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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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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-2.
NATIONAL FUEL GAS COMPANY
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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previously. Identify the previous filing by registration statement number,
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NATIONAL FUEL GAS COMPANY
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
FEBRUARY 17, 2000
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NATIONAL FUEL GAS COMPANY
10 LAFAYETTE SQUARE
BUFFALO, NEW YORK 14203
January 14, 2000
Dear Stockholder:
We are pleased to invite you to join us at the Annual Meeting of
Stockholders of National Fuel Gas Company. The meeting will be held at 10:00
A.M. Eastern Time on Thursday, February 17, 2000, at The Ritz-Carlton, 100 South
Ocean Boulevard, Manalapan, Florida, 33462.
The matters on the agenda for the meeting are outlined in the enclosed
Notice of Meeting and Proxy Statement. In addition, officers of the Company will
review the past year, report current developments and answer questions from the
floor.
So that you may elect Company directors and secure the representation of
your interests at the Annual Meeting, we urge you to vote your shares. The
preferred method of voting is by telephone as described on the proxy card. This
method is both convenient for you and reduces the expense of soliciting proxies
for the Company. If you prefer not to vote by telephone, please complete, sign
and date your proxy card and mail it in the envelope provided. The Proxies are
committed by law to vote your proxy as you designate.
If you plan to be present at the Annual Meeting, please respond to the
question if you vote by telephone, or check the "WILL ATTEND MEETING" box on the
proxy card. In order to reduce the costs associated with producing and mailing
your Annual Report and Proxy Statement in future years, we urge you to elect on
your proxy card that you would like to view your Annual Report and Proxy
Statement electronically via the Internet. Your election can be revoked at
anytime by calling 1-800-648-8166. You will continue to receive your proxy card
in the mail, regardless of your election. You will be receiving further
directions regarding the Internet viewing process in the future for next year's
Annual Report and Proxy Statement.
Whether or not you plan to attend, please vote your shares by telephone or
complete, sign, date and promptly return your proxy card so that your vote may
be counted. If you do attend and wish to vote in person, you can revoke your
proxy by giving written notice to the Secretary of the meeting and/or the
Trustees (as described on the first page of this Proxy Statement), and/or by
casting your ballot at the meeting.
Coffee will be served at 9:30 A.M. and I look forward to meeting you at
that time.
Please review the proxy statement and take advantage of your right to vote.
Sincerely yours,
BERNARD J. KENNEDY
Chairman of the Board of Directors,
Chief Executive Officer
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NATIONAL FUEL GAS COMPANY
10 LAFAYETTE SQUARE
BUFFALO, NEW YORK 14203
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 17, 2000
To the Stockholders of National Fuel Gas Company:
Notice is hereby given that the Annual Meeting of Stockholders of National
Fuel Gas Company will be held at 10:00 A.M. Eastern Time on Thursday, February
17, 2000, at The Ritz-Carlton, 100 South Ocean Boulevard, Manalapan, Florida,
33462. At the meeting, action will be taken with respect to:
(1) the election of directors;
(2) the appointment of independent accountants;
(3) approval of the Annual At Risk Compensation Incentive Program;
(4) approval of amendments to the National Fuel Gas Company 1997 Award
and Option Plan;
(5) adoption of, if presented at the meeting, a shareholder proposal
which the Board of Directors OPPOSES;
and such other business as may properly come before the meeting or any
adjournment thereof.
Stockholders of record at the close of business on December 20, 1999, will
be entitled to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
ANNA MARIE CELLINO
Secretary
January 14, 2000
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, AND WHATEVER THE NUMBER OF SHARES
YOU OWN, PLEASE VOTE YOUR SHARES BY TELEPHONE AS DESCRIBED ON THE PROXY/VOTING
INSTRUCTION CARD AND REDUCE NATIONAL FUEL GAS COMPANY'S EXPENSE IN SOLICITING
PROXIES. ALTERNATIVELY, YOU MAY COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE
ENCLOSED PROXY/VOTING INSTRUCTION CARD. PLEASE USE THE ACCOMPANYING ENVELOPE,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
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NATIONAL FUEL GAS COMPANY
10 LAFAYETTE SQUARE
BUFFALO, NEW YORK 14203
PROXY STATEMENT
This proxy statement is furnished to the holders of National Fuel Gas
Company ("Company") common stock ("Common Stock") in connection with the
solicitation of proxies on behalf of the Board of Directors of the Company for
use at the Annual Meeting of Stockholders to be held on February 17, 2000, or
any adjournment thereof. This proxy statement and the accompanying proxy/voting
instruction card are first being mailed to stockholders on or about January 14,
2000.
All costs of soliciting proxies will be borne by the Company. Morrow & Co.,
Inc., 445 Park Avenue, New York, New York 10022, has been retained to assist in
the solicitation of proxies and will be compensated in the estimated amount of
$6,500 plus reasonable out-of-pocket expenses. In addition to solicitation by
that firm and by mail, a number of regular employees of the Company and its
subsidiaries may solicit proxies in person, by telephone or by other methods.
Only stockholders of record at the close of business on December 20, 1999,
will be eligible to vote at this meeting. As of that date, 38,980,150 shares of
Common Stock were issued and outstanding.
Each share of Common Stock entitles the holder thereof to one vote with
respect to each matter that is subject to a vote at the meeting. All shares that
are represented by effective proxies received by the Company in time to be voted
will be voted at the meeting or any adjournment thereof. Where stockholders
direct how their votes shall be cast, shares will be voted in accordance with
such directions. Proxies submitted with abstentions and broker non-votes will be
included in determining whether or not a quorum is present. Abstentions and
broker non-votes will not be counted in tabulating the number of votes cast on
proposals presented to stockholders.
The proxy also confers discretionary authority to vote on all matters that
may properly come before the Annual Meeting of Stockholders, or any adjournment
thereof, respecting matters of which the Board is not currently aware but that
may be presented at the meeting, and respecting all matters incident to the
conduct of the meeting.
Any stockholder giving a proxy may revoke it at any time prior to the
voting thereof by mailing a revocation or a subsequent proxy to Anna Marie
Cellino at the above address, by filing written revocation at the meeting with
Mrs. Cellino, Secretary of the meeting, or by casting a ballot.
If you are a participant in the Company's Employee Stock Ownership Plans,
Employees' Thrift Plan or Tax-Deferred Savings Plans, and the accounts are
registered in the same name, the proxy card will also serve as a voting
instruction for the Trustees of those Plans. Shares in these Plans are not voted
unless voting instructions are received. If this card is returned signed but
without directions marked for one or more items, regarding the unmarked items
you are instructing the Trustee(s) and the Proxies to vote FOR items 1, 2, 3 and
4 and AGAINST item 5. Participants in the Plan(s) may also provide those voting
instructions by telephone. These instructions may be revoked by written notice
to The Chase Manhattan Bank, N.A., Trustee for the Company's Employee Stock
Ownership Plans and the Employees' Thrift Plan, or Vanguard Fiduciary Trust
Company, Trustee for the Company's Tax-Deferred Savings Plans, on or before
February 11, 2000. Addresses are as follows:
The Chase Manhattan Bank, N.A. Vanguard Fiduciary Trust Company
c/o National Fuel Gas Company c/o National Fuel Gas Company
Midtown Station Midtown Station
P.O. Box 847 P.O. Box 847
New York, NY 10138-0701 New York, NY 10138-0701
Enclosed is a copy of the Company's Annual Report and Form 10-K for the
fiscal year ended September 30, 1999, which includes financial statements.
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1. ELECTION OF DIRECTORS
Two directors are to be elected at this Annual Meeting, to serve for terms
of three years until the 2003 Annual Meeting, and until their successors are
duly elected and qualified. The nominees for the two directorships are: Eugene
T. Mann and George L. Mazanec. Each of the nominees is currently a director of
the Company.
It is intended that the Proxies will vote for the election of Messrs. Mann
and Mazanec as directors, unless they are otherwise directed by the
stockholders. Although the Board of Directors has no reason to believe that
either of the nominees will be unavailable for election or service,
stockholders' proxies confer discretionary authority upon the Proxies to vote
for the election of another nominee for director in the event any nominee is
unable to serve or for good cause will not serve. Messrs. Mann and Mazanec have
consented to being named in this proxy statement and to serve if elected.
The term of director George H. Schofield will expire at the 2000 Annual
Meeting. Mr. Schofield will retire from the Board at the 2000 Annual Meeting and
is not a candidate for reelection. The Board is deeply appreciative of his
contributions to the Company over the years.
The affirmative vote of a plurality of the votes cast by the holders of
shares of Common Stock entitled to vote is required to elect each of the
nominees for director.
Pages 3 through 5 contain information concerning the two nominees for
election and the six directors of the Company whose terms will continue after
the 2000 Annual Meeting, including information with respect to their principal
occupations during the five years ended September 30, 1999, and certain other
positions held by them.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF
MESSRS. MANN AND MAZANEC
NAME AND YEAR
BECAME A DIRECTOR AGE(1) PRINCIPAL OCCUPATION
NY -------------- ------ --------------------
NOMINEES FOR ELECTION AS DIRECTORS FOR THREE-YEAR TERMS TO EXPIRE IN 2003
EUGENE T. MANN........................... 69 Executive Vice President of Fleet
1993 Financial Group, a diversified financial
services company, from 1986 until his
retirement in August 1990.
GEORGE L. MAZANEC........................ 63 Former Vice Chairman of PanEnergy
1996 Corporation and Advisor to the Chief
Operating Officer of Duke Energy
Corporation, a diversified energy
company, since October 1996. Vice
Chairman of PanEnergy from 1989 until
October 1996. Director of TEPPCO, LP from
1992 until December 1997, and Director of
Northern Border Pipeline Company
Partnership from 1993 until August 1998.
Director of the Northern Trust Bank of
Texas, NA, Westcoast Energy Inc. and
Associated Electric and Gas Insurance
Services, Ltd. Chairman of the Management
Committee of Maritimes & Northeast
Pipeline, L.L.C.
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(1) As of February 17, 2000.
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NAME AND YEAR
BECAME A DIRECTOR AGE(1) PRINCIPAL OCCUPATION
NY -------------- ------ --------------------
DIRECTORS WHOSE TERMS EXPIRE IN 2002
ROBERT T. BRADY.......................... 59 Chairman of Moog Inc. since February
1995 1996. President and Chief Executive
Officer since 1988 and Director since
1981 of Moog Inc., a manufacturer of
motion control systems and components.
Director of Acme Electric Corporation,
Astronics Corporation, M&T Bank
Corporation, M&T Bank and Seneca Foods
Corporation.
WILLIAM J. HILL.......................... 69 President of National Fuel Gas
1995 Distribution Corporation(2) from June
1989 until his retirement in October
1995. Director of National Fuel Gas
Distribution Corporation(2) and Reed
Manufacturing Company.
BERNARD J. KENNEDY....................... 68 Chairman of the Board of Directors of the
1978 Company since March 1989, Chief Executive
Officer since August 1988, President from
January 1987 until July 1999. Chairman of
the Board of Associated Electric & Gas
Insurance Services Limited. Director of
American Precision Industries Inc.,
Interstate Natural Gas Association of
America, HSBC Bank USA, and Merchants
Mutual Insurance Company.
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(1) As of February 17, 2000.
(2) Wholly owned subsidiary of the Company.
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NAME AND YEAR
BECAME A DIRECTOR AGE(1) PRINCIPAL OCCUPATION
NY -------------- ------ --------------------
DIRECTORS WHOSE TERMS EXPIRE IN 2001
PHILIP C. ACKERMAN....................... 56 President of the Company since July 1999.
1994 Senior Vice President of the Company from
June 1989 until July 1999 and Vice
President from 1980 to 1989. President of
National Fuel Gas Distribution
Corporation(2) from October 1995 until
July 1999 and Executive Vice President
from June 1989 to October 1995. Executive
Vice President of National Fuel Gas
Supply Corporation(2) since October 1994.
President of Seneca Resources
Corporation(2) from June 1989 to October
1996. President of Horizon Energy
Development, Inc.(2) since September 1995
and certain other nonregulated
subsidiaries of the Company since prior
to 1992.
JAMES V. GLYNN........................... 65 President since 1971 of Maid of the Mist
1997 Corporation, which offers scenic boat
tours of the American and Canadian Falls,
Niagara Falls, New York. Director of M&T
Bank Corporation, M&T Bank, and Buffalo
Niagara Partnership; Chairman of Niagara
University Board of Trustees.
BERNARD S. LEE, PH.D. ................... 65 President since prior to 1992 of the
1994 Institute of Gas Technology, a not-for-
profit research and educational
institution, Des Plaines, Illinois.
Director of NUI Corporation and Peerless
Manufacturing Company.
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(1) As of February 17, 2000.
(2) Wholly owned subsidiary of the Company.
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MEETINGS OF THE BOARD OF DIRECTORS AND STANDING COMMITTEES
During the Company's fiscal year ended September 30, 1999 ("fiscal 1999"),
there were four meetings of the Board of Directors. In addition, certain
directors attended meetings of standing or pro tempore committees. The entire
Board of Directors acts as a nominating committee. Three standing committees are
described below.
Audit Committee. The Audit Committee held three meetings during fiscal
1999 in order to review the scope and results of the annual audit, to receive
reports of the Company's independent public accountants and chief internal
auditor, and to prepare a report of the committee's findings and recommendations
to the Board of Directors. The committee consists of Messrs. Hill, Glynn, Lee,
and Schofield.
Compensation Committee. The Compensation Committee, all of the members of
which are non-employee independent directors, held four meetings during fiscal
1999 in order to review and determine the compensation of Company officers, to
receive reports and to award stock options, stock appreciation rights,
restricted stock and At Risk Program awards. The committee administers the
Company's 1983 Incentive Stock Option Plan, 1984 Stock Plan, 1993 Award and
Option Plan, 1997 Award and Option Plan, and Annual At Risk Compensation
Incentive Program. The committee consists of Messrs. Brady, Mann, and Mazanec.
Executive Committee. The Executive Committee did not hold a meeting during
fiscal 1999. The committee has and may exercise the authority of the full Board
except as prohibited by New Jersey corporate law (N.J.S.A. sec.14A:6-9). This
committee will also respond to questions of public policy. The committee
consists of Messrs. Brady, Hill, Kennedy, Mann, and Mazanec.
During fiscal 1999, all incumbent directors attended at least 75% of the
aggregate of meetings of the Board and of the committees of the Board on which
they served.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no "Compensation Committee interlocks" or "insider participation"
which Securities and Exchange Commission (SEC) regulations would require to be
disclosed in this proxy statement.
DIRECTORS' COMPENSATION
The Retainer Policy for Non-Employee Directors (the "Retainer Policy")
which replaced the Board's preexisting retainer policy and the Retirement Plan
for Non-Employee Directors (the "Directors' Retirement Plan"), was approved at
the 1997 Annual Meeting of Stockholders. Directors who are not Company employees
do not participate in any of the Company's employee benefit or compensation
plans. Directors who are employees receive no compensation for serving as
directors. Only non-employee directors are covered by the Retainer Policy.
Under the Retainer Policy, non-employee directors are paid an annual
retainer of $12,000 and 400 shares of Common Stock. Common Stock issued to
non-employee directors under the Retainer Policy will be nontransferable until
the latter of two years from issuance or six months after the recipient's
cessation of service as a director of the Company.
Non-employee directors are paid a fee of $1,000 for each Board meeting and
$800 for each Committee meeting attended ($500 if participating by telephone).
Non-employee directors are paid $500 for each special consultation as a director
that is with or at the request of the Company's chief executive officer.
Benefit accruals under the Directors' Retirement Plan ceased for each
current non-employee director on December 31, 1996. All such directors who were
eligible vested in their Directors' Retirement Plan benefits at that time, and
will receive their accrued Directors' Retirement Plan benefits under its terms
(normally at age 70). People who first become directors after February 1997 are
not eligible to receive benefits under the Directors' Retirement Plan.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
To the best of the Company's knowledge, there are no beneficial owners of
5% or more of the Common Stock.
The following table sets forth for each current director, each nominee for
director, each of the executive officers named in the Summary Compensation
Table, and for all directors and officers as a group, information concerning
beneficial ownership of Common Stock. Unless otherwise stated, to the best of
the Company's knowledge, each person has sole voting and investment power with
respect to the shares listed.
NUMBER OF SHARES
OF COMMON STOCK PERCENT OF
BENEFICIALLY OWNED COMMON
AS OF SEPTEMBER 30, STOCK
NAME 1999 OWNED
---- ------------------- ----------
Philip C. Ackerman(1)(2)(3)(4).............................. 420,105 1%
Robert T. Brady............................................. 1,200 *
James V. Glynn.............................................. 923 *
Bruce H. Hale(1)(2)(3)...................................... 109,901 *
Richard Hare(1)(2)(3)....................................... 222,955 *
William J. Hill............................................. 34,982 *
Bernard J. Kennedy(2)(3)(5)(6).............................. 792,681 2%
Bernard S. Lee.............................................. 2,300 *
Eugene T. Mann.............................................. 1,950 *
George L. Mazanec(7)........................................ 1,600 *
George H. Schofield(8)...................................... 3,536 *
Gerald T. Wehrlin(1)(2)(9).................................. 140,352 *
Directors and Officers as a Group (17
individuals)(10)(11)...................................... 2,243,636 5.78%
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* Represents beneficial ownership of less than 1% of issued and outstanding
Common Stock on September 30, 1999.
(1) Includes shares held in the Company's Thrift Plan, Employee Stock Ownership
Plan for Supervisory Employees ("ESOP") and Tax-Deferred Savings Plan for
Non-Union Employees ("TDSP"), respectively, as follows: Philip C. Ackerman,
3,856, 5,477 and 4,806 shares; Richard Hare, 0, 5,601 and 4,030 shares;
Gerald T. Wehrlin, 666, 4,036 and 3,488 shares; Bruce H. Hale, 1,591,
2,788, 3,428 shares; and all current directors and officers as a group (17
individuals), 12,456, 26,410 and 31,989 shares. The beneficial owners of
the shares have sole voting power with respect to shares held in the Thrift
Plan, ESOP and TDSP, but do not have investment power respecting those
shares until they are distributed.
