CONSOLIDATED NATURAL GAS COMPANY
ANNUAL EXECUTIVE INCENTIVE PROGRAM
__________________________________
APPROVED 10-22-90
EFFECTIVE 01-01-91
AMENDED 07-09-91 (BONUS PAYMENT ALTERNATIVES)
AMENDED 07-13-92 (15% CAP ON BONUS POOL PERFORMANCE MEASURES)
1. ESTABLISHMENT OF BONUS POOL
___________________________
The Compensation and Benefits Committee of the Board of Directors annually
compares Consolidated's performance against performance goals that are approved
by the Committee at the beginning of each year. The performance measures may
be changed from time to time as deemed appropriate by the Committee.
The performance measures are as follows:
PERFORMANCE MEASURE (P.M.) HOW MEASURED (1) WTG.
____________________________ __________________________________ ____
1. Fixed Charge Coverage Ratio Against Internally Established Goal 20%
2. Return on Equity Against Peer Group ROE Average 40%
3. Net Income Against Internally Established Goal 20%
4. Cash Flow Against Internally Established Goal 20%
The Compensation and Benefits Committee will establish an annual bonus pool
as follows:
Weighted Average % Differential Between Goals and Actual Performance =
20% x % differential between goal and actual P.M. #1 + 40% x % differential
between CNG and Peer P.M. #2+
20% x % differential between goal and actual P.M. #3 + 20% x % differential
between goal and Actual P.M. #4
The Weighted Average % Differential as calculated by the above formula
determines the % of Corporate Net Income, not to exceed 3.25%, that will be
allocated to the bonus pool.
(1)Note:
_____
The % differential between the goal and actual performance for each
performance measure will not exceed +15%. The Compensation and Benefits
Committee approved putting an upside cap of +15% on each performance
measure to keep any one performance measure from substantially impacting
the overall weighting which is used to reflect overall performance and
determine bonus pool size.
2. ALLOCATION OF BONUS POOL TO SUBSIDIARY COMPANIES
________________________________________________
The Chairman will determine the distribution of the Bonus Pool to each
eligible subsidiary by comparing each company's performance against performance
measures that are established and approved by the Chairman at the beginning of
each performance year. The performance measures may be changed from time to
time as deemed appropriate by the Chairman and/or the Compensation and Benefits
Committee.
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Approximately 80% of the Bonus Pool will be allocated to participating
subsidiaries based on their respective actual performance compared to the
approved goals.
Approximately 20% of the Bonus Pool will be allocated at the discretion of
the Chairman.
The Subsidiary Performance Measures are as follows:
BUSINESS UNIT PERFORMANCE MEASURE WTG.
___________________________ _____________________________________ ____
CNG Corporate #1 Controllable O&M Expense vs. Goal 30%
#2 Net Income vs. Goal (Sum of Operating 30%
Co. N.I. Goals)
#3 Corporate ROE vs. Peer Group ROE Avg. 40%
Transmission & Distribution #1 Net Income vs. Goal 20%
#2 Cash Flow vs. Goal 20%
#3 Controllable O&M Expense vs. Goal 20%
#4 Throughput vs. Goal 20%
#5 Net Income to Net Plant vs. Goal 20%
Exploration & Production #1 Net Income vs. Goal 20%
#2 Cash Flow vs. Goal 20%
#3 Finding & Development Costs vs. Goal 20%
#4 Reserve Additions vs. Goal 20%
#5 Net Income to Net Plant vs. Goal 20%
Note:
_____
Operating companies may substitute an approved negotiated goal for one of
the Performance Measures other than net income or cash flow. The substituted
goal must be approved by the CEO and is subject to peer review.
Where Controllable O&M Expense Goals are established, it is recognized that
circumstances may change during the course of a performance period and
unanticipated expenses may be incurred over which the companies, or departments
at CNG Corporate, have no control. In those cases, i.e., unanticipated legal
expenses relating to unforeseeable legal proceedings, the effected company
president or CNG Corporate department head may make an "exception request" in
writing to the CEO either asking for a revision to the goal or that a
particular expense be excluded when comparing actual performance to goal. If
the expense is excluded, then any additional income generated from the expense
should also be excluded from appropriate net income amounts.
The operating company presidents will distribute 80% of their total
allocation based on their respective company's performance and retain 20% for
discretionary allocation based on individual participant contribution/
performance.
3. ESTABLISHMENT OF PERFORMANCE GOALS
__________________________________
The performance goals for the System and each operating company are to be
constructed with reference to five major sources of information: (1) the
Annual Long-Range Financial Forecast presented at the December or January
Board of Directors meeting; (2) actual performance for the prior year; (3)
information submitted at the November Business Plan Reviews; (4) management's
desire to achieve "stretch" goals; and, (5) compatibility with the System's
stated strategic objectives.
