<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
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 Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
Aquila Gas Pipeline Corporation (File No. 1-12426)
- - --------------------------------------------------------------------------------
(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):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
(5) Total fee paid:
- - --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- - --------------------------------------------------------------------------------
(3) Filing Party:
- - --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
[AQUILA GAS PIPELINE LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Aquila
Gas Pipeline Corporation will be held at the OMNI Hotel, 9821 Colonnade Blvd.,
San Antonio, Texas, on Thursday, May 15, 1997, at 10:00 a.m. (San Antonio time),
on that date and thereafter as it may from time to time be adjourned, for the
following purposes:
1. To elect two Directors of the Company to hold office for three years,
and until their successors have been duly elected and qualified.
2. To approve the Aquila Gas Pipeline Corporation 1997 Stock Incentive Plan
(the "Plan").
3. To consider and transact such other business as may properly come before
the meeting or any adjournment thereof.
Only stockholders of record at the close of business on March 28, 1997, are
entitled to receive notice of and vote at the meeting or any adjournment
thereof.
Accompanying this Notice of Annual Meeting is a Proxy, Proxy Statement and
a copy of the Company's 1996 Annual Report to Stockholders.
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN
THE ENCLOSED, SELF-ADDRESSED ENVELOPE. NO POSTAGE IS NECESSARY IF MAILED IN THE
UNITED STATES. IF YOU ATTEND THE MEETING, WE WILL BE GLAD TO RETURN YOUR PROXY
SO THAT YOU MAY VOTE IN PERSON.
By Order of the Board of Directors,
/s/ DONALD JAMES LABAUVE
DONALD JAMES LABAUVE
Corporate Secretary
San Antonio, Texas
April 15, 1997
<PAGE> 3
AQUILA GAS PIPELINE CORPORATION
ONE INTERNATIONAL CENTRE
100 N.E. LOOP 410, SUITE 1000
SAN ANTONIO, TEXAS 78216
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 1997
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Aquila Gas Pipeline Corporation, a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders to be
held at the OMNI Hotel, 9821 Colonnade Blvd., San Antonio, Texas at 10:00 a.m.
(San Antonio time), on Thursday, May 15, 1997, and at any adjournment thereof
for the purposes set forth in the foregoing Notice of Annual Meeting of
Stockholders.
Copies of soliciting material will be furnished to brokerage firms,
fiduciaries and other nominees as required for forwarding to beneficial owners.
In addition to the solicitation of proxies by mail, proxies may also be
solicited by telephone, telegram or personal interview by Directors, officers
and regular employees of the Company. Directors, officers and employees of the
Company will not be specially compensated for soliciting proxies. The Company
will bear all costs of soliciting proxies and will reimburse brokerage firms and
other nominees for their reasonable expenses in forwarding proxy material to
beneficial owners of stock.
The enclosed proxy may be revoked at any time prior to its exercise by
notifying the Secretary of the Company, by duly exercising a proxy bearing a
later date and delivering such later proxy to the Secretary of the Company prior
to the Annual Meeting or by attending the Annual Meeting and voting in person.
Unless the proxy is revoked, or unless it is received in such form as to render
it invalid, the shares represented by it will be voted in accordance with the
instructions contained therein.
The principal executive offices of the Company are located at One
International Centre, 100 N.E. Loop 410, Suite 1000, San Antonio, Texas 78216,
telephone (210) 342-0685.
On March 28, 1997, the record date for determining stockholders entitled to
vote at the Annual Meeting, there were 29,400,000 shares of common stock, par
value $.01 per share (the "Common Stock"), of the Company outstanding, each
share of such stock being entitled to one vote, except that each stockholder on
the vote for nominees for election of Directors is entitled to exercise the
right of cumulative voting. Cumulative voting entitles the stockholder to cast
as many votes as shall equal the number of shares owned multiplied by the number
of Directors to be elected, and to cast all of such votes for a single Director,
or to distribute the votes among those to be voted for. The two nominees for
election as Directors who receive the greatest number of votes cast, a quorum (a
majority of the shares entitled to vote) being present in person or by proxy,
shall become Directors at the conclusion of the tabulation of votes. The
abstention or failure to vote shares so present and broker non-votes does not
have the effect of a vote "against" a nominee, since only a plurality of votes
cast (rather than of votes present) is necessary to elect a Director. The votes
are counted and certified by one or more inspectors appointed by the Company in
advance of the Annual Meeting of Stockholders in accordance with the Delaware
General Corporation Law.
This proxy statement and the accompanying proxy are being mailed to
stockholders on or about April 15, 1997.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the only persons (or "group" within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934) who are
known to the Company to have beneficially owned on March 28, 1997, more than 5%
of the Common Stock entitled to vote at any meeting of stockholders of the
Company.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF SHARES OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED STOCK OWNED
------------------------------------ ------------------ -----------
<S> <C> <C>
Aquila Energy Corporation(1)............................ 24,000,000 81.6%
2533 North 117th Avenue, Suite 300
Omaha, NE 68164-8618
</TABLE>
- - ---------------
(1) UtiliCorp United Inc. ("UtiliCorp"), the parent of Aquila Energy Corporation
("Aquila Energy") and Richard C. Green, Jr., the Chairman of the Board and
Chief Executive Officer of UtiliCorp, may be considered beneficial owners of
the Common Stock held of record by Aquila Energy due to their control
position with respect to Aquila Energy.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of March 28, 1997, concerning
the shares of Common Stock beneficially owned by (i) each of the Directors of
the Company, (ii) each of the executive officers of the Company named in the
Summary Compensation Table and (iii) executive officers and Directors as a
group. The beneficial owner has sole voting and investment power over the shares
shown, unless otherwise indicated.
<TABLE>
<CAPTION>
NUMBER PERCENT OF
NAME OF INDIVIDUAL OR GROUP OF SHARES CLASS(1)
--------------------------- --------- ----------
<S> <C> <C>
Harvey J. Padewer........................................... -- --
Damon C. Button............................................. 4,658 --
Charles K. Dempster......................................... 1,251 --
Gary L. Downey.............................................. 1,273 --
Robert L. Howell............................................ 301 --
Travis H. Lynch............................................. 5,675 --
Jon L. Mosle, Jr............................................ 2,273 --
Mitchell R. Roper........................................... 4,126 --
Craig F. Strehl............................................. 16,329 --
Directors and Executive Officers -- as a group (11
persons).................................................. 39,700 --
</TABLE>
- - ---------------
(1) Less than 1% of Common Stock outstanding.
2
<PAGE> 5
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY AGE
---- ------------------------- ---
<S> <C> <C>
* Harvey J. Padewer(1)............................... Director and Vice Chairman of the Board of 49
Directors
Charles K. Dempster(2).............................. Chairman of the Board of Directors 54
* Gary L. Downey(1).................................. Director 60
Robert L. Howell(3)................................. Director 56
Jon L. Mosle, Jr.(3)................................ Director 67
Craig F. Strehl(2).................................. Chief Executive Officer, President, Chief 39
Operating Officer and Director
Damon C. Button..................................... Vice President, Treasurer and Chief 43
Financial Officer
Mitchell R. Roper................................... Managing Vice President, Gas Supply and 38
Marketing
Travis H. Lynch..................................... Vice President, Gas Supply 58
Douglas H. Westmoreland............................. Vice President, Operations and Engineering 50
James E. Wade....................................... Vice President, Gas Marketing 36
</TABLE>
- - ---------------
* Nominee for election as Director at this meeting.
(1) Term expires in 1997.
(2) Term expires in 1999.
(3) Term expires in 1998.
Harvey J. Padewer is a Director of the Company and has held such position
since March 1996. Beginning in March 1997, Mr. Padewer also serves as Vice
Chairman of the Board of Directors of the Company. In addition, since October
1995, Mr. Padewer has served as Senior Vice President of UtiliCorp Power
Services and since November 29, 1995, has served as Senior Vice President of
both UtiliCorp Power Services and UtiliCorp Energy Resources. Also since
November 29, 1995 to the present, he has served as President of Aquila Energy
Corporation. From June 30, 1995 to October 2, 1995, Mr. Padewer served as
Managing Vice President of UtiliCorp Power Services. Prior to being employed by
UtiliCorp, Mr. Padewer was employed by Asea Brown Boveri Power Generation, Inc.
at various officer level positions for over five years.
Charles K. Dempster is the Chairman of the Board of Directors of the
Company and has held such position since August 1993. From August 1993 to March
1997, Mr. Dempster also served as Chief Executive Officer of the Company. Mr.
Dempster has also served as Chairman of the Board of Directors and Chief
Executive Officer of UtiliCorp U.K., Inc. from November 29, 1995 to present.
From January 1993 through November 29, 1995, Mr. Dempster served as President of
Aquila Energy and director of various affiliates of the Company. From 1986 to
December 1992, Mr. Dempster served as President of Reliance Pipeline Company.
Gary L. Downey is a Director of the Company and has held such position
since August 1993. From 1988 until he retired in 1992, Mr. Downey served as
Senior Vice President, ARCO International Oil and Gas Co., a division of
Atlantic Richfield Company.
Robert L. Howell is a Director of the Company and has held such position
since September 1993. From October 1995 to the present, Mr. Howell has also
served as Senior Vice President of UtiliCorp. From September 1988 to October
1995, Mr. Howell held several positions including Vice President, Corporate
Development and Managing Vice President of UtiliCorp. Mr. Howell also serves as
a director of Aquila Energy.
3
<PAGE> 6
Jon L. Mosle, Jr. is a Director of the Company and has held such position
since August 1993. From 1992 to the present, Mr. Mosle served as an independent
consultant. From 1984 to 1992, Mr. Mosle served as Director, Private Capital, of
AmeriTrust Texas, N.A.
