SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Continental Natural Gas, Inc.
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
5) Total fee paid:
_____________________________________________________________________________
|_| Fee paid previously ith 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 No.:______________________________________
3) Filing Party: ___________________________________________________________
4) Date Filed: _____________________________________________________________
Notes:
April 30, 1998
Dear Stockholder:
This year's Annual Meeting of Stockholders will be held at the Adams Mark
Hotel, 100 East 2nd Street, Tulsa, Oklahoma 74103 on June 8, 1998 at 9:30 a.m.,
C.D.T. You are cordially invited to attend. The matters to be considered at the
meeting are described in the attached Proxy Statement and Notice of Annual
Meeting of Stockholders. The Company's Board of Directors recommends the
following actions: (i) the election of management's two nominees to serve as
Class I directors, and (ii) the ratification of the selection of Coopers &
Lybrand, L.L.P. as the Company's independent accountants for the fiscal year
ending December 31, 1998.
To be certain that your shares are voted at the Annual Meeting, whether or
not you plan to attend in person, you should sign, date and return the enclosed
proxy as soon as possible. Your vote is important.
At the Annual Meeting, I will review some of the Company's activities
during the past year. An opportunity will be provided for questions by the
stockholders. I hope you will be able to join us.
Sincerely,
Gary C. Adams
Chairman of the Board,
President and Chief
Executive Officer
CONTINENTAL NATURAL GAS, INC.
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD ON JUNE 8, 1998
TO THE STOCKHOLDERS OF CONTINENTAL NATURAL GAS, INC.:
Notice is hereby given that the Annual Meeting of Stockholders of
Continental Natural Gas, Inc. (the "Company") will be held at 9:30 a.m., C.D.T.,
on June 8, 1998, at the Adams Mark Hotel, 100 East 2nd Street, Tulsa, Oklahoma
74103, for the following purposes:
1. To elect two Class I directors to hold office for a three-year term
expiring at the Annual Meeting of Stockholders occurring in 2001 or
until the election and qualification of their respective successors.
2. To ratify the selection of Coopers & Lybrand, L.L.P. as the Company's
independent accountants for the fiscal year ending December 31, 1998.
3. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on April 22, 1998 as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting. Only stockholders of record as of the close of business
on such date are entitled to notice of and to vote at the meeting. Accompanying
this Notice of Annual Meeting is a Proxy, Proxy Statement and a copy of the
Company's 1997 Annual Report.
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.
We encourage you to take part in the affairs of your Company either in
person or by executing and returning the enclosed proxy.
By Order of the Board of Directors,
Garry D. Smith
Secretary
Dated: April 30, 1998
CONTINENTAL NATURAL GAS, INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 8, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Continental Natural Gas, Inc. (the
"Company") for use at the Annual Meeting of Stockholders of the Company to be
held on June 8, 1998, at 9:30 a.m. at the Adams Mark Hotel, 100 East 2nd Street,
Tulsa, Oklahoma 74103, and at any adjournment thereof. A stockholder giving the
enclosed proxy may revoke it at any time before the vote is cast at the Annual
Meeting by delivery to the Secretary of the Company of a written notice of
termination of the proxy's authority or a duly executed proxy or ballot bearing
a later date. Shares represented by a proxy will be voted in the manner directed
by a stockholder. If no direction is made, the proxy will be voted for the
election of the nominees for Class I directors named in this Proxy Statement and
for the other proposals set forth in this Proxy Statement. This Proxy Statement
and the accompanying form of proxy are being sent or given to stockholders
beginning on or about April 30, 1998 together with the Company's 1997 Annual
Report.
Only stockholders of record at the close of business on April 22, 1997 are
entitled to notice of and to vote at the meeting or at any adjournment thereof.
As of such date, there were 6,315,000 shares of Common Stock of the Company
outstanding. Each share is entitled to one vote. Cumulative voting is not
permitted. Shares voted as abstentions on any matter (or a "withhold vote for"
as to a director) will be counted as shares that are present and entitled to
vote for purposes of determining the presence of a quorum at the meeting and as
unvoted, although present and entitled to vote, for purposes of determining the
approval of each matter as to which the stockholder has abstained. If a broker
submits a proxy that indicates the broker does not have discretionary authority
as to certain shares to vote on one or more matters, those shares will be
counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum at the meeting, but will not be considered
as present and entitled to vote with respect to such matters. The Company's
Bylaws provide that the holders of not less than a majority of the shares
entitled to vote at any meeting of stockholders, present in person or
represented by proxy, shall constitute a quorum.
The Board of Directors knows of no matters other than those that are
described in this Proxy Statement that may be brought before the meeting.
However, if any other matters are properly brought before the meeting, persons
named in the enclosed proxy or their substitutes will vote in accordance with
their best judgment on such matters.
1
All expenses in connection with the solicitation of proxies will be paid by
the Company. In addition to solicitation by mail, officers, directors and
regular employees of the Company who will receive no extra compensation for
their services, may solicit proxies by telephone, facsimile or personal calls.
The Company's principal executive offices are located at 1437 South Boulder,
Suite 1250, Tulsa, Oklahoma 74119.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 22, 1998: (i) by each person
(or group of affiliated persons) who is known by the Company to own beneficially
more than five percent (5%) of the Company's Common Stock, (ii) by each of the
Company's executive officers, (iii) by each of the Company's directors, and (iv)
by all directors and executive officers as a group. The Company believes that
the persons and entities named in the table have sole voting and investment
power with respect to all shares of Common Stock shown as beneficially owned by
them, subject to community property laws, where applicable.