(2) Includes shares with respect to which each of the named individuals, and
all current directors and officers as a group (17 individuals), have the
right to acquire ownership within 60 days of September 30, 1999, through
the exercise of stock options granted under the 1983 Incentive Stock Option
Plan, the 1984 Stock Plan, the 1993 Award and Option Plan, and the 1997
Award and Option Plan as follows: 546,421 shares for Mr. Kennedy, 315,085
shares for Mr. Ackerman, 83,162 shares for Mr. Hare, 109,000 shares for Mr.
Wehrlin, 86,000 for Mr. Hale, and 1,538,546 shares for all current
directors and officers as a group (17 individuals). None of the options for
the 1,139,668 shares exercisable by executive officers set forth above were
exercisable at a price which was above the market value of the Company's
Common Stock on September 30, 1999.
(3) Includes shares of restricted stock, certain restrictions on which had not
lapsed as of September 30, 1999, as follows: 34,085 shares for Mr. Kennedy,
10,250 shares for Mr. Ackerman, 8,984 shares for Mr. Hare, 7,500 shares for
Mr. Hale, and 88,319 shares for all current directors and officers as a
group (17 individuals). Owners of restricted stock
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have power to vote the shares, but have no investment power with respect to the
shares until the restrictions lapse.
(4) Includes 500 shares held by Mr. Ackerman's wife in trust for her mother, as
to which shares Mr. Ackerman does not admit beneficial ownership, and 220
shares with respect to which Mr. Ackerman shares voting and investment
power with his wife.
(5) Includes 39,842 shares owned by Mr. Kennedy's wife as to which Mr. Kennedy
shares voting and investment power.
(6) Includes 2,400 shares held by the Kennedy Family Foundation, a New York
not-for-profit corporation, of which Mr. Kennedy, his wife and son are
directors. Mr. Kennedy disclaims beneficial ownership of these shares.
(7) Includes 300 shares owned by Mr. Mazanec's wife as to which Mr. Mazanec
shares voting and investment power.
(8) Mr. Schofield is retiring from the Board of Directors effective February
17, 2000.
(9) Includes 2,600 shares owned by Mr. Wehrlin's wife as to which Mr. Wehrlin
shares voting and investment power.
(10) See notes (1) through (9) above.
(11) Includes 11,494 shares with respect to which one or another of the officers
of the Company, not including the executive officers named in the Summary
Compensation Table, shares voting and investment power with his wife.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
General
The Compensation Committee (the "Committee") sets the base salaries of the
Company's executive officers, makes awards and sets goals for the Company's
executive officers and others under the Annual At Risk Compensation Incentive
Program (the "At Risk Program"), and makes awards to executive officers and
others under various compensation plans as described below. The Committee
consists exclusively of non-employee independent directors, appointed by
resolution of the entire Board of Directors. No member of the Committee is
permitted to receive any award under any plan administered by the Committee.
The Committee's objective is to set executive compensation at levels which
(i) are fair and reasonable to the stockholders, (ii) link executive
compensation to long-term and short-term interests of the stockholders, and
(iii) are sufficient to attract, motivate, and retain outstanding individuals
for executive positions. The executive officers' compensation is linked to the
interests of the stockholders by making a significant part of each executive
officer's potential compensation depend on the price of the Company's Common
Stock on the open market, the Company's earnings per share, and the officer's
own performance. The retention of officers is encouraged by making a substantial
portion of the compensation package in the form of awards which either increase
in value, or only have value, if the executive officer remains with the Company
for specified periods of time.
Specific components of executive officers' compensation earned or paid in
fiscal 1999 are discussed below. The Company's five most highly compensated
executive officers are identified on the Summary Compensation Table on page 12,
and are sometimes referred to as the "named executive officers."
Base Salary
The Committee annually reviews base salaries for the Company's officers and
adjusts them on a calendar year basis and as promotions occur. The Committee
generally uses a range of the 50th percentile to the 75th percentile of its
survey data as the starting point. The Committee also takes into account an
individual's specific responsibilities, experience and effectiveness.
As part of the Committee's effort to emphasize the at risk and incentive
portions of executive officer compensation, the base salary of Mr. Kennedy has
remained the same since
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calendar 1996. The fiscal 1999 base salaries of the named executive officers are
shown on the Summary Compensation Table on page 12 in the "Base Salary" column.
Annual At Risk Incentive and Bonus
Under the At Risk Program, the Committee makes At Risk Awards which grant
for certain named executive officers the opportunity to earn cash payments
depending on the achievement of goals set within the first quarter of each
fiscal year. Performance goals are both financial (for example, Company earnings
per share or subsidiary earnings) and non-financial (for example, customer
service).
The Summary Compensation Table on page 12 includes in the "LTIP (Long-Term
Incentive Plan) Payouts" column the amounts earned by Messrs. Kennedy, Ackerman
and Hare in fiscal 1999 under the At Risk Program. These payments are considered
by the SEC to be "long-term" incentives because payments are based on the
rolling average of performance during the two fiscal years most recently
completed. The range of potential At Risk Program awards for fiscal 1999 for
Messrs. Kennedy, Ackerman and Hare is set out in the Long-Term Incentive Plan
Table on page 14.
At Risk Program goals for Mr. Kennedy, as Chief Executive Officer, were a
specified level of Company earnings per share (weighted as 75% of the formula)
and customer service/other goals (weighted as 25% of the formula). Company
earnings per share (exclusive of non-cash asset write downs, non-cash cumulative
effect of changes in accounting methods, and certain other special items) must
reach a pre-determined target to trigger the maximum annual incentive award to
Mr. Kennedy.
In furtherance of the Committee's goal of emphasizing incentive-based
compensation for the Company's executive officers, most of the executive
officers, including Messrs. Wehrlin and Hale were paid amounts as bonuses in
December 1999 (for performance in fiscal 1999). These awards were based on the
performance of their respective subsidiaries and/or their effectiveness in
performing their respective responsibilities. Messrs. Kennedy and Ackerman made
recommendations for fiscal 1999 bonuses for the Company's executive officers and
other officers which were accepted by the Committee. The Summary Compensation
Table on page 12 includes in the "Bonus" column the amount earned by Messrs.
Wehrlin and Hale in fiscal 1999 as incentives. These awards are considered by
the SEC to be bonuses because they are based on performance during a single
fiscal year.
Stock Options, SARs and Restricted Stock
Stock options, stock appreciation rights (SARs) and restricted stock
represent the longer-term incentive and retention component of the executive
compensation package. In fiscal 1999, the Committee awarded stock options to 100
employees, including the named executive officers. These awards are intended to
focus attention on managing the Company from a long-term investor's perspective
and encourage officers and other managers to have a significant, personal
investment in the Company through stock ownership. Employees are encouraged to
retain their stock for long-term investment, rather than sell option shares
after receiving them. Awards are made under plans such as the 1997 Award and
Option Plan which allow the Committee broad flexibility to use a wide range of
stock-based performance awards.
The Committee annually awards SARs and stock options to buy Company Common
Stock, both of which have value only to the extent the market price of the
Company's Common Stock increases after the date of an award. The Committee also
from time to time awards restricted stock, which increases or decreases in value
to the same extent as the Company's Common Stock. Dividends are paid on
restricted stock and on the shares held for employees (including executive
officers) in various employee benefit plans, so executive officers benefit
directly from dividends paid on the Company's Common Stock.
During fiscal 1999, the Committee awarded to each named executive officer
options to buy stock in the future at the market price on the award date. The
Committee also awarded to Mr. Kennedy and Mr. Ackerman an equal number of SARs
with the same exercise price. The
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Committee also awarded 4,925 shares of restricted stock to Mr. Kennedy, because
the combination of his base salary (frozen at the 1996 level) and maximum At
Risk Award (limited to 50% of his base salary) would have left him
undercompensated in the Committee's opinion. The Committee also awarded 664
shares of restricted stock to Mr. Ackerman for the same reason. None of the
options or SARs awarded can be exercised for at least one year after the award
date, and all of them expire no later than 10 years after the award date. Awards
to the named executive officers are shown on the Option/SAR Grants in Fiscal
1999 table on page 13.
As a general rule, the Committee uses the prior year's grant as the
starting point for determining each subsequent year's grant. The Committee
changes the size of grants as (1) participants are promoted to new positions,
(2) surveys indicate that stock options should be adjusted, or (3) depending on
the Committee's perception of individual and Company performance. For example,
in early fiscal 1999, the Committee reduced the number of SARs and options
awarded to Mr. Kennedy from 150,000 each to 120,000 each in light of the
Committee's review of the Company's performance in fiscal 1998.
Benefits Based on Retirement, Death, or Change in Control
Benefits based on retirement, death, or change in control are payable under
various arrangements which are applicable to the named executive officers (as
well as other core employees). The Committee is not generally authorized to
amend such arrangements, but makes recommendations to the Board of Directors to
amend such plans. The following Committee recommendations were adopted by the
Board of Directors in fiscal 1999.
The Committee recommended a totally new form for the Company's Change in
Control Agreements, last updated in the early 1990s. The primary reason for the
change was to reduce the likelihood of negative tax consequences to the Company
and the officers who signed the agreement. At the same time, special change in
control benefits formerly provided for under the Executive Retirement Plan were
eliminated, again to avoid negative tax consequences. The Executive Retirement
Plan was also amended to shorten the period within which an executive vests in
the portion of the Executive Retirement Plan benefit resulting from Internal
Revenue Code limitations and/or participation in the Deferred Compensation Plan.
Formerly, this portion of the benefit did not reflect the intent of the
Committee which was to vest such benefits at 5 years of service. Instead,
without the amendment, certain benefits would have been forfeited if the officer
left the Company for any reason before age 55.
Other than the plan changes described above, neither the Company nor the
Committee made any other material changes in any of the plans described in this
section, nor any material changes in any of the "miscellaneous minor perquisites
and personal benefits" discussed in footnote (1) of the Summary Compensation
Table on page 12.
Compensation of Chief Executive Officer
The basis for Mr. Kennedy's fiscal 1999 base salary and At Risk Program
award, including the Committee's goals and methodology, are discussed earlier in
this report under the heading Base Salary and Annual At Risk Incentive and
Bonus. The basis for Mr. Kennedy's other fiscal 1999 longer-term incentive
awards are discussed earlier in this report under the heading Stock Options,
SARs and Restricted Stock.
Based on a survey completed by an independent compensation consulting firm
in the first quarter of fiscal 2000, total direct compensation earned by the
four principal executive officers of the Company -- Messrs. Kennedy, Ackerman,
Hare and David F. Smith who became President of National Fuel Gas Distribution
Corporation on July 1, 1999 -- equated to the 73rd percentile of the
compensation packages earned by officers in a 10 company peer group selected for
the survey. In light of the Company's performance in fiscal 1999, the Committee
believes this level of executive compensation is appropriate.
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Policy With Respect to Qualifying Compensation Paid to Executive Officers For
Deductibility Under Section 162(m) of the Internal Revenue Code
The Committee intends that, whenever reasonably possible, compensation paid
to its managers, including its executive officers, should be deductible for
federal income tax purposes. Compensation paid under the At Risk Program
qualifies as performance-based compensation under Section 162(m) of the Internal
Revenue Code. The Committee may vote to award compensation, especially to a
chief executive officer, that is not fully deductible, if the Committee
determines that such award is consistent with its philosophy and is in the best
interests of the Company and its stockholders.
COMPENSATION COMMITTEE
GEORGE L. MAZANEC, CHAIRMAN
ROBERT T. BRADY
EUGENE T. MANN
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EXECUTIVE COMPENSATION SUMMARY TABLE
The following table sets forth information with respect to compensation
paid by the Company and its subsidiaries for services rendered during the last
three fiscal years to the Chief Executive Officer and each of the four other
most highly compensated executive officers for the fiscal year ended September
30, 1999 (the "named executive officers").
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------- ----------------------------------------
AWARDS PAYOUTS
-------------------------- -----------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL FISCAL BASE COMPENSA- STOCK OPTIONS/ LTIP COMPENSA-
POSITION YEAR SALARY ($) BONUS ($) TION ($)(1) AWARDS ($)(2) SARS (#) PAYOUTS ($) TION ($)(3)
- ------------------ ------ ---------- --------- ------------ ------------- ---------- ----------- -----------
Bernard J. Kennedy........ 1999 $848,150 0 0 $241,017 240,000 $424,000 $226,326
Chairman of the Board 1998 848,150 0 0 210,966 300,000 424,000 248,284
of Directors, Chief 1997 848,150 0 0 251,003 300,000 424,000 232,289
Executive Officer
Philip C. Ackerman........ 1999 495,000 0 0 32,495 160,000 247,500 118,677
President of the 1998 470,000 0 0 0 200,000 225,000 105,849
Company and President 1997 470,000 0 0 0 160,000 225,000 88,497
of Certain Subsidiaries
Richard Hare.............. 1999 370,000 0 0 0 25,000 65,000 76,583
President of National 1998 370,000 0 0 0 60,000 67,500 73,865
Fuel Gas Supply 1997 370,000 0 0 0 100,000 70,000 70,655
Corporation
Gerald T. Wehrlin......... 1999 237,000 100,000 0 0 25,000 0 54,340
Controller of the 1998 229,000 90,000 0 0 25,000 0 50,116
Company, Senior 1997 220,750 50,000 0 0 22,000 0 43,067
Vice President of
National Fuel Gas
Distribution Corporation,
and Vice President of
Horizon Energy
Development, Inc.
Bruce H. Hale............. 1999 227,000 100,000 0 0 25,000 0 62,980
Senior Vice President of 1998 218,500 90,000 0 0 25,000 0 60,007
National Fuel Gas Supply 1997 208,250 50,000 0 0 22,000 0 55,071
Corporation and Vice
President of Horizon
Energy Development, Inc.
- ---------------
(1) Excludes perquisites or personal benefits because, for each named executive
officer, the cost to the Company of all such items was less than $50,000 and
less than 10% of that executive's base salary and bonus, if any, for each
fiscal year listed.
(2) The dollar values shown in the Restricted Stock Awards column are based on
the fair market value of the Company's Common Stock on the date of the
restricted stock award. Restricted shares may not be transferred or pledged,
but such Company-imposed restrictions lapse with the passage of time and
continued employment with the Company.
As of September 30, 1999, the aggregate number of unvested shares of
restricted stock held by each named executive officer and the aggregate
fair market value of such shares using a closing market price as of
September 30, 1999 of $47.1875 are as follows: for Mr. Kennedy, 34,085
shares ($1,608,386); Mr. Ackerman, 10,250 shares ($483,672); Mr. Hare,
8,984 shares ($423,933); and Mr. Hale, 7,500 shares ($353,906). Dividends
are paid on all shares of restricted stock.
Mr. Kennedy's restricted stock awards reported in the table may vest, in
whole or in part, in under three years from the date of grant, together
with their vesting schedule, as follows: For fiscal 1999, 4,925 restricted
shares were granted on 12/9/99 for performance in fiscal 1999. For fiscal
1998, 4,580 restricted shares were granted on 12/10/1998 for performance in
fiscal 1998. Vesting restrictions on Mr. Kennedy's fiscal 1999 and fiscal
1998 awards lapse on the first January 15 which occurs after the year in
which Mr. Kennedy retires as an officer of the Company. These shares do not
vest if both his employment and Directorship with the Company and its
subsidiaries terminate for any reason prior to the
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expiration of vesting restrictions, unless such termination is on account
of death, disability or retirement. For fiscal 1997, 5,609 restricted
shares were granted on 12/11/1997 for performance in fiscal 1997. The
restrictions on these shares will expire on the earlier of December 11,
2000, or his death, but do not expire if he terminates his services as
director prior to December 11, 2000, for reasons other than death.
Mr. Ackerman was awarded 664 shares of restricted stock on 12/9/99 for
performance in fiscal 1999. Vesting restrictions lapse on the first January
15 which occurs after the year in which Mr. Ackerman retires as an officer
of the Company. These shares do not vest if both his employment and
Directorship with the Company and its subsidiaries terminate for any reason
prior to the expiration of vesting restrictions, unless such termination is
on account of death, disability or retirement.
(3) In fiscal 1999, the Company paid, contributed or accrued for Messrs.
Kennedy, Ackerman, Hare, Wehrlin, and Hale $0, $8,572, $8,572, $8,572 and
$8,572, respectively, under the Tax-Deferred Savings Plan; $97,362, $35,289,
$18,812, $11,513 and $10,876, respectively, under the Tophat Plan which pays
all participants a sum intended to replace amounts which they will not
receive as Company-matching contributions under the Tax-Deferred Savings
Plan as a result of tax law limits or other tax considerations; $0, $5,086,
$5,206, $3,721 and $2,565, respectively, under a program that passes through
to employees the Company's tax savings associated with payment of dividends
on Employee Stock Ownership Plan shares; $36,782, $13,941, $12,536, $14,030
and $5,900, respectively, as above-market interest under the Deferred
Compensation Plan (which amount, in the case of Mr. Hale, could be
forfeited); and $92,182, $55,789, $31,457, $16,504 and $35,067 respectively,
as the dollar value of split-dollar or other life insurance benefits paid
for by the Company.
STOCK OPTION GRANT TABLE
The following table sets forth information with respect to options to
purchase shares of Common Stock and Stock Appreciation Rights ("SARs") awarded
during fiscal 1999 to the named executive officers pursuant to plans approved by
the Company's stockholders.
OPTION/SAR GRANTS IN FISCAL 1999 (1)
- --------------------------------------------------------------------------------
INDIVIDUAL GRANTS
----------------------------------------------
PERCENT OF TOTAL
NUMBER OF OPTIONS/SARS EXERCISE
SECURITIES GRANTED TO OR BASE
UNDERLYING EMPLOYEES PRICE PER GRANT DATE
OPTIONS/SARS IN FISCAL SHARE EXPIRATION PRESENT
NAME GRANTED(#) YEAR ($/SH) DATE VALUE($)(2)
- ---- --------------- ---------------- --------- ---------- -------------
Bernard J. Kennedy..... 120,000 options 12.6% $46.0625 12/2008 $852,000
120,000 SARs 12.6% 46.0625 12/2008 852,000
Philip C. Ackerman..... 80,000 options 8.4% 46.0625 12/2008 568,000
80,000 SARs 8.4% 46.0625 12/2008 568,000
Richard Hare........... 25,000 2.6% 46.0625 12/2008 177,500
options........