Craig F. Strehl is a Director, President and Chief Operating Officer of the
Company and has held such position since August 1993. Beginning in March 1997,
Mr. Strehl also serves as Chief Executive Officer of the Company. From 1990 to
July 1993, Mr. Strehl was President of Aquila Southwest Energy Corporation
("Aquila Southwest"), a subsidiary of the Company. From 1989 to 1990, Mr. Strehl
was Vice President, Pipeline Acquisitions, of Aquila Energy. Mr. Strehl has also
served as a director and officer of various subsidiaries of the Company, having
joined Aquila Energy's management team in 1987.
Damon C. Button is Vice President, Treasurer and Chief Financial Officer of
the Company and has held such position with the Company since August 1993. From
July 1992 to July 1993, Mr. Button held the same position with Aquila Southwest.
From 1980 to July 1992, Mr. Button held the same position with the general
partner of Clajon Holdings, L.P. and its predecessor.
Mitchell R. Roper is Managing Vice President, Gas Supply and Marketing, of
the Company and has held such position since January 1995. From November 1993 to
January 1995, Mr. Roper served as Vice President, Corporate Development, of the
Company. From May 1992 to November 1993, Mr. Roper served as Vice President, Gas
Marketing of the Company. From 1990 to May 1992, Mr. Roper served as Director,
Gas Marketing, of the Company. From 1989 to 1990, Mr. Roper served as a gas
marketing representative of Aquila Energy.
Travis H. Lynch is Vice President, Gas Supply, of the Company and has held
such position with the Company since August 1993. From July 1992 to July 1993,
Mr. Lynch held the same position with Aquila Southwest. From 1978 to July 1992,
Mr. Lynch held the same position with the general partner of Clajon Holdings,
L.P. and its predecessor.
Douglas H. Westmoreland is Vice President, Operations and Engineering, of
the Company and has held such position since August 1993. From 1991 to 1993, Mr.
Westmoreland served a subsidiary of the Company as Director of Operations, and
for more than three years prior to 1991 as District Engineering Supervisor.
James E. Wade is Vice President, Gas Marketing, of the Company and has held
such position with the Company since March 1996. From January 1994 through
February 1996, Mr. Wade served as Director, Gas Marketing of the Company. From
1984 through 1993, Mr. Wade held various positions with Tenneco Oil Company,
Tennessee Gas Pipeline, and their affiliates.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors presently consists of Gary L.
Downey and Jon L. Mosle, Jr. The function of the committee is to make
recommendations concerning the selection each year of independent auditors of
the Company, to review the effectiveness of the Company's internal auditing
methods and procedures, to determine through discussions with the independent
auditors whether any instructions or limitations have been placed upon them in
connection with either the scope of the audit or its implementation, to review
the financial statements and related notes with the independent auditors to
ensure such statements and notes fully disclose all material affairs of the
Company and to recommend approval or non-approval of such financial statements
and related notes.
The Affiliate Transaction Review Committee presently consists of Craig F.
Strehl, Jon L. Mosle, Jr. and Gary L. Downey. The function of the committee is
to conduct an appropriate review of and unanimously approve affiliate party
transactions and make a report of its conclusions to the Board of Directors.
The Long-Term Incentive Plan Committee presently consists of Gary L. Downey
and Jon L. Mosle, Jr. The function of the committee is to review and approve
Long-Term Incentive Plans adopted by the Company.
The Compensation Committee presently consists of Harvey J. Padewer, Charles
K. Dempster and Gary L. Downey. The function of the committee is to review and
approve executive compensation, including stock
4
<PAGE> 7
plans and management perquisites, to assess the Company's incentive compensation
plans and to recommend compensation for directors.
During 1996, the Board of Directors met four times, the Audit Committee met
one time, the Affiliate Transaction Review Committee met two times, the
Compensation Committee met two times and the Long-Term Incentive Plan Committee
met two times. All Directors attended at least 75% of the meetings of the Board
of Directors and the committees on which they served.
DIRECTOR COMPENSATION
Outside Directors will receive $2,000 per board meeting attended and $500
for each committee meeting attended regardless of whether such committee meeting
is held separately or in conjunction with a board meeting. In addition, outside
Directors are reimbursed for their reasonable expenses in attending meetings of
the Board of Directors or any committee and each outside director receives
$2,000 of Company Common Stock each quarter pursuant to the Company's 1996
Non-Employee Director Stock Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Charles K. Dempster is Chairman of the Board of Directors and until March
1997 was Chief Executive Officer of the Company in addition to being Chairman of
the Board and Chief Executive Officer of UtiliCorp U.K., Inc., an affiliate of
UtiliCorp, the parent company of Aquila Energy which is an 81.6% beneficial
owner of Common Stock of the Company. Harvey J. Padewer is Senior Vice
President, UtiliCorp Energy Resources and UtiliCorp Power Services, both
affiliates of UtiliCorp and is President of Aquila Energy. No executive officer
of the Company serves as a member of the compensation committee or other board
committee performing similar functions of any other entity.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of the Company (the
"Committee") is responsible for reviewing and approving policies, practices and
procedures relating to executive compensation and the establishment and
administration of compensation plans. The overall goal of the committee is to
attract, reward and retain strong management and provide incentive compensation
based on individual performance and success factors of the Company. The specific
elements of the Company's executive compensation package are base salary,
short-term incentives and long-term incentives. Each of those elements are
discussed below.
BASE SALARY
The policy of the Committee is to review base salaries of executive
officers each year in relation to oil and gas companies in general and peer
group companies of similar size, specifically. The goal of the committee is
to provide executive officers with salaries which are competitive with the
industry mean for similar positions. Salaries are set on an annual basis
based upon performance and market factors.
ANNUAL INCENTIVE PLAN
To supplement annual base salary, the Company provides for annual
incentive awards. The awards, which are paid 80% in cash and 20% in
restricted stock of the Company, are awarded based upon the achievement of
goals related to net income and shareholder value. All executive officers
fully participate in the plan based upon a graduating scale. Awards were
paid to executive officers for 1996 performance in amounts consistent with
the Company's financial performance in 1996.
STOCK APPRECIATION RIGHTS PLAN
The Stock Appreciation Rights Plan (the "SAR Plan") is the long-term
element of overall executive compensation. The purpose of the SAR Plan is
to align the interest of key managers participating in the SAR Plan with
the interest of shareholders by offering an incentive compensation
5
<PAGE> 8
vehicle based upon the growth in shareholders' equity and the value of the
Company. Under the SAR Plan, stock appreciation rights are considered for
grants annually. Awards are determined by the Committee based upon each
executive officer's performance and contribution to financial goals. The
committee does not consider current holdings when considering the
distribution of grants. Consistent with this philosophy, stock appreciation
rights were granted to executive officers in 1996.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Chief Executive Officer of the Company is also the Chairman of the
Board and Chief Executive Officer of UtiliCorp U.K., Inc., an affiliate of
UtiliCorp, the parent company of Aquila Energy which owns approximately
81.6% of the outstanding Common Stock of the Company. The Chief Executive
Officer's base salary, short-term incentive and long-term incentive awards
are determined and paid by UtiliCorp U.K., Inc. The Company does award
stock appreciation rights to the Chief Executive Officer consistent with
the Company's philosophy that key managers align their interest with the
interests of shareholders and are made without regard to total rights held
by Chief Executive Officers of similar size companies in the oil and gas
industry.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code enacted in 1993 generally
disallows a tax deduction to public companies for compensation over $1
million paid to the corporation's Chief Executive Officer and four other
most highly compensated executive officers. Qualifying performance based
compensation will not be subject to the deduction limit if certain
requirements are met. The Company currently intends to structure the
performance based portion of the compensation of its executive officers
(which currently consists of an annual incentive program and a long-term
incentive program) in a manner that complies with the statute.
Submitted by the Compensation Committee of the Company's Board of
Directors:
Harvey J. Padewer Charles K. Dempster Gary L. Downey
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth a summary of compensation for the three
fiscal years ended December 31, 1996, for the Chief Executive Officer and the
four other most highly compensated executive officers of the Company as of
December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
---------------------------- PAYOUTS
ANNUAL COMPENSATION RESTRICTED SECURITIES ----------
NAME AND PRINCIPAL ---------------------------- STOCK UNDERLYING LTIP ALL OTHER
POSITION YEAR SALARY($) BONUS($) AWARDS($) OPTIONS/SARS(#) PAYOUTS($) COMPENSATION($)
- - ----------------------------------- ---- --------- -------- ---------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles K. Dempster(1) 1996 $ -- $ -- $ -- 34,100(2) $ -- $ --
Chief Executive 1995 -- -- -- 49,032(3)(4) -- --
Officer 1994 -- -- -- 27,550(3)(4) -- --
Craig F. Strehl 1996 $239,377 $235,246 $28,812(7) 29,981(2)(3)(4) $ -- $127,926(8)
President and Chief 1995 231,000 98,750 30,849(7) 26,500(3)(4) -- 13,860(5)
Operating Officer 1994 216,667 55,150 -- 15,000(3) -- 9,240(5)
Damon C. Button 1996 $174,316 $142,930 $15,733(7) 12,000(3) $ -- $ 10,459(6)
Vice President, 1995 168,873 52,878 17,791(7) 10,000(3) -- 9,577(5)
Treasurer and Chief 1994 161,699 25,681 -- 9,000(3) -- 9,240(5)
Financial Officer
Travis H. Lynch 1996 $171,385 $79,752 $14,938(7) 8,000(3) $ -- $ 10,283(6)
Vice President, Gas 1995 166,900 49,635 18,806(7) 10,000(3) -- 9,240(5)
Supply 1994 160,160 29,726 -- 11,000(3) -- 9,240(5)
Mitchell R. Roper 1996 $148,077 $137,503 $14,376(7) 12,000(3) $ -- $ 8,885(6)
Managing Vice 1995 134,997 40,696 16,436(7) 15,000(3) -- 4,620(5)
President, Gas Supply 1994 117,084 20,230 -- 11,000(3) -- 5,099(5)
and Marketing
</TABLE>
- - ---------------
(1) Charles K. Dempster began serving as Chief Executive Officer of the Company
in August 1993. Mr. Dempster, who until November 1995 was also President of
Aquila Energy, receives no direct compensation from the Company. Aquila
Energy does not allocate specific amounts of Mr. Dempster's compensation to
the Company. The Company is charged a portion of Mr. Dempster's compensation
through a Services Agreement, effective August 1, 1993. Such agreement
allocates certain general and administrative expenses of Aquila Energy
including executive salaries, to the Company based on a formula taking into
account net assets and revenues of the Company. The amount allocated in 1996
is not necessarily reflective of Mr. Dempster's time spent on Company
matters.