Name and Address Number of Shares (1) Percent of Class (2)
- ---------------- ------------------ -----------------
Adams Affiliates, Inc. (3) ................................ 331,464 5.25%
1437 South Boulder, Suite 1250
Tulsa, Oklahoma 74119
Cottonwood Partnership (3) ................................ 3,471,604 54.97%
1437 South Boulder, Suite 1250
Tulsa, Oklahoma 74119
Brinson Holdings, Inc. (4) ................................ 309,400 4.90%
209 South LaSalle
Chicago, Illinois 60605-1295
(February 11, 1998)
Brinson Partners, Inc. (4) ................................ 309,400 4.90%
209 South LaSalle
Chicago, Illinois 60605-1295
(February 11, 1998)
SBC Holdings (USA), Inc. (4) .............................. 309,400 4.90%
222 Broadway
New York, New York 10038
(February 11, 1998)
Swiss Bank Corporation (4) ................................ 309,400 4.90%
Aeschenplatz 6 CH-4002
Basel, Switzerland
(February 11, 1998)
Wellington Management Company, L.L.P.(5) .................. 350,600 5.55%
75 State Street
Boston, Massachusetts 02109
(January 13, 1998)
Gary C. Adams (3) ......................................... 3,471,604 54.97%
Scott C. Longmore (6) ..................................... 167,962 2.66%
Garry D. Smith (7) ........................................ 126,005 2.00%
Terry K. Spencer (8) ...................................... 126,005 2.00%
William W. Pritchard (9) .................................. 10,000 *
William H. Bauch (9) ...................................... 5,000 *
Executive Officers and Directors (9) ...................... 3,872,976 61.33%
Of the Company as a Group (6 persons)
- ------------
* Less than one percent (1%) of outstanding common stock of the Company.
(1) Unless otherwise noted, each of the persons has sole voting and investment
power with respect to the shares reported.
2
(2) Based upon 6,315,000 shares of Common Stock actually outstanding at March
24, 1998 (with respect to certain individuals who have the right to acquire
shares of Common Stock within 60 days of March 24, 1998 pursuant to the
exercise of options or warrants, the number of shares of Common Stock not
outstanding which are subject to such options or warrants have been deemed
to be outstanding for the purpose of computing the percentage of
outstanding shares of Common Stock owned by such individuals pursuant to
Rule 13d-3(d) of the Securities Exchange Act of 1934).
(3) Gary C. Adams does not own of record any shares of the Company's common
stock. Gary C. Adams, President, Chief Executive Office and a director of
the Company is the Chief Executive Officer of Cottonwood Partnership.
Cottonwood Partnership owns approximately 98% of the outstanding common
stock of Adams Affiliates, Inc. ("Adams Affiliates"). The shares reflected
as beneficially owned by Adams Affiliates include 33,600 shares pledged to
Adams Affiliates by executive officers of the Company. The shares reflected
as beneficially owned by Cottonwood Partnership include 297,864 shares held
of record by Adams Affiliates and 33,600 pledged to Adams Affiliates by
executive officers of the Company. The shares reflected as beneficially
owned by Gary C. Adams include all shares reflected as beneficially held by
Cottonwood Partnership.
(4) Based solely on information reported in a Schedule 13G dated February 11,
1998, the named persons had shared voting power and shared investment power
as of December 31, 1997, with respect to 309,400 shares of the Company's
common stock. Such Schedule 13G filed on behalf of the named persons
reflects a percentage of 5.7%, the Company believes that 4.90% is the
appropriate percentage.
(5) Based solely on information reported in Schedule 13G dated January 13,
1998, filed with the SEC, the named person had, as of December 31, 1997,
shared dispositive power as an investment advisor for certain unnamed
persons. Based solely on the representations contained in such Schedule
13G, no such individual beneficially owns 5% or more of the Company.
(6) Includes 13,400 shares of common stock pledged to Adams Affiliates, Inc.
under Pledge Agreement dated August 13, 1997.
(7) Includes 10,100 shares of common stock pledged to Adams Affiliates, Inc.
under Pledge Agreement dated August 13, 1997.
(8) Includes 10,100 shares of Common Stock pledged to Adams Affiliates, Inc.
under Pledge Agreement dated August 13, 1997.
(9) Each of the named directors has been granted options to acquire 5,000
shares of the Company's common stock. Such options are presently
exercisable and, therefore, are deemed beneficially owned by such
individuals pursuant to Rule 13d-3(d)(1). Such beneficial ownership is also
reflected in the number of shares and percentage for officers and directors
as a group.
DIRECTORS OF THE COMPANY
Information regarding the directors of the Company is set forth below:
CLASS
EXPIRATION
NAME AGE OF TERM
- ------ ---- --------------
Scott C. Longmore 38 Class I 1998
Terry K. Spencer 38 Class I 1998
William H. Bauch (1)(2) 36 Class II 1999
Garry D. Smith (2) 41 Class II 1999
Gary C. Adams (1) 47 Class III 2000
William H. Pritchard (1)(2) 47 Class III 2000
- ---------
(1) Member of the Compensation Committee of the Board of Directors.
(2) Member of the Audit Committee of the Board of Directors.
3
GARY C. ADAMS, has been the Company's Chairman of the Board since his
founding of the Company in 1983. In 1994 he assumed the role of Chief Executive
Officer, and in March 1997, was elected President. Mr. Adams is also Chairman of
Adams Affiliates, which is engaged in different segments of the oil and gas
industry. Most of Mr. Adams' 25-year career has been spent in the oil and gas
industry. Prior to his association with Adams Affiliates, Mr. Adams served as
Executive Vice President of OKC Corporation, then a New York Stock Exchange
listed company, where he was responsible for its oil and gas operations. Mr.
Adams graduated from the University of Kansas in 1973 with a Bachelor of Science
degree in Business Administration. Mr. Adams is the son of the late K.S. "Boots"
Adams, former Chairman of Phillips Petroleum Company.
SCOTT C. LONGMORE, has been Vice President of Marketing of the Company
since 1988 and was elected to the Board of Directors of the Company in March
1997. His primary responsibilities are to supervise the acquisition of markets,
supplies and storage, the transportation of natural gas and risk management
activities. Prior to joining the Company in 1987, Mr. Longmore was employed with
Cabot Energy Marketing Corporation, where he served as a gas marketing and
supply representative. Mr. Longmore has 13 years of experience in the natural
gas marketing business. Prior to Cabot, he was an independent petroleum landman
in Oklahoma. Mr. Longmore graduated from the University of Oklahoma in 1982 with
a Bachelor of Business Administration degree in Petroleum Land Management.