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The Long-Range Financial Forecast acts as a base line in developing
performance goals. Because this forecast is used in preparing longer-range
financial plans, it is generally conservative in nature. However, the minimum
earnings standards which the System must achieve to be a satisfactory
performer in the financial markets is usually higher than the forecast.
Actual performance for the prior year is primarily a reference point for
System performance measures. Investor expectations of growing earnings and
possible stock price appreciation are critical to our incentive award plan.
Historical performance is also valuable in assessing the reasonableness of
individual operating companies' performance goals.
In the November Business Plan Reviews, operating company managements
assess the opportunities and risks that their companies face relative to
achievement of the coming year's goals. This "upside/downside" analysis is
useful in documenting performance potential relative to issues that are
controllable by management. It also helps clarify the degree and magnitude of
risks that are external to the Company.
"Stretch" goals are useful in that they measure individual company's
attempts to achieve excellence. There is no question that the "stretch" goals
adopted by management are near the upper limit of what is achievable in
today's uncertain business environment. Nonetheless, an incentive award
system is aimed at eliciting superior performance from management.
Finally, the Corporate Strategy assigns special roles to the various
business units. Recognizing this, the performance measures, in part, relate
to these special roles, although profitability will remain the primary
yardstick of achievement.
4. PARTICIPANT ELIGIBILITY
_______________________
All employees on System Executive Payroll.
5. PARTICIPANT BONUS ALLOCATION GUIDELINES
_______________________________________
1. Based on participant's salary at end of performance year. Pro-rated
based on number of months of eligibility during performance year.
2. Based on participant's performance rating for performance year. To
be eligible, participant's performance must at least meet
expectations of the position.
3. Bonus Thresholds, Targets and Maximums are as follows:
________________________________________________________________________________
________________
(a) (b)
(c)
THRESHOLD Bonus TARGET Bonus
MAX. Bonus
Executive As % of 12/31 As % of 12/31
As % of 12/31
Salary/Grade Base Salary Base Salary
Base Salary
________________________________________________________________________________
________________
12 - 15 20% 50%
70%
9 - 11 18% 45%
63%
7 - 8 16% 40%
56%
5 - 6 14% 35%
49%
3 - 4 12% 30%
42%
1 - 2 10% 25%
35%
________________________________________________________________________________
________________
(a) -15% total weighted average deviation from goals
(b) 0% total weighted average deviation from goals
(c) +15% total weighted average deviation from goals
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Note:
_____
In recognition of the role that the operating company presidents have in
planning and achieving Corporate goals, their respective bonuses will be
weighted 30% with respect to the attainment of the Corporate goals used to
establish the bonus pool.
6. INCENTIVE AWARD PAYMENT ALTERNATIVES (AMENDED 07/09/91)
_______________________________________________________
1. Cash
2. Stock (CNG Common - $2.75 Par Value)
If an incentive award is paid, at the discretion of the Company, up to
50% of the award payment may be made with CNG common stock. If a portion of
the incentive award is given in stock, it will be in 25% increments of the
total award, i.e., 25% or 50%.
If stock awards are given, the dollar value of the stock award portion
will be calculated as follows:
The dollar value will be increased by a factor reflecting the short-term
cost of money. The Chase Manhattan prime interest rate in effect on March 1,
or the next business day following March 1 if that day falls on a weekend,
following the performance year will be used for this calculation. Once the
factor has been applied, the enhanced dollar value of the stock award portion
will be divided by the closing price of the Company's common stock on March 15
or the preceding business day if that day falls on a weekend, to determine the
number of shares of stock to be awarded. Only whole shares of stock will be
awarded. Uneven amounts will be rounded up to the next whole share.
If stock awards are given and a stock deferral election was NOT made:
1. All stock awards will be issued only in the name of the participant.
2. All stock awards will have a six-month holding period requirement or
restriction.
3. By letter of agreement (Attachment A) between the Company and the
participant, issuances of Common Stock ($2.75 par value) will be
registered in the name of the participant, but will be subject to
forfeiture and other terms, conditions and restrictions specified in
the Letter of Agreement and the 1991 Stock Incentive Plan.
4. Risk of forfeiture - If a participant leaves the employment of the
Company prior to the end of the six-month holding period, the
employee's rights to the stock will be forfeited. The only
exceptions would be termination of employment for death, permanent
and total disability, retirement or involuntary termination by the
Company. If one of the exception events occurs during the six-month
holding period, the stock award will be payable in full as soon as
practical following the event.
5. The participant shall not sell, assign, transfer, pledge, hypothecate
or make any other disposition of any shares of the awarded stock
until the six-month holding/restriction period has lapsed.
6. During the six-month holding period, the participant has the right to
vote the Stock and to receive dividends thereon. Any dividends paid
during the restricted holding period will be taxable to the employee
and will be treated and shown as W-2 earnings subject to withholding
during the holding period.