(2) Options to purchase UtiliCorp common stock. The options become exercisable
in increments of 25%, 25% and 50% on the second, third and fourth
anniversary date, respectively, following the date of grant and have a term
of ten years. The exercise price of the options are 100% of the fair market
value of UtiliCorp common stock on the date of grant. For 1996, options of
34,100 and 3,603 were awarded to Mr. Dempster and Mr. Strehl, respectively.
(3) Grants of stock appreciation rights ("Rights") pursuant to a stock
appreciation rights plan. Each Right shall continue in effect for ten years
from the date of grant, subject to earlier termination upon the occurrence
of certain events and are exercisable one year from date of grant. Upon
exercise, the employee shall receive a cash payment equal to the
appreciation in the fair market value per share of Common Stock of the
Company from the date of grant. In 1994 15,000 Rights were granted to Mr.
Dempster, in 1995 20,000 Rights each were granted to Mr. Dempster and Mr.
Strehl, and in 1996 20,000 Rights were granted to Mr. Strehl.
(4) Options to purchase UtiliCorp common stock. All options fully vest one year
from the date of grant, have a term of ten years, and an exercise price of
100% of the fair market value of UtiliCorp common stock on the date of
grant. Options granted in 1994 were 12,550 to Mr. Dempster, in 1995 were
29,032 and 6,500 to Mr. Dempster and Mr. Strehl, respectively, and in 1996
were 6,378 to Mr. Strehl.
(5) Contributions by Aquila Gas Pipeline Corporation to the UtiliCorp 401(k)
plan.
7
<PAGE> 10
(6) Contributions by Aquila Gas Pipeline Corporation to the UtiliCorp 401(k)
plan and the UtiliCorp Supplementary Contributory Retirement Plan.
(7) Grants of Aquila Gas Pipeline Corporation restricted stock under Company
incentive plans. Restriction lapses on the second or third year after the
date of grant. Dividends are paid on restricted stock awards at the same
rate as paid to all Company stockholders. On December 31, 1996, Mr. Strehl
held a total of 6,270 shares of restricted stock valued at $99,536; Mr.
Button held a total of 3,533 shares of restricted stock valued at $56,086;
Mr. Lynch held a total of 3,607 shares of restricted stock valued at
$57,261; and Mr. Roper held a total of 3,098 shares of restricted stock
valued at $49,188.
(8) Contributions by Aquila Gas Pipeline Corporation to the UtiliCorp 401(k)
plan and the UtiliCorp Supplemental Contributory Retirement Plan and a
payment of $115,000 to Mr. Strehl for Rights exercised in 1996.
OPTION/SAR GRANTS DURING 1996 FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION GRANT DATE
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE PRESENT VALUE $
---- ------------ ------------ ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Charles K. Dempster..................... 34,100(1) 2.8% $27.750 2-04-07 $ 78,089(5)
Craig F. Strehl......................... 20,000(2) 22.7% $12.250 3-01-06 $190,000(4)
3,603(1) .2% $27.750 2-04-07 $ 8,251(5)
6,378(3) 2.0% $29.063 2-06-06 $ 24,394(6)
Damon C. Button......................... 12,000(2) 13.6% $12.250 3-01-06 $114,000(4)
Travis H. Lynch......................... 8,000(2) 9.1% $12.250 3-01-06 $ 76,000(4)
Mitchell R. Roper....................... 12,000(2) 13.6% $12.250 3-01-06 $114,000(4)
</TABLE>
- - ---------------
(1) Options to purchase UtiliCorp common stock granted on February 4, 1997. The
options become exercisable in increments of 25%, 25% and 50% on the second,
third and fourth anniversary date, respectively, following the date of
grant. All options fully vest four years from the date of grant, have a term
of ten years, and an exercise price of 100% of the fair market value of
UtiliCorp common stock on the date of grant.
(2) SARs granted on March 1, 1996 which become exercisable on March 1, 1997.
Each Right shall continue in effect for ten years from the date of grant,
subject to earlier termination upon the occurrence of certain events. Upon
exercise, the employee shall receive a cash payment equal to the
appreciation in the fair market value per share of Common Stock of the
Company from the date of grant.
(3) Options to purchase UtiliCorp common stock granted on February 6, 1996. The
options are exercisable one year from the date of grant, have a term of ten
years, and an exercise price of 100% of the fair market value of UtiliCorp
common stock on the date of grant.
(4) Based upon the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The actual value, if any, an executive may realize
will depend on the excess of the stock price over the exercise price on the
date the option is exercised, so that there is no assurance the value
realized by an executive will be at or near the value estimated by the
Black-Scholes model. Assumptions used in the model include a risk-free
interest rate of 5.63%, dividend yield of .3%, and a volatility factor of
.32. No adjustments for non-transferability, risk of forfeiture or exercise
of option prior to maturity have been included.
(5) Based upon the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The actual value, if any, an executive may realize
will depend on the excess of the stock price over the exercise price on the
date the option is exercised, so that there is no assurance the value
realized by an executive will be at or near the value estimated by the
Black-Scholes model. Assumptions used in the
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<PAGE> 11
model include a risk-free interest rate of 6.58%, dividend yield of 6.5%,
and a volatility factor of .14. No adjustments for non-transferability, risk
of forfeiture or exercise of option prior to maturity have been included.
(6) Based upon the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The actual value, if any, an executive may realize
will depend on the excess of the stock price over the exercise price on the
date the option is exercised, so that there is no assurance the value
realized by an executive will be at or near the value estimated by the
Black-Scholes model. Assumptions used in the model include a risk-free
interest rate of 6.81%, dividend yield of 6.4%, and a volatility factor of
.34. No adjustments for non-transferability, risk of forfeiture or exercise
of option prior to maturity have been included.
AGGREGATED OPTION/SAR EXERCISES DURING 1996 FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED ON UNDERLYING UNEXERCISED IN-THE-MONEY
EXERCISE OPTIONS/SARS AT OPTIONS/SARS AT
(#)SARS VALUE FY-END(#) FY-END($)
NAME EXERCISABLE REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Charles K. Dempster........ -- -- 106,276/ 0 $197,364/$ 0
Craig F. Strehl............ 20,000(1) $115,000 35,650/26,378 $ 57,500/$72,500
Damon C. Button............ -- -- 25,400/12,000 $104,500/$43,500
Travis H. Lynch............ -- -- 27,400/ 8,000 $111,000/$29,000
Mitchell R. Roper.......... -- -- 32,400/12,000 $146,000/$43,500
</TABLE>
- - ---------------
(1) Number of SARs exercised for which cash was received.
EMPLOYMENT CONTRACT
Mr. Strehl's employment agreement with the Company terminated December 31,
1995 and was replaced by a Change of Control Agreement effective January 1,
1996. In the event a change of control occurs (as defined in the agreement) and
Mr. Strehl does not continue as an employee of the Company, he will receive a
severance payment equal to one and one-half times his base salary at the time of
his separation from the Company.
9
<PAGE> 12
PERFORMANCE GRAPH
The following performance graph compares the performance of the Company's
Common Stock to the S&P 500 Index, an industry peer group index based on a
combination of the Dow Jones Oil-Secondary Index and Value Line's Natural Gas
Diversified Group ("Dow Jones/Value Line"), and an industry peer group index
constructed by the Company which consists of Delhi Gas Pipeline (USX-Delhi
Group), NGC Corp., Tejas Gas Corporation, TPC Corporation (formerly Tejas Power
Corporation), and Western Gas Resources, Inc. ("Peer Group").
<TABLE>
<CAPTION>
Dow
Measurement Period Aquila Gas Jones/Value
(Fiscal Year Covered) Pipeline S&P 500 Line Peer Group
<S> <C> <C> <C> <C>
10/19/93 100.000 100.000 100.000 100.000
12/31/93 86.992 100.082 92.542 83.566
12/31/94 51.557 98.541 82.986 67.740
12/31/95 84.755 132.154 100.197 63.008
12/31/96 104.907 158.933 123.878 119.940
</TABLE>
The returns calculated above assume the value of the investment in the
Company's Common Stock and each index was $100 on October 19, 1993 and that all
dividends were reinvested.
The stock price performance shown on this graph is not necessarily
indicative of future price performance of the Company's Common Stock.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, and any persons holding more than ten percent of
the Company's Common Stock to report their initial ownership of the Company's
Common Stock and any subsequent changes in that ownership to the Securities and
Exchange Commission ("SEC") and the New York Stock Exchange, and to provide
copies of such reports to the Company.