GARRY D. SMITH, has been Vice President and Controller of the Company since
1990 and was elected to the Board of Directors of the Company in March 1997. He
is responsible for managing the financial and accounting functions of the
Company. Prior to joining the Company in 1988, Mr. Smith served in various
capacities at Mustang Fuel Corporation, including management of the financial
and oil and gas revenue accounting functions. He received his Bachelor of
Science degree in Accounting from Central Oklahoma State University in 1979, and
his Masters of Business from the University of Oklahoma in 1987. Mr. Smith is a
Certified Public Accountant and a Certified Management Accountant.
TERRY K. SPENCER, has been Vice President of Operations of the Company
since 1991 and was elected to the Board of Directors of the Company in March
1997. He is responsible for the management of pipeline and plant operations,
engineering design and construction, new project development, reservoir
engineering and economic evaluation. Prior to joining the Company in 1989, Mr.
Spencer served as Manager of Project Development for Stellar Gas Company and
held various engineering-related positions in Delhi Gas Pipeline Corporation.
Mr. Spencer earned his Bachelor of Science degree in Petroleum Engineering from
the University of Alabama in 1981.
WILLIAM W. PRITCHARD, became a member of the Board of Directors of the
Company and the Compensation and Audit Committees of the Board on August 6,
1997. Mr. Pritchard has more than 21 years of experience in the domestic and
international oil and gas industry. Beginning in 1976, Mr. Pritchard assumed
various managerial positions with Parker Drilling Company, a New York Stock
Exchange company, serving its domestic and international operations, and in 1984
he became Vice President and General Counsel with Parker Drilling, positions he
held until he concluded his tenure at Parker in 1996. Mr. Pritchard became Of
Counsel to the law firm of Hall, Estill, Hardwick, Gable, Golden & Nelson P.C.
("Hall, Estill") in 1996 and his corporate practice focuses on acquisitions,
contracts, securities law and other legal matters related to the oil and gas
industry. Mr. Pritchard received a Bachelor of Arts from the University of
Kansas and a Juris Doctorate from the University of Tulsa.
WILLIAM H. BAUCH, became a member of the Board of Directors of the Company
and the Compensation and Audit Committees on August 6, 1997. Mr. Bauch has been
Managing Director in the corporate finance department of CIBC Oppenheimer Corp.
(formerly Oppenheimer & Co., Inc.) since 1996. Prior to that, he was a Vice
President in the investment banking department of Prudential Securities
Incorporated from 1994 to 1996, and a Vice President with Jefferies & Company,
Inc. from 1993 to 1994. He holds a Bachelors of Accountancy and Juris Doctorate
degrees from the University of Mississippi and a Masters of Law degree from the
New York University School of Law.
4
MEETINGS OF THE BOARD OF DIRECTORS
AND CERTAIN COMMITTEES
During the fiscal year ended December 31, 1997, the Board of Directors met
one time. All of the directors attended more than 75% of the aggregate of all
meetings of the Board of Directors and meetings of the committees on which they
served. The Board of Directors and its committees also act from time to time by
written consent in lieu of meetings.
The Board of Directors of the Company has standing Audit and Compensation
Committees which have a current membership as indicated above. The Board of
Directors has no standing nominating committee.
The Compensation Committee makes recommendations to the Board concerning
salaries and incentive compensation for the Company's officers and employees and
administers the Company's 1996 Incentive Stock Plan and the Company's 1997 Stock
Plan (the "Stock Plan"). During fiscal 1997, the Compensation Committee held one
meeting.
The Audit Committee aids management in the establishment and supervision of
the Company's financial controls, evaluates the scope of the annual audit,
reviews audit results, consults with management and the Company's independent
auditors prior to the presentation of financial statements to stockholders and,
as appropriate, initiates inquiries into aspects of the Company's financial
affairs. During fiscal 1997, the audit committee held no meetings. The Audit
Committee has held one meeting in 1998 with respect to the Company's 1997 Annual
Report on Form 10-K.
EXECUTIVE OFFICERS
NAME AGE POSITION
- ------ ---- ---------------------------------------
Gary C. Adams .......... 47 President and Chief Executive Officer
Scott C. Longmore ...... 38 Vice President - Marketing
Garry D. Smith ......... 41 Vice President - Controller
Terry K. Spencer ....... 38 Vice President - Operations
See the biographical information on Messrs. Adams, Longmore, Smith and Spencer
under "Election of Directors."
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors and persons who beneficially own
more than ten percent (10%) of the Company's Common Stock to file reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission ("SEC"). Executive officers, directors, and greater than ten percent
(10%) beneficial owners are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms filed with the SEC,
furnished to the Company and written representations from the executive
officers, directors and holders of 10% or more of the Company's Common Stock,
the Company believes that all Section 16(a) filing requirements applicable to
its executive officers, directors and 10% beneficial owners during 1997 were
complied with except that Form 3 for Cottonwood Partnership required in
connection with the Company's initial public offering. Such transaction was
reported on Form 5 filed by Cottonwood Partnership on February 18, 1998.
EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash compensation for
fiscal years 1996 and 1997 awarded to or earned by (i) the individual who served
as the Company's Chief Executive Officer ("CEO") in fiscal year 1997; and (ii)
all of the Company's other executive officers, other than the CEO, who were
serving as executive officers for fiscal year 1997. No other executive officer
had compensation in excess of $100,000 for fiscal year 1997:
5
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Awards
-----------
# of Shares
Annual Compensation(1) Underlying
------------------------------------------ Stock
Name and Principal Other Annual Option All Other
Position Year Salary Bonus Compensation(4) Granted Compensation
- ---------------------- ----- ---------- ---------- -------------- ----------- -------------
Gary C. Adams 1997 -- -- -- (1) -- $150,000(2)
Chief Executive 1996 -- -- -- (1) -- $150,000(2)
Officer
Scott C. Longmore 1997 $127,203 $ 73,949 -- -- --
President of 1996 $ 97,500 $152,842 $16,800(3) 68,000 --
Marketing
Garry D. Smith 1997 $131,488 $ 12,151 -- -- --
Vice President 1996 $104,195 $ 80,293 $12,600(3) 68,000 --
And Controller
Terry K. Spencer 1997 $127,203 $ 12,151
Vice President 1996 $ 94,500 $ 80,293 $12,600(3) 68,000 --
Of Operations
- -------------
(1) The Company was charged a fee of $210,000 for management services in 1996,
by Adams Affiliates, Inc., an affiliate of the named person. The Company
was charged a fee of $240,000 for management services in 1997 by Adams
Affiliates, Inc., an affiliate of the named person. See Employment and
Consulting Agreements below.
