. U. Edwin Garrison is the retired Chairman of
Thiokol Corporation, a position he held from July of 1991 to
November of 1995. He also served as Chief Executive Officer
of Thiokol from July of 1991 to July of 1993 and as
President of Thiokol from July of 1989 to July of 1992. Mr.
Garrison, age 68, has served as a director of the Company
since 1991 and is also a director of Thiokol Corporation and
First Security Corporation. He is the beneficial owner of
14,227 shares of the Company's common stock, including 3,650
shares under vested stock options.
[Picture] Mr. W. Whitley Hawkins is the owner of a consulting
firm, Hawkins Bricker International and HBI, Inc., which
manufactures chemical coating products. He was President
and Chief Operating Officer of Delta Air Lines from May of
1991 to March of 1993. He also served Delta Air Lines as
Executive Vice President, Marketing and Stations, from
August 1990 to May 1991. Mr. Hawkins, age 64, has served as
a director of the Company since 1991 and also serves on the
advisory council of SunTrust Bank, as a senior advisor to
the American International Group, and on the advisory board
of the International Airline Passengers Association. He is
the beneficial owner of 7,370 shares of the Company's common
stock, including 7,150 shares under vested stock options.
[Picture] Mr. Robert E. Kadlec retired as President and Chief
Executive Officer of BC Gas Inc., effective December 31,
1995. He currently has an investment and consulting firm,
Kadlec Holdings. Mr. Kadlec, age 62, has been a director of
the Company since 1987, is a director of BC Gas Inc., Trans
Mountain Pipe Line Company Ltd., British Pacific Properties
Ltd., International Forest Products Ltd., and is on the
Advisory Board of Anderson Consulting. He is the beneficial
owner of 14,750 shares of the Company's common stock,
including 11,150 shares under vested stock options.
[Picture] Mr. Harris H. Simmons has been the President and Chief
Executive Officer of Zions First National Bank and Zions
Bancorporation since December of 1990. He has served as
President of Zions Bancorporation since April of 1986 and is
also a director of Zions Bancorporation. He is the son of
Roy W. Simmons, an emeritus director of the Company who was
a director of the Company from 1968 to 1992. Mr. Simmons,
age 41, has served as a director since November 1, 1992. He
serves as Chairman of the Utah Symphony and the Economic
Development Corporation of Utah, and as a trustee of Salt
Lake Community College. Mr. Simmons is the beneficial owner
of 4,800 shares of the Company's common stock, including
4,200 shares under vested stock options.
Continuing Directors (Present Term Expires in 1998)
[Picture] Mr. R. D. Cash has served as the Company's President
and Chief Executive Officer since May of 1984 and as the
Company's Chairman of the Board since May of 1985. Mr.
Cash, age 53, has been a director of the Company since 1977
and also serves as a director of Zions First National Bank
and Zions Bancorporation; a director of Associated Electric
and Gas Insurance Services Limited; a member of the Board of
Directors of the Federal Reserve Bank (Salt Lake Branch) of
San Francisco; and a trustee of Southern Utah University.
He is the beneficial holder of 223,211 shares of the
Company's common stock, including 69,373 shares under vested
stock options and 42,596 shares that are owned by two
nonprofit foundations controlled by the Company.
[Picture] Mr. James A. Harmon is Chairman of Schroder Wertheim &
Co. Incorporated (investment bankers). He served as
Chairman and Chief Executive Officer from 1986 through
December 31, 1995. Mr. Harmon, age 60, has been a director
of the Company since 1976 and also serves as a director of
Schroder Plc and The Rank Organization Plc; Chairman of the
Advisory Board of the Barnard-Columbia University Center for
Leadership in Urban Public Policy; a trustee of Barnard
College; and a trustee emeritus of Brown University. He is
the beneficial holder of 28,964 shares of the Company's
common stock, including 4,950 shares under vested stock
options.
[Picture] Mr. William N. Jones is Chairman of the Board, Lite
Touch, Inc. (residential and commercial lighting systems).
Mr. Jones, age 69, has been a director of the Company since
1981. He is a trustee of Intermountain Health Care, Inc.
He is the beneficial holder of 12,218 shares of the
Company's common stock, including 3,500 shares under vested
stock options.
[Picture] Mr. Neal A. Maxwell is a member of the Council of the
Twelve for the Church of Jesus Christ of Latter-day Saints.
Mr. Maxwell, age 69, has been a director of the Company
since 1968 and also serves as a director of Deseret News
Publishing Company and as a trustee of Brigham Young
University. He is the beneficial holder of 10,078 shares of
the Company's common stock, including 5,100 shares under
vested stock options. (Mr. Maxwell has announced his
retirement as of May 21, 1996.)
[Picture] Mr. Gary G. Michael is Chairman and Chief Executive
Officer of Albertson's, Inc. and has served in this position
since February 1, 1991. He served as Vice Chairman and as
Chief Financial and Corporate Development Officer of
Albertson's from 1984 to January 31, 1992. Mr. Michael, age
55, has been a director of the Company since February of
1994. He is a director of Albertson's and a member of the
Board of Directors of the Federal Reserve Bank of San
Francisco. Mr. Michael is the beneficial holder of 3,400
shares of the Company's common stock, including 2,100 shares
under vested stock options.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
Board Committees
The Board of Directors is responsible for the Company's overall affairs.
To assist with this responsibility, the Board has established several standing
committees.
The Executive Committee is vested with the authority to act as the Board
of Directors in managing the affairs of the Company. Although this Committee
has very broad powers, it meets only infrequently when it would be impractical
to call a meeting of the full Board. Neal A. Maxwell serves as the Chairman
of this Committee; other members include R. D. Cash, U. Edwin Garrison, James
A. Harmon, and W. Whitley Hawkins. The Executive Committee held a joint
meeting during 1995 with the directors of Questar Pipeline Company, a
subsidiary of Questar.
The Finance and Audit Committee of the Board of Directors is currently
chaired by U. Edwin Garrison. Other members of this Committee include James
A. Harmon, William N. Jones, Robert E. Kadlec, Dixie L. Leavitt, Neal A.
Maxwell, Gary G. Michael, and Harris H. Simmons. During fiscal year 1995, the
Finance and Audit Committee held two meetings, at which time the members
reviewed financial statements, conferred with the Company's internal auditors
and representatives of the external auditors concerning their respective
examinations of the Company, and reviewed reports prepared for the Board of
Directors.
The Company's Board of Directors also has a Management Performance
Committee with W. Whitley Hawkins serving as the current Chairman. Other
members of this Committee include Patrick J. Early, U. Edwin Garrison, James
A. Harmon, William N. Jones, Robert E. Kadlec, Mary Mead, and Gary G. Michael.
During 1995, the Committee held two meetings. The Committee reviews the
salary and compensation arrangements paid the Company's officers and makes
recommendations to the Board of Directors concerning such arrangements;
administers the Stock Option Plan and the Long-Term Stock Incentive Plan; and
makes recommendations about employees chosen to participate in the Annual
Management Incentive Plans adopted by the Company and its major operating
subsidiaries and about the performance objectives and awards made under such
plans. (This Committee functions as the "Compensation Committee.") A report
from this Committee concerning executive compensation is set forth later.
The Company has a Nominating Committee consisting of R. D. Cash
(Chairman), Robert E. Kadlec, Dixie L. Leavitt, Mary Mead, and Harris H.
Simmons. This Committee was organized to select individuals for nomination as
directors. The Nominating Committee held one meeting in 1995. Although the
Nominating Committee will consider responsible recommendations by stockholders
concerning nominees, it has not established any formal procedures for
considering such nominees. The Company's Bylaws do specify procedures to
follow if shareholders want to nominate candidates for election as directors
at an annual meeting.
Attendance at Board and Committee Meetings
The Company's Board of Directors held four regular meetings during 1995;
Board Committees held a total of six meetings. The directors attended 100
percent of the aggregate of the meetings of the Board and of the meetings of
the Committees on which they serve.
Directors' Compensation
Messrs. Cash and Rose do not receive any remuneration for service as
directors of the Company. They do, however, receive fees for service as
directors of the Company's affiliates. All other directors are paid an annual
fee of $12,000, payable in 12 monthly installments. They also receive fees of
$800 for each Board meeting attended. With the exception of Mr. Cash, the
Chairman of each Board Committee receives a fee of $750 for meetings of the
Committee chaired by him. Other directors receive a fee of $600 for each
Committee meeting attended.
The Company and its major affiliated companies each have a Deferred
Compensation Plan for Directors, under which directors can elect to defer all
or any portion of the fees received for service as directors until their
retirement from such service and can choose to have the deferred amounts earn
interest as if invested in long-term certificates of deposit or be accounted
for with "phantom shares" of the Company's common stock. (The term phantom
stock refers to accounting entries that parallel the value of the Company's
common stock. Directors choosing the phantom stock option are credited with
the same number of shares and fractional shares that could have been purchased
using the closing price of the Company's common stock on the date such fees
would have been payable. The account balances are also credited with "shares"
purchased with reinvested "dividends." Upon retirement, directors receive the
cash equivalent of these phantom shares.) During 1995, several directors of
the Company and its affiliates chose to defer receipt of the compensation
earned by them for their service.
The directors, other than Messrs. Cash and Rose, are also eligible to
participate in the Stock Option Plan for Directors (Directors' Option Plan),
which was approved by the Company's stockholders in May of 1987 and amended
with shareholder approval effective March 1, 1991. Under the terms of this
nondiscretionary plan, nonemployee voting directors receive nonqualified stock
options at the first regular meeting of the Board of Directors held each year
to purchase shares of the Company's common stock using the closing price of
such stock on the date of grant as the exercise price. The number of shares
covered by the options granted to directors is specified in the plan.
Optionees, under the terms of the Directors' Option Plan, can use cash or
other shares of the Company's common stock (valued at the closing price of
such stock on the exercise date) as consideration. A proposal to amend the
Directors' Option Plan is discussed later in the proxy statement.
On February 13, 1996, 11 nonemployee voting directors of the Company
received nonqualified stock options to purchase a total of 32,600 shares of
the Company's common stock at an exercise price of $33.625 per share. Each
eligible director, with the exception of Messrs. Garrison, Hawkins, and
Maxwell, received a nonqualified stock option to purchase 2,800 shares.
Messrs. Garrison, Hawkins, and Maxwell each received options to purchase 3,400
shares reflecting their added responsibilities as Chairmen of Board
Committees. (These options will not begin to vest until August 13, 1996;
consequently, the shares covered by the options are not included in the shares
reported for the directors.)
The Company has entered into individual indemnification agreements with
all directors, including Messrs. Cash and Rose, indemnifying them as
directors. The form of these agreements was approved by the Company's
stockholders at the 1988 Annual Meeting.
Directors' Retirement Policy
In May of 1992, the Board of Directors adopted a retirement policy that
permits an outside director to continue serving in such position until the
annual meeting following his 72nd birthday if he is actively engaged in
business, financial, and community affairs. With the exception of the
Company's Chief Executive Officer, any inside director is expected to resign
as a director on or before the date of his retirement as an employee. The
former Chief Executive Officer may serve out the remainder of his term once he
retires as an active employee.
Certain Relationships and Related Transactions
Mr. Jones serves as a member of the Board of Trustees of Intermountain
Health Care, Inc. (IHC), a nonprofit corporation that provides health care
services in the Company's areas of operation. The Company offers two health
maintenance organizations and a preferred provider organization through IHC as
options available to employees under the Company's health plan. In 1995, the
Company and its subsidiaries paid IHC a total sum of $479,900 in
administrative fees.
Mr. Kadlec is the former President and Chief Executive Officer of BC Gas
Inc. The Company and BC Gas, through subsidiaries, are former owners of
FuelMaker Corporation, a Canadian corporation that manufacturers and markets
small natural gas compressors for use with natural gas vehicles. The Company
released its interest in FuelMaker during 1995. BC Gas also has several gas
supply contracts with Universal Resources Corporation (a subsidiary of the
Company) to purchase gas during portions of the 1995-96 and 1996-97 winter
heating seasons and also has long-term contracts with Questar Pipeline Company
(another subsidiary of the Company) for storage service. BC Gas paid
Universal Resources and Questar Pipeline a total of $9,190,000 during 1995 for
gas purchases and storage services.
Mr. Simmons is the President and Chief Executive Officer of Zions First
National Bank. Questar InfoComm, Inc., a subsidiary of the Company, has
corporate credit cards through Zions and also uses an account at Zions for its
payroll. The services provided by Zions to Questar InfoComm are based on
commercial terms that are available to other clients.
Compensation Committee Interlocks and Insider Participation
Mr. Harmon is Chairman of Schroder Wertheim & Co., an investment banking
firm that has served the Company and its affiliates as an underwriter and
agent in the past and is expected to serve the Company in such capacities in
the future. He will not be a member of this Committee as of May
21, 1996. Other members of the Management Performance Committee include
Messrs. Early, Garrison, Hawkins, Jones, Kadlec, and Michael and Mrs. Mead.
