UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CONSOLIDATED NATURAL 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 the Registrant)
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Notes:
LOGO CONSOLIDATED NATURAL GAS COMPANY
LOGO CONSOLIDATED NATURAL GAS COMPANY
LOGO CONSOLIDATED NATURAL GAS COMPANY
LOGO CONSOLIDATED NATURAL GAS COMPANY
LOGO CONSOLIDATED NATURAL GAS COMPANY
LOGO CONSOLIDATED NATURAL GAS COMPANY
LOGO CONSOLIDATED NATURAL GAS COMPANY
LOGO CONSOLIDATED NATURAL GAS COMPANY
LOGO CONSOLIDATED NATURAL GAS COMPANY
LOGO CONSOLIDATED NATURAL GAS COMPANY
LOGO CONSOLIDATED NATURAL GAS COMPANY
LOGO CONSOLIDATED NATURAL GAS COMPANY
LOGO CONSOLIDATED NATURAL GAS COMPANY
LOGO CONSOLIDATED NATURAL GAS COMPANY
1999 Notice of
Annual Meeting and
Proxy Statement
CONSOLIDATED NATURAL GAS COMPANY
TABLE OF CONTENTS
Page
----
Chairman's Letter.......................................................... 1
Notice of Meeting.......................................................... 2
Proxy Statement............................................................ 3
Voting Securities and Principal Holders.................................... 3
Election of Directors...................................................... 4
Board Committees........................................................... 9
Security Ownership......................................................... 11
Compensation Table......................................................... 12
Option Grants.............................................................. 13
Option Exercise Table...................................................... 14
Human Resources Committee Report........................................... 15
Shareholder Performance Graph.............................................. 19
Directors' Compensation.................................................... 19
Benefit Plans.............................................................. 20
Independent Accountants.................................................... 22
Approval of Performance Restricted Stock Awards............................ 23
Stockholder's Proposal..................................................... 24
Other Matters.............................................................. 25
Appendix I--1998 Financial Statements and Notes to Statements..............
(Appendix I is not included in this preliminary filing.)...................
CONSOLIDATED NATURAL GAS COMPANY
February 22, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders to
be held on Tuesday, April 13, 1999, at 10:00 a.m. Eastern Time at the Sheraton
Airport Plaza Hotel, I-85 & Billy Graham Parkway, Charlotte, North Carolina
28208.
The business items to be acted on during the Meeting are listed in the Notice
of Meeting and are described more fully in the Proxy Statement. The Board of
Directors has given careful consideration to these proposals and believes that
Proposals 1, 2 and 3 are in the best interests of the Company and its
stockholders and that Proposal 4 is not in the best interests of the Company
or its stockholders. The Board recommends that you vote FOR Proposals 1, 2 and
3 and AGAINST Proposal 4.
It is important that you be represented at the Annual Meeting in person or by
proxy. Whether or not you plan to attend, we urge you to mark, sign, date and
return the enclosed proxy card promptly in the postage-paid envelope provided
or call the toll-free telephone number on the proxy card to give your voting
instructions. If you plan to attend, please check the appropriate box on the
proxy card or advise while voting by telephone.
Thank you for your cooperation.
Sincerely,
/s/ George A. Davidson, Jr.
George A. Davidson, Jr.
Chairman of the Board and
Chief Executive Officer
1
CONSOLIDATED NATURAL GAS COMPANY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Consolidated Natural Gas Company will be held on Tuesday,
April 13, 1999, at 10:00 a.m. Eastern Time at the Sheraton Airport Plaza Hotel,
I-85 & Billy Graham Parkway, Charlotte, North Carolina 28208. Stockholders of
record at the close of business on February 22, 1999, will be entitled to vote
at the Meeting and any adjournment thereof.
The agenda for the Meeting includes:
1. Election of three Directors.
2. Ratification of the appointment of PricewaterhouseCoopers LLP as
independent accountants.
3. A proposal to approve the performance restricted stock granted awards
under the 1999-2001 Long-Term Strategic Incentive Program.
4. Action on a stockholder-proposed resolution regarding bonuses.
5. Transaction of any other business which may be properly brought before
the Meeting.
In the event you cannot be present in person, please sign and promptly return
the enclosed proxy card in the accompanying postage-paid envelope, or call the
toll-free telephone number on the proxy card to give your voting instructions,
so that your shares will be represented at the Meeting. Prompt return of
proxies will save the Company the expense of further requests for proxies to
ensure a quorum.
By order of the Board of
Directors,
/s/ E. J. Marks, III
E. J. Marks, III
Corporate Secretary
Pittsburgh, Pennsylvania
February 22, 1999
ATTENTION: Stockholders Participating in the Dividend Reinvestment Plan
The accompanying proxy card reflects the total shares of Common Stock
registered in your name directly, as well as any full shares credited to your
Dividend Reinvestment Plan account.
2
CONSOLIDATED NATURAL GAS COMPANY
PROXY STATEMENT
This statement and proxy card, mailed to stockholders commencing on or about
March 5, 1999, are furnished in connection with the solicitation by the Board
of Directors of Consolidated Natural Gas Company of proxies to be voted at the
Annual Meeting of Stockholders, and any adjournment thereof, for the purposes
stated in the Notice of the Annual Meeting. Stockholders can give proxies by
mailing their signed proxy cards or by calling a toll-free telephone number.
The telephone voting procedures are designed to authenticate stockholders'
identities, to allow stockholders to give their voting instructions, and to
confirm that stockholders' instructions have been recorded properly. Specific
instructions for stockholders who wish to use the telephone voting procedure
are set forth on the enclosed proxy card. Any stockholder who cannot attend
the Annual Meeting is requested to sign and return the accompanying proxy card
or call the toll-free telephone number on the proxy card promptly.
The proxy reflects the number of shares registered in a stockholder's name
directly and, for participants in the Company's Dividend Reinvestment Plan,
includes full shares credited to a participant's Dividend Reinvestment Plan
account. Proxies so given will be voted on all matters brought before the
Meeting and, as to the matters with respect to which a choice is specified,
will be voted as directed. The cost of solicitation will be paid by the
Company. In addition to the use of the mails, proxies may be solicited
personally, or by telephone, telecopy or other electronic means, by employees
of the Company and its subsidiaries with no special compensation to these
employees. Georgeson & Company Inc., Wall Street Plaza, New York, New York
10005, has been retained to assist in the solicitation of proxies at an
estimated cost of $8,000. The Company will reimburse brokerage houses and
other custodians, nominees and fiduciaries for expenses incurred in sending
proxy material to their principals.
Any proxy given pursuant to this solicitation may be revoked at any time
prior to exercise by written notice to the Corporate Secretary, by filing a
later dated executed proxy, or by attending and voting at the Annual Meeting.
The address of the principal executive offices of the Company is Consolidated
Natural Gas Company, CNG Tower, 625 Liberty Avenue, Pittsburgh, Pennsylvania
15222-3199.
Voting Securities and Principal Holders
Holders of Common Stock, $2.75 par value, of record on February 22, 1999, have
one vote for each share held. On January 31, 1999, 95,397,649 shares of Common
Stock were outstanding. A majority of the outstanding shares will constitute a
quorum at the Meeting. Abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a quorum for the
transaction of business. Abstentions are counted in tabulations of the votes
cast on proposals presented to stockholders. Broker non-votes are not counted
for purposes of determining whether a proposal has been approved.
The following table indicates the beneficial ownership, as of December 31,
1998, of the Company's Common Stock with respect to the only persons known to
the Company to be the beneficial owner of more than 5% of such Common Stock.
On December 31, 1998, 95,449,428 shares of Common Stock were outstanding.
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Name and Address of Amount and Nature Percent of Outstanding
Beneficial Owner of Beneficial Ownership Common Stock
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Morgan Stanley, Dean Witter &
Co.
1585 Broadway, New York, NY
10036 5,224,572 5.5%
Trustees, Alternate Thrift
Trust of Employees Thrift
Plans(/1/)
CNG Tower, 625 Liberty Avenue,
Pittsburgh, PA 15222-3199 2,874,257(/2/) 3.0%
Trustees, Long-Term Thrift
Trust of Employees Thrift
Plan(/1/)
CNG Tower, 625 Liberty Avenue,
Pittsburgh, PA 15222-3199 5,576,492(/3/) 5.8%
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(/1/)The Alternate and Long-Term Thrift Trusts beneficially hold shares for
employees under the various Company sponsored defined contribution plans.
(/2/)Such shares are beneficially owned in varying amounts by 1,995 employees,
no one of whom beneficially owned in excess of 9,000 shares in the Plans,
or 1/100ths of 1% of the shares outstanding. Such shares are voted
pursuant to confidential
3
instructions of participating employees and, in the absence of instructions,
such shares are not voted. A Registration Statement relating to various
investment options available to participants in the Plans has been made
effective under the Securities Act of 1933 and is on file with the Securities
and Exchange Commission (SEC).
(/3/)Such shares are beneficially owned in varying amounts by 3,872 employees,
no one of whom beneficially owned in excess of 14,900 shares in the Plan,
or 2/100ths of 1% of the shares outstanding. Such shares are voted
pursuant to confidential instructions of participating employees and, in
the absence of instructions, Trustees, Long-Term Thrift Trust of
Employees Thrift Plan shall vote unvoted shares in the same proportion as
shares voted pursuant to confidential instructions. A Registration
Statement relating to various investment options available to
participants in the Plan has been made effective under the Securities Act
of 1933 and is on file with the SEC.
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The Board of Directors does not know of any other persons or groups who
beneficially own 5% or more of the outstanding shares of Common Stock.