(2) The amounts shown represent the premiums paid by the Company under a split
dollar life insurance policy. Under this policy, the Company pays the
premiums for life insurance issued to the named person. Repayment of the
premiums is secured by the death benefit or the cash surrender value of the
policy, if any, if the named person cancels and surrenders the policy.
(3) Represents the difference between the fair market value of Common Stock
purchased by the named person in 1996 and the amount paid for such Common
Stock.
(4) No disclosure regarding items included in this column is required unless
the amount in any year exceeds the lesser of $50,000 or 10% of the total
annual salary and bonus reported for any such executive officer.
(5) Compensation information for the 1995 fiscal year has been omitted pursuant
to Instruction to Item 402(b) of Regulation S-K of the Securities and
Exchange Commission.
Employment and Consulting Agreements. The Company is a party to employment
agreements with Terry K. Spencer, Scott C. Longmore and Garry D. Smith. The
employment agreements will continue in effect until December 31, 1999, subject
to customary termination provisions. The employment agreements provide annual
salary payments to each of such executive officers in the amount of $150,000,
subject to annual CPI adjustment, and for annual bonuses based upon the Company
exceeding designated annual income levels. In addition, Mr. Longmore's
employment agreement provides for the payment of annual commissions based upon
gross margins of natural gas sales.
The Company and Adams Affiliates, Inc. are parties to a Consulting
Agreement dated as of April 1, 1997, under which Adams Affiliates, Inc. has
agreed to provide consulting services to the Company in return for payments of
$20,000 per month ($240,000 per year). It is anticipated that such consulting
services will be provided primarily by Gary C. Adams as an agent of Adams
Affiliates, Inc. The Consulting Agreement had a term which expired on March 31,
1998, subject to automatic one month renewals thereafter until terminated by one
of the parties. Mr. Adams is an affiliate of Adams Affiliates, Inc.
The Company believes that its Employment and Consulting Agreements entered
into with or on behalf of its executive officers provide compensation to its
executive officers which is consistent with the compensation paid by other
companies in the industry which of a comparable size to the Company and in
consideration of such officers' responsibilities and duties.
No options or stock appreciation rights ("SARs") were granted to any of the
executive officers of the Company in 1997.
6
AGGREGATE OPTION/EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR OPTION/VALUES
The following table provides information with respect to the executive
officers concerning the exercise of options during the last fiscal year ending
December 31, 1997, and unexercised options held as of December 31, 1997. No
options were exercised by any executive officer in 1997.
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options/
Options/SARs at Fiscal Year-End(#) SARs at Fiscal Year-End($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ----- ------------------------------- -------------------------
Gary C. Adams 0/0 $0/$0
Scott C. Longmore 0/68,000 $0/$713,320 (1)
Garry D. Smith 0/68,000 $0/$713,320 (1)
Terry K. Spencer 0/68,000 $0/$713,320 (1)
- ---------
(1) Based on closing price of $10.75 at December 31, 1997, and an exercise
price of $0.26/share. All options issued under the Company's 1996 Incentive
Stock Option Plan.
1996 Incentive Stock Option Plan. Effective as of February 28, 1996, the
Company adopted the 1996 Incentive Stock Option Plan (the "1996 Stock Plan"),
and granted options under the plan to acquire a total of 204,000 shares of
common stock to Terry K. Spencer, Garry D. Smith and Scott C. Longmore. The 1996
Stock Plan is intended to comply with Section 422 of the Internal Revenue Code
of 1986, as amended. Each incentive stock option ("ISO") granted entitled the
optionee to purchase up to 68,000 shares of common stock at an exercise price of
$0.26 per share, which the Board of Directors determined to represent the fair
market value of the common stock on the grant date. The exercise of each ISO is
conditioned upon the Company achieving certain specified financial performance
goals for each of calendar years 1997, 1998 and 1999, and the optionee may not
in any event exercise ISOs to acquire common stock having a fair market value in
excess of $150,000 for any one calendar year. The ISOs shall expires on the
earlier of ninety (90) days after termination of the Optionee's employment
agreement or February 28, 2006.
No more ISOs may be issued under the 1996 Stock Plan. As a result of the
Company's financial performance, no ISOs issued under the 1996 Stock Plan are
currently exercisable.
1997 Stock Plan. The purpose of the Continental Natural Gas, Inc. 1997
Stock Plan (the "1997 Stock Plan") is to promote the overall financial
objectives of the Company and its shareholders by motivating those person
selected to participate in the 1997 Stock Plan to achieve long-term growth in
shareholder equity in the Company and by retaining the association of those
individuals who are instrumental in achieving this growth. Executive officers,
key employees and non-employee directors, as well as such other employees or
consultants as the Board of Directors selects, are eligible recipients of awards
under the 1997 Stock Plan. The maximum number of shares authorized to be issued
under the 1997 Stock Plan is 600,000 shares of Common Stock.
The 1997 Stock Plan is administered by the Board of Directors of the
Company. The Board of Directors is authorized to determine plan participants,
the types and amounts of awards to be granted and the terms, conditions and
provisions of awards, prescribe forms of award agreements, interpret the 1997
Stock Plan, establish, amend and rescind rules and regulations relating to the
1997 Stock Plan and make all other determinations which may be necessary or
advisable for the administration of the 1997 Stock Plan. In 1998 the Company
filed a Registration Statement on Form S-8 with respect to options to be granted
to its employees for 250,000 shares of common stock of the Company. Following
such registration, the Board of Directors of the Company granted non-qualified
stock options to purchase 207,210 shares of the Company's common stock at an
average exercise price of $7.47/share. No options have been granted to the
Company's executive officers under the 1997 Stock Plan.