EXECUTIVE COMPENSATION
The following Summary Compensation Table lists annual and long-term
compensation earned by Mr. Cash and the other four most highly compensated
officers during 1993, 1994, and 1995.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
Restricted
Base Stock All Other
Name and Principal Year Salary Bonus Awards Options Compensation
Position ($) ($)1 ($)2 (#) ($)3
<S> <C> <C> <C> <C> <C> <C>
R. D. Cash 1995 395,000 28,463 23,336 30,000 54,240
Chairman, President and 1994 377,667 126,011 89,407 30,000 49,335
Chief Executive Officer 1993 363,533 99,899 89,271 30,000 43,099
D. N. Rose 1995 235,167 27,852 27,808 19,000 29,064
President and Chief 1994 209,500 36,061 36,053 19,000 21,713
Executive Officer 1993 200,417 38,572 38,525 19,000 18,786
Mountain Fuel Supply
Company
G. L. Nordloh 1995 235,000 25,099 16,039 22,000 25,521
President and Chief 1994 164,583 44,127 45,333 22,000 20,658
Executive Officer 1993 161,500 47,804 43,313 20,000 18,065
Celsius Energy Company,
Universal Resources
Corporation, and Wexpro
Company
A. J. Marushack 1995 225,500 6,089 6,086 19,000 28,771
President and Chief 1994 201,333 39,254 39,201 19,000 20,671
Executive Officer 1993 191,217 31,867 31,847 19,000 18,164
Questar Pipeline Company
C. M. Heiner 1995 218,417 0 0 19,000 23,737
Senior Vice President 1994 208,983 55,264 39,256 19,000 21,891
1993 199,833 40,613 40,604 19,000 18,983
</TABLE>
1 Amounts listed under this heading for 1995 include cash payments awarded
under the 1995 Annual Management Incentive Plans (AMIPs), cash payments
awarded under the 1995 general employee compensation plans adopted by Celsius
Energy Company/Universal Resources Corporation and Wexpro Company (E&P
Plans). The amounts reported for 1994 include special cash bonuses paid to
Messrs. Cash and Heiner when a business unit was sold.
2 Amounts under this heading for 1995 include the value (as of the grant
date) of any shares of restricted stock granted in 1996, in lieu of cash, as
partial payment of bonuses earned under the 1995 AMIPs and the value of any
shares of restricted stock granted in connection with the 1995 E&P Plans. All
shares of restricted stock vest in two annual, equal installments on the first
business day in February of the first and second years following the grant
date. Dividends are paid on the restricted shares at the same rate dividends
are paid on other outstanding shares of the Company's common stock. As of
December 31, 1995, Mr. Cash had 4,683 shares of restricted stock having a
market value of $156,881; Mr. Rose had 1,928 shares having a market value of
$64,588; Mr. Nordloh had 2,343 shares worth $78,491; Mr. Marushack had 1,937
shares worth $64,890; and Mr. Heiner had 2,078 shares worth $69,613.
3 The figure opposite Mr. Cash's name for 1995 includes $8,795 in
contributions to the Employee Investment Plan, $20,900 in directors' fees, and
$24,545 in "matching contributions" to the Deferred Share Plan. The figure
listed opposite Mr. Rose's name for 1995 includes $8,795 in contributions to
the Employee Investment Plan, $6,800 in director's fees, $8,853 in matching
contributions to the Deferred Share Plan, and $4,615 for unused vacation. The
figure listed opposite Mr. Nordloh's name for 1995 includes $8,795 in
contributions to the Employee Investment Plan; $6,800 in director's fees, and
$9,926 in matching contributions to the Deferred Share Plan. The figure
listed opposite Mr. Marushack's name for 1995 includes $8,795 in contributions
to the Employee Investment Plan; $7,300 in director's fees, $8,253 in matching
contributions to the Deferred Share Plan, and $4,423 for unused vacation. The
figure listed opposite Mr. Heiner's name includes $8,795 in contributions to
the Employee Investment Plan, $6,800 in director's fees, and $8,142 in
matching contributions to the Deferred Share Plan.
The following table lists information concerning the incentive stock
options that were granted to Messrs. Cash, Rose, Nordloh, Marushack, and
Heiner during 1995 under the Company's Long-Term Stock Incentive Plan. No
stock appreciation rights (SARs) were granted during 1995.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
% of Total
Options Options Granted Exercise or
Granted to Employees in Base Price Expiration Grant Date
Name (#)1 Last Fiscal Year ($/Share) Date Value ($)2
<S> <C> <C> <C> <C> <C>
R. D. Cash 30,000 7.8 27.375 2/14/2005 212,700
D. N. Rose 19,000 5.0 27.375 2/14/2005 134,710
G. L. Nordloh 22,000 5.7 27.375 2/14/2005 155,980
A. J. Marushack 19,000 5.0 27.375 2/14/2005 134,710
C. M. Heiner 19,000 5.0 27.375 2/14/2005 134,710
</TABLE>
1 These incentive stock options vest in four annual, equal installments,
with the first installment exercisable as of August 14, 1995. Participants
can use cash or previously-owned shares as consideration for option shares.
Options expire when a participant terminates his employment, unless
termination is caused by an approved retirement, death, or disability.
Options can be exercised for three months following a participant's approved
retirement and 12 months following a participant's death or disability.
2 When calculating the present value of options as of the date granted
(February 14, 1995), the Company used the Black-Scholes option pricing model.
The Company assumed a volatility of 20.81 percent, a risk free interest rate of
7.70 percent, a dividend yield of 4.16 percent, and a vesting discount of 5.7
percent. The real value of the options in this table depends upon the actual
performance of the Company's stock during the applicable period. There can be
no assurance that the values shown in this table will be achieved.
The following table lists information concerning the stock options that
were exercised by Messrs. Cash, Rose, Nordloh, Marushack, and Heiner during
1995 and the total options and their value held by each at year-end 1995.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
Shares Number of Unexercised Value of Unexercised,
Acquired or Value Options/SARs at Year- In-the-Money Options/
Exercised Realized1 End(#)2 at Year-End ($)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
R. D. Cash 0 0 69,373 45,000 518,175 202,500
D. N. Rose 17,450 195,342 28,500 28,500 114,000 128,250
G. L. Nordloh 10,250 94,250 21,000 33,500 68,250 146,188
A. J. Marushack 0 0 58,500 28,500 553,500 128,250
C. M. Heiner 0 0 32,250 28,500 209,969 128,250
</TABLE>
_____________________
1 The "value" is calculated by subtracting the fair market value of the
shares purchased on the date of exercise minus the option price. The value is
equal to the amount of ordinary income recognized by each officer. The current
value of the shares may be higher or lower than the aggregate value reported in
the table.
2 At year end 1995, there were no outstanding stock appreciation rights
(SARs); they have not been granted since February of 1989.
Retirement Plans
The Company maintains a noncontributory retirement plan that is funded
actuarially and does not involve specific contributions for any one individual.
The following table lists the estimated annual benefits payable on a straight
line annuity basis under the Company's Retirement Plan as of December 31, 1995,
and, if necessary, the Company's Supplemental Executive Retirement Plan (the
SERP). The benefits shown are based on earnings and years of service for an
employee reaching normal retirement age of 65 in 1995 and do not include Social
Security benefits. Benefits under the Retirement Plan are not reduced or offset
by Social Security benefits, although participants who retire prior to age 62 do
receive a temporary supplement.
Pension Plan Table
<TABLE>
<CAPTION>
Highest Consecutive Years of Service
Three-Year Average
Annual Compensation 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$250,000 68,917 91,890 114,862 121,112 127,362
300,000 83,167 110,890 138,612 146,112 153,612
350,000 97,417 129,890 162,362 171,112 179,862
400,000 111,667 148,890 186,112 196,112 206,112
450,000 125,917 167,890 209,862 221,112 232,362
500,000 140,167 186,890 233,612 246,112 258,612
550,000 154,417 205,890 257,362 271,112 284,862
600,000 168,667 224,890 281,112 296,112 311,112
</TABLE>
The Company's Retirement Plan has a "step rate/excess" benefit formula.
The formula provides for a basic benefit that is calculated by multiplying the
employee's final average earnings by a specified basic benefit factor and by
subsequently multiplying such sum by the employee's years of service (to a
maximum of 25). This basic benefit is increased for each year of service in
excess of 25 and is reduced for retirement prior to age 62. Employees also
receive a supplemental benefit, under the Retirement Plan, calculated by
multiplying the difference between the employee's final average earnings and
his "covered compensation" by a supplemental factor that varies by age. (The
term "covered compensation" refers to the 35-year average Social Security wage
base tied to year of an employee's birth.) Employees who retire prior to age
62 also receive a temporary supplement that is tied to years of service until
they are eligible to receive Social Security benefits at age 62.
The "final average earnings" (the average annual earnings of the three
highest-paid consecutive years of service) for purposes of calculating
retirement benefits for the executive officers named above is as follows: for
Mr. Cash, $558,968; for Mr. Rose, $283,605; for Mr. Nordloh, $278,740; for Mr.
Marushack, $269,886; and for Mr. Heiner, $281,850. The officer's base salary,
cash bonus payments, and value of restricted stock (paid in lieu of cash)
reported in the Summary Compensation Table would be included in the
calculation of the officer's final average earnings. The amounts reported in
the Summary Compensation Table are somewhat different than the final average
earnings figures because the latter figures include actual cash payments when
made, not when earned, and the value of restricted stock when distributed, not
granted. Dividends on the restricted shares are also included in the
officer's final average earnings, but are not reported in the table. One-time
extraordinary bonuses and payments for unused vacation are reported in the
table, but are not included in final average earnings.
These executive officers all participate in the Company's Executive
Incentive Retirement Plan (the EIRP), described below, and may receive
supplemental monthly payments after retirement in accordance with such plan.
The years of service for the individuals listed in the Summary Compensation
Table are 20 years for Mr. Cash, 27 years for Mr. Rose, 12 years for Mr.
Nordloh, 38 years for Mr. Marushack, and 25 years for Mr. Heiner.
The Company and its affiliates adopted the EIRP for officers in 1979.
Under this nonqualified plan, a participant will receive monthly payments upon
retirement equal to 10 percent of the highest average monthly base salary paid
to the officer during any period of 36 consecutive months of employment. The
plan also provides for a family benefit in the event of an officer's death.
Messrs. Cash, Rose, Heiner, and Marushack have satisfied the 15 years of
service required and have a vested right to receive benefits. Mr. Nordloh has
been nominated to participate in the plan, but has not satisfied the years of
service requirement. Based on current compensation, the annual benefits
payable to the named officers under this plan are as follows: Mr. Cash,
$37,873; Mr. Rose, $21,503; Mr. Marushack, $20,602; and Mr. Heiner, $20,908.
Any benefits payable under the SERP are offset against payments for the
EIRP. Consequently, an officer would not receive any benefits from the SERP
unless his benefit under the EIRP was less than the difference between what he
could be paid under the Company's Retirement Plan at the date of his
retirement and what he would have earned under such plan absent federal tax
limitations. Given this relationship between the two nonqualified plans and
the annual compensation cap of $150,000 applicable to the Retirement Plan as
of January 1, 1994, the amounts listed in the table above do not include
benefits payable under the EIRP.
Executive Severance Compensation Plan
The Company has an Executive Severance Compensation Plan that covers the
Company's executive officers and all other officers of the Company and its
affiliated companies. Under this plan, participants, following a change in
control of the Company, are eligible to receive compensation equal to up to
two years' salary and miscellaneous benefits upon a voluntary or involuntary
termination of their employment, provided that they have continued working or
have been agreeable to continue working for six months following a potential
change in control of the Company. The plan also contains a provision that
limits severance compensation and benefits payable under the plan to amounts
that can be deducted under Section 280G of the Internal Revenue Code of 1986.
The dollar amounts payable to the Company's executive officers (based on
current salaries paid by the Company and its affiliates) in the event of a
change in control of the Company are as follows: $832,000 to Mr. Cash;
$525,200 to Mr. Rose; $517,000 to Mr. Nordloh; $478,400 to Mr. Marushack; and
$458,000 to Mr. Heiner. The Company's executive officers would also receive
certain supplemental retirement benefits, welfare plan benefits, and cash
bonuses.
Under the plan, a "change in control" is defined to include any change
in control required to be reported under Item 6(e) of Schedule A of Regulation
14A of the Securities Exchange Act of 1934, as amended. A change in control
is also deemed to occur once any acquiring person becomes the beneficial
owner, directly or indirectly, of securities representing 15 percent or more
of the Company's outstanding shares of common stock.
CUMULATIVE TOTAL SHAREHOLDER RETURN
The following graph compares the cumulative total return 1/ of the
Company's common stock with the cumulative total returns of a peer group index
of diversified natural gas companies prepared and published by Value Line,
Inc.2/, and of the S&P Composite-500 Stock Index.