Annual Report
Commencing on or about March 5, 1999, the Company's Summary Annual Report and
financial statements for the year ended December 31, 1998, were mailed
together with this Notice of Annual Meeting and Proxy Statement to
stockholders of record on February 22, 1999. The financial statements are
included as part of Appendix I to this Notice of Annual Meeting and Proxy
Statement. The Company will provide a copy of the Summary Annual Report to
anyone else upon request in writing to the Corporate Secretary, Consolidated
Natural Gas Company, CNG Tower, 625 Liberty Avenue, Pittsburgh, Pennsylvania
15222-3199.
Notice of Recent Amendment to Rights Agreement
On January 19, 1999, the Board of Directors amended the existing Rights
Agreement to conform it to recent Delaware Court decisions. The Agreement was
amended to remove references to actions that could be taken only by directors
who were in office as of the adoption of the Rights Agreement (commonly
referred to as the "dead-hand" provision).
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors consists of nine members divided into three classes.
Each class has a three-year term, and only one class is elected each year.
There are no family relationships among any of the nominees, continuing
Directors and Executive Officers of the Company nor any arrangement or
understanding between any Director or Executive Officer or any other person
pursuant to which any of the nominees has been nominated. During 1998, each of
the members of the Board of Directors attended more than 75% of the aggregate
of the Board meetings and meetings held by all committees of the Board on
which the Director served during the periods that the Director served.
On recommendation of the Governance Committee of the Board of Directors,
three incumbent Class III Directors have been designated nominees for
reelection; each has consented to be a nominee and to serve if elected. The
remaining Directors will continue to serve in accordance with their previous
elections. The names and other information concerning the three persons
nominated for a term of three years and the six continuing Board members are
set forth by Class on pages 6 through 8 of this Proxy Statement. However,
since the bylaws of the Company state that the term of office of a Director
shall expire on the date of the Annual Meeting of Stockholders following his
or her 70th birthday, it is anticipated that Mr. Lego will serve two years of
the three-year term to which he is nominated. The personal information has
been furnished to the Company by the nominees and other Directors. Unless you
specify otherwise on your signed proxy card, your shares will be voted FOR the
election of the three persons named to three-year terms as Directors. In the
event of an unexpected vacancy on the slate of nominees, your shares will be
voted for the election of a substitute nominee if one shall be designated by
the Board. If any nominee for election as Director is unable to serve, which
the Board of Directors does not anticipate, the persons named in the proxy may
vote for another person in accordance with their judgment.
4
Vote Needed for Election of Directors
Directors are elected by a plurality of the votes of the shares of Common
Stock present in person or represented by proxy and entitled to vote at the
Annual Meeting. Any shares not voted (whether by abstention, broker non-vote
or votes withheld) are not counted as votes cast for such individuals and will
be excluded from the vote.
Board Recommendation
The Board recommends that stockholders vote FOR Proposal 1, and the
accompanying proxy will be so voted, unless a contrary specification is made.
5
DIRECTORS NOMINATED FOR ELECTION TO THE BOARD WITH A TERM EXPIRING APRIL 2002
Raymond E. Galvin Member: Audit Committee
Age 67 Financial Committee
[PHOTO Director since 1998 International Committee
APPEARS
HERE]
Mr. Galvin served as President of Chevron U.S.A. Production
Company, an oil and gas exploration, development and production
company, Houston, Texas, from January 1992 until his retirement
in February 1997 and as a Director of Chevron Corporation from
1995 until 1997. He served as Senior Vice President, Exploration,
Land and Production, for Chevron U.S.A. from 1988 to 1992, and a Vice
President of Chevron Corporation from 1988 to 1997. Upon implementation of the
Gulf-Chevron Corporation merger in 1985 and until 1988, he served as Vice
President, Exploration, Land and Production, for Chevron U.S.A. Inc. in its
Southern and Eastern Regions. Prior thereto, he served in various engineering
and management positions with Gulf Oil Corporation from 1953 to 1985. He
currently serves on the Board of Trustees of the Houston Museum of Natural
Science and on the Houston Advisory Board of the Nature Conservancy of Texas.
He is a fellow, External Advisory Council, College of Engineering, Texas A&M
University.
Paul E. Lego Chair:International Committee
Age 68 Member: Executive Committee
[PHOTO Director since 1991 Financial Committee
APPEARS Human Resources Committee
HERE]
Mr. Lego served as Chairman and Chief Executive Officer of
Westinghouse Electric Corporation, Pittsburgh, Pennsylvania, an
electronic products and services, environmental systems and
broadcasting company from 1990 to his retirement in January 1993.
He served that company as President and Chief Operating Officer from 1988 to
1990 and as a Director from 1988 to 1993. He had been Senior Executive Vice
President, Corporate Resources from 1985 to 1988, Executive Vice President,
Westinghouse Industries & International Group from 1983 to 1985 and Executive
Vice President, Westinghouse Industry Products from 1980 to 1983. Prior
thereto, he served in various engineering and management capacities with
Westinghouse since 1956. Mr. Lego is the non-executive Chairman of the Board
of Commonwealth Industries, Inc. and a Director of the Lincoln Electric
Company, USX Corporation and Orlimar Golf Company. He is a member of the
Business Council and a Trustee of the University of Pittsburgh.
Margaret A. McKenna Chair:Compliance Committee
Age 53 Member: Governance Committee
[PHOTO Director since 1994 Human Resources Committee
APPEARS
HERE]
Ms. McKenna has served as President of Lesley College, Cambridge,
Massachusetts, since 1985. She served as Vice President, Program
Planning, Radcliffe College from 1982 to 1985 and as Director of
its Bunting Institute from 1981 to 1985. Prior thereto, she had
served as Deputy Under Secretary of the U.S. Department of
Education, Deputy Counsel to the President of the United States, and in posts
with the International Association of Human Rights agencies and U.S.
Department of Justice. Ms. McKenna is a Director of The Stride Rite
Corporation.
6
CONTINUING DIRECTORS WITH A TERM EXPIRING APRIL 2000
William S. Barrack, Jr. Member: Audit Committee
Age 69 Compliance Committee
[PHOTO Director since 1994 Executive Committee
APPEARS International Committee
HERE]
Mr. Barrack served as Senior Vice President of Texaco Inc.,
Harrison, New York, an integrated international oil company and a
producer of natural gas, from 1983 to his retirement in 1992. He
served as a Senior Director of Caltex Petroleum Corporation from
1982 to 1992, President of Texaco Oil Trading & Supply Company from 1983 to
1984, and Chairman and Chief Executive Officer of Texaco Limited-London from
1980 to 1983. Prior thereto, he served in various marketing, producing and
management positions with Texaco Inc. since 1953. Mr. Barrack is a Director of
Standard Commercial Corporation.
Ray J. Groves Chair:Governance Committee
Age 63 Member: Audit Committee
[PHOTO Director since 1994 Financial Committee
APPEARS
HERE]
Mr. Groves served as Chairman and Chief Executive Officer of
Ernst & Young, New York, New York, a public accounting firm, from
1991 to his retirement in 1994. He served as Co-Chief Executive
Officer of the firm from 1989 to 1991 and served as Chairman and
Chief Executive Officer of Ernst & Whinney from 1977 to 1989. Mr. Groves was
admitted as a Partner in the firm in 1966, having joined the firm in 1957. Mr.
Groves is the Chairman of Legg Mason Merchant Banking Inc., a Director of
Allegheny Teledyne Incorporated, American Water Works Company Inc., Electronic
Data Systems Corp., LAI Worldwide Inc., Marsh & McLennan Companies, Inc., and
RJR Nabisco, Inc. Mr. Groves serves as a Trustee of The Public Policy
Institute, Vice Chairman of The Ohio State University Foundation and as a
Managing Director, Treasurer and Secretary of the Metropolitan Opera
Association.
Steven A. Minter Chair:Human Resources Committee
Age 60 Member: Compliance Committee
[PHOTO Director since 1988 Governance Committee
APPEARS
HERE]
Mr. Minter has been the Executive Director and President of The
Cleveland Foundation, Cleveland, Ohio, since 1984, an
organization supporting health, human services, cultural and
educational programs in the greater Cleveland area. He had been
Associate Director and Program Officer of The Cleveland
Foundation from 1975 to 1980 and from 1981 to 1983. He served as Under
Secretary of the U.S. Department of Education, Washington, D.C., from 1980 to
1981. He was the Commissioner of Public Welfare for the Commonwealth of
Massachusetts from 1970 to 1975. Mr. Minter is a Director of Goodyear Tire &
Rubber Company, Rubbermaid Inc., and KeyCorp. He is also a Trustee of the
College of Wooster and of The Foundation Center.
7
CONTINUING DIRECTORS WITH A TERM EXPIRING APRIL 2001
J. W. Connolly Chair:Financial Committee
Age 65 Member: Executive Committee
[PHOTO Director since 1984 Human Resources Committee
APPEARS International Committee
HERE]
Mr. Connolly served as Senior Vice President and Director of H.
J. Heinz Company, Pittsburgh, Pennsylvania, a processed food
products manufacturer, from 1985 to his retirement in December
1993. He served as President and Chief Executive Officer of Heinz
U.S.A., a division of the H. J. Heinz Company, from 1980 to 1985, and served
as Executive Vice President of that company from 1979 to 1980. He was
President and Chief Executive Officer of The Hubinger Company, a Heinz Company
subsidiary, from 1976 to 1979, Treasurer of H. J. Heinz Company from 1973 to
1976, and a Vice President of Ore-Ida Foods, Inc., a Heinz Company subsidiary,
from 1967 to 1973. An attorney by profession, Mr. Connolly joined the Law
Department of the H. J. Heinz Company in 1961. He is a Director of Mellon Bank
Corporation, Mellon Bank, N.A., First Vice Chairperson for UPMC Health System
Board of Directors, and Second Vice Chairperson for the Joint UPMC
Presbyterian/UPMC Shadyside Boards of Directors. He is also Chairman, Board of
Trustees of the University of Pittsburgh.