Gerald T. Wehrlin...... 25,000 options 2.6% 46.0625 12/2008 177,500
Bruce H. Hale.......... 25,000 options 2.6% 46.0625 12/2008 177,500
- ---------------
(1) The options and SARs shown on this table were granted under the 1997 Award
and Option Plan and can be exercised at any time during the nine years
preceding the expiration date if the holder remains with the Company. These
options and SARs terminate upon termination of employment, except that upon
termination of employment for any reason other than discharge for cause or
voluntary resignation prior to age 60, most of such options and SARs may be
exercised within five years after termination of employment. Payment of the
exercise price may be in cash or by tendering shares of Company Common
Stock.
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(2) This column shows the hypothetical value of these options and SARs according
to a binomial option pricing model. The assumptions used in this model for
the options granted in fiscal 1999 were: quarterly dividend yield of .9769%,
an annual standard deviation (volatility) of 18.86%, a risk-free rate of
4.49%, and an expected term before exercise of 5 years. Whether the
assumptions used will prove accurate cannot be known at the date of grant.
The model produces a value based on freely tradable securities, which the
options and SARs are not. The holder can derive a benefit only to the extent
the market value of Company Common Stock is higher than the exercise price
at the date of actual exercise.
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUE TABLE
The following table sets forth as to each named executive officer
information with respect to stock option and SAR exercises during fiscal 1999
and the number and value of unexercised options and SARs at September 30, 1999.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1999
AND OPTION/SAR VALUES ON SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
NUMBER OF SECURITIES
NUMBER OF UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SECURITIES OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
UNDERLYING FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(2)
OPTIONS/SARS VALUE --------------------------- ---------------------------
NAME EXERCISED(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------------- ----------- ------------- ----------- -------------
Bernard J. Kennedy............ 26,000 512,468 1,118,421 240,000 12,994,949 217,500
Philip C. Ackerman............ 21,079 480,791 640,085 160,000 7,106,147 145,000
Richard Hare.................. 0 0 215,662 25,000 2,004,689 22,656
Gerald T. Wehrlin............. 5,588 118,468 109,000 25,000 1,119,094 22,656
Bruce H. Hale................. 0 0 86,000 25,000 812,437 22,656
- ---------------
(1) Market value of stock at exercise less exercise price or base price.
(2) Market value of stock at fiscal year-end less exercise price or base price.
LONG-TERM INCENTIVE PLAN AWARD TABLE
The following table sets forth information with respect to long-term
incentive plan awards made during fiscal 1999 to the named executive officers
pursuant to the At Risk Program.
LONG-TERM INCENTIVE PLAN -- AWARDS IN FISCAL 1999
- --------------------------------------------------------------------------------
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS(1)
PERFORMANCE PERIOD ----------------------------------------
NAME UNTIL MATURATION THRESHOLD($) TARGET($) MAXIMUM($)
---- --------------------- ------------- ---------- -----------
Bernard J. Kennedy............ 2 years ended 9/30/99 0 424,000 424,000
Philip C. Ackerman............ 2 years ended 9/30/99 0 235,000 248,000
Richard Hare.................. 2 years ended 9/30/99 0 37,000 74,000
- ---------------
(1) This table describes the sole At Risk Program opportunity which was made to
executive officers in fiscal 1999 based on the rolling two-year average of
performance in fiscal 1998 and fiscal 1999. The actual amounts awarded and
paid for fiscal 1999 under the At Risk Program are shown in the Summary
Compensation Table on page 12 in the LTIP Payouts column.
REPORT ON REPRICING OF OPTIONS/SARS
The Company did not reprice any stock options or SARs in fiscal 1999.
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CORPORATE PERFORMANCE GRAPH
The following graph compares the yearly cumulative stockholder return on
the Company's Common Stock against the cumulative total return of the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500") and the Standard & Poor's
Utilities Index ("S&P Utilities") for a period of five years commencing
September 30, 1994, and ended September 30, 1999.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS*
FISCAL YEARS 1995-1999
[FIVE-YEAR COMPARISON]
* Assumes $100 invested on September 30, 1994, and reinvestment of dividends.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
AGREEMENTS
Mr. Kennedy entered into an employment agreement with the Company on
September 17, 1981, which was most recently extended as of September 1, 1999.
The agreement is effective until September 1, 2002, subject to earlier
termination in the event of his death or disability. The agreement preserves, as
a minimum level of compensation, monthly compensation levels as are in effect
from time to time.
Messrs. Ackerman, Hare, Wehrlin, and Hale entered into Employment
Continuation and Noncompetition Agreements with the Company dated December 11,
1998 that are to become effective in the event of a defined change of control of
the Company. They preserve as a minimum, for the three years following such
change of control, the annual salary levels and employee benefits as are then in
effect for these executives and provide that, in the event of certain
terminations of employment, these executives shall receive severance payments up
to 1.99 times their respective annual base salaries and annual bonuses prior to
termination. If an executive elects to be bound by the Noncompetition part of
the agreement, an additional payment of 1.00 times salary and annual bonus prior
to termination will be made. In addition, executives shall receive continuation
of certain employee benefits for three years or receipt of
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the value of such benefits, minus amounts earned through other employment over
such three-year period.
Also, in the event of a defined change in control, these executives shall
receive the above-market rate interest on their deferrals under the Deferred
Compensation Plan, which otherwise would have been forfeited. At September 30,
1999, the above-market rate interest account balance for each of the named
executive officers were as follows: $217,559 for Mr. Kennedy, $89,835 for Mr.
Ackerman, $79,603 for Mr. Hare, $98,344 for Mr. Wehrlin and $47,084 for Mr.
Hale.
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
The following table shows annual 50% joint and survivor life annuity total
benefits payable under the Retirement Plan plus the Executive Retirement Plan to
eligible officers retiring on the later of the normal retirement age of 65 or
their current age with a spouse of the same age. Forms of benefit payment other
than the 50% joint and survivor life annuity, or retirement at an age earlier
than 65, would result in different annual benefits to eligible officers.
ESTIMATED ANNUAL RETIREMENT BENEFITS
FIVE-YEAR FOR YEARS OF BENEFIT SERVICE CREDITED(1)
FINAL AVERAGE ---------------------------------------------
SALARY(2)(3) 25 30 35 40
- ------------- -- -- -- --
$ 300,000 $124,491 $149,389 $ 166,674 $ 183,960
700,000 296,472 355,766 396,099 436,431
1,100,000 468,453 562,143 625,523 688,903
1,500,000 640,434 768,521 854,948 1,263,771
1,900,000 812,415 974,898 1,084,372 1,552,971
- ---------------
(1) The service credited for retirement benefit purposes to the officers named
in the Summary Compensation Table, as of September 30, 1999, is as follows:
Mr. Kennedy, 40 years; Mr. Ackerman, 31 years, 2 months; Mr. Hare, 24 years;
Mr. Wehrlin, 23 years, 1 month; Mr. Hale, 28 years, 3 months.
(2) Compensation covered for retirement benefit purposes is more than the
amounts appearing in the three "annual compensation" columns of the Summary
Compensation Table on page 12, because of the inclusion of At Risk Program
awards, some restricted stock and other lump sum compensation payments.
Accordingly, the covered current compensation as of September 30, 1999, is
as follows: Mr. Kennedy, $1,513,167; Mr. Ackerman, $774,995; Mr. Hare,
$435,000; Mr. Wehrlin, $337,000; and Mr. Hale, $327,000.
(3) Benefits described in this table reflect a partial offset for Social
Security benefits.
2. APPOINTMENT OF INDEPENDENT ACCOUNTANTS
At the 2000 Annual Meeting, stockholders will be asked to appoint
PricewaterhouseCoopers LLP independent accountants for the Company's fiscal year
ending September 30, 2000 ("fiscal 2000"). If appointed, PricewaterhouseCoopers
LLP will examine the financial statements of the Company and its subsidiaries
and report upon the annual consolidated financial statements for fiscal 2000.
Representatives of that firm have regularly attended the Company's annual
meetings and one is expected to be available this year. This representative
shall have the opportunity to make a statement, if he or she desires, and is
expected to respond to questions, if any.
The affirmative vote of a majority of the votes cast with respect to the
appointment of independent accountants by the holders of shares of Common Stock
entitled to vote is required for the appointment of PricewaterhouseCoopers LLP
as independent accountants.
If the necessary votes are not received, or if PricewaterhouseCoopers LLP
declines to accept or otherwise becomes incapable of accepting or exercising the
appointment, or its services are otherwise discontinued, the Board of Directors
will appoint other independent accountants.
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Unless they are otherwise directed by the stockholders, the Proxies intend to
vote for the appointment of PricewaterhouseCoopers LLP as independent
accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS APPOINTMENT.
3. APPROVAL OF THE ANNUAL AT RISK COMPENSATION INCENTIVE PROGRAM
Since 1993, a key component of the Company's executive compensation package
has been the performance-based compensation paid in accordance with the
Company's Annual At Risk Compensation Incentive Program ("AARCIP"). The Company
is now seeking the stockholder approval necessary to receive the full tax
benefit of continuing to pay that performance-based compensation.
BACKGROUND.
The AARCIP is described in the "Administrative Rules With Respect to At
Risk Awards Under the 1993 Award and Option Plan," which the stockholders
approved at the 1995 Annual Meeting. Under the AARCIP, cash is payable to
eligible employees based on the extent of attainment over a Performance Period
of Performance Goals, all as specified and judged by the Compensation Committee
in its discretion ("At Risk Awards"). An At Risk Award is one of the several
types of awards which the Compensation Committee can make under the authority of
the 1993 Award and Option Plan (the "1993 Plan"), which the stockholders
approved at the 1993 Annual Meeting.
By 1997, virtually all of the stock options authorized by the 1993 Plan had
been issued. Accordingly, at the 1997 Annual Meeting, the stockholders approved
the 1997 Award and Option Plan (the "1997 Plan"), which is very similar to the
1993 Plan. The purposes of both the 1993 Plan and the 1997 Plan are (i) to
provide incentives to certain employees of the Company whose contributions are
important to the continued success of the Company, and (ii) to enhance the
Company's ability to attract and retain highly qualified persons for the
successful conduct of its businesses.
Since 1997, virtually all awards of stock options have been made under the
authority of the 1997 Plan. About the only thing the 1993 Plan is still used for
is At Risk Awards. The Company is now asking for approval by the stockholders,
at the 2000 Annual Meeting, of Administrative Rules With Respect to At Risk
Awards Under the 1997 Plan (the "2000 AARCIP"). Under the 2000 AARCIP, cash
would be payable to executives based on the extent of attainment over a
Performance Period of Performance Goals, all as specified and judged by the
Compensation Committee in its discretion.
In order for the Company to receive the maximum tax benefit from all
amounts paid under the 2000 AARCIP (or even under a continuation of the AARCIP),
stockholder approval at the 2000 Annual Meeting is necessary. Section 162(m) of
the Internal Revenue Code limits the amount of individual compensation that may
be deducted by an employer for tax purposes in any one fiscal year to $1 million
per person, and creates an exception to the $1 million limitation for
compensation which constitutes "performance-based compensation", paid as a
result of the attainment of pre-established, objective performance criteria.
Among other conditions, in order to be "performance-based compensation", the
material terms of a performance-based plan like the AARCIP or the 2000 AARCIP
must be approved by the Company's stockholders at least every five years.
Consequently, some future At Risk Awards may not be deductible by the Company
unless the 2000 AARCIP is approved by stockholders at the 2000 Annual Meeting.
Therefore, in order to ensure that future At Risk Awards would constitute
"performance-based compensation," and thus would be fully deductible to the
Company on its federal income tax returns, stockholder approval of the AARCIP is
being sought at this time. The Board of Directors of the Company has determined
that approval of the 2000 AARCIP by the stockholders is in the best interests of
the Company and the stockholders. The affirmative vote of a majority of the
shares of Common Stock present and voting at the meeting is required for
approval of the 2000 AARCIP.
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SUMMARY OF THE 2000 AARCIP.
The following is a summary of the 2000 AARCIP and the Administrative Rules
implementing the 2000 AARCIP ("Rules"). A copy of the Rules accompanies this
Proxy Statement as Exhibit A. The following summary is qualified in its entirety
by reference to Exhibit A.
At Risk Awards
Under the 2000 AARCIP, At Risk Awards granted by the Committee under the
1997 Plan entitle each recipient to a cash payment based upon the extent to
which Performance Goals have been attained for a specified Performance Period.
No Eligible Employee may receive more than one At Risk Award in any fiscal year.
An At Risk Award may be granted singly, in combination or in the alternative
with other Awards granted under the 1997 Plan or awards under other Company
benefit plans.
Administration
The 2000 AARCIP provides for administration by the Compensation Committee
of the Board, or such other committee designated by the Board ("Committee"). The
Committee must consist of at least two members, each of whom is an "outside
director" as defined by Section 162(m) of the Internal Revenue Code and the
rules, regulations and interpretations promulgated thereunder as amended from
time to time ("Code").
With respect to At Risk Awards, the Committee has full authority to:
interpret the 1997 Plan and Section 162(m) of the Code to the extent not
addressed by regulation, proposed regulation or publicly available
interpretation of the Internal Revenue Service; determine and select Eligible
Employees to receive At Risk Awards; determine the terms and conditions of an At
Risk Award, including the time of making the At Risk Award, the Performance
Period, Performance Goals, and levels of At Risk Awards to be earned in relation
to levels of achievement of the Performance Goals; determine whether At Risk
Awards are to be granted singly, in combination or in the alternative with other
Awards under the 1997 Plan or awards under other Company benefit plans; grant
waivers of 1997 Plan terms and conditions, provided that such waivers are not
inconsistent with Section 162(m) of the Code; and accelerate the vesting,
exercise or payment of any At Risk Award or the Performance Period of an At Risk
Award when such action would not cause compensation paid or payable under such
At Risk Award to cease to be deductible by the Company for federal income tax
purposes. The Committee will also have the authority to grant At Risk Awards in
replacement of Awards previously granted under the 1997 Plan or awards under any
other executive compensation or stock option plan of the Company or a
Subsidiary.
Under the 2000 AARCIP, all determinations of the Committee will be made by
a majority of its members, and its determinations will be final, binding and
conclusive. The 2000 AARCIP authorizes the Committee, in its discretion, to
delegate its authority and duties under the 1997 Plan with respect to At Risk
Awards to the Company's Chief Executive Officer or to other senior officers of
the Company, but only to the extent, if any, permitted by Section 162(m) of the
Code.
Eligibility for Participation
Eligible Employees are those employees of the Company or its Subsidiaries
who are expected to constitute "covered employees" within the meaning of Section
162(m) of the Code, and any other Core Employee to whom an At Risk Award has
been granted by the Committee. Presently, there are approximately four Eligible
Employees.
Effective Date
Upon approval of the 2000 AARCIP by the stockholders of the Company at the
2000 Annual Meeting, the 2000 AARCIP will become effective as of December 9,
1999.
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Objective Performance Goals
The Performance Goals of the 2000 AARCIP are established with reference to
earnings per share, subsidiary net income and customer service/other goals, and
are established by the Committee for each Eligible Employee who receives an At
Risk Award.
For example, for fiscal 2000, the Committee has granted At Risk Awards
pursuant to which Messrs. Kennedy, Ackerman and Hare each would have the
opportunity to earn annual at risk incentive compensation equal to specified
percentages of base salary, by achieving specific target Performance Goals
constituting median and maximum performance, as summarized below.
Mr. Kennedy, as Chief Executive Officer, would receive payment based upon
attainment of specified levels of Company earnings per share (weighted as a
specified percentage of the overall formula) and specified levels of
satisfaction of customer service/other goals (weighted as a specified percentage
of the overall formula).
Mr. Ackerman, as President and Chief Financial Officer of the Company,
would receive payment based upon attainment of specified levels of Company
earnings per share (weighted as a specified percentage of the overall formula),
specified levels of net income for the Subsidiaries for which he has
responsibility (weighted as a specified percentage of the overall formula), and
specified levels of satisfaction of customer service/other goals (weighted as a
specified percentage of the overall formula).
Mr. Hare, as President of National Fuel Gas Supply Corporation, would
receive payment based upon attainment of specified levels of Company earnings
per share (weighted as a specified percentage of the overall formula), specified
levels of net income for the Subsidiaries for which he has responsibility
(weighted as a specified percentage of the overall formula), and specified
levels of satisfaction of customer service/other goals (weighted as a specified
percentage of the overall formula).
Mr. Smith, as President of National Fuel Gas Distribution Corporation,
would receive payment based upon attainment of specified levels of Company
earnings per share (weighted as a specified percentage of the overall formula),
specified levels of net income for the Subsidiaries for which he has
responsibility (weighted as a specified percentage of the overall formula), and
specified levels of satisfaction of customer service/other goals (weighted as a
specified percentage of the overall formula).
The "customer service/other goals" to be used in evaluating satisfaction of
2000 AARCIP Awards in fiscal 2000 for all recipients of At Risk Awards may
include, but are not necessarily limited to: reliability, system integrity and
synergism, management preparedness, profitability, meeting of budgets,
nonregulated acquisitions, hedging, improving efficiency, resolving rates for
gathering services, and human resources projects.
The 2000 AARCIP provides that the maximum aggregate value of any At Risk
Award to any Eligible Employee in any fiscal year will not exceed the lower of
(i) that employee's base salary for that fiscal year, or (ii) one million
dollars. Under the AARCIP, such awards to an Eligible Employee were limited to
50% of that individual's base salary, but there was no absolute dollar limit.
The Summary Compensation Table on page 12 shows each named executive officer's
fiscal 1999 At Risk Award earned for performance in fiscal 1998 and fiscal 1999
in the "LTIP Payouts" column.
The Committee may revise the target and maximum Performance Goals and the
percentages and weightings, from time to time, provided that it is not intended
that such revisions would in the aggregate make future At Risk Awards more
valuable or more easily achievable than those described here.
Grant of At Risk Awards
The 2000 AARCIP provides that At Risk Awards may be made for each of the
fiscal years of the Company commencing with fiscal 2000. The At Risk Awards for
a fiscal year may be made only within the time allowed under Section 162(m) of
the Code.