To the Company's knowledge, based solely on the Company's review of the
copies of such reports received by the Company and written representations of
its directors, executive officers and ten percent holders, the Company believes
that during the year ended December 31, 1996 all Section 16(a) filing
requirements applicable to its directors, executive officers and ten percent
holders were satisfied.
CERTAIN TRANSACTIONS
Aquila Energy and UtiliCorp Services Agreement. The Company has entered
into services agreements with each of Aquila Energy and UtiliCorp (the "Services
Agreements") effective August 1, 1993, pursuant to which Aquila Energy and
UtiliCorp provide various services to the Company, including certain treasury,
legal,
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<PAGE> 13
tax, accounting, human resources, corporate secretarial, investor relations,
risk management, management information, marketing, administrative and other
services. Such services have historically been supplied to the Company by Aquila
Energy and UtiliCorp and the Services Agreements provide for the further
delivery of such services substantially similar in nature and quality to those
services previously provided. The Company has agreed to reimburse Aquila Energy
and UtiliCorp for all direct costs incurred in rendering such services and to
pay Aquila Energy and UtiliCorp for allocated indirect costs incurred in
rendering such services. The initial term of each of the Services Agreements is
until December 31, 1994, and automatically renews for successive periods of one
fiscal year unless terminated by either party. The Services Agreements are
reviewed annually by the Affiliate Transaction Review Committee.
Gas Sales Agreements. The Company has entered into two gas sales agreements
(the "Gas Sales Agreements") effective September 1, 1993, pursuant to which the
Company sells to a subsidiary of Aquila Energy substantially all of its gas
quantities available from its Elk City and Mooreland systems located in
Oklahoma. The Gas Sales Agreements provide pricing terms for the gas based on
published monthly index prices of interstate pipelines connected to the Elk City
and Mooreland systems. The pricing terms for such gas may be redetermined to be
effective on any successive six month anniversary of the date of the agreements.
If the parties cannot agree on a redetermination as provided in the Gas Sales
Agreements, the agreements shall terminate at such six month anniversary date.
The Gas Sales Agreements each have a term of five years.
Tax Sharing Agreement. The Company, Aquila Energy and UtiliCorp have
entered into a tax sharing agreement (the "Tax Sharing Agreement") which
provides for the allocation of liabilities, procedures to be followed and other
matters with respect to certain taxes for tax years beginning after December 31,
1992, in which UtiliCorp, Aquila Energy, the Company and its subsidiaries (the
"Combined Consolidated Group") are included in a consolidated Federal income tax
return filed for the Combined Consolidated Group.
Under the Tax Sharing Agreement, UtiliCorp has sole and exclusive
responsibility for the preparation and filing of the consolidated U.S. Federal
income tax return of the Combined Consolidated Group beginning in 1993.
UtiliCorp is responsible for making all Federal income tax payments on behalf of
the Combined Consolidated Group. Estimated tax sharing payments will be made by
the Company to UtiliCorp for each taxable year in which a combined consolidated
return is filed. If a return reflects a net operating loss, net capital loss,
excess tax credit or other tax attributes, UtiliCorp will pay the Company the
refund which the Company would have received as a result of the carryback of
such attribute to any taxable year or years subsequent to December 31, 1992 in
which the Company and its subsidiaries are included in the Combined Consolidated
Group. An amendment to the Tax Sharing Agreement was signed effective December
1, 1995 that specifies the manner in which the Company would be liable to
UtiliCorp in the event of a potential adjustment by the Internal Revenue Service
(IRS) relating to UtiliCorp's consolidated Federal income tax returns for a
certain depreciation expense issue through 1992. The amendment also provides for
UtiliCorp to pay the interest, if any, relating to the potential adjustment up
to $1.5 million.
The principles expressed above with respect to Federal income tax matters
apply equally to state and local income and franchise tax matters under the Tax
Sharing Agreement.
Aquila Revolvers. A Company subsidiary, Aquila Southwest Energy Corporation
("ASW"), has entered into a $50 million revolving credit agreement between ASW
and Aquila Energy (the "Aquila Revolver"). As of December 31, 1996, there was
$37.5 million outstanding under this credit agreement. This revolver bears
interest at ASW's election of either a base rate (the higher of a bank prime
rate or one-half of 1% above the Federal Funds rate), an adjusted certificate of
deposit rate or a Eurodollar rate. The maturity date on this revolver
automatically renews in one-year periods from each commitment period (October of
each year) unless Aquila Energy gives at least a one-year notice not to renew
from the commitment period. Currently, the maturity date is October of 1998. ASW
is obligated to pay a commitment fee on any unused portion of the Aquila
Revolver at the rate of one-fourth of 1% per annum. All principal outstanding is
due at the end of the Aquila Revolver's term. Amounts may be prepaid at any
time.
Under the Aquila Revolver, ASW may not pledge its assets to secure
indebtedness except for certain permitted liens. Amounts outstanding under the
Aquila Revolver are expressly subordinate to the Aquila Southwest 8.29% Senior
Notes due 2002 ("8.29% Senior Notes"). Certain limitations are placed on ASW's
11
<PAGE> 14
obligation to make payments on the Aquila Revolver in the event of default under
the terms of the 8.29% Senior Notes.
In September 1994, the Company entered into an additional agreement with
Aquila Energy that provides an unsecured revolving credit facility for borrowing
up to an amount equal to the difference between $165 million and the balance
outstanding on the $50 million revolving credit facility described above. As of
December 31, 1996 there was $124.2 million outstanding under this credit
agreement. This revolver bears interest at the Company's election of either a
base rate (the higher of a bank prime rate or one-half of 1% above the Federal
Funds rate), an adjusted certificate of deposit rate or a Eurodollar rate. The
maturity date on this revolver automatically renews in one-year periods from
each commitment period (December of each year) unless Aquila Energy gives at
least a one-year notice not to renew from the commitment period. Currently, the
maturity date is December of 1998. The Company must pay an annual commitment fee
to Aquila Energy of one-fourth of 1% on the unutilized portion of the revolving
credit facility.
In July 1996, a Company subsidiary, AQP Holdings L.P. ("Holdings"), entered
into an unsecured $3 million revolving note agreement with Aquila Energy. The
note bears interest at a bank prime rate and matures in December of 1999. The
balance outstanding at December 31, 1996 was $2.6 million.
Aquila Loan Agreement. In September 1995, the Company entered into a Loan
Agreement (the "Loan") with Aquila Energy for an amount of $50 million. The Loan
is unsecured and bears interest at 6.47% due semi-annually. The principal amount
of the Loan is required to be repaid to Aquila Energy by June 1, 2005. The Loan
contains various covenants including certain financial covenants related to net
worth. As of December 31, 1996, there was $50 million outstanding under the
Loan.
PROPOSAL 1
ELECTION OF DIRECTORS
Two Directors of the Company are to be elected, in "Class A", to hold
office for three years. The following persons have been designated as nominees
for the office: Harvey J. Padewer and Gary L. Downey. It is the intention of the
persons named in the enclosed proxy to vote such proxy for the election of the
said nominees unless otherwise specified.
THE BOARD OF DIRECTORS HAVE UNANIMOUSLY APPROVED AND RECOMMENDS THAT
STOCKHOLDERS VOTE FOR PROPOSAL 1.
PROPOSAL 2
TO APPROVE THE AQUILA GAS PIPELINE CORPORATION
1997 STOCK INCENTIVE PLAN
Set out below is a summary of the Aquila Gas Pipeline Corporation 1997
Stock Incentive Plan (the "Plan"). This summary is qualified in its entirety by
reference to the full text of the Plan attached as Appendix "A" hereto.
GENERAL
The Plan allows the granting of stock options, stock appreciation rights
("SARs"), restricted stock awards, performance awards and other stock-based
awards (collectively, "Awards") to eligible Plan participants.
The number of shares authorized to be issued pursuant to Awards granted
under the Plan is 500,000. If an Award expires or is cancelled without having
been fully exercised or vested, the unvested or cancelled shares generally will
be available thereafter for grants of Awards. The number of shares available for
grant under the Plan, as well as outstanding Awards and the numerical limits for
individual grants, will be adjusted as appropriate to reflect any stock splits,
stock dividends, recapitalizations, reorganizations or other changes to
12
<PAGE> 15
the capital structure of the Company. Shares delivered pursuant to an Award
consist of treasury shares currently held by the Company or acquired by the
Company through purchases on the open market.
PURPOSE OF THE PLAN
The Plan is intended to attract, motivate and retain executive officers and
other key employees of the Company and its affiliates. The Plan also is designed
to further the growth and financial success of the Company and its affiliates by
aligning the interests of the participants, through stock ownership and other
incentives, with the interests of the Company's stockholders.
ADMINISTRATION OF THE PLAN
The Plan will be administered by the Long-Term Incentive Plan Committee of
the Board of Directors (the "Committee"). Subject to the terms of the Plan, the
Committee has the sole discretion to determine the employees who shall be
granted Awards, the size and types of such Awards, and the terms and conditions
of such Awards.
ELIGIBILITY TO RECEIVE AWARDS
Employees of the Company and its affiliates are eligible to be selected to
receive one or more Awards. The actual number of employees who will receive
Awards under the Plan cannot be determined because selection for participation
in the Plan is in the sole discretion of the Committee.
OPTIONS
The Committee may grant nonqualified stock options, incentive stock options
("ISOs") (which are entitled to favorable tax treatment), or any combination
thereof. The number of shares covered by each option will be determined by the
Committee, but during any fiscal year of the Company, no participant may be
granted options for more than 100,000 shares.