The 1997 Stock Plan permits the granting of any or all of the following
types of awards: (a) stock options, (b) stock appreciation rights ("SARs"), and
(c) restricted stock. Generally, awards under the 1997 Stock Plan are granted
for no consideration other than prior and future services. Awards granted under
the 1997 Stock Plan may, in the discretion of the Board, be granted alone or in
addition to, in tandem with or in substitution for any other
7
award under the 1997 Stock Plan or other plan of the Company. Such grants could
include grants of options after a decline in the market price of the Common
Stock in substitution for previously granted options having a higher exercise
price.
Stock options granted pursuant to the 1997 Stock Plan, may, at the
discretion of the Board, be either ISOs within the meaning of Section 422 of the
Code, or non-qualified stock options. The exercise price of an ISO may not be
less than the fair market value of the Common Stock on the date of grant (or
110% of such fair market value in the case of ISOs granted to employees who
possess more than 10% of the combined voting power of all classes of stock of
the company). In the case of non-qualified stock options, the exercise price
shall be as determined by the Board in its sole discretion, but in no event
shall be less than 50% of the fair market value of the Common Stock on the date
of grant. Options granted pursuant to the 1997 Stock Plan are exercisable in
whole or in part at such time or times as may be determined by the Board, except
that ISOs may not be exercised after the expiration of 10 years from the date
granted (or 5 years in case of ISOs granted to employees who possess more than
10% of the combined voting power of all classes of stock of the Company).
Generally, options may be exercised by the payment of cash, promissory notes,
stock or combination thereof.
Any SARs granted under the 1997 Stock Plan will give the holder the right
to receive cash or stock in an amount equal to the difference between the fair
market value of a share of Common Stock on the date of exercise and the exercise
price of the options issued in conjunction with the SARs or such other amount as
the Board has established with respect to SARs issued on a stand-alone basis.
Methods of exercise and settlement and other terms of SARs are determined by the
Board.
The Board may award restricted stock, generally consisting of shares which
may not be disposed of by participants until certain restrictions established by
the Board lapse. Such restrictions may lapse in whole or in installments as the
Board determines. A participant receiving restricted stock will have all of the
rights of a shareholder of the Company, including the right to vote the shares
and the right to receive any dividends, unless the Board otherwise determines,
but shall not be permitted to sell, assign, or otherwise transfer the stock
during the restriction period established by the Board. Upon termination of
employment during the restriction period for any reason other than death or
disability, restricted stock will be forfeited, subject to such exceptions, if
any, as are authorized by the Board.
In the event of any change affecting the shares of common stock by reason
of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, combination or exchange of shares, or other corporate change or any
distributions to shareholders, the Board may make such substitution or
adjustment in the aggregate number of kind of shares which may be distributed
under the 1997 Stock Plan and in the number, kind and exercise, grant or
purchase price of shares subject to the outstanding awards granted under the
1997 Stock Plan, or make provisions for a cash payment relating to any award, as
it deems to be appropriate in order to maintain the purpose of the original
grant.
The Board of Directors may amend, alter, suspend, discontinue or terminate
the 1997 Stock Plan without the consent of shareholders or participants, except
that shareholder approval of such action will be sought if such approval is
required by any federal or state law or regulation or by any agreement, or if
the Board of Directors in its discretion determines that obtaining such
shareholder approval is advisable. Unless earlier terminated by the Board of
Directors, the 1997 Stock Plan will terminate when no shares remain reserved and
available for issuance, and the Company has not further obligation with respect
to any award granted under the 1997 Stock Plan.
In the event of a change of control of the Company, as defined in the 1997
Stock Plan, all outstanding awards under the 1997 Stock Plan, regardless of any
limitations or restrictions, become fully exercisable and freed of all
restrictions.
Performance Based Bonuses. From time to time the Board of Directors of the
Company awards cash bonuses to its executive officers and other employees based
on performance of the Company and the performance of such individual. Employment
agreements between the Company and Scott C. Longmore, Garry D. Smith and Terry
K. Spencer provide for payment of bonuses based on certain financial thresholds.
The bonuses paid to the executive officers for 1997 were calculated solely in
relation to the employment agreements existing between the Company and its
executive officers during 1997. Due to the financial performance of the Company
in 1997, no additional bonuses were paid to such executive officers.
8
Director Compensation. Directors receive no set compensation from the
Company for serving on the Board of Directors but are eligible to receive awards
under the 1997 Stock Plan and may be reimbursed for out-of-pocket expenses
incurred while attending board and committee meetings. Pursuant to the Company's
1997 Stock Plan, each non-employee director received options to purchase 5,000
shares of common stock from the Company during December 1997. The exercise price
for such options was the fair market value of the Company's stock on the date of
grant ($11.25).
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Chief Executive Officer of the Company serves as a member of the
Compensation Committee. Affiliates of the Chief Executive Officer are party to
various agreements with the Company. See "Certain Transactions---1997
Transactions Among Related Entities." The Company employed CIBC Oppenheimer
Corp. (formerly Oppenheimer & Co., Inc.) as an underwriter in connection with
the Company's initial public offering. Mr. Bauch is a Managing Director at CIBC
Oppenheimer Corp. The law firm of Hall, Estill, Hardwick, Gable, Golden & Nelson
rendered legal services in connection with the Company's initial public offering
and various other matters during the 1997 fiscal year. Mr. Pritchard is Of
Counsel to Hall, Estill. See "Certain Transactions---Other Relationships."
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed of two
outside directors and the Chief Executive Officer of the Company. The
Compensation Committee is responsible for developing and approving the Company's
executive compensation policies. In addition, the Compensation Committee reviews
and evaluates the compensation to be paid to the Chief Executive Officer and to
each of the other executive officers of the Company. The overall objectives of
the Company's executive compensation program are to provide compensation that
will attract and retain superior talent and reward performance.