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Payment of At Risk Awards
Under the 2000 AARCIP, each At Risk Award granted to an Eligible Employee
will entitle such Eligible Employee to receive a cash payment based on the
extent to which the Performance Goals for a particular Performance Period are
attained, as specified by the Committee in the Award Notice and certified in
writing by the Committee (for example, in approved Committee minutes). Cash
payment will be made promptly after such certification.
Termination of Employment, Retirement, or Death of Participant
The 1997 Plan provides that if an Eligible Employee's employment with the
Company or Subsidiary terminates for a reason other than death, disability,
retirement, or any other approved reason, all unearned or unpaid At Risk Awards
will be canceled or forfeited, unless otherwise provided in the Award Notice or
the Rules.
The Rules provide that if the Eligible Employee became disabled, retired or
was terminated for an approved reason during a Performance Period, his
participation would continue to the end of the Performance Period, and he would
be paid a percentage of the amount earned proportionate to his period of active
service during that Performance Period.
If the Eligible Employee died during a Performance Period, the designated
beneficiary or estate would be paid an amount proportionate to the period of
active service during the Performance Period, based upon the maximum Award
amount.
Amendments to At Risk Awards
The 2000 AARCIP provides that the Committee may at any time unilaterally
amend any unearned or unpaid At Risk Award, including At Risk Awards earned but
not yet paid, to the extent it deems appropriate. However, any such amendment
which is adverse to the Eligible Employee requires the Eligible Employee's
consent. The Committee has no authority to make any amendment which would cause
compensation paid or payable under the At Risk Award to cease to be deductible
by the Company for federal income tax purposes.
Amendments to Rules
Subject to the stockholder approval requirements of Section 162(m), the
Committee may, from time to time, amend the Rules in any manner.
Change in Control and Change in Ownership
The 1997 Plan defines a "Change in Control" as occurring when (i) a
"person" becomes the beneficial owner of 20% or more of voting control of the
Company, (ii) the stockholders approve either a merger that substantially
changes the stockholders' proportionate ownership of the surviving company or a
transfer of substantially all of the Company's assets, or (iii) members of the
"incumbent board" (including directors approved by at least 3/4 of the incumbent
board) cease to constitute a majority of the Board. The 1997 Plan also defines a
"Change in Ownership" as a change which results directly or indirectly in the
Company's Common Stock ceasing to be actively traded on a national securities
exchange or the National Association of Securities Dealers Automated Quotation
System.
If an Eligible Employee holding an At Risk Award is eligible for treatment
under the Change in Control and Change in Ownership provisions of the 1997 Plan,
the Rules determine the manner in which such At Risk Award will be paid to him.
For purposes of making such payment, each "current Performance Period," which is
a Performance Period that has commenced but has not yet ended, will be treated
as terminating upon the Acceleration Date, and for each such "current
Performance Period" and each "completed Performance Period," which is a
Performance Period which has ended but for which the Committee has not, on the
Acceleration Date, made a determination as to whether and to what degree the
Performance Goals for such period have been attained, it will be assumed that
the Performance Goals have been attained at a level of 100% of each target or
the equivalent thereof. If the Eligible Employee is participating in one or more
"current Performance Periods," he will be considered to have earned and,
therefore, to
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be entitled to receive, a prorated portion of the At Risk Awards previously
granted to him for each such Performance Period. Such prorated portion will be
determined by multiplying 100% of the At Risk Award to the Eligible Employee by
a fraction, the numerator of which is the total number of whole and partial
years, with each partial year being treated as a whole year, that have elapsed
since the beginning of the Performance Period, and the denominator of which is
the total number of years in such Performance Period. An Eligible Employee in
one or more "completed Performance Periods" will be considered to have earned
and, therefore, to be entitled to receive, 100% of the At Risk Awards previously
granted to him during each Performance Period.
Savings Provision
The Rules are intended to comply with all the applicable conditions of
Section 162(m) of the Code, so that compensation paid or payable as an At Risk
Award will constitute qualified "performance-based compensation." To the extent
any provision of the Rules or any action by the Committee fails to comply, such
provision or action will be deemed null and void, to the extent permitted by
law.
NEW PLAN BENEFITS TABLE
For each of the named executive officers and the various indicated groups,
the following table shows the amount of performance-based compensation paid
under the AARCIP in 2000 for 1999 performance under the 1993 Plan (Payments in
2001 for 2000 performance are not yet determinable). The table also shows the
new plan benefits resulting from Proposal 4, "Approval of Certain Amendments to
the 1997 Award and Option Plan" beginning on page 22. Under Proposal 4, for each
of the named executive officers and the various indicated groups, the table
shows (i) the number of options, SARs and Restricted Shares which would have
been granted if the 1997 Plan amendments had been adopted and approved as of
October 1, 1999 or are expected to be granted under the 1997 Plan in fiscal
2000; and (ii) the number of options and SARs which have already been granted in
fiscal 2000 under the 1997 Plan.
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NEW PLAN BENEFITS
- --------------------------------------------------------------------------------
1993 PLAN
------------ 1997 PLAN
AARCIP -----------------------------------------------
PERFORMANCE- AWARDS
BASED AWARDS EXPECTED
COMPENSATION DOLLAR GRANTED TO BE GRANTED
NAME AND POSITION IN 2000(1) VALUE IN 2000 IN 2000(3)
- ----------------- ------------ -------- ---------------- ---------------
Bernard J. Kennedy............ $424,000 $241,017(2) 4,925 Restricted 147,500 options
Chairman of the Board, and Shares 147,500 SARs
Chief Executive Officer
Philip C. Ackerman............ $247,500 $ 32,495(2) 664 Restricted 110,000 options
President of the Company Shares 110,000 SARs
and President of certain
subsidiaries
Richard Hare.................. $ 65,000 0 0 0
President of National Fuel Gas
Supply Corporation
Gerald T. Wehrlin............. $ 0 (2) 0 25,000 options
Controller of the Company and
Senior Vice President of
National Fuel Gas Distribution
Corporation
Bruce H. Hale................. $ 0 (2) 0 25,000 options
Senior Vice President of
National Fuel Gas Supply
Corporation
All current executive officers
as a group (10 persons)..... $736,500 $371,387(2) 7,589 Restricted 467,500 options
Shares 257,500 SARs
All non-employee directors as
a group (7 persons) as of
December 31, 1999........... $ 0 $ 0 0 0
All employees, including all
current officers who are not
executive officers, as a
group....................... 736,500 $371,387(2) 7,589 Restricted 839,900 options
Shares 257,500 SARs
- ---------------
(1) At Risk Awards under the AARCIP represent cash payments made in 2000 for the
1999 Performance Period. Payments for the 2000 Performance Period under the
AARCIP are not yet determinable.
(2) Dollar value of restricted shares equals fair market value at grant date.
The exercise or base price of each stock option or SAR will be determined by
the Committee, but will not be less than the fair market value per share of
the Company's common stock on the date the option is granted.
(3) Each option entitles the holder to purchase one share of Company Common
Stock subject to the provisions of the 1997 Plan. Each SAR entitles the
holder to receive a payment equal to the appreciation in fair market value
on the date of its exercise.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
4. APPROVAL OF CERTAIN AMENDMENTS TO THE 1997 AWARD AND OPTION PLAN
On December 13, 1996, the Board of Directors adopted the National Fuel Gas
Company 1997 Award and Option Plan ("1997 Plan"), subject to approval by the
common stockholders at the 1997 Annual Meeting. On December 9, 1999, the Board
of Directors adopted amendments to the
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1997 Plan, subject to approval by the common stockholders at this Annual
Meeting. The affirmative vote of a majority of the votes cast with respect to
this proposal by the holders of shares of Common Stock entitled to vote is
required for the adoption of the proposal. A copy of the 1997 Plan, as proposed
to be amended, is attached to and incorporated in this Proxy Statement as
Exhibit B.
The Board of Directors believes that it is in the Company's best interests
to approve the proposed amendments for several reasons. First, a competitive
stock option plan is essential to attract and retain outstanding individuals in
today's market. Second, it is expected that all of the 1,900,000 shares
originally issuable under the 1997 Plan will have been granted by early 2000,
and that such amount will be insufficient to satisfy anticipated option awards
for fiscal 2000 and beyond. The proposed amendment would add an additional
1,900,000 shares to the 1997 Plan. Third, an amendment to eliminate the
Committee's ability to reprice stock options and stock appreciation rights would
prevent the Committee from increasing the value of awards which had little or no
value because the Company's stock price had not increased after the award. The
Company has never utilized its ability to reprice options or stock appreciation
rights. Fourth, an amendment to limit the number of shares of restricted stock
which can be issued in one fiscal year would prevent the Committee from using
all the available shares as restricted stock awards instead of options. Fifth,
an amendment broadening the group of employees who can receive stock options
helps to align the interests of more employees more directly with those of the
shareholders. Each of these amendments is discussed in more detail in the
appropriate section(s) below.
ADMINISTRATION
The 1997 Plan provides for administration by the Compensation Committee of
the Board or another committee designated by the Board ("Committee"). The
Committee is composed entirely of "Disinterested Board Members" who are not
present or former employees or officers of the Company. No member of the
Committee is eligible to be selected to participate in the 1997 Plan. Among the
powers granted to the Committee are the authority to interpret the 1997 Plan,
establish rules and regulations for its administration, select core employees of
the Company and its subsidiaries to receive awards, determine the form and
amount and other terms and conditions of an award, grant waivers of 1997 Plan
terms and conditions, accelerate the vesting, exercise or payment of an award
and take all action it deems advisable for the proper administration of the 1997
Plan. The 1997 Plan authorizes the Committee to delegate its authority and
duties under the 1997 Plan, in certain circumstances, to the Chief Executive
Officer and other senior officers of the Company.
ELIGIBILITY FOR PARTICIPATION
All Core Employees (management employees selected by the Committee) of the
Company or any of its 80%-or-more owned subsidiaries are eligible to be selected
to participate in the 1997 Plan. The selection of Participants from among core
management employees is within the discretion of the Committee. The amendments
broaden the scope of people who can receive stock options beyond the "key
employees" who have previously been eligible, and make it clear that "Key
Management Employees" (select highly compensated employees) are the only people
eligible to receive the other types of awards authorized by the 1997 Plan.
AMENDMENT OF PLAN
The Board may suspend or terminate the 1997 Plan at any time, and may also
amend the 1997 Plan at any time but, any such amendment may be subject to
stockholder approval (i) at the discretion of the Board; and (ii) to the extent
stockholder approval may be required by law, including, but not limited to, the
requirements of Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
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SHARES AVAILABLE FOR GRANT
The 1997 Plan authorizes the Committee to grant awards during the period
from December 13, 1996 through December 12, 2006. Subject to equitable
adjustment, 3,800,000 shares of Common Stock of the Company are available for
grant under the 1997 Plan. These proposed amendments represent an increase in
the number of available shares by 1,900,000 shares, which is less than 5% of the
Company's total outstanding shares. Shares of Common Stock related to awards
which terminate by expiration, forfeiture, cancellation or otherwise without the
issuance of shares, or are settled in cash in lieu of Common Stock, will again
be available for grant under the 1997 Plan. Similarly, shares of Common Stock
used by a Participant with the Committee's consent to pay in full or in part the
purchase price of shares of Common Stock upon exercise of a stock option will
again be available for grant under the 1997 Plan.
No one Participant in the 1997 Plan may receive awards covering more than
300,000 shares of Common Stock of the Company in any fiscal year, subject to
equitable adjustment.
TYPES OF AWARDS
The 1997 Plan provides for the grant of any or all of the following types
of awards: (1) stock options, including incentive stock options; (2) stock
appreciation rights ("SARs"), which may be granted singly, in combination with
stock options or in the alternative; (3) Common Stock of the Company, including
restricted Common Stock; (4) performance units; (5) performance shares; (6)
Common Stock units; and (7) any other award established by the Committee which
is consistent with the 1997 Plan's purposes. Such awards may be granted singly,
in combination or in the alternative, as determined by the Committee.
STOCK OPTIONS
Under the 1997 Plan, the Committee may grant awards to Core Employees in
the form of stock options to purchase shares of the Company's Common Stock.
Unless the award notice provides otherwise, each option shall be exercisable in
whole or in part. The Committee will, with regard to each stock option,
determine the number of shares subject to the option, the manner and time of the
option's exercise, and the exercise price per share of Common Stock subject to
the option. In no event, however, may the exercise price of a stock option be
less than the fair market value of the Company's Common Stock on the date of the
stock option's grant. Unless the award notice provides otherwise, each incentive
stock option shall first become exercisable on the first anniversary of its date
of grant. Unless the award notice provides for a shorter period, each incentive
stock option shall expire on the tenth anniversary of its date of grant. Unless
the award notice provides otherwise, each non-qualified stock option shall
expire on the day after the tenth anniversary of its date of grant, and
incentive stock options and nonqualified stock options granted in combination
may be exercised separately. Any stock option grant in the form of an incentive
stock option will satisfy the applicable requirements of Section 422 of the
Internal Revenue Code of 1986, as amended, (the "Code"). See Federal Income Tax
Treatment beginning at page 28 for a discussion of the differing federal tax
treatment afforded to incentive and non-qualified stock options.
Unless the award notice provides otherwise, any incentive stock option
which has not theretofore expired shall terminate upon termination of the
Participant's employment with the Company whether by death or otherwise, and no
shares of Common Stock may thereafter be purchased pursuant to such incentive
stock option, except that upon termination of employment (other than by death),
a Participant may, within three months after the date of termination of
employment, purchase all or part of any shares of Common Stock which the
Participant was entitled to purchase under such incentive stock option on the
date of termination of employment. Also, upon the death of any Participant while
employed with the Company or within the three-month period after the date of
termination of a Participant's employment, the Participant's estate or the
person to whom the Participant's rights under the incentive stock option are
transferred by will or the laws of descent and distribution may, within one year
after the date of the Participant's death, purchase all or part of any shares of
Common Stock which the Participant was entitled to purchase under such incentive
stock option on the date of death.
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Notwithstanding the above, the Committee may at any time within the
three-month period after the date of termination of a Participant's employment,
with the consent of the Participant, the Participant's estate or the person to
whom the Participant's rights under the incentive stock options are transferred
by will or the laws of descent and distribution, extend the period for exercise
of the Participant's incentive stock options to any date not later than the date
on which such incentive stock options would have otherwise expired absent such
termination of employment. In no event shall an incentive stock option be
exercisable after the expiration of the exercise period therein provided, nor
later than ten years after the date of grant.
Unless the award notice provides otherwise, any non-qualified stock option,
which has not theretofore expired, shall terminate upon termination of the
Participant's employment with the Company, and no shares of Common Stock may
thereafter be purchased pursuant to such non-qualified stock option, except
that, upon termination of employment for any reason other than death, discharge
by the Company for cause, or voluntary resignation of the Participant prior to
age 60, a Participant may, within five years after the date of termination of
employment, or any such greater period of time as the Committee, in its sole
discretion, deems appropriate, exercise all or part of the non-qualified stock
option which the Participant was entitled to exercise on the date of termination
of employment or subsequently becomes eligible to exercise as described below
with respect to death and voluntary resignation after age 60. Notwithstanding
the foregoing, if the Committee determines that a Participant is employed by an
employer or engaged in a business that competes with the business of the
Company, the Participant shall thereafter lose his or her rights to exercise any
non-qualified stock options.
Upon the death of a Participant while employed with the Company or within
the period referred to below, the Participant's estate or the person to whom the
Participant's rights under the non-qualified stock option are transferred by
will or the laws of descent and distribution may, within five years after the
date of the Participant's death while employed, or within the period referred to
below, exercise all or part of the non-qualified stock option which the
Participant was entitled to exercise on the date of death.
Unless the award notice provides otherwise, each non-qualified option shall
first become exercisable on the first anniversary of its date of grant, or if
earlier (i) on the date of the Participant's death occurring after the date of
grant; (ii) six months after the date of grant, if the Participant has
voluntarily resigned on or after his or her 60th birthday, after the date of
grant, and before such six months; or (iii) on the date of the Participant's
voluntary resignation on or after his or her 60th birthday and at least six
months after the date of grant.
In no event shall a non-qualified stock option be exercisable later than
the exercise period set forth in the award notice.
Upon exercise, the exercise price may, at the discretion of the Committee,
be paid by a Participant in cash, shares of Common Stock, shares of restricted
stock, a combination thereof, or such other consideration as the Committee may
deem appropriate. An award may provide that a Participant who pays the option
exercise price with previously-owned shares of the Company's Common Stock shall
automatically be awarded a new stock option to purchase additional shares of
Common Stock equal to the number of shares used to pay the exercise price. The
1997 Plan also allows for the so-called "cashless exercise" of options by
payment of the exercise price using a portion of the shares otherwise receivable
upon exercise of the option.
The proposed amendments also explicitly provide that stock options will not
be repriced by reducing the exercise price after the options are granted. The
Company has never repriced any options, although it had the flexibility to do
so. This amendment is proposed to assure that options will not be repriced in
the future.
STOCK APPRECIATION RIGHTS
The 1997 Plan authorizes the Committee to grant SARs to Key Management
Employees either singly ("Independent SARs"), in combination with all or a
portion of a related stock option ("Combination SARs") or in the alternative
("Alternative SARs"). A SAR is a right to receive a payment equal to the
appreciation in fair market value of a stated number of shares of Common Stock
from the SAR's exercise price to the fair market value on the date of its
exercise.
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A Combination or Alternative SAR may be granted either at the time of the
grant of the related stock option or at any time thereafter during the term of
the stock option. Combination SARs may be exercised either together with the
related stock option or separately. The exercise price of a Combination SAR
shall be the exercise price of the related stock option, and a Combination SAR
shall be exercisable only to the extent that the related stock option is
exercisable. If a Participant exercises a Combination SAR or a related stock
option, but not both, the other shall remain outstanding and exercisable.
An Alternative SAR shall be exercisable to the extent its related stock
option is exercisable, and the exercise price of an Alternative SAR shall be the
same as the exercise price of its related stock option. Upon the exercise of a
stock option as to some or all of the shares covered by the award, the related
Alternative SAR shall be canceled automatically to the extent of the number of
shares covered by the stock option exercise. Upon exercise of an Alternative
SAR, the related stock option shall be automatically canceled to the extent of
such exercise. Unless an award notice provides otherwise, SARs granted in
conjunction with stock options shall be Combination SARs.