The exercise price of each option is set by the Committee. With respect to
ISOs, the exercise price cannot be less than 100% of the fair market value of
the Company's Common Stock on the date of grant and must be at least 110% of the
fair market value if the participant, on the grant date, owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or any of its subsidiaries (a "Ten Percent Owner"). Also, the aggregate
fair market value of the shares (determined on the grant date) covered by ISOs
which first become exercisable by any participant during any calendar year may
not exceed $100,000. The closing price of the Common Stock as of April 8, 1997
on the New York Stock Exchange was $14.250 per share.
The exercise price of each option must be paid in full at the time of
exercise. The Committee also may permit payment through the tender of shares of
the Company's Common Stock then owned by the participant, or by any other means
that the Committee determines to be consistent with the Plan's purpose. Any
taxes required to be withheld must be paid by the participant at the time of
exercise.
Options become exercisable at the times and on the terms established by the
Committee. Options expire at the times established by the Committee, but
generally not later than ten years after the date of grant. With respect to ISOs
granted to a Ten Percent Owner, such ISOs must expire no later than five years
after the date of grant. The Committee may extend the maximum term of any option
granted under the Plan, subject to the preceding limits.
STOCK APPRECIATION RIGHTS
The Committee determines the terms and conditions of each SAR. SARs may be
granted in conjunction with an option, or may be granted on an independent
basis. The number of shares covered by each SAR will
13
<PAGE> 16
be determined by the Committee, but during any fiscal year of the Company, no
participant may be granted SARs for more than 100,000 shares.
Upon exercise of an SAR, the participant will receive payment from the
Company in an amount determined by multiplying (1) the positive difference
between (a) the fair market value of a share of Company Common Stock on the date
of exercise, and (b) the exercise price, by (2) the number of shares with
respect to which the SAR is exercised. The exercise price of an SAR is set by
the Committee.
SARs are exercisable at the times and on the terms established by the
Committee. Proceeds from SAR exercises may be paid in cash or shares of the
Company's Common Stock, as determined by the Committee. SARs expire at the times
established by the Committee, but are subject to the same maximum time limits as
are applicable to employee options granted under the Plan.
RESTRICTED STOCK AWARDS
Restricted stock awards are shares of the Company's Common Stock that vest
in accordance with terms established by the Committee. The number of shares of
restricted stock granted to a participant will be determined by the Committee,
but during any fiscal year of the Company, no participant may be granted more
than 100,000 shares.
In determining the vesting schedule for each Award of restricted stock, the
Committee may impose whatever conditions to vesting it determines to be
appropriate. For example, the Committee may (but is not required to) provide
that restricted stock will vest only if one or more performance goals are
satisfied. In order for the Award to qualify as "performance-based" compensation
under section 162(m) of the Internal Revenue Code, the Committee must use one or
more of the following measures in setting the performance goals: (1) annual
revenue, (2) earnings per share, (3) customer satisfaction, (4) net income, (5)
employee morale, and (6) stock price.
PERFORMANCE AWARDS
Performance awards consist of a conditional right (a) denominated or
payable in cash, Common Stock, other securities or other property and (b) which
shall confer on the holder thereof conditional rights valued as determined by
the Committee and payable to, or exercisable by, such holder, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Committee shall establish. In order for the Award to qualify as
"performance-based" compensation under section 162(m) of the Internal Revenue
Code, the Committee must use one or more of the following measures in setting
the performance goals: (1) annual revenue, (2) earnings per share, (3) customer
satisfaction, (4) net income, (5) employee morale, and (6) stock price.
Whether a performance award actually will result in a payment to a
participant will depend upon the extent to which performance goals established
by the Committee are satisfied. The Committee may use the same performance goals
as are discussed above with respect to restricted stock. The Committee may, in
its sole discretion, waive any performance goal requirement.
The number of shares of Common Stock or dollar value of any cash or other
securities or property deliverable under any performance award shall be
determined by the Committee, but during any fiscal year of the Company, no
participant may be granted performance awards covering more than 100,000 shares
or $250,000 in cash or other securities or property.
NONTRANSFERABILITY OF AWARDS
Except as determined by the Committee and permitted by the Plan, awards
granted under the Plan may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by the applicable
laws of descent and distribution; provided, however, that a participant may
designate one or more beneficiaries to receive any exercisable or vested Awards
following his or her death.
14
<PAGE> 17
CHANGE IN CONTROL
The Committee may provide that, in the event of a "Change in Control" of
the Company, as defined in the Plan, an Award granted under the Plan then
outstanding but not then exercisable (or subject to restrictions) shall become
immediately exercisable (or free from restrictions).
TAX ASPECTS
The following discussion is intended to provide an overview of the U.S.
federal income tax laws that are generally applicable to awards granted under
the Plan as of the date of this Proxy Statement. People or entities in differing
circumstances may have different tax consequences, and the tax laws may change
in the future. This discussion is not to be construed as tax advice.
A recipient of a stock option or SAR will not have taxable income on the
date of grant. Upon the exercise of nonqualified options and SARs, the
participant will recognize ordinary income equal to the difference between the
fair market value of the shares on the date of exercise and the exercise price.
Shares acquired by exercise of a non-qualified stock option will be deemed to
have a cost equal to the sum of the price paid and the value included in the
participant's income, and any gain or loss recognized upon a later disposition
of the shares generally will be capital gain or loss.
Purchase of shares upon exercise of an ISO will not result in any taxable
income to the participant, except for purposes of the alternative minimum tax.
Gain or loss recognized by the participant on a later sale or other disposition
will be long-term capital gain or loss if disposition occurs no earlier than 1
year after exercise and 2 years after the date of grant. Otherwise, a
participant will recognize ordinary income in the amount, if any, by which the
lesser of (1) the fair market value of such shares on the date of exercise, or
(2) the amount realized from the sale, exceeds the exercise price, and capital
gain or loss based on the difference between (i) the sum of the price paid and
the value included in income and (ii) the proceeds of the sale.
Upon receipt of restricted stock, a performance unit or a performance
share, the participant will not have taxable income unless he or she elects to
be taxed. Absent such election, upon vesting the participant will recognize
ordinary income equal to the fair market value of the shares or units at such
time.
The Committee may permit participants to satisfy tax withholding
requirements in connection with the exercise or receipt of an Award by (1)
electing to have the Company withhold otherwise deliverable shares, or (2)
delivering to the Company shares having a value equal to the amount required to
be withheld.
The Company will be entitled to a tax deduction for an Award in an amount
equal to the ordinary income realized by the participant at the time the
participant recognizes such income. In addition, Internal Revenue Code section
162(m) contains special rules regarding the federal income tax deductibility of
compensation paid to the Company's Chief Executive Officer and to each of the
other four most highly compensated executive officers. The general rule is that
annual compensation paid to any of these specified executives will be deductible
only to the extent that it does not exceed $1 million. The Company can preserve
the deductibility of certain compensation in excess of $1 million, however, if
the Company complies with conditions imposed by the new rules, including (1) the
establishment of a maximum number of shares with respect to which stock options
and SARs may be granted to any one employee during a specified time period, and
(2) for restricted stock, performance units and performance shares, inclusion in
the Plan of performance goals which must be achieved prior to payment. The Plan
has been designed to permit the Committee to grant awards which satisfy the
requirements of new section 162(m).
AMENDMENT AND TERMINATION OF THE PLAN
The Board generally may amend or terminate the Plan at any time and for any
reason, provided that, without the approval of the stockholders, no such
amendment will increase the number of Shares of Common Stock available for
Awards under the Plan or cause the Plan to cease to qualify for or comply with
any tax or regulatory exemption, status or requirement.
15
<PAGE> 18
THE BOARD OF DIRECTORS HAVE UNANIMOUSLY APPROVED AND RECOMMENDS THAT
STOCKHOLDERS VOTE FOR PROPOSAL 2.
Approval of the proposals require the affirmative vote of the holders of a
majority of the shares of Common Stock present at the meeting, in person or by
proxy, and entitled to vote. Under applicable Delaware law, in determining
whether the proposal has received the requisite number of affirmative votes,
abstentions and broker non-votes will be counted and have the same effect as a
vote against the proposals.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The firm of Arthur Andersen LLP was retained by the Company as independent
public accountants for the year 1996. Representatives of Arthur Andersen LLP are
expected to be present at the annual meeting and will have the opportunity to
make a statement, if they desire to do so, and to respond to appropriate
questions.
The Audit Committee of the Board of Directors will make its recommendations
with respect to retention of an independent public accounting firm for the year
1997 at the next meeting of the Board of Directors.
OTHER BUSINESS
Management does not know of any matters to be presented at the meeting
other than those specifically referred to in the Notice of Meeting. However, if
any other matters shall properly come before the meeting, it is the intention of
the persons named in the proxy to vote it in accordance with their judgment.
PROPOSALS OF SECURITY HOLDERS
Proposals of security holders intended to be presented at the next annual
meeting scheduled for May 13, 1998, must be received by the Company no later
than December 17, 1997, in order to be considered for inclusion in the proxy
statement and form of proxy relating to that meeting. It is anticipated that the
proxy statement and form of proxy relating to that meeting will be mailed to
stockholders on or before April 15, 1998.
AQUILA GAS PIPELINE CORPORATION
/s/ CHARLES K. DEMPSTER
CHARLES K. DEMPSTER
Chairman of the Board
Dated: April 15, 1997
San Antonio, Texas 78216
16
<PAGE> 19
APPENDIX A
AQUILA GAS PIPELINE CORPORATION
1997 STOCK INCENTIVE PLAN
SECTION 1. Purpose.