George A. Davidson, Jr. Chair:Executive Committee
Age 60 Member: Financial Committee
Director since 1985
[PHOTO
APPEARS
HERE]
Mr. Davidson has served as Chairman of the Board and Chief
Executive Officer of the Company since May 1987, and has been
employed by Consolidated since 1966. He served as Vice Chairman
and Chief Operating Officer of the Company from January 1987 to
May 1987, and Vice Chairman from October 1985 to January 1987. He
served as President of CNG Transmission Corporation(/1/) from 1984 through
1985. He had been Vice President, System Gas Operations, for Consolidated
Natural Gas Service Company, Inc.,(/1/) from 1981 to 1984, and was Assistant
Vice President, Rates and Certificates, of that company from 1975 to 1981. Mr.
Davidson held various other positions in the Rates and Certificates Department
from 1966 to 1975. Mr. Davidson serves on the National Petroleum Council and
the Allegheny Conference on Community Development. He is a Director of the
American Gas Association, PNC Bank Corp. and BFGoodrich Company. Mr. Davidson
is Chairman of the Board of the Pittsburgh Cultural Trust and a Director of
the Pittsburgh Foundation. He is also a Trustee of the University of
Pittsburgh.
Richard P. Simmons Chair:Audit Committee
Age 67 Member: Compliance Committee
Director since 1990 Executive Committee
[PHOTO Governance Committee
APPEARS
HERE]
Mr. Simmons has served as Chairman, President and Chief Executive
Officer of Allegheny Teledyne Incorporated, Pittsburgh,
Pennsylvania, an international specialty steel manufacturer since
February 1997. He served as Chairman of Allegheny Teledyne
Incorporated since August 1996. He served as Chairman and Chairman of the
Executive Committee of Allegheny Ludlum Corporation, a predecessor company,
since 1990. He served as Chairman and Chief Executive Officer of Allegheny
Ludlum from 1980 to 1990 and as a Director of that company since 1980. He was
a Director of Allegheny Ludlum Industries from 1973 to 1980 and a member of
the Executive Office of that company from 1978 to 1980. Mr. Simmons is a
Director of PNC Bank Corp. He is a member of the Massachusetts Institute of
Technology Corporation and Chairman and a member of the Executive Committee of
the Allegheny Conference on Community Development.
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(/1/)Wholly owned subsidiary of the Company.
8
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Board of Directors
The Company is managed under the direction of the Board of Directors, which
met seven times in 1998. To assist it in various areas of responsibility, the
Board has established several standing committees that are briefly described
below.
Audit Committee
The Audit Committee is comprised of four non-employee Directors. The Audit
Committee assists the Board in fulfilling its oversight responsibilities by
reviewing the financial information to be provided to shareholders and others,
and by reviewing the audit process and any related internal control findings
of the internal auditors and independent accountants. The Committee also
selects and recommends to the Board the employment of independent accountants
and approves fees charged by independent accountants. The Committee met five
times in 1998.
Compliance Committee
The Compliance Committee consists of four non-employee Directors. It reviews
and monitors policies and procedures to prevent, detect and deter violations
of the law and violations of the Company's Business Ethics Policy. It also
reviews the results of the Annual Business Ethics and Compliance Surveys. The
Committee met three times in 1998.
Executive Committee
The Executive Committee consists of four non-employee Directors and the
Chairman of the Board. It has the authority to act in emergency situations and
can exercise all the powers of the Board of Directors. The Committee did not
meet in 1998.
Financial Committee
The Financial Committee consists of four non-employee Directors and the
Chairman of the Board. Its function is to oversee the short-term and long-term
financial activities and planning of the Company, including dividend actions.
The Committee met six times in 1998.
Governance Committee
The Governance Committee consists of four non-employee Directors. It monitors
corporate governance matters, including the structure, process and procedures
of the Board, and reviews the qualifications of Director candidates on the
basis of recognized achievements and their ability to bring skills and
experience to the deliberations of the Board. It also recommends qualified
candidates to the Board, including the slate of nominees submitted to the
stockholders at the Annual Meeting; reviews the size and composition of the
Board; annually reviews Directors' compensation and benefits; makes
recommendations to the Board; and monitors the Company's CEO succession plans.
The Committee met five times in 1998.
Stockholders who wish to propose candidates to the Governance Committee for
election to the Board at the 2000 Annual Meeting should write to the Corporate
Secretary, Consolidated Natural Gas Company, CNG Tower, 625 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3199, in accordance with the Company's bylaws,
stating in detail the qualifications of such candidates for consideration by
the Committee. Any such recommendation should be accompanied by a written
statement from the candidate of his or her consent to be considered as a
candidate and, if nominated and elected, to serve as a Director.
Human Resources Committee
The Human Resources Committee is comprised of four non-employee Directors. The
Committee reviews senior executive succession plans, compliance with
affirmative action and workforce diversity plans. It approves the salary
budgets and incentive plans for all non-union employees, reviews senior
executive
9
salary changes and incentive awards and establishes the salary and incentives
of the Chairman and Chief Executive Officer. The Committee also has general
supervision over the administration of all non-union employee pension,
compensation and benefit plans of the Company and its subsidiaries; reviews
proposals with respect to the creation of and changes in such plans; and makes
recommendations with respect thereto to the Board of Directors. The Committee
met six times in 1998.
International Committee
The International Committee is comprised of four non-employee Directors. Its
function is to review and take action on matters concerning CNG International
Corporation. The Committee advises, consults and assists in the screening of
projects prior to their recommendation to the Board of Directors for
investment. The Committee met five times in 1998.
10
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
The following table lists the beneficial ownership, as of December 31, 1998,
of the Company's Common Stock by each current Director, named executive, and
all current Directors and Officers as a group.
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(a) (b) (a) + (b)
--------------- ------------ -------------
Number of Number of Director's Percent of
Shares Shares Under Deferred Outstanding
Name of Beneficially Exercisable Compensation Common
Beneficial Owner Owned(/1/)(/2/) Options(/3/) Stock Credits(/4/) Stock
- -------------------------------------------------------------------------------------
R. L. Adams 21,449 71,750 .098
W. S. Barrack, Jr. 824 6,411 .001
J. W. Connolly 1,000 9,135 .001
G. A. Davidson, Jr. 129,053 369,443 .522
R. E. Galvin 1,000 1,371 .001
R. J. Groves 1,349 9,510 .001
P. E. Lego 800 5,834 .001
M. A. McKenna 3,967 1,923 .004
S. A. Minter 1,800 4,186 .002
R. M. Sable, Jr. 9,425 46,872 .059
R. P. Simmons 6,693 6,706 .007
D. M. Westfall 44,492 136,447 .190
S. E. Williams 38,705 124,410 .171
Directors and Officers
of the Company
as a group
(17 persons) 283,616 902,924 45,076 1.243
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(/1/)Includes shares owned by spouses and, in the case of employees, shares
beneficially owned under the Long-Term Thrift Trust of the Employees
Thrift Plan and the Employee Stock Ownership Plan. Unless otherwise
noted, the Directors and Officers have sole voting and investment power.
(/2/)Includes Performance Restricted Stock Awards and Restricted Stock Awards
granted pursuant to the 1996-1998 Long-Term Strategic Incentive Program
and the 1997 Stock Incentive Plan. Pursuant to the 1999-2001 Long-Term
Strategic Incentive Program, the terms of which are further described in
the Human Resources Committee Report, Performance Restricted Stock Awards
were granted, subject to shareholder approval, as follows: Messrs. Adams,
42,000; Davidson, 84,000; Sable, 13,500; Westfall, 42,000; and Williams,
31,400.
(/3/)Includes shares subject to options exercisable on December 31, 1998, and
options which will become exercisable within 60 days thereafter.
(/4/)Director's compensation deferred in the form of CNG stock credits, as
described under Non-Employee Directors' Compensation on page 19, is not
included in the percentage shown in the last column.
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11
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation of the named Executive
Officers for the last three completed fiscal years of the Company.
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
----------------------------------- --------------------------
Other Restricted Shares All
Name and Annual Stock Underlying Other
Principal Position Year Salary Bonus Compensation(/1/) Award(s)(/2/) Options(/3/) Compensation(/5/)
- -----------------------------------------------------------------------------------------------------------------
R. L. Adams 1998 $283,500 $139,100 $ 1,807 2,025 6,750 $14,374
(Sr. Vice President, 1997 208,333 120,000 1,587 0 0 10,624
Regulated Business; 1996 92,424 90,000 0 19,417 65,000 4,621
President, CNG
Transmission
Corporation)
G. A. Davidson, Jr. 1998 689,700 0 11,780 0 0 69,169
(Chairman and Chief 1997 632,650 400,000 8,922 0 0 63,472
Executive Officer, 1996 598,750 360,000 10,061 84,000 280,000 56,465
Director)
R. M. Sable, Jr. 1998 183,333 0 51 0 0 13,220
(Vice President and 1997 155,533 70,000 40 7,875 14,167(/4/) 7,984
Treasurer) 1996 124,917 61,900 1,344 0 27,500(/4/) 6,463
D. M. Westfall 1998 331,867 0 2,931 2,650 8,750 25,089
(Sr. Vice President, 1997 245,800 150,000 2,640 0 0 18,643
Nonregulated Business 1996 217,050 139,000 10,684 31,400 105,000 16,322
and
Chief Financial
Officer)
S. E. Williams 1998 275,967 0 4,074 2,025 6,750 20,896
(Sr. Vice President and 1997 254,570 140,000 3,265 0 0 19,300
General Counsel) 1996 240,900 153,000 4,457 23,300 78,000 18,286
- -------------
(/1/)Includes only tax reimbursements for Messrs. Adams, Davidson, Sable,
Westfall and Williams. No amounts are included in this column for the
Executive Split-Dollar Life Insurance Plan because the executives'
contributions to this plan are greater than or equal to the term life
insurance costs that apply to the underlying life insurance policies.