The Committee will, with regard to an Independent SAR, determine the number
of shares subject to the SAR, the manner and time of the SAR's exercise, and the
exercise price of the SAR. However, the exercise price of an Independent SAR
will in no event be less than the fair market value of the Common Stock on the
date of the grant of the Independent SAR.
The proposed amendments also provide that SARs will not be repriced by
decreasing the SAR's exercise price. The Company has never repriced any SARs.
This amendment is proposed to assure that SARs will not be repriced in the
future.
STOCK AWARDS
The 1997 Plan authorizes the Committee to grant awards to Key Management
Employees in the form of shares of Common Stock, restricted shares of Common
stock, and Common Stock units. Such awards will be subject to such terms and
conditions as the Committee deems appropriate, including restrictions on
transferability and continued employment. During any restricted period, the
Committee may grant to the Participant all or any rights of a stockholder with
respect to such shares, including the rights to vote and to receive dividends.
The 1997 Plan gives the Committee the discretion to accelerate the delivery of
shares of such awards.
Under the proposed amendments, the Company is limiting the number of shares
of restricted stock, which can be issued in a single fiscal year, to 50,000
restricted shares. As originally adopted, the 1997 Plan would have allowed the
Company to issue all the available shares as restricted stock. This amendment is
proposed to assure that this could not happen.
PERFORMANCE SHARES
The 1997 Plan allows for the grant of "performance shares". For purposes of
the 1997 Plan, "performance shares" means either shares of Common Stock of the
Company or units which are expressed in terms of Common Stock of the Company.
Such awards will be contingent upon the attainment over a period to be
determined by the Committee ("Performance Period") of certain performance or
service objectives. Such objectives may be revised by the Committee during the
Performance Period to take into account unforeseen events or changed
circumstances. The performance or service objectives to be achieved during a
Performance Period and the measure of whether and to what degree such objectives
have been attained will also be determined by the Committee.
PERFORMANCE UNITS
Awards may also be granted to Key Management Employees in the form of
performance units, which are units valued by reference to criteria chosen by the
Committee, other than by reference to the Company's Common Stock. Performance
units are similar to performance shares in that they are contingently awarded
based on the attainment over a Performance Period of certain performance. Such
objectives may be revised by the Committee during the Performance
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Period to take into account unforeseen events or changed circumstances. The
length of the Performance Period, the performance objectives to be achieved
during the Performance Period, and the measure of whether and to what degree
such objectives have been achieved will be determined by the Committee. At Risk
Awards are a type of performance unit.
OTHER TERMS OF AWARDS
Awards may be paid in cash, Common Stock, a combination of cash and Common
Stock, or any other form of property, and in a lump sum or in installments, as
the Committee shall determine. If an award is granted in the form of a stock
award, stock option, or performance share, or in the form of any other
stock-based grant, the Committee may include as part of such award an
entitlement to receive dividends or dividend equivalents. Dividends or dividend
equivalents which are not currently paid may, in the Committee's discretion,
accrue interest, be reinvested in additional shares of Common Stock, or be
credited as additional performance shares and paid to the Participant if and
when, and to the extent that, payment is made pursuant to such award. At the
discretion of the Committee, receipt of payment of a stock-based award,
performance unit, dividend or dividend equivalent may be deferred by a
Participant by the delivery of an irrevocable election prior to the time payment
would otherwise be made.
The 1997 Plan provides for the forfeiture of awards in the event of
termination of employment for a reason other than death, disability, retirement,
or any approved reason, unless the award provides otherwise. The 1997 Plan
authorizes the Committee to promulgate administrative guidelines for the purpose
of determining what treatment will be afforded to a Participant under the 1997
Plan in the event of his or her death, disability, retirement, or termination of
employment for an approved reason. Forfeiture is also required if, in the
opinion of the Committee, the Participant competes with the Company without its
written consent, or if he or she acts in a manner inimical to the Company's best
interests.
Upon grant of any award, the Committee may, by way of an award notice or
otherwise, establish such other items and conditions governing the grant of such
award as are not inconsistent with the 1997 Plan. The Committee may unilaterally
amend any award if such amendment is not adverse to the Participant. The Company
may deduct from any payment under the 1997 Plan the amount of any applicable
income and employment taxes, or may require the Participant to pay such taxes as
a condition to making such payment. A Participant may pay the amount of such
taxes required to be withheld from an award, in whole or in part, by requesting
that the Company withhold from any payment of Common Stock due as a result of
such award, or by delivering to the Company, shares of Common Stock with a fair
market value less than or equal to the amount of the applicable withholding
taxes.
NONASSIGNABILITY
All awards under the 1997 Plan may not be transferred (except by will or
the laws of descent and distribution or pursuant to a qualified domestic
relations order), and during a Participant's lifetime may be exercised only by
the Participant except that, unless the Committee specifies otherwise, all
awards of nonqualified stock options or SARs will be transferable, subject to
all the terms and conditions to which such nonqualified stock options or SARs
are otherwise subject, to (i) members of a Participant's immediate family as
defined in Rule 16a-1 of the Exchange Act or any successor rule or regulation,
(ii) trusts for the exclusive benefit of the Participant or such immediate
family members or (iii) entities which are wholly-owned by the Participant or
such immediate family members, provided that (a) there is no consideration for
such transfer and (b) subsequent transfers of transferred options are prohibited
(except by will or the laws of descent and distribution). Following transfer,
any such options continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer and, except for events related to the
termination of employment of the Participant, the term "Participant" will refer
to the transferee.
CHANGE IN CONTROL/CHANGE IN OWNERSHIP
In the event of a Change in Control (as defined in the 1997 Plan), a
Participant whose employment is terminated within two years of the date of such
event, for a reason other than
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death, disability, Cause (as defined in the 1997 Plan), voluntary resignations
or other Good Reason (as defined in the 1997 Plan) or retirement, would be
entitled to the following treatment under the 1997 Plan: (i) all of the terms
and conditions in effect on any of the Participant's outstanding awards would
immediately lapse; (ii) all of the Participant's outstanding awards would
automatically become one hundred percent vested; (iii) all of the Participant's
outstanding stock options, SARs, performance units, performance shares, and
other stock-based awards would be immediately cashed out on the basis of the
Change in Control Price (as defined in the Plan); and (iv) all of the
Participant's outstanding performance units would be cashed out on the same
basis and under the assumption that all performance criteria applicable to
Performance Periods completed or partially completed had been satisfied. Such
payments would be made as soon as possible, but no later than the 90th day
following such event.
The 1997 Plan also provides that upon a Change In Ownership (as defined in
the 1997 Plan), all Participants, regardless of whether their employment is
terminated, would automatically receive the same treatment afforded to a
terminated Participant under the Plan in the event of a Change in Control. The
1997 Plan defines a Change in Ownership as a change which results in the
Company's Common Stock ceasing to be actively traded on the New York Stock
Exchange, another national stock exchange or the National Association of
Securities Dealers Automated Quotation System.
ADJUSTMENT OF SHARES AVAILABLE
In the event of changes in the Common Stock by reason of a Common Stock
dividend, stock split, reverse stock split or other combination, appropriate
adjustment will be made by the Committee in the aggregate number of shares of
Common Stock available under the 1997 Plan, the number of shares of Common Stock
with respect to which awards may be granted to any Participant in any fiscal
year, and the number of shares of Common Stock, SARs, performance shares, Common
Stock units and other stock-based interests subject to outstanding awards,
without, in the case of stock options, causing a change in the aggregate
purchase price to be paid for such shares of Common Stock.
The 1997 Plan also provides that in the event of a merger, consolidation,
reorganization of the Company with another corporation, a reclassification of
the Common Stock, a spin-off of a significant asset, or other changes in the
capitalization of the Company, appropriate provisions will be made for the
protection and continuation of outstanding awards by either (i) the substitution
of appropriate stock or other securities, or (ii) by appropriate adjustments,
each as set forth under the Plan and as deemed appropriate by the Committee.
FEDERAL INCOME TAX TREATMENT
The following is a brief summary of the federal income tax aspects of the
1997 Plan, based on existing law and regulations which are subject to change.
The application of state and local income taxes and other federal taxes is not
discussed.
A Participant who is granted an incentive stock option is not required to
recognize taxable income at the time of the grant or at the time of exercise.
Under certain circumstances, however, a Participant may be subject to the
alternative minimum tax with respect to the exercise of his incentive stock
options. The Company is not entitled to a deduction at the time of grant or at
the time of exercise of an incentive stock option. If a Participant does not
dispose of the shares acquired pursuant to the exercise of an incentive stock
option before the later of two years from the date of grant of the option and
one year from the transfer of the shares to him, any gain or loss realized on a
subsequent disposition of the shares will be treated as long-term capital gain
or loss. Under such circumstances, the Company will not be entitled to any
deduction for federal income tax purposes.
If a Participant disposes of the shares received upon the exercise of any
incentive stock option either (1) within one year of the transfer of the shares
to him or her or (2) within two years after the incentive stock option was
granted, the Participant will generally recognize ordinary compensation income
equal to the lesser of (a) the excess of the fair market value of the shares on
the date the incentive stock option was exercised over the purchase price paid
for
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the shares upon exercise, and (b) the amount of gain realized on the sale. Any
gain realized in excess of the compensation income recognized, and any loss
realized, will be long-term or short-term capital gain or loss, depending upon
the length of the period the Participant held the shares. If a Participant is
required to recognize ordinary compensation income as a result of the
disposition of shares acquired on the exercise of any incentive stock option,
the Company, subject to general rules relating to the reasonableness of the
Participant's compensation and the $1 million cap on deductions for compensation
paid to certain employees under Section 162(m) of the Code, will be entitled to
a deduction for an equivalent amount.
A Participant who is granted a non-qualified stock option does not have
taxable income at the time of grant, but does have taxable income at the time of
exercise equal to the difference between the exercise price of the shares and
the market value of the shares on the date of exercise. Subject to general rules
relating to the reasonableness of the Participant's compensation and the $1
million cap on deductions for compensation paid to certain employees under
Section 162(m) of the Code, the Company is entitled to a corresponding deduction
for the same amount.
The grant of an SAR will produce no federal tax consequences for the
Participant or the Company. The exercise of an SAR results in taxable income to
the Participant, equal to the difference between the exercise price of the SAR
and the fair market value of a share on the date of exercise, and, subject to
general rules relating to the reasonableness of the Participant's compensation
and the $1 million cap on deductions for compensation paid to certain employees
under Section 162(m) of the Code, a corresponding deduction to the Company.
A Participant who has been granted either performance units or performance
shares expressed in the form of units of Common Stock generally will not be
required to recognize taxable income at the time of the grant, and the Company
will not be entitled to a deduction at such time. A Participant will be required
to recognize ordinary income either at the time the award vests or is paid,
depending upon the terms and conditions of the award, and, subject to general
rules relating to the reasonableness of the Participant's compensation and the
$1 million cap on deductions for compensation paid to certain employees under
Section 162(m) of the Code, the Company will have a corresponding deduction.
A Participant who has been granted shares of restricted stock will not be
required to recognize taxable income at the time of the grant, and the Company
will not be entitled to a deduction at the time of the grant, assuming that the
restrictions constitute a substantial risk of forfeiture for federal income tax
purposes. When such restrictions lapse, the Participant will recognize taxable
income in an amount equal to the excess of the fair market value of the shares
at such time over the amount, if any, paid for such shares. The Company will be
entitled to a corresponding deduction.
The award of an outright grant of Common Stock to a Participant will
produce immediate tax consequences for both the Participant and the Company. The
Participant will be treated as having received taxable compensation in an amount
equal to the then fair market value of the Common Stock distributed to him.
Subject to general rules relating to the reasonableness of the Participant's
compensation and the $1 million cap on deductions for compensation paid to
certain employees under Section 162(m) of the Code, the Company will receive a
corresponding deduction for the same amount.
MARKET PRICE OF THE COMMON STOCK
The closing price of the Company's Common Stock reported on the New York
Stock Exchange for January 6, 2000 was $46.125 per share. As of such date the
aggregate market value of the shares of Common Stock underlying the additional
options which would become available for issuance under the 1997 Plan was
$87,637,500.
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NEW PLAN BENEFITS
Please refer to pages 21-22 for further explanation of the new plan
benefits and the New Plan Benefits table respecting this Proposal 4.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
5. SHAREHOLDER PROPOSAL
A shareholder has indicated that he will present the proposal set forth
below for consideration by the shareholders at the Annual Meeting. The name,
address and stock ownership of the shareholder will be provided by the Company's
Secretary to any shareholder promptly upon receipt of any oral or written
request.
"The Stockholders recommend that the Board of Directors (1) create and
appoint a committee comprised principally of unaffiliated and independent
members of the public, including members of minority groups, (2) direct, empower
and enable this committee to issue a plan to eliminate the impact of
discrimination in employment at the Company and its subsidiaries ("NFG"), by
increasing minority employment to reflect the demographic makeup of the
customers, populations and places of business that NFG serves, and (3) describe
the plan in the Company's proxy statement or annual report of December 2000, and
describe its implementation in the following proxy statement or annual report."
SHAREHOLDER'S SUPPORTING STATEMENT:
"NFG has never had a nonwhite officer.
Why does this suggest that NFG has discriminated against nonwhites in its
employment practices?
NFG's principal business is its utility business. Most of the utility's
customers reside in Erie and Niagara Counties, New York, or Erie County,
Pennsylvania. The population of these two New York counties is approximately 13%
nonwhite, and the population of this Pennsylvania county is approximately 6%
nonwhite. The vast majority of the employees of NFG work for the utility.
Many NFG employees work in Houston, Texas (Harris County). 35% of the
population of Harris County, Texas is nonwhite.
The 1990 United States census provides these county population statistics.
If NFG's employment decisions reflected the makeup of the populations it
serves, and the available workforces, and no prejudice had ever been involved,
the nonwhite percentage of the full time employees of NFG would have been close
to 10%, rather than less than 3%. This large shortfall cannot be mere
coincidence. i.e., when corporate employment statistics deviate so substantially
from what should be true in a prejudice-free environment, one can fairly
conclude that the deviation results from management indifference or outright
hostility.
Why take resolution of this problem away from management and the Board? The
answer is obvious -- the continued persistence of the disgraceful statistics
cited strongly suggests that management and the Board have not cared about this
matter, and cannot be trusted to act unless externally motivated. They have not
solved the problem despite decades of opportunity.
The federal Civil Rights Act of 1964 was enacted 35 years ago. There are
many other laws concerning employment discrimination. Should not the spirit of
these laws, and simple notions of decency, fairness and equal opportunity, play
a more prominent role at NFG? Should not NFG take a more proactive role, before
any governmental agency decides to punish NFG or before litigation (e.g., the
Texaco case) occurs? Should not NFG secure the good will of politicians,
regulators and the community in general, in part because NFG is heavily
regulated, and faces a more competitive future?"
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STATEMENT OF THE BOARD IN OPPOSITION TO THE SHAREHOLDER PROPOSAL
Your Board of Directors recommends that you vote "AGAINST" this proposal,
which was submitted by a lawyer who was employed by the Company until his
separation from the Company's utility subsidiary about 11 months ago. This
shareholder's last position title with the utility from 1992 to January 1999 was
"General Manager -- Finance." The Company commenced litigation against the
shareholder in New York State Supreme Court, and the shareholder subsequently
commenced litigation against the Company in U.S. District Court. Both lawsuits
are still pending.
The Company is committed to operating its business in full compliance with
all applicable laws, including the laws relating to equal employment
opportunity. The Company has a long-standing and widely disseminated policy
which requires that our workplace be free from discrimination based on race,
color, gender, national origin, age or disability. The Company believes that
creating and maintaining a diverse workforce makes good business sense and is a
critical component of being successful in the competitive deregulated
environment. Recruiting and retaining a diverse workforce is a priority for the
Company. The Company has an extensive outreach program designed to ensure that
the applicants reflect talent from all segments of the American workforce,
including those in the many communities we serve.
The proposal as submitted materially understates the "nonwhite"
representation in the Company's U.S. full-time regular work force. The proposal
as submitted also materially overstates the "nonwhite" population in the
Company's utility service territory.
We continue to strive to make sure that (i) minority individuals and
organizations become aware of our employment opportunities, and (ii) all
applicants have an equal opportunity, regardless of race or ethnic origin, to
apply for employment and be evaluated objectively. Therefore, we believe that
the additional committee, procedures, plan and report suggested in the proposal
are unnecessary.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and the New York Stock Exchange. Directors, officers and
greater-than-10% stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on review
of information furnished to the Company, reports filed through the Company and
written representations that no Forms 5 were required, the Company believes that
all Section 16(a) filing requirements applicable to its directors, officers and
greater-than-10% beneficial owners were complied with during fiscal 1999.
OTHER BUSINESS
The Board of Directors does not know of any business that will be presented
for consideration at the meeting except as set forth above. However, if any
other business is properly brought before the meeting, or any adjournment
thereof, the Proxies will vote in regard thereto according to their discretion.
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PROPOSALS OF SECURITY HOLDERS
Proposals that security holders intend to present at the 2001 Annual
Meeting of Stockholders must be received by the Secretary at the principal
offices of the Company no later than September 18, 2000, in order to be
considered for inclusion in the Company's proxy statement and proxy for that
meeting. Notice of a shareholder proposal submitted outside the processes of SEC
Rule 14a-8 under the Securities Exchange Act, for consideration at the 2001
Annual Meeting of Stockholders, shall be considered untimely unless received by
the Secretary at the Company's principal office no later than September 26,
2000.
BY ORDER OF THE BOARD OF DIRECTORS
ANNA MARIE CELLINO
Secretary
January 14, 2000
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EXHIBIT A
ADMINISTRATIVE RULES WITH RESPECT TO
AT RISK AWARDS UNDER THE 1997 AWARD AND OPTION PLAN
1. DEFINITIONS
As used with respect to At Risk Awards, the following terms shall have the
following meanings:
(a) "At Risk Award" means an award granted by the Committee to a
Participant under the 1997 Plan, and entitling the Participant to a cash payment
based upon the extent to which specified Performance Goals are attained for a
specified Performance Period, pursuant to such terms and conditions as the
Committee may establish in an Award Notice. No Eligible Employee may receive
more than one At Risk Award under the 1997 Plan in any fiscal year. In no event
will the maximum value of any At Risk Award to any Eligible Employee in any
fiscal year exceed the lower of (i) that employee's base salary for that fiscal
year, or (ii) one million dollars. An At Risk Award may be granted singly, in
combination or in the alternative with other Awards granted under the 1997 Plan
or other Company benefit plans.