[The graph has three lines connecting the points in the following table]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Questar $100.00 $124.04 $159.30 $207.04 $179.12 $226.64
S&P 500 100.00 130.55 140.72 154.91 157.39 216.42
Peer Group 100.00 95.20 113.27 136.47 122.53 161.69
</TABLE>
1/ Assumes $100 invested at the close of trading on December 31, 1990 in
the Company's common stock, the published index of peer companies, and the S&P
500 Index; also assumes the dividends are reinvested. For 1995, the Company
had a return of 26.5 percent compared to a return of 37.5 percent for the S&P
500 Index and a return of 32.0 percent for the published peer group index.
For the five-year period, the Company had a compounded annual return of 17.8
percent compared to similar returns of 16.7 percent for the S&P 500 Index and
10.1 percent for the published peer group index.
2 The Company chose this index of diversified natural gas companies for
comparison purposes because it is a published and widely-used index.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Management Performance Committee (the "Committee") is a Committee of
outside directors that is chaired by W. Whitley Hawkins. Other members
include Patrick J. Early, U. Edwin Garrison, James A. Harmon, William N.
Jones, Robert E. Kadlec, Mary Mead, and Gary G. Michael. This Committee is
responsible for reviewing and approving all elements of the total compensation
program for officers of the Company and its affiliates and serves as the
administrator of the Company's Stock Option Plan and Long-Term Stock Incentive
Plan. The Committee is also responsible for monitoring the Company's
executive compensation programs to verify that they are aligned with the
Company's business strategies and financial goals. The Company believes that
such programs also motivate the Company's officers to acquire and retain
appropriate levels of stock ownership and are competitive with programs
offered by the Company's peers. It is the Committee's opinion that the total
compensation earned by the Company's officers in 1995 achieves these
objectives and is fair and reasonable.
Each year, the Committee reviews the performance of the Company on a
consolidated basis and the performance of the Company's major lines of
business and compares such performance to specified groups of peer companies.
The Company's 1995 financial performance was negatively affected by weather
that was 13 percent warmer than normal and by average natural gas wellhead
prices that were 25 percent lower in 1995 than they were in 1994.
Consequently, the Company's officers did not earn their target bonuses for
1995.
The Committee also assesses the individual performance of officers,
particularly the performance of R. D. Cash and a group that includes the
officers listed in the Summary Compensation Table. The Committee periodically
directs outside consultants to perform an in-depth audit and analysis of the
total compensation paid to the Company's officers. The most recent audit was
completed by William M. Mercer, Inc. (Mercer) in December of 1994. The
Committee also reviews executive compensation surveys, including an annual
survey on executive compensation sponsored by the American Gas Association
(AGA) and several compensation surveys published by consulting firms.
The Company's total compensation program for officers includes base
salaries, annual bonuses, and stock options. The total program is designed to
attract, motivate, reward and retain the broad-based management talent
required to achieve corporate objectives and increase shareholder value. Each
of these aspects of the total program is discussed in greater detail below.
Base Salaries
Base salaries for the Company's officers, including those named in the
Summary Compensation Table, are reviewed on an annual basis. Such salaries
are generally pegged at or near the 50th percentile or market average of
survey data. Merit increases are generally based on merit compensation
programs in place for the employees of the various business units. The merit
increases awarded to Mr. Cash and other officers are based on an assessment of
each officer's individual performance, and comparison with survey data and
have been in line with, or below, the overall merit budget guidelines adopted
for other employees.
On March 1, 1995, Mr. Cash received an overall merit increase of 4.74
percent on his base salary (from $380,000 to $398,000) after the Committee
determined that Mr. Cash's base salary was below the 50th percentile of AGA
survey data for comparable positions in integrated natural gas companies. The
Board of Directors, on the Committee's recommendation, also approved an
overall merit increase of 4.52 percent for Mr. Cash effective March 1, 1996
(from $398,000 to $416,000). Mr. Cash participates in the general employee
incentive compensation plan adopted by the Company's E&P affiliates.
Consequently, a portion of Mr. Cash's base salary ($58,500) has been frozen
and will be frozen through February of 1998.
Annual Bonuses
All of the Company's officers, but particularly the five highest paid
officers, have a significant portion of their total compensation at risk. The
Company and its affiliates adopted an annual incentive compensation plan in
1982 and have consistently used the framework of this plan since then. The
Committee reviews and approves minimum (85 percent), target (100 percent), and
maximum (125 percent) performance levels for each specified performance
objective. Factors are assigned to these performance objectives and the
resulting factors are multiplied to obtain an overall factor which, in turn,
is multiplied against the target bonus. Annual bonuses are directly linked
to the key financial and operating objectives for the major business units and
for the Company on a consolidated basis.
The Committee, at a meeting held in February of 1995, approved 1995
performance objectives for the Company and each major business unit. The
performance results for the Company, on a consolidated basis, were specified
net income, return on equity, and corporate operating and maintenance expense
goals. The performance results for each major business unit included at least
one financial goal, i.e., net income or net income and return on equity, and
at least one operating efficiency goal.
The Committee also approved target bonuses for each officer. Mr. Cash's
target bonus for 1995 was set at 45 percent of his base salary; the 1995
target bonus for each of the remaining highest compensated officers was set at
40 percent of his base salary. A portion of Mr. Cash's target bonus was
allocated to the performance of each major business unit. Approximately 60
percent of the target bonuses for Messrs. Rose, Marushack, and Nordloh were
allocated to the performance goals for their respective business units with
the remainder allocated to consolidated performance. All of Mr. Heiner's
target bonus was tied to consolidated results.
In 1995, the Company, on a consolidated basis, failed to meet the
minimum performance objectives for return on equity (12.50 percent) or net
income ($86,500,000). Consequently, the Company's officers did not receive
any bonuses attributable to consolidated results. Each of the Company's
major business units achieved at least its minimum operating efficiency goals.
Mountain Fuel and Wexpro also satisfied at least their respective minimum
financial goals. All of the officers named in the table, with the exception
of Mr. Heiner, earned a bonus for 1995, but the bonus payments were below
their target bonuses.
Mr. Cash earned a bonus of $46,700 for the performance of the Company
and its affiliates under the Company's 1995 Annual Management Incentive Plan,
or an overall 27.3 percent of his target bonus of $171,000. Of this amount,
$23,364 was paid in cash; the remainder of the bonus was paid in 694 shares of
the Company's restricted stock that will vest in equal annual installments in
February of 1997 and February of 1998. (During the restricted period, Mr.
Cash will receive dividends on these shares; the dividends will be treated as
additional compensation for purposes of the Company's qualified and
nonqualified benefit plans.) For 1995, he was eligible to receive up to 25
percent of his frozen salary if the Company's exploration and production
affiliates achieved specified performance objectives and earned two cash
bonuses of $1,917 and $3,182. (The 1995 bonus figure listed for Mr. Cash in
the Summary Compensation Table includes the cash bonus payments identified
above. The value of the restricted shares granted to him in 1996 for 1995
performance is listed under the restricted stock column.)
In February of 1996, the Committee approved annual performance
objectives for the Company, on a consolidated basis, and each of its major
business units. The Committee used the same categories for 1996 performance
measurements as were used in 1995. The 1996 performance objectives were set
after the Committee reviewed actual results for 1995 and budget numbers for
1996 and are generally higher than 1995 results and 1996 budget expectations.
The Committee set Mr. Cash's 1996 target bonus at 50 percent of his base
salary in effect at the time, or $199,000. A portion of his target bonus was
again allocated to the performance of each major business unit. The 1996
target bonuses for Messrs. Rose and Nordloh were set at 45 percent of each
officer's base salary, compared to 40 percent for the 1995 plan, reflecting
the appointment of both men to serve as Executive Vice Presidents as of
February 13, 1996.
Stock Options
Annual grants of stock options are awarded to the Company's officers and
key employees as part of their "risk-based" compensation. The Committee
considers the recommendations made by the Company's senior officers for
participants other than Mr. Cash, but independently determines Mr. Cash's
stock option. As a general rule, the Committee uses the prior year's grant as
the basis for determining each subsequent year's grant, but does increase the
size of grants when participants are promoted to new positions or when surveys
indicate that stock options should be increased to remain competitive. These
grants are awarded pursuant to the terms of an omnibus Long-Term Stock
Incentive Plan, which allows the Committee broad flexibility to use a wide
range of stock-based performance awards.
Stock options, from the Committee's perspective, focus attention on
managing the Company from a long-term investor's perspective and encourage
officers to have a significant, personal investment in the Company through
stock ownership. Stock options awarded to officers and key employees become
valuable only as the Company's performance is reflected in increased stock
prices. Stock options constitute the Company's only long-term incentive
compensation program. Officers are encouraged to retain their stock for
long-term investment, rather than sell option shares after purchasing them.
Based on recommendations made in the Mercer report, the Company recently
adopted stock ownership guidelines for officers in 1995. Mr. Cash's stock
ownership guideline is to own shares that have a value equal to four - five
times his base salary. Mr. Cash currently satisfies the ownership guideline.
The stock ownership guideline for the other officers in the Summary
Compensation Table is three - four times their respective base salaries.
As the Company's Chairman, President and Chief Executive Officer, Mr.
Cash has consistently received the largest stock option grant. Information
concerning the stock options granted to Mr. Cash and the other four named
officers in 1995 is included in the table labeled "Option/SAR Grants in Last
Fiscal Year." The table labeled "Aggregated Option/SAR Exercises" provides
information concerning the value realized by the individual members of the
group when exercising stock options in 1995 and the year-end value of their
remaining stock options.
In February of 1996, Mr. Cash received a grant to purchase 35,000 shares
of the Company's stock at a fair market price of $33.625 per share. The 1996
stock options vest in four equal installments with the first installment
vesting as of August 13, 1996 and have a ten-year term.
Miscellaneous
The Committee supports the Company's historic philosophy that officers
are not fundamentally different than employees but are paid more due to the
nature of their responsibilities, their experience, and the greater demands on
their time. Consequently, the Committee supports the Company's traditional
practice of limiting the perquisites granted to officers. Company officers do
not have first class travel privileges, cars, country club memberships,
supplemental welfare benefit plans, executive dining room service, or personal
use of the Company's airplane.
In 1993, Congress enacted Section 162(m) of the Internal Revenue Code
that generally limits the dollar amount of "compensation" paid to the
individual executive officers named in the Summary Compensation Table. The
primary exception to this limit, which is $1,000,000 for each officer, is for
performance-based compensation. The Committee does not anticipate that the
compensation paid to executive officers in the form of base salaries and
incentive compensation will exceed $1,000,000 per year in the near future, but
it is conceivable that an individual officer's compensation could exceed this
dollar limit when stock options are included. (The ordinary income recognized
by executive officers when exercising nonqualified stock options is
compensation for purposes of this federal tax provision.) Based on the
Committee's recommendation, the Company is requesting shareholder approval of
an amendment to the Long-Term Stock Incentive Plan that would allow it to
qualify under the final Section 162(m) regulations adopted by the Treasury
Department and that would eliminate the possibility that the Company could not
deduct all of the compensation paid to the officers listed in the Summary
Compensation Table.
Management Performance Committee
W. Whitley Hawkins, Chairman
Patrick J. Early
U. Edwin Garrison
James A. Harmon
William N. Jones
Robert E. Kadlec
Mary Mead
Gary G. Michael
SECURITY OWNERSHIP, DIRECTORS AND EXECUTIVE OFFICERS
The following table lists the shares of stock beneficially owned by each
of the directors, by each of the other named executive officers, and by all
directors and executive officers as a group as of March 1, 1996.
Percent of
Beneficial Owner Number of Shares Outstanding Shares1
Directors:
R. D. Cash 2,3,4,5,6 223,211 .55%
P. J. Early 1,000 1
U. Edwin Garrison 7 14,227 1
James A. Harmon 7,8 28,964 1
W. Whitley Hawkins 7 7,370 1
William N. Jones 7,8 12,218 1
Robert E. Kadlec 7,9 14,750 1
Dixie L. Leavitt 6,7 18,863 1
Neal A. Maxwell 6,7 11,878 1
Mary Mead 7 12,800 1
Gary G. Michae l7 3,400 1
D. N. Rose 3,4,5 65,886 .16%
Harris H. Simmons 7 4,800 1
Nondirector Executive Officers:
C. M. Heiner 3,4,5 80,519 .20%
A. J. Marushack 3,4,5,6 116,907 .29%
G. L. Nordloh 3,4,5,6 51,779 .13%
All directors, senior directors,
and executive officers
(21 individuals) 10 920,308 2.2%
1 Unless otherwise listed, the percentage of shares owned is less than
.1%. The percentages of beneficial ownership have been calculated in
accordance with Rule 13d-3(d)(1) under the Securities Exchange Act of 1934.
2 Mr. Cash is the Chairman of the Board of Trustees of the Questar
Corporation Educational Foundation and the Questar Corporation Arts
Foundation, two nonprofit corporations that own an aggregate of 42,596 shares
of the Company's common stock. As the Chairman, Mr. Cash has voting power for
such shares, but disclaims any beneficial ownership of the shares.