(/2/)Restricted Stock Award and Performance Restricted Stock Award Grants are
based on the individual's level of performance and responsibility.
Restrictions on the Restricted Stock Awards lapse on March 1, 1999, and
once vested must be held until March 1, 2001. Restrictions on the
Performance Restricted Stock Awards lapse on March 1, 1999, subject to
the achievement of performance levels. Dividends are paid on Restricted
Stock from the date of grant. Dividends on Performance Restricted Stock
are held by the Company from the date of the grant, subject to the
achievement of performance levels. At December 31, 1998, the number of
Restricted Stock holdings for each of the named Executive Officers was:
Messrs. Adams, 3,492; Davidson, 14,000; Sable, 1,686; Westfall, 5,951;
and Williams, 4,125 and the number of Performance Restricted Stock
holdings for each of the named Executive Officers was: Messrs. Adams,
17,950; Davidson, 70,000; Sable, 6,592; Westfall, 28,475; and Williams,
21,200. The aggregate values of such holdings at December 31, 1998, at
the year-end closing price of $54.00 per share, for each of the named
Executive Officers was: Messrs. Adams, $1,157,868; Davidson, $4,536,000;
Sable, $447,012; Westfall, $1,859,004; and Williams, $1,367,550.
(/3/)Comprised of Triannual Non-Qualified Stock Options granted pursuant to
the 1996-1998 Long-Term Strategic Incentive Program. Does not include
Triannual Options granted pursuant to the 1999-2001 Program. On January
4, 1999, the Company granted the following number of Triannual Options
pursuant to the 1999-2001 Program: Messrs. Adams, 105,000; Davidson,
280,000; Sable, 45,000; Westfall, 140,000; and Williams 105,000.
(/4/)Mr. Sable received a grant of 2,500 NQSOs in 1996 and 1997. Mr. Sable
received the following grants of Triannual Options: 1996, 25,000; 1997,
11,667.
(/5/)Comprising annual employer matching thrift plan contributions and ESOP
allocations.
- -------------------------------------------------------------------------------
12
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of Triannual
Non-Qualified Stock Options to the named Executive Officers as of the end of
the last fiscal year of the Company. No Stock Appreciation Rights ("SARs")
have been granted.
TRIANNUAL OPTION GRANTS IN LAST FISCAL YEAR
- -----------------------------------------------------------------------------------------------------------
Individual Grants
-----------------------------------------------
Potential Realizable
Number of % of Total Value at Assumed Annual
Shares Options Exercise Rates of Stock Price
Underlying Granted to or Base Appreciation for Option Term(/2/)
Options Employees Price Per Expiration ---------------------------------
Name Granted(/1/) in Fiscal Yr. Share Date 0% 5% 10%
- -----------------------------------------------------------------------------------------------------------
R. L. Adams 6,750 8.43% $56.813 2006 0 $ 241,173 $ 611,181
G. A. Davidson, Jr. 0 0 -- -- 0 0 0
R. M. Sable, Jr. 0 0 -- -- 0 0 0
D. M. Westfall 8,750 10.93 56.813 2006 0 312,632 792,271
S. E. Williams 6,750 8.43 56.813 2006 0 241,173 611,181
- -----------------------------------------------------------------------------------------------------------
All Shareholders N/A N/A N/A N/A 0 $3,410,349,879 $8,642,496,175
- -----------------------------------------------------------------------------------------------------------
All Optionees Receiving
Triannual Option Grants 80,083 100.00 41.875- 2006 0 $ 2,861,317 $ 7,251,138
59.375
- -----------------------------------------------------------------------------------------------------------
Optionee Gain as % of
All Shareholder Gain N/A N/A N/A N/A N/A 0.08% 0.08%
- -----------------------------------------------------------------------------------------------------------
(/1/)All material terms of the Triannual Options granted in 1998 are in the
Human Resources Committee Report under Long-Term Incentive Compensation.
(/2/)Based on actual option term (10-year) and annual compounding at rates
shown. The dollar amounts under these columns are the result of
calculations at 0% and at the 5% and 10% rates set by the Securities and
Exchange Commission and therefore are not intended to forecast possible
future appreciation, if any, of the Company's stock price. No gain to the
optionees is possible without stock price appreciation, which will
benefit all shareholders commensurately. A 0% gain in stock price
appreciation will result in 0 dollars for the optionees. The Company did
not use an alternative formula for a grant date valuation, as the Company
is not aware of any formula which will determine with reasonable accuracy
a present value based on future unknown or volatile factors.
- -------------------------------------------------------------------------------
13
The following table sets forth information with respect to the named Executive
Officers concerning the exercise of options during the last fiscal year of the
Company and unexercised options held as of the end of the fiscal year.
AGGREGATED NON-QUALIFIED STOCK OPTION EXERCISES IN LAST FISCAL YEAR
AND DECEMBER 31, 1998, YEAR-END NON-QUALIFIED STOCK OPTION VALUES
- -----------------------------------------------------------------------------------------
Number of Shares Value of Unexercised,
Underlying Unexercised In-the-Money Options
Shares Options Held at Year-End at Year-End(/2/)
Acquired On Value ------------------------- -------------------------
Name Exercise Realized(/1/) Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------
R. L.
Adams 0 $ 0 0 0 $ 0 $ 0
G. A.
Davidson,
Jr. 38,884 785,252 62,600 46,285 480,287 724,392
R. M.
Sable,
Jr. 0 0 8,065 5,748 97,287 35,434
D. M.
Westfall 512 8,224 18,565 7,603 244,884 122,806
S. E.
Williams 2,000 33,250 32,003 13,178 397,730 206,047
- ----------------
(/1/)Market value of underlying shares at time of exercise minus the exercise
price.
(/2/)Market value of underlying shares at year-end market price of $54.00 per
share minus the exercise price.
- -------------------------------------------------------------------------------
LONG-TERM INCENTIVE PLAN AWARDS IN THE LAST FISCAL YEAR
In 1998, Restricted Stock Awards were granted pursuant to the 1996-1998 Long-
Term Incentive Program in the following amounts to: Messrs. Adams, 325;
Westfall, 475; and Williams 325. Restrictions on this award lapse on March 1,
1999 and once vested, the shares must be held until March 1, 2001. Dividends
are paid on the shares from the date of the grant. Restricted Stock Awards are
based on an individual's level of responsibility. Also, in 1998, Performance
Restricted Stock Awards were granted pursuant to the 1996-1998 Program in the
following amounts to: Messrs. Adams, 1,700; Westfall, 2,175; and Williams,
1,700. Subject to achievement of performance levels described in the Human
Resources Committee report, restrictions on this award lapse on March 1, 1999.
Dividends on the shares are held by the Company from the date of the grant,
subject to the achievement of performance levels. Performance Restricted Stock
Awards are based on an individual's level of responsibility.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AGREEMENTS
On January 19, 1999, the Board of Directors revised existing change of control
agreements for the named executive officers. In the event of certain
terminations of employment, these executives shall receive severance payments
equal to 3.00 times their respective base salary plus annual bonus, as
defined. The agreements also provide for the Company to reimburse the employee
for the payment of certain excise taxes and for a related tax gross-up
payment, if any, payable in connection with compensation paid under such
agreement as well as welfare benefits, outplacement support and enhanced
retirement benefits.
Mr. Davidson entered into an agreement with the Company dated December 22,
1998. This agreement provides for the following until Mr. Davidson's announced
retirement date of August 1, 2000, or until such date as both parties agree:
(i) a base salary of $700,000 per year and an annual increase of the higher of
five percent of base salary or the average executive percentage increase in
base salary; (ii) short-term incentive compensation when payment of incentives
is authorized by the Board pursuant to the Company's short-term incentive
plan; (iii) the vested portion of previously granted stock options will be
exercisable for 10 years from the date of grant, and the holding period
requirement for previously granted restricted stock will be removed on the
retirement date; (iv) Mr. Davidson will continue to participate in the
Company's long-term incentive plans on a pro rata basis; (v) and Mr. Davidson
will receive all normal benefits and perquisites available to a senior
executive of the Company. Mr. Davidson may not disclose any confidential
knowledge or information of the Company or any of its subsidiaries.
14
The agreement also states the Company's obligations to Mr. Davidson and/or
his estate due to termination from permanent disability or death. The Company
would be obligated to provide all compensation and benefits as described
above, along with any applicable health insurance and other welfare benefits.
Mr. Davidson may elect to resign prior to August 1, 2000, if the Company
selects a successor or eliminates or reduces the duties of his position. In
this case the Company is obligated to pay all the compensation and benefits as
described above as if Mr. Davidson's employment had continued through August
1, 2000.