7. Stock certificates will be distributed at the end of the six-month
holding period and taxes will be due and payable upon receipt of the
stock certificate based on the market value of the stock at the end
of the holding period. The taxable event occurs at the time the
restrictions lapse.
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Note:
_____
The only additional restriction which is applicable only to Section 16
"Insiders" is when the "insiders" sell their bonus stock, which is a
reportable event, the sale of the stock will be subject to 16(b) short-swing
profit liabilities.
If stock awards are given and a stock deferral election had been made:
1. The deferred restricted stock will have a six-month holding period
requirement or restriction, i.e., (March 15 of the payment year -
September 15 of the payment year). Stock certificates will not be
issued for deferred restricted stock. Therefore, there are no voting
rights associated with deferred restricted stock.
2. The participant's "stock credit account" will be credited with common
stock equivalents, as determined on March 15 of the payment year, at
the end of the restricted holding period.
3. Risk of forfeiture - If a participant terminates employment with the
Company prior to the end of the six-month holding period, the
participant forfeits all rights to the awarded stock. The only
exceptions are death, permanent and total disability, retirement or
involuntary termination by the Company. If one of the exception
events occurs, payment will be made in accordance with the Executive
Incentive Deferral Plan.
4. Dividend equivalent payments will be credited to the participant's
stock credit account during the restriction period.
If the Company elects to pay a portion of the incentive award in stock, a
participant may elect to receive an additional 25% of the total award in stock
in lieu of 25% cash payment. If this option is elected by the participant, the
Chase Manhattan enhancement factor stated above will also be applied to this
portion of the award to determine the number of shares of stock to be awarded
instead of a cash payment. If this option is elected by the participant, this
stock is subject to the same six-month holding period requirement stated above.
If a participant opts for this method of payment, an irrevocable election to
do so must be made by January 31 OF THE PAYMENT YEAR on a form provided
specifically for this purpose by the Company (Attachment B). If a deferral
election is made, the 25% stock in lieu of cash election must be made at the
same time the deferral election is made (by January 31 of the performance year).
Taxes:
______
1. If no deferral election is made-
________________________________
Appropriate taxes will be withheld on the cash portion of the bonus
at time of payment. If a portion of the bonus is paid in restricted
stock, there is no tax liability at time of award. However, there is
a tax liability at ordinary income tax rates on the full value of the
shares (reflecting appreciation or depreciation) when the
restrictions lapse at the end of the six-month holding period when
the participant receives the stock certificate and is informed of
their tax liability. A participant has twenty-one calendar days
following the end of the holding period to remit a check to the
Company for applicable withholding taxes. If a participant fails to
remit a check to the Company within the twenty-one day period,
satisfying their full tax liability, the appropriate taxes will be
withheld from the participant's regular payroll check(s).
2. If a deferral election is made-
_______________________________
Social Security taxes (FICA) on the cash portion of the award which
is deferred will be withheld at the time of the award from the cash
portion not deferred or from the participant's regular payroll
check(s). All other taxes on the cash deferral will be payable on
the deferred payment date(s). With the exception of Social Security
tax, which is payable on the dollar value of the stock equivalents
posted to the participant's "stock credit account" at the end of the
restriction period, all other applicable taxes will be deferred until
the deferral payment date(s). The applicable Social Security tax
will be withheld from the
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participant's regular pay check(s) as soon as possible following the
end of the restriction period. If other arrangements are to be made
to fulfill the Social Security obligation, it is the responsibility
of the participant to make those arrangements directly with his/her
payroll department in a timely fashion so the obligation is fulfilled
within twenty-one calendar days from the end of the restriction period.
7. DEFERRED PAYMENT
________________
Participants may make an irrevocable election by January 31 of the
performance year, on a form provided by the Company specifically for deferral
and award payment purposes, to defer to their retirement date the receipt of
any amount of their prospective bonus awards as follows:
1. If cash is the method of payment determined by the Company for the
total incentive award, the participant may defer cash payment in
increments of 10%.
2. If a combination of cash and stock is the method of payment
determined by the Company, the participant may defer payment of the
cash portion and/or the stock portion in increments of 25%.
Details of the deferral program are covered in Attachment C - Executive
Incentive Deferral Plan.
12/13/94
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Attachment A
ANNUAL EXECUTIVE INCENTIVE PROGRAM
RESTRICTED STOCK AWARD
RESTRICTED STOCK AWARD AGREEMENT dated as of March 16, 1992, between
Consolidated Natural Gas Company, a Delaware corporation (CNG), and
____________, an employee of CNG or one of its subsidiary corporations
(Employee).