(b) "Committee" means the Compensation Committee of the Board, or such
other committee designated by the Board as authorized to administer the 1997
Plan with respect to At Risk Awards. The Committee shall consist of not less
than two members, each of whom shall be "outside directors" as defined by
Section 162(m) of the Code and the rules, regulations and interpretations
promulgated thereunder, as amended from time to time.
(c) "Eligible Employee" means those employees of the Company or its
Subsidiaries who are expected to constitute "covered employees" within the
meaning of Section 162(m) of the Code for the applicable fiscal year(s), and any
other Key Management Employee to whom an At Risk Award has been granted by the
Committee.
(d) "Performance Period" means the period established by the Committee in
the Award Notice, for measurement of the extent to which a Performance Goal has
been satisfied.
(e) "Performance Goal" means the performance objectives of earnings per
share, Subsidiary net income and customer service/other goals, established by
the Committee for each Eligible Employee who receives an At Risk Award.
(f) "1997 Plan" means the National Fuel Gas Company 1997 Award and Option
Plan as approved by the stockholders at the 1997 Annual Meeting of Stockholders,
as amended from time to time.
2. ADMINISTRATION
Within the limits of the 1997 Plan, with respect to At Risk Awards the
Committee is given full authority to (a) make reasonable, good faith
interpretations of the Plan and of Section 162(m) of the Code, to the extent not
addressed by regulation, proposed regulation or publicly available
interpretation of the Internal Revenue Service; (b) determine who shall be
Eligible Employees and select Eligible Employees to receive At Risk Awards; (c)
determine all the other terms and conditions of an At Risk Award, including the
time or times of making At Risk Awards to Eligible Employees, the Performance
Period, Performance Goals, and levels of At Risk Awards to be earned in relation
to levels of achievement of the Performance Goals, and such other measures as
may be necessary or desirable to achieve the purposes of the 1997 Plan; (d)
determine whether At Risk Awards are to be granted singly, in combination or in
the alternative with other Awards under the 1997 Plan or awards under other
Company benefit plans; (e) grant waivers of 1997 Plan terms and conditions,
provided that any such waiver shall not be inconsistent with Section 162(m) of
the Code and the rules, regulations and interpretations promulgated thereunder,
as amended from time to time; and (f) accelerate the vesting, exercise or
payment of any At Risk Award or the Performance Period of an At Risk Award when
any such action would not cause compensation paid or payable under such At Risk
Award to cease to be deductible by the Company for federal income tax purposes.
The Committee shall
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also have the authority to grant At Risk Awards in replacement of Awards
previously granted under the 1997 Plan or awards under any other executive
compensation or stock option plan of the Company or a Subsidiary.
All determinations of the Committee shall be made by a majority of its
members, and its determinations shall be final, binding and conclusive. The
Committee, in its discretion, may delegate its authority and duties under the
1997 Plan with respect to At Risk Awards to the Company's Chief Executive
Officer or to other senior officers of the Company, but only to the extent, if
any, permitted by Section 162(m) of the Code and notwithstanding any other
provision of the 1997 Plan or an Award Notice, under such conditions as the
Committee may establish.
3. GRANT OF AT RISK AWARDS
At Risk Awards may be made for each of the fiscal years of the Company
commencing with the 2000 fiscal year; provided, however, that At Risk Awards for
a fiscal year may only be made within the time allowed under Section 162(m) of
the Code and the rules, regulations and interpretations promulgated thereunder,
as amended from time to time, applicable to such fiscal year.
4. PAYMENT OF AT RISK AWARDS
Each At Risk Award granted to an Eligible Employee shall entitle such
Eligible Employee to receive a cash payment based upon the extent to which such
Eligible Employee's Performance Goals for a particular Performance Period are
attained, as specified by the Committee in the Award Notice and certified in
writing by the Committee that such Eligible Employee's Performance Goals have
been attained. Payment of earned At Risk Awards shall be made in cash promptly
after such certification.
5. TERMINATION OF EMPLOYMENT, RETIREMENT, OR DEATH OF PARTICIPANT
(a) General Rule. Subject to Section 16 of the 1997 Plan, if an Eligible
Employee's employment with the Company or a Subsidiary terminates for a reason
other than death, disability, retirement, or any approved reason, all unearned
or unpaid At Risk Awards shall be canceled or forfeited as the case may be,
unless otherwise provided in this Section or in the Eligible Employee's Award
Notice.
(b) In the event of the disability, retirement or termination for an
approved reason of an Eligible Employee during a Performance Period, his
participation shall be deemed to continue to the end of the Performance Period,
and he shall be paid a percentage of the amount earned, if any, according to the
terms of the At Risk Award, proportionate to his period of active service during
that Performance Period.
(c) In the event of the death of an Eligible Employee during a Performance
Period, the Eligible Employee's designated beneficiary (or if none, then the
Eligible Employee's estate) shall be paid an amount proportionate to the period
of active service during the Performance Period, based upon the maximum amount
which could have been earned under the At Risk Award.
6. AMENDMENTS TO AT RISK AWARDS
The Committee may, at any time, unilaterally amend any unearned or unpaid
At Risk Award, including At Risk Awards earned but not yet paid, to the extent
it deems appropriate; provided, however, that any such amendment which is
adverse to the Eligible Employee shall require the Eligible Employee's consent;
and provided further, however, that the Committee shall have no authority to
make any amendment which would cause compensation paid or payable under the At
Risk Award to cease to be deductible by the Company for federal income tax
purposes.
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7. AMENDMENT TO RULES
Subject to the stockholder approval requirements of Section 162(m) of the
Code, the Committee may, from time to time, amend these Administrative Rules
with respect to At Risk Awards in any manner.
8. CHANGE IN CONTROL AND CHANGE IN OWNERSHIP
If an Eligible Employee holding an At Risk Award is eligible for treatment
under Section 25 of the 1997 Plan, the provisions of this paragraph shall
determine the manner in which such At Risk Award shall be paid to him. For
purposes of making such payment, each "current performance period" (defined to
mean a Performance Period which period has commenced but not yet ended), shall
be treated as terminating upon the Acceleration Date, and for each such "current
performance period" and each "completed performance period" (defined to mean a
Performance Period which has ended but for which the Committee has not, on the
Acceleration Date, made a determination as to whether and to what degree the
Performance Goals for such period have been attained), it shall be assumed that
the Performance Goals have been attained at a level of 100% or the equivalent
thereof. If the Eligible Employee is participating in one or more "current
performance periods," he shall be considered to have earned and, therefore, to
be entitled to receive, a prorated portion of the At Risk Awards previously
granted to him for each such Performance Period. Such prorated portion shall be
determined by multiplying 100% of the At Risk Award granted to the Eligible
Employee by a fraction, the numerator of which is the total number of whole and
partial years (with each partial year being treated as a whole year) that have
elapsed since the beginning of the Performance Period, and the denominator of
which is the total number of years in such Performance Period. An Eligible
Employee in one or more "completed performance periods" shall be considered to
have earned and, therefore, be entitled to receive 100% of the At Risk Awards
previously granted to him during each Performance Period.
9. SAVINGS PROVISION
These Administrative Rules with respect to At Risk Awards are intended to
comply with all the applicable conditions of Section 162(m) of the Code, so that
compensation paid or payable hereunder shall constitute qualified
"performance-based compensation" thereunder. To the extent any provision of
these Administrative Rules with respect to At Risk Awards or any action by the
Committee fails to so comply, it shall be deemed null and void, to the extent
permitted by law.
10. EFFECTIVE DATE
Upon approval by the stockholders of the Company as required by Section
162(m) of the Code, these Administrative Rules with respect to At Risk Awards
shall become effective as of December 8, 1999.
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EXHIBIT B
NATIONAL FUEL GAS COMPANY
1997 AWARD AND OPTION PLAN
1. PURPOSE
The purpose of the Plan is to advance the interests of the Company and its
stockholders, by providing a long-term incentive compensation program that will
be an incentive to the Core Employees of the Company and its Subsidiaries whose
contributions are important to the continued success of the Company and its
Subsidiaries, and by enhancing their ability to attract and retain in their
employ highly qualified persons for the successful conduct of their businesses.
2. DEFINITIONS
2.1 "Acceleration Date" means (i) in the event of a Change in Ownership,
the date on which such change occurs, or (ii) with respect to a Participant who
is eligible for treatment under paragraph 25 hereof on account of the
termination of his employment following a Change in Control, the date on which
such termination occurs.
2.2 "Award" means any form of stock option, stock appreciation right,
Restricted Stock, performance unit, performance share or other incentive award
granted by the Committee to a Participant under the Plan pursuant to such terms
and conditions as the Committee may establish. An Award may be granted singly,
in combination or in the alternative.
2.3 "Award Notice" means a written notice from the Company to a Participant
that sets forth the terms and conditions of an Award in addition to those
established by this Plan and by the Committee's exercise of its administrative
powers.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Cause" means (i) the willful and continued failure by a Core Employee
to substantially perform his duties with his employer after written warnings
specifically identifying the lack of substantial performance are delivered to
him by his employer, or (ii) the willful engaging by a Core Employee in illegal
conduct which is materially and demonstrably injurious to the Company or a
Subsidiary.
2.6 "Change in Control" shall be deemed to have occurred at such time as
(i) any "person" within the meaning of Section 14(d) of the Exchange Act, other
than the Company, a Subsidiary, or any employee benefit plan or plans sponsored
by the Company or any Subsidiary, is or has become the "beneficial owner," as
defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of twenty
percent (20%) or more of the combined voting power of the outstanding securities
of the Company ordinarily having the right to vote at the election of directors,
or (ii) approval by the stockholders of the Company of (a) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of stock of the Company would be
converted into cash, securities or other property, other than a consolidation or
merger of the Company in which the common stockholders of the Company
immediately prior to the consolidation or merger have substantially the same
proportionate ownership of common stock of the surviving corporation immediately
after the consolidation or merger as immediately before, or (b) any
consolidation or merger in which the Company is the continuing or surviving
corporation but in which the common stockholders of the Company immediately
prior to the consolidation or merger do not hold at least a majority of the
outstanding common stock of the continuing or surviving corporation (except
where such holders of Common Stock hold at least a majority of the common stock
of the corporation which owns all of the Common Stock of the Company), or (c)
any sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all the assets of the Company, or
(iii) individuals who constitute the Board on January 1, 1997 (the "Incumbent
Board") have ceased for any reason to constitute at least a majority thereof,
provided that any person becoming a director subsequent to January 1, 1997 whose
election, or nomination for election by the Company's
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stockholders, was approved by a vote of at least three-quarters ( 3/4) of the
directors comprising the Incumbent Board (either by specific vote or by approval
of the proxy statement of the Company in which such person is named as nominee
for director without objection to such nomination) shall be, for purposes of
this Plan, considered as though such person were a member of the Incumbent
Board.
2.7 "Change in Control Price" means, in respect of a Change in Control, the
highest closing price per share paid for the purchase of Common Stock on the New
York Stock Exchange, another national stock exchange or the National Association
of Securities Dealers Automated Quotation System during the ninety (90) day
period ending on the date the Change in Control occurs, and in respect of a
Change in Ownership, the highest closing price per share paid for the purchase
of Common Stock on the New York Stock Exchange, another national stock exchange
or the National Association of Securities Dealers Automated Quotation System
during the ninety (90) day period ending on the date the Change in Ownership
occurs.
2.8 "Change in Ownership" means a change which results directly or
indirectly in the Company's Common Stock ceasing to be actively traded on a
national securities exchange or the National Association of Securities Dealers
Automated Quotation System.
2.9 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.10 "Committee" means the Compensation Committee of the Board, or such
other committee designated by the Board, authorized to administer the Plan. The
Committee shall consist of not less than two (2) members of the Board, each of
whom shall be a Disinterested Board Member. A "Disinterested Board Member" means
a member who (a) is not a current employee of the Company or a Subsidiary, (b)
is not a former employee of the Company or a Subsidiary who receives
compensation for prior services (other than benefits under a tax-qualified
retirement plan) during the taxable year, (c) has not been an officer of the
Company (d) does not receive remuneration from the Company or a Subsidiary,
either directly or indirectly, in any capacity other than as a director and (e)
does not possess an interest in any other transaction, and is not engaged in a
business relationship, for which disclosure would be required pursuant to Item
404(a) or (b) of Regulation S-K under the Securities Act of 1933, as amended.
The term Disinterested Board Member shall be interpreted in such manner as shall
be necessary to conform to the requirements of Section 162(m) of the Code and
Rule 16b-3 promulgated under the Exchange Act.
2.11 "Common Stock" means the common stock of the Company.
2.12 "Company" means National Fuel Gas Company.
2.13 "Core Employee" means an officer or other core management employee of
the company or a Subsidiary as determined by the Committee. Every Key Management
Employee is also a Core Employee.
2.14 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
2.15 "Fair Market Value" of a share of Common Stock on any date means the
average of the high and low sales prices of a share of Common Stock as reflected
in the report of consolidated trading of New York Stock Exchange-listed
securities for that date (or, if no such shares were publicly traded on that
date, the next preceding date that such shares were so traded) published in The
Wall Street Journal or in any other publication selected by the Committee;
provided, however, that if shares of Common Stock shall not have been publicly
traded for more than ten (10) days immediately preceding such date, then the
Fair Market Value of a share of Common Stock shall be determined by the
Committee in such manner as it may deem appropriate.
2.16 "Good Reason" means a good faith determination made by a Participant
that there has been any (i) material change by the Company of the Participant's
functions, duties or responsibilities which change could cause the Participant's
position with the Company to become of less dignity, responsibility, importance,
prestige or scope, including, without limitation, the assignment to the
Participant of duties and responsibilities inconsistent with his
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positions, (ii) assignment or reassignment by the Company of the Participant
without the Participant's consent, to another place of employment more than 30
miles from the Participant's current place of employment, or (iii) reduction in
the Participant's total compensation or benefits or any component thereof,
provided in each case that the Participant shall specify the event relied upon
for such determination by written notice to the Board at any time within six
months after the occurrence of such event.
2.17 "Key Management Employee" means a management employee of the Company
or a Subsidiary (i) who has significant policymaking responsibilities, and (ii)
whose current base salary at the time an Award is issued is among the highest
two percent (2%) of the current base salaries of all the employees of the
Company or any Subsidiary, all as determined by the Committee.
2.18 "Participant" means any individual to whom an Award has been granted
by the Committee under this Plan.
2.19 "Plan" means the National Fuel Gas Company 1997 Award and Option Plan.
2.20 "Restricted Stock" means an Award granted pursuant to paragraph 10
hereof.
2.21 "Subsidiary" means a corporation or other business entity in which the
Company directly or indirectly has an ownership interest of eighty percent (80%)
or more.
2.22 "Unit" means a bookkeeping entry used by the Company to record and
account for the grant of the following Awards until such time as the Award is
paid, cancelled, forfeited or terminated, as the case may be: Units of Common
Stock, performance units, and performance shares which are expressed in terms of
Units of Common Stock.
3. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall have
the authority to: (a) interpret the Plan; (b) establish such rules and
regulations as it deems necessary for the proper administration of the Plan; (c)
select Key Management Employees and Core Employees to receive Awards under the
Plan; (d) determine the form of an Award, whether a stock option, stock
appreciation right, Restricted Stock, performance unit, performance share, or
other incentive award established by the Committee in accordance with (h) below,
the number of shares or Units subject to the Award, all the terms and conditions
of an Award, including the time and conditions of exercise or vesting; (e)
determine whether Awards would be granted singly, in combination or in the
alternative; (f) grant waivers of Plan terms and conditions, provided that any
such waiver granted to an executive officer of the Company shall not be
inconsistent with Section 16 of the Exchange Act and the rules promulgated
thereunder; (g) accelerate the vesting, exercise or payment of any Award or the
performance period of an Award when any such action would be in the best
interest of the Company; (h) establish such other types of Awards, besides those
specifically enumerated in paragraph 2.2 hereof, which the Committee determines
are consistent with the Plan's purposes; and (i) take any and all other action
it deems advisable for the proper administration of the Plan. The Committee
shall also have the authority to grant Awards in replacement of Awards
previously granted under this Plan or any other executive compensation or stock
option plan of the Company or a Subsidiary. All determinations of the Committee
shall be made by a majority of its members, and its determinations shall be
final, binding and conclusive. The Committee, in its discretion, may delegate
its authority and duties under the Plan to the Chief Executive Officer or to
other senior officers of the Company to the extent permitted by Section 16 of
the Exchange Act and notwithstanding any other provision of this Plan or an
Award Notice, under such conditions as the Committee may establish; provided,
however, that only the Committee may select and grant Awards and render other
decisions as to the timing, pricing and amount of Awards to Participants who are
subject to Section 16 of the Exchange Act.
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4. ELIGIBILITY
Any Core Employee is eligible to become a Participant of the Plan who
receives Stock Options only. A Key Management Employee is also eligible to
become a Participant of the Plan who receives other awards under the Plan.
5. SHARES AVAILABLE
(a) The maximum number of shares of Common Stock, $1.00 par value, of the
Company which shall be available for grant of Awards under the Plan (including
incentive stock options) during its term shall not exceed 3,800,000; subject to
adjustment as provided in paragraph 18. Awards covering no more than 300,000
shares of Common Stock of the Company may be granted to any Participant in any
fiscal year subject to adjustment as provided in paragraph 18.