COMPENSATION PHILOSOPHY
The goals of the compensation program are to align compensation with
business objectives and performance, and to enable the Company to attract,
retain and reward executive officers whose contributions are critical to the
long-term success of the Company. The Company's executive compensation policy is
intended to provide an overall level of compensation that is competitive with
energy-related companies comparable to the Company. Actual compensation levels
may be greater than competitive levels in such companies based upon annual and
long-term Company performance, as well as individual performance. To a large
extent the compensation of the executive officers has been established in the
Employment Agreements and Consulting Agreements previously entered into between
the Company and its executive officers. The Compensation Committee believes that
the compensation paid to the Company's executive officers (including that set
forth in the Employment and Consulting Agreements) is consistent with the
compensation levels of executive officers employed by energy-related companies
comparable to the Company.
No cash or other compensation was paid to the executive officers in 1997 in
excess of that provided in such Employment and Consulting Agreements. In the
future, the Compensation Committee may award cash bonuses to its executive
officers in excess of those provided in the Employment Agreements.
Executive officers may also be rewarded based upon corporate performance
and individual performance. Corporate performance is evaluated by reviewing the
extent to which strategic and business plan goals are met, including such
factors as profitability, performance relative to competitors and consummation
of strategic acquisitions. Individual performance is evaluated by reviewing
organizational and management development progress and the degree to which
teamwork and Company values are fostered.
9
COMPENSATION VEHICLES
The Company uses a simple total compensation program that consists of cash-
and equity-based compensation. The components of the Company's compensation
program for its executive officers include (a) base salary, (b)
performance-based cash bonuses, and (c) long-term incentive compensation in the
form of stock options.
Base Salary
Base salary for the executive officers (other than the Chief Executive
Officer) were established in Employment Agreements. Each Employment Agreement
has a term which expires on December 31, 1999. On an on-going basis, the
Compensation Committee will review the Employment Agreements in relation to
compensation levels for management personnel employed by peer companies of a
size similar to the size of the Company. Upon expiration of Employment
Agreements, the Compensation Committee will, based on the recommendations of its
Chief Executive Officer, evaluate the base salary of its executive officers in
relation to such other companies. The Compensation Committee generally approves
the Chief Executive Officer's recommendations with respect to base salaries for
other executive officers.
Performance-Based Bonuses
The Employment Agreements also provide specific formulas for payment of
bonuses to its executive officers. The Employment Agreements provide specific
financial thresholds with resulting incentive based compensation. In addition,
the Chief Executive Officer may, from time to time, recommend that additional
bonuses be paid to the named executive officers. These recommendations are based
on the financial performance of the Company and evaluation of such executive's
contribution to the financial performance of the Company.
During 1997, no bonuses were paid to the executive officers other than
those permitted under the Employment Agreements. The Compensation Committee
generally approves the Chief Executive Officer's recommendations with respect to
performance-based bonuses for its executive officers.
Stock Option Program
In connection with the Employment Agreements, each executive officer was
issued options to purchase the Company's common stock under the 1996 Stock Plan.
In order for options under the 1996 Incentive Stock Plan to become vested, the
Company is required to achieve certain financial thresholds. Based on the
Company's financial performance in 1997, none of the options issued to the
executive officers are currently exercisable (such options may become
exercisable based on the financial performance of the Company in 1998 and 1999).
In its discretion, the Compensation Committee and Board of Directors may
issue awards to its executive officers to purchase shares of the Company's
common stock under the 1997 Stock Plan. The objective of the 1997 Stock Plan is
to align executive and stockholder long-term interest by creating a strong and
direct link between executive compensation and stockholder return, and to enable
executives to develop and maintain a significant long-term ownership position in
the Company. To date, none of the executive officers have been granted any
awards under the 1997 Stock Plan. Since options were issued to the executive
officers under the 1996 Stock Plan, it is anticipated that awards to the
executive officers under the 1997 Stock Plan will be issued as a result of
extraordinary contributions to the financial performance of the Company.
Stock options may be granted upon commencement of employment based on the
recommendation of the Chief Executive Officer. In determining whether to
recommend additional option grants to an executive officer, the Chief Executive
Officer typically considers the individual's performance and any planned change
in functional responsibility. Neither the profitability of the Company nor the
market value of its stock are considered in setting the amount of executive
officer stock option grants. The stock option position of executive officers is
reviewed on an annual basis. The Company's policy is to not grant stock options
annually, but to review each individual's stock option position, at which point
the Compensation Committee may or may not grant additional options in its
discretion. The determination of whether or not additional options will be
granted is based on a number of factors, including Company performance,
individual performance and levels of options granted by the Company's
competitors.
10
Savings and Profit-Sharing Plan; Benefits
The Company typically makes contributions under the Company's 401(k)
Savings and Profit Sharing Plan. Under its 401(k) the Company typically makes
contributions of: (i) two percent (2%) of each employee's gross cash
compensation; and (ii) an amount equal to 50% of an employee's contributions of
up to 6% of gross cash compensation. In addition, the Company provides medical
and other miscellaneous benefits to executive officers that are generally
available to Company employees. The amount of all such perquisites did not
exceed 10% of total annual salary and bonus for any executive officer during the
fiscal year 1997.
CHIEF EXECUTIVE OFFICER COMPENSATION
Base Salary
Compensation to the Chief Executive Officer is made primarily in the form
of a Consulting Agreement with Adams Affiliates. In addition, the Company pays
annual premiums in the amount of $150,000 for a split life insurance policy with
respect to Gary C. Adams.
The level of payments under the Consulting Agreement and payment for the
life insurance policy were previously established between Mr. Adams and the
Company. In general, the level of compensation paid under the Consulting
Agreement and payment for life insurance premiums are not inconsistent with
compensation levels paid to the chief executive officers of companies of similar
size. Periodically the Compensation Committee will review payments made for the
benefit of the Chief Executive Officer and, if warranted based on compensation
levels to other chief executive officers, increase the level of such
compensation. It is not anticipated that such compensation levels will be
decreased.
