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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting 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>
April 8, 1996
Dear Questar Stockholder:
We are pleased to invite you to attend the 1996 Annual Meeting of
Stockholders. This year's Annual Meeting will be held on Tuesday, May 21,
1996, at 10:00 a.m. Our downtown office building is undergoing extensive
remodeling. Consequently, we are holding this year's Annual Meeting in the
auditorium at Mountain Fuel Supply Company's Operations Center, 1140 West
Second South, in Salt Lake City, Utah. Free parking will be available at the
Operations Center.
The Notice and Proxy Statement contain information about the business of
the meeting. This year, we are asking you to elect four directors and to
approve three proposals recommended by the Board of Directors dealing with the
Company's stock option plans and a new plan that would permit directors to be
paid with shares of the Company's stock. We encourage you to elect the
directors and to vote for these proposals.
The United Food and Chemical Workers Union, Local 99R (the UFCW), has
also recommended two proposals that are opposed by the Board of Directors.
These proposals are discussed in the Proxy Statement and are listed on the
proxy card. The Board of Directors opposes these proposals and encourages you
to vote against them. You may receive separate proxy materials from the UFCW.
We encourage you to not return the UFCW's proxy cards, but to cast your vote
on the enclosed proxy card.
Please have your shares represented at the meeting by completing,
dating, and signing the enclosed proxy card and returning it in the envelope.
Sincerely,
/s/ R. D. Cash
R. D. Cash
Chairman, President and
Chief Executive Officer
<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 by
(Please turn over) duly authorized officer.
<PAGE>
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 NOS. 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 No. 4: To adopt a resolution recommending confidential
voting.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal No. 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 (Proposal No. 1);
3. To consider and approve amendments to the Company's Stock Option
Plan for Directors that would extend the term and reserve
additional shares (Proposal No. 2);
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 (Proposal No. 3);
5. To consider and act on a stockholder proposal opposed by the Board
of Directors recommending that the Company adopt confidential
voting (Proposal No. 4);
6. To consider and 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
/s/ Connie C. Holbrook
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 or postponements 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, two stockholder proposals
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 proposals. 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 proposals 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 the Company.
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 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 $9,190,000 during 1995 for
gas purchases and storage services.
Mr. Simmons is the President and Chief Executive Officer of Zions First
National Bank. The Company has a line of credit through Zions. Two of the
Company's subsidiaries, Questar InfoComm, Inc. and Mountain Fuel Supply
Company, have accounts with Zions. The Company's credit line with Zions is
priced at the same level that the Company pays for its other lines of credit,
and the services provided by Zions to Questar InfoComm and Mountain Fuel are
based on commercial terms that are available to other clients.
Compensation Committee Interlocks and Insider Participation
Mr. Harmon is Chairman of Schroder Wertheim & Co., an investment banking
firm that has served the Company and its affiliates as an underwriter and
agent in the past and is expected to serve the Company in such capacities in
the future. He will not be a member of this Committee as of May 21, 1996.
Other members of the Management Performance Committee include Messrs. Early,
Garrison, Hawkins, Jones, Kadlec, and Michael and Mrs. Mead.
EXECUTIVE COMPENSATION
The following Summary Compensation Table lists annual and long-term
compensation earned by Mr. Cash and the other four most highly compensated
officers during 1993, 1994, and 1995.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
Restricted
Base Stock All Other
Name and Principal Salary Bonus Awards Options Compensation
Position Year ($) ($)1 ($)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 $8,142 in
matching contributions to the Deferred Share Plan.
The following table lists information concerning the stock options that
were granted to Messrs. Cash, Rose, Nordloh, Marushack, and Heiner during 1995
under the Company's Long-Term Stock Incentive Plan. No stock appreciation
rights (SARs) were granted during 1995.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
% of Total
Options Options Granted Exercise or
Granted to Employees in Base Price Expiration Grant Date
Name (#)1 Last Fiscal Year ($/Share) Date Value ($)2
<S> <C> <C> <C> <C> <C>
R. D. Cash 30,000 7.8 27.375 2/14/2005 212,700
D. N. Rose 19,000 5.0 27.375 2/14/2005 134,710
G. L. Nordloh 22,000 5.7 27.375 2/14/2005 155,980
A. J. Marushack 19,000 5.0 27.375 2/14/2005 134,710
C. M. Heiner 19,000 5.0 27.375 2/14/2005 134,710
</TABLE>
1 These stock options vest in four annual, equal installments, with the
first installment exercisable as of August 14, 1995. Participants can use
cash or previously-owned shares as consideration for option shares. Options
expire when a participant terminates his employment, unless termination is
caused by an approved retirement, death, or disability. Options can be
exercised for three months following a participant's approved retirement and
12 months following a participant's death or disability.