(b) Any shares of Common Stock related to Awards which terminate by
expiration, forfeiture, cancellation or otherwise without the issuance of such
shares, are settled in cash in lieu of Common Stock, or are exchanged with the
Committee's permission for Awards not involving Common Stock, shall be available
again for grant under the Plan, provided, however, that if dividends or dividend
equivalents pursuant to paragraph 14, or other benefits of share ownership (not
including the right to vote the shares) have been received by the Participant in
respect of an Award prior to such termination, settlement or exchange, the
shares which were the subject of the Award shall not again be available for
grant under the Plan. Further, any shares of Common Stock which are used by a
Participant for the full or partial payment to the Company of the purchase price
of shares of Common Stock upon exercise of a stock option, or for any
withholding taxes due as a result of such exercise, shall again be available for
Awards under the Plan. Similarly, shares of Common Stock with respect to which
an Alternative SAR has been exercised and paid in cash shall again be available
for grant under the Plan. Shares to which independent or combination SARs relate
shall not count against the 3,800,000 share limit set forth in this paragraph 5.
(c) The shares of Common Stock available for issuance under the Plan may be
authorized and unissued shares or treasury shares.
6. TERM
The Plan shall become effective as of December 13, 1996 subject to its
approval by the Company's stockholders at the 1997 Annual Meeting of
Stockholders and subject to the approval of the Securities and Exchange
Commission under the Public Utility Holding Company Act of 1935, as amended. No
Awards shall be exercisable or payable before these approvals of the Plan have
been obtained and all Awards made prior to approval of the Plan by the Company's
stockholders and approval of the Plan by the Securities and Exchange Commission
under the Public Utility Holding Company Act of 1935, as amended, are contingent
upon such approval. Awards shall not be granted pursuant to the Plan after
December 12, 2006.
7. PARTICIPATION
The Committee shall select Participants, determine the type of Awards to be
made, and establish in the related Award Notices the applicable terms and
conditions of the Awards in addition to those set forth in this Plan and the
administrative rules issued by the Committee.
8. STOCK OPTIONS
(a) Grants. Awards may be granted in the form of stock options. These
stock options may be incentive stock options within the meaning of Section 422
of the Code or non-qualified stock options (i.e., stock options which are not
incentive stock options), or a combination of both.
(b) Terms and Conditions of Options. Unless the Award Notice provides
otherwise, an option shall be exercisable in whole or in part. The price at
which Common Stock may be purchased upon exercise of a stock option shall be
established by the Committee, but such price shall not be less than the Fair
Market Value of the Common Stock on the date of the stock option's grant. The
Committee shall not have the authority to decrease such price after the date
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of the stock option's grant, except for adjustments appropriate to reflect a
Common Stock dividend, stock split, reverse stock-split or other combination
pursuant to Section 18(a). An Award Notice evidencing a stock option may, in the
discretion of the Committee, provide that a Participant who pays the option
price of a stock option by an exchange of shares of Common Stock previously
owned by the Participant shall automatically be issued a new stock option to
purchase additional shares of Common Stock equal to the number of shares of
Common Stock so exchanged. Such new stock option shall have an option price
equal to the Fair Market Value of the Common Stock on the date such new stock
option is issued and shall be subject to such other terms and conditions as the
Committee deems appropriate. Unless the Award Notice provides otherwise, each
incentive stock option shall first become exercisable on the first anniversary
of its date of grant, and each non-qualified stock option shall first become
exercisable on the first anniversary of its date of grant, or, if earlier (i) on
the date of the Participant's death occurring after the date of grant, (ii) six
months after the date of grant, if the Participant has voluntarily resigned on
or after his 60th birthday, after the date of grant, and before such six months,
or (iii) on the date of the Participant's voluntary resignation on or after his
60th birthday and at least six months after the date of grant. Unless the Award
Notice provides otherwise, each non-qualified stock option shall expire on the
day after the tenth anniversary of its date of grant, and incentive stock
options and non-qualified stock options granted in combination may be exercised
separately.
(c) Restrictions Relating to Incentive Stock Options. Stock options issued
in the form of incentive stock options shall, in addition to being subject to
all applicable terms and conditions established by the Committee, comply with
Section 422 of the Code. Accordingly, the aggregate Fair Market Value
(determined at the time the option was granted) of the Common Stock with respect
to which incentive stock options are exercisable for the first time by a
Participant during any calendar year (under this Plan or any other plan of the
Company or any of its Subsidiaries) shall not exceed $100,000 (or such other
limit as may be required by the Code). Unless the Award Notice provides a
shorter period, each incentive stock option shall expire on the tenth
anniversary of its date of grant. The number of shares of Common Stock that
shall be available for incentive stock options granted under the Plan is
3,800,000.
(d) Exercise of Option. Upon exercise, the option price of a stock option
may be paid in cash, shares of Common Stock, shares of Restricted Stock, a
combination of the foregoing, or such other consideration as the Committee may
deem appropriate. The Committee shall establish appropriate methods for
accepting Common Stock, whether restricted or unrestricted, and may impose such
conditions as it deems appropriate on the use of such Common Stock to exercise a
stock option. The Committee, in its sole discretion, may establish procedures
whereby a Participant to the extent permitted by and subject to the requirements
of Rule 16b-3 under the Exchange Act, Regulation T issued by the Board of
Governors of the Federal Reserve System pursuant to the Exchange Act, federal
income tax laws, and other federal, state and local tax and securities laws, can
exercise an option or a portion thereof without making a direct payment of the
option price to the Company. If the Committee so elects to establish a cashless
exercise program, the Committee shall determine, in its sole discretion and from
time to time, such administrative procedures and policies as it deems
appropriate. Such procedures and policies shall be binding on any Participant
wishing to utilize the cashless exercise program.
9. STOCK APPRECIATION RIGHTS
(a) Grants and Valuation. Awards may be granted in the form of stock
appreciation rights ("SARs"). SARs may be granted singly ("Independent SARs"),
in combination with all or a portion of a related stock option under the Plan
("Combination SARs"), or in the alternative ("Alternative SARs"). Combination or
Alternative SARs may be granted either at the time of the grant of related stock
options or at any time thereafter during the term of the stock options.
Combination SARs shall be subject to paragraph 9(b) hereof. Alternative SARs
shall be subject to paragraph 9(c) hereof. Independent SARs shall be subject to
paragraph 9(d) hereof. Unless this Plan or the Award Notice provides otherwise,
SARs shall entitle the recipient to receive a payment equal to the appreciation
in the Fair Market Value of a stated number of shares of Common Stock from the
award date to the date of exercise. Once a SAR has been issued, the Committee
shall not reprice the SAR by changing the initial Fair Market Value from which
the
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payment is calculated except for adjustments appropriate to reflect a Common
Stock dividend, stock split, reverse stock-split or other combination pursuant
to Section 18(a). In the case of SARs granted in combination with, or in the
alternative to, stock options, the appreciation in value is from the option
price of such related stock option to the Fair Market Value on the date of
exercise of such SARs. Unless this Plan or the Award Notice provides otherwise,
SARs granted in conjunction with stock options shall be Combination SARs, and
all SARs shall be exercisable between one year and ten years and one day after
the date of their award.
(b) Terms and Conditions of Combination SARs. Both the stock options
granted in conjunction with Combination SARs and the Combination SARs may be
exercised. Combination SARs shall be exercisable only to the extent the related
stock option is exercisable, and the base from which the value of the
Combination SARs is measured at its exercise shall be the option price of the
related stock option. Combination SARs may be exercised either together with the
related stock option or separately. If a Participant exercises a Combination SAR
or related stock option, but not both, the other shall remain outstanding and
shall remain exercisable during the entire exercise period.
(c) Terms and Conditions of Alternative SARs. Either the stock options
granted in the alternative to Alternative SARs or the Alternative SARs may be
exercised, but not both. Alternative SARs shall be exercisable only to the
extent that the related stock option is exercisable, and the base from which the
value of the Alternative SARs is measured at its exercise shall be the option
price of the related stock option. If related stock options are exercised as to
some or all of the shares covered by the Award, the related Alternative SARs
shall be cancelled automatically to the extent of the number of shares covered
by the stock option exercise. Upon exercise of Alternative SARs as to some or
all of the shares covered by the Award, the related stock option shall be
cancelled automatically to the extent of the number of shares covered by such
exercise, and such shares shall again be eligible for grant in accordance with
paragraph 5 hereof.
(d) Terms and Conditions of Independent SARs. Independent SARs shall be
exercisable in whole or in such installments and at such time as may be
determined by the Committee. The base price from which the value of an
Independent SAR is measured shall also be determined by the Committee; provided,
however, that such price shall not be less than the Fair Market Value of the
Common Stock on the date of the grant of the Independent SAR.
(e) Deemed Exercise. The Committee may provide that a SAR shall be deemed
to be exercised at the close of business on the scheduled expiration date of
such SAR, if at such time the SAR by its terms remains exercisable and, if so
exercised, would result in a payment to the holder of such SAR.
10. RESTRICTED STOCK
(a) Grants. Awards may be granted in the form of Restricted Stock. Shares
of Restricted Stock shall be awarded in such amounts and at such times during
the term of the Plan as the Committee shall determine.
(b) Award Restrictions. Restricted Stock shall be subject to such terms
and conditions as the Committee deems appropriate, including restrictions on
transferability and continued employment. No more than 50,000 restricted shares
may be issued in a single fiscal year. The Committee may modify or accelerate
the delivery of shares of Restricted Stock under such circumstances as it deems
appropriate.
(c) Rights as Stockholders. During the period in which any shares of
Restricted Stock are subject to the restrictions imposed under paragraph 10(b),
the Committee may, in its discretion, grant to the Participant to whom shares of
Restricted Stock have been awarded all or any of the rights of a stockholder
with respect to such shares, including, but not by way of limitation, the right
to vote such shares and to receive dividends.
(d) Evidence of Award. Any shares of Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee deems appropriate,
including, without limitation, book-entry registration or issuance of a stock
certificate or certificates.
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11. PERFORMANCE UNITS
(a) Grants. Awards may be granted in the form of performance units.
Performance units shall refer to the Units valued by reference to designated
criteria established by the Committee, other than Units which are expressed in
terms of Common Stock.
(b) Performance or Service Criteria. Performance units shall be contingent
on the attainment during a performance period of certain performance and/or
service objectives. The length of the performance period, the performance or
service objectives to be achieved, and the extent to which such objectives have
been attained shall be conclusively determined by the Committee in the exercise
of its absolute discretion. Performance and service objectives may be revised by
the Committee during the performance period, in order to take into consideration
any unforeseen events or changes in circumstances.
12. PERFORMANCE SHARES
(a) Grants. Awards may be granted in the form of performance shares.
Performance shares shall refer to shares of Common Stock or Units which are
expressed in terms of Common Stock, including shares of phantom stock.
(b) Performance or Service Criteria. Performance shares shall be
contingent upon the attainment during a performance period of certain
performance or service objectives. The length of the performance period, the
performance or service objectives to be achieved, and the extent to which such
objectives have been attained shall be conclusively determined by the Committee
in the exercise of its absolute discretion. Performance and service objectives
may be revised by the Committee during the performance period, in order to take
into consideration any unforeseen events or changes in circumstances.
13. PAYMENT OF AWARDS
At the discretion of the Committee, payment of Awards may be made in cash,
Common Stock, a combination of cash and Common Stock, or any other form of
property as the Committee shall determine.
14. DIVIDENDS AND DIVIDEND EQUIVALENTS
If an Award is granted in the form of Restricted Stock, stock options, or
performance shares, or in the form of any other stock-based grant, the Committee
may, at any time up to the time of payment, include as part of an Award an
entitlement to receive dividends or dividend equivalents, subject to such terms
and conditions as the Committee may establish. Dividends and dividend
equivalents shall be paid in such form and manner (i.e., lump sum or
installments), and at such time as the Committee shall determine. All dividends
or dividend equivalents which are not paid currently may, at the Committee's
discretion, accrue interest, be reinvested into additional shares of Common
Stock or, in the case of dividends or dividend equivalents credited in
connection with performance shares, be credited as additional performance shares
and paid to the Participant if and when, and to the extent that, payment is made
pursuant to such Award.
15. DEFERRAL OF AWARDS
At the discretion of the Committee, the receipt of the payment of shares of
Restricted Stock, performance shares, performance units, dividends, dividend
equivalents, or any portion thereof, may be deferred by a Participant until such
time as the Committee may establish. All such deferrals shall be accomplished by
the delivery of a written, irrevocable election by the Participant prior to such
time payment would otherwise be made, on a form provided by the Company.
Further, all deferrals shall be made in accordance with administrative
guidelines established by the Committee to ensure that such deferrals comply
with all applicable requirements of the Code and its regulations. Deferred
payments shall be paid in a lump sum or installments, as determined by the
Committee. The Committee may also credit interest, at such rates to be
determined by the Committee, on cash payments that are deferred and credit
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dividends or dividend equivalents on deferred payments denominated in the form
of Common Stock.
16. TERMINATION OF EMPLOYMENT
(a) General Rule. Subject to paragraph 20, if a Participant's employment
with the Company or a Subsidiary terminates for a reason other than death,
disability, retirement, or any approved reason, all unexercised, unearned or
unpaid Awards shall be cancelled or forfeited as the case may be, unless
otherwise provided in this paragraph or in the Participant's Award Notice. The
Committee shall have the authority to promulgate rules and regulations to (i)
determine what events constitute disability, retirement, or termination for an
approved reason for purposes of the Plan, and (ii) determine the treatment of a
Participant under the Plan in the event of his death, disability, retirement, or
termination for an approved reason.
(b) Incentive Stock Options. Unless the Award Notice provides otherwise,
any incentive stock option which has not theretofore expired, shall terminate
upon termination of the Participant's employment with the Company whether by
death or otherwise, and no shares of Common Stock may thereafter be purchased
pursuant to such incentive stock option, except that:
(i) Upon termination of employment (other than by death), a
Participant may, within three months after the date of termination of
employment, purchase all or part of any shares of Common Stock which the
Participant was entitled to purchase under such incentive stock option on
the date of termination of employment.
(ii) Upon the death of any Participant while employed with the Company
or within the three-month period referred to in paragraph 16(b)(i) above,
the Participant's estate or the person to whom the Participant's rights
under the incentive stock option are transferred by will or the laws of
descent and distribution may, within one year after the date of the
Participant's death, purchase all or part of any shares of Common Stock
which the Participant was entitled to purchase under such incentive stock
option on the date of death.
Notwithstanding anything in this paragraph 16(b) to the contrary, the
Committee may at any time within the three-month period after the date of
termination of a Participant's employment, with the consent of the Participant,
the Participant's estate or the person to whom the Participant's rights under
the incentive stock options are transferred by will or the laws of descent and
distribution, extend the period for exercise of the Participant's incentive
stock options to any date not later than the date on which such incentive stock
options would have otherwise expired absent such termination of employment.
Nothing in this paragraph 16(b) shall authorize the exercise of an incentive
stock option after the expiration of the exercise period therein provided, nor
later than ten years after the date of grant.
(c) Non-Qualified Stock Options. Unless the Award Notice provides
otherwise, any nonqualified stock option which has not theretofore expired shall
terminate upon termination of the Participant's employment with the Company, and
no shares of Common Stock may thereafter be purchased pursuant to such
non-qualified stock option, except that:
(i) Upon termination of employment for any reason other than death,
discharge by the Company for cause, or voluntary resignation of the
Participant prior to age 60, a Participant may, within five years after the
date of termination of employment, or any such greater period of time as
the Committee, in its sole discretion, deems appropriate, exercise all or
part of the non-qualified stock option which the Participant was entitled
to exercise on the date of termination of employment or subsequently
becomes eligible to exercise pursuant to paragraph 8(b) above.
(ii) Upon the death of a Participant while employed with the Company
or within the period referred to in paragraph 16(c)(i) above, the
Participant's estate or the person to whom the Participant's rights under
the non-qualified stock option are transferred by will or the laws of
descent and distribution may, within five years after the date of the
Participant's death while employed, or within the period referred to in
paragraph 16(c)(i)
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above, exercise all or part of the non-qualified stock option which the
Participant was entitled to exercise on the date of death.
Nothing in this paragraph 16(c) shall authorize the exercise of a
non-qualified stock option later than the exercise period set forth in the Award
Notice.
17. NONASSIGNABILITY
No Award under the Plan shall be subject in any manner to alienation,
anticipation, sale, transfer (except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order), assignment,
pledge, or encumbrance, except that, unless the Committee specifies otherwise,
all awards of non-qualified stock options or SARs shall be transferable without
consideration, subject to all the terms and conditions to which such
non-qualified stock options or SARs are otherwise subject, to (i) members of a
Participant's immediate family as defined in Rule 16a-1 promulgated under the
Exchange Act, or any successor rule or regulation, (ii) trusts for the exclusive
benefit of the Participant or such immediate family members or (iii) entities
which are wholly-owned by the Participant or such immediate family members,
provided that (x) there may be no consideration for any such transfer, and (y)
subsequent transfers of transferred options shall be prohibited except those by
will or the laws of descent and distribution. Following transfer, any such
options shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer, and except as provided in the next
sentence, the term "Participant" shall be deemed to refer to the transferee. The
events of termination of employment of Section 16(c) hereof shall continue to be
applied with reference to the original Participant and following the termination
of employment of the original Participant, the options shall be exercisable by
the transferee only to the extent, and for the periods specified in Section
16(c), that the original Participant could have exercised such option. Except as
expressly permitted by this paragraph, an Award shall be exercisable during the
Participant's lifetime only by him.
18. ADJUSTMENT OF SHARES AVAILABLE
(a) Changes in Stock. In the event of changes in the Common Stock by
reason of a Common Stock dividend, stock split, reverse stock-split or other
combination, appropriate adjustment shall be made by the Committee in the
aggregate number of shares available under the Plan, the number of shares with
respect to which Awards may be granted to any Participant in any fiscal year,
and the number of shares, SARs, performance shares, Common Stock units and other
stock-based interests subject to outstanding Awards, without, in the case of
stock options, causing a change in the aggregate purchase price to be paid
therefor. Such proper adjustment as may be deemed equitable may be made by the
Committee in its discretion to give effect to any other change affecting the
Common Stock.
(b) Changes in Capitalization. In case of a merger or consolidation of the
Company with another corporation, a reorganization of the Company, a
reclassification of the Common Stock of the Company, a spinoff of a significant
asset, or other changes in the capitalization of the Company, appropriate
provision shall be made for the protection and continuation of any outstanding
Awards by either (i) the substitution, on an equitable basis, of appropriate
stock or other securities or other consideration to which holders of Common
Stock of the Company will be entitled pursuant to such transaction or succession
of transactions, or (ii) by appropriate adjustment in the number of shares
issuable pursuant to the Plan, the number of shares covered by outstanding
Awards, the option price of outstanding stock options, the exercise price of
outstanding SARs, the performance or service criteria or performance period of
outstanding performance units, and the performance or service criteria or
performance period of outstanding performance shares, as deemed appropriate by
the Committee.