3 The Company's executive officers have shares held for their accounts in
the Company's Employee Investment Plan. The number of shares opposite each of
their names includes shares of stock through such plan as of December 31, 1995
as follows: Mr. Cash, 29,550 shares; Mr. Rose, 15,814 shares; Mr. Nordloh,
7,563 shares; Mr. Marushack, 29,746 shares; and Mr. Heiner, 20,431 shares.
4 The Company's executive officers have options granted them under the
terms of the Company's Stock Option Plan and Long-Term Stock Incentive Plan.
The number of shares opposite each of their names includes the number of
shares each has vested options to acquire within 60 days after March 1, 1996
as follows: Mr. Cash, 69,373 shares; Mr. Rose, 28,500 shares; Mr. Nordloh,
21,000 shares; Mr. Marushack, 58,500 shares; and Mr. Heiner, 32,250 shares.
5 The Company's executive officers acquired restricted shares of the
Company's common stock in partial payment of bonuses earned under the Annual
Management Incentive Plans. Mr. Nordloh also acquired restricted shares of
the Company's common stock under employee compensation plans adopted by
Celsius Energy Company/Universal Resources Corporation and Wexpro Company.
The number of shares opposite each of their names includes the following
shares of restricted stock beneficially owned as of March 1, 1996: Mr. Cash,
2,327 shares; Mr. Rose, 1,485 shares; Mr. Nordloh, 1,305 shares; Mr.
Marushack, 897 shares; and Mr. Heiner, 717 shares. The officers receive
dividends on such shares and have voting powers for such shares, but cannot
dispose of them until they vest.
6 Of the total shares reported for Mr. Cash, 3,270 are owned jointly with
his wife and 4,899 are controlled by him as custodian for his son. Messrs.
Leavitt, Marushack, and Maxwell own their shares of record jointly with their
respective wives. Some of Mr. Nordloh's record shares are owned by a family
trust.
7 Messrs. Garrison, Harmon, Hawkins, Jones, Kadlec, Leavitt, Maxwell,
Michael, and Simmons and Mrs. Mead have vested nonqualified stock options
granted under the terms of the Directors' Plan to purchase shares of common
stock as follows: Mr. Garrison, 3,650 shares; Mr. Harmon, 4,950 shares; Mr.
Hawkins, 7,150 shares; Mr. Jones, 3,500 shares; Mr. Kadlec, 11,150 shares; Mr.
Leavitt, 7,000 shares; Mr. Maxwell, 5,100 shares; Mr. Michael, 2,100 shares;
Mr. Simmons, 4,200 shares; and Mrs. Mead, 3,500 shares.
8 Mr. Harmon's wife owns 2,000 shares of common stock. Mr. Harmon
disclaims any beneficial interest in these shares. Mr. Jones' wife owns 90
shares of the Company's common stock; Mr. Jones disclaims any beneficial
interest in the shares owned by his wife.
9 Mr. Kadlec's wife owns 200 shares of common stock. Mr. Kadlec has
voting control and investment control over such shares. Such shares are
included in the shares listed opposite his name.
10 The total number of shares reported for this group includes vested
options to purchase 387,423 shares of stock. When vested options are
excluded, the group, own approximately 1.3 percent of the outstanding shares
of the Company's common stock.
SECURITY OWNERSHIP, PRINCIPAL HOLDERS
The following table sets forth information, as of December 31, 1995,
with respect to each person known or believed by the Company to be the
beneficial owner of five percent or more of its common stock:
Shares and
Name and Nature of
Address of Beneficial Percent
Beneficial Owner Ownership of Class
First Security Bank of Utah N.A. 4,072,485 10.0
79 South Main Street Trustee for
Salt Lake City, Utah 84111 Company Employee
Benefit Plans
and Bank1
__________________
1Of this total, First Security beneficially owns 3,971,820 shares in its
role as trustee of employee benefit plans sponsored by the Company.
Participating employees control the voting of such shares.
BOARD OF DIRECTOR PROPOSALS
Proposal Number One: Amendments to Long-Term Stock Incentive Plan
The Company's Board of Directors is recommending that shareholders
approve amendments to the Company's Long-Term Stock Incentive Plan (Stock
Plan), which was originally approved by shareholders in May of 1992. The
proposed amendments would impose a new limit on the size of a stock option
that could be granted to any participant per year; would vest the Management
Performance Committee, as the administrator of the Stock Plan, with more
flexibility in determining the period of time in which stock options must be
exercised following retirement; and would enlarge the group of eligible
participants to include consultants and officers and key employees of
affiliated (not just subsidiary) organizations. A copy of the amended Stock
Plan is included as Exhibit No. 1.
General Description of Plan. The Stock Plan was adopted to encourage
officers and selected key employees to acquire and retain a proprietary
interest in the Company and to give them an increased incentive to contribute
to the Company's future growth and success. The Stock Plan is often referred
to as an "omnibus" plan because it allows the Board, upon the recommendation
of the Committee, to use nonqualified stock options, incentive stock options,
restricted stock, performance-based stock, and any other awards valued in
whole or in part by reference to the Company's common stock.
The Stock Plan has a 10-year term and will expire in May of 2001 unless
extended by approval of shareholders. The number of shares available for
options or other awards in any one year is limited to one percent of the
outstanding shares of the Company's common stock as of the first day of each
calendar year for which the Stock Plan is effect. As of January 1, 1996, the
Company had 40,697,814 shares of stock outstanding, making an additional
406,978 shares available for awards under the Stock Plan. All shares
available in any year that are not granted through stock options or other
awards are available for use in subsequent years. As of January 2, 1996,
there were 428,684 shares that were available from prior years.
Options and Restricted Stock. A total of 1,962,392 shares have been
used since the Stock Plan was approved in 1991. These shares include
1,896,625 shares covered by incentive stock options and nonqualified stock
options granted to 73 participants and 65,767 shares of restricted stock
granted as partial payment of earned bonuses. The Stock Plan requires that
options all be granted at the fair market value as of the date of grant.
Options granted under the Stock Plan include 369,000 shares at a purchase
price of $19.625, 381,125 shares at a per share price of $28.875, 371,000
shares at a per share price of $31.50, 379,000 shares at a per share price of
$27.375, and 396,500 shares at a per share price of $33.625. Each of these
options has a 10-year term and vests in four, annual and equal installments
beginning six months from the date of the grant.
The following table lists information concerning the stock options that
have been awarded under the Stock Plan since its adoption in 1991.
Name or Group Number of Option Shares
R. D. Cash 155,000
D. N. Rose 99,000
G. L. Nordloh 108,000
A. J. Marushack 94,000
C. M. Heiner 93,000
All current executive officers (9) 797,000
All other employees (64) 1,099,625
Nonemployee directors are not eligible to participate in the Stock Plan.
(The tables listed on pages 10-11 contain additional information concerning
the options granted to the Company's highest paid officers.)
On March 22, 1996, the closing price of the Company's common stock as
reported on the New York Stock Exchange was $31.125.
Administration. As previously noted, the Management Performance
Committee is the named administrator the Stock Plan; no Committee member is an
employee or former employee of the Company and none is eligible to receive any
awards under the Stock Plan. The Committee has the authority to select
participants to whom awards are granted and to determine the types of awards
and the number of shares covered by awards. The Committee is also responsible
for establishing the terms, conditions, and provisions of all awards, subject
to the terms of the Stock Plan, and to make any determinations that involve
the administration of the Stock Plan.
Change in Control. Any options or restricted stock granted pursuant to
the term of the Stock Plan become vested once the Company obtains actual
knowledge of a "change in control" of the Company. A change in control is
defined to include any "person" becoming the beneficial owner of 15 percent or
more of the Company's voting securities; shareholder approval of a plan, or
merger, or consolidation of the Company where the Company is not the survivor,
or a sale or deposition of all or substantially all of the Company's assets,
or of a plan of liquidation or dissolution of the Company; or a "Distribution
Date" within the meaning of the Company's Shareholder Rights Plan dated as of
February 13, 1996.
Tax Consequences. The following discussion summarizes certain federal
tax consequences of stock options granted under the Stock Plan based on
current provisions of the Internal Revenue Code. It is intended as a general
summary only and may not apply to participants who have special tax
circumstances. It does not address foreign, state, or local tax consequences,
which may differ; nor does it address federal gift and estate tax
consequences.
The grant of an option will not create any tax consequences for the
participant of the Company. Upon exercising a nonqualified stock option, the
optionee must recognize ordinary income equal to the difference between the
exercise price and the fair market value of the stock on the date of exercise.
The Company is entitled to a deduction for the same amount. When disposing of
shares received pursuant to exercising a nonqualified stock option, the
participant will recognize short- or long-term gain depending upon the
participant's holding period for such shares. To the extent not offset by
capital loss, any capital gain will be taxed at ordinary income rates, subject
to a current overall maximum rate of 28 percent. A participant's disposition
of shares obtained through exercising a nonqualified stock option has no tax
consequences for the Company.
Upon exercising an incentive stock option, a participant recognizes no
federal taxable income and the Company receives no deduction at the time of
exercise. The participant's tax consequences when disposing of shares obtained
pursuant to exercising an incentive stock option depend on the length of time
the shares have been held. If the participant has held the shares for two
years after the incentive stock option was granted and one year after it was
exercised, he recognizes long-term capital gain (or loss) equal to the
difference between the sale price of the shares and the exercise price. If
the participant fails to satisfy these holding periods, he must recognize
ordinary income, and the Company is entitled to a deduction equal to the
amount of the ordinary income recognized by the participant.
Proposed Amendments. Section 162(m) of the Internal Revenue Code, which
was adopted as part of the Omnibus Budget Reconciliation Act of 1993, provides
that a publicly-held corporation cannot deduct compensation paid to certain
"covered employees" to the extent that such compensation exceeds $1 million
per tax year. Covered employees include Mr. Cash and the other executive
officers named in the Compensation Table. Income derived from stock options
(ordinary income recognized when exercising nonqualified stock options and
ordinary income recognized when making a disqualifying disposition of shares
obtained through exercising an incentive stock option) is treated as
compensation for tax purposes and would be subject to this deductibility limit
unless the underlying plan satisfies specified requirements. The only
requirement not satisfied by the Company's Stock Plan is a requirement that
the plan provide for a maximum number of shares for which options may be
granted to any participant during any fiscal year.
The Board of Directors, upon the Committee's recommendation, has
approved an amendment that would limit the number of shares covered by awards
granted to any single individual in any fiscal year to 100,000 shares. (This
number would be subject to adjustment for any stock split, recapitalization,
or other similar event.) The Stock Plan does not currently contain this
limitation, although the Committee's largest grant to any individual in any
year has been 35,694 shares (35,000 shares subject to options and 694
restricted shares). The Committee does not anticipate using 100,000 shares
for options granted to current officers but wants the flexibility to have up
to 100,000 shares if it needs to provide a special incentive to hire someone
from outside the Company.
The Stock Plan currently contains an express provision that a
participant, upon retirement, has three months in which to exercise any
options vested as of the date of his retirement. This provision has been
characterized as "unusually restrictive" by executive benefit consultants who
note that it is not uncommon for participants to be given several years after
retirement in which to exercise stock options. The Committee has recommended
that the three-month limitation be deleted from the Stock Plan and that it be
expressly given the flexibility to determine the period of time, up to three
years following retirement, in which any given participant may exercise stock
options.
The Stock Plan also limits eligibility to officers and key employees of
the Company and its subsidiaries, which was a provision in the original
incentive stock option plan adopted by the Company in 1989. Tax rules limit
incentive stock options to employees of affiliated companies, but they do not
contain similar provisions for nonqualified stock options, restricted stock,
or other performance-based stock awards.
The Company envisions that it may engage in joint venture activities
with other entities and ask officers and other key employees to take
employment positions with such joint venture organizations. These
organizations would likely not be classified as subsidiaries for consolidated
tax return purposes even though the Company's investment in such entities
could have a significant impact on the Company's operating revenues, income,
and stock price. Consequently, the Board of Directors, acting upon the
Committee's recommendation, has adopted an amendment to the Stock Plan that
would enlarge the classification of eligible participants to include employees
of an organization in which the Company has a significant equity investment,
as determined by the Board.
The Board of Directors recommends a vote "FOR" approval and ratification
of the amendments to the Company's Stock Plan. Approval of the proposed
amendments to the Stock Plan requires the receipt of more affirmative votes
than negative votes cast for the shares represented at the Annual Meeting.
Proposal Number Two: Amendments to Stock Option Plan for Directors
The Company has a Stock Option Plan for Directors (Directors' Option
Plan), which was approved by shareholders in May of 1987 and which was
amended, with shareholder approval, in May of 1991. An aggregate of 320,000
shares is reserved for issuance under the terms of the Directors' Option Plan,
which will expire in May of 1996 unless it is extended. Of the 320,000
reserved shares, 138,812 shares have been issued pursuant to the exercise of
nonqualified stock options and 128,900 shares are subject to outstanding
options. Mr. R. D. Cash, the Company's Chairman, President and Chief
Executive Officer, recommended to the Board that the Directors' Option Plan be
amended to provide for an additional 150,000 shares and to extend the term to
May of 2001. Additional amendments provide for an increase in the number of
shares covered by each option, extend the period of time in which directors
may exercise vested options after their retirement, and shorten the time
period for vesting to occur. The Board of Directors accepted Mr. Cash's
recommendations, subject to shareholder approval.