The purposes of the 1997 Stock Incentive Plan (the "Plan") are to promote
the interests of Aquila Gas Pipeline Corporation (together with any successor
thereto, the "Company") and its stockholders by (i) attracting and retaining
executive personnel and other key employees of the Company and its affiliates;
(ii) motivating such employees by means of performance-related incentives to
achieve longer-range performance goals; and (iii) enabling such employees to
participate in the long-term growth and financial success of the Company.
SECTION 2. Definitions.
As used in the Plan, the following terms shall have the meanings set forth
below.
"Affiliate" shall mean (i) any entity that, directly or through one or
more intermediaries, is controlled by the Company and (ii) any entity in
which the Company has a significant equity interest, as determined by the
Committee.
"Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock, Performance Award, Stock Compensation Award or Other Stock-Based
Award.
"Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.
"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 Long-Term Incentive Plan Committee of the
Board.
"Employee" shall mean any employee of the Company or of any Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall mean the fair market value of the property
or other item being valued, as determined by the Committee.
"Incentive Stock Option" shall mean an option granted under Section
6(a) of the Plan that is intended to meet the requirements of Section 422
of the Code or any successor provision thereto.
"Non-Qualified Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is not intended to be an Incentive Stock
Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
"Other Stock-Based Award" shall mean any conditional right granted
under Section 6(f) of the Plan.
"Participant" shall mean any Employee granted an Award under the Plan.
"Performance Award" shall mean any conditional right granted under
Section 6(d) of the Plan.
"Performance Goals" shall mean the goal(s) or combined goal(s)
determined by the Committee to be applicable to a Participant with respect
to an Award and may provide for a targeted level or levels of achievement
using one or more of the following measures: earnings per share, annual
revenue, net income, customer satisfaction, employee morale and stock
price.
A-1
<PAGE> 20
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization,
government or political subdivision thereof or other entity.
"Restricted Period" shall mean the period during which the transfer of
Restricted Stock is subject to restrictions and, therefore, the Restricted
Stock is subject to a substantial risk of forfeiture.
"Restricted Stock" shall mean any Share, prior to the lapse of
restrictions thereon, conditionally granted under Section 6(c) of the Plan.
"Rule 16b-3" shall mean Rule 16b-3 promulgated by the SEC under the
Exchange Act, or any successor rule or regulation thereto as in effect from
time to time.
"SEC" shall mean the Securities and Exchange Commission, or any
successor thereto.
"Shares" shall mean the common shares of the Company, $0.01 par value,
and such other securities and property as may become the subject of Awards
or become subject to Awards pursuant to an adjustment made under Section
4(c) of the Plan.
"Stock Appreciation Right" shall mean any conditional right granted
under Section 6(b) of the Plan.
"Stock Compensation" shall mean any conditional right granted under
Section 6(e) of the Plan.
"Subsidiary" shall mean a subsidiary corporation within the meaning of
Section 424(f) of the Code.
"Substitute Awards" shall mean Awards granted in assumption of, or in
substitution for, outstanding awards previously granted by (i) a company
acquired by the Company or one or more of its Affiliates, or (ii) a company
with which the Company or one or more of its Affiliates combines.
"Ten Percent Owner" shall mean a person who, together with persons
whose stock ownership is attributed to the person pursuant to Section
424(d) of the Code, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any
Subsidiary.
SECTION 3. Administration.
The Plan shall be administered by the Committee. Subject to the terms of
the Plan and applicable law, and in addition to other express powers and
authorizations conferred on the Committee by the Plan, the Committee shall have
full power and authority to: (i) designate Participants; (ii) determine the type
or types of Awards to be granted to an eligible Employee; (iii) determine the
number of Shares to be covered by, or with respect to which payments, rights or
other matters are to be calculated in connection with, Awards; (iv) determine
the terms and conditions of any Award; (v) determine whether, to what extent,
and under what circumstances Awards may be settled or exercised in cash, Shares,
other securities, other Awards or other property, or canceled, forfeited, or
suspended; (vi) determine whether, to what extent, and under what circumstances
cash, Shares, other securities, other Awards, other property, and other amounts
payable with respect to an Award shall be deferred either automatically or at
the election of the holder thereof or of the Committee; (vii) interpret and
administer the Plan and any instrument or agreement relating to, or Award made
under, the Plan; (viii) establish, amend, suspend, or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and (ix) make any other determination and take any
other action that the Committee deems necessary or desirable for the
administration of the Plan. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations, and other decisions under or with
respect to the Plan or any Award shall be within the sole discretion of the
Committee, may be made at any time and shall be final, conclusive and binding
upon all Persons, including the Company, any Affiliate, any Participant, any
holder or beneficiary of any Award, any shareholder and any Employee.
SECTION 4. Shares Available for Awards.
(a) Shares Available. Subject to adjustment as provided in Section 4(c),
the number of Shares with respect to which may be granted under the Plan shall
be 500,000. If, after the effective date of the Plan, any
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Shares covered by an Award granted under the Plan, or to which such an Award
relates, are forfeited, or if an Award otherwise terminates or is canceled
without the delivery of Shares or of other consideration, then the Shares
covered by such Award, or to which such Award relates, or the number of Shares
otherwise counted against the aggregate number of Shares with respect to which
Awards may be granted, to the extent of any such forfeiture, termination or
cancellation, shall again be, or shall become, Shares with respect to which
Awards may be granted. In the event that any Option or other Award granted
hereunder is exercised through the delivery of Shares, the number of Shares for
Awards under the Plan shall be increased by the number of Shares surrendered.
(b) Sources of Shares Deliverable Under Awards. Shares delivered pursuant
to an Award consist of treasury Shares currently held by the Company or acquired
by the Company through purchases on the open market.
(c) Adjustments. In the event that the Committee determines that any
dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities of the
Company, or other similar corporate transaction or event affects the Shares such
that an adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee shall, in such manner as
it may deem equitable, adjust any or all of (i) the number and type of Shares
(or other securities or property) subject to outstanding Awards, and (ii) the
grant or exercise price with respect to any Award or, if deemed appropriate,
make provision for a cash payment to the holder of an outstanding award,
provided, in each case, that with respect to Awards of Incentive Stock Options
and awards intended to qualify as performance based compensation under Section
162(m)(4)(C) of the Code, no such adjustment shall be authorized to the extent
that such authority would cause the Plan to violate Section 422(b)(1) of the
Code or would cause such award to fail to so qualify under Section 162(m) or
Section 422(b) of the Code, as the case may be, or any successor provisions
thereto; and provided further, that the number of Shares subject to any Award
denominated in Shares shall always be a whole number.
SECTION 5. Eligibility.
Any Employee who is not a member of the Committee, including any officer or
employee-director of the Company or any affiliate, shall be eligible to be
designated a Participant.
SECTION 6. Awards.
(a) Options. Subject to the provisions of the Plan, the Committee shall
have authority to determine the Employees to whom Options shall be granted, the
number of Shares to be covered by each Option, the purchase price therefore and
the conditions and limitations applicable to the exercise of the Option
including the following terms and conditions and such additional terms and
conditions as the Committee shall determine are not inconsistent with the
provisions of the Plan; provided, however, that during any fiscal year of the
Company, no Participant shall be granted Options covering more than 100,000
Shares.
(i) Exercise Price. The purchase price of a Share purchasable under an
Option shall be determined by the Committee at the time each Option is
granted, provided that the purchase price per Share shall not be less than
100% of the Fair Market Value on the date of grant in the case of any grant
of an Incentive Stock Option, and further provided that the purchase price
per Share shall not be less than 110% of the Fair Market Value on the date
of grant in the case of a grant of an Incentive Stock Option to a Ten
Percent Owner.
(ii) Time and Method of Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part, and
the method or methods by which, and the form or forms (which may include,
without limitation, cash, Shares, outstanding Awards, other securities or
other property, or any combination thereof, having a Fair Market Value on
the exercise date equal to the relevant exercise price) in which payment of
the exercise price with respect thereto may be made or
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deemed to have been made. Pursuant to Section 7(c) of the Plan, the
Committee may, at its discretion, accelerate the time at which Options may
be exercised and otherwise modify the time or methods of exercise of the
Options, provided that no such modification shall be made if it causes an
option to be disqualified as "performance-based compensation" under Section
162(m) of the Code or an Incentive Stock Option under Section 422(b) of the
Code.
(iii) Incentive Stock Options. The terms of any Incentive Stock Option
granted under the Plan shall comply in all respects with the provisions of
Section 422 of the Code, or any successor provision, and any regulation
promulgated thereunder, including the following provisions:
(A) Exercisability. The aggregate Fair Market Value (determined on
the date of grant) of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by any Employee during any
calendar year (under all plans of the Company and its subsidiaries)
shall not exceed $100,000.
(B) Termination of Service. No Incentive Stock Option may be
exercised more than three (3) months after the Participant's termination
of employment for any reason other than disability or death, unless (I)
the Participant dies during such three-month period, and (II) the Award
Agreement or the Committee permits later exercise. No Incentive Stock
Option may be exercised more than one (1) year after the Participant's
termination of employment on account of disability, unless (I) the
Participant dies during such one-year period, and (II) the Award
Agreement or the Committee permits later exercise.
(C) Company and Subsidiaries Only. Incentive Stock Options may be
granted only to persons who are employees of the Company or a Subsidiary
on the date of grant.
(D) Expiration. No Incentive Stock Option may be exercised after
the expiration of ten (10) years from the date of grant; provided,
however, that if the Option is granted to a Ten Percent Owner, the
Option may not be exercised after the expiration of five (5) years from
the date of grant.