HUMAN RESOURCES COMMITTEE REPORT
SUMMARY
The Company's executive compensation programs are administered by the Human
Resources Committee of the Board of Directors (the "Committee"), which is
comprised of four non-employee Directors. The Committee reviews and approves
all issues pertaining to executive compensation. Total compensation is
designed in relationship to compensation paid by competitor organizations.
Base salary and long-term incentive compensation are targeted to median market
levels, and short-term incentive compensation is goal-based and structured to
be comparable to that paid by competitor organizations. The objective of the
Company's three compensation programs (base salary, short-term incentive and
long-term incentive) is to provide a total compensation package that will
enable the Company to attract, motivate and retain outstanding individuals and
align their success with that of the Company's shareholders.
Competitor organizations are defined annually as part of the compensation
administration process and include fully integrated natural gas companies as
well as broader industry comparatives, e.g., comparably sized general
industrial companies and, where appropriate, specific energy companies.
BASE SALARY
The level of base salary paid to executives for 1998 was determined on the
basis of performance and experience. The Company measures or identifies its
base salary structure by a range of market reference points in comparison to
base salaries offered by competitors. Salary levels are targeted to and, in
1998, correspond with the median range of compensation paid by competitor
organizations. These are not the same companies that comprise the Peer Group
index shown on the shareholder return performance presentation. The specific
competitive marketplace that the Company and its subsidiaries use in base
salary analysis is determined based on the nature and level of the positions
being analyzed and the labor markets from which individuals would be
recruited. The Committee also considered the competitiveness of the entire
compensation package in its approval of salary levels paid to senior
executives.
SHORT-TERM INCENTIVE COMPENSATION
Short-term incentive compensation plans are used at both CNG Corporate and
Business Segment levels. Short-term incentive opportunity is structured so
that awards are competitive at a level commensurate with the performance level
achieved by the Company with consideration for the executive's performance and
level of responsibility. The short-term incentive plan has threshold, target
and maximum bonus levels for the various executive levels based on competitive
data. For the named Executive Officers, the threshold bonus level is 14% to
24% of base pay, the target bonus level is 35% to 60% of base pay, and the
maximum bonus level is 49% to 84% of base pay. At the executive level, the
primary form of short-term incentive compensation is a cash bonus pool
arrangement, for which all employees on the Company's system executive payroll
are eligible.
Individual Business Segment Pools and a CNG Corporate Pool are established
if the Business Segments or the CNG System attain certain levels of
performance. The CNG Corporate Pool is calculated as a percent of eligible
base payroll, using the weighted differential between CNG System goals and
actual
15
performance. CNG Transmission's Pool is calculated using the weighted
differential between its goals and actual performance.
Executives participate in the bonus pools with payout opportunities
determined by actual individual performance and the level of responsibility
within their respective Business Segments and within the CNG System. A pool
will not be established at Corporate unless 90% of the net income goal is
achieved for the CNG System. A pool will not be established at CNG
Transmission unless 90% of the net income goal is achieved for CNG
Transmission. If the net income threshold is achieved and the total weighted
average achievement for all goals is 85%, threshold bonus pools are created;
at 100% of goal, target bonus pools are created; and, at 115% or greater of
goal achievement, maximum bonus pools are created. At less than the threshold
level, there are no bonus pools. The performance measures for the CNG
Corporate Pool (weighted as indicated) are based on the System's return on
equity vs. peers (20%), System net income (55%), and Corporate controllable
operations and maintenance expenses (25%), with specific performance goals
established based on the Company's annual long-range forecast, actual prior
year performance and business plan objectives. The performance measures for
CNG Transmission (weighted as indicated) are: net income (60%), controllable
operations and maintenance expenses (30%) and net cash flow (10%). For the
last fiscal year, CNG Corporate achieved 85% of its net income goal which was
not sufficient to establish a bonus pool. CNG Transmission achieved 111.5% of
its goals. Based on its performance, a bonus pool was established at CNG
Transmission of $2,209,100.
CEO's COMPENSATION
Mr. Davidson's base salary was determined in the general context of the
Summary and Base Salary sections above. Mr. Davidson's incentive compensation
was determined according to the agreement dated December 22, 1998 (see the
section above titled, "Employment Contracts and Termination of Employment
Agreements") and Mr. Davidson's incentive compensation goal (summarized
below):
- ------------------------------------------------
Earnings Per Share Bonus Level
- ------------------------------------------------
Less than $3.20 0
$3.20-$4.07 60% (Target)
$4.08 and greater 84% (Maximum)
- ------------------------------------------------
Based on the Company's 1998 earnings per share, the Committee did not award
any short-term incentive compensation to Mr. Davidson for 1998.
LONG-TERM INCENTIVE COMPENSATION
Under the Long-Term Strategic Incentive Program, executives who are driving
the strategy of the Company may be granted Performance Restricted Stock,
Triannual Non-Qualified Stock Options (Triannual Options) and/or other awards
in amounts which are intended to be competitive with comparable employers.
Executives who are responsible for strategy implementation are granted
Triannual Options in amounts which are intended to be competitive with
comparable employers. Grants under the Long-Term Strategic Incentive Program
can be made every three years. The first grants were made on January 2, 1996.
1996-1998 Long-Term Strategic Incentive Program
Performance Shares granted during the 1996-1998 performance period to a
Corporate executive have been earned based upon the System's attainment of
return on equity targets for this period. Performance criteria for a Corporate
executive was based on the following: if the average annual return on equity
for the System for the three-year period ended December 31, 1998 is (i) less
than 11.3%, no Performance Shares will vest, (ii) at least 11.3% but less than
11.7%, one-half of such Performance Shares will vest on March 1, 1999, and
(iii) if at least 11.7%, all such Performance Shares will vest on March 1,
1999. Performance shares granted to a CNG Transmission executive included an
additional goal of return on CNG Transmission's net assets. If return on net
assets is (i) less than 12%, no Performance Shares will
16
vest, or (ii) at least 12%, all such Performance Shares will vest on March 1,
1999. Return on equity for the period was 12.4% and CNG Transmission's return
on net assets was 16.6%, therefore, the Performance Shares will vest on March
1, 1999. The Committee reserves the right to reduce the number of Performance
Shares that vest based on factors that it deems appropriate. Executives will
not receive dividends on Performance Shares until they have vested, at which
time, dividends otherwise payable prior to the vesting date will be paid to
the executive without interest.
Triannual Options granted during the 1996-1998 performance period to an
executive have also been earned. Triannual Options were granted at the fair
market value of a share on the date of grant. Performance criteria was based
on the following: if the annual return on equity for the CNG System for the
three-year period ended December 31, 1998 is (i) less than 11.3%, all of the
Triannual Options will be exercisable on March 1, 1999, after which they will
expire, (ii) at least 11.3% but less than 11.7%, one-half of the Triannual
Options will be exercisable on March 1, 1999, after which they will expire,
and one-half of the Triannual Options will vest and have an exercise period
which will expire on January 2, 2006 and (iii) at least 11.7%, all of the
Triannual Options vest and will expire on January 2, 2006. Options expire at
the earlier of the expiration date of the option or, three years following
separation from employment due to retirement, one year after separation from
employment due to death or permanent disability or three months after
separation from employment for any other reason. Grants of Triannual Options
are based upon an executive's level within the Company.
1999-2001 Long-Term Strategic Incentive Program
Purpose
The purposes of the Program are to attract, retain and reward key employees;
motivate these employees for superior performance and to align and strengthen
their interests to the Company's shareholders.
Performance Criteria
Total Company shareholder return versus a sector-weighted index (the Peer
Group) comprised of the S&P 500--Natural Gas Index (25%), S&P Midcap 400--
Natural Gas Utilities Index (50%) and the S&P Midcap 400--Oil & Gas Index
(25%) will be used in determining the payout of the Program. Total shareholder
return is defined as the share price change from the closing price on the last
business day of 1998 compared with the closing price of the last business day
of 2001 plus reinvested dividends paid over the three-year performance period.
Awards under the Program will vest only if the Company's total shareholder
return is greater than the Peer Group during the specified performance period;
no vesting will occur if the Company's total shareholder return is less than
the Peer Group during the specified performance period.
Administration
The Program Administrator will interpret the Program, prescribe, amend, and
rescind rules relating to it, select eligible participants, and take all other
actions necessary for its administration. These actions will be final and
binding upon all participants. The "Program Administrator" means the Committee
with respect to determining participation and performance objectives for the
Chief Executive Officer and the Company's four highest compensated officers
other than the Chief Executive Officer (the "covered employees").
Compliance with Section 162(m)
For the performance period January 1, 1999 through December 31, 2001, the
Program will be administered to comply with Section 162(m) of the Code and
regulations promulgated thereunder, and if any Program provision is later
found not to be in compliance with Section 162(m), the provision will be
deemed modified as necessary to meet the requirements of Section 162(m).
Notwithstanding anything in the Program to the contrary, the Program
Administrator, in its absolute discretion, may bifurcate the Program so as to
restrict, limit, or condition the applicability of any provision of the
Program to the covered employees without so restricting, limiting, or
conditioning the Program with respect to other participants.
17
Awards Under the Program
Awards under the Program may be granted as shares of Common Stock, common
stock equivalents or such other awards allowed under the Program. For the
three-year period, the maximum number of Performance Restricted Stock to any
eligible employee is 84,000 shares, or common stock equivalents, and 280,000
shares issuable upon exercise of Triannual Non-Qualified Stock Options.
Executives, including the covered employees, will not receive dividends on
Performance Restricted Stock until the award has vested, at which time
dividends otherwise payable prior to the vesting date will be paid to the
executive without interest. If the performance criteria is met and vesting
occurs, based on the employee's election prior to the performance period, the
Company will distribute the awards in Common Stock or cash.