19. WITHHOLDING TAXES
The Company shall be entitled to deduct from any payment under the Plan,
regardless of the form of such payment, the amount of all applicable income and
employment taxes required by law to be withheld with respect to such payment or
may require the participant to pay to it such tax prior to and as a condition of
the making of such payment. Subject to the administrative
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guidelines established by the Committee, a Participant may pay the amount of
taxes required by law to be withheld from an Award, in whole or in part, by
requesting that the Company withhold from any payment of Common Stock due as a
result of such Award, or by delivering to the Company, shares of Common Stock
having a Fair Market Value less than or equal to the amount of such required
withholding taxes.
20. NONCOMPETITION PROVISION
Notwithstanding anything contained in this Plan to the contrary, unless the
Award Notice specifies otherwise, a Participant shall forfeit all unexercised,
unearned, and/or unpaid Awards, including Awards earned but not yet paid, all
unpaid dividends and dividend equivalents, and all interest, if any, accrued on
the foregoing if, (i) in the opinion of the Committee, the Participant, without
the written consent of the Company, engages directly or indirectly in any manner
or capacity as principal, agent, partner, officer, director, employee, or
otherwise, in any business or activity competitive with the business conducted
by the Company or any Subsidiary; or (ii) the Participant performs any act or
engages in any activity which in the opinion of the Committee is inimical to the
best interests of the Company. In addition, the Committee may, in its
discretion, condition the deferral of any Award, dividend, or dividend
equivalent under paragraph 15 hereof on a Participant's compliance with the
terms of this paragraph 20, and cause such a Participant to forfeit any payment
which is so deferred if the Participant fails to comply with the terms hereof.
21. AMENDMENTS TO AWARDS
The Committee may at any time unilaterally amend any unexercised, unearned,
or unpaid Award, including Awards earned but not yet paid, to the extent it
deems appropriate; provided, however, that any such amendment which is adverse
to the Participant shall require the Participant's consent.
22. REGULATORY APPROVALS AND LISTINGS
Notwithstanding anything contained in this Plan to the contrary, the
Company shall have no obligation to issue or deliver certificates of Common
Stock evidencing Awards resulting in the payment of Common Stock prior to (a)
the obtaining of any approval from any governmental agency which the Company
shall, in its sole discretion, determine to be necessary or advisable, (b) the
admission of such shares to listing on the stock exchange on which the Common
Stock may be listed, and (c) the completion of any registration or other
qualification of said shares under any state or federal law or ruling of any
governmental body which the Company shall, in its sole discretion, determine to
be necessary or advisable.
23. NO RIGHT TO CONTINUED EMPLOYMENT OR GRANTS
Participation in the Plan shall not give any Participant any right to
remain in the employ of the Company or any Subsidiary. The Company or, in the
case of employment with a Subsidiary, the Subsidiary, reserves the right to
terminate any Participant at any time. Further, the adoption of this Plan shall
not be deemed to give any person any right to be selected as a Participant or to
be granted an Award.
24. AMENDMENT
The Board may suspend or terminate the Plan at any time. In addition, the
Board may, from time to time, amend the Plan in any manner, provided however,
that any such amendment may be subject to stockholder approval (i) at the
discretion of the Board and (ii) to the extent that shareholder approval may be
required by law, including, but not limited to, the requirements of Rule 16b-3
under the Exchange Act, or any successor rule or regulation.
25. CHANGE IN CONTROL AND CHANGE IN OWNERSHIP
(a) Background. All Participants shall be eligible for the treatment
afforded by this paragraph 25 if there is a Change in Ownership or if their
employment terminates within two
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years following a Change in Control, unless the termination is due to (i) death;
(ii) disability entitling the Participant to benefits under his employer's
long-term disability plan; (iii) Cause; (iv) resignation by the Participant
other than for Good Reason; or (v) retirement entitling the Participant to
benefits under his employer's retirement plan.
(b) Vesting and Lapse of Restrictions. If a Participant is eligible for
treatment under this paragraph 25, (i) all of the terms and conditions in effect
on any unexercised, unearned, unpaid or deferred Awards shall immediately lapse
as of the Acceleration Date; (ii) no other terms or conditions shall be imposed
upon any Awards on or after such date, and in no event shall any Award be
forfeited on or after such date; and (iii) all of his unexercised, unvested,
unearned and/or unpaid Awards or any other outstanding Awards shall
automatically become one hundred percent (100%) vested immediately upon such
date.
(c) Dividends and Dividend Equivalents. If a Participant is eligible for
treatment under this paragraph 25, all unpaid dividends and dividend equivalents
and all interest accrued thereon, if any, shall be treated and paid under this
paragraph 25 in the identical manner and time as the Award under which such
dividends or dividend equivalents have been credited. For example, if upon a
Change in Ownership, an Award under this paragraph 25 is to be paid in a
prorated fashion, all unpaid dividends and dividend equivalents with respect to
such Award shall be paid according to the same formula used to determine the
amount of such prorated Award.
(d) Treatment of Performance Units and Performance Shares. If a
Participant holding either performance units or performance shares is eligible
for treatment under this paragraph 25, the provisions of this paragraph (d)
shall determine the manner in which such performance units and/or performance
shares shall be paid to him. For purposes of making such payment, each "current
performance period" (defined to mean a performance period or term of a
performance unit or performance share which period or term has commenced but not
yet ended), shall be treated as terminating upon the Acceleration Date, and for
each such "current performance period" and each "completed performance period"
(defined to mean a performance period or term of a performance unit or
performance share which has ended but for which the Committee has not, on the
Acceleration Date, made a determination as to whether and to what degree the
performance or service objectives for such period have been attained), it shall
be assumed that the performance or service objectives have been attained at a
level of one hundred percent (100%) or the equivalent thereof. If the
Participant is participating in one or more "current performance periods," he
shall be considered to have earned and, therefore, to be entitled to receive, a
prorated portion of the Awards previously granted to him for each such
performance period. Such prorated portion shall be determined by multiplying the
number of performance shares or performance units, as the case may be, granted
to the Participant by a fraction, the numerator of which is the total number of
whole and partial years (with each partial year being treated as a whole year)
that have elapsed since the beginning of the performance period, and the
denominator of which is the total number of years in such performance period. A
Participant in one or more "completed performance periods" shall be considered
to have earned and, therefore, be entitled to receive all the performance shares
and performance units previously granted to him during each performance period.
(e) Valuation of Awards. If a Participant is eligible for treatment under
this paragraph 25, his Awards (including those earned as a result of the
application of paragraph 25(d) above) shall be valued and cashed out on the
basis of the Change in Control Price.
(f) Payment of Awards. If a Participant is eligible for treatment under
this paragraph 25, whether or not he is still employed by the Company or a
Subsidiary, he shall be paid, in a single lump sum cash payment, as soon as
practicable but in no event later than 90 days after the Acceleration Date, for
all outstanding Units of Common Stock, Independent and Combination SARs, stock
options (including incentive stock options), performance units (including those
earned as a result of the application of paragraph 25(d) above), and performance
shares (including those earned as a result of paragraph 25(d) above), and all
other outstanding Awards, including those granted by the Committee pursuant to
its authority under paragraph 3(h) hereof.
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(g) Deferred Awards. If a Participant is eligible for treatment under this
paragraph 25, all deferred Awards for which payment has not been received as of
the Acceleration Date shall be paid in a single lump sum cash payment as soon as
practicable, but in no event later than 90 days after such date. For purposes of
making such payment, the value of all Awards which are stock-based shall be
determined by the Change in Control Price.
(h) Miscellaneous. Upon a Change in Control or a Change in Ownership, (i)
the provisions of paragraphs 16, 20 and 21 hereof shall become null and void and
of no force and effect insofar as they apply to a Participant who has been
terminated under the conditions described in (a) above; and (ii) no action shall
be taken which would affect the rights of any Participant or the operation of
the Plan with respect to any Award to which the Participant may have become
entitled hereunder on or prior to the date of the Change in Control or Change in
Ownership or to which he may become entitled as a result of such Change in
Control or Change in Ownership.
(i) Legal Fees. The Company shall pay all legal fees and related expenses
incurred by a Participant in seeking to obtain or enforce any payment, benefit
or right he may be entitled to under the Plan after a Change in Control or
Change in Ownership; provided, however, the Participant shall be required to
repay any such amounts to the Company to the extent a court of competent
jurisdiction issues a final and non-appealable order setting forth the
determination that the position taken by the Participant was frivolous or
advanced in bad faith.
26. NO RIGHT, TITLE OR INTEREST IN COMPANY ASSETS
No Participant shall have any rights as a stockholder as a result of
participation in the Plan until the date of issuance of a stock certificate in
his name, and, in the case of Restricted Stock, stock options, performance
shares or any other stock-based grant, such rights are granted to the
Participant under paragraph 10(c) hereof. To the extent any person acquires a
right to receive payments from the Company under this Plan, such rights shall be
no greater than the rights of an unsecured creditor of the Company.
B-12
52
PROXY
NATIONAL FUEL GAS COMPANY
PROXY/VOTING INSTRUCTION CARD SOLICITED BY THE BOARD OF
DIRECTORS FOR USE AT THE ANNUAL MEETING OF
STOCKHOLDERS, FEBRUARY 17, 2000
PLACE: THE RITZ-CARLTON, MANALAPAN, FLORIDA
The undersigned hereby appoints B. J. Kennedy, P. C. Ackerman, and A. M.
Cellino, and each or any of them, Proxies with full power of substitution and
revocation in each, to vote all the shares of Common Stock held of record by the
undersigned on December 20, 1999, at the Annual Meeting of Stockholders of
National Fuel Gas Company or at any adjournment of the meeting, on each of the
items on the reverse side and in accordance with the directions given there,
and, in their discretion, on all other matters that may properly come before the
Annual Meeting or any adjournment thereof. THIS PROXY MAY BE REVOKED WITH THE
SECRETARY OF THE MEETING AS DESCRIBED ON THE FIRST PAGE OF THE ENCLOSED PROXY
STATEMENT.
EMPLOYEE BENEFIT PLANS. This card also provides voting instructions for shares
held in the National Fuel Gas Company Employee Stock Ownership Plans, the
National Fuel Gas Company Employees' Thrift Plan, and the National Fuel Gas
Company Tax-Deferred Savings Plans. If you are a participant in any of these
plans and have shares of the Common Stock of the Company allocated to your
account under these plans, please read the following authorization to the
Trustees of those plans as to the voting of such shares.
TRUSTEES' AUTHORIZATION. The undersigned authorizes The Chase Manhattan Bank,
N.A. as Trustee of the National Fuel Gas Company Employee Stock Ownership Plans
and the National Fuel Gas Company Employees' Thrift Plan and/or authorizes
Vanguard Fiduciary Trust Company as Trustee of the National Fuel Gas Company
Tax-Deferred Savings Plans to vote all shares of the Common Stock of the Company
allocated to the undersigned's account under such plan(s) (as shown on the
reverse side) at the Annual Meeting, or at any adjournment thereof, in
accordance with the instructions on the reverse side.
INCOMPLETE DIRECTIONS AND INSTRUCTIONS. IF THIS CARD IS RETURNED SIGNED BUT
WITHOUT DIRECTIONS MARKED FOR ONE OR MORE ITEMS, REGARDING THE UNMARKED ITEMS,
YOU ARE INSTRUCTING THE TRUSTEE(S) AND GRANTING THE PROXIES DISCRETION TO VOTE
FOR ITEMS 1,2,3 AND 4 AND AGAINST ITEM 5. YOU MAY REVOKE YOUR INSTRUCTIONS BY
NOTICE TO THE TRUSTEE(S) AS DESCRIBED ON THE FIRST PAGE OF THE ENCLOSED PROXY
STATEMENT.
THIS PROXY/VOTING INSTRUCTION CARD IS CONTINUED ON THE REVERSE SIDE.
PLEASE VOTE BY TELEPHONE, OR SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF TWO WAYS:
1. Call TOLL FREE 1-800-840-1208 on a touch-tone telephone and follow the
instructions found on the reverse side.
Or
2. Mark, sign and date your proxy/voting card and return it promptly in the
enclosed envelope.
PLEASE VOTE
In order to reduce the costs associated with producing and mailing your Annual
Report and Proxy Statement in future years, we urge you to elect on your proxy
card that you would like to view your Annual Report and Proxy Statement
electronically via the Internet. Your election can be revoked at anytime by
calling 1-800-648-8166. You will continue to receive your proxy card in the
mail, regardless of your election.
You will receive further directions regarding the Internet viewing process in
the future for next year's Annual Report and Proxy Statement.
53
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. SEE REVERSE SIDE FOR IMPORTANT PROVISIONS AND ADDITIONAL
INSTRUCTIONS.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR ITEMS 1, 2, 3, 4 AND AGAINST ITEM 5.
Please mark
your vote as
indicated in
this example. /X/
FOR WITHHOLD
all nominees for all
(except as marked to nominees
the left)
Item 1 - Election of the following nominees as Directors: / / / /
For three-year terms which expire in 2003 -
01) E. T. Mann
02) G.L. Mazanec
WITHHOLD for the following only. Write name(s) below.
_____________________________________________________
Item 2 - Appointment of independent accountants. FOR AGAINST ABSTAIN
/ / / / / /
Item 3 - Approval of the Annual At Risk Compensation FOR AGAINST ABSTAIN
Incentive Plan / / / / / /
Item 4 - Approval of Amendments to the 1997 Award & FOR AGAINST ABSTAIN
Option Plan / / / / / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEM 5.
Item 5 - Adoption of, if presented at the Meeting, FOR AGAINST ABSTAIN
a shareholder proposal. / / / / / /
WILL ATTEND MEETING / /
I consent to future access of the Annual Reports and Proxy Statements
electronically via the Internet. I understand that the Company may no longer
distribute printed materials to me for any future shareholder meeting until such
consent is revoked. / /
**WE ENCOURAGE YOU TO VOTE BY TELEPHONE TOLL FREE.
PLEASE READ THE INSTRUCTIONS BELOW**
(Signature of Stockholder(s))______________________________ Dated: ____________
Please sign your name as it appears on this proxy/voting instruction card and
return the completed card in the enclosed envelope. When signing as an attorney,
executor, administrator, trustee, guardian or other representative, please give
title as such. If signer is a corporation, please sign full corporate name by
duly authorized officer and attach corporate seal. For joint accounts, each
joint owner should sign.
- -------------------------------------------------------------------------------
PLEASE FOLD AND DETACH HERE AND READ THE REVERSE SIDE
[GRAPHIC OF TELEPHONE] VOTE BY TELEPHONE - TOLL FREE [GRAPHIC OF TELEPHONE]
QUICK *** EASY *** IMMEDIATE
Your telephone vote authorizes the named proxies/trustees to vote your shares in
the same manner as if you marked, signed and returned your proxy card.
- - You will be asked to enter a Control Number, which is located in the box in
the lower right hand corner of this form.
OPTION #1: To vote as the Board of Directors recommends on ALL proposals.
WHEN ASKED, PLEASE CONFIRM BY PRESSING 1.
OPTION #2: If you choose to vote on each proposal separately, press 0 now and
you will hear these instructions:
Proposal 1: TO VOTE FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9;
TO WITHHOLD FOR AN INDIVIDUAL nominee, press 0.
If you press 0, enter the two-digit number that precedes the
nominee(s) for whom you withhold your vote.
Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
The instructions are the same for all remaining proposals.
Your votes will be repeated, please confirm your selections.
When prompted, please answer the following:
- Will you be attending the Annual Meeting?
- Do you consent to future access of the Annual Reports and
Proxy Statements electronically via the Internet?
(Please read the reverse side)
IF YOU VOTE BY TELEPHONE, THERE IS NO NEED TO MAIL BACK YOUR PROXY/VOTING
INSTRUCTION CARD.
THANK YOU FOR VOTING
CALL ** TOLL FREE ** ON A TOUCH TONE TELEPHONE
1-800-840-1208 - ANYTIME
There is NO CHARGE to you for this call.
54
(Signature of Stockholder(s)) ____________________ Dated:________________
Please sign your name as it appears on this proxy/voting instruction card and
return the completed card in the enclosed envelope. When signing as an attorney,
executor, administrator, trustee, guardian or other representative, please give
title as such. If signer is a corporation, please sign full corporate name by
duly authorized officer and attach corporate seal. For joint accounts, each
joint owner should sign.
...............................................................................
PLEASE FOLD AND DETACH HERE AND READ THE REVERSE SIDE
[ART] VOTE BY TELEPHONE -- TOLL FREE [ART]
QUICK * * * EASY * * * IMMEDIATE
Your telephone vote authorizes the named proxies/trustees to vote your shares in
the same manner as if you marked, signed and returned your proxy card.
- - You will be asked to enter a Control Number, which is located in the box in
the lower right hand corner of this form.
OPTION #1: To vote as the Board of Directors recommends on ALL proposals.
WHEN ASKED, PLEASE CONFIRM BY PRESSING 1.
OPTION #2: If you choose to vote on each proposal separately, press 0 now and
you will hear these instructions:
Proposal 1: TO VOTE FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees,
press 9;
TO WITHHOLD FOR AN INDIVIDUAL nominee, press 0.
If you press 0, enter the two-digit number that precedes the
nominee(s) for whom you withhold your vote.
Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
The instructions are the same for all remaining proposals.
Your votes will be repeated, please confirm your selections.
When prompted, please answer the following:
- Will you be attending the Annual Meeting?
- Do you consent to future access of the Annual Reports and Proxy
Statements electronically via the Internet? (Please read the
reverse side)
IF YOU VOTE BY TELEPHONE, THERE IS NO NEED TO MAIL BACK YOUR PROXY/VOTING
INSTRUCTION CARD.
THANK YOU FOR VOTING
CALL * * TOLL FREE * * ON A TOUCH TONE TELEPHONE
1-800-840-1208 -- ANYTIME
There is NO CHARGE to you for this call.