WHEREAS, on March 16, 1992, the Compensation and Benefits Committee of
the Board of Directors of CNG awarded Employee shares of common stock ($2.75
par value) of CNG (the awarded stock) pursuant to the CNG 1991 Stock Incentive
Plan (the Plan), a copy of which is attached as Exhibit A and made a part
hereof.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, intending to be legally bound, and for other good and valuable
consideration, the parties hereto hereby agree as follows:
1. The above described award is subject to all the terms and conditions
of the Plan and of this Agreement. For purposes of this Agreement,
the term "awarded stock" shall include any shares of common stock or
other securities of CNG which may be acquired by Employee with
respect to awarded stock as a result of a stock split or stock
dividend or other extraordinary corporate transaction affecting
shares. If there is any conflict between the provisions of this
Agreement and the provisions of the Plan, the provisions of the Plan
shall govern.
2. The certificate representing ________ shares of awarded stock,
registered in the name of Employee, will be held by CNG, together
with a stock power which shall be executed in favor of CNG by
Employee, until such time as the restriction on the awarded stock
shall lapse. Except as otherwise provided in the Plan, all
restrictions on the shares of awarded stock shall lapse on September
16, 1992.
1
If Employee shall die, become permanently and totally disabled, or
reach age 65, all restrictions shall lapse and cease to be effective
as of the end of the month in which Employee dies, attains age 65, or
is deemed to be permanently and totally disabled. For purposes of
this agreement, Employee shall be deemed to be permanently and
totally disabled if Employee is terminated due to disability and is
eligible as a result thereof for a disability pension under CNG's
pension plan then in effect or benefits under CNG's long-term
disability plan then in effect.
3. While the certificate is held by CNG, Employee shall have the right
to vote the awarded stock and to receive dividends thereon.
4. Employee shall not sell, assign, transfer, pledge, hypothecate or
make any other disposition of any shares of the awarded stock until
the restriction on such shares shall have lapsed.
5. Subject to the provisions of the Plan and except as provided in
Section 2 hereof, Employee shall forfeit his/her then remaining
rights to any awarded stock as to which restriction has not then
lapsed if his/her employment with CNG or any of its subsidiary
corporations shall terminate for any reason.
6. If Employee has elected to defer, under the terms of the CNG
Executive Incentive Deferral Plan, the receipt of awarded stock set
forth in paragraph 2, no certificate representing such deferred
awarded stock will be issued. The restrictions on such stock award
set forth herein shall be applicable to deferred stock awards except
that Employee shall not have the right to vote deferred stock. A
stock credit will be recorded on September 16, 1992,
2
on the books of the Company in accordance with the terms of the CNG
Executive Incentive Deferral plan reflecting the awarded stock.
Dividend equivalent payments will be credited to Employee's stock
credit account on the deferred awarded stock during the restriction
period.
7. Upon lapse of the restriction on awarded shares and as a condition to
the delivery of certificate therefor, CNG shall withhold from the
employee's wages all taxes which it is required to withhold under
federal, state, and local laws.
8. This agreement shall be governed by the laws of the State of
Delaware. This Agreement constitutes the entire agreement between the
parties with respect to the awarded stock under the Plan, and
supersedes any prior agreements or documents with respect to such
awarded stock. No amendment, alteration, suspension, discontinuation
or termination of this Agreement which may impose any additional
obligation upon CNG or any subsidiary or impair the rights of
Employee with respect to the awarded stock shall be valid unless in
each instance such amendment, alteration, suspension, discontinuation
or termination is expressed in a written instrument duly executed in
the name and on behalf of CNG and by Employee.
IN WITNESS WHEREOF, CNG has caused this Restricted Stock Award Agreement
to be duly executed by an authorized officer and Employee has hereunto set
his/her hand and seal, all as of the date and year first above written.
CONSOLIDATED NATURAL GAS COMPANY
By __________________________
Secretary
__________________________L.S.
Employee
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Attachment B
Consolidated Natural Gas System
EXECUTIVE Instructions:
DEFERRAL AND AWARD - Complete this form to irrevocably
PAYMENT ELECTIONS defer the receipt of all or a portion
of the incentive award.
CGS 873 10/91 - Complete a Beneficiary Designation Form
(CGS 874) if this is your first
deferral election or if you wish to change a
prior designation.
- Completion of this form does not guarantee
that an incentive award will
be paid for any performance year.
- Must be submitted by January 31 of the
performance year to:
Human Resources Department
Consolidated Natural Gas Company
CNG Tower
625 Liberty Avenue
Pittsburgh, PA 15222-3199
___________________________________________________________________
/ Last Name (Please print) / First Name / Middle /
/ / / Initial /
/__________________________________________________________________/
/ Subsidiary Company / Social Security Number /
/__________________________________________________________________/
I hereby authorize the deferral of the receipt of my incentive award to my
date of retirement by making the following irrevocable election: (BOTH
ALTERNATIVES MUST BE COMPLETED)
CASH ONLY PAYMENT ALTERNATIVE
For performance year 19___, if the Company pays the total award in cash, I
elect to defer ___% of the award (MUST BE IN 10% INCREMENTS).