The material features of the Directors' Option Plan are described below.
A copy of the amended Directors' Option Plan is included as Exhibit No. 2.
Purpose. The Directors' Option Plan was originally adopted and is
proposed to be extended in order to encourage nonemployee directors to promote
the value of the Company's common stock and acquire a larger stock ownership
interest in the Company. The Directors' Option Plan was also designed to
reinforce the community of interest between the Company's stockholders and
directors and to provide a form of compensation to attract and retain highly
qualified individuals to serve as directors.
Operation of Plan. Nonemployee voting directors receive nonqualified
stock options on the day of the Company's first regularly scheduled meeting of
the Board of Directors each year. Pursuant to the current terms of the
Directors' Option Plan, each eligible director received a nonqualified stock
option to purchase 2,800 shares; the directors who also serve as Chairmen of a
Board Committee each receive an additional 600 shares for each such
assignment. As amended, the Directors' Option Plan provides that each
director would receive an annual nonqualified stock option to purchase 3,200
shares and that directors who also serve as Chairmen would receive an
incremental 800 shares. The option price is equal to the closing price of the
Company's stock on the date of grant. The Directors' Option Plan is a
nondiscretionary plan and participation does not disqualify directors from
serving as administrators of grant and award plans under Section 16(b) of the
Securities Exchange Act of 1934.
Eligibility and Administration. Participants are limited to nonemployee
voting directors of the Company. The Directors' Option Plan is administered
by the Option Committee, a group consisting of at least three officers
appointed by the Company's President. These individuals are not eligible to
participate in the Directors' Option Plan.
Other Terms and Conditions. Under the terms of the Directors' Option
Plan, the stock options must be nonqualified options. As originally adopted,
the Directors' Option Plan provided that a participant's option expires upon
the date of death, resignation, removal from the Board, or expiration of
status as an elected director. The Directors' Option Plan, as proposed to be
amended, would provide that a participant (or his estate) would have one year
following the date of death or retirement to exercise any options that were
vested at the date of such death or retirement. In the event of a director's
removal, the options would terminate as of the date of removal.
The options granted prior to February of 1993 have five-year terms and
vest in two equal installments, with the first increment vesting six months
after grant date. Options granted since then have 10-year terms and vest in
four annual, equal installments beginning six months after grant date. As
amended, the Directors' Option Plan provides for 10-year terms, but shares
vest in one installment six months after grant date. An option is exercised
by delivering a written notice of exercise and payment of the full option
price to the Option Committee. A participant may purchase option shares by
delivering shares of the Company's common stock owed by him that have a fair
market value equal to the purchase price of such shares.
Change in Control. Options become immediately exercisable once the
Company obtains actual knowledge of a "change in control" of the Company. A
change in control is defined to include any "person" becoming the beneficial
owner of 15 percent or more of the Company's voting securities; shareholder
approval of a plan or merger or consolidation of the Company where the Company
is not the survivor, of a sale or disposition of all or substantially all of
the Company's assets or of a plan of liquidation or dissolution of the
Company; or a "Distribution Date" within the meaning of the Company's
Shareholder Rights Plan dated as of February 13, 1996.
Tax Consequences. A director will not recognize income when receiving
an option. Upon exercising a nonqualified stock option, the director
recognizes ordinary income equal to the difference between the exercise price
and the fair market value of the stock on the date of exercise. The Company
is entitled to a deduction for the same amount.
Amendments. The Company's Board of Directors may alter, amend, suspend
or discontinue the Directors' Plan, except that it cannot make any material
changes without the approval of the shareholders and cannot make any amendment
to or termination of the Directors' Option Plan that would affect previously
granted options without the consent of the participating directors. The Board
of Directors may not amend the Plan more often that every six months unless
the amendment is necessary to comply with tax laws.
Conclusion. Information concerning the number of shares covered by each
director's option is presented above under "Election of Directors."
Information concerning the most recent grant of options under the Directors'
Option Plan is presented above under "Directors Compensation." On March 22,
1996, the closing price of the Company's common stock was $32.125 per
share. As of such date the market value of the additional 150,000 shares
reserved for issuance under the Directors' Option Plan is $4,818,750.
The Company's Board of Directors, including Messrs. Cash and Rose,
believe that continuing the Directors' Option Plan and reserving more shares
will continue to provide an incentive for nonemployee directors to increase
their stock ownership and will reinforce the community of interest between the
Company's stockholders and directors.
Approval of proposed amendments to the Directors' Option Plan requires
the receipt of more affirmative votes than negative votes cast for the shares
represented at the Annual Meeting. The Board of Directors recommends that
shareholders vote "FOR" this proposal.
Proposal Number Three: Directors' Stock Plan
In February of 1996, the Board of Directors adopted the Questar
Corporation Directors' Stock Plan (Directors' Stock Plan) and determined that
it should be submitted to the Company's shareholders for approval. The
Directors' Stock Plan will become effective immediately upon approval by the
shareholders. The plan, which involves a maximum of 50,000 shares of the
Company's common stock, permits nonemployee directors to receive all or part
of their annual retainer and meeting fees in stock rather than in cash. The
Directors' Stock Plan was adopted to permit directors to increase their
ownership of the Company's common stock and to tie the directors' interests
more closely with those of shareholders.
The complete text of the Directors' Stock Plan is set forth in Exhibit
No.3. The following summary highlights several important features of it.
General Terms. The nonemployee directors of the Company currently
receive an annual retainer fee of $12,000 in monthly installments. They also
receive a meeting fee of $800 per meeting for each Board meeting they attend
and $600 for each Committee meeting they attend. Committee Chairmen receive
an incremental $150 for each Committee meeting at which they preside. All
nonemployee directors of the Company also serve as a director of one or the
Company's three primary subsidiaries; for this service, they receive an annual
retainer of $4,800, plus meeting fees of $500. The fees paid to nonemployee
directors by the Company's subsidiaries may also be paid in shares of the
Company's common stock.
The Directors' Stock Plan will permit nonemployee directors of the
Company to elect to receive all or a portion (in 25 percent increments) of
their retainer fees, meeting fees, or total fees in the Company's common
stock. Elections must be made six months in advance, and revocation of such
changes will not become effective for six months after revocation notices are
received. An election to receive fees in stock will result in shares being
credited to the director as of the first day of each month. The number of
shares will be calculated using the fair market value of the Company's common
stock, which is defined as the closing price of the stock as reported on the
New York Stock Exchange on the first day of each month (or the preceding
business day if the first day of the month is not a business day.) Shares
will be credited to directors on a book entry account basis. Upon request,
directors may receive certificates representing whole shares credited to their
accounts. The fair market value of the shares will be included in the
director's taxable income for the year in question.
Eligibility. Only the Company's nonemployee voting directors are
eligible to participate in the Directors' Stock Plan. At the current time, 11
directors are eligible to participate.
Administration. The Board of Directors will administer the Directors'
Stock Plan. The Option Committee is authorized to interpret the Directors'
Stock Plan. The plan is nondiscretionary in its principal provisions;
administration of the Directors' Stock Plan will not cause any director to
lose status as a "disinterested director" under the rules promulgated by the
Securities and Exchange Commission to interpret and enforce Section 16(b) of
the Securities Exchange Act of 1934.
Available Shares. The maximum number of shares of common stock issuable
under the Directors' Stock Plan is 50,000 shares, which may consist of either
original issue shares or shares purchased on the open market. The number of
shares is subject to automatic adjustment in certain circumstances, such as a
stock split, stock dividend, merger, consolidation, reorganization, or other
similar changes.
Amendment and Termination. The Board of Directors may terminate or
amend the Directors' Stock Plan without shareholder approval except to the
extent that applicable law or regulation requires such approval or unless the
Board of Directors, on advice of counsel, determines that shareholder approval
is otherwise necessary or advisable. The Directors' Stock Plan cannot be
amended more often than every six months unless the amendment is necessary to
comply with tax rules.
Relationship to Other Plans. The Company's nonemployee directors
currently have the right to defer their fees and to have such fees accounted
for as if invested in shares of the Company's common stock (phantom stock
option) or credited with interest using monthly rates on long-term
certificates of deposit. Some of the Company's eligible directors are
currently deferring their fees and have selected the phantom stock option to
account for such fees. These directors are deferring receipt of their fees
and will not be taxed on the value of the shares until they receive a cash
distribution upon retirement or resignation equal to the fair market value of
the shares. Directors who elect to be paid with actual shares of stock under
the Directors' Stock Plan will be taxed as if they had received the fees.
The Company's nonemployee directors also receive nonqualified stock
options to purchase shares of the Company's common stock. The shares of stock
received in lieu of fees may be used as consideration for option shares once
they have been held for six months.
Conclusion. The Directors' Stock Plan is being submitted for
shareholder approval in order to comply with the provisions of Rule 16b-3
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934. Compliance with such provisions exempts the acquisition
of shares under the Directors' Stock Plan from the operation of Section 16(b)
of such act.
The proposal to approve the Directors' Stock Plan requires the receipt
of more affirmative votes than negative votes cast for shares represented at
the Annual Meeting. The Board of Directors recommends a vote "FOR" approval
of the Directors' Stock Plan.
UFCW PROPOSALS
The United Food and Commercial Workers Union, Local 99R, with headquarters
in Phoenix, Arizona (UFCW), is engaged in a corporate campaign against
Albertson's, a large retail merchandiser with headquarters in Boise, Idaho, and
against Gary G. Michael, the Chairman and Chief Executive Officer of
Albertson's, who serves as a director of the Company. This corporate
campaign arises from labor disputes between the UFCW and Albertson's.
The UFCW has chosen to extend the campaign to corporations that have links
to Albertson's through its directors and officers. In its solicitation
materials, the UFCW acknowledges that it is not involved in a labor dispute
with the Company. The UFCW is not a bargaining agent for the Company's
employees, all of whom are nonunion.
The UFCW, the record shareholder of 100 shares, has advised the Company of
its intent to present two resolutions for separate votes at the Annual Meeting.
The UFCW's first resolution is as follows:
RESOLVED, that shareholders recommend the Company adopt a
policy of confidential shareholder voting, with the sole exception
being any disclosure ordered by a court. This resolution shall not
be construed as preventing the Company from using its own staff to
count votes, so long as this staff does not engage in soliciting or
report individual shareholder's votes to management or its proxy
solicitors. This resolution shall not be construed as preventing
management from receiving any information contained on the cards
other than how they were voted, nor as preventing management from
contacting shareholders who have not yet sent in cards.
The Company's Board of Directors recommends that shareholders vote
"AGAINST" the resolution because it is unnecessary in routine solicitations and
restrictive in contested issues. The Company's Shareholder Services department
functions as a transfer agent and maintains all shareholder records. It
currently receives proxy cards after the envelopes are opened and tabulates the
votes. This department notes the address and status changes identified by
stockholders on the proxy cards. It periodically prepares a list of record
shareholders who own shares in excess of a specified number and contacts these
shareholders (or arranges for them to be contacted) and encourages them to
return their proxy cards. This department also segregates those cards that have
comments or questions that warrant attention from the Company's management and
sends those cards to management. In routine solicitations, the Company is
effectively handling proxy cards returned by record shareholders in the manner
suggested by the UFCW. The Board of Directors, however, wants to retain the
flexibility to use different procedures when soliciting support in contested or
complex situations.
The Company uses a proxy solicitation firm when it is proposing complex
issues, particularly if they fall outside the New York Stock Exchange's
discretionary voting rules. The Company's financial officers also make direct
contacts with large institutional investors to make sure they understand the
Company's proposals and to encourage their support. In these situations, it is
critical for both the Company and its retained solicitation firm to determine
whether and how these large investors have voted. The Company's Board of
Directors believes that the UFCW's proposal would hamper the Company's ability
to communicate directly with investors, particularly in contested elections or
issues.
The Board of Directors is also concerned that the concept of confidential
voting as outlined in the UFCW's resolution is different than widely-held
notions of it. The Company's Board does not want to formally adopt these
procedures, only to incur additional pressure to make changes that will
increase the cost and administrative complexity of communicating with
shareholders.
More than 85 percent of the Company's outstanding shares of common stock
are held by beneficial owners. Some beneficial owners are large institutional
investors that are not subject to coercion and that may want their votes on
particular issues to send a message to the Company's management. Other
beneficial owners are individuals who choose to own shares through a broker or
trustee, rather than in their own names. The votes cast by individuals are
transmitted to the Company through brokers, trustees, or agents, and the Company
currently does not have access to any information about the votes cast by
individual beneficial owners. The UFCW's confidential voting proposal would not
affect these individual owners. (The Company, through complying with non-
objecting beneficial ownership proceedures may learn the identity of some
individual owners. It cannot use these rules to obtain information about their
votes.) The UFCW's confidential voting proposal, however, would effectively
preclude the Company's management from knowing how large institutional investors
are voting and trying to understand why.