2 When calculating the present value of options as of the date granted
(February 14, 1995), the Company used the Black-Scholes option pricing model.
The Company assumed a volatility of 20.81 percent, a risk-free interest rate
of 7.70 percent, a dividend yield of 4.16 percent, and a vesting discount of
5.7 percent. The real value of the options in this table depends upon the
actual performance of the Company's stock during the applicable period. There
can be no assurance that the values shown in this table will be achieved.
The following table lists information concerning the stock options that
were exercised by Messrs. Cash, Rose, Nordloh, Marushack, and Heiner during
1995 and the total options and their value held by each at year-end 1995.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
Shares Number of Unexercised Value of Unexercised,
Acquried or Value Options/SARs at Year- In-the-Money Options/
Exercised Realized1 End(#)2 SARs at Year-End ($)
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.
Federal tax laws impose limits on the amount of a participant's annual
compensation that can be used when calculating benefits under qualified plans
and on the amount of benefits that can be paid to a participant from such
plans. The SERP, a nonqualified plan, was adopted in 1987 to compensate
officers who are affected by these limits. It provides for retirement
benefits equal to the difference between the benefits payable under the
qualified Retirement Plan and the benefits that would be payable absent such
limits. All of the officers listed in the table earn annual compensation in
excess of the current cap of $150,000 and all of them have vested benefits
under the SERP.
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 return1 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 Committee
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
components 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 that, 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. Cash2,3,4,5,6 223,211 .55%
P. J. Early 1,000 1
U. Edwin Garrison7 14,227 1
James A. Harmon7,8 28,964 1
W. Whitley Hawkins7 7,370 1
William N. Jones7,8 12,218 1
Robert E. Kadlec7,9 14,750 1
Dixie L. Leavitt6,7 18,863 1
Neal A. Maxwell6,7 10,078 1
Mary Mead7 12,800 1
Gary G. Michael7 3,400 1
D. N. Rose3,4,5 65,886 .16%
Harris H. Simmons7 4,800 1
Nondirector Executive Officers:
C. M. Heiner3,4,5 80,519 .20%
A. J. Marushack3,4,5,6 116,907 .29%
G. L. Nordloh3,4,5,6 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.
5The 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 owns 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
__________________
1O f 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 A.
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 in 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 page 9 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 $32.125.
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 of merger or
consolidation of the Company where the Company is not the survivor, or 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. 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,
and does not address federal gift and estate tax consequences.
The grant of an option will not create any tax consequences for the
participant or 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 to specify 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 1981. 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 recommenda-
tion, 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, 141,362 shares have been issued pursuant to the exercise of
nonqualified stock options
and 126,350 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 B.
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 Board's first regularly scheduled meeting each year.
Pursuant to the current terms of the Directors' Option Plan, each eligible
director receives 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 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 of 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 some 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 C.
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 laws.
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 procedures, 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 page 11 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
/s/ Connie C. Holbrook
Connie C. Holbrook
Vice President and Secretary
Exhibit A
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 6 that is intended to meet the requirements of Section 422 of
the Code.
"Nonqualified Stock Option" shall mean a stock option granted
under Section 6 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) 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
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, shall thereafter be again available
for awards pursuant to the Plan, to the extent permitted by applicable
regulations or interpretations adopted by the Securities and Exchange
Commission.
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 percent 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 as of 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 of 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.
Exhibit B
QUESTAR CORPORATION
STOCK OPTION PLAN FOR DIRECTORS
As amended and restated effective May 21, 1996
Section 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.
Section 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.
Section 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.
Section 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.
Section 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.
Section 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.
Section 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.
Section 8. Non-Transferability of Options
No option granted under the Plan shall be assignable or transferable by
the optionee.
Section 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 in one 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.
Section 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.
Section 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.
Section 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.
Section 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.
Exhibit C
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.