Acceleration of Awards
Upon retirement, disability or death, the awards will be prorated based on the
number of quarters, and any partial quarters, the executive was an active
employee during the performance period; the awards will vest only if the
performance criteria is met. Upon a Change of Control, the awards will be
prorated based on the number of years, and any partial years, the executive
was an active employee during the performance period and will then vest
without regard whether or not the performance criteria is met. Retirement,
disability, death and Change of Control are all terms defined in the 1997
Stock Incentive Plan and referred to in the award agreements.
COMPENSATION CONSULTANT
The Committee utilizes the services of an independent compensation consultant
to assess market relativity of the executive compensation packages. Consistent
with the Company's compensation philosophy, adjustments are made to any
executive compensation components in order to achieve levels of compensation
at the median market position.
TAX MATTERS
Section 162(m) of the Internal Revenue Code imposes a limitation on the
Company's income tax deduction for annual compensation in excess of $1 million
paid to certain employees, generally the Chief Executive Officer and the four
other most highly compensated Executive Officers. The Human Resources
Committee intends to structure compensation that rewards performance while
preserving maximum deductibility of all compensation awards. Towards this end,
the Board of Directors has recommended that the shareholders approve the
Company's Performance Restricted Stock Awards granted under the 1999-2001
Long-Term Strategic Incentive Program. It is not currently anticipated that
compensation realized by any Executive Officer will result in a material loss
of tax deductions.
S. A. Minter, Chair
J. W. Connolly
P. E. Lego
M. A. McKenna
18
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly cumulative total
shareholder return on CNG's Common Stock against the cumulative total return of
the S&P 500 Stock Index and a sector weighted Peer Group Index comprised of the
S&P 500--Natural Gas Index (25%), S&P Midcap 400--Natural Gas Utilities Index
(50%) and S&P Midcap 400--Oil & Gas Index (25%) for the period of five years
commencing December 31, 1993, and ended December 31, 1998.
The Peer Group index shown is comprised of the companies listed in the above
named indices. These companies are: S&P 500--Natural Gas Index: The Coastal
Corporation, Columbia Energy Group, Consolidated Natural Gas Company, Eastern
Enterprises, Enron Corp., NICOR Inc., ONEOK, Inc., Peoples Energy Corp., Sempra
Energy, Sonat and Williams Companies, Inc.; S&P Midcap 400--Natural Gas
Utilities Index: AGL Resources Inc., El Paso Energy, Indiana Energy, Inc., KN
Energy, Keyspan Energy, MCN Energy Group Inc., National Fuel Gas Company,
Questar Corp. and Washington Gas Light Co.; and S&P Midcap 400--Oil & Gas
Index: Murphy Oil Corporation, Noble Affiliates Inc., Ocean Energy, Inc.,
Pioneer Natural Resources Company, Quaker State Corp., Ranger Oil Limited,
Seagull Energy Corporation, TOSCO Corporation, Ultramar Diamond Shamrock
Corporation, Valero Energy Corp. and Varco Intl.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG CNG, S&P 500 INDEX, PEER GROUP INDEX AND VALUE LINE INDEX
Measurement period S&P 500 PEER GROUP VALUE LINE
(Fiscal year Covered) CNG INDEX INDEX INDEX
- --------------------- ---- ------- ---------- ----------
Measurement PT -
12/31/93 $100 $100 $100 $100
FYE 12/31/94 $ 79 $101 $ 92 $ 87
FYE 12/31/95 $107 $139 $119 $119
FYE 12/31/96 $135 $171 $160 $152
FYE 12/31/97 $153 $229 $196 $186
FYE 12/31/98 $142 $294 $168 $188
*Assumes $100 investment on December 31, 1993, and reinvestment of dividends.
Last year the Company included the Value Line Natural Gas Industry Index. The
Value Line Index was replaced with the sector weighted Peer Group Index to
better represent the Company's asset mix and market capitalization.
NON-EMPLOYEE DIRECTORS' COMPENSATION
Non-employee Directors are currently paid a $24,000 annual retainer, a $2,000
per diem fee for attending each Board meeting, including all Board Committee
meetings held in conjunction with such Board meeting, and a $1,000 per diem fee
for participating in telephonic Board or Board Committee meetings. Committee
Chairpersons receive an additional annual fee of $3,000.
Directors may elect to defer receipt of these payments until after retirement
from the Board. Such payments are deferred in the form of cash credits or
Consolidated Natural Gas Company Common Stock credits. Such stock credits are
valued as Common Stock equivalents equal to the number of shares that could
have been purchased at the closing price on the date the compensation was
earned. As of the date any dividend is paid on the Company's Common Stock, a
credit is made to each participant's deferred
19
account equal to the number of shares of Common Stock that could have been
purchased on such date with the dividend paid. Amounts deferred in the form of
cash credits earn interest, compounded quarterly, at a rate equal to the
closing prime commercial rate at The Chase Manhattan Bank N.A. on the last day
of each quarter. Payments are made in cash, in a lump sum or in annual
installments over a period not exceeding ten years. The entire undistributed
deferred amount will be distributed in a lump sum upon a participating
Director's death.
Directors receive an annual grant of 200 shares of the Company's Common
Stock, subject to restrictions, or the same amount of Consolidated Natural Gas
Company Common Stock credits and options on 1,000 shares of the Company's
Common Stock. Such grants are to be made on the date of the Annual Meeting of
Stockholders. Newly elected Directors will receive an initial grant of 400
shares of the Company's Common Stock, subject to restrictions, or the same
amount of Consolidated Natural Gas Company Common Stock credits and options on
2,000 shares of the Company's Common Stock. Such grants are to be made on the
date of the Director's election to the Board. The restrictions on such stock
shall lapse in 25% installments on the anniversary date of each grant or shall
lapse in total upon the Director's retirement at age 70 or the Director's
ceasing to serve due to death or disability. The Consolidated Natural Gas
Company Common Stock credits are described above.
Effective January 1, 1997, the Board of Directors voted to terminate the
post-retirement retainer for newly elected non-employee Directors and all
current directors elected to waive the post-retirement retainer and receive
the present value of such benefit in deferred stock credits or restricted
common stock of the Company. In the past, the annual retainer paid to non-
employee Directors, as set by the Board of Directors from time to time, was
continued to be paid for life to each non-employee Director retired at age 70,
or at an earlier age due to disability, provided the non-employee Director
served a minimum of four years and agreed to be generally available as a
consultant. Payments under the continued post-retirement retainer arrangement
cease at the death of the Director.
Employee Directors do not receive any compensation for service as Directors.
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, the following Directors served as members of the Human Resources
Committee: S. A. Minter, Chair, J. W. Connolly, P. E. Lego and M. A. McKenna.
The Company now has a Credit Agreement totaling $775 million with a group of
banks. Each participating bank is compensated with a fee of .04% on its
respective commitment amounts.
Currently, PNC Bank, Pittsburgh, Pennsylvania, the subsidiary of PNC Bank
Corp., of which Messrs. Davidson and Simmons are Directors, provides a
commitment of $100 million under the Credit Agreement. Mellon Bank, N.A.,
Pittsburgh, Pennsylvania, of which Mr. Connolly is a Director, provides a
commitment of $102.5 million under the Credit Agreement. Key Bank, NA,
Cleveland, Ohio, the subsidiary of KeyCorp of which Mr. Minter is a Director,
provides a commitment of $100 million under the Credit Agreement. There were
no borrowings under the Agreement in 1998.
BENEFIT PLANS
LIFE INSURANCE AND RELATED BENEFIT PLANS
The Company maintains a program composed of Split Dollar Life Insurance Plans
and Supplemental Death Benefit Plans for employees on the executive payroll of
the Company and its subsidiaries, as well as non-employee Directors, which
provides death benefits to beneficiaries of those individuals. There were 135
eligible employees on December 31, 1998 and 80 were participating. Five non-
employee Directors also were participating. The plans are under the general
supervision of the Human Resources Committee of the Board. Continuation of the
plans beyond retirement requires the Committee's approval. The costs for the
Split Dollar Life Insurance Plans are shared by the Company and the
participants. Each year an employee participant pays a premium based on age
and amount of individual coverage, which is
20
approximately twice annual salary. Each year, Director participants pay a
premium based on age and amount of individual coverage. The Company pays all
additional premiums and expects to receive proceeds approximately equal to its
investment in the policy through the total coverage exceeding the participant's
individual coverage. The Supplemental Death Benefit Plans provide for payments
to a deceased participant's beneficiaries over a period of years.
RETIREMENT PROGRAMS
A non-contributory Pension Plan is maintained for employees who are not
represented by a recognized union, including Officers of the Company and its
subsidiaries. On December 31, 1998, all 2,822 eligible employees of the Company
and its subsidiary companies were participating in the Pension Plan.
The Company also maintains an unfunded Short Service Supplemental Retirement
Plan for certain management employees whose commencement of service with the
Company occurred after the employee had acquired experience of considerable
value to the Company and who will have less than 32 years of service at normal
retirement.
The following table illustrates maximum annual benefits--including any
supplemental payment described above but before being reduced by the required
offset--at normal retirement date (age 65) on the individual life annuity basis
for the indicated levels of final average annual salary and various periods of
service.