1
CASH AND RESTRICTED STOCK PAYMENT ALTERNATIVE
For performance year 19___, I elect to have an additional 25% of my total
incentive award paid in restricted stock in lieu of cash. ____ Yes
____ No.
I elect to defer:
_____ % of the cash portion of the award (MUST BE IN 25% INCREMENTS)
_____ % of the restricted stock portion of the award (MUST BE IN 25%
INCREMENTS)
Award payment and deferred elections will remain in effect for future
performance years unless revoked in writing or a new deferral election is
submitted. Applicable FICA taxes will be withheld on the total value of
the award on date of credit to the deferral account.
________________________________________
Signature Date
Forward WHITE PART to Human Resources - Retain CANARY PART for
your file.
2
Attachment C
CONSOLIDATED NATURAL GAS COMPANY
EXECUTIVE INCENTIVE DEFERRAL PLAN
Effective 12/13/94
CONSOLIDATED NATURAL GAS COMPANY
EXECUTIVE INCENTIVE DEFERRAL PLAN
Table of Contents
_________________
Section Page
_______ ____
1. Purpose 1
2. Definitions 1
3. Eligibility 2
4. Deferral of Awards 2
5. Payment of Deferred Amounts 7
6. Administration 10
7. General Provisions 11
CONSOLIDATED NATURAL GAS COMPANY
EXECUTIVE INCENTIVE DEFERRAL PLAN
1. Purpose
_______
The purpose of the Consolidated Natural Gas Company Executive Incentive
Deferral Plan (the "Plan") is to offer each employee of the Company who is
eligible to participate in the Consolidated Natural Gas Company Annual
Executive Incentive Program (the "Program") the opportunity to defer
receipt of awards that may be made under the Program until after
termination of employment and to earn appropriate additional compensation
during employment and thereafter with respect to such deferred awards.
2. Definitions
___________
Whenever used in the Plan, the following terms shall have the meaning set
forth below:
(a) "Closing Price" means the closing price per share of the Company's
Common Stock on the composite tape of New York Stock Exchange
securities transactions as reported in THE WALL STREET JOURNAL, for
the day at issue or the nearest previous trading day if no trade is
reported for the day at issue.
(b) "Company" means Consolidated Natural Gas Company.
(c) "Committee" means the Compensation and Benefits Committee of the
Board of Directors of the Company.
(d) "Common Stock" means the Common Stock ($2.75 par value) of the
Company.
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(e) "Insider" means those employees of the Company who have been
determined by the Board of Directors of the Company to be an
"officer" of the Company within the meaning of Rule 16a-l(f) for
purposes of Section l6 of the Securities and Exchange Act of 1934.
(f) "Stock Credit" means a credit that is equivalent to one share of
Company Common Stock.
(g) "Plan Year" means the calendar year.
3. Eligibility
___________
All employees of the Company who are eligible to participate in the
Program are eligible to participate in the Plan.
4. Deferral of Awards
__________________
(a) Each eligible employee may elect to participate in the Plan (the
"Participant") and have all or a specified percentage of the cash
portion or the stock portion of the award that may be made to such
Participant under the Program for services in a subsequent calendar
year deferred under the Plan and paid in cash as hereafter provided.
(b) An election to defer an award shall be made in writing on a form
supplied by the Company and shall be filed with the Company by
January 31 of the calendar year in which services will be performed
for such award (a "Service Year"). The Participant must also elect
the portion of his or her award he or she wishes to receive in stock,
by such date. However, any person who is hired or promoted into the
class of employees eligible to participate in the Program, on or
after February 1
2
of any Service Year, may elect to defer any award that may be made
for such Service Year by filing an election to that effect within 30
days after his or her date of hire or promotion. An election to
defer an award for any Service Year shall become effective and
irrevocable on January 3l of such Service Year (or, in a case of a
newly hired or promoted employee, upon expiration of 30 days after
his or her date of hire or promotion), and shall also apply to awards
for each subsequent Service Year through and including any Service
Year in which the participant files either a written revocation of
such election or a new deferral election in accordance with the
provisions of this Section 4. Any such written revocation or new
deferral election shall apply only to awards for Service Years
subsequent to the Service Year in which such revocation or new
deferral election is filed with the Company, and shall become
effective and irrevocable on January 3l of the first such subsequent
Service Year.