The Company's largest single shareholder is the trust for the Company's
Employee Investment Plan. The Company has 2,550 employees and retired employees
who own 3,971,820 shares (as of December 31, 1995) through this plan. (These
shares are included in the 85 percent figure used above.) First Security Bank
of Utah, N.A., as the trustee of the plan, receives confidential voting
instructions from plan participants and then submits one proxy to the Company.
The following is the text of the UFCW's second resolution:
RESOLVED, that shareholders recommend the Company end its
policy of offering golden parachute (severance benefits) to
employees who voluntarily quit after a change in control, unless and
until such a policy is approved by shareholder vote.
The Board of Directors recommends a vote "AGAINST" the UFCW's second
resolution for the following reasons:
The Company's Executive Severance Compensation Plan (Severance Plan), which
is described on pages [13-14] of the Proxy Statement, was adopted in September
of 1983. The Board of Directors believes that this plan, pursuant to which
officers of the Company and its affiliates are entitled to receive up to two
years' salary and other specified benefits in the event of a change in control,
serves the best interest of shareholders and is an impartial and appropriate
element of sound corporate governance. The Severance Plan is designed to ensure
that management assesses a takeover bid objectively and advises the Board if the
bid is in the best interest of the Company and its shareholders without undue
concern for personal financial loss or other personal uncertainties, even if
supporting a change in control may result in the loss of their jobs. The
Severance Plan is designed to keep the officers' undivided attention on their
duties, precisely at the time when such attention is needed. In the absence of
such protection, officers would more likely be tempted to leave the Company for
another position that offers greater security. The Severance Plan is intended
to minimize, rather than create, a conflict of interest for officers in the
event of a tender offer or other takeover bid.
The Severance Plan has no current cost to the Company or its shareholders;
no payments have ever been made under the Severance Plan. Benefits under the
Severance Plan are limited to amounts that can be deducted under applicable tax
laws and can generally be characterized as "modest" in comparison to other
change of control agreements. The Board of Directors also believes that the
Severance Plan does not affect the legal responsibility of officers to the
shareholders with respect to discharging their duties and responsibilities.
The Board believes that changing the Severance Plan and renegotiating the
benefits that have been promised to officers may weaken the Board's ability to
attract and retain the best-qualified officers, which could deprive the Company
and shareholders of the strength and leadership necessary to strive for
long-term maximization of shareholder value.
The Company's Board of Directors deplores the tactics and questions the
motives of the UFCW. The Board of Directors believes that labor-management
issues should be resolved at the bargaining table or in other traditional
labor-management arenas, not through corporate campaigns that use the proxy
process. The Board also believes that it is particularly unfair and
inappropriate for the UFCW to seek to involve the Company and its
stockholders in the UFCW's dispute with another corporation. The Board of
Directors believes that the two proposals submitted by the UFCW are not in
the best interest of the Company and its shareholders. The Board recommends
that shareholders vote "AGAINST" both resolutions advocated by the UFCW.
INDEPENDENT AUDITORS
The firm of Ernst & Young LLP, independent auditors, has audited the
accounts of the Company for a number of years, including 1995 and is expected to
continue doing so. Representatives of Ernst & Young LLP are expected to be
present at the Annual Meeting, will have an opportunity to make a statement if
they desire, and will be able to respond to questions.
STOCKHOLDER PROPOSALS
The Company must receive proposals from stockholders on or before December
4, 1996, in order to have such proposals evaluated for inclusion in the proxy
materials relating to the Company's 1997 Annual Meeting of Stockholders, which
is scheduled to be held on May 20, 1997. Any proposal submitted for the proxy
materials will be subject to the rules of the Securities and Exchange Commission
concerning stockholder proposals.
ANNUAL REPORT AND FORM 10-K REPORT
An annual report for the year ending December 31, 1995, containing
financial and other information about the Company, has been recently mailed to
all stockholders of record.
The Company will send, without charge, a copy of its 1995 Annual Report on
Form 10-K (excluding exhibits), as filed with the Securities and Exchange
Commission, to any stockholder upon written request. Requests should be sent to
Connie C. Holbrook, Vice President and Corporate Secretary, P. O. Box 45433,
Salt Lake City, Utah 84145-0433.
SECTION 16(a) COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and
regulations promulgated by the Securities and Exchange Commission, the Company's
directors, certain officers, and persons that own more than 10 percent of the
Company's stock, are required to file reports of ownership and changes in
ownership with the Commission and the New York Stock Exchange and to furnish the
Company with copies of all such reports they file.
Based solely on its review of copies of such reports received or written
representations for certain reporting persons, the Company believes that all
filing requirements were satisfied.
OTHER MATTERS
The directors and officers know of no additional matters that are likely
to be brought before the meeting. If any other business requiring a vote of the
stockholders should properly come before the meeting or any adjournment or
postponement of such meeting, the persons named in the enclosed proxy intend to
vote in accordance with their best judgment.
Pursuant to the Company's Bylaws, business must be properly brought before
an annual meeting in order to be considered by stockholders. The Bylaws specify
the procedure for stockholders to follow in order to bring business before an
annual meeting. A stockholder who wants to nominate a person for election as a
director must deliver a written notice, by certified mail, to the Company's
Secretary. Such notice must be received not less than 50 days nor more than 90
days prior to the date of the meeting. The notice must set forth (1) the name,
address, and stock ownership of the person making the nominations; (2) the name,
age, business address, residential address, and principal occupation or
employment of each nominee; (3) the number of shares of the Company's stock
owned by each nominee; (4) a description of all arrangements and
understandings between the stockholder and nominee pursuant to which the
nomination is made; and (5) such other information concerning the nominee as
would be required, under the rules of the Securities and Exchange Commission,
in a proxy statement soliciting proxies for the election of the nominee.
The notice must also include the signed consent of the nominee to serve as a
director if elected.
The Company's Bylaws also require that any stockholder who is entitled to
vote at the annual meeting and who wants to submit a proposal at such meeting
without having it considered through the proxy materials, must deliver a written
notice of the proposal, by certified mail, to the Company's Secretary. Such
notice must be received not less than 50 days nor more than 90 days prior to the
date of such meeting. The notice must set forth (1) a brief description of the
proposal; (2) the stockholder's name, address, and stock ownership; and (3) any
material interest of the stockholder in the proposal. A copy of the Company's
Bylaws specifying the requirements will be furnished to any stockholder upon
written request to the Secretary.
By Order of the
Board of Directors
Connie C. Holbrook
Vice President and Secretary
QUESTAR CORPORATION
LONG-TERM STOCK INCENTIVE PLAN
As amended and restated May 21, 1996
Section 1. Purpose
The Questar Corporation Long-Term Stock Incentive Plan (the
"Plan") is designed to encourage officers and selected key employees of
and consultants to Questar Corporation and its affiliated companies (the
"Company") to acquire a proprietary interest in the Company, to generate
an increased incentive to contribute to the Company's future growth and
success, and to enhance the Company's ability to attract and retain
talented officers and employees. Accordingly, the Company, during the
term of this Plan, may grant incentive stock options, nonqualified stock
options, stock appreciation rights, restricted stock, performance
shares, and other awards valued in whole or in part by reference to the
Company's stock.
Section 2. Definitions
"Affiliate" shall mean any business entity in which the Company
directly or indirectly has an equity interest deemed significant by the
Company's Board of Directors.
"Approved Retirement" shall mean any retirement of service on or
after age 60 or, with approval of the Board, early retirement under the
Company's Retirement Plan.
"Award" shall mean a grant or award under Section 6 through 10,
inclusive, of the Plan, as evidenced in a written document delivered to
a Participant as provided in Section 12(b).
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"Committee" shall mean the Management Performance Committee of the
Board of Directors.
"Common Stock" or "Stock" shall mean the Common Stock, no par
value, of the Company.
"Company" shall mean Questar Corporation on a consolidated basis.
"Designated Beneficiary" shall mean the beneficiary designated by
the Participant, in a manner determined by the Committee, to receive
amounts due the Participant in the event of the Participant's death. In
the absence of an effective designation by the Participant, Designated
Beneficiary shall mean the Participant's estate.
"Disability" shall mean permanent and total disability within the
meaning of Section 105(d)(4) of the Code.
"Employee" shall mean any officer or key employee of or consultant
to the Employer.
"Employer" shall mean the Company and any Affiliate.
"Fair Market Value" shall mean the closing price of the Company's
Common Stock reported on the New York Stock Exchange on the date in
question, or, if the Stock shall not have been traded on such date, the
closing price on the next preceding day on which a sale occurred.
"Fiscal Year" shall mean the fiscal year of the Company.
"Incentive Stock Option" shall mean a stock option granted under
Section 8 that is intended to meet the requirements of Section 422 of
the Code.
"Nonqualified Stock Option" shall mean a stock option granted
under Section 8 that is not intended to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Nonqualified
Stock Option.
"Participant" shall mean an Employee who is selected by the
Committee to receive an Award under the Plan.
"Payment Value" shall mean the dollar amount assigned to a
Performance Share which shall be equal to the Fair Market Value of the
Common Stock on the day of the Committee's determination under Section
8(c)(2) with respect to the applicable Performance Period.
"Performance Period" or "Period" shall mean the period of years
selected by the Committee during which the performance is measured for
the purpose of determining the extent to which an Award of Performance
Shares has been earned.
"Performance Goals" shall mean the objectives established by the
Committee for a Performance Period, for the purpose of determining the
extent to which Performance Shares which have been contingently awarded
for such Period are earned.
"Performance Share" shall mean an Award granted pursuant to
Section 8 of the Plan expressed as a share of Common Stock.
"Restricted Period" shall mean the period of years selected by the
Committee during which a grant of Restricted Stock or Restricted Stock
Units may be forfeited to the Company.
"Restricted Stock" shall mean shares of Common Stock contingently
granted to a Participant under Section 9 of the Plan.
"Restricted Stock Unit" shall mean a fixed or variable dollar
denominated unit contingently awarded under Section 9 of the Plan.
"Right" shall mean a Stock Appreciation Right granted under
Section 7.
"Stock Unit Award" shall mean an Award of Common Stock or units
granted under Section 10.
Section 3. Administration
The Plan shall be administered by the Committee. The Committee
shall have sole and complete authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the operation
of the Plan, and to interpret the terms and provisions of the Plan. The
Committee's decisions shall be binding upon all persons, including the
Company, stockholders, an Employer, Employees, Participants and
Designated Beneficiaries.
Section 4. Eligibility
Awards may only be granted to officers and key employees of or
consultants to the Company or any Affiliate who have the capacity to
contribute to the success of the Company. When selecting Participants
and making Awards, the Committee may consider such factors as the
Employee's functions and responsibilities and the Employee's past,
present and future contributions to the Company's profitability and
growth.
Neither the members of the Committee nor any member of the Board
who is not an employee of the Company shall be eligible to receive
awards.
Nothing contained in the Plan or in any individual agreement
pursuant to the terms of the Plan shall confer upon any Participant any
right to continue in the employment of the Company or to limit in any
respect the right of the Company to terminate the Participant's
employment at any time and for any reason.
Section 5. Maximum Amount Available for Awards and Maximum Award
The aggregate number of shares of Common Stock that may be issued
under Awards pursuant to this Plan on an annual basis shall not exceed
one percent (1%) of the issued and outstanding shares of Common Stock as
of the first day of each calendar year for which the Plan is in effect.
Any shares available in any year using this formula that are not granted
under this Plan or other plans in which stock is awarded to Employees
would be available for use in subsequent years. Shares of Common Stock
may be made available from the authorized but unissued shares of the
Company or from shares reacquired by the Company, including shares
purchased in the open market. In the event that an Option or Right
expires or is terminated unexercised as to any shares of Common Stock
covered thereby, or any Award in respect of shares is forfeited for any
reason under the Plan, such shares, to the extent not precluded by
applicable law or regulation, shall be again available for Awards
pursuant to the Plan.
In the event that the Committee shall determine that any stock
dividend, extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination, exchange of
shares, warrants or rights offering to purchase Common Stock at a price
substantially below fair market value or other similar corporate event
affects the Common Stock such that an adjustment is required in order to
preserve the benefits or potential benefits intended to be made
available under this Plan, then the Committee, in its sole discretion,
may take action. The Committee may adjust any or all of the number and
kind of shares that thereafter may be awarded or optioned and sold or
made the subject of Rights under the Plan, the number and kind of shares
subject to outstanding Options and other Awards, and the grant, exercise
or conversion price with respect to any of the foregoing and/or, if
deemed appropriate, make provision for a cash payment to a Participant
or a person who has an outstanding Option or other Award.
There is a maximum of 100,000 shares that can be the subject of
Awards granted to any single Participant in any given fiscal year.
Section 6. Stock Options
(a) Grant. Subject to the provisions of the Plan, the Committee
shall have sole and complete authority to determine the Employees to
whom Options shall be granted, the number of shares to be covered by
each Option, the option price therefor and the conditions and
limitations, applicable to the exercise of the Option. The Committee
shall have the authority to grant Incentive Stock Options, Nonqualified
Stock Options, or both types of Options. In the case of Incentive Stock
Options, the terms and conditions of such grants shall be subject to and
comply with such rules as may be prescribed by Section 422 of the Code
and any implementing regulations.