(b) Stock Appreciation Rights. Subject to the provisions of the Plan, the
Committee shall have authority to determine the Employees to whom Stock
Appreciation Rights shall be granted, the number of Shares to be covered by each
Stock Appreciation Right Award, the grant price thereof and the conditions and
limitations applicable to the exercise thereof; provided, however, that during
any fiscal year of the Company, no Participant shall be granted Stock
Appreciation Rights covering more than 100,000 Shares. A Stock Appreciation
Right may be granted in tandem with another Award, in addition to another Award,
or freestanding and unrelated to another Award. A Stock Appreciation Right
granted in tandem with or in addition to another Award may be granted either at
the same time as such other Award or at a later time.
(i) Grant Price. The grant price of a Stock Appreciation Right shall
be determined by the Committee.
(ii) Other Terms and Conditions. Subject to the terms of the Plan and
any applicable Award Agreement, the Committee shall determine, at or after
the grant of a Stock Appreciation Right, the term, methods of exercise,
methods of settlement, and any other terms and conditions of any Stock
Appreciation Right. Any such determination by the Committee may be changed
by the Committee from time to time and may govern the exercise of Stock
Appreciation Rights granted or exercised prior to such determination as
well as Stock Appreciation Rights granted or exercised thereafter. The
Committee may impose such conditions or restrictions on the exercise of any
Stock Appreciation Right as it shall deem appropriate.
(c) Restricted Stock. Subject to the provisions of the Plan, the Committee
shall have authority to determine the Employees to whom Restricted Stock shall
be granted, the number of Shares of Restricted Stock to be granted to each such
Participant, the duration of the Restricted Period during which, and the
conditions under which, the Restricted Stock may be forfeited to the Company,
and the other terms and
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conditions of such Awards; provided, however, that during any fiscal year of the
Company, no Participant shall be granted Restricted Stock covering more than
100,000 Shares.
(i) Dividends and Voting Rights. Unless otherwise determined by the
Committee, Restricted Stock Awards shall provide that Participants may
exercise full voting rights with respect to the Shares of Restricted Stock
granted and for the payment of all dividends and other distributions during
the Restricted Period. Dividends paid on Restricted Stock may be paid
directly to the Participant or may be subject to risk of forfeiture and/or
transfer restrictions during any period established by the Committee, all
as determined by the Committee in its discretion.
(ii) Certificates. Any Restricted Stock may be evidenced in such
manner as the Committee shall deem appropriate, including, without
limitation, book-entry registration or issuance of a stock certificate or
certificates. In the event any stock certificate is issued in respect of
Restricted Stock granted under the Plan, such certificate shall be
registered in the name of the Participant and shall bear an appropriate
legend referring to the terms, conditions, and restrictions applicable to
such Restricted Stock.
(iii) Forfeiture. Except as otherwise determined by the Committee,
upon termination of a Participant's employment (as determined under
criteria established by the Committee) for any reason during the applicable
Restricted Period, all Restricted Stock conditionally granted to the
Participant shall be forfeited by the Participant and reacquired by the
Company. The Committee may, when it finds that a waiver would be in the
best interests of the Company, waive in whole or in part any or all
remaining restrictions with respect to Restricted Stock conditionally
granted to a Participant whose employment is terminated for any reason
during the applicable Restricted Period. Shares, evidenced in such manner
as the Committee shall deem appropriate, shall be issued to the holder of
Restricted Stock promptly after the applicable restrictions have lapsed or
otherwise been satisfied.
(iv) Transfer Restrictions. During the Restricted Period, Restricted
Stock may not be assigned, alienated, pledged, attached, sold or otherwise
transferred or encumbered, until the end of the applicable Restricted
Period.
(v) Section 162(m) Performance Restrictions. For purposes of
qualifying grants of Restricted Stock as "performance-based compensation"
under Section 162(m) of the Code, the Committee, in its sole discretion,
may condition grants or set restrictions based upon the achievement of
Performance Goals. The Performance Goals shall be set by the Committee on
or before the latest date permissible to enable the Restricted Stock to
qualify as "performance-based compensation" under Section 162(m) of the
Code. In granting Restricted Stock that is intended to qualify under Code
Section 162(m), the Committee shall follow any procedures determined by it
in its sole discretion from time to time to be necessary, advisable or
appropriate to ensure qualification of the Restricted Stock under Code
Section 162(m) (e.g., in determining the Performance Goals).
(d) Performance Awards. The Committee shall have authority to determine the
Employees who shall receive a Performance Award, which shall consist of a
conditional right, (A) denominated or payable in cash, Shares, other securities
or other property (including, without limitation, Restricted Stock), and (B)
which shall confer on the holder thereof conditional rights valued as determined
by the Committee and payable to, or exercisable by, such holder, in whole or in
part, upon the achievement of such performance objectives during such
performance periods as the Committee shall establish; provided, however, that
during any fiscal year of the Company, no Participant shall be granted
Performance Awards covering more than 100,000 Shares or $250,000 in cash or
other securities or property.
(i) Terms and Conditions. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine the performance
objectives to be achieved during any performance period, the length of any
performance period, the amount of any Performance Award and the amount of
any payment or transfer to be made pursuant to any Performance Award.
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(ii) Payment of Performance Awards. Performance Awards may be paid in
a lump sum or in installments following the close of the performance period
or, in accordance with procedures established by the Committee, on a
deferred basis.
(iii) Forfeiture. Except as otherwise determined by the Committee, it
shall be a condition precedent that a Participant's employment remain
continuous (as determined under criteria established by the Committee)
during the applicable performance period and through the date established
by the Committee for payment for such Participant to be eligible to receive
a Performance Award.
(iv) Section 162(m) Performance Objectives. For purposes of qualifying
grants of Performance Awards as "performance-based compensation" under
Section 162(m) of the Code, the Committee, in its sole discretion, may
determine that the performance objectives applicable to Performance Awards
shall be based on the achievement of Performance Goals. The Performance
Goals shall be set by the Committee on or before the latest date
permissible to enable the Performance Awards to qualify as
"performance-based compensation" under Section 162(m) of the Code. In
granting Performance Awards which are intended to qualify under Code
Section 162(m), the Committee shall follow any procedures determined by it
from time to time to be necessary or appropriate in its sole discretion to
ensure qualification of the Performance Awards under Code Section 162(m)
(e.g., in determining the Performance Goals).
(e) Stock Compensation. The Committee shall have authority to pay in Shares
issued pursuant to this Plan all, or such portion as it shall determine, of
amounts payable under any compensation program of the Company. The number of
Shares to be distributed in lieu of the cash compensation for which an Employee
would otherwise be eligible to receive, as well as the terms and conditions
pursuant to which such Shares will be awarded, shall be determined by the
Committee.
(f) Other Stock-Based Awards. The Committee is hereby authorized to grant
to eligible Employees an "Other Stock-Based Award," which shall consist of a
conditional right (i) which is not an Award or conditional right described in
Section 6(a), (b), (c), (d), or (e) above and (ii) which is denominated or
payable in, valued in whole or in part by reference to, or otherwise based on or
related to, Shares (including, without limitation, securities convertible into
Shares), as are deemed by the Committee to be consistent with the purposes of
the Plan; provided, that any such conditional rights must comply, to the extent
deemed desirable by the Committee, with Rule 16b-3, Section 162(m) of the Code
and applicable law. Subject to the terms of the Plan and any applicable Award
Agreement, the Committee shall determine the terms and conditions of any such
Other Stock-Based Award.
(g) General.
(i) Awards May Be Granted Separately or Together. Awards may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with, or in substitution for any other Award granted under the Plan
or any award granted under any other plan of the Company or any Affiliate.
Awards granted in addition to or in tandem with other Awards or awards
granted under any other plan of the Company or any Affiliate may be granted
either at the same time as or at a different time from the grant of such
other Awards or awards; provided that no such award shall disqualify an
outstanding award as "performance-based compensation" under Section 162(m)
of the Code or an Incentive Stock Option under Section 422(b) of the Code.
(ii) Form of Payment by Company Under Awards. Subject to the terms of
the Plan and of any applicable Award Agreement, payments or transfers to be
made by the Company or any Affiliate upon the grant, exercise or payment of
an Award may be made in such form or forms as the Committee shall
determine, including, without limitation, cash, Shares, other securities,
other Awards or other property, or any combination thereof, and may be made
in a single payment or transfer, in installments, or on a deferred basis,
in each case in accordance with rules and procedures established by the
Committee. Such rules and procedures may include, without limitation,
provisions for the payment or crediting of reasonable interest on
installment or deferred payments and such interest shall be paid at the
applicable federal rate with respect to deferred payments on Option Awards.
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(iii) Limits on Transfer of Awards.
(A) During the Participant's lifetime, each Award, and each right
under any Award, shall be exercisable only by the Participant or
permitted transferee as determined by the Committee.
(B) Except as otherwise permitted by the Committee, no Award and no
right under any such Award may be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by a Participant
otherwise than by will or by the laws of descent and distribution (or,
in the case of Restricted Stock, to the Company) or pursuant to a
"domestic relations order" as defined in the Code, and any such
purported assignment, alienation, pledge, attachment, sale, transfer or
encumbrance shall be void and unenforceable against the Company or any
Affiliate.
(iv) Term of Awards. The term of each Award shall be for such period
as may be determined by the Committee; provided, that in no event shall the
term of any Incentive Stock Option exceed a period of ten years from the
date of its grant (five years in the case of a grant to a Ten Percent
Owner).