Bonuses and Stock Option Awards
Historically the Company has not paid bonuses or issued other long-term
awards (including restricted stock or stock options) to the Chief Executive
Officer. At the present time, such awards are not contemplated. In the future,
however, the Compensation Committee (acting without the chief executive officer)
will continue to evaluate the Chief Executive Officer's compensation in relation
to the compensation to other chief executive officers of companies of similar
size. If warranted, the Compensation Committee (or the Company's Board of
Directors) may issue such awards in its discretion
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction for compensation in excess of $1 million paid to the Company's Chief
Executive Officer and certain other highly-compensated executive officers.
Qualifying "performance-based" compensation will not be subject to the deduction
limit if certain requirements are met. The Compensation Committee believes,
however, that there may be, in the future, circumstances in which the Company's
interests are best served by providing compensation that is not fully deductible
under Section 162(m), and reserves the ability to exercise discretion to
authorize such compensation.
COMPENSATION COMMITTEE
Gary C. Adams
Williams H. Bauch
William W. Pritchard
11
PERFORMANCE GRAPH
The following line graph compares the cumulative total stockholder
return on the Company's Common Stock for the period from August 1, 1997 (the
date the Company's Common Stock became publicly traded) through December 31,
1997 with the cumulative total return on the S&P 500 Index and an index of a
group of peer companies constructed by the Company. Included in the peer group
are Aquila Gas Pipeline Corporation, KN Energy, Inc., Markwest Hydrocarbons,
Inc., MidCoast Energy Resources, Inc., NGC Corp. and Western Gas Resources, Inc.
Each company in the peer group is publicly-traded and generates a significant
portion of its total revenue from the transporting, gathering, processing and/or
marketing of natural gas or NGLs.
[THE FOLLOING TABLE AS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
TOTAL RETURN ANALYSIS
(Dividends Reinvested )
08/01/97 08/31/97 09/30/97 10/31/97 11/29/97 12/31/97
-------- -------- -------- -------- -------- --------
Continental Natural Gas, Inc. 100.00 101.11 106.67 103.33 102.21 95.55
Peer Group 100.00 98.61 109.91 114.10 107.80 114.89
S&P 500 Index 100.00 94.97 100.17 96.83 101.31 103.05
- ---------
(1) The Company's initial public offering commenced on August 1, 1997. For
purposes of this presentation, the Company has assumed that its initial
public offering price of $11.25 would have been the purchase price on
August 1, 1997.
(2) Assumes $100 invested on August 1, 1997 in each investment.
(3) Total return assumes reinvestment of dividends. Past results are not an
indication of future investment returns.
12
CERTAIN TRANSACTIONS
GENERAL
Gary C. Adams, the Chairman of the Board, President and Chief Executive
Officer of the Company, is the chief executive officer of Cottonwood
Partnership. Cottonwood Partnership is owned by certain trusts, the
beneficiaries of which are members of the immediate family of Mr. Adams (the
"Family Trusts"). Cottonwood Partnership owns approximately 98% of the
outstanding common stock of Adams Affiliates, Inc. ("Adams Affiliates") and all
of the outstanding common stock of Bird Creek Resources, Inc. ("Bird Creek").
Mr. Adams is a director and the chairman of Adams Affiliates and a director of
Bird Creek. The Family Trusts are also partners in Mountain Meadows Partnership,
a general partnership.
Adams Affiliates owns, directly or indirectly, all of the outstanding
equity interests of Continental Natural Gas Marketing, L.L.C. ("CNGM") and CPA
Aviation, Inc. ("CPA Aviation"). Mr. Adams is a director of CPA Aviation.
The Company believes that the transactions described below are on terms at
least as fair to the Company as could have obtained from unaffiliated third
parties.
1997 TRANSACTIONS AMONG RELATED ENTITIES
The Company sold approximately $20 million of natural gas to CNGM in 1997.
The natural gas was sold at cost plus $0.02 per Mcf to CNGM, which resold such
volumes under long-term sales contracts. At December 31, 1997, CNGM owed the
Company approximately $6.3 million, for such purchases.
In 1997, the Company purchased approximately $278,000 of natural gas
located in New Mexico and Oklahoma from Bird Creek under a month-to-month
contract. The Company's purchases from Bird Creek are made at a market index
price less gathering fees. No such amounts were payable at December 31, 1997.
In 1997, the Company provided office space and general administrative
services to Bird Creek and billed it for such rentals and fees in the aggregate
amount of $260,800. Additionally, in 1997 the Company was charged $14,329 by
Bird Creek for general and administrative expenses incurred on its behalf. In
1997, Adams Affiliates charged the Company $240,000 for consulting services.
Adams Affiliates and the Company are parties to a Consulting Agreement dated as
of April 1, 1997, under which Adams Affiliates provided consulting services to
the Company. See "Executive Compensation."
Bird Creek and Adams Affiliates are parties to Administrative Services
Agreements with the Company dated as of April 1, 1997, under which the Company
provides office space, accounting, clerical and other administrative services to
Bird Creek and Adams Affiliates in return for reimbursement to the Company of
the allocable cost to the Company of providing such services. These
Administrative Service Agreements expired on March 31, 1998, subject to
automatic renewal on a month-to-month basis thereafter until terminated by any
of the contracting parties. Bird Creek provides certain accounting, clerical and
administrative services to the Company (primarily accounting services) under the
terms of an Administrative Services Agreement dated as of April 1, 1997. The
Company reimburses Bird Creek for the allocable cost to Bird Creek of providing
such services. This Administrative Services Agreement expired on March 31, 1998,
subject to automatic renewal on a month-to-month basis thereafter until
terminated by one of the parties.
In 1997, the Company paid CPA Aviation a total of $89,400 for aviation
services. The Company and CPA Aviation are parties to a Flight Services
Agreement dated as of April 1, 1997, under which CPA Aviation agrees to provide
aviation services to the Company on an "as needed" basis (the "Flight Services
Agreement"). The Company pays CPA Aviation for such services at the rates of
$100 per hour for usage of Cessna Model Turbo 210 aircraft and $1,000 per hour
for usage of a Learjet Model 24F plus reimbursement of any taxes, fees, customs
duties or other charges which CPA Aviation may be required to pay by reason of
the Company's usage. The Flight Services Agreement expired on March 31, 1998,
subject to automatic renewal on a month-to-month basis thereafter until
terminated by one of the parties.