(c) Any provision of Section 4(b) above to the contrary notwithstanding,
no deferral election shall apply to an award for any Service Year in
which occurs a "Change in Control" of the Company or to an award for
any subsequent Service Year. For purposes of this Plan, a "Change in
Control" of the Company means a change in control of a nature that
would be required to be reported in response to Item 1(a) of Schedule
14A of Regulation 14A promulgated under the Securities Exchange Act
of 1934 as in effect on the effective date of this Plan; provided
that, without limitation, such a Change in Control shall be deemed to
have occurred if and when (i) any "person" (as such term is used in
Sections 13(d) and 14 (d) (2) of the Securities Exchange Act of 1934)
is or becomes a beneficial owner, directly or indirectly, of
securities of the Company
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representing twenty percent (20%) or more of the combined voting
power of the Company's then outstanding securities or (ii) during any
period of 24 consecutive months commencing before or after the
effective date of this Plan, individuals who at the beginning of such
24-month period were directors of the Company cease for any reason
(other than death, disability, or retirement in accordance with the
Company's policy relating to retirement of directors in effect on the
date of this Plan) to constitute at least a majority of the Board of
Directors of the Company.
(d) An award (or percentage thereof) deferred in accordance with the
provision above of this Section 4 shall be credited on the books of
the Company, on the same date on which it would otherwise have been
paid, to a cash credit account or a stock credit account (depending
upon the portion of the award deferred) and held in the name of the
Participant. Participants in the Plan shall have the rights of
unsecured general creditors of the Company with respect to amounts
payable under the Plan. The Company may provide for payment of
amounts payable under the Plan out of the Company's general assets.
Alternatively, the Company may provide, in whole or in part, for
payments of amounts payable under the Plan from the assets of a trust
established for such purpose, and to the extent of such funding,
payment of amounts due under the Plan shall be made from such trust
and shall pro tanto discharge the Company's liability for payment
under the Plan. However, no such trust shall place assets beyond the
reach of the creditors, in the event of insolvency or bankruptcy, of
the participating company on whose account assets are held under such
trust.
(e) Amounts equivalent to interest ("Interest Equivalents") shall accrue
quarterly on deferred cash awards
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previously credited to a Participant's cash credit account in
accordance with Section 4(d) above and on Interest Equivalents
previously credited to a Participant's account in accordance with
this Section 4(e). Such Interest Equivalents shall be equal to the
product of:
(i) the rate of interest quoted and published by the Chase Manhattan
Bank, N.A. for prime commercial loans on the last business day
of the calendar quarter, and
(ii) the Participant's average daily cash credit account balance
during such calendar quarter.
Interest Equivalents computed in accordance with the preceding
sentence for any calendar quarter shall be added to the Participant's
cash credit account balance as of the first day of the next
succeeding calendar quarter. However, any provision above of this
Section 4(e) to the contrary notwithstanding, Interest Equivalents
for the calendar quarter in which falls the date on which a
Participant's cash credit account balance (or portion thereof
remaining unpaid) is payable in full (the "Final Payment Date" in the
"Final Calendar Quarter") shall be paid to, rather than credited to
the account of, the Participant and shall be equal to the product of:
(A) The rate of interest quoted and published by the Chase
Manhattan Bank, N.A. for prime commercial loans on the last
business day of the calendar quarter immediately preceding
the Final Calendar Quarter which coincides with the Final
Payment Date
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(B) The Participant's average daily cash credit account balance
during the entire Final Calendar Quarter (with such balance
for each day following the Final Payment Date being deemed
to be zero, and such balances included in the calculation
of the average daily account balance).
(f) If the deferral is wholly or partly the stock portion of
Participant's award, the Participant's Stock Credit account shall be
credited with Common Stock equivalents equal to the number of shares
of Common Stock (including fractions of a share to the nearest ten
thousandth) that Participant would have received had he not elected
to defer the stock portion of his award. As of the date any dividend
is paid to holders of Common Stock, the Participant's Stock Credit
account shall also be credited with additional Common Stock
equivalents equal to the number of shares of Common Stock (including
fractions of a share to the nearest ten thousandth) that could have
been purchased at the Closing Price of Common Stock on such date with
the dividend paid on the number of shares of Common Stock to which
the Participant's Stock Credit account is then equivalent ("Dividend
Equivalents"). In case of dividends paid in property, the dividend
shall be deemed to be the fair market value of the property at the
date of distribution of the dividend, as determined by the Committee.
The amount of Stock Credits credited to each Participant's Stock
Credit account shall be appropriately adjusted upon the occurrence of
any stock split or reverse stock split. [In the event of any other
extraordinary transaction affecting the Company's Common Stock after
which Stock will no longer be registered under Section l2 of the
Securities Exchange Act of 1934, Stock Credits credited to each
Participant's Stock Credit account shall be converted
6
into cash equivalents of equal value at the date of such transaction,
with Interest Equivalents credited thereafter in the manner provided
in Section 4(e).]
(g) A Participant who is not an Insider Participant who has previously
elected to defer any stock portion of an award may, at any one time
prior to his termination of employment but only once, elect to
transfer, the balance of his Stock Credit account to his cash credit
account. The date on which such transfer shall occur shall be the
date on which the Employee Benefits Department of the Company
receives Participant's election to convert his Stock Credit account
to his cash credit account. Upon effectiveness of such transfer, an
amount shall be credited to the Participant's cash credit account
equal to the number of Stock Credits then credited to the
Participant's Stock Credit account multiplied by the Closing Price of
Common Stock on the business day immediately preceding the date of
transfer, and the balance of the Participant's Stock Credit account
shall be reduced to zero.