(v) Share Certificates. All certificates for Shares or other
securities of the Company or any Affiliate delivered under the Plan
pursuant to any Award or the exercise thereof shall be subject to such stop
transfer orders and other restrictions as the Committee may deem advisable
under the Plan or the rules, regulations, and other requirements of the
SEC, any stock exchange upon which such Shares or other securities are then
listed, and any applicable Federal or state laws, and the Committee may
cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
(vi) Consideration for Grants. Awards may be granted for no cash
consideration or for such consideration as the Committee determines
including, without limitation, such minimal cash consideration as may be
required by applicable law.
(vii) Delivery of Shares or other Securities and Payment by
Participant of Consideration. No Shares or other securities shall be
delivered pursuant to any Award until payment in full of any amount
required to be paid pursuant to the Plan or the applicable Award Agreement
is received by the Company. Such payment may be made by such method or
methods and in such form or forms as the Committee shall determine,
including, without limitation, cash, Shares, other securities, other Awards
or other property, or any combination thereof; provided that the combined
value, as determined by the Committee, of all cash and cash equivalents and
the Fair Market Value of any such Shares or other property so tendered to
the Company, as of the date of such tender, is at least equal to the full
amount required to be paid pursuant to the Plan or the applicable Award
Agreement to the Company.
SECTION 7. Amendment and Termination.
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of any shareholder,
Participant, other holder or beneficiary of an Award, or other Person; provided
that notwithstanding any other provision of the Plan or any Award Agreement,
without the approval of the shareholders of the Company no such amendment,
alteration, suspension, discontinuation, or termination shall be made that
would:
(i) increase the total number of Shares available for Awards under the
Plan, except as provided in Section 4(c) of the Plan; or
(ii) otherwise cause the Plan to cease to qualify for or comply with
any tax or regulatory exemption, status or requirement, including for these
purposes any approval or other requirement which is a prerequisite for
exemption relief from Section 16(b) of the Exchange Act and Sections 422(b)
and 162(m) of the Code, which require shareholder approval to change the
class of eligible Employees, the maximum number of Options or Stock
Appreciation Rights that may be awarded to any Employee during any fiscal
year of the Company and the Performance Goals.
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(b) Amendments to Awards. The Committee may waive any conditions or rights
under, amend any terms of, or alter any Award theretofore granted, provided no
change in any Award shall disqualify an award as "performance-based
compensation" under Section 162(m) of the Code or an Incentive Stock Option
under Section 422(b) of the Code or reduce the benefit to a Participant without
the consent of such Participant.
(c) Adjustment of Awards Upon the Occurrence of Certain Unusual or
Non-recurring Events. The Committee is hereby authorized to make adjustments in
the terms and conditions of, and the criteria included in, Awards in recognition
of unusual and non-recurring events (including, without limitation, the events
described in Section 4(c) of the Plan) affecting the Company, an Affiliate, or
the financial statements of the Company or any Affiliate, or of changes in
applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan. Notwithstanding the foregoing, with respect to any Incentive
Stock Option or award intended to qualify as performance-based compensation
under Section 162(m) of the Code, no adjustment shall be authorized to the
extent such adjustment would cause an Incentive Stock Option or award to fail to
so qualify.
SECTION 8. Change in Control.
(a) In addition to the Committee's authority set forth in Section 7(c) of
the Plan, in order to maintain the Participants' rights in the event of any
Change in Control, as hereinafter defined, the Committee, as constituted before
such Change in Control, is hereby authorized, and has sole discretion, as to any
Award, either at the time such Award is made hereunder or any time thereafter,
to take any one or more of the following actions: (i) provide for the
acceleration of any time periods relating to the exercise or realization of such
Award so that such Award may be exercised or realized in full on or before a
date fixed by the Committee; (ii) provide for the purchase of any such Award,
upon the Participant's request, for an amount of cash equal to the amount that
could have been attained upon the exercise of such Award or realization of the
Participant's rights had such Award been currently exercisable or payable; (iii)
make such adjustment to any such Award then outstanding as the Committee deems
appropriate to reflect such Change in Control; or (iv) cause any such Award then
outstanding to be assumed, or new rights substituted therefor, by the acquiring
or surviving corporation after such Change in Control. The Committee may, in its
discretion, include such further provisions and limitations in any Award
Agreement as it may deem equitable and in the best interests of the Company.
(b) A "Change in Control" shall be deemed to occur if (i) the Company
merges or consolidates with any other Person (other than a wholly owned
subsidiary of the Company) and is not the surviving entity (or survives only as
the subsidiary of another entity); (ii) the Company sells all or substantially
all of its assets to any other Person (other than a wholly owned subsidiary of
the Company); (iii) the Company is liquidated or dissolved; or (iv) with respect
solely to an individual Participant, upon the occurrence of a Change in Control
as defined in any written agreement between such Participant and the Company or
any Affiliate.
SECTION 9. General Provisions.
(a) No Rights to Awards. No Employee, Participant or other Person shall
have any claim to be granted any Award, and there is no obligation for
uniformity of treatment of Employees, Participants, or holders or beneficiaries
of Awards. The terms and conditions of Awards need not be the same with respect
to each recipient.
(b) Delegation. Subject to the terms of the Plan and applicable law, the
Committee may delegate to one or more officers or managers of the Company or any
Affiliate, or to a committee of such officers or managers, the authority,
subject to such terms and limitations as the Committee shall determine, to grant
Awards to, or to cancel, modify or waive rights with respect to, or to alter,
discontinue, suspend, or terminate Awards held by, Employees who are not
officers or directors of the Company for purposes of Section 16 of the Exchange
Act, or any successor Section thereto, or who are otherwise not subject to such
Section.
(c) Withholding. The Company or any Affiliate is hereby authorized to
withhold from any Award, from any payment due or transfer made under any Award
or under the Plan or from any compensation or other
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amount owing to a Participant the amount (in cash, Shares, other securities,
other Awards or other property) of any applicable withholding taxes in respect
of an Award, its exercise, the lapse of restrictions thereon, or any payment or
transfer under an Award or under the Plan and to take such other action as may
be necessary in the opinion of the Company to satisfy all obligations for the
payment of such taxes.
(d) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect, other compensation arrangements (subject to shareholder approval of such
other arrangement, if such approval is required), and such arrangements may be
either generally applicable or applicable only in specific cases.
(e) No Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the Company or
any Affiliate. Further, the Company or an Affiliate may at any time dismiss a
Participant from employment, free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.
(f) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Delaware and applicable Federal law.
(g) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as
to any Person or Award, or would disqualify the Plan or any Award under any law
deemed applicable by the Committee, such provision shall be construed or deemed
amended to conform to applicable laws, or if it cannot be construed or deemed
amended without, in the determination of the Committee, materially altering the
intent of the Plan or the Award, such provision shall be stricken as to such
jurisdiction, Person or Award and the remainder of the Plan and any such Award
shall remain in full force and effect.
(h) Other Laws. The Committee may refuse to issue or transfer any Shares or
other consideration under an Award if, acting in its sole discretion, it
determines that the issuance or transfer of such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary in
connection with the exercise of such Award shall be promptly refunded to the
relevant Participant, holder or beneficiary.
(i) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.
(j) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether
cash, other securities, or other property shall be paid or transferred in lieu
of any fractional Shares or whether such fractional Shares or any rights thereto
shall be canceled, terminated, or otherwise eliminated.
(k) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provisions thereof.
SECTION 10. Effective Date of the Plan.
The Plan shall be effective April 8, 1997, the date of its approval by the
Board.
SECTION 11. Term of the Plan.
No Award shall be granted under the Plan ten years after approval by the
Board. However, unless otherwise expressly provided in the Plan or in an
applicable Award Agreement, any Award theretofore granted may, and the authority
of the Board or the Committee to amend, alter, adjust, suspend, discontinue, or
terminate any such Award or to waive any conditions or rights under any such
Award shall, extend beyond such date.
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P
R
O
X
Y
AQUILA GAS PIPELINE CORPORATION PROXY/VOTING INSTRUCTION CARD
- - --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING ON MAY 15, 1997.
The undersigned hereby appoints Charles K. Dempster and Craig F. Strehl, the
attorneys and agents of the undersigned, each with powers of substitution, as
proxies for the undersigned to vote all Common Stock the undersigned may be
entitled to vote at the Annual Meeting of Stockholders of Aquila Gas Pipeline
Corporation called to be held at the OMNI Hotel, 9821 Colonnade Blvd., San
Antonio, Texas at 10:00 A.M., Thursday, May 15, 1997, and at any adjournment
thereof, in the manner indicated on the reverse side of this proxy, and upon
such other business as may lawfully come before the meeting. IF NO DIRECTION AS
TO THE MANNER OF VOTING THE PROXY IS MADE, THE PROXY WILL BE VOTED FOR THE
ELECTION OF DIRECTORS AND FOR ITEM 2 AS INDICATED ON THE REVERSE SIDE HEREOF.
COMMENTS
Election of Directors, Nominees:
Harvey J. Padewer ----------------------------------------
Gary L. Downey
----------------------------------------
----------------------------------------
(if you have written in the above space,
please mark the corresponding box on
the reverse side of this card)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES
(SEE REVERSE SIDE) BUT YOU NEED TO NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. HOWEVER, THE PROXY
COMMITTEE CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
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PLEASE MARK YOUR 6649
[X] VOTES AS IN THIS
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 AND 2.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
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WITHHOLD authority to vote
FOR for all Nominees
1. Election of [ ] [ ]
Directors
To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.
(nominees are listed on reverse)
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FOR AGAINST ABSTAIN
2. Approve the Aquila Gas Pipeline [ ] [ ] [ ]
Corporation 1997 Stock Incentive
Plan.
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please check this box if you
have written comments on the [ ]
reverse side.
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
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SIGNATURE (IF JOINTLY HELD) DATE
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SIGNATURE(S) DATE
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