13
As of December 31, 1997, Adams Affiliates was indebted to the Company in
the amount of approximately $98,492 and Mountain Meadows partnership was
indebted to the Company in the amount of approximately $800,000. Various other
affiliates of Cottonwood Partnership were indebted to the Company in the
aggregate amount of approximately $153,702 as of December 31, 1997 (of such
amount no affiliate was indebted to the Company in excess of $60,000). The
amounts owed by Adams Affiliates and the other affiliates of Cottonwood
Partnership (exclusive of Mountain Meadows Partnership) arise primarily as a
result of administrative services provided by the Company.
OTHER RELATIONSHIPS
CIBC Oppenheimer Corp. (formerly Oppenheimer & Co., Inc.) served as an
underwriter in relation to the Company's initial public offering. Mr. William H.
Bauch is an officer of CIBC Oppenheimer and is a director of the Company. The
Company incurred $1,839,000 as underwriters' discounts in connection with its
initial public offering. The Company believes that CIBC Oppenheimer Corp.
received approximately $400,000 of such amount. The law firm of Hall, Estill,
Hardwick, Golden & Nelson has advised the Company on certain legal matters. Mr.
William W. Pritchard is Of Counsel to Hall, Estill, Hardwick, Golden & Nelson
and is a director of the Company. During 1997, the legal fees paid by the
Company to Hall, Estill were approximately $168,000.
PROPOSAL I
ELECTION OF DIRECTORS
The business and affairs of the Company are managed under the direction of
its Board of Directors, which is comprised of six members. The Board of
Directors is divided into three classes and the members of each class are
elected to serve a three-year term, with the terms of office of each class
ending in successive years.
The term of the Class I directors expires at the Annual Meeting to be held
June 8, 1998, and two Class I directors will be elected at the Annual Meeting to
hold office until the Annual Meeting to be held in the year 2001 or until their
respective successors are elected and qualified. Scott C. Longmore and Terry K.
Spencer are the incumbent Class I directors, and Messrs. Longmore and Spencer
are being nominated for election at the Annual Meeting. The persons named as
proxies in the enclosed form of proxy will vote the proxies received by them for
the election of Messrs. Longmore and Spencer unless otherwise directed. Each of
Messrs. Longmore and Spencer has indicated a willingness to serve, but in case
either of them is not a candidate at the Annual Meeting, which is not presently
anticipated, the persons named as proxies in the enclosed form of proxy may vote
for a substitute nominee at their discretion. The terms of the incumbent Class
II and Class III directors expire at the 1999 and 2000 Annual Meetings,
respectively.
There are no family relationships between any director or executive officer
of the Company or any nominee. Except as otherwise described herein, there are
no arrangements or understandings regarding the election of any of the foregoing
nominees as directors.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES OF COMMON STOCK REPRESENTED AT
THE MEETING IS REQUIRED FOR THE ELECTION OF MESSRS. LONGMORE AND SPENCER. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF MESSRS. LONGMORE AND
SPENCER.
14
PROPOSAL II
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Coopers & Lybrand, L.L.P. as the
Company's independent accountants for the year ending December 31, 1998 and
recommends that the stockholders ratify that appointment. Coopers & Lybrand,
L.L.P. has no relationship with the Company other than that arising from its
engagement as independent accountants. Representatives of Coopers & Lybrand,
L.L.P. will be present at the 1998 Annual Meeting. They will have an opportunity
to make a statement if they desire to do so and will be available to respond to
appropriate questions from stockholders. The affirmative vote of a majority of
the outstanding shares of the Company's Common Stock represented at the 1998
Annual Meeting is required to ratify this appointment.
PROPOSALS FOR THE NEXT ANNUAL MEETING
Any proposal by a stockholder to be presented at the next annual meeting
must be received at the Company's principal executive offices, 1437 South
Boulder, Suite 1250, Tulsa, Oklahoma 74119, not later than December 15, 1998.
By Order of the Board of Directors,
Garry D. Smith
Secretary
Dated: April 30, 1998
15
DETACH HERE
PROXY
CONTINENTAL NATURAL GAS, INC.
1437 South Boulder, Suite 1250
Tulsa, Oklahoma 74119
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having duly received the Notice of Annual Meeting and
Proxy Statement dated April 30, 1998, appoints Gary C. Adams and William .
Pritchard proxies (each with the power to act alone and with the power of
substitution and revocation), to represent the undersigned and to vote, as
designated below, all shares of Common Stock of Continental Natural Gas, Inc.
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
of Continental Natural Gas, Inc. to be held on June 8, 1998 at the Adams Mark
Hotel, 100 East 2nd Street, Tulsa, Oklahoma 74103, at 9:30 a.m., C.D.T., and any
adjourment thereof. Each of the matters set forth below has been proposed by the
Company.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SEE REVERSE
SIDE SIDE
DETACH HERE
|x| Please mark
votes as in
this example.
This Proxy, when properly executed, will be voted in the manner directed herein
directed herein by the undesigned stockholder. If no direction is made, this
Proxy will be voted FOR all of the above items.
1. ELECTION OF CLASS I DIRECTORS
Nominees: Scott C. Longmore And Terry K. Spencer
FOR WITHHELD
|_| |_|
|_| ________________________________
For all nominees except as noted
above
2. RATIFICATION OF INDEPENDENT ACCOUNTANTS
Ratification of Coopers & Lybrand, LLP, as the Company's Independent Accountants
for the fiscal year ending December 31, 1998
FOR AGAINST ABSTAIN
|_| |_| |_|
|_| MARK HERE FOR ADDRESS CHANGE AND
NOTE BELOW
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
PLEASE SIGN, DATE AND MAIL THIS PROXY IN THE ENCLOSED ADDRESSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE U.S.
Please sign exactly as your name appears hereon. Jointly owned shares will be
voted as directed if one owner signs unless another owner instructs to the
contrary, in which case the shares will not be voted. If signing in a
representative capacity, please indicate title and authority.
Signature: _________________________________________ Date: _____________________
Signature: _________________________________________ Date: _____________________