(h) A Participant's interest under the Plan shall be deemed to be fully
vested at all times and nonforfeitable.
5. Payment of Deferred Amounts
___________________________
(a) Subject to the provisions below of this Section 5, the Participant
may elect to have the amounts deferred in the Participant's cash
credit [and] [and/or] Stock Credit accounts paid in from one to ten
annual installments commencing either on the date on which he or she
shall cease to be an employee of the Company, or as soon as
practicable after the January 1 next following such date, and with
installments continuing to be payable as soon as practicable after
the first
7
day of January of each year thereafter. The election authorized by
this Section 5(a) is a one time irrevocable election which must be
made at the same time the Participant initially elects to participate
in the Plan pursuant to Section 4 hereof and shall apply to all
future deferrals made hereunder; provided, however, that, any
provision of this Section 5(a) to the contrary notwithstanding, (i)
if a Participant should fail for any reason to make an election under
the foregoing provisions of this Section 5(a), all amounts deferred
shall be paid in one installment on or as soon as practicable after
January 1 following the date on which he or she shall cease to be an
employee of the Company, unless clause (ii) below applies, in which
case payment shall be made in accordance therewith; and (ii) if a
Participant's employment with the Company terminates for any reason
other than death, retirement, or disability, the amount deferred
shall be paid in one installment on a date selected by the Company
within six months after such termination of employment. For this
purpose, "retirement" shall mean termination of employment in
accordance with the retirement regulations of the Company as set
forth at the end of the System Pension Plan of Consolidated Natural
Gas Company and Its Participating Subsidiaries for Employees Who Are
Not Represented By a Recognized Union and "disability" shall mean
termination of employment at any age with entitlement to benefits
under the Company's long-term disability insurance program and/or a
disability pension under the Company's retirement program. For
purposes of this Section 5(a), a Participant shall elect only one
payment schedule which shall apply to both his cash credit account
and his Stock Credit account.
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(b) Distribution of a Participant's Stock Credit account balance shall be
made in cash with the amount of the distribution determined by
multiplying the number of Stock Credits attributable to the
installment by the Closing Price of Common Stock on the last business
day in December immediately prior to the Plan Year in which the
installment is to be paid; provided, however, that, if a distribution
date elected by a Participant pursuant to Section 5(a) is not to be
as soon as practicable after January 1 of a given year, the Closing
Price to be used shall be the Closing Price of Common Stock on the
last business day immediately prior to the date of Participant's
termination of employment.
(c) The amount of each annual installment to a Participant shall be
determined by dividing the balance remaining in the Participant's
account by the number of installments remaining to be paid.
(d) If, during the lifetime of a Participant, he or she incurs a severe
financial hardship as a result of an unanticipated emergency, the
Company may, in its sole discretion, accelerate payment of all or any
part of the Participant's account balance under the Plan, except that
an Insider Participant's Stock Account may not be accelerated under
this subsection (d); provided that such accelerated payment shall be
limited to the amount necessary to relieve the financial hardship.
In the event of the death of a Participant either while serving as an
employee of the Company or thereafter, the amount deferred shall
commence or continue to be paid after the death of the Participant at
the time or times and in the installments provided in Section 5(a)
above, but the Company shall have power to accelerate the payment of
any installment or installments because of hardship or other
circumstances determined by the Company in its discretion to warrant
such acceleration.
9
(e) Any provision above of this Section 5 to the contrary
notwithstanding, each Participant's account balance, except an
Insider Participant's Stock Account balance, shall be paid in full
upon the occurrence of a "Change in Control" as defined in Section
4(c) above unless, prior to such "Change in Control," the Board of
Directors of the Company shall have adopted a resolution to the
effect that payment should not be made at such time.
6. Administration
______________
(a) The Plan shall be administered, interpreted and construed by the
Committee as such Committee is from time to time constituted. The
Committee shall have authority, subject to and consistent with the
provisions of the Plan, to prescribe the form of any agreement,
instrument, form, or other communication relating to the Plan, to
adopt, amend, suspend, waive, and rescind rules and regulations and
appoint such agents as the Committee may deem necessary or advisable
to administer the Plan, to construe and interpret the Plan, the rules
and regulations or any agreement or instrument entered into under the
Plan, and to make all other decisions and determinations as may be
required under the terms of the Plan or as the Committee may deem
necessary or advisable for the administration of the Plan. Decisions
of the Committee under the Plan shall be final, conclusive and
binding on the Company, all employees, Participants and beneficiaries
and anyone claiming under or through any of them. Any instrument or
communication under the Plan to a Participant, employee or
beneficiary shall be deemed to have been properly delivered if and
when delivered in person or deposited in a Post Office Box regularly
maintained by the U.S. Government in an envelope properly stamped and
addressed to such Participant,
10
employee or beneficiary at his or her address as it appears on the
books of the Company. Any instrument or communication under the Plan
to the Company shall be deemed to have been properly delivered if and
when received by the Employee Benefits Department of the Company.