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
Annual Pension Benefit for Years of Service Indicated
------------------------------------------------------
Average Annual Salary 15 20 25 35 40
- --------------------------------------------------------------------------------
$100,000................. $ 34,000 $ 45,300 $ 55,000 $ 59,500 $ 68,000
150,000................. 51,000 68,000 82,500 89,300 102,000
200,000................. 68,000 90,700 110,000 119,000 136,000
250,000................. 85,000 113,300 137,500 148,800 170,000
300,000................. 102,000 136,000 165,000 178,500 204,000
350,000................. 119,000 158,700 192,500 208,300 238,000
400,000................. 136,000 181,300 220,000 238,000 272,000
450,000................. 153,000 204,000 247,500 267,800 306,000
500,000................. 170,000 226,700 275,000 297,500 340,000
550,000................. 187,000 249,300 302,500 327,300 374,000
600,000................. 204,000 272,000 330,000 357,000 408,000
650,000................. 221,000 294,700 357,500 386,800 442,000
700,000................. 238,000 317,300 385,000 416,500 476,000
- --------------------------------------------------------------------------------
The 1998 salaries, projected service to age 65, and estimated annual
retirement benefits on the individual life form of annuity, assuming
continuation of their December 1998 salaries until age 65 for each of the
individuals in the Summary Compensation table, are as follows:
ESTIMATED ANNUAL RETIREMENT BENEFITS
- --------------------------------------------------------------------------------
Years of Years of Estimated Annual
1998 Service at Service Retirement Benefits
Name Salary Year-End 1998 at Age 65 at Age 65
- --------------------------------------------------------------------------------
R. L. Adams................ $283,500 2 28 $167,114
G. A. Davidson, Jr......... 689,700 32 37 437,430
R. M. Sable, Jr............ 183,333 20 38 113,359
D. M. Westfall............. 331,867 29 43 257,925
S. E. Williams............. 275,967 24 39 181,658
- --------------------------------------------------------------------------------
21
The Company also maintains a Supplemental Retirement Benefit Plan under
which payments may be made, at the sole discretion of the Human Resources
Committee of the Board, to individuals comprising the executive payroll. As of
December 31, 1998, there were 135 potentially eligible employees. The decision
to grant a Supplemental Retirement Benefit is based on a review of the
retiring employee's total available benefits. Payments under such plan during
1998 amounted to $448,900. The maximum annual supplemental annuity under this
plan is 10% of an individual's final average annual salary. Assuming
continuation of their December 1998 salaries until age 65, the individuals
named in the Summary Compensation table would be eligible to receive the
following maximum annual supplemental retirement benefits: Messrs. Adams,
$31,360; Davidson, $70,000; Sable, $18,500; Westfall, $36,010 and Williams,
$28,250.
The benefits described above have not been reduced by the limitations
imposed on qualified plans by the Internal Revenue Code. As permitted by the
Internal Revenue Code, the Board of Directors has adopted a policy whereby
supplemental payments may be made, as necessary, to maintain the benefit
levels earned under the benefit plans.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Based on the Company's review of copies of all Section 16(a) forms filed by
the Officers and Directors of the Company, the Company believes that in 1998
there was compliance with all filing requirements applicable to its Officers
and Directors.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP has audited the accounts of the Company and its
subsidiaries since 1943. On recommendation of the Audit Committee, the Board
of Directors has, subject to ratification by the stockholders, appointed
PricewaterhouseCoopers LLP to audit the accounts of the Company and its
subsidiaries for the fiscal year 1999. Audit fees to PricewaterhouseCoopers
LLP in 1998 incurred by the Company and its subsidiaries were approximately
$1,685,000. A representative of PricewaterhouseCoopers LLP will be present at
the Meeting to respond to appropriate questions and will have an opportunity
to make a statement if he or she desires to do so. Accordingly, the following
resolutions will be offered at the Meeting:
RESOLVED, That the appointment, by the Board of Directors of the Company, of
PricewaterhouseCoopers LLP to audit the accounts of the Company and its
subsidiary companies for the fiscal year 1999, effective upon ratification by
the stockholders be, and it hereby is, ratified; and
FURTHER RESOLVED, That a representative of PricewaterhouseCoopers LLP shall
attend the next Annual Meeting and any special meetings of stockholders that
may be held in the interim.
Vote Needed for Appointment of Independent Accountants
An affirmative vote of the holders of a majority of the Company's Common
Stock, represented in person or by proxy and entitled to vote at the Meeting,
is necessary for ratification. If the stockholders do not ratify the
appointment of PricewaterhouseCoopers LLP, the selection of independent
accountants will be reconsidered by the Audit Committee and the Board of
Directors.
Board Recommendation
The Board recommends that stockholders vote FOR Proposal 2, and the
accompanying proxy will be so voted, unless a contrary specification is made.
22
PROPOSAL 3
APPROVAL OF THE COMPANY'S PERFORMANCE RESTRICTED STOCK AWARDS GRANTED UNDER
THE 1999-2001 LONG-TERM STRATEGIC INCENTIVE PROGRAM
Summary
Effective for the tax year ended December 31, 1994, the Internal Revenue Code
was amended by the addition of Section 162(m), which limits the tax deduction
available to a company with respect to compensation paid to certain Executive
Officers, unless the compensation qualifies as "performance based." Triannual
Non-Qualified Stock Options are granted to Executive Officers under a
shareholder approved Plan, the 1997 Stock Incentive Plan, that complies with
the requirements of Section 162(m) regarding performance based compensation.
The Board of Directors through its Human Resources Committee has adopted the
1999-2001 Long-Term Strategic Incentive Program. The Board believes that in
light of Section 162(m), it is desirable to submit the Performance Restricted
Stock Awards granted under the Program for Stockholder approval. This will
enable the Awards to these executives to qualify as "performance based"
compensation for purposes of Section 162(m), and thereby continue to be
deductible by the Company without regard to the deduction limit otherwise
imposed by such Section. All awards under the Program are issued pursuant to
the 1997 Stock Incentive Plan and are subject to the provisions of the award
agreement. If the Proposal is not approved by the shareholders, the Human
Resources Committee will consider whether it is appropriate to take any
alternate action or actions that would allow the Company to award incentives
to covered employees that are fully deductible by the Company under the
Internal Revenue Code.
1999-2001 Long-Term Strategic Incentive Program
Purpose
The purposes of the Program are to attract, retain and reward key employees;
motivate these employees for superior performance and to align and strengthen
their interests to the Company's shareholders.
Performance Criteria
Total Company shareholder return versus a sector-weighted index (the Peer
Group) comprised of the S&P 500--Natural Gas Index (25%), S&P Midcap 400--
Natural Gas Utilities Index (50%) and the S&P Midcap 400--Oil & Gas Index
(25%) will be used in determining the payout of the Program. Total shareholder
return is defined as the share price change from the closing price on the last
business day of 1998 compared with the closing price of the last business day
of 2001 plus reinvested dividends paid over the three-year performance period.
Awards under the Program will vest only if the Company's total shareholder
return is greater than the Peer Group during the specified performance period;
no vesting will occur if the Company's total shareholder return is less than
the Peer Group during the specified performance period.
Administration
The Program Administrator will interpret the Program, prescribe, amend, and
rescind rules relating to it, select eligible participants, and take all other
actions necessary for its administration. These actions will be final and
binding upon all participants. The "Program Administrator" means the Committee
with respect to determining participation and performance objectives for the
Chief Executive Officer and the Company's four highest compensated officers
other than the Chief Executive Officer (the "covered employees").
Compliance with Section 162(m)
For the performance period January 1, 1999 through December 31, 2001, the
Program will be administered to comply with Section 162(m) of the Code and
regulations promulgated thereunder, and if any Program provision is later
found not to be in compliance with Section 162(m), the provision will be
deemed modified as necessary to meet the requirements of Section 162(m).
Notwithstanding anything in
23
the Program to the contrary, the Program Administrator, in its absolute
discretion, may bifurcate the Program so as to restrict, limit, or condition
the applicability of any provision of the Program to the covered employees
without so restricting, limiting, or conditioning the Program with respect to
other participants.
Awards Under the Program
Awards under the Program may be granted as shares of Common Stock, common
stock equivalents or such other awards allowed under the Program. For the
three-year period, the maximum number of Performance Restricted Stock to any
eligible employee is 84,000 shares, or common stock equivalents, and 280,000
shares issuable upon exercise of Triannual Non-Qualified Stock Options.
Executives, including the covered employees, will not receive dividends on
Performance Restricted Stock until the award has vested, at which time
dividends otherwise payable prior to the vesting date will be paid to the
executive without interest. If the performance criteria is met and vesting
occurs, based on the employee's election prior to the performance period, the
Company will distribute the awards in Common Stock or cash.
Acceleration of Awards
Upon retirement, disability or death, the awards will be prorated based on the
number of quarters, and any partial quarters, the executive was an active
employee during the performance period; the awards will vest only if the
performance criteria is met. Upon a Change of Control, the awards will be
prorated based on the number of years, and any partial years, the executive
was an active employee during the performance period and will then vest
without regard whether or not the performance criteria is met. Retirement,
disability, death and Change of Control are all terms defined in the 1997
Stock Incentive Plan and referred to in the award agreements.
Vote Needed for Approval of the Proposal
Approval of this proposal requires an affirmative vote of the holders of a
majority of the shares present in person or represented by proxy and entitled
to vote. Abstentions are counted in tabulations of the votes cast on proposals
presented to stockholders. Broker non-votes are not counted for purposes of
determining whether a proposal has been approved.
Board Recommendation
The Board recommends that stockholders vote FOR Proposal 3, and the
accompanying proxy will be so voted, unless a contrary specification is made.