(b) Option Price. The Committee shall establish the option price
at the time each Option is granted, which price shall not be less than
100 percent of the Fair Market Value of the Common Stock on the date of
grant.
(c) Exercise. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Committee, in its sole
discretion, may specify in the applicable Award or thereafter; provided,
however, that in no event may any Option granted hereunder be
exercisable earlier than six months after the date of such grant or
after the expiration of ten years from the date of such grant. The
Committee may impose such conditions with respect to the exercise of
Options, including without limitation, any conditions relating to the
application of federal or state securities laws, as it may deem
necessary or advisable.
No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price is received by the Company.
Such payment may be made in cash, or its equivalent, or, if and to the
extent permitted by the Committee, by exchanging shares of Common Stock
owned by the optionee (which are not the subject of any pledge or other
security interest), or by a combination of the foregoing, provided that
the combined value of all cash and cash equivalents and the Fair Market
Value of any such Common Stock so tendered to the Company, valued as of
the date of such tender, is at least equal to such option price.
Section 7. Stock Appreciation Rights
(a) The Committee may, with sole and complete authority, grant
Rights in tandem with an Option. Rights shall not be exercisable
earlier than six months after grant, shall not be exercisable after the
expiration of ten years from the date of grant and shall have an
exercise price of not less than 100 percent of the Fair Market Value of
the Common Stock on the date of grant.
(b) A Right shall entitle the Participant to receive from the
Company an amount equal to the excess of the Fair Market Value of a
share of Common Stock on the exercise of the Right over the grant price
thereof. The Committee shall determine whether such Right shall be
settled in cash, shares of Common Stock or a combination of cash and
shares of Common Stock.
Section 8. Performance Shares
(a) The Committee shall have sole and complete authority to
determine the Employees who shall receive Performance Shares and the
number of such shares for each Performance Period and to determine the
duration of each Performance Period and the value of each Performance
Share. There may be more than one Performance Period in existence at
any one time, and the duration of Performance Periods may differ from
each other.
(b) Once the Committee decides to use Performance Shares, it
shall establish Performance Goals for each Period on the basis of
criteria selected by it. During any Period, the Committee may adjust
the Performance Goals for such Period as it deems equitable in
recognition of unusual or non-recurring events affecting the Company,
changes in applicable tax laws or accounting principles, or such other
factors as the Committee may determine.
(c) As soon as practicable after the end of a Performance Period,
the Committee shall determine the number of Performance Shares that have
been earned on the basis of performance in relation to the established
Performance Goals. Payment Values of earned Performance Shares shall be
distributed to the Participant or as soon as practicable after the
expiration of the Performance Period and the Committee's determination.
The Committee shall determine whether Payment Values are to be
distributed in the form of cash and/or shares of Common Stock.
Section 9. Restricted Stock and Restricted Stock Units
(a) Subject to the provisions of the Plan, the Committee shall
have sole and complete authority to determine the Employees to whom
shares of Restricted Stock and Restricted Stock Units shall be granted,
the number of shares of Restricted Stock and the number of Restricted
Stock Units to be granted to each Participant, the duration of the
Restricted Period during which and the conditions under which the
Restricted Stock and Restricted Stock Units may be forfeited to the
Company, and the other terms and conditions of such Awards.
(b) Shares of Restricted Stock and Restricted Stock Units may not
be sold, assigned, transferred, pledged or otherwise encumbered, except
as herein provided, during the Restricted Period. At the expiration of
the Restricted Period, the Company shall deliver such certificates to
the Participant or the Participant's legal representative. Payment for
Restricted Stock Units shall be made to the Company in cash and/or
shares of Common Stock, as determined at the sole discretion of the
Committee.
Section 10. Other Stock Based Awards
(a) In addition to granting Options, Rights, Performance Shares,
Restricted Stock, Restricted Stock Units, the Committee shall have
authority to grant Stock Unit Awards to Participants that can be in the
form of Common Stock or units, the value of which is based, in whole or
in part, on the value of Common Stock. Subject to the provisions of the
Plan, Stock Unit Awards shall be subject to such terms, restrictions,
conditions, vesting requirements and payment rules as the Committee may
determine in its sole and complete discretion at the time of grant.
(b) Any shares of Common Stock that are part of a Stock Unit
Award may not be assigned, sold, transferred, pledged or otherwise
encumbered prior to the date on which the shares are issued or, if
later, the date provided by the Committee at the time of grant of the
Stock Unit Award.
Stock Unit Awards may provide for the payment of cash
consideration by the person to whom such Award is granted or provide
that the Award, and any Common Stock to be issued in connection
therewith, if applicable, shall be delivered without the payment of cash
consideration, provided that for any Common Stock to be purchased in
connection with a Stock Unit Award the purchase price shall be at least
50% of the Fair Market Value of such Common Stock on the date such Award
is granted.
Stock Unit Awards may relate in whole or in part to certain
performance criteria established by the Committee at the time of grant.
Stock Unit Awards may provide for deferred payment schedules and/or
vesting over a specified period of employment. In such circumstances as
the Committee may deem advisable, the Committee may waive or otherwise
remove, in whole or in part, any restriction or limitation to which a
Stock Unit Award was made subject at the time of grant.
(c) In the sole and complete discretion of the Committee, an
Award, whether made as a Stock Unit Award under this Section 10 or as an
Award granted pursuant to Sections 6 through 9, may provide the
Participant with dividends or dividend equivalents (payable on a current
or deferred basis) and cash payments in lieu of or in addition to an
Award.
Section 11. Termination of Employment
The following provisions define a Participant's status in the
event of termination of employment:
(a) Options and Rights. If a Participant shall cease to be
employed by the Company or an Affiliate either directly or in a
consulting role, any Option and any Right granted to him under the Plan
shall terminate in accordance with the following rules:
(1) A Participant who terminates employment as a result of
an Approved Retirement shall have a period of time determined by the
Committee, but not to exceed three years from the date of retirement to
exercise an Option or Right. A Participant who returns to part- or
full-time service for the Company after termination of employment shall
not be eligible to exercise an Option or Right after the expiration of
the period of time specified by the Committee, but not to exceed three
years from the date of retirement.
(2) A Participant who is Disabled shall have 12 months after
the termination of employment in which to exercise an Option or Right.
(3) If a Participant dies while employed or after cessation
of employment but within the period during which he could have exercised
the Option or Right as provided above, then the Option or Right may be
exercised within 12 months after the Participant's termination of
employment by the Participant's Designated Beneficiary.
(4) The foregoing notwithstanding, a Participant shall not
be permitted to exercise an Option or Right after the expiration date
and shall not be permitted to exercise an Option or Right to which he
was not entitled to exercise on the date of termination of his
employment.
(b) Restricted Stock. If a Participant terminates employment
before the end of the Restricted Period for a reason other than death,
Approved Retirement, Disability, or Change of Control, the Participant
shall forfeit all shares of Restricted Stock. If a Participant
terminates employment as a result of death, Approved Retirement, or
Change of Control, the Committee, in its sole discretion, shall
determine what portion, if any, of the Restricted Stock shall be freed
from restrictions.
(c) Performance Shares and Other Awards. If a Participant ceases
to be an Employee before the end of any Performance Period as a result
of death, Approved Retirement, or Disability, the Committee may
authorize the payment to such Participant or his Designated Beneficiary
of a pro rata portion of the amount that would have been paid to him had
he continued as an Employee to the end of the Performance Period. In
the event a Participant terminates employment for any other reason, any
amounts for outstanding Performance Periods shall be forfeited.
Section 12. General Provisions
(a) Withholding. The Employer shall have the right to deduct
from all amounts paid to a Participant in cash any taxes required by law
to be withheld in respect of Awards under this Plan. In the case of
payments of Awards in the form of Common Stock, the Committee shall
require the Participant to pay to the Employer the amount of any taxes
required to be withheld with respect to such Common Stock, or, in lieu
thereof, the Employer shall have the right to retain (or the Participant
may be offered the opportunity to elect to tender) the number of shares
of Common Stock whose Fair Market Value equals the amount required to be
withheld.
(b) Awards. Each Award shall be evidenced in writing delivered
to the Participant and shall specify the terms and conditions and any
rules applicable to such Award.
(c) Nontransferability. No Award shall be assignable or
transferable, and no right or interest of any Participant shall be
subject to any lien, obligation or liability of the Participant, except
by will or the laws of descent and distribution.
(d) No Rights as Stockholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have
any rights as a stockholder with respect to any shares of Common Stock
to be distributed under the Plan until becoming the holder.
Notwithstanding the foregoing, in connection with each grant of
Restricted Stock hereunder, the applicable Award shall specify if and to
what extent the Participant shall not be entitled to the rights of a
stockholder in respect of such Restricted Stock.
(e) Construction of the Plan. The validity, construction,
interpretation, administration and effect of the Plan and of its rules
and regulations, and rights relating to the Plan, shall be determined
solely in accordance with the laws of Utah.
(f) Effective Date. Subject to the approval of the stockholders
of the Company, the Plan shall be effective on March 1, 1991. No
Options or Awards may be granted under the Plan, however, until the Plan
is approved by the Company's shareholders or after May 20, 2001.
(g) Amendment of Plan. The Board of Directors may amend, suspend
or terminate the Plan or any portion thereof at any time, provided that
no amendment shall be made without stockholder approval if such approval
is necessary to comply with any tax or regulatory requirement, including
for these purposes any approval requirement that is a prerequisite for
exemptive relief under Section 16(b) of the Securities Exchange Act of
1934.
(h) Amendment of Award. The Committee may amend, modify or
terminate any outstanding Award with the Participant's consent at any
time prior to payment or exercise in any manner not inconsistent with
the terms of the Plan, including without limitation, to change the date
or dates as of which an Option or Right becomes exercisable; a
Performance Share is deemed earned; Restricted Stock becomes
nonforfeitable; or to cancel and reissue an Award under such different
terms and conditions as it determines appropriate.
Section 13. Change of Control.
In the event of a Change of Control of the Company, all options,
restricted stock, and other awards granted under the Plan shall vest
immediately.
As used herein, a Change in Control of the Company shall be deemed
to have occurred if (i) any "Acquiring Person" (as that term is used in
the Rights Agreement dated February 13, 1996, between the Company and
Chemical Mellon Shareholder Services, L.L.C. ("Rights Agreement")) is or
becomes the beneficial owner (as such term is used in Rule 13d-3 under
the Securities Exchange Act of 1934) of securities of the Company
representing 15 percent or more of the combined voting power of the
Company, or (ii) the stockholders of the Company approve (A) a plan of
merger or consolidation of the Company (unless, immediately following
consummation of such merger or consolidation, the persons who held the
Company's voting securities immediately prior to consummation thereof
will hold at least a majority of the total voting power of the surviving
or new company, or (B) a sale or disposition of all or substantially all
assets of the Company, or (C) a plan or liquidation or dissolution of
the Company.
A Change in Control shall also include any act or event that, with
the passage of time, would result in a Distribution Date, within the
meaning of the Rights Agreement.
QUESTAR CORPORATION
STOCK OPTION PLAN FOR DIRECTORS
(as amended and restated effective May 21, 1996)
1. Purpose of the Plan
The Questar Corporation Stock Option Plan for Directors ("Plan")
is intended to provide a method whereby the nonemployee voting directors
("Directors") of Questar Corporation (the "Company"), who are
responsible for reviewing and monitoring the performance of the Company
and the performance of the Company's officers, may be encouraged to
acquire a larger stock ownership in the Company, thereby promoting the
interests of the Company and all its stockholders. Accordingly, the
Company, during the term of the Plan, will grant options to Directors to
purchase shares of the Company's common stock, subject to the conditions
hereinafter provided.
2. Administration of the Plan
The Plan shall be administered by the Company's Option Plan
Committee ("Committee"), a group appointed by the Company's President
and Chief Executive Officer that includes three or more officers of the
Company. The Committee shall hold meetings at such times and places as
it may determine. No member of the Committee shall be eligible to
receive options granted under the Plan.
3. Stock Subject to the Plan
(a) The stock to be issued upon exercise of options granted under
the Plan shall be the Company's common stock, without par value, that
shall be made available either from authorized but unissued common stock
or from common stock reacquired by the Company, including shares
purchased in the open market. The aggregate number of shares of common
stock that may be issued under options shall not exceed 470,000 shares.
The limitations established by the preceding sentence shall be subject
to adjustment as provided in Section 13 of the Plan.
(b) In the event that any outstanding option under the Plan for
any reason expires or is terminated, the shares of common stock
allocable to the unexercised portion of such option may again be made
subject to options under the Plan.
4. Type of Option
Only nonqualified stock options shall be granted under the terms
of the Plan. Nonqualified stock options granted under the terms of the
Plan are not to be treated as incentive stock options.
5. Option Price
The purchase price per share shall be 100 percent of the fair
market value of one share of the Company's common stock on the date the
option is granted.