(b) For purposes of the Employee Retirement Income Security Act of 1974,
the Plan is intended to be an unfunded deferred compensation plan for
a select executive group of employees. The Plan shall be
administered, interpreted and construed to carry out such intention,
and any provision of the Plan that cannot be so administered,
interpreted and construed shall, to that extent, be disregarded.
(c) Any costs incidental to the administration of the Plan shall be borne
by the Company.
7. General Provisions
__________________
(a) The Board of Directors of the Company may modify or amend the Plan,
in whole or in part, from time to time, or terminate the Plan at any
time, without the consent of any Participant or beneficiary of any
Participant; provided, however, that no such modification, amendment
or termination shall permit the acceleration of payment of any
installment of deferred amounts except as provided in Section 5(d) or
5(e) above and that any modification, amendment or termination shall
be of general application to all Participants and beneficiaries and
shall not, without the consent of any affected Participant or, in the
event of his or her death any affected, beneficiary of a Participant,
affect adversely (i) any amount theretofore deferred or credited to
the Participant's account or (ii) the right of the Participant to
receive all amounts theretofore
11
credited to the Participant's account, including Interest Equivalents
or Dividend Equivalents computed to the date of such modification,
amendment or termination, at the time or times provided by the Plan
prior to such modification, amendment or termination. The Plan shall
remain in effect until terminated pursuant to this Section 8(a).
(b) No rights under the Plan may be pledged, hypothecated, encumbered,
transferred or assigned, except that Participant may designate, in
writing on a form approved by the Company, a beneficiary or
beneficiaries to receive any unpaid amounts under the Plan after the
death of the Participant. The Company may at any time and from time
to time limit the number of categories of persons or entities who or
which may be designated as beneficiaries by a Participant. In the
absence of a beneficiary designation or in the event that the
designated person or entity shall not be in existence at the time a
payment under the Plan comes due, the beneficiary of the Participant
shall be the legal representative of the Participant's estate.
(c) The Plan shall be binding upon and inure to the benefit of the
Company and its successors and assigns, including any corporation
which may succeed to all or substantially all of its assets whether
by merger, sale of assets or otherwise, and the Participants, their
heirs and legal representatives.
(d) Neither the adoption of the Plan nor any aspect of its operation or
administration, including any document delivered pursuant to or
describing the Plan, shall limit or restrict in any way the right of
the Company to terminate the employment of any employee at any time
with or without cause or assigning a reason therefor, or shall be
construed to impose upon the Company any
12
liability not expressly and specifically assumed by the Company under
the Plan. Each employee of the Company shall remain subject to
discharge to the same extent as if the Plan had never been adopted.
No Participant or employee shall have any claim to be granted an
award under the Program based upon participation in the Plan. No
Participant or beneficiary shall have any of the rights or privileges
of a stockholder of the Company as a result of any deferral under the
Plan in the form of Stock Credits or otherwise based upon rights
conferred under the Plan.
(e) By electing to participate in the Plan, each Participant and each
person claiming under or through any Participant, shall be
conclusively deemed to have indicated his acceptance and ratification
of, and consent to, any action or decision taken or made or to be
taken or made under the Plan by the Company and the Committee.
(f) The place of administration of the Plan shall be conclusively deemed
to be within the State of Pennsylvania, and the validity,
construction, interpretation and administration of the Plan, and of
any determinations or decisions made thereunder, and the rights of
any and all persons having or claiming to have any interest therein
or thereunder, shall be governed by, and determined exclusively and
solely in accordance with, the internal laws of the State of
Pennsylvania.
(g) The Company may withhold any taxes that it determines are required
to be withheld in respect of amounts payable under the Plan under the
laws of regulations of any governmental authority, whether Federal,
state or local and whether domestic or foreign. Such withholding may
be made, at the election of the
13
Company, from amounts payable under the Plan and/or from any other
amounts payable to the Participant by the Company.
(h) The Plan shall become effective when duly adopted by the Board of
Directors of the Company.
(i) It is intended that the Plan and any and all transactions
occurring thereunder be exempt from Section l6 of the Securities
Exchange Act of 1934 (the "Exchange Act") as a cash-only plan not
involving an equity security of the Company pursuant to Rule 16a-1(c)
(3) of the regulations promulgated under the Exchange Act and
effective May 1, 1991. The Plan Administrator shall interpret and
administer the Plan in accordance with this intent.
14