PROPOSAL 4
STOCKHOLDER'S PROPOSAL CONCERNING BONUSES
Fred Wilson and Mazie M. Wilson, 3011 N. Miles Drive, Edmond, Oklahoma, who
own 200 shares of the Company's Common Stock have submitted the resolution set
forth below for inclusion in this proxy statement for the Company's 1999
Annual Meeting of Shareholders.
The Stockholder's Proposal
Bonus Resolution
"RESOLVED: That all bonuses be voted on by the shareholders and limited to 10%
of the annual salaries of the executive officers compensations. The executive
officers are identified as those filling the positions as follows:
1. Chairman and Chief Executive Officer
2. Vice President Accounting and Financial Control
3. President CNG Producing Co.
4. Senior Vice President & Chief Financial Officer
5. Senior Vice President & General Counsel"
24
The Stockholder's Supporting Statement
It is my opinion that the executive officers are grossly overpaid. I believe
that any man can live very comfortably on a lot less than what the executive
officers are currently being paid. I am currently retired and on a fixed
income with little or no incentive income prospects. These executives are not
unique; as they all have great staffs and/or assistants at their disposal to
advise them in all their decision making. It is therefore my opinion that the
executives are not justified in receiving the unusually large bonuses which
are apparently spontaneously awarded by the Board of Directors. It seems that
the fine salaries should be sufficient justification and incentive for doing a
good job.
Management's Comments
This proposal calls for certain Executive Officers' bonuses to be approved by
the stockholders and to be limited to 10% of their salaries. Management
strongly believes that this practice would not be in the interests of the
stockholders.
The objective of the Company's compensation programs is to provide a total
compensation package that will enable the Company to attract, motivate and
retain outstanding individuals and align their success with that of the
Company's shareholders. The opportunity for an Executive Officer to earn a
bonus is based on the nature of the position, its potential for contribution,
the level of responsibility and the competitive environment.
A bonus opportunity is established only if the Company attains a certain
level of performance. Payments are made only upon the successful achievement
of goals approved by the Human Resources Committee. The achievement of
established goals directly aligns the financial interests of Executive
Officers and others with those of the Shareholders. In management's view,
limiting bonuses to below market levels would weaken this alignment and fail
to serve the shareholders' interests.
Vote Needed for Approval of the Proposal
Approval of this proposal requires an affirmative vote of the holders of a
majority of the shares present in person or represented by proxy and entitled
to vote. Abstentions are counted in tabulations of the votes cast on proposals
presented to stockholders. Broker non-votes are not counted for purposes of
determining whether a proposal has been approved.
Board Recommendation
The Board recommends that stockholders vote AGAINST Proposal 4, and the
accompanying proxy will be so voted, unless a contrary specification is made.
OTHER MATTERS
Procedure for Submission of 2000 Stockholder Proposals
The 2000 Annual Meeting of Stockholders will be held on Tuesday, April 11,
2000. Proposals by stockholders for inclusion in the 2000 Annual Meeting Proxy
Statement must be received by the Corporate Secretary, Consolidated Natural
Gas Company, CNG Tower, 625 Liberty Avenue, Pittsburgh, Pennsylvania 15222-
3199, prior to November 3, 1999. All such proposals are subject to the
applicable rules and requirements of the Securities and Exchange Commission.
The SEC has amended Rule 14a-4(c) under the Securities Exchange Act of 1934
(the "1934 Act") which governs the Company's use of discretionary proxy voting
authority with respect to shareholder proposals that are not being included in
the Company's proxy solicitation materials pursuant to Rule 14a-8 of the 1934
Act. Therefore, in the event a shareholder does not notify the Company at
least 45 days before the date the Company mailed its proxy material for the
prior year's annual meeting of shareholders (which date would be January 19,
2000 for the Company's 2000 Annual Meeting) of an intent to present such a
proposal at the Company's Annual Meeting, the Company's management proxies
will have the right to exercise their discretionary authority in connection
with the matter submitted by the shareholder, without discussion of the matter
in the Proxy Statement.
25
OTHER BUSINESS
The Board of Directors does not intend to bring any business before the
Meeting other than that listed in the foregoing Notice and is not aware of any
business intended to be presented to the Meeting by any other person. Should
other matters properly come before the Meeting, the persons named in the
accompanying proxy will vote said proxy in such manner as they may, in their
discretion, determine.
/s/ E. J. Marks, III
E. J. Marks, III
Corporate Secretary
February 22, 1999
NOTE: YOUR SHARES CANNOT BE VOTED UNLESS YOU SIGN AND RETURN YOUR PROXY CARD,
GIVE YOUR PROXY BY CALLING THE TOLL-FREE TELEPHONE NUMBER, OR ATTEND THE
MEETING AND VOTE IN PERSON.
APPENDIX I
CONSOLIDATED NATURAL GAS COMPANY
1998 FINANCIAL STATEMENTS AND NOTES
(Appendix I is not included in this preliminary filing)
26
Consolidated Natural Gas Company
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
Regulated Business
The East Ohio Gas Company
Cleveland, Ohio
The Peoples Natural Gas Company
Pittsburgh, Pennsylvania
Virginia Natural Gas, Inc.
Norfolk, Virginia
Hope Gas, Inc.
Clarksburg, West Virginia
CNG Transmission Corporation
Clarksburg, West Virginia
Nonregulated Business
CNG Producing Company
New Orleans, Louisiana
CNG Retail Services Corporation
Pittsburgh, Pennsylvania
International
CNG International Corporation
Reston, Virginia
LOGO CNG
PLEASE MARK YOUR
[X] VOTES AS IN THIS
EXAMPLE.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3 AND AGAINST ITEM
4.
- -------------------------------------------------------------------------------
FOR WITHHELD
1. ELECTION OF [ ] [ ]
DIRECTORS
(SEE REVERSE)
For, except vote withheld from the following nominee(s):
- -----------------------------------------------
FOR AGAINST ABSTAIN
2. Ratification of [ ] [ ] [ ]
PricewaterhouseCoopers
LLP as Independent
accountants.
FOR AGAINST ABSTAIN
3. Approval of adoption [ ] [ ] [ ]
of Performance
Restricted Stock
Awards.
FOR AGAINST ABSTAIN
4. Adoption of a shareholder- [ ] [ ] [ ]
proposed resolution
regarding bonuses.
- -------------------------------------------------------------------------------
Change [ ] Attend [ ]
of Meeting
Address
SIGNATURE(S) DATE
----------------------------------- --------------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE. PLEASE VOTE, SIGN, AND RETURN THE ABOVE PROXY OR
VOTE ELECTRONICALLY BY TELEPHONE
CONSOLIDATED NATURAL GAS COMPANY
ANNUAL MEETING OF STOCKHOLDERS
Dear Stockholder,
Consolidated Natural Gas Company encourages you to take advantage of a new and
convenient way by which you can vote your shares--electronically through the
telephone. This eliminates the need to return the proxy card.
To vote your shares electronically through the telephone:
-On a touch-tone telephone call 1-800-OK2-VOTE (1-800-652-8683)
-24 hours a day, 7 days a week
-Listen to the recording for instructions
-Use the control number printed in the box above to access the system
-Use your phone key pad to vote
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card. If you choose to vote your
shares electronically, there is no need for you to mail back your proxy card.
YOUR VOTE IS IMPORTANT, THANK YOU FOR VOTING.
CONSOLIDATED
CNG(R) NATURAL GAS
COMPANY
CONSOLIDATED NATURAL GAS COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE ANNUAL MEETING OF STOCKHOLDERS APRIL 13, 1999
The undersigned hereby appoints G.A. Davidson, Jr., D.M. Westfall and S.E.
P Williams, and each or any of them, proxies with full power of substitution
R to vote the stock of the undersigned, as directed hereon, at the Annual
O Meeting of Stockholders of CONSOLIDATED NATURAL GAS COMPANY to be held at
X the Sheraton Airport Plaza Hotel, I-85 & Billy Graham Parkway, Charlotte,
Y NC 28208 at 10:00 a.m. (Eastern Time), and at any adjournment thereof, and,
in their discretion, on any other matters that may properly come before this
Meeting.
(change of address)
Election of Directors ---------------------------
---------------------------
Nominees: 1. Raymond E. Galvin ---------------------------
2. Paul E. Lego ---------------------------
3. Margaret A. McKenna (If you have written in the
above space, please mark the
Change of Address Box on the
reverse side of this card.)
PLEASE SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, SEE REVERSE SIDE.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH YOUR
INSTRUCTIONS, OR, IF YOU GIVE NO INSTRUCTIONS, THIS PROXY WILL BE VOTED FOR
ITEMS 1, 2 AND 3 AND AGAINST ITEM 4.
-----------
SEE REVERSE
SIDE
-----------
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
FEBRUARY 22, 1999
Dear Stockholder:
CNG and First Chicago Trust Company, a division of EquiServe, recently began
offering access to your Stockholder Account through the Internet. Access
instructions and your unique secure password were provided with either your
February dividend check, Dividend Reinvestment Statement, or Electronic Funds
Transfer confirmation. You can also call 1-877-THE-WEB7 (1-877-843-9327) and a
password will be mailed to you.
You may also call First Chicago at anytime toll-free at 1-800-414-6443, customer
service representatives are available between 8:30 a.m. and 7:00 p.m. Eastern
Time. You may also correspond by writing to First Chicago Trust Company, a
division of EquiServe, PO Box 2500, Jersey City, NJ 07023, via the Internet at
http://www.equiserve.com, or via e-mail at fct@em.fcnbd.com.
Sincerely,
/s/ GEORGE A. DAVIDSON, JR.
--------------------------------
George A. Davidson, Jr.
Chairman of the Board and
Chief Executive Officer