The fair market value shall be deemed to be the closing price of
the Company's common stock as reported on the New York Stock Exchange
Composite Tape on the date the option is granted, or, if no sale of
common stock has been reported on that date, the fair market value shall
be determined by reference to such price for the next preceding day on
which a sale occurred.
The purchase price shall be subject to adjustment only as provided
in Section 13 of the Plan.
6. Eligibility of Optionees
(a) Options shall be granted only to Directors of the Company who
are not currently serving as employees of the Company or its affiliates.
(b) Neither anything contained in the Plan or in any instrument
under the Plan nor the grant of any option hereunder shall confer upon
any optionee any right to continue as a Director of the Company.
7. Grant of Option
All Directors shall receive the first grant of Options pursuant to
this Plan upon the date such Plan is initially approved by the Company's
stockholders. Thereafter, all Directors shall receive options each year
on the date of the first regular meeting of the Board of Directors.
Each Director shall receive, on an annual basis, an option to purchase
3,200 shares of the Company's common stock. Each Director who serves as
the chairman of a committee of the Board of Directors shall receive an
option to purchase an additional 800 shares of the Company's common
stock for each assignment as chairman of a committee.
8. Non-Transferability of Options
No option granted under the Plan shall be assignable or
transferable by the optionee.
9. Term and Exercise of Options
(a) Each option granted under the Plan shall terminate ten years
after the date on which it was granted and shall vest installment six
months from the grant date.
(b) A Director electing to exercise an option shall give written
notice to the Company of such election and of the number of shares he
has elected to purchase, in such form as the Committee shall have
prescribed or approved, and shall at the time of exercise tender the
full purchase price of the shares he has elected to purchase. The
purchase price shall be paid in full in cash upon the exercise of the
option; provided, however, that in lieu of cash, an optionee may
exercise his option by tendering to the Company shares of common stock
owned by him and having a fair market value equal to the cash exercise
price applicable to his option, with the fair market value of such stock
to be determined in the manner provided in Section 5 of the Plan. The
optionee may also use a combination of cash and previously acquired
shares. An optionee may not use shares of common stock obtained by
exercising an option as consideration for additional shares until such
shares have been held for six months.
(c) An optionee shall have no rights as a stockholder with
respect to any shares covered by his option until the date the stock
certificate is issued evidencing ownership of the shares. No
adjustments shall be made for dividends (ordinary or extraordinary),
whether in cash, securities or other property, or distributions or other
rights, for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 13 hereof.
(d) Notwithstanding any provision of the Plan or any provision or
limitation in any option to the contrary, if the Company obtains actual
knowledge of a "change in control" in the Company (as defined below),
then all outstanding options held by Directors may be exercised with
respect to all shares of common stock subject thereto at any time during
the period of 60 days following the date upon which the Company obtained
actual knowledge of such change of control of the Company. As used
herein, a "change in control" of the Company shall be deemed to have
occurred if (i) any "Acquiring Person" (as such term is defined in the
Rights Agreement dated as of February 13, 1996, between the Company and
Chemical Mellon Shareholder Services, L.L.C. (the "Rights Agreement)) is
or becomes the beneficial owner (as such term is used in Rule 13d-3
under the Securities Exchange Act of 1934) of securities of the Company
representing 15% or more of the combined voting power of the Company, or
(ii) the stockholders of the Company approve (A) a plan of merger or
consolidation of the Company (unless, immediately following consummation
of such merger or consolidation, the persons who held the Company's
voting securities immediately prior to consummation thereof will hold at
least a majority of the total voting power of the surviving or new
corporation), or (B) a sale or disposition of all or substantially all
assets of the Company, or (C) plan of liquidation or dissolution of the
Company. A change in control shall also include any act or event which,
with the passage of time, would result in a Distribution Date, within
the meaning of the Rights Agreement.
10. Termination of Status as Director
If an optionee is removed from his position as Director, any
option granted to him under the terms of the Plan shall terminate as of
the date of his removal or resignation. Any unvested options granted
after February 13, 1996, shall vest upon the optionee's retirement as a
Director. If an optionee dies, retires, or resigns for some reason
other than to pursue a business opportunity that is or could be
perceived to be a business opportunity for the Company, he (or his
estate in the event of his death), shall have one year from the date of
death, retirement or resignation to exercise options that were granted
prior to such date.
11. Period in Which Options May be Granted
Options may be granted pursuant to the Plan, as amended, after
such amendments are approved by the Company's stockholders and prior to
May 21, 2001.
12. Amendment or Termination of the Plan
The Company's Board of Directors may at any time terminate, annul,
modify or suspend the Plan subject to the following conditions:
(a) The Board of Directors cannot amend the Plan more often than
once per six-month period except for amendments to comply with changes
in federal tax laws.
(b) The Board of Directors cannot amend, modify, suspend, or
terminate the Plan in such a way that affects any options previously
granted under the Plan without the consent of the optionee.
(c) Without the approval of the stockholders of the Company, no
amendment or modification shall be made by the Board that:
(i) Increases the maximum number of shares as to which
options may be granted under the Plan;
(ii) Alters the method by which the option price is
determined;
(iii) Extends any option for a period longer than 10 years
after the date of grant;
(iv) Materially modifies the requirements as to eligibility
for participation in the Plan; or
(v) Provides for the administration of the Plan by a
Committee that is not composed entirely of officers of the Company who
are not eligible to participate in the Plan;
(vi) Alters this Section 12 so as to defeat its purpose.
13. Changes in Capitalization
(a) In the event that the shares of stock of the Company, as
presently constituted, shall be changed into or exchanged for a
different number or kind of shares of stock or other securities of the
Company or of another corporation (whether by reason of merger,
consolidation, recapitalization, reclassification, split-up, combination
of shares or otherwise) or if the number of such shares of stock shall
be increased through the payment of a stock dividend, then, subject to
the provisions of Section 13(c) below, there shall be substituted for or
added to each share of stock of the Company that was theretofore
appropriated or that thereafter may become subject to an option under
the Plan, the number and kind of shares of stock or other securities
into which each outstanding share of the stock of the Company shall be
so changed or for which each such share shall be exchanged or to which
each such share shall be entitled, as the case may be. Outstanding
options shall also be appropriately amended as to price and other terms,
as may be necessary to reflect the foregoing events.
(b) A dissolution or liquidation of the Company, or a merger or
consolidation in which the Company is not the surviving corporation,
shall cause each outstanding option to terminate, except to the extent
that another corporation may and does in the transaction assume and
continue the option or substitute its own options.
(c) Fractional shares resulting from any adjustment in options
pursuant to this Section 13 may be settled as the Committee shall
determine.
(d) To the extent that the foregoing adjustments relate to stock
or securities of the Company, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding
and conclusive. Notice of any adjustment shall be given by the Company
to each holder of an option which shall have been so adjusted.
(e) The grant of an option pursuant to the Plan shall not affect
in any way the right or power of the Company to make adjustments,
reclassifications, reorganization or changes of its capital or business
structure, to merge, to consolidate, to dissolve, to liquidate or to
sell or transfer all or any part of its business or assets.
(f) In the case of an option exercised prior to the redemption or
other termination of Rights pursuant to the Rights Agreement, (i) if
such exercise occurs prior to the Distribution Date, the shares received
upon exercise shall be deemed to include the Rights to which a holder of
such shares on the Record Date would have been entitled, and (ii) if
such exercise occurs on or after the Distribution Date, the holder of
such option shall receive, upon exercise, in addition to the shares of
common stock subject to such option, the Rights to which he would have
been entitled had he been a holder of such shares on the Distribution
Date; provided, however, that the preceding clause (ii) shall not apply
if and to the extent that the Company shall have been advised by counsel
that application thereof would create a significant risk of material
adverse tax consequences to the Company or to such holder, and provided
further that, if the provisions of clause (i) or (ii) hereof apply to an
option with respect to a distribution of Rights, no further adjustment
shall be made to such option under this Section 13 with regard to such
distribution. The immediately preceding sentence contains terms and
concepts that are defined in the Rights Agreement; the use of such terms
and concepts is subject to the definitions and restrictions contained in
the Rights Agreement.
QUESTAR CORPORATION
DIRECTORS' STOCK PLAN
Section 1. Purpose
Questar Corporation (the "Company") hereby establishes the Questar
Corporation Directors' Stock Plan (the "Plan"), which provides
nonemployee directors with the option to receive all or part of their
fees in shares of the Company's common stock. The purpose of this Plan
is to further strengthen the alignment of interests between nonemployee
directors and the Company's shareholders.
Section 2. Definitions
"Director" means a member of the Company's Board of Directors who
is not an employee of the Company.
"Election" means a Participant's delivery of written notice of
election to the Secretary of the Company electing to receive fees or a
portion of such fees (in 25 percent increments) in the form of common
stock.
"Fees" means the annual retainer (paid in monthly installments)
and meeting fees earned by a Director for service as a member of the
Board of Directors and as a member of a Committee established by the
Board of Directors. Fees shall also mean any annual retainers and
meeting fees earned by a Director for service as a director of a
subsidiary owned or controlled by the Company.
"Participant" means a Director who has elected to receive payment
of all or a portion of his or her fees in shares of common stock.
Section 3. Administration.
The Plan shall be administered by the Board of Directors or a
Committee designated by the Board. The Plan is designed to qualify for
the exemption for "formula award" plans provided for in Rule
16b-3(c)(ii) of the rules adopted by the Securities and Exchange
Commission to enforce Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Act"). The Board of Directors shall appoint a
committee of "disinterested" directors to administer the Plan if, in the
opinion of counsel to the Company, it is necessary to preserve the
exemption for shares obtained pursuant to this Plan from Section 16(b)
of the Act.
Subject to the provisions of the Plan, the Board of Directors or
the designated Committee shall have the authority to interpret the Plan;
to establish, amend, and rescind appropriate rules and regulations
pertaining to the Plan; to administer the Plan; and to take all such
steps and make all such determinations in connection with the Plan. No
member of the Board of Directors or designated Committee shall be liable
for any action or determination made in good faith. The determinations,
interpretations, and other actions
of the Board of Directors or designated Committee pursuant to the
provisions of the Plan shall be binding and conclusive for all purposes
and all persons.
Section 4. Eligibility and Participation
Participation in the Plan shall be limited to members of the Board
of Directors who are not employees of the Company.
A Director may elect to receive all or a portion (in 25 percent
increments) of his/her fees in shares of the Company's common stock.
These fees include the annual retainer paid by the Company or its
subsidiaries and any meeting fees for attendance at meetings of the
Board of Directors, its Committees, and subsidiary Boards of Directors.
A Director may elect to participate in the Plan by providing
written notice of his or her election to participate and to receive all
or a portion of earned fees in shares of the Company's common stock.
This notice shall be effective six months after being received by the
Company's Corporate Secretary. A Director's election to participate in
the Plan shall be irrevocable. Notwithstanding the preceding sentence,
a Participant may revoke or change any election by making a subsequent
written election that takes effect six months after being received by
the Company's Corporate Secretary.
Section 5. Common Stock Subject to Plan
A maximum of 50,000 shares of common stock may be issued under
this Plan. The common stock issued under this Plan, at the option of
the Board of Directors, may be either original issue or purchased on the
open market. In the event of any change in the outstanding common stock
of the Company by reason of any stock split, stock dividend, merger,
consolidation, reorganization, or other similar change in
capitalization, the number or kind of shares that may be issued under
the Plan shall be automatically adjusted so that the proportionate
interest of the shares issuable under this Plan is maintained as before
the occurrence of such event.
Section 6. Issuance of Shares
The number of shares to be awarded by a Director shall be
calculated using the closing price of the Company's common stock on the
New York Stock Exchange ("NYSE") on the date the Director's fees for
service would otherwise have been paid. If there is no closing price on
such day, the number of shares shall be calculated using the closing
price of the common stock on the NYSE on the next preceding business
day.
All shares issued under the Plan, including fractional shares,
shall be held in a book-entry account. Participants may choose to
receive a stock certificate representing the number of whole shares
acquired by notifying the Company's Corporate Secretary in writing. The
Company shall make a cash payment to the Participant for any fractional
shares using the closing price of the Company's common stock on the NYSE
on the date the notification is received (or the next preceding business
day if the notification is received on a day when there is no closing
price on the NYSE).
Section 7. Effective Date
The Plan shall be submitted to the shareholders of the Company for
their approval and adoption and will become effective June 1, 1996, upon
such approval.
Section 8. Amendment and Termination
The Board of Directors of the Company may at any time terminate,
and from time to time may amend or modify, the Plan, provided, however,
that no amendment or modification may become effective without approval
by the shareholders of the Company, if shareholder approval is required
to enable the Plan to satisfy any applicable statutory or regulatory
requirements or if the Board of Directors, on advice of counsel,
determines that shareholder approval is otherwise necessary or
advisable. In addition, the Board of Directors may not amend the Plan
more than once every six months unless the amendment is designed to
implement changes in the Internal Revenue Code of 1986 as amended, or
rules promulgated to enforce it.
